Stock Purchase Agreement
among
Key Energy Group, Inc.,
and
Michael and Georgia McDermett
Dated as of January 10, 1997
I:\PBOOKER\JMA\Key Energy Group\Cobra Stock Purchase Agreement.wpd Stock
Purchase Agreement This Stock Purchase Agreement (this AAgreement@) is entered
into as of January 10, 1997 by and among Key Energy Group, Inc., a Maryland
corporation (AKey@), and Michael McDermett and Georgia McDermett, individual
residents of the State of Texas (individually the AShareholder@ and collectively
the AShareholders@). W I T N E S S E T H: WHEREAS, the Shareholders own 500
shares (the ACobra Shares@) of common stock, par value $1.00 per share (ACobra
Common Stock@), of Cobra Industries, Inc., a New Mexico corporation (ACobra@),
which constitute all of the issued and outstanding shares of capital stock of
Cobra; and WHEREAS, the Shareholders desire to sell to Key and Key desires to
purchase from the Shareholders all of the issued and outstanding capital stock
of Cobra. NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements herein contained, the parties hereto hereby
agree as follows:
ARTICLE 1
Purchase and Sale
ARTICLE 1 Purchase and Sale
1.1. Purchase and Sale of Cobra Shares.Purchase and
Sale of Cobra Shares. Subject to the terms and conditions of this Agreement, at
the Closing (as defined in Section 1.2), the Shareholders agree to sell and
convey to Key, free and clear of all Encumbrances (as defined in Section
2.1.8.1), and Key agrees to purchase and accept from the Shareholders, all of
the Cobra Shares. In consideration of the sale of the Cobra Shares, Key shall
pay and deliver to the Shareholders at the Closing: (i) $5,000,000 to be paid to
the Shareholders by means of a wire transfer of immediately available funds to
the account designated in writing by the Shareholders and (ii) shall institute
such action required under Section 7.7 hereof for the issuance to the
Shareholders of 175,000 shares (the AKey Shares@) of common stock, par value
$.10 per share, of Key (AKey Common Stock@). 1.2. Time and Place of Closing1.2.
Time and Place of Closing. The closing of the transactions contemplated by this
Agreement (the AClosing@) shall be at the offices of Lynch, Chappell & Alsup, a
Professional Corporation, located at 300 North Marienfeld, Suite 700, Midland,
Texas 79701, at 10:00 a.m. on January 10, 1997 (the AClosing Date@), unless
another time, place or date is agreed to by the Shareholders and Key.
ARTICLE 2 Representations and Warranties of the ShareholdersWarranties
reholders
2.1. Representations and Warranties of the Shareholders. The express
representations and warranties of the Shareholders contained in this Article 2
are exclusive and are in lieu of all other representations and warranties,
express, implied or statutory, or otherwise. Subject to the foregoing, each of
the Shareholders jointly and severally represents and warrants to Key as
follows: 2.1.1. Organization and Standing. Cobra is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Mexico, 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
Both of the Shareholders are residents of the State of Texas, above the age of
18 years, and each of them 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. 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 Articles of Incorporation or Bylaws of Cobra or (ii) any
obligation, indenture, mortgage, deed of trust, lease, contract or other
agreement to which Cobra or either of the Shareholders is a party or by which
Cobra or either of the Shareholders or their respective properties are bound.
2.1.3. Capitalization of Cobra The authorized capitalization of Cobra consists
of 50,000 shares of Cobra Common Stock, of which, as of the date hereof, 500
shares are issued and outstanding and held beneficially and of record by the
Shareholders. On the date hereof, Cobra 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 Cobra Common Stock are validly issued, fully paid and non-assessable
and are not subject to preemptive rights. None of the outstanding shares of
Cobra Common Stock is subject to any voting trust, 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 Cobra Shares.Ownership of
Cobra Shares. The Shareholders hold good and valid title to all of the Cobra
Shares free and clear of all Encumbrances. The Shareholders possess full
authority and legal right to sell, transfer and assign to Key the Cobra Shares,
free and clear of all Encumbrances. Upon transfer to Key by the Shareholders of
the Cobra Shares, Key will own the Cobra Shares free and clear of all
Encumbrances. There are no claims pending or, to the knowledge of either of the
Shareholders, threatened, against Cobra or either of the Shareholders that
concern or affect title to the Cobra Shares, or that seek to compel the issuance
of capital stock or other securities of Cobra. 2.1.5. No Subsidiaries There is
no corporation, partnership, joint venture, business trust or other legal entity
in which Cobra, 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
Shareholders have delivered to Key Cobra=s audited balance sheet and related
statements of income, retained earnings and cash flows, with appended notes
which are an integral part of such statements, as of and for the 12 months ended
July 31, 1996, and also have delivered to Key copies of Cobra=s unaudited
balance sheets and related statements of income, retained earnings and cash
flows as of and for the periods beginning August 1, 1996 and ending August 31,
September 30, October 31, and November 30, 1996. The unaudited November 30, 1996
balance sheet, a copy of which is attached hereto as Schedule 2.1.6, is
hereinafter referred to as the AUnaudited Balance Sheet.@ All of such financial
statements delivered to Key are complete in all material respects (except, with
respect to the unaudited financial statements, for the omission of notes and
schedules), present fairly the financial condition of Cobra as at the dates
indicated, and the results of operations for the respective periods indicated,
and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, except as noted therein and subject,
in the case of interim financial statements, to normal year-end adjustments and
other adjustments described therein; in addition, such financial statements as
of and for the months ended August 31, September 30, October 31, and November
30, 1996, though unaudited, include all adjustments which the Shareholders
consider necessary for a fair presentation of Cobra=s results for those periods.
November 30, 1996 shall hereinafter be referred to as the ABalance Sheet Date.@
The accounts receivable reflected in the Unaudited Balance Sheet, or which
thereafter have been acquired by Cobra, have been collected or are current and
collectible at the aggregate recorded amounts thereof less applicable reserves
computed in accordance with generally accepted accounting principles, which
reserves are adequate. 2.1.7.Liabilities. Except as disclosed on Schedule 2.1.7
hereto, Cobra has no liabilities or obligations, either accrued, absolute or
contingent, nor do either of the Shareholders have any knowledge of any
potential liabilities or obligations, which would materially adversely affect
the value and conduct of the business of Cobra, other than those (i) reflected
or reserved against in the Unaudited 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: 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 Cobra, with a description of the nature and amount of
any Encumbrances thereon. The term AEncumbrances@ means all liens, security
interests, pledges, mortgages, deeds of trust, claims, rights of first refusal,
options, charges, restrictions or conditions to transfer or assignment,
liabilities, obligations, 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 Cobra with a description of the nature and amount of any
Encumbrances thereon; 2.1.8.3 Receivables. All accounts and notes receivable,
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 Cobra holds a security interest to secure payment of the
underlying indebtedness, and (iv) a description of the nature and amount of any
Encumbrance on such accounts and notes receivable; 2.1.8.4 Payables. All
accounts and notes payable of Cobra, together with an appropriate aging
schedule; 2.1.8.5 Insurance. All insurance policies or bonds currently
maintained by Cobra, including title insurance policies, and those covering
Cobra=s properties, rigs, machinery, equipment, fixtures, employees and
operations, as well as a listing of any deductibles, premiums, audit adjustments
or retroactive adjustments due or pending on such policies or any predecessor
policies; 2.1.8.6 Contracts. All service contracts and all other material
contracts to which Cobra is a party which are to be performed in whole or in
part after the date hereof; 2.1.8.7 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 Cobra, 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 that have been received with respect to such plans;
2.1.8.8 Certain Salaries. The names and salary rates of all present employees of
Cobra who have salaries in excess of $50,000, 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; 2.1.8.9 Bank Accounts. The
name of each bank in which Cobra has an account, the account numbers of each
account and the names of all persons authorized to draw thereon; 2.1.8.10
Employee Agreements. Any collective bargaining agreements of Cobra 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 Cobra; 2.1.8.11 Intellectual Property.
All patents, trademarks, copyrights and other intellectual property rights
owned, licensed, or used by Cobra; 2.1.8.12 Trade Names. All trade names,
assumed names and fictitious names used or held by Cobra, whether and where such
names are registered, and where used; 2.1.8.13 Promissory Notes. All long-term
and short-term promissory notes, installment contracts, loan agreements, credit
agreements, and any other agreements of Cobra relating thereto or with respect
to collateral securing the same; 2.1.8.14 Guaranties. All indebtedness,
liabilities and commitments of others and as to which Cobra is a guarantor,
endorser, co-maker, surety, or accommodation maker, or contingently liable
therefor and all letters of credit, whether stand-by or documentary, issued by
any third party; 2.1.8.15 Leases. All leases to which Cobra is a party whether
as lessor or lessee; and 2.1.8.16 Environment. All environmental permits,
approvals, certifications, licenses, registrations, orders and decrees
applicable to current operations conducted by Cobra and all environmental
audits, assessments, investigations and reviews conducted by Cobra within the
last five years on any property owned or used by it. 2.1.9.No Defaults. Cobra is
not in default in any material obligation or covenant on its part to be
performed under any obligation, lease, contract, order, plan or other agreement
or arrangement other than those that are not material to the business or
business prospects of Cobra. 2.1.10. Absence of Certain Changes and Events.
Other than as a result of the transactions 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 Cobra; 2.1.10.2 Property Damage. Any material damage,
destruction, or loss to the business or properties of Cobra (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 Cobra Common
Stock, or any direct or indirect redemption, purchase or any other acquisition
by Cobra 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 authorized or
outstanding capital stock of Cobra as described in Section 2.1.3 hereof;
2.1.10.5 Labor Disputes. Except as disclosed on Schedule 2.1.16, any labor
disputes involving Cobra; or 2.1.10.6 Other Material Changes. Any other event or
condition known to either of the Shareholders particularly pertaining to and
adversely affecting the operations, assets or business of Cobra 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 Cobra 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 Cobra; and the tax provisions reflected in the
Unaudited Balance Sheet are adequate, in accordance with generally accepted
accounting principles, to cover liabilities of Cobra at the date thereof for all
taxes, including any assessed interest, assessed penalties and additions to
taxes of any character whatsoever applicable to Cobra or its assets or business.
No waiver of any statute of limitations executed by Cobra with respect to any
income or other tax is in effect for any period. Except for an audit by the
Internal Revenue Service of the 1991 federal income tax returns of Cobra, the
income tax returns of Cobra 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 Cobra except for taxes not yet currently due. Cobra is
not, never has been, nor has Cobra ever attempted to become, an S-Corp under the
Internal Revenue Code of 1986, as amended. 2.1.12. Intellectual Property. Cobra
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
AIntellectual Property@) that are either material to its business or that are
necessary for the rendering of any services rendered by it and the use or sale
of any equipment or products used or sold by it, including all such Intellectual
Property listed in Schedule 2.1.12 hereto. The Intellectual Property so owned or
possessed by Cobra is owned or licensed free and clear of any Encumbrance. Cobra
has not granted to any other person any license to use any Intellectual
Property. Cobra has not received any notice of infringement, misappropriation,
or conflict with, the intellectual property rights of others in connection with
the use by it of the Intellectual Property or otherwise in connection with the
operation of its business. 2.1.13. Title to and Condition of Assets. Cobra has
good, indefeasible and marketable title to all its properties, interests in
properties and assets, real and personal, reflected in the Unaudited Balance
Sheet or in Schedule 2.1.8 hereto, free and clear of any Encumbrance, except (i)
Encumbrances reflected in the Unaudited 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 Cobra 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 Cobra and in respect to which Cobra
has not taken adequate steps to prevent a default from occurring. The buildings
and premises of Cobra 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 Cobra 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. All such assets conform in all material respects
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 (or
are being) received by Cobra 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 Cobra is a party, by which it is bound or to which
Cobra or the assets of Cobra are subject are in full force and effect, and
constitute valid and binding obligations of Cobra. Cobra is not, and to the
knowledge of either 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 material default thereunder. No contract has
been entered into on terms which could reasonably be expected to have a
materially adverse effect on Cobra. Neither of the Shareholders has received any
information which would cause such Shareholder to conclude that any customer of
Cobra will (or is likely to) cease doing business with Cobra (or any successors
thereto) as a result of the consummation of the transactions contemplated
hereby. 2.1.15. Licenses and Permits. Cobra possess 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 APermits@) necessary under law or otherwise for
it 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 the rights
of Cobra with respect thereto is (and will be following the consummation of the
transactions contemplated hereby) valid and subsisting, in full force and
effect, and enforceable by Cobra subject to administrative powers of regulatory
agencies having jurisdiction. Cobra 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 Shareholders, are threatened to be, revoked, canceled,
suspended or modified. 2.1.16. Litigation. Except as set forth on Schedule
2.1.16, there is no suit, action, or legal, administrative, arbitration, or
other proceeding or governmental investigation pending to which Cobra is a party
or, to the knowledge of the Shareholders, might become a party or which
particularly affect Cobra, nor is any change in the zoning or building
ordinances directly affecting the real property or leasehold interests of Cobra,
pending or, to the knowledge of the Shareholders, threatened. 2.1.17.
Environmental Compliance.
2.1.17.1 Environmental Conditions.
Except as set forth in Schedule 2.1.17 hereof, 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 Cobra, or on any property to which hazardous substances or waste
generated by the operations of Cobra or by the use of the assets of Cobra were
disposed of, which would result in a material adverse change in the business or
business prospects of Cobra. The term Ahazardous substance@ means (i) asbestos,
polychlorinated biphenyls, urea formaldehyde, lead based paint, radon gas,
petroleum, oil, solid waste, pollutants and contaminants, and (ii) any
chemicals, materials, wastes or substances that are defined, regulated,
determined or identified as toxic or hazardous in any Applicable Environmental
Laws, including, but not limited to, substances defined as Ahazardous
substances,@ Ahazardous materials,@ or Ahazardous waste@ in CERCLA, RCRA, HMTA,
or comparable state and local statutes or in the regulations adopted and
promulgated pursuant to said statutes; 2.1.17.2 Permits, etc. Cobra 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 its business or operations, and is operating in substantial
compliance thereunder; 2.1.17.3 Compliance. Neither the operations of Cobra nor
the use of the assets of Cobra violate in any 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, or substances
(whether or not hazardous or toxic), including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C.
'9601 et seq.) (ACERCLA@), the Hazardous Materials Transportation Act (49 U.S.C.
'1801 et seq.) (AHMTA@), the Resource Conservation and Recovery Act (42 U.S.C.
'6901 et seq.) (ARCRA@), the Clean Water Act (33 U.S.C. 1251 et seq.), the Clean
Air Act (42 U.S.C. '7401 et seq.), the Toxic Substances Control Act (17 U.S.C.
'2601 et seq.), the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C.
'136 et seq.), the Safe Drinking Water Act (42 U.S.C. '201 and '300f et seq.),
the Rivers and Harbors Act (33 U.S.C. '401 et seq.), the Oil Pollution Act (33
U.S.C. '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 AApplicable Environmental Laws@), other than
violations that in the aggregate are not material to the business or operations
of Cobra; 2.1.17.4 Past Compliance. None of the operations or assets of Cobra
has ever been conducted or used in such a manner as to constitute a violation of
any of the Applicable Environmental Laws, other than violations that in the
aggregate are not material to the business or operations of Cobra; 2.1.17.5
Environmental Claims. No notice has been served on Cobra or either of the
Shareholders 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. Neither
of the Shareholders knows of any reason Cobra or their successors 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 of Cobra 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 Cobra, nor do polychlorinated biphenyls exist in
concentrations of 50 parts per million or more in electrical equipment owned or
being used by Cobra in the operations or on the properties of Cobra. 2.1.18.
Compliance with Other Laws. Cobra 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,
other than violations that in the aggregate are not material to the business or
operations of Cobra. 2.1.19. No ERISA Plans or Labor Issues; No Penalty for
Termination of Employee Compensation Plans. Cobra does not currently sponsor,
maintain or contribute to, and Cobra 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
(AERISA@). Cobra has not engaged in any unfair labor practices which could
reasonably be expected to result in a material adverse effect on the operations
or assets of Cobra. Except as described in Schedule 2.1.16 hereto, Cobra has no
dispute with any of the existing or former employees of Cobra. There are no
labor disputes or, to the knowledge of either of the Shareholders, any disputes
threatened by current or former employees of Cobra. There will not be any
penalty for the termination of any employee compensation plan listed on Schedule
2.1.8 for items in Section 2.1.8.7. 2.1.20. Investigations; Litigation. No
investigation or review by any governmental entity with respect to Cobra or any
of the transactions contemplated by this Agreement is pending or, to the
knowledge of either of the Shareholders, threatened, nor has any governmental
entity indicated to Cobra an intention to conduct the same, and there is no
action, suit or proceeding pending or, to the knowledge of either of the
Shareholders, threatened against or affecting Cobra 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 a material adverse change in
the financial condition, properties or business of Cobra. 2.1.21. Absence of
Certain Business Practices. Neither Cobra, nor any officer of Cobra, nor, to the
knowledge of either of the Shareholders, any employee or agent of Cobra or any
other person acting on behalf of Cobra, 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 Cobra (or to assist Cobra in
connection with any actual or proposed transaction) which (i) might subject
Cobra 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 materially
adverse effect on the assets, business or operations of Cobra, or (iii) if not
continued in the future, might materially and adversely affect the assets,
business operations or prospects of Cobra or which might result in liability to
Cobra in a private or governmental litigation or proceeding. 2.1.22. 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
Cobra in connection with the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby. 2.1.23.
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 Key and its counsel, without the intervention of any other person
as the result of any act of the Shareholders 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. 2.2. Investment Representations. Each of
the Shareholders acknowledges, represents and agrees that:
2.2.1. Shareholders Investment Suitability and Related Matters. (i) Key has
made available to the Shareholders the information and documents described in
Section 3.4. hereof, (ii) such Shareholder understands the risks associated with
ownership of Key Common Stock, and (iii) such Shareholder is capable of bearing
the financial risks associated with such ownership;
2.2.2. Key Shares Not Registered. The Key Shares have not been registered
under the Securities Act of 1933, as amended (the A Securities Act@), or
registered or qualified under any applicable state securities laws;
2.2.3. Reliance on Representations.
The Key Shares are being issued to such Shareholder in reliance upon exemptions
from such registration or qualification requirements, and the availability of
such exemptions depends in part upon such Shareholder=s bona fide investment
intent with respect to the Key Shares;
2.2.4. Investment Intent.
Such Shareholder's acquisition of the Key Shares is solely for his or her own
account for investment, and such 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;
2.2.5. Permitted Resale.
Such 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;
2.2.6. Investor Sophistication.
Such Shareholder has such knowledge and experience in financial and business
matters that he or she is capable of evaluating the merits and risks of an
investment in the Key Shares, and to make an informed investment decision with
respect thereto;
2.2.7. Availability of Information.
Such Shareholder has had the opportunity to ask questions of, and receive
answers from Key=s officers and directors concerning such 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 such
Shareholder deemed necessary in connection with making an informed investment
decision; and
2.2.8. Restrictive Legends.
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 (AACT@), 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.
ARTICLE 3
Representations and Warranties of Key
Key represents and warrants to each of the Shareholders as follows:
3.1. 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, except where the failure to be so
qualified or licensed would not have a material adverse effect on its financial
condition, properties or business.
3.2. 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 by Key will not conflict with or result in a
violation or breach of any term or provision of, or constitute a default under
(i) the Articles of Incorporation or Bylaws of Key or (ii) any obligation,
indenture, mortgage, deed of trust, lease, contract or other agreement to which
Key or any of its property is bound.
3.3. Capitalization.
The capitalization of Key consists of 25,000,000 shares of Key Common Stock, of
which as of the date hereof, 11,398,050 shares are issued and outstanding,
913,334 shares are reserved for issuance pursuant to stock options, 825,000
shares are reserved for issuance pursuant to outstanding warrants and 5,333,333
shares are reserved for issuance upon conversion of Key=s 7% Convertible
Subordinated Debentures (the AConvertible Debentures@). Pursuant to Key=s
Certificate of Incorporation, Key=s board of directors 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.
As of the date hereof, no shares have been so designated or issued. Except as
set forth in this Section 3.3., there are outstanding as of the date hereof (i)
no securities of Key or any other person convertible into or exchangeable or
exercisable for shares of capital stock or other voting securities of Key, and
(ii) no subscriptions, options, warrants, calls, rights obligating Key to issue,
deliver, sell, purchase, redeem or acquire shares of capital stock or other
voting securities of Key. All of the outstanding Key Common Stock is, and, when
issued, the Key Shares will be, validly issued, fully paid and nonassessable and
not subject to any preemptive right. As of the date hereof there is no, and at
the Closing Date there will not be any, stockholder agreement, voting trust, or
other agreement or understanding to which Key is a party or by which it is bound
relating to the voting of any shares of capital stock of Key.
3.4. Reports and Financial Statements.
Key has previously furnished to the Shareholders true and complete copies of (i)
Key=s annual report filed with the Securities and Exchange Commission (the
ACommission@) pursuant to the Securities and Exchange Act of 1934, as amended
(the AExchange Act@), for Key=s fiscal year ended June 30, 1996; (ii) Key=s
quarterly and other reports filed with the Commission since June 30, 1996; (iii)
all definitive proxy solicitation materials filed with the Commission since June
30, 1996; (iv) any registration statements (other than those relating to
employee benefit plans) declared effective by the Commission since June 30,
1996; and (v) Key=s Private Offering Memorandum dated June 28, 1996, relating to
the Convertible Debentures. All of the foregoing items are listed on Schedule
3.4 hereto (collectively, the AKey SEC Documents@). The consolidated financial
statements of Key and its consolidated subsidiaries included in Key=s most
recent report on Form 10-K and most recent report on Form 10-Q were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved and fairly present the consolidated financial
position of Key and its consolidated subsidiaries as of the dates thereof and
the consolidated results of their operations and changes in financial position
for the periods then ended; and the Key SEC Documents did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were, made not misleading. Since June 30, 1994,
Key has filed with the Commission all material reports, registration statements
and other material filings required to be filed with the Commission under the
rules and regulations of the Commission.
3.5. Absence of Certain Changes and Events in Key.
Since September 30, 1996, there has not been:
3.5.1. Financial Change.
Any material adverse change in the financial condition, backlog, operations,
assets, liabilities or business of Key; or
3.5.2. Other Material Changes.
Any other event or condition known to Key particularly pertaining to and
adversely affecting the operations, assets or business of Key, other than events
or conditions which are of a general or industry-wide nature and of general
public knowledge, or which have been disclosed in writing to the Shareholders.
3.6. Key=s Compliance with Other Laws.
Key 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 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 which would have a material
adverse affect upon its financial condition, properties or business.
3.7. 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 Key in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby, other than what is required by the American Stock Exchange
for the listing of the Key Shares issuable hereunder.
3.8. Investigations; Litigation.
No investigation or review by any governmental entity with respect to Key in
connection with any of the transactions contemplated by this Agreement is
pending or, to the best of Key=s knowledge, threatened, nor has any governmental
entity indicated to Key an intention to conduct the same. There is no action,
suit or proceeding pending or, to the best of Key=s knowledge, threatened
against or affecting Key by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, which either
individually or in the aggregate, does or is likely to result in any material
adverse change in the financial condition, properties or businesses of Key.
3.9. 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 Cobra and the
Shareholders 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.
3.10. Key=s Access to Cobra=s Assets and Records.
Key acknowledges that it is actively engaged in the same business as is Cobra,
that it has been afforded an opportunity to examine the assets and records of
Cobra, discuss Cobra=s business and operations with the Shareholders, and
investigate the condition of the assets of Cobra, and that Key is entering into
this Agreement on the basis of such investigation and the representations and
warranties of the Shareholders.
ARTICLE 4
Obligations Pending Closing Date
4.1. Agreements of Key and the Shareholders.
Except as expressly contemplated elsewhere in this Agreement, Key and the
Shareholders agree that from the date hereof until the Closing Date, Key will,
and the Shareholders will cause Cobra to (and unless otherwise indicated by the
context, since September 30, 1996, it has):
4.1.1. Maintenance of Present Business.
Operate its business only in the usual, regular, and ordinary manner so as to
maintain the goodwill it now enjoys and, to the extent consistent with such
operation, use all reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and employees,
and preserve its relationships with customers, suppliers, jobbers, distributors,
and others having business dealings with it;
4.1.2. Maintenance of Properties.
At its expense, maintain all of its property and assets in customary repair,
order, and condition, reasonable wear and tear excepted;
4.1.3. Maintenance of Books and Records.
Maintain its books of account and records in the usual, regular, and ordinary
manner, in accordance with generally accepted accounting principles applied on a
consistent basis;
4.1.4. Compliance with Law.
Duly comply in all material respects with all laws applicable to it and to the
conduct of its business;
4.1.5. Inspection.
Permit the other party hereto and their authorized representatives, during
normal business hours, to inspect its records and to consult with its officers,
employees, attorneys, and agents for the purpose of determining the accuracy of
the representations and warranties herein made and the compliance with covenants
contained in this Agreement. Each of the Shareholders and Key agrees that they
will and will cause their representatives to hold all data and information
obtained with respect to the other party, in confidence and further agrees that
they will not use such data or information or disclose the same to others,
except to the extent such data or information either are, or become, published
or a matter of public knowledge through the fault of its own; and
4.1.6. Notice of Material Developments.
Promptly notify the other party in writing of any Amaterial adverse change@ in,
or any changes which, in the aggregate, could result in a Amaterial adverse
change@ in, the consolidated financial condition, business or affairs of such
party, whether or not occurring in the ordinary course of business. As used in
this Agreement, the term Amaterial adverse change@ means any change, event,
circumstance or condition (collectively, a AChange@) which when considered with
all other Changes would reasonably be expected to result in a "loss" having the
effect of so fundamentally adversely affecting the business or financial
prospects of Key or Cobra, as the case may be, that the benefits reasonably
expected to be obtained by Key or Cobra, as the case may be, as a result of the
consummation of the transactions contemplated by this Agreement would be
jeopardized with relative certainty. The term "loss" shall mean any and all
direct or indirect payments, obligations, assessments, losses, loss of income,
liabilities, fines, penalties, costs and expenses paid or incurred or more
likely than not to be paid or incurred, or diminutions in value of any kind or
character (whether known or unknown, conditional or unconditional, choate or
inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute,
contingent or otherwise) that are more likely than not to occur, including
without limitation penalties, interest on any amount payable to a third party as
a result of the foregoing and any legal or other expenses reasonably incurred or
more likely than not to be incurred in connection with investigating or
defending any demands, claims, actions or causes of action that, if adversely
determined, would likely result in losses, and all amounts paid in settlement of
claims or actions; provided, that losses shall be net of any recoveries by Cobra
from third parties and any insurance proceeds Cobra is entitled to receive from
a nonaffiliated insurance company on account of such losses (after taking into
account any costs incurred in obtaining such proceeds and any increase in
insurance premiums as a result of a claim with respect to such proceeds); and
provided further, that a reduction of the trading price of the Key Common Stock
on the American Stock Exchange shall not, in and of itself, constitute a
material adverse change.
4.2. Additional Agreements of the Shareholders.
Except as expressly contemplated elsewhere in this Agreement, each of the
Shareholders agree that since the Balance Sheet Date, Cobra has not, and from
the date hereof until the Closing Date, they will not cause or permit Cobra to:
4.2.1. Prohibition of Certain Employment Contracts.
Enter into any contracts of employment which cannot be terminated on notice of
30 days or less or which provide for any severance payments or benefits covering
a period beyond the earlier of the termination date or notice thereof;
4.2.2. Prohibition of Certain Loans
Incur any borrowings which would exceed $50,000, in the aggregate, for any
purpose except (i) the refunding of indebtedness now outstanding, (ii) the
prepayment by customers of amounts due or to become due for services rendered or
to be rendered in the future, or (iii) as is otherwise approved in writing by
Key;
4.2.3. Prohibition of Certain Commitments.
Enter into commitments of a capital expenditure nature or incur any contingent
liabilities which would exceed $10,000 in the aggregate except (i) as may be
necessary for the maintenance of existing facilities, machinery and equipment in
good operating condition and repair in the ordinary course of business, or (ii)
as is otherwise approved in writing by Key;
4.2.4. Disposal of Assets.
Sell, dispose of, or encumber, any property or assets, except (i) in the usual
and ordinary course of business, (ii) property or assets which individually have
a value of less than $1,000; or (iii) as may be approved in writing by Key;
4.2.5. Maintenance of Insurance.
Discontinue its current level of insurance; provided, that if during the period
from the date hereof to and including the Closing Date any of its property or
assets are damaged or destroyed by fire or other casualty, the obligations of
Key and the Shareholders under this Agreement shall not be affected thereby, and
upon the Closing Date all proceeds of insurance and claims of every kind arising
as a result of any such damage or destruction shall remain the property of
Cobra; 4.2.6. Acquisition Proposals. Directly or indirectly (i) solicit,
initiate or encourage any inquiry or Acquisition Proposal from any person or
(ii) participate in any discussions or negotiations regarding, or furnish to any
person other than Key or its representatives any information with respect to, or
otherwise facilitate or encourage any Acquisition Proposal by any other person.
As used herein AAcquisition Proposal@ means any proposal for a merger,
consolidation or other business combination involving Cobra or for the
acquisition or purchase of any equity interest in, or a material portion of the
assets of, Cobra, other than the transactions with Key and the Shareholders
contemplated by this Agreement. Cobra shall promptly communicate to Key the
terms of any such written Acquisition Proposals which it may receive or any
written inquiries made to it or any of its directors, officers, representatives
or agents;
4.2.7. No Amendment to Articles of Incorporation.
Amend its Articles of Incorporation or merge or consolidate with or into any
other corporation or change in any manner the rights of its common stock or the
character of its business;
4.2.8. No Issuance, Sale, or Purchase of Securities.
Issue or sell, or issue options or rights to subscribe to, or enter into any
contract or commitment to issue or sell (upon conversion or otherwise), any
shares of Cobra Common Stock, or subdivide or in any way reclassify any shares
of Cobra Common Stock, or acquire, or agree to acquire, any shares of Cobra
Common Stock; and
4.2.9. Prohibition on Dividends.
Declare or pay any dividend on shares of Cobra Common Stock or make any other
distribution of assets to the holders thereof.
4.3. Agreements of Key.
Key agrees it will:
4.3.1. No Amendment to Articles of Incorporation.
Not amend its Articles of Incorporation or merge or with into any other
corporation or change in any manner the rights of the Key Shares; and
4.3.2. Notice of Material Developments.
Promptly furnish to the Shareholders copies of all Key=s communications to Key=s
stockholders and all reports filed by it with the Commission and the American
Stock Exchange, and relating to periodic or other material developments
concerning Key=s financial condition, business, or affairs.
ARTICLE 5
Conditions Precedent to Obligations
5.1. Conditions Precedent to Obligations of Shareholders.
The obligations of Shareholders to consummate and effect the transactions
contemplated hereunder shall be subject to the satisfaction of the following
conditions, or to the waiver thereof by Shareholders before the Closing Date:
5.1.1. Representations and Warranties of Key True at Closing Date. The
representations and warranties of Key herein contained shall be, in all material
respects, true as of and at the Closing Date with the same effect as though made
at such date, except as affected by transactions permitted or contemplated by
this Agreement; Key shall have performed and complied, in all material respects,
with all covenants required by this Agreement to be performed or complied with
by Key before the Closing Date; and Key shall have delivered to the Shareholders
a certificate, dated the Closing Date and signed by its vice president and its
secretary, to such effect.
5.1.2. No Material Litigation.
No suit, action, or other proceeding shall be pending, or to Key's knowledge,
threatened, before any court or governmental agency in which it will be, or it
is, sought to restrain or prohibit or to obtain damages or provide other relief
in connection with this Agreement or the consummation of the transactions
contemplated hereby or which might result in a material adverse change in the
value of the consolidated assets and business of Key.
5.1.3. Opinion of Key Counsel.
The Shareholders shall have received a favorable opinion, dated as of the
Closing Date, from Porter & Hedges, L.L.P., counsel for Key, in form and
substance satisfactory to the Shareholders, to the effect that (i) Key has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of Maryland; (ii) all corporate proceedings required
to be taken by or on the part of Key to authorize the execution of this
Agreement and the implementation of the transactions contemplated hereby have
been taken; (iii) the shares of Key Common Stock which are to be delivered in
accordance with this Agreement will, when issued, be validly issued, fully paid
and nonassessable outstanding securities of Key; (iv) this Agreement has been
duly executed and delivered by, and is the legal, valid and binding obligation
of Key and is enforceable against Key in accordance with its terms, except as
enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally. No
opinion need be expressed as to the enforceability of any indemnification
provisions of this Agreement. In rendering such opinion, such counsel may rely
upon (i) certificates of public officials and of officers of Key as to matters
of fact and (ii) the opinion or opinions of other counsel, which opinions shall
be reasonably satisfactory to the Shareholders, as to matters other than federal
or Texas law.
5.1.4. Consent of Certain Parties in Privity With Key. The holders of any
material indebtedness of Key, the lessors of any material property leased by
Key, and the other parties to any other material agreements to which Key are a
party shall, when and to the extent necessary in the reasonable opinion of the
Shareholders, have consented to the transactions contemplated hereby.
5.1.5. Employment Agreements.
Yale E. Key (a subsidiary of Key) shall have executed and entered into with the
Shareholders employment agreements described in Section 7.2 hereof.
5.1.6. Real Estate Agreements.
5.2. Conditions Precedent to Obligations of Key.
The obligation of Key to consummate and effect the transactions contemplated
hereunder shall be subject to the satisfaction of the following conditions, or
to the waiver thereof by Key before the Closing Date.
5.2.1. Representations and Warranties of Shareholders True at Closing Date. The
representations and warranties of the Shareholders herein contained shall be, in
all material respects, true as of and at the Closing Date with the same effect
as though made at such date, except as affected by transactions permitted or
contemplated by this Agreement; Cobra and the Shareholders shall have performed
and complied in all material respects, with all covenants required by this
Agreement to be performed or complied with by them before the Closing Date; and
Cobra and the Shareholders each shall have delivered to Key a certificate, dated
the Closing Date and signed by each of the Shareholders and by Cobra=s
president, chief financial or accounting officer, and secretary, as the case may
be, to such effects.
5.2.2. No Material Litigation.
No suit, action, or other proceeding shall be pending, or to the Shareholders=
knowledge, threatened, before any court or governmental agency in which it will
be, or it is, sought to restrain or prohibit or to obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby or which might result in a material adverse change in the
value of the assets and business of Cobra.
5.2.3. Opinion of Counsel.
Key shall have received a favorable opinion, dated the Closing Date, from Lynch,
Chappell & Alsup, a Professional Corporation, counsel to the Shareholders, in
form and substance satisfactory to Key, to the effect that (i) Cobra has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the state of New Mexico; (ii) all outstanding shares of the
Cobra Common Stock have been validly issued and are fully paid and
nonassessable; and (iii) this Agreement has been duly executed and delivered by,
and is the legal, valid and binding obligation of the Shareholders and is
enforceable against the Shareholders in accordance with its terms, except as the
enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally. No
opinion need be expressed as to the enforceability of any indemnification
provisions of this Agreement. In rendering such opinion, such counsel may rely
upon (i) certificates of public officials and of officers of Cobra or the
Shareholders as to matters of fact and (ii) on the opinion or opinions of other
counsel, which opinions shall be reasonably satisfactory to Key, as to matters
other than federal or Texas law.
5.2.4. Consent of Certain Parties in Privity with Cobra or the Shareholders. The
holders of any material indebtedness of Cobra or the Shareholders, the lessors
of any material property leased by Cobra or the Shareholders, and the other
parties to any other material agreements to which Cobra or the Shareholders are
a party shall, when and to the extent necessary in the reasonable opinion of
Key, have consented to the transaction contemplated hereby.
5.2.5. Employment Agreements.
The Shareholders shall have executed and entered into with Yale E. Key (a
subsidiary of Key) their respective employment Agreements described in Section
7.2 hereof.
5.2.6. Real Estate Agreements.
The Shareholders, or corporations owned by the Shareholders, shall have conveyed
to Cobra the real estate described on Schedule 5.1.6 under terms acceptable to
Key.
5.2.7. Completion of Due Diligence.
Key shall have completed and have been satisfied with the results of its due
diligence review of Cobra and its operations.
5.2.8. Environmental Restoration.
Notwithstanding the representations and warranties contained in Section 2.1.17
hereof, and notwithstanding the provisions of Section 8.1 which limit the
Shareholders= indemnification obligations to liabilities in excess of $150,000,
the Shareholders agree that if Key in good faith within 60 days of the Closing
Date determines that restoration activities are required to eliminate any
material environmental problem resulting in any violation of any Applicable
Environmental Laws that may exist as a result of the underground storage tank
that once existed at the property known as the Jal Yard and further described on
Schedule 2.1.17.1 hereof, then Cobra will conduct such restoration activities
for the account of the Shareholders who will reimburse Cobra for such
restoration costs within 30 days of receipt of the invoice relating thereto. As
used herein, Arestoration costs@ shall include, but not be limited to, the cost
of all investigations performed to determine that restoration activities must be
performed.
ARTICLE 6
Termination and Abandonment
6.1. Termination.
Anything contained in this Agreement to the contrary notwithstanding, this
Agreement may be terminated and the purchase and sale contemplated hereby
abandoned at any time before the Closing Date:
6.1.1. By Mutual Consent.
By mutual consent of Key and the Shareholders.
6.1.2. By Key Because of Failure to Perform Agreements or Conditions
Precedent
By Key, if the Shareholders have failed to perform any material agreement set
forth in Sections 4.1 or 4.2, or if any material condition set forth in Section
5.2 hereof has not been met, and such condition has not been waived.
6.1.3. By the Shareholders Because of Key=s Failure to Perform
Agreements or ConditionsPrecedent
By the Shareholders, if Key has failed to perform any material agreement set
forth in Sections 4.1 or 4.3 hereof, or if any material condition set forth in
Section 5.1 hereof has not been met, and such condition has not been waived.
6.1.4. By Key or by the Shareholders Because of Legal Proceedings. By either Key
or the Shareholders if any suit, action, or other proceeding shall be pending or
threatened by the federal or a state government before any court or governmental
agency, in which it is sought to restrain, prohibit, or otherwise affect the
consummation of the transactions contemplated hereby.
6.1.5. By Key Because of a Material Adverse Change.
By Key if there has been a material adverse change in the financial condition or
business of Cobra since the Balance Sheet Date.
6.1.6. By the Shareholders Because of a Material Adverse Change.
By the Shareholders if there has been a material adverse change in the financial
condition or business of Key since September 30, 1996.
6.1.7. By Key or by the Shareholders if No Closing by January 15, 1997. By
either Key or the Shareholders, if the Closing of the purchase and sale
contemplated hereby shall not have been consummated on or before January 15,
1997 through no fault of any party hereto; provided, however, that this
Agreement may not be terminated by any party hereto if the transactions
contemplated hereby have not occurred due to the breach of any provision of this
Agreement by the party desiring to terminate this Agreement.
6.2. Effect of Termination.
In the event of the termination and abandonment of this Agreement pursuant to
and in accordance with the provisions of Section 6.1 hereof, this Agreement
shall become void and have no effect, without any liability on the part of any
party hereto (or its stockholders or controlling persons or directors or
officers), except as otherwise provided in this Agreement; provided, however,
that a termination of this Agreement shall not relieve any party hereto from any
liability for damages incurred as a result of a breach by such party of its
representations, warranties, covenants, agreements, or other obligations
hereunder, occurring before such termination.
6.3. Waiver of Conditions.
Subject to the requirements of any applicable law, any of the terms or
conditions of this Agreement may be waived at any time by the party which is
entitled to the benefit thereof.
6.4. Expense on Termination.
If the transactions contemplated hereby are abandoned pursuant to and in
accordance with the provisions of Section 6.1 hereof, all expenses will be paid
by the party incurring them.
ARTICLE 7
Additional Agreements
7.1. Forgiveness of Notes.
At or before Closing, the Shareholders agree to forgive or convert to capital of
Cobra all principal and any accrued but unpaid interest on those certain
unsecured promissory notes made by Cobra and reflected on the Unaudited Balance
Sheet and held by Michael McDermett and Georgia McDermett, which promissory
notes are in the original principal amount of $1,000,000 and are further
described on Schedule 7.1 hereof.
7.2. Employment Agreements.
At the Closing, the Shareholders each agree to execute and enter into employment
agreements with Yale E. Key, Inc., a subsidiary of Key, pursuant to which each
of the Shareholders agree to work full time at Cobra for one year past the
Closing Date. Such employment agreements shall each include noncompetition
agreements satisfactory to Key pursuant to which each of the Shareholders agree
not to compete with Yale E. Key (or any of its affiliates) for five years from
the Closing Date in the geographic area covering Texas and New Mexico.
7.3. Registration Rights.
7.3.1. Agreement to Register Resales
Key agrees that no later than April 3, 1997, it will file with the Commission on
Form S-3, or if Form S-3 is not available to Key, on such other form as is
available to Key for registration of its securities under the Securities Act, a
shelf registration statement pursuant to Rule 415 of the Securities Act (the
AShelf Registration Statement@) covering the offer and resale by the
Shareholders of all the Key Shares and will use its best efforts to cause the
Shelf Registration Statement to be declared effective by July 3, 1997 by the
Commission.
7.3.2. Effectiveness of Shelf Registration Statement Key agrees to maintain the
Shelf Registration Statement in effect for the maximum period allowable under
the regulations promulgated by the Commission; provided that if such maximum
period is less than three years from the Closing Date and if as of the end of
such maximum period not all of the Key Shares registered under the Shelf
Registration Statement have been sold, then within 10 days after the end of such
maximum period Key shall file either a post-effective amendment to the existing
Shelf Registration Statement or a new Shelf Registration Statement covering the
offer and resale by the Shareholders of all Key Shares not previously sold, and
Key will use its best efforts to cause the same to be declared effective
promptly by the Commission and will maintain such Shelf Registration Statement
in effect until the third anniversary of the Closing Date. In addition, Key
shall amend the Shelf Registration Statement and supplement the prospectus
included therein as and when required by Form S-3 or the applicable form, or by
the Securities Act.
7.3.3. Blue Sky Qualification.
In any offering pursuant to this Section, Key will use its best efforts to
effect any such registration and use its best efforts to effect such
qualification and compliance as may be required and as would permit or
facilitate the resale of such Key Shares, including, without limitation,
registration under the Securities Act, appropriate qualifications under
applicable blue-sky or other state securities laws and, appropriate compliance
with any other governmental requirements.
7.3.4. Registration Expenses.
All expenses (except for any legal fees for the Shareholders= counsel) relating
to the registration of the Key Shares pursuant to this Agreement (including, but
not limited to, the expenses of any qualifications under the blue-sky or other
state securities laws and compliance with governmental requirements of preparing
and filing any post-effective amendments or prospectus supplements required for
the lawful distribution of the Key Shares to the public in connection with such
registration) will be paid by Key.
7.3.5. Preparation; Reasonable Investigation.
Key will give the Shareholders the opportunity to participate in the preparation
of the Shelf Registration Statement, each prospectus included therein or filed
with the Commission, and each amendment thereof or supplement thereto, and will
give the Shareholders such access to its books and records and such
opportunities to discuss the business of Key with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary to conduct a reasonable investigation within the meaning of
the Securities Act.
7.3.6. Rights Non-Transferable.
The registration rights provided by this Section 7.3 are for the sole benefit of
the Shareholders, are personal in nature, and shall not be available to any
subsequent holder of the Key Shares.
7.3.7. Undertaking to File Reports and Cooperate in Rule 144 and Rule 145
Transactions.
For as long as the Shareholders are subject to Rule 144 or Rule 145 of the
Securities Act with respect to the Key Shares, Key will use reasonable
commercial efforts to timely file all annual, quarterly and other reports
required to be filed by it under Section 13 or 15(d) of the Exchange Act and the
rules and regulations of the Commission thereunder, as amended from time to
time. If the Shareholders propose to sell any Key Shares pursuant to Rule 144
and 145, Key shall cooperate with the Shareholders so as to enable such sales to
be made in accordance with applicable laws, rules and regulations, the
requirements of Key's transfer agent, and the reasonable requirements of the
broker through which the sales are proposed to be executed. Without limiting the
generality of the foregoing, Key shall, upon request, furnish with respect to
each such sale (i) a written statement certifying that Key has complied with the
public information requirements of Rule 144 and 145 and (ii) an opinion of Key's
counsel regarding such matters as Key's transfer agent or such stockholder's
broker may reasonably desire to confirm.
7.4. 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.
7.5. Cobra Employees`.
The Shareholders will use their reasonable best efforts to make all of Cobra=s
employees remain in the employment of Cobra as of the Closing Date. On the
Closing Date, Yale E. Key, Inc. (a subsidiary of Key) will continue the
employment of the Cobra employees. All such employees hired by Yale E. Key shall
be entitled to participate in Yale E. Key=s employee benefit plans, including
Yale E. Key=s medical plan, and shall receive full credit thereunder for all
purposes for their years of service at Cobra. With respect to any preexisting
condition, limitations or similar provisions contained in Yale E. Key=s medical
plan, service with Cobra shall be treated as service with Yale E. Key, and for
the purpose of determining deductibles, copayments and out-of-pocket maximums
under Yale E. Key=s plans for 1997, such former Cobra employees shall be given
credit under Yale E. Key=s medical plan for any back deductibles, copayments and
out-of-pocket maximums made by a former Cobra employee or his or her dependents
with respect to coverage under the medical plan sponsored by Cobra during 1997.
Notwithstanding the foregoing, only those Cobra employees who are covered by
Cobra=s medical plan as of the Closing Date shall be entitled to participate in
Yale E. Key=s medical plan after the Closing Date; provided, however, that Yale
E. Key, may, in its discretion, with any or all of Cobra employees who are not
covered by Cobra=s medical plan allow them to participate in Yale E. Key=s
medical plan, subject to the terms and conditions thereof.
7.6. Noncompetition.
Each of the Shareholders agrees that for a period of five years from the Closing
Date, such Shareholder 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 3% of any security of any
class of any corporation or other business entity (i) engage in competition with
the business or businesses conducted by Cobra, Key or any affiliate of Key as of
the Closing Date, or in any service business the services of which are provided
and marketed by Cobra, Key or any affiliate of Key as of the Closing Date, in
New Mexico or Texas; (ii) request any present customers or suppliers of Cobra to
curtail or cancel their business with Cobra, Key or any affiliate of Key; (iii)
disclose to any person, firm or corporation any trade, technical or
technological secrets of Cobra, Key or any affiliate of Key or any details of
their organization or business affairs or (iv) induce or actively attempt to
influence any employee of Cobra, Key or any affiliate of Key to terminate his
employment. Each of the Shareholders agrees that if either the length of time or
geographical area set forth in this Section 7.6 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
7.6 are in addition to any other obligations that the Shareholders may have
under the laws of the State of New Mexico 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. Each of the Shareholders further
agrees and acknowledges that Cobra, Key and its affiliates do not have any
adequate remedy at law for the breach of threatened breach by such Shareholder
of this covenant, and agree that Cobra, Key or any affiliate of Key may, in
addition to the other remedies which may be available to it hereunder, file a
suit in equity to enjoin such Shareholder from such breach or threatened breach.
If any provisions of this Section 7.6 are held to be invalid or against public
policy the remaining provisions shall not be affected thereby. Each of the
Shareholders acknowledges that the covenants set forth in this Section 7.6 are
being executed and delivered by such Shareholder in consideration of the
covenants of Key contained in this Agreement, and for other good and valuable
consideration, receipt of which is hereby acknowledged.
7.7. Stock Certificate Issuance.
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 one or more
certificates representing the Key Shares in the names of the Shareholders in
accordance with written instructions signed by each of the Shareholders and
deliver such certificate(s) to the Shareholders at the address specified in
Section 9.5 hereof.
7.8. Releases.
Following the Closing, Key agrees to repay in full the loan which Cobra has with
the Small Business Administration and is listed on Schedule 2.1.8.13 hereof.
With regard to any other indebtedness of Cobra which the Shareholders have
personally guaranteed, after the Closing, Key and Cobra shall use their
reasonable efforts to secure the release of any personal guaranties the
Shareholders have made with respect to Cobra=s indebtedness; provided, however,
neither Key nor Cobra shall have any obligation to prepay any such indebtedness
in order to secure such releases.
ARTICLE 8
Indemnification
8.1. Indemnification by the Shareholders.
In addition to an other remedies available to Key under this Agreement, or at
law or in equity, each of the Shareholders shall jointly and severally
indemnify, defend and hold harmless Key, and its officers, directors, employees,
agents, and stockholders, against and with respect to any and all claims, costs,
damages, losses, expenses, obligations, liabilities, recoveries, suits, causes
of action and deficiencies, including interest, penalties and reasonable
attorneys= fees and expenses in excess of $150,000 in the aggregate
(collectively, the ADamages@) that such indemnitees shall incur or suffer, which
arise, result from or relate to any breach of, or failure by, 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 Key by the Shareholders under this
Agreement; provided however, that the Shareholders= aggregate obligations to
indemnify Key and the other parties identified above shall never exceed the
aggregate sum of $7,100,000; further provided, however, that the Shareholders
shall not be required to so indemnity, defend and hold harmless Key and its
officers, directors, employees, agents and stockholders, against and with
respect to any Damages incurred as a result of a breach by any of the
Shareholders of their respective representations and warranties in this
Agreement or in any schedule, certificate, exhibit or other instrument furnished
or delivered to Key by any of the Shareholders under this Agreement for which
Key fails to provide written notice of a claim for such Damages to the
Shareholders on or before the expiration of the survival period (as specified in
Section 9.2 hereof) of the specific representation or warranty alleged to have
been breached.
8.2. Indemnification by Key.
In addition to any other remedies available to the Shareholders under this
Agreement, or at law or in equity, Key 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 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 the
Shareholders by or on behalf of Key under this Agreement; provided, however,
that Key shall not be required to so indemnify, defend and hold harmless the
Shareholders and their employees and agents against and with respect to any
Damages incurred as a result of a breach by Key of any of its representations
and warranties in this Agreement or in any schedule, certificate, exhibit or
other instrument furnished or delivered to the Shareholders by Key under this
Agreement for which the Shareholders fail to provide written notice of a claim
for such Damages to Key on or before the expiration of the survival period (as
is specified in Section 9.2 hereof) of the specific representations or warranty
alleged to have been breached.
8.3. Additional Indemnification by Key.
In addition, Key will indemnify, defend and hold harmless the Shareholders
against any claims to which the Shareholders may become subject under the
Securities Act or otherwise, insofar as such claims (or actions or proceedings
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Shelf Registration Statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and Key will reimburse the Shareholders for any legal or
any other expenses reasonably incurred by them in connection with investigating
or defending any such claim (or action or proceeding in respect thereof);
provided that Key shall not be liable in any such case to the extent that a
claim (or action or proceeding in respect thereof) arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such Shelf Registration Statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to Key, in an
instrument duly executed by the Shareholders specifically stating that it is for
use in the preparation thereof.
8.4. Indemnification Procedures.
If any party hereto discovers or otherwise becomes aware of a claim for Damages
arising under this Article 8, 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
Damages arising under this Article 8 may be made, 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, and the expenses of such defense shall 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.
ARTICLE 9
Miscellaneous
9.1. Press Releases.
The Shareholders agree that they will not cause or permit Cobra to, make any
public statement or announcement concerning this Agreement or the transactions
contemplated herein without the prior consent of Key, subject, however, to the
right of any party to make such an announcement when in the opinion of its
counsel such public statement or announcement is legally required.
9.2. Survival of Representations, Warranties and Covenants. All representations
and warranties made by the parties hereto shall survive for a period of 24
months from the Closing Date, 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 24 months from the Closing Date
despite any investigation made by any party hereto or on its behalf. All
covenants and agreements contained herein shall survive as provided herein.
9.3. 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.
9.4. 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.
9.5. 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 Key: -----------------------------------------------------------
- --------------------------------------------------------
Addressed to: With a copy to:
- -----------------------------------------------------------
- --------------------------------------------------------
- -----------------------------------------------------------
- --------------------------------------------------------
Key Energy Group, Inc. Porter & Hedges, L.L.P.
Two Tower Center, Tenth Floor 700 Louisiana, 35th Floor
East Brunswick, New Jersey 08816 Houston, Texas 77210-4744
Attention: Jack D. Loftis Attention: Samuel N. Allen
Facsimile: (908) 247-5148 Facsimile: (713) 228-1331
- ----------------------------------- --------------------------------------------
If to any Shareholder:
- -------------------------------- -----------------------------------------------
Addressed to: With a copy to:
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Michael and Georgia McDermett Lynch, Chappell & Alsup, a Professional
P.O. Box 9504 Corporation
Midland, Texas 79708-9504 Attention: James M. Alsup
The Summit, Suite 700
300 North Marienfeld
Midland, Texas 79701
Facsimile: (915) 683-2587
- ----------------------------------- --------------------------------------------
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.
9.6 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.
9.7. Knowledge.
When the term Aknowledge@ is used in this Agreement, it shall mean the current
and actual knowledge of the person or entity to which such knowledge is
attributable.
9.8. 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.
9.9. 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.
9.10. 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 Key has
caused this Agreement to be signed in its corporate name by its duly authorized
representative, all as of the day and year first above written.
Key Energy Group, Inc.
By:
C. Ron Laidley, Vice President
Shareholders
Michael McDermett
Georgia McDermett
- --------------------------------------------------------------------------------
I:\PBOOKER\JMA\Key Energy Group\Cobra Stock Purchase Agreement.wpd
SCHEDULE 3.4
KEY SEC DOCUMENTS OF KEY ENERGY GROUP, INC.
1. Form 10-K. Annual Report of Key Energy Group, Inc. for fiscal year ended June
30, 1996. 2. Form 10-Q. Quarterly Report of Key Energy Group, Inc. for the
quarterly period ended September 30, 1996. 3. Form 8-K. Current Report of Key
Energy Group, Inc., dated July 3, 1996. 4. Form 8-K. Current Report of Key
Energy Group, Inc., dated September 16, 1996. 5. Notice of 1996 Annual Meeting
of Stockholders to be held on December 9, 1996; and Proxy Statement for the 1996
Annual Meeting of Stockholders to be held on December 9, 1996. 6. Private
Offering Memorandum, dated June 28, 1996, relating to 7% Convertible
Subordinated Debentures Due 2003.
v
I:\PBOOKER\JMA\Key Energy Group\Cobra Stock Purchase Agreement.wpd
Table of Contents
Page No.
ARTICLE 1Purchase and Sale.....................................................1
1.1. Purchase and Sale of Cobra Shares.....................................1
1.2. Time and Place of Closing.............................................1
ARTICLE 2 Representations and Warrantiesof the Shareholders............2
2.1. Representations and Warranties of the Shareholders....................2
2.1.1. Organization and Standing....................................2
2.1.2. Agreement Authorized and its Effect on Other Obligations.....2
2.1.3. Capitalization of Cobra......................................2
2.1.4. Ownership of Cobra Shares....................................3
2.1.5. No Subsidiaries..............................................3
2.1.6. Financial Statements.........................................3
2.1.7. Liabilities..................................................3
2.1.8. Additional Information.......................................4
2.1.8.1 Real Estate.........................................4
2.1.8.2 Machinery and Equipment.............................4
2.1.8.3 Receivables.........................................4
2.1.8.4 Payables............................................4
2.1.8.5 Insurance...........................................4
2.1.8.6 Contracts...........................................4
2.1.8.7 Employee Compensation Plans.........................4
2.1.8.8 Certain Salaries....................................5
2.1.8.9 Bank Accounts.......................................5
2.1.8.10 Employee Agreements................................5
2.1.8.11 Intellectual Property..............................5
2.1.8.12 Trade Names........................................5
2.1.8.13 Promissory Notes...................................5
2.1.8.14 Guaranties.........................................5
2.1.8.15 Leases.............................................5
2.1.8.16 Environment........................................5
2.1.9. No Defaults..................................................5
2.1.10. Absence of Certain Changes and Events........................6
2.1.10.1 Financial Change...................................6
2.1.10.2 Property Damage....................................6
2.1.10.3 Dividends..........................................6
2.1.10.4 Capitalization Change..............................6
2.1.10.5 Labor Disputes.....................................6
2.1.10.6 Other Material Changes.............................6
2.1.11. Taxes........................................................6
2.1.12. Intellectual Property........................................7
2.1.13. Title to and Condition of Assets.............................7
2.1.14. Contracts....................................................8
2.1.15. Licenses and Permits.........................................8
2.1.16. Litigation...................................................8
2.1.17. Environmental Compliance.....................................8
2.1.17.1 Environmental Conditions...........................8
2.1.17.2 Permits, etc.......................................9
2.1.17.3 Compliance.........................................9
2.1.17.4 Past Compliance....................................9
2.1.17.5 Environmental Claims...............................9
2.1.17.6 Renewals..........................................10
2.1.17.7 Asbestos and PCBs.................................10
2.1.18. Compliance with Other Laws..................................10
2.1.19. No ERISA Plans or Labor Issues; No Penalty for Termination of
Employee Compensation Plans.................................10
2.1.20. Investigations; Litigation..................................10
2.1.21. Absence of Certain Business Practices.......................11
2.1.22. Consents and Approvals......................................11
2.1.23. Finder=s Fee................................................11
2.2. Investment Representations..............................................11
2.2.1. Shareholders Investment Suitability and Related Matters......11
2.2.2. Key Shares Not Registered....................................11
2.2.3. Reliance on Representations..................................11
2.2.4. Investment Intent...........................................12
2.2.5. Permitted Resale.............................................12
2.2.6. Investor Sophistication......................................12
2.2.7. Availability of Information..................................12
2.2.8. Restrictive Legends..........................................12
ARTICLE 3Representations and Warranties of Key................................13
3.1. Organization and Standing...............................................13
3.2. Agreement Authorized and its Effect on Other Obligations................13
3.3. Capitalization..........................................................13
3.4. Reports and Financial Statements........................................14
3.5. Absence of Certain Changes and Events in Key............................14
3.5.1. Financial Change.............................................14
3.5.2. Other Material Changes.......................................14
3.6. Key=s Compliance with Other Laws.......................................14
3.7. Consents and Approvals..................................................14
3.8. Investigations; Litigation...............................................15
3.9. Finder=s Fee............................................................15
3.10. Key=s Access to Cobra=s Assets and Records.............................15
ARTICLE 4Obligations Pending Closing Date.....................................15
4.1. Agreements of Key and the Shareholders..................................15
4.1.1. Maintenance of Present Business..............................15
4.1.2. Maintenance of Properties....................................15
4.1.3. Maintenance of Books and Records.............................16
4.1.4. Compliance with Law..........................................16
4.1.5. Inspection...................................................16
4.1.6. Notice of Material Developments..............................16
4.2. Additional Agreements of the Shareholders...............................17
4.2.1. Prohibition of Certain Employment Contracts..................17
4.2.2. Prohibition of Certain Loans.................................17
4.2.3. Prohibition of Certain Commitments...........................17
4.2.4. Disposal of Assets...........................................17
4.2.5. Maintenance of Insurance.....................................17
4.2.6. Acquisition Proposals........................................17
4.2.7. No Amendment to Articles of Incorporation....................18
4.2.8. No Issuance, Sale, or Purchase of Securities.................18
4.2.9. Prohibition on Dividends.....................................18
4.3. Agreements of Key.......................................................18
4.3.1. No Amendment to Articles of Incorporation....................18
4.3.2. Notice of Material Developments..............................18
ARTICLE 5 Conditions Precedent to Obligations................................18
5.1. Conditions Precedent to Obligations of Shareholders.....................18
5.1.1. Representations and Warranties of Key True at Closing Date...18
5.1.2. No Material Litigation.......................................19
5.1.3. Opinion of Key Counsel.......................................19
5.1.4. Consent of Certain Parties in Privity With Key...............19
5.1.5. Employment Agreements........................................19
5.1.6. Real Estate Agreements.......................................19
5.2. Conditions Precedent to Obligations of Key..............................20
5.2.1. Representations and Warranties of Shareholders True at Closing
Date.........................................................20
5.2.2. No Material Litigation.......................................20
5.2.3. Opinion of Counsel...........................................20
5.2.4. Consent of Certain Parties in Privity with Cobra or the
Shareholders.................................................20
5.2.5. Employment Agreements........................................21
5.2.6. Real Estate Agreements.......................................21
5.2.7. Completion of Due Diligence..................................21
5.2.8. Environmental Restoration....................................21
ARTICLE 6Termination and Abandonment..........................................21
6.1. Termination.............................................................21
6.1.1. By Mutual Consent............................................21
6.1.2. By Key Because of Failure to Perform Agreements or Conditions
Precedent....................................................21
6.1.3. By the Shareholders Because of Key=s Failure to Perform
Agreements or Conditions Precedent...........................22
6.1.4. By Key or by the Shareholders Because of Legal Proceedings...22
6.1.5. By Key Because of a Material Adverse Change..................22
6.1.6. By the Shareholders Because of a Material Adverse Change.....22
6.1.7. By Key or by the Shareholders if No Closing by January 15,
1997.........................................................22
6.2. Effect of Termination...................................................22
6.3. Waiver of Conditions....................................................22
6.4. Expense on Termination..................................................22
6.5 Additional Agreements ..................................................23
7.1. Forgiveness of Notes....................................................23
7.2. Employment Agreements...................................................23
7.3. Registration Rights.....................................................23
7.3.1. Agreement to Register Resales................................23
7.3.2. Effectiveness of Shelf Registration Statement................23
7.3.3. Blue Sky Qualification.......................................23
7.3.4. Registration Expenses........................................24
7.3.5. Preparation; Reasonable Investigation........................24
7.3.6. Rights Non-Transferable......................................24
7.3.7. Undertaking to File Reports and Cooperate in Rule 144 and Rule
145 Transactions............................................24
7.4. Further Assurances......................................................24
7.5. Cobra Employees.........................................................25
7.6. Noncompetition..........................................................25
7.7. Stock Certificate Issuance..............................................26
7.8. Releases................................................................26
ARTICLE 8Indemnification......................................................26
8.1. Indemnification by the Shareholders.....................................26
8.2. Indemnification by Key..................................................27
8.3. Additional Indemnification by Key.......................................27
8.4. Indemnification Procedures..............................................27
ARTICLE 9Miscellaneous........................................................28
9.1. Press Releases..........................................................28
9.2. Survival of Representations, Warranties and Covenants...................28
9.3. Entirety................................................................29
9.4. Counterparts............................................................29
9.5. Notices and Waivers.....................................................29
9.6. Table of Contents and Captions..........................................29
9.7. Knowledge...............................................................30
9.8. Successors and Assigns..................................................30
9.9. Severability............................................................30
9.10. Applicable Law.........................................................30