EXHIBIT 10.2
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AGREEMENT OF PURCHASE AND SALE
BY AND BETWEEN
CMS ENTERPRISES COMPANY AND CMS ENERGY INVESTMENT LLC,
COLLECTIVELY AS SELLER,
AND
LUCID ENERGY, L.L.C. AND MICHIGAN PIPELINE AND PROCESSING, LLC,
COLLECTIVELY AS BUYER,
DATED AS OF
MARCH 12, 2007
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TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS.................................................... 1
Section 1.1 Specific Definitions..................................... 1
ARTICLE II SALE AND PURCHASE............................................. 8
Section 2.1 Agreement to Sell and Purchase........................... 8
Section 2.2 Time and Place of Closing................................ 8
Section 2.3 Effective Date........................................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..................... 10
Section 3.1 Corporate Organization; Qualification.................... 10
Section 3.2 Authority Relative to this Agreement..................... 10
Section 3.3 Equity Interests......................................... 11
Section 3.4 Consents and Approvals................................... 12
Section 3.5 No Conflict or Violation................................. 12
Section 3.6 Financial Information.................................... 12
Section 3.7 Contracts................................................ 13
Section 3.8 Compliance with Law...................................... 13
Section 3.9 Permits.................................................. 13
Section 3.10 Litigation............................................... 14
Section 3.11 Employee Matters......................................... 14
Section 3.12 Labor Relations.......................................... 15
Section 3.13 Intellectual Property.................................... 15
Section 3.14 Representations with Respect to Environmental Matters.... 16
Section 3.15 Tax Matters.............................................. 16
Section 3.16 Insurance................................................ 17
Section 3.17 Absence of Certain Changes or Events..................... 17
Section 3.18 Absence of Undisclosed Liabilities....................... 18
Section 3.19 Property................................................. 19
Section 3.20 Brokerage and Finders' Fees.............................. 19
Section 3.21 Corporate and Accounting Records......................... 19
Section 3.22 Affiliated Transactions.................................. 19
Section 3.23 No Other Representations or Warranties................... 19
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER................... 20
Section 4.1 Corporate Organization; Qualification.................... 20
Section 4.2 Authority Relative to this Agreement..................... 20
Section 4.3 Consents and Approvals................................... 21
Section 4.4 No Conflict or Violation................................. 21
Section 4.5 Litigation............................................... 21
Section 4.6 Brokerage and Finders' Fees.............................. 22
Section 4.7 Investment Representations............................... 22
Section 4.8 No Other Representations or Warranties................... 22
ARTICLE V COVENANTS OF THE PARTIES....................................... 22
Section 5.1 Consents and Approvals................................... 22
Section 5.2 Further Assurances....................................... 24
Section 5.3 Employee Matters......................................... 24
Section 5.4 Tax Covenants............................................ 25
Section 5.5 Maintenance of Insurance Policies........................ 30
Section 5.6 Transfers of Title and Possession of Assets of
Entities................................................. 31
Section 5.7 Preservation of Records.................................. 31
Section 5.8 Public Statements........................................ 32
Section 5.9 Use of Corporate Name; Transitional Use of Seller's
Name..................................................... 32
Section 5.10 Release of Guarantees.................................... 32
Section 5.11 Confidentiality.......................................... 33
ARTICLE VI SURVIVAL; INDEMNIFICATION..................................... 33
Section 6.1 Survival................................................. 33
Section 6.2 Indemnification.......................................... 34
Section 6.3 Calculation of Damages................................... 36
Section 6.4 Procedures for Third-Party Claims........................ 36
Section 6.5 Procedures for Inter-Party Claims........................ 37
Section 6.6 Special Indemnification Provision Relating to
Environmental Matters.................................... 38
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ARTICLE VII MISCELLANEOUS PROVISIONS..................................... 39
Section 7.1 Interpretation........................................... 39
Section 7.2 Disclosure Letters....................................... 40
Section 7.3 Payments................................................. 40
Section 7.4 Expenses................................................. 40
Section 7.5 Choice of Law............................................ 40
Section 7.6 Assignment............................................... 40
Section 7.7 Notices.................................................. 40
Section 7.8 Resolution of Disputes................................... 42
Section 7.9 No Right of Setoff....................................... 43
Section 7.10 Time is of the Essence................................... 43
Section 7.11 Specific Performance..................................... 43
Section 7.12 Entire Agreement......................................... 43
Section 7.13 Binding Nature; Third Party Beneficiaries................ 43
Section 7.14 Counterparts............................................. 44
Section 7.15 Severability............................................. 44
Section 7.16 Headings................................................. 44
Section 7.17 Waiver................................................... 44
Section 7.18 Amendment................................................ 44
EXHIBITS
A TRANSITION SERVICES AGREEMENT
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TABLE OF CONTENTS
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INDEX OF DEFINED TERMS
Action.................................................................. 1
Affected Employees...................................................... 2
Affiliate............................................................... 2
Agreement............................................................... 2
Applicable Law.......................................................... 2
Argentine Businesses.................................................... 1
Business Day............................................................ 2
Buyer................................................................... 1
Buyer Disclosure Letter................................................. 2
Buyer Indemnified Parties............................................... 33
Buyer Plans............................................................. 24
Cap Amount.............................................................. 34
Casualty Insurance Claims............................................... 29
Claims.................................................................. 2
Code.................................................................... 2
Common Agreement........................................................ 1
Confidentiality Agreement............................................... 2
Consolidated Income Tax Return.......................................... 27
Cut-off Date............................................................ 29
Damages................................................................. 2
Dispute................................................................. 41
Distribution............................................................ 3
Entities................................................................ 1
Environmental Laws...................................................... 3
Environmental Permit.................................................... 3
Equity Interests........................................................ 1
ERISA................................................................... 3
Exchange Act............................................................ 3
Financial Statements.................................................... 12
GAAP.................................................................... 3
Governmental Authority.................................................. 3
Guarantees.............................................................. 32
Hazardous Substances.................................................... 3
Indebtedness............................................................ 4
Indemnified Party....................................................... 34
Indemnifying Party...................................................... 34
Indemnity Period........................................................ 33
Insurance Policies...................................................... 30
Intellectual Property................................................... 4
Knowledge of Seller..................................................... 4
Knowledge of such Person................................................ 4
Liabilities............................................................. 4
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TABLE OF CONTENTS
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Liens................................................................... 4
Lucid................................................................... 1
Material Adverse Effect................................................. 5
Material Contract....................................................... 13
Michigan Businesses..................................................... 1
Michigan Courts......................................................... 42
Minimum Claim Amount.................................................... 34
PBOPs................................................................... 24
Pension Plans........................................................... 6
Permits................................................................. 13
Permitted Liens......................................................... 6
Person.................................................................. 6
Plans................................................................... 14
Policies................................................................ 16
Post-Cut-off Taxes...................................................... 26
Pre-Cut-off Taxes....................................................... 26
Released Parties........................................................ 32
Representatives......................................................... 6
Rules................................................................... 42
Seller.................................................................. 1
Seller Disclosure Letter................................................ 7
Seller Indemnified Parties.............................................. 34
Seller Plans............................................................ 24
Seller Returns.......................................................... 25
Straddle Period......................................................... 25
Straddle Period Returns................................................. 25
Straddle Statement...................................................... 25
Subsidiary.............................................................. 7
Tax Claim............................................................... 28
Tax Indemnified Party................................................... 28
Tax Indemnifying Party.................................................. 28
Tax Return.............................................................. 7
Taxes................................................................... 7
Third-Party Claim....................................................... 36
Threshold Amount........................................................ 34
Transfer Taxes.......................................................... 29
Transition Services Agreement........................................... 7
Treasury Regulation..................................................... 7
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AGREEMENT OF PURCHASE AND SALE
This AGREEMENT OF PURCHASE AND SALE, dated as of March 12, 2007, is made
and entered into by and between CMS Enterprises Company, a Michigan corporation,
and CMS Energy Investment LLC, a Delaware limited liability company
(collectively the "Seller"), and Lucid Energy, L.L.C., a Michigan limited
liability company ("Lucid"), and Michigan Pipeline and Processing, LLC, a
Michigan limited liability company (collectively the "Buyer").
WITNESSETH:
WHEREAS, Seller and Lucid have entered into that certain Common Agreement
dated as of the date hereof (the "Common Agreement"), pursuant to which Seller,
directly or through Affiliates of Seller, agreed to sell, and Lucid, directly or
through Affiliates of Lucid, agreed to acquire, upon the terms and conditions
set forth in this Agreement, certain Michigan-based natural gas transmission,
gathering and processing businesses (the "Michigan Businesses"), and upon the
terms and conditions entered into contemporaneously herewith, Argentina-based
natural gas transmission and marketing and independent power production
businesses (the "Argentine Businesses");
WHEREAS, Seller and Buyer intend that the transactions contemplated by this
Agreement relating to the sale of the Michigan Businesses will be consummated if
and only if the sale of the Argentine Businesses is consummated;
WHEREAS, the Michigan Businesses are conducted through various domestic
legal entities (the "Entities" as described on Annex I), the equity
participations in which are owned, directly or indirectly and in relevant
amounts, by Seller ("Equity Interests" as described on Annex I);
WHEREAS, Buyer desires to purchase, and Seller desires to sell to Buyer,
the Equity Interests, upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing, the representations,
warranties, covenants and agreements set forth in this Agreement, and other good
and valuable consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Specific Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Action" shall mean any administrative, regulatory,
judicial or other formal proceeding, action,
Claim, suit, investigation or inquiry
by or before any Governmental Authority,
arbitrator or mediator, at law or at equity.
"Affected Employees" shall mean the Employees listed on Section
1.1(a) of the Seller Disclosure Letter.
"Affiliate" shall have the meaning set forth in Rule 12b-2
of the General Rules and Regulations under the
Exchange Act.
"Agreement" shall mean this Agreement of Purchase and Sale,
together with the Seller Disclosure Letter,
Buyer Disclosure Letter, Annex I and Exhibits
hereto, as the same may be amended or
supplemented from time to time in accordance
with the provisions hereof.
"Applicable Law" shall mean any statute, treaty, code, law,
ordinance, executive order, rule or regulation
(including a regulation that has been formally
promulgated in a rule-making proceeding but,
pending final adoption, is in proposed or
temporary form having the force of law);
guideline or notice having the force of law; or
approval, permit, license, franchise, judgment,
order, decree, injunction or writ of any
Governmental Authority applicable to a
specified Person or specified property, as in
effect from time to time.
"Business Day" shall mean any day that is not a Saturday,
Sunday or other day on which banks are required
or authorized by law to be closed in the City
of New York.
"Buyer Disclosure Letter" shall mean the Buyer Disclosure Letter
delivered to Seller concurrently with this
Agreement, which is an integral part of this
Agreement.
"Claims" shall mean any and all claims, lawsuits,
demands, causes of action, investigations and
other proceedings (whether or not before a
Governmental Authority).
"Code" shall mean the Internal Revenue Code of 1986,
as amended.
"Confidentiality Agreement" shall mean the confidentiality agreement
entered into by and between the EE Group (an
Affiliate of Buyer) and CMS Enterprises Company
dated October 23, 2006.
"Damages" shall mean judgments, settlements, fines,
penalties, damages, Liabilities, losses or
deficiencies, costs and expenses, including
reasonable attorney's fees, court costs,
expenses of arbitration or mediation, and other
out-of-pocket expenses
2
incurred in investigating or preparing the
foregoing; provided, however, that "Damages"
shall not include incidental, indirect or
consequential damages, damages for lost profits
or other special, punitive or exemplary
damages.
"Distribution" shall mean:
(i) any dividend, distribution, repayment or
repurchase of share capital, capital
contribution or other return of capital to such
Person's shareholders or equivalent holders of
its ownership interests;
(ii) any repayment of any loan owed to an
Affiliate of such Person;
(iii) any loan made to an Affiliate of such
Person, in each case, other than to any of the
Entities.
"Environmental Laws" shall mean all foreign, federal, state and
local laws, regulations, rules and ordinances
in effect and existence as of the closing Date
where the Michigan Businesses currently operate
relating to pollution or protection of human
health or the environment, natural resources or
safety and health, including laws relating to
releases or threatened releases of Hazardous
Substances into the environment (including
ambient air, surface water, groundwater, land,
surface and subsurface strata).
"Environmental Permit" shall mean any Permit, formal exemption,
identification number or other authorization
issued by a Governmental Authority pursuant to
an applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the
regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"GAAP" shall mean United States generally accepted
accounting principles as in effect from time to
time
"Governmental Authority" shall mean any executive, legislative,
judicial, tribal, regulatory, taxing or
administrative agency, body, commission,
department, board, court, tribunal, arbitrating
body or authority of the United States or any
foreign country, or any state, local or other
governmental subdivision thereof.
"Hazardous Substances" shall mean any chemicals, materials or
substances defined as
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or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous
materials", "hazardous constituents",
"restricted hazardous materials", "extremely
hazardous substances", "toxic substances",
"contaminants", "pollutants", "toxic
pollutants", or words of similar meaning and
regulatory effect under any applicable
Environmental Law.
"Indebtedness" of any Person shall mean (i) all liabilities
and obligations of such Person for borrowed
money or evidenced by notes, bonds or similar
instruments, (ii) obligations in respect of the
deferred purchase price of property or services
(other than any amount that would constitute
current assets) to the extent that such amount
would be accrued as a liability on a balance
sheet prepared in accordance with GAAP, (iii)
obligations in respect of capitalized leases,
(iv) obligations in respect of letters of
credit, acceptances or similar obligations, (v)
obligations under interest rate cap agreements,
interest rate swap agreements, foreign currency
exchange contracts or other hedging contracts,
and (vi) any guarantee of the obligations of
another Person with respect to any of the
foregoing.
"Intellectual Property" shall mean all U.S. and foreign (a) patents and
patent applications, (b) trademarks, service
marks, logos, slogans, and trade dress, (c)
copyrights, (d) software (excluding commercial
off-the-shelf software), and (e) all
confidential and proprietary information and
know-how.
"Knowledge of Seller" shall mean the knowledge, after due inquiry, of
those Persons set forth in Section 1.1(b) of
the Seller Disclosure Letter.
"Knowledge of such Person" shall mean, and with respect to Lucid, the
knowledge, after due inquiry, of those Persons
set forth in Section 1.1(b) of the Buyer
Disclosure Letter, and with respect to Michigan
Pipeline and Processing, LLC, the knowledge,
after due inquiry, of those Persons set forth
in Section 1.1(c) of the Buyer Disclosure
Letter.
"Liabilities" shall mean any and all debts, liabilities,
commitments and obligations, whether or not
fixed, contingent or absolute, matured or
unmatured, liquidated or unliquidated, accrued
or unaccrued, known or unknown, whether or not
required by GAAP to be reflected in financial
statements or disclosed in the notes thereto.
"Liens" shall mean any mortgage, pledge, lien
(statutory or otherwise
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and including, without limitation,
environmental, ERISA and tax liens), security
interest, easement, right of way, limitation,
encroachment, covenant, claim, restriction,
right, option, conditional sale or other title
retention agreement, charge or encumbrance of
any kind or nature (except for any restrictions
arising under any applicable securities laws).
"Material Adverse Effect" shall mean actions, circumstances or omissions
that have an effect, individually or in the
aggregate, that is materially adverse to (a)
the business, operations, financial condition
or assets of the Entities, taken as a whole, or
(b) the ability of Seller to consummate the
transactions contemplated hereby, in each case,
other than any effect resulting from, relating
to or arising out of: (i) the negotiation,
execution, announcement of this Agreement and
the transactions contemplated hereby, including
the impact thereof on relationships,
contractual or otherwise, with customers,
suppliers, distributors, partners, joint owners
or venturers and employees, (ii) any action
taken by Seller, the Entities, Buyer or any of
their respective Representatives or Affiliates
required or permitted to be taken by the terms
of this Agreement or necessary to consummate
the transactions contemplated by this
Agreement, (iii) the general state of the
industries in which the Entities operate
(including (A) pricing levels, (B) changes in
national, regional or local wholesale or retail
markets for natural gas or electricity, (C)
changes in the national, regional or local
interstate natural gas pipeline systems, (D)
rules, regulations or decisions of Governmental
Authorities or the courts affecting the gas
transmission, gathering or processing
industries as a whole, or rate orders, motions,
complaints or other actions affecting the
Entities and (E) any condition described in the
Seller Disclosure Letter), (iv) general legal,
regulatory, political, business, economic,
capital market and financial market conditions
(including prevailing interest rate levels), or
conditions otherwise generally affecting the
industries in which the Entities operate, (v)
any change in law, rule or regulation or GAAP
or interpretations thereof applicable to the
Entities, Seller or Buyer, (vi) acts of God,
national or international political or social
conditions or (vii) general economic conditions
in Michigan; provided, that, for purposes of
determining a "Material Adverse Effect", any
effect on the business, financial conditions or
assets of the business of any Person shall
include only the portion of such effect
attributable to the ownership interest of the
Entities and their Affiliates and shall exclude
any portion of such effect attributable to the
ownership interest of any third party in such
Person.
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"Pension Plans" shall mean all Plans providing pensions,
superannuation benefits or retirement savings,
including pension plans, top up pensions or
supplemental pensions.
"Permitted Liens" shall mean (a) zoning, planning and building
codes and other applicable laws regulating the
use, development and occupancy of real property
and permits, consents and rules under such
laws; (b) encumbrances, easements,
rights-of-way, covenants, conditions,
restrictions and other matters affecting title
to real property which do not materially
detract from the value of such real property or
materially restrict the use of such real
property; (c) leases and subleases of real
property; (d) all easements, encumbrances or
other matters which are necessary for utilities
and other similar services on real property;
(e) Liens to secure indebtedness reflected on
the Financial Statements or indebtedness
incurred in the ordinary course of business,
consistent with past practice, after the date
thereof, (f) Liens for Taxes and other
governmental levies not yet due and payable or,
if due, (i) not delinquent or (ii) being
contested in good faith by appropriate
proceedings during which collection or
enforcement against the property is stayed and
with respect to which adequate reserves have
been established and are being maintained to
the extent required by GAAP, (g) mechanics',
workmen's, repairmen's, materialmen's,
warehousemen's, carriers' or other Liens,
including all statutory Liens, arising or
incurred in the ordinary course of business,
(h) original purchase price conditional sales
contracts and equipment leases with third
parties entered into in the ordinary course of
business, (i) Liens that do not materially
interfere with or materially affect the value
or use of the respective underlying asset to
which such Liens relate, (j) Liens which are
capable of being cured through condemnation
procedures under the Natural Gas Act, and (k)
Liens which are reflected in any Material
Contract.
"Person" shall mean any natural person, corporation,
company, general partnership, limited
partnership, limited liability partnership,
joint venture, proprietorship, limited
liability company, or other entity or business
organization or vehicle, trust, unincorporated
organization or Governmental Authority or any
department or agency thereof.
"Representatives" Shall mean accountants, counsel or
representatives.
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"Seller Disclosure Letter" shall mean the Seller Disclosure Letter
delivered to Buyer concurrently with this
Agreement, which is an integral part of this
Agreement.
"Subsidiary" of any Entity means, at any date, any Person
(a) the accounts of which would be consolidated
with and into those of the applicable Person in
such Person's consolidated financial statements
if such financial statements were prepared in
accordance with GAAP as of such date or (b) of
which securities or other ownership interests
representing more than fifty percent (50%) of
the equity or more than fifty percent (50%) of
the ordinary voting power or, in the case of a
partnership, more than fifty percent (50%) of
the general partnership interests or more than
fifty percent (50%) of the profits or losses of
which are, as of such date, owned, controlled
or held by the applicable Person or one or more
subsidiaries of such Person.
"Tax Return" shall mean any report, return, declaration, or
other information required to be supplied to a
Governmental Authority in connection with Taxes
including any claim for refund or amended
return.
"Taxes" shall mean all taxes, levies or other like
assessments, including income, gross receipts,
excise, value added, real or personal property,
withholding, asset, sales, use, license,
payroll, transaction, capital, business,
corporation, employment, net worth and
franchise taxes, or other governmental taxes
imposed by or payable to any foreign, Federal,
state or local taxing authority, whether
computed on a separate, consolidated, unitary,
combined or any other basis; and in each
instance such term shall include any interest,
penalties or additions to tax attributable to
any such Tax.
"Transition Services shall mean the transition services agreement to
Agreement" be entered into on the date hereof between
Seller and Buyer, substantially in the form of
the agreement attached hereto as Exhibit A.
"Treasury Regulation" shall mean the income Tax regulations,
including temporary and proposed regulations,
promulgated under the Code, as amended.
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ARTICLE II
SALE AND PURCHASE
Section 2.1 Agreement to Sell and Purchase.
(a) Simultaneously with the payment of the Purchase Price in
accordance with Section 2.1(b) of this Agreement, Buyer shall purchase,
acquire and accept from Seller, and Seller shall sell, convey, assign,
transfer and deliver to Buyer, all of Seller's interests in the Equity
Interests, free and clear of all Liens, as well as certain rights and
interests in related tangible and intangible property being granted in
support of the consummation of the transactions contemplated hereby.
(b) As of the date hereof, Buyer shall pay to Seller, in
consideration for the purchase of the Equity Interests and such related
rights and interests pursuant to Section 2.1(a), an amount in cash equal to
$55,000,000 (the "Purchase Price") by wire transfer of same day funds to an
account or accounts and in such amounts as designated by Seller.
Section 2.2 Time and Place of Closing.
(a) Upon payment of the Purchase Price, Seller shall deliver or
cause to be delivered, in form and substance satisfactory to Buyer (unless
previously delivered), the following items:
(i) a certificate or certificates representing the Equity
Interests (or other appropriate instruments evidencing transfer of
ownership), accompanied by stock or similar powers duly endorsed in blank
by Seller or accompanied by instruments of transfer duly executed by
Seller;
(ii) a certificate of incumbency and authority of Seller dated
the date hereof;
(iii) a duly executed counterpart of the Transition Services
Agreement;
(iv) written resignations, effective as of the date hereof, from
each of the officers and directors of the Entities;
(v) title to all assets attributed to the Entities and their
businesses that are not in their possession or titled in their name and
would not otherwise be transferred by transfer of the certificates
representing the Equity Interests;
(vi) an estimated payment of $2,200,000, which payment shall be
made by wire transfer of same day funds to an account or accounts and in
such amounts as designated by Buyer in writing. The estimated payment will
be reconciled in accordance with the provisions of Section 2.3.; and
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(vii) evidence of termination of the Intercompany Cash Pooling
Arrangement between CMS Energy Investment LLC and/or CMS Capital LLC and
the Entities (other than ▇▇▇▇▇▇▇ Pipeline Company LLC, which is not a party
to such arrangement).
(b) As of the date hereof, Buyer shall deliver or cause to be
delivered to Seller (unless previously delivered), the following items:
(i) the Purchase Price by wire transfer of same day funds to an
account or accounts and in such amounts as designated by Seller in writing;
(ii) a certificate of incumbency and authority of Buyer dated the
date hereof; and
(iii) a duly executed counterpart of the Transition Services
Agreement.
Section 2.3 Effective Date.
The Effective Date of the transaction for financial purposes shall be
December 31, 2006, so that Buyer will receive the assets and liabilities
shown on the December 31, 2006 Financial Statements plus all of the results
of operations (including net cash flow) in the ordinary course of business
consistent with past practices of each of the Entities after December 31,
2006. To avoid confusion, Buyer and Seller agree that:
(a) Buyer shall receive the assets and liabilities shown on the
December 31, 2006 Financial Statements, less the following Intercompany
Notes receivables:
(i) $2,494,058 loan from CMS Antrim Gas LLC to CMS Energy
Investment LLC
(ii) $855,989 loan from CMS Litchfield LLC to CMS Energy
Investment LLC
(iii) $716,663 loan from CMS Grands Lacs LLC to CMS Energy
Investment LLC
(iv) $950,341 loan from CMS Bay Area Pipeline, LLC to CMS Energy
Investment LLC
(v) $566,887 loan from CMS ▇▇▇▇▇▇▇ LLC to CMS Energy Investment
LLC.
(b) Buyer shall also receive all the results of operations
(including net cash flow) from January 1, 2007 through the date hereof.
Buyer and Seller shall work in good faith to reconcile and settle all
accounts as of the date hereof,
9
consistent with the intent described above, within thirty (30) days after
the date hereof. If it is determined that Seller owes money to Buyer, it
shall pay Buyer within five (5) days of such determination. If it is
determined that Buyer owes money to Seller, it shall pay Seller within five
(5) days of such determination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
Section 3.1 Corporate Organization; Qualification.
Each Seller is duly organized and validly existing and in good
standing under the Laws of its governing jurisdiction. Each of the Entities
is duly organized and validly existing and in good standing under the Laws
of its governing jurisdiction and each (a) has the requisite power to carry
on its businesses as currently conducted and (b) is duly qualified to do
business in each of the jurisdictions in which the ownership, operation or
leasing of its properties or assets or the conduct of its business requires
it to be so qualified, except where the failure to be so qualified would
not have a Material Adverse Effect.
Section 3.2 Authority Relative to this Agreement.
Each Seller has full corporate power and authority to execute and
deliver this Agreement, the Transition Services Agreement (as applicable)
and the other agreements, documents and instruments to be executed and
delivered by it in connection with this Agreement or the Transition
Services Agreement, and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this Agreement, the
Transition Services Agreement and the other agreements, documents and
instruments to be executed and delivered in connection with this Agreement
or the Transition Services Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all the necessary action on the part of each Seller (as
applicable) and no other corporate or other proceedings on the part of
Seller are necessary to authorize this Agreement, the Transition Services
Agreement and the other agreements, documents and instruments to be
executed and delivered in connection with this Agreement or the Transition
Services Agreement or to consummate the transactions contemplated hereby
and thereby. This Agreement, the Transition Services Agreement and the
other agreements, documents and instruments to be executed and delivered in
connection with this Agreement or the Transition Services Agreement have
been, duly and validly executed and delivered by Seller and assuming that
this Agreement, the Transition Services Agreement and the other agreements,
documents and instruments to be executed and delivered in connection with
this Agreement or the Transition Services Agreement constitute legal, valid
and binding agreements of the Buyer, are enforceable against Seller in
accordance with their respective terms, except that such enforceability may
be limited by applicable
10
bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally or general
principles of equity.
Section 3.3 Equity Interests.
(a) The Equity Interests are duly authorized, validly issued and
fully paid and were not issued in violation of any preemptive rights.
Except as set forth in Section 3.3(a) of the Seller Disclosure Letter, (i)
there are no equity interests of the Entities authorized, issued or
outstanding or reserved for any purpose and (ii) there are no (A) existing
options, warrants, calls, preemptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the
Entities, obligating Seller or any of its Affiliates to issue, transfer or
sell, or cause to be issued, transferred or sold, any additional equity
interest in the Entities, (B) outstanding securities of Seller or its
Affiliates that are convertible into or exchangeable or exercisable for any
equity interest in the Entities, (C) options, warrants or other rights to
purchase from Seller or its Affiliates any such convertible or exchangeable
securities or (D) other than this Agreement, contracts, agreements or
arrangements of any kind relating to the issuance of any equity interest in
the Entities, or any such options, warrants or rights, pursuant to which,
in any of the foregoing cases, Seller or its Affiliates are subject or
bound.
(b) Except as set forth in Section 3.3(b) of the Seller
Disclosure Letter, Seller owns all of the issued and outstanding Equity
Interests and has good, valid and marketable title to the Equity Interests,
free and clear of all Liens or other defects in title, and the Equity
Interests have not been pledged or assigned to any Person. The Equity
Interests owned by Seller are not subject to any restrictions on
transferability other than those imposed by this Agreement and by
applicable securities laws. Following the transfer of the Equity Interests
to Buyer, Buyer will own all of the issued and outstanding Equity Interests
owned by Seller and will have good and valid title to the Equity Interests,
free and clear of all Liens.
(c) Section 3.3(c) of the Seller Disclosure Letter sets forth, as
of the date hereof, a list of each of the Entities, including its name, its
jurisdiction of organization, its authorized and outstanding capital stock
(or equivalent equity interest) and the percentage of its outstanding
capital stock owned by the Seller and/or the Entities, as applicable.
(d) Except as set forth in Section 3.3(d) of the Seller
Disclosure Letter, there are no Persons (other than any of the Entities) in
which any of the Entities owns any equity or other similar interest.
Section 3.4 Consents and Approvals.
Except as set forth in Section 3.4 of the Seller Disclosure Letter,
Seller requires no consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority, or any
other Person as a condition to the execution and delivery of this Agreement
or the performance of the obligations hereunder, except where the
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failure to obtain such consent, approval or authorization of, or filing of,
registration or qualification with, any Governmental Authority, or any
other Person would not have a Material Adverse Effect.
Section 3.5 No Conflict or Violation.
Except as set forth in Section 3.5 of the Seller Disclosure Letter,
the execution, delivery and performance by the Seller of this Agreement
does not:
(a) violate or conflict with any provision of the organizational
documents or bylaws of Seller or any of the Entities;
(b) violate any applicable provision of a law, statute, judgment,
order, writ, injunction, decree, award, rule or regulation of any
Governmental Authority, except where such violation would not have a
Material Adverse Effect;
(c) violate, result in a breach of, constitute (with due notice
or lapse of time or both) a default, or cause any material obligation,
penalty or premium to arise or accrue including without limitation the
acceleration of maturity of any indebtedness or other obligation or
imposition of any lien, charge or encumbrance on any assets of any of the
Entities, under any Material Contract, lease, loan, mortgage, security
agreement, trust indenture or other material agreement or instrument to
which any of the Entities is a party or by which any of them is bound or to
which any of their respective properties or assets is subject, except for
violations, breaches or defaults that would not have a Material Adverse
Effect;
(d) result in the imposition or creation of any material Lien
upon or with respect to any of the properties or assets owned or used by
the Entities; or;
(e) result in the cancellation, modification, revocation or
suspension of any material Permits or in the failure to renew any material
Permit.
Section 3.6 Financial Information.
(a) Prior to the date hereof, Seller has made available to Buyer
or its Representatives certain unaudited financial information relating to
each of the Entities as of December 31, 2004, 2005 and 2006 detailing
assets, liabilities, income and cash flows (collectively, the "Financial
Statements"). A copy of the unaudited financial statements as of December
31, 2006 of the Entities is disclosed in Section 3.6(a) of the Seller
Disclosure Letter.
(b) The Financial Statements were prepared in accordance with
GAAP, consistently applied throughout the periods indicated and fairly
present, in all material respects, the combined financial position, results
of operations and cash flows of each of the Entities, as of the dates
thereof and for the periods covered thereby, in each case, except as
disclosed in Section 3.6(b) of the Seller Disclosure Letter.
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Section 3.7 Contracts.
(a) Section 3.7(a) of the Seller Disclosure Letter sets forth a
list, as of the date hereof, of each material contract, lease or similar
agreement or instrument to which any of the Entities is a party, other than
(i) any purchase or sale orders arising in the ordinary course of business,
(ii) any contract involving the payment or receipt of less than $100,000 in
any one year, (iii) any contract terminable within 30 days or less by its
terms, and (iv) any contract listed in any other Section of the Seller
Disclosure Letter (each contract set forth in Section 3.7(a) of the Seller
Disclosure Letter being referred to herein as a "Material Contract").
(b) Section 3.7(b) of the Seller Disclosure Letter sets forth a
list, as of the date hereof, of each Material Contract that any of the
Entities has with Seller or with any Affiliate of Seller that is not one of
the Entities.
(c) Except as set forth in Section 3.7(c) of the Seller
Disclosure Letter, each Material Contract is a valid and binding agreement
of the Entities party thereto and, to the Knowledge of Seller, is in full
force and effect.
(d) Except as set forth in Section 3.7(d) of the Seller
Disclosure Letter, there is no default by Seller or any of the Entities
under any Material Contract to which it is a party, and Seller has no
Knowledge of any default by any counterparties under any Material Contract,
in each case other than defaults which have been cured or waived and which
would not have a Material Adverse Effect.
Section 3.8 Compliance with Law.
Except for Environmental Laws and Tax laws, which are the subject of
Section 3.14 and Section 3.15, respectively, and except as set forth in
Section 3.8 of the Seller Disclosure Letter, the Entities are in compliance
with all federal, state, local or foreign laws, statutes, ordinances,
rules, regulations, judgments, orders, writs, injunctions or decrees of any
Governmental Authority applicable to their respective properties, assets
and businesses except where such noncompliance would, individually or in
the aggregate, not have a Material Adverse Effect.
Section 3.9 Permits.
(a) Except as set forth in Section 3.9(a) of the Seller
Disclosure Letter, Seller, and the Entities have all permits, licenses,
certificates of authority, orders and approvals of, and have made all
filings applications and registrations with Governmental Authorities
necessary for the conduct of their respective business operations as
presently conducted (collectively, the "Permits"), except for those Permits
the absence of which would not have a Material Adverse Effect.
(b) Except as set forth in Section 3.9(b) of the Seller
Disclosure, all Permits are issued to, and in the name of, the Entities
which require such Permit.
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(c) Except as set forth in Section 3.9(c) of the Seller
Disclosure Letter, the Permits are in full force and effect, no violations
thereof have been recorded and no proceedings are pending or, to the
Knowledge of Seller, threatened for the revocation or partial revocation
thereof, in each case other than such failures, violations or proceedings
that have been cured or waived and those which would not have a Material
Adverse Effect. Seller and Buyer shall use their reasonable best efforts to
cooperate with respect to the use and transfer of any Permits and licenses
that cannot be readily transferred.
Section 3.10 Litigation.
Except as identified in Section 3.10 of the Seller Disclosure Letter,
there are no Actions before any Governmental Authority or arbitration panel
or tribunal pending or in progress or, to the Knowledge of Seller,
threatened, against Seller, the Entities, or any of their respective
Affiliates or any executive officer or director thereof relating to the
Equity Interests or the respective assets or businesses of the Entities,
except as would not, individually or in the aggregate, have a Material
Adverse Effect. None of Seller, the Entities, or any of their respective
Affiliates are subject to any outstanding judgment, order, writ,
injunction, decree or award entered in an Action to which such Person was a
named party relating to the Equity Interests or the respective assets or
businesses of such Persons, except as would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 3.11 Employee Matters.
(a) All material benefit and compensation plans and contracts,
including, but not limited to, "employee benefit plans" within the meaning
of Section 3(3) of ERISA, and deferred compensation, stock option, stock
purchase, stock appreciation rights, stock-based incentive bonus,
severance, employment, change in control, vacation or fringe benefit
programs, policies, agreements, arrangements or plans maintained by the
Entities or by the Seller or their Affiliates for the benefit of any of
their current employees of the Entities (collectively, the "Plans") have
been or are being terminated and, if applicable, vested as of the date
hereof, in each case as determined by Seller and its Affiliates in its sole
discretion and subject to the provisions of such Plans and applicable Law.
(b) All Affected Employees are subject to "at will" employment
arrangements under applicable policies of Seller and the Entities as of the
date hereof.
Section 3.12 Labor Relations.
Except as set forth in Section 3.12 of the Seller Disclosure Letter,
(i) none of the Entities is a party to any labor or collective bargaining
agreements, and there are no labor or collective bargaining agreements
which pertain to any employees of the Entities, (ii) within the preceding
eighteen (18) months, there have been no representation or certification
proceedings, or petitions seeking a representation proceeding, pending or,
to
14
the Knowledge of Seller, threatened in writing to be brought or filed with
the National Labor Relations Board or any other labor relations tribunal or
authority with respect to the Entities, (iii) within the preceding twelve
(12) months, to the Knowledge of Seller, there have been no organizing
activities involving the Entities with respect to any group of their
respective employees, (iv) there are no pending or, to the Knowledge of
Seller, threatened strikes, work stoppages, slowdowns or lockouts against
the Entities, or their respective Employees or involving any of the
Entities' facilities; and (v) there are no pending unfair employment
practice charges, grievances or complaints filed or, to the Knowledge of
Seller, threatened to be filed with any Governmental Authority based on the
employment or termination of employment by the Entities of any employee
Section 3.13 Intellectual Property.
(a) Section 3.13(a) of the Seller Disclosure Letter sets forth a
list of all material U.S. and foreign: (i) patents and patent applications;
(ii) trademark registrations and applications; and (iii) copyright
registrations and applications, owned by the Entities. The foregoing
schedules set forth at Section 3.13(a) of the Seller Disclosure Letter are
complete and accurate in all material respects. To the Knowledge of Seller,
the foregoing registrations are in effect and subsisting. Except as set
forth in Section 3.13(a) of the Seller Disclosure Letter, the Entities have
all licenses necessary to use the equipment and processes as currently
being used by them in the ordinary conduct of their respective businesses
and operations and, to the Knowledge of Seller, no further licenses are
required to so conduct their businesses and operations.
(b) Except as would not, individually or in the aggregate, have a
Material Adverse Effect, or as set forth in Section 3.13(b) of the Seller
Disclosure Letter, (i) to the Knowledge of Seller, the conduct of the
respective businesses of the Entities does not infringe or otherwise
violate any Person's Intellectual Property, and there is no such claim
pending or to the Seller's Knowledge threatened against the Entities, and
(ii) to the Knowledge of Seller, no Person is infringing or otherwise
violating any Intellectual Property owned by the Entities, and no such
claims are pending or threatened against any Person by the Entities.
(c) Except as set forth in Section 3.13(c) of the Seller
Disclosure, all owned or licensed Intellectual Property is owned by or
licensed to the Entities which utilize such Intellectual Property.
Section 3.14 Representations with Respect to Environmental Matters.
To the Knowledge of Seller, and except as set forth in Section 3.14 of
the Seller Disclosure Letter or as would not, individually or in the
aggregate, have Material Adverse Effect:
(a) The Entities are in compliance with all applicable
Environmental Laws;
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(b) The Entities have all of the Environmental Permits required
in order to conduct their operations or, where such Environmental Permits
have expired, have applied for a renewal of such Environmental Permits in a
timely fashion;
(c) There is no pending or threatened written Claim, lawsuit, or
administrative proceeding against the Entities under or pursuant to any
Environmental Law;
(d) None of the Entities is a party or subject to any
administrative or judicial order, decree or other agreement with a
Governmental Authority under or pursuant to any applicable Environmental
Law;
(e) None of the Entities has received written notice from any
third party, including any Governmental Authority, alleging that any of the
Entities has been or is in violation or potentially in violation of any
applicable Environmental Law or otherwise may be liable under any
applicable Environmental Law; and
(f) With respect to the real property that is currently owned,
leased or under easement or right of way by the Entities, there have been
no spills or discharges of Hazardous Substances on or underneath any such
real property.
The representations and warranties set forth in this Section 3.14 are
Seller's sole and exclusive representations and warranties related to
environmental matters.
Section 3.15 Tax Matters.
Except as would not have a Material Adverse Effect:
(a) All federal, state, and local Tax Returns required to be
filed by or on behalf of the Entities, and each consolidated, combined,
unitary, affiliated or aggregate group of which any of the Entities are a
member has been timely filed (taking into account applicable extensions)
and in each case are correct and complete in so far as the Entities are
concerned, and all Taxes shown as due on such Tax Returns have been paid,
or adequate reserves therefor have been established.
(b) There is no deficiency, proposed adjustment, or matter in
controversy that has been asserted or assessed in writing with respect to
any Taxes due and owing by the Entities that has not been paid or settled
in full.
(c) Each of the Entities is treated as a disregarded entity for
federal tax purposes.
Section 3.16 Insurance.
(a) Section 3.16(a) of the Seller Disclosure Letter sets forth a
true and complete list of all current policies of all material property and
casualty insurance, insuring the properties, assets, employees and/or
operations of the Entities (collectively, the "Policies"). To the Knowledge
of Seller, all premiums payable under
16
such Policies have been paid in a timely manner and the Entities, as
applicable, have complied in all material respects with the terms and
conditions of all such Policies.
(b) As of the date hereof, Seller has not received any written
notification of the failure of any of the Policies to be in full force and
effect. To the Knowledge of Seller, none of the Entities is in default
under any provision of the Policies, and except as set forth in Section
3.16(b) of the Seller Disclosure Letter, there is no claim by the Entities
or any other Person pending under any of the Policies as to which coverage
has been denied or disputed by the underwriters or issuers thereof.
Section 3.17 Absence of Certain Changes or Events.
(a) Except as set forth in Section 3.17(a) of the Seller
Disclosure Letter, each of the Entities conducts its respective businesses
in the ordinary course of business, consistent with past practice in all
material respects, since December 31, 2006.
(b) Except as set forth in Section 3.17(b) of the Seller
Disclosure Letter, or in the Financial Statements, and the notes thereto,
there has not been with respect to each of the Entities any event or
development or change which has resulted or would reasonably be likely to
result in a Material Adverse Effect.
(c) Section 3.17(c) of the Seller Disclosure Letter sets forth a
true and complete list of the Distributions made by each of the Entities
since December 31, 2006.
(d) Except as set forth in Section 3.17(d) of the Seller
Disclosure Letter, since December 31, 2006, each of the Entities has not:
(i) granted any severance or termination pay to, or entered into,
extended or amended any employment, consulting, severance or other
compensation agreement with, or otherwise increased the compensation or
benefits provided to any of its officers or other employees whose annual
salary base is in excess of $100,000;
(ii) sold, leased, licensed, mortgaged or otherwise disposed of
any properties or assets material to its business having a fair market
value in excess of $100,000 individually or $400,000 in the aggregate,
other than (A) sales made in the ordinary course of business, consistent
with past practice; or (B) sales of obsolete or other assets not presently
utilized in its business;
(iii) made any capital expenditure in excess of 10% of the annual
budgeted capital expenditures;
(iv) paid, repurchased, discharged or satisfied any of its
material Claims, Liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than in the ordinary course of
business, consistent with past practice;
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(v) (A) incurred or assumed or guaranteed any long-term debt, or
except in the ordinary course of business or consistent with past practice,
incurred or assumed or guaranteed short-term Indebtedness (other than
intercompany Indebtedness) exceeding $100,000 in the aggregate; (B)
modified the terms of any Indebtedness or other liability, other than
modifications of short-term debt in the ordinary course of business,
consistent with past practice; or (C) assumed, guaranteed, endorsed or
otherwise became liable or responsible (whether directly, contingently or
otherwise) for the material obligations of any other Person; or
(vi) authorized any of, or committed or agreed to take any of,
the actions referred to in the paragraphs (i) through (v) above.
(e) Except as set forth in Section 3.17(e) of the Seller
Disclosure Letter, since December 31, 2006, each of the Entities has not
recognized any material Tax liability outside the ordinary course of
business, made or changed any election for Tax purposes, changed any annual
accounting period for Taxes, filed any material Tax Return or amended Tax
Return, entered into any closing agreement for Tax purposes, settled any
Tax claim or assessment relating to any of the Entities, surrendered any
right to claim a refund of Taxes, consented to any extension or waiver of
the limitation period applicable to any Tax claim or assessment relating to
any of the Entities, or taken any other action relating to the filing of
any Tax Return or the payment of any Tax, if such election, adoption,
change, amendment, agreement, settlement, surrender, consent or other
action would have the effect of increasing the Tax liability of any of the
Entities for any period ending after December 31, 2006 or decreasing any
Tax attribute of any of the Entities existing on that date.
Section 3.18 Absence of Undisclosed Liabilities.
None of the Entities has any Liabilities (whether absolute, accrued,
contingent or otherwise) except those Liabilities (a) disclosed and
reserved against in the Financial Statements (or notes thereto) as required
by GAAP, (b) set forth in Section 3.18 of the Seller Disclosure Letter, (c)
incurred in the ordinary course of business since December 31, 2006 for
each of the Entities as described in Section 3.6 or (d) which would not
result in a Material Adverse Effect.
Section 3.19 Property.
Except as set forth in Section 3.19 of the Seller Disclosure Letter,
each of the Entities has valid title to, leases, or holds valid rights of
way, easements or similar real property rights relating to, all assets used
or held for use by each of the Entities, in each case free and clear of any
Liens (other than Permitted Liens) except for such failures of which to so
own, lease or hold would not, individually or in the aggregate, have a
Material Adverse Effect.
Section 3.20 Brokerage and Finders' Fees.
None of Seller, the Entities, or any of their Affiliates or their
respective stockholders, partners, directors, officers or employees, has
incurred, or will incur any
18
brokerage, finders' or similar fee in connection with the transactions
contemplated by this Agreement or the Transition Services Agreement.
Section 3.21 Corporate and Accounting Records.
The minute books of the Entities (excluding ▇▇▇▇▇▇▇ Pipeline Company)
contain true, complete and accurate records of all meetings and accurately
reflect all other corporate action of their respective members (including
committees thereof). Each of the Entities (except ▇▇▇▇▇▇▇ Pipeline Company)
maintains adequate records which accurately and validly reflect
transactions conducted by each of the Entities in reasonable detail, and
maintains accounting controls, policies and procedures sufficient to ensure
that such transactions are (a) executed in accordance with its management's
general or specific authorization and (b) recorded in a manner which
permits the preparation of financial statements in accordance with
Applicable Law and applicable regulatory accounting requirements.
Section 3.22 Affiliated Transactions.
Except as described in Section 3.22 of the Seller Disclosure Letter,
and except for trade payables and receivables arising in the ordinary
course of business consistent with past practices for purchases and sales
of goods or services consistent with past practice, none of the Entities
have been a party over the past twelve (12) months to any material
transaction or agreement with Seller or any Affiliate of Seller (other than
the Entities) and no director or officer of Seller or its Affiliates (other
than the Entities), has, directly or indirectly, any material interest in
any of the assets or properties of the Entities.
Section 3.23 No Other Representations or Warranties.
Except for the representations and warranties contained in this
Article III, none of Seller, the Entities, or any other Person makes any
other express or implied representation or warranty on behalf of Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Each Buyer hereby represents and warrants to Seller as follows:
Section 4.1 Corporate Organization; Qualification.
Such Person (a) is a limited liability company duly organized and
validly existing under the Laws of its jurisdiction of formation, (b) has
the requisite power to carry on its businesses as currently conducted and
(c) is duly qualified to do business in each of the jurisdictions in which
the ownership, operation or leasing of its properties or assets or the
conduct of its business requires it to be so qualified, except where the
failure to be so qualified would not materially and adversely affect the
ability of, or timing for, Buyer to consummate the transactions
contemplated by this Agreement or the Transition Services Agreement.
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Section 4.2 Authority Relative to this Agreement.
Such Person has full corporate or similar power and authority to
execute and deliver this Agreement, the Transition Services Agreement and
the other agreements, documents and instruments to be executed and
delivered by it in connection with this Agreement or the Transition
Services Agreement, and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this Agreement, the
Transition Services Agreement and the other agreements, documents and
instruments to be executed and delivered in connection with this Agreement
or the Transition Services Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all the necessary action on the part of such Person and no
other organization or similar proceedings on the part of such Person are
necessary to authorize this Agreement, the Transition Services Agreement
and the other agreements, documents and instruments to be executed and
delivered in connection with this Agreement or the Transition Services
Agreement or to consummate the transactions contemplated hereby and
thereby. This Agreement, the Transition Services Agreement and the other
agreements, documents and instruments to be executed and delivered in
connection with this Agreement or the Transition Services Agreement has
been duly and validly executed and delivered by such Person and assuming
that this Agreement, the Transition Services Agreement and the other
agreements, documents and instruments to be executed and delivered in
connection with this Agreement or the Transition Services Agreement
constitute legal, valid and binding agreements of the Seller are
enforceable against such Person in accordance with their respective terms,
except that such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally or general principles of equity.
Section 4.3 Consents and Approvals.
Except as set forth in Section 4.3 of the Buyer Disclosure Letter,
such Person requires no consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority, or any
other Person as a condition to the execution and delivery of this Agreement
or the performance of the obligations hereunder, except where the failure
to obtain such consent, approval or authorization of, or filing of,
registration or qualification with, any Governmental Authority, or any
other Person would not materially and adversely affect the ability of, or
timing for, Seller to consummate the transactions contemplated by this
Agreement or the Transition Services Agreement.
Section 4.4 No Conflict or Violation.
Except as set forth in Section 4.4 of the Buyer Disclosure Letter, the
execution, delivery and performance by such Person of this Agreement does
not:
(a) violate or conflict with any provision of the organizational
documents of such Person;
20
(b) violate any applicable provision of a law, statute, judgment,
order, writ, injunction, decree, award, rule or regulation of any
Governmental Authority, except where such violation would not materially
and adversely affect the ability of, or timing for, Seller to consummate
the transactions contemplated by this Agreement or the Transition Services
Agreement; or
(c) violate, result in a breach of, constitute (with due notice
or lapse of time or both) a default or cause any material obligation,
penalty or premium to arise or accrue under any material contract, lease,
loan, agreement, mortgage, security agreement, trust indenture or other
material agreement or instrument to which such Person is a party or by
which it is bound or to which any of its properties or assets is subject,
except as would not materially and adversely affect the ability of, or
timing for, Seller to consummate the transactions contemplated by this
Agreement or the Transition Services Agreement.
Section 4.5 Litigation.
Except as identified in Section 4.5 of the Buyer Disclosure Letter,
there are no Actions before any Governmental Authority or arbitration panel
or tribunal pending or in progress or, to Knowledge of such Person,
threatened, against such Person, or any of their respective Affiliates or
any executive officer or director thereof, except as would not materially
and adversely affect the ability of, or timing for, such Person to
consummate the transactions contemplated by this Agreement or the
Transition Services Agreement. Neither such Person nor any of its
Affiliates are subject to any outstanding judgment, order, writ,
injunction, decree or award entered in an Action to which such Person was a
named party, except as would not materially and adversely affect the
ability of, or timing for, such Person to consummate the transactions
contemplated by this Agreement or the Transition Services Agreement.
Section 4.6 Brokerage and Finders' Fees.
Neither such Person nor any of its Affiliates, or their respective
members, stockholders, partners, directors, officers or employees, has
incurred, or will incur any brokerage, finders' or similar fee in
connection with the transactions contemplated by this Agreement or the
Transition Services Agreement.
Section 4.7 Investment Representations.
(a) Such Person is acquiring the Equity Interests to be acquired
by it hereunder for its own account, solely for the purpose of investment
and not with a view to, or for sale in connection with, any distribution
thereof in violation of the federal securities laws or any applicable
foreign or state securities law.
(b) Such Person understands that the acquisition of the Equity
Interests to be acquired by it pursuant to the terms of this Agreement
involves substantial risk. Such Person and its officers have experience as
an investor in securities and equity interests of companies such as the
ones being transferred pursuant to this Agreement and acknowledges that it
can bear the economic risk of its investment and has such
21
knowledge and experience in financial or business matters that such Person
is capable of evaluating the merits and risks of its investment in the
Equity Interests to be acquired by it pursuant to the transactions
contemplated hereby.
(c) Such Person understands that the Equity Interests to be
acquired by it hereunder have not been registered under the Securities Act
on the basis that the sale provided for in this Agreement is exempt from
the registration provisions thereof. Such Person acknowledges that such
securities may not be transferred or sold except pursuant to the
registration and other provisions of applicable securities laws or pursuant
to an applicable exemption therefrom.
(d) Such Person acknowledges that the offer and sale of the
Equity Interests to be acquired by it in the transactions contemplated
hereby has not been accomplished by the publication of any advertisement.
Section 4.8 No Other Representations or Warranties.
Except for the representations and warranties contained in this
Article IV, neither such Person nor any other Person makes any other
express or implied representation or warranty on behalf of such Person.
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.1 Consents and Approvals.
(a) Upon the terms and subject to the conditions of this
Agreement, each of the parties hereto agrees to use, and will cause its
Affiliates to use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary or
advisable under Applicable Law to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable
including the preparation and filing of all forms, registrations and
notices required to be filed by such party in order to consummate the
transactions contemplated by this Agreement and the taking of such actions
as are necessary to obtain any approvals, consents, orders, exemptions or
waivers of Governmental Authorities required to be obtained by such party
in order to consummate the transactions contemplated by this Agreement.
Each party shall promptly consult with the other with respect to, provide
any necessary information with respect to, and provide copies of all
filings made by such party with any Governmental Entity or any other
information supplied by such party to a Governmental Entity in connection
with this Agreement and the Transition Services Agreement and the
transactions contemplated hereby and thereby.
(b) If any objections are asserted with respect to the
transactions contemplated by this Agreement or the Transition Services
Agreement under any anti-competition Law or if any suit or proceeding is
instituted or threatened by any Governmental Entity or any private party
challenging any of the transactions contemplated by this Agreement or the
Transition Services Agreement as violative of any
22
anti-competition Law, each of Seller and Buyer shall use its reasonable
best efforts to promptly resolve such objections. Notwithstanding anything
to the contrary in this Agreement, none of Seller or any of its Affiliates
shall have any obligation to hold separate or divest any property or assets
of Seller or any of its Affiliates in connection with any such claim under
anti-competition law. In furtherance of the foregoing, Buyer shall, and
shall cause its Affiliates to, take all action, including agreeing to hold
separate or to divest any of the businesses or properties or assets of
Buyer or any of its Affiliates (including the Equity Interests) and to
terminate any existing relationships and contractual rights and
obligations, as may be required (i) by the applicable Governmental Entity
in order to resolve such objections as such Governmental Entity may have to
such transactions under any anti-competition Law or (ii) by any domestic or
foreign court or other tribunal, in any action or proceeding brought by a
private party or Governmental Entity challenging such transactions as
violative of any anti-competition Law, in order to avoid the entry of, or
to effect the dissolution, vacating, lifting, altering or reversal of, any
order that has the effect of restricting, preventing or prohibiting the
consummation of the transactions contemplated by this Agreement or the
Transition Services Agreement. In addition, Buyer shall, and shall cause
its Affiliates to, vigorously defend any action or proceeding brought by a
private party or Governmental Entity challenging the transactions
contemplated hereby or by the Transition Services Agreement as violative of
any anti-competition Law, in order to avoid the entry of, or to effect the
dissolution, vacating, lifting, altering or reversal of, any order that has
the effect of restricting, preventing or prohibiting the consummation of
the transactions contemplated by this Agreement or the Transition Services
Agreement (including by pursuing any available appeal process).
Section 5.2 Further Assurances.
On and after the date hereof, Seller and Buyer shall cooperate and use
their respective reasonable best efforts to take or cause to be taken all
appropriate actions and do, or cause to be done, all things necessary or
appropriate to consummate and make effective the transactions contemplated
hereby, including the execution of any additional assignment or similar
documents or instruments of transfer of any kind, the obtaining of consents
which may be reasonably necessary or appropriate to carry out any of the
provisions hereof and the taking of all such other actions as such party
may reasonably be requested to take by the other party hereto from time to
time, consistent with the terms of this Agreement and the Transition
Services Agreement, in order to effectuate the provisions and purposes of
this Agreement and the Transition Services Agreement and the transactions
contemplated hereby and thereby. Included without limitation within the
foregoing assurances is Seller's agreement to take such further actions to
evidence delivery to Buyer of title to the pipeline owned by the ▇▇▇▇▇▇▇
Pipeline Company in form and scope that is customary for properties of this
type including obtaining at Seller's cost an opinion of outside counsel
confirming the reasonable nature of such title if such an opinion is deemed
necessary in the joint opinion of Buyer and Seller. As further detailed in
the Transition Services Agreement, Seller shall continue to receive, record
and deposit receivables of the Entities and irrevocably instruct the
Entities' bank(s) to transfer all receipts to such bank and accounts as
designated by Buyer in writing and to forward to Buyer all correspondence
and invoices received by Seller that are directed to any of the Entities.
Section 5.3 Employee Matters.
(a) Subject to Section 5.3(b) and Section 5.3(c) below, on the
date hereof (unless previously done), Seller shall give notice to all
Affected Employees
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that the active participation of the Affected Employees in the Seller's and
Entities' employee benefit plans, programs and arrangements (such plans,
programs and arrangements, the "Seller Plans") shall terminate on the date
hereof, and the Entities shall terminate participation of Affected
Employees in the Seller Plans as of the date hereof. In addition, Seller
shall retain all Liabilities and assets that arise with respect to current
and former employees of the Entities by virtue of their employment with the
Sellers or their Affiliates prior to the date hereof, including without
limitation under the Pension Plan for Employees of Consumers Energy and
Other CMS Energy Companies.
(b) As of the date hereof, Buyer shall cause the Entities to
continue to employ all of the Affected Employees for a period of at least
six (6) months from and after the date hereof.
(c) With respect to those employee benefit plans of Buyer or its
Affiliates ("Buyer Plans") in which Affected Employees may participate on
or after the date hereof, Buyer shall, and shall cause the Entities to,
credit prior service of the Affected Employees with the Entities or other
Affiliates of Seller for purposes of eligibility and vesting under Buyer
Plans and for all purposes with respect to vacation, sick days and
severance under such Buyer Plans. Affected Employees shall also be given
pro rata credit for any deductible or co-insurance payment amounts payable
in respect of the Buyer Plan year in which the date hereof occurs, to the
extent that, following the date hereof, they participate in any Buyer Plan
during such plan year for which deductibles or co-payments are required.
(d) Buyer and the Entities shall be responsible for all
Liabilities and obligations under the Worker Adjustment and Retraining
Notification Act and similar foreign, state and local rules, statutes and
ordinances resulting from the actions of Buyer and the Entities after the
date hereof
(e) CMS Energy Corporation or its Affiliates shall retain all
assets that are accumulated as of date hereof under Financial Accounting
Standards Board Statement 106 (and deposited in various VEBA accounts and
401(h) accounts of Seller or its Affiliates). Further, Seller or its
Affiliates shall retain the liability for post-employment benefits other
than pensions ("PBOPs") for the benefit of former employees of the Entities
who are retirees of the Entities as of the date hereof, and Affected
Employees who are eligible to retire and qualified for benefits under PBOPs
as of the date hereof, and Seller or its Affiliates shall retain the
responsibility for providing post-retirement benefits to such employees
pursuant to the eligibility requirements of the Seller Plans. It is the
intent of the parties that Buyer shall have no obligation whatsoever with
respect to pension or any other post-employment benefits that any employee
of the Entities, whether current or retired, is entitled to as a result of
employment with the Entities or its Affiliates prior to the date hereof.
Section 5.4 Tax Covenants.
(a) Tax Return Filings, Refunds, and Credits.
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(i) Seller shall timely prepare and file (or cause such
preparation and filing) with the appropriate Tax authorities all Tax
Returns (including any Consolidated Income Tax Returns) with respect to the
Entities for Tax periods that end on or before the Cut-off Date (the
"Seller Returns"), and will pay (or cause to be paid) all Taxes due with
respect to the Seller Returns. The taxes shown on the Tax Returns shall be
correct and complete insofar as the Entities are concerned.
(ii) Buyer shall timely prepare and file (or cause such
preparation and filing) with the appropriate Tax authorities all Tax
Returns (the "Straddle Period Returns") with respect to the Entities for
all Tax periods ending after the Cut-off Date that include the Cut-off Date
(the "Straddle Period"). All Straddle Period Returns shall be prepared in
accordance with past practice. Buyer shall provide Seller with copies of
any Straddle Period Returns at least forty-five (45) days prior to the due
date thereof (giving effect to any extensions thereto), accompanied by a
statement (the "Straddle Statement") setting forth and calculating in
reasonable detail the Pre-Cut-off Taxes as defined below. If Seller agrees
with the Straddle Period Return and Straddle Statement, Seller shall pay to
Buyer (or Buyer shall pay to Seller, if appropriate) an amount equal to the
Pre-Cut-off Taxes as shown on the Straddle Statement not later than two (2)
Business Days before the due date (including any extensions thereof) for
payment of Taxes with respect to such Straddle Period Return. If, within
fifteen (15) days of the receipt of the Straddle Period Return and Straddle
Statement, Seller notifies Buyer that it disputes the manner of preparation
of the Straddle Period Return or the amount calculated in the Straddle
Statement, then Buyer and Seller shall attempt to resolve their
disagreement within the five (5) days following Seller's notification or
Buyer of such disagreement. If Buyer and Seller are unable to resolve their
disagreement, the dispute shall be submitted to a mutually agreed upon
nationally recognized independent accounting firm, whose expense shall be
borne equally by Buyer and Seller, for resolution, if possible, within
twenty (20) days of such submission. If the parties have not agreed on an
independent accounting firm within fifteen days following Seller's
notification of Buyer of such disagreement, on the request of any party
such independent accounting firm shall be appointed by the ICC Centre. Any
independent accounting firm appointed by the ICC Centre shall be an
impartial and disinterested senior partner in an internationally recognized
accounting firm. The decision of such accounting firm with respect to such
dispute shall be binding upon Buyer and Seller, and Seller shall pay to
Buyer (or Buyer shall pay to Seller, if appropriate) an amount equal to the
Pre-Cut-off Taxes as decided by such accounting firm not later than two (2)
Business Days before the due date (including any extensions thereof) for
payment of Taxes with respect to such Straddle Period Return.
(iii) From and after the Cut-off Date, Buyer and its Affiliates
(including the Entities) will not file any amended Tax Return, carryback
claim, or other adjustment request with respect to the Entities for any Tax
period that includes or ends on or before the Cut-off Date unless Seller
consents in writing; provided, however, that with respect to any Straddle
Period Return, such
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consent shall not be unreasonably withheld, provided Buyer has made
arrangements to the reasonable satisfaction of Seller to make Seller whole
for any detriment or cost incurred (or to be incurred) by Seller as a
result of such amended Tax Return, carryback claim or other adjustment
request.
(iv) For purposes of this Agreement, in the case of any Taxes of
the Entities that are payable with respect to any Straddle Period, the
portion of any such Taxes that constitutes "Pre-Cut-off Taxes" shall be the
excess of (A) (i) in the case of Taxes that are either (x) based upon or
related to income or receipts or (y) imposed in connection with any sale,
transfer or assignment or any deemed sale, transfer or assignment of
property (real or personal, tangible or intangible) be deemed equal to the
amount that would be payable if the Tax period ended on the Cut-off Date
and (ii) in the case of Taxes (other than those described in clause (i))
imposed on a periodic basis with respect to the business or assets of the
Entities, be deemed to be the amount of such Taxes for the entire Straddle
Period (or, in the case of such Taxes determined on an arrears basis, the
amount of such Taxes for the immediately preceding Tax period) multiplied
by a fraction the numerator of which is the number of calendar days in the
portion of the Straddle Period ending on the Cut-off Date and the
denominator of which is the number of calendar days in the entire Straddle
Period over (B) any prepayment or advances of Taxes or any payments of
estimated Taxes with respect to the Straddle Period. For purposes of clause
(i) of the preceding sentence, any exemption, deduction, credit or other
item that is calculated on an annual basis shall be allocated to the
portion of the Straddle Period ending on the Cut-off Date on a pro rata
basis determined by multiplying the total amount of such item allocated to
the Straddle Period by a fraction, the numerator of which is the number of
calendar days in the portion of the Straddle Period ending on the Cut-off
Date and the denominator of which is the number of calendar days in the
entire Straddle Period. Pre-Cut-off Taxes include any Taxes attributable to
a Person that is treated as a partnership for federal income tax purposes
as if such Person allocated Tax items to its partners in a manner
consistent with this Section 5.4(b)(iv). In the case of any Tax based upon
or measured by capital (including net worth or long-term debt) or
intangibles, any amount thereof required to be allocated under this Section
5.6(b)(iv) shall be computed by reference to the level of such items on the
Cut-off Date. The parties hereto will, to the extent permitted by
Applicable Law, elect with the relevant Tax authority to treat a portion of
any Straddle Period as a short taxable period ending as of the close of
business on the Cut-off Date. For purposes of this Agreement, "Post-Cut-off
Taxes" shall include any Taxes of the Entities that are payable with
respect to a Straddle Period, except for the portion of
any such Taxes that constitutes Pre-Cut-off Taxes. For avoidance of doubt,
Michigan property taxes shall be prorated using the "statutory" method.
(v) Seller and Buyer shall reasonably cooperate in preparing and
filing all Tax Returns with respect to the Entities, including maintaining
and making available to each other all records reasonably necessary
26
in connection with Taxes of the Entities and in resolving all disputes and
audits with respect to all Tax periods relating to Taxes of the Entities.
(vi) For a period of seven (7) years after the Cut-off Date, the
Seller and its Representatives shall have reasonable access to the books
and records (including the right to make extracts thereof) of the Entities
to the extent that such books and records relate to Taxes and to the extent
that such access may reasonably be required by Seller in connection with
matters relating to or affected by the operation of the Entities prior to
the Cut-off Date. Such access shall be afforded by Buyer upon receipt of
reasonable advance notice and during normal business hours. If Buyer shall
desire to dispose of any of such books and records prior to the expiration
of such seven-year period, Buyer shall, prior to such disposition, give
Seller a reasonable opportunity, at Seller's expense, to segregate and
remove such books and records as Seller may select.
(vii) If an Indemnified Party actually receives a refund or
credit or other reimbursement with respect to Taxes for which it would be
indemnified under this Agreement, the Indemnified Party shall pay over such
refund or credit or other reimbursement to the Indemnifying Party.
(viii) Buyer shall not, and shall cause the Entities to not,
make, amend or revoke any Tax election if such action would reasonably be
expected to adversely affect any of Seller or its Affiliates with respect
to any Tax period ending on or before the Cut-off Date or for the
Pre-Cut-off portion of any Straddle Period or any Tax refund or credit with
respect thereto.
(ix) For purposes of this Agreement a "Consolidated Income Tax
Return" is any income Tax Return filed with respect to any consolidated,
combined, affiliated or unified group provided for under Section 1501 of
the Code and the Treasury Regulations under Section 1502 of the Code, or
any comparable provisions of Applicable Law, other than any income Tax
Return that includes only any one of the Entities.
(b) Indemnity for Taxes.
(i) Seller hereby agrees to indemnify the Buyer and its
Affiliates against and hold them harmless from all liability for (i) all
Taxes imposed on the Entities with respect to Tax periods ending on or
before the Cut-off Date, (ii) Pre-Cut-off Taxes with respect to any
Straddle Period, and (iii) all Taxes that are attributable to Seller or any
member (other than the Entities) of an affiliated, consolidated, combined
or unitary Tax group of which at least one of the Entities was a member
prior to the Cut-off Date that is imposed under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign Tax law) by
reason of the Entities being included in any such Tax group.
(ii) Buyer hereby agrees to indemnify Seller and its Affiliates
against and hold them harmless from all liability for (A) all Taxes of the
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Entities with respect to all Tax periods beginning after the Cut-off Date,
(B) Post-Cut-off Taxes with respect to any Straddle Period, and (C)
Transfer Taxes.
(iii) The obligation of Seller to indemnify and hold harmless
Buyer, on the one hand, and the obligations of Buyer to indemnify and hold
harmless Seller, on the other hand, pursuant to this Section 5.4, shall
terminate upon the expiration of the applicable statutes of limitations
with respect to the Tax Liabilities in question (giving effect to any
waiver, mitigation or extension thereof).
(iv) Any indemnification obligation under this Section 5.4(b)
which relates to one of the Entities that is not wholly owned by Seller
shall be reduced pro rata to reflect the elimination of the amount of Tax
liability equivalent to the third-party's ownership percentage in such
Entity.
(c) Certain Payments. Buyer and Seller agree to treat (and cause
their Affiliates to treat) any payment under this Section 5.4 as an
adjustment to the Purchase Price for all Tax purposes.
(d) Contests.
(i) After the Cut-off Date, Seller and Buyer each shall notify
the other party in writing within ten (10) days of the commencement of any
Tax audit or administrative or judicial proceeding affecting the Taxes of
any of the Entities that, if determined adversely to the taxpayer (the "Tax
Indemnified Party") or after the lapse of time would be grounds for
indemnification under this Section 5.4 by the other party (the "Tax
Indemnifying Party" and a "Tax Claim"). Such notice shall contain factual
information describing any asserted Tax liability in reasonable detail and
shall include copies of any notice or other document received from any Tax
authority in respect of any such asserted Tax liability. Failure to give
such notification shall not affect the indemnification provided in this
Section 5.4 except to the extent the Tax Indemnifying Party shall have been
prejudiced as a result of such failure (except that the Tax Indemnifying
Party shall not be liable for any expenses incurred during the period in
which the Tax Indemnified Party failed to give such notice). Thereafter,
the Tax Indemnified Party shall deliver to the Tax Indemnifying Party, as
promptly as possible but in no event later than ten (10) days after the Tax
Indemnified Party's receipt thereof, copies of all relevant notices and
documents (including court papers) received by the Tax Indemnified Party.
(ii) In the case of an audit or administrative or judicial
proceeding involving any asserted liability for Taxes relating to any
Taxable years or periods ending on or before the Cut-off Date or any
Straddle Period, Seller shall have the right, at its expense, to control
the conduct of such audit or proceeding; provided, however, that (A) with
respect to Straddle Periods, Seller shall keep Buyer reasonably informed
with respect to the status of such audit or proceeding and provide Buyer
with copies of all written correspondence with
28
respect to such audit or proceeding in a timely manner and (B) if such
audit or proceeding would be reasonably expected to result in a material
increase in Tax liability of the Entities for which Buyer would be liable
under this Section 5.6, Buyer may participate in the conduct of such audit
or proceeding at its own expense.
(iii) In the case of an audit or administrative or judicial
proceeding involving any asserted liability for Taxes relating to any
Taxable years or periods beginning after the Cut-off Date, Buyer shall have
the right, at its expense, to control the conduct of such audit or
proceeding.
(iv) Buyer and Seller shall reasonably cooperate in connection
with any Tax Claim, and such cooperation shall include the provision to the
Tax Indemnifying Party of records and information which are reasonably
relevant to such Tax Claim and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder.
(e) Transfer and Similar Taxes. Notwithstanding any other
provisions of this Agreement to the contrary, all sales, use, transfer,
gains, stamp, duties, recording and similar Taxes (collectively, "Transfer
Taxes") incurred in connection with the transactions contemplated by this
Agreement shall be borne by Buyer, and Buyer shall accurately file all
necessary Tax Returns and other documentation with respect to Transfer
Taxes and timely pay all such Transfer Taxes. If required by Applicable
Law, Seller will join in the execution of any such Return. Buyer shall
provide copies of any Tax Returns with respect to Transfer Taxes to Seller
no later than fifteen (15) days after the due dates of such Tax Returns.
(f) Termination of Tax Sharing Agreements. On or prior to the
Cut-off Date, Seller shall cause all Tax sharing agreements between the
Seller or any of its Affiliates (as determined immediately after the
Cut-off Date) on the one hand, and the Entities on the other hand, to be
terminated, and all obligations thereunder shall be settled, and no
additional payments shall be made under any provisions thereof after the
Cut-off Date.
(g) Special Rule. For purposes of applying this Section 5.4, when
applying the definitions "Pre-Cut-off Taxes," "Post-Cut-off Taxes," and
"Straddle Period," the term "Cut-off Date" as used in such definitions
shall mean December 31, 2006.
Section 5.5 Maintenance of Insurance Policies.
(a) Seller and Buyer agree that Casualty Insurance Claims
relating to the businesses of the Entities (including reported claims and
including incurred but not reported claims) will remain with the Entities
immediately following the consummation of the transaction contemplated in
this Agreement. For purposes hereof, "Casualty Insurance Claims" shall mean
workers' compensation, auto liability, general
29
liability and products liability claims and claims for damages caused to
the facilities of the Entities generally insured under all risk, real
property, boiler and mechanical breakdown insurance coverage which are
disclosed on Section 5.6(a) of the Seller Disclosure Letter. The Casualty
Insurance Claims are subject to the provisions of policies of insurance
with insurance carriers and contractual arrangements with insurance
adjusters maintained by Seller or its Affiliates prior to the date hereof
(collectively, the "Insurance Policies"). With respect to the Casualty
Insurance Claims, the following procedures shall apply: (i) Seller or its
Affiliates shall continue to administer, adjust, settle and pay, on behalf
of the Entities, all Casualty Insurance Claims with dates of occurrence
prior to the date of hereof and (ii) Seller shall invoice Buyer at the end
of each month for Casualty Insurance Claims paid on behalf of the Entities
by Seller. In the event that Buyer does not pay, or cause to be paid, to
Seller such amount due within fifteen (15) days of such invoice, interest
at the rate of ten percent (10%) per annum shall accrue on the amount of
such invoice. Casualty Insurance Claims to be paid by Seller hereunder
shall include all costs necessary to settle claims including compensatory,
medical, legal and other allocated expenses. In the event that any Casualty
Insurance Claims exceeds a deductible or self-insured retention under the
Insurance Policies, Seller shall be entitled to the benefit of any
insurance proceeds that may be available to discharge any portion of such
Casualty Insurance Claim.
(b) Seller makes no representation or warranty with respect to
the applicability, validity or adequacy of any Insurance Policies, and
Seller shall not be responsible to Buyer or any of its Affiliates for the
failure of any insurer to pay under any such Insurance Policy.
(c) Nothing in this Agreement is intended to provide or shall be
construed as providing a benefit or release to any insurer or claims
service organization of any obligation under any Insurance Policies. Seller
and Buyer confirm that the sole intention of this Section 5.6 is to divide
and allocate the benefits and obligations under the Insurance Policies
between them as of the date hereof and not to effect, enhance or diminish
the rights and obligations of any insurer or claims service organization
thereunder. Nothing herein shall be construed as creating or permitting any
insurer or claims service organization the right of subrogation against
Seller or Buyer or any of their Affiliates in respect of payments made by
one to the other under any Insurance Policy.
(d) If Buyer requests a copy of an Insurance Policy relating to a
pending or threatened Casualty Insurance Claim, Seller shall provide a copy
of all relevant insurance policies which insure such Casualty Insurance
Claims within five (5) Business Days, provided, that if Seller cannot
provide such policy within five (5) days after exercising reasonable best
efforts to locate such policy, Seller shall continue to exercise its
reasonable best efforts to provide such policy to Buyer as soon as possible
thereafter.
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Section 5.6 Transfers of Title and Possession of Assets of Entities.
In those cases where a Material Contract, deed, easement, Permit,
right of way or other asset was entered into or acquired for the benefit of
one of the Entities or its business by any person other than one of the
Entities, including an Affiliate of one of the Entities, and the rights and
obligations of such Material Contract, deed, easement, Permit or other
asset have not been assigned to one of the Entities as of the date hereof,
Seller will use its reasonable best efforts at its reasonable expense to
ensure that such assignments are made as soon as reasonably practicable.
Section 5.7 Preservation of Records.
(a) Buyer agrees that it shall, at its own expense, preserve and
keep the records held by it relating to the respective businesses of the
Entities that could reasonably be required after the consummation of the
transaction contemplated in this Agreement by Seller for the time periods
required pursuant to the applicable document retention program in effect on
the date hereof (a copy of which has been provided to Buyer); provided,
however, that upon expiration of such period, as applicable, Buyer shall
give written notice to Seller if it or the custodian of such books and
records proposes to destroy or dispose of the same. Seller shall have the
opportunity for a period of thirty (30) days after receiving such notice to
elect to have some or all of such books and records delivered, at Seller's
expense and risk, to a location chosen by Seller. In addition, Buyer shall
make such records available to Seller as may reasonably be required by
Seller in connection with, among other things, any insurance claim, legal
proceeding or governmental investigation relating to the respective
businesses of Seller and its Affiliates, including the Entities. Seller
agrees to maintain the confidentiality of all information provided by Buyer
or the Entities hereunder during the time periods provided for in this
Section.
(b) Seller agrees that it shall, at its own expense, preserve and
keep the records held by it relating to the respective business of the
Entities which are contained in the records of Seller or its Affiliates
that could reasonably be required after the consummation of the transaction
contemplated by this Agreement by Seller for the time periods required
pursuant to the applicable document retention program in effect on the date
hereof. In addition, Seller shall make such records available to Buyer as
may reasonably be required by Buyer in connection with, among other things,
any insurance claim, legal proceeding or governmental investigation
relating to the Entities.
Section 5.8 Public Statements.
No public or private release, announcement or regulatory filing
concerning the transactions contemplated hereby shall be issued by any of
the parties without the prior consent of the other parties (which consent
shall not unreasonably withheld), except for such press release,
announcement or regulatory filing as is required by law, court process or
stock exchange rule to be made by the party proposing to issue the same, in
which case such party shall use its reasonable best efforts to consult in
good faith with the other party prior to the issuance of any such press
release, announcement or filing.
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Section 5.9 Use of Corporate Name; Transitional Use of Seller's Name.
Promptly after the consummation of the transaction contemplated
hereby, Buyer shall cause each of the Entities to make any necessary legal
filings with the appropriate Governmental Authorities to register the
change in their corporate names to names that do not include "CMS". Buyer
and its Affiliates shall hold harmless and indemnify Seller and any of its
Affiliates against all Damages resulting from or arising in connection with
the use by Buyer or any of its Affiliates of the "CMS" name as provided in
this Section 5.11.
Section 5.10 Release of Guarantees.
Unless previously done, Buyer shall, as soon as reasonably
practicable, either (a) arrange for substitute letters of credit,
guarantees and other obligations on commercially reasonable terms to
replace in all respects the indemnities, performance bonds, performance
guarantees, other guaranty obligations, letters of credit and other similar
arrangements of Seller or its Affiliates (collectively, the "Released
Parties") in favor of any of the Entities (collectively, "Guarantees" as
further disclosed in Section 5.10 of the Seller Disclosure Letter) or (b)
assume all obligations under each such Guarantee, obtaining from the
creditor or other counter-party a full release of the Released Parties. As
soon as reasonably practicable, Buyer shall terminate, or cause Buyer or
one of its Affiliates to be substituted in all respects for the Released
Parties in respect of, all obligations of the Released Parties under any
such Guarantee. Buyer shall, to the extent the beneficiary or counter-party
under any Guarantee refuses to accept such a substitute letter of credit,
(i) obtain a letter of credit on behalf of Buyer and (ii) indemnify and
hold harmless the Released Parties for any Losses arising from payments
under such Guarantees that relate to events or circumstances arising after
the date hereof. To the extent that any Released Party has performance
obligations under any such Guarantee, Buyer shall (i) perform such
obligations on behalf of such Released Party or (ii) otherwise take such
action as reasonably requested by Seller so as to put such Released Party
in the same position as if Buyer, and not such Released Party, had
performed or was performing such obligations.
Section 5.11 Confidentiality.
Each of Buyer and Seller will hold, and will cause its Representatives
to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of Law, all confidential
documents and information concerning the Entities furnished to Buyer in
connection with the transactions contemplated by this Agreement, except to
the extent that such information can be shown to have been (i) previously
known on a non-confidential basis by Buyer or Seller, (ii) in the public
domain through no fault of Buyer or Seller or (iii) later lawfully acquired
by Buyer or Seller from sources other than the the other party; provided
that Buyer may disclose such information to its Representatives in
connection with the transactions contemplated by this Agreement so long as
such Persons are informed by Buyer of the confidential nature of such
information and are directed by Buyer to treat such information
confidentially. The obligation of each of Buyer and Seller to hold any such
information in confidence shall
32
be satisfied if it exercises the same care with respect to such information
as it would take to preserve the confidentiality of their own similar
information.
ARTICLE VI
SURVIVAL; INDEMNIFICATION
Section 6.1 Survival.
(a) All representations and warranties contained herein shall
survive for a period of twelve (12) months following the date hereof except
for the representations and warranties of Seller set forth in Sections 3.1,
3.2, and 3.3, and of Buyer in Sections 4.1 and 4.2, which shall survive
indefinitely and those in Section 3.15 which shall survive for the
applicable statutes of limitation periods referred to therein (such periods
set forth above are referred to herein as the relevant "Indemnity Period").
The parties intend to shorten the statute of limitations and agree that no
claims or causes of action may be brought against Seller, Buyer or any of
their respective directors, officers, employees, Affiliates, controlling
persons, agents or Representatives based upon, directly or indirectly, any
of the representations and warranties contained in this Agreement after the
Indemnity Period; provided that if a written notice of claim for
indemnification is made during the applicable Indemnity Period in
accordance with this Article VIII, such claim shall survive until its
resolution.
(b) All covenants and agreements contained herein that by their
terms are to be performed in whole or in part, or which prohibit actions,
subsequent to the date hereof, shall survive the consummation of the
transaction contemplated hereby in accordance with their terms.
(c) Seller hereby covenants that CMS Enterprises Company shall
maintain a consolidated net worth of at least $10,000,000 for a period of
twelve (12) months following the date hereof.
Section 6.2 Indemnification.
(a) Subject to the limitations set forth in this Article VI,
subsequent to the consummation of the transaction contemplated hereby,
Seller shall indemnify, defend, save and hold harmless Buyer and its
Affiliates, their respective successors and permitted assigns, and their
officers and directors (collectively, the "Buyer Indemnified Parties"),
from and against any and all Damages incurred by a Buyer Indemnified Party
arising out of, resulting from or incurred in connection with:
(i) any breach or inaccuracy of any representation or warranty of
Seller contained in this Agreement, in each case, when made or deemed made;
and
(ii) any breach in any material respect by Seller of any covenant
or agreement contained in this Agreement.
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(b) Subject to the limitations set forth in this Article VI,
subsequent to the consummation of the transaction contemplated by this
Agreement, Buyer shall indemnify, defend, save and hold harmless Seller and
its Affiliates, their respective successors and permitted assigns, and
their officers and directors (collectively, the "Seller Indemnified
Parties") from and against any and all Damages to the extent incurred by
the Seller Indemnified Party arising out of, resulting from or incurred in
connection with:
(i) any breach or inaccuracy of any representation or warranty of
such Buyer contained in this Agreement, in each case, when made or deemed
made. For the avoidance of doubt, it is expressly understood that each of
Lucid and Michigan Pipeline and Processing, LLC shall be severally, and not
jointly, liable for Damages incurred by a Seller Indemnified Party as a
result of a breach or inaccuracy of any representation or warranty made by
such Person or for the breach of confidentiality obligations governed by
Section 5.15 and, as a result, a Seller Indemnified Party shall not be
entitled to make a Claim, seek contribution, assert joint and several
liability or otherwise seek indemnification against the other Buyer based
on such breach or inaccuracy or breach of confidentiality obligations; and
(ii) any breach in any material respect by Buyer of any covenant
or agreement contained in this Agreement.
(c) Any Person providing indemnification pursuant to the
provisions of this Section 6.2 is referred to herein as an "Indemnifying
Party," and any Person entitled to be indemnified pursuant to the
provisions of this Section 6.2 is referred to herein as an "Indemnified
Party."
(d) Seller's indemnification obligations contained in Section
6.2(a)(i) shall not apply to any Claim for Damages unless and until the
aggregate of all such Damages exceeds $300,000 (the "Threshold Amount"), in
which event Seller's indemnity obligation contained in Section 6.2(a)(i)
shall apply to all Claims for Damages in excess of the Threshold Amount,
subject to a maximum liability to Seller, in the aggregate, of $5,000,000
(the "Cap Amount"); provided, however, that any Claims for Damages for
breach of the representations and warranties set forth in Section 3.1,
Section 3.2 and Section 3.3, shall not be subject to the Threshold Amount,
Cap Amount or Minimum Claim Amount (as defined below). Damages relating to
any single breach or series of related breaches of Seller's representations
and warranties shall not constitute Damages, and therefore shall not be
applied towards the Threshold Amount or be indemnifiable hereunder, unless
such Damages relating to any single breach or series of related breaches
exceed $25,000 (the "Minimum Claim Amount").
(e) Buyer's indemnification obligations contained in Section
6.2(b)(i) shall not apply to any Claim for Damages unless and until the
aggregate of all such Damages equals the Threshold Amount, in which event
Buyer's indemnification obligation contained in Section 862(b)(i) shall
apply to all Claims for Damages in excess of the Threshold Amount, subject
to a maximum liability to the
34
Buyer, in the aggregate, of the Cap Amount. Damages relating to any single
breach or series of related breaches of Buyer's representations and
warranties shall not constitute Damages, and therefore shall not be applied
towards the Threshold Amount or be indemnifiable hereunder, unless such
Damages relating to any single breach or series of related breaches exceed
the Minimum Claim Amount.
(f) The indemnification obligations of each party hereto under
this Section 6.2 shall inure to the benefit of the Buyer Indemnified
Parties and Seller Indemnified Parties, and such Buyer Indemnified Parties
and Seller Indemnified Parties shall be obligated to keep and perform the
obligations imposed on an Indemnified Party by this Section 6.2, on the
same terms as are applicable to such other party.
(g) In all cases in which a Person is entitled to be indemnified
in accordance with this Agreement, such Indemnified Party shall be under a
duty to take all commercially reasonable measures to mitigate all losses.
(h) Notwithstanding any other provision of this Agreement, claims
for indemnification with respect to Tax matters shall be governed by the
provisions of Section 5.4 and claims for Environmental matters shall be
governed by Section 6.6 of this Agreement, but in each such case the
indemnification obligations for each party hereto shall remain subject to
the remaining provisions of Section 6.2 including without limitation the
application of the Cap Amount, Threshold Amount and Minimum Claim Amount.
(i) Notwithstanding any other provision of this Agreement, in no
event shall any Indemnified Party be entitled to indemnification pursuant
to this Article VI to the extent any Damages were attributable to such
Indemnified Party's own gross negligence or willful misconduct.
(j) The remedies provided in this Article VI shall be deemed the
sole and exclusive remedies of the parties, from and after the date hereof,
with respect to this Agreement and the transactions contemplated hereby.
Section 6.3 Calculation of Damages.
(a) The amount of any Damages suffered by any party hereto shall
be reduced by (i) any amount that is reserved for sums held in reserve in
respect of the indemnifiable event on the balance sheet of the Entities, as
applicable, as of December 31, 2006 to the extent such Damages are suffered
by a Buyer Indemnified Party, or (ii) any amount that an Indemnified Party
is entitled to receive with respect thereto under any third party insurance
coverage or from any other party alleged to be responsible therefor.
(b) If an Indemnified Party makes a claim for indemnification
under this Article VI, the Indemnified Party shall use its reasonable best
efforts to collect any amounts available under such insurance coverage and
from such other party alleged to have responsibility. If an Indemnified
Party receives an amount under insurance coverage or from such other party
with respect to Damages at any time subsequent to any
35
indemnification provided by Seller or Buyer, as the case may be, pursuant
to this Article VI, then such Indemnified Party shall promptly reimburse
the Indemnifying Party for any payment made or expense incurred by the
Indemnifying Party in connection with providing such indemnification up to
such amount received by the Indemnified Party, but net of any expenses
incurred by the Indemnified Party in collecting such amount. To the extent
the Indemnifying Party makes any indemnification payment pursuant to this
Article VII in respect of Damages for which an Indemnified Party has a
right to recover against a third party (including an insurance company),
the Indemnifying Party shall be subrogated to the right of the Indemnified
Party to seek and obtain recovery from such third party; provided, however,
that if the Indemnifying Party shall be prohibited from such subrogation,
the Indemnified Party shall seek recovery from such third party on the
Indemnifying Party's behalf and pay any such recovery to the Indemnifying
Party net of expenses.
Section 6.4 Procedures for Third-Party Claims.
The obligations of any Indemnifying Party to indemnify any Indemnified
Party under this Article VI with respect to Claim for Damages by third
parties (including Governmental Entities) (a "Third-Party Claim"), shall be
subject to the following terms and conditions:
(a) The Indemnified Party shall give the Indemnifying Party
written notice of any such Third-Party Claim reasonably promptly after
learning of such Third-Party Claim, and the Indemnifying Party may, at its
option, undertake the defense thereof by Representatives of its own
choosing and reasonably acceptable to the Indemnified Party, and shall
provide written notice of any such undertaking to the Indemnified Party.
Failure to give prompt written notice of a Third-Party Claim hereunder
shall not affect the Indemnifying Party's obligations under this Article
VI, except to the extent that the Indemnifying Party is actually prejudiced
by such failure to give prompt written notice. The Indemnified Party shall,
and shall cause its employees and Representatives to, cooperate reasonably
with the Indemnifying Party in connection with the settlement or defense of
such Third-Party Claim and shall provide the Indemnifying Party with all
available information and documents concerning such Third-Party Claim. The
Indemnifying Party shall provide the Indemnified Party with copies of all
non-privileged communications and other information in respect of the
Third-Party Claim. If the Indemnifying Party, within thirty (30) days after
written notice of any such Third-Party Claim, fails to assume the defense
of such Third-Party Claim, or, after assuming defense, negligently fails to
defend and fails to call after reasonable written notice of the same, the
Indemnified Party against whom such Third-Party Claim has been made shall
(upon further written notice to the Indemnifying Party) have the right to
undertake the defense, compromise or settlement of such Third-Party Claim
on behalf of and for the account and risk, and at the expense, of the
Indemnifying Party, subject to the right of the Indemnifying Party to
assume the defense of such Third-Party Claim at any time prior to
settlement, compromise or final determination thereof upon written notice
to the Indemnified Party.
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(b) Anything in this Section 6.4 to the contrary notwithstanding,
(i) the Indemnified Party shall not settle a Third-Party Claim for which it
is indemnified without the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld, conditioned or delayed
and (ii) the Indemnifying Party shall not enter into any settlement or
compromise of any action, suit or proceeding, or consent to the entry of
any judgment for relief other than monetary damages to be borne by the
Indemnifying Party, without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld, conditioned or
delayed.
Section 6.5 Procedures for Inter-Party Claims.
In the event that an Indemnified Party determines that it has a Claim
for Damages against an Indemnifying Party hereunder (other than as a result
of a Third-Party Claim), the Indemnified Party shall give reasonably prompt
written notice thereof to the Indemnifying Party, specifying the amount of
such Claim and any relevant facts and circumstances relating thereto, and
such notice shall be promptly given even if the nature or extent of the
Damages is not then known. The notification shall be subsequently
supplemented within a reasonable time as additional information regarding
the Claim or the nature or extent of Damages resulting therefrom becomes
available to the Indemnified Party. Any failure to give such reasonably
prompt notice or supplement thereto or to provide any such facts and
circumstances will not waive any rights of the Indemnified Party, except to
the extent that the rights of the Indemnifying Party are actually
materially prejudiced thereby. The Indemnified Party and the Indemnifying
Party shall attempt to negotiate in good faith for a thirty-day (30-day)
period regarding the resolution of any disputed Claims for Damages. If for
any reason, such dispute cannot be resolved by negotiation, on the request
of any party it shall be resolved by arbitration in accordance with Section
9.8 herein. Promptly following the final determination of the amount of any
Damages claimed by the Indemnified Party, the Indemnifying Party, subject
to the limitations of the Minimum Claim Amount, Threshold Amount and the
Cap Amount, shall pay such Damages to the Indemnified Party by wire
transfer of immediately available funds.
Section 6.6 Special Indemnification Provision Relating to
Environmental Matters.
(a) Buyer shall indemnify and hold the Seller harmless from all
Damages arising in any way from the matters disclosed in Section 6.6(a) of
the Seller Disclosure Letter. This includes, without limitation, all
Damages arising from non-compliance with, or remediation under, any
Environmental Law that arise out of actions or omissions that occurred
before the date hereof and that have been disclosed to Buyer in Section
6.6(a) of the Seller Disclosure Letter. It is further agreed that nothing
herein shall be deemed to require Seller to pursue any insurance or other
third party claims, or, if received, to pay over any insurance or other
third party proceeds to Buyer, in connection with the foregoing matters.
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(b) Buyer shall indemnify and hold the Seller harmless from all
Damages resulting from non-compliance with, or remediation under, any
Environmental Law that arise out of actions or omissions that occur after
the date hereof.
(c) Seller shall indemnify and hold Buyer harmless from all
Damages under any Environmental Law that arise out of actions or omissions
that occurred before the date hereof but were not disclosed in the Seller
Disclosure Letter, if they relate to matters as to which written
notification is given by Buyer to Seller during a period ending one year
after the date hereof.
To the extent, if any, that Seller may have responsibility for
responding to any non-compliance or requirement for remediation under any
Environmental Law with respect to a period for which it has indemnification
obligations hereunder, Buyer shall reasonably cooperate with environmental
response activities of Seller on the property of the Entities being
transferred pursuant to this Agreement. Buyer shall ensure that Seller has
reasonable access at all such times to investigate, monitor, and remediate
said property, and to install, operate, and maintain facilities for the
containment or treatment of the soil and groundwater, and to perform other
environmental remediation and response activities, which shall not
unreasonably interfere with the business of the Buyer or the Entities. In
the event of an environmental remediation with respect to a period for
which Seller may have indemnification obligations hereunder, Seller may
elect to perform a cleanup in accordance with applicable industrial cleanup
standards or (if applicable at the time of cleanup) commercial III or IV
cleanup standards under the Michigan Natural Resources and Environmental
Protection Act, Part 201 (Part 201), or similar standards which may be
allowed under Michigan law in the future. In connection with such a
cleanup, Buyer agrees to impose restrictions upon future use of the
property, if required, including the restrictions required under Mich.
Comp. Laws Section 324.20120a(1)(b) or (d). These may be included in a
declaration of restrictive covenants, in the form approved by the Michigan
Department of Environmental Quality, and which must be signed by Buyer and
filed with the Register of Deeds. By way of example and not of limitation,
these may include restrictions on site uses to commercial or industrial
uses consistent with the cleanup standards, restrictions on groundwater
use, and provisions for appropriate management of soils in accordance with
the requirements of Part 201, provided, however, (i) Seller shall conduct
any and all such investigation, monitoring, and remediation in compliance
with applicable Environmental Laws; (ii) cleanup standards or cleanup
criteria applicable to any remedial action by Seller at the property shall
not be in any way inconsistent with current use of the subject property or
expansion of uses of a similar nature at the property; (iii) no
restrictions, declarations or covenants to be imposed on the subject
property or recorded in the public registry shall be in any way
inconsistent with current use of the subject property or expansion of uses
of a similar nature at the property; and (iv) reasonable efforts shall be
made to minimize the applicable area for any restrictions, declarations or
covenants to be imposed on the subject property or recorded in the public
registry by limiting them to portions of the property that are subject to
such remedial actions.
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In regard to the matters covered by this Section 6.6, each party shall
at all times act reasonably so as to avoid unnecessarily exposing the other
party to liability under this Section 6.6 or to otherwise unnecessarily
cause the other party to incur costs or expenses.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1 Interpretation.
(a) Unless the context of this Agreement otherwise requires, (a)
words of any gender include the other gender; (b) words using the singular
or plural number also include the plural or singular number, respectively;
(c) the terms "hereof," "herein," "hereby" and derivative or similar words
refer to this entire Agreement; (d) the terms "Article," "Section" and
"Exhibit" refer to the specified Article, Section and Exhibit of this
Agreement, respectively; and (e) "including," shall mean "including, but
not limited to"; and (v) the words "asset" and "property" shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties (whether real or personal).
Unless otherwise expressly provided, any agreement, instrument, law or
regulation defined or referred to herein means such agreement, instrument,
law or regulation as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent
and (in the case of a law or regulation) by succession of comparable
successor law and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein.
(b) For purposes of Article III and all covenants and obligations
of Seller hereunder including indemnification obligations of Article VI,
all representations, warranties, covenants and obligations made by Seller
shall be deemed to be jointly and severally made by each Seller entity.
(c) For purposes of Article V, in the event that Seller shall be
obligated to cause, or use its reasonable best efforts to cause, an
Affiliate over which it does not have voting control to act or not act,
directly or indirectly through the exercise of equity voting rights or
contractual and other rights, it shall be obligated to exercise all of its
contractual and other rights to cause such action or inaction by such
Affiliate.
Section 7.2 Disclosure Letters.
The Seller Disclosure Letter and the Buyer Disclosure Letter are
incorporated into this Agreement by reference and made a part hereof.
Section 7.3 Payments.
All payments set forth in this Agreement and the Transition Services
Agreement are in United States Dollars. Such payments shall be made by wire
transfer of immediately available funds or by such other means as the
parties to such payment shall designate.
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Section 7.4 Expenses.
Except as expressly set forth herein, or as agreed upon in writing by
the parties, each party shall bear its own costs, fees and expenses,
including the expenses of its representatives, incurred by such party in
connection with this Agreement and the Transition Services Agreement and
the transaction contemplated hereby and thereby.
Section 7.5 Choice of Law.
THIS AGREEMENT, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF MICHIGAN, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR
CHOICE OF LAWS OR ANY OTHER LAW THAT WOULD MAKE THE LAWS OF ANY OTHER
JURISDICTION OTHER THAN THE STATE OF MICHIGAN APPLICABLE HERETO.
Section 7.6 Assignment.
This Agreement may not be assigned by either party without the prior
written consent of the other party; provided, however, that without the
prior written consent of the other party, each party shall have the right
to assign its rights and obligations under this Agreement to any third
party successor and/or its Affiliates to all or substantially all of its
entire business.
Section 7.7 Notices.
All demands, notices, consents, approvals, reports, requests and other
communications hereunder must be in writing, will be deemed to have been
duly given only if delivered personally or by facsimile transmission (with
confirmation of receipt) or by an internationally-recognized express
courier service or by mail (first class, postage prepaid) to the parties at
the following addresses or telephone or facsimile numbers and will be
deemed effective upon delivery; provided, however, that any communication
by facsimile shall be confirmed by an internationally-recognized express
courier service or regular mail.
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(i) If to the Seller:
CMS Enterprises Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
With a required copy to:
Miller, Canfield, Paddock and Stone, PLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
(ii) If to Buyer:
Lucid Energy, L.L.C.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
With a required copy to:
Ufer & Spaniola, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, Esquire
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
or to such other address as the addressee shall have last furnished in
writing in accord with this provision to the addressor.
Section 7.8 Resolution of Disputes.
Except for the resolution of disputes that shall be resolved in
accordance with the procedures set forth in sections 5.5 and 6.5 herein,
all disputes arising out of or relating to this Agreement or any Transition
Services Agreement or the breach, termination or validity thereof or the
parties' performance hereunder or thereunder ("Dispute") shall be resolved
as provided by this Section 7.8.
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(a) If the Dispute has not been resolved by executive officer
negotiation within thirty (30) days of the disputing party's notice
requesting negotiation, or if the parties fail to meet within twenty (20)
days from delivery of said notice, such Dispute shall be submitted to and
finally settled by arbitration in accordance with the Rules of Arbitration
of the International Chamber of Commerce in Detroit, Michigan ("ICC") then
in effect (the "Rules"), except as modified herein.
(b) The arbitration shall be held, and the award shall be
rendered, in the English language. There shall be three arbitrators, one of
whom shall be nominated by each of Buyer and Seller in accordance with the
Rules. The two party appointed arbitrators shall have thirty (30) days from
the confirmation of the nomination of the second arbitrator to agree on the
nomination of a third arbitrator who shall serve as chair of the arbitral
tribunal. On the request of any party, any arbitrator not timely appointed
in accordance with this Agreement or the Rules shall be appointed by the
ICC.
(c) The award shall be final and binding upon the parties as from
the date rendered, and shall be the sole and exclusive remedy between the
parties regarding any claims, counterclaims, issues, or accounting
presented to the arbitral tribunal. Judgment upon any award may be entered
and enforced in any court having jurisdiction over a party or any of its
assets. For the purpose of the enforcement of an award, the parties
irrevocably and unconditionally submit to the jurisdiction of a competent
court in any jurisdiction in which a party may have assets and waive any
defenses to such enforcement based on lack of personal jurisdiction or
inconvenient forum. This Agreement and the rights and obligations of the
parties shall remain in full force and effect pending the award in any
arbitration proceeding hereunder.
(d) The Parties agree that any court action or proceeding to
compel or in support of arbitration or for provisional remedies in aid of
arbitration, including but not limited to any action to enforce the
provisions of this Section 7.8, for temporary injunctive relief maintain
the status quo or prevent irreparable harm prior to the appointment of the
arbitral tribunal, shall be brought exclusively in the federal or state
courts located in Jackson, Michigan (the "Michigan Courts"). The Parties
hereby unconditionally and irrevocably submit to the exclusive jurisdiction
of the Michigan Courts for such purpose, and to the non-exclusive
jurisdiction of the Michigan Courts in any action to enforce any
arbitration award rendered hereunder, and waive any right to stay or
dismiss any such actions or proceedings brought before the Michigan Courts
on the basis of forum non conveniens or improper venue. Without prejudice
to such provisional remedies as may be available under the jurisdiction of
a national court, the arbitral tribunal shall have full authority to grant
provisional remedies and to direct the parties to request that any court
modify or vacate any temporary or preliminary relief issued by such court,
and to award damages for the failure of any party to respect the arbitral
tribunal's orders to that effect.
Section 7.9 No Right of Setoff.
Neither party hereto nor any Affiliate thereof may deduct from, set
off, holdback or otherwise reduce in any manner whatsoever any amount owed
to it hereunder or
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pursuant to the Transition Services Agreement or any agreement related to
the sale of the Argentine Businesses (the "Argentine Transaction
Documents") against any amounts owed hereunder or pursuant to the
Transition Services Agreement or the Argentine Transaction Documents by
such Persons to the other party hereto or any of such other party's
Affiliates.
Section 7.10 Time is of the Essence.
Time is of the essence in the performance of the provisions of this
Agreement.
Section 7.11 Specific Performance.
Each party acknowledges and agrees that any breach of any provision of
this Agreement would cause irreparable harm to the other party. Each party,
without prejudice to any rights to judicial relief it may otherwise have,
shall be entitled to equitable relief, including injunction and specific
performance. Each party agrees that it will not oppose the granting of such
relief on the basis that the other party has not suffered irreparable harm
or that the other party has an adequate remedy at law. Each party agrees
that it will not seek and agrees to waive any requirement for the securing
or posting of a bond in connection with the other party's seeking or
obtaining such relief.
Section 7.12 Entire Agreement.
This Agreement, together with the Seller Disclosure Letter, Buyer
Disclosure Letter, Annex I, the Exhibits hereto, the Transition Services
Agreement and the Confidentiality Agreement constitute the entire agreement
between the parties hereto with respect to the subject matter herein and
supersede all previous agreements, whether written or oral, relating to the
subject matter of this Agreement and all prior drafts of this Agreement,
all of which are merged into this Agreement. No prior drafts of this
Agreement and no words or phrases from any such prior drafts shall be
admissible into evidence in any action or suit involving this Agreement. In
the case of any material conflict between any provision of this Agreement
and any other agreement including the Transition Services Agreement, this
Agreement shall take precedence.
Section 7.13 Binding Nature; Third Party Beneficiaries.
This Agreement shall be binding upon and inure solely to the benefit
of the parties hereto and their respective successors (whether by operation
of law or otherwise) and permitted assigns. Except as expressly provided
herein, none of the provisions of this Agreement shall be for the benefit
of or enforceable by any third party, including any creditor of either
party or any of their Affiliates. Except as expressly provided herein, no
such third party shall obtain any right under any provision of this
Agreement or shall by reasons of any such provision make any Claim in
respect of any Liability (or otherwise) against either party hereto.
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Section 7.14 Counterparts.
This Agreement may be executed in two (2) or more counterparts, each of
which, when executed, shall be deemed to be an original and both of which
together shall constitute one and the same document. Any counterpart or
other signature to this Agreement that is delivered by facsimile or
electronic mail shall be deemed for all purposes as constituting good and
valid execution and delivery by such party of this Agreement.
Section 7.15 Severability.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any applicable present or future law, and if the rights
or obligations of either party under this Agreement will not be materially
and adversely affected thereby, (i) such provision shall be fully
severable, (ii) this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part
hereof, (iii) the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom and (iv) in lieu of
such illegal, invalid or unenforceable provision, there shall be added
automatically as a part of this Agreement, a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
Section 7.16 Headings.
The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof.
Section 7.17 Waiver.
Any term or condition of this Agreement may be waived at any time by
the party that is entitled to the benefit thereof, but no such waiver shall
be effective unless set forth in a written instrument duly executed by or
on behalf of the party or parties waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion. All
remedies, either under this Agreement or by law or otherwise afforded, will
be cumulative and not alternative.
Section 7.18 Amendment.
This Agreement may be altered, amended or changed only by a writing
making specific reference to this Agreement and signed by duly authorized
representatives of each party.
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IN WITNESS WHEREOF, Seller and Buyer, by their duly authorized
officers, have executed this Agreement as of the date first written above.
CMS ENTERPRISES COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Operating
Officer
CMS ENERGY INVESTMENT LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive
Officer
(Collectively, the Seller)
LUCID ENERGY, L.L.C.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman & CEO
MICHIGAN PIPELINE AND PROCESSING, LLC
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: :▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman & CEO
(Collectively, the Buyer)
45
ANNEX I
ENTITIES AND EQUITY INTERESTS
ENTITY NAME % OWNERSHIP INTEREST
----------- ---------------------------------------
CMS Antrim Gas LLC 100% owned by CMS Energy Investment LLC
CMS Bay Area Pipeline, LLC 100% owned by CMS Energy Investment LLC
CMS Grands Lacs LLC 100% owned by CMS Energy Investment LLC
CMS ▇▇▇▇▇▇▇ LLC 100% owned by CMS Energy Investment LLC
CMS Litchfield LLC 100% owned by CMS Energy Investment LLC
▇▇▇▇▇▇▇ Pipeline Company*
* CMS ▇▇▇▇▇▇▇ LLC's 75% ownership interest in the ▇▇▇▇▇▇▇ Pipeline Company
general partnership will be transferred by virtue of the sale of the
ownership of CMS ▇▇▇▇▇▇▇ LLC.
46