PURCHASE AGREEMENT
by and among
EQUITABLE RESOURCES ENERGY COMPANY,
ET BLUEGRASS COMPANY,
EREC NEVADA, INC.
and
ERI SERVICES, INC.
and
AEP RESOURCES, INC.
September 12, 1998
TABLE OF CONTENTS
Page
PURCHASE AGREEMENT 1
ARTICLE I - DEFINITIONS 1
1.1 Certain Defined Terms 1
1.2 Certain Additional Defined Terms 6
1.3 Construction 7
ARTICLE II - TERMS OF THE TRANSACTION 7
2.1 Agreement to Sell and to Purchase the Subject
Stock and Trading Assets 7
2.2 Purchase Price and Payment. 7
2.3 Additional Consideration 8
2.4 Calculation of Closing Consideration 8
2.5 Calculation of Adjustment Amount 8
2.6 Assumed Obligations 9
2.7 Purchase Price Allocation 9
ARTICLE III - CLOSING 10
3.1 Closing 10
3.2 Deliveries by Seller 10
3.3 Deliveries by Buyer 11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLER 12
4.1 Corporate Organization 12
4.2 Midstream Companies 12
4.3 Charter and Bylaws 13
4.4 Authority Relative to This Agreement 13
4.5 No Conflict 13
4.6 Consents, Approvals, Licenses, Etc. 14
4.7 Financial Statements 14
4.8 Absence of Certain Changes 14
4.9 Tax Matters 15
4.10 Compliance With Laws 16
4.11 Legal Proceedings 16
4.12 Title to Properties 16
4.13 Sufficiency and Condition of Properties 16
4.14 Midstream Company Agreements 16
4.15 ERISA 18
4.16 Environmental Matters 19
4.17 Labor Matters 20
4.18 Insurance 20
4.19 Absence of Undisclosed Liabilities 21
4.20 Bank Accounts 21
4.21 Transferred Contracts. 21
4.22 Trading Company Permits 21
4.23 Brokerage Fees 22
4.24 Governmental Regulation 22
4.25 No Other Representations 22
4.26 Year 2000 Compliance 22
4.27 No Misrepresentations 22
4.28 Tax Status of Equitable Storage Company, LLC 22
4.29 No Take-or-Pay Obligations 23
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BUYER 23
5.1 Corporate Organization 23
5.2 Authority Relative to This Agreement 23
5.3 No Conflict 24
5.4 Consents, Approvals, Licenses, Etc 24
5.5 Financing 24
5.6 Investment Intent; Investment Experience; Restricted Securities 24
5.7 Legal Proceedings 25
5.8 Brokerage Fees 25
5.9 Independent Investigation 25
5.10 LLC Status 25
ARTICLE VI - CONDUCT OF COMPANY PENDING CLOSING 25
6.1 Conduct and Preservation of the Midstream Companies 25
6.2 Restrictions on Certain Actions relating to
the Midstream Companies 26
6.3 Restrictions on Certain Actions relating to the Trading Assets 28
6.4 No Other Negotiations 28
6.5 Replacement of IT System 28
6.6 Transition Period 28
ARTICLE VII -ADDITIONAL AGREEMENTS 29
7.1 Access to Information; Confidentiality 29
7.2 Regulatory and Other Authorizations; Consents 30
7.3 Employee and Employee Benefit Plan Matters 32
7.4 Public Announcements 33
7.5 Notification of Certain Matters 34
7.6 Amendment of Schedules 34
7.7 Intercompany Accounts 34
7.8 Fees and Expenses 34
7.9 Transfer Taxes 34
7.10 Action Regarding Indemnities. 34
7.11 Casualty Loss. 34
7.12 Excluded Assets 35
7.13 Transition Services 35
7.14 Guarantees 35
7.15 [Intentionally omitted.] 35
7.16 Use of Name. 36
7.17 Insurance. 36
ARTICLE VIII -CONDITIONS TO OBLIGATIONS OF SELLER 36
8.1 Representations and Warranties True 36
8.2 Covenants and Agreements Performed 36
8.3 HSR Act; Consents 36
8.4 Legal Proceedings 36
8.5 Guarantees 37
ARTICLE IX - CONDITIONS TO OBLIGATIONS OF BUYER 37
9.1 Representations and Warranties True 37
9.2 Covenants and Agreements Performed 37
9.3 HSR Act; Consents 37
9.4 Legal Proceedings 37
9.5 Material Adverse Effect 37
ARTICLE X - TERMINATION, AMENDMENT, AND WAIVER 38
10.1 Termination 38
10.2 Effect of Termination 38
10.3 Amendment 38
10.4 Waiver 39
ARTICLE XI - TAX MATTERS 39
11.1 Tax Allocation: Pre-Closing. 39
11.2 Tax Allocation: Post-Closing. 39
11.3 Tax Allocation: Straddle Period. 39
11.4 Return Preparation. 40
11.5 Refunds or Credits. 40
11.6 Taxes Relating to Trading Assets. 40
ARTICLE XII - SURVIVAL; INDEMNIFICATION 41
12.1 Survival 41
12.2 Indemnification by Seller 41
12.3 Indemnification by Buyer 43
12.4 Further Limitations of Liability 44
12.5 Defense of Claims. 44
12.6 Additional Provisions Relating to Environmental Indemnification 45
12.7 Procedures for Remedial Actions 47
12.8 Third Party Indemnity 47
12.9 Tax Treatment of Indemnity Payments. 48
ARTICLE XIII - MISCELLANEOUS 48
13.1 Notices 48
13.2 Entire Agreement 49
13.3 Binding Effect; Assignment; No Third Party Benefit 49
13.4 Severability 50
13.5 GOVERNING LAW 50
13.6 Further Assurances 50
13.7 Descriptive Headings 50
13.8 Gender 50
13.9 References 50
13.10 Counterparts 50
13.11 [Intentionally omitted.] 50
13.12 Disclosure 51
13.13 Consent to Jurisdiction 51
13.14 Arbitration 51
13.15 Bulk Sales or Transfer Laws 52
PURCHASE AGREEMENT
PURCHASE AGREEMENT (this "Agreement"), dated as of September 12, 1998,
among Equitable Resources Energy Company, a West Virginia corporation, ET Blue
Grass Company, a Delaware corporation, EREC Nevada, Inc., a Nevada corporation,
and ERI Services, Inc., a Delaware corporation (collectively, "Seller"), and AEP
Resources, Inc., an Ohio corporation ("Buyer").
WHEREAS, the Midstream Companies (as defined in Section 1.1) are
wholly-owned direct or indirect subsidiaries of Seller; and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, the Subject Stock and the Trading Assets (in each case as defined
in Section 1.1);
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Seller and Buyer hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it below:
"Adjustment Amount" means (i) current assets of the Midstream
Companies less current liabilities of the Midstream Companies (but
excluding the cash in the bank account maintained by Equitable
Resources, Inc. with Mellon Bank and all Intercompany Accounts),
including the current portion of other assets and liabilities, as
reflected on the Effective Date Balance Sheet, plus (or minus) (ii) the
Physical Book Adjustment, plus (iii) if the Closing occurs after
December 1, 1998, the aggregate amount of cash transferred to or for
the account of the Midstream Companies by Seller or its affiliates
(other than the Midstream Companies) between the Effective Date and the
Closing Date, minus (iv) if the Closing occurs after December 1, 1998,
the aggregate amount of cash transferred to or for the account of
Seller or its affiliates (other than the Midstream Companies) by the
Midstream Companies between the Effective Date and the Closing Date,
plus (v) if the Closing occurs after December 1, 1998, the Interest
Adjustment. For purposes of determining the amount in the preceding
clause (i), the estimated costs as of the Effective Date to complete
(A) the Plaquemine plant expansion in Iberville Parish, Louisiana and
(B) the second salt-dome storage cavern at the Jefferson Island storage
facility shall be deemed to be current liabilities of the Midstream
Companies.
"affiliate" means, with respect to any person, any other
person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control
with, such person. For the purposes of this definition, "control" when
used with respect to any person means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership
of voting securities, by contract, or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
foregoing.
"Applicable Law" means any statute, law, ordinance, executive
order, rule or regulation, or any judgment, order, writ, injunction or
decree of, any Governmental Entity to which a specified person or
property is subject.
"Arbitrating Firm" means one of the "big five" independent
public accounting firms (other than any such firm that audited the 1996
or 1997 financial statements of Seller or Buyer or any of their
respective affiliates) selected by agreement of Buyer and Seller or, if
they cannot agree, chosen by lot by Buyer from among the eligible
firms.
"Assumed Litigation" means all Proceedings described in
Schedule 4.11 but does not include Retained Litigation.
"Code" means the Internal Revenue Code of 1986, as amended.
"commercially reasonable efforts" means efforts in accordance
with reasonable commercial practice and without the incurrence of
unreasonable expense.
"Confidentiality Agreement" means that certain letter
agreement dated May 15, 1998, between an affiliate of Buyer and ▇.▇.
▇▇▇▇▇▇ Securities, Inc. (on behalf of Equitable Resources, Inc.).
"Defense Costs" means the amount of costs and expenses
(including, without limitation, legal fees and expenses and expert fees
and expenses) incurred by Seller and its affiliates for goods and
services received by Seller after the Effective Date in the defense of
the Retained Litigation.
"EBITDA" means earnings before interest, taxes, depreciation
and amortization, as calculated in the same manner as the Financial
Statements have been prepared.
"Effective Date" means the earlier to occur of Closing Date
and December 1, 1998.
"Encumbrances" means liens, charges, pledges, options,
mortgages, deeds of trust, security interests, claims, restrictions
(whether on voting, sale, transfer, disposition, or otherwise),
easements and other encumbrances of every type and description, whether
imposed by law, agreement, understanding or otherwise.
"Environmental Response Measures" means any of the following,
to the extent required to effectuate compliance with Applicable
Environmental Laws: the cost of investigation, remedial response
obligations, removal response obligations, interim response
obligations, ecological investigation obligations, natural resource
damage remediation obligations, and obligations to comply with orders
of any Governmental Entity.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Approvals" means action by all appropriate
Governmental Entities granting any and all material permits, consents
and approvals of Governmental Entities, including but not limited to
those required under the HSR Act or from the Federal Energy Regulatory
Commission, the Securities and Exchange Commission, the Louisiana
Public Service Commission, the Louisiana Office of Conservation, the
State Mineral Board of the State of Louisiana, the State Land Office of
the State of Louisiana and various Louisiana parish authorities, that
reasonably may be deemed necessary so that the consummation of the
transactions contemplated hereby will be in compliance with Applicable
Law, the failure to comply with which would have a Material Adverse
Effect.
"Governmental Entity" means any court or tribunal in any
jurisdiction (domestic or foreign) or any federal, state, municipal or
other governmental body, agency, authority, department, commission,
board, bureau or instrumentality (domestic or foreign).
"Hazardous Material" means any hazardous substance defined in
Section 101(14) of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601(14),
petroleum, including crude oil or any fraction thereof, natural gas,
natural gas liquids, liquefied natural gas or any constituents thereof.
Solely for purposes of this Agreement, and without any admission or
implication that brine or waste water constitutes a hazardous material
or hazardous waste, the definition of "Hazardous Material" shall
include brine and waste water.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended.
"Intellectual Property" means patents, trademarks, service
marks, trade names, service names, brand names, copyrights, trade
secrets, know-how, technology, inventions, computer software (including
documentation and object and source codes) and similar rights, and all
registrations, applications, licenses and rights with respect to any of
the foregoing.
"Intercompany Accounts" mean all Intercompany Receivables and
all Intercompany Payables, including, without limitation, all
intercompany tax allocations.
"Intercompany Payables" means all amounts owed by the
Midstream Companies to Seller or any of its affiliates (including the
Midstream Companies), including, without limitation, all intercompany
notes payable (whether short or long term) and intercompany accounts
payable.
"Intercompany Receivables" means all amounts due from Seller
or any of its affiliates (including the Midstream Companies) to the
Midstream Companies, including, without limitation, all intercompany
notes receivable (whether short or long term) and intercompany accounts
receivable.
"Interest Adjustment" means an amount equal to interest on the
Purchase Price at 6.5% per annum from December 1, 1998, to the Closing
Date.
"IRS" means the Internal Revenue Service.
"Material Adverse Effect" means a material adverse effect on
the business, assets or financial condition of the Midstream Companies
and the Trading Assets considered as a whole.
"Midstream Companies" mean Equitable Storage Company, L.L.C.;
Equitable Pipeline Company; Louisiana Intrastate Gas Company, L.L.C.;
LIG, Inc.; LIG Liquids Company L.L.C.; LIG Chemical Company; and
Tuscaloosa Pipeline Company.
"Permits" means licenses, permits, franchises, consents,
approvals, variances, exemptions and other authorizations of or from
Governmental Entities.
"Permitted Encumbrances" means (i) Encumbrances created by
Buyer, (ii) liens for Taxes not yet due and payable, (iii) 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, (iv) Encumbrances
of record and (v) such defects, imperfections or irregularities of
title, if any, as are not substantial in character, amount, or extent
and do not materially impair the conduct of normal operations of the
Midstream Companies or the Trading Assets considered as a whole, or
otherwise result in a Material Adverse Effect. "Permitted Encumbrance"
does not include any lien described in clause (ii) or (iii) of this
definition to the extent that the existence of such lien or the
indebtedness secured thereby constitutes a breach by Seller of any
representation, warranty or covenant set forth in this Agreement or any
certificate, schedule, agreement or other instrument delivered by
Seller in connection herewith.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, enterprise,
unincorporated organization or Governmental Entity.
"Physical Book Adjustment" means the present value of the net
aggregate unrealized gain and loss with respect to the Transferred
Contracts as of the last day of the month in which the Closing occurs,
valued using the estimated fair market value of the Transferred
Contracts of the Trading Company as of such date and a discount rate
equal to the Prime Rate.
"Prime Rate" means the prime interest rate reported in the
Wall Street Journal on the Effective Date.
"Proceedings" means all proceedings, actions, claims, suits,
arbitration or mediation proceedings, investigations and inquiries by
or before any arbitrator or Governmental Entity.
"Retained Litigation" means the Proceedings listed on Schedule
1.1(a) to the extent Buyer is entitled to be indemnified therefor by
Seller pursuant to this Agreement and any Proceedings which are duly
served on the Midstream Companies between the date hereof and the
Closing Date.
"Securities Act" means the Securities Act of 1933, as amended.
"Subject Stock" means all the issued and outstanding capital
stock or membership interests, as applicable, of the Midstream
Companies.
"Subsidiary" means any corporation more than 50% of whose
outstanding voting securities, or any general partnership, joint
venture or similar entity more than 50% of whose total equity
interests, is owned, directly or indirectly, by Seller, or any limited
partnership of which Seller or any Subsidiary is a general partner.
"Taxes" means any income, add-on, value-added or gross
receipts taxes or similar assessments or any sales, excise, occupation,
use, ad valorem, property, production, severance, transportation,
employment, payroll, franchise, or other tax or duty imposed by any
United States federal, state or local (or any foreign or provincial)
taxing authority, including any interest, penalties or additions
attributable thereto.
"Tax Return" means any return or report, including any related
or supporting information, with respect to Taxes.
"to the knowledge" of a specified person (or similar
references to a person's knowledge) means that the only information to
be attributed to such person is information actually known to (a) such
person in the case of an individual or (b) in the case of a corporation
or other entity, each executive officer who devoted substantive
attention to matters of such nature during the ordinary course of his
employment by such person. Unless otherwise provided in this Agreement,
and unless undertaken in the course of due diligence, no such person is
represented to have undertaken a separate investigation in connection
with the transactions contemplated hereby to determine the existence or
absence of facts in any statement qualified by "to the knowledge" of
any person.
"Trading Assets" means the Transferred Contracts and the other
assets listed on Schedule 1.1(b) hereto.
"Trading Company" means ERI Services, Inc.
"Treasury Regulations" means one or more treasury regulations
(including temporary and proposed regulations) promulgated under the
Code by the Treasury Department of the United States.
"U.S. GAAP" means generally accepted accounting principles in
the United States of America from time to time, with such exceptions to
such generally accepted accounting principles as may be noted or
otherwise referred to on any individual financial statement or
schedule.
1.2 Certain Additional Defined Terms. In addition to such terms as are
defined in the opening paragraph of and the recitals to this Agreement and in
Section 1.1, the following terms are used in this Agreement as defined in the
Sections set forth opposite such terms:
Defined Term Section Reference
Applicable Environmental Laws................................. 4.16(b)
Arbitrator.................................................... 13.14
Assumed Liabilities........................................... 2.6
Base Purchase Price........................................... 2.2
Breach ..................................................... 4.5
Buyer Controlled Group........................................ 7.3(e)
Casualty Loss................................................. 7.11
Cause ..................................................... 7.3(f)
Closing ..................................................... 3.1
Closing Date.................................................. 3.1
Continuing Employees.......................................... 7.3(f)
Deposit ..................................................... 2.3
Designated Trading Employees.................................. 7.3(c)
Direct Claim.................................................. 12.5(c)
Dispute ..................................................... 13.14
Dispute Deadline Date......................................... 2.5(b)
Effective Date Balance Sheet.................................. 2.5(a)
Employee Plans................................................ 4.15(a)
Estimated Adjustment Amount................................... 2.4
Financial Book Transaction.................................... 7.15
Financial Statements.......................................... 4.7
Government Antitrust Authority................................ 7.2(b)
Guarantees.................................................... 7.14
Indemnifying Party............................................ 12.5(a)
Indemnitee.................................................... 12.4
Insurance Cap Amount.......................................... 12.2(c)
Interest Adjustment........................................... 2.2
JD Amount..................................................... 12.2
Joint Defense Agreement....................................... 12.2
Latest Balance Sheet.......................................... 4.7
Liquids Agreement............................................. 2.3
Loss ..................................................... 12.2(a)
Material Midstream Contracts.................................. 4.14(b)
Master Swap Agreement......................................... 7.15
Midstream Employees........................................... 7.3(a)
Midstream Insurance Policies.................................. 4.18
Pre-Closing Tax Period........................................ 11.1
Post-Closing Certificate...................................... 2.5(a)
Post-Closing Tax Period....................................... 11.2
Purchase Price................................................ 2.2
Qualified Offer............................................... 7.3(c)
Remediation Standard.......................................... 12.6(f)
Retention Agreements.......................................... 7.3(g)
Seller Claims................................................. 12.3(a)
Straddle Period............................................... 11.3
Survival Date................................................. 12.1(a)
Third Party Claim............................................. 12.5(a)
Third Party Indemnities....................................... 7.10
Trading Company Permits....................................... 4.22
Trading Employees............................................. 7.3(a)
Transferred Contracts......................................... 4.21
1.3 Construction. Unless herein otherwise provided, or unless the
context shall otherwise require, words importing the singular number shall
include the plural number, and vice versa; the terms "herein", "hereof",
"hereby" and "hereunder", or other similar terms, refer to this Agreement as a
whole and not only to the particular Article, Section or other subdivision in
which any such terms may be employed; references to Articles, Sections and other
subdivisions refer to the Articles, Sections, and other subdivisions of this
Agreement; a reference to any person shall include such person's predecessors
and successors; and all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with U.S. GAAP. Each reference herein to
a Schedule or Exhibit refers to the item attached to this Agreement or otherwise
identified separately in writing by the parties hereto as the described Schedule
or Exhibit to this Agreement.
ARTICLE II
TERMS OF THE TRANSACTION
2.1 Agreement to Sell and to Purchase the Subject Stock and Trading
Assets. At the Closing, and on the terms and subject to the conditions set forth
in this Agreement, Seller shall sell, assign, transfer, deliver and convey to
Buyer, and Buyer shall purchase and accept from Seller, the Subject Stock and
the Trading Assets.
2.2 Purchase Price and Payment. In consideration of the sale of the
Subject Stock and the Trading Assets to Buyer, Buyer shall pay to Seller at the
Closing an aggregate purchase price (the "Purchase Price") consisting of
$320,000,000 (the "Base Purchase Price") as adjusted by the Adjustment Amount in
accordance with this Article II.
2.3 Additional Consideration. As additional consideration for the
sale of the Subject Stock and the Trading Assets to Buyer, at the Closing Buyer
will cause certain of the Midstream Companies to execute and deliver an
agreement (the "Liquids Agreement") substantially in the form of Exhibit 2.3
hereto.
2.4 Calculation of Closing Consideration. Not later than 5 days prior
to the Closing Date, Seller shall deliver to Buyer a written statement setting
forth an estimate of the Adjustment Amount (the "Estimated Adjustment Amount")
with Seller's calculation thereof in reasonable detail, based on information
then available to Seller. Subject to the terms and conditions of this Agreement,
at the Closing Buyer shall pay in immediately available funds by confirmed wire
transfer to a bank account to be designated by Seller an amount equal to the
Base Purchase Price plus (i) the Interest Adjustment and plus or minus (ii) the
Estimated Adjustment Amount.
2.5 Calculation of Adjustment Amount
(a) As promptly as practicable after the Closing Date, and in any
event not later than 120 days after the Closing Date, Seller shall deliver to
Buyer (i) a combined balance sheet of the Midstream Companies as of the
beginning of the Effective Date (the "Effective Date Balance Sheet"), prepared
on the same basis as the Financial Statements referred to in Section 4.7 have
been prepared and (ii) a certificate of Seller (the "Post-Closing Certificate")
showing its calculation of the Adjustment Amount. Buyer agrees, without charge
to Seller, to give Seller and its authorized representatives reasonable access
to such employees, offices and other facilities and such books and records of
the Midstream Companies as are reasonably necessary to allow Seller and its
authorized representatives to prepare the Effective Date Balance Sheet in
compliance with this Section 2.5.
(b) In the event that Buyer acting in good faith disputes the
calculation of the Adjustment Amount, Buyer shall give written notice thereof to
Seller on or before the 60th day after the Post-Closing Certificate was given to
Buyer (the "Dispute Deadline Date"), which notice shall set forth the basis for
such dispute in reasonable detail. Buyer and Seller shall use all reasonable
efforts to resolve any such dispute, but if any such dispute cannot be resolved
by such parties within 60 days after the date the dispute notice is given, all
unresolved disputes shall be referred to an Arbitrating Firm for resolution.
Buyer and Seller shall seek to cause the Arbitrating Firm to make its
determination within 60 days after referral of a dispute to it. Buyer and Seller
shall each promptly prepare a written statement on the matters in dispute which
(together with the relevant documents) shall be submitted to the Arbitrating
Firm as soon as possible, and, in any event, within 30 days of its appointment,
for determination by the Arbitrating Firm within 60 days of its appointment. In
giving such determination, the Arbitrating Firm shall state what adjustments (if
any) are necessary to the draft Effective Date Balance Sheet in order to comply
with the requirements of this Agreement. Seller and Buyer shall each provide the
Arbitrating Firm with all information which it reasonably requires and the
Arbitrating Firm shall be entitled (to the extent it considers appropriate) to
base its opinion on such information and on the accounting and other records of
the Midstream Companies. The determination of the Arbitrating Firm shall be
conclusive and binding on each party. The fees of the Arbitrating Firm shall be
allocated and paid by Seller or Buyer, or divided between them, on a basis
determined by the Arbitrating Firm to be fair taking into account the
correctness of the positions asserted by each of them with respect to the
disputed matters resolved by the Arbitrating Firm.
(c) The Adjustment Amount shall be deemed to be finally determined in
the amount set forth in the Post-Closing Certificate on the Dispute Deadline
Date unless a dispute notice is given in accordance with Section 2.5(b) with
respect to the calculation thereof. If such a dispute notice is given, the
Adjustment Amount shall be deemed finally determined on the date that the
Arbitrating Firm gives written notice to Buyer and Seller of its determination
with respect to all disputes regarding the calculation thereof, or, if earlier,
the date on which Seller and Buyer agree in writing on the amount thereof, in
which case the Adjustment Amount shall be calculated in accordance with such
determination or agreement, as the case may be.
(d) If the Adjustment Amount, as finally determined, exceeds the
Estimated Adjustment Amount, then Buyer shall pay to Seller the amount of such
excess, plus interest on the amount of such excess from and including the
Closing Date to but excluding the date of payment at the Prime Rate. If the
Adjustment Amount is less than the Estimated Adjustment Amount, then Seller
shall pay to Buyer the amount of such deficiency, plus interest on the amount of
such deficiency from and including the Closing Date to but excluding the date of
payment at the Prime Rate. Any payment shall be made within 10 business days of
the date the Adjustment Amount is deemed to be finally determined pursuant to
Section 2.5(c).
2.6 Assumed Obligations. Buyer acknowledges and agrees that,
following the Closing, the Midstream Companies shall remain obligated for all
their respective liabilities and obligations, and subject to Seller's
obligations under Article XII, Buyer shall assume or cause the Midstream
Companies to pay, perform and discharge their liabilities and obligations after
the Closing. In addition, as further consideration for the sale hereunder to
Buyer, Buyer agrees, upon the terms and subject to the conditions set forth
herein and except as otherwise provided herein, to assume at the Closing and
thereafter to pay, perform and discharge, all liabilities and obligations
relating to the ownership or operation of the Trading Assets, including, without
limitation, all liabilities and obligations of Seller under the Transferred
Contracts, to the extent that such liabilities and obligations arise and relate
to periods beginning on or after the Effective Date. The foregoing liabilities
and obligations (i) of the Midstream Companies and (ii) relating to the
ownership or operation of the Trading Assets are herein collectively referred to
as the "Assumed Liabilities". "Assumed Liabilities" does not include any
liability or obligation to the extent that the existence of such liability or
obligation constitutes a breach by Seller of any representation, warranty or
covenant set forth in this Agreement or any certificate, schedule, agreement or
other instrument delivered by Seller in connection herewith.
2.7 Purchae Price Allocation. The Purchase Price shall be allocated
as set forth on Schedule 2.7 for all purposes, including the filing of any Tax
Returns. The parties agree that the Purchase Price and the liabilities of the
Subject Stock and Trading Assets have been allocated for all purposes (including
Tax and financial accounting purposes) in a manner consistent with the relative
fair market values set forth on Schedule 2.7. To the extent that an Adjustment
Amount occurs, Buyer and Seller shall promptly make appropriate adjustments to
such allocations. The valuations and allocation determined pursuant to this
Section 2.7, as they may be adjusted, shall be used for purposes of all relevant
tax returns, tax reports and tax filings.
ARTICLE III
CLOSING
3.1 Closing. Subject to Section 3.4 hereof and to fulfillment or
waiver of the conditions precedent specified herein, the closing of the
transactions contemplated hereby (the "Closing") shall take place at the offices
of Seller, in Houston, Texas, at 10 a.m. local time, on the later of (A) October
1, 1998, or (B) not later than the tenth business day following the receipt of
all Governmental Approvals, or at such other time or place as the parties hereto
shall agree. The date on which the Closing takes place is herein referred to as
the "Closing Date." All Closing transactions shall be deemed to have occurred
simultaneously.
3.2 Deliveries by Seller. At the Closing, Seller will deliver (or in
the case of clause (c)(ii) below, deliver or grant access and custody to) the
following documents to Buyer:
(a) A certificate executed on behalf of each Seller by the president
or vice president of such Seller, dated the Closing Date, representing and
certifying, in such detail as Buyer may reasonably request, that the conditions
set forth in Sections 9.1 and 9.2 have been fulfilled.
(b) An opinion of counsel to Seller, dated the Closing Date, in the
form of Exhibit 3.2(b).
(c) The certificates, instruments and documents listed below:
(i) The stock certificates representing the Subject Stock duly
endorsed in blank, or accompanied by stock powers duly executed in
blank, and otherwise in form acceptable for transfer of the Subject
Stock to Buyer.
(ii) The minute books, stock records, other corporate,
business, tax and financial records, and corporate seal of each of the
Midstream Companies.
(iii) The written resignations (or evidence of removal) of the
directors and officers of the Midstream Companies designated in writing
by Buyer to Seller not less than 14 days prior to Closing, such
resignations to be effective concurrently with the Closing on the
Closing Date.
(iv) Evidence of the Governmental Approvals of Seller and the
Midstream Companies.
(v) An assignment and assumption agreement substantially in
the form of Exhibit 3.2(c) duly executed by the Sellers conveying the
Trading Assets.
(vi) All security codes, access devices, instruments and other
information, equipment or documentation reasonably necessary to vest in
Buyer exclusive access to and control over all bank accounts, and
similar accounts with financial institutions, of the Midstream
Companies, all safe deposit boxes, escrow deposits or other bailments
maintained by or for the Midstream Companies, all premises occupied by
the Midstream Companies, all computer systems and files maintained by
the Midstream Companies, and all other property of the Midstream
Companies.
(vii) Certificates of Seller's officers performing the
functions of chief executive officer and chief financial officer that
the conditions specified in Sections 9.1, 9.2 and 9.5 have been
satisfied as of Closing.
(viii) Such other certificates, instruments of conveyance and
documents as may be reasonably requested by Buyer prior to the Closing
Date to carry out the intent and purposes of this Agreement.
(ix) A guaranty of ERI Investments, Inc. in substantially the
form of Exhibit 3.2(d)(ix).
(x) The Software License Agreement in substantially the form
of Exhibit 3.2(d)(x).
3.3 Deliveries by Buyer. At the Closing, Buyer will deliver the
following documents to Seller:
(a) A certificate executed by the president or vice president of
Buyer, dated the Closing Date, representing and certifying, in such detail as
Seller may reasonably request, that the conditions set forth in Sections 8.1 and
8.2 have been fulfilled.
(b) An opinion of legal counsel to Buyer, dated the Closing Date, in
the form of Exhibit 3.3(b).
(c) An assignment and assumption agreement substantially in the form
of Exhibit 3.2(c) duly executed by Buyer.
(d) All releases, replacements and substitutions required by Section
8.5 with respect to Guarantees, in form and substance satisfactory to Seller.
(e) Evidence of the Governmental Approvals of Buyer.
(f) Certificates of Buyer's chief executive officer and chief
financial officer that the conditions specified in Sections 8.1 and 8.2 have
been satisfied as of Closing.
(g) The Liquids Agreement, duly executed by the parties thereto.
(h) Such other certificates, instruments, and documents as may be
reasonably requested by Seller prior to the Closing Date to carry out the intent
and purposes of this Agreement.
(i) An instrument executed by the Midstream Companies joining the
Midstream Companies to the Buyer's post-Closing obligations under this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Each Seller jointly and severally represents and warrants to Buyer
that:
4.1 Corporate Organization. Each Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
4.2 Midstream Companies
(a) Except as set forth on Schedule 4.2, no Midstream Company owns,
directly or indirectly, any capital stock or other securities of any corporation
or has any direct or indirect equity or ownership interest in any other person,
other than the Midstream Companies. Schedule 4.2 lists each Midstream Company,
the jurisdiction of incorporation or formation of each Midstream Company, and
the authorized (in the case of capital stock) and outstanding capital stock or
other equity interests of each Midstream Company. Each corporate Midstream
Company is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation, and each other
Midstream Company is duly formed, validly existing and in good standing under
the laws of the jurisdiction of its formation. Each Midstream Company has all
requisite corporate or other power and authority, as applicable, to own, lease,
and operate its properties and to carry on its business as now being conducted.
No actions or proceedings to dissolve any Midstream Company are pending.
(b) Except as otherwise indicated on Schedule 4.2, all of the
outstanding capital stock or other equity interests of each Midstream Company is
owned directly or indirectly by Seller, free and clear of all Encumbrances,
other than (i) restrictions on transfer that may be imposed by federal or state
securities laws or (ii) those that arise by virtue of any actions taken by or on
behalf of Buyer or its affiliates. All outstanding shares of capital stock of
each corporate Midstream Company have been validly issued and are fully paid and
nonassessable. All equity interests of each other Midstream Company have been
validly issued and are fully paid (to the extent presently required). No shares
of capital stock or other equity interests of any Midstream Company are subject
to, nor have any been issued in violation of, preemptive or similar rights.
(c) Except as set forth on Schedule 4.2, there are (and as of the
Closing Date there will be) outstanding (i) no shares of capital stock or other
equity interests or voting securities of any Midstream Company, (ii) no
securities of any Midstream Company convertible into or exchangeable for shares
of capital stock or other equity interests or voting securities of any Midstream
Company, (iii) no options or other rights to acquire from Seller or any
Midstream Company, and no obligation of Seller or any Midstream Company to issue
or sell, any shares of capital stock or other equity interests or voting
securities of any Midstream Company or any securities convertible into or
exchangeable for such capital stock or equity interests or voting securities and
(iv) no equity equivalents, phantom stock arrangements, performance unit
arrangements, stock appreciation rights, interests in the ownership or earnings,
or other similar rights of or with respect to any Midstream Company. There are
(and as of the Closing Date there will be) no outstanding obligations of Seller
or any Midstream Company to repurchase, redeem, or otherwise acquire any of the
foregoing shares, securities, options, equity equivalents, interests or rights
or make any distribution with respect thereto.
(d) Each of the Midstream Companies is duly qualified or licensed to
do business as a foreign corporation or limited liability company, as
applicable, and each of the Midstream Companies is in good standing in, each of
the jurisdictions set forth opposite its name on Schedule 4.2, which are all the
jurisdiction in which the property owned, leased, or operated by it or the
conduct of its business requires such qualification or licensing, except
jurisdictions in which the failure to be so qualified or licensed would not,
individually or in the aggregate, have a Material Adverse Effect.
4.3 Charter and Bylaws. Seller has made available to Buyer accurate
and complete copies of each Midstream Company's certificate of incorporation and
bylaws (or equivalent organizational documents) as currently in effect, and
accurate, current and complete stock or other ownership records of the Midstream
Companies.
4.4 Authority Relative to This Agreement. Seller has full corporate
power and corporate authority to execute, deliver, and perform this Agreement
and any ancillary documents relating to the transactions contemplated hereby to
which it is a party to consummate the transactions contemplated hereby and
thereby. The execution, delivery, and performance by Seller of this Agreement
and such ancillary documents, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action of Seller. This Agreement has been duly executed and delivered
by Seller and constitutes, and each such ancillary document executed or to be
executed by Seller has been, or when executed will be, duly executed and
delivered by Seller and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of Seller, enforceable
against Seller in accordance with their respective terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally and (ii) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain instances.
4.5 No Conflict. Assuming all consents, approvals, authorizations and
other actions described in Section 4.6 have been obtained and all filings and
notifications listed on Schedule 4.6 have been made, and except as may result
from any facts or circumstances relating solely to Buyer or as described on
Schedule 4.5, the execution, delivery and performance of this Agreement by
Seller and the consummation by it of the transactions contemplated hereby and
the actions to be taken or withheld by the Midstream Companies pursuant hereto
do not and will not (a) violate or conflict with the certificate of
incorporation or by-laws (or equivalent organizational documents) of Seller or
any Midstream Company, (b) conflict with or violate any Applicable Law binding
upon Seller or any Midstream Company, except as would not, individually or in
the aggregate, have a Material Adverse Effect, (c) result in any breach of, or
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of (each, a "Breach"), or
result in the creation of any Encumbrance on any of the assets or properties of
any Midstream Company or on any of the Trading Assets pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument relating to such assets or properties to which
Seller or any Midstream Company is a party or by which any of such assets or
properties is bound or affected or (d) result in a Breach of a Transferred
Contract, except as would not, individually or in the aggregate, have a Material
Adverse Effect.
4.6 Consents, Approvals, Licenses, Etc. No consent, approval,
authorization, license, order or permit of, or declaration, filing or
registration with, or notification to, any Governmental Entity, or any other
person or entity, is required to be made or obtained by Seller or any Midstream
Company in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, except:
(a) as set forth on Schedule 4.6; (b) applicable requirements, if any, of the
HSR Act; (c) where the failure to obtain such consents, approvals,
authorizations, licenses, orders or permits of, or to make such declarations,
filings or registrations or notifications, either individually or in the
aggregate, (i) would not prevent Seller from performing its obligations under
this Agreement and (ii) would not have a Material Adverse Effect and (d) as may
be necessary as a result of any facts or circumstances relating solely to Buyer.
The Midstream Companies hold all Permits necessary or required for the conduct
of the business of the Midstream Companies, except for Permits the absence of
which would not have a Material Adverse Effect. As of the date of this
Agreement, all of such Permits are in full force and effect and each Midstream
Company is in compliance with each such Permit, except as would not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. No notice has been received by Seller or any Midstream Company
and no Proceeding is pending or, to the knowledge of Seller, threatened with
respect to any alleged failure by any Midstream Company to have any such Permit
or not to be in compliance therewith. To the knowledge of Seller, no event has
occurred and is continuing which permits, or after notice or lapse of time or
both would permit, any modification or termination of any such Permit held by
any Midstream Company.
4.7 Financial Statements. Set forth as Schedule 4.7 hereto are the
unaudited consolidated balance sheet of the Midstream Companies as of June 30,
1998 (the "Latest Balance Sheet"), and the related unaudited statements of
consolidated income and consolidated cash flows for the period then ended, and
the notes and schedules thereto (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Midstream
Companies and have been prepared in conformity with U.S. GAAP as modified by the
assumptions and limitations set forth in the notes thereto.
4.8 Absence of Certain Changes. Except as disclosed on Schedule 4.8,
since the date of the Latest Balance Sheet, (i) there has not been any material
adverse change in the assets or financial condition of the Midstream Companies;
(ii) the businesses of the Midstream Companies have been conducted only in the
ordinary course consistent with past practice; (iii) no Midstream Company has
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; (iv) no Midstream Company has suffered any material loss,
damage, destruction, or other casualty to any of its assets (whether or not
covered by insurance); and (v) no Midstream Company has taken any of the actions
set forth in Section 6.2 except as permitted thereunder.
4.9 Tax Matters. Except as disclosed on Schedule 4.9:
(a) Each Midstream Company has filed, or has had filed on its behalf,
in a timely manner (within any applicable extension periods) with the
appropriate taxing authority all Tax Returns with respect to Taxes of each of
the Midstream Companies other than those Tax Returns on which an immaterial
amount of Taxes would properly be shown the failure of which to file would not
have, individually or in the aggregate, a Material Adverse Effect on any
Midstream Company. All such Tax Returns were correct and complete in all
material respects;
(b) All Taxes due and payable on all filed Tax Returns of or with
respect to the Midstream Companies have been paid in full or adequate reserves
have been provided for on the Financial Statements;
(c) There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any federal, state, local or
foreign income or other material Tax Returns required to be filed by or with
respect to any of the Midstream Companies;
(d) None of the Tax Returns of or with respect to any of the
Midstream Companies is currently being audited or examined by any taxing
authority and no appeal from or adjudication of any such audit or examination is
pending;
(e) No material deficiency for any Taxes have been assessed, and
there are no material disputes or claims asserted, with respect to any of the
Midstream Companies (i) that has not been abated, (ii) that has not been paid in
full or (iii) for which adequate reserves have not been provided;
(f) None of the Midstream Companies has any liability or known
potential liability for any Tax owed by any other member of an Affiliated Group,
within the meaning of Section 1504 of the Code, of which any Midstream Company
has been a member for any period ending on or before the Closing Date pursuant
to a tax sharing or tax allocation agreement or otherwise;
(g) No Tax litigation is currently pending;
(h) No waiver or extension of any statute of limitations to any
federal, state, local or foreign Tax matter has been given by or requested from
any Midstream Company;
(i) None of the Midstream Companies has filed a consent under Section
341(f) of the Code; and
(j) All tax sharing or tax allocation agreements between or among the
Midstream Companies and the Seller or its affiliates shall be terminated on or
before the Closing Date and will have no future effect for any past, current or
future taxable year.
4.10 Compliance With Laws. Except as disclosed on Schedule 4.10, the
Midstream Companies are in compliance in all material respects with all
Applicable Laws (other than Applicable Environmental Laws, as to which Seller's
sole representations or warranties are set forth in Section 4.16), except for
noncompliance with such Applicable Laws which, individually or in the aggregate,
would not have a Material Adverse Effect.
4.11 Legal Proceedings. Except as disclosed on Schedule 4.11, there
are no Proceedings pending or to the knowledge of Seller threatened against or
involving any Midstream Company or any properties of any Midstream Company
which, individually or in the aggregate, might reasonably be expected to have a
Material Adverse Effect. No Midstream Company is subject to any judgment, order,
writ, injunction, or decree of any Governmental Entity which has had or is
reasonably likely to have a Material Adverse Effect. Notwithstanding the
foregoing, Seller makes no representation or warranty in this Section 4.11 as to
Proceedings, judgments, orders, writs, injunctions or decrees which are, or
contain issues, of broad applicability to, or which affect, the natural gas,
natural gas liquids or pipeline industry, including any state or federal
rulemaking or similar proceeding of general applicability and any petition for
review or appeal thereof.
4.12 Title to Properties. Except (i) as disclosed on Schedule 4.12,
(ii) for the Permitted Encumbrances and (iii) for such matters which,
individually or in the aggregate, would not have a Material Adverse Effect, (a)
each of the Midstream Companies has good and marketable title to those
properties (real, personal, and mixed, tangible and intangible) reflected in its
books and records and in the Latest Balance Sheet, other than those disposed of
after the date of such balance sheet in the ordinary course of business
consistent with past practice free and clear of all Encumbrances, and (b) the
Trading Company has good and marketable title to the Trading Assets owned by it
free and clear of all Encumbrances.
4.13 Sufficiency and Condition of Properties. The properties owned,
leased or used by the Midstream Companies are, to the knowledge of Seller, (i)
in the case of tangible properties, in reasonably good operating condition and
repair (ordinary wear and tear excepted) and have been maintained in accordance
with standard industry practice and are in compliance with applicable
requirements of any Governmental Entity in all material respects, (ii) suitable
for the purposes used and (iii) adequate and sufficient for the normal operation
of the Midstream Companies' businesses, as presently conducted.
4.14 Midstream Company Agreements
(a) Set forth on Schedule 4.14 is a list of the following agreements,
contracts, arrangements and understandings to which any Midstream Company is a
party or by which any Midstream Company or any of their respective properties is
otherwise bound:
(i) any commitment, agreement, note, loan, evidence of
indebtedness, purchase order, letter of credit or guarantee of the
indebtedness of others or promise of indemnity or contribution that
Seller reasonably anticipates will or may, in accordance with its
terms, involve aggregate payments by any Midstream Company of more than
$1,000,000 within the remaining term of such agreement;
(ii) any agreement or understanding for the purchase, sale,
gathering, compression, processing, transportation or storage of
natural gas or natural gas liquids;
(iii) any agreement or understanding which constitutes a lease
(other than for oil and gas interests), under which a Midstream Company
is the lessor or lessee of real or personal property which lease (A)
cannot be terminated by a Midstream Company without penalty upon not
more than 30 calendar days notice and (B) involves an annual base
rental in excess of $100,000, all other such leases involving an
aggregate annual base rental of not more than $1,000,000;
(iv) any contract or agreement containing covenants limiting
the freedom of any Midstream Company to engage in any line of business
or compete with any person;
(v) any employment agreement involving annual payments by any
Midstream Company in excess of $100,000 or any agreement that could
result in an "excess parachute payment" under section 280G of the Code
as a result of the transactions contemplated hereby;
(vi) any pending sale of real or personal property of a
Midstream Company (other than sales of natural gas or natural gas
liquids in the ordinary course of business) in excess of $100,000, all
other such pending sales involving an aggregate annual base rental of
not more than $1,000,000;
(vii) any contract requiring a capital expenditure or a
commitment for a capital expenditure in excess of $250,000, all other
such expenditures and commitments involving an aggregate annual base
rental of not more than $1,000,000; or
(viii) any obligation to make future payments, contingent or
otherwise, arising out of or relating to the acquisition or disposition
of any business, assets or stock of other companies by any Midstream
Company.
(b) No Midstream Company is, as of the date of this Agreement, in
material breach or violation of, or default under, any of the agreements,
contracts, arrangements or understandings listed on Schedule 4.14 (the "Material
Midstream Contracts"), and no Midstream Company has received notice of an
allegation by any counterparty thereto or other third Person of such a breach,
violation or default. The consummation of the transactions contemplated by this
Agreement will not constitute a breach or violation of, or entitle any other
party thereto to terminate, any of the Material Midstream Contracts. Each
Material Midstream Contract is, as of the date of this Agreement, a valid
agreement, arrangement or commitment of the Midstream Company which is a party
thereto, enforceable against the Midstream Company in accordance with its terms
and, to the knowledge of Seller, is a valid agreement, arrangement or commitment
of each other party thereto, enforceable against such party in accordance with
its terms, except in each case where enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and except where enforceability is subject to the application of
equitable principles or remedies or as would not have, individually or in the
aggregate, a Material Adverse Effect. True and complete copies of the written
Material Midstream Contracts and complete and accurate abstracts of the material
provisions of all oral Material Midstream Contracts have heretofore been made
available to Buyer. No Material Midstream Contract has been amended in any
material respect, except as disclosed on Schedule 4.14. To the knowledge of
Seller, no counterparty thereto or other person bound thereby or whose property
is subject thereto is in breach or violation thereof or in default thereunder or
is the subject of any bankruptcy, receivership, insolvency or similar
proceeding. Neither Seller nor any Midstream Company has waived or released in
any material respect any of its rights thereunder or entered into any
forbearance or moratorium agreement with respect thereto. No counterparty
thereto has made any payment or delivery thereunder where such payment or
delivery is otherwise scheduled to be made after Closing.
4.15 ERISA
(a) Set forth on Schedule 4.15 is a list identifying each "employee
benefit plan", as defined in Section 3(3) of ERISA, (i) which is subject to any
provision of ERISA, (ii) which is maintained, administered, or contributed to by
the Midstream Companies or any affiliate of the Midstream Companies and (iii)
which covers any employee or former employee of the Midstream Companies, or
under which any Midstream Company has any liability. Seller has made available
to Buyer accurate and complete copies of such plans (and, if applicable, the
related trust agreements) and all amendments thereto and written interpretations
thereof, together with (i) the three most recent annual reports (Form 5500
including, if applicable, Schedule B thereto) prepared in connection with any
such plan and (ii) the most recent actuarial valuation report prepared in
connection with any such plan. Such plans are collectively referred to as the
"Employee Plans." For purposes of this Section only, an "affiliate" of any
person means any other person which, together with such person, would be treated
as a single employer under Section 414 of the Code. The only Employee Plans
which individually or collectively would constitute an "employee pension benefit
plan" as defined in Section 3(2) of ERISA are identified as such on Schedule
4.15.
(b) Except as otherwise identified on Schedule 4.15, (i) no Employee
Plan constitutes a "multiemployer plan", as defined in Section 3(37) of ERISA,
(ii) no Employee Plan is maintained in connection with any trust described in
Section 501(c)(9) of the Code, and (iii) no Employee Plan is subject to Title IV
of ERISA or to the minimum funding standards of ERISA and the Code. There are no
accumulated funding deficiencies as defined in Section 412 of the Code (whether
or not waived) with respect to any Employee Plan. No Midstream Company has
incurred any material liability under Title IV of ERISA arising in connection
with the termination of, or complete or partial withdrawal from, any plan
covered or previously covered by Title IV of ERISA. Seller has paid and
discharged promptly when due all liabilities and obligations arising under ERISA
or the Code of a character which if unpaid or unperformed might result in the
imposition of a lien against any of the assets of any Midstream Company or any
of the Trading Assets. Nothing done or omitted to be done and no transaction or
holding of any asset under or in connection with any Employee Plan has or will
make any Midstream Company subject to any liability under Title I of ERISA or
liable for any Tax pursuant to Section 4975 of the Code that could have a
Material Adverse Effect. During the past 5 years, neither Seller nor any other
person that together with Seller will be treated as a single employer under
Section 414 of the Code has made or been required to make contributions to any
"multiemployer plan", as defined in Section 3(37) of ERISA.
(c) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified, and each trust forming a part
thereof is exempt from Tax pursuant to Section 501(a) of the Code. Seller has
made available to Buyer the most recent IRS determination letters with respect
to any such Plans. Each Employee Plan is being maintained in compliance with its
terms and with the requirements prescribed by all Applicable Laws.
4.16 Environmental Matters
(a) Except as set forth on Schedule 4.16, the Midstream Companies
have received no written notice of any violation or alleged non-compliance from
any Governmental Entity under any Applicable Environmental Laws (as defined
below) which has had or is reasonably likely to have a Material Adverse Effect
or any notice of potential responsibility or information request under the
Comprehensive Environmental Response, Compensation and Liability Act or any
analogous state law which has not been resolved. Except as set forth on Schedule
4.16, and, except for noncompliance or actions or conditions which have not had
and are not reasonably likely to have a Material Adverse Effect, to the
knowledge of Seller (i) the Midstream Companies are in compliance with all
Applicable Environmental Laws and (ii) no condition exists on any property
currently owned or leased by the Midstream Companies which would subject any
Midstream Company or such property to any Environmental Response Measures under
any Applicable Environmental Laws.
(b) For purposes of this Agreement, "Applicable Environmental Laws"
means any and all Applicable Laws as in effect as of the date of this Agreement
pertaining to protection of the environment in effect in any and all
jurisdictions in which any Midstream Company has conducted operations,
including, without limitation, the Clear Air Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Rivers and Harbors Act of 1899, as amended, the Federal Water Pollution Control
Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976, as amended, the Safe Drinking
Water Act, as amended, the Toxic Substances Control Act, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous
Materials Transportation Act, as amended, the Louisiana Environmental Quality
Act and other environmental protection laws.
(c) All known meter sites contaminated with mercury have been
remedied, and this expense has been substantially paid under Third Party
Indemnities.
(d) Seller knows of no other hydrocarbon contamination sites owned,
operated or leased by the Midstream Companies other than the 96 identified in
1995 in the Dames and ▇▇▇▇▇ report, dated December 22, 1995.
(e) To the knowledge of Seller, the Midstream Companies have only
been involved in two EPA Superfund cleanup sites to date and are not named as
"potentially responsible parties" at any other Superfund sites that have not
been resolved and have received no CERCLA ss.104(e) letters for any sites that
have not been resolved.
(f) To the knowledge of Seller, all used oil and hydrocarbons removed
from pigging pipelines is recycled or properly disposed of under Applicable
Environmental Laws.
(g) Except as set forth on Schedule 4.16, the Midstream Companies are
not presently involved in any wetlands restoration projects.
(h) Except as set forth on Schedule 4.16, the Midstream Companies are
not presently subject to any enforcement actions under Applicable Environmental
Laws.
(i) The Midstream Companies do not own or operate any PCB equipment,
including transformers and compressor motors, and are unaware of any locations
where PCB contamination requires remediation under EPA's current cleanup
standards.
(j) Seller knows of no abandoned or currently used landfills or waste
disposal operations on property owned, leased or operated by the Midstream
Companies, except for those for which all required permits have been obtained
and are in effect.
4.17 Labor Matters. Except as set forth on Schedule 4.17, no
Midstream Company (i) is a party to any labor agreement with respect to its
employees with any labor organization, group or association, (ii) has any
employees represented by any labor organization, collective bargaining
representative or group of employees, (iii) has been the subject of any
representational campaign by any union or other organization or group seeking to
become the collective bargaining representative of any of its employees or been
subject to or, to the knowledge of Seller, threatened with any strike or other
concerted labor activity or dispute or (iv) is obligated to bargain collectively
with respect to wages, hours and other terms and conditions of employment with
any recognized or certified labor organization, collective bargaining
representative or group of employees. Except as set forth on Schedule 4.17 or
where the failure to comply would not, individually or in the aggregate, have a
Material Adverse Effect, to the knowledge of Seller, each Midstream Company is
in compliance with all Applicable Laws respecting employment practices, terms
and conditions of employment and wages and hours. Except as set forth on
Schedule 4.17 or as would not, individually or in the aggregate, have a Material
Adverse Effect, as of the date of this Agreement, (a) there is no unfair labor
practice charge or complaint against any Midstream Company threatened or pending
before the National Labor Relations Board or any comparable domestic or foreign
agency and (b) there is no labor strike, labor disturbance or work stoppage
threatened or pending against any Midstream Company.
4.18 Insurance. Set forth on Schedule 4.18 is a list of all material
policies of insurance Seller maintains for the Midstream Companies with respect
to their respective assets and operations (the "Midstream Insurance Policies").
All premiums due and payable with respect to the Midstream Insurance Policies
have been timely paid. No notice of cancellation of, or indication of an
intention not to renew, any Midstream Insurance Policy has been received by
Seller or any Midstream Company.
4.19 Absence of Undisclosed Liabilities. To the knowledge of Seller,
no Midstream Company has any liability or obligation except (i) liabilities
reflected on the Latest Balance Sheet, (ii) liabilities which have arisen since
the date of the Latest Balance Sheet in the ordinary course of business (none of
which is a material liability for breach of contract, breach of warranty,
violation of law, tort or infringement), (iii) liabilities arising under
executory contracts entered into in the ordinary course of business (none of
which is a material liability for breach of contract), (iv) liabilities
specifically reflected on Schedule 4.19 or which relate to or are associated
with the matters described in the other Schedules hereto and (v) other
liabilities which, in the aggregate, are not material to the Midstream Companies
considered as a whole.
4.20 Bank Accounts. Set forth on Schedule 4.20 are the name of each
bank or other financial institution with which the Midstream Company has an
account.
4.21 Transferred Contracts. rue and complete copies of the agreements
being transferred to Buyer from the Trading Company (the "Transferred
Contracts") listed on Schedule 4.21 have heretofore been made available to
Buyer. Schedule 4.21 and the definition of Transferred Contracts will be updated
as of the Effective Date to reflect the deletion of any Transferred Contracts
not in effect as of the Effective Date and the addition of any similar
agreements entered into by the Trading Company from the date of this Agreement
to the Effective Date. The Trading Company is not, as of the date of this
Agreement, in breach or violation of, or default under, any of the material
agreements listed on Schedule 4.21, and the Trading Company has not received any
notice of an allegation by any counterparty thereto or other third Person of
such a breach, violation or default. Each Transferred Contract is, as of the
date of this Agreement, a valid agreement, arrangement or commitment of the
Trading Company, enforceable against the Trading Company in accordance with its
terms and, to the knowledge of Seller, is a valid agreement, arrangement or
commitment of each other party thereto, enforceable against such party in
accordance with its terms, except in each case where enforceability may be
limited by bankruptcy, insolvency or other similar laws affecting creditors'
rights generally and except where enforceability is subject to the application
of equitable principles or remedies or as would not have, individually or in the
aggregate, a Material Adverse Effect. No Transferred Contract has been amended
in any material respect except as disclosed on Schedule 4.21. To the knowledge
of Seller, no counterparty thereto or other person bound thereby or whose
property is subject thereto is in breach or violation thereof or in default
thereunder or is the subject of any bankruptcy, receivership, insolvency or
similar proceeding. Neither Seller nor the Trading Company has waived or
released in any material respect any of its rights thereunder or entered into
any forbearance or moratorium agreement with respect thereto. No counterparty
thereto has made any payment or delivery thereunder where such payment or
delivery is otherwise scheduled to be made after Closing.
4.22 Trading Company Permits. The Permits listed or described on
Schedule 4.22 hereto (the "Trading Company Permits") are all the Permits
necessary or required for the conduct of the business of owning and operating
the Trading Assets and entering into transactions similar to the Financial Book
Transactions, except for Permits the absence of which would not have a Material
Adverse Effect.
4.23 Brokerage Fees. Neither Seller nor any of its affiliates has
retained any financial advisor, broker, agent, or finder or paid or agreed to
pay any financial advisor, broker, agent, or finder on account of this Agreement
or any transaction contemplated hereby except that ▇.▇. ▇▇▇▇▇▇ Securities, Inc.
has been retained as Seller's financial advisor in connection with the
transactions contemplated hereby.
4.24 Governmental Regulation. No Midstream Company is a "holding
company," member of a "holding company group," or "subsidiary" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
4.25 No Other Representations. Except as and to the extent expressly
set forth in this Agreement or in any certificate or other instrument delivered
in connection herewith, Seller makes no representations or warranties whatsoever
to Buyer and hereby disclaims all liability and responsibility for any
representation, warranty, statement or information made, communicated, or
furnished (orally or in writing) to Buyer or its representatives (including
without limitation any opinion, information, projection, or advice that may have
been or may be provided to Buyer by any director, officer, employee, agent,
consultant, or representative of Seller or any affiliate thereof). Seller makes
no representations or warranties to Buyer regarding the probable success or
profitability of the business of the Midstream Companies or of the Trading
Assets.
4.26 Year 2000 Compliance. Seller has provided to Buyer copies of the
written Year 2000 Compliance plan attributable to the Midstream Companies (the
"Y2K Plan") and any and all audits or assessments of the Midstream Companies'
year 2000 Compliance efforts conducted by a third party. Seller knows of no
matter which would prevent the Midstream Companies from taking the actions
described in the Y2K Plan by the respective dates specified therein. The
Midstream Companies, in the ordinary course of business, will continue to
diligently pursue the implementation of the Y2K Plan.
4.27 No Misrepresentations. The representations and warranties of
Seller set forth in Article IV of this Agreement, and the information contained
in the Exhibits and Schedules attached hereto, do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in the light of the circumstances under which they
were made, not misleading.
4.28 Tax Status of Equitable Storage Company, LLC
(a) Equitable Storage Company, LLC (hereinafter in this Section 4.28
"LLC") is a business entity that is not classified as a corporation under
Treasury Regulation ss.301.7701-2(b) and LLC has not made an election pursuant
to Treasury Regulation ss.301.7701-3(c) to be classified as a corporation for
federal income tax purposes. LLC has complied with Treasury Regulation
ss.301.7701-3 in order to ensure its classification as a partnership for federal
income tax purposes and LLC has a reasonable basis (within the meaning of Code
Section 6662) for its classification as a partnership for federal income tax
purposes. LLC and all members of LLC recognized the federal tax consequences of
any change in the entity's classification from other than a partnership, to a
partnership within the 60 months prior to January 1, 1997. Neither LLC nor any
of its members have been notified in writing by the Internal Revenue Service
that the entity's classification is under examination. LLC represents that as a
protective measure to ensure that Buyer receives an adjustment to the inside tax
basis of the assets of LLC upon the purchase of the LLC's membership interests,
LLC will, if requested by Buyer, make an election under Section 754 of the Code
on its timely filed federal income tax return for the year in which the purchase
occurs to the extent permitted by applicable law.
(b) Seller agrees to cooperate with Buyer in tax matters relating to
the structure of the acquisition to the extent that alternative structures may
enhance Buyer's tax benefits relating to the acquisition, but only to the extent
that such alternative structure is not detrimental to Seller.
(c) LLC and its members represent that it has timely filed all
federal income tax returns since the date of its existence consistently
classifying its tax status as a partnership for federal income tax purposes. As
of Closing, LLC will be taxable as a partnership for federal income tax
purposes. The number of members of LLC will not be changed at any time prior to
Closing. No membership interest in LLC will be owned directly or indirectly by
Equitable Pipeline Company at any time prior to Closing.
4.29 No Take-or-Pay Obligations. Except as described in Schedule
4.29, no Midstream Company is a party to or otherwise bound by take-or-pay
obligations with respect to gas purchases or gas marketing which, in the
aggregate, impose minimum obligations upon all Midstream Companies of more than
$500,000 over the remaining terms of the contracts, including all renewal
options held by the counterparties thereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
5.1 Corporate Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation.
5.2. Authority Relative to This Agreement. Buyer has full corporate
power and corporate authority to execute, deliver, and perform this Agreement
and any ancillary documents relating to the transactions contemplated hereby to
which it is a party to consummate the transactions contemplated hereby and
thereby. The execution, delivery, and performance by Buyer of this Agreement and
such ancillary documents and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action of Buyer. This Agreement has been duly executed and delivered
by Buyer and constitutes, and each such ancillary document executed or to be
executed by Buyer has been, or when executed will be, duly executed and
delivered by Buyer and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of Buyer, enforceable against
Buyer in accordance with their respective terms, except that such enforceability
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting creditors' rights generally and (ii)
equitable principles which may limit the availability of certain equitable
remedies (such as specific performance) in certain instances.
5.3 No Conflict. Assuming all consents, approvals, authorizations and
other actions described in Section 5.4 have been obtained and all filings and
notifications listed in Section 5.4 have been made, and except as may result
from any facts or circumstances relating solely to Seller, the execution,
delivery and performance of this Agreement by Buyer do not and will not (a)
violate or conflict with the certificate of incorporation or by-laws of Buyer,
(b) conflict with or violate any Applicable Law binding upon Buyer, except as
would not, individually or in the aggregate, delay the consummation of the
transaction contemplated by this Agreement or have a material adverse effect on
the ability of Buyer to consummate the transactions contemplated by this
Agreement or (c) result in any breach of, or constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of Buyer pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument relating to such assets or properties to which Buyer is a party or by
which any of such assets or properties is bound or affected, except as would
not, individually or in the aggregate, delay the consummation of the
transactions contemplated by this Agreement or have a material adverse effect on
the ability of Buyer to consummate the transactions contemplated by this
Agreement.
5.4. Consents, Approvals, Licenses, Etc. No consent, approval,
authorization, license, order or permit of, or declaration, filing or
registration with, or notification to, any Governmental Entity (including but
not limited to the Securities and Exchange Commission under the Public Utility
Holding Company Act of 1935, as amended, and the Federal Energy Regulatory
Commission), or any other person or entity, is required to be made or obtained
by Buyer or any of its affiliates in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, except (a) applicable requirements, if any, of the HSR Act,
(b) where failure to obtain such consent, approval, authorization or action, or
to make such filing or notification, either individually or in conjunction with
other such failures, would delay the consummation of the transactions
contemplated by this Agreement or have a material adverse effect on the ability
of Buyer to consummate the transactions contemplated by this Agreement, or (c)
as set forth on Schedule 5.4.
5.5 Financing. Buyer has, and at the Closing will have, sufficient
cash, available lines of credit or other sources of immediately available funds
to enable it to pay the Purchase Price to Seller in accordance with Article II
hereof.
5.6 Investment Intent; Investment Experience; Restricted Securities.
Buyer is acquiring the Subject Stock for its own account for investment and not
with a view to, or for sale or other disposition in connection with, any
distribution of all or any part thereof. In acquiring the Subject Stock, Buyer
is not offering or selling, and will not offer or sell, for Seller in connection
with any distribution of the Subject Stock, and Buyer does not have a
participation and will not participate in any such undertaking or in any
underwriting of such an undertaking except in compliance with applicable federal
and state securities laws. Buyer acknowledges that it is able to fend for
itself, can bear the economic risk of its investment in the Subject Stock, and
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of an investment in the Subject
Stock. Buyer is an "accredited investor" as such term is defined in Regulation D
under the Securities Act. Buyer understands that the Subject Stock will not have
been registered pursuant to the Securities Act or any applicable state
securities laws, that the Subject Stock will be characterized as "restricted
securities" under federal securities laws and that under such laws and
applicable regulations the Subject Stock cannot be sold or otherwise disposed of
without registration under the Securities Act or an exemption therefrom.
5.7. Legal Proceedings. There are no Proceedings pending or, to the
knowledge of Buyer, threatened seeking to restrain, prohibit, or obtain damages
or other relief in connection with this Agreement or the transactions
contemplated hereby.
5.8 Brokerage Fees. Neither Buyer nor any of its affiliates has
retained any financial advisor, broker, agent, or finder or paid or agreed to
pay any financial advisor, broker, agent, or finder on account of this Agreement
or any transaction contemplated hereby except that Salomon Brothers, Inc. has
been retained as Buyer's financial advisor in connection with the transactions
contemplated hereby.
5.9 Independent Investigation. Buyer hereby acknowledges and affirms
that it has completed its own independent investigation, analysis and evaluation
of the Midstream Companies and the Trading Assets, that it has made all such
reviews and inspections of the business, assets, results of operations,
condition (financial or otherwise) and prospects of the Midstream Companies and
the Trading Assets as it has deemed necessary or appropriate, and that in making
its decision to enter into this Agreement and to consummate the transactions
contemplated hereby it has not relied on any evaluation of the Midstream
Companies and the Trading Assets submitted to it by Seller.
5.10 LLC Status. To the knowledge of Buyer as of the date of this
Agreement, the representation and warranty set forth in the first and second
sentences of Section 4.28(c) is true and correct.
ARTICLE VI
CONDUCT OF COMPANY PENDING CLOSING
Seller hereby covenants and agree with Buyer as follows:
6.1 Conduct and Preservation of the Midstream Companies. Except as
expressly provided in this Agreement, during the period from the date hereof to
the Closing, Seller shall cause each of the Midstream Companies to continue to
meet its contractual obligations and pay its obligations as they mature and
conduct its operations according to its ordinary course of business consistent
with past practice and in compliance with all Applicable Laws and shall use
commercially reasonable efforts to preserve, maintain and protect their
properties; provided, however, that Seller and the Midstream Companies shall not
be required to make any payments or enter into or amend any contractual
agreements, arrangements, or understandings to satisfy the foregoing obligation
unless such payment or other action is required or consistent with past
practice. Seller agrees to use commercially reasonable efforts to keep the
Midstream Insurance Policies in force through Closing.
6.2 Restrictions on Certain Actions relating to the Midstream
Companies. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Closing, Seller
shall not permit any Midstream Company, without the prior written consent of
Buyer, to:
(a)amend its charter or bylaws or other governing instruments;
(b) (i) issue, sell, or deliver (whether through the issuance
or granting of options, warrants, commitments, subscriptions, rights to
purchase, or otherwise) any shares of its capital stock of any class or
any other securities or equity equivalents; or (ii) amend in any
material respect any of the terms of any such securities outstanding as
of the date hereof;
(c) (i) split, combine, or reclassify any shares of its
capital stock or other equity securities; (ii) declare, set aside, or
pay any dividend or other distribution (whether in cash, stock, or
property or any combination thereof) in respect of its capital stock or
other equity securities; (iii) repurchase, redeem or otherwise acquire
any of its securities; or (iv) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing a liquidation,
dissolution, termination, merger, consolidation, restructuring,
recapitalization or other reorganization of any Midstream Company;
(d) (i) except in the ordinary course of business consistent
with past practice, create, incur, guarantee or assume any indebtedness
for borrowed money or otherwise become liable or responsible for the
obligations of any other person, except for obligations of wholly owned
Subsidiaries; (ii) make any loans, advances or capital contributions
to, or investments in, any other person (other than to wholly owned
Subsidiaries and customary loans or advances to employees in amounts
not material to the maker of such loan or advance); or (iii) except in
the ordinary course of business consistent with past practice, mortgage
or pledge any of its material assets, tangible or intangible, or create
or suffer to exist any material lien thereupon;
(e) (i) enter into, adopt or (except as may be required by
law) make any material amendments to or terminate any bonus, profit
sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase, pension, retirement, deferred compensation,
employment, collective bargaining, severance or other employee benefit
agreement, trust, plan, fund or other arrangement for the benefit or
welfare of any director, officer or employee; (ii) except for normal
increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase
in benefits or compensation expense to such Midstream Company, or
increase in any manner the compensation or fringe benefits of any
director, officer, or employee; or (iii) pay to any director, officer,
or employee any benefit not required by any employee benefit agreement,
trust, plan, fund, or other arrangement as in effect on the date
hereof;
(f) acquire, sell, lease, transfer, or otherwise dispose of,
directly or indirectly, any assets outside the ordinary course of
business consistent with past practice or any assets that in the
aggregate are material to the Midstream Companies considered as a
whole;
(g) acquire (by merger, consolidation, or acquisition of stock
or assets or otherwise) any corporation, partnership or other business
organization or division thereof;
(h) make any capital expenditure or expenditures, other than
those described on Schedule 6.2, which, individually, is in excess of
$250,000 or, in the aggregate, are in excess of $1,000,000, except
pursuant to contracts in existence on the date hereof;
(i) amend any Tax Return or make any Tax election or settle or
compromise any federal, state, local, or foreign income Tax liability
material to any of the Midstream Companies;
(j) pay, discharge, or satisfy any claims, liabilities or
obligations (whether accrued, absolute, contingent, unliquidated or
otherwise, and whether asserted or unasserted), other than the payment,
discharge or satisfaction in the ordinary course of business consistent
with past practice, or in accordance with their terms, of liabilities
reflected or reserved against in the Financial Statements or incurred
since the date of the Latest Balance Sheet in the ordinary course of
business consistent with past practice; provided, however, that Seller
may cause the Midstream Companies to settle or compromise any liability
or obligation associated with the Retained Litigation to the extent
Seller uses its funds to effect any such compromise or settlement;
(k) enter into any lease, contract, agreement, commitment,
arrangement or transaction outside the ordinary course of business
consistent with past practice or for a term extending beyond June 30,
1998;
(l) amend, modify, or change in any material respect any
existing lease, contract or agreement the result of which will have a
Material Adverse Effect;
(m) change any of the accounting principles or practices used
by it, except for any change required by reason of a concurrent change
in generally accepted accounting principles;
(n) make any election under Code section 168(g)(7) for any
post-1997 property additions of any Midstream Company; or
(o) from and after the Effective Date, make any payment to
Seller or any affiliate of Seller in respect of redemptions of
securities, dividends, loans or distributions except payments
made in respect of bona fide transactions incurred in the
ordinary course of business on an arm's-length basis.
6.3 Restrictions on Certain Actions relating to the Trading Assets.
Except as otherwise expressly provided in this Agreement, prior to the Closing,
Seller shall not, without the prior consent of Buyer:
(a) mortgage or pledge any of the Trading Assets or create or
suffer to exist any Encumbrance thereupon, other than the Permitted
Encumbrances and as described on Schedule 6.3;
(b) sell, lease, transfer or otherwise dispose of, directly or
indirectly, any of the Trading Assets other than in the ordinary course
of business consistent with past practice; or
(c) amend, modify or change any Transferred Contract other
than in the ordinary course of business consistent with past practice.
6.4 No Other Negotiations. In consideration for the substantial
expenditures of time, effort and expenses to be undertaken by Buyer in pursuing
the transactions contemplated by this Agreement, Seller agrees that from the
date hereof to the earlier of the Closing Date or the date on which this
Agreement is terminated, neither Seller nor any Midstream Company nor any of its
or their officers, directors, employees, affiliates, representatives or agents
shall, directly or indirectly, solicit, initiate or participate in any way in
discussions, proposals or negotiations with, or provide any information or
assistance to or enter into any agreement with, any person or entity (other than
Buyer and its representatives) concerning any acquisition of all or a portion of
the Subject Stock and/or the Trading Assets, or attempt by any other person to
do or seek to do any of the foregoing.
6.5 Replacement of IT System. Until Closing, the Midstream Companies
shall cooperate and coordinate with Buyer for the purpose of Buyer's licensing
the appropriate modules of ultra technologies Gas Management System (GMS)
necessary to replace the functionality provided by Sellers' Gas Management
Information System (GMIS). Seller shall provide all reasonably necessary data
needed to populate the GMS database with counterparties, shippers, contract
status, and other reasonably pertinent information prior to the testing,
parallel operation, and eventual cutting over from the Midstream Companies' GMIS
to the newly licensed ultra gms modules.
6.6 Transition Period. Between the date of this Agreement and the
Closing, Buyer may have one or more representatives present at the principal
office of the Midstream Companies and the Trading Company, and Seller agrees to
cause the Midstream Companies and the Trading Company to keep such
representatives informed about the operation of the business and will consult
with such representatives about important business decisions.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access to Information; Confidentiality
(a) Between the date hereof and the Closing, Seller (i) shall give
Buyer and its authorized representatives reasonable access, during regular
business hours and upon reasonable advance notice, to such employees, plants,
offices, warehouses, and other facilities, and such books and records of the
Midstream Companies and the Trading Company, as are reasonably necessary to
allow Buyer and its authorized representatives to make such inspections as they
may reasonably require to verify the accuracy of any representation or warranty
contained in Article IV and (ii) shall cause Seller's officers and those of the
Midstream Companies and the Trading Company to furnish Buyer and its authorized
representatives with such financial and operating data and other information
with respect to the Midstream Companies or the Trading Assets as Buyer may from
time to time reasonably request; provided, however, (A) that Seller shall have
the right to have a representative present at all times of any such inspections,
interviews, and examinations conducted at or on the offices or other facilities
or properties of Seller or the Midstream Companies or the Trading Company, (B)
that Buyer shall hold in confidence all such information on the terms and
subject to the conditions contained in the Confidentiality Agreement and (C)
that Buyer shall have no right of access to, and Seller shall have no obligation
to provide to Buyer, (1) bids received from others in connection with the
transactions contemplated by this Agreement and information relating to such
bids or (2) any information the disclosure of which would jeopardize any
privilege available to a Midstream Company or Seller relating to such
information or would cause Seller to breach a confidentiality obligation. Buyer
shall indemnify, defend and hold harmless Seller from and against any Losses (as
defined herein) asserted against or suffered by Seller relating to, resulting
from or arising out of examinations or inspections made by Buyer or its
authorized representatives pursuant to this Section 7.1(a).
(b) Buyer agrees that Seller may retain (i) a copy of all materials
included in the data room prepared by Seller in connection with the purchase and
sale contemplated hereby, together with a copy of all documents referred to in
such materials; (ii) all books and records prepared in connection with the
transactions contemplated by this Agreement, including without limitation, bids
received from others and information relating to such bids; (iii) copies of any
books and records which may be relevant in connection with the defense of (A)
the matters referred to in Article XII or (B) disputes arising hereunder; and
(iv) all consolidating and consolidated financial information and all other
accounting books and records prepared or used in connection with the preparation
of financial statements of Seller or any parent company of any of the Midstream
Companies.
(c) Buyer agrees that it shall preserve and keep all books and
records relating to the business or operations of the Midstream Companies on or
before the Closing Date in Buyer's possession for a period of at least 10 years
from the Closing Date. After such 10-year period, before Buyer shall dispose of
any of such books and records, at least 90 calendar days' prior written notice
to such effect shall be given by Buyer to Seller, and Seller shall be given an
opportunity, at its cost and expense, to remove and retain all or any part of
such books and records as Seller may select. Notwithstanding the foregoing,
Buyer agrees that it shall preserve and keep all books and records of the
Midstream Companies relating to any investigation instituted by a Governmental
Entity or any litigation (whether or not existing on the Closing Date) if any
possibility exists that such investigation or litigation may relate to matters
occurring prior to the Closing, without regard to the 10-year period set forth
in this Section 7.1(c).
(d) Each party agrees that it will cooperate with and make available
to the other party (including without limitation the right to make copies at
Seller's expense), during normal business hours, all books and records,
information and employees (without substantial disruption of employment)
retained and remaining in existence after the Closing Date which are necessary
or useful in connection with (i) any Tax inquiry, audit, investigation or
dispute, (ii) any litigation or investigation, or (iii) any other matter
requiring any such books and records, information or employees for any
reasonable business purpose. The party requesting any such books and records,
information or employees shall bear all of the out-of-pocket costs and expenses
(including, without limitation, attorneys' fees and reimbursement for the
reasonable salaries and employee benefits for those employees who are made
available) reasonably incurred in connection with providing such books and
records, information or employees. Seller may require certain financial
information relating to the Midstream Companies' businesses for periods prior to
the Closing Date for the purpose of filing federal, state, local and foreign Tax
returns and other governmental reports, and Buyer agrees to furnish such
information to Seller at Seller's request and expense.
7.2 Regulatory and Other Authorizations; Consents
(a) Each party hereto shall use all reasonable efforts to
expeditiously obtain all authorizations, consents, orders and approvals of, and
to give all notices to and make all filings with, all Governmental Entities
(including but not limited to those pertaining to the Governmental Approvals)
and other third parties that may be or become necessary for its execution and
delivery of, and the performance of its obligations pursuant to this Agreement
and will cooperate fully with the other party in promptly seeking to obtain all
such authorizations, consents, orders and approvals, giving such notices, and
making such filings. Buyer shall take the responsibility for the preparation,
filing and prosecution of any Governmental Approvals required to be obtained in
the name of any of the Midstream Companies, and shall give Seller a reasonable
opportunity to approve (which approval shall not be unreasonably withheld) any
such filings and to participate in any such prosecutions. To the extent required
by the HSR Act, each of the parties hereto shall (i) file or cause to be filed,
as promptly as practicable after the execution and delivery of this Agreement,
with the Federal Trade Commission and the United States Department of Justice,
all reports and other documents required to be filed by such party under the HSR
Act concerning the transactions contemplated hereby and (ii) promptly comply
with or cause to be complied with any requests by the Federal Trade Commission
or the United States Department of Justice for additional information concerning
such transactions, in each case so that the waiting period applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall
expire as soon as practicable after the execution and delivery of this
Agreement. Each party hereto agrees to request, and to cooperate with the other
party or parties in requesting, early termination of any applicable waiting
period under the HSR Act. Buyer shall pay the filing fees payable in connection
with the filings by the parties required by the HSR Act.
(b) Without limiting the generality of Buyer's undertakings pursuant
to Section 7.2(a), Buyer shall:
(i) use reasonable efforts to prevent the entry in a judicial
or administrative proceeding brought under any Applicable Law by any
Governmental Entity or any other party for a permanent or preliminary
injunction or other order that would make consummation of the
transactions contemplated by this Agreement unlawful or that would
prevent or delay such consummation; and
(ii) take promptly, in the event that such an injunction or
order has been issued in such a proceeding, any and all reasonable
steps, including, without limitation, the appeal thereof or the posting
of a bond, necessary to vacate, modify or suspend such injunction or
order so as to permit such consummation on a schedule as close as
possible to that contemplated by this Agreement.
(c) If the transfer of any instrument, contract, license, lease,
permit, or other document to Buyer hereunder shall require the consent of any
party thereto other than Seller, then this Agreement shall not constitute an
agreement to assign the same, and such item shall not be assigned to or assumed
by Buyer, if an actual or attempted assignment thereof would constitute a breach
thereof or default thereunder. In such case, Seller and Buyer shall cooperate
and each shall use commercially reasonable efforts to obtain such consents to
the extent required of such other parties. If any such consent cannot be
obtained, Seller shall cooperate, at Buyer's request, in any reasonable
arrangement designed to obtain for Buyer all benefits and privileges of the
applicable instrument, contract, license, lease, permit or document. Seller
shall use commercially reasonable efforts to transfer the Trading Company
Permits to Buyer or, if a Trading Company Permit is not transferable to Buyer,
to assist Buyer in obtaining a similar permit in Buyer's name.
(d) Buyer will use commercially reasonable efforts to assist Seller
in obtaining any consents of third parties necessary or advisable in connection
with the transactions contemplated by this Agreement, including, without
limitation, providing to such third parties such financial statements and other
publicly available financial information with respect to Buyer as such third
parties may reasonably request.
(e) The foregoing notwithstanding, Buyer shall not be required to
accept any Governmental Approval if the Governmental Entity having jurisdiction
thereof has imposed any conditions in writing within the body of such
Governmental Approval that (i) limits or restricts the operations of the
Midstream Companies in a manner that can reasonably be expected to have a
material adverse effect on the operations of the Midstream Companies (as
conducted on the date of this Agreement), (ii) requires the divestiture by
American Electric Power Company, Inc. or its subsidiaries of assets or
operations with a fair market value of more than $100,000,000, (iii) can
reasonably be expected to have a material adverse effect on American Electric
Power Company, Inc. and its subsidiaries considered as a whole (without regard
to the transactions contemplated hereby) or (iv) can reasonably be expected to
have a material adverse effect on the approval by (A) the Federal Trade
Commission or the United States Justice Department under the HSR Act, (B) the
Securities and Exchange Commission under the Public Utility Holding Company Act
of 1935 or (C) the Louisiana Public Service Commission of American Electric
Power Company, Inc.' s planned merger with Central and South West Corporation.
7.3 Employee and Employee Benefit Plan Matters
(a) Set forth on Schedule 7.3 is a list of the employees of the
Midstream Companies (the "Midstream Employees") and the Trading Company (the
"Trading Employees"), together with the amount of severance pay to which such
employees would be entitled assuming termination or modification of his or her
employment ("Severance Pay").
(b) Buyer acknowledges and agrees that the Midstream Companies shall
have no obligation to terminate any of the Midstream Employees prior to the
Closing, and that the Midstream Companies shall be obligated to pay all amounts
due to any Midstream Employee terminated in connection with or following the
Closing, including without limitation all Severance Pay. Following the Closing,
Buyer agrees to cause the Midstream Companies to make all such payments and to
indemnify and hold harmless Seller and its affiliates from and against any
claims by Midstream Employees relating to the termination of any of the
Midstream Employees by the Midstream Companies, Buyer or any of its affiliates.
(c) On or before 5 days prior to the Closing Date, Buyer shall
deliver to Seller a list of the Trading Employees (the "Designated Trading
Employees") to whom Buyer intends to extend a Qualified Offer of employment
effective as of the Closing. In connection with the Closing, Buyer shall extend
Qualified Offers of employment to the Designated Trading Employees. A "Qualified
Offer" means an offer of employment by the Buyer to a Trading Employee which (i)
contains a base salary not less than the base salary being paid by the Trading
Company to such Trading Employee on the date hereof, (ii) does not result in a
substantial reduction in the role or responsibilities of such Trading Employee
from that in effect on the date hereof and (iii) is at a primary worksite in a
location that is not more than 50 miles from the office location for such
Trading Employee on the date hereof. Seller shall be responsible for the payment
to the Trading Employees of all salaries wages, benefits and other sums due or
accrued through the Closing Date. Buyer shall pay to Seller within 5 days
following the Closing an amount equal to the Severance Pay and other amounts
relating thereto (including, without limitation, payroll taxes) as calculated by
Seller which would be incurred by Seller or any affiliate of Seller upon the
termination of employment of the Trading Employees who are not Designated
Trading Employees; provided, that Buyer's obligation under this Section 7.3(c)
shall be limited to 135% of the aggregate amount reflected on Schedule 7.3 for
such Trading Employees.
(d) As of the Closing Date, the Midstream Companies shall cease to be
a participating employer in the employee benefit plans for which the Midstream
Employees were eligible and the Midstream Employees shall cease to be eligible
for all Employee Plans for which they were eligible prior to the Closing Date
and shall, as of the Closing Date, cease to accrue any additional benefits under
such Employee Plans (for which benefit accruals are relevant). Buyer agrees that
the employee benefit plans, programs and policies of Buyer or the Midstream
Companies from and after the Closing Date shall recognize the Midstream
Employees' service before the Closing Date for purposes of vesting and
eligibility, and with respect to welfare plans, shall to the extent practicable
provide benefits without interruption. Buyer will cause the Midstream Companies
and any successors and assigns to honor all obligations of the Midstream
Companies arising in respect of periods on or before the Closing Date under the
Employee Plans set forth on Schedule 4.15 to the extent accruing at or prior to
the Closing.
(e) For each Designated Trading Employee who is employed by Buyer or
an affiliate of Buyer (including, after the Closing, any of the Midstream
Companies) ("Buyer Controlled Group"), Buyer or such affiliate shall cause such
Designated Trading Employee's prior employment by the Trading Company to be
treated as employment by the Buyer Controlled Group for purposes of vesting and
eligibility in the Buyer Controlled Group's benefit plans.
(f) The Midstream Employees who remain employed with the Buyer
Controlled Group after the Closing Date and the Trading Employees employed by a
Buyer Controlled Group member after the Closing Date are collectively referred
to as the "Continuing Employees." If a Continuing Employee is involuntarily
terminated from employment with the Buyer Controlled Group within the 18 month
period beginning on the Closing Date other than for fraud, gross dereliction of
duty, misappropriation of Buyer Controlled Group property, misconduct damaging
to such property or to the business of Buyer Controlled Group or the commission
of a felony ("Cause"), then Buyer shall pay or shall cause the Buyer Controlled
Group member employing such terminated Continuing Employee to pay to such
terminated Continuing Employee Severance Pay not less than the amount reflected
on Schedule 7.3 for any such Continuing Employee. For purposes of this Section
7.3(f), if within the 18 month period beginning on the Closing Date a Continuing
Employee is offered continued employment by the Buyer Controlled Group which (i)
contains a base salary less than the base salary paid to such Continuing
Employee on the date hereof, (ii) results in a substantial reduction in the role
or responsibilities of such Continuing Employee from that in effect on the date
hereof or (iii) is at a primary worksite in a location that is more than 50
miles from the primary worksite for such Continuing Employee on the date hereof,
such Continuing Employee shall be deemed to be involuntarily terminated without
Cause.
(g) Buyer shall cause the Midstream Companies to pay to the Midstream
Employees all amounts due under the retention agreements between the Midstream
Companies and the Midstream Employees in effect prior to Closing (the "Retention
Agreements"). Seller shall pay to the Midstream Companies within 5 days
following the Closing the aggregate amount of the fixed retention payments and
incentive retention payments (but specifically excluding any Severance Pay)
payable to the Midstream Employees under the Retention Agreements.
(h) Seller will assume at or prior to Closing the liabilities of the
Midstream Companies for accumulated post-retirement benefits for former
employees of the Midstream Companies.
7.4 Public Announcements. Buyer, on the one hand, and Seller, on the
other, shall consult with each other before they or any of their respective
affiliates issue any press release or otherwise make any public statement with
respect to this Agreement or the transactions contemplated hereby, and neither
of them or any such affiliate shall issue any such press release or make any
such public statement prior to such consultation (but no approval thereof shall
be required), except as may be required by law.
7.5 Notification of Certain Matters. Seller and Buyer shall promptly
notify each other of any event of circumstance prior to the Closing which shall
constitute a Material Adverse Effect or a breach of a representation or warranty
or a covenant or agreement of either Seller or Buyer.
7.6 Amendment of Schedules. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules. For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Articles VIII and IX
have been fulfilled, the Schedules hereto shall be deemed to include only that
information contained therein on the date of this Agreement and shall be deemed
to exclude all information contained in any supplement or amendment thereto;
provided, however, that if the Closing shall occur, then the Schedules hereto
shall be deemed to include all matters disclosed pursuant to any such supplement
or amendment at or prior to the Closing.
7.7 Intercompany Accounts. On the Closing Date, Seller and the
Midstream Companies shall undertake such transactions and execute and deliver
such agreements and instruments as may be necessary or appropriate to cause all
Intercompany Accounts existing immediately prior to the Closing to have been
eliminated or charged or credited, as appropriate, to capital.
7.8 Fees and Expenses. Except insofar as a party may be damaged by
another party's breach hereof or as otherwise expressly provided in this
Agreement, all fees and expenses, including fees and expenses of counsel,
financial advisors, and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such fee or expense, whether or not the Closing shall have occurred. Buyer shall
be obligated to pay any and all costs of any audit of the Midstream Companies or
the Trading Company as may be required to enable Buyer to complete and file any
filing by Buyer or an affiliate of Buyer with the Securities and Exchange
Commission.
7.9 Transfer Taxes. All sales, transfer, filing, recordation,
registration and similar taxes and fees arising from or associated with the
transactions contemplated hereunder, whether levied on Buyer or Seller, shall be
borne equally by Buyer and Seller, and the parties shall file all necessary
documentation with respect to, and make all payments of, such taxes and fees on
a timely basis.
7.10 Action Regarding Indemnities. Buyer agrees that it will not
knowingly take any action after the Closing that would limit, reduce or
extinguish any indemnity or right of contribution from a third party
(collectively "Third Party Indemnities") which may be available to Seller, Buyer
or the Midstream Companies, and will use commercially reasonable efforts to take
all necessary action, of which it has actual knowledge, to preserve claims under
any such indemnity.
7.11 Casualty Loss. Notwithstanding anything to the contrary in this
Agreement, in the event of damage by fire or other casualty to the properties of
any Midstream Company (a "Casualty Loss") prior to Closing, this Agreement shall
remain in full force and effect, there shall be no reduction in the Purchase
Price and no failure of a condition to closing shall be deemed to exist by
virtue of such event, provided that (a) in such event Seller, at its option, (i)
repairs such damage (which Seller shall have no obligation to do), (ii) collects
(and when collected pays over to Buyer) any insurance claims related to such
damage or (iii) assigns to Buyer such insurance claims, and (b) after Seller's
recourse to its option described in clause (a) of this Section 7.11, such damage
does not result in a Material Adverse Effect.
7.12 Excluded Assets. Notwithstanding Article VI hereof, the
transactions contemplated by this Agreement exclude and prior to the Closing
Date Seller may cause a Midstream Company to transfer to Seller or any of its
affiliates (other than the Midstream Companies):
(a) the assets listed or described on Schedule 7.12;
(b) all Midstream Insurance Policies and rights under any such
insurance policies in respect to any and all claims made under such policies
whether such claims are asserted before or after the Closing Date and all rights
to any proceeds payable under any such policy;
(c) the names "Equitable" and "ERI" and any related or similar trade
names, trade marks, service marks or logos (but excluding the name "Louisiana
Intrastate Gas"); and
(d) any refund or credit related to Taxes paid prior to the Effective
Date pursuant to Section 11.5, whether such refund is received as a payment or
as a credit against future Taxes payable.
7.13 Transition Services. For a reasonable period after Closing, not
to exceed 6 months or such longer period as may be agreed between the parties,
Buyer and Seller shall cooperate with respect to transition activities as to the
businesses of the Midstream Properties, including without limitation computer
support of the GMIS. To the extent Seller provides such services and unless
otherwise agreed by the parties, Buyer shall pay Seller reasonable compensation
for such services and shall reimburse Seller for reasonable costs actually
incurred in connection therewith.
7.14 Guarantees. Buyer and Seller shall cooperate and use
commercially reasonable efforts in order that, effective as of the Closing Date,
(i) all obligations relating to the guarantees, letters of credit, bonds, other
credit assurances of a comparable nature of Seller or any of its affiliates
(other than the Midstream Companies) for the benefit of any Midstream Company or
Trading Company and listed or described on Schedule 7.14 (the "Guarantees") and
any liabilities related thereto shall be released as to Seller or such affiliate
and (ii) substitute arrangements of Buyer or its affiliates shall be in effect.
No Midstream Company is currently obligated under any guarantee, letter of
credit, bond or other credit assurance in favor of Seller or any of its
affiliates (other than the Midstream Companies). In the event that any Guarantee
is not released, Buyer shall indemnify and hold harmless the guarantor(s)
thereunder from and against any losses that such guarantor(s) may suffer under
such Guarantees from and after the Closing Date.
7.15 [Intentionally omitted.]
7.16 Use of Name. Buyer agrees that promptly following the Closing,
it will (i) change the legal name of any of the Midstream Companies that contain
the word or initials "Equitable" or "ERI" to a name that does not include either
such word or initials and (ii) remove from any of the properties of the
Midstream Companies or paint over such name or initials and logos, symbols or
trademarks relating thereto.
7.17 Insurance. Buyer acknowledges and agrees that, following the
Closing, the Midstream Insurance Policies may be terminated or modified to
exclude coverage of all or any portion of the Midstream Companies or the Trading
Assets by Seller in its sole discretion, and, as a result, Buyer shall be
obligated at or before Closing to obtain at its sole cost and expense
replacement or substitute insurance coverage with similar policies and amounts
of coverage. Buyer further acknowledges and agrees that Buyer will need to
provide to certain Governmental Entities and third parties evidence of such
replacement or substitute insurance coverage for the continued operations of the
businesses of the Midstream Companies following the Closing.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment on or prior to the Closing
Date or, if and as applicable, the Canadian Deferred Closing Date of each of the
following conditions:
8.1 Representations and Warranties True. All the representations and
warranties of Buyer contained in this Agreement, and in any agreement,
instrument, or document delivered pursuant hereto or in connection herewith on
or prior to the Closing Date shall be true and correct in all material respects
on and as of the Closing Date as if made on and as of such date, except as
affected by transactions permitted by this Agreement and except to the extent
that any such representation or warranty is made as of a specified date, in
which case such representation or warranty shall have been true and correct in
all material respects as of such specified date.
8.2 Covenants and Agreements Performed. Buyer 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 on or prior to the
Closing Date and all deliveries contemplated by Section 3.3 shall have been
made.
8.3 HSR Act: Consents. All waiting periods (and any extensions
thereof) applicable to this Agreement and the transactions contemplated hereby
under the HSR Act shall have expired or been terminated, and there shall have
been obtained any and all other Governmental Approvals specified on Schedules
4.6 and 5.4.
8.4 Legal Proceedings. No preliminary or permanent injunction or
other order, decree or ruling issued by a Governmental Entity, and no statute,
rule, regulation or executive order promulgated or enacted by a Governmental
Entity, shall be in effect which restrains, enjoins, prohibits or otherwise
makes illegal the consummation of the transactions contemplated hereby.
8.5 Guarantees. The Guarantees shall be released as to Seller or its
appropriate affiliate and substitute arrangements of Buyer or its affiliates
shall be in effect.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment on or prior to the Closing
Date of each of the following conditions:
9.1 Representations and Warranties True. All the representations and
warranties of Seller contained in this Agreement, and in any agreement,
instrument or document delivered pursuant hereto or in connection herewith on or
prior to the Closing Date, shall be true and correct in all material respects on
and as of the Closing Date as if made on and as of such date, except as affected
by transactions permitted by this Agreement, in which case such representation
or warranty shall have been true and correct in all material respects as of such
specified date.
9.2 Covenants and Agreements Performed. Seller 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 on or prior to the
Closing Date and all deliveries contemplated by Section 3.2 shall have been
made.
9.3 HSR Act: Consents. All waiting periods (and any extensions
thereof) applicable to this Agreement and the transactions contemplated hereby
under the HSR Act shall have expired or been terminated, and there shall have
been obtained any and all other Governmental Approvals specified on Schedules
4.6 and 5.4.
9.4 Legal Proceedings. No preliminary or permanent injunction or
other order, decree or ruling issued by a Governmental Entity, and no statute,
rule, regulation or executive order promulgated or enacted by a Governmental
Entity, shall be in effect which restrains, enjoins, prohibits or otherwise
makes illegal the consummation of the transactions contemplated hereby.
9.5 Material Adverse Effect. There shall not have occurred or
transpired any event or circumstance (other than those described in this
Agreement or which result from the transactions contemplated hereby), whether or
not under the control of the Midstream Companies or Seller, that (i) constitutes
a Casualty Loss in excess of $15,000,000 (or $5,000,000 of uninsured loss) or
(ii) constitutes or is reasonably likely to constitute a Material Adverse Effect
as of Closing and (A) is a Proceeding against a Midstream Company or (B)
constitutes the loss of any supplier or customer (other than the expiration of
an Agreement in accordance with its terms). Notwithstanding the foregoing, the
condition specified in this Section 9.5 shall be deemed satisfied if Seller, on
or before the Closing, takes such action as is necessary to cure such event or
circumstance or enters into an agreement or other arrangement reasonably
satisfactory to Buyer that has the effect of indemnifying and holding harmless
Buyer and the affected Midstream Company for or from the effects of such event
or circumstance.
ARTICLE X
TERMINATION, AMENDMENT, AND WAIVER
10.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing in
the following manner:
(a) by mutual written consent of Seller and Buyer;
(b) by either Seller or Buyer, if any Governmental Entity with
jurisdiction over such matters shall have issued an order or injunction
restraining, enjoining or otherwise prohibiting the sale of the Subject
Stock hereunder and such order, decree, ruling or other action shall
have become final and unappealable;
(c) by Seller, if on or before December 31, 1998, all waiting
periods (and any extensions thereof) applicable to this Agreement and
the transactions contemplated hereby under the HSR Act shall not have
expired or been terminated, or there shall not have been obtained any
other Governmental Approval set forth on Schedule 5.4 or required by
Buyer; or
(d) by either Seller or Buyer, if the Closing shall not have
occurred on or before March 1, 1999, provided, however, that the right
to terminate this Agreement under this Section 10.1(d) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement shall have been the cause of, or shall have resulted in,
the failure of the Closing to occur prior to such date.
10.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 10.1 by Seller, on the one hand, or Buyer, on the
other, written notice thereof shall forthwith be given to the other party
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall become void and have no effect, except that the agreements
contained in this Section and in Article X and XIII and Sections 7.1(a), 7.4 and
7.8 shall survive the termination hereof. Nothing contained in this Section
shall relieve any party from liability for damages actually incurred as a result
of any breach of this Agreement. No termination of this Agreement shall affect
the obligations of the parties pursuant to the Confidentiality Agreement, except
to the extent specified in such letter agreement.
10.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of all the parties hereto.
10.4 Waiver. Each of Seller, on the one hand, and Buyer, on the
other, may (i) waive any inaccuracies in the representations and warranties of
the other contained herein or in any document, certificate, or writing delivered
pursuant hereto or (ii) waive compliance by the other with any of the other's
agreements or fulfillment of any conditions to its own obligations contained
herein. Any agreement on the part of a party hereto 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 hereto 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 XI
TAX MATTERS
11.1 Tax Allocation: Pre-Closing. Seller shall be solely liable for
and shall pay all Taxes of the Midstream Companies (and any costs or expenses
connected therewith) due for all taxable years and periods ending on or before
the Closing Date (the "Pre-Closing Tax Period") except for Taxes specifically
and fully reserved as a current liability on the Effective Date Balance Sheet.
Seller will include the taxable income of the Midstream Companies (including any
deferred income recognized by Treasury Regulation ss.1.1502-13) on the Seller's
federal consolidated income tax returns for all periods ending on or before the
Closing Date to the extent required under Treasury Regulation ss.1.1502-76(b).
The income of the Midstream Companies will be apportioned up to and including
the Closing Date by closing the books of the Midstream Companies as of the
Closing Date pursuant to Treasury Regulation ss.1.1502-76(b). Seller will
prepare and file or cause to be prepared and filed all Tax Returns for the
Midstream Companies that are required to be filed with the appropriate
Governmental Entities for any Pre-Closing Tax Period; provided, however, that
Seller shall furnish copies of such returns to Buyer for its review, at least 10
days prior to filing; and provided, further, that Seller shall not file any
amended Tax Returns for the Midstream Companies for any Pre-Closing Tax Period
without the written consent of Buyer, which will not be unreasonably withheld or
delayed.
11.2 Tax Allocation: Post-Closing. Buyer shall be solely liable for
and shall pay all Taxes of the Midstream Companies (and any costs or expenses
connected therewith) due for any taxable year or taxable period commencing after
the Closing Date (a "Post-Closing Tax Period"). Buyer will prepare and file or
cause to be prepared and filed all Returns for the Midstream Companies (and any
costs or expenses connected therewith) that are required to be filed with the
appropriate Governmental Entities for any Post-Closing Tax Period. Buyer will
make or cause to be made all payments shown thereon as owing with respect to any
such Tax Returns.
11.3 Tax Allocation: Straddle Period. Buyer shall cause the Midstream
Companies to pay all Taxes due for any taxable year or taxable period commencing
before and ending after the Closing Date (the "Straddle Period"). Upon notice
from Buyer, Seller shall pay to the Midstream Companies prior to the date any
payment for Taxes as described in this Section 11.3 is due, an amount equal to
the excess, if any, of (i) the Taxes that would have been due if the Straddle
Period had ended at the close of business on the Closing Date (using an
interim-closing-of-the-books method except that exemptions, allowances, and
deductions that are otherwise calculated on an annual basis such as deductions
for real estate taxes, depreciation, and depletion, shall be apportioned on a
per diem basis) over (ii) the sum of the Taxes for the Straddle Period (A) which
have been specifically and fully reserved on the Effective Date Balance Sheet or
(B) which have been paid prior to the Closing Date by the Midstream Companies or
by Seller or an affiliate thereof with respect to the Midstream Companies.
11.4 Return Preparation. In order to assist Seller in the preparation
of all Tax Returns that Seller is required to prepare, Buyer will promptly
provide or cause to be provided to Seller such information as Seller may
reasonably request in order for the operations of the Midstream Companies to be
properly reported in such Tax Returns.
11.5 Refunds or Credits. Except as otherwise set forth in this
Agreement, to the extent any refunds or credits not reflected in the current
assets on the Effective Date Balance Sheet with respect to Taxes paid by the
Midstream Companies are attributable to taxable periods commencing before and
ending on or before the Closing Date, such refunds or credits shall be for the
account of Seller. Except as provided in the immediately succeeding sentence, to
the extent that any refunds or credits with respect to Taxes paid by the
Midstream Companies are attributable to taxable periods commencing on or after
the Closing Date, such refunds or credits shall be for the account of Buyer. To
the extent that any refunds or credits with respect to taxes paid by the
Midstream Companies are attributable to the Straddle Period described in Section
11.3, such refunds and credits shall be for the account of the party who bears
responsibility for such Taxes pursuant to Section 11.3. Buyer shall cause the
Midstream Companies to forward to Seller or to reimburse Seller for any such
refunds or credits for the account of Seller within 10 business days from
receipt thereof by any of Buyer or the Midstream Companies. Seller shall forward
to Buyer or reimburse Buyer for any refunds or credits for the account of Buyer
within 10 business days from receipt thereof by Seller. To the extent any such
refund or credit is properly includable in the taxable income of the initial
recipient, the amount forwarded or reimbursed to Seller or Buyer, as the case
may be, shall be reduced by a percentage of the amount of such refund or credit
equal to the highest marginal federal income tax rate for the tax period in
which the refund or credit is received. Any refunds or reimbursements not made
within the 10 business day period specified above shall bear interest from the
date received by the refunding or reimbursing party at the Prime Rate.
11.6 Taxes Relating to Trading Assets. All property or ad valorem
taxes imposed on or with respect to the Trading Assets for the year in which the
Closing occurs shall be prorated between Seller and Buyer based on the number of
days in such year before and after the Closing Date. Seller shall be liable for
such taxes prorated for the period up to and including the Closing Date, and
Buyer shall be liable for such taxes prorated for the period subsequent to the
Closing Date. Seller shall be responsible for the actual payment of such taxes
to the appropriate Governmental Entity that become due and payable prior to the
Closing Date. Buyer shall likewise be responsible for the actual payment of such
taxes becoming due and payable subsequent to the Closing Date. The parties shall
file all necessary documentation with respect to, and make all payments of, such
taxes on a timely basis.
ARTICLE XII
SURVIVAL; INDEMNIFICATION
12.1 Survival
(a) The representations and warranties of the parties hereto contained
in Articles IV and V of this Agreement or in any certificate, instrument, or
document delivered pursuant hereto, and the indemnification obligations of the
parties contained in this Article XII for which no notice is given by the
applicable Survival Date, shall survive the Closing, regardless of any
investigation made by or on behalf of any party, until the second anniversary of
the Closing Date, provided however, that, (i) the representations set forth in
Section 4.9, Section 4.15, Section 4.28 and the second sentence of Section 4.17
shall survive until 30 days after all applicable statute of limitations,
including waivers and extensions, have expired with respect to the matters
addressed therein, and if no statute of limitations exists, forever thereafter
(as applicable, the "Survival Date") and (ii) the representations and warranties
set forth in Section 4.28(c) shall expire at the Closing. For this purpose, the
parties agree that proper notice shall have been given by Buyer to Seller as of
Closing with respect to all Retained Litigation.
(b) No party hereto shall have any indemnification obligation pursuant
to this Article XII or otherwise in respect of any such representation or
warranty unless before the Survival Date it shall have received from the party
seeking indemnification proper notice as required in this Article XII.
(c) The provisions of this Article shall have no effect upon any other
obligation of the parties hereto under this Agreement, whether to be performed
before, at or after the Closing.
12.2 Indemnification by Seller
(a) Subject to the terms, limitations and conditions of this Article
XII, Seller shall indemnify, defend and hold harmless Buyer and its successors
and assigns, the Midstream Companies, and its and their affiliates and their
respective officers, directors, partners, employees, agents and representatives
from and against any and all claims, actions, causes of action, demands,
assessments, losses, damages, liabilities, judgments, settlements, penalties,
damages, fines, interest, punitive damages payable to third parties, costs and
expenses (including reasonable attorneys' fees and expenses), of any nature
whatsoever (each, a "Loss"), asserted against, resulting to, imposed upon or
incurred by Buyer or its affiliates or any such other Person, directly or
indirectly, by reason of or resulting from any of the following:
(i) any breach by Seller of any of its covenants,
representations or warranties contained in this Agreement;
(ii) the Retained Litigation (other than the matter listed as
item 1 on Schedule 1.1(a) hereto), to the extent provided herein;
(iii) the ownership of the Trading Assets for the period prior
to the Effective Date;
(iv) the matter listed as item 1 on Schedule 1.1(a) hereto;
(v) any Loss that Buyer may suffer resulting from, arising out
of, relating to, in the nature of, or imposed upon any of the Midstream
Companies, for Taxes of any person other than the Midstream Companies
(i) under Treasury Reg. ss.1.1502-6 (or any similar provision of state,
local, or foreign law), (ii) as transferee or successor, by contract,
or (iii) otherwise;
(vi) any amount payable to any employee or other person (or
the present value of any amount as to which such a person's vesting is
accelerated), in respect of the provision of services to Seller or any
of its affiliates, as a result of the change in control of the
Midstream Companies or the acquisition of the Trading Assets as
contemplated by this Agreement, and any incremental Taxes imposed upon
the Buyer or any Midstream Company as a result of the application of
Code section 280G or 4999 thereto;
(vii) any (A) Third Party Claim arising out of or resulting
from the presence of Hazardous Material that has been released to the
soils, groundwater, sediments or otherwise to the environment or (B)
Environmental Response Measures, in either case that arise out of or
relate to the operations conducted by the Midstream Companies prior to
the Closing Date; and
(viii) any act of the Midstream Companies occurring after July
1, 1993, and prior to the Closing constituting (A) a violation of
Applicable Law (other than Applicable Environmental Laws) or (B)
statutory or contractual fraud.
(b) The indemnification obligations of Seller pursuant to this Article
XII shall be subject to the following limitations and other provisions set forth
herein:
(i) No indemnification shall be required to be made by Seller
with respect to any Losses under Sections 12.2(a)(i), (iii), (vi),
(vii) or (viii) except to the extent that the aggregate amount of such
Losses incurred by Buyer (whether arising, asserted, resulting, imposed
or incurred before, on or after the Closing Date) exceeds $3,000,000.
(ii) No indemnification shall be required to be made by Seller
with respect to any Losses under Sections 12.2(a)(i), (ii), (iii),
(vi), (vii) or (viii) to the extent that the aggregate amount of such
Losses incurred by Buyer and its affiliates (including the Midstream
Companies) (whether arising, asserted, resulting, imposed or incurred
before, on or after the Closing Date), together with the aggregate
amount paid by Seller and its affiliates as Defense Costs in connection
with the Retained Litigation (other than the matter listed as item 1 on
Schedule 1.1(a) hereto) exceeds $100,000,000.
(iii) No indemnification shall be required to be made by
Seller with respect to any Losses for any matter (A) for which Buyer or
its affiliates have otherwise indemnified Seller or its affiliates, (B)
to the extent that such matters were known to Buyer prior to the date
of this Agreement and were not disclosed to Seller prior to such date
or otherwise known by Seller or (C) to the extent such Losses arise
from the negligent or wrongful act or omission of Buyer or its
affiliates (other than the Midstream Companies prior to Closing), or
the breach of their obligations to Seller or its affiliates.
(iv) [Intentionally omitted.]
(v) No indemnification shall be required to be made by Seller
with respect to any Losses associated with the matter listed as item 1
on Schedule 1.1(a) hereto to the extent that the aggregate amount of
such Losses incurred by Buyer and its affiliates (including the
Midstream Companies), exceeds the amount (the "JD Amount") specified in
that certain joint defense agreement between Sellers and Buyer dated
September 12, 1998 (the "Joint Defense Agreement"). In addition, Seller
shall make available for payment of such indemnity claims the positive
amount (if any) equal to (i) the aggregate amount of insurance proceeds
actually received by Equitable Resources, Inc. ("ERI") in connection
with the matter listed as item 1 on Schedule 1.1(a) minus (ii) the sum
of (A) the JD Amount and (B) the aggregate amount of Losses of ERI and
its affiliates relating to or in connection with the matter listed as
item 1 on Schedule 1.1(a) (including, without limitation, the aggregate
amount of costs and expenses paid by ERI and its affiliates as Defense
Costs in connection with the matter listed as item 1 on Schedule
1.1(a)).
(vi) In addition to the other limitation contained herein, the
indemnification obligations of Seller for Losses under Section
12.2(a)(vii) shall be limited as follows:
(A) Seller shall only be liable to indemnify to the
extent of 50% of such Losses; and
(B) Seller shall not be liable to indemnify for any
such Loss unless and until the Loss relating to a specific
site or set of facts exceeds $20,000, in which event such
indemnity shall include such $20,000.
(c) Subject to the provisions of the Joint Defense Agreement, Seller
shall be entitled to conduct and direct the defense of the Proceedings and
claims related to the Retained Litigation in accordance with Section 12.5, and
Buyer shall cooperate, and shall cause the Midstream Companies to cooperate, in
good faith in such defense. Without limiting the generality of the preceding
sentence and as more fully set forth in the Joint Defense Agreement, Seller
shall be entitled, in the name and on behalf of Buyer or any of the Midstream
Companies, to pursue in good faith Third Party Indemnities from any Person.
Seller shall be entitled to control and direct all proceedings and claims
related to such insurance coverage associated with the Retained Litigation.
12.3 Indemnification by Buyer. Subject to the terms and conditions of
this Article XII, Buyer shall indemnify, defend and hold harmless Seller and its
affiliates and their respective officers, directors, partners, employees, agents
and representatives from and against any and all Losses asserted against,
resulting to, imposed upon or incurred by Seller or its affiliates or any such
other Person, directly or indirectly, by reason of or resulting from any of the
following:
(i) breach by Buyer of any of its covenants,
representations or warranties contained in this Agreement;
(ii) the Assumed Litigation; and
(iii) the Assumed Liabilities.
12.4 Further Limitations of Liability. The amount of any Loss shall be
reduced (i) to the extent that any person entitled to receive indemnification
under this Agreement (an "Indemnitee") receives any insurance proceeds with
respect to a Loss, (ii) to take into account any Tax benefit recognized by the
Indemnitee arising from the recognition of the Loss less any Tax detriment from
the receipt of indemnification associated with such Loss and (iii) to take into
account any payment actually received by an Indemnitee with respect to a Loss.
12.5 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any claim or
of the commencement of any claim, action or proceeding made or brought by any
person or entity who or which is not a party to this Agreement or an affiliate
of a party to this Agreement (a "Third Party Claim") with respect to which
indemnification is to be sought from a person required to provide
indemnification under this Agreement (the "Indemnifying Party"), the Indemnitee
will give such Indemnifying Party reasonable prompt written notice thereof, but
in any event not later than 20 calendar days after the Indemnitee$s receipt of
notice of such Third Party Claim, provided this failure to give timely notice
will not affect the rights or obligations of the Indemnifying Party except and
only to the extent that, as a result of such failure, the Indemnifying Party was
substantially disadvantaged. Such notice shall describe the nature of the Third
Party Claim in reasonable detail and will indicate the estimated amount, if
practicable, of the Loss that has been or may be sustained by the Indemnitee.
The Indemnifying Party will have the right to participate in or, by giving
written notice to the Indemnitee, to elect to assume the defense of any Third
Party Claim at such Indemnifying Party$s own expense and by such Indemnifying
Party$s own counsel, and the Indemnitee will cooperate in good faith in such
defense at such Indemnitee$s own expense.
(b) If within 10 calendar days after an Indemnitee provides written
notice to the Indemnifying Party of any Third Party Claim the Indemnitee
receives written notice from the Indemnifying Party that such Indemnifying Party
has elected to assume the defense of such Third Party Claim as provided in the
last sentence of Section 12.5(a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such Third Party Claim
within 10 calendar days after receiving notice from the Indemnitee that the
Indemnitee believes the Indemnifying Party has failed to take such steps the
Indemnitee may assume its own defense, and the Indemnifying Party will be liable
for all reasonable expenses thereof. Without the prior written consent of the
Indemnitee, the Indemnifying Party will not enter into any settlement of any
Third Party Claim which would lead to liability or create any financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder. If a firm offer is made to settle a Third
Party Claim without leading to liability or the creation of a financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party will give written notice
to the Indemnitee to that effect. If the Indemnitee fails to consent to such
firm offer within 10 calendar days after its receipt of such notice, the
Indemnitee may continue to contest or defend such Third Party Claim and, in such
event, the maximum liability of the Indemnifying Party to such Third Party Claim
will be the amount of such settlement offer, plus reasonable costs and expenses
paid or incurred by the Indemnitee up to the date of such notice. Subject to the
other provision of this Agreement, the parties agree that for purposes of this
Section 12.5(b), the Retained Litigation shall be deemed to be Third Party
Claims.
(c) Any claim by an Indemnitee on account of a Loss which does not
result from a Third Party Claim (a "Direct Claim") will be asserted by giving
the Indemnifying Party reasonably prompt written notice thereof, stating the
nature of such claim in reasonable detail and indicating the estimated amount,
if practicable, but in any event not later than 90 calendar days after the
Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party will
have a period of 30 calendar days within which to respond to such Direct Claim.
If the Indemnifying Party does not respond within such 30 day period, the
Indemnifying Party will be deemed to have accepted such claim. If the
Indemnifying Party rejects such claim, the Indemnitee will be free to seek
enforcement of its rights to indemnification under this Agreement.
(d) If the amount of any Loss, at any time subsequent to the making of
an indemnity payment in respect thereof, is reduced by recovery, settlement or
otherwise under or pursuant to any insurance coverage or Tax benefit, or
pursuant to any claim, recovery, settlement or payment by or against any other
entity, the amount of such reduction, less any costs, expenses or premiums
incurred in connection therewith, will promptly be repaid by the Indemnitee to
the Indemnifying Party. Upon making any indemnity payment, the Indemnifying
Party will, to the extent of such indemnity payment, be subrogated to all rights
of the Indemnitee against any third party in respect of the Loss to which the
indemnity payment relates; provided, however, that (i) the Indemnifying Party
will then be in compliance with its obligations under this Agreement in respect
of such Loss, (ii) until the Indemnitee recovers full payment of its Loss, any
and all claims of the Indemnifying Party against any such third party on account
of said indemnity payment are hereby made expressly subordinated and subjected
in right of payment to the Indemnitee$s rights against such third party and
(iii) under no circumstance shall Buyer or its affiliates (including the
Midstream Companies) have any rights to pursue recovery under the Midstream
Insurance Policies. Without limiting the generality or effect of any other
provision hereof, each such Indemnitee and Indemnifying Party will duly execute
upon request all instruments reasonably necessary to evidence and perfect the
above-described subrogation and subordination rights. Nothing in this Section
12.5(d) shall be construed to require any party hereto to obtain or maintain any
insurance coverage.
12.6 Additional Provisions Relating to Environmental Indemnification.
In addition to the limitations set forth elsewhere in this Article XII, Seller's
obligation to indemnify the Buyer pursuant to Article XII with respect to
environmental matters shall be further qualified as specified below:
(a) If Buyer has a Loss for costs of an Environmental Response Measure
pursuant to Article XII of this Agreement that relates to the presence of
Hazardous Material that has been released to the soils, groundwater, sediments
or otherwise to the environment, Seller shall only be required to defend,
indemnify and hold harmless the Buyer to the extent that: (i) investigation or
remediation of the Hazardous Material is required pursuant to an Applicable
Environmental Law that is in effect as of and is enforceable as of the Closing
Date; (ii) the Remediation Standards (as defined below) that must be met in
order to satisfy any legal requirements (A) are no more stringent than the
Remediation Standards that were in effect as of and were enforceable as of the
date of this Agreement under the Applicable Environmental Law that is the source
of the obligation to conduct a remediation, or, where no such Remediation
Standards had been promulgated and were enforceable as of the date of this
Agreement, Remediation Standards that were applied, within 1 year prior to the
date of this Agreement, on a case-by-case basis, to properties that are most
similar to the property that is subject to a remediation and (B) are also those
Remediation Standards that would be the least stringent Remediation Standards
that would be applicable given the use of the property as of the day before the
Closing Date; and (iii) such investigation and/or remediation is conducted using
the most reasonably cost effective methods for investigation, remediation and/or
containment consistent with Applicable Environmental Law. To the extent that the
Losses incurred in connection with an investigation or remediation are in excess
of the Losses that would be incurred for an investigation or remediation meeting
the conditions set forth in this Section 12.6(a), Seller shall have no
obligation to indemnify Buyer for such excess Losses.
(b) If the costs of an investigation or remediation that is subject to
an indemnity by Seller hereunder are increased due to an act or omission
(occurring after the Closing Date) by a person other than Seller or an agent,
representative or contractor of Seller, Seller shall not be responsible for any
such increase in costs incurred. Seller shall not be responsible for any
increased Losses that are incurred due to (i) the voluntary closure of
operations at any of the affected assets or (ii) a material voluntary change in
use of the affected assets from the use of such assets as of the Closing Date.
(c) Seller shall not be responsible for the costs associated with
Buyer's oversight of Seller's performance of its defense and indemnity
obligations under this Agreement, including the cost of Buyer's oversight of
Seller's legal counsel, consultant or employees, and Seller shall not be
responsible for any costs or expenses of Buyer that are not "out-of-pocket"
(including, without limitation, pro-rated salaries of Buyer's employees).
(d) Claims brought pursuant to Article XII that are related to
environmental matters shall be subject to the procedures for indemnification set
forth in Section 12.5 if such claims are third party claims. Claims that require
investigation and remediation of Hazardous Materials shall also be subject to
the procedures of Section 12.7.
(e) For purposes of this Agreement, "Remediation Standard" means a
numerical standard that defines the concentrations of Hazardous Materials that
may be permitted to remain in any environmental media after an investigation,
remediation or containment of a release of Hazardous Materials.
12.7 Procedures for Remedial Actions
(a) Seller shall have the right, but not the obligation, to control the
management of an environmental investigation or remediation that is subject to
indemnification pursuant to Article XII. Seller shall notify Buyer, within 30
days of receipt of notice of Buyer's claim for indemnification for such matter,
either that (i) it intends to undertake such responsibility, (ii) it does not
intend to undertake such responsibility or (iii) that more information is needed
from Buyer before Seller can reasonably determine that Buyer's claim is subject
to indemnification pursuant to this Agreement. Buyer shall promptly respond to
such requests for information (to the extent such information is reasonably
available to Buyer) and, within 30 days of receipt of such information, Seller
shall notify Buyer as to whether it shall undertake the investigation and
remediation.
(b) In the event Seller undertakes the responsibility for investigation
or remediation, Seller shall promptly provide copies to Buyer of all notices,
correspondence, draft reports, submissions, work plans and final reports and
shall give Buyer a reasonable opportunity (at Buyer's own expense) to approve
(which approval shall not be unreasonably withheld) on any submissions Seller
intends to deliver or submit to the appropriate Governmental Entity prior to
said submission. If Buyer does not object to such submission within 10 days of
receiving a copy thereof and all other requested information reasonably relating
thereto and available to Seller, Buyer shall be deemed to have approved the
same. In the event Buyer or Seller (but not both Buyer and Seller) does not
approve any offer by a Governmental Entity to settle any Environmental Response
Measure, the amount of Losses for which the other such party shall be obligated
for such Environmental Response Measure shall be limited to the amount of such
rejected settlement offer. Buyer may, at its own expense, hire its own
consultants, attorneys or other professionals to monitor the investigation or
remediation, including any field work undertaken by Seller, and Seller shall
provide Buyer with the results of all such field work or other evaluation or
analysis. Notwithstanding the above, Buyer shall not take any actions that shall
unreasonably interfere with Seller's performance of the investigation and
remediation. Seller shall undertake any such work required herein in a manner
designed to minimize any disruption to the greatest extent possible, with the
conduct of operations at the affected assets. Buyer shall allow Seller
reasonable access to conduct any of the work contemplated herein and shall fully
cooperate with Seller in the performance of the investigation and remediation,
including, but not limited to, providing Seller with reasonable access to
employees and documents as necessary.
(c) If Seller declines to undertake the performance of an investigation
and remediation hereunder, Buyer shall be entitled to undertake the
investigation and remediation. Buyer shall promptly provide copies to Seller of
all notices, correspondence, draft reports, submissions, work plans and final
reports and shall give Seller a reasonable opportunity (at Seller's own expense)
to comment on any submissions Buyer intends to deliver or submit to the
appropriate Governmental Entity prior to said submission. Seller may, at its own
expense, hire its own consultants, attorneys or other professionals to monitor
the investigation and remediation, including any field work undertaken by Buyer,
and Buyer shall provide Seller with the results of all such field work.
12.8 Third Party Indemnity. Buyer agrees that for all Buyer Losses ,
Buyer will cause the applicable Midstream Company to seek indemnification from
any applicable Third Party Indemnities. Buyer agrees that Seller, at its option,
shall have the right at its expense to pursue a Third Party Indemnity on behalf
of and in the name of the applicable Midstream Company for recovery under a
Third Party Indemnity with legal counsel reasonably satisfactory to Buyer.
Buyer, Seller and any Indemnitee agree to consult with each other with respect
to any action to be taken regarding a Third Party Indemnity and agree that no
action adversely affecting or settlement of a Third Party Indemnity will be
entered into without the written consent of each of Seller, the applicable
Midstream Company and Buyer.
12.9 Tax Treatment of Indemnity Payments. Each of the parties agrees to
treat any payments made in respect of Direct Claims pursuant to this Article
XII, under any other indemnity provision in this Agreement and for any
misrepresentations or breach of warranties or covenants as adjustments to the
Purchase Price for all federal and state income tax purposes.
ARTICLE XIII
MISCELLANEOUS
13.1 Notices. All notices, requests, demands, and other communications
required or permitted to be given or made hereunder by any party hereto shall be
in writing and shall be deemed to have been duly given or made if (i) delivered
personally, (ii) transmitted by first class registered or certified mail,
postage prepaid, return receipt requested, (iii) delivered by prepaid overnight
courier service, or (iv) delivered by confirmed telecopy or facsimile
transmission to the parties at the following addresses (or at such other
addresses as shall be specified by the parties by like notice):
If to Buyer:
AEP Resources, Inc.
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
General Counsel and Vice President
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
A Professional Corporation
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: C. ▇▇▇▇▇▇ ▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
If to any Seller:
ERI Supply & Logistics
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Corporate Secretary
Equitable Resources, Inc.
420 Boulevard of the Allies
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
Such notices, requests, demands, and other communications shall be effective (i)
if delivered personally or sent by courier service, upon actual receipt by the
intended recipient, (ii) if mailed, upon the earlier of five days after deposit
in the mail or the date of delivery as shown by the return receipt therefor or
(iii) if sent by telecopy or facsimile transmission, when the answer back is
received.
13.2 Entire Agreement. This Agreement, together with the Schedules and
other writings referred to herein or delivered pursuant hereto, including the
Confidentiality Agreement, constitute the entire agreement between the parties
hereto 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. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein or therein. It is expressly
acknowledged and agreed that there are no restrictions, promises,
representations, warranties, covenants or undertakings contained in the
Equitable Resources, Inc. Descriptive Memorandum for the sale of its Gulf Coast
Natural Gas Midstream Operations dated May 1998, or the Solicitation Letter,
dated July 31, 1998, previously made available to Buyer by Seller and ▇. ▇.
▇▇▇▇▇▇ Securities, Inc.
13.3 Binding Effect: Assignment: No Third Party Benefit. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Except as otherwise expressly
provided in this Agreement, neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties. Prior to Closing,
Equitable Resources Energy Company may assign its rights and obligations under
this Agreement to a new wholly owned entity in connection with the transfer of
all the capital stock of Equitable Pipeline Company to such entity. In
connection with the Closing, Buyer may assign its rights under this Agreement to
one or more of its present or future affiliates. Except as expressly provided
herein, nothing in this Agreement, express or implied, is intended to or shall
confer upon any person other than the parties hereto, and their respective
successors and permitted assigns, any rights, benefits, or remedies of any
nature whatsoever under or by reason of this Agreement.
13.4 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.
13.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
13.6 Further Assurances. From time to time following the Closing, at
the request of any party hereto and without further consideration, the other
party or parties hereto shall execute and deliver to such requesting party such
instruments and documents and take such other action (but without incurring any
material financial obligation) as such requesting party may reasonably request
in order to consummate more fully and effectively the transactions contemplated
hereby.
13.7. 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.
13.8 Gender. Pronouns in masculine, feminine, and neuter genders shall
be construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa, unless the context otherwise
requires.
13.9 References. All references in this Agreement to Articles,
Sections, and other subdivisions refer to the Articles, Sections, and other
subdivisions of this Agreement unless expressly provided otherwise. The words
"this Agreement", "herein", "hereof", "hereby", "hereunder", and words of
similar import refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. Whenever the words "include",
"includes", and "including" are used in this Agreement, such words shall be
deemed to be followed by the words "without limitation." Each reference herein
to a Schedule, Exhibit or Annex refers to the item identified separately in
writing by the parties hereto as the described Schedule, Exhibit, or Annex to
this Agreement. All Schedules, Exhibits or Annexes are hereby incorporated in
and made a part of this Agreement as if set forth in full herein.
13.10 Counterparts. This Agreement may be executed by the parties
hereto in any number of counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same agreement. Each counterpart
may consist of a number of copies hereof each signed by less than all, but
together signed by all, the parties hereto.
13.11 [Intentionally omitted.]
13.12 Disclosure. Each of the Schedules to this Agreement shall be
deemed to include and incorporate all disclosures made on the other Schedules to
this Agreement. Certain information set forth in the Schedules is included
solely for informational purposes and may not be required to be disclosed
pursuant to this Agreement. It is understood and agreed that the specification
of any dollar amount in the representations and warranties contained in this
Agreement or the inclusion of any specific item in the Schedules is not intended
to imply that such amounts or higher or lower amounts, or the items so included
or other items, are or are not material, and no party shall use the fact of the
setting of such amounts or the fact of the inclusion of any such item in the
Schedules in any dispute or controversy between the parties as to whether any
obligation, item, or matter not described herein or included in a Schedule is or
is not material for purposes of this Agreement.
13.13 Consent to Jurisdiction. The parties hereto hereby irrevocably
submit to the jurisdiction of the courts of the Commonwealth of Pennsylvania and
the federal courts of the United States of America located in Allegheny County,
Pennsylvania, and appropriate appellate courts therefrom, over any dispute
arising out of or relating to this Agreement or any of the transactions
contemplated hereby, and each party hereby irrevocably agrees that all claims in
respect of such dispute or proceeding shall be heard and determined in such
courts. The parties hereby irrevocably waive, to the fullest extent permitted by
Applicable Law, any objection which they may now or hereafter have to the laying
of venue of any dispute arising out of or relating to this Agreement or any of
the transactions contemplated hereby brought in such court or any defense of
inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
This consent to jurisdiction is being given solely for purposes of this
Agreement and is not intended to, and shall not, confer consent to jurisdiction
with respect to any other dispute in which a party to this Agreement may become
involved.
13.14 Arbitration. In the event the Closing occurs, then
notwithstanding Section 13.13, if any dispute or disagreement arises between
Buyer and Seller under this Agreement (any such dispute or disagreement being
referred to as a "Dispute"), and Buyer and Seller are unable to resolve such
Dispute within thirty (30) days after the date written notice of the Dispute is
given by Buyer or Seller, an arbitrator agreed upon by Buyer and Seller (the
"Arbitrator") shall be employed hereunder to settle such Dispute as soon as
practicable in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. In the event that the parties are unable to agree upon
the appointment of such an arbitrator within 15 business days, then each of
Buyer and Sellers shall within 10 business days appoint an independent
arbitrator, which independent arbitrators shall agree within 10 business days on
the appointment of a third independent arbitrator to whom the Dispute shall be
submitted. Buyer and Sellers shall submit the Dispute to the Arbitrator within 5
business days of its appointment and shall cooperate with each other and
otherwise use commercially reasonable efforts to cause the Arbitrator to make
its decision within 60 days after referral of a Dispute to it. The Arbitrator
shall have access to all documents and facilities necessary to perform its
function as arbitrator. The Arbitrator's determination with respect to any
Dispute shall be final and binding upon the parties hereto. The non-prevailing
party as determined by the Arbitrator shall pay all of the fees and expenses of
the Arbitrator for such services.
13.15 Bulk Sales or Transfer Laws. The Buyer hereby waives compliance
by the Seller with the provisions of the bulk sales or transfer laws of all
applicable jurisdictions.
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused
this Agreement to be executed by their duly authorized representatives, all as
of the day and year first above written.
SELLERS:
EQUITABLE RESOURCES ENERGY COMPANY
By:
Name:
Title:
ET BLUE GRASS COMPANY
By:
Name:
Title:
EREC NEVADA, INC.
By:
Name:
Title:
ERI SERVICES, INC.
By:
Name:
Title:
BUYER:
AEP RESOURCES, INC.
By:
Name:
Title: