EXHIBIT 10.78
EXECUTION COPY
PURCHASE AGREEMENT
BY AND BETWEEN
▇▇▇▇▇▇▇▇ GAS PIPELINE COMPANY, LLC
AS SELLER
AND
SOUTHERN STAR CENTRAL CORP.
AS BUYER,
FOR THE PURCHASE AND SALE OF
ALL THE CAPITAL STOCK
OF
▇▇▇▇▇▇▇▇ GAS PIPELINES CENTRAL, INC.
A DELAWARE CORPORATION
AND ALL LIMITED LIABILITY COMPANY MEMBERSHIP UNITS
OF
WESTERN FRONTIER PIPELINE COMPANY, L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY
DATED AS OF
SEPTEMBER 13, 2002
TABLE OF CONTENTS
PAGE
----
ARTICLE I SALE AND PURCHASE...................................................................... 1
SECTION 1.1. Agreement to Sell and to Purchase; Closing............................ 1
SECTION 1.2. Purchase Price........................................................ 2
SECTION 1.3. Adjustment to Purchase Price.......................................... 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER.............................................. 4
SECTION 2.1. Corporate Organization................................................ 4
SECTION 2.2. Capitalization; Title................................................. 4
SECTION 2.3. Subsidiaries and Equity Interests..................................... 5
SECTION 2.4. Validity of Agreement; Authorization.................................. 5
SECTION 2.5. No Conflict or Violation.............................................. 5
SECTION 2.6. Consents and Approvals................................................ 5
SECTION 2.7. Financial Statements.................................................. 6
SECTION 2.8. Absence of Certain Changes or Events.................................. 6
SECTION 2.9. Tax Matters........................................................... 6
SECTION 2.10. Absence of Undisclosed Liabilities.................................... 7
SECTION 2.11. Real and Personal Property............................................ 8
SECTION 2.12. Intellectual Property and Computer Hardware........................... 8
SECTION 2.13. Licenses, Permits and Governmental Approvals.......................... 9
SECTION 2.14. Compliance with Law................................................... 9
SECTION 2.15. Litigation............................................................ 9
SECTION 2.16. Contracts............................................................. 10
SECTION 2.17. Brokers............................................................... 10
SECTION 2.18. Employee Plans........................................................ 11
SECTION 2.19. Insurance............................................................. 13
SECTION 2.20. Environmental; Health and Safety Matters.............................. 13
SECTION 2.21. Regulatory Matters.................................................... 14
SECTION 2.22. No Other Representations.............................................. 15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER.............................................. 15
SECTION 3.1. Corporate Organization................................................ 15
SECTION 3.2. Validity of Agreement................................................. 15
SECTION 3.3. No Conflict or Violation; No Defaults................................. 16
SECTION 3.4. Consents and Approvals................................................ 16
SECTION 3.5. Financial Ability..................................................... 16
SECTION 3.6. Brokers............................................................... 16
SECTION 3.7. Independent Investigation............................................. 16
SECTION 3.8. Investment Intent; Investment Experience;
Restricted Securities................................................. 17
ARTICLE IV COVENANTS............................................................................. 17
SECTION 4.1. Certain Changes and Conduct of Business............................... 17
i
Table of Contents
(continued)
PAGE
----
SECTION 4.2. Access to Properties and Records...................................... 19
SECTION 4.3. Employee Matters...................................................... 20
SECTION 4.4. Consents and Approvals................................................ 23
SECTION 4.5. Further Assurances.................................................... 24
SECTION 4.6. Reasonable Efforts.................................................... 25
SECTION 4.7. Notice of Breach...................................................... 25
SECTION 4.8. Confidential Information.............................................. 25
SECTION 4.9. Negotiations.......................................................... 25
SECTION 4.10. Tax Covenants......................................................... 26
SECTION 4.11. Insurance, Bonds and Collateral....................................... 28
SECTION 4.12. Information Technology................................................ 28
SECTION 4.13. Software License...................................................... 29
SECTION 4.14. Non-software Copyright License........................................ 30
SECTION 4.15. Transitional Trademark License........................................ 30
SECTION 4.16. Audit or Review of Financial Statements............................... 31
SECTION 4.17. Termination of Certain Related Party Contracts........................ 31
ARTICLE V CONDITIONS TO OBLIGATIONS OF BUYER..................................................... 32
SECTION 5.1. Receipt of Documents.................................................. 32
SECTION 5.2. Representations and Warranties of Seller.............................. 32
SECTION 5.3. Performance of Seller's Obligations................................... 33
SECTION 5.4. Consents and Approvals................................................ 33
SECTION 5.5. No Violation of Orders................................................ 33
SECTION 5.6. Transition Services Agreement; Litigation
Cooperation Agreement................................................. 33
SECTION 5.7. Opinion of Counsel to Buyer........................................... 34
SECTION 5.8. Opinion of Counsel to Seller.......................................... 34
SECTION 5.9. Fairness Opinion...................................................... 34
ARTICLE VI CONDITIONS TO OBLIGATIONS OF SELLER................................................... 34
SECTION 6.1. Representations and Warranties of Buyer............................... 34
SECTION 6.2. Performance of Buyer's Obligations.................................... 34
SECTION 6.3. Consents and Approvals................................................ 34
SECTION 6.4. No Violation of Orders................................................ 34
SECTION 6.5. Purchase Price........................................................ 35
ARTICLE VII TERMINATION AND ABANDONMENT.......................................................... 35
SECTION 7.1. Methods of Termination; Upset Date.................................... 35
SECTION 7.2. Procedure Upon Termination............................................ 36
ARTICLE VIII SURVIVAL; INDEMNIFICATION........................................................... 36
SECTION 8.1. Survival.............................................................. 36
SECTION 8.2. Indemnification Coverage.............................................. 36
SECTION 8.3. Procedures............................................................ 38
ii
TABLE OF CONTENTS
(continued)
PAGE
----
SECTION 8.4. Waiver of Consequential, Etc. Damages................................. 39
SECTION 8.5. Compliance with Express Negligence Rule............................... 39
SECTION 8.6. Liquidated Damages.................................................... 39
SECTION 8.7. Remedy................................................................ 40
SECTION 8.8. Tax Treatment of Indemnity Payments................................... 40
ARTICLE IX MISCELLANEOUS PROVISIONS.............................................................. 40
SECTION 9.1. Publicity............................................................. 40
SECTION 9.2. Successors and Assigns; No Third-Party Beneficiaries.................. 40
SECTION 9.3. Investment Bankers, Financial Advisors, Brokers and Finders........... 41
SECTION 9.4. Fees and Expenses..................................................... 41
SECTION 9.5. Notices............................................................... 41
SECTION 9.6. Entire Agreement...................................................... 42
SECTION 9.7. Waivers and Amendments................................................ 43
SECTION 9.8. Severability.......................................................... 43
SECTION 9.9. Titles and Headings................................................... 43
SECTION 9.10. Signatures and Counterparts........................................... 43
SECTION 9.11. Enforcement of the Agreement.......................................... 43
SECTION 9.12. Governing Law......................................................... 44
SECTION 9.13. Disclosure............................................................ 44
SECTION 9.14. Disclaimer of Warranties.............................................. 44
SECTION 9.15. Consent to Jurisdiction............................................... 45
SECTION 9.16. Bulk Sales or Transfer Laws........................................... 45
SECTION 9.17. Certain Definitions................................................... 45
Disclosure Schedules
Schedule 1.2 Purchase Price Allocation
Schedule 1.3 Working Capital
Schedule 2.1 Corporate Organization - Qualifications
Schedule 2.5 Conflict or Violation
Schedule 2.6 Consents and Approvals
Schedule 2.8 Absence of Certain Changes or Events
Schedule 2.9 Tax Matters
Schedule 2.10(a) Absence of Undisclosed Liabilities
Schedule 2.10(b) Absence of Undisclosed Liabilities
Schedule 2.11(a) Rights of Way
Schedule 2.11(b) Property Restrictions
Schedule 2.12 Intellectual Property
Schedule 2.13 Licenses, Permits and Governmental Approvals
iii
TABLE OF CONTENTS
(continued)
Page
----
Schedule 2.14 Compliance with Law
Schedule 2.15 Material Litigation or Potential or Threatened Claims
Schedule 2.16 Contracts
Schedule 2.17 Brokers
Schedule 2.18(a)(i) Seller Plans
Schedule 2.18(a)(ii) Employee Plans Sponsored or Maintained by the Company or the LLC
Schedule 2.18(b)(i) Business Employees
Schedule 2.18(b)(ii) Contracts, Agreements, Plans or Arrangements Covering Business Employees
Schedule 2.18(e) Plans Providing Post-Employment Welfare Benefits
Schedule 2.18(k)(i) Business Employees Covered by a Collective Bargaining Agreement
Schedule 2.18(k)(ii) Business Employees Represented by a Union or Other Bargaining Agent
within the Last Three Years
Schedule 2.19 Property and Casualty Insurance
Schedule 2.20 Environmental; Health and Safety Matters
Schedule 3.4 Consents and Approvals
Schedule 3.6 Brokers
Schedule 4.1 Certain Changes and Conduct of Business
Schedule 4.11 Bonds, Letters of Credit and Cash Collateral
Schedule 4.17 Related Third Party Contracts Not Terminated as of Closing Date
iv
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of this 13th day of September, 2002, by and between ▇▇▇▇▇▇▇▇ GAS
PIPELINE COMPANY, LLC, a Delaware limited liability company ("SELLER"), and
SOUTHERN STAR CENTRAL CORP., a Delaware corporation ("BUYER").
W I T N E S S E T H:
WHEREAS, Seller owns 100% of the issued and outstanding
capital stock (the "SHARES") of ▇▇▇▇▇▇▇▇ Gas Pipelines Central, Inc. (the
"COMPANY"); and
WHEREAS, Seller owns 100% of the issued and outstanding
limited liability company interests (the "MEMBERSHIP UNITS") of Western Frontier
Pipeline Company, L.L.C., a Delaware limited liability company (the "LLC"); and
WHEREAS, Buyer desires to purchase the Shares and the
Membership Units from Seller, and Seller desires to sell the Shares and the
Membership Units to Buyer, in each case upon the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, on the date hereof, The ▇▇▇▇▇▇▇▇ Companies, Inc.
("PARENT") entered into a Guaranty Agreement in favor of Buyer and the other
Buyer Indemnified Parties, pursuant to which Parent guaranteed the performance
of all of Seller's obligations under this Agreement and the Transaction
Documents (as defined herein); and
WHEREAS, on the date hereof, the ultimate parent of Buyer
("BUYER PARENT") entered into a Guaranty Agreement in favor of Seller and the
other Seller Indemnified Parties, pursuant to which Buyer Parent guaranteed the
performance of all of Buyer's obligations under this Agreement and the
Transaction Documents;
NOW, THEREFORE, in consideration of the mutual terms,
conditions and other agreements set forth herein, the parties hereto hereby
agree as follows:
ARTICLE I
SALE AND PURCHASE
SECTION 1.1 AGREEMENT TO SELL AND TO PURCHASE; CLOSING
(a) On the Closing Date (as hereinafter defined) and upon the
terms and subject to the conditions set forth in this Agreement, Seller shall
sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase
and accept from Seller, all of the Shares and the Membership Units, free and
clear of any pledges, restrictions on transfer, proxies and voting or other
agreements, liens, claims, charges, mortgages, security interests or other legal
or equitable encumbrances, limitations or restrictions of any nature whatsoever
other than as may be set forth in the Organizational Documents (as defined in
Section 2.2) of the Company or the LLC ("ENCUMBRANCES").
(b) The closing of such sale and purchase (the "CLOSING")
shall take place at 10:00 a.m. (New York time), at the offices of Seller's
counsel, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ L.L.P., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, or at
such other place as the parties hereto shall agree in writing no later than the
later of (i) one business day following the expiration of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
waiting period or (ii) satisfaction of the conditions to the obligations of
Buyer and Seller
set forth in Article V and VI (other than those conditions that by their nature
are to be fulfilled at Closing) (the "CLOSING DATE"). At Seller's option, the
Closing Date may be delayed up to ten (10) days by written notice to Buyer. At
the Closing, Seller shall deliver to Buyer (i) the stock certificates
representing the Shares duly endorsed in blank, or accompanied by stock powers
duly executed in blank in form and substance reasonably acceptable to Buyer and
Seller (the "STOCK TRANSFER") and (ii) a duly executed ▇▇▇▇ of sale, in form and
substance reasonably satisfactory to Buyer and Seller, transferring the
Membership Units (the "▇▇▇▇ OF SALE"). In full consideration and exchange for
the Shares and the Membership Units, Buyer shall thereupon pay to Seller the
Purchase Price as provided in Section 1.2 hereof.
SECTION 1.2. PURCHASE PRICE
The purchase price for the Shares and the Membership Units
(the "PURCHASE PRICE") shall be Three Hundred and Eighty Million Dollars
($380,000,000.00) as adjusted in accordance with Section 1.3. In addition, Buyer
acknowledges that the Company has outstanding debt in the principal amount of
One Hundred Seventy-Five Million Dollars ($175,000,000.00) plus accrued and
unpaid interest thereon. This results in an enterprise value for the transaction
of Five Hundred and Fifty-Five Million Dollars ($555,000,000). On the Closing
Date, Buyer shall deliver to Seller the Purchase Price, which shall be paid by
wire transfer to Seller of immediately available funds made to a bank account in
the United States of America designated in writing by Seller not less than three
business days before the Closing Date. The Purchase Price shall be allocated
among the Shares and the Membership Units in accordance with Schedule 1.2.
SECTION 1.3. ADJUSTMENT TO PURCHASE PRICE
(a) Schedule 1.3 sets forth the Working Capital of the Company
as of June 30, 2002 (the "BASE STATEMENT") based on the Financial Statements.
"WORKING CAPITAL" shall mean Current Assets less Current Liabilities. "CURRENT
ASSETS" shall mean current assets of the Company as reflected in the financial
statements of the Company as of the relevant date of determination, but
excluding intercompany receivables (that is, receivables from the Seller and its
Affiliates), prepaid insurance and deferred taxes. "CURRENT LIABILITIES" shall
mean the current liabilities of the Company as reflected in the financial
statements of the Company as of the relevant date of determination, but
excluding intercompany payables (that is, payables to the Seller or any of its
Affiliates), the current portion of long-term debt, deferred taxes and accrued
liability for Taxes for which Seller is liable pursuant to Section 4.10. Within
60 days following the Closing Date, Seller shall prepare and deliver to Buyer a
statement (the "CLOSING STATEMENT"), which shall set forth in reasonable detail
the amount of Working Capital of the Company as of the Closing Date based upon a
balance sheet prepared as of the Closing Date on a basis consistent with the
balance sheet included in the Financial Statements and a calculation of the
adjustment to the Purchase Price that is payable based upon the difference
between the Working Capital in the Base Statement and the Working Capital in the
Closing Statement. Buyer agrees, at no cost to Seller, to give Seller and its
authorized representatives reasonable access to such employees, officers and
other facilities and such books and records of the Company and the LLC as are
reasonably necessary to allow Seller and its authorized representatives to
prepare the Closing Statement. The Base Statement shall be prepared in
accordance with RAP (as defined in Section 2.7) and on a basis consistent with
the Financial
2
Statements using the same accounting methods, policies, practices, procedures
and adjustments as were used in the preparation of the Financial Statements. The
Closing Statement shall be prepared in accordance with RAP and on a basis
consistent with the Financial Statements, using the same accounting methods,
policies, practices, procedures and adjustments as were used in the preparation
of the Financial Statements and the Base Statement.
(b) Following its receipt from Seller of the Closing
Statement, Buyer shall have 10 days to review the Closing Statement and to
inform Seller in writing of any disagreement (the "OBJECTION") which it may have
with the Closing Statement, which objection shall specify in reasonable detail
Buyer's disagreement with the Closing Statement. If Seller does not receive the
Objection within such 10-day period, the amount of Working Capital set forth on
the Closing Statement delivered pursuant to Section 1.3(a) shall be deemed to
have been accepted by Buyer and shall become binding upon Buyer. If Buyer does
timely deliver an Objection to Seller, Seller shall then have 10 days from the
date of receipt of such Objection (the "REVIEW PERIOD") to review and respond to
the Objection. Buyer and Seller shall attempt in good faith to resolve any
disagreements with respect to the determination of Working Capital of the
Company as of the Closing Date or the amount of the adjustment to the Purchase
Price. If they are unable to resolve all of their disagreements with respect to
the determination of Working Capital of the Company as of the Closing Date or
the amount of the adjustment to the Purchase Price within 10 days following the
expiration of Seller's Review Period, they may refer, at the option of either
Buyer or Seller, their differences to KPMG LLP, or if KPMG LLP decline to accept
such engagement, an internationally recognized firm of independent public
accountants selected jointly by Buyer and Seller, who shall determine only with
respect to the differences so submitted, whether and to what extent, if any, the
amount of Working Capital of the Company as of the Closing Date set forth in the
Closing Statement requires adjustment. If Buyer and Seller are unable to so
select the independent public accountants within five days of KPMG LLP declining
to accept such engagement, either Buyer or Seller may thereafter request that
the American Arbitration Association make such selection (as applicable, KPMG
LLP, the firm selected by Buyer and Seller or the firm selected by the American
Arbitration Association is referred to as the "CPA FIRM"). Buyer and Seller
shall direct the CPA Firm to use its reasonable best efforts to render its
determination within 30 days after the issue is first submitted to the CPA Firm.
The CPA Firm's determination shall be conclusive and binding upon Buyer and
Seller. The fees and disbursements of the CPA Firm shall be shared equally by
Buyer and Seller. Buyer and Seller shall make readily available to the CPA Firm
all relevant books and records relating to the Closing Statement and all other
items reasonably requested by the CPA Firm. The Closing Statement as agreed to
by Buyer and Seller or as determined by the CPA Firm shall be referred to as the
"FINAL CLOSING STATEMENT".
(c) In the event that Working Capital on the Final Closing
Statement exceeds Working Capital on the Base Statement, then Buyer shall pay to
Seller in cash the amount of such excess. In the event that Working Capital on
the Base Statement exceeds Working Capital on the Final Closing Statement, then
Seller shall pay to Buyer in cash the amount of such excess. All amounts payable
under this Section 1.3(c) shall be paid within three business days of the
determination of the Final Closing Statement by wire transfer of immediately
available funds to a bank account in the United States of America designated in
writing by the recipient not less than one business day before such payment.
3
(d) The Seller and Buyer hereby agree that, on or before the
Closing Date, all intercompany accounts between the Company and the Seller and
the Seller's Affiliates shall be paid in full or offset, dividended or
distributed to the Seller or its Affiliates or otherwise cancelled without
payment. On or before the Closing Date, Seller also shall take, or shall cause
the Company to take, all actions necessary to exclude as an asset of the Company
the Company's investment in the 1Line System.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
SECTION 2.1. CORPORATE ORGANIZATION.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of Delaware. The LLC is a limited liability
company, duly formed, validly existing and in good standing under the laws of
Delaware. Seller is duly formed, validly existing and in good standing under the
laws of Delaware. Each of the Company and the LLC has all requisite power and
authority and all governmental licenses, authorizations, permits, consents and
approvals to own its respective properties and assets and to conduct its
business as now conducted, except where the failure to have such licenses,
authorizations, permits, consents and approvals would not have a Material
Adverse Effect (as defined in Section 9.17). Each of the Company and the LLC is
duly qualified to do business as a foreign entity and is in good standing in
each jurisdiction where the character of the properties owned or leased by it or
the nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or in good standing would not
individually or in the aggregate have a Material Adverse Effect. Schedule 2.1
sets forth all of the jurisdictions in which the Company and the LLC are
qualified to do business.
SECTION 2.2. CAPITALIZATION; TITLE.
All of the outstanding Shares of the Company and all of the
outstanding Membership Units of the LLC are owned of record and beneficially by
Seller. All of the Shares and Membership Units have been validly issued, and the
Shares are fully paid and nonassessable. Except for this Agreement, there are no
outstanding options, warrants, agreements, conversion rights, preemptive rights
or other rights to subscribe for, purchase or otherwise acquire the Shares or
Membership Units. There are no voting trusts or other agreements or
understandings to which Seller, the Company or the LLC is a party with respect
to the voting of the Shares or the Membership Units. There is no indebtedness of
the Company or the LLC having general voting rights issued and outstanding.
Except for this Agreement, there are no outstanding obligations of any person to
repurchase, redeem or otherwise acquire outstanding Shares or Membership Units
or any securities convertible into or exchangeable for any Shares or Membership
Units. Seller has valid and marketable title to the Shares and Membership Units
free and clear of any Encumbrances. True and correct copies of the
Organizational Documents of the Company and the LLC with all amendments thereto
to the date hereof, have been made available by the Seller to the Buyer or its
representatives. "ORGANIZATIONAL DOCUMENTS" shall mean certificates of
incorporation, by-laws, certificates of formation, limited liability company
operating agreements,
4
partnership or limited partnership agreements or other formation or governing
documents of a particular entity.
SECTION 2.3. SUBSIDIARIES AND EQUITY INTERESTS.
Neither the Company nor the LLC has any subsidiaries, and they
do not own, directly or indirectly, any shares of capital stock, voting rights
or other equity interests or investments in any other Person. Neither the
Company nor the LLC has any rights to acquire by any means, directly or
indirectly, any capital stock, voting rights, equity interests or investments in
another Person.
SECTION 2.4. VALIDITY OF AGREEMENT; AUTHORIZATION.
Seller has the power to enter into this Agreement and the
Transaction Documents to which Seller is a party and to carry out its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Transaction Documents and the performance of its obligations
hereunder and thereunder have been duly authorized by the Board of Directors of
The ▇▇▇▇▇▇▇▇ Companies, Inc. and the Management Committee of Seller, and no
other proceedings on the part of Seller are necessary to authorize such
execution, delivery and performance. This Agreement and the Transaction
Documents each have been or will be duly executed by Seller and constitutes or
will constitute Seller's valid and binding obligation enforceable against Seller
in accordance with its terms (except to the extent that its enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
law affecting the enforcement of creditors' rights generally or by general
equitable principles).
SECTION 2.5. NO CONFLICT OR VIOLATION.
Except as set forth on Schedule 2.5, the execution, delivery
and performance by Seller of this Agreement and the Transaction Documents to
which Seller is a party does not and will not: (a) violate or conflict with any
provision of the Organizational Documents of Seller; (b) violate any applicable
provision of law, statute, judgment, order, writ, injunction, decree, award,
rule, or regulation of any foreign, federal, tribal, state or local government,
court, arbitrator, agency or commission or other governmental or regulatory body
or authority ("GOVERNMENTAL AUTHORITY"); (c) violate, result in a breach of,
constitute (with due notice or lapse of time or both) a default or cause any
obligation, penalty or premium to arise or accrue under any contract, lease,
loan agreement, mortgage, security agreement, trust indenture or other agreement
or instrument to which the Company or the LLC is a party or by which either of
them is bound or to which any of their respective properties or assets is
subject; (d) result in the creation or imposition of any Encumbrance upon any of
the properties or assets of the Company or the LLC; or (e) result in the
cancellation, modification, revocation or suspension of any License (as defined
in Section 2.14) of the Company or the LLC, except in the cases of clauses (b) -
(e) above as would not have a Material Adverse Effect.
SECTION 2.6. CONSENTS AND APPROVALS.
Except as disclosed on Schedule 2.6, no material consent,
approval or authorization of, or filing, registration or qualification with, any
Governmental Authority or any
5
other Person (on the part of Seller, the LLC or the Company), is required as a
condition to the execution and delivery of this Agreement and the Transaction
Documents to which Seller is a party or the performance of their respective
obligations hereunder or thereunder.
SECTION 2.7. FINANCIAL STATEMENTS.
Seller has heretofore furnished to Buyer copies of the audited
financial statements of the Company as of December 31, 2001, and December 31,
2000, and the notes thereto, and the unaudited balance sheet of the Company as
of June 30, 2002, together with the related statements of income and cash flows
for the period then ended (the "FINANCIAL STATEMENTS"). The Financial Statements
were prepared from the books and records of the Company in accordance with the
accounting principles prescribed by the Federal Energy Regulatory Commission
("RAP") applied on a consistent basis throughout the periods covered thereby.
The Financial Statements present fairly in all material respects the financial
position, results of operations and cash flows of the Company as of such dates
and for the periods then ended (the partial year Financial Statements being
subject to normal year-end audit adjustments consistent with prior periods).
SECTION 2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth in Schedule 2.8 and except for any
intercompany receivables or payables that may be paid, cancelled or offset prior
to Closing as contemplated in Section 1.3(d) hereof, since June 30, 2002, the
business of the Company and the LLC has been conducted in the ordinary course
consistent with past practices and neither the Company nor the LLC has taken any
of the actions described in Section 4.1(a)(i) through (xvi). Since June 30,
2002, there has not been any event or condition that has had a Material Adverse
Effect, except as disclosed in Schedule 2.8.
SECTION 2.9. TAX MATTERS.
(a) For purposes of this Agreement, "TAX RETURNS" shall mean
returns, reports, exhibits, schedules, information statements and other
documentation (including any additional or supporting material) filed or
maintained, or required to be filed or maintained, in connection with the
calculation, determination, assessment or collection of any Tax and shall
include any amended returns required as a result of examination adjustments made
by the Internal Revenue Service or other Tax authority. For purposes of this
Agreement, "TAX" or "TAXES" shall mean any and all federal, state, local,
foreign and other taxes, levies, fees, imposts and duties of whatever kind
(including any interest, penalties or additions to the tax imposed in connection
therewith or with respect thereto), including, without limitation, taxes imposed
on, or measured by, income, franchise, profits or gross receipts, and also ad
valorem, value added, sales, use, service, real or personal property, capital
stock, license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premium, windfall profits, transfer and gains taxes and
customs duties.
(b) Except as disclosed on Schedule 2.9, (i) the Company and
the LLC have filed (or joined in the filing of) when due all Tax Returns
required by applicable law to be filed with
6
respect to the Company or the LLC; (ii) all such Tax Returns were true, correct
and complete in all respects as of the time of such filing; (iii) all Taxes
relating to periods ending on or before the Closing Date owed by the Company or
the LLC (whether or not shown on any Tax Return) at any time on or prior to the
Closing Date, if required to have been paid, have been or will be paid (except
for Taxes which are being contested in good faith in appropriate proceedings);
(iv) any liability of the Company for Taxes not yet due and payable, or which
are being contested in good faith in appropriate proceedings, has been provided
for on the financial statements of the Company in accordance with RAP; (v) there
is no action, suit, proceeding, investigation, audit or claim now pending
against, or with respect to, the Company or the LLC in respect of any Tax or Tax
assessment, nor is any claim for additional Tax or Tax assessment asserted in
writing by any Tax authority; (vi) since January 1, 1998, no written claim has
been made by any Tax authority in a jurisdiction where the Company or the LLC
does not currently file a Tax Return that they are or may be subject to Tax by
such jurisdiction, nor to Seller's knowledge is any such assertion threatened in
writing; (vii) the Company and the LLC have no outstanding request for any
extension of time within which to pay its Taxes or file its Tax Returns; (viii)
there has been no waiver or extension of any applicable statute of limitations
for the assessment or collection of any Taxes of the Company or the LLC; (ix)
the LLC at all times has been treated as a disregarded entity for federal, state
and local income and franchise tax purposes; (x) Seller is not a "FOREIGN
PERSON" within the meaning of Section 1445 of the United States Internal Revenue
Code of 1986, as amended (the "CODE"); (xi) the Company and the LLC are not
parties to any agreement, whether written or unwritten, providing for the
payment of Taxes, payment for Tax losses, entitlements to refunds or similar Tax
matters; (xii) the Company and the LLC have withheld and paid all Taxes required
to be withheld by the Company or the LLC in connection with any amounts paid or
owing to any employee, creditor, independent contractor or other third party;
(xiii) there are no liens for Taxes upon the Shares, the Membership Units, or
any assets of the Company or the LLC except for Taxes not yet due and payable;
(xiv) no property of the Company or the LLC is subject to a tax benefit transfer
lease subject to the provisions of former Section 168(f)(8) of the Code; and
(xiv) neither the Company nor the LLC has made any payments or is obligated to
make any payments that will not be deductible under Section 280G or 162(m) of
the Code;
(c) Any reference in this Section 2.9 to the Company or the
LLC shall be deemed to include any predecessor of the Company or the LLC and any
entity with respect to which the Company or the LLC has successor or transferee
liability.
(d) The only representations and warranties given in respect
of Tax matters are those contained in Section 2.9 and none of the other
representations and warranties in this Agreement shall be deemed to constitute,
directly or indirectly, a representation and warranty in respect of Tax matters.
SECTION 2.10. ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Except as disclosed on Schedule 2.10(a), neither the
Company nor the LLC has any material indebtedness or liability, absolute or
contingent, which is not shown or provided for on the balance sheet of the
Company included in the Financial Statements other than liabilities incurred or
accrued in the ordinary course of business (including liens of current taxes and
assessments not in default) since June 30, 2002.
7
(b) Except as set forth on Schedule 2.10(b), the LLC: (i) does
not have any obligations or liabilities, absolute or contingent, direct or
indirect; (ii) is not required or obligated and will not be required or
obligated to make any payments to any Person, including to Seller or any of
Seller's Affiliates; (iii) is not and will not be a party to any agreements or
instruments of any kind; and (iv) has written off its investments in its
proposed business and as such its general ledger asset accounts reflect a zero
balance in all line items.
SECTION 2.11. REAL AND PERSONAL PROPERTY.
(a) Except as disclosed on Schedule 2.11(a), to the Knowledge
of the Seller, each of the Company and the LLC owns valid and defensible fee
title to, or holds a valid leasehold interest in, or a valid right-of-way or
easement (all such rights-of-way and easements collectively, the
"RIGHTS-OF-WAY") through, all real property ("REAL PROPERTY") used or necessary
for the conduct of the Company's business as it is presently conducted, and each
of the Company and the LLC has good and valid title to all of the material
tangible assets and properties which they own and which are reflected on the
Financial Statements (except for assets and properties sold, consumed or
otherwise disposed of in the ordinary course of business since the date of the
Financial Statements), and all such Real Property, assets and properties (other
than Rights-of-Way) are owned or leased free and clear of all Encumbrances,
except for (i) Encumbrances set forth on Schedule 2.11(b), (ii) liens for
current Taxes not yet due and payable or for Taxes the validity of which is
being contested in good faith, (iii) Encumbrances to secure indebtedness
reflected on the Financial Statements, (iv) Encumbrances which will be
discharged on or prior to the Closing Date, (v) laws, ordinances and regulations
affecting building use and occupancy or reservations of interest in title
(collectively, "PROPERTY RESTRICTIONS") imposed or promulgated by law or any
Governmental Authority with respect to Real Property, including zoning
regulations, provided they do not materially adversely affect the current use of
the applicable Real Property, (vi) Encumbrances, Property Restrictions,
Rights-of-Way and written agreements of record, (vii) mechanics', carriers',
workmen's and repairmen's liens and other Encumbrances, Property Restrictions
and other limitations of any kind, if any, which do not materially detract from
the value of or materially interfere with the present use of any Real Property
subject thereto or affected thereby and which have arisen or been incurred in
the ordinary course of business and (viii) Encumbrances that do materially
detract from the value or materially interfere with the present use of the asset
subject thereto (clauses (i) through (viii) above referred to collectively as
"PERMITTED ENCUMBRANCES").
(b) Except as set forth on Schedule 2.11(b), there are no
material structural defects relating to any of the improvements to the Real
Property and all tangible assets and property owned and used by the Company or
the LLC are in good operating condition, ordinary wear and tear excepted.
SECTION 2.12. INTELLECTUAL PROPERTY AND COMPUTER HARDWARE.
(a) Except as set forth on Schedule 2.12, and as may be
identified during development of the Migration Plan (as defined in Section 4.12
below) and for such matters as would not have a Material Adverse Effect, each of
the Company and the LLC owns all right, title and interest in and to, or has a
valid and enforceable license or other right to use, all the intellectual
property used by each of the Company and the LLC in connection with its
business,
8
which represents all intellectual property rights necessary for the Company and
the LLC to each conduct its business as presently conducted.
(b) The only representations and warranties given in respect
of intellectual property and matters and agreements relating thereto are those
contained in this Section 2.12, and none of the other representations and
warranties shall be deemed to constitute, directly or indirectly, a
representation and warranty in respect of intellectual property and matters or
agreements relating thereto.
(c) Computer hardware that is shared between other
subsidiaries and the Company or the LLC, and which is not wholly owned by the
Company or LLC, is not included in this Agreement. A listing of such hardware,
and its related computer software system(s), is identified in Schedule 2.12.
SECTION 2.13. LICENSES, PERMITS AND GOVERNMENTAL
APPROVALS.
Except as set forth on Schedule 2.13 and except as would not
have a Material Adverse Effect, each of the Company and the LLC has all material
licenses, permits, certificates, franchises, authorizations and approvals issued
or granted to the Company by any Governmental Authority necessary for the
conduct of its business as currently conducted (each a "LICENSE" and,
collectively, the "LICENSES"). Each License has been issued to, and duly
obtained and fully paid for by, the holder thereof and is valid, in full force
and effect, except where such invalidity or failure to be in full force and
effect would not have a Material Adverse Effect. As used in this Section 2.13,
the term License does not include any Environmental Permits which shall be
subject to Section 2.20(a)(iv).
SECTION 2.14. COMPLIANCE WITH LAW.
Except as relates to tax matters (which are provided for in
Section 2.9) or environmental, health and safety matters (which are provided for
in Section 2.20) and except as set forth on Schedule 2.14, since January 1,
2001, to the Knowledge of Seller, the operations of each of the Company and the
LLC have been conducted in material compliance with all applicable laws,
regulations, orders and other requirements of all Governmental Authorities
having jurisdiction over the Company, the LLC and their respective assets,
properties and operations. None of the Seller, the Company or the LLC has
received written notice of any material violation of any such law, license,
regulation, order or other legal requirement, or is in material default with
respect to any order, writ, judgment, award, injunction or decree of any
Governmental Authority, applicable to the Company, the LLC or any of their
respective assets, properties or operations.
SECTION 2.15. LITIGATION.
Except as set forth on Schedule 2.15 there are no Legal
Proceedings pending or, to the Knowledge of Seller, threatened against or
involving Seller, the Company or the LLC that, individually or in the aggregate,
are reasonably likely to (a) have a Material Adverse Effect or (b) materially
impair or delay the ability of Seller to perform its obligations under this
Agreement or consummate the transactions contemplated by this Agreement. Except
as set forth
9
on Schedule 2.15, there is no order, judgment, injunction or decree of any
Governmental Authority outstanding against Seller, the Company or the LLC that,
individually or in the aggregate, would have any effect referred to in the
foregoing clauses (a) and (b). "LEGAL PROCEEDING" shall mean any judicial,
administrative or arbitral actions, suits, proceedings (public or private),
investigations or governmental proceedings before any Governmental Authority.
SECTION 2.16. CONTRACTS.
To the Knowledge of the Seller, Schedule 2.16 sets forth
(subject to the dollar amount limitations of clauses (a) or (b) below) a true
and complete list of the following contracts, agreements, instruments and
commitments to which the Company or the LLC is a party or otherwise relating to
or affecting any of its assets, properties or operations, whether written or
oral:
(a) contracts which require or could require payments by or to
the Company or the LLC of amounts greater than $250,000 in any year;
(b) contracts, loan agreements, letters of credit, repurchase
agreements, mortgages, security agreements, guarantees, pledge agreements, trust
indentures and promissory notes and similar documents relating to the borrowing
of money or for lines of credit in any case for amounts in excess of $500,000;
and
(c) partnership or joint venture or noncompete agreements
("MATERIAL CONTRACTS").
Each Material Contract is valid, binding and enforceable
against the Company or the LLC, as the case may be, and, to the Seller's
Knowledge, each of the other parties thereto in accordance with its terms, and
in full force and effect on the date hereof except where a failure to be so
valid, binding or enforceable or in full force and effect would not have a
Material Adverse Effect.
The Company or the LLC, as the case may be, and, to Seller's
Knowledge, the other party(ies) to any Material Contract, have performed in all
material respects all obligations required to be performed by them under, and
are not in material default or breach of in respect of, any Material Contract,
and no event has occurred which, with due notice or lapse of time or both, would
constitute such a default or breach except for any default or breach that would
not individually or in the aggregate have a Material Adverse Effect. Seller has
made available to Buyer or its representatives true and complete originals or
copies of all the Material Contracts and a copy of every material default notice
received by Seller, the Company, the LLC or any of their Affiliates during the
past one year with respect to any of the Material Contracts.
SECTION 2.17. BROKERS.
Except as disclosed on Schedule 2.17, Seller has not employed
the services of an investment banker, financial advisor, broker or finder in
connection with this Agreement or any of the transactions contemplated hereby.
10
SECTION 2.18. EMPLOYEE PLANS.
(a) Except as disclosed on Schedule 2.18(a)(i), neither
Seller, the Company, the LLC, nor any of their Affiliates sponsors or maintains,
and has not at any time during the past five years sponsored or maintained, any
"EMPLOYEE BENEFIT PLAN," as defined under Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any other
bonus, pension, stock option, stock purchase, stock appreciation right, equity
incentive, welfare, profit-sharing, retirement, disability, vacation, severance,
hospitalization, insurance, incentive, deferred compensation, compensation,
fringe benefit or other employee benefit plan, fund, trust, program, agreement
or arrangement, whether written or oral, in each of the foregoing cases which
cover, are maintained for the benefit of, or relate to any or all current or
former employees, directors or independent contractors of the Company or the LLC
or Dedicated Employees ("EMPLOYEE PLANS"). Seller or the Company has delivered
to Buyer complete and correct copies of each Employee Plan, or written summaries
of any unwritten Employee Plan. Schedule 2.18(a)(ii) sets forth a true and
complete list of all Employee Plans which are sponsored solely by the Company
and which cover only current or former employees, directors or independent
contractors of the Company or the LLC (the "COMPANY PLANS").
(b) Schedule 2.18(b)(i) sets forth a list showing the names of
employees of the Company and employees of Seller who are assigned to the
business of the Company, ("BUSINESS EMPLOYEES"). Except as set forth on Schedule
2.18(b)(ii), there are no contracts, agreements, plans or arrangements covering
any Business Employee with "CHANGE OF CONTROL" or similar provisions that would
be triggered as a result of the consummation of this Agreement. To Seller's
Knowledge, none of the Business Employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of such employee's efforts to promote
the interests of the Company or Buyer or that would conflict with the Company's
business as presently conducted. Neither Seller nor the Company has received
notice from any officer or key Business Employee or group of Business Employees,
that such person(s) intends to terminate their employment.
(c) Except as would not, individually or in the aggregate,
have a Material Adverse Effect, each Employee Plan sponsored or maintained by
the Company has been maintained and operated in compliance with its terms, the
terms of any applicable collective bargaining agreement, and the requirements of
applicable law, including the Code and ERISA, and each Employee Plan intended to
be "QUALIFIED" within the meaning of Section 401(a) of the Code has received a
favorable determination letter from the IRS and nothing has occurred since the
date of such favorable determination letter which would adversely affect the
qualified status of such plan.
(d) All contributions and premium payments required to have
been paid under or with respect to any Employee Plan have been timely paid.
(e) Except as disclosed on Schedule 2.18(e), no Employee Plan
provides health, life insurance or other welfare benefits to retirees or other
terminated employees of the Company or Dedicated Employees, other than
continuation coverage required by Section 4980B of the Code or Sections 601-608
of ERISA ("COBRA").
11
(f) No Employee Plan is a multi-employer plan within the
meaning of Section 3(37) or 4001(a) of ERISA, and neither the Company nor the
LLC has any outstanding liability with respect to any such plan.
(g) With respect to any "DEFINED BENEFIT PLAN", within the
meaning of Section 3(35) of ERISA, maintained or contributed to by Seller, the
Company, the LLC or any entity treated as a single employer with Seller, the
Company, or the LLC under Section 4001(a) of ERISA ("ERISA AFFILIATE"): (i) no
liability to the PBGC has been incurred (other than for premiums not yet due);
(ii) no notice of intent to terminate any such plan has been filed with the PBGC
or distributed to participants and no amendment terminating any such plan has
been adopted; (iii) no proceedings to terminate any such plan have been
instituted by the PBGC and no event or condition has occurred which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such plan; (iv) no "ACCUMULATED
FUNDING DEFICIENCY," within the meaning of Section 302 of ERISA or Section 412
of the Code, whether or not waived, has been incurred; (v) no "REPORTABLE EVENT"
within the meaning of Section 4043 of ERISA (for which the 30-day notice
requirement has not been waived by the PBGC) has occurred within the last six
years; (vi) no lien has arisen under ERISA or the Code, or is likely to arise,
on the assets of the Company or the LLC; (vii) there has been no cessation of
operations at a facility subject to the provisions of Section 4062(e) of ERISA
within the last six years; and (viii) no event has occurred that places
participants on actual or constructive notice of the plan's termination.
(h) No event has occurred and no condition exists with respect
to any Employee Plan which could subject any Employee Plan, the Company, the
LLC, Buyer or any of their employees, agents, directors or Affiliates, directly
or indirectly (through an indemnification agreement or otherwise), to a
liability for a breach of fiduciary duty, a "PROHIBITED TRANSACTION," within the
meaning of Section 406 of ERISA or Section 4975 of the Code, or a tax, penalty
or fine under Section 502 or 4071 of ERISA or Subtitle D, Chapter 43 of the
Code.
(i) Except for litigation regarding Parent's 401(k) plan,
there are no actions, suits, or claims (other than routine claims for benefits
in the ordinary course) with respect to any Employee Plan pending which could
give rise to a material liability, or to Seller's Knowledge, threatened, and
Seller has no knowledge of any facts which could give rise to any such actions,
suits or claims (other than routine claims for benefits in the ordinary course).
No Employee Plan is currently under governmental investigation or audit and, to
Seller's Knowledge, no such investigation or audit is contemplated or under
consideration.
(j) Neither the Company nor the LLC has any liability,
contingent or otherwise, (i) with respect to any terminated employee benefit
plan or arrangement or (ii) under Section 4069 or 4212 of ERISA.
(k) Except as set forth on Schedule 2.18(k), (i) no Business
Employees are covered by a collective bargaining agreement; (ii) no Business
Employees are, or within the last three years have been, represented by a union
or other bargaining agent; and (iii) to Seller's Knowledge, no union organizing
efforts are pending with respect to Business Employees. Seller or the Company
has delivered to Buyer a complete and correct copy of any collective bargaining
agreement applicable to Business Employees. Within the last three years, there
has been no
12
strike, work slowdown or other material labor dispute with respect to Business
Employees, nor to Seller's Knowledge, is there pending or threatened (i) any
strike, work slowdown or other material labor dispute involving Business
Employees, or (ii) any grievance or arbitration proceeding involving Business
Employees, whether arising out of any collective bargaining agreement or
otherwise.
SECTION 2.19. INSURANCE.
(a) Schedule 2.19 sets forth a true and complete list of all
current policies of all material property and casualty insurance, insuring the
properties, assets, employees and/or operations of the Company and the LLC
(collectively, the "POLICIES"). All premiums payable under such Policies have
been paid in a timely manner and the Company and the LLC have complied fully
with the terms and conditions of all such Policies.
(b) All Policies are in full force and effect. Coverage for
the Company and the LLC under the Policies shall terminate on the Closing Date.
Neither the Company nor the LLC is in default under any provisions of the
Policies, and there is no claim by the Company or any other Person pending under
any of the Policies as to which coverage has been questioned, denied or disputed
by the underwriters or issuers of such Policies. After the Closing Date, Seller
or Parent shall continue to manage all workers' compensation and general and
automobile liability claims of the Company and the LLC, which are known and
reported on or prior to the Closing Date, or which are covered under the
worker's compensation policy or the primary automobile or general liability
policy shown on Schedule 2.19. Buyer shall be responsible for all costs on
account of such claims, including but not limited to deductibles and third party
administrator charges.
SECTION 2.20. ENVIRONMENTAL; HEALTH AND SAFETY MATTERS.
(a) Except as set forth on Schedule 2.20:
(i) to the Knowledge of Seller, each of the
Company and the LLC and its operations are in material
compliance with all applicable Environmental Laws;
(ii) to the Knowledge of Seller, neither Seller,
the LLC nor the Company has received any written request for
information, or has received written notification that it is a
potentially responsible party, under CERCLA or any similar
state law with respect to any on-site or off-site location
with respect to the activities or operations of the Company or
the LLC;
(iii) there are no material writs, injunctions,
decrees, orders or judgments outstanding, or any actions,
suits, proceedings or investigations pending or, to Seller's
Knowledge, threatened involving the Company or the LLC
relating to (A) its compliance with any Environmental Law, or
(B) the release, disposal, discharge, spill, treatment,
storage or recycling of Hazardous Materials into the
environment at any location which could reasonably be expected
to result in the Company or the LLC incurring any material
liability under Environmental Laws; and
13
(iv) the Company has obtained, currently
maintains and is in material compliance with all Licenses
which are required under Environmental Laws for the operation
of its business (collectively, "ENVIRONMENTAL PERMITS"), all
such Environmental Permits are in effect and no appeal nor any
other action is pending to revoke any such Environmental
Permit.
(b) The following terms shall have the following meanings:
"ENVIRONMENTAL LAW" shall mean current local, county, state,
federal, and/or foreign law (including common law), statute, code, ordinance,
rule, regulation or other legal obligation relating to the protection of the
environment, natural resources or human health, or to the transportation or
storage of petroleum or natural gas, and in effect on the date hereof,
including, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act (42 U.S.C. section 9601 et seq.), as amended, the
Resource Conservation and Recovery Act (42 U.S.C. section 6901 et seq.), as
amended ("RCRA"), the Federal Water Pollution Control Act (33 U.S.C. section
1251 et seq.), as amended, the Clean Air Act (42 U.S.C. section 7401 et seq.),
as amended, the Toxic Substances Control Act (15 U.S.C. section 2601 et seq.),
as amended, the Occupational Safety and Health Act (29 U.S.C. section 651 et
seq.), as amended, the Safe Drinking Water Act (42 U.S.C. section 300(f) et
seq.), as amended, the Federal Natural Gas Pipeline Safety Act of 1968, as
amended, the Hazardous Materials Transportation Act (49 U.S.C., sections 1801,
et seq.), as amended, the Oil Pollution Act (33 U.S.C. sections 2701, et seq.),
the Safe Drinking Water Act (42 U.S.C. sections 300(f) et seq.), as amended, the
Endangered Species Act (16 U.S.C. sections 1531, et seq.), as amended, the
National Environmental Policy Act (42 U.S.C. sections 4321 et seq.), as amended,
analogous state, tribal or local laws, and any similar, implementing or
successor law, and any amendment, rule, regulation, or directive issued
thereunder.
"HAZARDOUS MATERIAL" shall mean any substance, material or
waste which is regulated by any Environmental Law as hazardous, toxic, a
pollutant, contaminant or words of similar meaning including, without
limitation, petroleum, petroleum products, mercury, chlorinated solvents and
their breakdown products, asbestos, urea formaldehyde and polychlorinated
biphenyls.
(c) The only representations and warranties given in respect
of environmental, health and safety matters and compliance with and liability
under Environmental Laws are those contained in Section 2.20 and none of the
other representations and warranties shall be deemed to constitute, directly or
indirectly, a representation and warranty in respect of environmental, health
and safety matters or compliance with and liability under Environmental Laws.
SECTION 2.21. REGULATORY MATTERS.
The Company is a "NATURAL GAS COMPANY" as that term is defined
in Section 2 of the Natural Gas Act ("NGA"). The Company is not a "PUBLIC
UTILITY COMPANY," "HOLDING COMPANY" or "SUBSIDIARY" or "AFFILIATE" of a holding
company as such terms are defined in the Public Utility Holding Company Act of
1935 (the "1935 ACT"). Except as would not have a Material Adverse Effect, the
Company is in material compliance with all provisions of the NGA and all rules
and regulations promulgated by FERC pursuant thereto. Except as would not have
14
a Material Adverse Effect, the Company is in material compliance with all orders
issued by FERC that pertain to all terms and conditions and rates charged for
services. No approval of (i) the Securities and Exchange Commission under the
1935 Act or (ii) FERC under the NGA or the Federal Power Act is required in
connection with the execution of this Agreement by the Seller or the transaction
contemplated hereby with respect to the Seller. The Form No. 2 Annual Reports
filed by the Company with FERC for the years ended December 31, 2001 and
December 31, 2000 were true and correct in all material respects as of the dates
thereof and since June 30, 2002 neither the Company nor the LLC has become
subject to any proceeding under Section 5 of the NGA or any general rate case
proceeding commenced under Section 4 of the NGA by reason of a filing made with
the FERC after June 30, 2002.
SECTION 2.22. NO OTHER REPRESENTATIONS.
Except as and to the extent set forth in this Article II,
Seller makes no representations or warranties whatsoever to Buyer and hereby
disclaims all liability and responsibility for any representation, warranty,
statement, or information made, communicated, or furnished (orally or in
writing) to Buyer or its representatives (including any opinion, information,
projection, or advice that may have been or may be provided to Buyer by any
director, officer, employee, agent, consultant, or representative of Seller or
any Affiliate thereof). Seller makes no representations or warranties to Buyer
regarding the probable success or profitability of the Company or the LLC or
their respective businesses.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
As of the date hereof, Buyer hereby represents and warrants to
Seller as follows:
SECTION 3.1. CORPORATE ORGANIZATION.
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware and has all requisite
power and authority to own its properties and assets and to conduct its business
as now conducted. Buyer is duly qualified to do business as a foreign entity in
every jurisdiction where the character of the properties owned or leased by it
or the nature of the business conducted by it makes such qualifications
necessary.
SECTION 3.2. VALIDITY OF AGREEMENT.
Buyer has the power to enter into this Agreement and to carry
out its obligations hereunder. The execution and delivery of this Agreement and
the performance of Buyer's obligations hereunder have been duly authorized by
the Board of Directors of Buyer, and no other proceedings on the part of Buyer
are necessary to authorize such execution, delivery and performance. This
Agreement has been duly executed by Buyer and constitutes the valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms
(except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar law affecting the
enforcement of creditors' rights generally or by general equitable principles).
15
SECTION 3.3. NO CONFLICT OR VIOLATION; NO DEFAULTS.
The execution, delivery and performance by Buyer of this
Agreement does not and will not violate or conflict with any provision of its
Organizational Documents and does not and will not violate any applicable
provision of law, or any order, judgment or decree of any Governmental
Authority, nor violate or result in a breach of or constitute (with due notice
or lapse of time or both) a default under any contract, lease, loan agreement,
mortgage, security agreement, trust indenture or other agreement or instrument
to which Buyer is a party or by which it is bound or to which any of its
properties or assets is subject, nor result in the creation or imposition of any
Encumbrance upon any of its properties or assets where such violations, breaches
or defaults in the aggregate would have a material adverse effect on the
transactions contemplated hereby or on the assets, properties, business,
operations, net income or financial condition of Buyer.
SECTION 3.4. CONSENTS AND APPROVALS.
Except as disclosed on Schedule 3.4, no material consent,
approval or authorization of, or filing, registration or qualification with, any
Governmental Authority or any other person (on the part of Buyer), is required
as a condition to the execution and delivery of this Agreement or the
performance of its obligations hereunder.
SECTION 3.5. FINANCIAL ABILITY.
Buyer will at the Closing have sufficient immediately
available funds, in cash, to pay the Purchase Price and to pay any other amounts
payable pursuant to this Agreement and to effect the transactions contemplated
hereby. Buyer has provided to Seller true and correct copies of commitments from
financial institutions to enable Buyer to consummate the transactions
contemplated by this Agreement and the Transaction Documents to which Buyer is a
party.
SECTION 3.6. BROKERS.
Except as disclosed on Schedule 3.6, Buyer has not employed
the services of an investment banker, financial advisor, broker or finder in
connection with this Agreement or any of the transactions contemplated hereby.
SECTION 3.7. INDEPENDENT INVESTIGATION.
Buyer has conducted its own independent investigation, review
and analysis of the business, operations, assets, liabilities, results of
operations, financial condition and prospects of the Company and the LLC, which
investigation, review and analysis was done by Buyer and its Affiliates and, to
the extent Buyer deemed necessary or appropriate, by Buyer's representatives.
Buyer acknowledges that it and its representatives have been provided adequate
access to the personnel, properties, premises and records of the Company and the
LLC for such purpose. In entering into this Agreement, Buyer acknowledges that
it has relied solely upon the aforementioned investigation, review and analysis
and not on any factual representations of Seller or any of Seller's
representatives (except the specific representations and warranties of Seller
set forth in Article II of this Agreement).
16
SECTION 3.8. INVESTMENT INTENT; INVESTMENT EXPERIENCE;
RESTRICTED SECURITIES.
Buyer is acquiring the Shares and Membership Units for its own
account for investment and not with a view to, or for sale or other disposition
in connection with, any distribution of all or any part thereof in violation of
federal or state securities law. In acquiring the Shares and Membership Units,
Buyer is not offering or selling, and will not offer or sell, for Seller in
connection with any distribution of the Shares, and Buyer does not have a
participation and will not participate in any such undertaking or in any
underwriting of such an undertaking except in compliance with applicable federal
and state securities laws. Buyer acknowledges that it is able to fend for
itself, can bear the economic risk of its investment in the Shares, and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in the Shares and Membership
Units. Buyer is an "ACCREDITED INVESTOR" as such term is defined in Regulation D
under the Securities Act. Buyer understands that neither the Shares nor the
Membership Units will have been registered pursuant to the Securities Act or any
applicable state securities laws, that the Shares and Membership Units will be
characterized as "RESTRICTED SECURITIES" under federal securities laws and that
under such laws and applicable regulations neither the Shares nor the Membership
Units can be sold or otherwise disposed of without registration under the
Securities Act or an exemption therefrom.
ARTICLE IV
COVENANTS
SECTION 4.1. CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the
Closing Date, the Company and the LLC shall (except as required or permitted
pursuant to the terms hereof or as set forth on Schedule 4.1) conduct their
businesses solely in the ordinary course consistent with past practices and,
without the prior written consent of Buyer (which consent will not be
unreasonably withheld or delayed), Seller will not, except as required or
permitted pursuant to the terms hereof or as set forth on Schedule 4.1, permit
the Company or the LLC to:
(i) make any material change in the conduct of
its businesses and operations;
(ii) make any change in its Organizational
Documents or issue any additional equity securities or grant
any option, warrant or right to acquire any equity securities
or issue any security convertible into or exchangeable for its
equity securities;
(iii) (A) incur, assume or guarantee any
indebtedness for borrowed money (including obligations in
respect of capitalized lease obligations and purchase money
debt), issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase
any thereof or (B) issue any securities convertible or
exchangeable for debt securities of the Company or the LLC;
17
(iv) make any sale, assignment, transfer,
abandonment or other conveyance of any of its material assets
or any part thereof except for dispositions of inventory or of
worn-out or obsolete equipment for fair or reasonable value in
the ordinary course of business consistent with past
practices;
(v) subject any of its assets, or any part
thereof, to any Encumbrance except Permitted Encumbrances or
such other Encumbrances as may arise in the ordinary course of
business consistent with past practices by operation of law;
(vi) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of its equity interests
or (except as permitted by Section 1.3(d)) declare, set aside
or pay any dividends or other distribution in respect of such
equity interests in excess of the cash and cash equivalents
and advances reflected on the Base Statement;
(vii) (A) except as may be required by applicable
law, enter into, adopt or make any amendments to, permit the
acceleration of benefits under or terminate any bonus, profit
sharing, compensation, severance, termination, stock option,
stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase, pension, retirement,
deferred compensation, employment, severance or other employee
benefit agreement, trust, plan, fund or other arrangement for
the benefit or welfare of any current or former director,
officer or employee of the Company or the LLC or any Dedicated
Employee; (B) except for normal increases in the ordinary
course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or
compensation expense to the Company and the LLC, taken as a
whole, increase the benefits or compensation to any current or
former director, officer, or employee of the Company or the
LLC or to any Dedicated Employee; or (C) pay to any current or
former director, officer, or employee of the Company or the
LLC or to any Dedicated Employee any benefit not permitted by
any employee benefit agreement, trust, plan, fund, or other
arrangement as in effect on the date hereof;
(viii) acquire any material assets or properties,
except for inventory in the ordinary course of business
consistent with past practices;
(ix) except in the ordinary course of business
consistent with past practices, pay, loan or advance any
amount to any of its Affiliates;
(x) sell, transfer or lease any properties or
assets to, or enter into any agreement or arrangement with,
any of its Affiliates;
(xi) make any loan, advance or capital
contribution to or investment in any Person;
(xii) (A) make any change in any financial
accounting or tax principle, method, estimate or practice
(including any election with respect to Taxes) except as may
be required by law or regulation; or (B) enter into any
closing or other
18
agreement or settlement with respect to Taxes or file any
amended Tax Return which could reasonably be expected to
affect the amount of Taxes imposed on or with respect to the
Company or the LLC;
(xiii) other than routine compliance filings, make
any filings or submit any documents or information to FERC or
any other Governmental Entity without prior consultation with
Buyer;
(xiv) enter into any agreement or amendment,
modification, or termination of any contract, lease, or
license to which the Company or the LLC is a party, or by
which any of their respective assets or properties are bound,
except an agreement or an amendment, modification or
termination of a contract, lease or license entered into in
the ordinary course of business consistent with past practice
that would not have been considered to have been a Material
Contract had it been entered into prior to the date of this
Agreement;
(xv) cancel, compromise, waive, release or settle
any right, claim or lawsuit other than in the ordinary course
of business consistent with past practices; or
(xvi) commit itself to do any of the foregoing.
(b) Seller agrees to cause the Company to consult with and to
take into account Buyer's reasonable requests before finalizing the expansion
and discretionary-maintenance capital expenditure plans and project schedules
included in the 2003 capital budget for the Company.
SECTION 4.2. ACCESS TO PROPERTIES AND RECORDS.
(a) Seller shall afford, and shall cause the Company, the LLC
and Seller's other Affiliates to afford, to Buyer and Buyer's accountants,
counsel and representatives upon reasonable advance notice reasonable access
during normal business hours throughout the period commencing on the date hereof
and ending on the Closing Date (or the earlier termination of this Agreement
pursuant to Article VII hereof) to all the Company's and the LLC's properties,
books, contracts, and records and, during such period, shall furnish promptly to
Buyer all information concerning the Company's and the LLC's business,
properties, liabilities and personnel as Buyer may request, provided that no
investigation or receipt of information pursuant to this Section 4.2 shall
affect any representation or warranty of Seller or the conditions to the
obligations of Buyer. Additionally, Buyer shall hold in confidence all such
information on the terms and subject to the conditions contained in the
Confidentiality Agreement. Buyer shall have no right of access to, and Seller
shall have no obligation to provide to Buyer, (1) bids received from others in
connection with the transactions contemplated by this Agreement and information
and analysis (including financial analysis) relating to such bids or (2) any
information the disclosure of which Seller has concluded may jeopardize any
privilege available to the Company, the LLC or Seller relating to such
information or would cause the Company, the LLC or Seller to breach a
confidentiality obligation. Buyer agrees that if Buyer or its authorized
representatives receive, or if the information (whether in electronic mail
format, on computer hard drives or otherwise) held
19
by the Company or the LLC as of the Closing includes information that relates to
the business operations or other strategic matters of the Seller, its corporate
parent or any of their Affiliates (other than the Company or the LLC) such
information shall be held in confidence on the terms and subject to the
conditions contained in the Confidentiality Agreement, but the term of the
restriction on the disclosure and use of such information shall continue in
effect as to such information for a period of five years from the Closing. Buyer
further agrees that if Seller or Company or the LLC inadvertently furnishes to
Buyer copies of or access to information that is subject to clause (2) of the
second preceding sentence, Buyer will, upon Seller's request promptly return
same to Seller together with any and all extracts therefrom or notes pertaining
thereto (whether in electronic or other format). Buyer shall indemnify, defend,
and hold harmless Seller and its Affiliates from and against any Losses asserted
against or suffered by the Seller Indemnified Parties relating to, resulting
from, or arising out of, examinations or inspections made by Buyer or its
authorized representatives pursuant to this Section 4.2(a).
(b) Each of the parties agrees that it shall preserve and
keep, and make available to the other party for reasonable business needs, all
books and records relating to the business or operations of the Company and the
LLC on or before the Closing Date in its possession (including with respect to
Seller, to the extent in its possession, the most recent rate case records and
files of the Company and all other records and files of the Company and Seller
necessary for the Company to make a future rate case filing with the FERC) for a
period of at least 6 years from the Closing Date, except to the extent
previously delivered to the other party and receipt of which acknowledged in
writing by the other party. After such 6-year period, before a party may dispose
of any of such books and records, at least 90 calendar days' prior notice to
such effect shall be given to the other party, and the other party shall be
given an opportunity, at its cost and expense, to remove and retain all or any
part of such books and records that the notifying party elects to dispose of.
Notwithstanding the foregoing, each party agrees that it shall preserve and keep
all books and records of the Company and the LLC in its possession relating to
any audit or investigation instituted by a Governmental Authority or any
litigation (whether or not existing on the Closing Date), in each case of which
it has actual knowledge, until any such audit, investigation or proceeding has
been completed or finally resolved, if it is reasonably obvious that such audit,
investigation or litigation may relate to matters occurring prior to the
Closing.
SECTION 4.3. EMPLOYEE MATTERS.
(a) As promptly as practicable after the execution of this
Agreement, representatives of Buyer and Seller shall meet to identify employees
of the Seller or any of its Affiliates (other than the Company or the LLC) who
are not Business Employees and to whom Buyer and Seller agree that Buyer, the
Company or any Affiliate of Buyer may make offers of employment (collectively,
the "ADDITIONAL EMPLOYEES"). Buyer, the Company or any other Affiliate of Buyer
(i) shall offer employment effective as of the Closing Date to each Business
Employee, and (ii) may offer employment effective as of the Closing Date to each
Additional Employee, in each case on such terms and conditions as Buyer may
determine in its discretion, provided, however, that such terms and conditions
shall be reasonable in relation to the terms and conditions upon which similarly
situated employees of Buyer or one or more of its Affiliates are employed.
Business Employees and Additional Employees who accept such offer of employment
effective as of the Closing Date shall be referred to as "TRANSFERRED
EMPLOYEES." The total number of Business Employees and Additional Employees that
Seller will make
20
available to Buyer for employment will be no less than 492, and Buyer, the
Company or any other Affiliate of Buyer will make offers to no fewer than 458 of
such Persons. Buyer shall not initiate any contact with any of Seller, Company
or LLC employees except for Business or Additional Employees. After the date
hereof and prior to Closing, Seller shall afford, and shall cause the Company
and the LLC and Seller's other Affiliates to afford, to Buyer or its Affiliates
reasonable access to the Additional Employees for the purpose of enabling Buyer
and its Affiliates to determine to which of such employees it desires to extend
offers of employment.
(b) Effective as of the Closing Date, Seller shall take, or
shall cause the Company and the LLC to take, all necessary action to effect the
cessation of, and withdrawal from, participation by the Company and the LLC in
any Employee Plan which is not a Company Plan ("SELLER PLAN") and Transferred
Employees shall cease active participation in any Seller Plan as of such date.
(c) Each Transferred Employee shall, without duplication of
benefits, be given credit for all service with Seller prior to the Closing Date,
using the same methodology used by Seller as of the date hereof for crediting
service and determining levels of benefits (i) under all employee benefit plans,
programs and arrangements maintained by or contributed to by the Buyer, the
Company or another Affiliate of Buyer in which the Transferred Employees become
participants for purposes of eligibility to participate, vesting and
determination of level of benefits (excluding, however, benefit accrual or
subsidies under any defined benefit plans), and (ii) for purposes of calculating
the amount of each Transferred Employee's severance benefits, if any.
(d) With respect to the plan year during which the Closing
Date occurs, Buyer will, or will cause its appropriate Affiliate to, (i) waive
all limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Transferred
Employees under any medical, dental and life insurance benefit plans that such
employees may be eligible to participate in after the Closing Date, other than
limitations or waiting periods that are already in effect with respect to such
employees and that have not been satisfied as of the Closing Date under any
welfare plan maintained for the Transferred Employees immediately prior to the
Closing Date, and (ii) provide each Transferred Employee with credit for any
co-payments and deductibles paid prior to the Closing Date in satisfying any
applicable deductible or out-of-pocket requirements under any welfare plans that
such employees are eligible to participate in after the Closing Date. Buyer will
also ensure that Transferred Employees and their dependents who have commenced
orthodontia treatment prior to the Closing Date receive at least the same level
of benefit coverage for such treatment as they would have received if they had
remained employed by Seller.
(e) Transferred Employees who are otherwise eligible for early
retirement under the ▇▇▇▇▇▇▇▇ Pension Plan as of the Closing Date shall be
permitted to retire and commence receipt of benefits notwithstanding their
continued employment with the Company, the Buyer or any Affiliate of Buyer.
(f) On or as soon as practicable after the Closing Date,
Seller shall cause the assets of the Union Pension Plan held under a Seller
master trust to be transferred to a trust established or maintained by Buyer,
the Company or any other Affiliate of Buyer. Such transfer
21
shall be made within one business day after any valuation date of Seller's
master trust and shall be made in cash, marketable securities or other property
acceptable to Buyer.
(g) Effective as of the Closing Date, Transferred Employees
shall become fully vested in their account balances in any defined contribution
or 401(k) Plan maintained by Seller on behalf of such Transferred Employees (the
"SELLER SAVINGS PLAN") and distributions of such account balances shall be made
available to such Transferred Employees as soon as practicable following the
Closing Date, in accordance with, the provisions of Seller Savings Plan and
applicable law. Thereafter, Buyer shall accept, or shall cause the Company or
the appropriate Affiliate of Buyer to accept, rollover contributions from Seller
Savings Plan into a defined contribution or 401(k) Plan maintained by Buyer, the
Company or another Affiliate of Buyer (the "BUYER SAVINGS PLAN") of the account
balances distributed to the Transferred Employees from Seller Savings Plan in
accordance with the provisions of the Buyer Savings Plan and applicable law.
Such rollovers shall be made in cash and other property acceptable to Buyer.
(h) Effective as of the Closing Date, Buyer shall assume, or
shall cause the Company or another Affiliate of Buyer to assume, Seller's
obligation for providing retiree medical benefits to employees who are
represented by ▇▇▇▇▇ ▇▇. ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ of Operating Engineers,
AFL-CIO ("UNION EMPLOYEES") or former Union Employees. On or as soon as
practicable after the Closing Date, Seller shall cause to be transferred from
Seller's VEBA trust to a VEBA trust established or maintained by Buyer, the
Company or another Affiliate of Buyer assets attributable to current and former
Union Employees. Such transfer shall be made in cash, marketable securities or
other property acceptable to Buyer.
(i) Effective as of the Closing Date, Buyer shall assume, or
shall cause the Company or another Affiliate of Buyer to assume, Seller's
liabilities and obligations for providing retiree medical benefits to
Transferred Employees who are not Union Employees ("SALARIED EMPLOYEES") and who
as of the Closing Date are not eligible to retire under Seller's retiree medical
benefit plan. Seller shall retain all liabilities and obligations for retiree
medical benefits for Salaried Employees who as of the Closing Date are eligible
to retire under Seller's retiree medical benefits plan and for retired or former
Business Employees.
(j) Seller shall be responsible for any continuation of group
health coverage required under Section 4980B of the Code or Sections 601 through
608 of ERISA with respect to any Business Employee or any "QUALIFIED
BENEFICIARY" (as defined in Section 4980B of the Code) of any such employee who
incurs a "QUALIFYING EVENT" (as defined in Section 4980B of the Code) on or
prior to the Closing Date. Buyer, the Company or the appropriate Affiliate of
Buyer shall be responsible for any continuation of group health coverage
required under Section 4980B of the Code or Sections 601 through 608 of ERISA
with respect to any Transferred Employee or any "QUALIFIED BENEFICIARY" (as
defined in Section 4980B of the Code) who incurs a "QUALIFYING EVENT" (as
defined in Section 4980B of the Code) after the Closing Date.
(k) Buyer and Seller agree to cooperate as necessary to
effectuate the provisions of this Section 4.3 and to ensure an orderly
transition of benefits coverage with respect to the Transferred Employees from
the Seller Plans to the appropriate plans established by Buyer, the Company or
another Affiliate of Buyer, including, without limitation, coverage with respect
to Seller's educational assistance plan and Seller's Code Section 125 plan.
22
(l) Each Transferred Employee shall, without duplication of
benefits, be given credit for all accrued but unused paid-time-off under
Seller's paid-time-off program as of the Closing Date, using the same
methodology used by Seller immediately prior to the Closing Date for crediting
service and determining the amount of such paid time-off benefits.
(m) If Buyer, the Company or another Affiliate of Buyer
terminates the employment of a Transferred Employee who is a Salaried Employee
at any time between the Closing Date and the first anniversary of the Closing
Date, Buyer shall provide, or shall cause the Company or such other Affiliate of
Buyer, as appropriate, to provide, such Transferred Employee with a severance
benefit equal to the greater of (i) the benefit provided under the applicable
plan or program of Buyer, the Company or another Affiliate of Buyer and (ii) a
sum equal to two weeks of pay for every year of service with a minimum of six
weeks and a maximum of fifty-two weeks total severance benefit. Notwithstanding
the foregoing, in no event shall such an employee be entitled to severance if
such employee is terminated for cause, as defined under the terms of Seller's
severance plan or program as in effect on the date hereof ("SELLER'S SEVERANCE
PLAN"), a copy of which has been provided to Buyer, or if such employee would
not otherwise be entitled to severance under the terms of Seller's Severance
Plan, including, without limitation, by reason of the employee's failure to
provide a release to the Company.
(n) Except as otherwise expressly provided in this Section
4.3, Seller shall retain all liabilities and obligations under Seller's Plans.
(o) Nothing in this Agreement shall limit Buyer's right to
terminate the employment of any employee at any time or, except as provided in
paragraph (m) above, amend or terminate any employee benefit plan or
arrangement.
SECTION 4.4. CONSENTS AND APPROVALS.
(a) Seller and Buyer shall each use all commercially
reasonable efforts to obtain, or in the case of Seller, cause the Company and
the LLC to obtain, all necessary consents, waivers, authorizations and approvals
of all Governmental Authorities, and of all other persons required in connection
with the execution, delivery and performance by them of this Agreement and will
cooperate fully with the other Party in promptly seeking to obtain all such
authorizations, consents, orders, and approvals, giving such notices, and making
such filings. To the extent required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), each Party shall (i) file or cause to
be filed, as promptly as practicable but in no event later than the tenth
business day after the execution and delivery of this Agreement, with the
Federal Trade Commission and the United States Department of Justice, all
reports and other documents required to be filed by such Party under the HSR Act
concerning the transactions contemplated hereby and (ii) promptly comply with or
cause to be complied with any requests by the Federal Trade Commission or the
United States Department of Justice for additional information concerning such
transactions, in each case so that the waiting period applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall
expire as soon as practicable after the execution and delivery of this
Agreement. Each Party agrees to request, and to cooperate with the other Party
in requesting, early termination of any applicable waiting period under the HSR
Act.
23
(b) Without limiting the generality of Buyer's undertakings
pursuant to Section 4.6, Buyer shall take promptly any or all of the following
actions to the extent necessary to eliminate any concerns on the part of the
Federal Trade Commission or the United States Department of Justice regarding
the legality under any antitrust laws of Buyer's acquisition of the Shares and
Membership Units: entering into negotiations, providing information, making
proposals, entering into and performing agreements or submitting to judicial or
administrative orders, holding separate (through the establishment of a trust or
otherwise) particular assets or categories of assets, or businesses of the
Company or the LLC, or agreeing to dispose of one or more assets or properties
(whether owned by Buyer or its Affiliates or the Company or LLC) following the
Closing; use commercially reasonable efforts (including taking the steps
contemplated by Section 4.4(a)(i)) to prevent the entry in a judicial or
administrative proceeding brought under any antitrust law by the Federal Trade
Commission, the United States Department of Justice or any other party for a
permanent or preliminary injunction or other order that would make consummation
of the transactions contemplated by this Agreement unlawful or that would
prevent or delay such consummation; and take promptly, in the event that such an
injunction or order has been issued in such a proceeding, any and all reasonable
steps, including the appeal thereof, the posting of a bond or the steps
contemplated by Section 4.4(a)(i), necessary to vacate, modify, or suspend such
injunction or order so as to permit such consummation on a schedule as close as
possible to that contemplated by this Agreement.
(c) If the transfer of any instrument, contract, license,
lease, permit, or other document to Buyer hereunder shall require the consent of
any party thereto other than Seller, then this Agreement shall not constitute an
agreement to assign the same, and such item shall not be assigned to or assumed
by Buyer, if an actual or attempted assignment thereof would constitute a breach
thereof or default thereunder. In such case, Seller and Buyer shall cooperate
and each shall use commercially reasonable efforts to obtain such consents to
the extent required of such other parties and, if and when any such consents are
obtained, to transfer the applicable instrument, contract, license, lease,
permit, or other document. If any such consent cannot be obtained, Seller shall
cooperate in any reasonable arrangement designed to obtain for Buyer all
benefits, privileges, obligations and privileges of the applicable instrument,
contract, license, lease, permit, or document, including, without limitation,
possession, use, risk of loss, potential for gain and dominion, control and
demand. Without the express written consent of Seller, Buyer shall not commence
proceedings to bring in any partner or operator or take any other action prior
to Closing, the effect of which would add any additional regulatory or other
approvals by any Governmental Authority or delay the Closing in any way.
SECTION 4.5. FURTHER ASSURANCES.
Upon the request of Buyer at any time after the Closing Date,
Seller will promptly execute and deliver such further instruments of assignment,
transfer, conveyance, endorsement, direction or authorization and other
documents as the requesting party or parties or its or their counsel may
reasonably request in order to perfect title of Buyer and its successors and
assigns to the Shares and the Membership Units or otherwise to effectuate the
purposes of this Agreement.
24
SECTION 4.6. REASONABLE EFFORTS.
Upon the terms and subject to the conditions of this
Agreement, each of the parties hereto will use all commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable consistent with applicable law
to consummate and make effective in the most expeditious manner practicable the
transactions contemplated hereby.
SECTION 4.7. NOTICE OF BREACH.
Buyer shall promptly give to Seller written notice with
particularity upon having knowledge of any matter that would constitute a breach
of any representation, warranty, agreement or covenant contained in this
Agreement, including, without limitation, Seller's representations in Article
II. Seller shall have the right prior to the Closing to supplement the
Disclosure Schedule with respect to any matter which would have been required to
be set forth on or described in such Disclosure Schedule (a "DISCLOSURE SCHEDULE
UPDATE"). Any such supplemental disclosure will not be deemed to have been
disclosed as of the date of this Agreement for purposes of determining whether
the conditions set forth in Article V have been satisfied, but, if the Closing
occurs, such update shall be deemed to have cured any breach of representation,
warranty, covenant or agreement relating to the matters set forth in such update
for purposes of indemnification pursuant to Article VIII.
SECTION 4.8. CONFIDENTIAL INFORMATION.
For two years after the Closing, Seller and its Affiliates
shall not, directly or indirectly, disclose to any person any information not in
the public domain or generally known in the industry, in any form, whether
acquired prior to or after the Closing Date, relating to the business and
operations of the Company or the LLC. Notwithstanding the foregoing, Seller may
disclose any information relating to the business and operations of the Company
or the LLC (i) if required by law or applicable stock exchange rule, (ii) to
other Persons in the conduct of Seller's or its Affiliates' other businesses,
provided such disclosure is made in the ordinary course of business consistent
with past practices or if not in the ordinary course of business consistent with
past practices, such other Persons enter into a confidentiality agreement with
Seller similar to the Confidentiality Agreement, and (iii) to such other
Persons if, at the time such information is provided, such Person is already in
the possession of such information.
SECTION 4.9. NEGOTIATIONS.
From and after the date hereof, neither Seller, the Company,
the LLC nor their officers, directors, employees, affiliates, stockholders,
representatives, agents, nor anyone acting on behalf of them shall, directly or
indirectly, encourage, solicit, engage in discussions or negotiations with, or
provide any information to, any Person (other than Buyer or its representatives)
concerning any merger, sale of assets, purchase or sale of Shares or the
Membership Units or similar transaction involving the Company or the LLC unless
this Agreement is terminated pursuant to and in accordance with Article VII
hereof.
25
SECTION 4.10. TAX COVENANTS.
(a) Seller shall prepare and timely file all Tax Returns
relating to the Company or the LLC with the appropriate federal, state, local
and foreign governmental agencies, and pay the Taxes shown to be due thereon,
for which Tax Returns are due and Taxes are payable prior to the Closing Date.
For periods ending on or prior to the Closing Date, but for which Tax Returns
are not due and Taxes are not payable as of the Closing Date, Seller shall, no
later than 15 days before the applicable due date, prepare and submit to Buyer
for review, signature, and filing all such Tax Returns required to be filed by
the Company or the LLC, and Seller shall timely pay the Taxes shown to be due
thereon. Without limiting the foregoing, Seller specifically agrees to indemnify
and hold Buyer harmless from and against any liability of the Company or the LLC
for or in respect of any Taxes under Treasury Regulation Section 1.1502-6 (or
any analogous or similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise, for any full or partial Tax
period ending on or before the Closing Date. Buyer shall prepare and file all
Tax Returns for taxable periods ending after the Closing Date and shall pay all
Taxes shown to be due thereon; provided, that Seller shall reimburse Buyer for
its allocable share of any Taxes attributable to Tax periods including the
Closing Date and ending after the Closing Date ("STRADDLE PERIOD"). Buyer and
Seller shall utilize appropriate methods to allocate liability for purposes of
the preceding sentence, which appropriate methods shall include the following,
without limitation: (i) for any transactional Taxes, including, without
limitation, Taxes based on sales, revenue, or gross or net income, the
allocation of liability between Seller and Buyer shall be determined using a
closing-of-the-books method assuming that the applicable Tax period consists of
two taxable periods, one ending at the close of the Closing Date and one
beginning at the opening of the day after the Closing Date, and (ii) for any
real estate Taxes or other property or asset-based Taxes, the allocation of
liability between Seller and Buyer shall be based on the number of days the
applicable asset was held by the Company or the LLC in the applicable Tax period
prior to and including the Closing Date as compared to the number of days the
applicable asset was held by the Company or the LLC in the applicable Tax period
after the Closing Date.
(b) Seller will cause any tax sharing agreement or similar
arrangement with respect to Taxes involving the Company or the LLC to be
terminated effective as of the Closing Date, to the extent any such agreement or
arrangement relates to the Company or the LLC, and after the Closing Date the
Company and the LLC shall have no obligation under any such agreement or
arrangement for any past, present or future period.
(c) All excise, sales, use, transfer (including real property
transfer or gains), stamp, documentary, filing, recordation and other similar
taxes, together with any interest, additions or penalties with respect thereto
and any interest in respect of such additions or penalties, resulting directly
from the transactions contemplated by this Agreement (the "TRANSFER TAXES"),
shall be borne by the party on which such Transfer Taxes are imposed by
applicable law. Notwithstanding anything to the contrary in this Section 4.10,
any Tax Returns that must be filed in connection with Transfer Taxes shall be
prepared and filed when due by the party primarily or customarily responsible
under the applicable local law for filing such Tax Returns, and such party will
use reasonable commercial efforts to provide such Tax Returns to the other party
at least 10 days prior to the due date for such Tax Returns. If such a Tax
Return is not timely filed, any interest and penalties incurred as a result
shall be the responsibility of the
26
filing party. In the event that any dispute between the parties concerning the
form or content of such Tax Returns cannot be timely resolved prior to their due
date through good-faith negotiation, the determination of the party liable for
the applicable Transfer Taxes shall be controlling.
(d) If the Buyer elects and is qualified to do so, Buyer and
Seller shall make an election under section 338(h)(10) of the Code (and any
comparable election under state, local or foreign tax law) ("SECTION 338(h)(10)
ELECTION") with respect to the acquisition of the Company by Buyer. Buyer and
Seller shall cooperate fully with each other in the making of such election. In
particular, Buyer shall be responsible for the preparation and filing of all tax
returns and forms (the "SECTION 338 FORMS") required under applicable tax law to
be filed in connection with making the Section 338(h)(10) Election. Seller shall
deliver to Buyer no later than 45 days prior to the date the Section 338 Forms
are required to be filed, such documents and other forms as reasonably requested
by Buyer to properly complete the Section 338 Forms. Buyer and Seller shall
allocate the Purchase Price in the manner required by Section 338 and Section
1060 of the Code and the Treasury Regulations promulgated thereunder, as
applicable. Such allocations shall be used for purposes of determining the
aggregate deemed sales price under the applicable Treasury Regulations and in
reporting the deemed sale of assets of the Company in connection with the
Section 338(h)(10) Elections. Buyer shall initially prepare a completed set of
IRS Forms 8023 (and any comparable forms required to be filed under state, local
or foreign tax law) and any additional data or materials required to be attached
to Form 8023 pursuant to the Treasury Regulations promulgated under Section 338
of the Code. Buyer shall deliver said forms to Seller for review no later than
45 days prior to the date the Section 338 Forms are required to be filed. In the
event Seller objects to the manner in which the Section 338 Forms have been
prepared, Seller shall notify Buyer within 15 days of receipt of the Section 338
Forms of such objection, and the parties shall endeavor within the next 15 days
in good faith to resolve such dispute. If the parties are unable to resolve such
dispute within said 15 day period, Buyer and Seller shall submit such dispute to
an independent accounting firm of recognized national standing (the "ALLOCATION
ARBITER") selected by Buyer and Seller, which firm shall not be the auditor of
the financial statements of either Buyer or Seller. Promptly, but not later than
15 days after its acceptance of appointment hereunder, the Allocation Arbiter
will determine (based solely on presentations of Buyer and Seller and not by
independent review) only those matters in dispute and will render a written
report as to the disputed matters and the resulting preparation of the Section
338 Forms shall be conclusive and binding upon the parties. Seller shall be
responsible for all federal income Taxes attributable to Company resulting from
the Section 338(h)(10) Election. Seller shall be liable for any state, local or
foreign Tax attributable to an election under the state, local or foreign law
similar to the election available under Section 338(h)(10) of the Code. Buyer
shall be responsible for and shall pay any income, franchise or similar taxes
imposed by any state or local taxing authority as a result of any Section 338(g)
election (or any comparable election under state law) if such state or local
taxing authority does not allow or respect a Section 338(h)(10) Election (or any
comparable or resulting election under state law) with respect to the purchase
and sale of the shares of Company contemplated hereby.
(e) Seller and Buyer shall each provide the other with such
assistance as may reasonably be requested by either of them in connection with
the preparation of any Tax return, any audit or other examination by any Tax
authority or any judicial or administrative proceeding with respect to Taxes,
and each retain in accordance with its customary document retention
27
policies and provide the other with any records or other information which may
be relevant to any such return, audit, examination or proceeding.
(f) Buyer shall, in the event that Buyer or, following the
Closing Date, the Company or the LLC receives notice (whether orally or in
writing) of any audit, examination or claim by any taxing authority with respect
to Taxes for which Buyer or its Affiliates may be indemnified (a "TAX CLAIM"),
promptly notify the Seller thereof, provided, however, that failure to give such
notification shall not affect the indemnification provided hereunder except to
the extent that Seller has been actually prejudiced by such failure. Except in
the case of Taxes imposed with respect to a Straddle Period, Seller shall have
the right to contest, at its own expense, any Tax Claim, and shall be entitled
to control any such contest, provided, however, that Seller shall not be
entitled to settle or compromise any such contest without the consent of Buyer
if such settlement or compromise could affect the tax liability of Buyer or any
of its Affiliates for any period after the Closing. In the case of the contest
of a Tax Claim with respect to any Straddle Period, Seller shall have the right
to participate at its own expense in any such contest to the extent that the
outcome could affect the liability of the Seller hereunder, and Buyer shall not
settle any such contest in a manner that could affect the liability of the
Seller without Seller's consent.
SECTION 4.11. INSURANCE, BONDS AND COLLATERAL.
(a) Prior to the Closing, Buyer shall use its reasonable best
efforts to take such actions as may be necessary or appropriate so that all
surety bonds, letters of credit, and cash collateral issued in respect of the
Company or the LLC listed on Schedule 4.11 (collectively, the "SELLER'S BONDS")
are released and replaced immediately after the Closing and Buyer shall take
such actions as are necessary to replace and release all the Seller's Bonds not
later than 30 days after the Closing Date by comparable surety bonds, letters of
credit and cash collateral provided by Buyer or an Affiliate of Buyer (the
"BUYER'S BONDS"). Seller shall use its commercially reasonable efforts to
maintain the Bonds until they are released and replaced by Buyer. Buyer shall
indemnify, defend and hold harmless Seller and its Affiliates for any and all
Losses (in each case without deduction or set off) incurred on account of the
Seller's Bonds on or after the Closing Date insofar as such Losses relate to
events occurring after Closing.
(b) Seller agrees to pursue recovery under the applicable
excess-liability insurance policies relating to claims made in connection with
the explosion that is the subject of the Legal Proceeding described in Item III
of Schedule 2.15 (KCP&L ▇. ▇▇▇▇ and Associates, et al.). Seller shall pay Buyer
an amount equal to the amount of any recovery for monetary damages with respect
to the claims for which Seller receives reimbursement from its excess liability
carriers less any unreimbursed amounts incurred by Seller or its Affiliates in
pursuing its recovery.
SECTION 4.12. INFORMATION TECHNOLOGY.
(a) The parties shall each designate representatives to a
migration team ("IT MIGRATION TEAM") that shall be responsible for identifying
the specific software and hardware, and agreements for the maintenance, support
or service thereof, necessary for Buyer to continue operations of Company and
the LLC in the manner in which they operate as of the Closing Date,
28
including any software listed on Schedule 2.12 ("IT ASSETS"). The IT Migration
Team shall also be responsible for developing a detailed plan to include cost
estimates and timetables for: conversion and loading of existing Company and LLC
data, integration of the IT Assets into Buyer's or its Affiliate's information
technology systems and transfer or replacement of IT Asset licenses and
maintenance agreements not currently held in Company's or the LLC's name and any
post-closing transitional services required by Buyer, the Company or the LLC
("IT MIGRATION PLAN"). The Migration Team shall complete the preparation of the
IT Migration Plan no later than 45 days after execution of this Agreement. The
IT Migration Team then promptly shall begin the pre-Closing implementation of
the IT Migration Plan in order for the parties to be in a position to complete
the post-Closing transfer, conversion and loading of the Company and LLC data
from Seller to Buyer or Buyer's designated Affiliates, all in accordance with
the IT Migration Plan. The time for completion and execution of the IT Migration
Plan shall be referred to as the "IT MIGRATION PERIOD." The respective rights,
benefits and obligations of the parties, their Affiliates and the Company and
the LLC addressed in the IT Migration Plan, including the provision of various
services and products by Seller and its Affiliates to Buyer, the Company and the
LLC for the respective post-Closing transition period specified for such
services or products in the IT Migration Plan, will be set forth in an agreement
to be substantially in the form of the Transition Services Agreement attached as
Exhibit 4.12 to be executed and delivered by Seller, Parent and Buyer prior to
Closing (the "TRANSITION SERVICES AGREEMENT").
(b) On or before the expiration of the IT Migration
Period and in accordance with the IT Migration Plan, Seller shall, and shall
cause its Affiliates to either: (i) assign to Buyer, Company or the LLC all of
their respective right, title and interest in the IT Assets, including license
and contract rights, and secure any consents necessary for such assignment; (ii)
with respect to license and software rights that, in accordance with the IT
Migration Plan, are to be retained by Seller and its Affiliates during the IT
Migration Period, secure any consents necessary for the use by the Seller and
its Affiliates of the IT Assets on behalf of the Company or Buyer during the IT
Migration Period; or (iii) obtain for the Buyer or its designated Affiliate, on
commercially reasonable terms and at Buyer's expense, comparable replacements
for any IT Assets not assigned pursuant to (i) above. Fees for license transfers
or comparable replacements shall be borne by Buyer. Costs related to Seller's
employees and contractors involved in the preparation and implementation of the
IT Migration Plan shall be borne by Seller, and costs related to Buyer's
employees and contractors involved in the preparation and implementation of the
IT Migration Plan shall be borne by Buyer.
SECTION 4.13. SOFTWARE LICENSE.
Effective upon the Closing Date, Seller, for itself and on
behalf of its Affiliates, hereby grants to Company, the LLC, Buyer and its
Affiliates, a nonexclusive royalty-free, perpetual license, without right to
sublicense, to use, copy, modify, enhance, and upgrade, solely for their
internal business purposes and not as a service bureau, all computer software
owned by the Seller and/or its Affiliates which is used in connection with the
business of Company as conducted as of the Closing Date ("LICENSED SOFTWARE").
Any copies of the Licensed Software and any documentation related thereto must
contain all copyright and other intellectual property rights notices included
thereon. Except as may be expressly provided in the Transition Services
Agreement, the Company, the LLC and Buyer shall not be entitled to receive and
Seller and its Affiliates shall have no obligation to provide any modifications,
enhancements, or upgrades
29
made to the Licenses Software developed subsequent to the Closing Date.
Ownership of all intellectual property rights in the Licensed Software remains
with Seller and its Affiliates. Buyer agrees, and agrees to cause its
Affiliates, not to take any action inconsistent with Seller's and its Affiliates
rights in the Licensed Software. All rights not expressly granted herein to
Company, the LLC and Buyer are retained by Seller and its Affiliates. Except as
otherwise expressly provided in this section, the Licensed Software and any
related documentation are provided on an "AS IS" basis. Seller and its
Affiliates hereby expressly disclaim any implied warranty of merchantability or
fitness for a particular purpose. Seller and its Affiliates do not warrant that
the Licensed Software or documentation are error-free or that Company's, the
LLC's or Buyer's use thereof will be uninterrupted. Seller and Buyer acknowledge
that Buyer and its Affiliates have the right to transfer to a third party any
rights in the foregoing upon the sale or transfer of all or substantially all of
the assets of Buyer or any of its Affiliates. All rights not expressly granted
to Buyer and its Affiliates are retained by Seller and its Affiliates.
SECTION 4.14. NON-SOFTWARE COPYRIGHT LICENSE.
Effective upon the Closing Date, Seller, for itself and on
behalf of its Affiliates, hereby grants to Company, the LLC, Buyer and its
Affiliates, a nonexclusive royalty-free, perpetual license, without right to
sublicense, to use, copy, modify, enhance, and upgrade, solely for their
internal business purposes and not as a service bureau, all manuals, user
guides, standards and operation procedures and similar documents owned by Seller
and/or its Affiliates and used by Company or the LLC. All copies of the
foregoing must reproduce and include all copyright and other intellectual
property rights notices provided by Seller. Seller and Buyer acknowledge that
Buyer and its Affiliates have the right to transfer to a third party any rights
in the foregoing upon the sale or transfer of all or substantially all of the
assets of Buyer or any of its Affiliates. All rights not expressly granted to
Buyer and its Affiliates are retained by Seller and its Affiliates.
SECTION 4.15. TRANSITIONAL TRADEMARK LICENSE.
Effective upon the Closing Date, Seller and Seller's
affiliates, hereby grant to Company, LLC and Buyer a nonexclusive,
nontransferable, royalty-free license, without right to sublicense, to use,
solely in Company's and LLC's businesses as they are presently conducted, any
and all trademarks, service marks, and trade names owned by the Sellers and
Seller's affiliates solely to the extent appearing on existing inventory,
advertising materials and property of the Company or the LLC (such as signage,
vehicles, and equipment) (collectively "SELLER'S MARKS") for a period of six (6)
months from the Closing Date ("LICENSE PERIOD"). The Buyer, Company and LLC may
use such existing inventory, advertising materials and property during the
License Period, but shall not create new inventory, advertising materials or
property using Seller's Marks. Buyer, Company and LLC shall promptly replace or
remove Seller's Marks on inventory, advertising materials and Property, provided
that all such use shall cease no later than the end of the License Period. The
nature and quality of all uses of Seller's Marks by Buyer, Company and LLC shall
conform to Seller's existing quality standards. Immediately upon expiration of
the License Period, the Buyer, Company and LLC shall cease all further use of
Seller's Marks and shall adopt new trademarks, service marks, and trade names
which are not confusingly similar to Seller's Marks. All rights not expressly
granted in this section with respect to Seller's Marks are hereby reserved. In
the event Buyer, Company or LLC breaches
30
the provisions of this section, Seller may immediately terminate the License
Period upon fifteen (15) days written notice.
SECTION 4.16. AUDIT OR REVIEW OF FINANCIAL STATEMENTS.
Seller will cooperate with Ernst & Young, LLP, the independent
auditors chosen by Buyer and its Affiliates, in connection with their audit of
any annual financial statements of the Company and the LLC that Buyer or any of
its Affiliates requires to comply with Regulations S-X and S-K, and their review
of any interim quarterly financial statements of the Company and the LLC that
Buyer or any of its Affiliates requires to comply with the reporting
requirements of the Securities and Exchange Commission (the "SEC") set forth in
Regulations S-K and S-X, but in no event shall Seller be required pursuant to
this Section 4.16 to cooperate with respect to more than three (3) years of such
annual financial statements of the Company and the LLC. Seller's cooperation
will include (i) such access to Seller's employees who were responsible for
preparing the financial statements and to workpapers and other supporting
documents used in the preparation of the financial statements as may be required
by such auditors to perform an audit in accordance with generally accepted
auditing standards, (ii) delivery of one or more customary representation
letters from Seller to such auditors that are requested by Buyer or any of its
Affiliates to allow such auditors to complete an audit (or review of any interim
quarterly financials), and to issue an opinion that in such Buyer Affiliate's
experience is acceptable to the SEC with respect to an audit or review of those
financial statements required pursuant to Section 4.16, (iii) cooperation with
Buyer and its Affiliates to obtain any necessary consents from Ernst & Young,
LLP to the use of the financial statements in any filings Buyer or any of its
Affiliates is required to make pursuant to the Securities Act of 1933, as
amended ("SECURITIES ACT") or the Securities and Exchange Act of 1934 and to
cooperate in seeking to obtain any related comfort letters from Ernst & Young,
LLP; Buyer will reimburse Seller for any reasonable overhead costs with respect
to the preparation of the financial statements. Buyer or its appropriate
Affiliate will be responsible for any fees due to Ernst & Young LLP for
preparing the financial statements.
SECTION 4.17. TERMINATION OF CERTAIN RELATED PARTY
CONTRACTS.
Effective as of the Closing Date, except as otherwise provided
in Schedule 4.17, Seller shall have terminated, or caused the Company, the LLC
and Seller's other Affiliates to terminate, all contracts, commitments and
agreements (including employment relationships and leases of Real Property)
between Seller or any of its Affiliates (other than the Company and the LLC), on
the one hand, and the Company or the LLC, on the other hand. Seller shall be
solely liable for any contractual or other claims, express or implied, arising
out of the termination, cancellation and elimination of any of the foregoing.
SECTION 4.18. OWENSBORO EMPLOYMENT BASE
Buyer agrees that until the first anniversary of the Closing
Date, Buyer will maintain, or will cause the Company to maintain an employment
base in the Company's present Owensboro, KY, headquarters, of not less than
ninety percent (90%) of the Transferred Employees then employed in Owensboro,
KY.
31
SECTION 4.19. MINIMUM STOCKHOLDER'S EQUITY
During the period commencing upon the termination of Buyer's
Guaranty and ending on the third anniversary of the Closing, Buyer shall
maintain a stockholder's equity of not less than $ 175 million, calculated in
accordance with RAP.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before the
Closing Date, of the following conditions, any one or more of which may be
waived by Buyer in its sole discretion:
SECTION 5.1. RECEIPT OF DOCUMENTS.
Seller shall have delivered, or be standing ready to deliver,
to Buyer:
(a) a duly executed Stock Transfer and a duly executed ▇▇▇▇ of
Sale dated the Closing Date;
(b) any documents Buyer may reasonably require relating to the
existence of Seller, the Company, the LLC and the authority of Seller, the
Company and the LLC and their respective members or shareholders for this
Agreement and the Transaction Documents, all in form and substance reasonably
satisfactory to Buyer;
(c) the books of account, minute books, stock ledgers and
Organizational Documents of the Company and the LLC and the employee records (or
copies thereof) relating to the Transferred Employees;
(d) a properly executed statement, dated as of the Closing
Date, in form and substance reasonably acceptable to Buyer conforming to the
requirements of Treasury Regulation Section 1.1445-2(b)(2), and any other
certificate or similar documents reasonably requested by Buyer that may be
required by any relevant Tax authority in order to relieve Buyer of any
obligation to withhold any portion of the Purchase Price; and
(e) if requested by Buyer, duly executed letters of
resignation from any or all of the officers, directors and managers of the
Company and the LLC, in a form reasonably acceptable to Buyer.
SECTION 5.2. REPRESENTATIONS AND WARRANTIES OF SELLER.
All representations and warranties made by Seller in this
Agreement shall be true and correct (i) as of the date hereof and (ii) on and as
of the Closing Date as if again made by Seller on and as of such date, except
for such breaches as would not individually or in the aggregate have a Material
Adverse Effect, and Buyer shall have received a certificate dated the Closing
Date and signed by a senior executive officer of Seller to that effect.
32
SECTION 5.3. PERFORMANCE OF SELLER'S OBLIGATIONS.
Seller shall have performed all obligations required under
this Agreement to be performed by it on or before the Closing Date except for
such non-performance as would not have a Material Adverse Effect, and Buyer
shall have received a certificate dated the Closing Date and signed by a senior
executive officer of Seller to that effect.
SECTION 5.4. CONSENTS AND APPROVALS.
The consents, waivers, authorizations and approvals set forth
on Schedule 2.6 shall have been duly obtained and shall be in full force and
effect on the Closing Date. All applicable waiting periods under the HSR Act
shall have expired or been terminated.
SECTION 5.5. NO VIOLATION OF ORDERS.
No preliminary or permanent injunction or other order issued
by any Governmental Authority, which declares this Agreement or any of the
Transaction Documents invalid or unenforceable in any respect or which prevents
the consummation of the transactions contemplated hereby or thereby shall be in
effect; and no action or proceeding before any Governmental Authority shall have
been instituted by a Governmental Authority or other person or threatened by any
Government Authority which seeks to prevent or delay the consummation of the
transactions contemplated by this Agreement or any of the Transaction Documents
or which challenges the validity or enforceability of this Agreement or any of
the Transaction Documents.
SECTION 5.6. TRANSITION SERVICES AGREEMENT; LITIGATION
COOPERATION AGREEMENT.
The parties shall have executed and delivered prior to Closing
a Transition Services Agreement (which shall provide that it shall last for six
months, except for services relating to billing, the electronic bulletin board
and use of the main frame computer which may last for up to one year from
Closing), and a Litigation Cooperation Agreement with respect to (A) Will Price
and Stixon Petroleum ▇. ▇▇▇▇▇▇▇▇ et al., Case No. 99C30, in the Twenty-sixth
Judicial District, District Court, ▇▇▇▇▇▇▇ County, Kansas, Civil Department
(a/k/a Quinique), and any action containing the same or substantially similar
allegations arising out of or related to the actions of the Company prior to the
Closing Date; and (B) In Re: Natural Gas Royalties Qui Tam Litigation, MDL
Docket ▇▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ of Wyoming (consolidated
matter that includes United States of America ex rel. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ Natural Gas Company, et al. Civil Action No. 97-D-1428, United States
District Court, District of Colorado), and any action containing the same or
substantially similar allegations arising out of or related to the actions of
the Company prior to the Closing Date, each in form and substance reasonably
acceptable to Buyer and Seller and providing only for reasonable cooperation of
Seller in the defense of any such actions.
33
SECTION 5.7. INTENTIONALLY OMITTED.
SECTION 5.8. OPINION OF COUNSEL TO SELLER.
Buyer shall have received a favorable opinion, dated as of the
Closing Date, from ▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P., counsel to Seller and Parent in
form and substance reasonably satisfactory to Seller, including, without
limitations, with respect to the enforceability of the Guaranty
SECTION 5.9. FAIRNESS OPINION.
Seller shall have received, and delivered to Buyer a true and
complete copy of, the opinion of ▇.▇. ▇▇▇▇▇▇ Securities Inc. to the effect that,
as of the Closing Date, the Purchase Price, as adjusted, is fair, from a
financial point of view, to Seller.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before the
Closing Date, of the following conditions, any one or more of which may be
waived by Seller in their sole discretion:
SECTION 6.1. REPRESENTATIONS AND WARRANTIES OF BUYER.
All representations and warranties made by Buyer in this
Agreement shall be true and correct on and as of the Closing Date as if again
made by Buyer on and as of such date, except for such breaches as would not have
a material adverse effect on Buyer's ability to perform its obligations under
this Agreement, and Seller shall have received a certificate dated the Closing
Date and signed by a senior executive officer of Buyer to that effect.
SECTION 6.2. PERFORMANCE OF BUYER'S OBLIGATIONS.
Buyer shall have performed all obligations required under this
Agreement to be performed by it on or before the Closing Date except for such
non-performance as would not have a material adverse effect on Buyer's ability
to perform its obligations under this Agreement, and Seller shall have received
a certificate dated the Closing Date and signed by a senior executive officer of
Buyer to that effect.
SECTION 6.3. CONSENTS AND APPROVALS.
All consents, waivers, authorizations and approvals set forth
on Schedule 3.4 shall have been duly obtained and shall be in full force and
effect on the Closing Date. All applicable waiting periods under the HSR Act
shall have expired or been terminated.
SECTION 6.4. NO VIOLATION OF ORDERS.
No preliminary or permanent injunction or other order issued
by any Governmental Authority, that declares this Agreement invalid or
unenforceable in any respect or
34
which prevents the consummation of the transactions contemplated hereby shall be
in effect; and no action or proceeding before any Governmental Authority, shall
have been instituted by a Governmental Authority or other person or threatened
by any Governmental Authority which seeks to prevent or delay the consummation
of the transactions contemplated by this Agreement or which challenges the
validity or enforceability of this Agreement.
SECTION 6.5. PURCHASE PRICE.
Buyer shall have paid and delivered to Seller, or be standing
ready to pay and deliver to Seller, the Purchase Price.
SECTION 6.6. OPINION OF COUNSEL OF BUYER
Seller shall have received a favorable opinion, dated as of
the Closing Date, from counsel to Buyer and Buyer Parent in form and substance
reasonably satisfactory to Seller including with limitations, with respect to
the enforceability of the Guaranty.
ARTICLE VII
TERMINATION AND ABANDONMENT
SECTION 7.1. METHODS OF TERMINATION; UPSET DATE.
This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time before the Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by Seller, if Buyer fails to comply with any of its
covenants or agreements contained herein, or breaches its representations and
warranties contained herein, which failure to comply or breach (other than a
breach or failure of compliance with the covenant in the last sentence of
Section 4.4 (c), in which case, there is no thirty (30) day cure period ) is
not cured within 30 days after receipt by Buyer from Seller of written notice
specifying particularly such failure to comply or breach, and such failure to
comply or breach would result in a failure to satisfy the conditions to Closing
set forth in Sections 6.1 and/or 6.2;
(c) by Buyer, if Seller fails to comply with any of its
covenants or agreements contained herein, or breaches its representations and
warranties contained herein, which failure to comply or breach is not cured
within 30 days after receipt by Seller from Buyer of written notice specifying
particularly such failure to comply or breach, and such failure to comply or
breach would result in the failure to satisfy the conditions to Closing set
forth in Sections 5.2 and/or 5.3;
(d) by Seller or Buyer, if a Governmental Authority shall have
issued an order, decree or ruling or taken any other action (which order, decree
or ruling the parties hereto shall use their commercially reasonable efforts to
lift), which permanently restrains, enjoins or otherwise prohibits the
transactions contemplated by this Agreement and which order, decree, ruling or
other action is not subject to appeal;
35
(e) by Seller or Buyer at any time after March 10, 2003; or
(f) by Seller at any time if the Closing has not occurred by
the latest of (i) one business day after the HSR waiting period has expired,
(ii) satisfaction of the conditions in (a) the first sentence of Section 5.4 and
(b) Section 5.5, (iii) satisfaction by Seller of the conditions to the
obligations of Buyer set forth in Article V that are to be satisfied by Seller
(other than those conditions that by their nature are to be fulfilled by Seller
at Closing, in which case, Seller shall be prepared to fulfill same), and (iv)
the expiration of the period, if any, by which Seller delayed the Closing Date
in accordance with Section 1.1(b).
SECTION 7.2. PROCEDURE UPON TERMINATION.
In the event of termination and abandonment of this Agreement
pursuant to Section 7.1, written notice thereof shall forthwith be given to the
other party hereto and this Agreement shall terminate and the transactions
contemplated hereby shall be abandoned, without further action by Seller or
Buyer. If this Agreement is terminated as provided herein, no party to this
Agreement shall have any liability or further obligation to any other party to
this Agreement except as provided in Sections 8.4, 8.6, 9.3, 9.4 and 9.11
hereof; provided, however, that no termination of this Agreement pursuant to
this Article VII shall relieve any party of liability for a willful and material
breach of any provision of this Agreement occurring before such termination.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
SECTION 8.1. SURVIVAL.
The representations and warranties of Seller contained herein
or in any certificates or other documents delivered pursuant to this Agreement
on the Closing and Seller's covenants in Section 4.1 hereof shall survive the
Closing until 180 days following the Closing Date, provided however, that the
representations and warranties set forth in Section 2.2 (Capitalization; Title),
Section 2.4 (Validity of Agreement; Authorization), and Section 2.17 (Brokers)
shall survive indefinitely, the representations and warranties set forth in
Section 2.9 (Taxes) shall survive for a period equal to the applicable statute
of limitations for each Tax and taxable year, the representations and warranties
set forth in Section 2.18 (Employees; Employee Plans) shall survive until the
first (1st) anniversary of the Closing Date, and the representations and
warranties set forth in Section 2.20 (Environmental; Health and Safety Matters)
shall survive until the second (2nd) anniversary of the Closing Date. The other
terms of this Agreement and the agreements delivered in connection herewith
shall survive the Closing.
SECTION 8.2. INDEMNIFICATION COVERAGE.
(a) From and after the Closing, Seller shall indemnify and
defend, save and hold Buyer, the Company, the LLC and their Affiliates and each
of their officers, directors, employees and agents (collectively, the "BUYER
INDEMNIFIED PARTIES") harmless if any such Buyer Indemnified Party shall suffer
any damage, judgment, fine, penalty, demand, settlement, liability,
36
loss, cost, Tax, expense (including reasonable attorneys', consultants' and
experts' fees), claim or cause of action (each, a "LOSS") arising out of,
relating to or resulting from:
(i) any breach or inaccuracy in any
representation by Seller or the breach of any warranty by
Seller contained in this Agreement or any certificates or
other documents delivered pursuant to this Agreement on
Closing; and
(ii) any failure by Seller to perform or observe
any term, provision, covenant, or agreement on the part of
Seller to be performed or observed under this Agreement.
(b) From and after the Closing, Buyer shall indemnify and
defend, save and hold Seller and its Affiliates and its and their officers,
directors, employees and agents (collectively, the "SELLER INDEMNIFIED PARTIES")
harmless if Seller Indemnified Parties shall suffer any Loss arising out of,
relating to, or resulting from:
(i) any breach or inaccuracy in any
representation by Buyer or the breach of any warranty by Buyer
contained in this Agreement or any certificates or other
documents delivered pursuant to this Agreement on Closing;
(ii) any failure by Buyer to perform or observe
any term, provision, covenant, or agreement on the part of
Buyer to be performed or observed under this Agreement; and
(iii) any Losses arising with respect to the
Company or the LLC whether occurring before or after Closing
to the extent such Losses (x) cannot be properly asserted
against Seller under Section 8.2(a) or otherwise by Buyer,
except to the extent such Losses cannot be properly asserted
against Seller because of limitations under Section 8.2(c),
and (y) do not arise as a result of any other obligation of
Seller to any Buyer Indemnified Party arising under this
Agreement
(c) The foregoing indemnification obligations shall be subject
to the following limitations:
(i) Seller's aggregate liability under Section
8.2(a) shall not exceed $25,000,000;
(ii) no indemnification for any Losses asserted
against Seller under this Section 8.2 shall be required unless
and until the cumulative aggregate amount of such Losses
exceeds $5,000,000 (the "DEDUCTIBLE"), at which point Seller
shall be obligated to indemnify the Buyer Indemnified Parties
only as to the amount of such Losses in excess of the
Deductible, subject to the limitation in Section 8.2(c)(i),
provided however, that the Deductible shall not be applicable
to breaches under Sections 1.2 and 1.3;
(iii) the amount of any Losses suffered by a
Seller Indemnified Party or a Buyer Indemnified Party, as the
case may be (such party seeking
37
indemnification, the "INDEMNIFIED PARTY," and the other party,
the "INDEMNIFYING PARTY") shall be reduced by any third-party
insurance or other indemnification benefits which such party
receives in respect of or as a result of such Losses. If any
Losses for which indemnification is provided hereunder is
subsequently reduced by any third-party insurance or other
indemnification benefit or recovery, the amount of the
reduction, shall be remitted to the Indemnifying Party;
(iv) any calculation of Losses for purposes of
Article VIII hereof shall be net of any U.S. federal, state or
local tax benefit to Seller Indemnified Party or Buyer
Indemnified Party seeking indemnification pursuant to this
Article VIII hereof, as the case may be (such party seeking
indemnification, the "INDEMNIFIED PARTY", and the other party,
the "INDEMNIFIED PARTY");
(v) no claim may be asserted nor may any action
be commenced against Seller for breach or inaccuracy of any
representation or breach of a warranty, unless written notice
of such claim or action is received by Seller describing in
reasonable detail the facts and circumstances with respect to
the subject matter of such claim or action on or prior to the
date on which the representation or warranty on which such
claim or action is based ceases to survive as set forth in
Section 8.1;
(vi) an Indemnified Party shall not be entitled
under this Agreement to multiple recovery for the same Losses;
and
(vii) the limitations on indemnification set forth
in clauses (i) and (ii) of Section 8.2(c) shall not apply to
any Losses arising from any inaccuracy or breach of Section
2.2, the failure by Seller or Buyer to pay any Taxes in
accordance with Section 4.10 or for any amounts payable in
accordance with Section 9.3 hereof.
SECTION 8.3. PROCEDURES.
Any Indemnified Party shall notify the Indemnifying Party
(with reasonable specificity) promptly after it becomes aware of facts
supporting a claim or action for indemnification under this Article VIII, and
shall provide to the Indemnifying Party as soon as practicable thereafter all
information and documentation necessary to support and verify any Losses
associated with such claim or action. Subject to Section 8.2(c)(iv), the failure
to so notify or provide information to the Indemnifying Party shall not relieve
the Indemnifying Party of any liability that it may have to any Indemnified
Party, except to the extent that the Indemnifying Party is materially prejudiced
by the Indemnified Party's failure to give such notice, in which case the
Indemnifying Party shall be relieved from its obligations hereunder to the
extent of such material prejudice. The Indemnifying Party shall have the right,
exercisable by written notice to the Indemnified Party within ten days after
receipt of notice from the Indemnified Party of the commencement of or assertion
of any claim or action, suit or proceeding by a third party in respect of which
indemnity may be sought hereunder, to participate in and defend, contest or
otherwise protect the Indemnified Party against any such claim, action, suit or
proceeding with counsel of the Indemnifying Party's choice (which counsel shall
be reasonably satisfactory to the
38
Indemnified Party) at its sole cost and expense; provided, however, that (i) the
Indemnifying Party expressly agrees in such notice that, as between the
Indemnifying Party and the Indemnified Party, solely the Indemnifying Party
shall be obligated to satisfy and discharge such claim; (ii) such claim does not
include a request or demand for injunctive or other equitable relief by a
Governmental Authority and (iii) the Indemnifying Party makes reasonably
adequate provision to assure the Indemnified Party of the ability of the
Indemnifying Party to satisfy the full amount of any adverse monetary judgment
that is reasonably likely to result and continues to make such assurances; and,
provided, further, that the Indemnifying Party shall not make any settlement or
compromise without the prior written consent of the Indemnified Party (which
consent shall not be unreasonably withheld or delayed) unless the sole relief
provided is monetary damages that are paid in full by the Indemnifying Party.
The Indemnified Party shall have the right, but not the obligation, to
participate at its own expense in the defense thereof by counsel of the
Indemnified Party's choice and shall in any event shall use its reasonable best
efforts to cooperate with and assist the Indemnifying Party. If the Indemnifying
Party fails timely to defend, contest or otherwise protect against such suit,
action, investigation, claim or proceeding in accordance herewith, the
Indemnified Party shall have the right to do so, including, without limitation,
the right to make any compromise or settlement thereof, and the Indemnified
Party shall be entitled to recover the entire cost thereof from the Indemnifying
Party, including, without limitation, reasonable attorneys' fees, disbursements
and amounts paid as the result of such suit, action, investigation, claim or
proceeding.
SECTION 8.4. WAIVER OF CONSEQUENTIAL, ETC. DAMAGES.
Notwithstanding anything to the contrary in this Agreement,
Buyer shall not be liable to any of the Seller Indemnified Parties, nor shall
Seller be liable to any of the Buyer Indemnified Parties, for any exemplary,
punitive, SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE, or speculative damages
(including, without limitation, any damages on account of lost profits or
OPPORTUNITIES) or resulting from or arising out of this Agreement or the
transactions contemplated hereby.
SECTION 8.5. COMPLIANCE WITH EXPRESS NEGLIGENCE RULE.
All releases, disclaimers, limitations on liability, and
indemnities in this Agreement, including those in this Article VIII, shall apply
even in the event of the sole, joint, and/or concurrent negligence, strict
liability, or other fault of the party whose liability is released, disclaimed,
limited, or indemnified.
SECTION 8.6. LIQUIDATED DAMAGES.
If Seller terminates this Agreement as provided in Section 7.1
(b) or 7.1(f), then Buyer shall pay to Seller a sum equal to Fifty-Five Million
Five Hundred Thousand Dollars ($55,500,000.00) by wire transfer of immediately
available funds to a bank account in the United States of America designated in
writing by Seller not later than three days following receipt of such
designation. BUYER HEREBY ACKNOWLEDGES THAT (1) THE EXTENT OF DAMAGES TO SELLER
CAUSED BY THE FAILURE OF THIS TRANSACTION TO BE CONSUMMATED WOULD BE IMPOSSIBLE
OR EXTREMELY DIFFICULT TO ASCERTAIN (2) THE AMOUNT OF THE LIQUIDATED DAMAGES
PROVIDED FOR IN
39
THIS SECTION 8.6 IS A FAIR AND REASONABLE ESTIMATE OF SUCH DAMAGES UNDER THE
CIRCUMSTANCES AND (III) RECEIPT OF SUCH AMOUNT BY SELLER DOES NOT CONSTITUTE A
PENALTY AND WILL BE SELLER'S SOLE AND EXCLUSIVE REMEDY FOR ANY SUCH TERMINATION
OF THIS AGREEMENT.
SECTION 8.7. REMEDY.
Except for seeking equitable relief, from and after the
Closing the sole remedy of a party in connection with (i) a breach or inaccuracy
of the representations, or breach of warranties, in this Agreement or any
certificates or other documents delivered pursuant to this Agreement on Closing,
or (ii) any failure by a party to perform or observe any term, provision,
covenant, or agreement on the part of such party to be performed or observed
under this Agreement, shall, in each case, be as set forth in this Article VIII.
SECTION 8.8. TAX TREATMENT OF INDEMNITY PAYMENTS.
Each party, to the extent permitted by applicable law, agrees
to treat any payments made pursuant to this Article VIII as adjustments to the
Purchase Price for all federal and state income and franchise Tax purposes.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. PUBLICITY.
Concurrently with the execution of this Agreement, each party
shall have the right to issue a press release to announce this transaction.
Thereafter, on or prior to the Closing Date, neither party shall, nor shall it
permit its Affiliates to, issue or cause the publication of any press release or
other announcement with respect to this Agreement or the transactions
contemplated hereby without the consent of the other party hereto.
Notwithstanding the foregoing, in the event any such press release or
announcement is required by law or stock exchange rule to be made by the party
proposing to issue the same, such party shall use its reasonable best efforts to
consult in good faith with the other party prior to the issuance of any such
press release or announcement.
SECTION 9.2. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY
BENEFICIARIES.
This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective successors and permitted assigns.
Neither party shall assign or delegate any of the obligations created under this
Agreement without the prior written consent of the other party; provided that,
without the consent of Seller, Buyer may assign all of its rights and
obligations under this Agreement to any of its Affiliates; and provided further,
that, without the consent of Seller, Buyer may collaterally assign its rights
and benefits under this Agreement to any lenders providing financing to Buyer or
any of its Affiliates in connection with this Agreement to secure loans to be
made by such lenders to Buyer or any of its Affiliates. Except as contemplated
by Article VIII, nothing in this Agreement shall confer upon any Person not a
party (or an Affiliate of a party) to this Agreement, or the legal
representatives of such Person, any rights or remedies of any nature or kind
whatsoever under or by reason of this Agreement.
40
SECTION 9.3. INVESTMENT BANKERS, FINANCIAL ADVISORS,
BROKERS AND FINDERS.
(a) Seller shall indemnify and agrees to defend and hold the
Buyer Indemnified Parties harmless against and in respect of all claims, losses,
liabilities and expenses which may be asserted against any Buyer Indemnified
Party by any broker or other person who claims to be entitled to an investment
banker's, financial advisor's, broker's, finder's or similar fee or commission
in respect of the execution of this Agreement or the consummation of the
transactions contemplated hereby, by reason of his acting at the request of
Seller, any Affiliate of Seller, the LLC or the Company.
(b) Buyer shall indemnify and agrees to save and hold the
Seller Indemnified Parties harmless against and in respect of all claims,
losses, liabilities, fees, costs and expenses which may be asserted against any
Seller Indemnified Party (or any Affiliate of Seller) by any broker or other
person who claims to be entitled to an investment banker's, financial advisor's,
broker's, finder's or similar fee or commission in respect of the execution of
this Agreement or the consummation of the transactions contemplated hereby, by
reason of his acting at the request of Buyer.
SECTION 9.4. FEES AND EXPENSES.
Except as otherwise expressly provided in this Agreement, all
legal, accounting and other fees, costs and expenses of a party hereto incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such fees, costs or expenses; provided, however
that Seller shall be solely responsible for all legal, accounting and other
fees, costs and expenses incurred by Seller, the Company and the LLC. Buyer
shall bear the costs of HSR Act filing fees.
SECTION 9.5. NOTICES.
All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
if delivered personally or sent by overnight courier or sent by facsimile (with
evidence of confirmation of receipt) to the parties at the following addresses:
(a) If to Buyer, to:
Southern Star Central Corp.
c/o AIG Highstar Capital, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
Facsimile: with a copy (which shall not constitute
notice) to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
41
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Seller, to:
▇▇▇▇▇▇▇▇ Gas Pipeline Company, LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
The ▇▇▇▇▇▇▇▇ Companies, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other Persons or at such other addresses as shall be furnished by
either party by like notice to the other, and such notice or communication shall
be deemed to have been given or made as of the date so delivered. No change in
any of such addresses shall be effective insofar as notices under this Section
9.5 are concerned unless such changed address is located in the United States of
America and notice of such change shall have been given to such other party
hereto as provided in this Section 9.5.
SECTION 9.6. ENTIRE AGREEMENT.
This Agreement, together with the Transaction Documents and
the exhibits and schedules hereto and thereto, and the Confidentiality Agreement
represent the entire agreement and understanding of the parties with respect to
the transactions contemplated herein and therein and no representations or
warranties have been made in connection with the transactions contemplated
hereby or thereby other than those expressly set forth herein or therein. This
Agreement, together with the Transaction Documents and the exhibits and
schedules hereto and thereto, and the Confidentiality Agreement supersede all
prior negotiations, discussions, correspondence, communications, understandings
and agreements between the parties relating to the subject matter of this
Agreement, the Transaction Documents and the Confidentiality Agreement and all
prior drafts of this Agreement, the Transaction Documents and the
Confidentiality Agreement, all of which are merged into this Agreement, the
Transaction Documents and the Confidentiality Agreement, respectively. No prior
drafts of this Agreement, the Transaction Documents or the Confidentiality
Agreement and no words or phrases from any such prior drafts shall be admissible
into evidence in any action or suit involving this Agreement, the Transaction
Documents or the Confidentiality Agreement.
42
SECTION 9.7. WAIVERS AND AMENDMENTS.
Seller or Buyer may, by written notice to the other: (a)
extend the time for the performance of any of the obligations or other actions
of the other; (b) waive any inaccuracies in the representations or warranties of
the other contained in this Agreement or in any document delivered pursuant to
this Agreement by the other party; (c) waive compliance with any of the
covenants of the other contained in this Agreement; (d) waive performance of any
of the obligations of the other created under this Agreement; or (e) waive
fulfillment of any of the conditions to its own obligations under this Agreement
or in any documents delivered pursuant to this Agreement by the other party. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach, whether or not
similar, unless such waiver specifically states that it is to be construed as a
continuing waiver. This Agreement may be amended, modified or supplemented only
by a written instrument executed by the parties hereto.
SECTION 9.8. SEVERABILITY.
This Agreement shall be deemed severable, and the invalidity
or unenforceability of any term or provision hereof shall not affect the
validity or enforceability of this Agreement or of any other term or provision
hereof. Furthermore, in lieu of any such invalid or unenforceable term or
provision, the parties hereto intend that there shall be added as a part of this
Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 9.9. TITLES AND HEADINGS.
The Article and Section headings and any table of contents
contained in this Agreement are solely for convenience of reference and shall
not affect the meaning or interpretation of this Agreement or of any term or
provision hereof.
SECTION 9.10. SIGNATURES AND COUNTERPARTS.
Facsimile transmission of any signed original document and/or
retransmission of any signed facsimile transmission shall be the same as
delivery of an original. At the request of Buyer or Seller, the parties will
confirm facsimile transmission by signing a duplicate original document. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original and all of which together shall be considered one and the
same agreement.
SECTION 9.11. ENFORCEMENT OF THE AGREEMENT.
The parties hereto agree that irreparable damage would occur
if any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereto, this being in addition to any other remedy to which they are entitled at
law or in equity.
43
SECTION 9.12. GOVERNING LAW.
This Agreement shall be governed by and construed in
accordance with the internal and substantive laws of New York and without regard
to any conflicts of laws concepts which would apply the substantive law of some
other jurisdiction.
SECTION 9.13. DISCLOSURE.
Certain information set forth in the Disclosure Schedules is
included solely for informational purposes, is not an admission of liability
with respect to the matters covered by the information, and may not be required
to be disclosed pursuant to this Agreement. The specification of any dollar
amount in the representations and warranties contained in this Agreement or the
inclusion of any specific item in the Disclosure Schedules is not intended to
imply that such amounts (or higher or lower amounts) are or are not material,
and no party shall use the fact of the setting of such amounts or the fact of
the inclusion of any such item in the Disclosure Schedules in any dispute or
controversy between the parties as to whether any obligation, item, or matter
not described herein or included in a Disclosure Schedule is or is not material
for purposes of this Agreement.
SECTION 9.14. DISCLAIMER OF WARRANTIES
(a) INFORMATION. EXCEPT AS PROVIDED IN ARTICLE II, SELLER
MAKES NO REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, STATUTORY
OR OTHERWISE, WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION,
RECORDS, AND DATA NOW, HERETOFORE, OR HEREAFTER MADE AVAILABLE TO BUYER IN
CONNECTION WITH THIS AGREEMENT (INCLUDING ANY DESCRIPTION OF THE COMPANY, THE
LLC OR THEIR RESPECTIVE FACILITIES OR EQUIPMENT, REVENUE, PRICE AND EXPENSE
ASSUMPTIONS, FORECASTS, OR ENVIRONMENTAL INFORMATION, OR ANY OTHER INFORMATION
FURNISHED TO BUYER BY SELLER OR ANY AFFILIATE OR SELLER OR ANY DIRECTOR,
OFFICER, EMPLOYEE, COUNSEL, AGENT, OR ADVISOR THEREOF).
(b) FACILITIES. NOTWITHSTANDING ANYTHING CONTAINED TO THE
CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF
EACH PARTY TO THIS AGREEMENT THAT SELLER IS NOT MAKING ANY REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS, IMPLIED, AT COMMON LAW, STATUTORY OR OTHERWISE,
EXCEPT FOR THE REPRESENTATIONS OR WARRANTIES GIVEN IN THIS AGREEMENT, AND BUYER
ACKNOWLEDGES AND AGREES THAT THE FACILITIES, EQUIPMENT AND OTHER ASSETS OF THE
COMPANY AND THE LLC ARE BEING TAKEN BY BUYER, SUBJECT TO ALL FAULTS, "AS IS" AND
"WHERE IS." WITHOUT LIMITING THE GENERALITY OF THE IMMEDIATELY PRECEDING
SENTENCE, EXCEPT AS PROVIDED IN HIS AGREEMENT, SELLER HEREBY EXPRESSLY DISCLAIMS
AND NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW,
STATUTORY, OR OTHERWISE, RELATING TO (I) THE CONDITION OF THE FACILITIES,
EQUIPMENT AND OTHER ASSETS OF THE COMPANY OR THE
44
LLC (INCLUDING ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, OR THE
PRESENCE OR ABSENCE OF ANY HAZARDOUS MATERIALS IN OR ON, OR DISPOSED OR
DISCHARGED FROM, SUCH FACILITIES, EQUIPMENT AND OTHER ASSETS) OR (II) ANY
INFRINGEMENT BY SELLER, THE COMPANY, THE LLC, OR ANY OF THEIR AFFILIATES OF ANY
PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY. BUYER HAS AGREED NOT TO RELY ON
ANY REPRESENTATION MADE BY SELLER WITH RESPECT TO THE CONDITION, QUALITY, OR
STATE OF THE FACILITIES, EQUIPMENT AND OTHER ASSETS OF THE COMPANY OR THE LLC
EXCEPT FOR THOSE IN THIS AGREEMENT, BUT RATHER, AS A SIGNIFICANT PORTION OF THE
CONSIDERATION GIVEN TO SELLER FOR THIS PURCHASE AND SALE, HAS AGREED, EXCEPT AS
PROVIDED IN THIS AGREEMENT, TO RELY SOLELY AND EXCLUSIVELY UPON ITS OWN
EVALUATION OF THE COMPANY, THE LLC AND THE FACILITIES, EQUIPMENT AND OTHER
ASSETS OF THE COMPANY OR THE LLC. THE PROVISIONS CONTAINED IN THIS AGREEMENT ARE
THE RESULT OF EXTENSIVE NEGOTIATIONS BETWEEN BUYER AND SELLER AND NO OTHER
ASSURANCES, REPRESENTATIONS OR WARRANTIES ABOUT THE QUALITY, CONDITION, OR STATE
OF THE COMPANY, THE LLC AND THE FACILITIES, EQUIPMENT AND OTHER ASSETS OF THE
COMPANY OR THE LLC WERE MADE BY SELLER IN THE INDUCEMENT THEREOF, EXCEPT AS
PROVIDED HEREIN.
SECTION 9.15. CONSENT TO JURISDICTION.
The parties hereby irrevocably submit to the exclusive
jurisdiction of the courts of the State of New York located in the Borough of
Manhattan and the federal courts of the United States of America located in the
Southern District of the State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby, and
each party irrevocably agrees that all claims in respect of such dispute or
proceeding shall be heard and determined in such courts. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the venue of any dispute
arising out of or relating to this Agreement or any of the transactions
contemplated hereby brought in any such court or any defense of inconvenient
forum for the maintenance of such dispute. Each party agrees that a judgment in
any such dispute may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by applicable law.
SECTION 9.16. BULK SALES OR TRANSFER LAWS.
The Buyer hereby waives compliance by the Seller with the
provisions of the bulk sales or transfer laws of all applicable jurisdictions.
SECTION 9.17. CERTAIN DEFINITIONS.
For purposes of this Agreement, the term:
(a) "AFFILIATE" or "AFFILIATE" of a person means a person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common
45
control with, the first mentioned person. For purposes of this Agreement, AIG
Highstar Capital, L.P. shall be deemed to be an Affiliate of Buyer.
(b) "CONFIDENTIALITY AGREEMENT" shall mean collectively the
Confidentiality Agreement dated as of July 19, 2002, between Buyer and ▇.▇.
▇▇▇▇▇▇ Securities Inc., as agent for the Parent.
(c) "KNOWLEDGE" shall mean the actual knowledge of those
Persons serving as CEO, CFO, Chief Accounting Officer, Chief Environmental
Officer or Secretary of Seller, Company or the LLC.
(d) "MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on (x) the assets, properties, business, results of operations or
financial condition of the Company and the LLC, taken as a whole, it being
understood that none of the following shall be deemed to constitute a Material
Adverse Effect: (i) any effect resulting from entering into this Agreement or
the announcement of the transactions contemplated by this Agreement, (ii) any
effect resulting from changes in general economic conditions in the industry in
which the Company or the LLC operates, except for such effects which
disproportionately impact the Company and the LLC, and (iii) any effect
resulting from changes in the United States or global economy as a whole, except
for such effects which disproportionately impact the Company and the LLC; or (y)
the ability of Seller or Parent to perform in all material respects its
obligations under this Agreement and the Transaction Documents.
(e) "PERSON" or "PERSON" means an individual, corporation,
association, trust, limited liability company, limited partnership, limited
liability partnership, partnership, incorporated organization, other entity or
group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934).
(f) "TRANSACTION DOCUMENTS" shall mean the agreements,
contracts, documents, instruments and certificates provided for in this
Agreement to be entered into by one or more of the parties hereto or any of
their Affiliates in connection with the transactions contemplated by this
Agreement, including without limitation the Parent's Guaranty Agreement.
46
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
SELLER: ▇▇▇▇▇▇▇▇ GAS PIPELINE COMPANY, LLC
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------
Name: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title President and Chief Executive Officer
BUYER: SOUTHERN STAR CENTRAL CORP.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
Title: President
47