Asset Purchase Agreement
among
Key Four Corners, Inc.,
Colorado Well Service, Inc.
and
Keith Poole
July 10, 1998
TABLE OF CONTENTS
ARTICLE 1 Purchase and Sale of Assets 1
1.1 Purchase and Sale of the Assets 1
1.2 Excluded Assets 2
1.3 Consideration for Assets 3
1.4 Liabilities 3
1.5 Closing 3
1.6 Closing Deliveries 3
1.6.1 Opinion of Buyer's Counsel 3
1.6.2 Opinion of Seller's Counsel. 4
ARTICLE IIRepresentations and Warranties 4
2.1 Representations and Warranties of
the Seller and the Shareholders 4
2.1.1 Organization and Good Standing 4
2.1.2 Agreement Authorized and Effect
on Other Obligations. 4
2.1.3 Contracts 5
2.1.4 Title to Assets 5
2.1.5 Licenses and Permits 5
2.1.6 Intellectual Property 6
2.1.7 Financial Statements 6
2.1.8 Absence of Certain Changes and Events 6
(a) Financial Change 6
(b) Property Damage 6
(c) Waiver 6
(d) Change in Assets 6
(e) Labor Disputes 7
(f) Other Changes 7
2.1.9 Necessary Consents 7
2.1.10 Environmental Matters 7
2.1.11 Termination of the Colorado Well Service,
Inc. Profit Sharing Plan and Trust 8
2.1.12 Investigations; Litigation8
2.1.13 Absence of Certain Businesses Practices 9
2.1.14 Solvency 9
2.1.15 Finder's Fee 9
2.1.16 Taxes 9
2.2 Representations and Warranties of Buyer 9
2.2.1 Organization and Good Standing 10
2.2.2 Agreement Authorized and its Effect
on Other Obligations 10
2.2.3 Consents and Approvals 10
2.2.4 Finder's Fee 10
2.2.5 Non-Forecasts 10
ARTICLE III Additional Agreements 11
3.1 Noncompetition. 11
3.2 Hiring Employees 11
3.3 Allocation of Purchase Price 12
3.4 Name Change 12
3.5 Budget Agreement 12
3.6 Acknowledgment of Adequate Considerations 12
3.7 Lease Agreement 12
3.8 Further Assurances 13
ARTICLE IV Indemnification 13
4.1 Indemnification by the Seller
and the Shareholder 13
4.2 Indemnification by Buyer 13
4.3 Indemnification Procedure 13
ARTICLE V Miscellaneous 14
5.1 Survival of Representations,
Warranties and Covenants 14
5.2 Entirety 15
5.3 Counterparts. 15
5.4 Notices and Waivers. 15
5.5 Captions. 15
5.6 Successors and Assigns. 16
5.7 Severability. 16
5.8 Applicable Law. 16
5.9 Non Disclosure of Purchase Price 16
Asset Purchase Agreement
This Asset Purchase Agreement (this "Agreement") is entered into as of July 10,
1998 among Key Four Corners, Inc., a Delaware corporation (the "Buyer"),
Colorado Well Service, Inc., a Colorado corporation (the "Seller") and Keith
Poole (the "Shareholder").
RECITATIONS
The Seller desires to sell substantially all of its assets, and Buyer desires to
acquire such assets.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements, and subject to the terms
and conditions herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
Purchase and Sale of Assets
1.1 Purchase and Sale of the Assets. Subject to the terms and conditions set
forth in this Agreement, the Seller hereby agrees to sell, convey, transfer,
assign and deliver to Buyer effective as of 11:59 P.M. Colorado time (the
"Effective Time") on the date of delivery and payment of the cash consideration
set forth in Section 1.3 hereof, but in no event later than July 15, 1998 (the
"Closing Date"), all of the assets of the Seller existing as of the Effective
Time other than the Excluded Assets (defined below), whether real, personal,
tangible or intangible, including, without limitation, the following assets
owned by the Seller relating to or used or useful in the operation of the
business as conducted by the Seller on and before the Effective Time (the
"Business") (all such assets being sold hereunder are referred to collectively
herein as the "Assets"):
(a) all tangible personal property owned by Seller (such as machinery,
equipment, leasehold improvements, furniture and fixtures, and vehicles),
including, without limitation, that which is more fully described on
Schedule 1.1(a) hereto (collectively, the "Tangible Personal Property");
(a) all of the inventory owned by Seller, including without limitation, that
which is more fully described on Schedule 1.1(b) hereto (collectively, the
"Inventory");
(a) all of the Seller's intangible assets (the "Intangibles"), including
without limitation, (i) all of the Seller's rights to the name under which
it is incorporated or under which it currently does business, (ii) all of
the Seller's rights to any patents, patent applications, trademarks and
service marks (including registrations and applications therefor), trade
names, and copyrights and written know-how, trade secrets, licenses and
sublicenses and all other similar proprietary data and the goodwill
associated therewith (collectively, the "Intellectual Property") used or
held in connection with the Business, including without limitation, that
which is more fully described on Schedule 1.1(c) hereto (the "Seller
Intellectual Property"), (iii) the Seller's telephone numbers, and (iv) the
sales and promotional literature, computer software, customer and supplier
lists and all other records of the Seller relating to the Assets or the
Business, excluding the corporate minute books, accounting records, files,
tax returns and other financial data on whatever media, relating to the
Seller or the Shareholder or the Excluded Assets (the "Retained Records");
(a) those leases, subleases, contracts, contract rights and agreements relating
to the Assets or the operation of the Business listed on Schedule 1.1(d)
hereto (collectively, the "Contracts");
(a) all of the permits, exemptions from permit requirements, authorizations,
certificates, approvals, registrations, variances, waivers, exemptions,
rights-of-way, franchises, ordinances, orders, licenses and other rights of
every kind and character (collectively, the "Permits") relating to all or
any of the Assets or to the operation of the Business, including, but not
limited to, those that are more fully described on Schedule 1.1(e) hereto;
(a) the goodwill and going concern value of the Business; and
(g) all other or additional privileges, rights, interests, properties and
assets of the Seller of every kind and description and wherever located
that are used in the Business or intended for use in the Business in
connection with, or that are necessary for the continued conduct of, the
Business.
1.2 Excluded Assets. The Assets shall not include the following (collectively,
the "Excluded Assets"): (i) all of the Seller's accounts receivable and all
other rights of the Seller to receive payment for services rendered by the
Seller before the Effective Time; (ii) all cash accounts of the Seller, all
petty cash of the Seller kept on hand for use in the Business and all
investments, investment accounts, notes receivable and other accounts maintained
by the Seller at financial institutions; (iii) all other receivables and prepaid
expenses, including all right, title and interest of the Seller in and to any
prepaid expenses, bonds, deposits and other current assets relating to any of
the Assets or the Businesses; (iv) the Retained Records; (v) the cash
consideration paid or payable by Buyer to Seller pursuant to Sections 1.3 and
3.1 hereof; and (vi) the other assets described in Schedule 1.2 attached hereto.
1.3 Consideration for Assets. As consideration for the sale of the Assets to
Buyer and for the other covenants and agreements of the Seller and the
Shareholder contained herein, Buyer agrees to pay on the Closing Date, the sum
of Six Million, Four Hundred Eighty Thousand Dollars ($6,480,000) to Seller by
wire transfer of immediately available funds to an account designated by the
Seller or by delivery of immediately available funds.
1.4 Liabilities. Effective as of the Effective Time, Buyer shall assume those,
and only those, (a) liabilities and obligations of the Seller to perform the
Contracts to the extent that the Contracts (i) are not in default on the
Effective Time (other than by reason of defaults caused by not having required
consents to assignment) and (ii) have either been duly assigned to Buyer or, if
not so assigned, Buyer has performed or rendered services under such Contracts
after the Effective Time, and (b) the obligations of Seller expressly assumed by
Buyer as described and set forth in Section 3.2 hereof (the "Assumed
Liabilities"). On and after the Effective Date, the Seller shall be responsible
for any and all liabilities and obligations of the Seller other than the Assumed
Liabilities, including, without limitation, (a) any obligations arising from the
Seller's employment of those employees of the Seller listed on Schedule 3.2
hereto (other than those expressly assumed by Buyer as set forth on Schedule 3.2
hereto); (b) any liabilities arising from or relating to Seller's failure to be
duly qualified or licensed to do business and in good standing as a foreign
corporation in all jurisdictions in which the character of the properties owned
or the nature of the business conducted by Seller would make such qualification
or licensing necessary; (c) any failure to pay any taxes owed by Seller which
are applicable to the period ending with the Effective Time; (d) any liabilities
arising out of any matters listed on Schedules 2.1.10 and 2.1.12 hereto; (e) any
liability incurred by the Seller or the Shareholder for commission or other fees
payable to brokers, attorneys or others; and (f) any other liabilities resulting
from Seller's operation of the Assets or conduct of its business before the
Effective Time (collectively, the "Retained Liabilities").
1.5 Closing. The closing of the purchase and sale provided for hereunder (the
"Closing") shall take place on the Closing Date, at the offices of Williams,
Turner & Holmes, P.C., 200 N. 6th Street, Grand Junction, Colorado.
1.6 Closing Deliveries. At the Closing, in addition to the conveyances of the
Assets to the Buyer in exchange for the Purchase Price, Buyer and Seller will
deliver to one another the following:
1.6.1 Opinion of Buyer's Counsel. The Seller shall have received a favorable
opinion, dated as of the Closing Date, from Lynch, Chappell & Alsup, P.C.,
counsel for Buyer, in the form attached hereto as Schedule 1.6.1. In rendering
such opinion, such counsel may rely upon (x) certificates of public officials
and of officers or Buyer as to the matters of fact and (y) the opinion or
opinions of other counsel, which opinions shall be reasonably satisfactory to
the Seller, as to matters other than federal or Colorado law.
1.6.2 Opinion of Seller's Counsel. The Buyer shall have received a favorable
opinion, dated as of the Closing Date, from Williams, Turner & Holmes, P.C.,
counsel to Seller and the Shareholder, in the form of that attached hereto as
Schedule 1.6.2. In rendering such opinion, such counsel may rely upon (x)
certificates of public officials and of officers of the Seller as to the matters
of fact and (y) on the opinion or opinions of other counsel, which opinions
shall be reasonably satisfactory to Buyer, as to matters other than federal or
Colorado law.
1.6.3 Consent to Sublease. The Buyer shall have received a consent, in form and
substance satisfactory to the Buyer, consenting to the execution and delivery of
the Sublease Agreement described in Section 3.7 hereof.
1.7 Post-Closing Adjustments. With respect to accounts receivable and all other
rights of the Seller to receive payment for services rendered by the Seller
before the Effective Time which have not been invoiced by Seller prior to the
Effective Time, Buyer shall invoice all such receivables and services as an
accomodation to Seller, and Buyer will account to Seller for all amounts paid to
Buyer thereon (less any expenses authorized by Seller to be paid on Seller's
behalf by Buyer) upon the expiration of thirty (30) days (the "First Settlement
Date") and sixty (60) days (the "Second Settlement Date") following the
Effective Time (with any such accounts as are unpaid as of the Second Settlement
Date to be surrendered by Buyer to Seller upon request by Seller). In addition,
on the First Settlement Date, Buyer will pay Seller an additional amount equal
to the amounts paid by Seller for equipment purchases made by Seller after May
12, 1998, and before the date hereof which expand the capabilities of the
Business and which are described on Schedule 1.7 hereto, less any amounts
representing Seller's obligations to its employees which have been expressly
assumed by Buyer as set forth on Schedule 3.2 hereto.
ARTICLE II
Representations and Warranties
2.1 Representations and Warranties of the Seller and the Shareholder. As of the
Closing and the Effective Time, the Seller and the Shareholder jointly and
severally represent and warrant to Buyer as follows:
2.1.1 Organization and Good Standing. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado,
is qualified to do business in Wyoming, Utah and Nevada and in each other state
in which the nature and conduct of its business requires it to be qualified to
do business and has full requisite corporate power and authority to carry on its
businesses as it is currently conducted and to own and operate the properties
currently owned and operated by it. The Shareholder owns all of the issued and
outstanding shares of the Seller's capital stock and has the sole right to vote
the same.
2.1.2 Agreement Authorized and Effect on Other Obligations. The execution and
delivery of this Agreement and all instruments to be executed by Seller and the
Shareholder hereunder have been authorized by all necessary corporate,
shareholder and other action on the part of the Seller and the Shareholder and
this Agreement and all instruments to be executed by the Seller and the
Shareholder hereunder are the valid and binding obligations of the Seller and
the Shareholder enforceable (subject to normal equitable principals) against
each of such parties in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, debtor relief or
similar laws affecting the rights of creditors generally. The execution,
delivery and performance of this Agreement and all instruments to be executed by
the Seller and the Shareholder hereunder and the consummation of the
transactions contemplated hereby and thereby, 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 (or other organizational
documents) of the Seller, (ii) except as set forth on Schedule 2.1.9 hereto, any
obligation, indenture, mortgage, deed of trust, lease, contract or other
agreement to which the Seller or the Shareholder is a party or by which the
Seller or the Shareholder or their respective properties are bound; or (iii) to
the their knowledge, any provision of any law, rule, regulation, order, permits,
certificate, writ, judgment, injunction, decree, determination, award or other
decision of any court, arbitrator or other governmental authority to which the
Seller or the Shareholder, or any of their respective properties are subject.
2.1.3 Contracts. Schedule 1.1(d) hereto sets forth a complete list of all
contracts, including leases under which the Seller is lessor or lessee, which
relate to the Assets. In addition, except as set forth on Schedule 1.1(d) hereto
(a) all of the Contracts are in full force and effect, and constitute valid and
binding obligations of the Seller, (b) except as set forth on Schedule 2.1.9
hereto, the Seller is not, and to the knowledge of the Seller and the
Shareholder, no other party to any of the Contracts is, in default thereunder,
and no event has occurred which (with or without notice, lapse of time, or the
happening of any other event) would constitute a default thereunder, (c) no
Contract has been entered into on terms which could reasonably be expected to
have an adverse effect on the use of the Assets by Buyer for the same purpose as
they were used by the Seller prior to the Closing Date, (d) neither the Seller
nor the Shareholder has received any information which would cause any of such
parties to conclude that any customer of the Seller will (or is likely to) cease
doing business with Buyer (or its successors) as a result of the consummation of
the transactions contemplated hereby.
2.1.4 Title to Assets. The Seller has good, indefeasible and marketable title to
all of the Assets, free and clear of any Encumbrances (defined below) except as
set forth in Schedule 2.1.4 hereto. Except as set forth in Schedule 1.1(a) and
Schedule 2.1.4 hereto, all of the Assets are (a) in a state of good repair,
ordinary wear and tear excepted, (b) are free from any known defects except as
may be repaired by routine maintenance and such minor defects as do not
substantially interfere with the continued use thereof in the conduct of normal
operations and (c) to the knowledge of the Seller and the Shareholder, conform
to all applicable laws governing their use. No notice of any violation of any
law, statute, ordinance or regulation relating to any of the Assets has been
received by the Seller or the Shareholder, except such as have been fully
complied with. The term "Encumbrances" 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, taxes, privileges, equities, easements, rights of way, limitations,
reservations, restrictions and other encumbrances of any kind or nature.
2.1.5 Licenses and Permits. Schedule 1.1(e) hereto sets forth a complete list of
all Permits necessary under law or otherwise for the operation, maintenance and
use of the Assets in the manner in which they are now being operated, maintained
and used; each of the Permits and the Seller's rights with respect thereto is
valid and subsisting, in full force and effect, and enforceable by the Seller;
the Seller is in compliance in all material respects with the terms of each of
the Permits; none of the Permits have been, or to the knowledge of the Seller or
the Shareholder, are threatened to be, revoked, canceled, suspended or modified
(although certain of the Permits (as identified on Schedule 1.1(e) hereto) shall
expire as of June 30, 1998).
2.1.6 Intellectual Property. Schedule 1.1(c) hereto sets forth a complete list
of all Seller Intellectual Property material or necessary for the continued use
of the Assets; the Seller Intellectual Property is owned or licensed by the
Seller free and clear of any Encumbrances; the Seller has not granted to any
other person any license to use any Seller Intellectual Property and use of the
Seller Intellectual Property will not, and the conduct of the Business did not,
to the knowledge of the Seller and the Shareholder, infringe, misappropriate or
conflict with the Intellectual Property rights of others. Neither the Seller or
the Shareholder has received any notice of infringement, misappropriation or
conflict with the Intellectual Property rights of others in connection with the
use by Seller of the Seller Intellectual Property.
2.1.7 Financial Statements. The Seller has delivered to Buyer a copy of Seller's
unaudited statement of income for the four (4) month period ended April 30,
1998, a copy of which is attached hereto as Schedule 2.1.7 (the "Seller's
Statement of Income"); the Seller's Statement of Income is true, correct and
complete in all material respects and presents fairly and fully the income and
expenses of the Seller as at the date and for the periods indicated thereon, and
except as set forth on Schedule 2.1.7 hereto has been prepared in accordance
with generally accepted accounting principles as promulgated by the American
Institute of Certified Public Accountants ("GAAP") applied on a consistent basis
and the Seller's Statement of Income includes all adjustments which are
necessary for a fair presentation of the Seller's income and expenses for the
period indicated.
2.1.8 Absence of Certain Changes and Events. Since April 30, 1998, there has not
been:
(a) Financial Change. Any adverse change in the Assets, the Business or the
financial condition, operations, liabilities or prospects of the Seller,
except as set forth on Schedule 2.1.8(d);
(b) Property Damage. Any damage, destruction, or loss to any of the Assets or
the Business (whether or not covered by insurance);
(c) Waiver. Any waiver or release of a material right of or claim held by the
Seller;
(d) Change in Assets. Any acquisition, disposition, transfer, encumbrance,
mortgage, pledge or other encumbrance of any asset of the Seller except as
set forth on Schedule 2.1.8(d) hereto or as otherwise made in the ordinary
course of business;
(e) Labor Disputes. Any labor disputes between the Seller and its employees; or
(f) Other Changes. Any other event or condition known to the Seller or the
Shareholder that particularly pertains to and has or might have an adverse
effect on the Assets, the operations of the Business or the financial
condition or prospects of the Seller, except as expressly noted on Schedule
2.1.8(d) hereto.
2.1.9 Necessary Consents. The Seller has obtained and delivered to Buyer all
consents to assignment or waivers thereof required to be obtained from any
governmental authority or from any other third party in order to validly
transfer the Assets hereunder, including, without limitation, the Contracts and
the Seller Permits, except as expressly noted on Schedule 2.1.9 hereto.
2.1.10 Environmental Matters. (a) Except as described in a letter dated July 6,
1998 from Mesa Environmental, Inc. to Donna Stoner of the Colorado Department of
Health and Environment, Grand Junction, Colorado (the "Mesa Environmental
Letter"), none of the current or past operations of the Business or any of the
Assets are being or have been conducted or used in such a manner as to
constitute a violation of any Environmental Law (defined below); except as
described in the Mesa Environmental Letter, neither the Seller or the
Shareholder has received any notice (whether formal or informal, written or
oral) from any entity, governmental agency or individual regarding any existing,
pending or threatened investigation or inquiry related to violations of any
Environmental Law or regarding any claims for remedial obligations or
contribution for removal costs or damages under any Environmental Law; there are
no writs, injunction decrees, orders or judgments outstanding, or lawsuits,
claims, proceedings or investigations pending or, to the knowledge of the Seller
or the Shareholder, threatened relating to the ownership, use, maintenance or
operation of the Assets or the conduct of the Business, nor, to the knowledge of
the Seller or the Shareholder, is there any basis for any of the foregoing;
Buyer is not required to obtain any permits, licenses or similar authorizations
pursuant to any Environmental Law in effect as of the date hereof to operate and
use any of the Assets for their current purposes and uses; to the knowledge of
the Seller or the Shareholder, the Assets include all environmental and
pollution control equipment necessary for compliance with applicable
Environmental Law; except as disclosed on Schedule 2.1.10, no Hazardous
Materials (defined below) have been or are currently being used by the Seller in
the operation of the Assets; except as disclosed on Schedule 2.1.10 hereto, no
Hazardous Materials are or have ever been situated on or under any of the
Seller's properties, whether owned or leased, or incorporated into any of the
Assets; except as disclosed on Schedule 2.1.10 hereto, there are no, and there
have never been any, underground storage tanks (as defined under Environmental
Law) located under any of the Seller's properties, whether owned or leased; and,
except as disclosed on Schedule 2.1.10 hereto, there are no environmental
conditions or circumstances, including the presence or release of any Hazardous
Materials, on any property presently or previously owned or leased by the
Seller, or on any property on which Hazardous Materials generated by the
Seller's operations or the use of the Assets were disposed of, which would
result in an adverse change in the Assets, Business or business prospects of the
Seller. The term "Environmental Law" means any and all laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, and other legally enforceable
requirements (including, without limitation, common law) of the United states,
or any state, regional, city, local, municipal or other governmental authority
or quasi-governmental authority, regulating, relating to, or imposing
environmental standards of conduct concerning protection of the environment or
human health, or employee health and safety as from time to time has been or is
now in effect. The term "Hazardous Materials" means (x) asbestos,
polychlorinated biphenyls, urea formaldehyde, lead based paint, radon gas,
petroleum, oil, solid waste, pollutants and contaminants, and (y) any chemicals,
materials, wastes or substances that are defined, regulated, determined or
identified as toxic or hazardous in any Environmental Law.
(b) With respect to the matters identified in the Mesa Environmental Letter in
Schedule 2.1.10 hereto, Seller and Shareholder shall undertake at their
cost and expense all appropriate remediation and clean-up procedures in
accordance with the requirements of each applicable regulatory authority
(the "Remedial Work"), and Seller and Shareholder shall jointly indemnify
and hold harmless Buyer from all such costs, expenses and fees incurred by
Seller and Shareholder in performing the Remedial Work pertaining to the
matters set forth in the Mesa Environmental Letter.
2.1.11 Termination of the Colorado Well Service, Inc. Profit Sharing Plan and
Trust. Seller hereby agrees to amend and terminate the Colorado Well Service,
Inc. Profit Sharing Plan (the "Plan") prior to the Effective Time by adopting
board resolutions and an agreement for amendment and termination of the Plan.
After the effective date of termination of the Plan, the Plan shall be "frozen"
pending distribution of its assets to Participants and their beneficiaries. No
persons who are not Participants as of the termination date shall be eligible to
participate in the Plan or receive benefits thereunder, and no distributions
shall be made by the Plan except normal distributions in the ordinary course of
business to or on behalf of employees who have separated from service with the
Seller or, after the Closing Date, with Buyer and its parent and subsidiaries
("Key"). Within 90 days after the Closing Date, Seller agrees to file a
submission to formally request a determination letter from the Internal Revenue
Service ("IRS") to the effect that the Plan is a qualified plan under Section
401(a) of the Code upon its termination and that the trust used to fund the Plan
(the "Trust") is tax exempt under Section 501(a) of the Code. As soon as
administratively practicable following receipt of a favorable IRS determination
letter, the trustee of the Trust shall effectuate distributions of all remaining
assets from the Trust and, thereafter, it shall be liquidated. After liquidation
of the Trust, Seller agrees to file a final IRS form 5500 for the Plan with the
IRS. Key assumes no liability or obligation with respect to or arising out of
the Plan or Trust at any time, before, on or after the Closing Date, and all
costs, damages, liabilities, penalties, taxes and expenses, of any nature,
relating to, or arising out of, the Plan and Trust, including termination of the
Plan and Trust, shall be paid by Seller and its shareholders and not by Key.
2.1.12 Investigations; Litigation. No investigation or review by any
governmental entity with respect to the Seller or any of the transactions
contemplated by this Agreement is pending or threatened, nor has any
governmental entity indicated to the Seller or the Shareholder, an intention to
conduct the same; and there is no suit, action, or legal, administrative,
arbitration or other proceeding or governmental investigation pending, , to
which the Seller or the Shareholder, is a party or any other unasserted claims
against the Seller or the Shareholder which would have an adverse effect on any
of the Assets or the Business, except as set forth on the Schedule 2.1.12
hereto.
2.1.13 Absence of Certain Businesses Practices. Neither the Seller or the
Shareholder, nor to the knowledge of the Seller or the Shareholder, any officer,
employee or agent of the Seller, or any other person acting on behalf of the
Seller or the Shareholder 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 profitable conduct of the Business or the profitable use of
the Assets (or to assist the Seller in connection with any actual or proposed
transaction) which if not given in the past, might have had an adverse effect on
the profitable conduct of the Business or the profitable use of the Assets, or
if not continued in the future, might adversely affect the profitable conduct of
the Business or the profitable use of the Assets.
2.1.14 Solvency. The Seller is not presently insolvent, nor will the Seller be
rendered insolvent by the occurrence of the transactions contemplated by this
Agreement. The term "insolvent," with respect to the Seller, means that the sum
of the present fair and saleable value of the Seller's assets does not and will
not exceed its debts and other probable liabilities, and the term "debts"
includes any legal liability whether matured or unmatured, liquidated or
unliquidated, absolute fixed or contingent, disputed or undisputed or secured or
unsecured.
2.1.15 Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Seller and the
Shareholder and their counsel directly with Buyer and its counsel, without the
intervention of any other person in such manner as to give rise to any valid
claim against Buyer for a brokerage commission, finder's fee or any similar
payment.
2.1.16 Taxes. All federal, state and local taxes assessed or assessable against
the Assets for periods prior to January 1, 1998 have been paid by Seller and the
Assets will be conveyed to Buyer free and clear of any such taxes or claims
therefor. All taxes assessed against the Assets for the period commencing
January 1, 1998 will be prorated through the Closing Date (based on 1997
assessed values) with Seller paying to Buyer at Closing an amount equal to the
portion of such taxes applicable to the period between January 1, 1998 and the
Closing Date. Buyer shall be responsible for the payment of any sales taxes due
as a result of the sale of the Assets by Seller to Buyer.
2.2 Representations and Warranties of Buyer. Buyer represents and warrants to
the Seller and the Shareholder as follows:
2.2.1 Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has full requisite corporate power and authority to carry on its businesses 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 businesses and is in
good standing as a foreign corporation authorized to do business in the State of
Colorado.
2.2.2 Agreement Authorized and its Effect on Other Obligations. The consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Buyer, and this Agreement is a
valid and binding obligation of Buyer enforceable (subject to normal equitable
principles) in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, debtor relief or similar laws
affecting the rights of creditors generally. The execution, delivery and
performance of this Agreement by Buyer will not conflict with or result in a
violation or breach of any term or provision of, or constitute a default under
(a) the Certificate of Incorporation or Bylaws of Buyer or (b) any obligation,
indenture, mortgage, deed of trust, lease, contract or other agreement to which
Buyer or any of its property is bound.
2.2.3 Consents and Approvals. No consent, approval or authorization of, or
filing of a registration with, any governmental or regulatory authority, or any
other person or entity is required to be made or obtained by Buyer in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
2.2.4 Finder's Fee. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Buyer and its counsel
directly with the Seller and the Shareholder and their counsel, without the
intervention by any other person as the result of any act of Buyer in such a
manner as to give rise to any valid claim against the Seller or the Shareholder
for any brokerage commission, finder's fee or any similar payments.
2.2.5 Non-Forecasts. Seller and the Shareholder make no other representations
and warranties except as expressly set forth in this Agreement and the Schedules
hereto, including any general representations, warranties, guaranties or other
assurances as to the future profitability of the Business or the Assets
following the Closing of the transactions contemplated by this Agreement.
ARTICLE III
Additional Agreements
3.1 Noncompetition. Except as set forth below or as otherwise consented to or
approved in writing by Buyer, the Seller and the Shareholder each agree that for
a period of 60 months following the date hereof, such party will not (and will
cause its affiliates and successors not to) directly or indirectly, acting alone
or as a member of a partnership or as an officer, director, employee,
consultant, representative, advisor, lender (including gifts used for
capitalization or collateral), a holder of, or investor in as much as 3% of any
security of any class of any corporation or other business entity (a) engage in
any business in competition with the business or businesses conducted by the
Seller on or before the date hereof or by Buyer (or Buyer's affiliates) on or
after the date hereof, or in any service business the services of which were
provided and marketed by the Seller on or before the date hereof or by Buyer (or
Buyer's affiliates) on or after the date hereof in the states of Colorado,
Nevada, Utah and Wyoming; (b) request any present customers or suppliers of the
Seller or any customers of Buyer (or Buyer's affiliates) to curtail or cancel
their business with Buyer (or Buyer's affiliates); (c) disclose to any person,
firm or corporation any trade, technical or technological secrets of Buyer (or
Buyer's affiliates) or of the Seller or any details of their organization or
business affairs or (d) induce or actively attempt to influence any employee of
Buyer (or Buyer's affiliates) to terminate his or her employment. The Seller and
the Shareholder agree that if either the length of time or geographical area as
set forth in this Section 3.1 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 3.1 are in addition
to any other obligations that the Seller or the Shareholder may have under the
laws of any state requiring a corporation selling its assets (or a shareholder
of such corporation) to limit its activities so that the goodwill and business
relations being transferred with such assets will not be materially impaired.
The Seller and the Shareholder further agree and acknowledge that Buyer does not
have any adequate remedy at law for the breach or threatened breach by the
Seller or the Shareholder of the covenants contained in this Section 3.1, and
agree that Buyer may, in addition to the other remedies which may be available
to it hereunder, file a suit in equity to enjoin the Seller or the Shareholder
from such breach or threatened breach. If any provisions of this Section 3.1 are
held to be invalid or against public policy, the remaining provisions shall not
be affected thereby. The Seller and the Shareholder acknowledge that the
covenants set forth in this Section 3.1 are being executed and delivered by such
party in consideration of (i) the covenants of Buyer contained in this
Agreement, (ii) additional consideration in the amount of $10,000 payable by
Buyer to Seller and $10,000 payable by Buyer to Shareholder on the date hereof
by wire transfer of immediately available funds and (iii) for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged.
3.2 Hiring Employees. Schedule 3.2 hereto is a complete and accurate listing of
all employees of the Seller who devote their full or part time in the operation
of the Assets and the conduct of the Business and their job titles (the
"Employees"). Effective as of 12:01 A.M. next following the Effective Time, all
of the Employees actively engaged in the conduct of Seller's business shall be
offered full or part-time employment by Buyer, subject to such Employees meeting
Buyer's standard employment eligibility requirements. Except as specifically set
forth as being assumed by Buyer on Schedule 3.2 hereto for those Employees
actually hired by Buyer, Buyer shall have no liability or obligation with
respect to any employee benefits of any Employee except those benefits that
accrue pursuant to such Employees' employment with Buyer on or after the
Effective Time. The Seller and the Shareholder shall cooperate with Buyer in
connection with any offer of employment from Buyer to the Employees and use
their best efforts to cause the acceptance of any and all such offers.
3.3 Allocation of Purchase Price. The parties hereto agree to allocate the
Purchase Price payable by Buyer for the Assets hereunder as set forth on
Schedule 3.3 hereto, and shall report this transaction for federal income tax
purposes in accordance with the allocation so agreed upon. The parties hereto
for themselves and for their respective successors and assigns covenant and
agree that they will file coordinating Form 8594's in accordance with Section
1060 of the Internal Revenue Code of 1986, as amended, with their respective
income tax returns for the taxable year that includes the date hereof.
3.4 Name Change. The Seller and the Shareholder shall, within twenty (20) days
from the date of Closing, cause to be filed with the Secretary of State of
Colorado an amendment to the Articles of Incorporation of the Seller changing
the names of the Seller from its current name to a name that is not similar to
such name. The Seller and the Shareholder shall, within five (5) days from the
date of its receipt of confirmation of such filings from the Secretary of State
of Colorado, cause the same to be filed with the appropriate office of each
state in which the Seller is qualified to do business and deliver to Buyer a
copy of such filings.
3.5 Employment Agreement. Concurrently herewith, the Shareholder and Buyer shall
have executed an Employment Agreement (the "Employment Agreement") in a form
acceptable to them.
3.6 Acknowledgment of Adequate Considerations. The Shareholder acknowledges and
agrees that Buyer is relying upon the accuracy of the representation and
warranties made herein by the Shareholder and the enforceability of the
covenants and agreements of the Shareholder contained herein and that Buyer
would not be willing to complete the transactions contemplated hereby without
such representations, warranties, covenants and agreements. The Shareholder
acknowledges and agrees that he will personally benefit from the consideration
being paid by Buyer to Seller hereunder and that such consideration, together
with the other benefits and consideration resulting to them hereunder, is
adequate to support the enforcement of their representation, warranties,
covenants and agreements contained herein.
3.7 Sublease Agreement. Concurrently herewith, the Buyer shall have executed a
Sublease Agreement with Seller and Shareholder, pursuant to which Buyer shall
have subleased the property currently leased by Seller in Rangely, Colorado, for
the remaining term of the primary lease and on terms and conditions otherwise
acceptable to Buyer.
3.8 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 and other actions as may be reasonably necessary to
effect the transactions contemplated hereby.
ARTICLE IV
Indemnification
4.1 Indemnification by the Seller and the Shareholder. In addition to any other
remedies available to Buyer under this Agreement, or at law or in equity, the
Seller and the Shareholder shall, jointly and severally, indemnify, defend and
hold harmless Buyer and its officers, directors, employees, agents and
stockholders (collectively, the "Buyer Indemnified Parties"), against and with
respect to any and all claims, costs, damages, losses, expenses, obligations,
liabilities, recoveries, suits, causes of action and deficiencies, including
interest, penalties and reasonable attorneys' fees and expenses (collectively,
the "Damages") which exceed the sum of $10,000 in the aggregate that a Buyer
Indemnified Party shall incur or suffer (whether the damages are suffered or
incurred by such Buyer Indemnified Party directly or as a result of a third
party claim against such Buyer Indemnified Party), which arise, result from or
relate to (a) any breach of, or failure by the Seller and the Shareholder to
perform, their respective representations, warranties, covenants or agreements
in this Agreement or in any schedule, certificate, exhibit or other instrument
furnished or delivered to Buyer by the Seller or the Shareholder under this
Agreement; or (b) the Retained Liabilities.
4.2 Indemnification by Buyer. In addition to any other remedies available to the
Seller or the Shareholder under this Agreement, or at law or in equity, Buyer
shall indemnify, defend and hold harmless the Seller and its officers,
directors, employees, agents and stockholders and the Shareholder against and
with respect to any and all Damages which exceed the sum of $10,000 in the
aggregate that such indemnitees shall incur or suffer, which arise, result from
or relate to (a) any breach of, or failure by Buyer to perform, any of its
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or delivered to the
Seller or the Shareholder by or on behalf of Buyer under this Agreement or (b)
the Assumed Liabilities.
4.3 Indemnification Procedure. If any party hereto discovers or otherwise
becomes aware of an indemnification claim arising under Section 4.1 or 4.2 of
this Agreement, such indemnified party shall give written notice to the
indemnifying party, specifying such claim, and may thereafter exercise any
remedies available to such party under this Agreement; provided, however, that
the failure of an indemnified party to give notice as provided herein shall not
relieve the indemnifying party of any obligation 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 third party action or proceeding against such indemnified party with
respect to which a claim for indemnification may be made pursuant to this
Article IV, 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 third party action; provided, however, that the failure of
an indemnified party to give notice as provided herein shall not relieve the
indemnifying party of any obligation hereunder to the extent the indemnifying
party is not materially prejudiced thereby. In case any such third party 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 third party claim and to employ counsel
reasonably satisfactory to such indemnified person. An indemnifying party who
elects not to assume the defense of a third party 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 third
party claim or with respect to third party 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 third party
action brought against it if the indemnifying party fails to select counsel
reasonably satisfactory to the indemnified party, the expenses of such defense
to be paid by the indemnifying party. No indemnifying party shall consent to
entry of any judgment or enter into any settlement with respect to a third party
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 third party claimant or plaintiff
to such indemnified party of a release from all liability with respect to such
third party claim. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such third party 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, delayed or
continued.
ARTICLE V
Miscellaneous
5.1 Survival of Representations, Warranties and Covenants. All representations
and warranties made by the parties hereto shall survive for a period of three
(3) years from the date hereof, notwithstanding any investigation made on the
part of the parties hereto; provided, however, that the representation and
warranties contained in Section 2.1.16 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 three (3) years from the date
being, notwithstanding any investigations made by any party hereto or on its
behalf. All covenants and agreements contained herein shall survive as provided
herein.
5.2 Entirety. This Agreement embodies the entire agreement among the
parties with respect to the subject matter hereof, and all prior agreements
between the parties with respect thereto are hereby superseded in their
entirety.
5.3 Counterparts. Any number of counterparts (including facsimile
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.
5.4 Notices and Waivers. Any notice or waiver to be given to any party
hereto shall be in writing and shall be delivered by courier, sent by
facsimile transmission or first class registered or certified mail, postage
prepaid, return receipt requested:
If to Buyer
Addressed to: With a copy to:
Key Four Corners, Inc. Lynch, Chappell & Alsup, P.C.
Two Tower Center, 20th Floor 300 N. Marienfeld, Suite 700
East Brunswick, New Jersey 08816 Midland, Texas 79701
Attn: General Counsel Attn: James M. Alsup, Esq.
Facsimile: (908) 247-5148 Facsimile: (915) 683-2587
If to the Seller or the Shareholder
Addressed to: With a copy to:
Colorado Well Service, Inc. Williams, Turner & Holmes
2603 E. Main 200 N. 6th Street
Rangely, Colorado 81648 Grand Junction, Colorado 81501
Attn: Mr. Keith Poole Attn: J. D. Snodgrass, Esq.
Facsimile: (970) 675-2014 Facsimile: (970) 241-3026
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 fifth (5th) businesses day after so mailed,
and if delivered by courier or facsimile to such address, upon delivery
during normal businesses hours on any businesses day.
5.5 Captions. The 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.
5.6 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors and assigns of
the parties hereto.
5.7 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to
be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
which may be hereafter declared invalid, void or unenforceable.
5.8 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the applicable laws of the State of Colorado.
5.9 Non Disclosure of Purchase Price. Buyer agrees that it will not issue a
press release, public announcement or otherwise provide information to
employees or former employees of Seller, following the Closing of the
transaction contemplated by this Agreement which discloses the purchase
price being paid hereunder for the Assets (except as a portion of the
aggregate purchase price paid by Buyer to Seller and others for the Assets
purchased hereunder and assets being purchased from others) unless deemed
to be necessary or appropriate by Buyer to do so in order to comply with
applicable securities, tax or other laws or regulations and except as
required by court order or subpoena.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Shareholder has executed this Agreement and the
Buyer has caused this Agreement to be executed in its corporate name by its
duly authorized representative, all as of the day and year first above
written.
BUYER:
KEY FOUR CORNERS, INC.
By:
Ron Fellabaum, Vice President
SELLER:
COLORADO WELL SERVICE, INC.
By:
Keith Poole, President
SHAREHOLDER:
___________________________________________
Keith Poole