EXHIBIT 10.63
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made as of December 10, 2004,
by Xxxxx-Xxxxxxxx Corporation, a Delaware corporation ("Buyer"), Xxx Xxxxx, an
individual resident in Midland, Texas ("Xxxxx"), Xxxx Xxxxxx, an individual
resident in Midland, Texas ("Xxxxxx"), and Chevron USA Inc., a Pennsylvania
corporation ("Chevron"), Nagi Soas, an individual resident in Hobbs, New Mexico
("Soas"), and Xxxxx Xxxxxx, an individual resident in San Antonio, Texas
("Xxxxxx"). "Xxxxx", "Xxxxxx", "Chevron", "Soas" and "Xxxxxx" are hereinafter
collectively referred to as "Sellers".
R E C I T A L S
Sellers desire to sell, and Buyer desires to purchase, all of the
issued and outstanding membership interests ("Interests") of Downhole Injection
Systems, LLC, a Texas limited liability company ("Company"), for the
consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"APPLICABLE CONTRACT"--any Contract (a) under which the Company has or
may acquire any rights, (b) under which the Company has or may become
subject to any obligation or liability, or (c) by which the Company or
any of the assets owned or used by it is or may become bound.
"BALANCE SHEET"--as defined in Section 3.4.
"BEST EFFORTS"--the efforts that a prudent Person desirous of achieving
a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible provided, however, that an
obligation to use Best Efforts under this Agreement does not require
the Person subject to that obligation to take actions that would result
in a materially adverse change in the benefits to such Person of this
Agreement and the Contemplated Transactions.
"BREACH"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if
there is or has been (a) any inaccuracy in or breach of, or any failure
to perform or comply with, such representation, warranty, covenant,
obligation, or other provision, or (b) any claim (by any Person) or
other occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation, or other provision, and
the term "Breach" means any such inaccuracy, breach, failure, claim,
occurrence, or circumstance.
1
"BUYER"--as defined in the first paragraph of this Agreement.
"CLOSING"--as defined in Section 2.3.
"CLOSING DATE"--the date and time as of which the Closing actually
takes place.
"COMMON STOCK"--as defined in Section 2.4(b)(ii).
"COMPANY"--as defined in the Recitals of this Agreement.
"CONSENT"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Interests by Sellers to Buyer;
(b) the execution, delivery, and performance of the Employment
Agreement, the Non-Competition Agreements, and the Sellers'
Releases;
(c) the performance by Buyer and Sellers of their respective
covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Interests and
exercise of control over the Company.
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied)
that is legally binding.
"CONTROLLING MEMBERS"--are defined in Section 3.27 as Kelly, Redman,
Chevron and Soas.
"DAMAGES"--as defined in Section 8.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by Sellers to
Buyer concurrently with the execution and delivery of this Agreement.
"EMPLOYMENT AGREEMENT"--as defined in Section 2.4(a)(iii).
2
"ENCUMBRANCE"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest,
right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of
any other attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life,
and any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any cost, damages,
expense, liability, obligation, or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and
consisting of or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational
safety and health, and regulation of chemical substances or
products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands
and response, investigative, remedial, or inspection costs and
expenses arising under Environmental Law or Occupational
Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or
corrective action, including any investigation, cleanup,
removal, containment, or other remediation or response actions
("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any Governmental
Body or any other Person) and for any natural resource
damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or
Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the
types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. '
9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or
other prohibitions and of the commencements of activities,
such as resource extraction or construction, that could have
significant impact on the Environment;
3
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the release, or minimizing
the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human
health or the Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or
other potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or
prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or
permitting self-appointed representatives of the public
interest to recover for injuries done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"FACILITIES"--any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any
buildings, plants, structures, or equipment (including motor vehicles,
tank cars, and rolling stock) currently or formerly owned or operated
by the Company.
"GAAP"--generally accepted United States accounting principles, applied
on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.4 were prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise
made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
4
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department,
official, or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or
taxing authority or power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or
use (including any withdrawal or other use of groundwater) of Hazardous
Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment, and any other act, business, operation,
or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the
Company.
"HAZARDOUS MATERIALS"--any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under
or pursuant to any Environmental Law, including any admixture or
solution thereof, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefore and asbestos or
asbestos-containing materials.
"INTELLECTUAL PROPERTY ASSETS" --as defined in Section 3.22.
"INTERESTS"--as defined in the Recitals of this Agreement.
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS"--the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
5
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the
course of conducting a reasonably comprehensive investigation
concerning the existence of such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving,
or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has,
or at any time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute, or treaty.
"NON-COMPETITION AGREEMENTS"--as defined in Section 2.4(a)(iv).
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement designed to
provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by
industry associations and insurance companies), designed to provide
safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal
day-to-day operations of such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising
similar authority), in the ordinary course of the normal
day-to-day operations of other Persons that are in the same
line of business as such Person.
6
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited
partnership of a limited partnership; (d) any charter or similar
document adopted or filed in connection with the creation, formation,
or organization of a Person; and (e) any amendment to any of the
foregoing.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor
union, or other entity or Governmental Body.
"PLAN"--as defined in Section 3.13.
"PROCEEDING"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by
or before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a
Material Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director,
officer, partner, executor, or trustee (or in a similar
capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly
under common control with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity);
and
(f) any Related Person of any individual described in clause (b)
or (c).
7
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any
other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other
natural person who resides with such individual, and (b) "Material
Interest" means direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 20% of the
outstanding voting power of a Person or equity securities or other
equity interests representing at least 20% of the outstanding equity
securities or equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment,
whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial
advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this Agreement.
"SELLERS' RELEASES"--as defined in Section 2.4.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power
to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person
(other than securities or other interests having such power only upon
the happening of a contingency that has not occurred) are held by the
Owner or one or more of its Subsidiaries; when used without reference
to a particular Person, "Subsidiary" means a Subsidiary of the Company.
"TAX"--any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate tax),
levy, assessment, tariff, duty (including any customs duty),
deficiency, or other fee, and any related charge or amount (including
any fine, penalty, interest, or addition to tax), imposed, assessed, or
collected by or under the authority of any Governmental Body or payable
pursuant to any tax-sharing agreement or any other Contract relating to
the sharing or payment of any such tax, levy, assessment, tariff, duty,
deficiency, or fee.
8
"TAX RETURN"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted
to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with
any Legal Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has
been made in writing or any notice has been given in writing, or if any
other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, commenced,
taken, or otherwise pursued in the future.
2. SALE AND TRANSFER OF INTERESTS; CLOSING
2.1 INTERESTS
Subject to the terms and conditions of this Agreement, at the Closing,
Sellers will sell and transfer the Interests to Buyer, and Buyer will purchase
the Interests from Sellers, free and clear of all Encumbrances.
2.2 PURCHASE PRICE
The purchase price (the "Purchase Price") for the Interests will be
$3,000,000.00 and the payment or assumption by Buyer of the debt of the Company
as described on Exhibit 2.2.
2.3 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement
will take place at the offices of Buyer at 0000 Xxxxxxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxx 00000 at 10:00 a.m. (local time) on December 10, 2004, or at such other
time and place as the parties may agree. Subject to the provisions of Section 9,
failure to consummate the purchase and sale provided for in this Agreement on
the date and time and at the place determined pursuant to this Section 2.3 will
not result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement.
2.4 CLOSING OBLIGATIONS
At the Closing:
(a) Sellers will deliver to Buyer:
9
(i) certificates representing the Interests, duly
endorsed (or accompanied by duly executed stock
powers) for transfer to Buyer or any other documents
Buyer requests from Sellers to transfer the
Interests;
(ii) releases in the form of Exhibit 2.4(a)(ii) executed
by Sellers (collectively, "Sellers' Releases");
(iii) an employment agreement in the form of Exhibit
2.4(a)(iii), executed by Xxxx Xxxxxx ("Employment
Agreement"); and
(iv) non-competition agreements in the form of Exhibit
2.4(a)(iv), executed by Sellers (except for Xxxxxx
which is included in the Employment Agreement)
(collectively, the "Non-Competition Agreements").
(b) Buyer will deliver to Sellers:
(i) the following amounts by bank cashier's or certified
check payable to the order of or by wire transfer to
accounts specified by Kelly, Redman, Chevron, Soas,
and Xxxxxx, respectively,$306,800 to Xxxxx; $247,000
to Xxxxxx; $460,200 to Chevron; and $39,000 to
Xxxxxx.
(ii) a total of $1,700,000.00 in shares of common stock,
$.01 par value ("Common Stock") of Buyer calculated
based on a $3.425 per share price for the Common
Stock, which equals 508,466 shares of Common Stock to
be issued collectively to Sellers following Closing.
The shares of Common Stock shall be allocated to the
Sellers who are "accredited investors" as defined
under the Securities Act as follows: (a) 117,138
shares to Xxxxx; 94,307 shares to Xxxxxx; 175,708
shares to Chevron; 106,423 shares to Soas; and 14,890
shares to Xxxxxx. Sellers and Buyer agree that Buyer
shall issue the above described shares of Common
Stock after Closing to Sellers upon filing a listing
application authorizing such shares on the American
Stock Exchange;
(iii) the Employment Agreement, executed by Buyer; and
(iv) evidence of payment or assumption of the Indebtedness
of the Company as described on Exhibit 2.2 and
releases of any personal guarantees of Sellers
related thereto.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Buyer as
follows:
10
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a complete and
accurate list for the Company of its name, its jurisdiction of incorporation,
other jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each member and the number of
Interests held by each). The Company is a limited liability company duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of organization, with full power and authority to conduct its
business as it is now being conducted, to own or use the properties and assets
that it purports to own or use, and to perform all its obligations under
Applicable Contracts. The Company is duly qualified to do business as a foreign
limited liability company and is in good standing under the laws of each state
or other jurisdiction in which either the ownership or use of the properties
owned or used by it, or the nature of the activities conducted by it, requires
such qualification.
(b) Sellers have delivered to Buyer copies of the
Organizational Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms.
Upon the execution and delivery by Sellers of the Employment Agreement, the
Sellers' Releases, and the Non-Competition Agreements (collectively, the
"Sellers' Closing Documents"), the Sellers' Closing Documents will constitute
the legal, valid, and binding obligations of Sellers, enforceable against
Sellers in accordance with their respective terms. Sellers have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the Sellers' Closing Documents and to perform their obligations
under this Agreement and the Sellers' Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational Documents
of the Company, or (B) any resolution adopted by the
managers or members of the Company;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the
right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any
relief under, any Legal Requirement or any Order to
which the Company or Sellers, or any of the assets
owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the
Company or that otherwise relates to the business of,
or any of the assets owned or used by, the Company;
11
(iv) cause Buyer or the Company to become subject to, or
to become liable for the payment of, any Tax;
(v) cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or
other Governmental Body;
(vi) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the
right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any
Applicable Contract; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets
owned or used by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter, neither Sellers or the
Company is or will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of 1,000
membership interests of which 1,000 membership interests are issued and
outstanding and constitute the Interests. Sellers are and will be on the Closing
Date the record and beneficial owners and holders of the Interests, free and
clear of all Encumbrances. Xxxxx owns 23.6% of the Interests, Xxxxxx owns 19% of
the Interests, Chevron owns 35.4% of the Interests, Soas owns 19% of the
Interests, and Xxxxxx owns 3% of the Interests. No legend or other reference to
any purported Encumbrance appears upon any certificate representing Interests of
the Company. All of the outstanding Interests of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
Contracts relating to the issuance, sale, or transfer of any equity securities,
Interests, or other securities of the Company. None of the outstanding
Interests, equity securities or other securities of the Company were issued in
violation of the Securities Act or any other Legal Requirement. The Company does
not own, or have any Contract to acquire, any equity securities or other
securities of any Person or any direct or indirect equity or ownership interest
in any other business.
12
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) a unaudited consolidated balance
sheet of the Company as at December 31, 2003 (including the notes thereto, the
"Balance Sheet"), and the related consolidated statements of income, changes in
members' equity, and cash flow for the fiscal year then ended, and (b) an
unaudited consolidated balance sheet of the Company as at October 31, 2004 (the
"Interim Balance Sheet") and the related unaudited consolidated statements of
income, changes in members' equity, and cash flow for the 10 months then ended,
including in each case the notes thereto. Such financial statements and notes
fairly and truly present the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Company as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
included in the Balance Sheet); the financial statements referred to in this
Section 3.4 reflect the consistent application of such accounting principles
throughout the periods involved. No financial statements of any Person other
than the Company are required by GAAP to be included in the consolidated
financial statements of the Company.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other
records of the Company, all of which have been made available to Buyer, are
complete and correct and have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal controls.
The minute books of the Company contain accurate and complete records of all
meetings held of, and action taken by, the members or the managers, and no
meeting of any such members, managers, or committee has been held for which
minutes have not been prepared and are not contained in such minute books. At
the Closing, all of those books and records will be in the possession of the
Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and accurate list
of all leaseholds, or other interests therein used by the Company. Sellers have
delivered or made available to Buyer copies of the leases by which the Company
leases such real property and interests, and copies of all surveys in the
possession of Sellers or the Company and relating to such property or interests.
The Company owns all the properties and assets (whether real, personal, or mixed
and whether tangible or intangible) that they purport to own located in the
facilities operated by the Company or reflected as owned in the books and
records of the Company, including all of the properties and assets reflected in
the Balance Sheet and the Interim Balance Sheet (except for assets held under
capitalized leases disclosed or not required to be disclosed in Part 3.6 of the
Disclosure Letter and personal property sold since the date of the Balance Sheet
and the Interim Balance Sheet, as the case may be, in the Ordinary Course of
Business), and all of the properties and assets purchased or otherwise acquired
by the Company since the date of the Balance Sheet (except for personal property
acquired and sold since the date of the Balance Sheet in the Ordinary Course of
Business and consistent with past practice). All material properties and assets
reflected in the Balance Sheet and the Interim Balance Sheet are free and clear
of all Encumbrances except (a) security interests shown on the Balance Sheet or
the Interim Balance Sheet as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (b) security interests incurred in
connection with the purchase of property or assets after the date of the Interim
Balance Sheet (such security interests being limited to the property or assets
so acquired), with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, and (c) liens for
current taxes not yet due.
13
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of the Company are
structurally sound, are in good operating condition and repair, and are adequate
for the uses to which they are being put, and none of such buildings, plants,
structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost. The building, plants, structures, and equipment of the Company are
sufficient for the continued conduct of the Company's businesses after the
Closing in substantially the same manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of the respective reserves shown on the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date (which reserves are adequate and calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, will not represent a greater percentage of the Accounts Receivable as of
the Closing Date than the reserve reflected in the Interim Balance Sheet
represented of the Accounts Receivable reflected therein and will not represent
a material adverse change in the composition of such Accounts Receivable in
terms of aging). Subject to such reserves, each of the Accounts Receivable
either has been or will be collectable in full, without any set-off, within
ninety days after the day on which it first becomes due and payable. There is no
contest, claim, or right of set-off, other than returns in the Ordinary Course
of Business, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable. Part 3.8 of the
Disclosure Letter contains a complete and accurate list of all Accounts
Receivable as of the date of the Interim Balance Sheet, which list sets forth
the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Company, whether or not reflected in the Balance
Sheet or the Interim Balance Sheet, consists of a quality and quantity usable
and salable in the Ordinary Course of Business, except for obsolete items and
items of below-standard quality, all of which have been written off or written
down to net realizable value in the Balance Sheet or the Interim Balance Sheet
or on the accounting records of the Company as of the Closing Date, as the case
may be. All inventories not written off have been priced at the lower of cost or
market on a last in, first out basis.
14
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, the Company
has no liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Balance Sheet or the Interim
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
3.11 TAXES
(a) The Company is not required to file federal Tax Returns
either separately or as a member of a group pursuant to any applicable Legal
Requirements. Sellers have delivered to Buyer copies of, and Part 3.11 of the
Disclosure Letter contains a complete and accurate list of, all such Tax Returns
relating to franchise taxes filed since January 1, 2003. The Company is not
taxed as a corporation, but each member of the Company is taxed on their
percentage ownership of the Company. The Company has paid, or made provision for
the payment of, all Taxes that have or may have become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received by Sellers or the
Company, except such Taxes, if any, as are listed in Part 3.11 of the Disclosure
Letter and are being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the Balance Sheet and
the Interim Balance Sheet.
(b) Part 3.11 of the Disclosure Letter contains a complete and
accurate list of all audits of all such Tax Returns, including a reasonably
detailed description of the nature and outcome of each audit. All deficiencies
proposed as a result of such audits have been paid, reserved against, settled,
or, as described in Part 3.11 of the Disclosure Letter, are being contested in
good faith by appropriate proceedings. Except as described in Part 3.11 of the
Disclosure Letter, neither Sellers or the Company have given or been requested
to give waivers or extensions (or is or would be subject to a waiver or
extension given by any other Person) of any statute of limitations relating to
the payment of Taxes of the Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of the Company are adequate (determined in accordance
with GAAP) and are at least equal to the Company's liability for Taxes. There
exists no proposed tax assessment against the Company except as disclosed in the
Balance Sheet or in Part 3.11 of the Disclosure Letter. No consent to the
application of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by the Company. All Taxes
that the Company is or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required, have been paid
to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a
consolidated basis) the Company are true, correct, and complete. There is no tax
sharing agreement that will require any payment by the Company after the date of
this Agreement. The Company is not, or nor has been within the five-year period
preceding the Closing Date, an "S" corporation. During the consistency period
(as defined in Section 338(h)(4) of the IRC with respect to the sale of the
Interests to Buyer), the Company or target affiliate (as defined in Section
338(h)(6) of the IRC with respect to the sale of the Interests to Buyer) has not
sold or nor will sell any property or assets to Buyer or to any member of the
affiliated group (as defined in Section 338(h)(5) of the IRC) that includes
Buyer. Part 3.11 of the Disclosure Letter lists all such target affiliates.
15
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any material
adverse change in the business, operations, properties, prospects, assets, or
condition of the Company, and no event has occurred or circumstance exists that
may result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
(a) As used in this Section 3.13, the following terms have the
meanings set forth below.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit Obligation
owed, adopted, or followed by the Company or an ERISA Affiliate of the Company.
"COMPANY PLAN" means all Plans of which the Company or an ERISA
Affiliate of the Company is or was a Plan Sponsor, or to which the Company or an
ERISA Affiliate of the Company otherwise contributes or has contributed, or in
which the Company or an ERISA Affiliate of the Company otherwise participates or
has participated. All references to Plans are to Company Plans unless the
context requires otherwise.
"COMPANY VEBA" means a VEBA whose members include employees of the
Company or any ERISA Affiliate of the Company.
"ERISA AFFILIATE" means, with respect to the Company, any other person
that, together with the Company, would be treated as a single employer under IRC
ss. 414.
"MULTI-EMPLOYER PLAN" has the meaning given in ERISA ss. 3(37)(A).
"OTHER BENEFIT OBLIGATIONS" means all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, or agents, other than obligations, arrangements, and
practices that are Plans. Other Benefit Obligations include consulting
agreements under which the compensation paid does not depend upon the amount of
service rendered, sabbatical policies, severance payment policies, and fringe
benefits within the meaning of IRC ss. 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PENSION PLAN" has the meaning given in ERISA ss. 3(2)(A).
"PLAN" has the meaning given in ERISA ss. 3(3).
"PLAN SPONSOR" has the meaning given in ERISA ss. 3(16)(B).
16
"QUALIFIED PLAN" means any Plan that meets or purports to meet the
requirements of IRC ss. 401(a).
"TITLE IV PLANS" means all Pension Plans that are subject to Title IV
of ERISA, 29 U.S.C. ss. 1301 et seq., other than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC
ss. 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA ss. 3(1).
(b) (i) Part 3.13(i) of the Disclosure Letter contains a complete
and accurate list of all Company Plans, Company Other Benefit
Obligations, and Company VEBAs, and identifies as such all
Company Plans that are (A) defined benefit Pension Plans, (B)
Qualified Plans, (C) Title IV Plans, or (D) Multi-Employer
Plans.
(ii) Part 3.13(ii) of the Disclosure Letter contains a
complete and accurate list of (A) all ERISA Affiliates of the
Company, and (B) all Plans of which any such ERISA Affiliate
is or was a Plan Sponsor, in which any such ERISA Affiliate
participates or has participated, or to which any such ERISA
Affiliate contributes or has contributed.
(iii) Part 3.13(iii) of the Disclosure Letter sets forth, for
each Multi-Employer Plan, as of its last valuation date, the
amount of potential withdrawal liability of the Company and
the Company's other ERISA Affiliates, calculated according to
information made available pursuant to ERISA ss. 4221(e).
(iv) Part 3.13(iv) of the Disclosure Letter sets forth a
calculation of the liability of the Company for
post-retirement benefits other than pensions, made in
accordance with Financial Accounting Statement 106 of the
Financial Accounting Standards Board, regardless of whether
the Company is required by this Statement to disclose such
information.
(v) Part 3.13(v) of the Disclosure Letter sets forth the
financial cost of all obligations owed under any Company Plan
or Company Other Benefit Obligation that is not subject to the
disclosure and reporting requirements of ERISA.
(c) Sellers have delivered to Buyer, or will deliver to Buyer within
ten days of the date of this Agreement:
(i) all documents that set forth the terms of each Company
Plan, Company Other Benefit Obligation, or Company VEBA and of
any related trust, including (A) all plan descriptions and
summary plan descriptions of Company Plans for which Sellers
or the Company are required to prepare, file, and distribute
plan descriptions and summary plan descriptions, and (B) all
summaries and descriptions furnished to participants and
beneficiaries regarding Company Plans, Company Other Benefit
Obligations, and Company VEBAs for which a plan description or
summary plan description is not required;
17
(ii) all personnel, payroll, and employment manuals and
policies;
(iii) all collective bargaining agreements pursuant to which
contributions have been made or obligations incurred
(including both pension and welfare benefits) by the Company
and the ERISA Affiliates of the Company, and all collective
bargaining agreements pursuant to which contributions are
being made or obligations are owed by such entities;
(iv) a written description of any Company Plan or Company
Other Benefit Obligation that is not otherwise in writing;
(v) all registration statements filed with respect to any
Company Plan;
(vi) all insurance policies purchased by or to provide
benefits under any Company Plan;
(vii) all contracts with third party administrators,
actuaries, investment managers, consultants, and other
independent contractors that relate to any Company Plan,
Company Other Benefit Obligation, or Company VEBA;
(viii) all reports submitted within the four years preceding
the date of this Agreement by third party administrators,
actuaries, investment managers, consultants, or other
independent contractors with respect to any Company Plan,
Company Other Benefit Obligation, or Company VEBA;
(ix) all notifications to employees of their rights under
ERISA ss. 601 et seq. and IRC ss. 4980B;
(x) the Form 5500 filed in each of the most recent three plan
years with respect to each Company Plan, including all
schedules thereto and the opinions of independent accountants;
(xi) all notices that were given by the Company or any ERISA
Affiliate of the Company or any Company Plan to the IRS, the
PBGC, or any participant or beneficiary, pursuant to statute,
within the four years preceding the date of this Agreement,
including notices that are expressly mentioned elsewhere in
this Section 3.13;
(xii) all notices that were given by the IRS, the PBGC, or the
Department of Labor to the Company, any ERISA Affiliate of the
Company, or any Company Plan within the four years preceding
the date of this Agreement;
18
(xiii) with respect to Qualified Plans and VEBAs, the most
recent determination letter for each Plan of the Company that
is a Qualified Plan; and
(xiv) with respect to Title IV Plans, the Form PBGC-1 filed
for each of the three most recent plan years.
(d) Except as set forth in Part 3.13(vi) of the Disclosure Letter:
(i) The Company has performed all of its respective
obligations under all Company Plans, Company Other Benefit
Obligations, and Company VEBAs. The Company has made
appropriate entries in their financial records and statements
for all obligations and liabilities under such Plans, VEBAs,
and Obligations that have accrued but are not due.
(ii) No statement, either written or oral, has been made by
the Company to any Person with regard to any Plan or Other
Benefit Obligation that was not in accordance with the Plan or
Other Benefit Obligation and that could have an adverse
economic consequence to the Company or to Buyer.
(iii) The Company, with respect to all Company Plans, Company
Other Benefits Obligations, and Company VEBAs, are, and each
Company Plan, Company Other Benefit Obligation, and Company
VEBA is, in full compliance with ERISA, the IRC, and other
applicable Laws including the provisions of such Laws
expressly mentioned in this Section 3.13, and with any
applicable collective bargaining agreement.
(A) No transaction prohibited by ERISA ss. 406 and no
"prohibited transaction" under IRC ss. 4975(c) have
occurred with respect to any Company Plan.
(B) Neither Sellers or the Company have any liability
to the IRS with respect to any Plan, including any
liability imposed by Chapter 43 of the IRC.
(C) Neither Sellers or the Company have any liability
to the PBGC with respect to any Plan or has any
liability under ERISA ss. 502 or ss. 4071.
(D) All filings required by ERISA and the IRC as to
each Plan have been timely filed, and all notices and
disclosures to participants required by either ERISA
or the IRC have been timely provided.
(E) All contributions and payments made or accrued
with respect to all Company Plans, Company Other
Benefit Obligations, and Company VEBAs are deductible
under IRC ss. 162 or ss. 404. No amount, or any asset
of any Company Plan or Company VEBA, is subject to
tax as unrelated business taxable income.
19
(iv) Each Company Plan can be terminated within thirty days,
without payment of any additional contribution or amount and
without the vesting or acceleration of any benefits promised
by such Plan.
(v) Since January 1, 2003, there has been no establishment or
amendment of any Company Plan, Company VEBA, or Company Other
Benefit Obligation.
(vi) No event has occurred or circumstance exists that could
result in a material increase in premium costs of Company
Plans and Company Other Benefit Obligations that are insured,
or a material increase in benefit costs of such Plans and
Obligations that are self-insured.
(vii) Other than claims for benefits submitted by participants
or beneficiaries, no claim against, or legal proceeding
involving, any Company Plan, Company Other Benefit Obligation,
or Company VEBA is pending or, to Sellers' Knowledge, is
Threatened.
(viii) No Company Plan is a stock bonus, pension, or
profit-sharing plan within the meaning of IRC ss. 401(a).
(ix) Each Qualified Plan of the Company is qualified in form
and operation under IRC ss. 401(a); each trust for each such
Plan is exempt from federal income tax under IRC ss. 501(a).
Each Company VEBA is exempt from federal income tax. No event
has occurred or circumstance exists that will or could give
rise to disqualification or loss of tax-exempt status of any
such Plan or trust.
(x) The Company and each ERISA Affiliate of the Company has
met the minimum funding standard, and has made all
contributions required, under ERISA ss. 302 and IRC ss. 402.
(xi) No Company Plan is subject to Title IV of ERISA.
(xii) The Company have paid all amounts due to the PBGC
pursuant to ERISA ss. 4007.
(xiii) The Company or any ERISA Affiliate of the Company have
not ceased operations at any facility or has withdrawn from
any Title IV Plan in a manner that would subject to any entity
or Sellers to liability under ERISA ss. 4062(e), ss. 4063, or
ss. 4064.
(xiv) The Company or any ERISA Affiliate of the Company have
not filed a notice of intent to terminate any Plan or has
adopted any amendment to treat a Plan as terminated. The PBGC
has not instituted proceedings to treat any Company Plan as
terminated. No event has occurred or circumstance exists that
may constitute grounds under ERISA ss. 4042 for the
termination of, or the appointment of a trustee to administer,
any Company Plan.
20
(xv) No amendment has been made, or is reasonably expected to
be made, to any Plan that has required or could require the
provision of security under ERISA ss. 307 or IRC ss.
401(a)(29).
(xvi) No accumulated funding deficiency, whether or not
waived, exists with respect to any Company Plan; no event has
occurred or circumstance exists that may result in an
accumulated funding deficiency as of the last day of the
current plan year of any such Plan.
(xvii) The actuarial report for each Pension Plan of the
Company and each ERISA Affiliate of the Company fairly
presents the financial condition and the results of operations
of each such Plan in accordance with GAAP.
(xviii) Since the last valuation date for each Pension Plan of
the Company and each ERISA Affiliate of the Company, no event
has occurred or circumstance exists that would increase the
amount of benefits under any such Plan or that would cause the
excess of Plan assets over benefit liabilities (as defined in
ERISA ss. 4001) to decrease, or the amount by which benefit
liabilities exceed assets to increase.
(xiv) No reportable event (as defined in ERISA ss. 4043 and in
regulations issued thereunder) has occurred.
(xx) Neither Sellers or the Company have Knowledge of any
facts or circumstances that may give rise to any liability of
any Seller, the Company, or Buyer to the PBGC under Title IV
of ERISA.
(xxi) Neither the Company or any ERISA Affiliate of the
Company have ever established, maintained, or contributed to
or otherwise participated in, or had an obligation to
maintain, contribute to, or otherwise participate in, any
Multi-Employer Plan.
(xxii) Neither the Company or any ERISA Affiliate of the
Company have withdrawn from any Multi-Employer Plan with
respect to which there is any outstanding liability as of the
date of this Agreement. No event has occurred or circumstance
exists that presents a risk of the occurrence of any
withdrawal from, or the participation, termination,
reorganization, or insolvency of, any Multi-Employer Plan that
could result in any liability of either the Company or Buyer
to a Multi-Employer Plan.
21
(xxiii) Neither the Company or any ERISA Affiliate of the
Company have received notice from any Multi-Employer Plan that
it is in reorganization or is insolvent, that increased
contributions may be required to avoid a reduction in plan
benefits or the imposition of any excise tax, or that such
Plan intends to terminate or has terminated.
(xxiv) No Multi-Employer Plan to which the Company or any
ERISA Affiliate of the Company contributes or has contributed
is a party to any pending merger or asset or liability
transfer or is subject to any proceeding brought by the PBGC.
(xxv) Except to the extent required under ERISA ss. 601 et
seq. and IRC ss. 4980B, the Company does not provides health
or welfare benefits for any retired or former employee or is
obligated to provide health or welfare benefits to any active
employee following such employee's retirement or other
termination of service.
(xxvi) The Company has the right to modify and terminate
benefits to retirees (other than pensions) with respect to
both retired and active employees.
(xxii) Sellers and the Company have complied with the
provisions of ERISA ss. 601 et seq. and IRC ss. 4980B.
(xxviii) No payment that is owed or may become due to any
director, officer, employee, or agent of the Company will be
non-deductible to the Company or subject to tax under IRC ss.
280G or ss. 4999; nor will the Company be required to "gross
up" or otherwise compensate any such person because of the
imposition of any excise tax on a payment to such person.
(xxiv) The consummation of the Contemplated Transactions will
not result in the payment, vesting, or acceleration of any
benefit.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times since January 1,
2004, has been, in full compliance with each Legal
Requirement that is or was applicable to it or to the
conduct or operation of its business or the ownership
or use of any of its assets;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) (A)
may constitute or result in a violation by the
Company of, or a failure on the part of the Company
to comply with, any Legal Requirement, or (B) may
give rise to any obligation on the part of the
Company to undertake, or to bear all or any portion
of the cost of, any remedial action of any nature;
and
22
(iii) the Company has not received, at any time since
January 1, 2004, any notice or other communication
(whether oral or written) from any Governmental Body
or any other Person regarding (A) any actual,
alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B)
any actual, alleged, possible, or potential
obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or to any of the assets owned or used
by, the Company. Each Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter is valid and in full force and effect.
Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times since January 1,
2004, has been, in full compliance with all of the
terms and requirements of each Governmental
Authorization identified or required to be identified
in Part 3.14 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists
that may (with or without notice or lapse of time)
(A) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed
or required to be listed in Part 3.14 of the
Disclosure Letter, or (B) result directly or
indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification
to, any Governmental Authorization listed or required
to be listed in Part 3.14 of the Disclosure Letter;
(iii) the Company has not received, at any time since
January 1, 2004, any notice or other communication
(whether oral or written) from any Governmental Body
or any other Person regarding (A) any actual,
alleged, possible, or potential violation of or
failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual,
proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of,
or modification to any Governmental Authorization;
and
(iv) all applications required to have been filed for
the renewal of the Governmental Authorizations listed
or required to be listed in Part 3.14 of the
Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and
all other filings required to have been made with
respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate
Governmental Bodies.
23
The Governmental Authorizations listed in Part 3.14 of the
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate its business in
the manner it currently conducts and operates such business and to permit the
Company to own and use its assets in the manner in which it currently owns and
uses such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against the Company
or that otherwise relates to or may affect the
business of, or any of the assets owned or used by,
the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated
Transactions.
To the Knowledge of Sellers and the Company, (1) no such
Proceeding has been Threatened, and (2) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Proceeding. Sellers have delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
3.15 of the Disclosure Letter. The Proceedings listed in Part 3.15 of the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of the Company.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which the Company, or any of
the assets owned or used by the Company, is subject;
(ii) Sellers are not subject to any Order that
relates to the business of, or any of the assets
owned or used by, the Company; and
(iii) no officer, manager, member, agent, or employee
of the Company is subject to any Order that prohibits
such officer, manager, member, agent, or employee
from engaging in or continuing any conduct, activity,
or practice relating to the business of the Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) the Company is, and at all times since January 1,
2004, has been, in full compliance with all of the
terms and requirements of each Order to which it, or
any of the assets owned or used by it, is or has been
subject;
24
(ii) no event has occurred or circumstance exists
that may constitute or result in (with or without
notice or lapse of time) a violation of or failure to
comply with any term or requirement of any Order to
which the Company, or any of the assets owned or used
by the Company, is subject; and
(iii) the Company has not received, at any time since
January 1, 2004, any notice or other communication
from any Governmental Body or any other Person
regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or
requirement of any Order to which the Company, or any
of the assets owned or used by the Company, is or has
been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, since
September 1, 2004, the Company has conducted its business only in the Ordinary
Course of Business and there has not been any:
(a) change in the Company's issued Interests; grant of any
stock option or right to purchase Interests or other equity interests of the
Company; issuance of any security convertible into such Interests; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
the Company of any Interests or of any such equity interests; or declaration or
payment of any dividend or other distribution or payment in respect of the
Interests or distributions to any members or managers of the Company of any kind
whatsoever;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any member, manager, officer, or (except in
the Ordinary Course of Business) employee or entry into any employment,
severance, or similar Contract with any member, manager, officer, or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any employees of
the Company;
(e) damage to or destruction or loss of any asset or property
of the Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of at least
$10,000.00;
25
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of the Company, including the sale, lease, or
other disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a
value to the Company in excess of $10,000;
(i) material change in the accounting methods used by the
Company; or
(j) agreement, whether oral or written, by the Company to do
any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete
and accurate list, and Sellers have delivered to Buyer true and complete copies,
of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or
materials by the Company of an amount or value in
excess of $10,000.00;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or
materials to the Company of an amount or value in
excess of $10,000.00;
(iii) each Applicable Contract that was not entered
into in the Ordinary Course of Business and that
involves expenditures or receipts of the Company in
excess of $10,000.00;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement,
and other Applicable Contract affecting the ownership
of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property
(except personal property leases and installment and
conditional sales agreements having a value per item
or aggregate payments of less than $5,000.00 and with
terms of less than one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks,
copyrights, or other intellectual property, including
agreements with current or former employees,
consultants, or contractors regarding the
appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or
other employee representative of a group of
employees;
26
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a
sharing of profits, losses, costs, or liabilities by
the Company with any other Person;
(viii) each Applicable Contract containing covenants
that in any way purport to restrict the business
activity of the Company or any Affiliate of the
Company or limit the freedom of the Company or any
Affiliate of the Company to engage in any line of
business or to compete with any Person;
(ix) each Applicable Contract providing for payments
to or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(x) each power of attorney that is currently
effective and outstanding;
(xi) each Applicable Contract entered into other than
in the Ordinary Course of Business that contains or
provides for an express undertaking by the Company to
be responsible for consequential damages;
(xii) each Applicable Contract for capital
expenditures in excess of $10,000.00;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual
performance extended by the Company other than in the
Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the
foregoing.
Part 3.17(a) of the Disclosure Letter sets forth reasonably complete details
concerning such Contracts, including the parties to the Contracts, the amount of
the remaining commitment of the Company under the Contracts, and the Company's
office where details relating to the Contracts are located.
(b) Except as set forth in Part 3.17(b) of the Disclosure
Letter:
(i) none of Sellers (and no Related Person of
Sellers) have or may acquire any rights under, and no
Seller has or may become subject to any obligation or
liability under, any Contract that relates to the
business of, or any of the assets owned or used by,
the Company; and
(ii) to the Knowledge of Sellers and the Company, no
officer, director, agent, employee, consultant, or
contractor of the Company is bound by any Contract
that purports to limit the ability of such officer,
member, manager, agent, employee, consultant, or
contractor to (A) engage in or continue any conduct,
activity, or practice relating to the business of the
Company, or (B) assign to the Company or to any other
Person any rights to any invention, improvement, or
discovery.
27
(c) Except as set forth in Part 3.17(c) of the Disclosure
Letter, each Contract identified or required to be identified in Part 3.17(a) of
the Disclosure Letter is in full force and effect and is valid and enforceable
in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure
Letter:
(i) the Company is, and at all times since January 1,
2004, has been, in full compliance with all
applicable terms and requirements of each Contract
under which the Company has or had any obligation or
liability or by which the Company or any of the
assets owned or used by the Company is or was bound;
(ii) each other Person that has or had any obligation
or liability under any Contract under which the
Company has or had any rights is, and at all times
since January 1, 2004, has been, in full compliance
with all applicable terms and requirements of such
Contract;
(iii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation
or breach of, or give the Company or other Person the
right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any
Applicable Contract; and
(iv) the Company has not given to or received from
any other Person, at any time since January 1, 2004,
any notice or other communication (whether oral or
written) regarding any actual, alleged, possible, or
potential violation or breach of, or default under,
any Contract.
(e) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and no such Person
has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture,
or provision of products or services by the Company have been entered into in
the Ordinary Course of Business and have been entered into without the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in violation of
any Legal Requirement.
3.18 INSURANCE
(a) Sellers have delivered to Buyer:
28
(i) true and complete copies of all policies of
insurance to which the Company is a party or under
which the Company, or any member or manger of the
Company, is or has been covered at any time within
the 3 years preceding the date of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of
such entity's coverage or of the reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting
the Company, including any reserves established
thereunder;
(ii) any contract or arrangement, other than a policy
of insurance, for the transfer or sharing of any risk
by the Company; and
(iii) all obligations of the Company to third parties
with respect to insurance (including such obligations
under leases and service agreements) and identifies
the policy under which such coverage is provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year,
for the current policy year and the preceding policy year a statement describing
each claim under an insurance policy for an amount in excess of $10,000.00,
which sets forth:
(i) the name of the claimant;
(ii) a description of the policy by insurer, type of
insurance, and period of coverage; and
(iii) the amount and a brief description of the
claim.
(d) Except as set forth on Part 3.18(d) of the Disclosure
Letter:
(i) All policies to which the Company is a party or
that provide coverage to Sellers, the Company, or any
manager, member or officer of the Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is
financially sound and reputable;
29
(C) taken together, provide adequate
insurance coverage for the assets and the
operations of the Company for all risks
normally insured against by a Person
carrying on the same business as the Company
is normally exposed; and
(D) are sufficient for compliance with all
Legal Requirements and Contracts to which
the Company is a party or by which it is
bound.
(ii) Neither Sellers or the Company have received (A)
any refusal of coverage or any notice that a defense
will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication
that any insurance policy is no longer in full force
or effect or will not be renewed or that the issuer
of any policy is not willing or able to perform its
obligations thereunder.
(iii) The Company has paid all premiums due, and has
otherwise performed all of its respective
obligations, under each policy to which the Company
is a party or that provides coverage to the Company
or manager, member or officer thereof.
(iv) The Company has given notice to the insurer of
all claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the disclosure letter:
(a) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under,
any Environmental Law. Neither Sellers or the Company have any basis to expect,
nor has any of them or any other Person for whose conduct they are or may be
held to be responsible received, any actual or Threatened order, notice, or
other communication from (i) any Governmental Body or private citizen acting in
the public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or the Company have had an interest, or
with respect to any property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or processed by
Sellers, the Company, or any other Person for whose conduct they are or may be
held responsible, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
30
(b) There are no pending or, to the Knowledge of Sellers and
the Company, Threatened claims, Encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting
any of the Facilities or any other properties and assets (whether real,
personal, or mixed) in which Sellers or the Company has or had an interest.
(c) Neither Sellers or the Company have any basis to expect,
nor has any of them or any other Person for whose conduct they are or may be
held responsible, received, any citation, directive, inquiry, notice, Order,
summons, warning, or other communication that relates to Hazardous Activity,
Hazardous Materials, or any alleged, actual, or potential violation or failure
to comply with any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which Sellers or the Company had
an interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by Sellers, the Company, or any other Person for whose conduct they
are or may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) To the Knowledge of Sellers neither Sellers or the
Company, or any other Person for whose conduct they are or may be held
responsible, have any Environmental, Health, and Safety Liabilities with respect
to the Facilities or , to the Knowledge of Sellers and the Company, with respect
to any other properties and assets (whether real, personal, or mixed) in which
Sellers or the Company (or any predecessor), has or had an interest, or at any
property geologically or hydrologically adjoining the Facilities or any such
other property or assets.
(e) To the Knowledge of Sellers, there are no Hazardous
Materials present (except those properly contained) on or in the Environment at
the Facilities or at any geologically or hydrologically adjoining property,
including any Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether moveable or
fixed) or other containers, either temporary or permanent, and deposited or
located in land, water, sumps, or any other part of the Facilities or such
adjoining property, or incorporated into any structure therein or thereon.
Neither Sellers, the Company, any other Person for whose conduct they are or may
be held responsible, or any other Person, has permitted or conducted, or is
aware of, any Hazardous Activity conducted with respect to the Facilities or any
other properties or assets (whether real, personal, or mixed) in which Sellers
or the Company has or had an interest except that are properly contained and in
full compliance with all applicable Environmental Laws.
(f) There has been no Release or, to the Knowledge of Sellers
and the Company, Threat of Release, of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which Sellers or the Company has or
had an interest, or to the Knowledge of Sellers and the Company any geologically
or hydrologically adjoining property, whether by Sellers, the Company, or any
other Person.
31
(g) Sellers have delivered to Buyer true and complete copies
and results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Sellers or the Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by Sellers, the Company, or any other Person for whose conduct they are or may
be held responsible, with Environmental Laws.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee, member or manager
of the Company, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since January 1, 2004, vacation accrued; and service credited
for purposes of vesting and eligibility to participate under the Company's
pension, retirement, profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option, cash bonus, employee stock ownership (including
investment credit or payroll stock ownership), severance pay, insurance,
medical, welfare, or vacation plan, other Employee Pension Benefit Plan or
Employee Welfare Benefit Plan, or any other employee benefit plan or any
Director Plan.
(b) No employee, member or manager of the Company is a party
to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between such
employee, member or manager and any other Person ("Proprietary Rights
Agreement") that in any way adversely affects or will affect (i) the performance
of his duties as an employee, member or manager of the Company, or (ii) the
ability of the Company to conduct its business, including any Proprietary Rights
Agreement with Sellers or the Company by any such employee, member or manager.
To Sellers' Knowledge, no member, manager, officer, or other key employee of the
Company intends to terminate his employment with the Company.
(c) Part 3.20 of the Disclosure Letter also contains a
complete and accurate list of the following information for each retired
employee, member or manager of the Company, or their dependents, receiving
benefits or scheduled to receive benefits in the future: name, pension benefit,
pension option election, retiree medical insurance coverage, retiree life
insurance coverage, and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE
Since January 1, 2004, the Company has not been or is a party to any
collective bargaining or other labor Contract. Since January 1, 2004, there has
not been, there is not presently pending or existing, and to Sellers' Knowledge
there is not Threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any Proceeding against or affecting the Company
relating to the alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, including any charge or complaint filed by an
employee or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable Governmental Body, organizational
activity, or other labor or employment dispute against or affecting the Company
or its premises, or (c) any application for certification of a collective
bargaining agent. To Sellers' Knowledge no event has occurred or circumstance
exists that could provide the basis for any work stoppage or other labor
dispute. There is no lockout of any employees by the Company, and no such action
is contemplated by the Company. The Company has complied in all respects with
all Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
32
3.22 INTELLECTUAL PROPERTY
(a) INTELLECTUAL PROPERTY ASSETS--The term "Intellectual
Property Assets" includes:
(i) the name "Downhole Injection Systems LLC", all
fictional business names, trading names, registered
and unregistered trademarks, service marks, and
applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions
and discoveries that may be patentable (collectively,
"Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential
information, customer lists, software, technical
information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade
Secrets"); owned, used, or licensed by the Company as
licensee or licensor.
(b) AGREEMENTS--Part 3.22(b) of the Disclosure Letter contains
a complete and accurate list and summary description, including any royalties
paid or received by the Company, of all Contracts relating to the Intellectual
Property Assets to which the Company is a party or by which the Company is
bound, except for any license implied by the sale of a product and perpetual,
paid-up licenses for commonly available software programs with a value of less
than $5,000.00 under which the Company is the licensee. There are no outstanding
and, to Sellers' Knowledge, no Threatened disputes or disagreements with respect
to any such agreement.
(c) KNOW-HOW NECESSARY FOR THE BUSINESS
(i) The Intellectual Property Assets are all those
necessary for the operation of the Company's
businesses as they are currently conducted. The
Company is the owner of all right, title, and
interest in and to each of the Intellectual Property
Assets, free and clear of all liens, security
interests, charges, encumbrances, equities, and other
adverse claims, and has the right to use without
payment to a third party all of the Intellectual
Property Assets.
33
(ii) Except as set forth in Part 3.22(c) of the
Disclosure Letter, all former and current employees
of the Company have executed written Contracts with
the Company that assign to the Company all rights to
any inventions, improvements, discoveries, or
information relating to the business of the Company.
No employee of the Company has entered into any
Contract that restricts or limits in any way the
scope or type of work in which the employee may be
engaged or requires the employee to transfer, assign,
or disclose information concerning his work to anyone
other than the Company.
(d) Patents
(i) Part 3.22(d) of the Disclosure Letter contains a
complete and accurate list and summary description of
all Patents. The Company is the owner of all right,
title, and interest in and to each of the Patents,
free and clear of all liens, security interests,
charges, encumbrances, entities, and other adverse
claims.
(ii) All of the issued Patents are currently in
compliance with formal legal requirements (including
payment of filing, examination, and maintenance fees
and proofs of working or use), are valid and
enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety
days after the Closing Date.
(iii) No Patent has been or is now involved in any
interference, reissue, reexamination, or opposition
proceeding. To Sellers' Knowledge, there is no
potentially interfering patent or patent application
of any third party.
(iv) No Patent is infringed or, to Sellers'
Knowledge, has been challenged or threatened in any
way. None of the products manufactured and sold, nor
any process or know-how used, by the Company
infringes or is alleged to infringe any patent or
other proprietary right of any other Person.
(v) All products made, used, or sold under the
Patents have been marked with the proper patent
notice.
(e) Trade Secrets
(i) With respect to each Trade Secret, the
documentation relating to such Trade Secret is
current, accurate, and sufficient in detail and
content to identify and explain it and to allow its
full and proper use without reliance on the knowledge
or memory of any individual.
(ii) Sellers and the Company have taken all
reasonable precautions to protect the secrecy,
confidentiality, and value of their Trade Secrets.
(iii) The Company has good title and an absolute (but
not necessarily exclusive) right to use the Trade
Secrets. The Trade Secrets are not part of the public
knowledge or literature, and, to Sellers' Knowledge,
have not been used, divulged, or appropriated either
for the benefit of any Person or to the detriment of
the Company. No Trade Secret is subject to any
adverse claim or has been challenged or threatened in
any way.
34
3.23 CERTAIN PAYMENTS
Since January 1, 2004, neither the Company, the Sellers or any manager,
member, officer, agent, or employee of the Company, or to Sellers' Knowledge any
other Person associated with or acting for or on behalf of the Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company, (iv) in
violation of any Legal Requirement, or (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Company.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers in this Agreement
and no statement in the Disclosure Letter omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) There is no fact known to Sellers that have specific
application to Sellers or the Company (other than general economic or industry
conditions) and that materially adversely affects or, as far as Sellers can
reasonably foresee, materially threatens, the assets, business, prospects,
financial condition, or results of operations of the Company that has not been
set forth in this Agreement or the Disclosure Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Neither Sellers or any Related Person of Sellers or the Company has, or
since the first day of the next to last completed fiscal year of the Company has
had, any interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Company's business. No
Seller or any Related Person of Sellers or of the Company is, or since the first
day of the next to last completed fiscal year of the Company has owned (of
record or as a beneficial owner) an equity interest or any other financial or
profit interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with the Company, or (ii) engaged in
competition with the Company with respect to any line of the products or
services of the Company (a "Competing Business") in any market presently served
by the Company except for less than one percent of the outstanding capital stock
of any Competing Business that is publicly traded on any recognized exchange or
in the over-the-counter market. Except as set forth in Part 3.25 of the
Disclosure Letter, no Seller or any Related Person of Sellers or of the Company
is a party to any Contract with, or has any claim or right against, the Company.
35
3.26 BROKERS OR FINDERS
Sellers and their agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
3.27 INVESTMENT INTENT AND INVESTIGATION
Sellers are acquiring the shares of Common Stock of the Company for
their own accounts for investment and not with a view to, or for resale in
connection with, any "distribution" thereof for purposes of the Securities Act.
All the Sellers are "accredited investors" as such term is defined in Regulation
D under the Securities Act. Sellers acknowledge that the shares of Common Stock
shall be "restricted securities" within the meaning of Rule 144 ("Rule 144")
under the Securities Act, will contain a transfer restriction legend and may
only be resold pursuant to an effective registration statement filed with the
SEC under the Securities Act, or pursuant to Rule 144 or another valid exemption
from the registration requirements of the Securities Act as established by an
opinion of counsel reasonably acceptable to the Company. Sellers have been given
full access by the Company to all information concerning the business and
financial condition, properties, operations and prospects of the Company that
the Sellers have deemed relevant in connection with the issuance of the shares
of Common Stock to them. By reason of the Sellers knowledge and experience in
financial and business matters in general, the business of the Company, the
Sellers are capable of evaluating the merits and risks of making the investment
in the shares of Common Stock and are able to bear the economic risk of the
investment (including a complete loss of its investment in the shares of Common
Stock). The Sellers acknowledge that the Buyer files reports with the Securities
and Exchange Commission that are publicly available, and has provided all the
Sellers with an Annual Report on Form 10-K for the fiscal year ended December
31, 2003, and a Quarterly Report on Form 10-Q for the quarter ended September
30, 2004.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Employment Agreement (the
"Buyer's Closing Documents"), the Buyer's Closing Documents will constitute the
legal, valid, and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms. Buyer has the absolute and unrestricted
right, power, and authority to execute and deliver this Agreement and the
Buyer's Closing Documents and to perform its obligations under this Agreement
and the Buyer's Closing Documents.
36
(b) Except as set forth in Schedule 4.2, neither the execution
and delivery of this Agreement by Buyer nor the consummation or performance of
any of the Contemplated Transactions by Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) any provision of Buyer's Organizational
Documents;
(ii) any resolution adopted by the board of directors
or the stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer
may be subject; or
(iv) any Contract to which Buyer is a party or by
which Buyer may be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement, the issuance of the shares of Common Stock or the
consummation or performance of any of the Contemplated Transactions.
4.3 CAPITALIZATION
(a) The authorized capital stock of Buyer consists of
20,000,000 shares of Common Stock, par value $.01 per share, 13,041,231 shares
of which have been validly issued and are outstanding as of the date hereof (and
such shares are fully paid and non-assessable), and 10,000,000 shares of
preferred stock, par value $.01 per share, of which no shares are outstanding as
of the date hereof. In addition, as of December 1, 2004, there are 2,808,198
shares of Common Stock reserved for issuance through options and warrants on
behalf of the Company.
(b) All certificates representing shares of Common Stock of
Buyer to be issued to the Sellers shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE
SOLD, OFFERRED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT AND THE LAWS OF
SUCH STATES UNDER WHOSE LAWS A TRANSFER OF SECURITIES WOULD BE SUBJECT
TO A REGISTRATION REQUIREMENT OR AN OPINION OF COUNSEL TO THE
CORPORATION IS DELIVERED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE
WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION".
37
All certificates representing such shares of Common Stock above will be subject
to a stop transfer order with the Company's transfer agent that restricts the
transfer of such shares except in compliance with applicable law.
4.4 INVESTMENT INTENT
Buyer is acquiring the Interests for its own account and not with a
view to their distribution within the meaning of Section 2(11) of the Securities
Act.
4.5 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer
and that challenges, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated Transactions. To
Buyer's Knowledge, no such Proceeding has been Threatened.
4.6 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and will
indemnify and hold Sellers harmless from any such payment alleged to be due by
or through Buyer as a result of the action of Buyer or its officers or agents.
5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Interests and to take the other
actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
5.1 ACCURACY OF REPRESENTATIONS
All of Sellers' representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all respects as of the
Closing Date.
5.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers are
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all respects.
(b) Each document required to be delivered pursuant to Section
2.4 must have been delivered.
38
5.3 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Xxxxxx, Xxxxx & Xxxxxx dated the Closing
Date, in the form of Exhibit 5.4(a); and
(b) such other documents as Buyer may reasonably request for
the purpose of (i) evidencing the accuracy of any of Sellers' representations
and warranties, (ii) evidencing the performance by Sellers of, or the compliance
by Sellers with, any covenant or obligation required to be performed or complied
with by such Seller, (iii) evidencing the satisfaction of any condition referred
to in this Section 5, or (v) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
5.4 NO PROCEEDINGS
As of the Closing Date, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
5.5 NO CLAIM REGARDING INTERESTS OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any membership
interest of, or any other voting, equity, or ownership interest in the Company,
or (b) is entitled to all or any portion of the Purchase Price payable for the
Interests.
5.6 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
6. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Interests and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
39
6.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all respects as of the
Closing Date.
6.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all respects.
(b) Buyer must have delivered each of the documents required
to be delivered by Buyer pursuant to Section 2.4 and must have made the cash
payments required to be made by Buyer pursuant to Section 2.4(b)(i) and the
Common Stock required to be issued by Buyer pursuant to Section 2.4(b)(ii) shall
be issued after Closing and following the filing of a listing application on the
American Stock Exchange.
(c) Buyer must have paid or assumed the debt of the Company
described in Section 2.2 and Buyer will obtain the release of the guarantees of
Sellers to such indebtedness.
6.3 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to
Sellers: such other documents as Sellers may reasonably request for the purpose
of (i) enabling their counsel to provide the opinion referred to in Section
5.4(a), (ii) evidencing the accuracy of any representation or warranty of Buyer,
(iii) evidencing the performance by Buyer of, or the compliance by Buyer with,
any covenant or obligation required to be performed or complied with by Buyer,
(ii) evidencing the satisfaction of any condition referred to in this Section 6,
or (v) otherwise facilitating the consummation of any of the Contemplated
Transactions.
6.4 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the Interests by Sellers to Buyer,
and (b) has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
7. TERMINATION
7.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
40
(a) by either Buyer or Sellers if a material Breach of any
provision of this Agreement has been committed by the other party and such
Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 5 has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date; or (ii) by Sellers, if any of the conditions in
Section 6 has not been satisfied of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of Sellers
to comply with their obligations under this Agreement) and Sellers have not
waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before December
31, 2004, or such later date as the parties may agree upon.
7.2 EFFECT OF TERMINATION
Each party's right of termination under Section 7.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 7.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections 9.1
and 9.3 will survive; provided, however, that if this Agreement is terminated by
a party because of the Breach of the Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.
8. INDEMNIFICATION; REMEDIES
8.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, and any other certificate or document
delivered pursuant to this Agreement will survive the Closing. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
41
8.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Kelly, Redman, Soas and Chevron ("Controlling Members"), jointly and
severally, will indemnify and hold harmless Buyer, the Company, and its
respective Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
Sellers in this Agreement, the Disclosure Letter, or any other certificate or
document delivered by Sellers pursuant to this Agreement;
(b) any Breach by Sellers of any covenant or obligation of
Sellers in this Agreement and Exhibits and other documents referred to herein;
(c) any product shipped or manufactured by, or any services
provided by, the Company prior to the Closing Date;
(d) the lawsuit involving Xxxxx Xxxxxxxxxx and his former
employer Dynacoil of South Texas LP or payments to Xx. Xxxxxxxxxx in connection
therewith or any liability to the Company under such lawsuit; or
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Sellers or the Company (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.
8.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS--
ENVIRONMENTAL MATTERS
In addition to the provisions of Section 8.2, the Controlling Members,
jointly and severally, will indemnify and hold harmless Buyer, the Company, and
the other Indemnified Persons for, and will pay to Buyer, the Company, and the
other Indemnified Persons the amount of, any Damages (including costs of
cleanup, containment, or other remediation) arising, directly or indirectly,
from or in connection with:
42
(a) any Environmental, Health, and Safety Liabilities arising
out of or relating to: (i) (A) the ownership, operation, or condition at any
time on or prior to the Closing Date of the Facilities or any other properties
and assets (whether real, personal, or mixed and whether tangible or intangible)
in which Sellers or the Company has or had an interest, or (B) any Hazardous
Materials or other contaminants that were present on the Facilities or such
other properties and assets at any time on or prior to the Closing Date; or (ii)
(A) any Hazardous Materials or other contaminants, wherever located, that were,
or were allegedly, generated, transported, stored, treated, Released, or
otherwise handled by Sellers or the Company or by any other Person for whose
conduct they are or may be held responsible at any time on or prior to the
Closing Date, or (B) any Hazardous Activities that were, or were allegedly,
conducted at any time on or prior to the Closing by Sellers or the Company or by
any other Person for whose conduct they are or may be held responsible; or
(b) any bodily injury (including illness, disability, and
death, and regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property), or
other damage of or to any Person, including any employee or former employee of
Sellers or the Company or any other Person for whose conduct they are or may be
held responsible, in any way arising from or allegedly arising from any
Hazardous Activity conducted or allegedly conducted with respect to the
Facilities or the operation of the Company prior to the Closing Date, or from
Hazardous Material that was (i) present or suspected to be present on or before
the Closing Date on or at the Facilities (or present or suspected to be present
on any other property, if such Hazardous Material emanated or allegedly emanated
from any of the Facilities and was present or suspected to be present on any of
the Facilities on or prior to the Closing Date) or (ii) Released or allegedly
Released by Sellers or the Company or any other Person for whose conduct they
are or may be held responsible, at any time on or prior to the Closing Date.
Buyer will be entitled to control any Cleanup, any related Proceeding,
and, except as provided in the following sentence, any other Proceeding with
respect to which indemnity may be sought under this Section 8.3. The procedure
described in Section 8.8 will apply to any claim solely for monetary damages
relating to a matter covered by this Section 8.3.
8.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers and their respective
Representatives, stockholders, controlling persons and affiliates (collectively
"Sellers Indemnified Persons"), and will pay to Sellers Indemnified Persons the
amount of any Damages arising, directly or indirectly, from or in connection
with:
(a) any Breach of any representation or warranty made by Buyer
in this Agreement or in any certificate delivered by Buyer pursuant to this
Agreement;
(b) any Breach by Buyer of any covenant or obligation of Buyer
in this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions;
43
(d) any Damages to Sellers resulting from the performance or
Breach of any Applicable Contract described in the Disclosure Letter in Section
3.17; or
(e) any Damages by a third-party against Kelly, Redman, Soas
or Xxxxxx, jointly or severally, which are alleged to have occurred within the
course and scope of Kelly, Redman, Soas or Xxxxxx'x employment with the Company
(as long as such acts or omissions are determined to have occurred within the
course and scope of such employment).
8.5 TIME LIMITATIONS
(a) The Controlling Members will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Sections 3.3, 3.11, 3.13, and 3.19, unless on or
before December 31, 2005, Buyer notifies the Controlling Members of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Buyer. The Controlling Members will have no liability (for
indemnification or otherwise) with respect to Section 3.3, 3.11, 3.13, or 3.19,
unless on or before December 31, 2006, Buyer notifies the Controlling Members of
a claim specifying the factual basis of that claim in reasonable detail to the
extent known by Buyer.
(b) Buyer will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, unless
on or before December 31, 2005, the Controlling Members notify Buyer of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by the Controlling Members or any one of them.
8.6 LIMITATIONS ON AMOUNT--SELLERS
The Controlling Members will have no liability (for indemnification or
otherwise) with respect to the matters described in Section 8.2 and Section 8.3
until the total of all Damages with respect to such matters exceeds $50,000.00,
but then for all such Damages. However, in no event shall the aggregate
indemnification, Damages or other liability to be provided by the Controlling
Members pursuant to the matters described in Section 8.2 and Section 8.3 exceed
$650,000.
8.7 LIMITATIONS ON AMOUNT--BUYER
Buyer will have no liability (for indemnification or otherwise) with
respect to the matters described in Section 8.4 until the total of all Damages
with respect to such matters exceeds $50,000.00, but then for all such Damages.
However, in no event shall the aggregate indemnification or other liability to
be provided by the Buyer pursuant to the matters described in Section 8.4 exceed
$650,000.
44
8.8 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under
Section 8.2, 8.4, or (to the extent provided in the last sentence of Section
8.3) Section 8.3 of notice of the commencement of any Proceeding against it,
such indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in Section 8.8(a) is brought
against an indemnified party and it gives notice to the indemnifying party of
the commencement of such Proceeding, the indemnifying party will, unless the
claim involves Taxes, be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 8 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
45
(d) The Controlling Members and Buyer hereby consent to the
non-exclusive jurisdiction of any court in which a Proceeding is brought against
any Indemnified Person for purposes of any claim that an Indemnified Person may
have under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on the Controlling Members or
Buyer with respect to such a claim anywhere in the world.
(e) Controlling Members' liability, if any, to indemnify Buyer
under this Section 8 for claims of third-parties for personal injury or property
damage or for claims arising from or related to personal injuries to Company's
employees or property (and the defense and investigation thereof) shall not
attach unless and until all applicable insurance for such claims whether carried
by Buyer or the Company is exhausted. However, if Buyer notifies the Controlling
Members of a claim for indemnification relating to such personal injury or
property damage as required hereunder, such notice shall toll the time
limitations under Section 8.5 until such matter is finally adjudicated or
disposed. Buyer agrees to maintain on Company's behalf or will cause the Company
to maintain for Company's benefit policies of insurance providing workers'
compensation, general liability, property and casualty, and
pollution/environmental coverage on a "claims made" basis with limits of not
less than $1,000,000 per occurrence for a period of at least two years
immediately following the Closing. In the event that it is determined that a
claim is not covered under the insurance agreed to be provided hereunder by
Buyer or such other insurance coverage carried by Buyer then the Controlling
Members liability will attach upon such determination.
8.9 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
9. GENERAL PROVISIONS
9.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Sellers will cause the Company not to incur any
out-of-pocket expenses in connection with this Agreement except for professional
fees not in excess of $10,000.00. In the event of termination of this Agreement,
the obligation of each party to pay its own expenses will be subject to any
rights of such party arising from a breach of this Agreement by another party.
9.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Buyer determines, provided, however, that Buyer will
obtain Chevron's agreement prior to the use of its name in any press releases or
public announcements. Unless consented to by Buyer in advance or required by
Legal Requirements, prior to the Closing Sellers shall, and shall cause the
Company to, keep this Agreement strictly confidential and may not make any
disclosure of this Agreement to any Person. Sellers and Buyer will consult with
each other concerning the means by which the Company's employees, customers, and
suppliers and others having dealings with the Company will be informed of the
Contemplated Transactions, and Buyer will have the right to be present for any
such communication.
46
9.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and
Sellers will maintain in confidence, and will cause the managers, members,
officers, employees, agents, and advisors of Buyer and the Company to maintain
in confidence, and not use to the detriment of another party or the Company any
written, oral, or other information obtained in confidence from another party or
the Company in connection with this Agreement or the Contemplated Transactions,
unless (a) such information is already known to such party or to others not
bound by a duty of confidentiality or such information becomes publicly
available through no fault of such party, (b) the use of such information is
necessary or appropriate in making any filing or obtaining any consent or
approval required for the consummation of the Contemplated Transactions, or (c)
the furnishing or use of such information is required by or necessary or
appropriate in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Whether or not the Closing takes place, Sellers waive, and
will upon Buyer's request cause the Company to waive, any cause of action,
right, or claim arising out of the access of Buyer or its representatives to any
trade secrets or other confidential information of the Company except for the
intentional competitive misuse by Buyer of such trade secrets or confidential
information.
9.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
SELLERS: Xxxx Xxxxxx, Xxx Xxxxx, Xxxx Soas
and Xxxxx Xxxxxx
405 North Marienfield
P. O. Xxx 00000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxx
Facsimile No.: (000) 000-0000
47
Chevron USA Inc.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: W. G. (Xxxxxx) Xxxxx
Facsimile No.: (000) 000-0000
WITH A COPY TO: Xxxxxx Xxxxx & Xxxxxx, P.C.
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
BUYER: Xxxxx-Xxxxxxxx Corporation
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxx Xxxxx, Chief Financial Officer
Xxxxxxxx X. Pound III, General Counsel
Facsimile No.: (000) 000-0000
9.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of Texas, County of Xxxxxx or County of
Midland or, if it has or can acquire jurisdiction, in the United States District
Court for the Southern or Western District of Texas, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
9.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
48
9.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
9.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
9.9 DISCLOSURE LETTER
(a) The disclosures in the Disclosure Letter, and those in any
Supplement thereto, must relate only to the representations and warranties in
the Section of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements
in the body of this Agreement and those in the Disclosure Letter (other than an
exception expressly set forth as such in the Disclosure Letter with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
9.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without
the prior consent of the other parties except that Buyer may assign any of its
rights under this Agreement to any Subsidiary of Buyer. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and conditions are for
the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
49
9.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
9.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
9.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
9.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of Texas
without regard to conflicts of laws principles.
9.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
Delivery of an executed counterpart of this Agreement by facsimile shall be
equally effective as delivery of an original executed counterpart of this
Agreement. Any party delivering an executed counterpart of this Agreement by
facsimile also shall deliver an original executed counterpart of this Agreement,
but failure to deliver an original executed counterpart shall not affect the
validity, enforceability or binding effect of this Agreement.
[The remainder of this page is left intentionally blank.]
50
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: XXXXX-XXXXXXXX CORPORATION,
A DELAWARE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxxxxx
Name: Xxxxxxx X. Xxxxxxxxxxxx
Title: Chairman and Chief Executive Officer
SELLERS: XXX XXXXX
/s/ Xxx Xxxxx
XXXX XXXXXX
/s/ Xxxx Xxxxxx
CHEVRON USA INC.
A PENNSYLVANIA CORPORATION
By: /s/ W. Xxxxxx Xxxxx III
----------------------------
Name: W. Xxxxxx Xxxxx III
Title: Attorney-in-Fact
XXXXX XXXXXX
/s/ Xxxxx Xxxxxx
NAGI SOAS
/s/ Nagi Soas
51
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of December 8,
2004, by Downhole Injection Systems, LLC, a Texas limited liability company (the
"Employer") and Xxxx Xxxxxx, an individual resident in Midland, Texas (the
"Executive").
R E C I T A L S
Concurrently with the execution and delivery of this Agreement,
Xxxxx-Xxxxxxxx Corporation, a Delaware corporation (the "Buyer"), is purchasing
from the Executive and other Sellers of the Company, all of the issued
membership interests of the Employer, pursuant to a Purchase Agreement dated
December 8, 2004, between the Executive and other Sellers (the "Purchase
Agreement"). The Buyer and the Employer desire the Executive's continued
employment with the Employer, and the Executive wishes to accept such continued
employment, upon the terms and conditions set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1.
"AGREEMENT"--this Employment Agreement, as amended from time to time.
"BASIC COMPENSATION"--Salary and Benefits.
"BENEFITS"--as defined in Section 3.1(b).
"BOARD OF DIRECTORS"--the board of directors of the Employer.
"CONFIDENTIAL INFORMATION"--any and all:
(a) trade secrets concerning the business and affairs of the
Employer, product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs, graphs,
drawings, samples, inventions and ideas, past, current, and planned
research and development, current and planned manufacturing or
distribution methods and processes, customer lists, current and
anticipated customer requirements, price lists, market studies,
business plans, computer software and programs (including object code
and source code), computer software and database technologies, systems,
structures, and architectures (and related formulae, compositions,
processes, improvements, devices, know-how, inventions, discoveries,
concepts, ideas, designs, methods and information) and any other
information, however documented, that is a trade secret within the
meaning of trade secret laws of the State of Texas;
1
(b) information concerning the business and affairs of the
Employer (which includes historical financial statements, financial
projections and budgets, historical and projected sales, capital
spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and materials); and
(c) notes, analysis, compilations, studies, summaries, and
other material prepared by or for the Employer containing or based, in
whole or in part, on any information included in the foregoing.
"DISABILITY"--as defined in Section 6.2.
"EFFECTIVE DATE"--the date stated in the first paragraph of the
Agreement.
"EMPLOYMENT PERIOD"--the term of the Executive's employment under this
Agreement.
"FISCAL YEAR"--the Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
"FOR CAUSE"--as defined in Section 6.3.
"NON-COMPETITION AGREEMENT"--as defined in Section 6.3.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, or
governmental body.
"POST-EMPLOYMENT PERIOD"--as defined in Section 8.2.
"PROPRIETARY ITEMS"--as defined in Section 7.2(a)(iv).
"SALARY"--as defined in Section 3.1(a).
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT
The Employer hereby employs the Executive, and the Executive
hereby accepts employment by the Employer, upon the terms and conditions set
forth in this Agreement.
2
2.2 TERM
Subject to the provisions of Section 6, the term of the
Executive's employment under this Agreement will be two years, beginning on the
Effective Date and ending on the second anniversary of the Effective Date.
2.3 DUTIES
The Executive will have such duties as are assigned or
delegated to the Executive by the Managers of the Employer or CEO of
Xxxxx-Xxxxxxxx Corporation ("ACC"), and will initially serve as President of the
Employer. The Executive will use his best efforts to promote the success of the
Employer's business, devote the majority of his working time and cooperate with
the Managers of the Employer and CEO of ACC in the advancement of the best
interests of the Employer. It is understood that the Executive is currently
involved in efforts to develop the business of Propetro Services, which is a
company that is not currently affiliated with the Employer or ACC or their
businesses. The Employer understands that the Executive will continue to be
involved in the business of Propetro Services during all or a portion of the
term of this Agreement. It is further understood that the Executive may have
interests in other outside ventures from time to time during the term of this
Agreement. The Executive will be allowed to participate in such outside ventures
unless the time commitment to those ventures does not allow (i) the Executive to
reasonably fulfill his duties to the Employer, (ii) Executive fails to meet the
strategic objectives established by Employer in any fiscal year, or (iii) such
outside ventures conflict with the best interests of ACC or Employer as
determined by the CEO of ACC in his sole discretion. CEO of ACC shall give
Executive written notice of either (i), (ii) or (iii) in the event that ACC
determines that Executive shall not participate in such outside ventures.
3. COMPENSATION
3.1 BASIC COMPENSATION
(a) Salary. The Executive will be paid an annual salary of
$120,000.00, subject to adjustment as provided below (the "Salary"),
which will be payable in equal periodic installments according to the
Employer's customary payroll practices, but no less frequently than
monthly. The Salary will be reviewed by the Board of Directors not less
frequently than annually, and may be adjusted upward in the sole
discretion of the Board of Directors, but in no event will the Salary
be less than $120,000.00 per year.
(b) Benefits. The Executive will, during the Employment Period, be
permitted to participate in such pension, profit sharing, bonus, life
insurance, hospitalization, major medical, and other employee benefit
plans of the Employer that may be in effect from time to time, to the
extent the Executive is eligible under the terms of those plans
(collectively, the "Benefits").
3
3.2 INCENTIVE COMPENSATION
The Executive will be entitled to such discretionary Incentive
Compensation or bonuses as the Managers of Employer or ACC may determine based
on performance and established goals for Employer.
4. FACILITIES AND EXPENSES
4.1 GENERAL
The Employer will furnish the Executive office space,
equipment, supplies, and such other facilities and personnel as the Employer
deems necessary or appropriate for the performance of the Executive's duties
under this Agreement. The Employer will pay the Executive's dues in such
professional societies and organizations as the CEO of ACC deems appropriate,
and will pay on behalf of the Executive (or reimburse Executive for) reasonable
expenses incurred by the Executive at the request of, or on behalf of, the
Employer in the performance of the Executive's duties pursuant to this
Agreement, and in accordance with the Employer's employment policies, including
reasonable expenses incurred by the Executive, in appropriate entertainment
activities, and for business promotional expenses. The Executive must file
expense reports with respect to such expenses in accordance with the Employer's
policies.
4.2 AUTOMOBILE
The Employer will pay the Executive an automobile allowance of
$1,000.00 per month. The Executive will own his own automobile, and maintain and
insure it at his own expense, for his business use in connection with his
employment under this Agreement. The Executive will at his own expense maintain
liability insurance on any automobile used in connection with the Employer's
business, including excess liability (umbrella) insurance coverage in an amount
not less than $1,000,000 per occurrence, with underlying insurance coverage as
required by such excess liability insurance policy, and the Executive will
furnish proof of such insurance to the Employer as requested by the Employer.
The Executive shall be responsible for all automobile expenses.
5. VACATIONS AND HOLIDAYS
The Executive will be entitled to three (3) weeks' paid vacation each
Fiscal Year in accordance with the vacation policies of the Employer in effect
for its executive officers from time to time. Vacation must be taken by the
Executive at such time or times as approved by the Chairman of the Board or
Chief Executive Officer of ACC. The Executive will also be entitled to the paid
holidays set forth in the Employer's policies. Vacation days and holidays during
any Fiscal Year that are not used by the Executive during such Fiscal Year may
not be used in any subsequent Fiscal Year.
4
6. TERMINATION
6.1 EVENTS OF TERMINATION
The Employment Period, the Executive's Basic Compensation, and
any and all other rights of the Executive under this Agreement or otherwise as
an employee of the Employer will terminate (except as otherwise provided in this
Section 6):
(a) upon the death of the Executive; or
(b) upon the disability of the Executive (as defined in
Section 6.2) immediately upon notice from either
party to the other;
(c) for cause (as defined in Section 6.3), immediately
upon notice from the Employer to the Executive, or at
such later time as such notice may specify; and
(d) without cause, immediately upon notice from either
party hereto or at such later time as such notice may
specify.
6.2 DEFINITION OF DISABILITY
For purposes of Section 6.1, the Executive will be deemed to
have a "disability" if, for physical or mental reasons, the Executive is unable
to perform the essential functions of the Executive's duties under this
Agreement for 120 consecutive days, or 180 days during any twelvemonth period,
as determined in accordance with this Section 6.2. The disability of the
Executive will be determined by a medical doctor selected by written agreement
of the Employer and the Executive upon the request of either party by notice to
the other. If the Employer and the Executive cannot agree on the selection of a
medical doctor, each of them will select a medical doctor and the two medical
doctors will select a third medical doctor who will determine whether the
Executive has a disability. The determination of the medical doctor selected
under this Section 6.2 will be binding on both parties. The Executive must
submit to a reasonable number of examinations by the medical doctor making the
determination of disability under this Section 6.2, and the Executive hereby
authorizes the disclosure and release to the Employer of such determination and
all supporting medical records. If the Executive is not legally competent, the
Executive's legal guardian or duly authorized attorney-in-fact will act in the
Executive's stead, under this Section 6.2, for the purposes of submitting the
Executive to the examinations, and providing the authorization of disclosure,
required under this Section 6.2.
6.3 DEFINITION OF "FOR CAUSE"
For purposes of Section 6.1, the phrase "for cause" means: (a)
the Executive's breach of this Agreement or the Non-competition Agreement
entered into on the date hereof between the Buyer and the Executive (the
"Non-Competition Agreement"); (b) the Executive's failure to adhere to any
written Employer policy if the Executive has been given a reasonable opportunity
to comply with such policy or cure his failure to comply; (c) the appropriation
(or attempted appropriation) of a material business opportunity of the Employer,
including attempting to secure or securing any personal profit in connection
with any transaction entered into on behalf of the Employer; (d) the
misappropriation (or attempted misappropriation) of any of the Employer's funds
or property; or (e) the conviction of, the indictment for (or its procedural
equivalent), or the entering of a guilty plea or plea of no contest with respect
to, a felony, the equivalent thereof, or any other crime with respect to which
imprisonment is a possible punishment.
5
6.4 TERMINATION PAY
Effective upon the termination of this Agreement, the Employer
will be obligated to pay the Executive (or, in the event of his death, his
designated beneficiary as defined below) only such compensation as is provided
in this Section 6.5, and in lieu of all other amounts and in settlement and
complete release of all claims the Executive may have against the Employer. For
purposes of this Section 6.5, the Executive's designated beneficiary will be
such individual beneficiary or trust, located at such address, as the Executive
may designate by notice to the Employer from time to time or, if the Executive
fails to give notice to the Employer of such a beneficiary, the Executive's
estate. Notwithstanding the preceding sentence, the Employer will have no duty,
in any circumstances, to attempt to open an estate on behalf of the Executive,
to determine whether any beneficiary designated by the Executive is alive or to
ascertain the address of any such beneficiary, to determine the existence of any
trust, to determine whether any person or entity purporting to act as the
Executive's personal representative (or the trustee of a trust established by
the Executive) is duly authorized to act in that capacity, or to locate or
attempt to locate any beneficiary, personal representative, or trustee.
(a) TERMINATION BY THE EMPLOYER FOR CAUSE. If the Employer
terminates this Agreement for cause, the Executive will be entitled to
receive his Salary only through the date such termination is effective.
(b) TERMINATION UPON DISABILITY. If this Agreement is
terminated by either party as a result of the Executive's disability,
as determined under Section 6.2, the Employer will continue to pay the
Executive his Salary for the period of two months less any disability
insurance benefits received under the disability insurance coverage
furnished by Employer.
(c) TERMINATION UPON DEATH. If this Agreement is terminated
because of the Executive's death, the Executive will be entitled to
receive his Salary through the end of the calendar month in which his
death occurs and one additional month.
(d) TERMINATION WITHOUT CAUSE. If this Agreement is terminated
by Employer without Cause, the Executive will be entitled to receive
his Salary as it becomes due for the remaining term of this Agreement.
If the Executive terminates this Agreement, without Cause, Executive
will be entitled to his Salary only through the date such termination
is effective.
6
(e) BENEFITS. Except as otherwise provided herein, the
Executive's accrual of, or participation in plans providing for, the
Benefits will cease at the effective date of the termination of this
Agreement, and the Executive will be entitled to accrued Benefits
pursuant to such plans only as provided in such plans. The Executive
will not receive, as part of his termination pay pursuant to this
Section 6, any payment or other compensation for any vacation, holiday,
sick leave, or other leave unused on the date the notice of termination
is given under this Agreement.
7. NON-DISCLOSURE COVENANT
7.1 ACKNOWLEDGMENTS BY THE EXECUTIVE
The Executive acknowledges that (a) during the Employment
Period and as a part of his employment, the Executive will be afforded access to
Confidential Information; (b) public disclosure of such Confidential Information
could have an adverse effect on the Employer and its business; (c) because the
Executive possesses substantial technical expertise and skill with respect to
the Employer's business; (d) the Buyer has required that the Executive make the
covenants in this Section 7 as a condition to its purchase of the Employer's
members interests; and (e) the provisions of this Section 7 are reasonable and
necessary to prevent the improper use or disclosure of Confidential Information
and to provide the Employer with exclusive ownership of all Employee Inventions.
7.2 AGREEMENTS OF THE EXECUTIVE
In consideration of the compensation and benefits to be paid
or provided to the Executive by the Employer under this Agreement, the Executive
covenants as follows:
CONFIDENTIALITY.
(i) During and following the Employment Period, the
Executive will hold in confidence the Confidential Information
and will not disclose it to any person except with the
specific prior written consent of the Employer or except as
otherwise expressly permitted by the terms of this Agreement.
(ii) Any trade secrets of the Employer will be
entitled to all of the protections and benefits under trade
secret law of the State of Texas and any other applicable law.
If any information that the Employer deems to be a trade
secret is found by a court of competent jurisdiction not to be
a trade secret for purposes of this Agreement, such
information will, nevertheless, be considered Confidential
Information for purposes of this Agreement. The Executive
hereby waives any requirement that the Employer submit proof
of the economic value of any trade secret or post a bond or
other security.
(iii) None of the foregoing obligations and
restrictions applies to any part of the Confidential
Information that the Executive demonstrates was or became
generally available to the public other than as a result of a
disclosure by the Executive.
7
(iv) The Executive will not remove from the
Employer's premises (except to the extent such removal is for
purposes of the performance of the Executive's duties at home
or while traveling, or except as otherwise specifically
authorized by the Employer) any document, record, notebook,
plan, model, component, device, or computer software or code,
whether embodied in a disk or in any other form (collectively,
the "Proprietary Items"). The Executive recognizes that, as
between the Employer and the Executive, all of the Proprietary
Items, whether or not developed by the Executive, are the
exclusive property of the Employer. Upon termination of this
Agreement by either party, or upon the request of the Employer
during the Employment Period, the Executive will return to the
Employer all of the Proprietary Items in the Executive's
possession or subject to the Executive's control, and the
Executive shall not retain any copies, abstracts, sketches, or
other physical embodiment of any of the Proprietary Items.
7.3 DISPUTES OR CONTROVERSIES
The Executive recognizes that should a dispute or controversy
arising from or relating to this Agreement be submitted for adjudication to any
court, arbitration panel, or other third party, the preservation of the secrecy
of Confidential Information may be jeopardized. All pleadings, documents,
testimony, and records relating to any such adjudication will be maintained in
secrecy and will be available for inspection by the Employer, the Executive, and
their respective attorneys and experts, who will agree, in advance and in
writing, to receive and maintain all such information in secrecy, except as may
be limited by them in writing.
8. NON-COMPETITION AND NON-INTERFERENCE
8.1 ACKNOWLEDGMENTS BY THE EXECUTIVE
The Executive acknowledges that: (a) the services to be
performed by him under this Agreement are of a special, unique, unusual,
extraordinary, and intellectual character; (b) the Employer's business is
national in scope and its products are marketed throughout the United States;
(c) the Employer competes with other businesses that are or could be located in
any part of the United States or the World; (d) the Buyer has required that the
Executive make the covenants set forth in this Section 8 as a condition to the
Buyer's purchase of the Executive's membership interests in the Employer; and
(e) the provisions of this Section 8 are reasonable and necessary to protect the
Employer's business.
8.2 COVENANTS OF THE EXECUTIVE
In consideration of the acknowledgments by the Executive, and
in consideration of the compensation and benefits to be paid or provided to the
Executive by the Employer, the Executive covenants that he will not, directly or
indirectly:
8
(a) during the Employment Period, except in the course of his
employment hereunder, and during the Post-Employment Period, engage or
invest in, own, manage, operate, finance, control, or participate in
the ownership, management, operation, financing, or control of, be
employed by, associated with, or in any manner connected with, lend the
Executive's name or any similar name to, lend Executive's credit to or
render services or advice to, any business whose products or activities
compete in whole or in part with the products or activities of the
Employer anywhere within the United States; provided, however, that the
Executive may purchase or otherwise acquire up to (but not more than)
one percent of any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if such
securities are listed on any national or regional securities exchange
or have been registered under Section 12(g) of the Securities Exchange
Act of 1934;
(b) whether for the Executive's own account or for the account
of any other person, at any time during the Employment Period and the
Post-Employment Period, solicit business of the same or similar type
being carried on by the Employer, from any person known by the
Executive to be a customer of the Employer, whether or not the
Executive had personal contact with such person during and by reason of
the Executive's employment with the Employer;
(c) whether for the Executive's own account or the account of
any other person (i) at any time during the Employment Period and the
Post-Employment Period, solicit, employ, or otherwise engage as an
employee, independent contractor, or otherwise, any person who is or
was an employee of the Employer at any time during the Employment
Period or in any manner induce or attempt to induce any employee of the
Employer to terminate his employment with the Employer; or (ii) at any
time during the Employment Period and for three years thereafter,
interfere with the Employer's relationship with any person, including
any person who at any time during the Employment Period was an
employee, contractor, supplier, or customer of the Employer; or
(d) at any time during or after the Employment Period,
disparage the Employer or any of its shareholders, directors, officers,
employees, or agents.
For purposes of this Section 8.2, the term "Post-Employment Period" means the
three year period beginning on the date of termination of the Executive's
employment with the Employer.
If any covenant in this Section 8.2 is held to be
unreasonable, arbitrary, or against public policy, such covenant will be
considered to be divisible with respect to scope, time, and geographic area, and
such lesser scope, time, or geographic area, or all of them, as a court of
competent jurisdiction may determine to be reasonable, not arbitrary, and not
against public policy, will be effective, binding, and enforceable against the
Executive.
The period of time applicable to any covenant in this Section
8.2 will be extended by the duration of any violation by the Executive of such
covenant.
9
The Executive will, while the covenant under this Section 8.2
is in effect, give notice to the Employer, within ten days after accepting any
other employment, of the identity of the Executive's employer. The Buyer or the
Employer may notify such employer that the Executive is bound by this Agreement
and, at the Employer's election, furnish such employer with a copy of this
Agreement or relevant portions thereof.
9. GENERAL PROVISIONS
9.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY
The Executive acknowledges that the injury that would be
suffered by the Employer as a result of a breach of the provisions of this
Agreement (including any provision of Sections 7 and 8) would be irreparable and
that an award of monetary damages to the Employer for such a breach would be an
inadequate remedy. Consequently, the Employer will have the right, in addition
to any other rights it may have, to obtain injunctive relief to restrain any
breach or threatened breach or otherwise to specifically enforce any provision
of this Agreement, and the Employer will not be obligated to post bond or other
security in seeking such relief. Without limiting the Employer's rights under
this Section 9 or any other remedies of the Employer, if the Executive breaches
any of the provisions of Section 7 or 8, the Employer will have the right to
cease making any payments otherwise due to the Executive under this Agreement.
9.2 COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL
AND INDEPENDENT COVENANTS
The covenants by the Executive in Sections 7 and 8 are
essential elements of this Agreement, and without the Executive's agreement to
comply with such covenants, the Buyer would not have purchased the Executive's
membership interests under the Purchase Agreement and the Employer would not
have entered into this Agreement or employed or continued the employment of the
Executive. The Employer and the Executive have independently consulted their
respective counsel and have been advised in all respects concerning the
reasonableness and propriety of such covenants, with specific regard to the
nature of the business conducted by the Employer.
The Executive's covenants in Sections 7 and 8 are independent
covenants and the existence of any claim by the Executive against the Employer
under this Agreement or otherwise, or against the Buyer, will not excuse the
Executive's breach of any covenant in Section 7 or 8.
If the Executive's employment hereunder expires or is
terminated, this Agreement will continue in full force and effect as is
necessary or appropriate to enforce the covenants and agreements of the
Executive in Sections 7 and 8.
9.3 OFFSET
The Employer will be entitled to offset against any and all
amounts owing to the Executive under this Agreement the amount of any and all
claims that the Buyer may have against the Executive under the Purchase
Agreement.
10
9.4 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE
The Executive represents and warrants to the Employer that the
execution and delivery by the Executive of this Agreement do not, and the
performance by the Executive of the Executive's obligations hereunder will not,
with or without the giving of notice or the passage of time, or both: (a)
violate any judgment, writ, injunction, or order of any court, arbitrator, or
governmental agency applicable to the Executive; or (b) conflict with, result in
the breach of any provisions of or the termination of, or constitute a default
under, any agreement to which the Executive is a party or by which the Executive
is or may be bound.
9.5 OBLIGATIONS CONTINGENT ON PERFORMANCE
The obligations of the Employer hereunder, including its
obligation to pay the compensation provided for herein, are contingent upon the
Executive's performance of the Executive's obligations hereunder.
9.6 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by either
party in exercising any right, power, or privilege under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement.
9.7 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED
This Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective successors, assigns,
heirs, and legal representatives, including any entity with which the Employer
may merge or consolidate or to which all or substantially all of its assets may
be transferred. The duties and covenants of the Executive under this Agreement,
being personal, may not be delegated.
11
9.8 NOTICES
All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by facsimile (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nation-ally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
If to Employer: Downhole Injection Systems, LLC
c/o Xxxxx-Xxxxxxxx Corporation
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx,
Chief Financial Officer
Facsimile No.: (000) 000-0000
With a copy to: Xxxxx-Xxxxxxxx Corporation
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxxx X. Pound III, General Counsel
Facsimile No.: (000) 000-0000
If to the Executive: Xxxx Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
With a copy to: Xxxxxx Xxxxx & Xxxxxx, P.C.
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
9.9 ENTIRE AGREEMENT; AMENDMENTS
This Agreement, the Purchase Agreement, and the documents
executed in connection with the Purchase Agreement, contain the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, oral or written, between the parties hereto
with respect to the subject matter hereof. This Agreement may not be amended
orally, but only by an agreement in writing signed by the parties hereto.
9.10 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Texas without regard to conflicts of laws principles.
12
9.11 JURISDICTION
Any action or proceeding seeking to enforce any provision of,
or based on any right arising out of, this Agreement may be brought against
either of the parties in the courts of the State of Texas, County of Xxxxxx or
County of Midland or, if it has or can acquire jurisdiction, in the United
States District Court for the Southern or Western District of Texas, and each of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on either party anywhere in the world.
9.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement unless otherwise specified. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
9.13 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
9.14 COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date above first written above.
EMPLOYER: DOWNHOLE INJECTION SYSTEMS, LLC
By: /s/ Xxxxxxx X. Xxxxxxxxxxxx
Name: Xxxxxxx X. Xxxxxxxxxxxx
Title: President
EXECUTIVE: XXXX XXXXXX
/s/ Xxxx Xxxxxx
13
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement") is made as of
December 10, 2004, by and between Xxxxx-Xxxxxxxx Corporation, a Delaware
corporation ("Buyer"), and Chevron USA Inc., a Pennsylvania corporation residing
at Midland, Texas ("Seller").
R E C I T A L S
Concurrently with the execution and delivery of this Agreement, Buyer
is purchasing from Seller and the other owners all of the outstanding membership
interests (the "Interests") of Downhole Injection Systems, LLC (the "Company")
pursuant to the terms and conditions of a Purchase Agreement made as of December
10, 2004, (the "Purchase Agreement"). Section 2.4(a)(iv) of the Purchase
Agreement requires that non-competition agreements be executed and delivered by
Seller and the other Interest owners as a condition to the purchase of the
Interests by Buyer.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
Capitalized terms not expressly defined in this Agreement shall have
the meanings ascribed to them in the Purchase Agreement.
2. ACKNOWLEDGMENTS BY SELLER
Seller acknowledges that (a) Seller has occupied a position of trust
and confidence with the Company prior to the date hereof and has become familiar
with the following, any and all of which constitute confidential information of
the Company, (collectively the "Confidential Information"): (i) any and all
trade secrets concerning the business and affairs of the Company, product
specifications, data, know-how, formulae, compositions, processes, designs,
sketches, photographs, graphs, drawings, samples, inventions and ideas, past,
current and planned research and development, current and planned manufacturing
and distribution methods and processes, customer lists, current and anticipated
customer requirements, price lists, market studies, business plans, computer
software and programs (including object code and source code), computer software
and database technologies, systems, structures and architectures (and related
processes, formulae, compositions, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information, regarding
downhole injection technology, methodology or applications, of the Company and
any other information, however documented, of the Company that is a trade secret
within the meaning of trade secret laws of the State of Texas); (ii) any and all
information concerning the business and affairs of the Company (which includes
1
historical financial statements, financial projections and budgets, historical
and projected sales, capital spending budgets and plans, the names and
backgrounds of key personnel, personnel training and techniques and materials),
however documented; and (iii) any and all notes, analysis, compilations,
studies, summaries, and other material prepared by or for the Company containing
or based, in whole or in part, on any information included in the foregoing, (b)
the business of the Company is international in scope, (c) its products and
services are marketed throughout the World; (d) the Company competes with other
businesses that are or could be located in any part of the World; (e) Buyer has
required that Seller make the covenants set forth in Sections 3 and 4 of this
Agreement as a condition to the Buyer's purchase of the Interests owned by
Seller and the other owners; (f) the provisions of Sections 3 and 4 of this
Agreement are reasonable and necessary to protect and preserve the Company's
business, and (g) the Company would be irreparably damaged if Seller were to
breach the covenants set forth in Sections 3 and 4 of this Agreement.
3. CONFIDENTIAL INFORMATION
Seller acknowledges and agrees that all Confidential Information known
or obtained by Seller, whether before or after the date hereof, is the property
of the Company. Therefore, Seller agrees that Seller will not, at any time,
disclose to any unauthorized Persons or use for his own account or for the
benefit of any third party any Confidential Information, whether Seller has such
information in Seller's memory or embodied in writing or other physical form,
without Buyer's written consent, unless and to the extent that the Confidential
Information is or becomes generally known to and available for use by the public
other than as a result of Seller's fault or the fault of any other Person bound
by a duty of confidentiality to Buyer or the Company. Seller agrees to deliver
to Buyer at the time of execution of this Agreement, and at any other time Buyer
may request, all documents, memoranda, notes, plans, records, reports, and other
documentation, models, components, devices, or computer software, whether
embodied in a disk or in other form (and all copies of all of the foregoing),
relating to the businesses, operations, or affairs of the Company and any other
Confidential Information that Seller may then possess or have under Seller's
control.
4. NON-COMPETITION
As an inducement for Buyer to enter into the Purchase Agreement and as
additional consideration for the consideration to be paid to Seller under the
Purchase Agreement, Seller agrees that:
(a) For a period of three years after the Closing:
(i) Seller will not, directly or indirectly, engage
or invest in, own, manage, operate, finance, control,
or participate in the ownership, management,
operation, financing, or control of, be employed by,
associated with, or in any manner connected with,
lend Seller's name or any similar name to, lend
Seller's credit to, or render services or advice to,
any business involved in the installation of
capillary tubing in the oil and gas business;
provided, however, that Seller may purchase or
2
otherwise acquire up to (but not more than) five
percent of any class of securities of any enterprise
(but without otherwise participating in the
activities of such enterprise) if such securities are
listed on any national or regional securities
exchange or have been registered under Section 12(g)
of the Securities Exchange Act of 1934. Seller agrees
that this covenant is reasonable with respect to its
duration, geographical area, and scope.
(ii) Seller will not, directly or indirectly, either
for himself or any other Person, (A) induce or
attempt to induce any employee of the Company to
leave the employ of the Company, (B) in any way
interfere with the relationship between the Company
and any employee of the Company, (C) employ, or
otherwise engage as an employee, independent
contractor, or otherwise, any employee of the
Company, or (D) induce or attempt to induce any
customer, supplier, licensee, or business relation of
the Company to cease doing business with the Company,
or in any way interfere with the relationship between
any customer, supplier, licensee, or business
relation of the Company.
(b) In the event of a breach by Seller of any covenant set
forth in Subsection 4(a) of this Agreement, the term of such covenant
will be extended by the period of the duration of such breach.
5. REMEDIES
If Seller breaches the covenants set forth in Sections 3 or 4 of this
Agreement, Buyer and the Company will be entitled to the following remedies:
(a) Damages from Seller;
(b) To offset against any and all amounts owing to Seller
under the Purchase Agreement any and all amounts which Buyer or the
Company claim under Subsection 6(a) of this Agreement; and
(c) In addition to its right to damages and any other rights
it may have, to obtain injunctive or other equitable relief to restrain
any breach or threatened breach or otherwise to specifically enforce
the provisions of Sections 3 and 4 of this Agreement, it being agreed
that money damages alone would be inadequate to compensate the Buyer
and the Company and would be an inadequate remedy for such breach.
(d) The rights and remedies of the parties to this Agreement
are cumulative and not alternative.
6. SUCCESSORS AND ASSIGNS
This Agreement will be binding upon Buyer, the Company and Seller and
will inure to the benefit of Buyer and the Company and their affiliates,
successors and assigns.
3
7. WAIVER
Neither the failure nor any delay by any party in exercising any right,
power, or privilege under this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement can be discharged by one party, in whole or in part, by a waiver
or renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement.
8. GOVERNING LAW
This Agreement will be governed by the laws of the State of Texas
without regard to conflicts of laws principles.
9. JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of Texas, County of Xxxxxx or County of
Midland or, if it has or can acquire jurisdiction, in the United States District
Court for the Western or Southern District of Texas, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
10. SEVERABILITY
Whenever possible each provision and term of this Agreement will be
interpreted in a manner to be effective and valid but if any provision or term
of this Agreement is held to be prohibited by or invalid, then such provision or
term will be ineffective only to the extent of such prohibition or invalidity,
without invalidating or affecting in any manner whatsoever the remainder of such
provision or term or the remaining provisions or terms of this Agreement. If any
of the covenants set forth in Section 4 of this Agreement are held to be
unreasonable, arbitrary, or against public policy, such covenants will be
considered divisible with respect to scope, time, and geographic area, and in
such lesser scope, time and geographic area, will be effective, binding and
4
11. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
12. SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
13. NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by facsimile
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
SELLER: Chevron USA Inc.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: W. G. (Xxxxxx) Xxxxx
Facsimile No.: (000) 000-0000
WITH A COPY TO: Xxxxxx Xxxxx & Xxxxxx, P.C.
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
BUYER: Xxxxx-Xxxxxxxx Corporation
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxx Xxxxx, Chief Financial Officer
Xxxxxxxx X. Pound III, General Counsel
Facsimile No.: (000) 000-0000
5
14. ENTIRE AGREEMENT
This Agreement and the Purchase Agreement constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior written and oral agreements and understandings
between Buyer and Seller with respect to the subject matter of this Agreement.
This Agreement may not be amended except by a written agreement executed by the
party to be charged with the amendment.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
BUYER: SELLER:
XXXXX-XXXXXXXX CORPORATION CHEVRON USA INC.
By: /s Xxxxxxx X. Xxxxxxxxxxxx By: /s/ W. Xxxxxx Xxxxx III
------------------------------------ -------------------------------
Xxxxxxx X. Xxxxxxxxxxxx Name: W. Xxxxxx Xxxxx III
Chairman and Chief Executive Officer Title: Attorney-in-Fact
6
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "Agreement") is made as of
December 9, 2004, by and between Xxxxx-Xxxxxxxx Corporation, a Delaware
corporation ("Buyer"), and Xxx Xxxxx residing at Midland, Texas ("Seller").
R E C I T A L S
Concurrently with the execution and delivery of this Agreement, Buyer
is purchasing from Seller and the other owners all of the outstanding membership
interests (the "Interests") of Downhole Injection Systems, LLC (the "Company")
pursuant to the terms and conditions of a Purchase Agreement made as of December
9, 2004, (the "Purchase Agreement"). Section 2.4(a)(iv) of the Purchase
Agreement requires that non-competition agreements be executed and delivered by
Seller and the other Interest owners as a condition to the purchase of the
Interests by Buyer.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
Capitalized terms not expressly defined in this Agreement shall have
the meanings ascribed to them in the Purchase Agreement.
2. ACKNOWLEDGMENTS BY SELLER
Seller acknowledges that (a) Seller has occupied a position of trust
and confidence with the Company prior to the date hereof and has become familiar
with the following, any and all of which constitute confidential information of
the Company, (collectively the "Confidential Information"): (i) any and all
trade secrets concerning the business and affairs of the Company, product
specifications, data, know-how, formulae, compositions, processes, designs,
sketches, photographs, graphs, drawings, samples, inventions and ideas, past,
current and planned research and development, current and planned manufacturing
and distribution methods and processes, customer lists, current and anticipated
customer requirements, price lists, market studies, business plans, computer
software and programs (including object code and source code), computer software
and database technologies, systems, structures and architectures (and related
processes, formulae, compositions, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information, regarding
downhole injection technology, methodology or applications, of the Company and
any other information, however documented, of the Company that is a trade secret
within the meaning of trade secret laws of the State of Texas); (ii) any and all
information concerning the business and affairs of the Company (which includes
historical financial statements, financial projections and budgets, historical
and projected sales, capital spending budgets and plans, the names and
backgrounds of key personnel, personnel training and techniques and materials),
however documented; and (iii) any and all notes, analysis, compilations,
1
studies, summaries, and other material prepared by or for the Company containing
or based, in whole or in part, on any information included in the foregoing, (b)
the business of the Company is international in scope, (c) its products and
services are marketed throughout the World; (d) the Company competes with other
businesses that are or could be located in any part of the World; (e) Buyer has
required that Seller make the covenants set forth in Sections 3 and 4 of this
Agreement as a condition to the Buyer's purchase of the Interests owned by
Seller and the other owners; (f) the provisions of Sections 3 and 4 of this
Agreement are reasonable and necessary to protect and preserve the Company's
business, and (g) the Company would be irreparably damaged if Seller were to
breach the covenants set forth in Sections 3 and 4 of this Agreement.
3. CONFIDENTIAL INFORMATION
Seller acknowledges and agrees that all Confidential Information known
or obtained by Seller, whether before or after the date hereof, is the property
of the Company. Therefore, Seller agrees that Seller will not, at any time,
disclose to any unauthorized Persons or use for his own account or for the
benefit of any third party any Confidential Information, whether Seller has such
information in Seller's memory or embodied in writing or other physical form,
without Buyer's written consent, unless and to the extent that the Confidential
Information is or becomes generally known to and available for use by the public
other than as a result of Seller's fault or the fault of any other Person bound
by a duty of confidentiality to Buyer or the Company. Seller agrees to deliver
to Buyer at the time of execution of this Agreement, and at any other time Buyer
may request, all documents, memoranda, notes, plans, records, reports, and other
documentation, models, components, devices, or computer software, whether
embodied in a disk or in other form (and all copies of all of the foregoing),
relating to the businesses, operations, or affairs of the Company and any other
Confidential Information that Seller may then possess or have under Seller's
control.
4. NON-COMPETITION
As an inducement for Buyer to enter into the Purchase Agreement and as
additional consideration for the consideration to be paid to Seller under the
Purchase Agreement, Seller agrees that:
(a) For a period of three years after the Closing:
(i) Seller will not, directly or indirectly, engage
or invest in, own, manage, operate, finance, control,
or participate in the ownership, management,
operation, financing, or control of, be employed by,
associated with, or in any manner connected with,
lend Seller's name or any similar name to, lend
Seller's credit to, or render services or advice to,
any business whose products or activities compete in
whole or in part with the pro ducts or activities of
the Company; provided, however, that Seller may
2
purchase or otherwise acquire up to (but not more
than) five percent of any class of securities of any
enterprise (but without otherwise participating in
the activities of such enterprise) if such securities
are listed on any national or regional securities
exchange or have been registered under Section 12(g)
of the Securities Exchange Act of 1934. Seller agrees
that this covenant is reasonable with respect to its
duration, geographical area, and scope.
(ii) Seller will not, directly or indirectly, either
for himself or any other Person, (A) induce or
attempt to induce any employee of the Company to
leave the employ of the Company, (B) in any way
interfere with the relationship between the Company
and any employee of the Company, (C) employ, or
otherwise engage as an employee, independent
contractor, or otherwise, any employee of the
Company, or (D) induce or attempt to induce any
customer, supplier, licensee, or business relation of
the Company to cease doing business with the Company,
or in any way interfere with the relationship between
any customer, supplier, licensee, or business
relation of the Company.
(iii) Seller will not, directly or indirectly, either
for himself or any other Person, solicit the business
of any Person known to Seller to be a customer of the
Company, whether or not Seller had personal contact
with such Person with respect to activities which
compete in whole or in part with the activities of
the Company;
(b) In the event of a breach by Seller of any covenant set
forth in Subsection 4(a) of this Agreement, the term of such covenant
will be extended by the period of the duration of such breach;
(c) Seller will not, at any time during or after the three
year period, disparage Buyer or the Company, or any of their
shareholders, directors, officers, employees, or agents; and
(d) Seller will, for a period of three years after the
Closing, within ten days after accepting any employment, advise Buyer
of the identity of any employer of Seller. Buyer or the Company may
serve notice upon each such employer that Seller is bound by this
Agreement and furnish each such employer with a copy of this Agreement
or relevant portions thereof.
6. REMEDIES
If Seller breaches the covenants set forth in Sections 3 or 4 of this
Agreement, Buyer and the Company will be entitled to the following remedies:
(a) Damages from Seller;
3
(b) To offset against any and all amounts owing to Seller
under the Purchase Agreement any and all amounts which Buyer or the
Company claim under Subsection 6(a) of this Agreement; and
(c) In addition to its right to damages and any other rights
it may have, to obtain injunctive or other equitable relief to restrain
any breach or threatened breach or otherwise to specifically enforce
the provisions of Sections 3 and 4 of this Agreement, it being agreed
that money damages alone would be inadequate to compensate the Buyer
and the Company and would be an inadequate remedy for such breach.
(d) The rights and remedies of the parties to this Agreement
are cumulative and not alternative.
7. SUCCESSORS AND ASSIGNS
This Agreement will be binding upon Buyer, the Company and Seller and
will inure to the benefit of Buyer and the Company and their affiliates,
successors and assigns and Seller and Seller's assigns, heirs and legal
representatives.
8. WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement will operate as a
waiver of such right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.
9. GOVERNING LAW
This Agreement will be governed by the laws of the State of Texas
without regard to conflicts of laws principles.
10. JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of Texas, County of Xxxxxx or County of
Midland or, if it has or can acquire jurisdiction, in the United States District
Court for the Northern or Southern District of Texas, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
11. SEVERABILITY
Whenever possible each provision and term of this Agreement will be
interpreted in a manner to be effective and valid but if any provision or term
of this Agreement is held to be prohibited by or invalid, then such provision or
term will be ineffective only to the extent of such prohibition or invalidity,
without invalidating or affecting in any manner whatsoever the remainder of such
provision or term or the remaining provisions or terms of this Agreement. If any
of the covenants set forth in Section 4 of this Agreement are held to be
unreasonable, arbitrary, or against public policy, such covenants will be
considered divisible with respect to scope, time, and geographic area, and in
such lesser scope, time and geographic area, will be effective, binding and
enforceable against Seller.
12. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
13. SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
14. NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by facsimile
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
5
SELLER: Xxx Xxxxx
405 North Marienfield
P. O. Xxx 00000
Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
WITH A COPY TO: Xxxxxx Xxxxx & Xxxxxx, P.C.
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
BUYER: Xxxxx-Xxxxxxxx Corporation
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxx Xxxxx, Chief Financial Officer
Xxxxxxxx X. Pound III, General Counsel
Facsimile No.: (000) 000-0000
15. ENTIRE AGREEMENT
This Agreement and the Purchase Agreement constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior written and oral agreements and understandings
between Buyer and Seller with respect to the subject matter of this Agreement.
This Agreement may not be amended except by a written agreement executed by the
party to be charged with the amendment.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
BUYER: SELLER:
XXXXX-XXXXXXXX CORPORATION XXX XXXXX
By: /s/ Xxxxxxx X. Xxxxxxxxxxxx /s/ Xxx Xxxxx
------------------------------ ------------------------------
Xxxxxxx X. Xxxxxxxxxxxx
Chairman and Chief Executive Officer
6
