EXHIBIT 10.12
ASSET PURCHASE AGREEMENT
(X. X. KEY SERVICES, L.L.C.)
THIS AGREEMENT is made and entered into by and among CRC-KEY, INC, an
Oklahoma corporation, ("Buyer"), and X. X. KEY SERVICES, L.L.C. ("Seller"),
XXXXX X. KEY ("Key"), XXXXX X. XxXXXX ("Xxxxx XxXxxx"), the XXXXX X. XxXXXX
REVOCABLE LIVING TRUST DATED JUNE 28, 1996, amended and restated October 22,
1996 (the "Trust"), XXXXX XXXXXXX XxXXXX ("Xxxxxxx XxXxxx") (Key, Xxxxx XxXxxx
and Xxxxxxx XxXxxx being referred to as "Member" or "Members").
RECITALS
1. Seller owns and operates a business that designs, manufactures and
sells concrete weights that are used in the pipeline business, among others (the
"Business"). Seller is an Oklahoma Limited Liability Company, which, under
Oklahoma law, has "Members" and "Managers" instead of "Shareholders" and
"Directors" or "Limited Partners" and "General Partners." Under Oklahoma
corporate law Key, the Trust and Xxxxxxx XxXxxx are the only members of Seller
and Key and Xxxxx XxXxxx are the only Managers of the Seller, although the
Seller has other employees who hold managerial positions but are not "Managers"
of the L.L.C. under Oklahoma law.
2. Seller desires to sell to Buyer, and Buyer desires to buy from Seller,
substantially all of Seller's assets upon the terms and conditions contained in
this Agreement.
NOW, THEREFORE, in consideration for the mutual terms and provisions
contained in this Agreement, and other good and valuable consideration, the
receipt and adequacy of which are acknowledged, the Parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 PURCHASE OF ASSETS. On the basis of the representations and warranties
of the Parties contained herein, subject to the terms and conditions set forth
in this Agreement, and for the consideration hereafter provided, Seller agrees
to sell, transfer and deliver to Buyer, and Buyer agrees to purchase from
Seller, on the Closing Date (as hereafter defined) all of the following assets
(except as specifically excluded in Section 1.2):
(a) The real property and improvements described in and according to
the terms of the Contract for the Purchase of Real Estate attached
as SCHEDULE 1.L(A) (the "Real Estate Contract"); provided that such
real property shall be leased as provided in the lease attached to
such Real Estate Contract;
(b) All of Seller's supplies, equipment, inventory, fixed assets and
other tangible personal property as of October 31, 1997 as described
on SCHEDULE 1.L(B). Such schedule shall be updated from October 31,
1997 through the Closing Date (all of Seller's supplies, equipment,
inventory, fixed assets and other tangible personal property being
purchased by Buyer is hereinafter referred to as the "Personal
Property") Seller's cost of all such Personal Property and the
accumulated depreciation for each item through October 31, 1997, is
shown on SCHEDULE 1.L(B);
(c) All rights accruing under the leases of and licenses to use
real, tangible or intangible personal, or other property in which
Seller has an interest listed on SCHEDULE 1.L(C) from and after the
Closing Date, which Schedule includes: (i) all leases or licenses of
property that would be "Personal Property" if Seller owned that
property and (ii) all real property leases, leases or licenses of
computer systems, software, systems and documentation, visual and
electronic security equipment, facsimile and duplicating equipment,
and leases of all other equipment, automobiles, trucks, rolling
stock, and communications equipment, collectively referred to as the
"Personal Property Leases";
(d) All of the following related to the Business: (i) supplier
lists, (ii) customer lists, (iii) address or phone lists, (iv)
marketing prospects and brochures, (v) product descriptions,
drawings, plans and specifications; (vi) computer files, (vii)
warranties, maintenance and other records relating to the Purchased
Assets, and (viii) copies of Seller's tax returns and financial
records, Seller's organizational document and operating agreement
and Seller's personnel files;
(e) All intangible personal property of Seller (collectively,
"Intangible Property") described on SCHEDULE 1.1(E) and the
following:
(i) Contracts as listed in SCHEDULE 1.L(E)(I);
(ii) All deposits, prepaid items and refunds including utility
deposits;
(iii) To the extent transferable, all licenses, certificates,
franchises, accreditations, permits, and other indicia of
authority relating to business operations of the Business;
(iv) All trade names and business names including, without
limitation, the names "X. X. Key Services" (or any part or
derivation thereof), service marks, trade dress, trademarks,
logos, and all derivations and variations of any thereof, and
all proprietary materials listed on SCHEDULE 1.1(E)(IV)
(collectively called the "Business Identity");
(v) All telephone, facsimile, e-mail numbers, Internet
web-page identifiers and communication numbers and post office
box rights listed on Schedule I - 1 (e) (v),
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(vi) All technical information, blueprints, plans,
specifications, processes, engineering drawings or notes,
patents, rights to inventions, copyrights, rights to
proprietary processes, ideas, developments, and all other
intellectual property (collectively called "Intellectual
Property"), including such intellectual property described on
Schedule 1.1(e)(vi);
(vii) The rights of Seller under all manufacturers',
contractors', bankers' or others' warranties and guaranties
which relate to the Purchased Assets;
(viii) All of Seller's goodwill in the Business.
(f) To the extent that policy limits are not exhausted by Seller
before December 31, 1999, or thereafter with respect to claims
asserted against Seller, all rights under all insurance policies
insuring against any liability for any past or future activity or
liability of the Seller or the Business for periods before the
Closing Date;
(g) To the extent that Buyer pays an amount to resolve, settle or
pay for a claim, rights of subrogation, contribution, claims against
agents, or claims against others, in which the Seller has an
interest or that are related to the Business, including without
limitation all rights which, under law or equity, accrue before or
after the Closing Date but relate to an occurrence that happened
before the Closing Date;
(h) All "work in process" in which Seller has an interest as shown
on SCHEDULE 1.1(H) as such schedule shall be updated through the
Closing Date; and
(i) The intent of the foregoing is that the Buyer will purchase
substantially all of the assets and rights that are used in the
Business and have been paid for by Seller other than Excluded
Assets. If a schedule omits such an asset or right of Seller, other
than an asset described in Section 1.2(a)-(e), Buyer will have the
right and option to purchase such item or right from Seller for
Seller's cost less depreciation or if greater, the assumption of any
purchase money indebtedness thereon. Buyer's purchase option will
survive the Closing for a period of twelve (12) months.
1.2 EXCLUDED ASSETS. The following assets (the "Excluded Assets") shall
not be included in the definition of "Purchased Assets" (hereinafter defined)
and shall not be included in the sale:
(a) All of Seller's cash on hand, in banks, or elsewhere;
(b) Any property (including, any Personal Property) of Seller that
is expended, disposed of or sold in the ordinary course of business
prior to the Closing Date;
(c) The Seller's accounts receivable;
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(d) Seller's notes receivable;
(e) The other assets described on SCHEDULE 1.2; and
(f) All rights, claims, interests and property of Seller not
described in Section 1.1 above.
all of which (a-f) are called the "Excluded Assets." The Assets described in
Section 1.1, less the Excluded Assets, will be called the " Purchased Assets."
1.3 ASSUMPTION OF OBLIGATIONS AND LIABILITIES.
(a) IN GENERAL. Subject to the terms and conditions set forth in
this Agreement, Buyer agrees to assume, perform and pay when due the
obligations and liabilities of Seller with respect to the Personal
Property, the Personal Property Leases, the Contracts, all
obligations related to the work in progress being assigned to Buyer
hereunder, and the remaining Purchased Assets, but only to the
extent they arise or are to be performed after the Closing Date (the
"Assumed Obligations"). Buyer also agrees to assume and pay any
specific liabilities described in SCHEDULE 1.3(A)("Assumed
Liabilities").
(b) EXCLUDED LIABILITIES. Seller shall pay all liabilities and
obligations not expressly assumed by Buyer on the Closing Date and
Seller shall indemnify Buyer against any and all such liabilities
pursuant to and in accordance with Section 4.4 hereof. Buyer does
not assume any liabilities or obligations of Seller, or related in
any way to the Purchased Assets or actions of Seller, which are not
specifically assumed by Buyer under this Agreement including,
without limitation, liabilities arising prior to the Closing Date in
connection with the operation of the Business and the activities of
Seller.
1.4 PURCHASE PRICE.
(a) IN GENERAL. Subject to the terms and conditions of this
Agreement and the adjustments and credits provided in SECTION 1.5,
the purchase price ("Purchase Price") to be paid by Buyer to Seller
for the Purchased Assets shall be as follows:
(i) The sum of One Million Thirty Thousand Dollars
($1,030,000.00), less closing adjustments described in SECTION
1.5 of this Agreement, payable on the Closing Date by a
cashier's check drawn on a bank located in the United States
or, at the Seller's option, a wire transfer of funds initiated
and transferred on the Closing Date; plus
(ii) A note in the form attached hereto as SCHEDULE
1.4(A)(II); plus
(iii) If, but only to the extent that, any "Earnout Payments"
described in SUBSECTION 1.4(B) are payable, such Earnout
Payments; plus or minus
(iv) Any "Purchase Price Adjustment" described in SUBSECTION
1.4(C).
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(b) EARNOUT PAYMENTS. The "Earnout Payments" shall be calculated as
described on SCHEDULE 1.4(B), subject to the following rules:
(i) CUMULATIVE BASIS. The maximum Earnout Payments will be
calculated on a cumulative basis, beginning on April 1, 1998,
and ending March 31, 2003. Interim calculations and payments
will be made as described in this Subsection, but all
calculations and payments will be based on the entire period
described above.
(ii) EARNOUT PAYMENT. For each of the Buyer's Fiscal Years
ending on or before March 31, 2003, the Buyer will calculate
and pay an Earnout Payment; provided that, in no event will
the Seller receive aggregate Earnout Payments that exceed the
cumulative sum of Five Million Five Hundred Thousand Dollars
($5,500,000.00). If the Earnout Ratio described on SCHEDULE
1.4(B) exceeds 0.2 for one or more fiscal years, and then
drops below 0.2 for a future fiscal year, then Seller will not
be required to repay Earnout Payments previously made by the
Buyer. In addition, if for two successive fiscal years the
Earnout Ratio is less than 0.1, then in Buyer's discretion it
may cancel and terminate all remaining Earnout Payments. In
addition, if Buyer in any fiscal year suffers an operating
loss (not including any extraordinary items) in excess of
$500,000, then Buyer in its discretion may cancel and
terminate any Earnout Payment for that fiscal year and for all
future fiscal years.
(iii) FINANCIAL ACCOUNTING METHODS. The Earnout Payments
calculation will be applied on a non-consolidated basis, even
while the Buyer is a member of a business group that should be
consolidated for tax or regular accounting basis. While the
Business is owned by the Buyer and it does not own assets
other the those purchased hereunder, or employed or generated
as a part of the Business, the Buyer's entire assets,
liabilities, earnings and other accounting elements will be
used to calculate the Earnout Payments, Average Net Assets and
EBITDA as such terms are defined on SCHEDULE 1.4(B). If,
however, the Buyer owns other businesses, the Buyer shall
operate the Business as a separate division and only the
accounts of that division will be used to calculate the
Earnout Payments, Average Net Assets and EBITDA. The increased
basis or cost of the Purchased Assets, based on the Buyer's
purchase price (including any previous Earnout Payment), will
be included in the carrying cost of the Total Assets as such
term is defined on SCHEDULE 1.4(B). To calculate Total Assets
for purposes of the Earnout Payments, no asset will be
depreciated, depleted, amortized or written off by more than
the amount permitted as an expense for the Earnout Payments,
Average Net Assets and EBITDA, even if GAAP or tax rules
permit or require such depreciation, amortization or
write-off; thus, Total Assets for the Earnout Payment may
exceed the Total Assets stated on the Buyer's regular books of
account or on its tax statements.
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(iv) PAYMENT. Any Earnout Payment will be payable, by Buyer's
wire transfer, on or before the earlier of (A) August 31 that
follows immediately after the end of each "Applicable Year,"
or (B) 10 business days after Buyer receives its final
certified audit for the previous fiscal year. The "Applicable
Years" relate to the fiscal years ending on March 31, 1999,
through March 31, 2003, inclusive. With the payment for any
Earnout Payment, the Buyer shall include a calculation of the
Earnout Payment computed and shown in accordance with SCHEDULE
1.4(B), and copies of Buyer's monthly financial statements for
that fiscal year and fiscal year financial statements.
(v) SELLER'S RIGHTS TO REVIEW AND OBJECT. Seller shall have
the right to review the Buyer's financial statements during
the period that Earnout Payments are calculated on a monthly
basis. Seller also has the right to review the Buyer's regular
books of account for such fiscal year during Buyer's regular
business hours, by giving Buyer at least ten business days'
notice within 120 days after Buyer delivers the information
described in Subsection 1.4(b)(iv). The Seller may object to
the calculation of the Earnout Payment by delivering a
specific and detailed statement of the reasons for the
objection and the errors in the calculation of the Earnout
Payment by giving at least ten business days' notice; provided
that if the Seller does not deliver its Statement within 180
days after the Buyer delivers to Seller the calculation of the
Earnout Payment, Average Net Assets and EBITDA for that fiscal
year, the Seller shall be deemed to have accepted the Buyer's
calculation of the Earnout Payment, Average Net Assets and
EBITDA and for future fiscal years all previous fiscal years'
calculations shall not be subject to review or objection.
(vi) DISPUTE RESOLUTION. In the event of a timely objection to
Buyer's calculation of the Average Net Assets, EBITDA and the
Earnout Payment, the Parties shall endeavor to resolve the
objection during a period of at least 60 days after Seller
delivers such timely objection. If the Parties are unable to
resolve such timely objection, they shall appoint Xxxxx X.
Xxxxx at Xxxxx & Xxxxxxxx, Tulsa, Oklahoma, to review the
Buyer's calculation, and the determination of such accounting
firm of the correct amounts shall be binding on both Parties.
The fees of such accounting firm shall be shared equally by
the Parties.
THIS SUBSECTION IS THE EXCLUSIVE REMEDY WITH RESPECT TO
DISPUTES REGARDING THE BUYER'S CALCULATION OF THE AVERAGE NET
ASSETS, EBITDA, AND EARNOUT PAYMENTS.
(vii) KEY MAN INSURANCE. Notwithstanding the foregoing
description of the Earnout Payments, this Subsection describes
the exclusive rights to Earnout Payments with respect to the
interest of any of the Members who dies before March 31, 2003.
The Seller or Key and Xxxxx XxXxxx currently have life
insurance policies insuring the lives of each other as
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described on SCHEDULE 1.4(B)(VII), with death benefits
totaling $1,500,000 on the life of Key and $1,000,000 on the
life of Xxxxx XxXxxx. Such policies will be split such that
one third ($500,000) of the policy insuring the life of Key
will be assigned to Buyer at Closing with the remainder
($1,000,000) assigned to Key at Closing and one-quarter
($250,000) of the policy insuring the life of Xxxxx XxXxxx
will be assigned to Buyer at Closing with the remainder
($750,000) assigned to Xxxxx XxXxxx at Closing. Key and McGill
will consent to such assignment. In addition, Xxxxxxx XxXxxx
will cooperate with the obtaining of $500,000 in life
insurance on his life. One policy for $200,000 will be owned
by the Buyer; the other policy for $300,000 will be owned by
Xxxxxxx XxXxxx. The Members will keep all such life insurance
policies in full force and effect for the full policy limits
stated above with premiums paid on a timely basis throughout
the period of the Earnout Payments. If any of the Members
should die before March 31, 2003, then the respective death
beneficiaries of such policies shall receive the benefits
thereof. Further, Buyer shall have the obligation to pay a pro
rata portion of any Earnout Payment with respect o such
deceased Member's "interest" (or the Trust's "interest" with
respect to Xxxxx XxXxxx) in the Seller with respect to the
year in which such death occurred. Such Earnout Payment will
be a pro rata share ("Pro Rata Share") of such deceased
Member's "interest" (or the Trust's "interest" with respect to
Xxxxx XxXxxx) in the total Earnout Payment which is paid for
such fiscal year based upon the number of days that such
Member lived during the fiscal year in which death occurred.
Upon payment of the Pro Rata Share, such deceased Member's
"interest" (or the Trust's "interest" with respect to Xxxxx
XxXxxx) in the Earnout Payments shall not thereafter be
payable to anyone. Each Member's "interest" (or the Trust's
"interest" with respect to Xxxxx XxXxxx) in the Seller, and
the portion of the Earnout Payments that will cease to be
payable with respect to a Member's death, is as follows:
Key - 49% "interest" in the Seller and of the Earnout
Payments;
Xxxxx X. XxXxxx Revocable Living Trust dated June 28,
1996, as amended and restated October 22, 1996 - 46 %
"interest" in the Seller and of the Earnout Payments
with respect to Xxxxx X. XxXxxx'x death; and
Xxxxxxx XxXxxx - 5% "interest" in the Seller and of the
Earnout Payments.
For example, if Xxxxx XxXxxx dies on August 1, 2000, the
Company will be liable to the Seller for 33.42 percent of
amounts otherwise accruing with respect to the Trust's
interest in Seller as Earnout Payments for the fiscal year
ending March 31, 2001. After such payments are made, no person
shall have any right or interest in the portion of the Earnout
Payment previously payable with respect to the Trust's
interest therein.
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The Seller or the applicable Member's estate and his
beneficiaries will bear all income, estate and other taxes and
withholdings on the payments described in this Subsection
(vii).
If any Member fails to maintain in full force and effect any
of the life insurance policies provided for above for the full
policy limits stated above for the term described above, then
no death benefits will be paid to the beneficiaries of the
policies held by the Members and Buyer will not be liable for
such death benefits.
(viii) If, prior to the final Earnout Payment being made
hereunder, a Member becomes qualified to receive long term
disability payments in accordance with the long term
disability plan of Buyer or if a Member ceases employment with
Buyer, then the payment or nonpayment of that Member's (or the
Trust's) "interest" in future Earnout Payments will be
determined in accordance with such Member's Employment
Agreement (or Xxxxx X. XxXxxx'x Consulting Agreement with
respect to the Trust) with Buyer as attached hereto as
SCHEDULE 1.7(A)(XV).
A Member's or the Trust's interest in Earnout Payments is used
for the purpose of reducing a portion of the Earnout Payments
if a Member dies. The Seller will receive all Earnout Payments
as provided in this Agreement.
(C) PURCHASE PRICE ADJUSTMENT. Within 90 days after the Closing
Date, the Buyer will determine the Business' Personal Property and
work in process as of the Closing Date. Based on such "Closing Date
Personal Property Statement" and the October 31, 1997 Personal
Property Statement attached hereto as SCHEDULE 1.4(C) and the work
in process on March 31, 1998, the Buyer will calculate the Purchase
Price Adjustment as follows:
(i) CLOSING DATE PERSONAL PROPERTY STATEMENT. The Closing Date
Personal Property Statement will be prepared on the same basis
as the October 31, 1997 Personal Property Statement. The
Closing Date Personal Property Statement will not reflect an
increase in the basis or carrying cost of the assets shown on
the Closing Date Personal Property Statement. The cost, net of
depreciation, of the Personal Property shown on the October
31, 1997 Personal Property Statement shall be subtracted from
the cost, net of depreciation, of the Personal Property shown
on the Closing Date Personal Property Statement. Any positive
difference shall be paid by Buyer to Seller and any negative
difference shall be paid by Seller to Buyer. Any personal
property acquired or disposed of after October 31, 1997 and
before the Closing Date shall have depreciation accounted for
in accordance with generally accepted accounting practices,
consistently applied.
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(ii) WORK IN PROCESS. Work in process on March 31, 1998 shall
be treated in the following manner:
(A) With respect to the work in process described on
Schedule 1.4(c)(ii)(A), all revenues and costs accrued
prior to the Closing Date shall belong to and be
received or paid by Seller and all revenues and costs
accrued on or after the Closing Date shall belong to and
be received or paid by Buyer.
(B) With respect to the work in process described on
Schedule 1.4(c)(ii)(B), the gross profit derived
therefrom shall be calculated as described on SCHEDULE
1.4(C)(II)(B) and shall be either retained by the Buyer
or paid to the Seller as described in SCHEDULE
1.4(C)(II)(B).
(iii) CALCULATION AND PAYMENT. Within 90 days after the
Closing Date, the Buyer will deliver the Closing Date Personal
Property Statement, and a detailed calculation of the gross
profit derived from the work in process described on SCHEDULE
1.4(C)(II)(B) (all of which are called the "Calculations").
Within 10 days after the delivery of such information, Buyer
shall pay to Seller any net positive amount, and, within ten
days after the close of Seller's right to review and object
period set forth below, Seller shall pay to Buyer any net
negative amount, shown by the Calculations.
(iv) SELLER'S RIGHTS TO REVIEW AND OBJECT. Seller will have
the right to review the Buyer's regular books of account for a
fiscal year during Buyer's regular business hours, by giving
Buyer at least ten business days' notice within 45 days after
Buyer delivers the Calculations. The Seller also may object to
the calculation of the Closing-Date Personal Property
Statement, the price to be paid for the other assets, or the
gross profit derived from the work in process described on
SCHEDULE 1.4(C)(II)(B) by delivering a specific and detailed
"Statement" of the reasons for the objection and the errors in
such Calculations by giving at least ten business days'
notice; provided that if the Seller does not deliver its
Statement within 60 days after the Buyer delivers such
Calculations, the Seller shall be deemed to have accepted the
Calculations, and the Purchase Price Adjustment shall not be
subject to review or objection.
(v) DISPUTE RESOLUTION. In the event of a timely objection to
Calculations, the Parties shall endeavor to resolve the
objection during a period of at least 60 days after Buyer
delivers such timely objection. If the Parties are unable to
resolve such timely objection, they shall appoint Xxxxx X.
Xxxxx at Xxxxx & Xxxxxxxx, Tulsa, Oklahoma to review the
Calculations, and the determination of such accounting firm of
the correct amounts will be binding on both Parties. The fees
of such accounting firm will be shared equally by the Parties.
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THIS SUBSECTION STATES THE EXCLUSIVE REMEDY FOR DISPUTES RELATING TO THE
CALCULATIONS.
1.5 PRORATIONS.
(a) TAXES. Buyer shall pay all special assessments against the Purchased
Assets. All state, city, county and tax district ad valorem and personal
property taxes and general assessments, if any, which are directly
attributable to the Purchased Assets, shall be prorated between the
Parties as of the Closing Date. Buyer shall pay only the pro rata share of
any personal property taxes arising with respect to the period after the
Closing Date regardless of when the taxes are assessed. If such taxes have
not been assessed as of the Closing Date, such taxes will be based on the
previous year's taxes.
(b) UTILITIES. The proration of utilities is described in the Real Estate
Contract. For periods before the Closing Date, Seller shall pay all
utilities relating to the Business except as prorated in the Real Estate
Contract. For periods after the Closing Date, Buyer shall pay all of the
utilities.
(c) SALES TAXES. Buyer shall pay to Seller or to the taxing authority all
sales taxes that are payable with respect to the purchase of the Purchased
Assets.
(d) NO DOUBLE PRORATIONS. This Agreement and the Real Estate Contract both
have proration clauses. There shall be no duplicate proration of any cost,
expense or amount. If there is a conflict between the prorations described
in this Agreement and the prorations described in the Real Estate
Contract, the Real Estate Contract shall control.
1.6 CLOSING DATE. The consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at Suite 1000, 100 West Fifth
Street, Tulsa, Oklahoma, on or before March 31, 1998, at a time mutually agreed
by the Parties or such other date, time and place as the Parties shall mutually
agree (the "Closing Date"), provided that all conditions and other matters
required to be completed as of the Closing Date have been or shall be completed
on the date. In the event the Closing shall not have occurred prior to June 1,
1998, this Agreement shall terminate, and, except as set forth in Sections 4.6,
4.7 and 8.3, neither party shall have any further liability to any other party
hereunder other than for a breach of this Agreement occurring before that date
such as the failure to consummate this Agreement after all conditions and
requirements have been satisfied.
1.7 INSTRUMENTS OF CONVEYANCE AND TRANSFER.
(a) SELLER. At the Closing, Seller shall execute and deliver or
cause to be executed and delivered to Buyer the following:
(i) A xxxx of sale, assignment and assumption agreement
substantially in the form attached as SCHEDULE 1.7(A)(I) which
shall be effective to vest in Buyer good and marketable title
to the Purchased Assets free and clear of all liens, charges
and encumbrances, and restrictions of any kind
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whatsoever, except only the Assumed Obligations and Assumed
Liabilities;
(ii) UCC-2 Termination Statements with respect to all of
Seller's Financing Statements including those identified in
SCHEDULE 2. L(F) but not including those described on SCHEDULE
1.7(A)(II);
(iii) A copy of Seller's Articles of Organization and
Operating Agreement certified by a Manager of Seller;
(iv) A certified copy of a resolution, signed by all of the
Seller's Members and Managers, approving this Agreement and
all transactions contemplated in this Agreement;
(v) An opinion of counsel that this Agreement is the
fully-authorized, valid and binding agreement of the Seller
that is enforceable according to its terms, except as the
enforceability thereof may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditor's rights
generally and to general principles of equity regardless of
whether such enforceability is considered in a proceeding in
equity or at law;
(vi) Original policies of insurance on the lives of Key and
Xxxxx XxXxxx and related consents to such assignments;
(vii) Copies of the notice letters to lessors, lessees,
employees and contractors who are Parties to the leases,
licenses contracts and accounts payable to be assumed by Buyer
regarding the assignment thereof, which shall be in a form
that is acceptable to Seller and Buyer;
(viii) Assignments and consents to the assumption of such of
Seller's purchase or sales orders or contracts as require such
consents; a general form for such assignments and consents is
attached as SCHEDULE 1.7(A)(VIII);
(ix) Certificates of title to all personal property required
to have such titles, signed and acknowledged to transfer such
titles to the Buyer and having all liens thereon released
except for Assumed Obligations and Assumed Liabilities;
(x) All documents required to close the Real Estate Contract
or the lease in lieu of the Real Estate Contract; and
(xi) All tangible personal property, and all documents
evidencing intangible personal property, that are part of the
Purchased Assets.
(xii) Estoppel Certificates from each of the Seller's full
time employees (about 10 people), in the form attached as
SCHEDULE 1.7(A)(XII);
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(xiii) COBRA notices to all of Buyer's employees to whom COBRA
notices are required to be sent;
(xiv) Copies of all Form 5500s that the Seller has been
required to file;
(xv) Final Employment Agreements and a Consulting Agreement
with Buyer and Key, Xxxxxxx XxXxxx and Xxxxx XxXxxx in the
form attached as SCHEDULE 1.7(A)(XV); and
(xvi) All other instruments of title, certificates, consents,
endorsements, assignments, assumptions and other documents or
instruments, in a form satisfactory to Buyer and its counsel,
as may be reasonably requested by Buyer in order to transfer
the Purchased Assets to Buyer and to carry out the
transactions contemplated by this Agreement.
(b) BUYER. At the Closing Buyer shall execute and deliver or cause
to be executed and delivered to Seller the following:
(i) The payment of the initial amount of the Purchase Price as
provided in Subsection 1.4(a)(i) and (ii) of this Agreement;
and
(ii) Certificates, consents and other documents as may be
required to carry out the terms of this Agreement.
(iii) Assumption of Assumed Obligations and Assumed
Liabilities Agreement in the form as shown on SCHEDULE
1.7(A)(I).
(iv) Guaranty attached hereto as SCHEDULE 1.7(B)(IV).
ARTICLE 2
SELLER'S REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES. Seller represents and warrants to
Buyer, which representations and warranties shall be true and correct on the
date hereof and through and including the Closing Date, as follows:
(a) ORGANIZATION: GOOD STANDING. The Seller is an Oklahoma
Limited Liability Company, duly organized, validly existing
and in good standing under the laws of the State of Oklahoma.
(b) AUTHORITY. Seller has all requisite power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been fully-authorized
by the Seller's Members and Managers.
(c) BINDING EFFECT. All action on the part of the Seller
necessary for the authorization, execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby has been or will be taken
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prior to the Closing Date, and Seller has received all
consents necessary to carry out this Agreement and each of the
transactions contemplated herein. The individual signing this
Agreement on behalf of the Seller is duly authorized to bind
Seller to the terms of this Agreement. This Agreement is and
shall constitute the legal, valid and binding obligation of
Seller, enforceable in accordance with its terms except as the
enforceability thereof may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditor's rights
generally and to general principles of equity regardless of
whether such enforceability is considered in a proceeding in
equity or at law.
(d) TITLE TO AND CONDITION OF PERSONAL PROPERTY AND CONTRACTS.
Except as set forth on SCHEDULE 2.1(D), with respect to the
Personal Property and Contracts:
(i) Except for the Personal Property that is the subject
of a Personal Property Lease, Seller is the sole and
exclusive legal and equitable owner of all right, title
and interest in and has good, insurable and marketable
title to all of the Personal Property. Except as shown
on SCHEDULE 2.1(D), none of the Purchased Assets is
subject to: (A) any security interest, mortgage, pledge,
lien, restriction or encumbrance of any kind or
character, direct or indirect, whether accrued,
absolute, contingent or otherwise, or (B) any claims in
which any person or entity other than Buyer will have
acquired or will have a basis to assert any right, title
or interest in, or right to possession, use, enjoyment
or proceeds of any of the Personal Property. The liens
described on SCHEDULE 2.L(D) will be extinguished at the
Closing.
(ii) SCHEDULE 1.1(C), SCHEDULE 1.1(E)(I), and SCHEDULE
1.1(E)(IV) set forth accurate and complete lists of all
Personal Property Leases, Contracts and Business
Identity used in, or necessary or intended for the
operation of, the Business. Seller has provided, or will
provide within ten (10) days from the date hereof, Buyer
with complete and correct copies of all Contracts and
Personal Property Leases and Business Identity. Except
as set forth in such Schedules: (A) the Contracts and
Personal Property Leases are freely assignable by Seller
to Buyer, have not been modified, amended or assigned
and are in full force and effect; (B) there are no
defaults by Seller, or any other party to the Contracts
and Personal Property Leases; (C) Seller has not
perfected its rights to use its Business Identity by a
state or federal filing, but has a right to use its
Business Identity through use and has not received any
adverse claims to any of the Business Identity; (D)
Seller has not received any notice of any default,
offset, counterclaim or defense under the Contracts or
Personal Property Leases, or with respect to the
Business Identity; (E) no condition or event has
occurred which with the passage of time or the giving of
notice or both would constitute a material default or
breach by Seller of the terms of the Contracts or
Personal Property Leases; and (F) there does not now,
and at Closing shall not exist any security interest,
lien, encumbrance, right of
13
set-off, prepayment, deposit or claim on any interest of
Seller in the Contracts or Personal Property Leases, or
with respect to the Business Identity except for the
Assumed Obligations and Assumed Liabilities.
(iii) The Personal Property, including, without
limitation, any Personal Property leased by Seller, is
merchantable, is in good operating condition and repair
(ordinary wear and tear excepted).
(iv) The supplies and inventories to be purchased by
Buyer are of good quality, not obsolete, and are of a
quantity useable and saleable in the ordinary course of
business. Seller has not made any additions or
reductions to the supplies prior to the Closing Date,
except in the ordinary course of business.
(v) To the best knowledge of Seller, Seller is the sole
owner of all of the Intellectual Property, free from the
claims or rights of any other person. None of the
Intellectual Property is subject to any actual or
claimed assignment, lien, encumbrance, license or
royalty, except as described on SCHEDULE 1.1(E)(VI).
(vi) Except as shown on SCHEDULE 2.L(D)(VI) the
Purchased Assets are located at the Business address in
Tulsa or near Catoosa, Oklahoma or under the custody and
control of an on-site supervisor.
(e) ABSENCE OF ADVERSE FACTS OR CIRCUMSTANCES. Except as
stated on SCHEDULE 2.1(E), to the best of Seller's knowledge,
no facts or circumstances exist which are expected to
materially and adversely affect the present condition of the
Purchased Assets.
(f) COMPLIANCE WITH LAW. Except as stated on SCHEDULE 2.L(F),
to the best of Seller's knowledge, the Business and the
Purchased Assets are not in violation of any applicable
statutes, regulations, ordinances or other laws which could in
any manner materially adversely affect Buyer's ownership of
the Purchase Assets or the operation of the Business. Seller
does not know of any governmental investigation of Seller
pending in connection with the operation of the Business.
(g) PURCHASED ASSETS. Except as stated on SCHEDULE 2.1(G), the
Purchased Assets constitute all of the property presently used
in or required for the operation of the Business (excluding
the Excluded Assets described in Subsection 1.2(a)-(e)).
(h) NO VIOLATION. Entering into this Agreement and
consummating the transactions contemplated hereby will not
constitute or result in a breach or default (or an event
which, with notice or lapse of time or both, would constitute
a default) under, or result in the termination of or
accelerate the performance required, or cause the acceleration
of the maturity of any debt or obligation pursuant to, or
result in the creation or imposition of any security interest,
lien or other encumbrance upon the Purchased Assets, under any
provision of any
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chapter, bylaw, mortgage, lease or agreement, or any order,
judgment or decree to which any of the Purchased Assets is
subject or by which Seller is bound. Neither the execution or
delivery of this Agreement nor the consummation of the
transactions contemplated herein violate any order, writ,
injunction, judgment or decree of any federal, state or local
court, department, agency or instrumentality to which the
Seller is a party or by which the Seller is bound.
(i) LITIGATION; LIABILITY. Except as set forth in SCHEDULE
2.1(I) attached hereto, there is no action, assertion of
breach, investigation or proceeding pending or, to the best
knowledge of Seller, threatened against or involving the
Purchased Assets or the Seller, and to the best knowledge of
Seller after due inquiry, there are no facts based on which
material assertions of breach may be hereafter made against
the Purchased Assets or the Seller.
(j) INSURANCE. A description of all insurance policies
presently in effect with respect to the Purchased Assets,
including the policies and respective coverage amounts, is set
forth in SCHEDULE 2.L(I). Seller has maintained and shall
continue to maintain (i) insurance on all of their assets and
business of a type customarily insured, covering property
damage and loss of income by fire and other casualties, and
(ii) adequate insurance protection against all liabilities,
claims and risks against which it is customary to insure.
Seller shall deliver copies of all such insurance policies to
Buyer at Closing.
(k) REAL ESTATE. All warranties and representations made in
the Real Estate Contract are and will be true, complete and
accurate as of the dates described in the Real Estate
Contract, and are incorporated by reference into this
Agreement as if they were completely restated in this
subsection.
2.2 NO UNTRUE OR INACCURATE REPRESENTATION OR WARRANTY. No representation
or warranty by Seller contains or will contain any untrue statement of material
fact, or omits or will omit to state a material fact necessary to make the
statements therein not materially misleading.
2.3 SCHEDULES. Each Schedule to this Agreement discloses all of the
information that the text of this Agreement requires to be disclosed with
respect to the subject matter of that Schedule.
2.4 SURVIVAL. The representations and warranties of Seller contained in
this Agreement shall be deemed to have been made as of the date of this
Agreement and as of the Closing Date, and shall, as of each such date, then be
true, accurate and complete in all material respects. The representations and
warranties of Seller contained in this Agreement shall terminate December 31,
1999, except that the termination thereof does not affect the right of
indemnification under Section 4.4.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants to
Seller, which representations and warranties shall be true correct on the date
hereof and through and including the Closing Date, as follows:
(A) ORGANIZATION; GOOD STANDING. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Oklahoma.
(B) CORPORATE AUTHORITY. Buyer has all requisite corporate power and
authority to enter into this Agreement and consummate the transactions
contemplated hereby.
(C) BINDING EFFECT. All corporate action on the part of Buyer, its
officers and directors necessary for the authorization, execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby has been or shall be taken prior to the
Closing Date. This Agreement shall constitute the legal, valid and binding
obligation of Buyer, enforceable in accordance with its terms.
(D) NO VIOLATION. Consummation of the transactions contemplated hereby
will not constitute or result in a breach or default under any provision
of any charter, bylaw, mortgage, lease or agreement, or any order,
judgment or decree to which any property of Buyer is subject or by which
Buyer is bound.
3.2 SURVIVAL. The representations and warranties of Buyer contained in
this Agreement shall be deemed to have been made as of the date of this
Agreement and also as of the Closing Date and shall, as of both such dates, be
true, accurate and complete in all respects. The representations and warranties
of Buyer contained in this Agreement shall terminate December 31, 1999, except
that the termination thereof does not affect the right of indemnification under
Section 5.1.
ARTICLE 4
COVENANTS OF SELLER
4.1 ACCESS AND INFORMATION. From the date of this Agreement until Closing,
Seller shall give to Buyer or Buyer's representatives access during normal
business hours to the business, books, accounts and records and all other
relevant documents and shall make available copies of all documents and
information with respect to the business and properties of Seller as
representatives of Buyer may from time to time request, all in a manner as not
unduly to disrupt Seller's normal business activities. Access may include
consultations with Seller and (after advance notice and only at times reasonably
permitted by Seller) the personnel of Seller. From the date of this Agreement
until Closing, Seller shall (after advance notice and only at times reasonably
permitted by Seller) make the Personal Property available for inspection by
Buyer and its representatives during normal business hours. Prior to the Closing
Date, Seller shall
16
notify Buyer of (a) any material adverse change in the financial position,
earnings or business of Seller, (b) any governmental, customer, supplier,
current or former employee, or others' complaints, investigations or hearings to
which Seller is a party, and (c) any pending or threatened court actions to
which the Seller is a party.
4.2 CONDUCT OF BUSINESS. Before the Closing Date, except as otherwise
approved by Buyer, Seller shall conduct its business only in the ordinary course
thereof consistent with past practice and in a manner that the representations
and warranties contained in Article 2 shall be true and correct at and as of the
Closing Date (except for changes contemplated, permitted or required by this
Agreement). Seller will, consistent with conducting its business in accordance
with reasonable business judgment, use its best efforts to maintain and preserve
its business organization, employee relationships, customer and supplier base,
and rights under the Personal Property Leases and Contracts intact.
4.3 NEGATIVE COVENANTS. During the period from the date of this Agreement
to the Closing Date, Seller shall not, without Buyer's prior written consent:
(a) Transfer, sell or otherwise dispose of any assets material to the
operation of the Business other than in the ordinary and usual course of
business as heretofore conducted, except for the items as are no longer
useful, or obsolete, worn out or incapable of any further use, and as will
be replaced in accordance with Seller's usual practices with other items
of substantially the same value and utility as the items transferred,
sold, exchanged or otherwise disposed of;
(b) Create, participate in or agree to the creation of any liens,
encumbrances or hypothecation of any of the assets of Seller, except any
liens for current taxes;
(c) Except for contracts for the sale of goods or services on standard
terms, conditions and profit margins, enter into any leases, contracts or
agreements of any kind or character with respect to the Business or its
operation, or incur any liabilities in connection therewith, save and
except (i) those which will terminate or expire prior to the Closing Date,
and (ii) those to which Seller is presently committed or which arise in
the ordinary course of business as heretofore conducted and involve a
liability or obligation not exceeding an aggregate amount of $20,000.00;
(d) Engage in any transaction concerning the Business except in the
ordinary course of business;
(e) Except as required for the performance by Seller of the terms of this
Agreement, amend or terminate prior to its expiration date, any contract
or agreement to which the Seller is a party, including those Contracts and
Personal Property Leases that Buyer has agreed to assume;
(f) Authorize or undertake any capital projects with respect to the
Business, except equipment purchases, repairs and replacements occurring
in the ordinary course of business as heretofore conducted and not
exceeding $30,000.00 for any single item or an aggregate of $100,000.00
for all items;
17
(g) Increase any salaries or other compensation payable or to become
payable to Seller' employees, or incur any obligation not currently part
of Seller's compensation arrangement for payment of bonuses or similar
payments; or
(h) Except as part of the sale of trucks or other equipment for which
replacements are being obtained, offer for sale, solicit offers to buy, or
enter into any agreement with any person (other than Buyer) with respect
to the sale or other disposition of, all or any material portion of the
Purchased Assets or any ownership interest of Seller, hold discussions
with any party (other than Buyer looking toward an offer or solicitation,
or furnish or cause to be furnished any information with respect to the
Seller or the Purchased Assets to any person that the Seller knows or has
reason to believe is in the process of considering any acquisition.
4.4 INDEMNIFICATION BY SELLER.
(a) EXCEPT FOR ASSUMED OBLIGATIONS AND ASSUMED LIABILITIES ASSUMED BY
BUYER UNDER THIS AGREEMENT, SELLER AGREES TO PROTECT, INDEMNIFY, DEFEND
AND HOLD BUYER, ITS OFFICERS, DIRECTORS, LEGAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS, AND EACH OF THEM, FREE AND HARMLESS FROM AND AGAINST ANY AND
ALL DEBTS, LIABILITIES, OBLIGATIONS, DAMAGES, COSTS OR EXPENSES
(INCLUDING, BUT NOT LIMITED TO ATTORNEY'S FEES AND COURT COSTS), LIENS OR
ENCUMBRANCES ACCRUING OR BASED UPON OR ARISING OUT OF:
(i) ANY BREACH OR VIOLATION OF ANY REPRESENTATION OR WARRANTY BY
SELLER SET FORTH IN ARTICLE 2 HEREOF,
(ii) THE BREACH BY SELLER OR A MEMBER OF ANY OTHER TERM OR PROVISION
OF THIS AGREEMENT; AND
(iii) THE INDEMNIFICATION PROVISIONS OF SUBSECTION 1.3(B) AND
SECTION 4.9. PROVIDED, HOWEVER, SELLER'S OBLIGATION IN THE
AGGREGATE:
(iv) TO PROTECT, INDEMNIFY, DEFEND AND HOLD BUYER HARMLESS AS STATED
ABOVE; AND
(v) TO BUYER WITH RESPECT TO ANY BREACH OR VIOLATION DESCRIBED IN
SECTION 4.4(A)(I), (II) AND (III) SHALL BE LIMITED:
(vi) WITH RESPECT TO ALL CLAIMS FILED, NOTICES OF CLAIMS DELIVERED
TO BUYER AND CLAIMS BY BUYER DELIVERED TO SELLER ON OR PRIOR TO
DECEMBER 31, 1999, (AND DAMAGES ARISING THEREFROM INCLUDING, BUT NOT
LIMITED TO, SPECIAL CONSEQUENTIAL, ORDINARY OR PUNITIVE) TO THE
AMOUNT ACTUALLY PAID BY BUYER FOR THE PURCHASE OF THE PURCHASED
18
ASSETS, PLUS EARNOUT PAYMENTS PAID ON OR BEFORE DECEMBER 31, 1999,
AND INCLUDING ANY PAYMENTS UNDER SUBSECTION 1.4(C) FOR THE
ASSET-BASED PRICE ADJUSTMENT; AND
(vii) WITH RESPECT TO ALL CLAIMS FILED, NOTICES OF CLAIMS DELIVERED
TO BUYER AND CLAIMS BY BUYER DELIVERED TO SELLER AFTER DECEMBER 31,
1999, (AND DAMAGES ARISING THEREFROM INCLUDING, BUT NOT LIMITED TO,
SPECIAL CONSEQUENTIAL, ORDINARY OR PUNITIVE) TO THE AMOUNT OF ANY
EARNOUT PAYMENT WHICH IS PAID AFTER DECEMBER 31, 1999.
PROVIDED, HOWEVER, SUCH LIMITATIONS SHALL NOT APPLY TO CLAIMS BY BUYER
ALLEGING A BREACH OF SUBSECTIONS 4.5, 4.6 OR 4.7 HEREOF.
(b) IN ORDER FOR BUYER (THE "INDEMNIFIED PARTY"), TO BE ENTITLED TO ANY
INDEMNIFICATION PROVIDED FOR UNDER THIS AGREEMENT IN RESPECT OF, ARISING
OUT OF OR INVOLVING A CLAIM MADE BY ANY PERSON AGAINST THE INDEMNIFIED
PARTY (A "THIRD PARTY CLAIM"), SUCH INDEMNIFIED PARTY MUST NOTIFY THE
INDEMNIFYING PARTY IN WRITING OF THE THIRD PARTY CLAIM WITHIN A REASONABLE
TIME AFTER RECEIPT BY SUCH INDEMNIFIED PARTY OF WRITTEN NOTICE OF THE
THIRD PARTY CLAIM UNLESS THE INDEMNIFYING PARTY SHALL HAVE PREVIOUSLY
OBTAINED ACTUAL KNOWLEDGE THEREOF. THEREAFTER, THE INDEMNIFIED PARTY SHALL
DELIVER TO THE INDEMNIFYING PARTY, WITHIN A REASONABLE TIME AFTER THE
INDEMNIFIED PARTY'S RECEIPT THEREOF, COPIES OF ALL NOTICES AND DOCUMENTS
(INCLUDING COURT PAPERS) RECEIVED BY THE INDEMNIFIED PARTY RELATING TO THE
THIRD PARTY CLAIM.
(c) IF A THIRD PARTY CLAIM IS MADE AGAINST AN INDEMNIFIED PARTY, THE
INDEMNIFYING PARTY WILL BE ENTITLED TO PARTICIPATE IN THE DEFENSE THEREOF
AND, IF IT SO CHOOSES, TO ASSUME THE DEFENSE THEREOF WITH COUNSEL SELECTED
BY THE INDEMNIFYING PARTY; PROVIDED SUCH COUNSEL IS NOT REASONABLY
OBJECTED TO BY THE INDEMNIFIED PARTY; AND PROVIDED FURTHER THAT THE
INDEMNIFYING PARTY FIRST ADMITS IN WRITING ITS LIABILITY TO THE
INDEMNIFIED PARTY WITH RESPECT TO SUCH CLAIM AND HAS THE ABILITY TO PAY
FOR THE DEFENSE AND LIABILITY ON SUCH CLAIM. SHOULD THE INDEMNIFYING PARTY
SO ELECT TO ASSUME THE DEFENSE OF A THIRD PARTY CLAIM, THE INDEMNIFYING
PARTY WILL NOT BE LIABLE TO THE INDEMNIFIED PARTY FOR ANY LEGAL EXPENSES
SUBSEQUENTLY INCURRED BY THE INDEMNIFIED PARTY IN CONNECTION WITH THE
DEFENSE THEREOF. IF THE INDEMNIFYING PARTY ELECTS TO ASSUME THE DEFENSE OF
A THIRD PARTY CLAIM, THE INDEMNIFIED PARTY WILL (i) COOPERATE (AT
INDEMNIFYING PARTY'S EXPENSE FOR THE INDEMNIFIED PARTY'S OUT OF POCKET
COSTS) IN ALL REASONABLE RESPECTS WITH THE INDEMNIFYING PARTY IN
CONNECTION WITH SUCH DEFENSE, (ii) NOT ADMIT ANY LIABILITY WITH RESPECT
TO, OR SETTLE, COMPROMISE OR DISCHARGE, ANY THIRD PARTY CLAIM WITHOUT THE
INDEMNIFYING PARTY'S PRIOR WRITTEN CONSENT (WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD), AND (iii) AGREE TO ANY SETTLEMENT, COMPROMISE OR
DISCHARGE OF A THIRTY PARTY CLAIM WHICH THE INDEMNIFYING PARTY MAY
RECOMMEND AND WHICH BY ITS TERMS OBLIGATES THE INDEMNIFYING PARTY TO PAY
THE FULL AMOUNT OF THE LIABILITY IN CONNECTION WITH SUCH THIRD PARTY CLAIM
WHICH RELEASES THE INDEMNIFIED PARTY COMPLETELY IN CONNECTION WITH SUCH
19
THIRD PARTY CLAIM WITHOUT ANY INJUNCTION OR ORDER AGAINST THE INDEMNIFIED
PARTY, AND WHICH DOES NOT ADVERSELY AFFECT THE BUSINESS CARRIED ON BY THE
INDEMNIFIED PARTY. IN THE EVENT THE INDEMNIFYING PARTY SHALL ASSUME THE
DEFENSE OF ANY THIRD PARTY CLAIM, THE INDEMNIFIED PARTY SHALL BE ENTITLED
TO PARTICIPATE IN (BUT NOT CONTROL) SUCH DEFENSE WITH ITS OWN COUNSEL AT
ITS OWN EXPENSE. IF THE INDEMNIFYING PARTY DOES NOT ASSUME THE DEFENSE OF
ANY SUCH THIRD PARTY CLAIM, THE INDEMNIFIED PARTY MAY DEFEND THE SAME IN
SUCH MANNER AS IT MAY DEEM APPROPRIATE, INCLUDING BUT NOT LIMITED TO
SETTLING SUCH CLAIM OR LITIGATION AFTER GIVING NOTICE TO THE INDEMNIFYING
PARTY OF SUCH TERMS AND THE INDEMNIFYING PARTY WILL PROMPTLY REIMBURSE THE
INDEMNIFIED PARTY FOR THE COSTS OF DEFENSE AND DAMAGES UPON WRITTEN
REQUEST SUBJECT TO THE LIMITATIONS DESCRIBED ABOVE AND PROVIDED, FURTHER,
THAT IF THE INDEMNIFYING PARTY MAKES SUCH REIMBURSEMENT, THEN THE COSTS OF
DEFENSE AND DAMAGES PAID BY BUYER SHALL NOT BE TAKEN INTO ACCOUNT IN
DETERMINING ANY EARNOUT PAYMENTS. IF THE COSTS OF DEFENSE AND DAMAGES ARE
PAID BY BUYER AND NOT REIMBURSED BY SELLER, THEN SUCH AMOUNTS SHALL BE
TAKEN INTO ACCOUNT IN DETERMINING ANY EARNOUT PAYMENTS AND TO THAT EXTENT
SELLER SHALL NOT HAVE TO REIMBURSE BUYER HEREUNDER. IN ADDITION, IF BUYER
RECOVERS ANY DAMAGES OR MONETARY RELIEF FROM OTHER PARTIES, INCLUDING,
WITHOUT LIMITATION, OTHER RESPONSIBLE PARTIES, INSURANCE PROCEEDS AND
OTHERS, THEN ALL SUCH DAMAGES AND MONETARY RELIEF SHALL BE TAKING INTO
ACCOUNT IN DETERMINING ANY EARNOUT PAYMENT.
4.5 USE OF NAME. SELLER MAY CONTINUE TO USE ITS CURRENT NAME UNTIL
DECEMBER 31, 1999, AND MAY USE ITS NAME DURING SUCH PERIOD BUT SOLELY FOR THE
PURPOSES OF WINDING UP ITS BUSINESS OPERATIONS AND AFFAIRS, DISSOLVING ITSELF,
DEFENDING ITSELF FROM CLAIMS AND EFFECTUATING THE TERMS OF THIS AGREEMENT.
SELLER WILL EXECUTE ALL CONSENTS REQUESTED BY BUYER IN ORDER FOR BUYER TO USE
SELLER'S NAME. EXCEPT TO THE EXTENT DESCRIBED IN THE PRECEDING SENTENCES OF THIS
SECTION, AS OF THE CLOSING DATE ALL MEMBERS SHALL CEASE USING ANY OF THE
BUSINESS IDENTITY IN ANY MANNER WHATSOEVER, DIRECTLY OR INDIRECTLY, WITHOUT THE
PRIOR WRITTEN APPROVAL OF BUYER. SELLER SHALL EXECUTE AN ASSIGNMENT OF TRADE
NAME AND OF ALL OF THE BUSINESS IDENTITY SUBSTANTIALLY IN THE FORM ATTACHED AS
SCHEDULE 4.5. BY DECEMBER 31, 1999, SELLER SHALL FILE AMENDED ARTICLES OF
ORGANIZATION TO CHANGE ITS NAME TO A NAME THAT DOES NOT HAVE ANY OF THE
FOLLOWING WORDS: "X. X."; "KEY"; OR "SERVICES."
4.6 CONFIDENTIALITY. SELLER AND THE MEMBERS ACKNOWLEDGE THAT BUYER WOULD
BE IRREPARABLY DAMAGED IF CONFIDENTIAL INFORMATION CONCERNING BUYER OR THE
BUYER'S BUSINESSES (AS DEFINED IN SCHEDULE 4.6) WERE DISCLOSED TO OR UTILIZED BY
ANY PERSON TO THE DETRIMENT OF BUYER. THEREFORE, THE SELLER AND THE MEMBERS
SHALL NOT, AT ANY TIME, DIRECTLY OR INDIRECTLY, WITHOUT THE PRIOR WRITTEN
CONSENT OF BUYER, MAKE USE OF OR DIVULGE TO ANY PERSON, GOVERNMENTAL OFFICIAL OR
OFFICE, OR PUBLIC OR PRIVATE ENTITY, ANY OF: (i) BUYER'S INTELLECTUAL PROPERTY
DEFINED IN SCHEDULE 4.6); (ii) PURCHASED ASSETS; (iii) NON-PUBLIC OR PROPRIETARY
INFORMATION CONCERNING SELLER, BUYER, ANY AFFILIATE (DEFINED IN SCHEDULE 4.6) OR
THE BUYER'S BUSINESSES; (iv) ANY FINANCIAL, MARKETING, EMPLOYEE OR TRANSACTIONAL
INFORMATION RELATING TO AFFAIRS OR MATTERS OF SELLER OR THE BUYER'S BUSINESSES
THAT COULD BE USED TO THE DETRIMENT OF BUYER OR AN AFFILIATE; OR (v)
DESCRIPTIONS OF THIS AGREEMENT OR ANY OF ITS SCHEDULES OR TRANSACTIONS
CONTEMPLATED HEREIN, EXCEPT TO THE EXTENT REQUIRED BY LAW,
20
GOVERNMENT FILINGS OR JUDICIAL, ADMINISTRATIVE OR ARBITRATION PROCEEDINGS OR AS
MAY BE REQUIRED FOR SELLER'S ACCOUNTING OR INCOME TAX PURPOSES OF SELLER, OR IN
ORDER TO PRESERVE OR ENFORCE SELLER'S RIGHTS UNDER THIS OR ANY OTHER AGREEMENT
BETWEEN THE PARTIES. ALL AFFILIATES ARE THIRD PARTY BENEFICIARIES OF THIS
SECTION 4.6.
4.7 COVENANT NOT TO COMPETE; PROPRIETARY INFORMATION; NONSOLICITATION.
(a) EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION 4.7, FOR A PERIOD
ENDING 24 MONTHS FOLLOWING THE PAYMENT OF THE FINAL EARNOUT PAYMENT
BUT IN NO EVENT LATER THAN MARCH 31, 2005 (THE "NONCOMPETE PERIOD"),
SELLER AND MEMBERS SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF
BUYER, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY OF THE BUYER'S
BUSINESSES, OR IN ANY ACTIVITY THAT IS SIMILAR TO THE BUYER'S
BUSINESSES, AND SHALL NOT PERMIT, ASSIST, INVEST WITH (EXCEPT WITH
RESPECT TO NO MORE THAN 5% OF THE VOTING STOCK OF ANY COMPANY WHOSE
STOCK IS PUBLICLY TRADED) OR ENCOURAGE ANY OTHER PERSON TO TAKE ANY
ACTION THAT WOULD BE PROHIBITED IF TAKEN DIRECTLY BY THE SELLER OR A
MEMBER, WITHIN ANY OF THE STATES OF THE UNITED STATES LOCATED IN
NORTH AMERICA (INCLUDING, WITHOUT LIMITATION, ALASKA), HAWAII,
CANADA, SAUDI ARABIA, ANY NATION LOCATED IN ASIA, AFRICA OR SOUTH
AMERICA, OR ANY OTHER LOCATION WORLDWIDE (IN WHICH THE SELLER
ACKNOWLEDGES THAT IT HAS, OR HAS THE POTENTIAL OF, DOING BUSINESS)
(THE "NONCOMPETE AREA").
(b) PROPRIETARY INFORMATION. FOR PURPOSES OF THIS AGREEMENT,
PROPRIETARY INFORMATION INCLUDES, WITHOUT LIMITATION, ALL
INFORMATION THAT IS SECRET OR THAT IS IMPORTANT TO, DEVELOPED BY, OR
USED OR USEFUL IN BUYER'S BUSINESSES, AND ALL INFORMATION,
CONTRACTS, BUSINESS IDENTITY, AND INTELLECTUAL PROPERTY OF THE
SELLER OR ANY AFFILIATE. FOR EXAMPLE BUT WITHOUT LIMITATION,
PROPRIETARY INFORMATION INCLUDES ALL OF THE FOLLOWING:
(i) TRADE SECRETS, PROCESSES, FORMULAS, DATA, ALGORITHMS,
COMPUTER PROGRAMS, KNOW-HOW, INVENTIONS, STRATEGIC PLANS,
CUSTOMER LISTS, THE STATUS OF NEGOTIATIONS WITH ANY OTHER
PERSON OR ENTITY, AND MARKETING INFORMATION AND PLANS, THAT
ARE, HAVE BEEN, OR IN THE FUTURE ARE OWNED, USED, OR USEFUL IN
ANY OF THE BUYER'S BUSINESSES;
(ii) CLAIMS OR LITIGATION BY OR AGAINST THE BUYER, ANY
AFFILIATE OR ANY OFFICER, DIRECTOR, EMPLOYEE MEMBER, OR
MANAGER O BUYER OR ANY AFFILIATE;
(iii) THE BUYER'S OR ANY AFFILIATE'S FINANCIAL CONDITION OR
THE STATUS OF ANY OF THEIR BORROWINGS OR LOAN AGREEMENTS; AND
(iv) ALL INFORMATION ABOUT THE ABILITIES, QUALIFICATIONS,
CHARACTERISTICS, PERFORMANCE, MENTAL OR PHYSICAL HEALTH,
DISABILITY, INFECTION (INCLUDING WITHOUT LIMITATION HIV
INFECTION), CONTENTS OF PERSONNEL FILES, EXISTENCE OR REASONS
FOR ANY DISCIPLINARY ACTION, OR
21
ACTUAL OR ALLEGED INAPPROPRIATE ACTIONS, OF ANY CURRENT,
FUTURE, OR PAST EMPLOYEE OF ANY OF THE BUYER'S BUSINESSES.
(c) PROTECTION OF PROPRIETY INFORMATION. SELLER AND MEMBERS SHALL
USE THEIR BEST EFFORTS TO PROTECT THE PROPRIETARY INFORMATION.
SELLER AND MEMBERS SHALL NOT, DIRECTLY OR INDIRECTLY USE ANY
PROPRIETARY INFORMATION FOR ANY OF THEIR BENEFIT OR FOR THE BENEFIT
OF ANY PERSON OR ENTITY OTHER THAN BUYER, WITHOUT BUYER'S WRITTEN
CONSENT. SELLER AND MEMBERS SHALL NOT DISCLOSE ANY PROPRIETARY
INFORMATION TO ANY PERSON OR ENTITY OTHER THAN BUYER OR AN
AFFILIATE, WITHOUT BUYER'S PRIOR WRITTEN CONSENT, EXCEPT TO THE
EXTENT REQUIRED BY LAW, GOVERNMENT FILINGS OR JUDICIAL,
ADMINISTRATIVE OR ARBITRATION PROCEEDINGS OR AS MAY BE REQUIRED FOR
SELLER'S ACCOUNTING OR INCOME TAX PURPOSES OF SELLER, OR IN ORDER TO
PRESERVE OR ENFORCE SELLER'S RIGHTS UNDER THIS OR ANY OTHER
AGREEMENT BETWEEN THE PARTIES.
(d) SOLICITATION. DURING THE NONCOMPETE PERIOD, SELLER AND THE
MEMBERS SHALL NOT, EITHER DIRECTLY, INDIRECTLY, INDIVIDUALLY, OR
JOINTLY:
(i) EMPLOYMENT. SOLICIT, OR ATTEMPT TO INDUCE OR INFLUENCE,
ANY PERSON CURRENTLY EMPLOYED BY SELLER OR EMPLOYED IN THE
FUTURE BY BUYER OR AN AFFILIATE, TO LEAVE BUYER'S OR AN
AFFILIATE'S EMPLOYMENT OR TO HIRE ANY SUCH PERSON; OR
(ii) CUSTOMERS. SOLICIT ANY ACTUAL OR POTENTIAL CUSTOMER OF
ANY OF BUYER'S BUSINESSES FOR SALE OF PRODUCTS OR SERVICES
SIMILAR TO THOSE OF SUCH BUSINESSES, AT ANY PLACE IN THE
NONCOMPETE AREA.
(e) REMEDY. THE REMEDY AT LAW FOR ANY BREACH OF THIS SECTION 4.7 IS
AND SHALL BE INADEQUATE, AND IN THE EVENT OF A BREACH OR THREATENED
BREACH BY SELLER OR ANY MEMBER, BUYER OR AN AFFILIATE SHALL BE
ENTITLED TO AN INJUNCTION RESTRAINING SELLER OR ANY MEMBER FROM ANY
BREACH OR THREATENED BREACH HEREOF. NOTHING HEREIN SHALL BE
CONSTRUED AS PROHIBITING BUYER OR AN AFFILIATE FROM PURSUING ANY
OTHER REMEDIES AVAILABLE FOR SUCH BREACH OR THREATENED BREACH,
INCLUDING THE RECOVERY OF DAMAGES.
(f) THE PROVISIONS OF THIS SECTION 4.7 SHALL BE DEEMED TO CONSIST OF
A SERIES OF SEPARATE COVENANTS. SELLER AND MEMBERS EXPRESSLY AGREE
THAT THE CHARACTER, DURATION AND GEOGRAPHICAL SCOPE OF SUCH
PROVISIONS ARE REASONABLE. HOWEVER, SHOULD A DETERMINATION
NONETHELESS BE MADE BY A COURT OF COMPETENT JURISDICTION OR OTHER
TRIBUNAL AT A LATER DATE THAT THE CHARACTER, DURATION OR
GEOGRAPHICAL SCOPE OF SUCH PROVISIONS IS UNREASONABLE, THEN IT IS
THE INTENTION AND THE AGREEMENT OF THE PARTIES THAT SUCH PROVISIONS
SHALL BE CONSTRUED BY THE COURT IN SUCH A MANNER AS TO IMPOSE ONLY
THOSE RESTRICTIONS ON THE CONDUCT OF SELLER WHICH ARE REASONABLE IN
LIGHT OF THE CIRCUMSTANCES AS THEY THEN EXIST AND AS ARE NECESSARY
TO ASSURE BUYER AND ANY AFFILIATE OF THE INTENDED BENEFIT TO THIS
AGREEMENT, THEN THOSE COVENANTS WHICH, IF ELIMINATED, WOULD PERMIT
THE REMAINING SEPARATE COVENANTS TO BE
22
ENFORCED IN SUCH PROCEEDING SHALL, FOR THE PURPOSE OF SUCH
PROCEEDING, BE DEEMED ELIMINATED FROM THIS AGREEMENT.
(g) IF ANY OF THE PROVISIONS OF THIS SECTION 4.7 SHALL OTHERWISE
CONTRAVENE OR BE INVALID UNDER THE LAWS OF ANY STATE OR OTHER
JURISDICTION WHERE IT IS APPLICABLE BUT FOR SUCH CONTRAVENTION OR
INVALIDITY, SUCH CONTRAVENTION OR INVALIDITY SHALL NOT INVALIDATE
ALL OF THE PROVISIONS OF THIS AGREEMENT, BUT RATHER THIS AGREEMENT
SHALL BE CONSTRUED, INSOFAR AS THE LAWS OF THE STATE OR JURISDICTION
ARE CONCERNED, AS NOT CONTAINING THE PROVISION OR PROVISIONS
CONTRAVENING OR INVALID UNDER THE LAWS OF THAT STATE OR
JURISDICTION, AND THE RIOTS AND OBLIGATIONS CREATED HEREBY SHALL BE
CONSTRUED AND ENFORCED ACCORDINGLY.
(h) THE PROVISIONS OF THIS SECTION 4.7 SHALL SURVIVE THE CLOSING
DATE. ALL AFFILIATES ARE THIRD PARTY BENEFICIARIES OF THIS SECTION
4.7.
4.8 SELLER'S CONFIDENTIAL INFORMATION.
(a) FOR PURPOSES OF THIS AGREEMENT, SELLER'S CONFIDENTIAL
INFORMATION INCLUDES, WITHOUT LIMITATION, ALL INFORMATION ABOUT THE
SELLER THAT IS SECRET, THAT RELATES TO THIS AGREEMENT BUT IS NOT
PURCHASED BY BUYER HEREUNDER. FOR EXAMPLE BUT WITHOUT LIMITATION,
SELLER'S CONFIDENTIAL INFORMATION INCLUDES ALL OF THE FOLLOWING:
(i) ALL PERSONAL INFORMATION CONCERNING THE MEMBERS;
(ii) CLAIMS OR LITIGATION BY OR AGAINST THE SELLER OR ANY
MEMBER, MANAGER, DIRECT OR INDIRECT CORPORATE SUBSIDIARY OR
PARENT, OR AFFILIATES; AND
(iii) THE SELLER'S OR MEMBER'S FINANCIAL CONDITION OR THE
STATUS OF SELLER'S OR ANY MEMBER'S BORROWINGS OR LOAN
AGREEMENTS.
(b) BUYER AND ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS SHALL
USE THEIR BEST EFFORTS TO PROTECT THE SELLER'S CONFIDENTIAL
INFORMATION. BUYER AND ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
SHALL NOT, DIRECTLY OR INDIRECTLY, USE ANY OF SELLER'S CONFIDENTIAL
INFORMATION FOR ANY OF THEIR BENEFIT OR FOR THE BENEFIT OF ANY
PERSON OR ENTITY OTHER THAN SELLER OR THE APPLICABLE MEMBER, WITHOUT
SELLER'S OR THE APPLICABLE MEMBER'S WRITTEN CONSENT. BUYER AND ITS
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS SHALL NOT DISCLOSE ANY OF
SELLER'S CONFIDENTIAL INFORMATION TO ANY PERSON OR ENTITY OTHER THAN
SELLER OR THE APPLICABLE MEMBER, WITHOUT SELLER'S OR THE APPLICABLE
MEMBER'S PRIOR WRITTEN CONSENT, EXCEPT TO THE EXTENT REQUIRED BY
LAW, GOVERNMENT FILINGS OR JUDICIAL, ADMINISTRATIVE OR ARBITRATION
PROCEEDINGS OR AS MAY BE REQUIRED FOR SELLER'S ACCOUNTING OR INCOME
TAX PURPOSES OF SELLER, OR IN ORDER TO PRESERVE OR ENFORCE SELLER'S
RIGHTS UNDER THIS OR ANY OTHER AGREEMENT BETWEEN THE PARTIES.
23
(c) THE REMEDY AT LAW FOR ANY BREACH OF THIS SECTION 4.8 IS AND
SHALL BE INADEQUATE, AND IN THE EVENT OF A BREACH OR THREATENED
BREACH BY BUYER, SELLER SHALL BE ENTITLED TO AN INJUNCTION
RESTRAINING BUYER FROM ANY BREACH OR THREATENED BREACH HEREOF.
NOTHING HEREIN SHALL BE CONSTRUED AS PROHIBITING SELLER FROM
PURSUING ANY OTHER REMEDIES AVAILABLE FOR SUCH BREACH OR THREATENED
BREACH, INCLUDING THE RECOVERY OF DAMAGES.
(d) IF ANY OF THE PROVISIONS OF THIS SECTION 4.8 SHALL OTHERWISE
CONTRAVENE OR BE INVALID UNDER THE LAWS OF ANY STATE OR OTHER
JURISDICTION WHERE IT IS APPLICABLE BUT FOR SUCH CONTRAVENTION OR
INVALIDITY, SUCH CONTRAVENTION OR INVALIDITY SHALL NOT INVALIDATE
ALL OF THE PROVISIONS OF THIS AGREEMENT, BUT RATHER THIS AGREEMENT
SHALL BE CONSTRUED, INSOFAR AS THE LAWS OF THE STATE OR JURISDICTION
ARE CONCERNED, AS NOT CONTAINING THE PROVISION OR PROVISIONS
CONTRAVENING OR INVALID UNDER THE LAWS OF THAT STATE OR
JURISDICTION, AND THE RIGHTS AND OBLIGATIONS CREATED HEREBY SHALL BE
CONSTRUED AND ENFORCED ACCORDINGLY.
(e) THE PROVISIONS OF THIS SECTION 4.8 SHALL SURVIVE THE CLOSING
DATE.
4.9 EMPLOYEE MATTERS. PURSUANT TO AND IN ACCORDANCE WITH SECTION 4.4
HEREOF SELLER SHALL INDEMNIFY, DEFEND AND HOLD BUYER HARMLESS AGAINST ANY AND
ALL EXPENSE, DAMAGE OR LIABILITY, INCLUDING REASONABLE ATTORNEYS FEES AND COURT
COSTS, THAT BUYER MAY SUFFER AS A RESULT OF ANY CLAIMS, SUITS, INVESTIGATIONS,
OR CHARGES ASSERTED BY OR ON BEHALF OF SELLER'S EMPLOYEES OR INDEPENDENT
CONTRACTORS, DUE TO ANY ACTUAL OR ALLEGED LIABILITIES OR OBLIGATIONS OF SELLER,
OR INJURIES OR DAMAGES DUE TO ACTS OR OMISSIONS OF SELLER TO SUCH EMPLOYEES OR
INDEPENDENT CONTRACTORS OR WHILE SELLER IS EMPLOYEES' EMPLOYER, OCCURRING OR
ARISING PRIOR TO THE CLOSING DATE, INCLUDING, WITHOUT LIMITATION, ANY MATTERS
ARISING UNDER LAWS GOVERNING WAGES AND HOURS, WAGE PAYMENT AND COLLECTION,
EMPLOYMENT DISCRIMINATION, OCCUPATIONAL SAFETY AND HEALTH, WORKER'S
COMPENSATION, SHORT- AND LONG-TERM DISABILITY, OCCUPATIONAL DISEASES,
UNEMPLOYMENT INSURANCE, THE PAYMENT AND WITHHOLDING OF EMPLOYMENT TAXES,
WRONGFUL TERMINATION, HARASSMENT, EMPLOYEE BENEFITS, AND ANY ALLEGED VIOLATION
OF THE COMMON LAW.
4.10 CONTINUING, COOPERATION. After the Closing, Seller shall continue to
use its best efforts to assure that Buyer has the benefit of all Personal
Property Leases, Contracts, Business Identity, accounts receivable and
Intellectual Property. Seller appoints Buyer as Seller's attorney-in-fact to xxx
for, collect, compromise and collect all accounts receivable, warranties and
contract rights included within the definitions of Purchased Assets, for and in
the name of the Seller and for the Buyer's benefit. Seller shall execute,
deliver and file all affidavits, bills of sale, assignments and other documents
that Buyer deems helpful to confirm Buyer's ownership of or interest in any item
of Purchased Assets.
ARTICLE 5
COVENANTS OF BUYER
5.1 INDEMNIFICATION BY BUYER.
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(a) BUYER AGREES TO PROTECT, INDEMNIFY, DEFEND AND HOLD SELLER,
LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS, AND EACH OF THEM,
FREE AND HARMLESS FROM AND AGAINST ANY AND ALL DEBTS, LIABILITIES,
OBLIGATIONS, DAMAGES, COSTS OR EXPENSES (INCLUDING, BUT NOT LIMITED
TO ATTORNEYS' FEES), LIENS OR ENCUMBRANCES ACCRUING OR BASED UPON OR
ARISING OUT OF (I) ANY BREACH OR VIOLATION BY BUYER OF ANY
REPRESENTATION OR WARRANTY SET FORTH IN ARTICLE 3, (II) THE BREACH
BY BUYER OF ANY OTHER TERM OR PROVISION OF THIS AGREEMENT, (III) ANY
BREACH BY BUYER OF BUYER'S OBLIGATIONS UNDER ANY LEASES, AGREEMENTS,
LIABILITIES AND OBLIGATIONS ASSUMED BY BUYER PURSUANT TO THIS
AGREEMENT, OR (IV) ANY FACTS OR EVENTS OCCURRING AFTER THE CLOSING
DATE AND CONNECTED WITH (A) THE PURCHASED ASSETS, OR (B) ANY
EMPLOYEE OF SELLER HIRED BY BUYER (EXCEPT AS EXPRESSLY PROVIDED
HEREIN TO THE CONTRARY); PROVIDED THAT THIS INDEMNITY SHALL NOT
APPLY TO ANY LIABILITY ARISING FROM A BREACH OR OTHER ACT OR
OMISSION BY SELLER OCCURRING BEFORE THE CLOSING DATE AND CREATING
ANY LIABILITY OUTSIDE OF THE ORDINARY AND BASIC OBLIGATION TO
PERFORM OR MAKE ANY PAYMENTS BECOMING DUE AFTER SAID DATE IN
ACCORDANCE WITH THE ASSUMED OBLIGATIONS OR ASSUMED LIABILITIES
PURSUANT TO THIS AGREEMENT.
(b) IN ORDER FOR SELLER (THE "INDEMNIFIED PARTY") TO BE ENTITLED TO
ANY INDEMNIFICATION PROVIDED FOR UNDER THIS AGREEMENT IN RESPECT OF,
ARISING OUT OF OR INVOLVING A CLAIM MADE BY ANY PERSON AGAINST THE
INDEMNIFIED PARTY (A "THIRD PARTY CLAIM"), SUCH INDEMNIFIED PARTY
MUST NOTIFY THE INDEMNIFYING PARTY IN WRITING OF THE THIRD PARTY
CLAIM WITHIN A REASONABLE TIME AFTER RECEIPT BY SUCH INDEMNIFIED
PARTY OF WRITTEN NOTICE OF THE THIRD PARTY CLAIM UNLESS THE
INDEMNIFYING PARTY SHALL HAVE PREVIOUSLY OBTAINED ACTUAL KNOWLEDGE
THEREOF. THEREAFTER, THE INDEMNIFIED PARTY SHALL DELIVER TO THE
INDEMNIFYING PARTY, WITHIN REASONABLE TIME AFTER THE INDEMNIFIED
PARTY'S RECEIPT THEREOF, COPIES OF ALL NOTICES AND DOCUMENTS
(INCLUDING COURT PAPERS) RECEIVED BY THE INDEMNIFIED PARTY RELATING
TO THE THIRD PARTY CLAIM.
(c) IF A THIRD PARTY CLAIM IS MADE AGAINST AN INDEMNIFIED PARTY, THE
INDEMNIFYING PARTY WILL BE ENTITLED TO PARTICIPATE IN THE DEFENSE
THEREOF AND, IF IT SO CHOOSES, TO ASSUME THE DEFENSE THEREOF WITH
COUNSEL SELECTED BY THE INDEMNIFYING PARTY; PROVIDED SUCH COUNSEL IS
NOT REASONABLY OBJECTED TO BY THE INDEMNIFIED PARTY; AND PROVIDED
FURTHER THAT THE INDEMNIFYING PARTY FIRST ADMITS IN WRITING ITS
LIABILITY TO THE INDEMNIFIED PARTY WITH RESPECT TO SUCH CLAIM AND
STATES THAT IT HAS THE ABILITY TO PAY FOR THE DEFENSE AND LIABILITY
ON SUCH CLAIM. SHOULD THE INDEMNIFYING PARTY SO ELECT TO ASSUME THE
DEFENSE OF A THIRD PARTY CLAIM, THE INDEMNIFYING PARTY WILL NOT BE
LIABLE TO THE INDEMNIFIED PARTY FOR ANY LEGAL EXPENSES SUBSEQUENTLY
INCURRED BY THE INDEMNIFIED PARTY IN CONNECTION WITH THE DEFENSE
THEREOF. IF THE INDEMNIFYING PARTY ELECTS TO ASSUME THE DEFENSE OF A
THIRD PARTY CLAIM, THE INDEMNIFIED PARTY WILL (i) COOPERATE (AT
INDEMNIFYING PARTY'S EXPENSE FOR THE INDEMNIFIED PARTY'S OUT OF
POCKET COSTS) IN ALL REASONABLE RESPECTS WITH THE INDEMNIFYING PARTY
IN CONNECTION WITH SUCH DEFENSE, (ii) NOT ADMIT ANY LIABILITY WITH
RESPECT TO OR SETTLE, COMPROMISE OR DISCHARGE, ANY THIRD PARTY CLAIM
WITHOUT THE INDEMNIFYING PARTY'S PRIOR WRITTEN CONSENT (WHICH
CONSENT
25
SHALL NOT BE UNREASONABLY WITHHELD), AND (iii) AGREE TO ANY
SETTLEMENT, COMPROMISE OR DISCHARGE OF A THIRTY PARTY CLAIM WHICH
THE INDEMNIFYING PARTY MAY RECOMMEND AND WHICH BY ITS TERMS
OBLIGATES THE INDEMNIFYING PARTY TO PAY THE FULL AMOUNT OF THE
LIABILITY IN CONNECTION WITH SUCH THIRD PARTY CLAIM WHICH RELEASES
THE INDEMNIFIED PARTY COMPLETELY IN CONNECTION WITH SUCH THIRD PARTY
CLAIM WITHOUT ANY INJUNCTION OR ORDER AGAINST THE INDEMNIFIED PARTY,
AND WHICH DOES NOT ADVERSELY AFFECT THE BUSINESS CARRIED ON BY THE
INDEMNIFIED PARTY. IN THE EVENT THE INDEMNIFYING PARTY SHALL ASSUME
THE DEFENSE OF ANY THIRD PARTY CLAIM, THE INDEMNIFIED PARTY SHALL BE
ENTITLED TO PARTICIPATE IN (BUT NOT CONTROL) SUCH DEFENSE WITH ITS
OWN COUNSEL AT ITS OWN EXPENSE. IF THE INDEMNIFYING PARTY DOES NOT
ASSUME THE DEFENSE OF ANY SUCH THIRD PARTY CLAIM, THE INDEMNIFIED
PARTY MAY DEFEND THE SAME IN SUCH MANNER AS IT MAY DEEM APPROPRIATE,
INCLUDING BUT NOT LIMITED TO SETTLING SUCH CLAIM OR LITIGATION AFTER
GIVING NOTICE TO THE INDEMNIFYING PARTY OF SUCH TERMS AND THE
INDEMNIFYING PARTY WILL PROMPTLY REIMBURSE THE INDEMNIFIED PARTY FOR
THE COSTS OF DEFENSE AND DAMAGES UPON WRITTEN REQUEST.
5.2 EMPLOYMENT MATTERS.
(a) Buyer shall offer employment to Seller's employees identified in
SCHEDULE 5.2(A) as of the Closing Date, on terms and conditions
established by Buyer in accordance with its hiring policies. Such
employees will be Buyer's employees at will in accordance with
Buyer's employment policies.
(b) Buyer shall employ Key and Xxxxxxx XxXxxx, and shall enter into
a consulting agreement with Xxxxx XxXxxx, on the terms described on
SCHEDULE 1.7(A)(XV).
ARTICLE 6
CONDITIONS PRECEDENT TO PARTIES' OBLIGATIONS
The Parties' respective obligations to consummate this transaction shall
be subject to fulfillment on or before the Closing Date of each of the following
conditions, unless waived in writing by the party for whose benefit such
condition exists.
6.1 REPRESENTATIONS AND WARRANTIES TRUE. All representations and
warranties of the Parties set forth in this Agreement shall be true and correct
on the date set forth above the signature line and as of the Closing Date as
though made at and as of those dates.
6.2 PERFORMANCE OF COVENANTS. The Parties shall have performed all
covenants required by this Agreement to be performed On or before the Closing
Date.
6.3 ASSIGNMENTS AND CONSENTS. Seller shall have obtained all necessary
assignments, approvals, authorizations and consents necessary (i) for the
assignment to Buyer of all of the Personal Property Leases, Contracts, Business
Identity, Intellectual Property and other Purchased Assets on the same terms and
conditions as presently apply to Seller without any transfer
26
premium or penalty whatsoever to be paid by Buyer or its assignee, and (ii) in
connection with the valid execution, delivery and performances of this
Agreement.
6.4 ACTION OR PROCEEDINGS. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions contemplated hereby, and no order, decree
or judgment of any court, agency, commission or governmental authority shall be
outstanding which seeks to or would render it unlawful to consummate the
transactions described herein.
6.5 DUG DILIGENCE. Buyer shall have completed to its satisfaction a due
diligence review of Seller including, without limitation, the receipt of
documents, certificates, interviews with Members, review of the Purchased Asset,
and a review of the differences between Seller's accounting system and Generally
Accepted Accounting Standards. If the results of such due diligence review
reveal facts that are materially different than those represented herein or in
Seller's Confidential Memorandum Regarding, X. X. Key Services, L.L.C., attached
hereto as SCHEDULE 6.5, Buyer may terminate this Agreement without liability and
all related Agreements without liability to Seller. The provisions of Section
4.6, 4.7 and 8.3 shall apply upon the happening of any such termination and
shall survive such termination for the period stated.
6.6 COVENANTS. Buyer shall have performed all of Buyer's covenants
described in Article IV.
6.7 REAL ESTATE CONTRACT. Buyer and Seller shall have executed and
delivered the lease attached as SCHEDULE 1.1(A).
6.8 OTHER DELIVERIES. The Parties shall have delivered other documents and
instruments contemplated by this Agreement or the agreements entered into in
connection herewith, and other documents and instruments as either party or its
counsel may reasonably request, including all of the Closing documents described
in Section 1.7.
6.9 THE OKLAHOMA TAX COMMISSION AND CITY OF TULSA. The Oklahoma Tax
Commission and City of Tulsa shall have issued all state and local tax
clearances which are either required by law or otherwise available and requested
by Buyer.
6.10 TERMINATION. No termination of this Agreement under Article 7 or 8
will have occurred.
ARTICLE 7
DESTRUCTION OF ASSETS
7.1 DESTRUCTION. If, as of the Closing Date, the Purchased Assets have
suffered loss or damage, whether or not caused by Seller and whether or not
caused by an Act of God, to the extent which materially affects the value of the
Purchased Assets, Buyer shall have the right to:
(a) Terminate this Agreement by giving written notice to Seller within
twenty (20) calendar days after the date Buyer acquires actual knowledge
of loss or damage;
27
(b) Close the purchase of the Purchased Assets hereunder, in which
event Buyer shall be entitled to all insurance proceeds payable by
reason of loss or damage to the Purchased Assets; or
(c) Complete the purchase of the Purchased Assets subject to
reduction of the Purchase Price in an amount to be agreed by the
Parties in which case Buyer shall not be entitled to any insurance
proceeds payable by reason of such loss or damage.
ARTICLE 8
TERMINATION
8.1 TERMINATION. This Agreement may be terminated by the mutual written
consent of the Parties, by one (1) party if any condition set forth in Article 6
has not been satisfied or waived by the party for whose benefit such condition
exists, on or before the Closing Date, or by the Buyer as described in Article
7.
8.2 COSTS. In the event of a termination of this Agreement pursuant to
Section 8.1, each party shall pay the costs and expenses incurred by it in
connection with this Agreement, and no party shall be liable to any other party
for any costs, expenses, damage or loss of anticipated profits hereunder.
8.3 OTHER. If this Agreement is terminated without a purchase of assets
being completed, then for a period of 2 years from the date hereof neither Buyer
nor any of its officers or directors shall (1) disclose to any party or use to
the detriment of Seller any Proprietary Information or Seller's Confidential
Information; (2) without the prior consent of Seller, directly or indirectly,
engage in the Business, or in any activity that is similar to the Business, and
shall not permit, assist, invest with (except with respect to no more than 5% of
the voting stock of any company whose stock is publicly traded) or encourage any
other person to take any action that would be prohibited if taken directly by
the Buyer or one of its affiliates, within the Noncompete Area as defined in
Section 4.7(a) above; and (3) solicit, or attempt to induce or influence, any
person currently employed by Seller as listed on SCHEDULE 5.2(A), or employed in
the future by Seller to replace a person listed on SCHEDULE 5.2(A), to leave
Seller's employment or to hire any such person; or solicit any actual or
potential Business customer for the sale of products or services similar to
those of Business, at any place in the Noncompete Area. The provisions of
Section 4.7(e), (f), (g) and (h) shall be applied with respect to the foregoing
except that in all cases the rights and protections accruing to Buyer thereunder
shall accrue to Seller instead and shall be applicable to this Section 8.3.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 ASSIGNMENT. Except as stated in this Section, none of the Buyer,
Seller or Members or the Trust may assign any right, interest or obligation of
this Agreement to any third party.
28
9.2 WAIVER. Any failure on the part of any party hereto to comply with any
of its obligations, agreements or conditions hereunder may be waived in writing
by the party or Parties to whom compliance is owed. One waiver or failure to
insist on strict compliance does not, however, imply that similar waivers or
failures to insist on compliance will or must be granted.
9.3 BROKERS. Each party represents to the other Parties that no broker or
finder has acted for it in connection with this Agreement and agrees to
indemnify and hold harmless other Parties alleged to have been employed by it.
9.4 GOVERNING LAW. Except as specifically stated in this Agreement, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Oklahoma. The Covenant not to compete, however, Section 4.7 will be
governed by the laws of the jurisdictions described in such Section.
9.5 AMENDMENTS. This Agreement may not be amended or terminated other than
by written instrument signed by the party against whom enforcement of amendment
or termination is sought. Only the Chief Executive Officer of the Buyer has the
authority to amend this Agreement for the Buyer.
9.6 SCHEDULES. All schedules referred to in this Agreement shall be
attached to this Agreement and are incorporated by reference herein.
9.7 NOTICES. Any and all notices or other communications required or
permitted by this Agreement or by law to be given to any Party shall be in
writing and shall be deemed delivered when personally delivered to the Party to
whom they are directed, three days after being deposited by certified mail in
the United States mail, postage prepaid, or by facsimile transmission with a
confirmation of transmission, addressed as follows:
If to Buyer: Attention M. Xxxxxxx Xxxxx, CEO
CRC-Key, Inc.
00000 Xx. Xxxxxxx Xxxxxxx Xx.
Xxxxxxx, XX 00000
Fax (000) 000-0000
With a copy to:
Xxxxx X XxXxxxxx
Xxxxxxx, XxXxxxxxx & Xxxxxxxx
000 Xxxx Xxxxx Xxxxx 000
Xxxxx, XX 00000
Fax (000) 000-0000
29
If to Seller: Attention Xxxxx X. XxXxxx, Member and Manager
X. X. KEY SERVICES, L.L.C.
0000 Xx. Xxxxxxx, Xxx. 0
Xxxxx, XX 00000
Fax (000) 000-0000
If to Key: Xxxxx X. Key
Xxxxx Xxxxxxx Mock Xxxxxxx Xxxxx Xxxxxxxx
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000-0000
ATTN: X. Xxxxxxx Xxxx
Fax (000) 000-0000
If to Xxxxx XxXxxx: Xxxxx X. XxXxxx
Xxxxx Xxxxxxx Mock Xxxxxxx Xxxxx Xxxxxxxx
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000-0000
ATTN: X. Xxxxxxx Xxxx
Fax (000) 000-0000
If to the Xxxxx X. XxXxxx Xxxxx X. XxXxxx, Trustee
Revocable Living Trust
dated June 28, 1996, as Xxxxx Xxxxxxx Mock Xxxxxxx Xxxxx Xxxxxxxx
amended and restated 000 X. Xxxxx Xxxxxx, Xxxxx 0000
October 22, 1996 Xxxxx, XX 00000-0000
ATTN: X. Xxxxxxx Xxxx
Fax (000) 000-0000
If to Xxxxxxx XxXxxx: Xxxxxxx XxXxxx
Xxxxx Xxxxxxx Mock Xxxxxxx Xxxxx Xxxxxxxx
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000-0000
ATTN: X. Xxxxxxx Xxxx
Fax (000) 000-0000
or at another address as one party may designate by notice hereunder to the
other Parties.
9.8 ATTORNEY'S FEES. Should any legal proceeding be commenced among the
Parties to this Agreement concerning the Business, this Agreement, the Real
Estate Contract or the rights and duties of the Parties in relation thereto, the
party prevailing in the proceeding shall be entitled, in addition to the other
relief as may be granted, to a reasonable sum as and for the party's attorneys'
fees and court costs actually incurred and paid.
30
9.9 RESTRICTIONS ON SELLER'S DISTRIBUTIONS. Seller, Members and the Trust
agree that Seller shall not dissolve between the Closing Date and December 31,
1999. Seller and Members agree that Seller shall maintain liquid assets in
excess of $2,000,000 (less any amounts paid to resolve any claims against the
Seller by any third party or Buyer), for the period from the Closing Date to
December 31, 1999. Liquid assets shall include the note described in SCHEDULE
1.4(A)(II).
9.10 BINDING AGREEMENT. This Agreement shall be binding on and shall inure
to the benefit of the Parties and their respective heirs, executors,
administrators, successors and permitted assigns. The Members and the Trust are
bound by this Agreement only with respect to the Sections of this Agreement
where the Members and the Trust have specific rights or obligations set forth
with respect to the Members. Where the rights and obligations relate to the
Seller, only the Seller and not the Members and the Trust shall have such rights
or obligations under this Agreement; provided that the Members and the Trust
retain whatever rights or obligations, if any, they may have under Limited
Liability Company statutes, or other statutes or rules of law. The Buyer's
parent and affiliated corporations do not have any rights or obligations under
this Agreement; provided that the Corporation's parent corporation retains
whatever rights or obligations, if any, it may have under corporation statutes,
or other statutes or rules of law.
9.11 LITIGATION ARISING FROM THE OPERATION OF THE BUSINESS. It is
recognized that in the future litigation may arise relating to Seller's or
Buyer's operations and the Purchased Assets, which may relate directly or
indirectly to the period prior to the Closing, the period subsequent to the
Closing, or both. Therefore, to the extent reasonable under the circumstances,
each Party shall assist and provide information, records and documents to the
other Party with respect to any litigation or potential litigation in which the
other party is or may be involved.
9.12 FISCAL YEAR. It is assumed by the parties that Buyer will be able to
elect a fiscal year ending March 31 and Buyer will so elect. If such assumption
is incorrect or cannot be accomplished, then the fiscal year shall be the
calendar year and all references to fiscal years ending on or prior to March 31,
2003 or 2005 shall be deemed to refer to the calendar years ending on or prior
to December 31, 2003 or 2005.
9.13 CLOSING COSTS. Except as specifically described in this Agreement,
each party shall bear and pay its own costs, expenses, consulting fees, attorney
fees and other costs relating to the negotiation or closing of this Agreement.
Buyer will not assume or pay Seller's accounts payable or accrued liabilities
relating to such negotiation or closing costs of Seller.
9.14 HEADINGS. The section and other headings contained in this Agreement
and in the exhibits and schedules to this Agreement are included for the purpose
of convenient reference only and shall not restrict, amplify, modify or
otherwise affect in any way the meaning or interpretation of this Agreement or
the exhibits and schedules.
9.15 FAIR MEANING. This Agreement shall be construed according to its fair
meaning and as if prepared by all Parties.
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9.16 GENDER AND NUMBER. All references to the neuter gender shall include
the feminine or masculine gender and vice versa, where applicable, and all
references to the singular shall include the plural and vice versa, where
applicable.
9.17 NO THIRD PARTY BENEFICIARY. The provisions of this Agreement are not
intended by the Parties, nor shall they be deemed, to confer any benefit on any
person that is not a party to this Agreement, except death beneficiaries to the
extent provided for in Section 1.4(b)(vii) and Affiliates to the extent provided
in Sections 4.6 or 4.7.
9.18 CONSENT TO JURISDICTION. Each of the Parties submits to the personal
jurisdiction of the federal or state district courts located in Tulsa, Oklahoma,
with respect to any claim brought to enforce, xxx for the breach of, interpret,
rescind, or interpret this Agreement.
9.19 ENTIRE AGREEMENT. THIS IS THE ENTIRE AGREEMENT OF THE PARTIES. ALL
LETTERS OF INTENT, DISCUSSIONS, AND NEGOTIATIONS ARE MERGED INTO THIS DOCUMENT
AND WILL NOT SURVIVE UNLESS THEY ARE DESCRIBED IN THIS DOCUMENT. THERE ARE NO
CONDITIONS PRECEDENT OR SUBSEQUENT.
IN WITNESS WHEREOF, this Agreement has been entered into on the 31 day of
March, 1998.
BUYER: CRC-Key, Inc., an Oklahoma corporation
By:___________________________________
Chief Executive Officer
SELLER: X. X. KEY SERVICES, L.L.C., Seller
By:___________________________________
Xxxxx X. Key, Member and Manager
And___________________________________
Xxxxxxx XxXxxx, Member
And___________________________________
Xxxxx X. XxXxxx as Trustee, Member
And___________________________________
Xxxxx X. XxXxxx, Manager
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And___________________________________
Xxxxx X. Key
XXXXX XXXXXX: ______________________________________
Xxxxx X. XxXxxx
XXXXX X. XXXXXX REVOCABLE
LIVING TRUST DATED JUNE 28, 1996, AS
AMENDED AND RESTATED OCTOBER 22, 1996: ______________________________________
Xxxxx X. XxXxxx, Trustee
XXXXXXX XXXXXX: ______________________________________
Xxxxx X. XxXxxx
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ACKNOWLEDGMENTS
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
This foregoing instrument was acknowledged before me on this 31st day
of March, 1998, by XXXXX X. XxXXXX, individually and as Trustee of the Xxxxx
X. XxXxxx Revocable Living Trust dated June 2 , 1996, as amended and restated
October 22, 1996, and as Manager of X. X. Key Services, L.L.C. (the Seller),
XXXXX X. KEY individually and as Member/Manager of Seller, and XXXXX X.
XxXXXX, individually and also as Member of the Seller.
______________________________________
Notary Public
My Commission Expires:
_________________________________
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
This foregoing instrument was acknowledged before me on this 31st day of
March, 1998, by M. XXXXXXX XXXXX, as Chief Executive Officer of CRC-Key, Inc.,
on behalf of the Buyer.
______________________________________
Notary Public
My Commission Expires:
_________________________________
34
