1
EXHIBIT 2-A
PENNZOIL EXPLORATION AND PRODUCTION COMPANY
PENNZOIL GAS MARKETING COMPANY
PENNZOIL ENERGY MARKETING COMPANY
AND
COLUMBIA ENERGY SERVICES CORPORATION
------------------------------
UNIT PURCHASE AGREEMENT
------------------------------
Dated effective as of June 2, 1997
----------------------------
2
TABLE OF CONTENTS
ARTICLE I Purchase and Sale................................................... 1
1.01 Transfer of Units................................................... 1
1.02 Purchase Price...................................................... 1
1.03 Purchase Price and Pennzoil Credit Facility Adjustment Mechanism.... 2
1.04 Post-Closing Adjustments and Indebtedness........................... 3
1.05 Accounts Receivable and Related Matters............................. 5
1.06 The Closing......................................................... 5
1.07 Purchase Price Allocation........................................... 5
ARTICLE II Representations and Warranties of Pennzoil and Sellers.............. 6
2.01 Organization and Good Standing...................................... 6
2.02 Corporate Authority; Authorization of Agreement..................... 6
2.03 The Company......................................................... 6
2.04 No Violations....................................................... 7
2.05 No Default; Compliance with Laws.................................... 7
2.06 Financial Statements................................................ 8
2.07 Bank, Brokerage and Trading Accounts................................ 8
2.08 Accounts Receivable; Guaranties..................................... 8
2.09 Trade Names and Intellectual Property Rights........................ 8
2.10 Absence of Certain Changes.......................................... 8
2.11 Absence of Undisclosed Liabilities.................................. 9
2.12 Taxes............................................................... 10
2.13 Title to Properties; Encumbrances................................... 10
2.14 Subsidiaries........................................................ 10
2.15 Contracts, Agreements, Plans and Commitments........................ 10
2.16 Contracts and Permits............................................... 11
2.17 Litigation.......................................................... 11
2.18 Environmental Matters............................................... 12
2.19 Insurance Policies.................................................. 12
2.20 Employment Arrangements............................................. 12
2.21 Labor Relations; Employees.......................................... 12
2.22 Employee Benefit Matters............................................ 12
2.23 Illegal Payments.................................................... 14
2.24 June and July Gas Sales............................................. 14
2.25 Public Utility Holding Company...................................... 14
2.26 Books and Records................................................... 15
2.27 Full Disclosure..................................................... 15
ARTICLE III Representations and Warranties of Purchaser......................... 15
3.01 Organization and Good Standing...................................... 15
3.02 Corporate Authority; Authorization of Agreement..................... 15
3.03 No Violations....................................................... 15
i
3
3.04 Funds Available..................................................... 16
3.05 Litigation.......................................................... 16
ARTICLE IV Additional Agreements and Covenants................................. 16
4.01 Covenants of Pennzoil and Sellers................................... 16
4.02 Covenants of Purchaser.............................................. 19
ARTICLE V Conditions to Closing............................................... 20
5.01 Conditions to the Obligations of Purchaser.......................... 20
5.02 Conditions to the Obligations of Pennzoil and Sellers............... 21
ARTICLE VI Taxes............................................................... 22
6.01 Tax Return.......................................................... 22
ARTICLE VII Termination......................................................... 22
7.01 Grounds for Termination............................................. 22
7.02 Effect of Termination............................................... 22
ARTICLE VIII Survival of Representations and Warranties; Indemnification......... 23
8.01 Scope of Representations of Pennzoil and Sellers.................... 23
8.02 Indemnification of Purchaser........................................ 23
8.03 Indemnification of Sellers.......................................... 24
8.04 Claims.............................................................. 24
8.05 Limitation on Indemnification....................................... 24
8.06 Survival............................................................ 25
8.07 Tax Benefits; Insurance Proceeds.................................... 25
8.08 Exclusive Remedy.................................................... 25
ARTICLE IX Notices; Miscellaneous.............................................. 25
9.01 Notices............................................................. 25
9.02 Brokers............................................................. 26
9.03 Expenses............................................................ 26
9.04 Books and Records................................................... 26
9.05 Miscellaneous....................................................... 26
Appendix A Definitions .................................................. X-0
Xxxxxxxx X Gas Sales Agreement................................................. B-1
Appendix C Assignment and Assumption Agreement................................. C-1
Schedule 2.04 Consents, Violations, Etc.
Schedule 2.07 Banks, Brokerage Accounts and Trading Accounts
Schedule 2.08 Accounts Receivable and Guaranties
Schedule 2.09 Trade names and Intellectual Property Rights
Schedule 2.10 Changes
ii
4
Schedule 2.11 Undisclosed Liabilities
Schedule 2.13 Contested Ad Valorem Taxes Not Delinquent
Schedule 2.14 Subsidiaries
Schedule 2.15 Contracts
Schedule 2.16 Defaults on Contracts and Permits
Schedule 2.17 Litigation
Schedule 2.18 Environmental Claims and Environmental Conditions
Schedule 2.19 Insurance Policies
Schedule 2.20 Employment Arrangements
Schedule 2.21 Employees, Officers, Directors, Etc.
Schedule 2.22 Plans
iii
5
UNIT PURCHASE AGREEMENT
This UNIT PURCHASE AGREEMENT (this "Agreement"), dated
effective as of June 2, by and between, (a) on the one hand, (i) Pennzoil
Exploration and Production Company, a Delaware corporation ("Pennzoil") and,
(ii) Pennzoil Gas Marketing Company, a Delaware corporation and Pennzoil Energy
Marketing Company, a Delaware corporation ("Sellers"), and, (b) on the other
hand, Columbia Energy Services Corporation, a Kentucky corporation
("Purchaser");
W I T N E S S E T H:
WHEREAS, Sellers are the only members of PennUnion Energy
Services, L.L.C., a Delaware limited liability company (the "Company"), pursuant
to that Amended and Restated Limited Liability Company Agreement of the Company
(the "LLC Agreement") dated as of March 21, 1995;
WHEREAS, Sellers are the owners of 2,000 Class A Units (as
defined in the LLC Agreement) of the Company (the "Units"), which constitute all
of the Membership Interests (as defined in the LLC Agreement) in the Company;
WHEREAS, Purchaser desires to acquire the Units and Sellers
have agreed to sell the Units to Purchaser, upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the
respective representations, warranties, covenants, agreements and conditions
contained herein, the parties hereto hereby agree as follows. Unless defined
elsewhere in this Agreement, all capitalized terms used herein shall have the
respective meanings given them in Appendix A hereto, which is incorporated
herein by reference and shall be deemed to be a part of this Agreement for all
purposes.
ARTICLE I
Purchase and Sale
I.1 Transfer of Units. Upon the terms and subject to the conditions of
this Agreement, at the Closing, Sellers will sell and assign the Units and
deliver to Purchaser (and/or Purchaser's designees) certificates representing
the Units, duly registered in Purchaser's (and/or Purchaser's designees) name,
against receipt of payment for such Units as provided in Section 1.02.
I.2 Purchase Price. Upon the terms and subject to the conditions of
this Agreement, at the Closing, Purchaser will purchase the Units for
$14,750,000 (the "Purchase Price"), subject
6
to the adjustments provided in Sections 1.03 and 1.04. The Purchase Price shall
be paid to Sellers at the Closing by wire transfer in federal or other
immediately available funds in the amounts and to the accounts to be specified
by Sellers at least two business days prior to the Closing.
I.3 Purchase Price and Pennzoil Credit Facility Adjustment Mechanism.
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
2
7
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
I.4 Post-Closing Adjustments and Indebtedness.
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
3
8
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
(f) Within 15 days after the earlier of (i) the expiration of
Sellers' 30-day review and audit period without delivery of a notice of
disagreement or (ii) the date on which the parties or the Accounting
Arbitrator, as applicable, finally determines the disputed matters,
Purchaser, Sellers and Pennzoil shall make the following adjustments to
the Purchase Price and the Pennzoil Credit Facility:
4
9
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
I.5 Accounts Receivable and Related Matters. At Closing, the Company
shall execute and deliver one or more assignments in favor of Sellers of all
rights to the Olympic Receivable and Olympic Payable and gas imbalances related
to the Carthage Plant pursuant to an Assignment and Assumption Agreement in the
form of Appendix C. At the time of the payment pursuant to Section 1.04(f), all
of the Remaining Accounts Receivable and the Remaining Accounts Payable shall be
assigned to Seller pursuant to an Assignment and Assumption Agreement in the
form of Appendix C attached hereto. Purchaser shall use the same efforts during
the 180 day period to collect the Actual Accounts Receivable that Purchaser uses
to collect Purchaser's other accounts receivable; provided, however, Purchaser
shall be under no obligation to initiate any legal proceedings to collect the
Actual Accounts Receivable.
I.6 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxx & Xxxxx,
L.L.P., Xxx Xxxxx Xxxxx, 000 Xxxxxxxxx, Xxxxxxx, Xxxxx on or before June 30,
1997 or at such other time and place as the parties may mutually agree following
satisfaction of the conditions precedent as outlined in Sections 5.01 and 5.02.
I.7 Purchase Price Allocation. The Purchase Price, as adjusted, and the
liabilities of the Company as of the Closing Date, including the Pennzoil Credit
Facility, shall be allocated among the assets represented by the Units in
accordance with Section 1060 of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Treasury regulations thereunder. Such allocation shall be
jointly established by Purchaser and Sellers and shall be attached to the
Agreement as Schedule 1.07 at Closing. Schedule 1.07 shall be based on the most
currently available financial statements of the Company and shall be adjusted,
if necessary, by Purchaser and Sellers to reflect the Purchase Price, as
adjusted by application of Sections 1.03 and 1.04, and Actual Closing Financial
Statements, once they have been determined. Such adjusted Schedule 1.07 shall be
delivered to Sellers in accordance with the notice provisions of Section 9.01.
The allocations will be used by Purchaser and Sellers as the basis for reporting
asset values and other items for purposes of all required returns, statements
and reports with respect to taxes,
5
10
including any reports required to be filed under Section 1060(b) of the Code and
the Treasury regulations promulgated thereunder. Sellers and Purchaser agree not
to assert, in connection with any audit or other proceeding with respect to
taxes, any asset values or other items inconsistent with the allocations set
forth in Schedule 1.07.
ARTICLE II
Representations and Warranties of Pennzoil and Sellers
Except as otherwise provided for or disclosed in this
Agreement or in the Schedules attached hereto, Pennzoil and Sellers hereby
represent and warrant to Purchaser that:
II.1 Organization and Good Standing. Each Seller and the Company is a
corporation or a limited liability company, as the case may be, duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation or formation, and each has all requisite power and
authority to own and lease the properties and assets it currently owns and
leases and to carry on its business as such business is currently conducted. The
Company is duly licensed or qualified to do business as a limited liability
company and is in good standing in all jurisdictions in which the character of
the properties and assets now owned or leased by it or the nature of the
business now conducted by it requires it to be so licensed or qualified except
where the failure so to qualify or to be so licensed would not reasonably be
expected to have a Material Adverse Effect.
II.2 Corporate Authority; Authorization of Agreement. Pennzoil and each
Seller has all requisite corporate power and authority to execute and deliver
this Agreement, to consummate the transactions contemplated hereby and to
perform all the terms and conditions hereof to be performed by it. The execution
and delivery of this Agreement by Pennzoil and each Seller, the performance by
Pennzoil and each Seller of all the terms and conditions hereof to be performed
by it and the consummation of the transactions contemplated hereby have been
duly authorized and approved by the Board of Directors of Pennzoil and each
Seller. This Agreement has been duly executed and delivered by Pennzoil and each
Seller and constitutes the valid and binding obligation of Pennzoil and each
Seller, enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws relating
to or affecting the enforcement of creditors' rights generally and general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
II.3 The Company. The authorized membership interests of the Company
consist solely of 2,000 Class A Units, all of which are issued and outstanding
on the date hereof. Sellers own beneficially and of record the Units, free and
clear of all liens, charges, encumbrances, rights of others, mortgages, pledges
or security interests. There are no outstanding subscriptions, options,
convertible securities, warrants or calls of any kind issued or granted by or
binding upon Sellers or the Company to purchase or otherwise acquire any
security of or membership interest in the Company.
6
11
II.4 No Violations. Except as set forth on Schedule 2.04, this
Agreement and the execution and delivery hereof by Sellers does not, and the
fulfillment and compliance with the terms and conditions hereof and the
consummation of the transactions contemplated hereby, will not:
(a) conflict with, or require the consent of any Person under,
any of the terms, conditions or provisions of the charter or bylaws or
other organizational documents of any of Sellers or the Company;
(b) violate any provision of, or require any filing, consent,
authorization or approval under, any Legal Requirement applicable to or
binding upon Sellers or the Company (assuming receipt of all routine
governmental consents typically received after consummation of
transactions of the nature contemplated by this Agreement);
(c) conflict with, result in a breach of, constitute a default
under (without regard to requirements of notice or the lapse of time or
both), accelerate or permit the acceleration of the performance
required by, or require any consent, authorization or approval under,
(i) any mortgage, indenture, loan, credit agreement or other agreement
or instrument evidencing indebtedness for borrowed money to which any
of Sellers or the Company is a party or by which any of Sellers or the
Company is bound or to which any of their respective properties is
subject or (ii) any lease, license, contract or other agreement or
instrument to which any of Sellers or the Company is a party or by
which any of them is bound or to which any of their respective
properties is subject; or
(d) result in the creation or imposition of any lien, charge
or other encumbrance upon the assets of the Company or upon the Units,
which violation, breach or encumbrance with respect to the matters specified in
clauses (c) through (d) of this Section 2.04 might reasonably be expected to
have a Material Adverse Effect.
II.5 No Default; Compliance with Laws. To the best of their knowledge:
(a) the Company is not in default under, and no condition
exists that with notice or lapse of time or both would constitute a
default under, (i) any mortgage, indenture, loan, credit agreement or
other agreement or instrument evidencing indebtedness for borrowed
money to which the Company is a party or by which the Company is bound
or to which any of its properties is subject, (ii) any order, judgment
or decree of any Governmental Authority or (iii) any other agreement,
contract, lease, license or other instrument, which default or
potential default might reasonably be expected to have a Material
Adverse Effect; and
(b) the Company is in compliance with all Legal Requirements
applicable to
7
12
its business and operations, noncompliance with which might reasonably
be expected to have a Material Adverse Effect;
II.6 Financial Statements. Sellers have heretofore delivered to
Purchaser true and complete copies of the unaudited financial statements of the
Company as of and for the period ended March 31, 1997 (including a balance
sheet, a statement of income, a statement of cash flows and any notes and
schedules thereto) (the "Financial Statements"). The Financial Statements are
true and complete in all material respects; have been prepared from the books
and records of the Company; have been prepared in accordance with generally
accepted accounting principles that have been consistently applied by the
Company throughout the periods indicated; and fairly represent the financial
position of the Company as at the date thereof and the results of its operations
for the period then ended.
II.7 Bank, Brokerage and Trading Accounts. Schedule 2.07 sets forth a
complete and correct listing of names and addresses of all banks or other
financial institutions in which Company has bank accounts, brokerage accounts,
deposit or safe-deposit boxes, with the names of all persons authorized to draw
on these accounts or deposits or to these boxes.
II.8 Accounts Receivable; Guaranties. Schedule 2.08 sets forth a
complete and accurate schedule of (a) the accounts receivable and accounts
receivable - owner, and accounts payable of Company as of Xxxxx 00, 0000, (x)
gas in storage and gas imbalances to Sellers and Company's knowledge as of April
30, 1997, and (c) Guaranties given by Pennzoil or the Sellers and/or received by
the Company as of the date hereof, together with an accurate aging of such
accounts receivable and accounts payable. These accounts receivable and accounts
payable, and all accounts receivable and accounts payable of Company created
after such date, arose from valid purchases and sales in the ordinary course of
business. To the knowledge of Sellers, except as set forth on Schedule 2.08, all
accounts receivable are collectible at their full amounts without any defense or
right of set off or counterclaim.
II.9 Trade Names and Intellectual Property Rights. Schedule 2.09 sets
forth all patents, trade names, trademarks, service marks and copyrights and
their registrations, owned by Company or in which it has any rights or licenses,
together with a brief description of each. Company has not infringed, and is not
now infringing, on any trade name, trademark, patent service xxxx, copyright or
other intellectual property rights belonging to any other person, firm or
corporation. Except as set forth in Schedule 2.09, the Company is not a party to
any license, agreement or arrangement, whether licensor, licensee, or otherwise,
with respect to any patents, trademarks, service marks, trade names or
applications for them, or any copyrights. Company owns, or holds adequate
licenses or other rights to use, all patents, trademarks, service marks, trade
names and copyrights and other intellectual property rights necessary for the
conduct of its businesses as presently conducted. All such licenses and other
rights to use are freely assignable or otherwise transferable, without any fees,
assessments or third party consents following consummation of the transactions
contemplated by this Agreement.
8
13
II.10 Absence of Certain Changes. Except as indicated in Schedule 2.10,
since May 8, 1997, there has not been:
(a) any material adverse change in the business, financial
condition or results of operations of the Company taken as a whole,
including the departure of full-time Company employees necessary to
carry out each operation of the Company, which change was not the
result of an industry-wide development affecting other companies in the
natural gas marketing industry;
(b) any damage, destruction or loss to or of any material
properties of the Company, whether or not covered by insurance, that
has had, or might reasonably be expected to have, a Material Adverse
Effect;
(c) any issuance or attempted issuance by the Company of any
Units;
(d) any sale, lease or other disposition of properties and
assets of the Company other than in the ordinary course of business;
(e) any merger or consolidation of the Company with any other
Person or any acquisition by the Company of the stock or business of
another Person;
(f) any borrowing of, or agreement to borrow, funds by the
Company;
(g) any mortgage, pledge or grant of a lien or security
interest in any property of the Company, other than in the ordinary
course of business (except any such encumbrance that will be released
at or before the Closing);
(h) any loan by the Company to any Person, other than accounts
receivable for goods furnished or services rendered which are payable
in accordance with customary terms, or guaranty by the Company of any
loan;
(i) any written waiver or release of any material right or
claim of the Company;
(j) any increase in the salary or other compensation payable
to or to become payable by the Company to any of its officers, managers,
employees, or the declaration, payment, commitment or obligation of any kind for
the payment of any bonus, award, severance or other salary or compensation to
any Person other than the vesting of employees' benefits under the Company's
qualified plans; or
(k) any contract or commitment to do any of the foregoing.
II.11 Absence of Undisclosed Liabilities. To the knowledge of Sellers,
except as set
9
14
forth in Schedule 2.11, the Company has no debt, liens, charges, assessments,
demands, liabilities, or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, that is not reflected
or reserved against in the Financial Statements.
II.12 Taxes. Sellers have (or will have by the Closing Date) caused to
be timely filed with the appropriate Governmental Authorities all Tax Returns,
information returns or statements and reports required to be filed on or before
the Closing Date by or with respect to the Company which, if not so filed, would
have a Material Adverse Effect, and have (or will have by the Closing Date)
caused to be paid or deposited or made adequate provision for the payment of all
Taxes shown to be due on such returns or reports. Sellers have not received and
have no knowledge of any notice of deficiency, statutory notice of deficiency or
notice of partnership administrative proceedings or proposed deficiency or
assessment with respect to the Company or any of its properties from any taxing
authority, and there are no outstanding agreements or waivers by or with respect
to the Company that extend the statutory period of limitations applicable to any
federal, foreign, state or local income or franchise tax returns for any period.
For federal income tax purposes, the Company is characterized as a partnership
and not as an association taxable as a corporation pursuant to Treas. Reg.
Section 301.7701-2. The Company has taken the position on all of its federal
income Tax Returns that it is a partnership. There are no present disputes as to
taxes of any nature payable by Company. The Company is not and will not be
liable for any claim for taxes of the Sellers or any member of any affiliated or
consolidated group of which either Seller is a member.
II.13 Title to Properties; Encumbrances. The Company has good title to
all the properties and assets (whether real, personal or mixed and whether
tangible or intangible) that it purports to own, including all of the properties
and assets reflected in the Financial Statements (except for assets held under
capitalized leases and personal property sold since the date of the Financial
Statements in the ordinary course of business and consistent with past
practice), and all of the properties and assets purchased or otherwise acquired
by the Company since the date of the Financial Statements (except for personal
property acquired and sold since the date of the Financial Statements in the
ordinary course of business and consistent with past practice). All Material
Properties and assets reflected in the Financial Statements are free and clear
of all Encumbrances other than Permitted Encumbrances. As used herein, the term
"Permitted Encumbrances" means (a) liens for current taxes or securing payments
to mechanics and materialmen that are not yet delinquent or are being contested,
as set forth in Schedule 2.13, in good faith in the ordinary course of business,
and (b) with respect to real property, (i) minor imperfections of title, if any,
none of which is substantial in amount, materially detracts from the value or
impairs the use of the property subject thereto, or impairs the operations of
the Company, (ii) Legal Requirements that do not impair the present or
anticipated use of the property subject thereto, and (iii) utility and similar
easements and rights of way which, individually and in the aggregate, do not
materially interfere with the use of such real property in the business of the
Company.
10
15
II.14 Subsidiaries. Except as set forth in Schedule 2.14, the Company
does not own, directly or indirectly, any interest or investment (whether equity
or debt) in any corporation, partnership, business, trust, or other entity.
II.15 Contracts, Agreements, Plans and Commitments. Schedule 2.15
includes a list of the following contracts, leases, licenses, agreements, plans
and commitments to which the Company is a party or by which the Company or any
of its material properties is bound (the "Contracts"):
(a) any contract, commitment or agreement that involves
expenditures by the Company of more than $10,000 per year, other than
(i) contracts, commitments or agreements listed pursuant to other
clauses of this Section 2.15 or 2.19 and (ii) contracts, commitments or
agreements entered into in the ordinary course of business, which
collectively involve expenditures by the Company of less than $10,000
per year;
(b) any indenture, trust agreement, loan agreement or note
under which the Company has outstanding indebtedness, obligations or
liabilities for borrowed money;
(c) any lease, sublease, installment purchase or similar
arrangement for the use or occupancy of real property that involves
aggregate expenditures by the Company of more than $50,000 per year,
together with a list of the location of such leased property, the date
of termination of such arrangements, the name of the other party and
the annual rental payments required to be made for such arrangements;
(d) any agreement of surety, guaranty or indemnification by
the Company other than indemnification of managers and officers as
provided for in the Company's organization documents and guarantees
resulting from the endorsement, in the ordinary course of business, of
negotiable instruments for deposit or collection; and
(e) any written contract or agreement with either Sellers or
any Affiliate of either Seller relating to the provision of goods or
services.
II.16 Contracts and Permits. Each Contract and each license and permit
issued to the Company by any Governmental Authority is valid and binding upon
each party thereto and is in full force and effect according to its terms, and
there have been no amendments, modifications or supplements thereto other than
in the ordinary course of business or such as are specifically described on
Schedule 2.16. To the knowledge of Sellers, except as set forth on Schedule
2.16, there is no default or claim of default under any such Contract, license
or permit and no event has occurred which, with the passage of time or the
giving of notice (or both), would constitute a default by the Company, or any
other party thereto, under any such Contract, license or permit, or would permit
modifications, acceleration or termination of any such Contract, license or
permit, or result in the creation of any lien or encumbrance on any of the
assets of the Company. Except as indicated on Schedule 2.16, none of the
permits, licenses or Contracts will require the consent of or notice to any
person thereto with respect to any of the transactions contemplated hereby. None
of the licenses or permits requires the payments of any further fees before
Closing except as listed on Schedule 2.16, nor do any facts or circumstances
exist which would indicate
11
16
that the Company will not be entitled to renew any license or permit upon its
expiration or would be required to pay an extraordinary fee or change in
connection therewith. Except for the licenses or permits listed on Schedule
2.16, no other permit is required for the operation of the properties or
businesses of the Company as presently conducted.
II.17 Litigation.
(a) Except as set forth in Schedule 2.17, there is no action,
suit or proceeding pending or, to the knowledge of Pennzoil or Sellers,
threatened against the Company or any of its properties or assets.
(b) The Company has not been charged with a violation of, or,
to the knowledge of Sellers, threatened with a charge of a violation
of, any Legal Requirement relating to any aspect of its business, which
violation might reasonably be expected to have a Material Adverse
Effect.
II.18 Environmental Matters. Except as specified in Schedule 2.18,
there is no material Environmental Claim or environmental condition with respect
to the properties and assets of the Company or resulting from the operation
thereof.
II.19 Insurance Policies. Schedule 2.19 hereto sets forth a list of all
material insurance policies, including directors' and officers' liability
policies, by which the Company or any of its properties or assets are covered
against present losses, all of which are now in full force and effect. All these
policies are in the respective principal amounts set forth in Schedule 2.19.
II.20 Employment Arrangements. Schedule 2.20 attaches a correct and
current list of all contracts with respect to employment and collective
bargaining agreements, to which Company is a party or by which Company is bound;
all these contracts and agreements are in full force and effect, and neither
Company nor, to the knowledge of Sellers, any other party is in default under
any of them.
II.21 Labor Relations; Employees. Company has paid all salaries, wages,
bonuses and severance, accrued to the present to or for the benefit of its past
and/or present employees and has complied in all respects with all applicable
legal requirements relating to the employment of labor, including those relating
to wages, hours, collective bargaining and the payment and withholding of taxes,
and has withheld and paid to the appropriate governmental authority, or is
holding for payment not yet due to such authority, all amounts required by law
or agreement to be withheld from the wages or salaries of such employees. A
complete and correct list of the names and addresses of all officers, managers,
employees and agents (who are individuals) of Company (and its subsidiaries),
stating the rates of compensation payable to each is set forth in Schedule 2.21.
II.22 Employee Benefit Matters.
(a) Each Plan is listed on Schedule 2.22 hereto. No Plan is or
has been (A) covered by Title IV of ERISA, (B) a "multi-employer plan"
as defined in Section 3(37) of ERISA or (D) a voluntary employees'
beneficiary association within the meaning of Code Section 501(c)(9).
Each Plan intended to be qualified under Section 401(a) of
12
17
the Code is designated as a tax-qualified plan on Schedule 2.22 and is
so qualified.
(b) Sellers have heretofore delivered to Purchaser true and
correct copies of the following:
(i) each written Plan and all amendments thereto as of
the date hereof;
(ii) a complete description of each other Plan;
(iii) all current summary plan descriptions provided to
employees regarding the Plans;
(iv) the most recent determination letter issued by the
Internal Revenue Service with respect to any Plan qualified
under Section 401(a) of the Code;
(v) the trust agreement or other funding arrangement
for each Plan; and
(vi) all contracts or agreements related to each Plan.
(c) Except as set forth on Schedule 2.22, each Plan and
related trust as in effect on the date hereof is, to the extent
applicable, a duly qualified plan and trust under Section 401 and
501(a), respectively, of the Code; a favorable determination letter has
been received from the Internal Revenue Service with respect to each
such plan and trust; there have been no amendments to the respective
plan or trust since the date of such determination letter and no
actions have been taken which would adversely affect such
qualification.
(d) Each Plan and each funding medium which may be attendant
thereto, including group annuity contracts, has been in all material
respects operated and administered in accordance with its provisions
and applicable legal requirements.
(e) At or prior to the Closing Date, there will have been
contributed to each Plan not less than the greater of the amounts
required pursuant to any applicable union contracts or such amounts
necessary to comply with the minimum funding standards of Section 412
of the Code, as the case may be, for all plan years prior to the
current plan year;
(f) As of the Closing Date, the fair market value of assets
under each Plan will be sufficient to satisfy the liability to
participants thereunder for benefits accrued through the Closing Date.
(g) The Company has made or will have made prior to the
Closing Date all other contributions or payments required to be paid or
accrued with respect to such Plan.
(h) Other than routine claims or obligations for benefits or
payments under the Plans in the ordinary course of business, there are
no actions, suits or claims pending or, to the knowledge of the Company
threatened against any Plan or any of its assets, and the Company has
no knowledge of any facts which could give rise to any such actions,
suits
13
18
or claims which if adversely determined would be expected to have a
material adverse effect on the financial position of any Plan or, to
the extent applicable, qualified status under the Code or ERISA of any
Plan.
(i) The Company and its respective affiliates, directors,
officers, representatives and employees have not, with respect to the
Plans, engaged in any "prohibited transaction" (as such term is defined
in the Code and ERISA) which has not been exempted under the statutory
as opposed to administrative provisions of Section 408 of ERISA, and to
the knowledge of Sellers no such Plan, related trust, trustee,
administrator or other "party-in-interest" (as defined in ERISA) has
engaged in any transactions, directly or indirectly, to which
prohibited transaction, sanctions, taxes or penalties may be imposed
under the Code or ERISA.
(j) The Company and its respective directors, officers,
representatives and employees, and, to the best of Seller's knowledge,
any other "fiduciary" (as defined in ERISA), has not, with respect to
any Plan, committed any breach of fiduciary responsibility imposed by
ERISA or any other applicable Law which could subject the Company or
any of its respective directors or officers to liability under ERISA or
any Legal Requirements.
(k) The Company and its subsidiaries do not have any leased
employees within the meaning of Code Section 414(n).
(l) Except for continuation coverage provided pursuant to Code
Section 4980B, no Plan provides any medical or other welfare benefit
plan coverage beyond termination of employment and there is no
obligation to do so.
(m) The Company will not have on or after the Closing any
liability, obligation or responsibility for any Plan (except as to its
severance plan referred to in Section 4.02(d)), or for any other
employee benefit or compensation plan, agreement or arrangement
maintained, sponsored or contributed to by the Company or by any trade
or business, whether or not incorporated, which is a member of a
control group of companies or is otherwise treated with the Company as
a single employer within the meaning of ERISA Section 4001 or Code
Section 414.
II.23 Illegal Payments. Neither Sellers, Company, or to the best
knowledge of Sellers and Company have any of their respective Affiliates,
managers, officers, agents, unitholder or employees:
(a) made or has agreed to make any contributions, payments, or
gifts of funds or property through any governmental official, employee
or agent where either the payment or purpose of such contribution,
payment or gift was or is illegal under the laws of the United States,
or any state thereof, or any other jurisdiction (foreign or domestic);
(b) established or maintained any unrecorded fund or asset for
any purpose, or has made any false or artificial entries on any of its
books or records for any reason; or
(c) made or had agreed to make any contribution or
expenditure, or has
14
19
reimbursed any political gift or contribution or any expenditure made
by any other person to candidates for public office, whether federal,
state or local (foreign or domestic) where such contributions were or
would be in violation of applicable Legal Requirement.
II.24 June and July Gas Sales. All gas purchased by the Company from
Pennzoil during the month of June and July 1997 will be purchased on the
financial terms and conditions set forth in the Gas Sales Agreement attached as
Appendix B hereto.
II.25 Public Utility Holding Company. The Company does not own or
operate any facilities used for the retail distribution of natural or
manufactured gas for heat, light or power, nor does the Company, directly or
indirectly, own, control or hold with power to vote 10% or more of the
outstanding stock of, or exercise direct or indirect controlling influence over
the management or policies of, such a company or a company so controlling such a
company.
II.26 Books and Records. To their knowledge, all existing records of
every type and description of the Company and that are in the possession of
Pennzoil or Sellers are, or shall prior to the Closing Date be, located in the
offices of the Company. The books and records of Company accurately reflect in
all material respects the business, financial condition and result of operations
of Company and have been maintained in all material respects in accordance with
good business and bookkeeping practices.
II.27 Full Disclosure. Except as set forth in the letter dated May 7,
1997, from the Company to Purchaser, none of the representations and warranties
made by Pennzoil or Sellers, or made in any certificate, document, instrument or
other writing furnished or to be furnished by Pennzoil, Sellers or Company or on
any of their behalf, contain or will contain any untrue statement of material
fact, or omit any material fact the omission of which would be misleading.
ARTICLE III
Representations and Warranties of Purchaser
Except as otherwise provided for or disclosed in this
Agreement or in the Schedules attached hereto, Purchaser hereby represents and
warrants to Sellers that:
III.1 Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
III.2 Corporate Authority; Authorization of Agreement. Purchaser has
all requisite corporate power and authority to execute and deliver this
Agreement, to consummate the transactions contemplated hereby and to perform all
the terms and conditions hereof to be performed by it. The execution and
delivery of this Agreement by Purchaser, the performance by Purchaser of all the
terms and conditions hereof to be performed by it and the consummation of the
transactions contemplated hereby have been duly authorized and approved by the
Board of Directors of Purchaser. This Agreement has been duly executed and
delivered by Purchaser and constitutes the valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws relating
to or affecting the enforcement of creditors' rights generally and general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at
15
20
law).
III.3 No Violations. This Agreement and the execution and delivery
hereof by Purchaser do not, and the fulfillment and compliance with the terms
and conditions hereof and the consummation of the transactions contemplated
hereby will not:
(a) conflict with, or require the consent of any Person under,
any of the terms, conditions or provisions of the certificate of
incorporation or bylaws of Purchaser;
(b) violate any provision of, or require any filing, consent,
authorization or approval under, any Legal Requirement applicable to or
binding upon Purchaser (assuming receipt of all routine governmental
consents typically received after consummation of transactions of the
nature contemplated by this Agreement);
(c) conflict with, result in a breach of, constitute a default
under (without regard to requirements of notice or the lapse of time or
both), accelerate or permit the acceleration of the performance
required by, or require any consent, authorization or approval under,
(i) any mortgage, indenture, loan, credit agreement or other agreement
or instrument evidencing indebtedness for borrowed money to which
Purchaser is a party or by which Purchaser is bound or to which any of
its properties is subject or (ii) any lease, license, contract or other
agreement or instrument to which Purchaser is a party or by which it is
bound or to which any of its properties is subject; or
(d) result in the creation or imposition of any lien, charge
or other encumbrance upon the assets of Purchaser;
which violation, breach or encumbrance with respect to the matters specified in
clauses (c) through (d) of this Section 3.03 might reasonably be expected to
have a Material Adverse Effect.
III.4 Funds Available. Purchaser has, or will have prior to the Closing
Date, sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to make payment of the Purchase Price at the
Closing.
III.5 Litigation. There is no action, suit, proceeding or governmental
investigation or inquiry pending or, to the knowledge of Purchaser, threatened
against Purchaser or its subsidiaries or any of their respective properties that
might delay, prevent or hinder the consummation of the transactions contemplated
hereby.
ARTICLE IV
Additional Agreements and Covenants
IV.1 Covenants of Pennzoil and Sellers. Pennzoil and Sellers covenant
and agree with Purchaser that from the date of execution of this Agreement until
Closing:
(a) New Transactions; Consent. Sellers agree to cause Company
to carry on its businesses and activities diligently and in
substantially the same manner as it had
16
21
previously been carried out, and shall not make agreements to any
unusual or novel methods of manufacture, purchase, sale, lease,
management, accounting or operation that will vary materially from
those methods previously used by Company.
(b) Compliance with and Performance of Agreement and Legal
Requirements. Sellers shall and shall cause Company to:
(i) perform all acts to be performed by it as
contemplated by this Agreement and that may be necessary to be
performed by it to keep this Agreement and the transactions
contemplated by this Agreement from (i) violating any Legal
Requirement, or (ii) resulting in the creation of any lien,
charge or encumbrance upon any of the properties and assets of
the Company;
(ii) refrain from taking any action that would in any
way prevent or invalidate the consummation of the transactions
contemplated by this Agreement, or that would cause or permit
this Agreement and the consummation of the transactions
contemplated by this Agreement to (a) violate any Legal
Requirements or the Company's policies and procedures, or (b)
result in the creation of any lien, charge or encumbrance upon
any of the properties and assets of the Company; and
(iii) notify Purchaser of any inaccuracy of any
representation or warranty contained in Article II of this
Agreement or the Schedules hereto promptly after receiving
notice of the same.
(c) Operation of Properties. Except as may be expressly
permitted hereunder or as set forth in any Schedule hereto, from the
date hereof until the Closing, without first obtaining the written
consent of Purchaser (which consent will not be unreasonably withheld,
conditioned or delayed), Sellers will not permit the Company to:
(i) waive any right of material value relating to any
of the properties and assets of the Company;
(ii) convey, encumber, mortgage, pledge or dispose of
properties or assets of the Company with a fair market value
exceeding either $50,000 or an individual basis or $50,000 in
the aggregate; and
(iii) commit itself to do any of the foregoing.
provided, however, that nothing contained in this Section 4.01(c) or
elsewhere in this Agreement shall limit the rights of the Company to
operate the properties and assets of the Company in the ordinary course
of business.
(d) Certain Changes. Except as may be expressly permitted by
this Agreement or set forth in any Schedule hereto, from the date
hereof until the Closing, without first obtaining the written consent
of Purchaser (which consent will not be unreasonably withheld,
conditioned or delayed), Sellers will not permit the Company to:
17
22
(i) declare or pay any distributions;
(ii) make any material change in the conduct of the
business or operations, of the Company, including, without
limitation, its trading activities and the payment (including
the timing of payments) of accounts payable of the Company;
(iii) except in the ordinary course of business and
consistent with past practices, enter into, assign, terminate
or amend in any material respect any contract or agreement
required to be disclosed pursuant to Section 2.15;
(iv) issue any equity interests, or repurchase, redeem
or otherwise acquire any such interests or make or propose to
make any other change in its capitalization;
(v) merge into or with or consolidate with any other
Entity or acquire all or substantially all of the business or
assets of any Person;
(vi) make any change in the LLC Agreement;
(vii) purchase any securities of any Person except for
short-term investments made in the ordinary course of business
consistent with past practices;
(viii) make or cause to be made any amendment to any
Plan;
(ix) fail to maintain the insurance policies now in
force with respect to the Company, its officers, managers and
employees (or insurance that is substantially equivalent);
(x) fail to perform and comply with all covenants and
conditions contained in the Company's contracts, leases,
licenses and other agreements in any material respect;
(xi) fail to comply, in all material respects, with the
legal requirements of any Governmental Authority having
jurisdiction over the business and operations of the Company;
or
(xii) commit itself to do any of the foregoing.
(e) Access. Pennzoil and Sellers will cause the Company to
afford to Purchaser and its authorized representatives, at Purchaser's
sole expense, risk and cost and upon reasonable notice, reasonable
access from the date hereof until the Closing Date, during normal
business hours, to the Company's personnel, properties, books and
records to the extent that such access and disclosure would not
unreasonably interfere with the normal operation of the business of the
Company or violate the terms of any agreement by which Sellers or the
Company is bound or any applicable Legal Requirement; provided,
however, that the confidentiality of any data or information so
18
23
acquired shall be maintained by Purchaser and its representatives in
accordance with Section 4.02(f).
(f) Reasonable Efforts. Pennzoil and Sellers will use their
respective Reasonable Efforts to obtain the satisfaction of the
conditions to Closing set forth in Section 5.02.
(g) No Negotiations. Pennzoil and Sellers shall not, and shall
not permit the Company to, solicit from any Person any proposals or
offers, or enter into any negotiations relating to the disposition of
all or substantially all the Company's assets or business, the
acquisition of the Units or the merger or consolidation of the Company
with any Entity.
(h) Public Announcements. Subject to applicable securities
laws or stock exchange requirements, at all times until the Closing
Date, Pennzoil and Sellers shall obtain the written approval of
Purchaser before issuing, or permitting any of the directors, officers,
employees or agents or Affiliates of Pennzoil, Sellers or the Company
to issue, any press release with respect to this Agreement or the
transactions contemplated hereby.
(i) Employee Benefit Plans and Employees. Pennzoil and Sellers
shall, on or before the Closing Date become plan sponsors of, or
terminate, the Company's Plans other than the Severance Pay Plan (as
described on Schedule 2.22), and shall satisfy all obligations and
liabilities with respect thereto, including but not limited to funding
all contributions, maintaining a Plan to the extent necessary to
continue its qualification under appropriate provisions of the Code or
to otherwise comply with applicable law, and providing COBRA
continuation benefits under Code Section 4980B for all employees whose
initial "qualifying event" (within the meaning of Code Section 4980B)
was on or prior to the Closing Date. Pennzoil and Sellers shall not
take any action inconsistent with the Purchaser's intent to treat all
employees of the Company and its subsidiaries who are employed on and
after the Closing Date as new employees (except as the Purchaser in its
sole discretion determines otherwise) for the purposes of the
Purchaser's compensation and employee benefit plans. Effective at
Closing, employees of the Company who remain in the employ of the
Company or Purchaser shall be covered by Purchaser's health insurance
plan.
IV.2 Covenants of Purchaser. Purchaser covenants and agrees with
Sellers as follows:
(a) Reasonable Efforts. Purchaser will use its Reasonable
Efforts to obtain the satisfaction of the conditions to Closing set
forth in Section 5.01.
(b) Public Announcements. Subject to applicable securities
laws or stock exchange requirements, at all times until the Closing
Date, Purchaser shall obtain the written approval of Sellers before
issuing, or permitting any of Purchaser's directors, officers,
employees, agents or Affiliates to issue, any press release with
respect to this Agreement or the transactions contemplated hereby.
(c) Tradenames. After the Closing, Purchaser and its
Affiliates shall not use the name "PennUnion" or "Pennzoil" or any
tradename incorporating or derivative of the
19
24
name "PennUnion" or "Pennzoil," except as to notify the Company's
customers, suppliers and business associates. Within thirty (30) days
after the Closing, Purchaser will change the name of the Company so
that it does not include the name "PennUnion" or "Pennzoil."
(d) Severance. Sellers shall be responsible for and shall pay
to Purchaser all costs and expenses incurred pursuant to the Company's
current Severance Pay Plan) related to the severance ________________
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
associated with severing such
employees. Purchaser shall be responsible for, and shall indemnify
Sellers for, any and all severance costs incurred by Sellers pursuant
to the Company's currently effective Severance Pay Plan in excess of
those for which Sellers are responsible as stated above. Within ten
(10) days after receipt of the notice, Sellers shall pay to Purchaser,
as designated by Purchaser, the severance costs and expenses associated
with the designated employees.
(e) Guaranties. Seller shall maintain all Guaranties
outstanding and Purchaser shall use its Reasonable Efforts to obtain
from the appropriate parties and deliver to Pennzoil, within _______
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
after Closing, releases of any obligations of Pennzoil arising after
Closing pursuant to the Guaranties and other commitments identified in
Part III of Schedule 2.10 (the "Guaranties"). Purchaser agrees to
indemnify and hold harmless Pennzoil from and against any and all
claims under the Guaranties arising after Closing.
(f) Confidential Information. In the event that this Agreement
is terminated or, if not terminated, until the Closing Date, the
confidentiality of any data or information received by Purchaser
regarding the business and assets of the Company shall be maintained by
Purchaser and its representatives in accordance with the
Confidentiality Agreement dated December 10, 1996 executed by
Purchaser.
ARTICLE V
Conditions to Closing
V.1 Conditions to the Obligations of Purchaser. The obligations of
Purchaser to proceed with the Closing contemplated hereby are subject to the
satisfaction on or prior to the Closing Date of all of the following conditions,
any one or more of which may be waived, in whole or in part, in writing by
Purchaser:
(a) Compliance. Except for such breaches of representations or
warranties by and covenants of Pennzoil and/or Sellers made herein as
would not have a Material Adverse Effect, the representations and
warranties made herein by Pennzoil and Sellers shall be correct on and
as of the Closing Date as though such representations and warranties
were made on and as of the Closing Date, and Pennzoil and Sellers shall
have complied with all the covenants hereof required by this Agreement
to be performed by them at or prior to the Closing Date.
20
25
(b) Consents. All consents identified on Schedule 2.04 shall
have been received.
(c) Officer's Certificates. Purchaser shall have received
certificates dated the Closing Date, of an executive officer of
Pennzoil and each Seller certifying as to the matters specified in
Section 5.01(a).
(d) No Orders. The Closing hereunder shall not violate any
order or decree of any Governmental Authority having competent
jurisdiction over the transactions contemplated by this Agreement;
provided, however, that if such order or decree is a temporary
restraining order or other ex parte order or decree and all other
conditions precedent to Closing have been satisfied or waived, the
Closing Date shall be extended to a date five business days subsequent
to the date on which such temporary restraining order or other ex parte
order or decree ceases to be in effect.
(e) Amendment of Pennzoil Credit Facility. Pennzoil shall have
amended the Pennzoil Credit Facility to provide for the Facilities'
continued existence as provided for in Section 1.03.
(f) Gas Sales Agreement. Pennzoil and the Company shall have
terminated the gas sales agreement dated April 1, 1995. Pennzoil and
the Purchaser shall have executed, delivered and closed the Gas Sales
Agreement in the form of Appendix B (the "Gas Sales Agreement").
(g) Resignations. The Company shall have delivered to
Purchaser, except as otherwise requested by Purchaser, the written
resignations of the board of managers of the Company, and will cause
any other actions to be taken with respect to these resignations that
Purchaser may reasonably request.
(h) Purchaser shall have received a release from Sellers, in
their capacity as members of the Company, releasing the Company from
all claims and causes of action arising from Sellers' capacity as
members (except as may arise from this Agreement) including any claim
that Sellers are owed any sums or are entitled to distributions from
the Company.
(i) All liens on the assets of the Company in favor of
Canadian Imperial Bank shall have been released.
V.2 Conditions to the Obligations of Pennzoil and Sellers. The
obligations of Pennzoil and Sellers to proceed with the Closing contemplated
hereby are subject to the satisfaction on or prior to the Closing Date of all of
the following conditions, any one or more of which may be waived, in whole or in
part, in writing by Pennzoil and Sellers:
(a) Compliance. The representations and warranties made herein
by Purchaser shall be correct on and as of the Closing Date as though
such representations and warranties were made on and as of the Closing
Date, and Purchaser shall have complied with all the covenants hereof
required by this Agreement to be performed by it at or prior to the
Closing Date.
21
26
(b) Officer's Certificate. Sellers shall have received a
certificate dated the Closing Date of an executive officer of
Purchaser, certifying as to the matters specified in Section 5.02(a)
hereof.
(c) No Orders. The Closing hereunder shall not violate any
order or decree of any Governmental Authority having competent
jurisdiction over the transactions contemplated by this Agreement;
provided, however, that if such order or decree is a temporary
restraining order or other ex parte order or decree and all other
conditions precedent to Closing have been satisfied or waived, the
Closing Date shall be extended to a date five business days subsequent
to the date on which the temporary restraining order or such other ex
parte order or decree ceases to be in effect.
(d) Gas Sales Agreement. Pennzoil and the Company shall have
terminated the gas sales agreement dated April 1, 1995. Pennzoil and
the Purchaser shall have executed, delivered and closed the Gas Sales
Agreement and all guarantees and letters of credit called for under the
Gas Sales Agreement.
(e) Assignment and Assumption Agreement. The Company shall
have executed and delivered to Sellers one or more Assignment and
Assumption Agreements required to be delivered at Closing pursuant to
Section 1.05.
ARTICLE VI
Taxes
VI.1 Tax Return. The tax year of the Company will close effective as of
the end of the Closing Date pursuant to Code Section 708(b)(1)(B). Sellers shall
prepare and file all required federal income Tax Returns of the Company for
periods ending on or before the Closing Date, and pay and discharge all Taxes
resulting from taxable income shown on such Tax Returns. Sellers shall cause the
Company to file an election pursuant to Code Section 754 to adjust the basis of
Company property in the manner provided in Code Sections 734(b) and 743(b) on
the Company's federal income Tax Return for the short taxable year beginning on
January 1, 1997 and ending on the Closing Date. Purchaser and the Company shall
cooperate with Sellers and shall make available to Sellers all information and
timely take any action reasonably necessary to allow Sellers to prepare and file
any such Tax Return and pay and discharge any such taxes. Sellers shall
indemnify and hold Purchaser harmless from any federal income taxes imposed with
respect to the Company for periods prior to the Closing. Purchaser shall
indemnify and hold Sellers harmless from any federal income taxes arising from
any transaction involving the Company (including a liquidation or deemed
liquidation of the Company) occurring at or after the Closing.
ARTICLE VII
Termination
VII.1 Grounds for Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written agreement of all of the parties
hereto; or
22
27
(b) by either Pennzoil and Sellers or Purchaser if (i) the
Closing has not occurred by June 30, 1997, or (ii) the consummation of
the transactions contemplated hereby would violate any nonappealable
final order, decree or judgment of any Governmental Authority having
competent jurisdiction enjoining, restraining or otherwise preventing,
or awarding substantial damages in connection with, the consummation of
this Agreement or the transactions contemplated hereby; provided,
however, that a party shall not be allowed to exercise any right of
termination pursuant to this Section 7.01(b) if the event giving rise
to such right shall be due to the negligent or willful failure of such
party to perform or observe in any material respect any of the
covenants or agreements set forth herein to be performed or observed by
such party.
VII.2 Effect of Termination. The following provisions shall apply in
the event of a termination of this Agreement:
(a) If this Agreement is terminated as permitted under Section
7.01 and not as the result of the negligent or willful failure of any
party to perform its obligations hereunder, such termination shall be
without liability of any party to this Agreement or any Affiliate,
shareholder, director, officer, employee, agent or representative of
such party.
(b) If this Agreement is terminated as a result of the
negligent or willful failure of Purchaser to perform its obligations
hereunder, Purchaser shall be fully liable for any and all damages,
costs and expenses (including, but not limited to, reasonable
attorneys' fees) thereby sustained or incurred by Sellers.
(c) If this Agreement shall be terminated as a result of the
negligent or willful failure of Pennzoil or Sellers to perform their
respective obligations hereunder, Pennzoil and Sellers shall be fully
liable for any and all damages, costs and expenses (including, but not
limited to, reasonable attorneys' fees) thereby sustained or incurred
by Purchaser.
(d) The parties hereto hereby agree that the provisions of
Section 4.02(f) shall survive any termination of this Agreement.
ARTICLE VIII
Survival of Representations
and Warranties; Indemnification
VIII.1 Scope of Representations of Pennzoil and Sellers. Except as and
to the extent expressly set forth in Article II hereof, Pennzoil and Sellers
make no representations or warranties whatsoever, and disclaim all liability and
responsibility for any representation, warranty, statement or information made
or communicated (orally or in writing) to Purchaser (including, but not limited
to, any opinion, information or advice which may have been provided to Purchaser
by any Affiliate, officer, unitholder, director, employee, agent, consultant or
representative of Pennzoil, Sellers or the Company. Purchaser acknowledges and
affirms that Purchaser has made its own independent investigation, analysis and
evaluation of the Company
23
28
and its properties, assets, business, financial condition, operations and
prospects.
VIII.2 Indemnification of Purchaser.
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
VIII.3 Indemnification of Sellers.
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
VIII.4 Claims. If a claim under the indemnities set forth in Sections
8.02 or 8.03 above is to be made by an indemnified party in connection with any
third party claim asserted against such indemnified party, the indemnified party
shall promptly notify the indemnifying party of such claim. The indemnifying
party shall have 30 days after receipt of such notice to undertake, conduct and
control, through counsel of its own choosing (subject to the consent of the
indemnified party, such consent not be unreasonably withheld) and at its
expense, the settlement or defense of such third party claim, and the
indemnified party shall cooperate in connection therewith; provided that (a) the
indemnifying party shall not thereby permit to exist any lien, encumbrance or
other adverse charge upon any asset of the indemnified party arising as a result
of such third party claim unless such lien, encumbrance or charge is being
contested in good faith by appropriate proceedings, and (b) the indemnifying
party shall permit the indemnified party to participate in such settlement or
defense through counsel chosen by the indemnified party, provided that the fees
and expenses of such counsel shall be borne by the indemnified party.
The indemnified party shall not pay or settle any third party claim
without first notifying the indemnifying party and providing the indemnifying
party with the option, for 30 days
24
29
following receipt of such notice, to (i) admit in writing its liability for such
claim, if it has not already done so, and (ii) if liability is so admitted,
reject, in its reasonable judgment, the proposed settlement. Notwithstanding the
foregoing, the indemnified party shall have the right to pay or settle any such
third party claim to the extent, but only to the extent, that such settlement
provides for payments of money; provided that in such event it shall waive any
right to indemnity therefor by the indemnifying party.
VIII.5 Limitation on Indemnification.
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
VIII.6 Survival. Except for the representations and warranties
contained in Section 2.22 which shall survive in perpetuity, the representations
and warranties set forth in this Agreement and in any certificate or instrument
delivered in connection herewith shall survive until four years after the
Closing Date, following which date none of the parties may bring any action or
present any claim for a breach of such representations and warranties; provided
that there shall be no termination of any representation or warranty as to which
a bona fide claim has been asserted if the Indemnifying Party has received
notice of such claim prior to the fourth anniversary of the Closing Date.
VIII.7 Tax Benefits; Insurance Proceeds. In determining the amount of
any loss, liability or expense for which any party is entitled to
indemnification under this Article VIII, the gross amount thereof will be
reduced by any correlative tax benefit or insurance proceeds realized or to be
realized by such party (or, in the case of Purchaser, by the Company or its
Subsidiaries), and such correlative insurance benefit shall be net of any
insurance premium that becomes due as a result of such claim.
VIII.8 Exclusive Remedy. The rights and remedies in this Article VIII
shall, to the fullest extent permitted by applicable law, be the exclusive
rights and remedies of the parties with respect to breaches of the
representations and warranties contained in this Agreement, and the affirmations
of such representations and warranties in the certificates contemplated by
Sections 5.01(c) and 5.02(b), and the covenants and agreements contained in
Sections 4.01 and 4.02(a) and (b) of this Agreement.
ARTICLE IX
Notices; Miscellaneous
IX.1 Notices. All notices and other communications given hereunder
shall be in writing and shall be deemed given if telecopied, delivered
personally or mailed by registered or certified mail, return receipt requested,
to the parties at the following addresses:
25
30
(A) If to Purchaser to:
Columbia Energy Services Corporation
000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxx
Telephone: 412/000-0000
Telecopy: 412/873-1411
(B) If to Pennzoil and Sellers to:
Pennzoil Company
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxx Xxxxxxx
Telephone: 713/000-0000
Telecopy: 713/546-6405
IX.2 Brokers. Pennzoil and Sellers have retained Xxxxxx Brothers, Inc.
to assist and advise them in connection with the transactions contemplated by
this Agreement. Each of Purchaser and each of Pennzoil and the Sellers
represents to the other parties that, except as set forth in the preceding
sentence, it has not, directly or indirectly, employed any broker, finder or
intermediary in connection with such transactions that might be entitled to a
fee or commission upon the execution of this Agreement or the consummation of
such transactions.
IX.3 Expenses. The parties agree that Pennzoil and Sellers shall pay
the costs and expenses of the engagement of Xxxxxx Brothers, Inc. to advise them
in connection with the transactions contemplated by this Agreement. Except as
specifically provided herein, all legal and other costs and expenses in
connection with this Agreement and the transactions contemplated hereby shall be
paid by Pennzoil, Sellers (and not the Company) or Purchaser, as the case may
be, depending upon which party incurred such costs and expenses.
IX.4 Books and Records. Pennzoil and Sellers agree that they will
deliver or cause to be delivered to Purchaser on the Closing Date all books and
records of the Company, to the extent that such books and records are not then
in the possession of the Company, provided that Pennzoil and Sellers may retain
copies of all tax and accounting records and of any matters for which Pennzoil
and Sellers may retain responsibility under the terms of this Agreement.
IX.5 Miscellaneous.
(a) Exclusive Agreement. This Agreement supersedes all prior
written or oral agreements between the parties with respect to the
transactions contemplated herein, other than the Confidentiality
Agreement between Sellers and Purchaser dated December 10, 1996, and,
except for such Confidentiality Agreement, is intended as a complete
and exclusive statement of the terms of the agreement between the
parties with respect to the transactions contemplated herein. Each
party represents to the other that it is not a party to any agreement
with any other party relating to the transactions contemplated by this
26
31
Agreement.
(b) Choice of Law; Amendments; Headings. This Agreement shall
be governed by the internal laws of the State of Texas, without giving
effect to principles of conflicts of laws. This Agreement may not be
changed or terminated orally. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Terms such as "herein",
"hereby", "hereto" and "hereof" refer to this Agreement as a whole. The
term "include" and derivatives thereof are used in an illustrative
sense and not a limitative sense.
(c) Arbitration. Any issue, controversy, dispute or claim
arising out of or relating to this Agreement or its alleged breach that
cannot be resolved by mutual agreement shall be resolved exclusively by
final and binding arbitration by a panel of three arbitrators in
Houston, Texas, in accordance with the Commercial Arbitration Rules of
the American Arbitration Association ("AAA"), and judgment on the award
rendered by the panel may be entered by any court having jurisdiction
thereof. The arbitrators shall be selected by mutual agreement of the
parties (i.e., Pennzoil and Sellers on the one hand, and Purchaser on
the other), if possible. If the parties fail to reach agreement upon
appointment of the arbitrators within thirty days after a demand for
arbitration is made, the arbitrators shall be selected from a list of
proposed arbitrators submitted by AAA. The selection process shall be
that which is set forth in the AAA commercial arbitration rules then
prevailing, except that (1) the number of preemptory strikes shall not
be limited, and (2), if the parties fail to select the arbitrators from
one or more lists, AAA shall not have the power to make an appointment
but shall continue to submit additional lists until the arbitrators
have been selected. If an arbitrator should die, withdraw, or otherwise
become incapable of serving, a replacement shall be selected and
appointed in a like manner. If the arbitrators have not been selected
following submission of three or more lists by AAA, either party may
declare the existence of an impasse by giving written notice to the
other. In that event, the arbitrators shall be selected in the
following manner: Each party shall designate five proposed arbitrators
whose names appear on any of the lists previously submitted by AAA. The
parties shall then eliminate seven of the designated names by
alternately striking one, and the three persons whose names remain
shall serve as arbitrators. If necessary, the party to make the first
strike shall be designated by lot.
(d) Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing
by all the parties. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in
writing by the party making the waiver.
(e) Assignments and Third Parties. No party hereto shall
assign this Agreement or any part hereof without the prior written
consent of the other parties. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. No such assignment
shall release Purchaser of any of its obligations under this Agreement.
Nothing in this Agreement shall entitle any person other than the
parties hereto or their
27
32
respective permitted successors and assigns to any claim, cause of
action, remedy or right of any kind.
(f) Schedules. Pennzoil and Sellers may revise or supplement
the Schedules attached to this Agreement at any time on or prior to the
Closing; provided, however, that no such revision or supplement shall
revise or supplement any such Schedules so as to reflect any
information materially adverse to the Company that was not heretofore
disclosed to Purchaser.
(g) 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 transactions
contemplated hereby is not affected in any manner adverse to any party.
Upon any binding 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 an
acceptable and legally enforceable manner, to the end that the
transactions contemplated hereby may be completed to the extent
possible.
(h) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and
all of which together shall constitute but one and the same agreement.
(i) Further Assurances. The parties hereto each agree to
deliver or cause to be delivered to the others on the Closing Date, and
at such other times thereafter as shall be reasonably requested, any
additional instrument that the other may reasonably request for the
purpose of carrying out this Agreement.
(j) Preservation of Books and Records. For a period of six (6)
years after the Closing Date, Purchaser shall (i) preserve and retain
the corporate, accounting, legal, auditing, contractual and other books
and records of the Company that relate to the conduct of its businesses
and operations prior to the Closing Date (including, but not limited
to, any documents relating to any governmental or nongovernmental
actions, suits, proceedings or investigations arising out of the
conduct of the business and operations of the Company prior to the
Closing Date) and (ii) make such books and records available at the
then current administrative headquarters of Purchaser to Pennzoil and
Sellers and their respective partners, officers, employees, agents and
Affiliates upon reasonable notice and at reasonable times, it being
understood that Pennzoil and Sellers shall be entitled to make and
retain copies of any such books and records as it shall deem necessary.
Purchaser agrees to permit representatives of Sellers to meet with
employees of Purchaser or the Company on a mutually convenient basis in
order to enable Sellers to obtain additional information and
explanations of any materials provided pursuant to this Section
9.05(j). Additionally, Purchaser shall retain such other records and
books of the Company that Sellers reasonably request beyond the
six-year period if Sellers are involved in any dispute or proceeding
regarding the use of such records if Sellers have notified Purchaser,
in writing, of the records that need to be maintained beyond the
six-year period prior to the termination of such six-year period.
28
33
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
29
34
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
PENNZOIL EXPLORATION AND
PRODUCTION COMPANY
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Agent & Attorney in Fact
PENNZOIL GAS MARKETING COMPANY
By: /s/ Xxxxxx X. Dalts
--------------------------------------
Name: Xxxxxx X. Dalts
Title: President
PENNZOIL ENERGY MARKETING COMPANY
By: /s/ Xxxxxx X. Dalts
--------------------------------------
Name: Xxxxxx X. Dalts
Title: President
SELLERS
COLUMBIA ENERGY SERVICES CORPORATION
By: /s/ Xxxxx X. XxXxxxxxx
--------------------------------------
Name: Xxxxx X. XxXxxxxxx
Title: Vice President
PURCHASER
30
35
APPENDIX A
Definitions
Capitalized terms used in this Agreement shall have the
meanings ascribed to them in this Appendix A unless such terms are defined
elsewhere in this Agreement. A cross reference sheet of terms defined elsewhere
in this Agreement follows this list of definitions.
Actual Accounts Receivable: The sum of the "Accounts Receivable" and
"Accounts Receivable-Owner," as identified in the Actual Effective Date
Financial Statements as of the Effective Date,
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
Actual Accounts Payable: The sum of "accounts payable" and "Accounts
Payable-Owner" as identified in the Actual Effective Date Financial Statements,
as of the Effective Date, less any accounts payable whose write-off is reflected
in the Actual Operating Loss Amount.
Actual Closing Date Pennzoil Credit Facility: The balance (including
accrued interest) on the Pennzoil Credit Facility as of the Closing Date.
Actual Effective Date Pennzoil Credit Facility: The balance (including
accrued interest) on the Pennzoil Credit Facility as of the Effective Date.
Actual Operating Loss Amount: The actual aggregate change in Total
Member's Equity of the Company calculated from January 31, 1997 through the
Effective Date plus ___________.
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
Affiliate: Any Person that is an affiliate within the meaning of the
regulations promulgated under the Securities Act of 1933, as such regulations
are amended or in effect on the date in question.
Closing: The closing of the transactions contemplated by this
Agreement.
Closing Date. The date of the Closing.
Code: The Internal Revenue Code of 1986, as amended.
Commission: The U.S. Securities and Exchange Commission.
Effective Date: The effective date shall be May 31, 1997.
Encumbrance: Any mortgage, lien, security interest, pledge, charge,
encumbrance, easement, claim, restriction, limitation, irregularity, burden or
defect.
Entity: A corporation, partnership, joint venture, trust or
unincorporated organization or association, Governmental Authority or other
entity.
Environmental Claim: Any action, suit, investigation, proceeding or
written notice by
A-1
36
any Person alleging or inquiring as to potential liability arising out of, based
on or resulting from any violation, or alleged violation, of any environmental
Legal Requirement.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
Estimated Operating Loss Amount:
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
Governmental Authority: The United States of America, any state,
commonwealth, territory or possession thereof and any political subdivision of
any of the foregoing, including but not limited to courts, departments,
commission, boards, bureaus, agencies or other instrumentalities.
Legal Requirements: Any law, statute, ordinance, decree, requirement,
order, judgment, rule or regulation of, including the terms of any license or
permit issued by, any Governmental Authority.
Material Adverse Effect: Any material adverse effect on the business,
financial condition or results of operations of the Company taken as a whole.
Material Properties: Any property of the Company, real, personal or
intangible with a fair market value greater than $50,000.
Olympic Payable:
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
Olympic Receivable:
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
Pennzoil Credit Facility: The credit facility between Pennzoil and the
Company pursuant to that certain Revolving Demand Loan Agreement dated as of
December 1, 1996 between Pennzoil and the Company as amended as of the Closing
Date.
Person: Any individual or Entity.
Plan: Each "employee benefit plan", as such term is defined in Section
3(2) of ERISA, which is covered by Title I of ERISA or such other plan or
arrangement, whether written or oral, designated to provide benefits or
remuneration to employees, including, without limitation, any pension, profit
sharing, savings, bonus, incentive, option, insurance, welfare, phantom stock or
A-2
37
similar arrangement and which is or had been maintained, or otherwise
contributed to, by the Company or its subsidiaries for the benefit of the
employees (or former employees) of the Company or its subsidiaries or to which
the Company or its Subsidiaries has an obligation, responsibility or liability.
Purchaser Indemnified Loss:
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
Reasonable Efforts: The standard of performance that is in accordance
with reasonable commercial practices and without the incurrence of unreasonable
expense.
Realized Accounts Payable: The Actual Accounts Payable which have been
paid or, if applicable, reclassified as "gas held in storage" or "gas
imbalances", by ____ days after the Closing Date.
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
Realized Accounts Receivable: The Actual Accounts Receivable which have
been received or, if applicable, reclassified as "gas held in storage" or "gas
imbalances", by ____ days after the Closing Date.
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
Remaining Accounts Payable: The Actual Amounts Payable which have not
been paid or, if applicable, reclassified as "gas held in storage" or "gas
imbalances", by ____ days after the Closing Date.
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
Remaining Accounts Receivable: The Actual Accounts Receivable which
have not been received or, if applicable, reclassified as "gas held in storage"
or "gas imbalances", by ____ days after the Closing Date.
********************************************
Information has been omitted
pursuant to a confidential treatment request
filed with the Commission.
********************************************
Securities Act: Securities Act of 1933, as amended.
Seller Indemnified Loss: Any loss, charge, assessment, damage or
expense (including reasonable attorneys' fees) sustained by Sellers arising out
of or resulting from any act or omission of Purchaser in its operation of the
Company after the Closing Date or any inaccuracy in or breach of any of the
representations, warranties or covenants made by Purchaser in this Agreement.
A-3
38
Taxes: All federal, foreign, state or local net or gross income, gross
receipts, petroleum revenue, sales, use, ad valorem, value added, franchise,
withholding, payroll, employment, excise, property, windfall profits or similar
taxes, assessments, duties, fees, levies or other governmental charges, together
with any interest thereon, any penalties, additions to tax or additional amounts
with respect thereto and any interest in respect of such penalties, additions or
additional amounts.
Tax Return: Any federal or state Tax return filed or to be filed by the
Company or any of its Subsidiaries.
Total Members' Equity: The sum of the "paid in capital" and "retained
earnings" as identified in the applicable financial statements of the Company.
CROSS REFERENCE SHEET
TERM SECTION
---- -------
AAA................................... 9.05(c)
Agreement............................. Preamble
Closing............................... 1.05
Company............................... Recitals
Contracts............................. 2.10
Financial Statements.................. 2.06
Guaranties............................ 4.02(e)
Pennzoil.............................. Preamble
Purchase Price........................ 1.02
Purchaser............................. Preamble
Sellers............................... Preamble
Units................................. Recitals
A-4
