EXHIBIT 2.A
Execution Version
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CONTRIBUTION, PURCHASE AND SALE AGREEMENT
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By and Between
EL PASO CORPORATION
(Seller)
and
EL PASO ENERGY PARTNERS, L.P.
(Buyer)
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Covering the Acquisition of
THE FOLLOWING EQUITY INTERESTS IN
(Acquired Company Equity Interests)
100% of ANR Central Gulf Gathering Company, L.L.C.,
100% of El Paso San ▇▇▇▇, L.L.C.,
100% of El Paso South Texas, L.P., and
50% of Coyote Gas Treating, LLC
(the Acquired Companies)
and
Certain Residual Interests related to the Chaco Plant, and
The Typhoon Oil Gathering System
(the Acquired Assets)
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November 21, 2002
TABLE OF CONTENTS
PAGE
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1. Definitions..............................................................................................3
2. The Transactions........................................................................................14
(a) Sale and Contribution of Acquired Company Equity Interests and Acquired Assets.................14
(b) Consideration..................................................................................14
(c) The Closing....................................................................................15
(d) Deliveries at the Closing......................................................................15
(e) Proposed Closing Statement and Post-Closing Adjustment.........................................16
(f) Assumed Obligations............................................................................17
3. Representations and Warranties Concerning the Transaction...............................................18
(a) Representations and Warranties of the Seller...................................................18
(b) Representations and Warranties of the Buyer....................................................19
4. Representations and Warranties Concerning the Acquired Company Equity Interests, Acquired
Companies and Relevant Assets...........................................................................22
(a) Organization, Qualification, and Company Power.................................................22
(b) Noncontravention...............................................................................22
(c) Title to and Condition of Assets...............................................................23
(d) Material Change................................................................................25
(e) Legal Compliance...............................................................................25
(f) Tax Matters....................................................................................25
(g) Contracts and Commitments......................................................................26
(h) Litigation.....................................................................................26
(i) Environmental Matters..........................................................................27
(j) Preferential Purchase Rights; Transferability of Coyote Gas Interest...........................28
(k) Financial Statements...........................................................................28
(l) Employee Matters...............................................................................29
(m) Prohibited Events..............................................................................29
(n) Regulatory Matters.............................................................................29
(o) Intercompany Transactions......................................................................29
(p) Disclaimer of Representations and Warranties Concerning Personal Property, Equipment,
and Fixtures...................................................................................29
(q) Reorganization Transactions....................................................................30
5. Pre-Closing Covenants...................................................................................30
(a) General........................................................................................30
(b) Notices and Consents...........................................................................30
(c) Operation of Business..........................................................................30
(d) Intercompany Transactions......................................................................32
(e) Full Access....................................................................................32
(f) Liens and Encumbrances.........................................................................32
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(g) Notice of Developments.........................................................................32
6. Post-Closing Covenants..................................................................................32
(a) General........................................................................................32
(b) Litigation Support.............................................................................32
(c) Surety Bonds; Guarantees.......................................................................33
(d) Delivery and Retention of Records..............................................................33
(e) Assignment of Rights...........................................................................33
(f) Maintenance Capital............................................................................33
(g) Inadvertent Exclusions.........................................................................35
(h) Post-Closing Right-of-Way Matters..............................................................35
7. Conditions to Obligation to Close.......................................................................35
(a) Conditions to Obligation of the Buyer..........................................................35
(b) Conditions to Obligation of the Seller.........................................................37
(c) Effect of Supplements to Schedules.............................................................38
8. Remedies for Breaches of this Agreement.................................................................38
(a) Survival of Representations and Warranties.....................................................38
(b) Indemnification Provisions for Benefit of the Buyer............................................39
(c) Indemnification Provisions for Benefit of the Seller...........................................42
(d) Matters Involving Third Parties................................................................43
(e) Determination of Amount of Adverse Consequences................................................43
(f) Tax Treatment of Indemnity Payments............................................................44
9. Tax Matters.............................................................................................44
(a) Post-Closing Tax Returns.......................................................................44
(b) Pre-Closing Tax Returns........................................................................44
(c) Straddle Periods...............................................................................44
(d) Straddle Returns...............................................................................44
(e) Claims for Refund..............................................................................45
(f) Indemnification................................................................................45
(g) Cooperation on Tax Matters.....................................................................45
(h) Certain Taxes..................................................................................46
(i) Confidentiality................................................................................46
(j) Audits.........................................................................................46
(k) Control of Proceedings.........................................................................46
(l) Powers of Attorney.............................................................................47
(m) Remittance of Refunds..........................................................................47
(n) Purchase Price Allocation......................................................................47
(o) Closing Tax Certificate........................................................................47
(p) Like Kind Exchanges............................................................................47
10. Termination.............................................................................................48
(a) Termination of Agreement.......................................................................48
(b) Effect of Termination..........................................................................48
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11. Miscellaneous...........................................................................................49
(a) Public Announcements...........................................................................49
(b) Insurance......................................................................................49
(c) No Third Party Beneficiaries...................................................................49
(d) Succession and Assignment......................................................................49
(e) Counterparts...................................................................................50
(f) Headings.......................................................................................50
(g) Notices........................................................................................50
(h) Governing Law..................................................................................50
(i) Amendments and Waivers.........................................................................51
(j) Severability...................................................................................51
(k) Transaction Expenses...........................................................................51
(l) Construction...................................................................................51
(m) Matters Related to New Chaco...................................................................51
(n) Incorporation of Exhibits and Schedules........................................................52
(o) Entire Agreement...............................................................................52
EXHIBITS AND SCHEDULES
Exhibit A: Principal Acquired Company Assets
Exhibit B: The Acquired Assets
Exhibit C: Retained Assets
Exhibit D-1: Form of Acquired Company Equity Interests Assignment
Exhibit D-2: Form of Acquired Assets Assignment
Exhibit D-3: Form of Coyote Gas Note Assignment
Exhibit E: Construction Costs
Exhibit F: The Reorganization Transactions
Exhibit G: Form of Certification of Non-Foreign Status
Exhibit H: Terms of Series C Units
Exhibit I: Form of Registration Rights Agreement
Exhibit J: Form of Tolling Agreement Amendment
Exhibit K: Form of Repurchase Agreement
Schedule 1(a): Subject Insurance Policies
Schedule 1(b): Permitted Encumbrances
Schedule 2(d)(iii)(F): El Paso Shared Rights of Way
Schedule 2(d)(iii)(G): Coastal Shared Rights of Way
Schedule 3(a)(ii): Consents (Seller Parties)
Schedule 3(a)(iii): Noncontravention (Seller Parties)
Schedule 3(b)(ii): Consents (Buyer)
Schedule 3(b)(iii): Noncontravention (Buyer)
Schedule 4(b): Noncontravention (Acquired Companies)
Schedule 4(c)(i): Encumbrances
Schedule 4(c)(ii): Condition of Acquired Company Assets and Acquired Assets
Schedule 4(c)(v): Encumbrances for Borrowed Money
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Schedule 4(d): Material Changes
Schedule 4(f): Tax Matters
Schedule 4(g)(i): Subject Contracts
Schedule 4(g)(ii): Rights of Way
Schedule 4(h): Litigation
Schedule 4(i): Environmental Matters
Schedule 4(i)(ii): Environmental Permits
Schedule 4(j): Preferential Purchase Rights
Schedule 4(k)(ii): Obligations of the Acquired Companies [Intentionally deleted]
Schedule 4(n): Regulatory Matters
Schedule 4(o): Intercompany Transactions
Schedule 5(c): Operation of Business
Schedule 5(c)(v): Capital Expenditures Budget
Schedule 6(c): Surety Bonds
Schedule 6(e): Assigned Rights
[We agree to furnish supplementally a copy of any of the above schedules or
exhibits to the Commission upon request.]
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CONTRIBUTION, PURCHASE AND SALE AGREEMENT
THIS
CONTRIBUTION, PURCHASE AND SALE AGREEMENT (this "Agreement") dated
as of November 21, 2002 is by and between El Paso Corporation, a Delaware
corporation ("Seller"), and El Paso Energy Partners, L.P., a Delaware limited
partnership (the "Buyer"). The Seller and the Buyer are sometimes referred to
collectively herein as the "Parties" and individually as a "Party."
INTRODUCTION
1. The Seller (through subsidiaries and a joint venture) beneficially owns the
indicated interest in the assets/facilities commonly known as:
Beneficial
Ownership Assets/Facilities Historical Record Owner
--------- ----------------- -----------------------
100% Chaco Liquids Processing Plant (certain residual El Paso New Chaco, L.L.C.
interests)
100% San ▇▇▇▇ Basin Gathering System, which includes El Paso Field Services, L.P.
o San ▇▇▇▇ Gathering System
o Blanco Compression Plant
o Global Compression Plant
o Rattlesnake Treating Plant
o Florida River Compression Facility
o Certain related assets (including wellhead
automation telemetry technology)
50% Coyote Gulch Processing Plant Coyote Gas Treating, LLC
100% South Texas Pipeline Assets Coastal Liquid Partners, L.P.
o Houston 8" Pipeline
▇ ▇▇▇▇▇▇▇ Terminal/Propane Pipeline
o Markham Butane Shuttle
o Texas City 6" Pipeline/Terminal
o Almeda Fractionator and related leased storage
facilities
100% Typhoon Gas Gathering System ANR Central Gulf Gathering Company, L.L.C.
100% Typhoon Oil Gathering System El Paso Merchant Energy-Petroleum Company
2. The Seller desires to sell and/or contribute to the Buyer, and the Buyer
desires to purchase and/or receive from the Seller, the Seller's beneficial
interest in such assets/facilities;
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3. To effect such contribution, sale and purchase, the Seller has reorganized
the manner in which it holds such beneficial interest to be as follows:
Acquired
Beneficial Company/Acquired Current Record Owner of
Ownership Assets/Facilities Asset Owner Acquired Company
--------- ----------------- ---------------- -----------------------
100% Chaco Liquids Processing Plant (certain El Paso New Chaco, n/a
residual interests) L.L.C.
100% San ▇▇▇▇ Basin Gathering System, which includes El Paso San ▇▇▇▇, L.L.C. El Paso San ▇▇▇▇ Holding
Company, L.P.
o San ▇▇▇▇ Gathering System
o Blanco Compression Plant
o Global Compression Plant
o Rattlesnake Treating Plant
o Florida River Compression Facility
o Certain related assets (including
wellhead automation telemetry technology)
50% Coyote Gulch Processing Plant Coyote Gas Treating, LLC El Paso San ▇▇▇▇, L.L.C.
100% South Texas Pipeline Assets El Paso South Texas, El Paso Merchant
L.P. Energy-Petroleum Company and ANR
o Houston 8" Pipeline Production Company
▇ ▇▇▇▇▇▇▇ Terminal/Propane Pipeline
o Markham Butane Shuttle
o Texas City 6" Pipeline/Terminal
o Almeda Fractionator and related leased
storage facilities
100% Typhoon Gas Gathering System ANR Central Gulf El Paso Typhoon, Inc.
Gathering Company,
L.L.C.
100% Typhoon Oil Gathering System El Paso Merchant n/a
Energy-Petroleum Company
4. Subject to the terms and conditions set forth in this agreement, the Seller
will sell and/or contribute to the Buyer, and the Buyer will purchase and
acquire from the Seller, the Seller's beneficial interest in such
assets/facilities in a transaction pursuant to which:
o the Seller would cause the record owners (as of the closing
time) of the indicated equity interests in the above
referenced acquired entities to transfer record and beneficial
ownership of such equity interests to the Buyer (or its
designee);
o the Seller would cause El Paso Merchant Energy-Petroleum
Company to transfer 100% of the record and beneficial
ownership interest in the Typhoon Oil Gathering System to the
Buyer (or its designee);
o the Seller would cause El Paso New Chaco, L.L.C. to transfer
100% of the record and beneficial interest in the Chaco Plant
residual interests as further described below; and
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o the Buyer would pay and issue to the Seller the consideration
described in this Agreement.
5. Subsidiaries of the Seller are party to a tolling agreement and lease
arrangements with subsidiaries of the Buyer covering the Chaco Liquids
Processing Plant, pursuant to which such subsidiaries have (a) the right to
purchase the Chaco plant and certain related rights for approximately $77
million and (b) if such right is not exercised, the obligation (among other
things) to make a substantial forfeiture payment to the Buyer.
6. The Seller desires to avoid being required to incur the forfeiture payment
and the other related obligations; accordingly, the Seller (through its
applicable subsidiary) desires to exercise its right to acquire the Chaco plant
and such related rights.
7. The Buyer desires (i) to preserve its rights, and realize the relative
economics provided, under the lease and tolling arrangements, regardless of
whether or not the transactions contemplated by this Agreement are consummated,
and (ii) ultimately to acquire and own the Chaco plant and the other rights and
interests related thereto as contemplated by this Agreement, which would require
(a) the exercise by the applicable subsidiary of the Seller of its option to
purchase the plant under the applicable lease arrangements, (b) the conveyance
of title to the plant from the applicable subsidiary of the Buyer to such Seller
subsidiary, (c) the repurchase of the plant from such Seller subsidiary and (d)
the reconveyance of title to the plant from such Seller subsidiary to a
subsidiary of the Buyer, subject to the obligations set forth in the tolling
agreement (as amended at closing) and the Repurchase Agreement (defined below).
8. Upon consummation of the transactions contemplated by this Agreement, the
Buyer and the Seller desire to cause the transactions described in (a) - (d) in
Recital 7 above to have substantively occurred (or to be deemed to have
substantively occurred) without the need to make the various technical
assignments back and forth between the applicable entities.
In consideration of the premises and the mutual promises herein made,
and in consideration of the representations, warranties, and covenants herein
contained, the Parties agree as follows:
AGREEMENT
1. Definitions.
"Acquired Assets Contracts" has the meaning set forth in Section 4(g).
"Acquired Assets Assignment" means the assignment and assumption
agreement in the form of Exhibit D-2.
"Acquired Assets" means all rights, title and interest in (i) the
rights and assets comprising the Typhoon Oil Pipeline and the related
facilities, rights of way and other assets existing on Typhoon Oil Pipeline and
all rights and assets related to or devised from such assets that are acquired
or accrue between the date hereof and the Closing Date, and (ii) the rights and
assets owned by New Chaco, substantially all of which ((i) and (ii)) are more
particularly described on Exhibit B.
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"Acquired Companies" means ANR Central Gulf, San ▇▇▇▇ Co., South
Texas
Co. and Coyote Gas.
"Acquired Company Assets" means, excluding the Retained Assets, the San
▇▇▇▇ Assets, the South
Texas Assets, the Typhoon Gas Pipeline and the Coyote Gas
Assets, substantially all of which are more particularly described on Exhibit A.
"Acquired Company Contracts" has the meaning set forth in Section 4(g).
"Acquired Company Equity Interests" means the ANR Central Gulf
Interest, the San ▇▇▇▇ Interest, the South
Texas Interest and the Coyote Gas
Interest, all of which are being acquired by the Buyer pursuant to this
Agreement through the Acquired Company Equity Interests Assignment.
"Acquired Company Equity Interests Assignment" means the assignment of
equity interests in the form of Exhibit D-1.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses, but excluding
punitive (except as provided in Section 8), exemplary, special or consequential
damages.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act; provided, however, that (i) with
respect to the Buyer, the term "Affiliate" shall exclude each member of the El
Paso Group, (ii) with respect to the Seller, the term "Affiliate" shall exclude
each member of the Buyer Group and (iii) the Acquired Companies shall be deemed
to be Affiliates (x) prior to the Closing, of the Seller and (y) on and after
the Closing, of the Buyer.
"Agreement" has the meaning set forth in the preface.
"ANR Central Gulf" means ANR Central Gulf Gathering Company, L.L.C., a
Delaware limited liability company.
"ANR Central Gulf Interest" means a 100% membership interest in ANR
Central Gulf.
"ANR Company" means ANR Pipeline Company, a Delaware corporation.
"ANR Production" means ANR Production Company, a Delaware corporation.
"Assumed Obligations" has the meaning set forth in Section 2(f).
"Basis" means any past or current fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction about which the relevant Person has
Knowledge that forms or could form the basis for any specified consequence.
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"Best Efforts" means the efforts, time, and costs that a prudent Person
desirous of achieving a result would use, expend, or incur in similar
circumstances to ensure that such result is achieved as expeditiously as
possible; provided, however, that no such use, expenditure, or incurrence shall
be required if it could reasonably be expected to have an adverse effect on such
Person and would require an expense of such Person in excess of $1,000,000.
"Buyer" has the meaning set forth in the preface.
"Buyer Group" means (i) the General Partner, (ii) the Buyer, (iii) each
Affiliate of the Buyer in which the Buyer owns (directly or indirectly) an
Equity Interest and (iv) each natural person that is an Affiliate of any Person
described in (i) - (iii) above solely because of such natural person's position
as an officer (or natural person performing similar functions), director (or
natural person performing similar functions) or other representative of any
Person described in (i) - (iii) above, but only to the extent that such natural
person is acting in such capacity.
"Buyer Indemnitees" means, collectively, the Buyer and its Affiliates
and each of their respective officers (or natural persons performing similar
functions), directors (or natural persons performing similar functions),
employees, agents and representatives to the extent acting in such capacity.
"Buyer Party" means each of (i) the Buyer, (ii) each Affiliate of the
Buyer (other than, prior to Closing, the Acquired Companies) in which the Buyer
owns (directly or indirectly) an Equity Interest and which is a party to any
Transaction Agreement and (iii) immediately after the Closing, each of the
Acquired Companies.
"Cash Purchase Price" means the Purchase Price minus the Series C Unit
Amount.
"CERCLA" has the meaning set forth in Section 4(i).
"Closing" has the meaning set forth in Section 2(c).
"Closing Date" has the meaning set forth in Section 2(c).
"Closing Statement" has the meaning set forth in Section 2(e)(i).
"Coastal Partners" means Coastal Liquids Partners, L.P., a Delaware
limited partnership.
"Coastal Shared Rights of Way" means the rights-of-way, easements,
surface leases, fee properties, permits, licenses, franchises or other rights of
ingress, egress and use of land used in connection therewith set forth on
Schedule 2(d)(iii)(G), which constitute rights-of-way, easements, surface
leases, fee properties, permits, licenses, franchises or other rights of
ingress, egress and use of land used in connection therewith associated with,
arising out of, or related to the ownership or operation of the South
Texas
Assets and in which South Texas Co., Coastal Partners or a third party may be
granted rights.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Law.
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"Commitment" means (a) options, warrants, convertible securities,
exchangeable securities, subscription rights, conversion rights, exchange rights
or other contracts that could require a Person to issue any of its Equity
Interests or to sell any Equity Interest it owns in another Person; (b) any
other securities convertible into, exchangeable or exercisable for, or
representing the right to subscribe for any Equity Interest of a Person or owned
by a Person; (c) statutory pre-emptive rights or pre-emptive rights granted
under a Person's Organizational Documents; and (d) stock appreciation rights,
phantom stock, profit participation, or other similar rights with respect to a
Person.
"Confidentiality Agreement" means the Confidentiality Agreement, dated
June 28, 2002, by and between El Paso Field Services, L.P. and the Buyer.
"Construction Costs" means, without duplication, the out-of-pocket
construction costs that are capitalized by an Acquired Company (after
reimbursement to a member of the Seller Group, if applicable) in accordance with
GAAP which are paid or payable by any member of the Seller Group (excluding any
Acquired Company) to an un-Affiliated Person to the extent such costs are
described on Exhibit E and South Texas Co. receives the benefit related to such
costs.
"Coyote Gas" means Coyote Gas Treating, LLC, a Colorado limited
liability company.
"Coyote Gas Assets" means all of the assets of Coyote Gas.
"Coyote Gas Interest" means a 50% membership interest in Coyote Gas.
"Coyote Gas Note" means the Promissory Note made by Coyote Gas dated
June 28, 2002 in favor of Field Services in the principal amount of $17.5
million.
"Coyote Gas Note Assignment" means the assignment of promissory note in
the form of Exhibit D-3.
"Coyote Gas Treating Agreement" means the Gas Compression and Treating
Agreement, dated March 30, 1996, between Red Cedar Gathering Company, a Colorado
joint venture and Coyote Gas.
"Delaware LLC Act" means the Delaware Limited Liability Company Act as
in effect on the date of this Agreement and as amended, restated or replaced
from time to time thereafter.
"Delaware LP Act" means the Delaware Revised Uniform Limited
Partnership Act as in effect on the date of this Agreement and as amended,
restated or replaced from time to time thereafter.
"Delos" means Delos Offshore Company, L.L.C., a Delaware limited
liability company.
"Effective Time" means the point in time immediately following the last
day of the calendar month immediately preceding the calendar month in which the
Closing occurs.
"El Paso CGP" means El Paso CGP Company, a Delaware corporation.
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"El Paso Group" means, other than members of the Buyer Group, (i) each
Affiliate of the Seller in which the Seller owns (directly or indirectly) an
Equity Interest and (ii) each natural person that is an Affiliate of any Person
described in (i) above solely because of such natural person's position as an
officer (or natural person performing similar functions), director (or natural
person performing similar functions) or other representative of any Person
described in (i) above, but only to the extent that such natural person is
acting in such capacity.
"El Paso Natural Gas" means El Paso Natural Gas Company, a Delaware
corporation.
"El Paso Shared Rights of Way" means the rights-of-way, easements,
surface leases, fee properties, permits, licenses, franchises or other rights of
ingress, egress and use of land used in connection therewith set forth on
Schedule 2(d)(iii)(F), which constitute rights-of-way, easements, surface
leases, fee properties, permits, licenses, franchises or other rights of
ingress, egress and use of land used in connection therewith associated with,
arising out of, or related to the ownership or operation of the San ▇▇▇▇ Assets
and in which San ▇▇▇▇ Co., El Paso Natural Gas or a third party may be granted
rights.
"El Paso Typhoon" means El Paso Typhoon, Inc., a Delaware corporation.
"Encumbrance" means any mortgage, pledge, lien, encumbrance, charge,
security interest, purchase or preferential right, right of first refusal,
option or other defect in title.
"Environmental Law" and "Environmental Laws" have the meanings set
forth in Section 4(i).
"EP" has the meaning set forth in the preface.
"Equity Interest" means (a) with respect to a corporation, any and all
shares of capital stock and any Commitments with respect thereto, (b) with
respect to a partnership, limited liability company, trust or similar Person,
any and all units, interests or other partnership, limited liability company,
trust or similar interests, and any Commitments with respect thereto, and (c)
any other direct equity ownership or participation in a Person.
"Exchange Agreement" has the meaning set forth in Section 9(p).
"Field Services" means El Paso Field Services, L.P., a Delaware limited
partnership.
"Financial Statements" has the meaning set forth in Section 4(k).
"FTC" has the meaning set forth in Section 3(a)(ii).
"GAAP" means accounting principles generally accepted in the United
States consistently applied.
"General Partner" means El Paso Energy Partners Company, a Delaware
corporation and the general partner of the Buyer.
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"Governmental Authority" means the United States or any agency thereof
and any state, county, city or other political subdivision, agency, court or
instrumentality.
"Hazardous Substances" means all materials, substances, chemicals, gas
and wastes that are designated or defined (either by inclusion in a list of
materials or by reference to exhibited characteristics) as hazardous, toxic or
dangerous, or as a pollutant or contaminant under any Environmental Law, or
which may form the basis for liability under any Environmental Law.
"Holding" means El Paso Field Services Holding Company, a Delaware
corporation.
"Indebtedness" means, with respect to any Person, to the extent not
classified as a current liability, on a consolidated basis, all Obligations of
the Person to other Persons for (a) borrowed money, (b) any capital lease
Obligation, (c) any Obligation (whether fixed or contingent) to reimburse any
bank or other Person in respect of amounts paid or payable under a standby
letter of credit, (d) any guarantee with respect to indebtedness (of the kind
otherwise described in this definition) of any Person and (e) any liability,
indebtedness or other Obligation of the Person.
"Indemnified Party" has the meaning set forth in Section 8(d).
"Indemnifying Party" has the meaning set forth in Section 8(d).
"Joint Use Agreement" means one or more agreements reasonably
acceptable to both Parties setting forth the Parties rights and obligations with
respect to the Shared Rights of Way.
"Knowledge" means as follows: an individual shall be deemed to have
"Knowledge" of a particular fact or other matter if such individual is
consciously aware of such fact or other matter at the time of determination
after due inquiry. A Person other than a natural person shall be deemed to have
"Knowledge" of a particular fact or other matter if (i) any natural person who
is serving as a director, executive officer, partner, member, executor, or
trustee of such Person (or in any similar capacity) or (ii) any employee (or any
natural person serving in a similar capacity) who is charged with the ultimate
responsibility for a particular area of such Person's operations (e.g., the
manager of the environmental section with respect to Knowledge of environmental
matters), at the time of determination and after due inquiry had Knowledge of
such fact or other matter; provided, however, that the Seller shall also be
deemed to have Knowledge of any facts or other matters of which a Seller Party,
any Acquired Company, ANR Company, El Paso CGP, El Paso Typhoon, Field Services,
or Merchant-Energy has Knowledge (as defined above) prior to the Closing Date.
"Law" or "Laws" means any statute, code, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any applicable
Governmental Authority.
"Legal Right" means the legal authority and right (without risk of
liability, criminal, civil or otherwise), such that the contemplated conduct
would not, to the extent arising from, related to or in any way connected with
Coyote Gas or the Coyote Gas Assets (including under any Organizational
Documents thereof or any contract, agreement or arrangement related thereto)
constitute a violation, termination or breach of, or require any payment under,
or cause or permit any termination under, any contract or agreement;
arrangement; applicable Law; fiduciary,
8
quasi-fiduciary or similar duty; or any other obligation of or by Coyote Gas or
with respect to the Coyote Gas Assets.
"Maintenance Capital" means the direct, out-of-pocket costs that are
capitalized by an Acquired Company in accordance with GAAP that are reasonably
incurred by the Buyer or any of its Affiliates directly related to the
maintenance or overhaul of the Relevant Assets.
"Management" means El Paso Field Services Management, Inc., a Delaware
corporation.
"Material Adverse Effect" means, without duplication, any change or
effect relating to the Acquired Company Equity Interests, the Relevant Assets or
the businesses, operations (financial or otherwise) and properties of the
Acquired Companies or relating to the Relevant Assets, taken as a whole, that,
individually or in the aggregate with other changes or effects, materially and
adversely affects the value of the Acquired Company Equity Interests or the
Relevant Assets, taken as a whole, provided that in determining whether a
Material Adverse Effect has occurred, changes or effects relating to (i) the
natural gas pipeline, treating and processing industry generally (including the
price of natural gas and the costs associated with the drilling and/or
production of natural gas), (ii) United States or global economic conditions or
financial markets in general, or (iii) the transactions contemplated by this
Agreement, shall not be considered.
"Maximum Annual Maintenance Reimbursement" means the following amounts:
(i) for the calendar year ending December 31, 2003, $8,112,000; (ii) for the
calendar year ending December 31, 2004, $7,634,000; and (ii) for the calendar
year ending December 31, 2005, $7,833,000.
"Merchant-Energy" means El Paso Merchant-Energy Petroleum Company, a
Delaware corporation.
"Minimum Annual Maintenance Capital Amount" means the Maintenance
Capital for the following years in the following amounts: (i) for the calendar
year ending December 31, 2003, $14,371,000; (ii) for the calendar year ending
December 31, 2004, $11,549,000; and (ii) for the calendar year ending December
31, 2005, $10,492,000.
"New Chaco" means El Paso New Chaco, L.L.C. a Delaware limited
liability company.
"New Chaco Assets" means all of the assets of New Chaco.
"New Chaco Holding" means El Paso New Chaco Holding Company, L.P., a
Delaware limited partnership.
"Obligations" means duties, liabilities and obligations, whether
vested, absolute or contingent, known or unknown, asserted or unasserted,
accrued or unaccrued, liquidated or unliquidated, due or to become due, and
whether contractual, statutory or otherwise.
"Ordinary Course of Business" means the ordinary course of business
consistent with the applicable Person's past custom and practice (including with
respect to quantity and frequency).
9
"Organizational Documents" means the articles of incorporation,
certificate of incorporation, charter, bylaws, articles or certificate of
formation, regulations, operating agreement, certificate of limited partnership,
partnership agreement, and all other similar documents, instruments or
certificates executed, adopted, or filed in connection with the creation,
formation, or organization of a Person, including any amendments thereto.
"Party" and "Parties" have the meanings set forth in the preface.
"Permitted Encumbrances" means any of the following: (i) any liens for
Taxes and assessments not yet delinquent or, if delinquent, that are being
contested in good faith in the Ordinary Course of Business, provided that
adequate reserve accounts have been established in accordance with GAAP; (ii)
inchoate, mechanic's, materialmen's, and similar liens; (iii) any inchoate liens
or other Encumbrances created pursuant to (1) any operating, farmout,
construction, operation and maintenance, co-owners, cotenancy, lease or similar
agreements listed on Schedule 1(b) for which amounts are not due or (2) the
Organizational Documents of any of the Acquired Companies for which amounts are
not due; and (iv) easements, rights-of-way, restrictions and other similar
Encumbrances incurred in the Ordinary Course of Business which, in the
aggregate, are not substantial in amount and which do not in any case materially
detract from the value of the property subject thereto as it is currently being
used or materially interfere with the ordinary conduct of the business.
"Person" means an individual or entity, including any partnership,
corporation, association, joint stock company, trust, joint venture, limited
liability company, unincorporated organization, or Governmental Authority (or
any department, agency or political subdivision thereof).
"Post-Closing Tax Period" means any Tax period beginning after the
Closing Date.
"Post-Closing Tax Return" means any Tax Return that is required to be
filed for any of the Acquired Companies, the Seller or any of its Affiliates
with respect to a Post-Closing Tax Period.
"Pre-Closing Obligations" means (other than Obligations for which the
Buyer Indemnitees are entitled to indemnify under Sections 8(b)(iii) - (ix)) all
Obligations associated with, arising out of, or related to the ownership or
operation of the Relevant Assets and attributable to the period ending
immediately prior to the Closing.
"Pre-Closing Tax Period" means any Tax periods or portions thereof
ending on or before the Closing Date.
"Pre-Closing Tax Return" means any Tax Return that is required to be
filed for any Acquired Company, the Seller or any of its Affiliates with respect
to a Pre-Closing Tax Period.
"Preferential Rights" has the meaning set forth in Section 4(j).
"Prime Rate" means the prime rate reported in the Wall Street Journal
at the time such rate must be determined under the terms of this Agreement.
10
"Proposed Closing Statement" has the meaning set forth in Section
2(e)(i).
"Purchase Price" means $782 million plus (i) the amount, if any, by
which the total of the Purchase Price Increases exceeds the total of the
Purchase Price Decreases, or minus (ii) the amount, if any, by which the total
of the Purchase Price Decreases exceeds the total of the Purchase Price
Increases.
"Purchase Price Decreases" means, without duplication, the following:
(i) 100% of the amount, if any, of negative Working Capital of the Acquired
Companies other than Coyote Gas, or constituting part of the Acquired Assets, in
each case as of the Effective Time, as determined and calculated in accordance
with GAAP, (ii) 100% of the amount, if any, of all of the consolidated
Indebtedness (other than Indebtedness otherwise included in Working Capital) of
the Acquired Companies other than Coyote Gas, or constituting part of the
Acquired Assets, in each case as of the Effective Time, (iii) 50% of the amount,
if any, of negative Working Capital of Coyote Gas as of the Effective Time, as
determined and calculated in accordance with GAAP, (iv) 50% of the amount, if
any, of all of the consolidated Indebtedness (other than Indebtedness otherwise
included in Working Capital) of Coyote Gas as of the Effective Time, (v) 100% of
all distributions made by the Acquired Companies other than Coyote Gas after the
Effective Time and (vi) 50% of all distributions made by Coyote Gas after the
Effective Time.
"Purchase Price Increases" means, without duplication, (i) 100% of the
amount, if any, of positive Working Capital of the Acquired Companies other than
Coyote Gas, or constituting part of the Acquired Assets, in each case as of the
Effective Time, as determined and calculated in accordance with GAAP, (ii) 50%
of the amount, if any, of positive Working Capital of Coyote Gas as of the
Effective Time, as determined and calculated in accordance with GAAP, (iii) 100%
of the Construction Costs, if any, incurred from and including June 1, 2002 to,
but excluding, the Effective Time, provided, however, that the Purchase Price
shall not be increased by more than $49 million pursuant to this sub-section
(iii), regardless of the amount of actual Construction Costs incurred, (iv) 100%
of the Construction Costs, if any, incurred from and including the Effective
Time to, but excluding, the Closing Date to the extent not reducing the Working
Capital of an Acquired Company from and including the Effective Time to, but
excluding, the Closing Date and (v) the interest on the Purchase Price from and
including the Effective Time to, but excluding, the Closing Date at a rate per
annum equal to the Prime Rate plus two percent, calculated on the basis of a
year of 365 days.
"Records" has the meaning set forth in Section 6(d).
"Registration Rights Agreement" means an agreement substantially in the
form of Exhibit I.
"Relevant Assets" means the Acquired Company Assets and the Acquired
Assets, including any assets covered by Section 6(g) .
"Reorganization Transactions" has the meaning set forth in Section
4(q).
"Repurchase Agreement" means an agreement substantially in the form of
Exhibit K.
11
"Retained Assets" means, other than the Relevant Assets, each and every
right, title, interest or other asset owned by, or that in any way accrued to
the benefit of, any Acquired Company or Seller Party (including their respective
successors) prior to the Closing Date, including the rights, title, interests
and assets described on Exhibit C.
"Retained Obligations" means all Obligations, regardless of when such
Obligations actually arise or arose, (i) associated with, arising out of, or
related to the ownership or operation of the Retained Assets and (ii) other than
the Assumed Obligations and any Obligations explicitly set forth on the face of
the balance sheet constituting part of the Financial Statements described in
Section 4(k)(i)(B), existing on the Closing Date and not associated with the
Relevant Assets.
"Rights of Way" means any and all rights-of-way, easements, surface
leases, fee properties, permits, licenses, franchises or other rights of
ingress, egress and use of land associated with, arising out of, or related to
the ownership or operation of the Relevant Assets.
"San ▇▇▇▇ Assets" means all the assets of San ▇▇▇▇ Co.
"San ▇▇▇▇ Co." means El Paso San ▇▇▇▇, L.L.C., a Delaware limited
liability company.
"San ▇▇▇▇ Holding" means El Paso San ▇▇▇▇ Holding Company, L.P., a
Delaware limited partnership.
"San ▇▇▇▇ Interest" means a 100% membership interest in San ▇▇▇▇ Co.
"SEC" has the meaning set forth in Section 3(b)(vii).
"SEC Documents" has the meaning set forth in Section 3(b)(vii).
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Seller" has the meaning set forth in the preface.
"Seller's Disclosure Schedules" is defined in Section 5(g).
"Seller Indemnitees" means, collectively, the Seller and its Affiliates
and each of their respective officers (or Persons performing similar functions),
directors (or Persons performing similar functions), employees, agents, and
representatives.
"Seller Party" means each of (i) the Seller, (ii) each Affiliate of the
Seller (other than, after the Closing, the Acquired Companies) in which the
Seller owns (directly or indirectly) an Equity Interest and which is a party to
any Transaction Agreement and (iii) up to and through the Closing, each of the
Acquired Companies.
"Series C Unit Amount" means $350 million.
12
"Series C Units" means Series C Units representing limited partner
interests in the Buyer, which have the terms set forth in Exhibit H.
"Shared Rights of Way" means all of the Coastal Shared Rights of Way
and the El Paso Shared Rights of Way.
"South Texas 2% LP Interest" means a 2.194% limited partner interest in
South Texas Co.
"South Texas 97% LP Interest" means a 97.002% limited partner interest
in South Texas Co.
"South Texas Assets" means all of the assets of South Texas Co.
"South Texas Co." means El Paso South Texas, L.P. a Delaware limited
partnership.
"South Texas GP Interest" means a .804% general partner interest in
South Texas Co.
"South Texas Interest" means the South Texas 2% LP Interest, the South
Texas 97% LP Interest and the South Texas GP Interest.
"Spin Down Agreement" means the Agreement to Transfer, dated October 4,
1996 but made effective on January 1, 1996, between El Paso Field Services
Company and El Paso Natural Gas, providing for the transfer of field systems and
other field assets.
"Straddle Period" means a Tax period or year commencing before and
ending after the Closing Date.
"Straddle Return" means a Tax Return for a Straddle Period.
"Subject Contracts" has the meaning set forth in Section 4(g).
"Subject Insurance Policies" means those material policies of
insurance, the current policies of which are listed on Schedule 1(a), which the
Seller or any of its Affiliates maintain covering any Acquired Company or any
Relevant Assets with respect to its assets and operations.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), custom duties, capital stock, franchise, profits, withholding,
social security (or similar excises), unemployment, disability, ad valorem, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or not.
"Tax Records" means all Tax Returns and Tax-related work papers
relating to any Relevant Asset.
13
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d).
"Tolling Agreement Amendment" means an agreement substantially in the
form of Exhibit J.
"Transaction Agreements" means this Agreement, the Acquired Assets
Assignment, the Acquired Company Equity Interests Assignments, the Joint Use
Agreement, the Coyote Note Assignment, the Exchange Agreement (if applicable),
the Repurchase Agreement, the Tolling Agreement Amendment and all other
agreements, documents, certificates or instruments executed and delivered in
connection with the transactions contemplated herein.
"Typhoon Gas Pipeline" means the 35-mile, 20-inch natural gas pipeline
located in the Green Canyon area of the Gulf of Mexico and originating on the
Chevron/BHP "Typhoon" platform in Green Canyon Block 237.
"Typhoon Oil Pipeline" means the 16-mile, 12-inch oil pipeline located
in the Green Canyon area of the Gulf of Mexico and originating on the
Chevron/BHP "Typhoon" platform in Green Canyon Block 237.
"Working Capital" means current assets less current liabilities.
2. The Transactions.
(a) Sale and Contribution of Acquired Company Equity Interests
and Acquired Assets. Subject to the terms and conditions of this Agreement, the
Seller agrees to sell and/or contribute (and, as applicable, agree to cause to
be sold and/or contributed to) the Buyer (or its designee(s)) the Acquired
Company Equity Interests and all of the rights, title and interest in and to the
Acquired Assets, in each case as further set forth in Section 2(b) and free and
clear of any Encumbrances other than Permitted Encumbrances, and the Buyer
agrees (or agrees to cause its designee(s)) to purchase and accept contribution
of the Acquired Company Equity Interests and all of the rights, title and
interest in the Acquired Assets, in each case as further set forth in Section
2(b).
(b) Consideration. In consideration for the contribution and
assignment of the Acquired Company Equity Interests and the Acquired Assets, the
Buyer agrees to pay the Seller the cash consideration amounts set forth below,
in cash by wire transfer of immediately available federal funds, and to issue
10,937,500 Series C Units to the Seller or its designee(s), in each case as
further set forth in this Section 2(b). All cash payments will be made to the
Seller, and the Seller will be responsible for allocating and distributing such
consideration among any applicable Seller Parties. The Seller will cause the
Acquired Company Equity Interests and the Acquired Assets to be contributed and
assigned as follows, and the Buyer will pay and issue the Purchase Price as
follows:
14
(i) the ANR Central Gulf Interest will be assigned to
the Buyer for $52 million of cash; and
(ii) the remaining Acquired Company Equity Interests,
and the Acquired Assets, will be contributed to the Buyer for
(A) an amount of cash equal to (x) the Cash Purchase Price
minus (y) $52 million and (B) 10,937,500 Series C Units,
representing $350 million of the Purchase Price consideration.
Any adjustment in the Purchase Price associated with Purchase Price Increases or
Purchase Price Decreases shall be made in cash and shall not adjust the number
of Series C Units issued hereunder.
(c) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of the Seller,
commencing at 10:00 a.m., local time, on the third business day following the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby has occurred (other than
conditions with respect to actions each Party shall take at the Closing itself)
or such other date as the Parties may mutually determine (the "Closing Date").
(d) Deliveries at the Closing. At the Closing,
(i) the Seller shall deliver to the Buyer the various
certificates, instruments, and documents referred to in
Sections 7(a) and 9(o);
(ii) the Buyer shall deliver to the Seller the
various certificates, instruments, and documents referred to
in Section 7(b);
(iii) the Seller shall cause
(A) San ▇▇▇▇ Holding to execute and deliver
an Acquired Company Equity Interests Assignment with
respect to the San ▇▇▇▇ Interest,
(B) Merchant-Energy and ANR Production to
execute and deliver an Acquired Company Equity
Interests Assignment with respect to the South Texas
Interest,
(C) El Paso Typhoon to execute and deliver
the Acquired Company Equity Interests Assignment with
respect to the ANR Central Gulf Interest,
(D) Each of Merchant-Energy and New Chaco to
execute and deliver an Acquired Assets Assignment
with respect to the Acquired Assets,
(E) Field Services to execute and deliver
the Coyote Gas Note Assignment,
15
(F) El Paso Natural Gas to execute and
deliver one or more Joint Use Agreements with respect
to the El Paso Shared Rights of Way, and
(G) Coastal Partners to execute and deliver
one or more Joint Use Agreements with respect to the
Coastal Shared Rights of Way;
(iv) the Buyer and the Seller shall execute and
deliver the Registration Rights Agreement and the Repurchase
Agreement;
(v) the Buyer shall cause Delos, and the Seller shall
cause New Chaco Holding, to execute and deliver the Tolling
Agreement Amendment;
(vi) the Buyer shall deliver to the Seller the
estimated Purchase Price (consisting of the Cash Purchase
Price and 10,937,500 Series C Units) as set forth on the
Proposed Closing Statement; and
(vii) the Parties shall execute and/or deliver, or
cause to be executed and/or delivered, to each other the other
Transaction Agreements (including the Exchange Agreement, if
applicable).
(e) Proposed Closing Statement and Post-Closing Adjustment.
(i) On or prior to the Closing Date, the Seller shall
cause to be prepared and delivered to the Buyer a statement
(the "Proposed Closing Statement"), as prepared and determined
in accordance with GAAP to the extent applicable, setting
forth the Seller's good faith estimate, including reasonable
detail, of the Purchase Price. As soon as practicable, but in
any event no later than 60 days following the Closing Date,
the Seller shall cause to be prepared and delivered to the
Buyer a statement, including reasonable detail, of the actual
Purchase Price (such statement, as it may be adjusted pursuant
to Section 2(e)(ii), the "Closing Statement").
(ii) Upon receipt of the Closing Statement, the Buyer
and the Buyer's independent accountants shall be permitted
during the succeeding 30-day period to examine the work papers
used or generated in connection with the preparation of the
Closing Statement and such other documents as the Buyer may
reasonably request in connection with its review of the
Closing Statement. Within 30 days of receipt of the Closing
Statement, the Buyer shall deliver to the Seller a written
statement describing in reasonable detail its objections (if
any) to any amounts or items set forth on the Closing
Statement. If the Buyer does not raise objections within such
period, then, the Closing Statement shall become final and
binding upon all Parties at the end of such period. If the
Buyer raises objections, the Parties shall negotiate in good
faith to resolve any such objections. If the Parties are
unable to resolve any disputed item within 60 days after the
Buyer's receipt of the Closing Statement, any such disputed
item shall be submitted to a nationally recognized independent
accounting firm mutually agreeable to the Parties who shall be
instructed to resolve such disputed item within 30 days. The
resolution of
16
disputes by the accounting firm so selected shall be set forth
in writing and shall be conclusive, binding and non-appealable
upon the Parties and the Closing Statement shall become final
and binding upon the date of such resolution. The fees and
expenses of such accounting firm shall be paid one-half by the
Buyer and one-half by the Seller.
(iii) If the Purchase Price as set forth on the
Closing Statement exceeds the estimated Purchase Price as set
forth on the Proposed Closing Statement, the Buyer shall pay
the Seller in cash the amount of such excess. If the estimated
Purchase Price as set forth on the Proposed Closing Statement
exceeds the Purchase Price as set forth on the Closing
Statement, the Seller shall pay to the Buyer (or its designee)
in cash the amount of such excess. After giving effect to the
foregoing adjustments, any amount to be paid by the Buyer to
the Seller, or to be paid by the Seller to the Buyer, as the
case may be, shall be paid in the manner and with interest as
provided in Section 2(e)(iv) at a mutually convenient time and
place within five business days after the later of acceptance
of the Closing Statement or the resolution of the Buyer's
objections thereto pursuant to Section 2(e)(ii)).
(iv) Any payments pursuant to this Section 2(e) shall
be made by causing such payments to be credited in immediately
available funds to such account or accounts of the Buyer or
the Seller, as the case may be, as may be designated by the
Buyer or the Seller, as the case may be. If payment is being
made after the fifth business day referred to in Section
2(e)(iii), the amount of the payment to be made pursuant to
this Section 2(e) shall bear interest from and including such
fifth business day to, but excluding, the date of payment at a
rate per annum equal to the Prime Rate plus two percent. Such
interest shall be payable at the same time as the payment to
which it relates and shall be calculated on the basis of a
year of 365 days and the actual number of days for which due.
(v) The Buyer shall cooperate in the preparation of
the Closing Statement, including providing customary
certifications to the Seller, and, if requested, to the
Seller's independent accountants or the accounting firm
selected by mutual agreement of the Parties pursuant to
Section 2(e)(ii).
(vi) Except as set forth in Section 2(e)(ii), each
Party shall bear its own expenses incurred in connection with
the preparation and review of the Closing Statement.
(f) Assumed Obligations. On the Closing Date, subject to the
other terms and conditions of this Agreement (including the Seller's
indemnification obligations in Section 8(b)), the Buyer will assume and will be
obligated to fully and timely pay, perform, and discharge in accordance with
their terms, the Obligations (the "Assumed Obligations") relating to:
(i) any and all Obligations of the Seller Parties
under the Acquired Asset Contracts, to the extent existing,
arising, accruing or otherwise related to the period on,
including and after the Effective Time;
17
(ii) any and all Obligations in any way relating to
the abandoning, decommissioning, or removing of any pipelines
or facilities constituting any portion of the Acquired Assets
or restoring or reconditioning the lands affected thereby; and
(iii) any and all Obligations in any way relating to
the ownership or operation of the Acquired Assets arising
during, related to or otherwise attributable to acts or
omissions of the Buyer that occur or are attributable to the
period commencing with the Effective Time, including any
Obligations covered by Section 6(g).
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Seller. The Seller
hereby represents and warrants to the Buyer as follows:
(i) Organization and Good Standing. Seller is an
entity duly organized, validly existing, and in good standing
under the Laws of the state of Delaware. Seller is in good
standing under the Laws of the state of Texas and each other
jurisdiction which requires such qualification, except where
the lack of such qualification would not have a Material
Adverse Effect.
(ii) Authorization of Transaction. Each Seller Party
has full power and authority (including full entity power and
authority) to execute and deliver each Transaction Agreement
to which such Seller Party is a party and to perform its
obligations thereunder. Each Transaction Agreement to which
any Seller Party is a party constitutes the valid and legally
binding obligation of such Seller Party, enforceable against
such Seller Party in accordance with its terms and conditions,
subject, however, to the effects of bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting
creditors' rights generally, and to general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Except as set
forth on Schedule 3(a)(ii), no Seller Party need give any
notice to, make any filing with, or obtain any authorization,
consent, or approval of any Governmental Authority or any
other Person in order to consummate the transactions
contemplated by this Agreement or any other Transaction
Agreement to which such Seller Party is a party, except for
the prior approval of the Federal Trade Commission ("FTC"), if
applicable.
(iii) Noncontravention. Except for prior approval of
the FTC (if applicable) and filings specified in Schedule
3(a)(ii) or as set forth in Schedule 3(a)(iii) neither the
execution and delivery of any Transaction Agreement to which
Seller is a party, nor the consummation of any of the
transactions contemplated thereby, shall (A) violate any Law
to which any Seller Party is subject or any provision of its
Organizational Documents or (B) conflict with, result in a
breach of, constitute a default under, result in the
acceleration of, create in any Person the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or
18
other arrangement to which any Seller Party is a party or by
which it is bound or to which any of its assets or any of the
Relevant Assets are subject, except for such violations,
defaults, breaches, or other occurrences that do not,
individually or in the aggregate, have a material adverse
effect on the ability of the Seller or any other Seller Party
to consummate the transactions contemplated by such
Transaction Agreement.
(iv) Brokers' Fees. No Seller Party has any liability
or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated
by this Agreement for which the Buyer could become liable or
obligated.
(v) Taxes. To the Knowledge of each Seller Party, the
Seller has (i) duly filed all material Tax Returns required to
be filed by or with respect to the Seller or its assets or
operations with the Internal Revenue Service or other
applicable taxing authority, (ii) paid, or adequately reserved
against, all Taxes due or claimed due by a taxing authority
from or with respect to the Buyer or its assets or operations
and (iii) made all material deposits required with respect to
Taxes. To the Knowledge of each Seller Party, there has been
no material issue raised or material adjustment proposed (and
none is pending) by the Internal Revenue Service or any other
taxing authority in connection with any Tax Returns relating
to the Acquired Assets or operations of the Seller, and no
waiver or extension of any statute of limitations as to any
federal, state, local or foreign tax matter relating to the
Acquired Assets or operations of the Seller has been given by
or requested from Seller with respect to any Tax year.
(vi) Investment. The Seller is not acquiring the
Series C Units with a view to or for sale in connection with
any distribution thereof or any other security related thereto
within the meaning of the Securities Act. The Seller is
familiar with investments of the nature of the Series C Units,
understands that this investment involves substantial risks,
has adequately investigated the Buyer and the Series C Units,
and has substantial knowledge and experience in financial and
business matters such that it is capable of evaluating, and
has evaluated, the merits and risks inherent in purchasing the
Series C Units, and is able to bear the economic risks of such
investment. The Seller has had the opportunity to visit with
the Buyer and meet with its officers and other representatives
to discuss the business, assets, liabilities, financial
condition, and operations of the Buyer, has received all
materials, documents and other information that the Seller
deems necessary or advisable to evaluate the Buyer and the
Series C Units, and has made its own independent examination,
investigation, analysis and evaluation of the Buyer and the
Series C Units, including its own estimate of the value of the
Series C Units. The Seller has undertaken such due diligence
(including a review of the properties, liabilities, books,
records and contracts of the Buyer) as the Seller deems
adequate.
(b) Representations and Warranties of the Buyer. The Buyer
hereby represents and warrants to the Seller as follows:
19
(i) Organization of the Buyer. Each Buyer Party is a
limited liability company, limited partnership or corporation
duly organized, validly existing, and in good standing under
the Laws of the state of Delaware. Each Buyer Party is in good
standing under the Laws of the state of Texas and each other
jurisdiction which requires such qualification, except where
the lack of such qualification would not have a Material
Adverse Effect.
(ii) Authorization of Transaction. Each Buyer Party
has full power and authority (including full entity power and
authority) to execute and deliver each Transaction Agreement
to which it is a party and to perform its obligations
thereunder. Each Transaction Agreement to which such Buyer
Party is a party constitutes the valid and legally binding
obligation of such Buyer Party, enforceable against such Buyer
Party in accordance with its terms and conditions, subject,
however, to the effects of bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting
creditors' rights generally, and to general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Except as set
forth on Schedule 3(b)(ii), no Buyer Party needs to give any
notice to, make any filing with, or obtain any authorization,
consent, or approval of any Governmental Authority or any
other Person in order to consummate the transactions
contemplated by this Agreement or any other Transaction
Agreement, except for the prior approval of the FTC, if
applicable.
(iii) Noncontravention. Except for the prior approval
of the FTC (if applicable) and filings specified in Schedule
3(b)(ii) or as set forth in Schedule 3(b)(iii), neither the
execution and delivery of any Transaction Agreement to which
any Buyer Party is a party, nor the consummation of any of the
transactions contemplated thereby, shall (A) violate any Law
to which such Buyer Party is subject or any provision of its
Organizational Documents or (B) conflict with, result in a
breach of, constitute a default under, result in the
acceleration of, create in any Person the right to accelerate,
terminate, modify, or cancel, or require any notice, approval
or consent under any agreement, contract, lease, license,
instrument, or other arrangement to which any Buyer Party is a
party or by which it is bound or to which any of its assets is
subject, except for such violations, defaults, breaches, or
other occurrences that do not, individually or in the
aggregate, have a material adverse effect on the ability of
any Buyer Party to consummate the transactions contemplated by
such Transaction Agreement.
(iv) Brokers' Fees. No Buyer Party has any liability
or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated
by this Agreement for which the Seller could become liable or
obligated.
(v) Investment. The Buyer is not acquiring the
Acquired Company Equity Interests or the Relevant Assets with
a view to or for sale in connection with any distribution
thereof or any other security related thereto within the
20
meaning of the Securities Act. The Buyer is familiar with
investments of the nature of the Acquired Company Equity
Interests and the Relevant Assets, understands that this
investment involves substantial risks, has adequately
investigated the Acquired Company Equity Interests and the
Relevant Assets, and has substantial Knowledge and experience
in financial and business matters such that it is capable of
evaluating, and has evaluated, the merits and risks inherent
in purchasing the Acquired Company Equity Interests and the
Relevant Assets, and is able to bear the economic risks of
such investment. The Buyer has had the opportunity to visit
with the Seller and their applicable Affiliates and meet with
their representative officers and other representatives to
discuss the business, assets, liabilities, financial
condition, and operations of the Acquired Companies and the
Relevant Assets, has received all materials, documents and
other information that the Buyer deems necessary or advisable
to evaluate the Acquired Companies and the Relevant Assets,
and has made its own independent examination, investigation,
analysis and evaluation of the Acquired Companies and the
Relevant Assets, including its own estimate of the value of
the Acquired Companies and the Relevant Assets. The Buyer has
undertaken such due diligence (including a review of the
Acquired Assets, properties, liabilities, books, records and
contracts of the Acquired Companies and the Relevant Assets)
as the Buyer deems adequate.
(vi) Series C Units. The issuance of the Series C
Units by the Buyer has been duly authorized and approved by
all requisite partnership actions, and such Series C Units
shall, when issued in consideration for the contribution by
the Seller of the Acquired Company Equity Interests (other
than the ANR Central Gulf Interest) pursuant to Section
2(b)(ii), be validly issued, fully paid and (except as set
forth in Sections 17-303(a) and 17-607 of the Delaware LP Act)
non-assessable, and (except as described in the Buyer's
limited partnership agreement) will not be subject to any
preemptive rights created by statute, the Buyer's
organizational documents or any other agreement to which the
Buyer is a party or by which the Buyer is bound.
(vii) SEC Documents - The Buyer has made available to
the Seller a true and complete copy of the Buyer's Form 10-K
for 2001, all Form 10-Qs filed by the Buyer during 2002 and
all Form 8-Ks filed by the Buyer through the date hereof (the
"SEC Documents"). As of their respective dates, (a) the SEC
Documents complied in all material respects with the
requirements of the Securities Act or the Securities Exchange
Act, as the case may be, and the rules and regulations of the
Securities and Exchange Commission (the "SEC") thereunder
applicable to the Buyer, and (b) none of the SEC Documents
contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each
of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the SEC
Documents (i) were prepared in accordance with, and complied
as to form with, the published rules and regulations of the
SEC and GAAP applied on a consistent basis throughout the
periods involved (except as otherwise noted therein) and (ii)
fairly present, in all material respects, the
21
consolidated financial position of the Buyer and its
subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their cash flows
for the periods indicated, except that any unaudited interim
financial statements were or will be subject to normal and
recurring year-end adjustments, which individually and in the
aggregate, will not materially affect the total net worth
shown on, or the results indicated by, such interim financial
statements. Except as and to the extent disclosed in the SEC
Documents filed prior to the date of this Agreement, there has
not been since September 30, 2002, (i) a material adverse
change in the business, operations or financial condition of
the Buyer or (ii) any significant change by the Buyer or its
subsidiaries in their accounting methods, principles or
practices.
4. Representations and Warranties Concerning the Acquired Company
Equity Interests, Acquired Companies and Relevant Assets. The Seller hereby
represents and warrants to the Buyer as follows (provided, however, that any
representation or warranty given in Sections 4(c)-4(g), and 4(i) with respect to
the Coyote Gas Assets and the operations of Coyote Gas shall be deemed to be
made to the Seller's Knowledge):
(a) Organization, Qualification, and Company Power. Each of
the Acquired Companies and the Seller Parties (x) is a limited liability
company, partnership (limited or general), joint venture or corporation duly
organized, validly existing, and in good standing under the Laws of the state of
Delaware, except where the lack of such organization, existence or good standing
would not have a Material Adverse Effect; (y) is in good standing under the Laws
of the state of Texas and each other jurisdiction which requires qualification,
except where the lack of such qualification would not have a Material Adverse
Effect; and (z) has full power and authority to carry on the businesses in which
it is engaged and to own and use the properties owned and used by it, except
where the lack of such power and authority would not have a Material Adverse
Effect.
(b) Noncontravention. Except for the need to obtain prior
approval of the FTC or as set forth in Schedule 4(b), neither the execution and
delivery of any Transaction Agreement to which any Seller Party is a party, nor
the consummation of any of the transactions contemplated thereby, shall (i)
violate any Law to which any Acquired Company, any of the Acquired Company
Equity Interests or any of the Relevant Assets is subject or any provision of
the Organizational Documents of any Seller Party or any Acquired Company or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, require any notice or trigger any rights to payment or other
compensation, or result in the imposition of any Encumbrance on any Acquired
Company, any of the Acquired Company Equity Interests or any of the Relevant
Assets under, any agreement, contract, lease, license, instrument, or other
arrangement to which any Acquired Company, any of the Acquired Company Equity
Interests or any of the Relevant Assets is subject, except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, right to payment or other compensation, or
Encumbrance would not have a Material Adverse Effect, or would not materially
adversely affect the ability of any Seller Party to consummate the transactions
contemplated by such Transaction Agreement.
22
(c) Title to and Condition of Assets.
(i) Except to the extent constituting assets or
interests ultimately transferred to the Buyer (or its
designee) pursuant to Section 6(h) or pursuant to a Joint Use
Agreement executed and delivered at Closing, each of
Merchant-Energy, New Chaco and the Acquired Companies,
respectively, have good, marketable and indefeasible title to
all of the Acquired Assets and the Acquired Company Assets,
respectively, in each case free and clear of all Encumbrances,
except for (a) Permitted Encumbrances and (b) on the date of
this Agreement, Encumbrances disclosed in Schedule 4(c)(i).
The principal assets constituting the Acquired Company Assets
are described on Exhibit A. The principal assets constituting
the Acquired Assets are described on Exhibit B. The operations
of the Relevant Assets are the only operations reflected in
the Financial Statements. When such assets and interests are
contributed, sold and transferred, the applicable Acquired
Companies (or another designee of the Buyer) will have good,
marketable and indefeasible title to all of the assets or
interests ultimately transferred pursuant to Section 6(h) or
pursuant to a Joint Use Agreement executed and delivered at
Closing
(ii) To the Seller's Knowledge, except as disclosed
in Schedule 4(c)(ii), the Relevant Assets are in good
operating condition and repair (normal wear and tear
excepted), are free from defects (patent and latent), are
suitable for the purposes for which they are currently used
and are not in need of maintenance or repairs except for
ordinary routine maintenance and repairs and the additional
Maintenance Capital intended to be incurred pursuant to
Section 6(f).
(iii) Capitalization of the Acquired Companies.
(A) The capitalization of the Acquired
Companies is as follows:
(1) The San ▇▇▇▇ Interest
constitutes all of the Equity Interests of
San ▇▇▇▇ Co. San ▇▇▇▇ Holding owns
(beneficially and of record) 100% of the San
▇▇▇▇ Interest.
(2) The ANR Central Gulf Interest
constitutes all of the Equity Interests of
ANR Central Gulf. El Paso Typhoon owns
(beneficially and of record) 100% of the ANR
Central Gulf Interest.
(3) The South Texas Interest
constitutes all of the Equity Interests of
South Texas Co. Merchant-Energy owns
(beneficially and of record) 100% of the
South Texas 97% LP Interest and 100% of the
South Texas GP Interest. ANR Production owns
(beneficially and of record) 100% of the
South Texas 2% LP Interest.
23
(4) Notwithstanding anything in the
Organizational Documents of Coyote Gas or
any other understandings or agreements,
written or oral, to which an Acquired
Company or Field Services is a party, the
Coyote Gas Interest constitutes 50% of all
(i) Equity Interests, (ii) voting rights and
(iii) economic rights in Coyote Gas. San
▇▇▇▇ Co. owns (beneficially and of record)
100% of the Coyote Gas Interest.
(B) The Seller beneficially owns directly or
indirectly 100% of the Seller Parties. The Seller
beneficially owns directly or indirectly 100% of the
Acquired Company Equity Interests, which includes
100% of the Equity Interests in the Acquired
Companies other than Coyote Gas. All of the Acquired
Company Equity Interests are uncertificated. The
Acquired Company Equity Interests constitute 100% of
the issued and outstanding Equity Interests of the
Acquired Companies other than Coyote Gas, and have
been duly authorized, and are validly issued and
fully paid and (except (i) with respect to general
partnership and joint venture interests and (ii) as
set forth in Sections 17-303(a) and 17-607 of the
Delaware LP Act with respect to limited partnership
interests) non-assessable. Except to the extent
created under the Securities Act, state securities
Laws, limited liability company Laws, limited
partnership Laws, partnership and joint venture Laws
and general corporation Laws of the Acquired
Companies' jurisdiction of formation, and as created
by the Acquired Companies' Organizational Documents,
(x) the Acquired Company Equity Interests are held as
set forth above, free and clear of any Encumbrances
and (y) there are no Commitments with respect to any
Equity Interest of any Acquired Company. No Seller
Party is party to any voting trusts, proxies, or
other agreements or understandings with respect to
voting any Equity Interest of any Acquired Company.
Other than as disclosed in Schedule 4(c)(i), neither
the Organizational Documents of Coyote Gas nor any
other understandings or agreements, written or oral,
to which an Acquired Company or Field Services is a
party contain any Encumbrances on or Commitments with
respect to the Coyote Gas Interest.
(C) After the consummation of the
transactions contemplated in this Agreement, the
Buyer shall own, directly or indirectly, 100% of the
Acquired Company Equity Interests, which includes
100% of the Equity Interests in the Acquired
Companies other than Coyote Gas, and 100% of the
Acquired Company Assets other than the Coyote Gas
Assets, in which the Buyer will acquire beneficial
ownership of 50%.
(iv) Acquired Company Asset Ownership. Other than the
Coyote Gas Interest, no Acquired Company owns (and the
Acquired Assets do not include) an Equity Interest in any
Person. There are no Commitments with respect to an Equity
Interest in any Acquired Company. The Acquired Companies own
no other assets other than the Acquired Company Assets, and
have no operations or
24
Obligations other than those directly related to the Acquired
Company Assets or explicitly set forth on Schedule 4(k)(ii).
(v) Encumbrances for Borrowed Money. Except as set
forth on Schedule 4(c)(v), there are no borrowings, loan
agreements, promissory notes, pledges, mortgages, guaranties,
liens and similar liabilities (direct and indirect), or
Encumbrances which are secured by or constitute an Encumbrance
on the Relevant Assets.
(d) Material Change. Except for the Reorganization
Transactions and as set forth in Schedule 4(d), since December 31, 2001 (and
except as expressly set forth in the Financial Statements):
(i) there has not been any Material Adverse Effect;
(ii) the Relevant Assets have been operated and
maintained in the Ordinary Course of Business;
(iii) there has not been any damage, destruction or
loss to any portion of the Relevant Assets, whether or not
covered by insurance, that would have a Material Adverse
Effect;
(iv) there has been no purchase, sale or lease of any
material asset included in the Relevant Assets;
(v) there has been no actual, pending, or, to the
Seller's Knowledge, threatened change affecting any of the
Relevant Assets with any customers, licensors, suppliers,
distributors or sales representatives of any Seller Party,
except for changes that do not have a Material Adverse Effect;
(vi) there has been no (x) amendment or modification
in any material respect to any Subject Contract or any other
contract or agreement material to the Relevant Assets, or (y)
termination of any Subject Contract or any other contract or
agreement material to the Relevant Assets before the
expiration of the term thereof other than to the extent any
such material contract or agreement terminated pursuant to its
terms in the Ordinary Course of Business; and
(vii) there is no contract, commitment or agreement
to do any of the foregoing, except as expressly permitted
hereby.
(e) Legal Compliance. Each Seller Party, with respect to the
Relevant Assets, and each Acquired Company, has complied with all applicable
Laws of all Governmental Authorities, except where the failure to comply would
not have a Material Adverse Effect. The Seller makes no representations or
warranties in this Section 4(e) with respect to Taxes or Environmental Laws, for
which the sole representations and warranties of the Seller are set forth in
Sections 4(f) and 4(i), respectively.
(f) Tax Matters. Except as set forth in Schedule 4(f) or as
would not have a
25
Material Adverse Effect, the Seller, its Affiliates and the Acquired Companies
have filed all Tax Returns with respect to the Relevant Assets that they were
required to file and such Tax Returns are accurate in all material respects. All
Taxes shown as due by any Acquired Company or with respect to the Relevant
Assets on any such Tax Returns have been paid. Additionally, there is no dispute
or claim concerning any Tax liability of the Seller, its Affiliates or the
Acquired Companies related to the Relevant Assets claimed or raised in writing
by any Governmental Authority.
(g) Contracts and Commitments. Except for contracts entered
into after the date hereof as permitted pursuant to Section 5(c)(v), Schedule
4(g)(i) contains a list of the contracts, agreements, licenses, permits and
other documents and instruments to which any Acquired Company is a party or
otherwise constituting part of the Acquired Company Assets (the "Acquired
Company Contracts") or constituting any portion of the Acquired Assets (the
"Acquired Asset Contracts," and, together with the Acquired Company Contracts,
the "Subject Contracts"), and each such Subject Contract is in full force and
effect, except where the failure to be in full force and effect would not have a
Material Adverse Effect. Schedule 4(g)(ii) contains a list of the Rights of Way.
The Subject Contracts, together with the Rights of Way, the Joint Use Agreements
executed and delivered at Closing and the agreements transferring rights and
interests to the Buyer pursuant to Section 6(h), constitute all of the material
contracts, agreements, rights of way, licenses, permits, and other documents and
instruments necessary for the operation and business of the Acquired Companies
and the Relevant Assets, as applicable, in order to generate the financial
results set forth in the Financial Statements. The Seller Parties have performed
all material obligations required to be performed by them to date under the
Subject Contracts and the Rights of Way, and are not in default under any
obligation of any such contract or right-of-way, except when such default would
not have a Material Adverse Effect. To the Seller's Knowledge, no other party to
any Subject Contract is in default thereunder. No Acquired Company, Seller Party
or Affiliate of any Seller Party has made any promise (whether in any
Organizational Documents or otherwise, and whether written or oral) to
contribute cash or property to or to perform services for Coyote Gas.
(h) Litigation.
(i) Schedule 4(h) sets forth each instance in which
any Acquired Company or any of the Relevant Assets (A) is
subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (B) is the subject of any action,
suit, proceeding, hearing, or investigation of, in, or before
any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction, or is the
subject of any pending or, to the Seller's Knowledge,
threatened claim, demand, or notice of violation or liability
from any Person, except where any of the foregoing would not
have a Material Adverse Effect.
(ii) No Seller Party has Knowledge of any Basis for
any present or future injunction, judgment, order, decree,
ruling, or charge or action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction, against any of them giving rise to any
Obligation to which any Acquired Company or any of the
Relevant Assets would be subject.
26
(i) Environmental Matters. Except as set forth in Schedule
4(i):
(i) The Seller, with respect to the Relevant Assets,
has been in compliance with all applicable local, state, and
federal laws, rules, regulations, and orders regulating or
otherwise pertaining to (a) the use, generation, migration,
storage, removal, treatment, remedy, discharge, release,
transportation, disposal, or cleanup of pollutants,
contamination, hazardous wastes, hazardous substances,
hazardous materials, toxic substances or toxic pollutants, (b)
surface waters, ground waters, ambient air and any other
environmental medium on or off any Lease or (c) the
environment or health and safety-related matters; including
the following as from time to time amended and all others
whether similar or dissimilar: the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended
by the Superfund Amendments and Reauthorization Act of 1986
("CERCLA"), the Resource Conservation and Recovery Act of
1976, as amended by the Used Oil Recycling Act of 1980, the
Solid Waste Disposal Act Amendments of 1980, and the Hazardous
and Solid Waste Amendments of 1984, the Hazardous Materials
Transportation Act, as amended, the Toxic Substance Control
Act, as amended, the Clean Air Act, as amended, the Clean
Water Act, as amended, and all regulations promulgated
pursuant thereto (collectively, the "Environmental Laws" and
individually an "Environmental Law"), except, in the case of
each of (a), (b) and (c), for such instances of noncompliance
that individually or in the aggregate do not have a Material
Adverse Effect.
(ii) The Seller has obtained all permits, licenses,
franchises, authorities, consents, registrations, orders,
certificates, waivers, exceptions, variances and approvals,
and have made all filings, paid all fees, and maintained all
material information, documentation, and records, as necessary
under applicable Environmental Laws for operating the Relevant
Assets as they are presently operated, and all such permits,
licenses, franchises, authorities, consents, approvals, and
filings remain in full force and effect, except for such
matters that individually or in the aggregate do not have a
Material Adverse Effect. Schedule 4(i)(ii) sets forth a
complete list of all permits, licenses, franchises,
authorities, consents, and approvals, as necessary under
applicable Environmental Laws for operating the Relevant
Assets and the Acquired Companies' businesses as they are
presently operated (except with respect to the Retained
Assets), each of which is held in the name of the appropriate
Seller Party as indicated on such schedule.
(iii) Except as would not have a Material Adverse
Effect, (x) there are no pending or threatened claims,
demands, actions, administrative proceedings or lawsuits
against any Seller with respect to the Relevant Assets and the
Seller has not received notice of any of the foregoing and (y)
no Acquired Company, and none of the Relevant Assets, is
subject to any outstanding injunction, judgment, order, decree
or ruling under any Environmental Laws.
27
(iv) The Seller has not received any written notice
that it, with respect to the Relevant Assets, is or may be a
potentially responsible party under CERCLA or any analogous
state law in connection with any site actually or allegedly
containing or used for the treatment, storage or disposal of
Hazardous Substances.
(v) All Hazardous Substances or solid wastes
generated, transported, handled, stored, treated or disposed
by, in connection with or as a result of the operation or
possession of the Seller or the conduct of the Seller, have
been transported only by carriers maintaining valid
authorizations under applicable Environmental Laws and
treated, stored, disposed of or otherwise handled only at
facilities maintaining valid authorizations under applicable
Environmental Laws and such carriers and facilities have been
and are operating in compliance with such authorizations and
are not the subject of any existing, pending or threatened
action, investigation or inquiry by any Governmental Authority
or other Person in connection with any of the Environmental
Laws.
The Seller makes no representation or warranty regarding any compliance or
failure to comply with, or any actual or contingent liability under, any
Environmental Law, except as expressly set forth in this Section 4(i). For
purposes of this Section 4(i), each reference to the Seller or the Seller
Parties shall be deemed to include the Seller Parties and their Affiliates.
(j) Preferential Purchase Rights; Transferability of Coyote
Gas Interest. Except as set forth on Schedule 4(j), there are no preferential
purchase rights, options or other rights held by any Person not a party to this
Agreement to purchase or acquire any or all of the Equity Interest in any
Acquired Company, or any of the Relevant Assets, in whole or in part, that would
be triggered or otherwise affected as a result of the transactions contemplated
by this Agreement ("Preferential Rights"). Except as set forth on Schedule 4(j),
there are no restrictions on the transfer of the Coyote Gas Interest to a third
party and no Acquired Company, Seller Party or Affiliate of any Seller Party has
agreed (whether in any Organizational Documents or otherwise, and whether
written or oral) to any such restrictions on transfer of the Coyote Gas
Interest.
(k) Financial Statements.
(i) Buyer's Current Reports on Form 8-K filed with
the Securities and Exchange Commission (A) on August 12, 2002
set forth audited combined and consolidated financial
statements covering the ownership and operation of the
Acquired Companies and the ownership and operation of the
Relevant Assets as of, and for the twelve month periods ended,
December 31, 2001, December 31, 2000 and December 31, 1999 and
(B) on October 10, 2002 set forth unaudited combined and
consolidated financial statements covering the ownership and
operation of the Acquired Companies and the ownership and
operation of the Relevant Assets as of, and for the six month
periods ended, June 30, 2002 and June 30, 2001 (the financial
statements described in (A) and (B) collectively, the
"Financial Statements").
28
(ii) (A) The Financial Statements were prepared in
accordance with GAAP (except as expressly set forth therein
and, with respect to the Financial Statements described in
Section 4(k)(i)(B), for the absence of footnotes) and fairly
present, in all material respects, the financial position and
income associated with the ownership and operation of the
Acquired Companies and Relevant Assets as of the dates and for
the periods indicated; (B) the Financial Statements do not
omit to state any liability required to be stated therein in
accordance with GAAP (except as expressly set forth therein
and, with respect to the Financial Statements described in
Section 4(k)(i)(B), for the absence of footnotes, and normal
year-end adjustments); (C) none of the Acquired Companies has,
and none of the Relevant Assets are subject to, any
Obligations other than those reflected in the Financial
Statements; and (D) all Assumed Obligations are reflected in
the Financial Statements.
(l) Employee Matters. No Acquired Company has any employees.
(m) Prohibited Events. Except for the Reorganization
Transactions, none of the matters described in Section 5(c) have occurred since
December 31, 2001.
(n) Regulatory Matters. No Seller Party or Acquired Company is
(i) a "holding company," a "subsidiary company" of a "holding company," an
"affiliate" of a "holding company," or a "public utility," as each such term is
defined in the Public Utility Holding Company Act of 1935, as amended, or (ii)
an "investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended, and the
rules and regulations promulgated thereunder. Except as set forth on Schedule
4(n), none of the Relevant Assets are subject to regulation by the Federal
Energy Regulatory Commission or rate regulation or comprehensive
nondiscriminatory access regulation under any federal laws or the laws of any
state or other local jurisdiction.
(o) Intercompany Transactions. Each outstanding receivable,
payable and other intercompany transaction and arrangement between the Seller or
any of its Affiliates, on the one hand, and any Acquired Company, on the other
hand, (including hydrocarbon imbalances existing on the date of this Agreement)
existing on the Closing Date is listed on Schedule 4(o).
(p) Disclaimer of Representations and Warranties Concerning
Personal Property, Equipment, and Fixtures. The Buyer acknowledges that (i) it
has had and pursuant to this Agreement shall have before Closing access to the
Acquired Companies and the Relevant Assets and the officers and employees of the
Seller and (ii) in making the decision to enter into this Agreement and
consummate the transactions contemplated hereby, the Buyer has relied solely on
the basis of its own independent investigation and upon the express
representations, warranties, covenants, and agreements set forth in this
Agreement and the other Transaction Agreements. Accordingly, the Buyer
acknowledges that, except as expressly set forth in this Agreement, the Seller
has not made, and THE SELLER MAKES NO AND DISCLAIM ANY, REPRESENTATIONS OR
WARRANTIES, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE, OR
OTHERWISE, REGARDING (i) THE QUALITY, CONDITION, OR OPERABILITY OF ANY PERSONAL
PROPERTY, EQUIPMENT, OR FIXTURES, (ii) THEIR MERCHANTABILITY, (iii) THEIR
FITNESS
29
FOR ANY PARTICULAR PURPOSE, (iv) THEIR CONFORMITY TO MODELS, SAMPLES OF
MATERIALS OR MANUFACTURER DESIGN, OR (v) AS TO WHETHER ANY RELEVANT ASSETS
(OTHER THAN RETAINED ASSETS) ARE YEAR 2000 COMPLIANT, AND ALL PERSONAL PROPERTY
AND EQUIPMENT IS DELIVERED "AS IS, WHERE IS" IN THE CONDITION IN WHICH THE SAME
EXISTS.
(q) Reorganization Transactions. The transactions described on
Exhibit F (the "Reorganization Transactions") occurred as and when described on
such Exhibit.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the date of this Agreement and the Closing:
(a) General. The Buyer shall use its Best Efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement,
including the Seller's conditions to closing in Section 7(b). The Seller shall
use its Best Efforts to take all action and to do all things necessary, proper,
or advisable in order to consummate and make effective the transactions
contemplated by this Agreement, including the Buyer's conditions to closing in
Section 7(a).
(b) Notices and Consents. Each of the Parties shall give any
notices to, make any filings with, and use its Best Efforts to obtain any
authorizations, consents, and approvals of Governmental Authorities and third
parties it is required to obtain in connection with the matters referred to in
Sections 3(a)(ii), 3(a)(iii), 3(b)(ii), and 3(b)(iii) including the
corresponding Schedules, so as to permit the Closing to occur not later than
10:00 a.m. (Houston time) on November 29, 2002. Without limiting the generality
of the foregoing, the Parties agree to work in good faith with the FTC in order
to consummate the transactions contemplated hereby as soon as reasonably
practicable, but in no event later than 10:00 a.m. (Houston time) on November
29, 2002; provided, that, notwithstanding anything to the contrary contained
herein, this sentence shall not obligate the Buyer to divest or hold separate
any assets or enter into any agreement not contemplated by this Agreement or
modify this Agreement.
(c) Operation of Business. The Seller shall not, without the
consent of the Buyer (which consent shall not be unreasonably withheld or
delayed), except as expressly contemplated by this Agreement or as contemplated
by Schedule 5(c), cause or (to the extent any Seller Party or its Affiliate has
the Legal Right) permit any Acquired Company to engage in any practice, take any
action, or enter into any transaction outside the Ordinary Course of Business
or, with respect to the Relevant Assets, engage in any practice, take any
action, or enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing, without the consent of the
Buyer (which consent shall not be unreasonably withheld or delayed), except as
expressly contemplated by this Agreement or Schedule 5(c), the Seller shall not,
and shall not cause or (to the extent any Seller Party has the Legal Right)
permit any Acquired Company to, do any of the following:
(i) issue, sell, pledge, dispose of, grant, encumber,
or authorize the issuance, sale, pledge, disposition, or grant
of any Equity Interest of any Acquired Company or any
Commitments with respect to any Equity Interest of any
Acquired Company;
30
(ii) cause or allow any part of the Acquired Company
Equity Interests or the Relevant Assets to become subject to
an Encumbrance, except for Permitted Encumbrances and other
Encumbrances identified in Section 4(c);
(iii) amend in any material respect any Subject
Contract material to the Relevant Assets or any Acquired
Company (including any Acquired Company's Organizational
Documents) or terminate any such material contract or
agreement before the expiration of the term thereof other than
to the extent any such material contract or agreement expires
in accordance with its terms in the Ordinary Course of
Business;
(iv) except as required by Law, make, change or
revoke any Tax election relevant to any Acquired Company or
Relevant Asset;
(v) (A) acquire (including by merger, consolidation
or acquisition of Equity Interest or assets) any corporation,
partnership, limited liability company or other business
organization or any division thereof or any material amount of
assets; (B) incur any Indebtedness for borrowed money or issue
any debt securities or assume, guarantee, endorse, or
otherwise as an accommodation become responsible for, the
obligations of any Person, or make any loans or advances
except for intercompany borrowing among the Acquired Companies
in the Ordinary Course of Business; (C) except for the
Retained Assets, sell, lease or otherwise dispose of any
property or assets, other than sales of goods or services in
the Ordinary Course of Business; or (D) enter into or amend a
contract, agreement, commitment, or arrangement with respect
to any matter set forth in this Section 5(c)(v) or (except for
contracts with aggregate Obligations of the applicable
Acquired Company not in excess of $10,000) otherwise not in
the Ordinary Course of Business; provided that notwithstanding
any provision of this Agreement, if the Buyer expressly
consents in writing (x) each Acquired Company shall be
entitled to dividend and/or distribute to its Equity Interest
holders, at any time, and from time to time, such cash
generated by such company's business to which such Equity
Interest holder would otherwise be entitled (other than cash
arising from borrowings by such company or sales of assets by
such company outside of the Ordinary Course of Business) so
long as such dividends and/or distributions are reflected as a
Purchase Price Decrease, where appropriate, and (y) each
Acquired Company may make or incur capital expenditures in
accordance with the terms of its Organizational Documents and
the capital expenditures budget set forth on Schedule 5(c)(v);
(vi) change any Acquired Company's accounting
practices in any material respect with the exception of any
changes in accounting methodologies that have already been
agreed upon by its Equity Interest holders, consistent with
its Organizational Documents; or
(vii) initiate or settle any litigation, complaint,
rate filing or administrative proceeding.
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(d) Intercompany Transactions. All outstanding receivables,
payables and other intercompany transactions and arrangements between the Seller
or any of its Affiliates, on the one hand, and any Acquired Company, on the
other hand, shall remain in full force and effect through and after the Closing.
(e) Full Access. To the extent they have the Legal Right, the
Seller shall permit, and shall cause their Affiliates to permit, representatives
of the Buyer to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Seller and its
Affiliates, to all premises, properties, personnel, books, records (including
Tax records), contracts, and documents of or pertaining to any Acquired Company
or any of the Relevant Assets.
(f) Liens and Encumbrances. Prior to the Closing, the Seller
shall obtain releases of all liens and other Encumbrances disclosed in Schedule
4(c)(i), without any post-Closing liability or expense to any Acquired Company,
Acquired Company Asset, Acquired Asset or any Buyer Party, and shall provide
proof of such releases to the Buyer at the Closing.
(g) Notice of Developments. The Seller will give prompt
written notice to the Buyer and supplement or amend Seller's disclosure
schedules attached hereto ("Seller's Disclosure Schedules") with respect to any
applicable development occurring after the date of this Agreement, or any
applicable item about which the Seller did not have Knowledge on the date of
this Agreement. The Seller will also promptly supplement Schedule 4(g)(i) with
respect to any contract entered into after the date hereof pursuant to Section
5(c)(v). The Buyer will give prompt written notice to the Seller of any
applicable development (including any actual or anticipated breach or violation
of any representation, warranty or covenant herein) occurring after the date of
this Agreement, or any applicable item about which the Buyer did not have
Knowledge on the date of this Agreement.
6. Post-Closing Covenants. The Parties agree as follows:
(a) General. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties shall take such further action (including the execution and delivery of
such further instruments and documents) as the other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 8). As an
example, the Buyer will (at the Seller's cost and expense) reasonably cooperate
with the Seller to utilize any powers of eminent domain, condemnation or other
authority that the Buyer or any of its subsidiaries have to obtain or maintain
any Rights of Way or other rights described in Section 8(b)(viii). The Seller
shall obtain (at their expense) all governmental consents necessary in
connection with the transfer of title to the Rights of Way associated with the
San ▇▇▇▇ Assets from EPNG ultimately to San ▇▇▇▇ Co. (as successor in interest
to Field Services).
(b) Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or before
the Closing Date
32
involving any Acquired Company or the Relevant Assets, the other Party shall
cooperate with the contesting or defending Party and its counsel in the defense
or contest, make available its personnel, and provide such testimony and access
to its books and records (other than books and records which are subject to
privilege or to confidentiality restrictions) as shall be necessary in
connection with the defense or contest, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8).
(c) Surety Bonds; Guarantees. The Buyer agrees to be
substituted as the surety or guarantor of any surety bonds or guarantees issued
by the Seller or any of its Affiliates in connection with the Acquired Companies
or the Relevant Assets, including the surety bonds and guarantees listed on
Schedule 6(c). The Buyer and the Seller shall cooperate to effect all such
substitutions and the Buyer shall indemnify and hold the Seller harmless from
and against any Adverse Consequences (including the costs to the Seller of
maintaining such surety bonds and guarantees) arising from the failure of the
Buyer to be so substituted. The Buyer shall use commercially reasonable efforts
to obtain a release of the Seller from any surety or guaranty obligations with
respect to the Acquired Companies or the Relevant Assets.
(d) Delivery and Retention of Records. On or promptly after
the Closing Date, the Seller shall deliver or cause to be delivered to the
Buyer, copies of Tax Records which are relevant to Post-Closing Tax Periods and
all other files, books, records, information and data relating to the Acquired
Companies or the Relevant Assets that are in the possession or control of the
Seller (the "Records"). The Buyer agrees to (i) hold the Records and not to
destroy or dispose of any thereof for a period of ten years from the Closing
Date or such longer time as may be required by Law, provided that, if it desires
to destroy or dispose of such Records during such period, it shall first offer
in writing at least 60 days before such destruction or disposition to surrender
them to the Seller and if the Seller does not accept such offer within 20 days
after receipt of such offer, the Buyer may take such action and (ii) following
the Closing Date to afford the Seller, its accountants, and counsel, during
normal business hours, upon reasonable request, at any time, full access to the
Records and to the Buyer's employees to the extent that such access may be
requested for any legitimate purpose at no cost to the Seller (other than for
reasonable out-of-pocket expenses); provided that such access shall not be
construed to require the disclosure of Records that would cause the waiver of
any attorney-client, work product, or like privilege; provided, further that in
the event of any litigation nothing herein shall limit any Party's rights of
discovery under applicable Law.
(e) Assignment of Rights. The Seller will assign and will
cause its Affiliates to assign, upon the Buyer's request, any and all rights
(including claims) of the Seller or its Affiliates relating to any of the
Relevant Assets under any agreement (including the Spin Down Agreement and all
indemnification rights to the benefit of the Seller or its Affiliates arising
therefrom) pursuant to which the Seller or any of its Affiliates purchased or
otherwise acquired any of the Relevant Assets, all of which agreements are
listed on Schedule 6(e).
(f) Maintenance Capital.
(i) With respect to the calendar years 2003, 2004 and
2005, within 15 days following the end of each calendar month,
the Buyer shall cause to be
33
prepared and delivered to the Seller a statement, including
reasonable detail, of the Maintenance Capital incurred (paid
or payable) by the Buyer or any of its Affiliates for the
immediately preceding month (such statement, as it may be
adjusted pursuant to Section 6(f)(ii) (the "Maintenance
Capital Statement").
(ii) Within 10 days of receipt of the Maintenance
Capital Statement, the Seller shall deliver to the Buyer a
written statement describing in reasonable detail its
objections (if any) to any amounts or items set forth on the
Maintenance Capital Statement. If the Seller does not raise
objections within such period, then, the Maintenance Capital
Statement shall become final and binding upon all Parties at
the end of such 10 day period. If the Seller raises
objections, the Parties shall negotiate in good faith to
resolve any such objections. If the Parties are unable to
resolve any disputed item within 10 days after the Buyer's
receipt of the Seller's objection to the Maintenance Capital
Statement, any such disputed item shall be submitted to a
nationally recognized independent accounting firm mutually
agreeable to the Parties who shall be instructed to resolve
such disputed item within 30 days. The resolution of disputes
by the accounting firm so selected shall be set forth in
writing and shall be conclusive, binding and non-appealable
upon the Parties and the Closing Statement shall become final
and binding upon the date of such resolution. The fees and
expenses of such accounting firm shall be paid one-half by the
Buyer and one-half by the Seller.
(iii) If the aggregate Maintenance Capital incurred
(paid or payable) by the Buyer or any of its Affiliates for a
calendar year exceeds the Minimum Annual Capital Maintenance
Amount for such year, the Seller shall pay to the Buyer (or
its designee) the amount of such excess; provided that
Seller's payment obligations with respect to Maintenance
Capital incurred (paid or payable) by the Buyer or any of its
Affiliates shall not exceed the Maximum Annual Maintenance
Reimbursement for the relevant year. Any amount to be paid by
the Seller to the Buyer shall be paid in the manner and with
interest as provided in Section 6(f)(iv) at a mutually
convenient time and place within five business days after the
later of acceptance of the Maintenance Capital Statement or
the resolution of the Buyer's objections thereto pursuant to
Section 2.
(iv) Any payments pursuant to this Section 6(f) shall
be made by causing such payments to be credited in immediately
available funds to such account or accounts of the Buyer as
may be designated by the Buyer. If payment is being made after
the fifth business day referred to in Section 6(f)(iii), the
amount of the payment to be made pursuant to this Section 6(f)
shall bear interest from and including such fifth business day
to, but excluding, the date of payment at a rate per annum
equal to the Prime Rate plus two percent. Such interest shall
be payable at the same time as the payment to which it relates
and shall be calculated on the basis of a year of 365 days and
the actual number of days for which due.
34
(v) Except as set forth in Section 6(f)(ii), each
Party shall bear its own expenses incurred in connection with
the preparation and review of the Maintenance Capital
Statement.
(vi) To the extent that in any year the Seller pays
to the Buyer (or to its designee) any amount under Section
6(f)(iii) with respect to amounts payable by the Buyer or any
of its Affiliates, and neither the Buyer nor any of its
Affiliates actually pays such amount within the succeeding
calendar year, the Buyer will promptly reimburse the Seller
such amount.
(g) Inadvertent Exclusions. With respect to any assets which
were intended by both Parties to be Relevant Assets (and which have been used
and operated by the Buyer or its Affiliates, or finally determined by
Governmental Authority to have been used and operated by the Buyer or the
Affiliates, as though they were owned by the Buyer or its Affiliates after
Closing) but were unintentionally excluded from Exhibit A or Exhibit B, the
Parties hereby agree to do all things necessary and appropriate to effect the
sale and conveyance of such asset to Buyer (or its designees) as promptly as
possible after Closing. In such event, this Agreement shall be read and
interpreted as if such omitted asset was included in the definition of Relevant
Asset from the date hereof, including application of Article 8 with respect to
the Seller's indemnification obligations (and limitations thereon), with respect
thereto.
(h) Post-Closing Right-of-Way Matters. To the extent that the
Seller or any of its Affiliates owns any right-of-way, easement, surface lease,
fee property, permit, license, franchise or other right of ingress, egress and
use of land used in connection therewith necessary or appropriate for the
ownership and/or operation of any Relevant Asset, the Seller shall, or shall
cause such Affiliate to, within 60 days after Closing, provide to the Buyer or
its designee (whether through execution and delivery of a Joint Use Agreement or
another document reasonably acceptable to both Parties) all rights owned by the
Seller or any of its Affiliates necessary for the Buyer and its Affiliates to
continue the ownership and operation of the Relevant Assets without violating
any Law or violating the rights of (or giving rise to any termination right or
other Obligation in favor of) any landowner or other Person.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of
the Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties of the Seller
contained in Sections 3(a) and 4 must be true and correct in
all respects (without giving effect to any supplement to the
Schedules, any qualification as to materiality, Material
Adverse Effect or concepts of similar import, or any
qualification or limitation as to monetary amount or value as
of the date of this Agreement and at Closing (except for those
which refer to a specific date, which must be true and correct
as of such date), except where all breaches of such
representations and warranties
35
would (or reasonably could be expected to) result in Adverse
Consequences of less than $5 million in the aggregate;
(ii) the Seller must have performed and complied in
all respects with its covenants hereunder through the Closing
(without giving effect to any supplement to the Schedules, any
qualification as to materiality, Material Adverse Effect or
concepts of similar import, or any qualification or limitation
as to monetary amount or value), except where all breaches of
such covenants would (or reasonably could be expected to)
result in Adverse Consequences of less than $5 million in the
aggregate;
(iii) there must not be any injunction, judgment,
order, decree, ruling, or charge in effect preventing
consummation of any of the transactions contemplated by this
Agreement or any suit or action pending by a Governmental
Authority to enjoin the consummation of any of the
transactions, contemplated by this Agreement;
(iv) the Seller must have obtained all material
Governmental Authority and third party consents, including any
material consents specified in Sections 3(a)(ii), 3(a)(iii),
and 4(b) and including the corresponding Schedules;
(v) the FTC must have approved the transactions
contemplated hereunder;
(vi) the Buyer shall have received net proceeds in an
amount at least equal to the Cash Purchase Price plus all
costs and expenses incurred by Buyer and its Affiliates or
otherwise relating to the acquisition and financing
contemplated by this Agreement from any source of financing
(other than the Series C Units) acceptable to the Buyer in its
sole discretion, at a price and on other terms satisfactory to
the Buyer;
(vii) the Board of Directors of the General Partner
shall have received a fairness opinion acceptable to such
Board (in its sole discretion) from UBS Warburg LLC or any
other financial advisor acceptable to such Board (in its sole
discretion) (A) with respect to the transactions contemplated
herein and (B) with respect to the issuance and valuation of
the Series C Units;
(viii) the transactions contemplated herein
(including the issuance of the Series C Units) shall have been
approved by at least a majority of the members of each of (1)
of the Board of Directors of the General Partner, (2) the
independent members of the Board of Directors of the General
Partner and (3) the Special Committee of the Board of
Directors of the General Partner responsible for reviewing
such transactions;
(ix) the applicable subsidiary of the Seller shall
have assigned to the Buyer all of its right, title and
interest in and to the Coyote Gas Note;
36
(x) the Seller must have delivered to the Buyer
certified copies of the Organizational Documents of each of
the Acquired Companies; and
(xi) the Seller must have delivered to the Buyer a
certificate to the effect that each of the conditions
specified in Sections 7(a)(i)-(x) is satisfied in all
respects.
The Buyer may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or before the Closing.
(b) Conditions to Obligation of the Seller. The obligation of
the Seller to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties of the Buyer
contained in Section 3(b) must be true and correct in all
respects (without giving effect to any supplement to the
Schedules, any qualification as to materiality, Material
Adverse Effect or concepts of similar import, or any
qualification or limitation as to monetary amount or value) as
of the date of this Agreement and at Closing (except for those
which refer to a specific date, which must be true and correct
as of such date), except where all breaches of such
representations and warranties would (or reasonably could be
expected to) result in Adverse Consequences of less than $5
million in the aggregate;
(ii) the Buyer must have performed and complied in
all respects with each of its covenants hereunder through the
Closing (without giving effect to any supplement to the
Schedules, any qualification as to materiality, Material
Adverse Effect or concepts of similar import, or any
qualification or limitation as to monetary amount or value),
except where all breaches of such covenants would (or
reasonably could be expected to) result in Adverse
Consequences of less than $5 million in the aggregate;
(iii) there must not be any injunction, judgment,
order, decree, ruling, or charge in effect preventing
consummation of any of the transactions contemplated by this
Agreement or any suit or action pending by a Governmental
Authority to enjoin the consummation of any of the
transactions, contemplated by this Agreement;
(iv) the Seller must have obtained all material
Governmental Authority and third party consents, including
material consents specified in Sections 3(a)(ii), 3(a)(iii),
and 4(b) and including the corresponding Schedules;
(v) the Board of Directors of the Seller shall have
received a fairness opinion acceptable to such Board (in its
sole discretion) from Deutsche Bank or any other financial
advisor acceptable to such Board (in its sole discretion) with
respect to the transactions contemplated herein;
37
(vi) the transactions contemplated herein shall have
been approved by at least a majority of the members of the
Board of Directors of EP;
(vii) the FTC must have approved the transactions
contemplated hereunder;
(viii) the Buyer must have delivered to the Seller a
certificate to the effect that each of the conditions
specified in Section 7(b)(i)-(vii) is satisfied in all
respects; and
(ix) all matters arising after the date hereof that
are disclosed pursuant to supplements or amendments to
Seller's Disclosure Schedules (other than supplements
disclosing contracts permitted under Section 5(c)(v)) must not
cause (or reasonably be expected to cause) Buyer and its
Affiliates to suffer Adverse Consequences of more than $10
million if Closing were to occur.
The Seller may waive any condition specified in this Section 7(b) if
they execute a writing so stating at or before the Closing.
(c) Effect of Supplements to Schedules. For the purpose of
determining whether the conditions set forth in this Section 7 have been
fulfilled, the Seller's Disclosure Schedules shall be deemed to include all
information contained therein on the date of this Agreement and shall be deemed
to exclude all information contained in any supplement or amendment thereto;
provided, however, that if all matters arising after the date hereof that are
disclosed pursuant to such supplements or amendments would cause (or reasonably
could be expected to cause) Buyer to suffer Adverse Consequences of less than $1
million, the existence of such matters, by themselves, shall not constitute a
breach of Section 7(a)(i).
8. Remedies for Breaches of this Agreement.
(a) Survival of Representations and Warranties. (i) All of the
representations and warranties of the Seller contained in Sections 3 and 4
(other than Sections 4(c)(i) (Title to Assets), 4(c)(ii) (Condition of Assets),
4(c)(iii) (Capitalization), 4(f) (Tax Matters) and 4(h)(ii) (Unasserted Claims)
shall survive the Closing hereunder for a period of two years after the Closing
Date; (ii) the representations and warranties of the Seller contained in
Sections 4(c)(i) (Title to Assets) and 4(c)(ii) (Condition of Assets) shall
survive the Closing for a period of three years after the Closing Date; (iii)
the representations and warranties of the Seller contained in Section 4(c)(iii)
(Capitalization) shall survive the Closing forever; (iv) the representations and
warranties of the Seller contained in Section 4(f) (Tax Matters) shall survive
the Closing with respect to any given claim that would constitute a breach of
such representation or warranty until 90 days after the expiration of the
statute of limitations applicable to the underlying Tax matter giving rise to
that claim, and (v) the representations and warranties of the Seller contained
in Section 4(h)(ii) (Unasserted Claims) shall survive the Closing for a period
of one year after the Closing Date. The representations and warranties of the
Buyer contained in Section 3(b) shall survive the Closing for a period of two
years after the Closing Date. The covenants and obligations contained in
Sections 2 and 6 and all other covenants and obligations contained in this
Agreement (other than Sections 8(b)(iv) (Undisclosed Environmental Liabilities)
and
38
8(b)(vi) (Litigation)) shall survive the Closing forever. The covenants and
obligations contained in Section 8(b)(iv) (Undisclosed Environmental
Liabilities) shall survive the Closing for a period of three years after the
Closing Date. The covenants and obligations contained in Section 8(b)(vi)
(Litigation) shall survive the Closing until 90 days after the expiration of the
statute of limitations applicable to the applicable claim.
(b) Indemnification Provisions for Benefit of the Buyer.
(i) General Representations and Warranties. In the
event: (x) any of the representations or warranties of the
Seller is breached (without giving effect to any supplement to
the Schedules, any qualification as to materiality, Material
Adverse Effect or concepts of similar import, or any
qualification or limitation as to monetary amount or value
contained herein (other than a representation or warranty
contained in Section 4(c)(iii) (Capitalization) or 4(f) (Tax
Matters), which are covered by Section 8(b)(ii), for which an
aggregate deductible or aggregate ceiling set forth in this
subsection will not apply); (y) there is an applicable
survival period pursuant to Section 8(a); and (z) the Buyer
makes a written claim for indemnification against the Seller
pursuant to Section 11(g) within such survival period, then
the Seller agrees to release, indemnify and hold harmless the
Buyer Indemnitees from and against any Adverse Consequences
suffered by the Buyer Indemnitees by reason of all such
breaches; provided, that the Seller shall not have any
obligation to indemnify the Buyer Indemnitees from and against
any such Adverse Consequences by reason of all such breaches
(A) until the Buyer Indemnitees, in the aggregate, have
suffered Adverse Consequences by reason of all such breaches
in excess of an aggregate deductible amount equal to 1% of the
Purchase Price, except with respect to breaches of Section
4(c)(i) (Title to Assets), in which case the deductible amount
shall be 0.1% of the Purchase Price, (after which point the
Seller shall be obligated only to indemnify the Buyer
Indemnitees from and against further such Adverse
Consequences) or thereafter (B) to the extent the Adverse
Consequences the Buyer Indemnitees, in the aggregate, have
suffered by reason of all such breaches exceeds an aggregate
ceiling amount equal to 50% of the Purchase Price (after which
point the Seller shall have no obligation to indemnify the
Buyer Indemnitees from and against further such Adverse
Consequences).
(ii) Covenants and Obligations and Other
Representations and Warranties. In the event: (x) any of the
covenants or obligations of the Seller in Sections 2 or 6 or
any other covenants or obligations of the Seller in this
Agreement or any representation or warranty of the Seller
contained in Sections 4(c)(iii) (Capitalization) or 4(f) (Tax
Matters) are breached (in each case above without giving
effect to any supplement to the Schedules, any qualification
as to materiality, Material Adverse Effect or concepts of
similar import, or any qualification or limitation as to
monetary amount or value); (y) there is an applicable survival
period pursuant to Section 8(a); and (z) the Buyer makes a
written claim for indemnification against the Seller pursuant
to Section 11(g) within such survival period, then (subject to
the limitations in Section 8(b)(xi) with respect to Sections
4(c)(iii) (Capitalization) and 4(f) (Tax Matters)) the
39
Seller agrees to release, indemnify and hold harmless the
Buyer Indemnitees from and against the entirety of any Adverse
Consequences suffered by the Buyer Indemnitees.
(iii) ERISA. Subject to the limitations in Section
8(b)(xi), the Seller shall release, indemnify and hold
harmless the Buyer Indemnitees against any and all Adverse
Consequences resulting by reason of (a) joint and several
liability with the Seller arising by reason of having been
required to be aggregated with the Seller under Section 414(o)
of the Code, or having been under "common control" with the
Seller, within the meaning of Section 4001(a)(14) of ERISA.
(iv) Undisclosed Environmental Liabilities.
Notwithstanding anything in this Agreement to the contrary and
subject to the limitations in Section 8(b)(xi), in the event:
(x) there is an applicable survival period pursuant to Section
8(a) and (y) the Buyer makes a written claim for
indemnification against the Seller pursuant to Section 11(g)
within such survival period, then the Seller agrees to
release, indemnify and hold harmless the Buyer Indemnitees
from and against the entirety of any Adverse Consequences
suffered by the Buyer Indemnitees with respect to, any
environmental condition, claim or loss with respect to any
Acquired Company or any of the Relevant Assets arising as a
result of events occurring on or prior to the Effective Time,
other than the matters covered by Section 8(b)(v) (Specified
Environmental Liabilities).
(v) Specified Environmental Liabilities.
Notwithstanding anything in this Agreement to the contrary and
subject to the limitations in Section 8(b)(xi) (and in
addition to Section 8(b)(iv) (Undisclosed Environmental
Liabilities)), in the event the Buyer makes a written claim
for indemnification against the Seller pursuant to Section
11(g), then the Seller agrees to release, indemnify and hold
harmless the Buyer Indemnitees, from and against the entirety
of any Adverse Consequences suffered by the Buyer Indemnitees
with respect to, any environmental condition, claim or loss
with respect to any Acquired Company or any of the Relevant
Assets arising as a result of events occurring on or prior to
the Effective Time and disclosed on Schedule 4(i).
(vi) Litigation. Subject to the limitations in
Section 8(b)(xi), in the event: (x) there is an applicable
survival period pursuant to Section 8(a) and (y) the Buyer
makes a written claim for indemnification against the Seller
within such survival period, then the Seller shall release,
indemnify and hold harmless the Buyer Indemnitees against any
and all Adverse Consequences suffered by the Buyer Indemnitees
with respect to, any outstanding injunction, judgment, order,
decree, ruling, or charge, or any pending or threatened
action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction, relating
to any Acquired Company or any of the Relevant Assets on the
Closing Date, including the matters listed on Schedule 4(h).
40
(vii) Reorganization Transactions. The Seller shall
release, indemnify and hold harmless the Buyer Indemnitees
against any and all Adverse Consequences arising as a result
of any of the Reorganization Transactions, including any
Adverse Consequences incurred by South Texas Co. and San ▇▇▇▇
Co. under their respective agreements and plans of merger
entered into in the Reorganization Transactions.
(viii) South Texas Rights of Way. Subject to the
limitations in Section 8(b)(xi), to the extent that the
Relevant Assets and the Joint Use Agreements executed at
Closing do not include all Rights of Way and other rights
necessary for the Buyer and its subsidiaries to operate the
assets of South Texas Co. without violating any Law or
violating the rights of (or giving rise to any termination
right or other Obligation in favor of) any landowner or other
Person, the Seller shall release, indemnify and hold harmless
the Buyer Indemnitees against any and all Adverse Consequences
arising as a result thereof.
(ix) Coyote Gas Matters. Subject to the limitations
in Section 8(b)(xi), to the extent that (A) the Coyote Gas
Interest does not constitute 50% of all Equity Interests,
voting rights and economic rights in Coyote Gas, (B) any
Encumbrances, other than Permitted Encumbrances, exist with
respect to the Coyote Gas Interest or (C) any Acquired
Company, Seller Party or Affiliate thereof has made any
promise (whether in any Organizational Documents or otherwise,
and whether written or oral) to contribute cash or property to
or to perform services for Coyote Gas, the Seller shall
release, indemnify and hold harmless the Buyer Indemnitees
against any and all Adverse Consequences arising as a result
thereof.
(x) Retained and Pre-Closing Obligations. (A) The
Seller shall release, indemnify and hold harmless the Buyer
Indemnitees against any and all Adverse Consequences with
respect to the Retained Obligations, including any Tax
attributable thereto. (B) The Seller shall release, indemnify
and hold harmless the Buyer Indemnitees against any and all
Adverse Consequences with respect to the Pre-Closing
Obligations; provided, however, that the Seller shall not have
any obligation to indemnify any Buyer Indemnified Party
against any and all Adverse Consequences with respect to the
Pre-Closing Obligations to the extent that the Seller's
aggregate payments with respect to such Pre-Closing
Obligations would exceed the fair market value (at the time
such indemnity is due) of the relevant Acquired Company or
Acquired Asset acquirer, or its successor, subject to such
claim.
(xi) Notwithstanding anything to the contrary
contained in Sections 8(b)(i)-(ix), and except with respect to
the Seller's indemnity obligations under Section 8(b)(ii)
(other than with respect to Sections 4(c)(iii)
(Capitalization) or 4(f) (Tax Matters)), Section 8(b)(x)
(Retained and Pre-Closing Obligations) and Section 8(b)(vii)
(Reorganization Transactions), the Seller shall not have any
obligation to indemnify any Buyer Indemnified Party under this
Agreement to the extent that the payment thereof would cause
the Seller's aggregate indemnity
41
payments under this Agreement to exceed 100% of the Purchase
Price. The Seller's indemnity obligations under Section
8(b)(ii) (other than with respect to Sections 4(c)(iii)
(Capitalization) or 4(f) (Tax Matters)), Section 8(b)(x)
(Retained and Pre-Closing Obligations) and Section 8(b)(vii)
(Reorganization Transactions) are only subject to the
limitations (if any) set forth in their respective
subsections.
(xii) To the extent any Buyer Indemnitee becomes
liable to, and is ordered to and does pay to any third party,
punitive, exemplary, special or consequential damages caused
by a breach by the Seller of any representation, warranty or
covenant contained in this Agreement, then such punitive,
exemplary, special or consequential damages shall be deemed
actual damages to such Buyer Indemnitee and included within
the definition of Adverse Consequences for purposes of this
Section 8.
(xiii) Except for the rights of indemnification
provided in this Section 8, the Buyer hereby waives any claim
or cause of action pursuant to common or statutory law or
otherwise against the Seller arising from any breach by the
Seller of any of its representations, warranties or covenants
under this Agreement or the transactions contemplated hereby.
(c) Indemnification Provisions for Benefit of the Seller.
(i) In the event: (x) the Buyer breaches any of its
representations, warranties or covenants contained herein
(without giving effect to any supplement to the Schedules, any
qualification as to materiality, Material Adverse Effect or
concepts of similar import, or any qualification or limitation
as to monetary amount or value); (y) there is an applicable
survival period pursuant to Section 8(a); and (z) the Seller
makes a written claim for indemnification against the Buyer
pursuant to Section 11(g) within such survival period, then
the Buyer agrees to release, indemnify and hold harmless the
Seller Indemnitees from and against the entirety of any
Adverse Consequences suffered by such Seller Indemnitees by
reason of all such breaches.
(ii) Except to the extent the Seller is obligated to
indemnify Buyer pursuant to Section 8(b), the Buyer agrees to
release, indemnify and hold harmless the Seller Indemnitees
from and against the entirety of any Adverse Consequences
relating to (A) the Assumed Obligations and (b) the ownership
and operation of each Acquired Company and each Relevant Asset
(including those arising during, related to or otherwise
attributable to the period commencing with the Effective
Time).
(iii) To the extent any Seller Indemnitee becomes
liable to, and is ordered to and does pay to any third party,
punitive, exemplary, special or consequential damages caused
by a breach by the Buyer of any representation, warranty or
covenant contained in this Agreement, then such punitive,
exemplary, special or consequential damages shall be deemed
actual damages to such Seller
42
Indemnitee and included within the definition of Adverse
Consequences for purposes of this Section 8.
(iv) Except for the rights of indemnification
provided in this Section 8, the Seller hereby waives any claim
or cause of action pursuant to common or statutory law or
otherwise against the Buyer arising from any breach by the
Buyer of any of its representations, warranties or covenants
under this Agreement or the transactions contemplated hereby.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third
Party Claim") that may give rise to a claim for
indemnification against any other Party (the "Indemnifying
Party") under this Section 8, then the Indemnified Party shall
promptly (and in any event within five business days after
receiving notice of the Third Party Claim) notify the
Indemnifying Party thereof in writing.
(ii) The Indemnifying Party shall have the right to
assume and thereafter conduct the defense of the Third Party
Claim with counsel of its choice reasonably satisfactory to
the Indemnified Party and the Indemnifying Party shall have
full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that the
Indemnifying Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim which provides for or results in any payment
by or Obligation of the Indemnified Party of or for any
damages or other amount, any Encumbrance on any property of
the Indemnified Party, any finding of responsibility or
liability on the part of the Indemnified Party or any sanction
or injunction of, restriction upon the conduct of any business
by, or other equitable relief upon the Indemnified Party
without the prior written consent of the Indemnified Party
(not to be withheld unreasonably).
(iii) Unless and until the Indemnifying Party assumes
the defense of the Third Party Claim as provided in Section
8(d)(ii), the Indemnified Party may defend against the Third
Party Claim in any manner it reasonably may deem appropriate.
(iv) In no event shall the Indemnified Party consent
to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written
consent of the Indemnifying Party which consent shall not be
withheld unreasonably.
(e) Determination of Amount of Adverse Consequences. The
Adverse Consequences giving rise to any indemnification obligation hereunder
shall be limited to the actual loss suffered by the Indemnified Party (i.e.
reduced by any insurance proceeds or other payment or recoupment received,
realized or retained by the Indemnified Party as a result of the events giving
rise to the claim for indemnification net of any expenses related to the receipt
of
43
such proceeds, payment or recoupment, including retrospective premium
adjustments, if any), but not any reduction in Taxes of the Indemnified Party
(or the affiliated group of which it is a member) occasioned by such loss or
damage. The amount of the actual loss and the amount of the indemnity payment
shall be computed by taking into account the timing of the loss or payment, as
applicable, using a Prime Rate plus 2% interest or discount rate, as
appropriate. Upon the request of the Indemnifying Party, the Indemnified Party
shall provide the Indemnifying Party with information sufficient to allow the
Indemnifying Party to calculate the amount of the indemnity payment in
accordance with this Section 8(e). An Indemnified Party shall take all
reasonable steps to mitigate damages in respect of any claim for which it is
seeking indemnification and shall use reasonable efforts to avoid any costs or
expenses associated with such claim and, if such costs and expenses cannot be
avoided, to minimize the amount thereof.
(f) Tax Treatment of Indemnity Payments. All indemnification
payments made under this Agreement, including any payment made under Section 9,
shall be made in cash and treated as purchase price adjustments for Tax
purposes.
9. Tax Matters.
(a) Post-Closing Tax Returns. The Buyer shall prepare or cause
to be prepared and file or cause to be filed any Post-Closing Tax Returns with
respect to the Relevant Assets or the Acquired Companies. The Buyer shall pay
(or cause to be paid) any Taxes due with respect to such Tax Returns.
(b) Pre-Closing Tax Returns. The Seller shall prepare or cause
to be prepared and file or cause to be filed all Pre-Closing Tax Returns with
respect to the Relevant Assets or Acquired Companies. The Seller shall pay or
cause to be paid any Taxes due with respect to such Tax Returns.
(c) Straddle Periods. The Buyer shall be responsible for Taxes
of the Relevant Assets and the Acquired Companies related to the portion of any
Straddle Period occurring after the Closing Date. The Seller shall be
responsible for Taxes of the Relevant Assets and the Acquired Companies relating
to the portion of any Straddle Period occurring before and on the Closing Date.
With respect to any Straddle Period, to the extent permitted by applicable Law,
the Seller or the Buyer shall elect to treat the Closing Date as the last day of
the Tax period. If applicable Law shall not permit the Closing Date to be the
last day of a period, then (i) real or personal property Taxes with respect to
the Relevant Assets and the Acquired Companies shall be allocated based on the
number of days in the partial period before and after the Closing Date, (ii) in
the case of all other Taxes based on or in respect of income, the Tax computed
on the basis of the taxable income or loss attributable to the Relevant Assets
and the Acquired Companies for each partial period as determined from their
books and records, and (iii) in the case of all other Taxes, on the basis of the
actual activities or attributes of the Relevant Assets and the Acquired
Companies for each partial period as determined from their books and records.
(d) Straddle Returns. The Buyer shall prepare any Straddle
Returns. The Buyer shall deliver, at least 45 days prior to the due date for
filing such Straddle Return (including any extension) to the Seller a statement
setting forth the amount of Tax that the Seller
44
owes, including the allocation of taxable income and Taxes under Section 9(c),
and copies of such Straddle Return. The Seller shall have the right to review
such Straddle Returns and the allocation of taxable income and liability for
Taxes and to suggest to the Buyer any reasonable changes to such Straddle
Returns no later than 15 days prior to the date for the filing of such Straddle
Returns. The Seller and the Buyer agree to consult and to attempt to resolve in
good faith any issue arising as a result of the review of such Straddle Returns
and allocation of taxable income and liability for Taxes and mutually to consent
to the filing as promptly as possible of such Straddle Returns. Not later than 5
days before the due date for the payment of Taxes with respect to such Straddle
Returns, the Seller shall pay or cause to be paid to the Buyer an amount equal
to the Taxes as agreed to by the Buyer and the Seller as being owed by the
Seller. If the Buyer and the Seller cannot agree on the amount of Taxes owed by
the Seller with respect to a Straddle Return, the Seller shall pay or cause to
be paid to the Buyer the amount of Taxes reasonably determined by the Seller to
be owed by the Seller. Within 10 days after such payment, the Seller and the
Buyer shall refer the matter to an independent "Big-Five" accounting firm agreed
to by the Buyer and the Seller to arbitrate the dispute. The Seller and the
Buyer shall equally share the fees and expenses of such accounting firm and its
determination as to the amount owing by the Seller with respect to a Straddle
Return shall be binding on the Seller and the Buyer. Within five days after the
determination by such accounting firm, if necessary, the appropriate Party shall
pay the other Party any amount which is determined by such accounting firm to be
owed. The Seller shall be entitled to reduce its obligation to pay Taxes with
respect to a Straddle Return by the amount of any estimated Taxes paid with
respect to such Taxes on or before the Closing Date.
(e) Claims for Refund. The Buyer shall not, and shall cause
the Acquired Companies and any of their Affiliates not to, file any claim for
refund of Taxes with respect to the Relevant Assets and the Acquired Companies
for whole or partial taxable periods on or before the Closing Date.
(f) Indemnification. The Buyer agrees to indemnify the Seller
against all Taxes of or with respect to the Relevant Assets and the Acquired
Companies for any Post-Closing Tax Period and the portion of any Straddle Period
occurring after the Closing Date. The Seller agrees to indemnify the Buyer
against all Taxes of or with respect to the Relevant Assets and the Acquired
Companies for any Pre-Closing Tax Period and the portion of any Straddle Period
occurring on or before the Closing Date, and the Buyer Parties against all Taxes
of or with respect to the Retained Assets, and all Taxes arising directly as a
result of the Reorganization Transactions.
(g) Cooperation on Tax Matters.
(i) The Buyer and the Seller shall cooperate fully,
as and to the extent reasonably requested by the other Party,
in connection with the filing of Tax Returns pursuant to this
Section 9(g) and any audit, litigation or other proceeding and
making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder.
(ii) The Buyer and the Seller further agree, upon
request, to use their Best Efforts to obtain any certificate
or other document from any Governmental
45
Authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including
with respect to the transactions contemplated hereby).
(iii) The Buyer and the Seller agree, upon request,
to provide the other Parties with all information that such
other Parties may be required to report pursuant to Section
6043 of the Code and all Treasury Department Regulations
promulgated thereunder.
(h) Certain Taxes. The Seller shall file all necessary Tax
Returns and other documentation with respect to all transfer, documentary,
sales, use, stamp, registration and other similar Taxes and fees, pay the
related Tax, and, if required by applicable Law, the Buyer shall, and shall
cause its Affiliates to, join in the execution of any such Tax Returns and other
documentation. Notwithstanding anything set forth in this Agreement to the
contrary, the Buyer shall pay to the Seller, on or before the date such payments
are due from the Seller, any transfer, documentary, sales, use, stamp,
registration and other Taxes and fees incurred in connection with this Agreement
and the transactions contemplated hereby (but not with respect to the
Reorganization Transactions).
(i) Confidentiality. Any information shared in connection with
Taxes shall be kept confidential, except as may otherwise be necessary in
connection with the filing of Tax Returns or reports, refund claims, tax audits,
tax claims and tax litigation, or as required by Law.
(j) Audits. The Seller or the Buyer, as applicable, shall
provide prompt written notice to the other Parties of any pending or threatened
tax audit, assessment or proceeding that it becomes aware of related to the
Relevant Assets or the Acquired Companies for whole or partial periods for which
it is indemnified by any other Party hereunder. Such notice shall contain
factual information (to the extent known) describing the asserted tax liability
in reasonable detail and shall be accompanied by copies of any notice or other
document received from or with any tax authority in respect of any such matters.
If an indemnified party has Knowledge of an asserted tax liability with respect
to a matter for which it is to be indemnified hereunder and such party fails to
give the indemnifying party prompt notice of such asserted tax liability, then
(I) if the indemnifying party is precluded by the failure to give prompt notice
from contesting the asserted tax liability in any forum, the indemnifying party
shall have no obligation to indemnify the indemnified party for any Taxes
arising out of such asserted tax liability, and (II) if the indemnifying party
is not so precluded from contesting, but such failure to give prompt notice
results in a detriment to the indemnifying party, then any amount which the
indemnifying party is otherwise required to pay the indemnified party pursuant
to this Section 9(j) shall be reduced by the amount of such detriment, provided,
the indemnified party shall nevertheless be entitled to full indemnification
hereunder to the extent, and only to the extent, that such party can establish
that the indemnifying party was not prejudiced by such failure. This Section
9(j) shall control the procedure for Tax indemnification matters to the extent
it is inconsistent with any other provision of this Agreement.
(k) Control of Proceedings. The party responsible for the Tax under this
Agreement shall control audits and disputes related to such Taxes (including
action taken to pay, compromise or settle such Taxes). The Seller and the Buyer
shall jointly control, in good faith
46
with each other, audits and disputes relating to Straddle Periods. Reasonable
out-of-pocket expenses with respect to such contests shall be borne by the
Seller and the Buyer in proportion to their responsibility for such Taxes as set
forth in this Agreement. Except as otherwise provided by this Agreement, the
noncontrolling party shall be afforded a reasonable opportunity to participate
in such proceedings at its own expense.
(l) Powers of Attorney. The Buyer, the Acquired Companies and
their respective Affiliates shall provide the Seller and its Affiliates with
such powers of attorney or other authorizing documentation as are reasonably
necessary to empower them to execute and file returns they are responsible for
hereunder, file refund and equivalent claims for Taxes they are responsible for,
and contest, settle, and resolve any audits and disputes that they have control
over under Section 9(k) (including any refund claims which turn into audits or
disputes).
(m) Remittance of Refunds. If the Buyer or any Affiliate of
the Buyer receives a refund of any Taxes that the Seller is responsible for
hereunder, or if the Seller or any Affiliate of the Seller receives a refund of
any Taxes that the Buyer is responsible for hereunder, the party receiving such
refund shall, within 30 days after receipt of such refund, remit it to the party
who has responsibility for such Taxes hereunder. For the purpose of this Section
9(m), the term "refund" shall include a reduction in Tax and the use of an
overpayment as a credit or other Tax offset, and receipt of a refund shall occur
upon the filing of a Tax Return or an adjustment thereto using such reduction,
overpayment or offset or upon the receipt of cash.
(n) Purchase Price Allocation. The Seller and the Buyer agree
that the actual Purchase Price allocable to the Relevant Assets shall be
allocated to the Relevant Assets for all purposes (including Tax and financial
accounting purposes) as jointly agreed between the Buyer and the Seller within
ninety (90) days after the Closing Date, agree to allocate the Purchase Price
(as adjusted pursuant to this Agreement) and any Assumed Obligations among the
Relevant Assets. The Seller and the Buyer agree (i) to report the federal, state
and local income and other Tax consequences of the transactions contemplated
herein, and in particular to report the information required by Section 1060(b)
of the Code, and to jointly prepare Form 8594 (Asset Acquisition Statement under
Section 1060) in a manner consistent with such allocation and (ii) without the
consent of the other Party, not to take any position inconsistent therewith upon
examination of any Tax return, in any refund claim, in any litigation,
investigation or otherwise. The Seller and the Buyer agree that each will
furnish the other a copy of Form 8594 (Asset Acquisition Statement under Section
1060) proposed to be filed with the Internal Revenue Service by such Party or
any Affiliate thereof within 10 days prior to the filing of such form with the
Internal Revenue Service.
(o) Closing Tax Certificate. At the Closing, the Seller shall
deliver to the Buyer a certificate, in the form of Exhibit G, signed under
penalties of perjury (i) stating it is not a foreign corporation, foreign
partnership, foreign trust or foreign estate, (ii) providing its U.S. Employer
Identification Number, and (iii) providing its address, all pursuant to Section
1445 of the Code.
(p) Like Kind Exchanges. Each of the Buyer and the Seller
shall cooperate fully, as and to the extent reasonably requested by the other
Party, in connection with enabling the transactions contemplated herein to
qualify in whole or in part as a "like-kind exchange"
47
pursuant to Section 1031 of the Code. Each of the Buyer and the Seller agree to
indemnify the other Party against any and all costs and expenses incurred with
respect to furnishing such cooperation. Each Party may assign all or a portion
of its rights under this Agreement to a "qualified intermediary" to facilitate a
like-kind exchange. The agreement between the applicable Party and the qualified
intermediary ("Exchange Agreement") shall be reasonably acceptable to both
Parties.
10. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement, as provided below:
(i) the Buyer and the Seller may terminate this
Agreement by mutual written consent at any time before the
Closing;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Seller at any time before Closing (A) in
the event the Seller has breached any representation, warranty
or covenant contained in this Agreement, the Buyer has
notified the Seller of the breach, the breach has continued
without cure for a period of 10 days after the notice of
breach and such breach would result in a failure to satisfy a
condition to the Buyer's obligation to consummate the
transactions contemplated hereby; (B) if the Closing shall not
have occurred on or before 10:00 a.m. (Houston time) on
November 29, 2002 (unless the failure results primarily from
the Buyer itself breaching any representation, warranty or
covenant contained in this Agreement); or (C) if the
transactions contemplated hereby do not receive all required
approvals of the FTC;
(iii) the Seller may terminate this Agreement by
giving written notice to the Buyer at any time before the
Closing (A) in the event the Buyer has breached any
representation, warranty or covenant contained in this
Agreement, the Seller has notified the Buyer of the breach,
the breach has continued without cure for a period of 10 days
after the notice of breach and such breach would result in a
failure to satisfy a condition to the Seller's obligation to
consummate the transactions contemplated hereby; (B) if the
Closing shall not have occurred on or before 10:00 a.m.
(Houston time) on November 29, 2002 (unless the failure
results primarily from the Seller breaching any
representation, warranty or covenant contained in this
Agreement); or (C) if the transactions contemplated hereby do
not receive all required approvals of the FTC; and
(iv) the Buyer or the Seller may terminate this
Agreement if any court of competent jurisdiction or any
governmental, administrative or regulatory authority, agency
or body shall have issued an order, decree or ruling or shall
have taken any other action permanently enjoining, restraining
or otherwise prohibiting the transactions contemplated hereby
and such order, decree, ruling or other action shall have
become final and nonappealable.
(b) Effect of Termination. Except for the obligations under
Sections 8, 10 and
48
11, if any Party terminates this Agreement pursuant to Section 10(a), all rights
and obligations of the Parties hereunder shall terminate without any liability
of any Party to any other Party (except for any liability of any Party then in
breach).
11. Miscellaneous.
(a) Public Announcements. Any Party is permitted to issue a
press release or make a public announcement concerning this Agreement without
the other Parties' consents, in which case the disclosing Party shall provide an
advance copy of the proposed public disclosure to the non-disclosing Parties and
permit the non-disclosing Parties the opportunity to reasonably comment on such
proposed disclosure. The Parties agree to cooperate in good faith to issue
separate and simultaneous press releases within 24 hours following the execution
of this Agreement by all Parties.
(b) Insurance. The Buyer acknowledges and agrees that,
following the Closing, any Subject Insurance Policies shall be terminated or
modified to exclude coverage of all or any portion of the Relevant Assets or
Acquired Companies by the Seller or any of its Affiliates, and, as a result, the
Buyer shall be obligated at or before Closing to obtain at its sole cost and
expense replacement insurance, including insurance required by any third party
to be maintained for or by the Relevant Assets or the Acquired Companies. The
Buyer further acknowledges and agrees that the Buyer may need to provide to
certain Governmental Authorities and third parties evidence of such replacement
or substitute insurance coverage for the continued operations or businesses of
the Relevant Assets or the Acquired Companies. If any claims are made or losses
occur prior to the Closing Date that relate solely to the Relevant Assets or the
business activities of the Acquired Companies and such claims, or the claims
associated with such losses, properly may be made against the policies retained
by the Seller or their Affiliates after the Closing, then the Seller shall use
its Best Efforts so that the Buyer can file notice, and otherwise continue to
pursue these claims pursuant to the terms of such policies; provided, however,
nothing in this Agreement shall require the Seller to maintain or to refrain
from asserting claims against or exhausting any retained policies.
(c) No Third Party Beneficiaries. Except for the
indemnification provisions, this Agreement shall not confer any rights or
remedies upon any Person other than the Parties and their respective successors
and permitted assigns.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. Prior to the Closing, the Buyer may not assign
this Agreement or any of its rights, interests or obligations hereunder without
the prior written approval of the Seller; provided, however, without the prior
written approval of the Seller, the Buyer and its permitted successors and
assigns may assign any or all of its rights, interests or obligations under this
Agreement (i) to an Affiliate of the Buyer, including designating one or more
Affiliates of the Buyer to be the assignee of some or any portion of the
Acquired Company Equity Interests or the Acquired Assets, (ii) in connection
with granting a lien, pledge, mortgage or other security interest pursuant to a
bona fide lending transaction, or (iii) pursuant to the foreclosure or
settlement of any assignment made pursuant to (ii) above; provided the Buyer is
not released from any of its obligations or liabilities hereunder. Each Party
may assign either this Agreement or any of its
49
rights, interests or obligations hereunder, without the prior written approval
of the other Party, to a qualified intermediary in connection with any
transaction described in Section 9(p); provided, however, that no such
assignment shall relieve any Party from any of its obligations or liabilities
under this Agreement.
(e) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given two business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to the Seller: El Paso Corporation
Attn: President
El Paso Building
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to the Buyer: El Paso Energy Partners, L.P.
Attn: President
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the addresses set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS. VENUE FOR ANY ACTION
ARISING UNDER THIS AGREEMENT SHALL LIE EXCLUSIVELY IN ANY STATE OR FEDERAL COURT
IN ▇▇▇▇▇▇ COUNTY, TEXAS.
50
(i) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(k) Transaction Expenses. Each of the Buyer and the Seller
shall bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby, provided that Buyer shall bear all reasonable costs and expenses
incurred by the Seller in connection with (i) the assignment of any contracts,
permits, leases and rights-of-way and (ii) obtaining any required consents or
approvals, to the extent arising out of the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. All personal pronouns
used in this Agreement, whether used in the masculine, feminine or neuter
gender, shall include all other genders; the singular shall include the plural,
and vice versa. All references herein to Exhibits, Schedules, Articles, Sections
or subdivisions thereof shall refer to the corresponding Exhibits, Schedules,
Article, Section or subdivision thereof of this Agreement unless specific
reference is made to such exhibits, articles, sections or subdivisions of
another document or instrument. The terms "herein," "hereby," "hereunder,"
"hereof," "hereinafter," and other equivalent words refer to this Agreement in
its entirety and not solely to the particular portion of the Agreement in which
such word is used. Each certificate delivered pursuant to this Agreement shall
be deemed a part hereof, and any representation, warranty or covenant herein
referenced or affirmed in such certificate shall be treated as a representation,
warranty or covenant given in the correlated Section hereof on the date of such
certificate. Additionally, any representation, warranty or covenant made in any
such certificate shall be deemed to be made herein.
(m) Matters Related to New Chaco. The Parties acknowledge and
agree that the transfer of the assets of New Chaco at Closing is intended to
cause Buyer or its subsidiaries to acquire and own the Chaco cryogenic gas
extraction plant and the related rights and assets, and that, notwithstanding
the form of the transfer caused pursuant hereto, the substance of such
transaction includes (i) the exercise by New Chaco of its option to purchase the
relevant assets under the applicable lease arrangements, (ii) the conveyance of
title to such assets from the applicable subsidiary of the Buyer to New Chaco,
(iii) the repurchase of such assets by the
51
applicable subsidiary of the Buyer from New Chaco and (iv) the reconveyance of
title to such assets from New Chaco to the applicable subsidiary of the Buyer.
The Parties acknowledge and agree that the transactions described in (i) - (iv)
above substantively occurred (or shall be deemed to have occurred),
notwithstanding the fact that the Parties did not convey title to the applicable
assets back and forth between themselves or their Affiliates. To the extent that
the Buyer's (including its subsidiaries) rights hereunder are not the same as
they would have been had the documentation at Closing reflected each step
described in (i) - (iv) above, the Parties will take appropriate actions, and
will execute and deliver any appropriate additional documentation, to cause the
Buyer's rights to be as if each such step had been taken.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(o) Entire Agreement. THIS AGREEMENT (INCLUDING THE DOCUMENTS
REFERRED TO HEREIN) CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES AND
SUPERSEDES ANY PRIOR UNDERSTANDINGS, AGREEMENTS, OR REPRESENTATIONS BY OR AMONG
THE PARTIES, WRITTEN OR ORAL, TO THE EXTENT THEY HAVE RELATED IN ANY WAY TO THE
SUBJECT MATTER HEREOF, INCLUDING THE CONFIDENTIALITY AGREEMENT.
*****
52
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth in the preamble.
EL PASO CORPORATION
By: /s/ D. ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
Name: D. ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
Title: Chief Financial Officer
----------------------------
EL PASO ENERGY PARTNERS, L.P.
By: /s/ D. ▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Name: D. ▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: Senior Vice President
----------------------------
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