EXHIBIT 10.30
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ACQUISITION AGREEMENT
BY AND AMONG
U.S. PROPANE, L.P.,
U.S. PROPANE, L.L.C.,
AGL PROPANE SERVICES, INC., AGL ENERGY CORPORATION,
UNITED CITIES PROPANE GAS, INC.,
TECO PROPANE VENTURES, LLC,
PIEDMONT PROPANE COMPANY,
AND
LA GRANGE ENERGY, L.P.
NOVEMBER 6, 2003
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Execution Copy
Dates as of November 6, 2003
TABLE OF CONTENTS
Page No.
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ARTICLE I DEFINITIONS............................................................................................ 1
1.1 Definitions.......................................................................................... 1
1.2 Certain Additional Definitions....................................................................... 8
1.3 Rules of Construction................................................................................ 9
ARTICLE II CLOSING............................................................................................... 9
2.1 Closing.............................................................................................. 9
ARTICLE III CLOSING TRANSACTIONS................................................................................. 10
3.1 Formation of NewLP................................................................................... 10
3.2 Transfer of Equity Ownership of U.S. Propane......................................................... 10
3.3 Transfer of Assets and Liabilities to NewLP.......................................................... 10
3.4 Sale and Purchase of U.S. Propane and GP Securities.................................................. 14
3.5 U.S. Propane General Partner Interests............................................................... 14
3.6 Resignations; Venture Board Rights................................................................... 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE VENTURERS....................................................... 15
4.1 Organization and Existence........................................................................... 16
4.2 Capitalization of the GP and U.S. Propane............................................................ 16
4.3 Authority............................................................................................ 17
4.4 Noncontravention..................................................................................... 18
4.5 Governmental Approvals............................................................................... 18
4.6 Title to Securities.................................................................................. 18
4.7 Subsidiaries; Joint Ventures......................................................................... 19
4.8 Title to Assets and Properties....................................................................... 19
4.9 Financial Statements; Absence of Liabilities......................................................... 19
4.10 Absence of Certain Changes........................................................................... 20
4.11 Tax Matters.......................................................................................... 20
4.12 Compliance with Laws................................................................................. 22
4.13 Legal Proceedings.................................................................................... 22
4.14 Sufficiency of Assets and Properties................................................................. 22
4.15 Intellectual Property................................................................................ 22
4.16 Status as General Partner............................................................................ 23
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4.17 Material Contracts................................................................................... 23
4.18 Environmental Matters................................................................................ 23
4.19 Insurance............................................................................................ 24
4.20 Books and Records.................................................................................... 24
4.21 Employee Matters..................................................................................... 25
4.22 ERISA................................................................................................ 25
4.23 Consents............................................................................................. 26
4.24 Finder's Fees........................................................................................ 26
4.25 Regulation........................................................................................... 26
4.26 Conduct of Business.................................................................................. 26
4.27 Exemption from Registration.......................................................................... 26
4.28 No Violation......................................................................................... 26
4.29 SEC Filings.......................................................................................... 27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE ACQUIRER......................................................... 27
5.1 Organization; Power and Authority.................................................................... 27
5.2 Noncontravention..................................................................................... 27
5.3 Investment Intent.................................................................................... 27
5.4 Brokers.............................................................................................. 28
5.5 Representations Regarding Funding.................................................................... 28
ARTICLE VI APPROVALS, AUTHORIZATIONS AND CONSENTS................................................................ 28
6.1 Consent of the GP, U.S. Propane and the Venturers.................................................... 28
6.2 Authorizations and Consents.......................................................................... 28
6.3 Further Assurances................................................................................... 29
ARTICLE VII ADDITIONAL AGREEMENTS................................................................................ 30
7.1 Access to Information................................................................................ 30
7.2 Maintenance of Books and Records; Financial Statements; Reports; Etc................................. 30
7.3 Public Announcements................................................................................. 30
7.4 Conduct and Preservation of the Business of the GP, U.S. Propane and Other Entities.................. 31
7.5 Restrictions on Certain Actions of the GP, U.S. Propane and Other Entities........................... 31
7.6 Updating Schedules................................................................................... 33
7.7 Tax Reporting........................................................................................ 33
7.8 Fees and Expenses.................................................................................... 35
7.9 Actions by Parties................................................................................... 35
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7.10 Employees of U.S. Propane............................................................................ 35
7.11 Third Party Beneficiary.............................................................................. 35
7.12 Confidentiality and Tax Shelter Regulations.......................................................... 35
7.13 Trademarks, Logos, Etc............................................................................... 35
7.14 Vote of Common Units................................................................................. 36
ARTICLE VIII CONDITIONS TO CLOSING............................................................................... 36
8.1 Conditions to Closing of the Acquirer................................................................ 36
8.2 Conditions to Closing of NewLP and the Venturers..................................................... 38
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER..................................................................... 39
9.1 Termination.......................................................................................... 39
9.2 Effect of Termination................................................................................ 40
9.3 Amendment............................................................................................ 41
9.4 Waiver............................................................................................... 41
ARTICLE X INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS........................................................... 41
10.1 Indemnification Obligations of NewLP and the Venturers............................................... 41
10.2 Indemnification Obligations of the Acquirer.......................................................... 42
10.3 Indemnification Procedures........................................................................... 43
10.4 Survival............................................................................................. 44
10.5 No Special or Consequential Damages.................................................................. 45
10.6 Limitations on Indemnification....................................................................... 45
ARTICLE XI MISCELLANEOUS......................................................................................... 46
11.1 Notices.............................................................................................. 46
11.2 Entire Agreement..................................................................................... 48
11.3 Binding Effect; Assignment; No Third Party Benefit................................................... 48
11.4 Severability......................................................................................... 48
11.5 Governing Law........................................................................................ 48
11.6 Jurisdiction......................................................................................... 48
11.7 Further Assurances................................................................................... 49
11.8 Descriptive Headings................................................................................. 49
11.9 Counterparts......................................................................................... 49
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ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT (as amended, supplemented or otherwise
modified from time to time in accordance with the terms hereof, this
"Agreement"), dated as of November 6, 2003, is made and entered into, by and
among U.S. Propane, L.P., a Delaware limited partnership ("U.S. Propane"), U.S.
Propane, L.L.C., a Delaware limited liability company (the "GP"), AGL Propane
Services, Inc. and AGL Energy Corporation, each a Delaware corporation
(collectively, "AGL"), United Cities Propane Gas, Inc., a Tennessee corporation
("Atmos"), TECO Propane Ventures, LLC, a Delaware limited liability company
("TECO"), and Piedmont Propane Company, a North Carolina corporation
("Piedmont") (each of AGL, Atmos, TECO and Piedmont, a "Venturer" and
collectively, the "Venturers"), and La Grange Energy, L.P., a Texas limited
partnership (the "Acquirer").
RECITALS:
A. The Venturers own all of the outstanding member interests in
the GP and all of the outstanding limited partner interests in U.S. Propane.
B. The parties desire to enter into a series of transactions
whereby Acquirer will become the sole member of the GP and the sole limited
partner of U.S. Propane, as more fully described in this Agreement.
C. In consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"Acquirer Indemnified Parties" means the Acquirer and its Affiliates,
and their respective managers, directors, officers, members, employees and
representatives (in each case in their respective capacity as such).
"Affiliate" means, with respect to a Person, (a) any other Person more
than 50 percent of whose outstanding voting securities are directly or
indirectly owned, controlled or held with the power to vote by such Person and
(b) any other Person directly or indirectly controlling, controlled by or under
common control with such Person. The term "controls" (and the variants thereof)
as used in this definition means the possession of the power, acting alone, to
direct or cause the direction of the management and policies of a Person by
virtue of ownership of voting securities or otherwise.
"Applicable Law" means any Law to which a specified Person or property
is subject.
"Assets and Properties" means, with respect to any Person, all assets
and properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible
or intangible, whether absolute, accrued, contingent, fixed or otherwise and
wherever situated), including the goodwill related thereto, operated, owned or
leased by such Person, including cash, cash equivalents, securities and
investments, accounts and notes receivable, chattel paper, documents,
instruments, contracts, general intangibles, real estate, equipment, inventory
and goods.
"Benefit Plan(s)" means any Pension Plan, Welfare Plan, bonus, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical, dependent care, cafeteria, employee
assistance, scholarship or other plan, program, arrangement or understanding
(whether or not covered under 3(3) of ERISA and whether or not legally binding)
maintained in whole or in part, contributed to, or required to be contributed to
by U.S. Propane or GP for the benefit of any present or former officer, employee
or director of U.S. Propane or GP.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of Texas or Oklahoma are authorized or
obligated to close.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time. Any reference herein to a specific section or sections
of the Code shall be deemed to include a reference to a corresponding provision
of any successor law.
"Common Unit" means a Common Unit as defined in the Heritage MLP
Partnership Agreement.
"Contract" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Contribution Agreement" means that certain Contribution Agreement,
dated as of November 6, 2003, by and among Heritage MLP, U.S. Propane and the
Acquirer.
"Current Assets" shall have the meaning assigned to such term and shall
be calculated in accordance with Exhibit 1.1(e).
"Current Liabilities" shall have the meaning assigned to such term and
shall be calculated in accordance with Exhibit 1.1(f).
"DRULPA" means the Delaware Revised Uniform Limited Partnership Act, as
amended and in effect from time to time. Any reference to a specific section or
sections of DRULPA shall be deemed to include a reference to a corresponding
provision of any successor law.
"Encumbrance" means any security interest, lien, pledge, claim, charge,
escrow, encumbrance, option, right of first offer, right of first refusal,
preemptive right, mortgage, indenture, security agreement or other similar
agreement, arrangement, contract, commitment, understanding or obligation,
whether written or oral and whether or not relating in any way to credit or the
borrowing of money.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time and any
regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to the GP and U.S. Propane,
any trade or business (whether or not incorporated) under common control with
the GP or U.S. Propane and which, together with the GP or U.S. Propane, are
treated as a single employer within the meaning of Sections 414(b) or (c) of the
Code, excluding the Venturers and the Acquirer and each other Person that would
not be an ERISA Affiliate if the Acquirer did not own any issued and outstanding
Securities of the GP or U.S. Propane.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America on the applicable date.
"General Partner Status Liability" means a Liability arising pursuant
to Section 17-403(b) of DRULPA on account of a person's status as the general
partner of a limited partnership, but excluding any Liability existing as of the
Closing Date and arising on account of such status on or prior to the Closing
Date by virtue of Section 17-403(d)(3) and (5) of the DRULPA; provided, however,
that exclusion of any Liability that may arise on account of such status by
virtue of Section 17-403(d)(3) and (5) of DRULPA shall not exclude from the
General Partner Status Liability any Retained Liabilities described in Sections
3.3(c)(iv) through (ix).
"Governmental Authority" means a federal, state, local or foreign
governmental authority; a state, province, commonwealth, territory or district
thereof; a county or parish; a city, town, township, village or other
municipality; a district, ▇▇▇▇ or other subdivision of any of the foregoing; any
executive, legislative or other governing body of any of the foregoing; any
agency, authority, board, department, system, service, office, commission,
committee, council or other administrative body of any of the foregoing; any
court or other judicial body; and any officer, official or other representative
of any of the foregoing.
"Heritage Entities" means Heritage MLP, Heritage OLP and the following
entities: M-P Oils, Ltd., an Alberta, Canada, corporation, Heritage-Bi State,
L.L.C., a Delaware limited liability company, Heritage Energy Resources, L.L.C.,
an Oklahoma limited liability company, Heritage Service Corp., a Delaware
corporation, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ limited liability
company, EarthAmerica, L.L.C., a Delaware limited liability company,
EarthAmerica GP, L.L.C., a Delaware limited liability company, and EarthAmerica
of Texas, L.P., a Texas limited partnership.
"Heritage MLP" means Heritage Propane Partners, L.P., a Delaware
limited partnership.
"Heritage MLP Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of Heritage MLP dated as of June 27, 1996, as
amended or supplemented and in effect as of the date hereof.
"Heritage OLP" means Heritage Operating, L.P., a Delaware limited
partnership.
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"Heritage OLP Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of Heritage OLP dated as of June 27, 1996, as
amended or supplemented and in effect as of the date hereof.
"HHI" means Heritage Holdings, Inc., a Delaware corporation.
"HHI Purchase Agreement" means that certain Stock Purchase Agreement,
dated as of November 6, 2003, among Heritage MLP and the Venturers relating to
the purchase by Heritage MLP of all of the capital stock of HHI.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"Incentive Distribution Right" means an Incentive Distribution Right as
defined in the Heritage MLP Partnership Agreement.
"Indebtedness" means (a) all indebtedness of the GP and U.S. Propane,
including the principal of, and premium, if any, and interest (including
interest accruing after the filing of a petition initiating any proceeding under
any federal or state bankruptcy laws, whether or not allowable as a claim in
such proceeding) on, all indebtedness, whether outstanding as of the date of
this Agreement or hereafter created (i) for borrowed money, (ii) for money
borrowed by others and guaranteed, directly or indirectly, by the GP or U.S.
Propane (excluding indebtedness of Heritage MLP, Heritage OLP or any of their
subsidiaries that has not been guaranteed directly by the GP or U.S. Propane but
for which the GP or U.S. Propane may have liability under applicable state law
in respect of such entity's capacity as, in the case of U.S. Propane, the
general partner of Heritage MLP or Heritage OLP and, in the case of the GP, the
general partner of U.S. Propane), (iii) for money borrowed by others for which
the GP or U.S. Propane provides security, (iv) constituting purchase money
indebtedness the payment of which the GP or U.S. Propane is directly or
contingently liable (excluding indebtedness of Heritage MLP, Heritage OLP or any
of their subsidiaries that has not been guaranteed directly by the GP or U.S.
Propane but for which the GP or U.S. Propane may have liability under applicable
state law in respect of such entity's capacity as, in the case of U.S. Propane,
the general partner of Heritage MLP or Heritage OLP and, in the case of the GP,
the general partner of U.S. Propane), (v) under any lease of any real or
personal property, which obligations are capitalized on the books of the GP or
U.S. Propane in accordance with GAAP or (vi) under any other arrangement under
which obligations are recorded as indebtedness on the books of the GP or U.S.
Propane in accordance with GAAP and (b) any modifications, refundings,
deferrals, renewals or extensions of any such Indebtedness, or securities, notes
or other evidences of indebtedness issued in exchange for such Indebtedness.
"IRS" means the Internal Revenue Service.
"Knowledge" means, with respect to each of the Venturers, the actual
knowledge of the Persons specified in Exhibit 1.1(a) hereto, after making
appropriate inquiry. As used herein, the Parties agree that appropriate inquiry
by the Venturers shall mean inquiring of the following executive officers of
U.S. Propane: president, chief executive officer, chief operating officer,
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chief financial officer, treasurer, vice president - corporate development, and
vice president(s) for the southern, northern and western operations.
"Law" means any applicable constitutional provision, statute, act, code
(including the Code), law, regulation, rule, ordinance, order, decree, ruling,
proclamation, resolution, judgment, decision, declaration, or interpretative or
advisory opinion or letter of a Governmental Authority having valid
jurisdiction.
"Legal Expenses" means the reasonable out-of-pocket fees, costs and
expenses of any kind incurred by any Person entitled to indemnification pursuant
to Article 10 in investigating, preparing for, defending against, providing
evidence, producing documents or taking other action with respect to any claim
as to which such person is entitled to indemnification pursuant to Article 10.
"Liabilities" means all Indebtedness, obligations and other liabilities
(or contingencies that have not yet become liabilities but which, after the
passage of time, the occurrence of some event or a combination of same, will
become a liability) of a Person, whether absolute, accrued, contingent (or based
upon any contingency), known or unknown, unliquidated, fixed or otherwise, or
whether due or to become due.
"Losses" means losses, damages, liabilities, claims, costs and expenses
(including, without limitation, related Legal Expenses), but excluding lost
profits or special, consequential, exemplary or punitive damages.
"Material Adverse Effect" means material adverse effect on (i) the
financial condition, business, properties, net worth, prospects or results of
operations of the GP and U.S. Propane, taken as a whole, including any condition
(other than any condition resulting from general economic conditions or weather,
seasonality or other conditions that may affect the industry of the Heritage
Entities and their Subsidiaries generally) affecting Heritage MLP that would be
reasonably likely to reduce amounts to be distributed under the Incentive
Distribution Rights, (ii) the ability of any Person to consummate the
transactions contemplated by this Agreement and the Operative Documents or (iii)
the legality, validity or enforceability of this Agreement and the other
Operative Documents.
"Material Contracts" means (i) the Heritage MLP Partnership Agreement,
(ii) the Heritage OLP Partnership Agreement, (iii) all Contracts of the GP and
U.S. Propane which involve aggregate payments over the term of each such
Contract by or to the GP or U.S. Propane of more than $20,000 or which extend
for a term of more than one year from the date hereof and are not cancelable
upon 60 days' or less advance notice without penalty, (iv) all loan agreements,
bank lines or credit agreements, indentures, mortgages, deeds of trust, pledge
and security agreements, letters of credit or other debt instruments to which
the GP or U.S. Propane is a party, (v) all employment contracts to which the GP
or U.S. Propane is a party, (vi) any guarantees by the GP or U.S. Propane, (vii)
all non competition and other similar agreements to which the GP or U.S. Propane
is a party and (viii) all other material contracts of the GP and U.S. Propane.
"Member Interests" means the member interests in the GP, which member
interests constitute all of the issued and outstanding member interests of the
GP.
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"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which the GP or U.S. Propane is making, is
obligated to make, has made or been obligated to make, contributions on behalf
of participants who are or were employed by any of them.
"Noncompetition Agreement" means the Noncompetition Agreement to be
entered into at the Closing among AGL Resources Inc., AGL, Atmos Energy
Corporation, Atmos, TECO Energy, Inc., TECO, Piedmont Natural Gas Company, Inc.,
Piedmont and U.S. Propane, in substantially the form attached as Exhibit 1.1(c).
"Operative Documents" means this Agreement, the Contribution Agreement,
the Noncompetition Agreement, the Unitholder Rights Agreement, a release of U.S.
Propane and the GP from all obligations under the HHI Note, and all other
agreements to be executed and delivered pursuant to this Agreement between the
GP, U.S. Propane, NewLP or one or more Venturers or their Affiliates, on the one
hand, and the Acquirer or one or more of its Affiliates, on the other hand, as
modified or amended from time to time.
"Original Formation Agreements" means (i) the Amended and Restated
Formation Agreement, dated effective as of June 15, 2000 (the "Formation
Agreement"), by and among AGL Resources Inc., AGL Investments, Inc., AGL, Atmos
Energy Corporation, Atmos Propane, Inc., Atmos, Teco Energy, Inc., TECO,
Piedmont Natural Gas Company, Inc., PNG Energy Company, Piedmont, U.S. Propane
and the GP, (ii) the GP LLC Agreement, (iii) the U.S. Propane Agreement, (iv)
the Transfer Restriction Agreement, dated as of August 10, 2000 (the "Transfer
Restriction Agreement"), among the parties to the Formation Agreement (other
than Atmos Propane, Inc.), (v) the Collateral Agent Agreement, dated as of
August 10, 2000, between U.S. Propane and the Secured Parties named therein,
(vi) the NonCompetition Agreement, among the parties to the Formation Agreement
(other than Atmos Propane, Inc.), (vii) the Contribution Agreement, dated as of
June 15, 2000, as amended, by and among U.S. Propane, Heritage OLP and Heritage
MLP (the "Original Contribution Agreement"), (viii) the Indemnification
Agreement, dated as of August 10, 2000, between U.S. Propane and HHI (the
"Original Indemnification Agreement"), (ix) the Indemnification Agreement, dated
as of February 4, 2002, between HHI and U.S. Propane (the "Replacement
Indemnification Agreement", (x) the Conveyance and Assignment Agreement, dated
as of August 10, 2000, between U.S. Propane and Heritage OLP, (xi) the Stock
Purchase Agreement, dated as of June 15, 2000 among U.S. Propane, the Heritage
GP Stockholders (as defined therein) and FHS Investments, L.L.C. (the "Stock
Purchase Agreement"), and (xii) the Subscription Agreement, dated as of June 15,
2000, as amended, among Heritage MLP and the parties to the Stock Purchase
Agreement (other than U.S. Propane and FHS Investments, L.L.C.).
"Organization State" means, as applied to (i) any corporation, its
state or other jurisdiction of incorporation, (ii) any limited liability company
or limited partnership, the state or other jurisdiction under whose laws it is
formed, organized and existing in that legal form, and (iii) any other entity,
the state or other jurisdiction whose laws govern that entity's internal
affairs.
"Partner Interests" means the limited partner interests in U.S.
Propane, which limited partner interests constitute 99.99% of the outstanding
partner interests of U.S. Propane.
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"Pension Plan(s)" means any "employee pension benefit plan" as such
term is defined in Section 3(1) of ERISA that is or was sponsored by U.S.
Propane, or GP, or to which U.S. Propane or GP is or was obligated to
contribute.
"Permits" means licenses, permits, franchises, consents, approvals,
variances, exemptions and other authorizations of or from Governmental
Authorities.
"Permitted Encumbrances" with respect to the GP, U.S. Propane, NewLP or
any of their respective Subsidiaries, means (a) the Encumbrances set forth in
the Schedules to this Agreement, and specifically identified as such, (b) liens
for Taxes not yet due and payable or the validity of which is being contested in
good faith by appropriate legal proceedings and for which adequate reserves have
been set aside, (c) statutory liens (including materialmen's, mechanic's,
repairmen's, landlord's and other similar liens) arising in connection with the
ordinary course of business securing payments not yet due and payable or, if due
and payable, the validity of which is being contested in good faith by
appropriate legal proceedings and for which adequate reserves have been set
aside, and (d) such imperfections or irregularities of title, if any, as (i) are
not substantial in character, amount or extent and do not materially detract
from the value of the property subject thereto, (ii) do not materially interfere
with either the present or intended use of such property and (iii) do not,
individually or in the aggregate, materially interfere with the conduct of the
business of the GP, U.S. Propane, NewLP or any of their respective Subsidiaries.
"Person" means any individual, corporation, firm, partnership, limited
partnership, limited liability company, joint venture, association, joint-stock
company, trust, enterprise, other entity, unincorporated association or
Governmental Authority.
"Proceedings" means all proceedings, actions, claims, suits,
investigations and inquiries by or before any arbitrator or Governmental
Authority.
"SEC" means the United States Securities and Exchange Commission.
"SEC Filings" means all forms, reports, schedules, statements and other
documents (including all amendments thereto) filed with the SEC by Heritage MLP
since January 1, 2000 under the Securities Act and the rules and regulations
promulgated thereunder or the Exchange Act and the rules and regulations
promulgated thereunder.
"Securities" means, collectively, the Member Interests and the Partner
Interests.
"Securities Act" means the Securities Act of 1933, as amended, of the
United States of America and the rules and regulations of the SEC promulgated
thereunder.
"Subsidiary" means as to any Person, (a) any corporation more than 50
percent of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(excluding stock of any class or classes of such corporation that might have
voting power by reason of the happening of any contingency) is at the time owned
by such Person and/or one or more Subsidiaries of such Person and (b) any
partnership, limited partnership, limited liability company, joint venture,
association, joint-stock company, trust, enterprise, other entity or
unincorporated association in which such Person
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and/or one or more Subsidiaries of such Person has more than a 50 percent equity
interest at the time.
"Tax Return" means any return or report, including any related or
supporting information, with respect to Taxes.
"Taxes" means any income taxes or similar assessments or any sales,
gross receipts, excise, occupation, use, ad valorem, property, production,
severance, transportation, employment, payroll, franchise or other tax imposed
by any United States federal, state or local (or any foreign or provincial)
taxing authority, including any interest, penalties or additions attributable
thereto.
"Transfer" means, directly or indirectly, any sale, transfer,
assignment, hypothecation, pledge or other disposition of any of the Securities
or any interests therein.
"Unitholder Rights Agreement" means that certain Unitholder Rights
Agreement to be entered into at the Closing among HHI, NewLP, Acquirer and
Heritage MLP, substantially in the form of Exhibit 1.1(d) hereto.
"U.S. Propane Business" means all of the business activities of the GP
and U.S. Propane as currently conducted.
"Venturer Indemnified Parties" means NewLP and the Venturers, and their
respective Affiliates, managers, directors, officers, members, employees and
representatives, in each case in their respective capacity as such.
"Welfare Plan(s)" means any "employee welfare benefit plan" as such
term is defined in Section 3(1) of ERISA that is or was sponsored by U.S.
Propane or the GP, or to which U.S. Propane or the GP was obligated to
contribute.
1.2 CERTAIN ADDITIONAL DEFINITIONS. In addition to such terms as are
defined in Section 1.1, the following terms are used in ----------- this
Agreement and defined in the Sections set forth opposite such terms:
DEFINED TERM SECTION REFERENCE
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Acquirer................................................. Preamble
AGL...................................................... Preamble
Agreement................................................ Preamble
Applicable Environmental Laws............................ 4.18(a)
Assumed Liabilities...................................... 3.3(b)
Atmos.................................................... Preamble
August Financial Statements.............................. 4.9(a)
CERCLA................................................... 4.18(a)
Closing.................................................. 2.1
Closing Date............................................. 2.1
Financial Statements..................................... 4.9(a)
Financial Statement Date................................. 4.9(a)
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GP....................................................... Preamble
GP Interests Note........................................ 3.13(f)
GP LLC Agreement......................................... 4.2(a)
Hazardous Substance...................................... 4.18(c)
HHI Conveyances.......................................... 3.3(a)
HHI Note................................................. 3.3(b)(iii)
Indemnified Party........................................ 10.3(a)
MLP Note................................................. 3.6(b)
Indemnifying Party....................................... 10.3(a)
NewGP.................................................... 3.1
NewLP.................................................... 3.1
NewLP Assets............................................. 3.3(b)
Piedmont................................................. Preamble
Post-Signing Events...................................... 7.6
Pre-Signing Events....................................... 7.6
Purchase Price........................................... 3.4
RCRA..................................................... 4.18(a)
Retained Assets.......................................... 3.3(a)
Retained Liabilities..................................... 3.3(c)
Solid Waste.............................................. 4.18(c)
TECO..................................................... Preamble
Third Party Action....................................... 10.3(a)
Transfer Instruments..................................... 3.3(e)
U.S. Propane............................................. Preamble
U.S. Propane Agreement................................... 4.2(a)
Venturer Board Member.................................... 3.6(b)
Venturers................................................ Preamble
WARN..................................................... 7.10
1.3 RULES OF CONSTRUCTION. Unless the context otherwise requires, (a)
the gender (or lack of gender) of all words used in this Agreement includes the
masculine, feminine and neuter; (b) the term "include" or "includes" means
"includes, without limitation", and "including" means "including, without
limitation"; references to Articles and Sections refers to Articles and Sections
of this Agreement; (c) references to Exhibits or Schedules refer to the Exhibits
and Schedules attached to this Agreement, which are made a part hereof for all
purposes; (d) references to Laws refer to such Laws as they may be amended from
time to time, and references to particular provisions of a Law include any
corresponding provisions of any succeeding Law; and (e) references to money
refer to legal currency of the United States of America.
ARTICLE II
CLOSING
2.1 CLOSING. Subject to the terms and conditions hereof, the closing
(the "Closing") of the transactions described in Article 3 will take place at
the time and place provided for in the Contribution Agreement on the third
Business Day following the date on which the last of the conditions to Closing
set forth in Sections 8.1 and 8.2 have been satisfied or waived by the party
9
or parties entitled to waive the same (the date and time of the Closing are
herein referred to as the "Closing Date"). At the Closing, there shall be
delivered the opinions, certificates and other agreements, documents and
instruments to be delivered under Article 8. Except for purposes of Article 3,
all Closing transactions will be deemed to have occurred simultaneously.
ARTICLE III
CLOSING TRANSACTIONS
3.1 FORMATION OF NEWLP. Prior to the Closing, the Venturers shall form
NewGP ("NewGP"), which the Venturers will own in the same relative percentages
as their existing ownership of the GP as set forth on Exhibit 3.1. Prior to the
Closing, the Venturers and NewGP shall also form NewLP ("NewLP"), which the
Venturers and NewGP will own in the same relative percentages as the existing
ownership of U.S. Propane and the GP, respectively, as set forth on Exhibit 3.1.
3.2 TRANSFER OF EQUITY OWNERSHIP OF U.S. PROPANE. Immediately prior to
the transactions described in Section 3.3, the declaration by HHI of the
dividend described in Section 6.13(a) of the HHI Purchase Agreement and the
declaration and payment by HHI of the dividend described in Section 6.13(b) of
the HHI Purchase Agreement (a) the Venturers will assign, transfer and convey
all of their respective Member Interests in the GP to NewGP and (b) NewGP and
the Venturers will assign, transfer and convey all of their Member Interests in
the GP and all of their Partner Interests in U.S. Propane to NewLP. As a
consequence of the transactions described in this Section 3.2, (i) NewLP will
become the sole member of the GP (which is the sole general partner of U.S.
Propane) and the sole limited partner of U.S. Propane, and (ii) the Venturers
shall cease to have any direct member interest or limited partner interest in
the GP or U.S. Propane, including any rights to receive distributions directly
from the GP or U.S. Propane.
3.3 TRANSFER OF ASSETS AND LIABILITIES TO NEWLP.
(a) Immediately prior to the Closing, U.S. Propane will distribute,
assign, transfer, deliver and convey, without consideration, to NewLP, and NewLP
will accept, all of the Assets and Properties of U.S. Propane, including all of
the stock of HHI, all rights and obligations of U.S. Propane under the Original
Formation Agreements (other than the agreements referred to in clauses (ii),
(iii), (viii), (ix) and (xi) of the definition of Original Formation
Agreements), all obligations (but not the rights) of U.S. Propane under the
Original Contribution Agreement) and the 180,028 common units of Heritage MLP
that are owned by U.S. Propane, but save and except for the following
(collectively, the "Retained Assets"): (i) U.S. Propane's right to serve as the
general partner of Heritage MLP and Heritage OLP, including all rights to
exercise the rights and powers conferred upon U.S. Propane as a general partner
pursuant to the Heritage MLP Partnership Agreement and the agreement of limited
partnership of Heritage OLP, (ii) all Current Assets of U.S. Propane up to the
amount of Current Liabilities of U.S. Propane, and cash balances held in the
escrow accounts at Bank of Oklahoma, National Association in respect of
non-compete payments owed under non-compete agreements entered into in
connection with acquisitions by or on behalf of Heritage MLP, (iii) a one
percent right to all allocations of income, gain, loss, deduction and credit
from, the associated capital account balance of, and all associated
distributions from, Heritage MLP, (iv) a 1.0101% percent right to all
allocations of income, gain, loss, deduction and credit from, the associated
capital account balance of, and all
10
associated distributions from, Heritage OLP, (v) the Incentive Distribution
Rights, (vi) the rights and obligations of U.S. Propane under the agreements
referred to in clauses (ii), (iii), (viii), (ix) and (xi) of the definition of
Original Formation Agreements, (vii) all rights (but not the obligations) of
U.S. Propane under the Original Contribution Agreement and all rights and
obligations of U.S. Propane under (A) this Agreement and the Operative Documents
to the extent arising after the Closing or (B) the Contribution Agreement,
(viii) all rights of the GP or U.S. Propane resulting from or relating to any
employment agreement or the employment relationship with present or former
employees or independent contractors (other than independent contractors engaged
for the purpose of representing the Venturers in connection with the
transactions contemplated by this Agreement) of the GP or U.S. Propane, to the
extent arising from the activities of such independent contractors on behalf of
the Heritage Entities, (ix) all rights of the GP or U.S. Propane under any
agreement, trust, plan, fund or other arrangement (whether pursuant to ERISA or
otherwise) under which benefits are, or employment is, provided for present or
former employees or independent contractors of the GP or U.S. Propane
(including, without limitation, all rights of the GP or U.S. Propane under the
employment agreements referred to in Section 8.1(j) hereof), (x) any rights to
reimbursements from any Heritage Entities for Retained Liabilities, and (xi)
those certain assets related to the operations of Heritage MLP and Heritage OLP
conducted by HHI that were assigned and conveyed by HHI to U.S. Propane pursuant
to that certain Assignment, Conveyance and Assumption Agreement (HPP) and that
certain Assignment, Conveyance and Assumption Agreement (Operating), each dated
as of February 4, 2002 (the "HHI Conveyances"). The Assets and Properties of
U.S. Propane to be contributed or transferred to NewLP pursuant to this Section
3.3(a) are referred to herein collectively as the "NewLP Assets."
(b) Immediately prior to the Closing, NewLP will assume all Liabilities
of U.S. Propane and of the GP that exist immediately prior to the Closing
(whether or not known to U.S. Propane, the GP or the Venturers), except as set
forth in Section 3.3(c) (collectively, the "Assumed Liabilities"). Without
limiting the generality of the foregoing, and except as set forth in Section
3.3(c), the Assumed Liabilities include the following:
(i) all Liabilities of the GP or U.S. Propane
that arise directly on account of any of the NewLP Assets;
(ii) any Liability of the GP or U.S. Propane
existing at or arising after the date hereof under any leases,
contracts, agreements or permits included in the NewLP Assets,
including any indemnification obligations of U.S. Propane to
Heritage OLP or Heritage MLP pursuant to the Original
Contribution Agreement;
(iii) any Liability of the GP or U.S. Propane
arising under any Indebtedness (other than any such Liability
that may arise under the Original Indemnification Agreement
and excluding any General Partner Status Liability), including
all obligations in respect of that certain $11,538,944.36
promissory note payable by U.S. Propane to HHI (the "HHI
Note");
(iv) any Liability or deficiency of the GP or
U.S. Propane for any Taxes, to the extent applicable to
periods (or portions thereof) ending on or prior to the
Closing Date;
11
(v) all Liabilities of the GP or U.S. Propane to
the extent arising from actions or inactions by the GP or U.S.
Propane prior to the Closing and resulting from, caused by or
arising out of or imposed pursuant to, the violation of any
Applicable Law, including any Environmental Law (excluding any
General Partner Status Liability of the GP or U.S. Propane
existing solely as a result of their respective status as the
general partner of U.S. Propane (in the case of the GP) or
Heritage MLP or Heritage OLP (in the case of U.S. Propane));
(vi) all fees and expenses incurred or to be
incurred by the GP (to the extent relating to the period prior
to the Closing), U.S. Propane (to the extent relating to the
period prior to the Closing), NewLP or the Venturers or their
Affiliates in connection with the negotiation, execution,
delivery and performance of this Agreement and the other
Operative Documents, including investment banking fees, legal
fees or similar transaction costs, but excluding any payments
due under any change in control provisions to which any of the
GP, U.S.Propane or any of the Heritage Entities is a party;
and
(vii) all Liabilities of the GP or U.S. Propane to
make reimbursements or make payments of indemnification of any
kind to any person with respect to any of the Assumed
Liabilities.
(c) Notwithstanding Section 3.3(b), (i) U.S. Propane will retain all
General Partner Status Liabilities of U.S. Propane existing as of the Closing
Date solely as a result of its status as the general partner of Heritage MLP or
Heritage OLP, (ii) the GP will retain all General Partner Status Liabilities of
the GP existing as of the Closing Date solely as a result of its status as the
general partner of U.S. Propane (and not any other partnership), (iii) U.S.
Propane and the GP will retain all General Partner Status Liabilities relating
to the service or status of U.S. Propane as the general partner of Heritage MLP
and Heritage OLP for all periods on and after the Closing Date, (iv) U.S.
Propane and the GP will retain all Liabilities resulting from or relating to any
employment agreement or relationship with current or former employees, or
independent contractor relationship, of U.S. Propane or the GP or the
termination of any such relationship, including, but not limited to, any
severance pay or other similar benefits, whether accrued or accruing, and any
claims filed or that may be filed by or on behalf of any such present or former
employee or independent contractor relating to the employment or termination of
employment or services by U.S. Propane or the GP of any such person, including
any claim for wrongful discharge, breach of contract, unfair labor practice,
employment discrimination, unemployment compensation, or workers' compensation;
and any liability in respect of noncompete payments owed under noncompete
agreements entered into in connection with prior acquisitions by or on behalf of
Heritage MLP; provided, however, that this subsection (iv) shall not apply to
any Liabilities owed to or on account of independent contractors engaged for the
purpose of representing the Venturers in connection with the transactions
contemplated by this Agreement or independent contractors not engaged to render
activities on behalf of the Heritage Entities, (v) U.S. Propane and the GP will
retain all Liabilities relating to any Benefit Plan, (vi) U.S. Propane and the
GP will retain all Liabilities of the GP or U.S. Propane under (A) this
Agreement or the other Operative Documents (other than the Contribution
Agreement) arising after the Closing, (B) the Contribution Agreement or (C) the
agreements referred to in clauses (ii), (iii), (viii), (ix) and (xi) of the
definition of Original Formation Agreements, (vii) U.S.
12
Propane and the GP will retain all Liabilities resulting from or relating to the
obligation to provide healthcare continuation coverage under Section 4980B of
the Code to any covered employee or qualified beneficiary (as such terms are
defined in Section 4980(f) of the Code) occurring prior to, on or after the
transactions contemplated by this Agreement, (viii) U.S. Propane and the GP will
retain all Liabilities pursuant to the HHI Conveyances and (ix) U.S. Propane and
the GP will retain all Liabilities of U.S. Propane or the GP in respect of
non-compete obligations to third parties for which the escrow amounts referred
to in Section 3.3(a)(ii) are held (the "Retained Liabilities").
(d) It is the intention of the parties that immediately following the
assumption of the Assumed Liabilities by NewLP, neither U.S. Propane nor the GP
will have any liability or responsibility for any Liabilities of U.S. Propane or
the GP other than the Retained Liabilities, and such Assumed Liabilities and
Retained Liabilities will be the subject of the indemnity of NewLP and the
Venturers (with respect to the Assumed Liabilities) and U.S. Propane and
Acquirer (with respect to Retained Liabilities) as and to the extent provided in
Section 10.1 and Section 10.2. It is the further intention of the parties that
the characterization of Liabilities as Assumed Liabilities or Retained
Liabilities, respectively, will not diminish any right of the Venturer
Indemnified Parties to receive indemnification for Losses pursuant to Section
10.2 or any right of the Acquirer Indemnified Parties to receive indemnification
for Losses pursuant to Section 10.1 for a breach of a representation or warranty
contained in this Agreement pertaining to Assumed Liabilities or Retained
Liabilities, respectively.
(e) In order to effect the transfers of the assets and the assumption
or retention of the Assumed Liabilities and Retained Liabilities contemplated in
this Section 3.3 at the Closing, the appropriate parties shall execute and
deliver one or more instruments of assignment and assumption substantially in
the form attached hereto as Exhibit 3.3(e) ("Transfer Instruments").
(f) Immediately prior to the Closing, but after the completion of the
steps described in this Sections 3.3(a) through (e) above, U.S. Propane shall
declare a dividend to NewGP and NewLP, the record holders of all general and
limited partner interests of U.S. Propane on the record date to be established
for such distribution, of the obligations to pay NewGP and NewLP the aggregate
amounts determined as specified below (which obligation shall be evidenced by a
note (the "GP Interests Note"), to be in a form mutually acceptable to the
Acquirer and the Venturers, such dividend to be declared and paid immediately
prior to the Closing. The GP Interests Note shall entitle NewGP and NewLP to
receive aggregate amounts calculated as described below, which amounts shall be
payable at the times specified below:
If the Closing occurs before payment of the quarterly
cash distributions by Heritage OLP and Heritage MLP for the
quarterly period ending November 30, 2003, an aggregate amount
equal to the sum of (A) the product of (I) the sum of the
quarterly cash distribution paid for the quarterly period
ending November 30, 2003 (which payment is to be made on or
about January 14, 2003) by (w) Heritage OLP in respect of the
1.0101% general partner interest owned prior to Closing by
U.S. Propane in Heritage OLP and (x) Heritage MLP in respect
of the 1.0% general partner interest and the Incentive
Distribution Right owned prior to Closing by U.S. Propane in
Heritage MLP times (II) a fraction, of which the numerator is
the number of days during the period that commences on, and
13
includes, September 1, 2003 and ends at, but excludes, the
Closing (but in no event shall the numerator exceed 91) and of
which the denominator is 91, and (B) if the Closing occurs
after November 30, 2003, the product of (I) the sum of the
quarterly cash distributions paid for the quarterly period
ending February 28, 2004 (which payment is to be made on or
about April 14, 2004) by (y) Heritage OLP in respect of the
1.0101% general partner interest owned prior to Closing by
U.S. Propane in Heritage OLP and (z) Heritage MLP in respect
of the 1.0% general partner interest and the Incentive
Distribution Right owned prior to Closing by U.S. Propane in
Heritage MLP times (II) a fraction, of which the numerator is
the number of days during the period that commences on, and
includes, December 1, 2003 and ends at, but excludes, the
Closing (but in no event shall the numerator exceed 90) and of
which the denominator is 90.
Acquirer shall pay the amounts calculated pursuant to this Section
3.3(f) to NewLP in immediately available funds within one Business Day following
the payment date established by Heritage OLP or Heritage MLP, as the case may
be, for the quarterly cash distribution in respect of which an amount calculated
under this Section 3.4(b) is determined or determinable.
3.4 SALE AND PURCHASE OF U.S. PROPANE AND GP SECURITIES. At the
Closing, NewLP shall sell to the Acquirer, and the Acquirer shall purchase from
NewLP, the Securities, including the right to become a substituted member of the
GP and a substituted limited partner of U.S. Propane. The purchase price for
such Securities (the "Purchase Price") to be paid to NewLP shall be cash in
immediately available funds in the amount of $30,000,000.00. As a consequence of
the transactions described in this Section 3.4, (i) the Acquirer will become the
substituted member of the GP, (ii) the Acquirer will become the substituted
limited partner of U.S. Propane, (iii) NewLP shall cease to have any member
interest or limited partner interest in the GP or U.S. Propane, including the
cessation of any rights to receive allocations of income, gain, loss, deduction
or credit from, the capital account balance of, or (subject to the rights to
payments under the GP Interests Note) distributions from, the GP or U.S.
Propane, and (iv) NewLP and the Venturers shall cease to have any deficit
restoration obligation pursuant to the U.S. Propane agreement of limited
partnership.
3.5 U.S. PROPANE GENERAL PARTNER INTERESTS. Immediately following the
capital contribution to Heritage LP, Inc., described in Section 2.2 of the
Contribution Agreement, U.S. Propane shall contribute to Heritage MLP all of its
interest in Heritage OLP as an additional capital contribution to Heritage MLP
in exchange for an additional 1% general partner interest in Heritage MLP such
that when such capital contribution is made, U.S. Propane will own a 2% general
partner interest in Heritage MLP.
3.6 RESIGNATIONS; VENTURERS' BOARD RIGHTS.
(a) Effective concurrently with the Closing, H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇'▇▇▇▇, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇ and
▇.▇. ▇▇▇▇▇▇▇▇ (or their respective successors as members of the Board of
Directors of the GP) will resign, or the Venturers will take such action to
cause such members to be removed from the Board of Directors, as members of the
Board of Directors of the GP and any other offices that such persons may hold
with the GP
14
or U.S. Propane, and concurrently with such resignations, the Acquirer will take
such actions as are necessary or appropriate to fill the vacancies created
thereby. In addition, upon the request of Acquirer received not less than three
business days in writing prior to Closing, each of ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ will resign as members of the Board of Directors
of the GP effective as of Closing.
(b) During the period that commences immediately after the
Closing, the Venturers collectively shall have the right to appoint one person
(the "Venturer Board Member") who shall have the right to serve as a member of
the Board of Directors of the GP, to receive notice of such meetings and to
receive information provided by the GP to the Board of Directors; provided,
however, that the GP may require as a condition precedent to the Venturers'
rights under this Section 3.6 that the Venturer Board Member shall agree to hold
in trust and confidence all information so received during such meetings;
provided further, that the GP reserves the right not to provide information and
to exclude the Venturer Board Member from any meeting or portion thereof if (i)
delivery of such information or attendance at such meeting by the Venturer Board
Member would adversely affect the attorney-client privilege between the GP and
its counsel or (ii) the GP determines in its sole discretion that it is
necessary or advisable to discuss matters relating to that certain Promissory
Note of Heritage MLP dated as of the Closing Date and payable to NewLP in the
original principal amount of $50,000,000 (the "MLP Note"). In the event of the
death or Disability of the person serving as the Venturer Board Member, the
Venturers shall have the right to designate a replacement to serve as the
Venturer Board Member, and the person so designated as a replacement shall be
subject to the approval (which will not be unreasonably withheld) of not less
than a majority of the entire membership of Board of Directors of the GP
(excluding the Venturer Board Member, if the Venturer Board Member is then a
member of the Board of Directors), and if not so approved the Venturers may
propose a different person as such a replacement. The right of the Venturers to
designate the Venturer Board Member shall terminate upon the payment in full of
all amounts due and payable under the MLP Note and the Venturer Board Member
shall resign from the Board of Directors of the GP immediately upon such
payment. The Parties agree that ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ shall be the initial Venturer
Board Member upon Closing. As used herein, "Disability" shall mean a physical or
mental condition of the Venturer Board Member that, in the good faith judgment
of not less than a majority of the entire membership of the Board of Directors
of the GP (excluding the Venturer Board Member, if the Venturer Board Member is
then a member of the Board of Directors), based upon certification by a licensed
physician reasonably acceptable to the Venturer Board Member and the Board of
Directors, (i) prevents the Venturer Board Member from being able to perform the
services required of a member of the Board of Directors, (ii) has continued for
a period of at least 180 days during any 12-month period and (iii) is expected
to continue.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE VENTURERS
For the purposes of this Agreement, each of the Venturers, severally
and not jointly, represents and warrants to the Acquirer as set forth in this
Article 4.
15
4.1 ORGANIZATION AND EXISTENCE.
(a) Schedule 4.1(a) sets forth the form of organization, legal name and
the Organization State of each of the Venturers. Each of the Venturers is either
a limited liability company or corporation, as indicated on Schedule 4.1(a),
duly organized or formed, validly existing and in good standing under the laws
of its Organization State. Each of the Venturers has full power and authority to
own, lease or otherwise hold and operate its properties and assets and to carry
on its business as presently conducted. Each of the Venturers is duly qualified
and in good standing to do business as a foreign limited liability company or
corporation, as applicable, in each jurisdiction in which the conduct or nature
of its business or the ownership, leasing, holding or operating of its
properties makes such qualification necessary, except such jurisdictions where
the failure to be so qualified or in good standing, individually or in the
aggregate, would not have a Material Adverse Effect on such Venturer.
(b) As of the Closing, NewLP will (i) be a limited partnership duly
organized or formed, validly existing and in good standing under the laws of the
State of Delaware, (ii) have full power and authority to own, lease or otherwise
hold and operate its properties and assets and to carry on its business as then
conducted and (iii) be duly qualified and in good standing to do business as a
foreign limited partnership in each jurisdiction in which the conduct or nature
of its business or the ownership, leasing, holding or operating of its
properties makes such qualification necessary, except in such jurisdictions
where the failure to be so qualified or in good standing, individually or in the
aggregate, would not have a Material Adverse Effect on NewLP.
(c) Each of U.S. Propane and the GP is a limited partnership or a
limited liability company, respectively, in each case duly organized or formed,
validly existing and in good standing under the laws of the State of Delaware.
Each of U.S. Propane and the GP has full power and authority to own, lease or
otherwise hold and operate its properties and assets and to carry on its
business as presently conducted. Each of U.S. Propane and the GP is duly
qualified and in good standing to do business as a foreign limited partnership
or limited liability company, as applicable, in each jurisdiction in which the
conduct or nature of its business or the ownership, leasing, holding or
operating of its properties makes such qualification necessary, except such
jurisdictions where the failure to be so qualified or in good standing,
individually or in the aggregate, would not have a Material Adverse Effect on
the GP or U.S. Propane.
4.2 CAPITALIZATION OF THE GP AND U.S. PROPANE.
(a) The respective authorized and outstanding Member Interests of the
GP and the authorized and outstanding Partner Interests of U.S. Propane are as
disclosed on Schedule 4.2(a). All outstanding Securities have been validly
issued and are fully paid (to the extent required under the Amended and Restated
Limited Liability Company Agreement of the GP (the "GP LLC Agreement") and the
Amended and Restated Agreement of Limited Partnership of U.S. Propane (the "U.S.
Propane Agreement"), respectively) and nonassessable (except as such
non-assessability may be affected by the matters specified in Sections 17-303
and 17-607 of DRULPA and except for the capital account restoration obligation
under the U.S. Propane Agreement), and none of the Securities has been issued in
violation of preemptive or similar rights. U.S. Propane does not have a negative
balance in its Capital Account (as defined in the
16
Heritage MLP Partnership Agreement, the Heritage OLP Partnership Agreement or
the U.S. Propane Agreement, as applicable) maintained by Heritage MLP or
Heritage OLP (in the case of U.S. Propane) or by U.S. Propane (in the case of
GP) and in the case of the GP at Closing, the GP will not have a negative
balance in its Capital Account. All issuances, sales, and repurchases by the GP
and U.S. Propane of their respective Securities have been effected in compliance
in all material respects with all Applicable Laws, including applicable Federal
and state securities laws. None of the Venturers, in their respective capacities
as the limited partners of U.S. Propane, have participated in the control of the
business of U.S. Propane in a manner that would give rise to liability of a
purchaser of the Securities for the obligations of U.S. Propane pursuant to
Section 17-303(a) of DRULPA, and none of the Venturers has received a
distribution from U.S. Propane or the GP in violation of Section 17-607(a) of
DRULPA or Section 18-607(a) under the Delaware Limited Liability Company Act for
which a purchaser of the Securities would be responsible.
(b) Except as contemplated by Article III of this Agreement and as set
forth on Schedule 4.2(b), no authorized but unissued Securities of the GP or
U.S. Propane, as applicable, are reserved for or subject to issuance.
(c) Except as contemplated by Article III of this Agreement, the
Transfer Restriction Agreement and as set forth on Schedule 4.2(c), there are no
outstanding options, warrants, subscriptions, rights, convertible or
exchangeable securities or other agreements or plans under which the GP, U.S.
Propane, NewLP or any Venturer may become obligated to issue, sell or transfer
any Securities (whether issued or granted by, or binding upon any of the GP,
U.S. Propane, NewLP or any Venturer).
(d) There are no outstanding registration rights with respect to any
Securities.
(e) Except as contemplated by Article III of this Agreement, the GP LLC
Agreement, the U.S. Propane Agreement and as set forth on Schedule 4.2(e), there
are no voting trusts, agreements, proxies or other agreements or understandings
to which any of the GP, U.S. Propane, NewLP or the Venturers is a party with
respect to the issuance, sale, redemption, registration, voting or transfer or
other disposition of any of the Securities.
(f) All outstanding Incentive Distribution Rights have been validly
issued and are fully paid and nonassessable, and all outstanding general partner
interests in Heritage MLP and Heritage OLP have been validly issued. None of the
Incentive Distribution Rights nor such general partner interests in Heritage MLP
and Heritage OLP are subject to, nor have any been issued in violation of,
preemptive or similar rights. All prior issuances and sales by Heritage MLP of
Incentive Distribution Rights, its outstanding general partner interests or
Common Units owned by U.S. Propane or HHI and all issuances and sales by
Heritage OLP of its outstanding general partner interests have been effected in
compliance in all material respects with all Applicable Laws, including
applicable Federal and state securities laws. Heritage MLP has not repurchased
any of its Incentive Distribution Rights or outstanding general partner
interests.
4.3 AUTHORITY. Each of the GP and U.S. Propane and each of the
Venturers has full power and authority to execute, deliver and perform this
Agreement and the other Operative Documents to which it is a party, and to
consummate the transactions contemplated hereby or
17
thereby. The execution, delivery and performance by each of the GP and U.S.
Propane and each of the Venturers of this Agreement and the other Operative
Documents, and the consummation by it of the transactions contemplated thereby,
have been duly authorized by all necessary action of such Person. This Agreement
has been duly executed and delivered by each of the GP and U.S. Propane and each
of the Venturers and constitutes, and each of the Operative Documents and each
other agreement, instrument or document executed or to be executed by the GP,
U.S. Propane or any of the Venturers in connection with the transactions
contemplated by this Agreement has been, or when executed will be, duly executed
and delivered by such party and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of such Person enforceable
against it in accordance with its terms, except as may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws
affecting creditors' rights generally and (b) general equitable principles.
4.4 NONCONTRAVENTION. The execution, delivery and performance by the
each of the GP, U.S. Propane and each of the Venturers of this Agreement and the
other Operative Documents to which it is a party, and the consummation by it of
the transactions contemplated hereby and thereby do not and will not (a) result
in a breach or violation of any provision of the respective charter or bylaws or
other governing instruments of any of the GP, U.S. Propane, NewLP, any Venturer
or any of the Heritage Entities, (b) result in a breach or violation of any
provision of, or constitute (with or without the giving of notice or the passage
of time or both) a default under, or (except as disclosed on Schedule 4.4) give
rise (with or without the giving of notice or the passage of time or both) to
any right of termination, cancellation or acceleration under, any material bond,
debenture, note, mortgage, indenture, lease, contract, agreement or other
instrument or obligation to which the GP, U.S. Propane, NewLP or any Venturer is
a party or by which their respective properties are bound, (c) result in the
creation or imposition of any Encumbrance upon any of the GP or U.S. Propane or
any of their respective Assets and Properties or (d) assuming compliance with
the matters referred to in Section 4.5, violate any Applicable Law binding upon
the GP, U.S. Propane, NewLP or any Venturer, or any of their respective Assets
and Properties.
4.5 GOVERNMENTAL APPROVALS. Except as set forth in Schedule 4.5, except
as may be required under state securities or "Blue Sky" laws and except for
filings with Governmental Authorities with respect to the formation of NewGP and
NewLP and the transactions contemplated by the Contribution Agreement, no
consent, approval, order or authorization of, or declaration, filing or
registration with, any Governmental Authority is required to be obtained or made
by any of the GP, U.S. Propane, the Heritage MLP or the Heritage OLP in
connection with the execution, delivery or performance of this Agreement and the
other Operative Documents or the consummation by any of such Persons of the
transactions contemplated hereby or thereby.
4.6 TITLE TO SECURITIES. A true and correct copy of the U.S. Propane
Agreement and the GP LLC Agreement, together with all amendments through the
date of this Agreement, have been provided to the Acquirer. Except for such
consents and approvals as are referenced in Section 4.5 and provided that the
consents referred to in Section 6.1 of this Agreement will be obtained from
NewLP and the other Venturers pursuant to Section 6.1 of this Agreement, each
Venturer has the power and authority to transfer, assign and convey the
Securities owned by such Venturer to NewLP at the Closing as provided herein,
and upon such transfer, assignment and conveyance, NewLP shall acquire good and
marketable title to such Securities free and clear of
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all Encumbrances (other than any Encumbrances listed on Schedule 4.6,
Encumbrances arising under the U.S. Propane Agreement or the GP LLC Agreement,
which to the extent such Encumbrances may be waived by the Venturers, are being
waived pursuant to Section 6.1 of this Agreement, and any restriction on free
transferability of the Securities arising under applicable federal or state
securities laws). Prior to the Closing, NewLP will have the power and authority
to transfer, assign and convey the Securities to the Acquirer at the Closing as
provided herein, and upon such conveyance and assignment, Acquirer shall acquire
good and marketable title to such Securities free and clear of all Encumbrances
(other than any Encumbrances arising under the U.S. Propane Agreement or the GP
LLC Agreement and any restriction on free transferability of the Securities
arising under applicable federal or state securities laws), and Acquirer shall
become a substituted member of the GP and a substituted limited partner of U.S.
Propane.
4.7 SUBSIDIARIES; JOINT VENTURES.
(a) The only Subsidiaries of the GP and U.S. Propane are HHI and those
set forth on Schedule 4.7(a) hereto. Schedule 4.7(a) hereto identifies the
equity interests owned by the GP, U.S. Propane or HHI in each of the Heritage
Entities (excluding the 1.0 percent general partner interest in Heritage MLP,
the 1.0101 percent general partner interest in Heritage OLP, and the Incentive
Distribution Rights owned by U.S. Propane), which equity interests (including
such general partner interests not included on Schedule 4.7(a)) are so owned,
beneficially and of record, and free and clear of all Encumbrances, by the GP,
U.S. Propane or HHI, as applicable.
(b) Except (i) as set forth on Schedule 4.7(b), (ii) with respect to
the status of the GP as the general partner of U.S. Propane and (iii) with
respect to the status of U.S. Propane as the general partner of Heritage MLP and
Heritage OLP, neither the GP nor U.S. Propane is engaged in any joint venture or
partnership with any other Person.
4.8 TITLE TO ASSETS AND PROPERTIES. Immediately prior to the Closing
and after giving effect to the transactions contemplated in Sections 3.1 through
3.5, inclusive, (i) NewLP will have good and marketable title to the Securities,
(ii) the GP will have good and marketable title to the 0.01% general partner
interest of U.S. Propane, (iii) U.S. Propane will have good and marketable title
to, or valid leasehold interests in, the Retained Assets and (iv) NewLP will
have title to, or valid leasehold interests in, the assets received from U.S.
Propane pursuant to Section 3.3(a) and with respect to clauses (i) and (ii) of
this Section 4.8 free and clear of all Encumbrances (except for Permitted
Encumbrances, Encumbrances arising pursuant to this Agreement or the Operative
Documents or any Encumbrance arising or existing under the charter, bylaws,
limited liability company agreement or limited partnership agreement, as
applicable, of such Person or, with respect to securities issued by a third
party held by such Person, of the issuer of such securities.
4.9 FINANCIAL STATEMENTS; ABSENCE OF LIABILITIES.
(a) Attached hereto as Schedule 4.9(a) are copies of the audited
balance sheet as of August 31, 2002 and the related unaudited statement of
income and owners' equity for the fiscal year then ended (including in all cases
the notes, if any, thereto) of U.S. Propane (collectively, the "Audited
Financial Statements"). Also attached as Schedule 4.9(a) are copies of the
unaudited balance sheet as of August 31, 2003 (the "Financial Statement Date")
and the related
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statement of income, cash flows and owners' equity for the fiscal quarter then
ended of U.S. Propane (collectively, together with the Audited Financial
Statements, the "Financial Statements"). The Financial Statements have been
prepared in accordance with GAAP except in the case of the unaudited statements
as of the Financial Statement Date for normal year-end adjustments and the
absence of footnotes, and fairly present the respective consolidated financial
position of U.S. Propane as of the date set forth therein.
(b) Except as reserved against in the Financial Statements, as
otherwise disclosed on Schedule 4.9(b) or for Liabilities not exceeding $5,000
individually or in the aggregate, there are no Liabilities of, relating to or
affecting the GP or U.S. Propane, other than the Assumed Liabilities,
Liabilities incurred in the ordinary course of business consistent with past
practice since the Financial Statement Date and General Partner Status
Liabilities of the GP and U.S. Propane solely as a result of their status as
general partner of U.S. Propane (in the case of the GP) and Heritage MLP and
Heritage OLP (in the case of U.S. Propane). Immediately prior to the Closing,
the Retained Liabilities and the GP Interests Note will be the only Liabilities
of the GP or U.S. Propane for which neither the GP nor U.S. Propane will be
entitled to indemnification under Section 10.2 hereof.
4.10 ABSENCE OF CERTAIN CHANGES. Since the Financial Statement Date,
(a) there has been no event (except for changes resulting from general economic
conditions and weather, seasonality and other conditions that may affect the
industry of the GP, U.S. Propane, NewLP, the Heritage Entities and their
respective Subsidiaries generally) that would have a Material Adverse Effect;
(b) except for the execution, delivery and performance of this Agreement and the
Operative Documents to which the GP or U.S. Propane is a party, the U.S. Propane
Business has been conducted only in the ordinary course consistent with past
practice; (c) except for, or as contemplated by, this Agreement or the other
Operative Documents, none of the GP, U.S. Propane or NewLP have incurred any
material liability, engaged in any material transaction or entered into any
material agreement outside the ordinary course of business consistent with past
practice that individually or in the aggregate would have a Material Adverse
Effect; (d) none of the GP, U.S. Propane or NewLP has suffered any material
loss, damage, destruction or other casualty to any of the Assets and Properties
of such entity (whether or not covered by insurance) that individually or in the
aggregate would have a Material Adverse Effect; and (e) none of the GP or U.S.
Propane has taken any of the actions set forth in Section 7.5, except as
permitted thereunder.
4.11 TAX MATTERS.
(a) Except as set forth on Schedule 4.11(a), each of the GP and U.S.
Propane has filed all material Tax Returns required to be filed with the IRS or
other applicable taxing authority through the date hereof and such Tax Returns
are complete and correct in all material respects, and each of the GP and U.S.
Propane has timely paid or has recorded a full reserve in the Financial
Statements for payment of all Taxes shown to be due on any such Tax Return, and
has withheld and paid to the appropriate taxing authority any Tax that it is
required by Applicable Law to withhold and pay to a Taxing authority on or
before the date hereof other than, in either case, those which are being
contested in good faith as disclosed on Schedule 4.11(b). Neither the GP nor
U.S. Propane has any material liability for Taxes other than those incurred in
the ordinary course of business and in respect of which adequate reserves are
being maintained on the
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Financial Statements in accordance with GAAP. There are no material liens for
Taxes upon any asset of any of the GP or U.S. Propane except for liens arising
as a matter of Applicable Law relating to current Taxes not yet due. There are
no Taxes that will be imposed on any of the GP or U.S. Propane in connection
with the execution of this Agreement or the Operative Documents (excluding the
Contribution Agreement) or in connection with any of the transactions
contemplated hereby or thereby. Except as set forth on Schedule 4.11(a), neither
the GP nor U.S. Propane currently is the beneficiary of any extension of time
within which to file any Tax Return.
(b) Schedule 4.11(b) lists all Tax Returns filed by any of the GP or
U.S. Propane or any affiliated, consolidated, combined, unitary or similar group
of which any of the GP or U.S. Propane is or was a member on or after January 1,
2000 and on or before the date hereof and indicates those Tax Returns (i) that
are the subject of audit, (ii) in respect of which there is any other suit,
action, investigation or claim in progress by any Taxing authority or (iii) in
respect of which any issue has been raised by any Taxing authority at an earlier
time that is reasonably expected to be raised at a later time. Neither the GP
nor U.S. Propane has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency
or has received any notice from any Taxing authority that it intends to conduct
an audit or investigation thereof or is subject to any ruling of any Taxing
authority.
(c) Except for payments triggered by change of control provisions under
the employment agreements identified on Schedule 3.18(a) to the Contribution
Agreement, neither the GP nor U.S. Propane has made any payment, is obligated to
make any payment, or is a party to any agreement that under certain
circumstances could obligate it to make any payment that will not be deductible
under Section 280G of the Code.
(d) Neither the GP nor U.S. Propane is a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code on the
date hereof.
(e) Except as disclosed on Schedule 4.11(e), neither the GP nor U.S.
Propane (i) has been a member of an affiliated group filing a consolidated
federal income Tax Return or (ii) has any liability for Taxes of any Person
(other than the GP or U.S. Propane) under Treas. Reg. 1.1502--6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise.
(f) Neither the GP nor U.S. Propane will be classified at the time of
the transaction for which provision is made in Section 3.4, or will have been
classified at any time before that time, as a corporation for federal, state,
local or foreign income tax purposes or will be at that time, or will have been
at any time before that time, subject to any federal, state, local or foreign
income tax, except for Texas franchise taxes paid or payable by the GP. At the
time of the transaction for which provision is made in Section 3.4(a) hereof,
each of the GP and U.S. Propane will be disregarded for federal income tax
purposes, within the meaning of Treasury Regulation Section 301.7701--3(a), and
no election will have been filed with the IRS prior to such time that will cause
either of the GP or U.S. Propane to be classified as a corporation for federal
income tax purposes at any future time.
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(g) Both Heritage MLP and Heritage OLP have currently effective
elections under Section 754 of the Code.
(h) Prior to the transaction for which provision is made in Section
3.4(a) hereof, the Venturers will not cause or permit U.S. Propane or Heritage
MLP or Heritage OLP to take any action or omit to take any action which, if
taken or omitted (as the case may be), would cause or permit the currently
effective elections by either such limited partnerships under Section 754 of the
Internal Revenue Code to be revoked.
4.12 COMPLIANCE WITH LAWS. Subject to the specific representations
and warranties in this Agreement, which representations and warranties shall
govern the subject matter thereof, each of the GP and U.S. Propane has complied
in all material respects with all Applicable Laws relating to the ownership or
operation of their respective Assets and Properties and the conduct of their
respective businesses. Neither the GP nor U.S. Propane are charged or, to the
Knowledge of any of the Venturers, threatened with, or under investigation with
respect to, any violation of any Applicable Law relating to any aspect of the
ownership or operation of the GP or U.S. Propane or the U.S. Propane Business.
4.13 LEGAL PROCEEDINGS. Except as set forth on Schedule 4.13, there
is (i) no Proceeding before or by any Governmental Authority or arbitrator or
official, domestic or foreign, now pending or, to the Knowledge of any of the
Venturers, threatened, to which any of the GP, U.S. Propane, NewLP or any of the
Venturers is or may be a party or to which the business or property of any of
the GP, U.S. Propane, NewLP or any of the Venturers is or may be subject, (ii)
no statute, rule, regulation or order that has been enacted, adopted or issued
by any Governmental Authority or that has been proposed by any Governmental
Authority and (iii) no injunction, restraining order or order of any nature
issued by a federal or state court or foreign court of competent jurisdiction to
which any of the GP, U.S. Propane, NewLP or any of the Venturers is or may be
subject, that, in the case of clauses (i), (ii) and (iii) above, is reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect.
4.14 SUFFICIENCY OF ASSETS AND PROPERTIES. The Assets and
Properties of the GP and U.S. Propane constitute all the Assets and Properties
the use or benefit of which are reasonably necessary for the operation of the
business of each of such Persons as currently conducted. As of the Closing, all
tangible Assets and Properties of the GP and U.S. Propane (excluding those
Assets and Properties distributed and assigned or issued to NewLP pursuant to
Sections 3.2, 3.3 and 3.4) will be in the possession, or under the control, of
the GP and U.S. Propane, as applicable, subject to sales of inventory in the
ordinary course of business, and all of such Assets and Properties are in good
condition, normal wear and tear excepted, and are useable in the continued
operation of the business of the GP and U.S. Propane, as applicable, consistent
with past practice.
4.15 INTELLECTUAL PROPERTY. Except as set forth in Schedule 4.15,
each of the GP and U.S. Propane owns or possesses or has the right to use, or at
the Closing Date will own or possess or have the right to use in the localities
where they are currently used by the GP or U.S. Propane, all patents,
trademarks, trademark registrations, service marks, service ▇▇▇▇ registrations,
trade names, copyrights, licenses, inventions, trade secrets and rights
necessary for the conduct of the business of the GP or U.S. Propane, other than
those which if not so owned or
22
possessed would not have a Material Adverse Effect, and none of the Venturers
has any Knowledge of any claim to the contrary or any challenge by any other
Person to the rights of the GP or U.S. Propane with respect to the foregoing.
4.16 STATUS AS GENERAL PARTNER. U.S. Propane became the sole general
partner of each of Heritage MLP and Heritage OLP on February 4, 2002, and no
consent, approval, waiver, permit, order or authorization of, or declaration to
or filing with, any Person or Governmental Authority not otherwise obtained was
necessary in order for U.S. Propane to become the sole general partner of
Heritage MLP and Heritage OLP.
4.17 MATERIAL CONTRACTS. Set forth in Schedule 4.17 is a list of all
Material Contracts to which the GP or U.S. Propane is a party or by which it or
any of its properties may be bound (other than the GP LLC Agreement, the U.S.
Propane Agreement, the Heritage MLP Agreement, the agreement of limited
partnership, as amended, of Heritage OLP and the other Original Formation
Agreements). Each such Material Contract to which the GP or U.S. Propane is a
party is a valid and binding agreement of the GP or U.S. Propane (as the case
may be) enforceable against the GP or U.S. Propane, as applicable, in accordance
with its terms except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to the enforcement of creditors' rights generally and by general
principles of equity. Neither the GP nor U.S. Propane is in breach, default (or
an event that, with notice or lapse of time or both, would constitute such a
default) or violation in the performance of any obligation, agreement or
condition contained in any Material Contract to which it is a party or by which
it or any of its properties may be bound. To the Knowledge of any Venturer, no
third party to any Material Contract to which the GP or U.S. Propane is a party
or by which any of them is bound or to which any of their properties are subject
is in default under any such Material Contract.
4.18 ENVIRONMENTAL ▇▇▇▇▇▇▇.▇▇ the Knowledge of each of the Venturers,
except as set forth in Schedule 4.18, neither the GP nor U.S. Propane is in
violation of, or subject to, any pending or threatened Proceeding under, any
Applicable Laws pertaining to health, safety, the environment, Hazardous
Substances or Solid Wastes (such Applicable Laws as they now exist are herein
collectively called "Applicable Environmental Laws") relating to the ownership
or operation of the Assets and Properties of the GP or U.S. Propane or the
operation of the respective businesses of the GP or U.S. Propane, including (i)
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended ("CERCLA"), and (ii) the Resource Conservation and Recovery Act
of 1976, as amended ("RCRA"). To the Knowledge of each of the Venturers, except
as set forth in Schedule 4.18, the GP and U.S. Propane have obtained all Permits
to construct, occupy, lease, operate or use any real property or any equipment
or other tangible property forming a part of their respective Assets and
Properties by reason of any Applicable Environmental Laws.
(a) To the Knowledge of each of the Venturers, except as set forth in
Schedule 4.18, there are no past or present events, conditions, circumstances or
plans (i) that interfere with or prevent compliance or continued compliance,
with respect to the Assets and Properties of the GP or U.S. Propane or their
respective businesses, with Applicable Environmental Laws or (ii) that are
reasonably expected to give rise to any common law or other legal liability or
obligation with respect to the Assets and Properties of the GP or U.S. Propane
or their respective businesses,
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including liability or obligation under CERCLA or RCRA, based on or related to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling or the emission, discharge, release or threatened release
into the environment, of any pollutant, contaminant, chemical, industrial toxin,
Hazardous Substance or Solid Waste (other than any General Partner Status
Liability of the GP or U.S. Propane existing solely as a result of their status
as the general partner of U.S. Propane (in the case of the GP) or Heritage MLP
or Heritage OLP (in the case of U.S. Propane).
(b) As used in this Agreement, the term "Hazardous Substance" shall
have the meaning currently specified in CERCLA and the term "Solid Waste" shall
have the meaning currently specified in RCRA; provided, that to the extent the
Applicable Laws of the jurisdiction in which the particular asset is located
have currently established a meaning for such term that is broader than that
specified in CERCLA or RCRA, such broader meaning shall apply.
(c) To the Knowledge of each of the Venturers, except as set forth in
Schedule 4.18, there are no (i) underground storage tanks, known contamination
of soil or groundwater, or known or suspected asbestos or asbestos-containing
materials on any property owned or leased by the GP or U.S. Propane, (ii)
pending or threatened complaints, suits, actions or demand letters by any third
party or Governmental Authority relating to any alleged violation of Applicable
Environmental Law by any of the GP or U.S. Propane or (iii) permits required of
the GP or U.S. Propane under applicable Environmental Laws to own, lease or
operate their properties and conduct their respective businesses the terms and
conditions of which any of the GP or U.S. Propane have violated or are violating
(except, in each case as would not have a Material Adverse Effect on the GP or
U.S. Propane), or (iv) real estate sites owned or operated by any of the GP or
U.S. Propane that have been used as a manufactured gas plant site.
4.19 INSURANCE. The GP and U.S. Propane maintain insurance covering
their respective properties, operations, personnel and businesses. In the
reasonable judgment of the Venturers, such insurance insures against such losses
and risks as are reasonably adequate to protect the GP and U.S. Propane and
their respective businesses. Neither the GP nor U.S. Propane has received
written notice from any insurer or agent of such insurer that substantial
capital improvements or other expenditures will have to be made in order to
continue such insurance; all such insurance is outstanding and duly in force on
the date hereof and will be outstanding and duly in force on the Closing Date.
4.20 BOOKS AND RECORDS.
(a) Each of the GP and U.S. Propane (i) makes and keeps books, records
and accounts, which, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of assets and (ii) maintains systems of internal
accounting controls sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's general or specific
authorization; (B) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain accountability
for assets; (C) access to assets is permitted only in accordance with
management's general or specific authorization; and (D) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
24
(b) None of the GP, U.S. Propane nor, to the Knowledge of the
Venturers, any employee or agent of any of the GP or U.S. Propane has made any
payment of funds of any either of the GP or U.S. Propane or received or retained
any funds in either case in violation of any law, rule or regulation, which
payment, receipt or retention of funds is of a character which would be required
to be disclosed in any reports which would be required to be filed by the GP or
U.S. Propane if the such entity were subject to the reporting requirements of
the Exchange Act.
4.21 EMPLOYEE MATTERS. Each of the GP and U.S. Propane has complied
in all material respects with all Applicable Laws relating to the employment of
labor, including provisions relating to wages, hours, equal opportunity,
collective bargaining and the payment of Social Security and other taxes. Except
as set forth in Schedule 4.21, neither the GP nor U.S. Propane is bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or, to the Knowledge of any of the Venturers, oral, express or implied,
commitment or arrangement with any labor union, and, to the Knowledge of the GP,
U.S. Propane or the Venturers, no labor union has requested or has sought to
represent any of the employees, representatives or agents of the GP or U.S.
Propane and there is no labor strike, dispute, slowdown or stoppage actually
pending or, to the Knowledge of the Venturers, threatened against or involving
the GP or U.S. Propane.
4.22 ERISA.Schedule 4.22(a) lists each Benefit Plan maintained by
the GP, U.S. Propane or any ERISA Affiliate.
(a) Schedule 4.22(b) lists each defined benefit plan, within the
meaning of Section 3(35) of ERISA (whether or not subject to Title IV thereof),
maintained by the GP, U.S. Propane or any ERISA Affiliate within the last six
years (or with respect to which any of them could reasonably be expected to have
any liability), and copies of the most recent actuarial valuation report, if
any, with respect to any such plan has been made available to the Acquirer. None
of the GP, U.S. Propane, any ERISA Affiliate or any organization to which any of
them is a successor or parent corporation (within the meaning of Section 4069(6)
of ERISA) have engaged in any transaction which is subject to Section 4069 of
ERISA.
(b) None of the GP, U.S. Propane or any ERISA Affiliate has any
obligation to contribute to any Multiemployer Plan subject to Title IV of ERISA,
and no circumstances exist pursuant to which the GP, U.S. Propane or any ERISA
Affiliate could be assessed with withdrawal liability by any such multiemployer
plan under Section 4201 of ERISA.
(c) Each Benefit Plan that is intended to be qualified under Section
401 of the Code has received a favorable determination as to its qualified
status from the IRS, and to the Knowledge of the Venturers, nothing has occurred
with respect to the operation of any such plan which could cause the loss of
such qualification.
(d) To the Knowledge of the Venturers, each Benefit Plan has been
maintained in all material respects in accordance with its terms and with all
provisions of ERISA and the Code (including rules and regulations thereunder)
and other Applicable Laws.
(e) None of the GP, U.S. Propane or any ERISA Affiliate have incurred
any liability under Section 4062, 4063 or 4064 of ERISA.
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4.23 CONSENTS. Schedule 4.23 sets forth each of the consents,
approvals, orders, authorizations and waivers of, and declarations, filings and
registrations with, all third parties (including Governmental Authorities) that
are necessary or required to permit the transactions contemplated by this
Agreement and otherwise to consummate the transactions contemplated hereby (the
"Consents"). Schedule 4.23 includes all of the Consents that, if not obtained
and in full force and effect at the time of the Closing, could result in a
Material Adverse Effect.
4.24 FINDER'S FEES. Except as set forth on Schedule 4.24, none of the
GP, U.S. Propane, NewLP, the Venturers, or any of their respective Affiliates,
are obligated (directly or indirectly) under any agreement with any Person that
would obligate the Acquirer to pay any commission, brokerage or "finder's fee"
in connection with the transactions contemplated by this Agreement or the other
Operative Documents.
4.25 REGULATION. Except as set forth on Schedule 4.25, neither the GP
nor U.S. Propane is now, and immediately after the consummation of the
transactions contemplated by this Agreement none of the Heritage Entities will
be, (i) an "investment company" or a company "controlled by" an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or (ii) a "holding company" or a "subsidiary company" of a "holding company" or
an "affiliate" thereof, within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
4.26 CONDUCT OF BUSINESS. Except as provided on Schedule 4.26, since
the Financial Statement Date, neither the GP nor U.S. Propane has taken any
actions that would be prohibited by the provisions of Section 7.5, if such
actions had been taken after the date of this Agreement.
4.27 EXEMPTION FROM REGISTRATION. Assuming the accuracy on the date
hereof and on the Closing Date of the representations and warranties of the
Acquirer set forth in Section 5.3 below, the transfer, assignment and conveyance
of the Securities by the Venturers to NewLP and by NewLP to the Acquirer
hereunder are exempt from the registration requirements of the Securities Act.
4.28 NO VIOLATION. None of the GP, U.S. Propane or NewLP is in (i)
violation of its partnership agreement, certificate or articles of incorporation
or bylaws or other organizational documents, (ii) violation of any law, statute,
ordinance, administrative or governmental rule or regulation applicable to it or
of any decree of any Governmental Authority having jurisdiction over it or (iii)
breach, default (or an event which, with notice or lapse of time or both, would
constitute such a default) or violation in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any agreement, indenture, lease or other
instrument to which it is a party or by which it or any of its properties may be
bound, which in the case of any breach, default or violation subject to clause
(ii) or (iii) would, if continued, have a Material Adverse Effect. To the
Knowledge of the Venturers, no third party to any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which any of the GP,
U.S. Propane or NewLP is a party or by which any of them is bound or to which
any of their respective properties are subject, is in default under any such
agreement, which breach, default or violation would, if continued, have a
Material Adverse Effect.
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4.29 SEC FILINGS. To the Knowledge of Venturers, none of the SEC
Filings, including, without limitation, any financial statements or schedules
included therein, at the time filed, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ACQUIRER
The Acquirer hereby represents and warrants to each of the Venturers as
follows:
5.1 ORGANIZATION; POWER AND AUTHORITY. The Acquirer is duly organized
and validly existing as a limited partnership under the laws of the State of
Texas, and has full power and authority to execute and deliver this Agreement
and the other Operative Documents to which it is a party and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Acquirer of
this Agreement and the performance by the Acquirer of its obligations hereunder
have been, and the other Operative Documents will be, duly and validly
authorized by the Acquirer. This Agreement has been duly and validly executed
and delivered by the Acquirer and constitutes, and upon the execution and
delivery by the Acquirer of the other Operative Documents to which it is a
party, such other Operative Documents will constitute, legal, valid and binding
obligations of the Acquirer enforceable against it in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to the enforcement of creditors' rights generally and by general
principles of equity.
5.2 NONCONTRAVENTION. The execution, delivery and performance of this
Agreement and the other Operative Documents to which the Acquirer is a party and
the consummation by the Acquirer of the transactions contemplated hereby and
thereby do not and will not conflict with, or constitute a breach, violation or
default under, any Contract to which the Acquirer is a party, or result in a
violation of the Acquirer's organizational documents or any order, judgment or
decree of any court or Governmental Authority having jurisdiction over the
Acquirer or any of its properties and, no consent, authorization or order of, or
filing or registration with, any Governmental Authority (other than such filings
as are contemplated in the Contribution Agreement, including any necessary
filings under the HSR Act) is required by the Acquirer for the execution,
delivery and performance of this Agreement or any of the other Operative
Documents.
5.3 INVESTMENT INTENT.
(a) The Acquirer is acquiring the Securities for its own account as
principal, for investment purposes only, and not for or with a view to the
resale, distribution or granting of a participation therein, in whole or in
part, in violation of the Securities Act or the securities laws of any
jurisdiction applicable to the Acquirer.
(b) The Acquirer acknowledges its understanding that the offering and
sale of Securities has not been registered under the Securities Act. The
Acquirer acknowledges that it is familiar
27
with the limitations that are imposed by the Securities Act on any Transfer of
an interest in the Securities. The Acquirer understands and acknowledges that it
may have to bear the economic risk of its investment in the Securities for an
indefinite period of time unless the Securities are subsequently registered
under the Securities Act or an exemption therefrom is available. The Acquirer
hereby agrees that the Securities will not be transferred other than (i)
pursuant to a registration under the Securities Act or pursuant to an exemption
therefrom, and (ii) in compliance with any applicable state securities laws.
5.4 BROKERS. No agent, broker, finder, investment banker, financial
advisor or other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement or the other Operative Documents on the basis of any act or statement
made or alleged to have been made by the Acquirer or any of its Affiliates,
directors, officers or other representatives.
5.5 REPRESENTATIONS REGARDING FUNDING. The Acquirer will have adequate
funds available to it as are necessary to pay the Purchase Price in full at the
Closing.
ARTICLE VI
APPROVALS, AUTHORIZATIONS AND CONSENTS
6.1 CONSENT OF THE GP, U.S. PROPANE AND THE VENTURERS. By its execution
of this Agreement, (a) each of the GP, U.S. Propane and the Venturers consent
to, and prior to the Closing will cause NewLP to consent to (to the extent
applicable), the Transfer by each Venturer and NewLP of the Member Interests and
the Partner Interests, as applicable, in accordance with the transactions
contemplated in this Agreement, pursuant to (i) the U.S. Propane Agreement, (ii)
the GP LLC Agreement, (iii) the Transfer Restriction Agreement and (iv) any
other agreements by and among one or more Venturers that require such consent to
the transactions contemplated in this Agreement, and (b) each of the Venturers
waives any Encumbrances that exist under the U.S. Propane Agreement or the GP
LLC Agreement on the Securities immediately prior to the Closing to the fullest
extent that such Encumbrances may be so waived by such Venturer.
6.2 AUTHORIZATIONS AND CONSENTS.
(a) Each party hereto shall take all commercially reasonable steps
necessary or desirable, and proceed diligently and in good faith and shall use
all reasonable commercial efforts to obtain, as promptly as practicable, (i) all
authorizations, consents, orders and approvals of all Governmental Authorities
that may be or become necessary for such party's execution and delivery of, and
the performance of its obligations pursuant to, this Agreement and the other
Operative Documents, and (ii) all approvals and consents (including those
approvals, consents and authorizations specified in Schedule 4.23) required
under all Contracts to which the GP, U.S. Propane, NewLP or any of the Venturers
is a party (including all Contracts involving Indebtedness) to consummate the
transactions contemplated hereby. Each party will cooperate fully (including by
providing all information the other party reasonably requests, subject to any
confidentiality agreement (other than any confidentiality agreement exclusively
between or among one or more of the parties to this Agreement) to which the
party may be subject (and such party will use its reasonable commercial efforts
to limit the applicability of any such
28
confidentiality agreement to the extent reasonably practicable, including by (1)
obtaining a waiver thereof or (2) obtaining assurances from the requesting party
that such information will remain confidential)) with the other parties in
promptly seeking to obtain all such authorizations, consents, orders and
approvals. To the extent that the parties hereto mutually agree that filings
under the HSR Act are necessary or appropriate, each party hereto agrees to make
an appropriate filing of a Notification and Report Form pursuant to the HSR Act
with respect to the transactions contemplated hereby within five Business Days
after the date of this Agreement, use their commercially reasonable efforts to
cause the waiting period under the HSR Act to expire as quickly as possible and
to supply promptly any additional information and documentary material that may
be requested pursuant to the HSR Act. Notwithstanding the foregoing, no party
hereto shall have any obligation to dispose of, hold separate or otherwise
restrict its enjoyment of any of their assets or properties in order to obtain
requisite approvals pursuant to the HSR Act.
(b) Each party hereto shall promptly inform the other party of any
communication from any Governmental Authority regarding any of the transactions
contemplated by this Agreement. If any party or Affiliate thereof receives a
request for additional information or documentary material from any such
Governmental Authority with respect to the transactions contemplated hereby,
then such party will endeavor in good faith to make, or cause to be made, as
soon as reasonably practicable and after consultation with the other party, an
appropriate response in compliance with such request.
6.3 FURTHER ASSURANCES. The GP, U.S. Propane and each of the Venturers
will, and, following the formation of NewLP and prior to Closing, the Venturers
will cause NewLP to, whenever and as often as reasonably requested to do so by
the Acquirer, perform, execute, acknowledge and deliver any and all such other
and further acts, assignments, transfers and any instruments of further
assurance, approvals and consents as are necessary or proper in order to
complete, ensure and perfect the sale and transfer to the Acquirer of the
Securities and the consummation of the other transactions contemplated hereby.
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ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 ACCESS TO INFORMATION.(a) Between the date hereof and the Closing,
the Venturers shall cause the GP, U.S. Propane and NewLP to (i) give the
Acquirer and its authorized representatives reasonable access to all facilities
and all books and records relating to the GP, U.S. Propane and NewLP, (ii)
permit the Acquirer and its authorized representatives to make such inspections
of the Assets and Properties of the GP and U.S. Propane as they may reasonably
require to verify the accuracy of any representation or warranty contained in
Article 4 and (iii) shall furnish the Acquirer and their respective authorized
representatives with such financial and operating data and other information
with respect to the GP, U.S. Propane and NewLP as the Acquirer may from time to
time reasonably request; provided, however, that the Venturers shall have the
right to have a representative present at all times of any such inspections or
examinations conducted at the offices or other facilities of the GP or U.S.
Propane; and, provided further, however, that the Venturers shall not be
required to cause the GP, U.S. Propane or NewLP to disclose or make available to
the Acquirer any information or data the disclosure of which would violate any
confidential or non-disclosure obligation (other than any obligation exclusively
between or among one or more of the parties to this Agreement) to which the
party may be subject, provided that such party will use its reasonable
commercial efforts to limit the applicability of any confidential or
non-disclosure obligation to the extent reasonably practicable, including by (1)
obtaining a waiver thereof or (2) obtaining assurances from the Acquirer that
such information will remain confidential.
(a) Acquirer agrees that at any time during the period commencing on
the Closing Date and ending on November 6, 2009 NewLP and its Affiliates and
representatives shall have reasonable access to inspect and copy all books and
records of U.S. Propane relating to the Contributed Interests and Transferred
Interests (as such terms are defined in the Original Contribution Agreement) to
the extent that such access may reasonably be required in connection with
matters relating to or affected by the operation of the Business (as such term
is defined in the Original Contribution Agreement) prior to the Closing. U.S.
Propane shall, and shall cause the Heritage Parties to, afford such access upon
receipt of reasonable advance notice and during normal business hours. If U.S.
Propane or any of the Heritage Entities desire to dispose of any such books and
records prior to the expiration of such period, Acquirer agrees that U.S.
Propane shall, and shall cause such Heritage Party to, give NewLP a reasonable
opportunity, at its expense, to segregate and remove such books and records as
they select. NewLP shall be solely responsible for any costs or expenses
incurred by it pursuant to this Section 7.1(b).
7.2 MAINTENANCE OF BOOKS AND RECORDS; FINANCIAL STATEMENTS; REPORTS;
ETC. Between the date hereof and the Closing, the GP and U.S. Propane shall keep
adequate records and books of account with respect to each such Person's
business activities in which proper entries are made in all material respects in
accordance with GAAP reflecting all of their respective financial transactions.
The GP and U.S. Propane shall furnish to the Acquirer promptly after the sending
or filing thereof, as the case may be, copies of any financial statements or
reports that the GP or U.S. Propane has made available to its partners or
members.
7.3 PUBLIC ANNOUNCEMENTS. The GP, U.S. Propane, NewLP, the Venturers,
the Acquirer and their respective Affiliates, will consult with each other
before issuing, and provide each other
30
the opportunity to review and comment upon, any press release or other public
statement with respect to the transactions contemplated by this Agreement and
the other Operative Documents and shall not issue any such press release or make
any such public statement without the advance approval of the other party
following such consultation (such approval not to be unreasonably withheld,
delayed or conditioned), except as each party may determine is required by
Applicable Law, court process or by the requirements of any securities exchange.
7.4 CONDUCT AND PRESERVATION OF THE BUSINESS OF THE GP, U.S. PROPANE
AND OTHER ENTITIES. Except as expressly provided in this Agreement and the
Operative Documents or except as described in Schedule 7.4, between the date
hereof and the Closing the Venturers and, following its formation, NewLP shall
(a) cause the GP and U.S. Propane to conduct the respective businesses of the GP
and U.S. Propane substantially as it is being conducted on the date hereof; (b)
use their commercially reasonable efforts to cause the GP and U.S. Propane to
preserve, maintain and protect the Assets and Properties of the GP and U.S.
Propane and their respective businesses consistent with available resources; and
(c) use their commercially reasonable efforts to cause the GP and U.S. Propane
to preserve intact the business organization of the GP and U.S. Propane and
their respective businesses, consistent with its available resources, to keep
available the services of the employees of the GP and U.S. Propane and to
maintain existing relationships with suppliers, contractors, distributors,
customers and others having business relationships with the GP and U.S. Propane.
7.5 RESTRICTIONS ON CERTAIN ACTIONS OF THE GP, U.S. PROPANE AND OTHER
ENTITIES. Without limiting the generality of Section 7.4, except as otherwise
expressly contemplated by this Agreement and the Operative Documents, from and
after the date hereof and until the Closing Date, without the approval of the
Acquirer, with respect to the business of the GP and U.S. Propane:
(a) None of the GP, U.S. Propane, any of the Venturers or, after its
formation, NewLP shall agree to sell, transfer or otherwise dispose, or grant or
agree to grant an option to purchase, sell, transfer, or otherwise dispose of
any Securities. Notwithstanding anything in this Section 7.5(b) or elsewhere in
this Agreement, the Venturers may cause the GP or U.S. Propane, at any time or
from time to time to distribute to their respective owners cash or cash
equivalents, to the extent that Current Assets exceed Current Liabilities at
such time.
(b) Except as set forth on Schedule 7.5 or as otherwise contemplated in
this Agreement or the Operative Documents, none of the Venturers nor, after its
formation, NewLP shall cause or permit any of the GP or U.S. Propane to:
(i) make any expenditures outside the ordinary
course of business consistent with past practice which,
individually or in the aggregate, exceed $20,000;
(ii) make any material change in the ongoing
operations of the business of such entity;
(iii) create, incur, guarantee or assume any
Indebtedness;
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(iv) mortgage or pledge any of the securities or
the Assets and Properties of any such entity or create or
suffer to exist any Encumbrance thereupon, other than
Permitted Encumbrances;
(v) sell, lease, transfer or otherwise dispose
of, directly or indirectly, any of the Assets and Properties
of any such entity;
(vi) enter into any lease, contract, agreement,
commitment, arrangement or transaction relating to the Assets
and Properties of any such entity other than in the ordinary
course of business;
(vii) amend, modify or change any existing lease
or contract, other than in the ordinary course of the business
consistent with past practice;
(viii) waive, release, grant or transfer any rights
of value relating to the business of such entity, other than
in the ordinary course of business consistent with past
practice;
(ix) hire any employees other than in the
ordinary course of business consistent with past practice;
(x) delay payment of any account payable or
other liability relating to the business of such entity beyond
the later of its due date or the date when such liability
would have been paid in the ordinary course of business
consistent with past practice, unless such delay is due to a
good faith dispute as to liability or amount;
(xi) to the extent commercially practicable,
permit any current insurance or reinsurance or continuation
coverage to lapse if such policy insures risks, contingencies
or liabilities (including product liability) related to the
business of such entity;
(xii) except as set forth in this Section 7.5,
take any action which would make any of the representations or
warranties of any of the Venturers untrue as of any time from
the date of this Agreement to the date of the Closing, or
would result in any of the conditions to Closing set forth in
this Agreement not being satisfied;
(xiii) authorize or propose, or agree in writing or
otherwise take, any of the actions described in this Section
7.5;
(xiv) merge into or with or consolidate with any
other Person or acquire all or substantially all of the
business or assets of any other Person;
(xv) purchase any securities of any Person;
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(xvi) take any action or enter into any commitment
with respect to or in contemplation of any liquidation,
dissolution, recapitalization, reorganization, or other
winding up of the business of such entity;
(xvii) create any employee benefit plans (within
the meaning of Section 3(3) of ERISA) or any other employee
benefit plan or program not subject to ERISA, except as
required by law; or
(xviii) enter into or take any action in connection
with ▇▇▇▇▇▇, trades or swaps of any commodity.
(c) The Acquirer shall not take any action which would make any of the
representations and warranties of the Acquirer untrue as of any time from the
date of this Agreement to the date of Closing, or would result in any of the
conditions to Closing set forth in this Agreement not being satisfied.
7.6 UPDATING SCHEDULES. The GP, U.S. Propane and the Venturers will,
promptly upon becoming aware of any fact, matter, circumstance or event, which
fact, matter, circumstance or event arose either (i) on or prior to the date
hereof (a "Pre-signing Event") or (ii) after the date hereof but prior to the
Closing (a "Post-Signing Event"), in any case, requiring supplementation or
amendment of the schedules provided by the Venturers in the Disclosure Schedules
of the Venturers, supplement or amend such schedules to this Agreement to
reflect any fact, matter, circumstance or event, which, if existing, occurring
or known on the date of this Agreement, would have been required to be set forth
or described in such schedules which were or have been rendered inaccurate
thereby. Notwithstanding the immediately preceding sentence, any such
supplements or amendments must be made prior to such date on which the last of
the conditions to Closing set forth in Sections 8.1 and 8.2 have been satisfied
or waived by the party or parties entitled to waive the same, it being the
intention of the parties that such schedules may not be amended within 72 hours
prior to the Closing. All supplements and amendments to the schedules provided
by the Venturers are provided for the information of the Acquirer only and no
such supplement or amendment to the schedules shall (i) amend or supplement the
representations and warranties (and corresponding schedules) made as of the date
hereof or (ii) have any effect for the purpose of determining (A) satisfaction
of the conditions set forth in Article 8 hereof or (B) compliance by the GP,
U.S. Propane and the Venturers with their respective covenants and agreements
set forth herein; provided, however, that if the Closing occurs the Disclosure
Schedules as so supplemented or amended as of the Closing with respect to
Pre-Signing Events and Post-Signing Events shall be deemed to be the Disclosure
Schedules for purposes of determining whether or not any breach of the
representations and warranties of any of the Venturers has occurred.
7.7 TAX REPORTING. The parties intend that this Agreement effect a sale
by U.S. Propane of the Retained Assets, including a general partner interest in
Heritage MLP and a general partner interest in Heritage OLP. The parties have
agreed to the transactions contemplated hereby in order to achieve the economic
and Tax consequences of such sales. In furtherance thereof, the parties agree to
report for federal income tax purposes the Tax consequences of the transactions
contemplated by this Agreement in a manner that is consistent with the form (and
33
order) of the transactions described in Article 3, and in particular agree to
report the federal income tax consequences of such transactions as follows:
(a) Each of US Propane and the GP is a partnership immediately prior to
the transaction for which provision is made in Section 3.2.
(b) After the transfer of all of the equity in the GP to NewGP and the
transfer of all of the equity of U.S. Propane to NewLP as provided in Section
3.2, NewGP will be the continuation of the GP (that is, the same partnership for
federal income tax purposes as) and NewLP will be the continuation of (that is,
the same partnership for federal income tax purposes as) U.S. Propane, and the
GP and U.S. Propane are disregarded from and after such transfer until (at
least) all of the transactions contemplated in this Agreement have occurred.
(c) The transfer of certain assets from U.S. Propane to NewLP and the
assumption by NewLP of certain liabilities of U.S. Propane, as provided in
Section 3.3, are each disregarded.
(d) The purchase by Acquirer, as provided in Section 3.4, of the
Securities is treated as the purchase of the Assets and Properties of U.S.
Propane. The parties agree that the fair market value of each of the then Assets
and Properties of U.S. Propane is as set out in Schedule 7.7. Each of the
parties shall use such fair market values for all tax reporting purposes.
Further, the Parties agree that in determining the taxable income of each of the
Parties attributable to their ownership of interests in the Heritage MLP and
Heritage OLP for the taxable year of the Heritage MLP and Heritage OLP including
the Closing Date, Acquirer shall cause Heritage MLP and Heritage OLP to close
their books as of the Closing Date and to allocate the taxable income of
Heritage MLP and Heritage OLP for the period prior to the Closing Date allocable
to the Retained Assets to NewLP and the taxable income of Heritage MLP and
Heritage OLP allocable to the Retained Assets for the period beginning with the
Closing Date through the end of the taxable year to Acquirer. To the extent that
Heritage MLP or Heritage OLP is unable to close its books as of the Closing
Date, the Parties agree to cause the tax results to the Parties to equal as
nearly as possible those that would have resulted if the books of Heritage MLP
and Heritage OLP had been closed as provided in the preceding sentence.
In addition, each party agrees to so report the transactions for all other Tax
purposes in a manner consistent with the foregoing provisions of this Section
7.7 unless such party receives a written opinion of counsel or its regular tax
adviser that one or more of such positions is not permitted under then
Applicable Law, in which case such party may then so report the transactions in
a manner that is inconsistent with the foregoing only after providing such
written opinion to the other parties hereto and consultation thereafter with
such other parties. The requirements of the foregoing (taking into account the
effect of the preceding sentence) are referred to herein as the "Reporting
Position." If any Tax authority proposes to characterize the transactions
contemplated in this Agreement as to a party in a manner that is inconsistent
with the Reporting Position, then such party agrees to contest such proposed
characterization in good faith using commercially reasonable efforts to defend
the Reporting Position and further agrees to keep the other parties hereto
reasonably informed as to the status of any such controversy. Likewise, the
Parties agree that Heritage OLP and Heritage MLP will allocate to NewLP taxable
income attributable to the amounts paid to NewLP pursuant to Section 3.3(f).
34
7.8 FEES AND EXPENSES. Except as otherwise expressly provided in this
Agreement, the Venturers shall cause NewLP to pay the out-of-pocket fees and
expenses of the GP, U.S. Propane, NewLP and the Venturers, on the one hand, and
the Acquirer shall pay its out-of-pocket fees and expenses, on the other hand,
incurred in connection with the negotiation, execution and delivery of this
Agreement and the transactions contemplated hereby, whether or not the Closing
shall have occurred. Notwithstanding the foregoing, all such out-of-pocket fees
and expenses incurred by the GP or U.S. Propane for time periods after the
Closing shall be paid by the GP, U.S. Propane or the Acquirer.
7.9 ACTIONS BY PARTIES. Each party hereto agrees to use its
commercially reasonable efforts to satisfy the conditions to Closing set forth
in Article 8 and to use its commercially reasonable efforts to refrain from
taking any action within its control that would cause a breach of a
representation, warranty, covenant or agreement set forth in this Agreement.
Each party hereto shall take all commercially reasonable steps necessary or
desirable, and proceed diligently and in good faith and shall use all reasonable
efforts to, as promptly as practicable, consummate the transactions contemplated
by this Agreement and the Operative Documents.
7.10 EMPLOYEES OF U.S. PROPANE. The Acquirer shall not, at any time
prior to 60 days after the Closing Date, effectuate a "plant closing" or "mass
layoff" as those terms are defined in the Worker Adjustment and Retraining
Notification Act ("WARN") affecting any employee of U.S. Propane or GP without
fully complying with the notice and other applicable requirements of WARN.
7.11 THIRD PARTY BENEFICIARY. The Acquirer will enforce the capital
commitments of the members of the Acquirer to make capital contributions to the
Acquirer, and will not permit the waiver, amendment or termination of (i) any of
such capital commitments, or (ii) any provision of the limited liability
agreement of the Acquirer that provides that the Venturers are third party
beneficiaries of the obligations of the members to make such capital
commitments.
7.12 CONFIDENTIALITY AND TAX SHELTER REGULATIONS. Except as reasonably
necessary to comply with applicable securities laws and notwithstanding anything
in this Agreement to the contrary (including the confidentiality provisions set
forth in Section 7.3 and Section 7.4) or in any other agreement to which a party
hereto is bound, the parties hereto (and each employee, representative, or other
agent of any of the parties) are expressly authorized to disclose to any and all
persons, without limitation of any kind, the U.S. federal income "tax treatment"
and "tax structure" (as those terms are defined in Treas. Reg. Sections
1.6011-4(c)(8) and (9), respectively) of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to such parties relating to such "tax treatment" and
"tax structure" of the transactions contemplated by this Agreement. For these
purposes, "tax structure" is limited to facts relevant to the U.S. federal
income tax treatment of the transaction described herein.
7.13 TRADEMARKS, LOGOS, ETC. The Heritage Entities shall have the right
to continue to use all trademarks, service marks, trade names, service names and
logos (i) of AGL Propane Services, Inc., a Delaware corporation, United Cities
Propane Gas L.L.C., a Delaware limited liability company, Peoples Gas Company,
L.L.C., a Delaware limited liability company and Piedmont Propane Company, a
North Carolina corporation and (ii) that Heritage MLP and
35
Heritage OLP were granted the right to use pursuant to that certain Contribution
Agreement dated June 15, 2000 among U.S. Propane, Heritage MLP and Heritage OLP,
except as specifically set forth on Schedule 7.13 (the "Trademarks"), until the
first anniversary of the Closing. From and after such first anniversary, the
Heritage Entities shall cease all use of the Trademarks, including all use of
the name "Peoples Gas."
7.14 VOTE OF COMMON UNITS. Each of the Venturers hereby covenants and
agrees to vote, and to cause NewLP to vote at each meeting or other vote of the
holders of Common Units of Heritage MLP, with respect thereto, all of the Common
Units, if any, that such Venturer or NewLP may own as of the record date
established for determining the holders of Common Units entitled to vote at such
meeting or in such other vote for approval of the transactions contemplated
hereby and for approval of the conversion of the Class D Subordinated Units (as
defined in Amendment No. 5 to the Heritage MLP Partnership Agreement) to Common
Units on a one-for-one basis and otherwise on the terms described in Amendment
No. 5 to the Heritage MLP Partnership Agreement and any amendment to the
Heritage MLP Partnership Agreement related thereto.
7.15 PRECLOSING TRANSACTIONS. Prior to the Closing, the Venturers shall
cause the transactions described in Article III that are to be effected prior to
the Closing to be so effected.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 CONDITIONS TO CLOSING OF THE ACQUIRER. The obligations of the
Acquirer to consummate the transactions contemplated by this Agreement at the
Closing shall be subject to the fulfillment by each of the GP, U.S. Propane and
each of the Venturers on or prior to the Closing Date of each of the following
conditions (all or any of which may be waived in whole or in part by the
Acquirer in its sole discretion):
(a) Representations and Warranties True. The representations and
warranties of the Venturers set forth in this Agreement shall be true and
correct in all material respects on and as of the Closing Date (other than those
that are qualified by a reference to materiality or Material Adverse Effect,
which representations and warranties shall have been true and correct in all
respects as so qualified), and any representations and warranties made as of a
specified date earlier than the Closing Date shall have been true and correct in
all material respects on and as of such earlier date (other than those that are
qualified by a reference to materiality or Material Adverse Effect, which
representations and warranties shall have been true and correct in all respects
as so qualified).
(b) Covenants and Agreements Performed. Each of the GP, U.S. Propane
and each of the Venturers shall have performed and complied with, in all
material respects, all covenants and agreements required by this Agreement to be
performed or complied with by it, and each of the Venturers shall have caused
NewLP to have performed and complied with, in all material respects, all
covenants and agreements required by this Agreement to be performed or complied
with by NewLP.
36
(c) Certificates. The Acquirer shall have received a certificate from
(i) each of the Venturers, in substantially the form set forth in Exhibit
8.1(c)(i), dated the Closing Date, representing and certifying that (A) the
conditions set forth in Section 8.1(a) have been fulfilled and (B) except for
matters relating to the Heritage Entities disclosed pursuant to the Contribution
Agreement and except for the effects of general economic conditions or weather,
seasonality or other conditions affecting the industry in which any of the
Heritage Entities conduct business, to each such Venturer's Knowledge, since the
Financial Statement Date there has not been any event or condition relative to
any of the Heritage Entities having, or reasonably expected to have, a Material
Adverse Effect on the GP or U.S. Propane, (ii) each of the GP, U.S. Propane and
each of the Venturers, in substantially the form set forth in Exhibit
8.1(c)(ii), dated the Closing Date, representing and certifying that the
conditions set forth in Section 8.1(b), have been fulfilled and a certificate as
to the incumbency of the officers executing this Agreement on behalf of such
party.
(d) Legal Proceedings. No preliminary or permanent injunction or other
order, decree or ruling issued by a Governmental Authority, and no statute,
rule, regulation or executive order promulgated or enacted by a Governmental
Authority, shall be in effect that restrains, enjoins, prohibits or otherwise
makes illegal the consummation of the transactions contemplated by this
Agreement or the Operative Documents. No Proceeding before a Governmental
Authority shall be pending (A) seeking to restrain or prohibit the consummation
of the transactions contemplated by this Agreement or the Operative Documents or
(B) that could reasonably be expected, if adversely determined, to impose any
material limitation on the ability of any of the GP, U.S. Propane, NewLP or any
of the Venturers to consummate the transactions contemplated hereby or by the
Operative Documents.
(e) Consents. All Consents set forth on Exhibit 8.1(e) shall have been
obtained or made and shall be in full force and effect as to each of the GP,
U.S. Propane, NewLP and each of the Venturers, as applicable, at the time of the
Closing.
(f) No Material Adverse Effect. Since the date of this Agreement, there
shall not have been any event or condition having a Material Adverse Effect
(excluding for purposes of such determination the effects on the GP and U.S.
Propane of the transactions to be effected prior to Closing pursuant to Article
3).
(g) Deliveries. Each of the GP, U.S. Propane, NewLP and each of the
Venturers shall have delivered to the Acquirer executed copies of the Operative
Documents and the certificates representing all of the Securities purchased by
the Acquirer hereunder, duly endorsed in blank or accompanied by transfer
powers.
(h) Contribution Agreement; HHI Purchase Agreement. All conditions to
the closing of the transactions contemplated by the Contribution Agreement
(other than a condition relating to the satisfaction of all conditions to
closing of this Agreement) shall have been satisfied or waived. The HHI Purchase
Agreement shall have been executed and delivered by each of the Persons party
thereto and the closing thereunder shall have occurred.
(i) Assumption of Assumed Liabilities; Dividend of GP Interests Note.
NewLP shall have delivered to the GP and U.S. Propane the Transfer Instruments
whereby NewLP agrees to
37
assume all of the Assumed Liabilities, and U.S. Propane shall have declared and
paid the GP Interests Note as a dividend to NewGP and NewLP.
(j) Resignations. Each of H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇'▇▇▇▇ and ▇.▇. ▇▇▇▇▇▇▇▇ (or their
respective successors as members of the Board of Directors of the GP) shall
have, and, if requested in writing by Acquirer not less than three business days
prior to Closing, each of ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and J. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ shall have, tendered their resignations as a member of the GP's Board of
Directors, effective as of the Closing.
(k) HSR Waiting Period. If applicable, the waiting period under the HSR
Act applicable to the consummation of the transactions contemplated hereby shall
have expired or been terminated without any adverse condition attached thereto.
8.2 CONDITIONS TO CLOSING OF NEWLP AND THE VENTURERS. The obligations
of NewLP and each of the Venturers to consummate the transactions contemplated
by this Agreement at the Closing shall be subject to the fulfillment by the
Acquirer on or prior to the Closing Date of each of the following conditions
(all or any of which may be waived in whole or in part by the Venturers in their
sole discretion):
(a) Representations and Warranties True. The representations and
warranties of the Acquirer set forth in this Agreement shall be true and correct
in all material respects on and as of the Closing Date (other than those that
are qualified by a reference to materiality or Material Adverse Effect, which
representations and warranties shall have been true and correct in all respects
as so qualified), and any representations and warranties made as of a specified
date earlier than the Closing Date shall have been true and correct in all
material respects on and as of such earlier date (other than those that are
qualified by a reference to materiality or Material Adverse Effect, which
representations and warranties shall have been true and correct in all respects
as so qualified).
(b) Covenants and Agreements Performed. The Acquirer shall have
performed and complied with, in all material respects, all covenants and
agreements required by this Agreement to be performed or complied with by it.
(c) Certificates. Each of the Venturers shall have received a
certificate from the Acquirer, in substantially the form set forth in Exhibit
8.2(c), dated the Closing Date, representing and certifying that the conditions
set forth in Sections 8.2(a) and 8.2(b) have been fulfilled and a certificate as
to the incumbency of the officers executing this Agreement on behalf of the
Acquirer.
(d) Legal Proceedings. No preliminary or permanent injunction or other
order, decree or ruling issued by a Governmental Authority, and no statute,
rule, regulation or executive order promulgated or enacted by a Governmental
Authority, shall be in effect that restrains, enjoins, prohibits or otherwise
makes illegal the consummation of the transactions contemplated by this
Agreement or the Operative Documents. No Proceeding before a Governmental
Authority shall be pending (A) seeking to restrain or prohibit the consummation
of the transactions contemplated
38
by this Agreement or the Operative Documents or (B) that could reasonably be
expected, if adversely determined, to impose any material limitation on the
ability of any of the Acquirer to consummate the transactions contemplated
hereby or by the Operative Documents.
(e) Consents. All Consents set forth on Exhibit 8.2(e) shall have been
obtained or made and shall be in full force and effect as to the Acquirer at the
time of the Closing.
(f) Deliveries. The Acquirer and each Person that is a party thereto
(other than the GP, U.S. Propane, NewLP or any of the Venturers) shall have
delivered executed copies of the Operative Documents to the GP, U.S. Propane,
NewLP and the Venturers.
(g) Contribution Agreement; HHI Purchase Agreement. The Contribution
Agreement shall have been executed and delivered by each of the Persons party
thereto and all conditions to closing therein (other than a condition relating
to the satisfaction of all conditions to closing of this Agreement and the HHI
Purchase Agreement) shall have been satisfied or waived. The HHI Purchase
Agreement shall have been executed and delivered by each of the Persons party
thereto and the closing thereunder shall have occurred.
(h) Payment. NewLP shall have received full payment in cash or
immediately available funds (wired to the account of NewLP in accordance with
wiring instructions to be specified by NewLP not less than three Business Days
prior to the Closing) of the Purchase Price from the Acquirer in consideration
for the transfer, assignment and conveyance of the Securities.
(i) HSR Waiting Period. If applicable, the waiting period under the HSR
Act applicable to the consummation of the transactions contemplated hereby shall
have expired or been terminated without any adverse condition attached thereto.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby abandoned by written notice at any time prior to the Closing
in any of the following manners:
(a) concurrently with any permitted termination of the Contribution
Agreement; provided, however, that if the Contribution Agreement is terminated
due to a breach or default (i) by La Grange (as such term is defined in the
Contribution Agreement) of its obligations thereunder or a failure by La Grange
to satisfy its conditions to closing thereunder, this Agreement shall not be
terminated automatically but may be terminated by election of the Venturers
furnished in writing to the other parties hereto, or (ii) by Heritage MLP or
Heritage OLP of their respective obligations thereunder or a failure by Heritage
MLP or Heritage OLP to satisfy their conditions to closing thereunder, this
Agreement shall not be terminated automatically but may be terminated by
election of the Acquirer furnished in writing to the other parties hereto;
(b) by written consent of each of the parties to this Agreement;
39
(c) by any party if the Closing has not occurred on or before February
15, 2004, unless such failure to close resulted from a breach of this Agreement
by the party or its Affiliate seeking to terminate this Agreement pursuant to
this Section 9.1(c);
(d) by any party if (i) there is any statute, rule or regulation that
makes consummation of the transactions contemplated hereby illegal or otherwise
prohibited or (ii) a Governmental Authority (A) has issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated hereby, and such order,
decree, ruling or other action shall have become final and nonappealable or (B)
has made any order, decree, ruling or other action consenting to or approving
consummation of the transactions contemplated hereby contingent or conditional
in any manner that has a Material Adverse Effect, which order, decree, ruling or
other action shall have become final and nonappealable;
(e) by any party, if there has been any violation or breach by any
other party (other than an Affiliate or related party of the first party) of any
representation, warranty, covenant or agreement contained in this Agreement that
has rendered impossible the satisfaction of any condition to the obligations of
such other party set forth in Section 8.1 or Section 8.2 and such violation or
breach has neither been cured within 30 days after notice by such first party to
the other party nor waived by the first party;
(f) by any party, if any other event shall occur that shall render the
satisfaction of any condition to the obligations of any other party (other than
an Affiliate or related party of the first party) impossible and such condition
has not been waived by the other parties; or
(g) by the Acquirer, if any amendment is made to any schedule in
accordance with Section 7.6 that in the Acquirer's reasonable judgment (i) with
respect to any Pre-Signing Event, is material or (ii) with respect to any
Post-Signing Event, the effect of the event or circumstance to which such
amendment relates materially impairs the financial condition, business,
properties, prospects, net worth or results of operations of the GP or U.S.
Propane.
9.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 9.1 by any party, written notice thereof shall forthwith be given to the
other parties specifying the provision hereof pursuant to which such termination
is made. If this Agreement is terminated for any reason, this Agreement shall
become void and have no effect, except that (a) the agreements contained in this
Section 9.2 and in Section 7.8 shall survive the termination hereof, (b) nothing
contained in this Section 9.2 shall relieve any party from liability for any
willful breach of this Agreement and (c) nothing shall relieve any party from
any liability for a breach of its obligations hereunder existing at the time of
such termination. If this Agreement is terminated (y) because the Acquirer is
unable to arrange the funding necessary to consummate the Closing, the Acquirer
agrees to pay $500,000 to the Venturers or (z) by the Acquirer pursuant to
Section 9.1(g) because of an amendment to any schedule with respect to a
Pre-Signing Event, the Venturers agree to pay $500,000 to the Acquirer. The
parties stipulate and agree that (a) the $500,000 amount referred to in the
immediately preceding sentence shall constitute liquidated damages payable in
lieu of any other costs or expenses incurred by a party upon such termination,
shall constitute the sole remedy upon a termination in accordance with clause
(y) or (z) of the preceding sentence and (b) they each believe that such amounts
constitute a fair and
40
reasonable resolution if this Agreement is terminated under the circumstances
referred to in such clauses (y) or (z).
9.3 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by each of the parties.
9.4 WAIVER. Any party may, on behalf of itself only and not on behalf
of any other party, (a) waive any inaccuracies in the representations and
warranties of any other party (other than an Affiliate or related party of the
first party) contained herein or in any document, certificate or writing
delivered pursuant hereto, (b) waive compliance by any other party (other than
an Affiliate or related party of the first party) with any of its agreements
contained herein and (c) waive fulfillment of any conditions to its obligations
contained herein. Any agreement on the part of a party to any such waiver shall
be valid only if set forth in an instrument in writing signed by or on behalf of
such party. No failure or delay by a party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
ARTICLE X
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS
10.1 INDEMNIFICATION OBLIGATIONS OF NEWLP AND THE VENTURERS. NewLP
and, if NewLP is unable to satisfy its obligations hereunder and, with respect
to each Venturer, only to the extent that a Venturer has received after the
Closing from NewLP any distribution of cash or property, each such Venturer
shall, except for indemnification in respect of the clause (b) below with
respect to the last sentence of Section 4.6, which indemnification shall only be
several as among NewLP and each of the Venturers, indemnify the Acquirer
Indemnified Parties, as the case may be, and hold the Acquirer Indemnified
Parties harmless from, against and in respect of any and all Losses arising out
of, based upon or resulting from:
(a) the breach of any representation or warranty of any Venturer
contained in or made pursuant to this Agreement (other than those in Section
4.2, Section 4.3, the last sentence of Section 4.6 or in Section 4.24);
(b) the breach of any representation or warranty of any Venturer
contained in or made pursuant to Section 4.2, Section 4.3, the last sentence of
Section 4.6 or in Section 4.24;
(c) the breach by any Venturer or the failure of any of the Venturers
to observe or perform in any material respect, any of its covenants or
agreements contained in this Agreement or any other Operative Document; and
(d) the Assumed Liabilities.
Notwithstanding the foregoing, NewLP and the Venturers will not have any
obligation to indemnify the Acquirer Indemnified Parties for Losses under
Section 10.1(a) unless and until the aggregate amount of all such Losses under
Section 10.1(a) exceeds $300,000 (regardless of whether, in the case of third
party actions, suits or proceedings with respect to any of the foregoing, the
Venturers may have a meritorious defense), at and after which time NewLP and
41
the Venturers shall be liable for all Losses in excess of $300,000 and which do
not in the aggregate exceed $3,000,000. Notwithstanding anything else herein to
the contrary, none of the Venturers shall be required pursuant to this Section
10.1 to make any payment to any of the Acquirer Indemnified Parties for Losses
unless such Acquirer Indemnified Party has first sought to collect payment of
such Losses from NewLP and NewLP has failed or refused to make payment thereof
to the extent required under this Article 10, after which such Acquirer
Indemnified Party may, only to the extent specified in this Section 10.1, seek
payment of such Losses from a Venturer (unless the failure or refusal of NewLP
to make such payment is due to a good faith dispute regarding such Acquirer
Indemnified Party's right under this Section 10.1 to indemnification for such
Losses). The rights and remedies of the Acquirer Indemnified Parties based upon,
arising out of or otherwise in respect of any clause of this Section 10.1 or any
representation, warranty or covenant in this Agreement or other Operative
Documents shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any such claim is based may also
be the subject matter of any representation, warranty or covenant in this
Agreement or other Operative Document that would not give rise to any rights or
remedies of the Acquirer Indemnified Parties.
10.2 INDEMNIFICATION OBLIGATIONS OF THE ACQUIRER. The Acquirer,
shall indemnify the Venturer Indemnified Parties, as the case may be, and hold
the Venturer Indemnified Parties harmless from, against and in respect of any
and all Losses arising out of, based upon or resulting from:
(a) the breach of any representation or warranty of the Acquirer
contained in or made pursuant to this Agreement (other than those in the second
and third sentences of Section 5.1 and in Section 5.3 and Section 5.4);
(b) the breach of any representation or warranty of Acquirer contained
in or made pursuant to the second and third sentences of Section 5.1, or in
Section 5.3 or Section 5.4;
(c) the breach by the Acquirer or failure of the Acquirer or any of its
Affiliates to observe or perform in any material respect, any of their covenants
or agreements contained in this Agreement or any other Operative Document; and
(d) the Retained Liabilities.
Notwithstanding the foregoing, the Acquirer will not have any obligation to
indemnify the Venturer Indemnified Parties for Losses under Section 10.2(a)
unless and until the aggregate amount of all such Losses under Section 10.2(a)
exceeds $300,000 of the Purchase Price (regardless of whether, in the case of
third party actions, suits or proceedings with respect to any of the foregoing,
the Acquirer may have a meritorious defense), at and after which time the
Acquirer shall be liable for all Losses in excess of $300,000 and which do not
in the aggregate exceed $3,000,000. The rights and remedies of the Venturer
Indemnified Parties based upon, arising out of or otherwise in respect of any
clause of this Section 10.2 or any representation, warranty or covenant in this
Agreement or other Operative Document shall in no way be limited by the fact
that the act, omission, occurrence or other state of facts upon which any such
claim is based may also be the subject matter of any representation, warranty or
covenant in this
42
Agreement or other Operative Document that would not give rise to any rights or
remedies of the Venturer Indemnified Parties.
10.3 INDEMNIFICATION PROCEDURES.
(a) Promptly upon receipt by a party indemnified under this Article 10
(an "Indemnified Party") of notice of the commencement of any action against
such Indemnified Party (a "Third Party Action") in respect of which indemnity or
reimbursement may be sought against a party or parties required to make
indemnification hereunder (an "Indemnifying Party"), such Indemnified Party
shall notify the Indemnifying Party in writing of the commencement of such Third
Party Action, but the failure so to notify the Indemnifying Party shall not
relieve it of any liability which it may have to any Acquirer Indemnified Party
under Section 10.1 or any Venturer Indemnified Party under Section 10.2, as
applicable, unless such failure actually and materially adversely affects the
defense of such Third Party Action. In case notice of commencement of any such
Third Party Action shall be given to the Indemnifying Party as above provided,
the Indemnifying Party shall be entitled to participate in and to assume the
defense of such action at its own expense, with counsel chosen by it that is
reasonably satisfactory to the Indemnified Party; provided, however, that:
(i) the Indemnified Party shall be entitled to
participate in the defense of such Third Party Action and to employ
counsel at its own expense to assist in the handling of such Third
Party Action (provided that the Indemnified Party shall be entitled to
reimbursement for the reasonable out-of-pocket expenses for such
counsel in accordance with subclauses (A) and (B) below in this Section
10.3(a));
(ii) the Indemnifying Party shall obtain the prior written
approval of the Indemnified Party, which approval shall not be
unreasonably withheld or delayed, before entering into any settlement
of such Third Party Action or ceasing to defend against such Third
Party Action, if pursuant to or as a result of such settlement or
cessation, injunctive or other equitable relief would be imposed
against the Indemnified Party or the Indemnified Party would be
adversely affected thereby;
(iii) no Indemnifying Party shall consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to
each Indemnified Party of a release from all liability in respect of
such Third Party Action; and
(iv) the Indemnifying Party shall not be entitled to
control the defense of any Third Party Action unless within 15 days
after receipt of such written notice from the Indemnified Party, the
Indemnifying Party confirms in writing its responsibility to indemnify
the Indemnified Party with respect to such Third Party Action and
reasonably demonstrates that it will be able to pay the full amount of
the reasonably expected Losses in connection with any such Third Party
Action.
Except as set forth in the following sentence, after written notice by the
Indemnifying Party to the Indemnified Party of its election to assume control of
the defense of any such Third Party Action in accordance with the foregoing, (i)
the Indemnifying Party shall not be liable to the
43
Indemnified Party hereunder for any fees and expenses of counsel subsequently
incurred by the Indemnified Party attributable to defending against such Third
Party Action, and (ii) as long as the Indemnifying Party is reasonably
contesting such Third Party Action in good faith, the Indemnified Party shall
not admit any liability with respect to, or settle, compromise or discharge the
claim underlying, such Third Party Action without the prior written consent of
the Indemnifying Party. If (A) the Indemnifying Party does not assume control of
the defense of such Third Party Action in accordance with this Section 10.3(a),
or (B) the Indemnified Party has been advised in writing by counsel that
representation of such Indemnified Party and the Indemnifying Party by the same
counsel would be inappropriate under applicable standards of professional
conduct (in which case the Indemnifying Party shall not have the right to assume
the defense of such Third Party Action on behalf of the Indemnified Party), in
each case the Indemnified Party shall have the right to defend such Third Party
Action in such manner as it may deem appropriate at the cost and expense of the
Indemnifying Party, provided that (i) the Indemnifying Party shall be obligated
to reimburse the Indemnified Parties for the costs and expenses of only a single
counsel for such Third Party Action and any matters related thereto and (ii) the
Indemnified Party shall not settle or resolve such Third Party Action without
the prior written consent of the Indemnifying Party (which consent will not be
unreasonably withheld, conditioned or delayed), and the Indemnifying Party shall
promptly reimburse the Indemnified Party therefor in accordance with this
Article 10. The reimbursement of fees and expenses of counsel required by this
Article 10 shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses incurred.
(b) If the Indemnifying Party shall be obligated to indemnify the
indemnified Party pursuant to this Article 10, the Indemnifying Party shall be
subrogated to all rights of the Indemnified Party with respect to the claims to
which such indemnification relates. If an Indemnified Party becomes entitled to
any indemnification from an Indemnifying Party, such indemnification shall be
made in cash upon demand, unless the Indemnifying Party is disputing the right
of such Indemnified Party to indemnification hereunder.
(c) The right of indemnification pursuant to this Article 10 shall
constitute the sole and exclusive remedy of each of the Parties to this
Agreement and their respective Affiliates, managers, directors, officers,
members, employees and other agents and representatives, other than with respect
to fraud or willful breach by a Party.
10.4 SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement shall survive (and not be affected in any
respect by) the Closing, any investigation conducted by any party and any
information that any party may receive (other than information identified in the
Schedules attached hereto).
44
(a) The right to indemnification:
(i) with respect to any breach or violation of any of the
representations and warranties contained in this Agreement (other than
those in the last sentence of Section 4.6, or Sections 4.11, 4.18,
4.22, 4.24 and 5.4), shall survive for one (1) year from the Closing
Date;
(ii) with respect to any breach of violation of any of the
representations and warranties contained in the last sentence of
Section 4.6 and in Sections 4.24 or 5.4, shall survive indefinitely;
(iii) with respect to any breach or violation of any of the
representations and warranties contained in Sections 4.11, 4.18 and
4.22, shall survive for the applicable statute of limitations; and
(iv) with respect to all covenants and agreements
contained in this Agreement, shall survive for the applicable statute
of limitations (including all periods of extension thereof, whether
automatic or permissive).
(b) The expiration of any survival period under this Agreement will not
affect the liability of any Party under this Article 10 for any Losses as to
which a bona fide claim has been asserted prior to the termination of such
survival period.
10.5 NO SPECIAL OR CONSEQUENTIAL DAMAGES. No party and no
Indemnified Party shall be entitled to recover special, consequential, exemplary
or punitive damages from the other parties or any Indemnifying Party in
connection with any claim for indemnification under this Article 10 or
otherwise, and each party hereby waives any claim or right to special,
consequential, exemplary or punitive damages hereunder, even if caused by the
active, passive, sole, joint, concurrent or comparative negligence, strict
liability, or other fault of any party, other than fraud or intentional
misconduct.
10.6 LIMITATIONS ON INDEMNIFICATION.
(a) Neither NewLP nor any of the Venturers shall have any obligation to
indemnify the Acquirer Indemnified Parties hereunder with respect to any breach
of a representation or warranty of the Venturers resulting from a Pre-Signing
Event or Post-Signing Event to the extent that the Disclosure Schedules of the
Venturers to this Agreement were amended or supplemented in accordance with
Section 7.6 to reflect such Pre-Signing Event or Post-Signing Event prior to
Closing. Following the Closing, the determination of whether any of the
Venturers have breached any of their representations or warranties shall be
determined on the basis of the Disclosure Schedules of the Venturers as amended
or supplemented as of the Closing.
(b) The Acquirer shall not have any obligation to indemnify the
Venturer Indemnified Parties hereunder with respect to any breach of a
representation or warranty of the Acquirer resulting from a Pre-Signing Event or
from a Post-Signing Event to the extent that the Acquirer submits Disclosure
Schedules to the Venturers reflecting such Pre-Signing Event or Post-Signing
Event prior to Closing.
45
(c) Following the Closing, the determination of whether the Acquirer
has breached any of its representations or warranties shall be determined on the
basis of the Disclosure Letter of the Acquirer as so amended or supplemented as
of the Closing.
ARTICLE XI
MISCELLANEOUS
11.1 NOTICES. All notices, requests, demands and other
communications required or permitted to be given or made hereunder by any party
shall be in writing, and shall be delivered either personally, or by registered
or certified mail (postage prepaid and return receipt requested) or by express
courier or delivery service, or by telegram, telefax, telex or similar facsimile
means, to the Parties, at the addresses (or at such other addresses as shall be
specified by the Parties by like notice) set forth below:
(a) If to the GP, U.S. Propane, NewLP or the Venturers, to:
AGL Propane Services, Inc.
AGL Energy Corporation
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
United Cities Propane Gas, Inc.
c/o Atmos Energy Corporation
5430 LBJ Freeway
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
TECO Propane Ventures, LLC
c/o TECO Energy, Inc.
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Attention: General Counsel
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Piedmont Propane Company
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP
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Attention: G. ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇
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(b) If to the Acquirer, to:
c/o ETC Holdings, LP
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Attention: ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇.▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & Knight L.L.P.
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Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Notices and other communications shall be deemed given or made (i) when
received, if sent by telegram, telefax, telex or similar facsimile means
(written confirmation of such receipt by confirmed facsimile transmission being
deemed receipt of communications sent by telefax, telex or similar facsimile
means) and (ii) when delivered and receipted for (or upon the date of attempted
delivery where delivery is refused), if hand delivered, sent by registered or
certified mail or sent by express courier or delivery service, except in the
case of facsimile transmissions received after the normal close of business at
the receiving location, which shall be deemed given on the next Business Day.
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11.2 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein, together with the Schedules and Exhibits hereto (where applicable, as
executed and delivered), and that certain letter agreement, dated September 15,
2003, among Acquirer and the Venturers, constitute the entire agreement between
the Parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, between the Parties with
respect to the subject matter hereof.
11.3 BINDING EFFECT; ASSIGNMENT; NO THIRD PARTY BENEFIT. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned (whether
by operation of law or otherwise) by any party without the prior written consent
of each of the parties, and any purported assignment without such consent shall
be void; provided, however, that Acquirer may assign its rights, interests and
obligations under this Agreement to an Affiliate of Acquirer without the prior
written consent of any of the other parties, but no such assignment shall
relieve the Acquirer of its obligations hereunder. Except as provided in Article
10, nothing in this Agreement, express or implied, is intended to or shall
confer upon any Person other than the parties, and their respective successors
and permitted assigns, any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
11.4 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in all
other respects this Agreement shall remain in full force and effect; provided,
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by Applicable Law.
11.5 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Texas,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Texas or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Texas.
11.6 JURISDICTION. Any legal action, suit or proceeding in law or
equity arising out of or relating to this Agreement or the transactions
contemplated by this Agreement may only be instituted in any state or federal
court located in the State of Texas, and each party agrees not to assert, by way
of motion, as a defense or otherwise, in any such action, suit or proceeding,
any claim that it is not subject personally to the jurisdiction of such court,
that its property is exempt or immune from attachment or execution, that the
action, suit or proceeding is brought in an inconvenient forum, that the venue
of the action, suit or proceeding is improper or that this Agreement, or the
subject matter hereof or thereof may not be enforced in or by such court. Each
party further irrevocably submits to the jurisdiction of any such court in any
such action, suit or proceeding. Any and all service of process and any other
notice in any such action, suit or proceeding shall be effective against any
party if given by registered or certified mail (return receipt requested) or by
any other means which requires a signed receipt in accordance with, and at the
address listed in, Section 10.1. Nothing herein contained shall be deemed to
affect the right of any party to serve process in any manner permitted by law.
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11.7 FURTHER ASSURANCES. From time to time following the Closing,
at the request of any party and without further consideration, the other parties
shall execute and deliver to such requesting party such instruments and
documents and take such other action as such requesting party may reasonably
request or as may be otherwise necessary to (a) cause the Acquirer, the GP, U.S.
Propane, NewLP or the Venturers to fulfill their respective obligations under
this Agreement and the other Operative Documents and (b) otherwise consummate
more fully and effectively the transactions contemplated by this Agreement and
the Operative Documents.
11.8 DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only, do not constitute a part of this
Agreement and shall not affect in any manner the meaning or interpretation of
this Agreement.
11.9 COUNTERPARTS. This Agreement may be executed by the Parties in
any number of counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same agreement.
[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, this Acquisition Agreement has been duly executed
and delivered by the duly authorized representative of each party hereto as of
the date first above written.
GP: U.S. PROPANE, L.L.C.
By:___________________________________
Name:
Title:
U.S. PROPANE: U.S. PROPANE, L.P.
By: U.S. Propane, L.L.C., its general
partner
By:___________________________________
Name:
Title:
[SIGNATURE PAGE TO ACQUISITION AGREEMENT]
1
VENTURERS:
AGL PROPANE SERVICES, INC.
By:___________________________________
Name:
Title:
AGL ENERGY CORPORATION
By:___________________________________
Name:
Title:
UNITED CITIES PROPANE GAS, INC.
By:___________________________________
Name:
Title:
TECO PROPANE VENTURES, LLC
By:___________________________________
Name:
Title:
PIEDMONT PROPANE COMPANY
By:___________________________________
Name:
Title:
[SIGNATURE PAGE TO ACQUISITION AGREEMENT]
2
ACQUIRER: LA GRANGE ENERGY, L.P.
By: LE GP, LLC, its general partner
By:___________________________________
Name:
Title:
[SIGNATURE PAGE TO ACQUISITION AGREEMENT]
3
