SPLIT-OFF AGREEMENT
Exhibit
2.2
This SPLIT-OFF AGREEMENT, dated as
of this 2nd day of May, 2008 (this “Agreement”), is entered into by and among
Kentucky USA Energy, Inc., formerly known as Las Rocas Mining Corp., a Delaware
corporation (“Seller”), Xxxxxxxxxxx Xxxxxxxxx (“Xxxxxxxxx” or “Buyer”), Las
Rocas Leaseco Corp., a Delaware corporation (“Leaseco”), and KY USA Energy,
Inc., a Kentucky corporation (“KY USA”).
R
E C I T A L S:
WHEREAS, Seller is the owner of
all of the issued and outstanding capital stock of Leaseco. Leaseco is a
newly-formed, wholly-owned subsidiary of Seller which was organized to acquire,
and has so acquired, the business assets and liabilities previously held by
Seller. Seller has no other businesses or operations prior to the Merger (as
defined herein);
WHEREAS, contemporaneously
with the execution of this Agreement, Seller, KY USA and a newly-formed
wholly-owned Kentucky subsidiary of Seller, KY USA Acquisition Corp.
(“Acquisition Corp.”), will enter into an Agreement and Plan of Merger and
Reorganization (the “Merger Agreement”) pursuant to which Acquisition Corp. will
merge with and into KY USA with KY USA remaining as the surviving entity (the
“Merger”). The equity holders of KY USA will receive securities of
Seller in exchange for their equity interests in KY USA;
WHEREAS, the execution and
delivery of this Agreement is required by KY USA as a condition to its execution
of the Merger Agreement. The consummation of the purchase and sale transaction
contemplated by this Agreement is also a condition to the completion of the
Merger pursuant to the Merger Agreement. Seller has represented to KY USA in the
Merger Agreement that the purchase and sale transaction contemplated by this
Agreement will be consummated immediately following the closing of the Merger,
and KY USA relied on such representation in entering into the Merger
Agreement;
WHEREAS, Buyer desires to
purchase the Shares (as defined in Section 1.1) from
Seller, and to assume, as between Seller and Buyer, all responsibilities for any
debts, obligations and liabilities of Leaseco, on the terms and subject to the
conditions specified in this Agreement; and
WHEREAS, Seller desires to
sell and transfer the Shares to the Buyer, on the terms and subject to the
conditions specified in this Agreement.
NOW, THEREFORE, in
consideration of the premises and the covenants, promises and agreements herein
set forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, agree as follows:
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I. PURCHASE
AND SALE OF STOCK.
1.1 Purchased
Shares. Subject to the terms and conditions provided below,
Seller shall sell and transfer to Buyer and Buyer shall purchase from Seller, on
the Closing Date (as defined in Section 1.3), all of
the issued and outstanding shares of capital stock of Leaseco (the
“Shares”).
1.2 Purchase
Price. The purchase price for the Shares shall be the transfer
and delivery by Buyer to Seller of 24,000,000 shares of common stock of Seller
that Buyer owns (the “Purchase Price Shares”), deliverable as provided in Section
2.2.
1.3 Closing. The
closing of the transactions contemplated in this Agreement (the “Closing”) shall
take place as soon as practicable following the execution of this Agreement;
provided, however, that
the Closing must occur immediately after the closing of the
Merger. The date on which the Closing occurs shall be referred to
herein as the Closing Date (the “Closing Date”).
II. CLOSING.
2.1 Transfer
of Shares. At the Closing, Seller shall deliver to Buyer
certificates representing the Shares, duly endorsed to Buyer or as directed by
Buyer, which delivery shall vest Buyer with good and marketable title to all of
the issued and outstanding shares of capital stock of Leaseco, free and clear of
all liens and encumbrances.
2.2 Payment
of Purchase Price. At the Closing, Buyer shall deliver to
Seller a certificate or certificates representing the Purchase Price Shares duly
endorsed to Seller, which delivery shall vest Seller with good and marketable
title to the Purchase Price Shares, free and clear of all liens and
encumbrances.
2.3 Transfer
of Records. On or before the Closing, Seller shall transfer to
Leaseco all existing corporate books and records in Seller’s possession relating
to Leaseco and its business, including but not limited to all agreements,
litigation files, real estate files, personnel files and filings with
governmental agencies; provided, however, when any such
documents relate to both Seller and Leaseco, only copies of such documents need
be furnished. On or before the Closing, Buyer and Leaseco shall transfer to
Seller all existing corporate books and records in the possession of Buyer or
Leaseco relating to Seller, including but not limited to all corporate minute
books, stock ledgers, certificates and corporate seals of Seller and all
agreements, litigation files, real property files, personnel files and filings
with governmental agencies; provided, however, when any such
documents relate to both Seller and Leaseco or its business, only copies of such
documents need be furnished.
III. BUYER’S
REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants
to Seller and KY USA that:
3.1 Capacity
and Enforceability. Buyer has the legal capacity to execute
and deliver this Agreement and the documents to be executed and delivered by
Buyer at the Closing pursuant to the transactions contemplated hereby. This
Agreement and all such documents constitute valid and binding agreements of
Buyer, enforceable in accordance with their terms.
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3.2 Compliance. Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby by Buyer will result in the breach of any term
or provision of, or constitute a default under, or violate any agreement,
indenture, instrument, order, law or regulation to which Buyer is a party or by
which Buyer is bound.
3.3 Purchase
for Investment. Buyer is financially able to bear the economic
risks of acquiring Leaseco and the other transactions contemplated hereby, and
has no need for liquidity in this investment. Buyer has such knowledge and
experience in financial and business matters in general, and with respect to
businesses of a nature similar to the business of Leaseco, so as to be capable
of evaluating the merits and risks of, and making an informed business decision
with regard to, the acquisition of the Shares. Buyer is acquiring the Shares
solely for his own account and not with a view to or for resale in connection
with any distribution or public offering thereof, within the meaning of any
applicable securities laws and regulations, unless such distribution or offering
is registered under the Securities Act of 1933, as amended (the “Securities
Act”), or an exemption from such registration is available. Buyer has
(i) received all the information he has deemed necessary to make an
informed investment decision with respect to the acquisition of the Shares;
(ii) had an opportunity to make such investigation as he has desired
pertaining to Leaseco and the acquisition of an interest therein, and to verify
the information which is, and has been, made available to him; and
(iii) had the opportunity to ask questions of Seller concerning Leaseco.
Buyer acknowledges that Buyer is a current director and officer of Seller, and a
current director and officer of Leaseco and, as such, has actual
knowledge of the business, operations and financial affairs of Leaseco. Buyer
has received no public solicitation or advertisement with respect to the offer
or sale of the Shares. Buyer realizes that the Shares are “restricted
securities” as that term is defined in Rule 144 promulgated by the Securities
and Exchange Commission under the Securities Act, the resale of the Shares is
restricted by federal and state securities laws and, accordingly, the Shares
must be held indefinitely unless their resale is subsequently registered under
the Securities Act or an exemption from such registration is available for their
resale. Buyer understands that any resale of the Shares by him must be
registered under the Securities Act (and any applicable state securities law) or
be effected in circumstances that, in the opinion of counsel for Leaseco at the
time, create an exemption or otherwise do not require registration under the
Securities Act (or applicable state securities laws). Buyer acknowledges and
consents that certificates now or hereafter issued for the Shares will bear a
legend substantially as follows:
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER
ANY APPLICABLE STATE SECURITIES LAWS (THE “STATE ACTS”), HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
QUALIFICATION UNDER THE STATE ACTS OR PURSUANT TO EXEMPTIONS FROM SUCH
REGISTRATION OR QUALIFICATION REQUIREMENTS (INCLUDING, IN THE CASE OF THE
SECURITIES ACT, THE EXEMPTIONS AFFORDED BY SECTION 4(1) OF THE SECURITIES ACT
AND RULE 144 THEREUNDER). AS A PRECONDITION TO ANY SUCH TRANSFER, THE ISSUER OF
THESE SECURITIES SHALL BE FURNISHED WITH AN OPINION OF COUNSEL OPINING AS TO THE
AVAILABILITY OF EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION AND/OR SUCH
OTHER EVIDENCE AS MAY BE SATISFACTORY THERETO THAT ANY SUCH TRANSFER WILL NOT
VIOLATE THE SECURITIES LAWS.
Buyer
understands that the Shares are being sold to him pursuant to the exemption from
registration contained in Section 4(1) of the Securities Act and that the Seller
is relying upon the representations made herein as one of the bases for claiming
the Section 4(1) exemption.
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3.4 Liabilities. Following
the Closing, Seller will have no liability for any debts, liabilities or
obligations of Leaseco or its business or activities, and there are no
outstanding guaranties, performance or payment bonds, letters of credit or other
contingent contractual obligations that have been undertaken by Seller directly
or indirectly in relation to Leaseco or its business and that may survive the
Closing.
3.5 Title to
Purchase Price Shares. Buyer is the sole record and beneficial
owner of the Purchase Price Shares. At Closing, Buyer will have good and
marketable title to the Purchase Price Shares, which Purchase Price Shares are,
and at the Closing will be, free and clear of all options, warrants, pledges,
claims, liens and encumbrances, and any restrictions or limitations prohibiting
or restricting transfer to Seller, except for restrictions on transfer as
contemplated by applicable securities laws.
IV. SELLER’S
AND LEASECO’S REPRESENTATIONS AND WARRANTIES. Seller and
Leaseco, jointly and severally, represent and warrant to Buyer
that:
4.1 Organization
and Good Standing. Each of the Seller and Leaseco is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Delaware.
4.2 Authority
and Enforceability. The execution and delivery of this
Agreement and the documents to be executed and delivered at the Closing pursuant
to the transactions contemplated hereby, and performance in accordance with the
terms hereof and thereof, have been duly authorized by Seller and all such
documents constitute valid and binding agreements of Seller enforceable in
accordance with their terms.
4.3 Title to
Shares. Seller is the sole record and beneficial owner of the
Shares. At Closing, Seller will have good and marketable title to the
Shares, which Shares are, and at the Closing will be, free and clear of all
options, warrants, pledges, claims, liens and encumbrances, and any restrictions
or limitations prohibiting or restricting transfer to Buyer, except for
restrictions on transfer as contemplated by Section 3.3
above. The Shares constitute all of the issued and outstanding shares
of capital stock of Leaseco.
4.4 WARN
Act. Leaseco does not have a sufficient number of employees to
make it subject to the Worker Adjustment and Retraining Notification
Act.
4.5 Representations
in Merger Agreement. Leaseco represents and warrants that all
of the representations and warranties by Seller, insofar as they relate to
Leaseco, contained in the Merger Agreement are true and correct.
V. OBLIGATIONS
OF BUYER PENDING CLOSING. Buyer covenants and agrees that
between the date hereof and the Closing:
5.1 Not
Impair Performance. Buyer shall not take any intentional
action that would cause the conditions upon the obligations of the parties
hereto to effect the transactions contemplated hereby not to be fulfilled,
including, without limitation, taking or causing to be taken any action that
would cause the representations and warranties made by any party herein not to
be true, correct and accurate as of the Closing, or in any way impairing the
ability of Seller to satisfy its obligations as provided in Article
VI.
5.2 Assist
Performance. Buyer shall exercise its reasonable best efforts
to cause to be fulfilled those conditions precedent to Seller’s obligations to
consummate the transactions contemplated hereby which are dependent upon actions
of Buyer and to make and/or obtain any necessary filings and consents in order
to consummate the sale transaction contemplated by this Agreement.
VI. OBLIGATIONS
OF SELLER PENDING CLOSING. Seller covenants and agrees that
between the date hereof and the Closing:
6.1 Business
as Usual. Leaseco shall operate and Seller shall cause Leaseco
to operate in accordance with past practices and shall use best efforts to
preserve its goodwill and the goodwill of its employees, customers and others
having business dealings with Leaseco. Without limiting the generality of the
foregoing, from the date of this Agreement until the Closing Date, Leaseco shall
(a) make all normal and customary repairs to its equipment, assets and
facilities, (b) keep in force all insurance, (c) preserve in full
force and effect all material franchises, licenses, contracts and real property
interests and comply in all material respects with all laws and regulations,
(d) collect all accounts receivable and pay all trade creditors in the
ordinary course of business at intervals historically experienced, and
(e) preserve and maintain Leaseco’s assets in their current operating
condition and repair, ordinary wear and tear excepted. From the date of this
Agreement until the Closing Date, Leaseco shall not (i) amend, terminate or
surrender any material franchise, license, contract or real property interest,
or (ii) sell or dispose of any of its assets except in the ordinary course
of business. Neither Leaseco nor Buyer shall take or omit to take any action
that results in Seller incurring any liability or obligation prior to or in
connection with the Closing.
6.2 Not
Impair Performance. Seller shall not take any intentional
action that would cause the conditions upon the obligations of the parties
hereto to effect the transactions contemplated hereby not to be fulfilled,
including, without limitation, taking or causing to be taken any action which
would cause the representations and warranties made by any party herein not to
be materially true, correct and accurate as of the Closing, or in any way
impairing the ability of Buyer to satisfy his obligations as provided in Article
V.
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6.3 Assist
Performance. Seller shall exercise its reasonable best efforts
to cause to be fulfilled those conditions precedent to Buyer’s obligations to
consummate the transactions contemplated hereby which are dependent upon the
actions of Seller and to work with Buyer to make and/or obtain any necessary
filings and consents. Seller shall cause Leaseco to comply with its obligations
under this Agreement.
VII. SELLER’S
AND LEASECO’S CONDITIONS PRECEDENT TO CLOSING. The obligations
of Seller and Leaseco to close the transactions contemplated by this Agreement
are subject to the satisfaction at or prior to the Closing of each of the
following conditions precedent (any or all of which may be waived by Seller and
KY USA in writing):
7.1 Representations
and Warranties; Performance. All representations and
warranties of Buyer contained in this Agreement shall have been true and
correct, in all material respects, when made and shall be true and correct, in
all material respects, at and as of the Closing, with the same effect as though
such representations and warranties were made at and as of the Closing. Buyer
shall have performed and complied with all covenants and agreements and
satisfied all conditions, in all material respects, required by this Agreement
to be performed or complied with or satisfied by Buyer at or prior to the
Closing.
7.2 Additional
Documents. Buyer shall deliver or cause to be delivered such
additional documents as may be necessary in connection with the consummation of
the transactions contemplated by this Agreement and the performance of their
obligations hereunder.
7.3 Release
by Leaseco. At the Closing, Leaseco shall execute and deliver
to Seller and KY USA a general release which in substance and effect releases
Seller and KY USA from any and all liabilities and obligations that Seller and
KY USA may owe to Leaseco in any capacity, and from any and all claims that
Leaseco may have against Seller, KY USA, or their respective managers, members,
officers, directors, stockholders, employees and agents (other than those
arising pursuant to this Agreement or any document delivered in connection with
this Agreement).
VIII. BUYER’S
CONDITIONS PRECEDENT TO CLOSING. The obligation of Buyer to
close the transactions contemplated by this Agreement is subject to the
satisfaction at or prior to the Closing of each of the following conditions
precedent (any and all of which may be waived by Buyer in writing):
8.1 Representations
and Warranties; Performance. All representations and
warranties of Seller and Leaseco contained in this Agreement shall have been
true and correct, in all material respects, when made and shall be true and
correct, in all material respects, at and as of the Closing with the same effect
as though such representations and warranties were made at and as of the
Closing. Seller and Leaseco shall have performed and complied with all covenants
and agreements and satisfied all conditions, in all material respects, required
by this Agreement to be performed or complied with or satisfied by them at or
prior to the Closing.
IX. OTHER
AGREEMENTS.
9.1 Expenses. Each
party hereto shall bear its expenses separately incurred in connection with this
Agreement and with the performance of its obligations hereunder.
9.2 Confidentiality. The
parties hereto shall not make any public announcements concerning this
transaction other than in accordance with mutual agreement reached prior to any
such announcement(s) and other than as may be required by applicable law or
judicial process. If for any reason the transactions contemplated hereby are not
consummated, then Buyer shall return any information received by Buyer from
Seller or Leaseco, and Buyer shall cause all confidential information obtained
by Buyer concerning Leaseco and its business to be treated as such.
9.3 Brokers’
Fees. In connection with the transaction specifically
contemplated by this Agreement, no party to this Agreement has employed the
services of a broker and each agrees to indemnify the other against all claims
of any third parties for fees and commissions of any brokers claiming a fee or
commission related to the transactions contemplated hereby.
9.4 Access
to Information Post-Closing; Cooperation.
(a) Following the Closing, Buyer and
Leaseco shall afford to Seller and its authorized accountants, counsel and other
designated representatives, reasonable access (and including using reasonable
efforts to give access to persons or firms possessing information) and
duplicating rights during normal business hours to allow records, books,
contracts, instruments, computer data and other data and information
(collectively, “Information”) within the possession or control of Buyer or
Leaseco insofar as such access is reasonably required by Seller. Information may
be requested under this Section 9.4(a) for,
without limitation, audit, accounting, claims, litigation and tax purposes, as
well as for purposes of fulfilling disclosure and reporting obligations and
performing this Agreement and the transactions contemplated hereby. No files,
books or records of Leaseco existing at the Closing Date shall be destroyed by
Buyer or Leaseco after Closing but prior to the expiration of any period during
which such files, books or records are required to be maintained and preserved
by applicable law without giving the Seller at least 30 days’ prior written
notice, during which xxxx Xxxxxx shall have the right to examine and to remove
any such files, books and records prior to their destruction.
(b) Following the Closing, Seller shall
afford to Leaseco and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) duplicating rights during
normal business hours to Information within Seller’s possession or control
relating to the business of Leaseco. Information may be requested under this
Section 9.4(b)
for, without limitation, audit, accounting, claims, litigation and tax purposes
as well as for purposes of fulfilling disclosure and reporting obligations and
for performing this Agreement and the transactions contemplated hereby. No
files, books or records of Leaseco existing at the Closing Date shall be
destroyed by Seller after Closing but prior to the expiration of any period
during which such files, books or records are required to be maintained and
preserved by applicable law without giving the Buyer at least 30 days prior
written notice, during which time Buyer shall have the right to examine and to
remove any such files, books and records prior to their
destruction.
(c) At all times following the Closing,
Seller, Buyer and Leaseco shall use reasonable efforts to make available to the
other party on written request, the current and former officers, directors,
employees and agents of Seller or Leaseco for any of the purposes set forth in
Section 9.4(a) or
(b) above or as witnesses to the extent that such persons may reasonably
be required in connection with any legal, administrative or other proceedings in
which Seller or Leaseco may from time to be involved.
(d) The party to whom any Information or
witnesses are provided under this Section 9.4 shall
reimburse the provider thereof for all out-of-pocket expenses actually and
reasonably incurred in providing such Information or witnesses.
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(e) Seller, Buyer, Leaseco and their
respective employees and agents shall each hold in strict confidence all
Information concerning the other party in their possession or furnished by the
other or the other’s representative pursuant to this Agreement with the same
degree of care as such party utilizes as to such party’s own confidential
information (except to the extent that such Information is (i) in the
public domain through no fault of such party or (ii) later lawfully
acquired from any other source by such party), and each party shall not release
or disclose such Information to any other person, except such party’s auditors,
attorneys, financial advisors, bankers, other consultants and advisors or
persons with whom such party has a valid obligation to disclose such
Information, unless compelled to disclose such Information by judicial or
administrative process or, as advised by its counsel, by other requirements of
law.
(f) Seller, Buyer and Leaseco shall each
use their best efforts to forward promptly to the other party all notices,
claims, correspondence and other materials which are received and determined to
pertain to the other party.
9.5 Guarantees,
Surety Bonds and Letter of Credit Obligations. In the event
that Seller is obligated for any debts, obligations or liabilities of Leaseco by
virtue of any outstanding guarantee, performance or surety bond or letter of
credit provided or arranged by Seller on or prior to the Closing Date, Buyer and
Leaseco shall use best efforts to cause to be issued replacements of such bonds,
letters of credit and guarantees and to obtain any amendments, novations,
releases and approvals necessary to release and discharge fully Seller from any
liability thereunder following the Closing. Buyer and Leaseco, jointly and
severally, shall be responsible for, and shall indemnify, hold harmless and
defend Seller from and against, any costs or losses incurred by Seller arising
from such bonds, letters of credits and guarantees and any liabilities arising
therefrom and shall reimburse Seller for any payments that Seller may be
required to pay pursuant to enforcement of its obligations relating to such
bonds, letters of credit and guarantees.
9.6 Filings
and Consents. Buyer, at its risk, shall determine what, if
any, filings and consents must be made and/or obtained prior to Closing to
consummate the purchase and sale of the Shares. Buyer shall indemnify the Seller
Indemnified Parties (as defined in Section 11.1 below)
against any Losses (as defined in Section 11.1 below)
incurred by such Seller Indemnified Parties by virtue of the failure to make
and/or obtain any such filings or consents. Recognizing that the failure to make
and/or obtain any filings or consents may cause Seller to incur Losses or
otherwise adversely affect Seller, Buyer and Leaseco confirm that the provisions
of this Section
9.6 will not limit Seller’s right to treat such failure as the failure of
a condition precedent to Seller’s obligation to close pursuant to Article VII
above.
9.7 Insurance. Buyer
acknowledges that on the Closing Date, effective as of the Closing, all
insurance coverage and bonds provided by Seller for Leaseco, and all
certificates of insurance evidencing that Leaseco maintains any required
insurance by virtue of insurance provided by Seller, will terminate with respect
to any insured damages resulting from matters occurring subsequent to
Closing.
9.8 Agreements
Regarding Taxes.
(a) Tax
Sharing Agreements. Any tax sharing agreement between Seller
and Leaseco is terminated as of the Closing Date and will have no further effect
for any taxable year (whether the current year, a future year or a past
year).
(b) Returns
for Periods Through the Closing Date. Seller will include the
income and loss of Leaseco (including any deferred income triggered into income
by Reg. §1.1502-13 and any excess loss accounts taken into income under Reg.
§1.1502-19) on Seller’s consolidated federal income tax returns for all periods
through the Closing Date and pay any federal income taxes attributable to such
income. Seller and Leaseco agree to allocate income, gain, loss, deductions and
credits between the period up to Closing (the “Pre-Closing Period”) and the
period after Closing (the “Post-Closing Period”) based on a closing of the books
of Leaseco, and both Seller and Leaseco agree not to make an election under Reg.
§1.1502-76(b)(2)(ii) to ratably allocate the year’s items of income, gain, loss,
deduction and credit. Seller, Leaseco and Buyer agree to report all transactions
not in the ordinary course of business occurring on the Closing Date after
Buyer’s purchase of the Shares on Leaseco’s tax returns to the extent permitted
by Reg. §1.1502-76(b)(1)(ii)(B). Buyer agrees to indemnify Seller for any
additional tax owed by Seller (including tax owned by Seller due to this
indemnification payment) resulting from any transaction engaged in by Leaseco
during the Pre-Closing Period or on the Closing Date after Buyer’s purchase of
the Shares. Leaseco will furnish tax information to Seller for inclusion in
Seller’s consolidated federal income tax return for the period which includes
the Closing Date in accordance with Leaseco’s past custom and
practice.
(c) Audits. Seller
will allow Leaseco and its counsel to participate at Leaseco’s expense in any
audits of Seller’s consolidated federal income tax returns to the extent that
such audit raises issues that relate to and increase the tax liability of
Leaseco. Seller shall have the absolute right, in its sole discretion, to engage
professionals and direct the representation of Seller in connection with any
such audit and the resolution thereof, without receiving the consent of Buyer or
Leaseco or any other party acting on behalf of Buyer or Leaseco, provided that
Seller will not settle any such audit in a manner which would materially
adversely affect Leaseco after the Closing Date unless such settlement would be
reasonable in the case of a person that owned Leaseco both before and after the
Closing Date. In the event that after Closing any tax authority informs the
Buyer or Leaseco of any notice of proposed audit, claim, assessment or other
dispute concerning an amount of taxes which pertain to the Seller, or to Leaseco
during the period prior to Closing, Buyer or Leaseco must promptly notify the
Seller of the same within 15 calendar days of the date of the notice from the
tax authority. In the event Buyer or Leaseco do not notify the Seller within
such 15 day period, Buyer and Leaseco, jointly and severally, will indemnify the
Seller for any incremental interest, penalty or other assessments resulting from
the delay in giving notice. To the extent of any conflict or inconsistency, the
provisions of this Section 9.8 shall control over the provisions of Section 11.2
below.
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(d) Cooperation
on Tax Matters. Buyer, Seller and Leaseco shall cooperate
fully, as and to the extent reasonably requested by any party, in connection
with the filing of tax returns pursuant to this Section and any audit,
litigation or other proceeding with respect to taxes. Such cooperation shall
include the retention and (upon the other party’s request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Leaseco shall (i) retain all books and records
with respect to tax matters pertinent to Leaseco relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Seller, any extensions thereof) of
the respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) give Seller reasonable
written notice prior to transferring, destroying or discarding any such books
and records and, if the Seller so requests, Buyer agrees to cause Leaseco to
allow Seller to take possession of such books and records.
9.9 ERISA. Effective
as of the Closing Date, Leaseco shall terminate its participation in, and
withdraw from, all employee benefit plans sponsored by Seller, and Seller and
Buyer shall cooperate fully in such termination and withdrawal. Without
limitation, Leaseco shall be solely responsible for (i) all liabilities
under those employee benefit plans notwithstanding any status as an employee
benefit plan sponsored by Seller, and (ii) all liabilities for the payment
of vacation pay, severance benefits, and similar obligations, including, without
limitation, amounts which are accrued but unpaid as of the Closing Date with
respect thereto. Buyer and Leaseco acknowledge that Leaseco is solely
responsible for providing continuation health coverage, as required under the
Consolidated Omnibus Reconciliation Act of 1985, as amended (“COBRA”), to each
person, if any, participating in an employee benefit plan subject to COBRA with
respect to such employee benefit plan as of the Closing Date, including, without
limitation, any person whose employment with Leaseco is terminated after the
Closing Date.
X. TERMINATION. This
Agreement may be terminated at, or at any time prior to, the Closing by mutual
written consent of Seller, Buyer and KY USA.
If this
Agreement is terminated as provided herein, it shall become wholly void and of
no further force and effect and there shall be no further liability or
obligation on the part of any party except to pay such expenses as are required
of such party.
XI. INDEMNIFICATION.
11.1 Indemnification
by Buyer. Buyer covenants and agrees to indemnify, defend,
protect and hold harmless Seller, and its officers, directors, employees,
stockholders, agents, representatives and affiliates (collectively, together
with Seller, the “Seller Indemnified Parties”) at all times from and after the
date of this Agreement from and against all losses, liabilities, damages,
claims, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys’ fees and expenses of investigation), whether or not involving a third
party claim and regardless of any negligence of any Seller Indemnified Party
(collectively, “Losses”), incurred by any Seller Indemnified Party as a result
of or arising from (i) any breach of the representations and warranties of
Buyer set forth herein or in certificates delivered in connection herewith,
(ii) any breach or nonfulfillment of any covenant or agreement (including
any other agreement of Buyer to indemnify Seller set forth in this Agreement) on
the part of Buyer under this Agreement, (iii) any debt, liability or
obligation of Leaseco, (iv) the conduct and operations of the business of
Leaseco whether before or after Closing, (v) claims asserted against
Leaseco whether before or after Closing, or (vi) any federal or state
income tax payable by Seller and attributable to the transaction contemplated by
this Agreement.
11.2 Third
Party Claims.
(a) Defense. If
any claim or liability (a “Third-Party Claim”) should be asserted against any of
the Seller Indemnified Parties (the “Indemnitee”) by a third party after the
Closing for which Buyer has an indemnification obligation under the terms of
Section 11.1,
then the Indemnitee shall notify Buyer (the “Indemnitor”) within 20 days after
the Third-Party Claim is asserted by a third party (said notification being
referred to as a “Claim Notice”) and give the Indemnitor a reasonable
opportunity to take part in any examination of the books and records of the
Indemnitee relating to such Third-Party Claim and to assume the defense of such
Third-Party Claim and in connection therewith and to conduct any proceedings or
negotiations relating thereto and necessary or appropriate to defend the
Indemnitee and/or settle the Third-Party Claim. The expenses (including
reasonable attorneys’ fees) of all negotiations, proceedings, contests, lawsuits
or settlements with respect to any Third-Party Claim shall be borne by the
Indemnitor. If the Indemnitor agrees to assume the defense of any Third-Party
Claim in writing within 20 days after the Claim Notice of such Third-Party Claim
has been delivered, through counsel reasonably satisfactory to Indemnitee, then
the Indemnitor shall be entitled to control the conduct of such defense, and any
decision to settle such Third-Party Claim, and shall be responsible for any
expenses of the Indemnitee in connection with the defense of such Third-Party
Claim so long as the Indemnitor continues such defense until the final
resolution of such Third-Party Claim. The Indemnitor shall be responsible for
paying all settlements made or judgments entered with respect to any Third-Party
Claim the defense of which has been assumed by the
Indemnitors. Except as provided on subsection (b) below, both the
Indemnitor and the Indemnitee must approve any settlement of a Third-Party
Claim. A failure by the Indemnitee to timely give the Claim Notice shall not
excuse Indemnitor from any indemnification liability except only to the extent
that the Indemnitor is materially and adversely prejudiced by such
failure.
7
(b) Failure
to Defend. If the Indemnitor shall not agree to assume the
defense of any Third-Party Claim in writing within 20 days after the Claim
Notice of such Third-Party Claim has been delivered, or shall fail to continue
such defense until the final resolution of such Third-Party Claim, then the
Indemnitee may defend against such Third-Party Claim in such manner as it may
deem appropriate and the Indemnitee may settle such Third-Party Claim, in its
sole discretion, on such terms as it may deem appropriate. The Indemnitor shall
promptly reimburse the Indemnitee for the amount of all settlement payments and
expenses, legal and otherwise, incurred by the Indemnitee in connection with the
defense or settlement of such Third-Party Claim. If no settlement of such
Third-Party Claim is made, then the Indemnitor shall satisfy any judgment
rendered with respect to such Third-Party Claim before the Indemnitee is
required to do so, and pay all expenses, legal or otherwise, incurred by the
Indemnitee in the defense against such Third-Party Claim.
11.3 Non-Third-Party
Claims. Upon discovery of any claim for which Buyer has an
indemnification obligation under the terms of this Section 11.3 which
does not involve a claim by a third party against the Indemnitee, the Indemnitee
shall give prompt notice to Buyer of such claim and, in any case, shall give
Buyer such notice within 30 days of such discovery. A failure by Indemnitee to
timely give the foregoing notice to Buyer shall not excuse Buyer from any
indemnification liability except to the extent that Buyer is materially and
adversely prejudiced by such failure.
11.4 Survival. Except
as otherwise provided in this Section 11.4, all
representations and warranties made by Buyer, Leaseco and Seller in connection
with this Agreement shall survive the Closing. Anything in this Agreement to the
contrary notwithstanding, the liability of all Indemnitors under this Article XI shall
terminate on the third (3rd)
anniversary of the Closing Date, except with respect to (a) liability for
any item as to which, prior to the third (3rd)
anniversary of the Closing Date, any Indemnitee shall have asserted a Claim in
writing, which Claim shall identify its basis with reasonable specificity, in
which case the liability for such Claim shall continue until it shall have been
finally settled, decided or adjudicated, (b) liability of any party for
Losses for which such party has an indemnification obligation, incurred as a
result of such party’s breach of any covenant or agreement to be performed by
such party after the Closing, (c) liability of Buyer for Losses incurred by
a Seller Indemnified Party due to breaches of its representations and warranties
in Article III
of this Agreement, and (d) liability of Buyer for Losses arising out of
Third-Party Claims for which Buyer have an indemnification obligation, which
liability shall survive until the statute of limitation applicable to any third
party’s right to assert a Third-Party Claim bars assertion of such
claim.
XII. MISCELLANEOUS.
12.1 Notices. All
notices and communications required or permitted hereunder shall be in writing
and deemed given when received by means of the United States mail, addressed to
the party to be notified, postage prepaid and registered or certified with
return receipt requested, or personal delivery, or overnight courier, as
follows:
(a) If to Seller, addressed
to:
000
Xxxxxxxx Xx.
Xxxxxx,
XX 00000
Attn:
Xxxxxx X. Xxxxxxxx, Chief Executive Officer
With a copy to (which shall not
constitute notice hereunder):
Gottbetter
& Partners, LLP
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx Xxxx,
XX 00000
Attention: Xxxx
X. Xxxxxxxxxx, Esq.
Facsimile:
(000) 000-0000
(b) If to Buyer or Leaseco, addressed
to:
c/o
Xxxxxxxxxxx Xxxxxxxxx
000 X.
Xxxxxxxxx Xxxxxx
Xxxxx
Xxxxxxx, XX 00000
8
With a copy to (which shall not
constitute notice hereunder):
Gottbetter
& Partners, LLP
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx Xxxx,
XX 00000
Attention: Xxxx
X. Xxxxxxxxxx, Esq.
Facsimile:
(000) 000-0000
(c) If to KY USA, addressed
to:
000
Xxxxxxxx Xx.
Xxxxxx,
XX 00000
Attn:
Xxxxxx X. Xxxxxxxx, Chief Executive Officer
With a copy to (which shall not
constitute notice hereunder):
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
00
Xxxxxxxx, 00xx
Xxxxx
Xxx Xxxx,
XX 00000
Attn:
Xxxx X. Xxxx, Esq.
Facsimile:
(000) 000-0000
or to
such other address as any party hereto shall specify pursuant to this Section 12.1 from
time to time.
12.2 Exercise
of Rights and Remedies. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
12.3 Time. Time
is of the essence with respect to this Agreement.
12.4 Reformation
and Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired
thereby.
9
12.5 Further
Acts. Seller, Buyer and Leaseco shall execute any and all
documents and perform such other acts which may be reasonably necessary to
effectuate the purposes of this Agreement.
12.6 Entire
Agreement; Amendments. This Agreement contains the entire
understanding of the parties relating to the subject matter contained herein.
This Agreement cannot be amended or changed except through a written instrument
signed by all of the parties hereto, including KY USA. No provisions of this
Agreement or any rights hereunder may be waived by any party without the prior
written consent of KY USA.
12.7 Assignment. No
party may assign his, her or its rights or obligations hereunder, in whole or in
part, without the prior written consent of the other parties.
12.8 Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to
principles of conflicts or choice of laws thereof.
12.9 Counterparts. This
Agreement may be executed in one or more counterparts, with the same effect as
if all parties had signed the same document. Each such counterpart shall be an
original, but all such counterparts taken together shall constitute a single
agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature page was an original
thereof.
12.10 Section
Headings and Gender. The Section headings used herein are
inserted for reference purposes only and shall not in any way affect the meaning
or interpretation of this Agreement. All personal pronouns used in this
Agreement shall include the other genders, whether used in the masculine,
feminine or neuter, and the singular shall include the plural, and vice versa, whenever and as
often as may be appropriate.
12.11 Specific
Performance; Remedies. Each of Seller, Buyer and Leaseco
acknowledges and agrees that KY USA would be damaged irreparably if any
provision of this Agreement is not performed in accordance with its specific
terms or is otherwise breached. Accordingly, each of Seller, Buyer and Leaseco
agrees that KY USA will be entitled to seek an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and its terms and provisions in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
parties and the matter, subject to Section 12.8, in
addition to any other remedy to which they may be entitled, at law or in equity.
Except as expressly provided herein, the rights, obligations and remedies
created by this Agreement are cumulative and are in addition to any other
rights, obligations or remedies otherwise available at law or in equity, and
nothing herein will be considered an election of remedies.
10
12.12 Submission
to Jurisdiction; Process Agent; No Jury Trial.
(a) Each party to the Agreement hereby
submits to the jurisdiction of any state or federal court sitting in the State
of Delaware in any action arising out of or relating to this Agreement and
agrees that all claims in respect of the action may be heard and determined in
any such court. Each party to the Agreement also agrees not to bring any action
arising out of or relating to this Agreement in any other court. Each party to
the Agreement agrees that a final judgment in any action so brought will be
conclusive and may be enforced by action on the judgment or in any other manner
provided at law or in equity. Each party to the Agreement waives any defense of
inconvenient forum to the maintenance of any action so brought and waives any
bond, surety or other security that might be required of any other party with
respect thereto.
(b) EACH PARTY TO THIS AGREEMENT HEREBY
AGREES TO WAIVE ITS RIGHTS TO JURY TRIAL OF ANY DISPUTE BASED UPON OR ARISING
OUT OF THIS AGREEMENT OR ANY OTHER AGREEMENTS RELATING TO THE SUBJECT MATTER OF
THIS AGREEMENT OR ANY DEALINGS AMONG THEM RELATING TO THE TRANSACTIONS
CONTEMPLATED HEREBY. The scope of this waiver is intended to be all encompassing
of any and all actions that may be filed in any court and that relate to the
subject matter of the transactions, including contract claims, tort claims,
breach of duty claims and all other common law and statutory claims. Each party
to the Agreement hereby acknowledges that this waiver is a material inducement
to enter into a business relationship and that they will continue to rely on the
waiver in their related future dealings. Each party to the Agreement further
represents and warrants that it has reviewed this waiver with its legal counsel,
and that each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. NOTWITHSTANDING ANYTHING TO THE CONTRARY
HEREIN, THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED ORALLY
OR IN WRITING, AND THE WAIVER WILL APPLY TO ANY AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING HERETO. In the event of commencement of any action, this
Agreement may be filed as a written consent to trial by a court.
12.13 Construction. The
parties hereto have participated jointly in the negotiation and drafting of this
Agreement. If an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof will arise favoring or disfavoring any party
because of the authorship of any provision of this Agreement. Any reference to
any federal, state, local or foreign law will be deemed also to refer to law as
amended and all rules and regulations promulgated thereunder, unless the context
requires otherwise. The words “include,” “includes,” and “including” will be
deemed to be followed by “without limitation.” The words “this
Agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar
import refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. The parties hereto intend that each representation,
warranty and covenant contained herein will have independent significance. If
any party hereto has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which that party has not breached will not
detract from or mitigate the fact that such party is in breach of the first
representation, warranty or covenant.
[Signature
page follows this page.]
11
IN WITNESS WHEREOF, the
parties hereto have duly executed this Split-Off Agreement as of the day and
year first above written.
By: /s/ Xxxxxxxxxxx
Xxxxxxxxx
Name: Xxxxxxxxxxx
Xxxxxxxxx
Title: President
LAS
ROCAS LEASECO, INC.
By: /s/ Xxxxxxxxxxx
Xxxxxxxxx
Name: Xxxxxxxxxxx
Xxxxxxxxx
Title President
BUYER
/s/ Xxxxxxxxxxx
Xxxxxxxxx
Xxxxxxxxxxx
Xxxxxxxxx
KY
USA ENERGY, INC.
By: /s/ Xxxxxx X.
Xxxxxxxx
Name: Xxxxxx
X. Xxxxxxxx
Title: Chief
Executive Officer
12
