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EXHIBIT B
[Please see attached.]
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
K N ENERGY, INC.,
ROCKIES MERGER CORP.
AND
▇▇▇▇▇▇ ▇▇▇▇▇▇, INC.
DATED AS OF
JULY 8, 1999
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
SECTION 1.1 The Merger.................................................. A-1-1
SECTION 1.2 Closing..................................................... A-1-1
SECTION 1.3 Effective Time.............................................. A-1-1
SECTION 1.4 Effects of the Merger....................................... A-1-1
SECTION 1.5 Certificate of Incorporation and Bylaws of the Surviving
Corporation................................................. A-1-2
SECTION 1.6 Directors and Officers of the Surviving Corporation......... A-1-2
SECTION 1.7 Tax Consequences............................................ A-1-2
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.1 Effect on the Stock of the Constituent Corporations......... A-1-2
SECTION 2.2 Fractional Interests........................................ A-1-3
SECTION 2.3 Exchange of Certificates; Stock Transfer Books.............. A-1-3
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
SECTION 3.1 Organization and Qualification.............................. A-1-4
SECTION 3.2 Subsidiaries................................................ A-1-4
SECTION 3.3 Capitalization.............................................. A-1-5
SECTION 3.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.................................................. A-1-5
SECTION 3.5 Reports and Financial Statements............................ A-1-7
SECTION 3.6 Absence of Certain Changes or Events; Absence of Undisclosed
Liabilities................................................. A-1-7
SECTION 3.7 Litigation; Regulatory Proceedings.......................... A-1-8
SECTION 3.8 Tax Matters................................................. A-1-8
SECTION 3.9 Employee Matters; ERISA..................................... A-1-10
SECTION 3.10 Environmental Protection.................................... A-1-12
SECTION 3.11 Regulation.................................................. A-1-14
SECTION 3.12 Vote Required............................................... A-1-15
SECTION 3.13 Opinions of Financial Advisors.............................. A-1-15
SECTION 3.14 Insurance................................................... A-1-15
SECTION 3.15 Parent Rights Agreement..................................... A-1-16
SECTION 3.16 Brokers..................................................... A-1-16
SECTION 3.17 No Agreements to Sell Parent or Its Assets.................. A-1-16
SECTION 3.18 Assets...................................................... A-1-16
SECTION 3.19 Contracts and Commitments................................... A-1-16
SECTION 3.20 Absence of Breaches or Defaults............................. A-1-18
SECTION 3.21 Labor Matters............................................... A-1-18
SECTION 3.22 Affiliate Transactions...................................... A-1-19
SECTION 3.23 Easements................................................... A-1-19
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SECTION 3.24 Commodity Price Exposure.................................... A-1-19
SECTION 3.25 Year 2000................................................... A-1-20
SECTION 3.26 Intellectual Property and Software.......................... A-1-20
SECTION 3.27 Form S-4 and Joint Proxy Statement.......................... A-1-20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
SECTION 4.1 Organization and Qualification.............................. A-1-21
SECTION 4.2 Subsidiaries................................................ A-1-21
SECTION 4.3 Capitalization.............................................. A-1-22
SECTION 4.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.................................................. A-1-22
SECTION 4.5 Reports and Financial Statements............................ A-1-23
SECTION 4.6 Absence of Certain Changes or Events; Absence of Undisclosed
Liabilities................................................. A-1-24
SECTION 4.7 Litigation; Regulatory Proceedings.......................... A-1-24
SECTION 4.8 Form S-4 and Proxy Statement................................ A-1-25
SECTION 4.9 Tax Matters................................................. A-1-25
SECTION 4.10 Employee Matters; ERISA..................................... A-1-28
SECTION 4.11 Environmental Protection.................................... A-1-29
SECTION 4.12 Regulation.................................................. A-1-30
SECTION 4.13 Insurance................................................... A-1-30
SECTION 4.14 Company Rights Agreement.................................... A-1-31
SECTION 4.15 Brokers..................................................... A-1-31
SECTION 4.16 No Other Agreements to Sell the Company or Its Assets....... A-1-31
SECTION 4.17 Assets...................................................... A-1-31
SECTION 4.18 Contracts and Commitments................................... A-1-31
SECTION 4.19 Absence of Breaches or Defaults............................. A-1-32
SECTION 4.20 Labor Matters............................................... A-1-32
SECTION 4.21 Affiliate Transactions...................................... A-1-33
SECTION 4.22 Easements................................................... A-1-33
SECTION 4.23 Commodity Price Exposure.................................... A-1-33
SECTION 4.24 Year 2000................................................... A-1-33
SECTION 4.25 Intellectual Property and Software.......................... A-1-34
SECTION 4.26 Nature of the Company's Business............................ A-1-34
SECTION 4.27 Vote Required............................................... A-1-34
SECTION 4.28 Ownership of Parent Common Stock............................ A-1-34
SECTION 4.29 Section 203 of the DGCL..................................... A-1-34
ARTICLE V
COVENANTS RELATING TO
CONDUCT OF BUSINESS
SECTION 5.1 Conduct of the Company's Business Pending the Merger........ A-1-35
SECTION 5.2 Conduct of Parent's Business Pending the Merger............. A-1-37
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Preparation of Form S-4 and the Joint Proxy Statement;
Stockholder Meetings........................................ A-1-40
SECTION 6.2 No Solicitation............................................. A-1-41
SECTION 6.3 Access to Information....................................... A-1-42
SECTION 6.4 Notification of Certain Matters............................. A-1-42
SECTION 6.5 Further Action.............................................. A-1-43
SECTION 6.6 Stock Exchange Listing...................................... A-1-43
SECTION 6.7 Affiliates.................................................. A-1-43
SECTION 6.8 Public Announcements........................................ A-1-43
SECTION 6.9 Rights Agreement............................................ A-1-43
SECTION 6.10 Takeover Statutes........................................... A-1-43
SECTION 6.11 Transition Management....................................... A-1-44
SECTION 6.12 Employment Agreement........................................ A-1-44
SECTION 6.13 Governance Agreement........................................ A-1-44
SECTION 6.14 No Investment in Parent Common Stock........................ A-1-44
SECTION 6.15 Bank Holding Company Act.................................... A-1-44
ARTICLE VII
CONDITIONS
SECTION 7.1 Conditions to the Obligations of Each Party to Effect the
Merger...................................................... A-1-44
SECTION 7.2 Conditions to the Obligations of Parent and Merger Sub...... A-1-45
SECTION 7.3 Conditions to the Obligations of the Company................ A-1-46
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination................................................. A-1-47
SECTION 8.2 Effect of Termination....................................... A-1-49
SECTION 8.3 Fees and Expenses........................................... A-1-49
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements.................................................. A-1-50
SECTION 9.2 Amendment................................................... A-1-50
SECTION 9.3 Extension; Waiver........................................... A-1-50
SECTION 9.4 Notices..................................................... A-1-51
SECTION 9.5 Certain Definitions......................................... A-1-51
SECTION 9.6 Other Defined Terms......................................... A-1-53
SECTION 9.7 Descriptive Headings........................................ A-1-55
SECTION 9.8 Severability................................................ A-1-55
SECTION 9.9 Counterparts................................................ A-1-55
SECTION 9.10 Entire Agreement; No Third Party Beneficiaries.............. A-1-56
SECTION 9.11 Governing Law............................................... A-1-56
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SECTION 9.12 Assignment.................................................. A-1-56
SECTION 9.13 Specific Performance........................................ A-1-56
EXHIBIT A -- Form of Affiliate Letter............................................ A-1-57
EXHIBIT B -- Form of Employment Agreement (intentionally omitted)
EXHIBIT C -- Form of Governance Agreement (intentionally omitted)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July 8, 1999,
by and among K N Energy, Inc., a Kansas corporation ("Parent"), Rockies Merger
Corp., a Delaware corporation and wholly-owned subsidiary of Parent ("Merger
Sub"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc., a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each approved the merger of Merger Sub with and into the Company (the "Merger")
in accordance with the Delaware General Corporation Law (the "DGCL");
WHEREAS, as an inducement and a condition to Parent and Merger Sub entering
into this Agreement and incurring the obligations set forth herein, certain
stockholders of the Company have, simultaneously herewith, entered into a Voting
Agreement whereby they have agreed, among other things, to vote in favor of the
Merger; and
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that
this Agreement is intended to be and hereby is adopted as a plan of
reorganization within the meaning of Section 368 of the Code.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained in this Agreement, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, Merger Sub shall be
merged with and into the Company at the Effective Time (as defined in Section
1.3). Following the Effective Time, the Company shall be the surviving
corporation (sometimes referred to herein as the "Surviving Corporation").
SECTION 1.2 Closing. The closing of the Merger (the "Closing") will take
place (a) at 10:00 a.m. on the second business day after satisfaction or waiver
of all of the conditions to the respective obligations of the parties set forth
in Article VII hereof or (b) at such other time and date as Parent and the
Company shall agree (such date and time on and at which the Closing occurs being
referred to herein as the "Closing Date"). At the Closing, there shall be
delivered to Parent and the Company certificates and other documents and
instruments required to be delivered under Article VII hereof. The Closing shall
take place at such location as Parent and the Company shall agree.
SECTION 1.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, a certificate of merger (the
"Certificate of Merger") shall be properly executed and duly filed with the
Secretary of State of the State of Delaware as provided in the DGCL. The Merger
shall become effective upon the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware (the "Effective Time").
SECTION 1.4 Effects of the Merger. At the Effective Time, (a) the separate
existence of Merger Sub shall cease and Merger Sub shall be merged with and into
the Company (the Company
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and Merger Sub are sometimes referred to herein as the "Constituent
Corporations") and (b) the Merger shall have the effects set forth in the DGCL.
SECTION 1.5 Certificate of Incorporation and Bylaws of the Surviving
Corporation. At the Effective Time and without any further action on the part of
the Company and Merger Sub, the Certificate of Incorporation and the Bylaws of
the Company as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation and the Bylaws of the Surviving Corporation until
thereafter amended as provided therein and under the DGCL.
SECTION 1.6 Directors and Officers of the Surviving Corporation. The
directors and officers of the Company in office immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation
and shall hold office until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
SECTION 1.7 Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Code,
and each of Parent, Merger Sub and the Company hereby adopt this Agreement as a
"plan of reorganization" for purposes of the Code.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.1 Effect on the Stock of the Constituent Corporations. As of the
Effective Time, by virtue of the Merger and without any action on the part of
the holders of any shares of stock of the Constituent Corporations:
(a) Conversion of Merger Sub Stock. Each share of common stock of
Merger Sub, par value $.01 per share, issued and outstanding immediately
prior to the Effective Time shall be converted into and become one fully
paid and nonassessable share of Class A common stock, par value $.01 per
share, of the Surviving Corporation.
(b) Cancellation of Treasury Shares. Each share of Class A common
stock, par value $.01 per share, of the Company ("Class A Common Stock")
and each share of Class B common stock, par value $.01 per share, of the
Company ("Class B Common Stock," and together with the Class A Common
Stock, "Company Common Stock") that is held in the treasury of the Company
immediately prior to the Effective Time shall automatically be cancelled
and retired without any conversion thereof and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.1(d),
each share of Company Common Stock issued and outstanding immediately prior
to the Effective Time, other than shares to be cancelled in accordance with
Section 2.1(b), shall automatically be converted into and become the right
to receive 3917.957 (the "Exchange Ratio") fully paid and nonassessable
shares of common stock, par value $5.00 per share, of Parent ("Parent
Common Stock"), which shall constitute the Merger consideration (the
"Merger Consideration"). As of the Effective Time, shares of Company Common
Stock shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing any such Company Common Stock shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
upon surrender of such certificate. In no event shall interest be paid or
accrued on the Merger Consideration.
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(d) Appraisal Rights. Notwithstanding any other provision of this
Agreement to the contrary, shares of Company Common Stock outstanding
immediately prior to the Effective Time and held by a holder who has timely
objected to and not voted in favor of the Merger or consented thereto in
writing and who has demanded appraisal in writing for such Company Common
Stock in accordance with Section 262 of the DGCL shall not be converted
into a right to receive the Merger Consideration, unless such holder fails
to perfect or withdraws or otherwise loses its right to appraisal. If after
the Effective Time such holder fails to perfect or withdraws or loses its
rights to appraisal, or if it is determined that such holder does not have
an appraisal right, such shares of Company Common Stock shall be treated as
if they had been exchanged as of the Effective Time for a right to receive
the Merger Consideration in accordance with this Article II. The Company
shall give Parent and Merger Sub prompt notice of any demands received by
the Company for appraisal of shares of Company Common Stock, and Parent and
Merger Sub shall have the right to participate in all negotiations and
proceedings with respect to such demands except as required by applicable
law. The Company shall not, except with prior written consent of Parent and
Merger Sub, make any payment with respect to, or settle or offer to settle,
any such demands.
SECTION 2.2 Fractional Interests. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued in connection with the
Merger, and such fractional interests shall not entitle the owner thereof to any
rights of a stockholder of Parent. In lieu of any such fractional interests,
each holder of shares of Company Common Stock exchanged pursuant to Section
2.1(c) who would otherwise have been entitled to receive a fraction of a share
of Parent Common Stock (after taking into account all shares of Company Common
Stock then held by such holder) shall receive cash (without interest) in an
amount equal to the product of such fractional part of a share of Parent Common
Stock multiplied by the average of the closing prices of the Parent Common Stock
on the New York Stock Exchange ("NYSE") as reported on the NYSE Composite
Transaction Tape for the 10 trading days immediately preceding the Closing Date.
SECTION 2.3 Exchange of Certificates; Stock Transfer Books.
(a) Exchange of Shares. At the Effective Time, each holder of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented shares of Company Common Stock (the "Certificates") shall
receive, upon surrender to the Surviving Corporation of one or more Certificates
for cancellation, (i) a certificate representing that number of whole shares of
Parent Common Stock which such holder has the right to receive pursuant to the
provisions of Section 2.1(c), (ii) a certified or bank cashier's check in an
amount equal to the cash, if any, which such holder has the right to receive
pursuant to the provisions of Section 2.2, after giving effect to any required
tax withholdings and (iii) any dividends or distributions to which such holder
is entitled to pursuant to Section 2.3(d), and the Certificate so surrendered
shall forthwith be cancelled. Certificates surrendered for exchange by any
Person (as defined in Section 9.5) constituting an "affiliate" of the Company
for purposes of Rule 145(c) under the Securities Act of 1933, as amended (the
"Securities Act"), shall not be exchanged, nor shall any Person have the right
to receive the Merger Consideration with respect to any share of Company Common
Stock owned by such Person, until Parent has received a written agreement from
such Person as provided in Section 6.7.
(b) Transfer Taxes. If any certificates for shares of Parent Common Stock
are to be issued in a name other than that in which the Certificate surrendered
in exchange therefor is registered, it shall be a condition of such exchange
that the Person requesting such exchange shall pay to the Surviving Corporation
any transfer or other Taxes required by reason of the issuance of certificates
for such shares of Parent Common Stock in a name other than that of the
registered holder of the Certificate surrendered, or shall establish to the
satisfaction of the Surviving Corporation that such Tax has been paid or is not
applicable.
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(c) Closing Transfer Books. From and after the Effective Time, the stock
transfer books of the Company shall be closed and thereafter there shall be no
further registration of transfers of shares of Company Common Stock on the
records of the Company.
(d) Dividends and Other Distributions. No dividends or other distributions
declared or made after the Effective Time with respect to shares of Parent
Common Stock shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock such holder is entitled to receive
until the holder of such Certificate shall surrender such Certificate in
accordance with the provisions of this Agreement. Upon such surrender, Parent
shall cause to be paid to the Person in whose name the certificates representing
such shares of Parent Common Stock shall be issued, any dividends or
distributions with respect to such shares of Parent Common Stock which have a
record date after the Effective Time and shall have become payable between the
Effective Time and the time of such surrender. In no event shall the Person
entitled to receive such dividends or distributions be entitled to receive
interest thereon.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub each hereby represents and warrants to the Company as
follows:
SECTION 3.1 Organization and Qualification. Except as set forth in Section
3.1 of the disclosure schedule delivered by Parent to the Company concurrently
with the execution of this Agreement (the "Parent Disclosure Schedule"), Parent
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Kansas, has all requisite corporate power and authority,
and has been duly authorized by all necessary approvals and orders, to own,
lease and operate its Assets (as hereinafter defined) and to carry on its
business as it is now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its Assets (as hereinafter defined) makes such
qualification necessary other than in such jurisdictions where the failure to be
so qualified and in good standing will not, when taken together with all other
such failures, have a Parent Material Adverse Effect (as hereinafter defined).
SECTION 3.2 Subsidiaries. Section 3.2 of the Parent Disclosure Schedule
sets forth a description as of the date hereof of all Subsidiaries (as defined
in Section 9.5) of Parent and each other corporation, partnership, limited
liability company, business, trust or other Person in which Parent or any of its
Subsidiaries owns, directly or indirectly, an interest in the equity (other than
publicly traded securities which constitute less than 5% of the outstanding
securities of such series or class) including the name of each such Person and
Parent's interest therein, and, as to each Subsidiary identified as a "Material
Parent Entity" in Section 3.2 of the Parent Disclosure Schedule, a brief
description of the principal line or lines of business conducted by each such
entity. Except as set forth in Section 3.2 of the Parent Disclosure Schedule,
each of Parent's Subsidiaries is duly organized, validly existing and in good
standing under the laws of its state or county of organization, has all
requisite organizational power and authority, and has been duly authorized by
all necessary approvals and orders, to own, lease and operate its Assets and to
carry on its business as it is now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its Assets make such qualification
necessary other than in such jurisdictions where the failure to be so qualified
and in good standing will not, when taken together with all other such failures,
have a Parent Material Adverse Effect. Except as set forth in Section 3.2 of the
Parent Disclosure Schedule, all of the issued and outstanding shares of capital
stock of each Subsidiary of Parent are validly issued, fully paid, nonassessable
and
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free of preemptive rights, are owned directly or indirectly by Parent free and
clear of any liens, claims, encumbrances, security interests, equities, charges
and options of any nature whatsoever ("Encumbrances") and there are no
outstanding subscriptions, options, calls, contracts, voting trusts, proxies or
other commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating any such Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of its capital stock or obligating it to grant, extend or enter into any
such agreement or commitment.
SECTION 3.3 Capitalization. The authorized capital stock of Parent
consists of (i) 150,000,000 shares of Parent Common Stock, (ii) 200,000 shares
of Class A Preferred Stock, without par value (the "Parent Class A Preferred
Stock"), of which 70,000 shares have been designated as a series of "Class A $5
Cumulative Preferred Stock," 1,200 shares have been designated as a series of
"Class A $5.65 Cumulative Preferred Stock" and 125,000 shares have been
designated as a series of "Class A $8.50 Cumulative Preferred Stock" and (iii)
2,000,000 shares of Class B Preferred Stock, without par value (the "Parent
Class B Preferred Stock"), of which 120,000 shares have been designated as a
series of "Class B $8.30 Series Cumulative Preferred Stock" and 150,000 shares
have been designated as "Class B Junior Participating Series Preferred Stock."
As of the close of business on July 6, 1999, there were issued and outstanding
(i) 70,897,055 shares of Parent Common Stock, (ii) no shares of Parent Class A
Preferred Stock and (iii) no shares of Parent Class B Preferred Stock. All of
the issued and outstanding shares of the capital stock of Parent are validly
issued, fully paid, nonassessable and free of preemptive rights. Except as set
forth in Section 3.3 of the Parent Disclosure Schedule, as of the date hereof,
there are no outstanding subscriptions, options, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating Parent
or any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of Parent or
obligating Parent or any of its Subsidiaries to grant, extend or enter into any
such agreement or commitment, other than (x) Parent's 8.25% Premium Equity
Participating Security Units-PEPS Units ("PEPS Units") (which are exchangeable,
in the aggregate, for up to 16,059,000 shares of Parent Common Stock) and (y)
under the Parent Rights Agreement (as hereinafter defined). Except as set forth
in Section 3.3 of the Parent Disclosure Schedule, Parent has no commitments or
obligations to purchase or redeem any shares of capital stock of Parent or any
of its Subsidiaries. There are no stockholder agreements, voting trusts, proxies
or other agreements or understandings to which Parent or any of its Subsidiaries
is a party or by which Parent or any of its Subsidiaries is bound relating to
the voting of any shares of the capital stock of Parent or any of its
Subsidiaries by any Person other than Parent or a Subsidiary of Parent. True,
accurate and complete copies of the Restated Articles of Incorporation and
Bylaws of Parent and the charter and bylaws or other organizational documents
and operating agreements for each Subsidiary of Parent, as in effect on the date
hereof, have previously been made available to the Company.
SECTION 3.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. Each of Parent and Merger Sub has all requisite power and
authority to enter into this Agreement and, subject to obtaining the Parent
Stockholders' Approval (as hereinafter defined) and each of the statutory
approvals listed in Section 3.4(c) (the "Parent Required Statutory Approvals"),
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation by Parent and Merger Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub, subject to obtaining the
applicable Parent Stockholders' Approval. This Agreement has been duly and
validly executed and delivered by Parent and Merger Sub and, assuming the due
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authorization, execution and delivery hereof by the Company, constitutes the
valid and binding obligation of Parent and Merger Sub enforceable against each
of them in accordance with its terms (subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law)). Each
member of the Board of Directors of Parent and each of its executive officers
has advised Parent that he or she currently intends to vote or cause to be voted
all shares of Parent Common Stock owned by him or her in favor of approval of
this Agreement.
(b) Non-Contravention. Except as set forth in Section 3.4(b) of the Parent
Disclosure Schedule, the execution and delivery of this Agreement by Parent and
Merger Sub does not, and the consummation of the transactions contemplated
hereby will not (with or without notice or lapse of time or both), (i) violate
or conflict with any provision of the Restated Articles of Incorporation or
Bylaws of Parent or similar governing documents of any of Parent's Subsidiaries,
(ii) subject to obtaining the Parent Required Statutory Approvals and the Parent
Stockholders' Approval, violate or conflict with any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction, writ, permit or license
of any Governmental Authority (as hereinafter defined) applicable to Parent or
any of its Subsidiaries or any of their respective Assets or (iii) subject to
obtaining the third-party consents set forth in Section 3.4(b) of the Parent
Disclosure Schedule (the "Parent Required Consents"), violate, conflict with, or
result in a breach of any provision of, or constitute a default under, or
trigger any obligation to repurchase, redeem or otherwise retire indebtedness
under, or result in the termination of, or accelerate the performance required
by, or result in a right of termination, cancellation, or acceleration of any
obligation or the loss of a material benefit under, or result in the creation of
any Encumbrance upon any of the Assets of Parent or any of its Subsidiaries
pursuant to any provisions of any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Parent or any of its
Subsidiaries is now a party or by which it or any of its Assets may be bound or
affected, except, in the case of clauses (ii) and (iii), as would not, in the
aggregate, have or be reasonably likely to have a Parent Material Adverse
Effect.
(c) Statutory Approvals. Except for (i) applicable requirements, if any, of
the Securities Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and state securities or "blue sky" laws ("Blue Sky Laws"), (ii)
the pre-merger notification requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act") or filings or notifications under the antitrust, competition or
similar laws of any foreign jurisdiction, (iii) the filing of the Certificate of
Merger pursuant to the DGCL, (iv) applicable filings with and approvals of the
California Public Utility Commission (the "CPUC"), (v) applicable filings with
and approvals of the Federal Energy Regulatory Commission (the "FERC") and (vi)
any notices or filings not required to be given or made until or after the
Effective Time, no declaration, filing or registration with, or notice to or
authorization, consent or approval of, any court, governmental or regulatory
body (including a stock exchange or other self-regulatory body) or authority,
domestic or foreign (each, a "Governmental Authority") is necessary for the
execution and delivery of this Agreement by Parent and Merger Sub or the
consummation by Parent and Merger Sub of the transactions contemplated hereby,
except for such notices, reports, filings, waivers, consents, approvals or
authorizations that, if not made or obtained, would not, in the aggregate, have
or reasonably be expected to have a Parent Material Adverse Effect.
(d) Compliance. Except as set forth in Section 3.4(d) of the Parent
Disclosure Schedule or as disclosed in the Parent SEC Reports (as hereinafter
defined), neither Parent nor any of its Subsidiaries is in violation of or, to
Parent's knowledge, is under investigation with respect to, or has been given
notice or been charged with any violation of, any law, statute, order, rule,
regulation,
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ordinance or judgment of any Governmental Authority, except for violations,
investigations and charges relating to Environmental Laws (which are the subject
of Section 3.10) and except for violations, investigations and charges that, in
the aggregate, would not have or reasonably be expected to have a Parent
Material Adverse Effect. Except as set forth in Section 3.4(d) of the Parent
Disclosure Schedule, Parent and each of its Subsidiaries have all permits,
licenses, franchises and other governmental authorizations, consents and
approvals necessary to conduct their businesses as presently conducted except
for Environmental Permits (which are the subject of Section 3.10) and permits,
licenses, franchises, authorizations, consents and approvals the failure to
possess, in the aggregate, would not have or reasonably be expected to have a
Parent Material Adverse Effect.
SECTION 3.5 Reports and Financial Statements. The filings required to be
made by Parent and its Subsidiaries since January 1, 1996 under the Securities
Act, the Exchange Act, the Federal Power Act (the "Power Act"), the Natural Gas
Act (the "Gas Act"), the Natural Gas Policy Act (the "NGPA"), the Public Utility
Holding Company Act of 1935, as amended (the "1935 Act"), or any applicable
state laws, rules or regulations have been filed with the Securities and
Exchange Commission (the "SEC"), the applicable public utility regulatory
authorities or the FERC, as the case may be, including all forms, statements,
reports, agreements (oral or written) and all documents, exhibits, amendments
and supplements appertaining thereto, and Parent has complied in all material
respects with all applicable requirements of the appropriate act and the rules
and regulations thereunder. Parent has made available to the Company a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Parent with the SEC since January 1, 1996 (as such
documents have since the time of their filing been amended, the "Parent SEC
Reports"). As of their respective dates, the Parent SEC Reports (i) complied, or
with respect to those not yet filed, will comply, in all material respects with
the applicable requirements of the Securities Act and the Exchange Act and (ii)
did not, or with respect to those not yet filed, will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial statements of
Parent included in the Parent SEC Reports (collectively, the "Parent Financial
Statements") have been, or with respect to those not yet filed, will be prepared
in accordance with GAAP (except as may be indicated therein or in the notes
thereto and except with respect to unaudited statements as permitted by Form
10-Q of the SEC) and fairly present, or with respect to those not yet filed,
will fairly present the financial position of Parent as of the dates thereof and
the results of its operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal,
recurring audit adjustments. Notwithstanding the foregoing, no representation or
warranty is being made in this Section 3.5 with respect to information furnished
in writing by the Company specifically for inclusion in any Parent SEC Report
filed after the date hereof or with respect to any Company SEC Report (as
hereinafter defined) incorporated therein by reference.
SECTION 3.6 Absence of Certain Changes or Events; Absence of Undisclosed
Liabilities. (a) Except as set forth in the Parent SEC Reports or Section 3.6 of
the Parent Disclosure Schedule, from January 1, 1999 through the date hereof
each of Parent and its Subsidiaries has conducted its business in all material
respects only in the ordinary course of such businesses consistent with past
practice and there has not been any (i) declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to the capital stock of Parent other than (x) quarterly cash dividends
of $1.25 per share in respect of the outstanding shares of the Parent Class A $5
Cumulative Preferred Stock, (y) quarterly cash dividends of $.20 per share
(after giving effect to the 3-for-2 stock dividend effected by Parent as of
December 31, 1998) in respect of the outstanding shares of the Parent Common
Stock and (z) as of and after May 31, 1999 semi-annual distributions of up to
$1.82221 per outstanding PEPS Unit payable in accordance with the terms
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thereof; (ii) repurchase, redemption or other acquisition by Parent or any of
its Subsidiaries of any outstanding shares of capital stock or other equity
securities of or other ownership interests in, Parent or any of its
Subsidiaries, except (x) in accordance with any of Parent's Stock Plans (as
defined in Section 9.5) and (y) in connection with Parent's redemption of its
Class A $5 Cumulative Preferred Stock; (iii) material change in any method of
accounting or accounting practices by Parent or any of its Subsidiaries other
than as required by GAAP or applicable law; or (iv) material change in Parent's
business operations, condition (financial or otherwise), results of operations,
assets or liabilities.
(b) Except as set forth in the Parent SEC Reports filed as of the date
hereof, neither Parent nor any of its Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) except (i)
liabilities, obligations or contingencies that are accrued or reserved against
in the consolidated financial statements of Parent or reflected in the notes
thereto for the 3-month period ended March 31, 1999; (ii) normal and recurring
liabilities which were incurred after March 31, 1999 in the ordinary course of
business consistent with past practice; or (iii) liabilities, obligations or
contingencies that would not, in the aggregate, have a Parent Material Adverse
Effect.
SECTION 3.7 Litigation; Regulatory Proceedings. Except as disclosed in the
Parent SEC Reports or as set forth in Section 3.7 of the Parent Disclosure
Schedule, (i) there are, as of the date hereof, no suits, actions, proceedings
or, to the knowledge of Parent, claims pending or, to the knowledge of Parent,
threatened, before a court or other Governmental Authority nor are there, to the
knowledge of Parent, any investigations or reviews pending or threatened
against, relating to or affecting Parent or any of its Subsidiaries and (ii)
there are no judgments, decrees, injunctions or orders of any court,
governmental department, commission, agency, instrumentality or authority or any
arbitrator applicable to Parent or any of its Subsidiaries which, in the
aggregate, could reasonably be expected to have a Parent Material Adverse
Effect.
SECTION 3.8 Tax Matters.
(a) Filing of Timely Tax Returns. Except as set forth in Section 3.8(a) of
the Parent Disclosure Schedule, Parent and each of its Subsidiaries have filed
(or there has been filed on their behalf) all Tax Returns required to be filed
by each of them under applicable law. All Tax Returns were in all material
respects (and, as to Tax Returns not filed as of the date hereof will be) true,
complete and correct and filed on a timely basis.
(b) Payment of Taxes. Parent and each of its Subsidiaries have, within the
time and in the manner prescribed by law, paid (and until the Closing Date will
pay within the time and in the manner prescribed by law) all Taxes that are
currently due and payable except for those contested in good faith and for which
adequate reserves have been taken.
(c) Tax Reserves. Except as set forth in Section 3.8(c) of the Parent
Disclosure Schedule, Parent and its Subsidiaries have established (and until the
Effective Time will maintain) on their books and records reserves adequate to
pay all Taxes, all deficiencies in Taxes asserted or proposed against Parent or
its Subsidiaries and reserves for deferred income taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of Parent or any of
its Subsidiaries except liens for Taxes not yet due and payable.
(e) Withholding Taxes. Parent and each of its Subsidiaries have complied
(and until the Effective Time will comply) in all respects with the provisions
of the Code relating to the payment and withholding of Taxes, including, without
limitation, the withholding and reporting requirements under Sections 1441
through 1464, 3401 through 3406, and 6041 and 6049 of the Code, as well as
similar provisions under any other laws, and have, within the time and in the
manner prescribed by
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law, withheld from employee wages and paid over to the proper governmental
authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns. Except as set forth in
Section 3.8(f) of the Parent Disclosure Schedule, neither Parent nor any of its
Subsidiaries has requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed.
(g) Waivers of Statute of Limitations. Except as set forth in Section
3.8(g) of the Parent Disclosure Schedule, neither Parent nor any of its
Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. Except as set forth in Section
3.8(h) of the Parent Disclosure Schedule, the statute of limitations for the
assessment of all federal income and applicable state income or franchise Taxes
has expired for all related Tax Returns of Parent and each of its Subsidiaries
or those Tax Returns have been examined by the appropriate taxing authorities
for all periods through the date hereof and no deficiency for any such Taxes has
been proposed, asserted or assessed against Parent or any of its Subsidiaries
that has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. Except as set forth in
Section 3.8(i) of the Parent Disclosure Schedule, no audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of Parent or any of its Subsidiaries, and
neither Parent nor any of its Subsidiaries has any knowledge of any threatened
action, audit or administrative or court proceeding with respect to any such
Taxes or Tax Returns.
(j) Powers of Attorney. Except as set forth in Section 3.8(j) of the Parent
Disclosure Schedule, no power of attorney currently in force has been granted by
Parent or any of its Subsidiaries concerning any Tax matter.
(k) Tax Rulings. Except as set forth in Section 3.8(k) of the Parent
Disclosure Schedule, neither Parent nor any of its Subsidiaries has received a
Tax Ruling or entered into a Closing Agreement with any taxing authority that
would have a continuing adverse effect after the Effective Time. "Tax Ruling",
as used in this Agreement, shall mean a written ruling of a taxing authority
relating to Taxes. "Closing Agreement", as used in this Agreement, shall mean a
written and legally binding agreement with a taxing authority relating to Taxes.
(l) Availability of Tax Returns. Except as set forth in Section 3.8(l) of
the Parent Disclosure Schedule, Parent and its Subsidiaries have made available
to the Company complete and accurate copies of all federal income and state
income or franchise Tax Returns, and any amendments thereto, filed by Parent or
any of its Subsidiaries for all taxable years commencing on or after January 1,
1997. Section 3.8(l) of the Parent Disclosure Schedule sets forth all foreign,
state and local jurisdictions in which Parent or any of its Subsidiaries is or
has been subject to Tax and each material type of Tax payable in such
jurisdiction during the taxable years ended December 31, 1998 and December 31,
1997. In addition, Parent and its Subsidiaries have made available to the
Company complete and accurate copies of all audit reports received from any
taxing authority relating to any Tax Return filed by Parent or any of its
Subsidiaries for all taxable years commencing on or after January 1, 1995.
(m) Tax Sharing Agreements. Except as set forth in Section 3.8(m) of the
Parent Disclosure Schedule, no agreements relating to allocating or sharing of
Taxes exist between or among Parent and any of its Subsidiaries.
(n) Code Section 341(f). Neither Parent nor any of its Subsidiaries has
filed (or will file prior to the Closing) a consent pursuant to Section 341(f)
of the Code or has agreed to have
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Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as that term is defined in Section 341(f)(4) of the Code) owned by Parent or
any of its Subsidiaries.
(o) Code Section 168. No property of Parent or any of its Subsidiaries is
property that Parent or any such Subsidiary or any party to this transaction is
or will be required to treat as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Code (as in effect prior to its amendment
by the Tax Reform Act of 1986) or is "tax-exempt use property" within the
meaning of Section 168 of the Code.
(p) Code Section 481 Adjustments. Except as set forth in Section 3.8(p) of
the Parent Disclosure Schedule and except for adjustments that in the aggregate
could not reasonably be expected to have a Parent Material Adverse Effect,
neither Parent nor any of its Subsidiaries is required to include in income any
adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by Parent or any of its Subsidiaries, and
to the best of the knowledge of Parent, the Internal Revenue Service (the "IRS")
has not proposed any such adjustment or change in accounting method.
(q) Tax Attributes. Section 3.8(q) of the Parent Disclosure Schedule sets
forth, with respect to Parent and its Subsidiaries: (i) the amount of and year
of expiration of any net operating loss carryovers and (ii) the amount of and
year of expiration of any tax credit carryovers.
(r) Code Section 338 Elections. Except as set forth in Section 3.8(r)() of
the Parent Disclosure Schedule, no election under Section 338 of the Code (or
any predecessor provision) has been made by or with respect to Parent or any of
its Subsidiaries or any of their respective assets or properties.
(s) Acquisition Indebtedness. Except as set forth in Section 3.8(s) of the
Parent Disclosure Schedule, no indebtedness of Parent or any of its Subsidiaries
is "corporate acquisition indebtedness" within the meaning of Section 279(b) of
the Code.
(t) Code Section 280G. Except as set forth in Section 3.8(t) of the Parent
Disclosure Schedule, neither Parent nor any of its Subsidiaries is a party to
any agreement, contract, or arrangement that could result, on account of the
transactions contemplated hereunder, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G of
the Code.
(u) Affiliated Group. Except as set forth in Section 3.8(u) of the Parent
Disclosure Schedule: (i) none of Parent and its Subsidiaries (A) has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Parent) or (B) has any
liability for Taxes of any other Person (other than any of Parent and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise, and (ii) neither Parent nor any of its Subsidiaries has
engaged in any intercompany transactions within the meaning of Treasury
Regulation Section 1.1502-13 for which any income remains unrecognized as of the
close of the last taxable year prior to the Effective Time.
(v) Tax Treatment of Merger. Parent has not taken or agreed to take any
action, or knows of any circumstances, that (without regard to any action taken
or agreed to be taken by the Company or any of its affiliates) would prevent the
Merger from qualifying as a reorganization within the meaning of Sections
368(a)(1)(A) or 368(a)(2)(E) of the Code.
SECTION 3.9 Employee Matters; ERISA.
(a) Benefit Plans. Section 3.9(a) of the Parent Disclosure Schedule
contains a true and complete list of each material employee benefit plan,
program or arrangement currently sponsored,
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maintained or contributed to by Parent or any of its Subsidiaries for the
benefit of employees, former employees or directors and their beneficiaries or
for which Parent or any of its Subsidiaries may have any liability, including,
but not limited to, any employee benefit plans within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any employment, consulting, non-compete, severance or change in
control agreement (collectively, the "Parent Benefit Plans"). For the purposes
of this Section 3.9 only, the term "Parent" shall be deemed to include
predecessors thereof.
(b) Termination of Parent Benefit Plans; Withdrawal. All of the Parent
Benefit Plans (other than any multiemployer plan, as defined in Section 3(37) of
ERISA) can be terminated by Parent without incurring any material liability.
Subject to any collective bargaining obligations, except as set forth in Section
3.9(b) of the Parent Disclosure Schedule, Parent and its Subsidiaries can
withdraw from participation in any Parent Benefit Plan that is a multiemployer
plan, without incurring any material liability.
(c) Contributions. Except as set forth in Section 3.9(c) of the Parent
Disclosure Schedule, all material contributions and other payments required to
be made as of the date hereof by Parent or any of its Subsidiaries to any Parent
Benefit Plan (or to any person pursuant to the terms thereof) have been made or
the amount of such payment or contribution obligation has been properly
reflected in the Parent Financial Statements in accordance with GAAP.
(d) Qualification; Compliance. Except as set forth in Section 3.9(d) of the
Parent Disclosure Schedule, each of the Parent Benefit Plans (other than any
multiemployer plan as defined in Section 3(37) of ERISA) intended to be
"qualified" within the meaning of Section 401(a) of the Code has been determined
by the IRS to be so qualified, and, to the best knowledge of Parent, no
circumstances exist that are reasonably expected by Parent to result in the
revocation of any such determination. Parent is in compliance in all material
respects with, and each Parent Benefit Plan (other than any multiemployer plan
as defined in Section 3(37) of ERISA) is and has been operated in all material
respects in compliance with, all applicable laws, rules and regulations
governing such plan, including, without limitation, ERISA and the Code. Each
Parent Benefit Plan (other than any multiemployer plan as defined in Section
3(37) of ERISA) intended to provide for the deferral of income, the reduction of
salary or other compensation, or to afford other income tax benefits, complies
with the material requirements of the applicable provisions of the Code or other
laws, rules and regulations required to provide such income tax benefits.
(e) Liabilities. With respect to the Parent Benefit Plans individually and
in the aggregate, no event has occurred, and, to the best knowledge of Parent,
there exists no condition or set of circumstances that is reasonably likely to
subject Parent or any of its Subsidiaries to any liability arising under the
Code, ERISA or any other applicable law (including, without limitation, any
liability to any such plan or the Pension Benefit Guaranty Corporation (the
"PBGC")), or under any indemnity agreement to which Parent is a party, which
liability could reasonably be expected to have a Parent Material Adverse Effect.
(f) Welfare Plans. Except as set forth in Section 3.9(f) of the Parent
Disclosure Schedule, none of the Parent Benefit Plans that are "welfare plans",
within the meaning of Section 3(1) of ERISA, provides for any retiree benefits
other than coverage mandated by applicable law or benefits the full cost of
which is borne by the retiree.
(g) Documents Made Available. Parent has made available to the Company a
true and correct copy of each collective bargaining agreement to which Parent or
any of its Subsidiaries is a party or under which Parent or any of its
Subsidiaries has obligations and, with respect to each Parent Benefit Plan, (i)
such plan and summary plan description, as applicable, (ii) the most recent
annual report
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filed with the IRS, (iii) each related trust agreement, insurance contract,
service provider or investment management agreement (including all amendments to
each such document), (iv) the most recent determination of the IRS with respect
to the qualified status of such plan and (v) the most recent actuarial report or
valuation.
(h) Payments Resulting from Mergers. Except as set forth in Section 3.9(h)
of the Parent Disclosure Schedule or specifically provided for herein, neither
Parent nor any of its Subsidiaries is a party to any plan, agreement or
arrangement pursuant to the terms of which the consummation or announcement of
any transaction contemplated by this Agreement will (either alone or in
connection with the occurrence of any additional or further acts or events)
result in any (A) payment (whether of severance pay or otherwise) becoming due
from Parent or any of its Subsidiaries to any officer, employee, former employee
or director thereof or to a trustee under any "rabbi trust" or similar
arrangement, or (B) benefit under any Parent Benefit Plan being established or
becoming accelerated, or immediately vested or payable.
SECTION 3.10 Environmental Protection.
(a) Compliance. Except as set forth in the Parent SEC Reports or in Section
3.10(a) of the Parent Disclosure Schedule, (i) each of Parent and its
Subsidiaries is in compliance in all material respects with all applicable
Environmental Laws and (ii) to the knowledge of the General Counsel and the
Director of Environmental Health and Safety of Parent, neither Parent nor any of
its Subsidiaries has received any unresolved written communication since January
1, 1996 from any Person or Govern mental Authority that alleges that Parent or
any of its Subsidiaries is not in such compliance with applicable Environmental
Laws.
(b) Environmental Permits. Except as set forth in the Parent SEC Reports or
as set forth in Section 3.10(b) of the Parent Disclosure Schedule, each of
Parent and its Subsidiaries has obtained or has applied for all material
environmental, health and safety permits and governmental authorizations
(collectively, the "Environmental Permits") necessary for the construction of
their facilities or the conduct of their operations, and all such permits are in
good standing or, where applicable, a renewal application has been timely filed
and is pending agency approval, and Parent and its Subsidiaries are in material
compliance with all terms and conditions of the Environmental Permits.
(c) Environmental Claims. Except as set forth in the Parent SEC Reports or
as set forth in Section 3.10(c) of the Parent Disclosure Schedule (i) as of the
date hereof there is no Environmental Claim pending (x) against Parent or any of
its Subsidiaries, (y) to Parent's knowledge, against any Person whose liability
for any Environmental Claim Parent or any of its Subsidiaries has retained or
assumed contractually or (z) against any real or personal property or operations
which Parent or any of its Subsidiaries owns, leases or manages, in whole or in
part, and (ii) there are no past or present actions, activities, circumstances,
conditions, events or incidents which could reasonably be expected to form the
basis of any such Environmental Claim except as would not be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
(d) Releases. Except as set forth in the Parent SEC Reports or as set forth
in Section 3.10(c) or Section 3.10(d) of the Parent Disclosure Schedule, as of
the date hereof there have been no Releases of any Hazardous Substances that
would be reasonably likely to form the basis of any Environmental Claim against
Parent or any of its Subsidiaries, or to Parent's knowledge against any Person
whose liability for any Environmental Claim Parent or any of its Subsidiaries
has retained or assumed contractually, except for those that would not be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
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(e) Predecessors. Except as set forth in the Parent SEC Reports or as set
forth in Section 3.10(e) of the Parent Disclosure Schedule and, to Parent's
knowledge, with respect to any predecessor of Parent or any Subsidiary of
Parent, there is no Environmental Claim pending or, to Parent's knowledge,
threatened, nor any Release of Hazardous Substances that would be reasonably
likely to form the basis of any Environmental Claim, except for those that would
not be expected to have, individually or in the aggregate, a Parent Material
Adverse Effect.
(f) Disclosure. Parent has made available to the Company all material
documents which Parent reasonably believes provide the basis for (i) the cost of
Parent pollution control equipment currently required or known to be required in
the future; (ii) current Parent remediation costs or Parent remediation costs
known or suspected to be required in the future; or (iii) any other
environmental matter affecting Parent, except for those that would not be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
(g) Cost Estimates. No environmental matter set forth in the Parent SEC
Reports or the Parent Disclosure Schedule could reasonably be expected to
substantially differ from the cost or recovery estimates provided in the Parent
SEC Reports or the Parent Disclosure Schedules, as the case may be.
(h) Reports. Each of Parent and its Subsidiaries has made available to the
Company true, complete and correct summaries or copies of all environmental
audits, assessments or investigations, which (i) have been conducted by or on
behalf of Parent or any of its Subsidiaries since January 1, 1996 and (ii) are
available to, or in the possession of, Parent or any of its Subsidiaries on any
currently or formerly owned, leased or operated property.
(i) Release. Except as set forth in Section 3.10(i) of the Parent
Disclosure Schedule, neither Parent nor any of its Subsidiaries has released any
party from any material claim under any Environmental Law or waived any rights
against any other party under any Environmental Law, except for those that would
not be expected to have, individually or in the aggregate, a Parent Material
Adverse Effect.
(j) Prior Indemnification Agreements. Except as set forth in Section
3.10(j) of the Parent Disclosure Schedule, neither Parent nor any of its
Subsidiaries has entered into any material agreement that may require Parent or
any of its Subsidiaries to pay to, reimburse, guarantee, pledge, defend,
indemnify or hold harmless any Person for or against any Environmental Claim,
except for those that would not be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
(k) Definitions.
(i) "Cleanup" means all actions required to: (1) cleanup, remove,
treat or remediate Hazardous Substances in the indoor or outdoor
environment; (2) prevent the Release of Hazardous Substances so that they
do not migrate, endanger or threaten to endanger public health or welfare
or the indoor or outdoor environment; (3) perform pre-remedial studies and
investigations and post-remedial monitoring and care; or (4) respond to any
government requests for information or documents in any way relating to
cleanup, removal, treatment or remediation or potential cleanup, removal,
treatment or remediation of Hazardous Substances in the indoor or outdoor
environment.
(ii) "Environmental Claim" means any claim, action, cause of action,
investigation or notice (written or oral) by any Person alleging potential
liability (including, without limitation, potential liability for
investigatory costs, Cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties)
arising out of, based on or
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resulting from (a) the presence, or Release or threatened Release into the
environment, of any Hazardous Substances at any location, whether or not
now or formerly owned, operated, leased or managed by the Parent or any of
its Subsidiaries or the Company or any of its Subsidiaries, as applicable;
(b) circumstances forming the basis of any violation or alleged violation
of, or responsibility or alleged responsibility under, any Environmental
Law; or (c) any and all claims by any Person seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting
from the presence or Release of any Hazardous Substances.
(iii) "Environmental Laws" means all federal, state, local and foreign
laws, rules, regulations, statutes, common law, ordinances, policies or
directives relating to pollution or protection of human health or the
environment, including without limitation, laws relating to Releases or
threatened Releases of Hazardous Substances or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
disposal, transport or handling of Hazardous Substances and all laws and
regulations with regard to recordkeeping, notification, disclosure and
reporting requirements respecting Hazardous Substances.
(iv) "Hazardous Substances" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, and transformers or
other equipment that contain dielectric fluid containing polychlorinated
biphenyls; (B) any chemicals, materials or substances which are now defined
as or included in the definition of "hazardous substances", "hazardous
wastes", hazardous materials", "extremely hazardous wastes", "restricted
hazardous wastes", "toxic substances", "toxic pollutants", or words of
similar import, under any Environmental Law; and (C) any other chemical,
material, substance or waste, exposure to which is now prohibited, limited
or regulated under any Environmental Law in a jurisdiction in which the
Parent or any of its Subsidiaries or the Company or any of its
Subsidiaries, as applicable, operates.
(v) "Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration
into the indoor or outdoor environment (including, without limitation,
ambient air, surface water, groundwater and surface or subsurface strata)
or into or out of any property, including the movement of Hazardous
Substances through or in the air, soil, surface water, groundwater or
property.
SECTION 3.11 Regulation.
(a) Parent is regulated as a local distribution company or public utility
by the States of Colorado, Wyoming and Nebraska and as a pipeline or gatherer by
the States of Oklahoma, Montana, New Mexico, Colorado, Wyoming, Texas, Kansas
and Utah and by no other state and is a "public utility company" and a "gas
utility company" under the 1935 Act. Except as set forth in Section 3.11(a) of
the Parent Disclosure Schedule, neither Parent (except as aforesaid) nor any of
its Subsidiaries is subject to regulation as a local distribution company,
pipeline, gatherer, storage provider or public utility or public service company
(or similar designation) by any other state in the United States or any foreign
country, is a "holding company," "gas utility company," "electric utility
company," "public utility company" or an "affiliate" of any "public utility
company" (other than Parent) or "holding company" as defined under the 1935 Act
or the holder of an authorization or certificate issued under Section 3 or
Section 7 of the Gas Act.
(b) Parent holds no assets in its own name subject to the jurisdiction of
the United States under Section 7(c) of the Gas Act. Section 3.11(b) of the
Parent Disclosure Schedule sets forth all of Parent's direct and indirect
interests in electrical generation assets. Each of the foregoing electric
generation assets sells all of its electric generating output pursuant to
contracts under, and is defined
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as, a qualifying facility pursuant to the Public Utilities Regulatory Policy Act
of 1978 ("PURPA"). Parent has no direct or indirect control or ownership of
electric transmission facilities.
SECTION 3.12 Vote Required.
(a) The approval of the issuance of shares of Parent Common Stock pursuant
to the Merger by the affirmative vote of a majority of the votes cast by holders
of Parent Common Stock, provided that the total vote cast represents over 50% in
interest of all securities entitled to vote on the matter, is the only vote of
the holders of any class or series of the capital stock of Parent required to
approve the issuance of shares of Parent Common Stock pursuant to the Merger,
this Agreement or the consummation of the transactions contemplated hereby (the
"Parent Stockholders' Approval"), except that approval of the amendment to
Parent's Restated Articles of Incorporation to effect the Parent Name Change (as
hereinafter defined) requires the affirmative vote of a majority of the votes
entitled to be cast by all holders of Parent Common Stock. Other than as set
forth herein, no other vote by the stockholders of Parent (or of any holders of
an equity interest in any Subsidiary of Parent, other than Merger Sub) is
required to approve this Agreement, the Merger or consummation of the
transactions contemplated hereby.
(b) The Board of Directors of Parent has (i) unanimously approved this
Agreement in accordance with the General Corporation Code of Kansas (the
"KGCC"), (ii) determined that the issuance of the Merger Consideration is fair
to, and in the best interests of, the holders of the capital stock of Parent,
and (iii) subject to Section 6.2, resolved to recommend the issuance of shares
of Parent Common Stock pursuant to the Merger to such holders for approval.
(c) Prior to the date hereof, the Board of Directors of Parent has approved
this Agreement, the Merger, the issuance of shares of Parent Common Stock
pursuant to the Merger and the other transactions contemplated hereby (including
the Parent Name Change), and such approval is sufficient to render inapplicable
to the issuance of the Merger Consideration and any of such other transactions
the provisions of Sections 17-12,100 through 17-12,104 of the KGCC and Sections
17-1286 through 17-1298 of the KGCC. To Parent's knowledge, no other state
takeover statute or similar statute or regulation applies or purports to apply
to the Merger, this Agreement, the issuance of the Merger Consideration or any
of the transactions contemplated hereby and no provision of the Restated
Articles of Incorporation or Bylaws of Parent or the charter, bylaws or other
organizational document of any of its Subsidiaries would, directly or
indirectly, restrict or impair the ability of the holders of Company Common
Stock to vote, or otherwise to exercise the rights of a stockholder with respect
to, shares of capital stock of Parent that may be acquired or controlled by the
holders of Company Common Stock as contemplated by this Agreement.
(d) The Board of Directors of Merger Sub has unanimously approved this
Agreement, the transactions contemplated hereby and the Merger in accordance
with the DGCL. Parent, as the sole stockholder of Merger Sub, has approved this
Agreement, the transactions contemplated hereby and the Merger in accordance
with the DGCL.
SECTION 3.13 Opinions of Financial Advisors. Parent has received the
opinions of ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated and of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co., Inc. (together, the "Parent Financial Advisors"), dated July 8,
1999, to the effect that, as of such date, the Exchange Ratio is fair to Parent
from a financial point of view. Parent has been authorized by the Parent
Financial Advisors to permit (or reference thereto) the inclusion of such
fairness opinions in the Form S-4 (as hereinafter defined) and the Joint Proxy
Statement (as hereinafter defined).
SECTION 3.14 Insurance. Except as set forth in Section 3.14 of the Parent
Disclosure Schedule, each of Parent and its Subsidiaries is, and has been
continuously since January 1, 1996, insured with financially responsible
insurers or under other financially responsible arrangements in
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such amounts and against such risks and losses as are customary for companies
conducting the business as conducted by Parent and its Subsidiaries during such
time period. Neither Parent nor its Subsidiaries has received any notice of
cancellation or termination with respect to any material insurance policy of
Parent or its Subsidiaries. The insurance policies of Parent and each of its
Subsidiaries are valid and enforceable policies in all material respects.
SECTION 3.15 Parent Rights Agreement. Parent has delivered to the Company
a true and complete copy of the Rights Agreement, dated as of August 21, 1995,
between Parent and First Chicago Trust Company of New York, as successor Rights
Agent, as amended by Amendment No. 1 to Rights Agreement, dated as of September
8, 1998 (the "Parent Rights Agreement"), as in effect on the date hereof. Prior
to the Effective Time, Parent will have taken all necessary action to amend the
Parent Rights Agreement so that neither the execution of this Agreement nor the
consummation of the Merger and the other transactions contemplated hereby
(including the issuance of the Merger Consideration) will (a) cause the Parent
Rights to become exercisable, (b) cause any holder of Company Common Stock
immediately prior to the Effective Time to become an Acquiring Person (as such
term is defined in the Parent Rights Agreement) or (c) give rise to a
Distribution Date or a Shares Acquisition Date (as those terms are defined in
the Parent Rights Agreement).
SECTION 3.16 Brokers. No broker, finder or investment banker (other than
the Parent Financial Advisors) is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger based upon arrangements made by
or on behalf of Parent. Parent has heretofore furnished to the Company a
complete and correct copy of all agreements between Parent and the Parent
Financial Advisors pursuant to which such firm would be entitled to any payment
relating to the Merger.
SECTION 3.17 No Agreements to Sell Parent or Its Assets. Except as set
forth in Section 3.17 of the Parent Disclosure Schedule, neither Parent nor any
of its Subsidiaries has any legal obligation, absolute or contingent, to any
other Person to sell any material portion of the Assets of Parent or any of its
Subsidiaries, to sell any material portion of the capital stock or other
ownership interests of Parent or any of its Subsidiaries (other than (x)
pursuant to the exercise of any Stock Rights granted under any of Parent's Stock
Plans, (y) the Thermo Agreements (as defined in Section 9.5) or (z) upon
exchange of the PEPS Units), or to effect any merger, consolidation or other
reorganization of Parent or any of its Subsidiaries or to enter into any
agreement with respect thereto. Since January 30, 1999, Parent has executed no
confidentiality agreement with any Person in connection with its consideration
of acquiring all or a substantial part of the Assets or capital stock of Parent
or any of its Subsidiaries.
SECTION 3.18 Assets. Except as set forth in Section 3.18 of the Parent
Disclosure Schedule or except as would not, in the aggregate, have or be
reasonably likely to have a Parent Material Adverse Effect, Parent and its
Subsidiaries have good and marketable or, with respect to Assets located in the
State of Texas, defensible title to or a valid leasehold estate in or a valid
right to use all of the material Assets (other than easements and rights of way
which are the subject of Section 3.23) reflected on Parent's balance sheet at
March 31, 1999 (except for Assets subsequently sold in the ordinary course of
business consistent with past practice). All of such Assets are free and clear
of all Encumbrances (other than Permitted Encumbrances) and have been maintained
in reasonable operating condition and repair, subject to ordinary wear and tear.
SECTION 3.19 Contracts and Commitments. As of the date hereof, Section
3.19 of the Parent Disclosure Schedule contains a complete and accurate list of
all contracts (written or oral), plans, undertakings, commitments or agreements
(including, without limitation, intercompany contracts)
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("Parent Contracts") of the following categories to which Parent or any of its
Subsidiaries is a party or by which any of them is bound as of the date of this
Agreement:
(a) employment contracts, including, without limitation, contracts to
employ executive officers and other contracts with officers, directors or
stockholders of Parent, and all severance, change in control or similar
arrangements with any officers, employees or agents of Parent that will
result in any obligation (absolute or contingent) of Parent or any of its
Subsidiaries to make any payment to any officers, employees or agents of
Parent following the consummation of the transactions contemplated hereby
or termination or change of terms and conditions of employment;
(b) collective bargaining agreements;
(c) (i) all gas sales and purchase Parent Contracts that are not
cancellable or otherwise terminable on or prior to June 30, 2000 and that
have volumes greater than 5,000 MMBtu/day and all firm transportation and
storage Parent Contracts related to the commodity marketing or Texas
intrastate gas marketing operations of Parent, (ii) gathering Parent
Contracts in excess of $2.0 million annually, (iii) gas purchases for plant
shrink and fuel in excess of $6.0 million annually, (iv) liquid hydrocarbon
purchases for purposes of resale in excess of $4.0 million annually, (v)
gas sales at plant outlets in excess of $6.0 million annually, (vi) liquid
hydrocarbon sales in excess of $6.0 million annually, (vii) processing
agreements in excess of $2.0 million annually, (viii) Natural Gas Pipeline
transportation contracts in excess of $2.4 million annually, (ix) Natural
Gas Pipeline storage and balancing contracts in excess of $2.4 million
annually, (x) the 10 largest KN Interstate transportation and/or storage
Parent Contracts (measured by combined annual revenue), (xi) all Mid-Con
Texas Pipeline Contracts with Houston Lighting & Power, (xii) all Mid-Con
Texas Pipeline Contracts with Entex, (xiii) the 10 largest Mid-Con Texas
Pipeline end use sales contracts (measured by annual revenue), (xiv) all
West Texas System Contracts with Energas, (xv) all West Texas System
Contracts with Southwest Public Service, (xvi) all West Texas System
Contracts with Texas Utilities, (xvii) the 10 largest remaining West Texas
System end use sales Contracts (measured by annual revenue), (xviii) all
Rocky Mountain Natural and Northern Gas Company Contracts with Parent's
retail gas divisions, (xix) the 10 largest regulated utility franchise
agreements (measured by annual revenue), (xx) "qualifying facilities" (as
defined under PURPA) Contracts for plant outlet power sales, and (xxi) all
en-able and Orcom Contracts for services which are not cancellable or
otherwise terminable on or prior to December 31, 1999;
(d) Parent Contracts for the purchase of inventory which are not
cancellable (without material penalty, cost or other liability) within one
year and, other than Parent Contracts described elsewhere in this Section
3.19, other Parent Contracts made in the ordinary course of business
involving annual expenditures or liabilities in excess of $1,000,000 which
are not cancellable (without material penalty, cost or other liability)
within 90 days;
(e) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments providing for the lending of money,
whether as borrower, lender or guarantor, in excess of $1,000,000;
(f) Parent Contracts containing covenants limiting the freedom of
Parent or any of its Subsidiaries to engage in any line of business or
compete with any Person or operate at any location, including, without
limitation, any preferential rights granted to third parties;
(g) any Parent Contract pending for the acquisition or disposition,
directly or indirectly (by merger or otherwise) of material Assets (other
than inventory) or capital stock of any Person (including, without
limitation, Parent or any of its Subsidiaries); and
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(h) other than Parent Contracts described elsewhere in this Section
3.19 or Parent Contracts which may be omitted pursuant to the specific size
limitations set forth in other provisions of this Section 3.19, Parent
Contracts between Parent and any of its wholly-owned Subsidiaries, on one
hand, and any Subsidiary of Parent which is not wholly-owned, directly or
indirectly, by Parent, on the other hand.
True copies of the written Parent Contracts identified in Section 3.19 of
the Parent Disclosure Schedule (except as to the Parent Contracts identified in
Section 3.19(c), true copies of only those Parent Contracts which are material
as to one or more of the categories listed in Section 3.19(c)), or with respect
to the Natural Gas Pipeline Transportation and Storage Contracts, true summaries
of all material terms, have been delivered or made available to the Company.
Promptly after the date of this Agreement, Parent shall use its reasonable best
efforts to obtain all required consents to deliver or make available the Natural
Gas Pipeline Transportation and Storage Contracts to the Company and, upon
obtaining such consents, shall deliver or make available to the Company all of
the Natural Gas Pipeline Transportation and Storage Contracts.
SECTION 3.20 Absence of Breaches or Defaults. Except as set forth in
Section 3.20 of the Parent Disclosure Schedule, (i) neither Parent nor any of
its Subsidiaries is in default under, or in breach or violation of (and no event
has occurred which, with notice or the lapse of time or both, would constitute a
default under, or a breach or violation of), any term, condition or provision of
its respective charter, bylaws or other governing documents and (ii) neither
Parent nor any of its Subsidiaries is and, to the knowledge of Parent, no other
party is in default under, or in breach or violation of (and no event has
occurred which, with notice or the lapse of time or both, would constitute a
default under, or a breach or violation of), any term, condition or provision of
any Parent Contract identified on Section 3.19 of the Parent Disclosure Schedule
except for defaults, breaches, violations or events which, individually or in
the aggregate, would not have a Parent Material Adverse Effect; provided that
any defaults, breaches, violations or events with respect to those Parent
Contracts referred to in Section 3.19(e) shall be scheduled without regard to
any Parent Material Adverse Effect. Other than contracts which have terminated
or expired in accordance with their terms, each of the Parent Contracts
identified on Section 3.19 of the Parent Disclosure Schedule is valid, binding
and enforceable in accordance with its terms (subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered on a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing) and is in full force and
effect. To the knowledge of Parent, no event has occurred which either entitles,
or would, on notice or lapse of time or both, entitle the holder of any
indebtedness for borrowed money affecting Parent or any of its Subsidiaries to
accelerate, or which does accelerate, the maturity of any indebtedness affecting
Parent or any of its Subsidiaries, except as set forth in Section 3.20 of the
Parent Disclosure Schedule.
SECTION 3.21 Labor Matters.
(a) Section 3.21(a) of the Parent Disclosure Schedule contains a complete
list of all organizations representing the employees of Parent or any of its
Subsidiaries. As of the date hereof, there is no strike or work stoppage,
pending or, to the knowledge of Parent, threatened, which involves any employees
of Parent or any of its Subsidiaries.
(b) Section 3.21(b) of the Parent Disclosure Schedule contains as of the
date hereof (i) a list of all material unfair employment or labor practice
charges which are presently pending which, to the knowledge of Parent, have been
filed with any Governmental Authority by or on behalf of any employee against
Parent or any of its Subsidiaries and (ii) a list of all material
employment-related litigation, including, without limitation, arbitrations or
administrative proceedings which are presently
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pending, filed by or on behalf of any former, current or prospective employee
against Parent or any of its Subsidiaries.
(c) Except as described in Sections 3.21(a) and (b) of the Parent
Disclosure Schedule, there are not presently pending or, to the knowledge of
Parent, threatened, against Parent or any of its Subsidiaries any claims by any
Governmental Authority, labor organization, or any former, current or
prospective employee alleging that Parent or any such employer has violated any
applicable laws respecting employment practices, except where such claims would
not, individually or in the aggregate, have a Parent Material Adverse Effect.
SECTION 3.22 Affiliate Transactions. Except as set forth in the Parent SEC
Reports and Schedule 3.22 of the Parent Disclosure Schedule, from December 31,
1998 through the date of this Agreement there have been no transactions,
agreements, arrangements or understandings (and no such arrangements are
pending) between Parent or any of its Subsidiaries, on the one hand, and
affiliates of Parent or other Persons, on the other hand, that would be required
to be disclosed under Item 404 of Regulation S-K under the Securities Act.
SECTION 3.23 Easements. The businesses of Parent and each of its
Subsidiaries are being operated in a manner which does not violate (in any
manner which would, or which would be reasonably likely to, have a Parent
Material Adverse Effect) the terms of any easements, rights of way, permits,
servitudes, licenses, leasehold estates and similar rights relating to real
property (collectively, "Easements") used by Parent and each of its Subsidiaries
in such businesses. All Easements are valid and enforceable, except as the
enforceability thereof may be affected by bankruptcy, insolvency or other laws
of general applicability affecting the rights of creditors generally or
principles of equity, and grant the rights purported to be granted thereby and
all rights necessary thereunder for the current operation of such business,
except where the failure of any such Easement to be valid and enforceable or to
grant the rights purported to be granted thereby or necessary thereunder would
have a Parent Material Adverse Effect. There are no special gaps in the
Easements which would impair the conduct of such businesses in a manner which
would, or which would be reasonably likely to, have a Parent Material Adverse
Effect, and no part of the pipelines, equipment and other tangible personal
property used in connection with Parent's pipeline operations is located on
property which is not owned in fee by Parent or a Subsidiary or subject to an
Easement in favor of Parent or a Subsidiary, where the failure of such
pipelines, equipment or assets to be so located would have a Parent Material
Adverse Effect. As of the date of this Agreement, there are no pending or, to
the knowledge of the Company, threatened actions against any Easements which are
reasonably likely to have a Parent Material Adverse Effect.
SECTION 3.24 Commodity Price Exposure. The Risk Management Committee of
Parent has established risk parameters, limits and guidelines in compliance with
the risk management policy approved by Parent's Board of Directors which
parameters, limits and guidelines have been previously provided to the Company
(the "Parent Trading Guidelines") to restrict the level of risk that Parent and
its Subsidiaries are authorized to take with respect to the net position
resulting from all physical commodity transactions, exchange traded futures and
options and over-the-counter derivative instruments (the "Net Parent Position")
and monitors the compliance by Parent and its Subsidiaries with such risk
parameters. As of the date hereof, (i) the Net Parent Position is within the
risk parameters which are set forth in the Parent Trading Guidelines and (ii)
the exposure of Parent and its Subsidiaries with respect to their net position
resulting from all physical commodity transactions, exchange traded futures and
options and over-the-counter derivative instruments is not material to Parent
and its Subsidiaries taken as a whole. Except as previously disclosed in writing
to the Company, as of the date hereof, neither Parent nor any of its
Subsidiaries is a party to any agreement for (x) the purchase, sale,
transportation, storage of petroleum, petroleum products, natural gas, natural
gas liquids, electricity, or other energy products which would result in a loss
or have a
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negative value in excess of $5.0 million when marked to market in accordance
with generally recognized ▇▇▇▇ to market accounting policies that have been
discussed and agreed to by the parties or (y) for the processing of natural gas
and natural gas liquids which would result in a loss in excess of $2.0 million
when valued at market prices as of the date hereof.
SECTION 3.25 Year 2000. All Software and hardware systems currently
utilized by Parent and its Subsidiaries and material to the operation of their
respective businesses are capable of providing or are being adapted or replaced
to provide on or before December 31, 1999 accurate results using data having
date ranges spanning the twentieth and twenty-first centuries, except where the
failure to provide such accurate results is not reasonably expected to have a
Parent Material Adverse Effect.
SECTION 3.26 Intellectual Property and Software.
(a) Parent and its Subsidiaries have used commercially reasonable measures
to protect the confidentiality of the material trade secrets used in connection
with its business. To Parent's knowledge, no material Intellectual Property or
Software used in connection with its businesses has been improperly used,
improperly divulged or misappropriated by Parent or any other Person. As of the
date hereof, neither Parent nor any of its Subsidiaries has made in the past
three years any claim in writing which remains unresolved of a violation,
infringement, misuse or misappropriation by others of rights of Parent and its
Subsidiaries to or in connection with any material Intellectual Property used in
connection with its business. There is no pending or, to the knowledge of
Parent, threatened claim by any third person of a violation, infringement,
misuse or misappropriation by any of Parent or any of its Subsidiaries of any
Intellectual Property or Software owned by any third person, or of the
invalidity of any patent used in connection with its business, that would,
individually or in the aggregate, have a Parent Material Adverse Effect. No
trade secret, formula, process, invention, design, know-how or other information
considered material, confidential or proprietary to Parent or any of its
Subsidiaries has been disclosed or authorized to be disclosed except in the
ordinary course of business or pursuant to any obligation of confidentiality
binding on the recipient.
(b) "Intellectual Property" means intellectual and similar property of
every kind and nature relating to, used or necessary in the operation of the
business of a Person and each of its Subsidiaries, including, without
limitation, all U.S. and foreign patents and patent applications, divisions,
continuations or continuations-in-part, extensions, reissues or substitutions of
any of the foregoing, all U.S. and foreign trademarks, service marks, and
trademark or service ▇▇▇▇ registrations and applications, trade names, logos,
designs, Internet domain names, slogans and general intangibles of like nature,
all registrations and recordings thereof and all extensions and renewals thereof
together with all goodwill symbolized thereby or associated therewith,
copyrights, U.S. and foreign copyright registrations, renewals and applications,
technology, trade secrets and other confidential information, know how,
confidential or proprietary technical and business information, proprietary
processes, formulae, algorithms, models and methodologies, licenses and rights
with respect to the intellectual property, agreements, computer programs,
databases and compilations (and all descriptions, flow-charts, documentation and
other work product related to the foregoing) and all other proprietary rights.
SECTION 3.27 Form S-4 and Joint Proxy Statement. None of the information
supplied or to be supplied by or on behalf of Parent or any of its Subsidiaries
for inclusion or incorporation by reference in (i) the registration statement on
Form S-4 to be filed with the SEC by Parent in connection with the issuance of
the Merger Consideration (the "Form S-4") will, at the time the Form S-4 is
filed with the SEC and at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading and (ii) the proxy statement in definitive form relating
to the meeting of Parent's stockholders and the Company's
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stockholders to be held in connection with the issuance of the Merger
Consideration (the "Joint Proxy Statement") will, at the date mailed to
stockholders of Parent and the Company and at the times of such meetings,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If, at any time prior to the Effective Time, any event with respect
to Parent or any of its Subsidiaries, or with respect to any information
supplied by Parent for inclusion or incorporation by reference in the Form S-4
or the Joint Proxy Statement, shall occur which is required to be described in
an amendment or supplement to, the Form S-4 or the Joint Proxy Statement, such
event shall be so described, and such amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the stockholders of
Parent entitled to vote at the meeting of Parent's stockholders to which the
Joint Proxy Statement applies and to the holders of the Company Common Stock
entitled to vote at the meeting of the Company's stockholders to which the Joint
Proxy Statement applies. The Form S-4 and the Joint Proxy Statement, to the
extent either relates to Parent and its Subsidiaries, will comply as to form in
all material respects with the provisions of the Securities Act and the Exchange
Act, respectively, and the rules and regulations thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows:
SECTION 4.1 Organization and Qualification. Except as set forth in Section
4.1 of the disclosure schedule delivered by the Company to Parent and Merger Sub
concurrently with the execution of this Agreement (the "Company Disclosure
Schedule"), the Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has all requisite
corporate power and authority, and has been duly authorized by all necessary
approvals and orders, to own, lease and operate its Assets and to carry on its
business as it is now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its Assets makes such qualification necessary
other than in such jurisdictions where the failure to be so qualified and in
good standing will not, when taken together with all other such failures, have a
Company Material Adverse Effect.
SECTION 4.2 Subsidiaries. Section 4.2 of the Company Disclosure Schedule
sets forth a description as of the date hereof of all Subsidiaries of the
Company and each other corporation, partnership, limited liability company,
business, trust or other Person in which the Company or any of its Subsidiaries
owns, directly or indirectly, an interest in the equity (other than publicly
traded securities which constitute less than 5% of the outstanding securities of
such series or class) including the name of each such Person and the Company's
interest therein, and, as to each Subsidiary identified as a "Material Company
Entity" in Section 4.2 of the Company Disclosure Schedule, a brief description
of the principal line or lines of business conducted by each such entity. Except
as set forth in Section 4.2 of the Company Disclosure Schedule, each of
Company's Subsidiaries is duly organized, validly existing and in good standing
under the laws of its state of organization, has all requisite organizational
power and authority, and has been duly authorized by all necessary approvals and
orders, to own, lease and operate its Assets and to carry on its business as it
is now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its Assets make such qualification necessary other than
in such jurisdictions where the failure to be so qualified and in good standing
will not, when taken together with all other such failures, have a Company
Material Adverse Effect. Except as set forth in Section 4.2 of the Company
Disclosure Schedule, all of the issued and outstanding shares of
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capital stock of each Subsidiary of the Company are validly issued, fully paid,
nonassessable and free of preemptive rights, are owned directly or indirectly by
the Company free and clear of any Encumbrances and there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating any such Subsidiary to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of its
capital stock or obligating it to grant, extend or enter into any such agreement
or commitment.
SECTION 4.3 Capitalization. The authorized capital stock of the Company
consists of (i) 25,000 shares of Class A Common Stock, par value $0.01, of
which, as of the date hereof, 8,047 shares are issued and outstanding and (ii)
25,000 shares of Class B Common Stock, par value $0.01, of which, as of the date
hereof, 2,541 shares are issued and outstanding. All of the issued and
outstanding shares of the capital stock of the Company are validly issued, fully
paid, nonassessable and free of preemptive rights. Section 4.3 of the Company
Disclosure Schedule sets forth a list of holders of Company Common Stock and the
number of shares held by each holder. As of the date hereof, there are no
outstanding subscriptions, options, calls, contracts, voting trusts, proxies or
other commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of the capital stock of the Company or obligating the
Company or any of its Subsidiaries to grant, extend or enter into any such
agreement or commitment other than the conversion of the Company's Class B
Common Stock under the Company's Restated Certificate of Incorporation. Except
as set forth in Section 4.3 of the Company Disclosure Schedule, the Company has
no commitments or obligations to purchase or redeem any shares of capital stock
of the Company or any of its Subsidiaries. Except as set forth in Section 4.3 of
the Company Disclosure Schedule, there are no stockholder agreements, voting
trusts, proxies or other agreements or understandings to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound relating to the voting of any shares of the capital stock
of the Company or any of its Subsidiaries by any Person other than the Company
or a Subsidiary of the Company. True, accurate and complete copies of the
Restated Certificate of Incorporation and Bylaws of the Company, the charter and
bylaws or other organizational documents and operating agreements for each
Subsidiary of the Company and all shareholder, partnership or similar agreements
to which the Company or any of its Subsidiaries is a party, as in effect on the
date hereof, have previously been delivered to Parent.
SECTION 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. The Company has all requisite power and authority to enter
into this Agreement and, subject to obtaining the Company Stockholders' Approval
(as hereinafter defined) and each of the statutory approvals listed in Section
4.4(c) (the "Company Required Statutory Approvals"), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject to obtaining the applicable Company Stockholders' Approval.
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery hereof by Parent and
Merger Sub, constitutes the valid and binding obligation of the Company
enforceable against it in accordance with its terms (subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law)).
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(b) Non-Contravention. Except as set forth in Section 4.4(b) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by the Company
does not, and the consummation of the transactions contemplated hereby will not
(with or without notice or lapse of time or both), (i) violate or conflict with
any provision of the Restated Certificate of Incorporation or Bylaws of the
Company or similar governing documents of any of the Company's Subsidiaries,
(ii) subject to obtaining the Company Required Statutory Approvals and the
Company Stockholders' Approval, violate or conflict with any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any Governmental Authority applicable to the Company or any of its
Subsidiaries or any of their respective Assets or (iii) subject to obtaining the
third-party consents set forth in Section 4.4(b) of the Company Disclosure
Schedule (the "Company Required Consents"), violate, conflict with, or result in
a breach of any provision of, or constitute a default under, or trigger any
obligation to repurchase, redeem or otherwise retire indebtedness under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination, cancellation, or acceleration of any
obligation or the loss of a material benefit under, or result in the creation of
any Encumbrance upon any of the Assets of the Company or any of its Subsidiaries
pursuant to any provisions of any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Company or any of
its Subsidiaries is now a party or by which it or any of its Assets may be bound
or affected, except, in the case of clauses (ii) and (iii), as would not, in the
aggregate, have or be reasonably likely to have a Company Material Adverse
Effect.
(c) Statutory Approvals. Except for (i) applicable requirements, if any, of
the Securities Act, the Exchange Act or "Blue Sky Laws," (ii) the pre-merger
notification requirements of the HSR Act or filings or notifications under the
antitrust, competition or similar laws of any foreign jurisdiction, (iii) the
filing of the Certificate of Merger pursuant to the DGCL, (iv) applicable
filings with and approvals by the CPUC, (v) applicable filings with and
approvals of the FERC and (vi) any notices or filings not required to be given
or made until or after the Effective Time, no declaration, filing or
registration with, or notice to or authorization, consent or approval of, any
Governmental Authority is necessary for the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, except for such notices, reports, filings, waivers,
consents, approvals or authorizations that, if not made or obtained, would not,
in the aggregate, have or reasonably be expected to have a Company Material
Adverse Effect.
(d) Compliance. Except as set forth in Section 4.4(d) of the Company
Disclosure Schedule or as disclosed in the Company SEC Reports, neither the
Company nor any of its Subsidiaries is in violation of or, to the Company's
knowledge, is under investigation with respect to, or has been given notice or
been charged with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment of any Governmental Authority, except for violations,
investigations and charges relating to Environmental Laws (which are the subject
of Section 4.11) and except for violations, investigations and charges that, in
the aggregate, would not have or reasonably be expected to have a Company
Material Adverse Effect. Except as set forth in Section 4.4(d) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries have all permits,
licenses, franchises and other governmental authorizations, consents and
approvals necessary to conduct their businesses as presently conducted except
for Environmental Permits (which are the subject of Section 4.11) and permits,
licenses, franchises, authorizations, consents and approvals the failure to
possess, in the aggregate, would not have or reasonably be expected to have a
Company Material Adverse Effect.
SECTION 4.5 Reports and Financial Statements. The filings required to be
made by the Company and its Subsidiaries since February 14, 1997 under the
Securities Act, the Exchange Act, the Interstate Commerce Act or any applicable
state laws, rules or regulations have been filed with the SEC, the applicable
public utility regulatory authorities or the FERC, as the case may be,
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including all forms, statements, reports, agreements (oral or written) and all
documents, exhibits, amendments and supplements appertaining thereto, and the
Company has complied in all material respects with all applicable requirements
of the appropriate act and the rules and regulations thereunder. The Company has
made available to Parent a true and complete copy of each report, schedule,
registration statement (including, but not limited to the Company's Amendment
No. 1 to Registration Statement on Form S-1, as filed with the SEC on June 18,
1999 (Registration No. 333-78165)) and definitive proxy statement filed by
Company or any of its Subsidiaries with the SEC since February 14, 1997 (as such
documents have since the time of their filing been amended, the "Company SEC
Reports"). As of their respective dates, the Company SEC Reports (i) complied,
or with respect to those not yet filed, will comply, in all material respects
with the applicable requirements of the Securities Act and the Exchange Act and
(ii) did not, or with respect to those not yet filed, will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial statements of
the Company included in the Company SEC Reports (collectively, the "Company
Financial Statements") have been, or with respect to those not yet filed, will
be prepared in accordance with GAAP (except as may be indicated therein or in
the notes thereto and except with respect to unaudited statements as permitted
by Form 10-Q of the SEC) and fairly present, or with respect to those not yet
filed, will fairly present the financial position of the Company as of the dates
thereof and the results of its operations and cash flows for the periods then
ended, subject, in the case of the unaudited interim financial statements, to
normal, recurring audit adjustments. Notwithstanding the foregoing, no
representation or warranty is being made in this Section 4.5 with respect to
information furnished in writing by Parent specifically for inclusion in any
Company SEC Report filed after the date hereof or with respect to any Parent SEC
Report incorporated therein by reference.
SECTION 4.6 Absence of Certain Changes or Events; Absence of Undisclosed
Liabilities.
(a) Except as set forth in the Company SEC Reports or Section 4.6 of the
Company Disclosure Schedule, from January 1, 1999 through the date hereof each
of the Company and its Subsidiaries has conducted its business in all material
respects only in the ordinary course of such businesses consistent with past
practice and there has not been any (i) declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to the capital stock of the Company; (ii) repurchase, redemption or
other acquisition by the Company or any of its Subsidiaries of any outstanding
shares of capital stock or other equity securities of or other ownership
interests in, the Company or any of its Subsidiaries, except in accordance with
the Stock Plans; (iii) material change in any method of accounting or accounting
practices by the Company or any of its Subsidiaries other than as required by
GAAP or applicable law; or (iv) material change in the Company's business
operations, condition (financial or otherwise), results of operations, assets or
liabilities.
(b) Except as set forth in the Company SEC Reports filed as of the date
hereof, neither the Company nor any of its Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) except (i)
liabilities, obligations or contingencies that are accrued or reserved against
in the consolidated financial statements of the Company or reflected in the
notes thereto for the 3-month period ended March 31, 1999; (ii) normal and
recurring liabilities which were incurred after March 31, 1999 in the ordinary
course of business consistent with past practice; or (iii) liabilities,
obligations or contingencies that would not, in the aggregate, have a Company
Material Adverse Effect.
SECTION 4.7 Litigation; Regulatory Proceedings. Except as disclosed in the
Company SEC Reports or as set forth in Section 4.7 of the Company Disclosure
Schedule, (i) there are as of the
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date hereof no suits, actions, proceedings or, to the knowledge of the Company,
claims pending or, to the knowledge of the Company, threatened, before a court
or other Governmental Authority nor are there, to the knowledge of the Company,
any investigations or reviews pending or threatened against, relating to or
affecting the Company or any of its Subsidiaries and (ii) there are no
judgments, decrees, injunctions or orders of any court, governmental department,
commission, agency, instrumentality or authority or any arbitrator applicable to
the Company or any of its Subsidiaries which, in the aggregate, could reasonably
be expected to have a Company Material Adverse Effect.
SECTION 4.8 Form S-4 and Proxy Statement. None of the information
supplied or to be supplied by or on behalf of the Company or any of its
Subsidiaries for inclusion or incorporation by reference in (i) the Form S-4
will, at the time the Form S-4 is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading and (ii) the Joint Proxy Statement will, at
the date mailed to stockholders of Parent and the Company and at the times of
such meetings, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. If, at any time prior to the Effective Time, any event with
respect to the Company or any of its Subsidiaries, or with respect to any
information supplied by the Company for inclusion or incorporation by reference
in the Form S-4 or the Joint Proxy Statement, shall occur which is required to
be described in an amendment or supplement to, the Form S-4 or the Joint Proxy
Statement, such event shall be so described, and such amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated to
the stockholders of Parent entitled to vote at the meeting of Parent's
stockholders to which the Joint Proxy Statement applies and to the holders of
the Company Common Stock entitled to vote at the meeting of the Company's
stockholders to which the Joint Proxy Statement applies. The Joint Proxy
Statement, to the extent it relates to the Company, will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
SECTION 4.9 Tax Matters.
(a) Filing of Timely Tax Returns. Except as set forth in Section 4.9(a) of
the Company Disclosure Schedule, the Company and each of its Subsidiaries have
filed (or there has been filed on their behalf) all Tax Returns required to be
filed by each of them under applicable law. All Tax Returns were in all material
respects (and, as to Tax Returns not filed as of the date hereof will be) true,
complete and correct and filed on a timely basis.
(b) Payment of Taxes. The Company and each of its Subsidiaries have, within
the time and in the manner prescribed by law, paid (and until the Closing Date
will pay within the time and in the manner prescribed by law) all Taxes that are
currently due and payable except for those contested in good faith and for which
adequate reserves have been taken.
(c) Tax Reserves. Except as set forth in Section 4.9(c) of the Company
Disclosure Schedule, the Company and its Subsidiaries have established (and
until the Effective Time will maintain) on their books and records reserves
adequate to pay all Taxes, all deficiencies in Taxes asserted or proposed
against the Company or its Subsidiaries and reserves for deferred income taxes
in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the Assets of the Company or any
of its Subsidiaries except liens for Taxes not yet due and payable.
(e) Withholding Taxes. The Company and each of its Subsidiaries have
complied (and until the Effective Time will comply) in all respects with the
provisions of the Code relating to the
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payment and withholding of Taxes, including, without limitation, the withholding
and reporting requirements under Sections 1441 through 1464, 3401 through 3406,
and 6041 and 6049 of the Code, as well as similar provisions under any other
laws, and have, within the time and in the manner prescribed by law, withheld
from employee wages and paid over to the proper governmental authorities all
amounts required.
(f) Extensions of Time for Filing Tax Returns. Except as set forth in
Section 4.9(f) of the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries has requested any extension of time within which to file any
Tax Return, which Tax Return has not since been filed.
(g) Waivers of Statute of Limitations. Except as set forth in Section
4.9(g) of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. Except as set forth in Section
4.9(h) of the Company Disclosure Schedule, the statute of limitations for the
assessment of all federal income and applicable state income or franchise Taxes
has expired for all related Tax Returns of the Company and each of its
Subsidiaries or those Tax Returns have been examined by the appropriate taxing
authorities for all periods through the date hereof and no deficiency for any
such Taxes has been proposed, asserted or assessed against the Company or any of
its Subsidiaries that has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. Except as set forth in
Section 4.9(i) of the Company Disclosure Schedule, no audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or any of its Subsidiaries,
and neither the Company nor any of its Subsidiaries has any knowledge of any
threatened action, audit or administrative or court proceeding with respect to
any such Taxes or Tax Returns.
(j) Powers of Attorney. Except as set forth in Section 4.9(j) of the
Company Disclosure Schedule, no power of attorney currently in force has been
granted by the Company or any of its Subsidiaries concerning any Tax matter.
(k) Tax Rulings. Except as set forth in Section 4.9(k) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has
received a Tax Ruling or entered into a Closing Agreement with any taxing
authority that would have a continuing adverse effect after the Effective Time.
(l) Availability of Tax Returns. Except as set forth in Section 4.9(l) of
the Company Disclosure Schedule, the Company and its Subsidiaries have made
available to Parent complete and accurate copies of all federal income and state
income or franchise Tax Returns, and any amendments thereto, filed by the
Company or any of its Subsidiaries for all taxable years commencing on or after
January 1, 1997. Section 4.9(l) of the Company Disclosure Schedule sets forth
all foreign, state and local jurisdictions in which the Company or any of its
Subsidiaries is or has been subject to Tax and each material type of Tax payable
in such jurisdiction during the taxable years ended December 31, 1998 and
December 31, 1997. In addition, the Company and its Subsidiaries have made
available to Parent complete and accurate copies of all audit reports received
by the Company or any of its Subsidiaries on or after February 14, 1997 from any
taxing authority relating to any Tax Return filed by the Company or any of its
Subsidiaries for all taxable years commencing on or after January 1, 1995.
(m) Tax Sharing Agreements. Except as set forth in Section 4.9(m) of the
Company Disclosure Schedule, no agreements relating to allocating or sharing of
Taxes exist between or among the Company and any of its Subsidiaries.
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(n) Code Section 341(f). Neither the Company nor any of its Subsidiaries
has filed (or will file prior to the Closing) a consent pursuant to Section
341(f) of the Code or has agreed to have Section 341(f)(2) of the Code apply to
any disposition of a subsection (f) asset (as that term is defined in Section
341(f)(4) of the Code) owned by the Company or any of its Subsidiaries.
(o) Code Section 168. No property of the Company or any of its Subsidiaries
is property that the Company or any such Subsidiary or any party to this
transaction is or will be required to treat as being owned by another person
pursuant to the provisions of Section 168(f)(8) of the Code (as in effect prior
to its amendment by the Tax Reform Act of 1986) or is "tax-exempt use property"
within the meaning of Section 168 of the Code.
(p) Code Section 481 Adjustments. Except as set forth in Section 4.9(p) of
the Company Disclosure Schedule and except for adjustments that in the aggregate
could not reasonably be expected to have a Company Material Adverse Effect,
neither the Company nor any of its Subsidiaries is required to include in income
any adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by the Company or any of its Subsidiaries,
and to the best of the knowledge of the Company, the IRS has not proposed any
such adjustment or change in accounting method.
(q) Tax Attributes. Section 4.9(q) of the Company Disclosure Schedule sets
forth, with respect to the Company and its Subsidiaries: (i) the amount of and
year of expiration of any net operating loss carryovers and (ii) the amount of
and year of expiration of any tax credit carryovers.
(r) Code Section 338 Elections. Except as set forth in Section 4.9(r) of
the Company Disclosure Schedule, no election under Section 338 of the Code (or
any predecessor provision) has been made by or with respect to the Company or
any of its Subsidiaries or any of their respective assets or properties.
(s) Acquisition Indebtedness. Except as set forth in Section 4.9(s) of the
Company Disclosure Schedule, no indebtedness of the Company or any of its
Subsidiaries is "corporate acquisition indebtedness" within the meaning of
Section 279(b) of the Code.
(t) Code Section 280G. Except as set forth in Section 4.9(t) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to any agreement, contract, or arrangement that could result, on account of the
transactions contemplated hereunder, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G of
the Code.
(u) Affiliated Group. Except as set forth in Section 4.9(u) of the Company
Disclosure Schedule: (i) none of the Company and its Subsidiaries (A) has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Company) or (B) has any
liability for Taxes of any other Person (other than any of the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise, and (ii) neither the Company nor any of its Subsidiaries
has engaged in any intercompany transactions within the meaning of Treasury
Regulation Section 1.1502-13 for which any income remains unrecognized as of the
close of the last taxable year prior to the Effective Time.
(v) Tax Treatment of Merger. The Company has not taken or agreed to take
any action, or knows of any circumstances, that (without regard to any action
taken or agreed to be taken by Parent or Merger Sub or any of their respective
affiliates) would prevent the Merger from qualifying as a reorganization within
the meaning of Sections 368(a)(l)(A) or 368(a)(2)(E) of the Code.
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SECTION 4.10 Employee Matters; ERISA.
(a) Benefit Plans. Section 4.10(a) of the Company Disclosure Schedule
contains a true and complete list of each material employee benefit plan,
program or arrangement currently sponsored, maintained or contributed to by the
Company or any of its Subsidiaries for the benefit of employees, former
employees or directors and their beneficiaries or for which the Company or any
of its Subsidiaries may have any liability, including, but not limited to, any
employee benefit plans within the meaning of Section 3(3) of ERISA, and any
employment, consulting, non-compete, severance or change in control agreement
(collectively, the "Company Benefit Plans"). For the purposes of this Section
4.10 only, the term "Company" shall be deemed to include predecessors thereof.
(b) Termination of Company Benefit Plans; Withdrawal. All of the Company
Benefit Plans (other than any multiemployer plan, as defined in Section 3(37) of
ERISA) can be terminated by the Company without incurring any material
liability. Subject to any collective bargaining obligations, except as set forth
in Section 4.10(a) of the Company Disclosure Schedule, the Company and its
Subsidiaries can withdraw from participation in any Company Benefit Plan that is
a multiemployer plan, without incurring any material liability.
(c) Contributions. Except as set forth in Section 4.10(c) of the Company
Disclosure Schedule, all material contributions and other payments required to
be made as of date hereof by the Company or any of its Subsidiaries to any
Company Benefit Plan (or to any person pursuant to the terms thereof) have been
made or the amount of such payment or contribution obligation has been properly
reflected in the Company Financial Statements in accordance with GAAP.
(d) Qualification; Compliance. Except as set forth in Section 4.10(d) of
the Company Disclosure Schedule, each of the Company Benefit Plans (other than
any multiemployer plan as defined in Section 3(37) of ERISA) intended to be
"qualified" within the meaning of Section 401(a) of the Code has been determined
by the IRS to be so qualified, and, to the best knowledge of the Company, no
circumstances exist that are reasonably expected by the Company to result in the
revocation of any such determination. The Company is in compliance in all
material respects with, and each Company Benefit Plan (other than any
multiemployer plan as defined in Section 3(37) of ERISA) is and has been
operated in all material respects in compliance with, all applicable laws, rules
and regulations governing such plan, including, without limitation, ERISA and
the Code. Each Company Benefit Plan (other than any multiemployer plan as
defined in Section 3(37) of ERISA) intended to provide for the deferral of
income, the reduction of salary or other compensation, or to afford other income
tax benefits, complies with the material requirements of the applicable
provisions of the Code or other laws, rules and regulations required to provide
such income tax benefits.
(e) Liabilities. With respect to the Company Benefit Plans individually and
in the aggregate, no event has occurred, and, to the best knowledge of the
Company, there exists no condition or set of circumstances that is reasonably
likely to subject the Company or any of its Subsidiaries to any liability
arising under the Code, ERISA or any other applicable law (including, without
limitation, any liability to any such plan or the PBGC, or under any indemnity
agreement to which the Company is a party, which liability could reasonably be
expected to have a Company Material Adverse Effect.
(f) Welfare Plans. Except as set forth in Section 4.10(f) of the Company
Disclosure Schedule, none of the Company Benefit Plans that are "welfare plans",
within the meaning of Section 3(1) of ERISA, provides for any retiree benefits
other than coverage mandated by applicable law or benefits the full cost of
which is borne by the retiree.
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(g) Documents Made Available. The Company has made available to Parent a
true and correct copy of each collective bargaining agreement to which the
Company or any of its Subsidiaries is a party or under which the Company or any
of its Subsidiaries has obligations and, with respect to each Company Benefit
Plan, (i) such plan and summary plan description, as applicable, (ii) the most
recent annual report filed with the IRS, (iii) each related trust agreement,
insurance contract, service provider or investment management agreement
(including all amendments to each such document), (iv) the most recent
determination of the IRS with respect to the qualified status of such plan and
(v) the most recent actuarial report or valuation.
(h) Payments Resulting from Mergers. Except as set forth in Section 4.10(h)
of the Company Disclosure Schedule or specifically provided for herein, neither
the Company nor any of its Subsidiaries is a party to any plan, agreement or
arrangement pursuant to the terms of which the consummation or announcement of
any transaction contemplated by this Agreement will (either alone or in
connection with the occurrence of any additional or further acts or events)
result in any (A) payment (whether of severance pay or otherwise) becoming due
from the Company or any of its Subsidiaries to any officer, employee, former
employee or director thereof or to a trustee under any "rabbi trust" or similar
arrangement, or (B) benefit under any Company Benefit Plan being established or
becoming accelerated, or immediately vested or payable.
SECTION 4.11 Environmental Protection.
(a) Compliance. Except as set forth in the Company SEC Reports or in
Section 4.11(a) of the Company Disclosure Schedule, (i) each of the Company and
its Subsidiaries is in compliance in all material respects with all applicable
Environmental Laws and (ii) to the knowledge of the Vice
President -- Environmental of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Energy Partners, L.P., neither the
Company nor any of its Subsidiaries has received any unresolved written
communication since January 1, 1996 from any Person or Governmental Authority
that alleges that the Company or any of its Subsidiaries is not in such
compliance with applicable Environmental Laws.
(b) Environmental Permits. Except as set forth in the Company SEC Reports
or as set forth in Section 2.11(b) of the Company Disclosure Schedule, each of
the Company and its Subsidiaries has obtained or has applied for all material
Environmental Permits necessary for the construction of their facilities or the
conduct of their operations, and all such permits are in good standing or, where
applicable, a renewal application has been timely filed and is pending agency
approval, and the Company and its Subsidiaries are in material compliance with
all terms and conditions of the Environmental Permits.
(c) Environmental Claims. Except as set forth in the Company SEC Reports or
as set forth in Section 4.11(c) of the Company Disclosure Schedule (i) as of the
date hereof there is no Environmental Claim pending (x) against the Company or
any of its Subsidiaries, (y) to the Company's knowledge, against any Person
whose liability for any Environmental Claim the Company or any of its
Subsidiaries has retained or assumed contractually or (z) against any real or
personal property or operations which the Company or any of its Subsidiaries
owns, leases or manages, in whole or in part, and (ii) there are no past or
present actions, activities, circumstances, conditions, events or incidents
which could reasonably be expected to form the basis of any such Environmental
Claim, except as would not be expected to have, individually or, in the
aggregate, a Company Material Adverse Effect.
(d) Releases. Except as set forth in the Company SEC Reports or as set
forth in Section 4.11(c) or Section 4.11(d) of the Company Disclosure Schedule,
as of the date hereof there have been no Releases of any Hazardous Substances
that would be reasonably likely to form the basis of any Environmental Claim
against the Company or any of its Subsidiaries, or to the
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Company's knowledge against any Person whose liability for any Environmental
Claim the Company or any of its Subsidiaries has retained or assumed
contractually, except for those that would not be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
(e) Predecessors. Except as set forth in the Company SEC Reports or as set
forth in Section 4.11(e) of the Company Disclosure Schedule and, to the
Company's knowledge, with respect to any predecessor of the Company or any
Subsidiary of the Company, there is no Environmental Claim pending or, to the
Company's knowledge, threatened, nor any Release of Hazardous Substances that
would be reasonably likely to form the basis of any Environmental Claim, except
for those that would not be expected to have, individually or in the aggregate,
a Company Material Adverse Effect.
(f) Disclosure. The Company has made available to Parent all material
documents which the Company reasonably believes provide the basis for (i) the
cost of Company pollution control equipment currently required or known to be
required in the future; (ii) current Company remediation costs or Company
remediation costs known or suspected to be required in the future; or (iii) any
other environmental matter affecting the Company, except for those that would
not be expected to have, individually or in the aggregate, a Company Material
Adverse Effect.
(g) Cost Estimates. No environmental matter set forth in the Company SEC
Reports or the Company Disclosure Schedule could reasonably be expected to
substantially differ from the cost or recovery estimates provided in the Company
SEC Reports.
(h) Reports. Each of the Company and its Subsidiaries has made available to
Parent true, complete and correct summaries or copies of all environmental
audits, assessments or investigations, which (i) have been conducted by or on
behalf of the Company or any of its Subsidiaries since January 1, 1996 and (ii)
are available to, or in the possession of, the Company or any of its
Subsidiaries on any currently or formerly owned, leased or operated property.
(i) Release. Except as set forth in Section 4.11(i) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has
released any party from any material claim under any Environmental Law or waived
any rights against any other party under any Environmental Law, except for those
that would not be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(j) Prior Indemnification Agreements. Except as set forth in Section
4.11(j) of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has entered into any material agreement that may require the
Company or any of its Subsidiaries to pay to, reimburse, guarantee, pledge,
defend, indemnify or hold harmless any Person for or against any Environmental
Claim, except for those that would not be expected to have, individually or in
the aggregate, a Company Material Adverse Effect.
SECTION 4.12 Regulation. The Company is regulated as an oil pipeline
company by the FERC and as a pipeline company by the State of California.
Neither the Company nor any of its Subsidiaries is subject to regulation as a
"holding company," "gas utility company," "electric utility company," "public
utility company," "subsidiary" of any of the foregoing, "affiliate" of any of
the foregoing or "affiliate" of any "Subsidiary" of any of the foregoing.
SECTION 4.13 Insurance. Except as set forth in Section 4.13 of the Company
Disclosure Schedule, each of the Company and its Subsidiaries is, and has been
continuously since February 14, 1997, insured with financially responsible
insurers or under other financially responsible arrangements in such amounts and
against such risks and losses as are customary for companies conducting the
business as conducted by the Company and its Subsidiaries during such time
period. Neither the
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Company nor its Subsidiaries has received any notice of cancellation or
termination with respect to any material insurance policy of the Company or its
Subsidiaries. The insurance policies of the Company and each of its Subsidiaries
are valid and enforceable policies in all material respects.
SECTION 4.14 Company Rights Agreement. The Company has no stockholders'
rights plan.
SECTION 4.15 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Merger based upon arrangements made by or on behalf of the Company.
SECTION 4.16 No Other Agreements to Sell the Company or Its Assets. Except
pursuant to this Agreement and as set forth in Section 4.16 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has any
legal obligation, absolute or contingent, to any other Person to sell any
material portion of the Assets of the Company or any of its Subsidiaries, to
sell any material portion of the capital stock or other ownership interests of
the Company or any of its Subsidiaries (other than pursuant to the exercise of
any Stock Rights granted under any of the Company's Stock Plans) or to effect
any merger, consolidation or other reorganization of the Company or any of its
Subsidiaries or to enter into any agreement with respect thereto. Since January
30, 1999, the Company has executed no confidentiality agreement with any Person
in connection with its consideration of acquiring all or a substantial part of
the Assets or capital stock of the Company or any of its Subsidiaries.
SECTION 4.17 Assets. Except as set forth in Section 4.17 of the Company
Disclosure Schedule or except as would not, in the aggregate, have or be
reasonably likely to have a Company Material Adverse Effect, the Company and its
Subsidiaries have good and marketable or, with respect to Assets located in the
State of Texas, defensible title to or a valid leasehold estate in or a valid
right to use all of the material Assets (other than easements and rights of way
which are the subject of Section 4.22) reflected on the Company's balance sheet
at March 31, 1999 (except for Assets subsequently sold in the ordinary course of
business consistent with past practice). All of such Assets are free and clear
of all Encumbrances (other than Permitted Encumbrances) and have been maintained
in reasonable operating condition and repair, subject to ordinary wear and tear.
SECTION 4.18 Contracts and Commitments. As of the date hereof,
Section 4.18 of the Company Disclosure Schedule contains a complete and accurate
list of all contracts (written or oral), plans, undertakings, commitments or
agreements (including, without limitation, intercompany contracts) ("Company
Contracts") of the following categories to which the Company or any of its
Subsidiaries is a party or by which any of them is bound as of the date of this
Agreement:
(a) employment contracts, including, without limitation, contracts to
employ executive officers and other contracts with officers, directors or
stockholders of the Company, and all severance, change in control or similar
arrangements with any officers, employees or agents of the Company that will
result in any obligation (absolute or contingent) of the Company or any of its
Subsidiaries to make any payment to any officers, employees or agents of the
Company following the consummation of the transactions contemplated hereby or
termination or change of terms and conditions of employment;
(b) collective bargaining agreements;
(c) Company Contracts for the purchase of inventory which are not
cancellable (without material penalty, cost or other liability) within one year
and, other than Company Contracts described elsewhere in this Section 4.18,
other Company Contracts made in the ordinary course of business involving annual
expenditures or liabilities in excess of $5,000,000 which are not cancellable
(without material penalty, cost or other liability) within 90 days;
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(d) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments providing for the lending of money, whether as
borrower, lender or guarantor, in excess of $1,000,000;
(e) Company Contracts containing covenants limiting the freedom of the
Company or any of its Subsidiaries to engage in any line of business or compete
with any Person or operate at any location, including, without limitation, any
preferential rights granted to third parties;
(f) any Company Contract pending for the acquisition or disposition,
directly or indirectly (by merger or otherwise) of material Assets (other than
inventory) or capital stock of any Person (including, without limitation, the
Company or any of its Subsidiaries); and
(g) other than Company Contracts described elsewhere in this Section 4.18
or Company Contracts which may be omitted pursuant to the specific size
limitations set forth in other provisions of this Section 4.18, Company
Contracts between the Company and any of its wholly-owned Subsidiaries, on one
hand, and any Subsidiary of the Company which is not wholly-owned, directly or
indirectly, by the Company, on the other hand.
True copies of the written Company Contracts identified in Section 4.18 of
the Company Disclosure Schedule have been delivered or made available to Parent.
SECTION 4.19 Absence of Breaches or Defaults. Except as set forth in
Section 4.19 of the Company Disclosure Schedule, (i) neither the Company nor any
of its Subsidiaries is in default under, or in breach or violation of (and no
event has occurred which, with notice or the lapse of time or both, would
constitute a default under, or a breach or violation of), any term, condition or
provision of its charter, bylaws or other governing documents and (ii) neither
the Company nor any of its Subsidiaries is and, to the knowledge of the Company,
no other party is in default under, or in breach or violation of (and no event
has occurred which, with notice or the lapse of time or both, would constitute a
default under, or a breach or violation of), any term, condition or provision of
any Company Contract identified on Section 4.18 of the Company Disclosure
Schedule except for defaults, breaches, violations or events which, individually
or in the aggregate, would not have a Company Material Adverse Effect; provided
that any defaults, breaches, violations or events with respect to those Company
Contracts referred to in Section 4.18(d) shall be scheduled without regard to
any Company Material Adverse Effect. Other than contracts which have terminated
or expired in accordance with their terms, each of the Company Contracts
identified on Section 4.18 of the Company Disclosure Schedule is valid, binding
and enforceable in accordance with its terms (subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered on a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing) and is in full force and
effect. To the knowledge of the Company, no event has occurred which either
entitles, or would, on notice or lapse of time or both, entitle the holder of
any indebtedness for borrowed money affecting the Company or any of its
Subsidiaries to accelerate, or which does accelerate, the maturity of any
indebtedness affecting the Company or any of its Subsidiaries, except as set
forth in Section 4.19 of the Company Disclosure Schedule.
SECTION 4.20 Labor Matters.
(a) Section 4.20(a) of the Company Disclosure Schedule contains a complete
list of all organizations representing the employees of the Company or any of
its Subsidiaries. As of the date hereof, there is no strike or work stoppage,
pending or, to the knowledge of the Company, threatened, which involves any
employees of the Company or any of its Subsidiaries.
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(b) Section 4.20(b) of the Company Disclosure Schedule contains as of the
date hereof (i) a list of all material unfair employment or labor practice
charges which are presently pending which, to the knowledge of the Company, have
been filed with any governmental authority by or on behalf of any employee
against the Company or any of its Subsidiaries and (ii) a list of all material
employment-related litigation, including, without limitation, arbitrations or
administrative proceedings which are presently pending, filed by or on behalf of
any former, current or prospective employee against the Company or any of its
Subsidiaries.
(c) Except as described in Sections 4.20(a) and (b) of the Company
Disclosure Schedule, there are not presently pending or, to the knowledge of the
Company, threatened, against the Company or any of its Subsidiaries any claims
by any Governmental Authority, labor organization, or any former, current or
prospective employee alleging that the Company or any such employer has violated
any applicable laws respecting employment practices, except where such claims
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
SECTION 4.21 Affiliate Transactions. Except as set forth in the Company
SEC Reports and Schedule 4.21 of the Company Disclosure Schedule, from December
31, 1998 through the date of this Agreement there have been no transactions,
agreements, arrangements or understandings (and no such arrangements are
pending) between the Company or any of its Subsidiaries, on the one hand, and
affiliates of the Company or other Persons, on the other hand, that would be
required to be disclosed under Item 404 of Regulation S-K under the Securities
Act.
SECTION 4.22 Easements. The businesses of the Company and each of its
Subsidiaries are being operated in a manner which does not violate (in any
manner which would, or which would be reasonably likely to, have a Company
Material Adverse Effect) the terms of any Easements used by the Company and each
of its Subsidiaries in such businesses. Except as set forth in the Company SEC
Reports, all Easements are valid and enforceable, except as the enforceability
thereof may be affected by bankruptcy, insolvency or other laws of general
applicability affecting the rights of creditors generally or principles of
equity, and grant the rights purported to be granted thereby and all rights
necessary thereunder for the current operation of such business, except where
the failure of any such Easement to be valid and enforceable or to grant the
rights purported to be granted thereby or necessary thereunder would have a
Company Material Adverse Effect. Except as set forth in the Company SEC Reports,
there are no special gaps in the Easements which would impair the conduct of
such businesses in a manner which would, or which would be reasonably likely to,
have a Company Material Adverse Effect, and no part of the pipelines, equipment
and other tangible personal property used in connection with the Company's
pipeline operations is located on property which is not owned in fee by the
Company or a Subsidiary or subject to an Easement in favor of the Company or a
Subsidiary, where the failure of such pipelines, equipment or assets to be so
located would have a Company Material Adverse Effect. As of the date of this
Agreement, there are no pending or, to the knowledge of the Company, threatened
actions against any Easements which are reasonably likely to have a Company
Material Adverse Effect.
SECTION 4.23 Commodity Price Exposure. Neither the Company nor any of its
Subsidiaries is engaged in the purchase and resale of commodity products.
SECTION 4.24 Year 2000. All Software and hardware systems currently
utilized by the Company and its Subsidiaries and material to the operation of
their respective businesses are capable of providing or are being adapted or
replaced to provide on or before December 31, 1999 accurate results using data
having date ranges spanning the twentieth and twenty-first centuries, except
where the failure to provide such accurate results is not reasonably expected to
have a Company Material Adverse Effect.
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SECTION 4.25 Intellectual Property and Software. Subject to obtaining
required consents under all license agreements pursuant to which the Company or
its Subsidiaries have obtained the right to use the Intellectual Property owned
by third parties, the Surviving Corporation, after giving effect to the Merger,
will own or have the valid, legal right to use all Intellectual Property and
Software used in connection with its business as conducted by the Company on the
date hereof. No trade secret, formula, process, invention, design, know-how or
other information considered material, confidential or proprietary to the
Company or any of its Subsidiaries has been disclosed or authorized to be
disclosed except in the ordinary course of business or pursuant to an obligation
of confidentiality binding on the recipient. The Company and its Subsidiaries
have used commercially reasonable measures to protect the confidentiality of the
material trade secrets used in connection with its business. To the Company's
knowledge, no material Intellectual Property or Software used in connection with
its businesses has been improperly used, improperly divulged or misappropriated
by the Company or any other Person. As of the date hereof, neither the Company
nor any of its Subsidiaries has made in the past three years any claim in
writing which remains unresolved of a violation, infringement, misuse or
misappropriation by others of rights of the Company and its Subsidiaries to or
in connection with any material Intellectual Property used in connection with
its business. There is no pending or, to the knowledge of the Company,
threatened claim by any third person of a violation, infringement, misuse or
misappropriation by any of the Company or any of its Subsidiaries of any
Intellectual Property or Software owned by any third person, or of the
invalidity of any patent used in connection with its business, that would,
individually or in the aggregate, have a Company Material Adverse Effect.
SECTION 4.26 Nature of the Company's Business. Since the date of its
formation, the Company has not engaged in any business activities other than in
connection with its organization, the acquisition and ownership of Kinder ▇▇▇▇▇▇
▇.▇., Inc. and the transaction proposed herein.
SECTION 4.27 Vote Required. The approval of the Merger by the affirmative
vote of a majority of the votes entitled to be cast by all holders of Company
Common Stock is the only vote of holders of any class or series of the capital
stock of the Company required to approve this Agreement, the Merger and the
transactions contemplated hereby (the "Company Stockholders' Approval"). Other
than as set forth herein, no other vote (including, without limitation, that of
any holders of an equity interest in any Subsidiary of the Company) is required
to approve this Agreement, the Merger or the consummation of the transactions
contemplated hereby.
SECTION 4.28 Ownership of Parent Common Stock. Except as set forth in
Section 4.28 of the Company Disclosure Schedule, neither the Company nor any of
its affiliates "beneficially own" (as such term is defined for purposes of
Section 13(d) of the Exchange Act) any shares of Parent Common Stock.
SECTION 4.29 Section 203 of the DGCL. Prior to the date hereof, the Board
of Directors of the Company has approved this Agreement and the Merger, and such
approval is sufficient to render inapplicable to the Merger and to such other
transactions the provisions of Section 203 of the DGCL. To the Company's
knowledge, no other state takeover statute or similar statue or regulation
applies or purports to apply to the Merger, this Agreement or any of the
transactions contemplated hereby and no provision of the Company's or any of its
Subsidiary's Articles of Incorporation, Bylaws or other similar organizational
documents would, directly or indirectly, restrict or impair the ability of
Parent to vote, or otherwise to exercise the rights of a stockholder with
respect to, shares of capital stock of the Company and its Subsidiaries that may
be acquired or controlled by Parent as contemplated by this Agreement.
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ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.1 Conduct of the Company's Business Pending the Merger. The
Company covenants and agrees that, during the period from the date hereof to the
Effective Time (except as otherwise contemplated by the terms of this
Agreement), unless Parent shall otherwise agree in writing in advance, the
businesses of the Company and its Subsidiaries shall be conducted only in the
usual and ordinary course of business in substantially the same manner as
heretofore conducted and in compliance with applicable laws; and the Company and
its Subsidiaries shall each use all commercially reasonable efforts consistent
with the foregoing to preserve substantially intact the business organization of
the Company and its Subsidiaries, to keep available the services of the present
officers and employees of the Company and its Subsidiaries (subject to prudent
management of workforce needs and ongoing programs currently in force), to
preserve the present relationships of the Company and its Subsidiaries with
customers, suppliers, distributors and other Persons with which the Company or
any of the Subsidiaries has significant business relations, to maintain and keep
its material assets in good repair and condition (subject to ordinary wear and
tear), to maintain supplies and inventories in quantities consistent with past
practice; provided, however, that, notwithstanding any of the foregoing, in no
event shall any of the Company's Subsidiaries be restricted from taking any
action, nor shall they be required to obtain Parent's consent prior to taking
such action, if Kinder ▇▇▇▇▇▇ ▇.▇., Inc. believes the taking of that action to
be in the best interests of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Energy Partners, L.P. and its
unitholders; and provided, further, that the Company shall promptly notify
Parent of any action taken pursuant to the immediately preceding proviso. By way
of amplification and not limitation, neither the Company nor any of its
Subsidiaries shall, except as set forth in Section 5.1 of the Company Disclosure
Schedule and as otherwise contemplated by the terms of this Agreement, between
the date of this Agreement and the Effective Time, directly or indirectly do, or
propose or commit to do, any of the following without the prior written consent
of Parent:
(a) except as required by law, make or commit to make any capital
expenditures (other than reimbursable expenditures which are collected from
third parties within 120 days of incurrence) in excess of $1 million, other
than (i) expenditures for routine maintenance and repair or (ii) unplanned
capital expenditures due to emergency conditions, unanticipated
catastrophic events or extreme weather;
(b) incur any indebtedness for borrowed money or guarantee such
indebtedness of another Person (other than the Company or a wholly-owned
Subsidiary of the Company or enter into any "keep well" or other agreement
to maintain the financial condition of another Person (other than the
Company or a wholly-owned Subsidiary of the Company) or make any loans, or
advances of borrowed money or capital contributions to, or equity
investments in, any other Person (other than the Company or a wholly-owned
Subsidiary of the Company) or issue or sell any debt securities such that
the debt of the Company shall be greater than $148.6 million plus any debt
incurred to fund a required capital contribution by Kinder ▇▇▇▇▇▇ ▇.▇.,
Inc. to ▇▇▇▇▇▇ ▇▇▇▇▇▇ Energy Partners, L.P. or its operating limited
partnerships in accordance with their respective limited partnership
agreements;
(c) (i) amend its Restated Certificate of Incorporation or Bylaws or
the charter or bylaws or organizational documents of any of its
Subsidiaries; (ii) split, combine or reclassify the outstanding shares of
its capital stock or declare, set aside or pay any dividend payable in cash
(other than dividends in an amount not to exceed $10 million payable as a
result, directly or indirectly, of quarterly distributions from ▇▇▇▇▇▇
▇▇▇▇▇▇ Energy Partners, L.P. received through Kinder ▇▇▇▇▇▇ ▇.▇., Inc.
consistent with past practice, whether such dividends are paid directly
after receipt or are paid by borrowings, subject to this Agreement, after
repayment of
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indebtedness), stock or property or make any other distribution with
respect to such shares of capital stock or other ownership interests; (iii)
redeem, purchase or otherwise acquire, directly or indirectly, any shares
of its capital stock or other ownership interests; or (iv) sell or pledge
any stock of any of its Subsidiaries;
(d) (i) issue or sell or agree to issue or sell any additional shares
of, or grant, confer or award any options, warrants or rights of any kind
to acquire any shares of, its capital stock of any class; (ii) enter into
any agreement, contract or commitment out of the ordinary course of its
business, to dispose of or acquire, or relating to the disposition or
acquisition of, a segment of its business; (iii) except in the ordinary
course of business consistent with past practice, sell, pledge, dispose of
or encumber any material amount of assets (including without limitation,
any indebtedness owed to them or any claims held by them); or (iv) acquire
(by merger, consolidation, acquisition of stock or assets or otherwise) any
corporation, partnership or other business organization or division thereof
or acquire any material amount of assets (other than in the ordinary course
of business consistent with past practice) or make any material investment,
either by purchase of stock or other securities, or contribution to
capital, in any case, in any other Person (other than a Subsidiary of the
Company as of the date hereof);
(e) except as required by law, grant any severance or termination pay
(other than pursuant to policies or agreements in effect on the date hereof
as disclosed in the Company SEC reports or set forth in Section 5.1(e) of
the Company Disclosure Schedule) or increase the benefits payable under its
severance or termination pay policies or agreements in effect on the date
hereof or enter into any employment (other than "at will") or severance
agreement with any officer, director or employee;
(f) except as required by law, adopt or amend any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust,
fund or other arrangement for the benefit or welfare of any director,
officer or employee or increase in any manner the compensation or fringe
benefits of any director, officer or, except in the ordinary course of
business consistent with past practice, employee, or grant, confer, award
or pay any forms of cash incentive, bonuses or other benefit not required
by any existing plan, arrangement or agreement;
(g) enter into or modify any collective bargaining agreement, other
than in replacement of collective bargaining agreements expiring prior to
the Effective Time;
(h) make any material change in its tax or accounting policies or any
material reclassification of Assets or liabilities except as required by
law, rule or regulation or GAAP;
(i) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), except the payment, discharge or satisfaction of (i)
liabilities or obligations in the ordinary course of business consistent
with past practice or in accordance with the terms thereof as in effect on
the date hereof or (ii) claims settled or compromised to the extent
permitted by Section 5.1(j), or waive, release, grant or transfer any
rights of material value or modify or change in any material respect any
existing Company Contract, in each case other than in the ordinary course
of business consistent with past practice;
(j) settle or compromise any litigation, other than litigation not in
excess of amounts reserved for in the most recent consolidated financial
statements of the Company included in the Company SEC Reports or, if not so
reserved for, in an aggregate amount not in excess of $500,000, provided in
either case such settlement documents do not involve any material non-
monetary obligations on the part of the Company and its Subsidiaries;
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(k) take any action (without regard to any action taken or agreed to
be taken by Parent or any of its affiliates) with knowledge that such
action would prevent the Merger from qualifying as a reorganization within
the meaning of Sections 368(a)(1)(A) or 368(a)(2)(E) of the Code;
(l) consummate any acquisition or disposition pursuant to any Company
Contract disclosed pursuant to Section 4.18 other than in accordance with
the terms so disclosed (including without waiver of any condition to the
Company's obligations to consummate such acquisition), excluding
insignificant deviations from such terms;
(m) engage in any activities which would cause a change in its status,
or that of its Subsidiaries, under the 1935 Act, or that would impair the
ability of the Parent to claim an exemption as of right under Section
3(a)(1) of the 1935 Act; and
(n) take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 5.1(a) through 5.1(m)
or any action which would or is reasonably likely to result in (i) a
material breach of any provision of this Agreement, (ii) any of the
representations and warranties of the Company set forth in this Agreement
becoming untrue in any material respect or (iii) any of the conditions set
forth in Article VII not being satisfied.
SECTION 5.2 Conduct of Parent's Business Pending the Merger. Except as set
forth in Section 5.2 of the Parent Disclosure Schedule, Parent covenants and
agrees that, during the period from the date hereof to the Effective Time
(except as otherwise contemplated by the terms of this Agreement), unless the
Company shall otherwise agree in writing in advance, the businesses of Parent
and its Subsidiaries shall be conducted only in the usual and ordinary course of
business in substantially the same manner as heretofore conducted and in
compliance with applicable laws; and Parent and its Subsidiaries shall each use
all commercially reasonable efforts consistent with the foregoing to preserve
substantially intact the business organization of Parent and its Subsidiaries,
to keep available the services of the present officers and employees of Parent
and its Subsidiaries (subject to prudent management of workforce needs and
ongoing programs currently in force), to preserve the present relationships of
Parent and its Subsidiaries with customers, suppliers, distributors and other
Persons with which Parent or any of the Subsidiaries has significant business
relations, to maintain and keep its material assets in good repair and condition
(subject to ordinary wear and tear), to maintain supplies and inventories in
quantities consistent with past practice and, with respect to any hedging and
energy trading transactions, to comply with prudent policies, practices and
procedures with respect to risk management and trading limitations, including
the Company Trading Guidelines. Parent and its Subsidiaries will manage their
commodity price risk exposure with respect to their respective gathering,
processing, transportation and storage contracts in accordance with prudent risk
management guidelines to be developed and mutually agreed to by the Company and
Parent as promptly as practicable after the date hereof. From time to time prior
to the Effective Time, Parent will allow the Company and its representatives
reasonable access to the energy trading operations, as well as gathering,
processing, transportation and storage contracting operations, of Parent and its
Subsidiaries and their respective books and records, and develop appropriate
procedures to permit the Company and its representatives to monitor Parent's and
its Subsidiaries' compliance with the Company Trading Guidelines and the other
risk management guidelines agreed to by the parties. The Company will not amend
or rescind the Company Trading Guidelines or the other risk management
guidelines agreed to by the parties. By way of amplification and not limitation,
neither Parent nor any of its Subsidiaries shall, except as set forth in Section
5.2 of the Parent Disclosure Schedule and as otherwise contemplated by the terms
of this Agreement, between the date of this Agreement and the Effective Time,
directly or indirectly do, or propose or commit to do, any of the following
without the prior written consent of the Company:
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(a) except as required by law, make or commit to make any capital
expenditures (other than reimbursable expenditures which are collected from
third parties within 120 days of incurrence) in excess of 110% of those
contained in Parent's 1999 budget provided to and approved by the Company
prior to the date hereof, and for the fiscal year 2000 make any such
expenditures in excess of those contained in Parent's 2000 budget which
shall have been provided to and reasonably approved by the Company prior to
incurring any such expenditures, other than (i) expenditures for routine
maintenance and repair or (ii) unplanned capital expenditures due to
emergency conditions, unanticipated catastrophic events or extreme weather;
(b) incur any indebtedness for borrowed money or guarantee such
indebtedness of another Person (other than Parent or a wholly-owned
Subsidiary of Parent or enter into any "keep well" or other agreement to
maintain the financial condition of another Person (other than Parent or a
wholly-owned Subsidiary of Parent) or make any loans, or advances of
borrowed money or capital contributions to, or equity investments in, any
other Person (other than Parent or a wholly-owned Subsidiary of Parent) or
issue or sell any debt securities, other than (i) refinancings or
refundings of indebtedness existing as of the date hereof, (ii) in
connection with financings or ordinary course trade payables and (iii)
additional borrowings under existing lines of credit or via commercial
paper issuances in the ordinary course of business consistent with past
practice in an amount such that total short-term indebtedness of Parent
from these sources shall not exceed $700 million in the aggregate, provided
that any of such additional indebtedness does not cause Parent's debt to be
downgraded to below investment grade;
(c) (i) amend its Restated Articles of Incorporation or Bylaws or the
charter or bylaws of any of its Subsidiaries; (ii) split, combine or
reclassify the outstanding shares of its capital stock or declare, set
aside or pay any dividend payable in cash (other than (x) regular quarterly
cash dividends of Parent in an amount not to exceed $0.20 per share of
Parent Common Stock paid at such times and in such amounts as are
consistent with past practices and in compliance with applicable law and
(y) contract fees in connection with the PEPS Units); (iii) except for
"cashless" exercises of Parent's Stock Rights pursuant to any of its Stock
Plans, redeem, purchase or otherwise acquire, directly or indirectly, any
shares of its capital stock or other ownership interests; or (iv) sell or
pledge any stock of any of its Subsidiaries;
(d) (i) Other than (w) pursuant to Parent's Stock Rights granted in
the ordinary course of business consistent with past practice under any of
Parent's Stock Plans, (x) the Thermo Agreements, (y) early settlement of
the PEPS Units or (z) pursuant to Parent's DRIP Plan, issue or sell or
agree to issue or sell any additional shares of, or grant, confer or award
any options, warrants or rights of any kind to acquire any shares of, its
capital stock of any class; (ii) enter into any agreement, contract or
commitment out of the ordinary course of its business, to dispose of or
acquire, or relating to the disposition or acquisition of, a segment of its
business; (iii) except in the ordinary course of business consistent with
past practice, sell, pledge, dispose of or encumber any material amount of
Assets (including without limitation, any indebtedness owed to them or any
claims held by them); or (iv) acquire (by merger, consolidation,
acquisition of stock or Assets or otherwise) any corporation, partnership
or other business organization or division thereof or acquire any material
amount of Assets (other than in the ordinary course of business consistent
with past practice or other than pursuant to Section 5.2(a)) or make any
material investment, either by purchase of stock or other securities, or
contribution to capital, in any case, in any other Person;
(e) except as required by law, grant any severance or termination pay
(other than pursuant to policies or agreements in effect on the date hereof
as disclosed in the Parent SEC Reports or set forth in Section 5.2(e) of
the Parent Disclosure Schedule) or increase the benefits payable under its
severance or termination pay policies or agreements in effect on the date
hereof or
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enter into any employment (other than "at will") or severance agreement
with any officer, director or employee;
(f) except as required by law, adopt or amend any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust,
fund or other arrangement for the benefit or welfare of any director,
officer or employee or increase in any manner the compensation or fringe
benefits of any director, officer or, except in the ordinary course of
business consistent with past practice, employee, or grant, confer, award
or pay any forms of cash incentive, bonuses or other benefit not required
by any existing plan, arrangement or agreement, except for retention
bonuses paid to Parent employees with the reasonable approval of the
Company in an aggregate amount not to exceed $5 million;
(g) enter into or amend (i) any Parent Contract for the sale,
purchase, transportation and/or storage of gas related to the commodity
marketing or Texas intrastate gas marketing operations of Parent which is
not consistent with the Parent Trading Guidelines, (ii) any Parent Contract
for gathering in excess of $2.0 million annually, (iii) any Parent Contract
for purchase or sale of gas for plant shrink and fuel in excess of $2.0
million annually, (iv) any Parent Contract for purchase or sale of liquid
hydrocarbons in excess of $6.0 million annually, (v) any Parent Contract
for sale of gas at plant outlets in excess of $6.0 million annually, (vi)
any Parent Contract for processing in excess of $2.0 million annually,
(vii) any Parent Contract for transportation services in excess of $2.4
million annually, (viii) any Parent Contract for storage and/or balancing
services in excess of $2.4 million annually, in each case which is not
cancellable or otherwise terminable on or prior to December 31, 1999, (ix)
any franchise agreement, (x) any qualifying facilities Parent Contracts for
plant outlet power sales or (xi) any en-able or Orcom agreements or similar
agreements for services which are not cancellable or otherwise terminable
on or prior to December 31, 1999;
(h) enter into or modify any collective bargaining agreement, other
than in replacement of collective bargaining agreements expiring prior to
the Effective Time;
(i) make any material change in its tax or accounting policies or any
material reclassification of Assets or liabilities except as required by
law, rule or regulation or GAAP;
(j) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), except the payment, discharge or satisfaction of (i)
liabilities or obligations in the ordinary course of business consistent
with past practice or in accordance with the terms thereof as in effect on
the date hereof or (ii) claims settled or compromised to the extent
permitted by Section 5.2(k), or waive, release, grant or transfer any
rights of material value or modify or change in any material respect any
existing Parent Contract, in each case other than in the ordinary course of
business consistent with past practice;
(k) settle or compromise any litigation, other than litigation not in
excess of amounts reserved for in the most recent consolidated financial
statements of Parent included in the Parent SEC Reports or, if not so
reserved for, in an aggregate amount not in excess of $500,000, provided in
either case such settlement documents do not involve any material
non-monetary obligations on the part of Parent and its Subsidiaries;
(l) take any action (without regard to any action taken or agreed to
be taken by Parent or any of its affiliates) with knowledge that such
action would prevent the Merger from qualifying as a reorganization within
the meaning of Sections 368(a)(1)(A) or 368(a)(2)(E) of the Code;
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(m) consummate any acquisition pursuant to any Parent Contract
disclosed pursuant to Section 3.19(g) other than in accordance with the
terms so disclosed (including without waiver of any condition to the
Company's obligations to consummate such acquisition), excluding
insignificant deviations from such terms;
(n) enter into any fixed price, basis or option positions related to
petroleum, petroleum products, natural gas, natural gas liquids,
electricity or energy in any form, either financial or physical that are
not consistent with the Parent Trading Guidelines;
(o) engage in any activities which would cause a change in its status,
or that of its Subsidiaries, under the 1935 Act, or that would impair the
ability of Parent to claim an exemption as of right under Section 3(a)(1)
of the 1935 Act; and
(p) take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 5.2(a) through 5.2(o)
or any action which would or is reasonably likely to result in (i) a
material breach of any provision of this Agreement, (ii) any of the
representations and warranties of Parent set forth in this Agreement
becoming untrue in any material respect or (iii) any of the conditions set
forth in Article VII not being satisfied.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Preparation of Form S-4 and the Joint Proxy Statement;
Stockholder Meetings. (a) Promptly following the date of this Agreement, Parent
and the Company shall prepare and Parent shall file with the SEC the Joint Proxy
Statement, and Parent shall prepare and file with the SEC the Form S-4, in which
the Joint Proxy Statement will be included as a prospectus. Each of the Company
and Parent shall use its reasonable best efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such filing.
Each of the Company and Parent will use its reasonable best efforts to cause the
Joint Proxy Statement to be mailed to its respective stockholders as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
Parent shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be taken under any
applicable state securities law in connection with the issuance of Parent Common
Stock in the Merger, and the Company shall furnish all information concerning
the Company and the holders of the Company Common Stock as may be reasonably
required in connection with any such action. Each of Parent and the Company
shall furnish all information concerning itself to the other as may be
reasonably requested in connection with any such action and the preparation,
filing and distribution of the Form S-4 and the Joint Proxy Statement, which
information shall be true and correct in all material respects without omission
of any material fact which is required to make such information not false or
misleading. The Company, Parent and Merger Sub each agree to correct any
information provided by it for use in the Form S-4 or the Joint Proxy Statement
which shall have become false or misleading. Subject to Section 6.2, no
amendment or supplement to the Form S-4 or the Joint Proxy Statement will be
made without the approval of both Parent and the Company. Each party will advise
the other, promptly after it receives notice thereof, of the time when the Form
S-4 has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension, if applicable, of the qualification
of the Parent Common Stock for sale in any jurisdiction, or any request by the
SEC for amendment of the Form S-4 or the Joint Proxy Statement or comments
thereon and responses thereto or requests by the SEC for additional information.
(b) Subject to Section 6.2, Parent, acting through its Board of Directors,
shall, in accordance with its Restated Articles of Incorporation and Bylaws,
promptly and duly call, give notice of,
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convene and hold, as soon as practicable following the date upon which the Form
S-4 becomes effective, a meeting of the holders of Parent Common Stock for the
purpose of voting to approve (i) the issuance of Parent Common Stock pursuant to
the Merger and (ii) an amendment to Parent's Restated Articles of Incorporation
to amend the Parent's corporate name to be "▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc." (the "Parent
Name Change"). Parent shall, through its Board of Directors, recommend approval
of the issuance of Parent Common Stock pursuant to the Merger and the Parent
Name Change by the stockholders of Parent and include in the Joint Proxy
Statement such recommendation and take all reasonable and lawful action to
solicit and obtain such approval, subject to the Parent's Board of Directors'
rights under Section 6.2. The Company, acting through its Board of Directors,
shall, in accordance with its Certificate of Incorporation and Bylaws, promptly
and duly call, give notice of, convene and hold, as soon as practicable
following the date upon which the Form S-4 becomes effective, a meeting of the
holders of Company Common Stock for the purpose of voting to approve the Merger,
this Agreement and the transactions contemplated hereby. The Company shall,
through its Board of Directors, recommend approval of the Merger, this Agreement
and the transactions contemplated hereby by the stockholders of the Company and
include in the Joint Proxy Statement such recommendation and take all reasonable
and lawful action to solicit and obtain such approval.
SECTION 6.2 No Solicitation. (a) Parent shall not, nor shall it permit any
of its Subsidiaries to (and Parent shall use its reasonable best efforts to
cause its and each of its Subsidiaries' officers, directors, employees,
representatives and agents, including, but not limited to, investment bankers,
attorneys and accountants, not to), directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, provide any
information to, or enter into any agreement with, any Person (other than the
Company, any of its affiliates or representatives) concerning any merger,
business combination, tender offer, exchange offer, sale of assets (other than
as expressly permitted by Section 5.2), sale of shares of capital stock or debt
securities or similar transactions involving Parent or any Subsidiary, division
or operating or principal business unit of Parent (a "Parent Acquisition
Proposal"). Parent further agrees that it will immediately cease any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. Notwithstanding the foregoing, prior to
Parent Stockholders' Approval, Parent may, directly or indirectly, provide
access and furnish information concerning its business, properties or assets to
any Person pursuant to appropriate confidentiality agreements, and may negotiate
and participate in discussions and negotiations with such Person, if (w) such
Person has submitted an unsolicited bona fide written proposal to the Board of
Directors of Parent relating to any such transaction, (x) such proposal provides
for the acquisition for cash and/or publicly traded securities of all of the
outstanding Parent Common Stock, (y) the Board of Directors of Parent determines
in good faith, after consultation with its independent financial advisor, that
such proposal is more favorable to the holders of Parent Common Stock than the
Merger and is fully financed or reasonably capable of being financed or
otherwise consummated, and (z) the Board of Directors of Parent determines in
good faith, after consultation with independent legal counsel, that the failure
to provide such information or access or to engage in such discussions or
negotiations would be inconsistent with their fiduciary duties to Parent's
stockholders under applicable law. A proposal meeting all of the criteria in the
preceding sentence is referred to herein as a "Superior Proposal." Parent will
immediately notify the Company of any Parent Acquisition Proposal, or if an
inquiry is made, will keep the Company fully apprized of all developments with
respect to any Parent Acquisition Proposal, will immediately provide to the
Company copies of any written materials received by Parent in connection with
any Parent Acquisition Proposal, discussion, negotiation or inquiry and the
identity of the party making any Parent Acquisition Proposal or inquiry or
engaging in such discussion or negotiation. Parent will promptly provide to the
Company any non-public information concerning Parent provided to any other
Person which was not previously provided to the Company. Subject to the last
sentence of this Section 6.2(a) and notwithstanding anything to the contrary
contained in this Agreement, except in
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connection with the valid termination of this Agreement pursuant to Section
8.1(c)(i) hereof, neither the Board of Directors of Parent nor any committee
thereof shall (i) approve or recommend, or propose to approve or recommend, any
Parent Acquisition Proposal, (ii) enter into any agreement (other than a
confidentiality agreement) with respect to any Parent Acquisition Proposal or
(iii) withdraw or modify, or propose to withdraw or modify, in a manner adverse
to the Company, the approval or recommendation by Parent's Board of Directors or
a committee thereof of the Merger, this Agreement or the issuance of the Parent
Common Stock to be issued pursuant to the Merger. Nothing contained in this
Section 6.2 shall prohibit Parent or its Board of Directors from taking and
disclosing to Parent's stockholders a position with respect to a tender offer by
a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act.
(b) The Company shall not, nor shall it permit any of its Subsidiaries to
(and the Company shall use its reasonable best efforts to cause its and each of
its Subsidiaries' officers, directors, employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, provide any information to, or enter into any
agreement with, any Person (other than Parent, any of its affiliates or
representatives) concerning any merger, business combination, tender offer,
exchange offer, sale of assets (other than as expressly permitted by Section
5.1), sale of shares of capital stock or debt securities or similar transactions
involving the Company or any Subsidiary, division or operating or principal
business unit of the Company (a "Company Acquisition Proposal"); provided,
however, that, notwithstanding any of the foregoing, in no event shall any of
the Company's Subsidiaries be restricted from taking any action, nor shall they
be required to obtain Parent's consent prior to taking such action, if Kinder
▇▇▇▇▇▇ ▇.▇., Inc. believes the taking of that action to be in the best interests
of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Energy Partners, L.P. and its unitholders. The Company further
agrees that it will immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing.
SECTION 6.3 Access to Information. (a) Except as required pursuant to any
confidentiality agreement or similar agreement or arrangement to which the
Company or Parent or any of their respective Subsidiaries is a party or pursuant
to applicable law or the regulations or requirements of any stock exchange or
other regulatory organization with whose rules the parties are required to
comply, from the date of this Agreement to the Effective Time, the Company or
Parent shall, and shall cause their respective Subsidiaries to, furnish promptly
such information concerning, and provide reasonable access during normal
business hours with respect to, the business, properties, contracts, assets,
liabilities, personnel and other aspects of such party and its Subsidiaries as
the other party or its representatives may reasonably request. Each party shall
use reasonable efforts to accommodate the other party's request for information
or access in the event the first party is subject to a confidentiality
agreement. No investigation conducted pursuant to this Section 6.3 shall affect
or be deemed to modify any representation or warranty made in this Agreement.
(b) The parties shall comply with, and shall cause their respective
representatives to comply with, all of their respective obligations under the
confidentiality agreement dated July 2, 1999 (the "Confidentiality Agreement")
between the Company and Parent with respect to the information disclosed
pursuant to this Section 6.3.
SECTION 6.4 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate and (ii) any failure of the Company, Parent
or Merger Sub, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the
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delivery of any notice pursuant to this Section 6.4 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
SECTION 6.5 Further Action. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use all commercially reasonable efforts
to take, or cause to be taken, all appropriate action, and to do or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, (i) cooperating in the
preparation and filing of the Form S-4, the Proxy Statement, and required
filings under the HSR Act and any amendments thereof, (ii) using all
commercially reasonable efforts to make all required regulatory filings and
applications and to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Authorities and
parties to contracts with the Company and its Subsidiaries as are necessary for
the consummation of the transactions contemplated by this Agreement and to
fulfill the conditions to the Merger, including, without limitation, the Company
Required Statutory Approvals and the Parent Required Statutory Approvals, (iii)
cooperating in all respects with each other in connection with any investigation
or other inquiry, including any proceeding initiated by a private party, in
connection with the transactions pursuant hereto, (iv) keeping the other party
informed in all material respects of any material communication received by such
party from, or given by such party to, the Federal Trade Commission (the "FTC"),
the Antitrust Division of the Department of Justice ("DOJ"), the SEC, the FERC
or any other Governmental Authority and of any material communication received
or given in connection with any proceeding by a private party, in each case
regarding any of the transactions contemplated hereby, (v) cooperating in all
respects with each other in connection with providing the tax opinions described
in Sections 7.2(d) and 7.3(d) of this Agreement and using all commercially
reasonable efforts to obtain the tax opinions referred to in such Sections of
this Agreement, and (vi) permitting the other party to review any material
communication given by it to, and consult with each other in advance of any
meeting or conference with, the FTC, the DOJ or any such other Governmental
Authority or, in connection with any such proceeding by a private party, with
any other Person.
SECTION 6.6 Stock Exchange Listing. Parent shall use its reasonable best
efforts to have approved for listing on the NYSE prior to the Effective Time,
subject to official notice of issuance, the Parent Common Stock to be issued
pursuant to the Merger.
SECTION 6.7 Affiliates. The Company shall deliver to Parent a letter
identifying all persons who are, on the date hereof, "affiliates" of the Company
for purposes of Rule 145 under the Securities Act. The Company shall use its
reasonable best efforts to cause each such Person to deliver to Parent on or
prior to the Closing Date a written agreement substantially in the form attached
as Exhibit A hereto.
SECTION 6.8 Public Announcements. Subject to each party's disclosure
obligations imposed by applicable law, Parent and the Company shall cooperate
with each other in the development and distribution of all news releases and
other public information disclosures with respect to this Agreement or any of
the transactions contemplated hereby and shall not issue any public announcement
or statement without the prior consent of the other party.
SECTION 6.9 Rights Agreement. Parent shall take all actions necessary to
ensure that the Parent Rights Agreement is amended in accordance with Section
3.15 prior to the Effective Time.
SECTION 6.10 Takeover Statutes. If any "interested stockholder," "fair
price," "moratorium," "control share acquisition" or other form of antitakeover
statute or regulation shall become applicable to the transactions contemplated
hereby, the Company and the members of its Board of Directors
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shall grant such approvals and take such other actions as may be necessary to
make Parent and its Subsidiaries exempt under or otherwise not subject to such
statutes.
SECTION 6.11 Transition Management. As soon as practicable after the date
hereof, the parties shall create a joint transition management committee (the
"Transition Committee") consisting of two representatives from each of the
parties hereto designated from time to time as agreed by each of the Boards of
Directors of Parent and the Company. The initial members of the Transition
Committee shall be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇
▇▇▇▇▇▇. The Transition Committee shall be responsible for organizing,
developing, managing and implementing a transition plan for the prompt and
efficient integration of the business organizations of Parent and the Company
and their respective Subsidiaries (the "Transition Plan"), subject to the
requirement that control of the management and properties of Parent and the
Company, as set forth in this Agreement, shall at all times prior to the
Effective Time remain under the control of their respective Boards of Directors.
The Transition Committee shall report its findings and make recommendations to
the Board of Directors of each of Parent and the Company with respect to
transition matters. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ will manage and be responsible for the
day-to-day activities and operations of the Transition Committee. After the date
hereof and prior to the Effective Time, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall be permitted to
attend those meetings of Parent's Board of Directors and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall
be permitted to attend those meetings of the Company's Board of Directors as
they deem appropriate.
SECTION 6.12 Employment Agreement. Parent shall execute and deliver to
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ an employment agreement substantially in the form attached as
Exhibit B hereto (the "Employment Agreement"), such agreement to be effective as
of the Effective Time. The Company shall use its best efforts to cause ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ to enter into the Employment Agreement.
SECTION 6.13 Governance Agreement. Parent shall execute and deliver to
each of the other parties named therein a governance agreement substantially in
the form attached as Exhibit C hereto (the "Governance Agreement"), such
agreement to be effective as of the Effective Time. The Company shall use its
best efforts to cause the persons named therein to enter into the Governance
Agreement.
SECTION 6.14 No Investment in Parent Common Stock. Prior to the Effective
Time, the Company shall not acquire (directly or indirectly, beneficially or of
record) any shares of Parent Common Stock (or any rights to acquire any such
shares), except pursuant to this Agreement.
SECTION 6.15 Bank Holding Company Act. At the request of First Union
Corporation, the parties shall make appropriate provision to provide that First
Union Corporation's holdings of capital stock of Parent are structured in such a
way, including, if necessary, by providing a form of non-voting capital stock,
so as not to result in a violation by First Union Corporation of the Bank
Holding Company Act of 1956.
ARTICLE VII
CONDITIONS
SECTION 7.1 Conditions to the Obligations of Each Party to Effect the
Merger. The obligations of the Company, on the one hand, and Parent and Merger
Sub, on the other hand, to
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effect the Merger, are subject to the satisfaction or, if permitted by
applicable law, waiver of the following conditions:
(a) Form S-4. The Form S-4 shall have been declared effective by the
SEC under the Securities Act and no stop order suspending the effectiveness
of the Form S-4 shall have been issued by the SEC and no proceeding for
that purpose shall have been initiated by the SEC.
(b) Stockholder Approval. The issuance of shares of Parent Common
Stock pursuant to the Merger shall have been approved by the requisite vote
of the holders of the outstanding shares of Parent Common Stock. The Merger
and this Agreement shall have been approved by the requisite vote of the
holders of the outstanding shares of Company Common Stock.
(c) No Injunction. No court of competent jurisdiction shall have
issued or entered any order which is then in effect and has the effect of
making any of the transactions contemplated by this Agreement, including
the Merger, illegal, or otherwise prohibiting their consummation.
(d) HSR Act. All applicable waiting periods (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated.
(e) Consents and Approvals. All consents, authorizations, orders,
permits and approvals of (or registrations, declarations or filings with)
any Governmental Authorities in connection with the execution, delivery and
performance of this Agreement shall have been obtained and made, except
where the failure to obtain or make any such consents, authorizations,
order, permit, approval, registration, declaration or filing would not
result in a Parent Material Adverse Effect or a Company Material Adverse
Effect.
(f) Listing. The shares of Parent Common Stock to be issued pursuant
to this Agreement shall have been authorized for listing on the NYSE
subject to official notice of issuance.
(g) 1935 Act. None of the holders of Company Common Stock shall, as a
result of the Merger, become subject to registration regulation as a
"holding company" under the 1935 Act and Parent shall not, as a result of
the Merger, become subject to registration regulation as part of a "holding
company system" under the 1935 Act.
SECTION 7.2 Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction or, if permitted by applicable law, waiver of the following further
conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date, except
where any such failure or failures to be so true and correct (without
regard to materiality or knowledge qualifiers contained therein), in the
aggregate, would not have a Company Material Adverse Effect. Parent shall
have received a certificate of the President of the Company to such effect.
(b) Covenants. The Company shall have performed or complied in all
material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date, and Parent shall have received a certificate of the President of the
Company to that effect.
(c) Company Material Adverse Effect. No Company Material Adverse
Effect shall have occurred.
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(d) Tax Opinion. Parent shall have received a written opinion of
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, dated as of the Closing Date, in
form and substance reasonably satisfactory to it, substantially to the
effect that, on the basis of representations of Parent and the Company
contained in tax certificates that are customarily required in similar
circumstances, the Merger constitutes a "reorganization" within the meaning
of Section 368 of the Code.
(e) Required Consents. The Company Required Consents and the Company
Required Statutory Approvals shall have been obtained at or prior to the
Effective Time.
(f) Employment Agreement. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have entered into
the Employment Agreement with Parent.
(g) Governance Agreement. The parties thereto shall have entered into
the Governance Agreement with Parent.
(h) Appraisal Rights. No holder of Company Common Stock shall have
demanded appraisal pursuant to Section 262 of the DGCL.
SECTION 7.3 Conditions to the Obligations of the Company. The obligations
of the Company to effect the Merger are subject to the satisfaction or, if
permitted by applicable law, waiver of the following further conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date, except where any such failure or
failures to be so true and correct (without regard to materiality or
knowledge qualifiers contained therein), in the aggregate, would not have a
Parent Material Adverse Effect. The Company shall have received a
certificate of the Chief Executive Officers of Parent and Merger Sub to
such effect.
(b) Covenants. Parent and Merger Sub shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the
Closing Date, and the Company shall have received a certificate of the
President of Parent and Merger Sub to that effect.
(c) Parent Material Adverse Effect. No Parent Material Adverse Effect
shall have occurred.
(d) Tax Opinion. The Company shall have received a written opinion of
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P., date as of the Closing Date, in form and
substance reasonably satisfactory to it, substantially to the effect that,
on the basis of representations of the Company and Parent contained in tax
certificates that are customarily required in similar circumstances, the
Merger constitutes a "reorganization" within the meaning of Section 368 of
the Code.
(e) Required Consents. The Parent Required Consents and the Parent
Required Statutory Approvals shall have been obtained at or prior to the
Effective Time.
(f) Parent Rights. The rights issued pursuant to the Parent Rights
Agreement shall not have become non-redeemable, exercisable, distributed or
triggered pursuant to the terms of such agreement. Parent shall have
amended the Parent Rights Agreement in accordance with Section 3.15 hereof.
(g) Employment Agreement. Parent shall have entered into the
Employment Agreement with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
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(h) Governance Agreement. Parent shall have entered into the
Governance Agreement.
(i) Director Resignations; Bylaw Amendment. All of Parent's directors,
other than those directors listed on Annex A to the Governance Agreement,
shall have submitted their resignations from the Board of Directors,
effective as of the Effective Time, and the Bylaws of Parent shall have
been amended, effective as of the Effective Time, in compliance with
Section 2.1 of the Governance Agreement.
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated
herein may be abandoned at any time prior to the Effective Time, whether before
or after stockholder approval thereof:
(a) By the mutual consent of the Board of Directors of Parent and the
Board of Directors of the Company.
(b) By either of the Board of Directors of the Company or the Board of
Directors of Parent:
(i) if the Merger shall not have been consummated on or before
December 31, 1999; provided, however, that the right to terminate this
Agreement under this Section 8.1(b)(i) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Merger to have
been consummated on or before such date; and provided, further, that
such date shall be extended to March 31, 2000 if on December 31, 1999
(x) any Parent Required Statutory Approval or Company Required Statutory
Approval has not been obtained but is being diligently pursued and (y)
all other conditions to the consummation of the transactions
contemplated hereby are then capable of being satisfied; or
(ii) if any Governmental Authority shall have issued an order,
decree or ruling or taken any other action (which order, decree, ruling
or other action the parties hereto shall use their reasonable efforts to
lift), in each case, permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable; or
(iii) if any required approval of the stockholders of Parent for
the issuance of shares of Parent Common Stock pursuant to the Merger
shall not have been obtained at a duly held meeting of stockholders or
at any adjournment thereof; provided, however, that the right to
terminate under this Section 8.1(b)(iii) shall not be available to any
party whose failure to fulfill any obligations under this Agreement has
been the cause of, or resulted in, the failure of such approval to have
been obtained; or
(iv) if any required approval of the stockholders of the Company of
the Merger and this Agreement shall not have been obtained at a duly
held meeting of stockholders or at any adjournment thereof; provided,
however, that the right to terminate under this Section 8.1(b)(iv) shall
not be available to any party whose failure to fulfill any obligations
under this Agreement has been the cause of, or resulted in, the failure
of such approval to have been obtained.
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(c) By the Board of Directors of Parent:
(i) if, prior to the Effective Time, the Board of Directors of
Parent (or any committee thereof) shall have withdrawn, or modified or
changed in a manner adverse to the Company, its approval or
recommendation of the issuance of shares of Parent Common Stock pursuant
to the Merger in order to approve and permit Parent to execute a
definitive agreement providing for a Superior Proposal; provided that
(A) at least 5 business days prior to terminating this Agreement
pursuant to this Section 8.1(c)(i) Parent has provided the Company with
written notice advising the Company that the Board of Directors of
Parent has received a Superior Proposal that it intends to accept,
specifying the material terms and conditions of such Superior Proposal
and identifying the Person making such Superior Proposal and (B) Parent
shall have caused its financial and legal advisors to negotiate in good
faith with the Company to make such adjustments in the terms and
conditions of this Agreement as would enable Parent to proceed with the
transactions contemplated herein on such adjusted terms; and further
provided that simultaneously with any termination of this Agreement
pursuant to this Section 8.1(c)(i), Parent shall pay to the Company the
Termination Fee (as defined in Section 8.3(b) hereof); and further
provided that Parent may not terminate this Agreement pursuant to this
Section 8.1(c)(i) if Parent is in material breach of this Agreement; or
(ii) if, prior to the Effective Time, the Company breaches or fails
in any material respect to perform or comply with any of its material
covenants and agreements contained herein or breaches its
representations and warranties in any material respect, which breach
cannot be or has not been cured within 30 days after the giving of
written notice by Parent to the Company and which breach of a covenant,
representation or warranty could reasonably be expected to result in a
Company Material Adverse Effect; provided that Parent may not terminate
this Agreement pursuant to this Section 8.1(c)(ii) if Parent is in
material breach of this Agreement;
(d) By the Board of Directors of the Company:
(i) if, prior to the Effective Time, the Board of Directors of
Parent (or any committee thereof) shall have (A) recommended a Parent
Acquisition Proposal or offer (B) withdrawn, modified or changed in a
manner adverse to the Company its approval or recommendation of the
issuance of shares of Parent Common Stock pursuant to the Merger, (C)
taken a position in accordance with the last sentence of Section 6.2(a)
adverse to the Company, (D) executed an agreement in principle (or
similar agreement) or definitive agreement providing for a tender offer
or exchange offer for any shares of capital stock of Parent, or a
merger, consolidation or other business combination with a Person other
than the Company, or (E) resolved to do any of the foregoing; provided
that the Company may not terminate this Agreement pursuant to this
Section 8.1(d)(i) if the Company is in material breach of this
Agreement;
(ii) if Parent breaches its agreements contained in the first two
sentences of Section 6.2(a) or breaches in any material respect its
agreements contained in Section 6.2(a) other than the first two
sentences thereof; provided that the Company may not terminate this
Agreement pursuant to this Section 8.1(d)(ii) if the Company is in
material breach of this Agreement; or
(iii) if, prior to the Effective Time, Parent breaches or fails in
any material respect to perform or comply with any of its material
covenants or agreements contained herein (other than Section 6.2(a)) or
breaches its representations and warranties in any material respect,
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which breach cannot be or has not been cured within 30 days after the
giving of written notice by the Company to Parent and which breach of a
covenant, representation or warranty could reasonably be expected to
result in a Parent Material Adverse Effect; provided that the Company
may not terminate this Agreement pursuant to this Section 8.1(d)(iii) if
the Company is in material breach of this Agreement.
SECTION 8.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 8.1 hereof, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall forthwith
become null and void, except as set forth in Section 9.1, and there shall be no
liability on the part of the Parent or the Company except (a) for fraud and (b)
as set forth in Section 8.3.
SECTION 8.3 Fees and Expenses. (a) Except as contemplated by this
Agreement, including Sections 8.3(b) and 8.3(c) hereof, all costs and expenses
incurred in connection with this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
(b) If (v) the Board of Directors of Parent (or any committee thereof)
shall terminate this Agreement pursuant to Section 8.1(c)(i) hereof, (w) the
Board of Directors of the Company shall terminate this Agreement pursuant to
Section 8.1(d)(i) or Section 8.1(d)(ii), (x) the Board of Directors of the
Company shall terminate this Agreement pursuant to Section 8.1(d)(iii) as a
result of a willful breach by Parent, (y) either the Board of Directors of
Parent or the Board of Directors of the Company shall terminate this Agreement
pursuant to Section 8.1(b)(iii) and on or prior to the date of the Parent
stockholders meeting an Alternative Transaction (as defined below) has been
publicly announced, or (z) either the Board of Directors of Parent or the Board
of Directors of the Company shall terminate this Agreement pursuant to Section
8.1(b)(iii) and on or prior to the date of the Parent stockholders meeting no
Alternative Transaction has been publicly announced, Parent shall pay to the
Company (not later than one business day after such termination of this
Agreement or, in the case of any termination by the Company pursuant to Section
8.1(c)(i) hereof, simultaneously with such termination) an amount equal to (I)
in the case of clauses (v), (w), (x) or (y), $45 million (the "Termination Fee")
and (II) in the case of clause (z), $22.5 million. If the Board of Directors of
the Company shall terminate this Agreement pursuant to Section 8.1(d)(iii) other
than as a result of a willful breach by Parent, Parent shall promptly reimburse
the Company for all actual, documented and reasonable out-of-pocket expenses
incurred, or to be incurred by the Company (including the fees and expenses of
legal counsel, accountants, financial advisors, other consultants, financial
printers and financing sources) ("Expenses") in connection with the Merger and
the consummation of the transactions contemplated by this Agreement, in an
amount not to exceed $5 million in the aggregate. Under no circumstances shall
Parent be required to pay more than one fee pursuant to this Section 8.3(b).
"Alternative Transaction" means any of the following events: (i) the acquisition
of Parent or any of its Subsidiaries by merger, tender offer or otherwise by any
Person other than the Company or any of affiliate thereof (a "Third Party");
(ii) the acquisition by a Third Party of 30% or more of the Assets of Parent and
its Subsidiaries, taken as a whole; (iii) the acquisition by a Third Party of
30% or more of the outstanding shares of Parent Common Stock; (iv) the adoption
by Parent of a plan of liquidation or the declaration or payment of an
extraordinary dividend; or (v) the repurchase by Parent or any of its
Subsidiaries of 30% or more of the outstanding shares of Parent Common Stock.
(c) If the Board of Directors of the Parent shall terminate this Agreement
pursuant to Section 8.1(c)(ii) as a result of a willful breach by the Company,
the Company shall pay to Parent (not later than one business day after such
termination of this Agreement) an amount equal to the Termination Fee. If the
Board of Directors of Parent shall terminate this Agreement pursuant to
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Section 8.1(c)(ii) other than as a result of a willful breach by the Company,
the Company shall reimburse Parent for Expenses in connection with the Merger
and the consummation of the transactions contemplated by this Agreement, in an
amount not to exceed $5 million in the aggregate.
(d) Parent and the Company agree that the agreements contained in Section
8.3(b) and (c) are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. If one party
fails to promptly pay to the other any amounts due under such Section 8.3(b) and
(c), the defaulting party shall pay the costs and expenses (including legal fees
and expenses) in connection with any action, including the filing of any lawsuit
or other legal action, taken to collect payment, together with interest on any
unpaid amounts at the publicly announced prime rate of Citibank, N.A. from the
date such amount was required to be paid.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements of each of the
Company, Parent and Merger Sub set forth in this Agreement shall not survive
following the Effective Time or the termination of this Agreement pursuant to
Section 8.1, as the case may be, other than Sections 6.3(b) and 8.3 hereof. Each
party agrees that, except for the representations and warranties contained in
this Agreement, or in any agreements attached hereto or any certificate
delivered pursuant to this Agreement, no party has made any other
representations and warranties, and each party hereby disclaims any other
representations and warranties made by itself or any of its officers, directors,
employees, agents, financial and legal advisors or other representatives with
respect to the execution and delivery of this Agreement or the transactions
contemplated in this Agreement, notwithstanding the delivery or disclosure to
any other party or any party's representatives of any documentation or other
information with respect to any one or more of the foregoing.
SECTION 9.2 Amendment. This Agreement may be amended prior to the
Effective Time by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of any
matters presented in connection with the Merger by the stockholders of Parent,
but, after such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
SECTION 9.3 Extension; Waiver. At any time prior to the Effective Time,
either party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
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SECTION 9.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by overnight courier service to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
if to the Company to:
▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Bracewell & ▇▇▇▇▇▇▇▇▇, L.L.P.
South Tower Pennzoil Place
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
if to Parent or Merger Sub, to:
K N Energy, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Phase II -- ▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 9.5 Certain Definitions.
"affiliate" shall mean, with respect to any Person, any other Person that
directly, or through one or more intermediaries, controls or is controlled by or
is under common control with such Person.
"Assets" shall mean, with respect to any Person, all properties, land,
buildings, improvements, leasehold improvements, Fixtures and Equipment and
other assets, real or personal, tangible or intangible, owned, leased or
licensed by such Person or any of its Subsidiaries.
"Company Material Adverse Effect" shall mean a material adverse change in
or effect on the business, operations, assets, financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole, or any change
that materially impairs or materially delays the ability of the Company to
consummate the transactions contemplated by this Agreement; provided, that a
Company Material Adverse Effect shall exclude any change or effect due to (i)
United States or global economic condition or financial markets in general, (ii)
changes in the international, national,
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regional or local wholesale or retail markets for natural gas or liquid
hydrocarbons as a whole and (iii) rules, regulations or decisions of the FERC,
the CPUC or any other regulatory body affecting the petroleum products pipelines
industry as a whole.
"Fixtures and Equipment" shall mean, with respect to any Person, all of the
furniture, fixtures, furnishings, machinery and equipment owned, leased or
licensed by such Person and located in, at or upon the facilities of such
Person.
"GAAP" shall mean generally accepted accounting principles in the United
States, as in effect from time to time, consistently applied.
"knowledge", the phrase "to the knowledge of Parent" or any similar phrase
shall mean and be limited to the actual (but not constructive or imputed)
knowledge of senior management of Parent without inquiry; the phrase "to the
knowledge of the Company" or any similar phrase shall mean and be limited to the
actual (but not constructive or imputed) knowledge of senior management of the
Company, Kinder ▇▇▇▇▇▇ ▇.▇., Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇ Energy Partners, L.P.
without inquiry.
"Parent Material Adverse Effect" shall mean a material adverse change in or
effect on the business, operations, assets, financial condition or results of
operations of Parent and its Subsidiaries, taken as a whole, or any change that
materially impairs or materially delays the ability of Parent to consummate the
transactions contemplated by this Agreement; provided, that a Parent Material
Adverse Effect shall exclude any change or effect due to (i) United States or
global economic condition or financial markets in general, (ii) changes in the
international, national, regional or local wholesale or retail markets for
natural gas, liquid hydrocarbons or electricity as a whole and (iii) rules,
regulations or decisions of the FERC or any other regulatory body affecting the
interstate natural gas transmission industry as a whole or the wholesale sale
and transmission of electric power as a whole.
"Permitted Encumbrances" shall mean any Encumbrances resulting from (i) all
statutory or other liens for Taxes or assessments which are not yet due or
delinquent or the validity of which are being contested in good faith by
appropriate proceedings for which adequate reserves are being maintained in
accordance with GAAP; (ii) all cashiers', landlords', workers' and repairers'
liens, and similar liens imposed by law, incurred in the ordinary course of
business; (iii) all laws and governmental rules, regulations, ordinances and
restrictions; (iv) all leases, subleases, licenses, concessions or service
contracts to which any Person or any of its Subsidiaries is a party; (v)
Encumbrances identified on title policies or preliminary title reports or other
documents or writing delivered or made available for inspection to any Person
prior to the date hereof or included in the public records; and (vi) all other
liens and mortgages (but solely to the extent such liens and mortgages secure
indebtedness described or referred to in the Parent Disclosure Schedule or the
Company Disclosure Schedule, as applicable), covenants, imperfections in title,
charges, easements, restrictions and other Encumbrances which, in the case of
any such Encumbrances pursuant to clause (i) through (vi), do not materially
detract from or materially interfere with the present use of the Asset subject
thereto or affected thereby.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint, venture, governmental agency or instrumentality, or
any other entity.
"Stock Plan" shall mean any employee stock option, performance unit, stock
purchase or similar plan of a Person or any of its Subsidiaries.
"Stock Rights" shall mean any outstanding stock options, stock appreciation
rights, limited stock appreciation rights, performance units, phantom stock and
stock purchase rights of a Person.
"Subsidiary" shall mean, with respect to any Person, (i) any corporation,
partnership, joint venture or other organization, whether incorporated or
unincorporated, of which such Person directly
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or indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions, (ii) any limited
partnership of which such Person, or any Subsidiary of such Person, is the
general partner and (iii) any general partnership of which such Person, or any
Subsidiary of such Person, owns an interest in the revenues or profits of 50% or
more. With respect to the Company, the definition of "Subsidiary" shall include,
without limitation, Kinder ▇▇▇▇▇▇ ▇.▇., Inc., ▇▇▇▇▇▇ ▇▇▇▇▇▇ Energy Partners,
L.P., ▇▇▇▇▇▇ ▇▇▇▇▇▇ Operating L.P. "A," ▇▇▇▇▇▇ ▇▇▇▇▇▇ Operating L.P. "B," ▇▇▇▇▇▇
▇▇▇▇▇▇ Operating L.P. "C," and ▇▇▇▇▇▇ ▇▇▇▇▇▇ Operating L.P. "D" and, in each
case, any Subsidiaries thereof.
"Tax" or "Taxes" includes all taxes, charges, fees, levies or other
assessments imposed by any federal, state, local or foreign taxing authority,
including, without limitation, all income, gross receipts, gains, profits,
windfall profits, gift, severance, ad valorem, social security, employment,
disability, unemployment, premium, recapture, credit, excise, property, sales,
use, occupation, service, service use, leasing, leasing use, value added,
transfer, payroll, withholding, estimated, license, stamp, franchise or similar
taxes (including any interest earned thereon or penalties, additions or fines
attributable thereto or attributable to any failure to comply with any
requirement regarding Tax Returns and any interest in respect of such penalties,
additions or fines).
"Tax Return" includes any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction with respect to Taxes, including, without limitation, any
supporting schedules or attachments and any amendments or claims for refund with
respect thereto.
"Thermo Agreements" shall mean (i) the Contribution Agreement, dated as of
February 18, 1998, by and among Thermo LLC, a Colorado limited liability
company, Thermo Ft. ▇▇▇▇▇▇, ▇.▇., a Colorado limited partnership, Thermo
Investments Limited Partnership, a Colorado limited partnership, Crystal River
Energy Company, a California corporation, ▇▇▇▇▇ ▇▇▇▇▇▇ III, an individual,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual, and KN
Cogeneration, Inc., a Colorado corporation; (ii) the Purchase Agreement, dated
as of February 18, 1998, by and among ▇▇▇▇▇ ▇▇▇▇▇▇ III, an individual, Thermo
Greeley I, Inc., a Colorado corporation, and KN Thermo Acquisition, Inc., a
Colorado corporation; (iii) the Master Joint Venture Agreement, dated as of
February 18, 1998, by and among ▇▇▇▇▇ ▇▇▇▇▇▇ III, an individual, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, an individual, ▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual, Thermo LLC, a Colorado
limited liability company, and KN Cogeneration, a Colorado corporation; and (iv)
the Transaction Modification Agreement, dated as of August 27, 1998, by and
among Thermo LLC, a Colorado limited liability company, Thermo Ft. ▇▇▇▇▇▇, ▇.▇.,
a Colorado limited partnership, Thermo Investments Limited Partner ship, a
Colorado limited partnership, Crystal River Energy Company, a California
corporation, ▇▇▇▇▇ ▇▇▇▇▇▇ III, an individual, ▇▇▇▇▇ ▇▇▇▇▇▇ III, as trustee under
that certain restated Declaration and Agreement of Trust dated August 10, 1997,
originally dated January 1, 1997, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual, Thermo
Greeley I, Inc., a Colorado corporation, KN Cogeneration, Inc., a Colorado
corporation, and KN Thermo Acquisition, Inc., a Colorado corporation; and (v)
any other Parent Contracts arising from or related to the relationship between
the Company and its affiliates, on the one hand, and Thermo, LLC and its
affiliates (including, the parties set forth in clauses (i) through (iv) above),
on the other hand; including in each case any and all exhibits, attachments or
amendments to the above referenced agreements.
SECTION 9.6 Other Defined Terms. The following terms shall have the
respective meanings given to such terms in the Sections set forth below:
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TERM SECTION
---- --------
1935 Act.................................................... 3.5
Agreement................................................... Recitals
Alternative Transaction..................................... 8.3(b)
Blue Sky Laws............................................... 3.4(c)
Certificate of Merger....................................... 1.3
Certificates................................................ 2.3(a)
Class A Common Stock........................................ 2.1(b)
Class B Common Stock........................................ 2.1(b)
Closing..................................................... 1.2
Closing Agreement........................................... 3.8(k)
Closing Date................................................ 1.2
Code........................................................ Recitals
Company..................................................... Recitals
Company Acquisition Proposal................................ 6.2(b)
Company Benefit Plans....................................... 4.10(a)
Company Common Stock........................................ 2.1(b)
Company Contracts........................................... 4.18
Company Disclosure Schedule................................. 4.1
Company Financial Statements................................ 4.5
Company Required Consents................................... 4.4(b)
Company SEC Reports......................................... 4.5
Company Stockholders' Approval.............................. 4.27
Confidentiality Agreement................................... 6.3(b)
Constituent Corporations.................................... 1.4
CPUC........................................................ 3.4(c)
DGCL........................................................ Recitals
DOJ......................................................... 6.5
Easements................................................... 3.23
Effective Time.............................................. 1.3
Employment Agreement........................................ 6.12
Encumbrances................................................ 3.2
Environmental Permits....................................... 3.10
ERISA....................................................... 3.9(a)
Exchange Ratio.............................................. 2.1(c)
Exchange Act................................................ 3.4(c)
Expenses.................................................... 8.3(c)
FERC........................................................ 3.5
Form S-4.................................................... 3.27
FTC......................................................... 6.5
Gas Act..................................................... 3.5
Governance Agreement........................................ 6.13
Governmental Authority...................................... 3.4(c)
HSR Act..................................................... 3.4(c)
Intellectual Property....................................... 3.26(b)
Interim Operating Committee................................. 6.11
IRS......................................................... 3.8(p)
Joint Proxy Statement....................................... 3.27
KGCC........................................................ 3.12(b)
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TERM SECTION
---- --------
Merger...................................................... Recitals
Merger Consideration........................................ 2.1(c)
Merger Sub.................................................. Recitals
Net Parent Position......................................... 3.24
NGPA........................................................ 3.5
NYSE........................................................ 2.2
Parent...................................................... Recitals
Parent Acquisition Proposal................................. 6.2(a)
Parent Benefit Plans........................................ 3.9(a)
Parent Class A Preferred Stock.............................. 3.3
Parent Class B Preferred Stock.............................. 3.3
Parent Common Stock......................................... 2.1(c)
Parent Contracts............................................ 3.19
Parent Disclosure Schedule.................................. 3.1
Parent Financial Statements................................. 3.5
Parent Financial Advisors................................... 3.13
Parent Required Consents.................................... 3.4(b)
Parent Required Statutory Approvals......................... 3.4
Parent Rights Agreement..................................... 3.15
Parent SEC Reports.......................................... 3.5
Parent Stockholders' Approval............................... 3.12(a)
Parent Trading Guidelines................................... 3.24
PBGC........................................................ 3.9(e)
PEPS Units.................................................. 3.3
Power Act................................................... 3.5
PURPA....................................................... 3.11(b)
Registration Statement...................................... 4.8
SEC......................................................... 3.5
Securities Act.............................................. 2.3(a)
Superior Proposal........................................... 6.2(a)
Surviving Corporation....................................... 1.1
Task Force.................................................. 6.11
Tax Ruling.................................................. 3.8(k)
Termination Fee............................................. 8.3(b)
SECTION 9.7 Descriptive Headings. The descriptive headings contained in
this Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.8 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the Merger is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the Merger be
consummated as originally contemplated to the fullest extent possible.
SECTION 9.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute a single agreement.
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SECTION 9.10 Entire Agreement; No Third Party Beneficiaries. This
Agreement, together with the Confidentiality Agreement and the other agreements
referred to herein or contemplated hereby, (a) constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof; and (b) is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
SECTION 9.11 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.
SECTION 9.12 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. This Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
permitted assigns.
SECTION 9.13 Specific Performance. The parties recognize and agree that if
for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to any
other available remedies, the other party shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or
equity. In the event that any action should be brought in equity to enforce the
provisions of this Agreement, no party will allege, and each party hereby waives
the defense, that there is an adequate remedy at law.
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be
duly signed as of the date first written above.
K N ENERGY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Interim CEO
ROCKIES MERGER CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇ ▇▇▇▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice Chairman and
President
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