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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
CMS ENERGY CORPORATION
CMS MERGING CORPORATION
CONTINENTAL NATURAL GAS, INC.
XXXXX AFFILIATES, INC.
AND
COTTONWOOD PARTNERSHIP
-----------------------------------------------
Dated as of July 31, 1998
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TABLE OF CONTENTS
ARTICLE I THE MERGER.......................................................................................................2
Section 1.1. The Merger.......................................................................................2
Section 1.2. Filing Certificate of Merger and Effectiveness...................................................2
Section 1.3. Effects of the Merger............................................................................3
Section 1.4. Articles of Incorporation, By-Laws, Directors and Officers.......................................3
Section 1.5. Further Assurances...............................................................................3
ARTICLE II CONVERSION OF SHARES............................................................................................3
Section 2.1. Conversion of Securities.........................................................................3
Section 2.2. Closing..........................................................................................4
Section 2.3. Dissenting Shares................................................................................5
Section 2.4. Payment of Cash and Delivery of Certificates.....................................................5
Section 2.5. Dividends and Distributions......................................................................7
Section 2.6. Fractional Shares................................................................................7
Section 2.7. Changes in CMS Common Stock......................................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CNG AND THE MAJORITY STOCKHOLDERS............................................8
Section 3.1. Organization of CNG..............................................................................8
Section 3.2. Subsidiaries and Investments.....................................................................9
Section 3.3. Capitalization..................................................................................10
Section 3.4. Authority.......................................................................................11
Section 3.5. Financial Statements............................................................................13
Section 3.6. Operations Since Balance Sheet Date.............................................................13
Section 3.7. No Undisclosed Liabilities......................................................................15
Section 3.8. Taxes...........................................................................................15
Section 3.9. Condition of Tangible Assets....................................................................19
Section 3.10. Title to Property...............................................................................19
Section 3.11. Availability and Ownership of Assets............................................................20
Section 3.12. Personal Property Leases........................................................................20
Section 3.13. Accounts Receivable.............................................................................21
Section 3.14. Intellectual Property...........................................................................21
Section 3.15. Real Property...................................................................................22
Section 3.16. [Intentionally Omitted].........................................................................22
Section 3.17. Litigation......................................................................................22
Section 3.18. No Guaranties; Extensions of Credit.............................................................22
Section 3.19. Compliance with Laws............................................................................23
Section 3.20. Permits.........................................................................................23
Section 3.21. Insurance.......................................................................................23
Section 3.22. Employee Benefit Plans..........................................................................24
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Section 3.23. Employees and Agents and Related Agreements.....................................................26
Section 3.24. Employee Relations and Labor Matters............................................................26
Section 3.25. Absence of Certain Business Practices...........................................................27
Section 3.26. Territorial Restrictions........................................................................27
Section 3.27. Transactions with Certain Persons...............................................................27
Section 3.28. [Intentionally Omitted].........................................................................28
Section 3.29. Environmental Matters...........................................................................28
Section 3.30. Contracts.......................................................................................31
Section 3.31. [Intentionally omitted].........................................................................32
Section 3.32. Gas Imbalances..................................................................................32
Section 3.33. [Intentionally omitted].........................................................................32
Section 3.34. CNG Filings; Registration Statement Information.................................................33
Section 3.35. Disclosure......................................................................................34
Section 3.36. Brokers.........................................................................................34
Section 3.37. PUHCA...........................................................................................34
Section 3.38. Vote Required...................................................................................34
Section 3.39. Knowledge of Facts or Circumstances.............................................................35
Section 3.40. Information Supplied............................................................................35
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CMS ENERGY...................................................................35
Section 4.1. Organization of CMS Energy......................................................................35
Section 4.2. Authority.......................................................................................36
Section 4.3. Shares of CMS Common Stock......................................................................37
Section 4.4. Capitalization..................................................................................38
Section 4.5. Operations Since March 31, 1998.................................................................38
Section 4.6. Compliance with Laws............................................................................38
Section 4.7. SEC Documents...................................................................................39
Section 4.8. No Finder.......................................................................................39
Section 4.9. Section 368 Representations.....................................................................39
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SUB...........................................................................40
Section 5.1. Organization and Standing.......................................................................40
Section 5.2. Capital Structure...............................................................................41
Section 5.3. Authority.......................................................................................41
ARTICLE VI ACTIONS PRIOR TO THE EFFECTIVE DATE............................................................................41
Section 6.1. Issuance of CMS Common Shares...................................................................41
Section 6.2. Action by Majority Stockholders of CNG..........................................................42
Section 6.3. Subsequent Financial Statements.................................................................42
Section 6.4. Investigation of CNG............................................................................42
Section 6.5. Lawsuits, Proceedings, Etc......................................................................45
Section 6.6. Conduct of Business by CNG Pending the Merger...................................................45
Section 6.7. Mutual Cooperation; Reasonable Best Efforts.....................................................48
Section 6.8. Public Announcement.............................................................................48
Section 6.9. No Solicitation.................................................................................48
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Section 6.10. Antitrust Law Compliance........................................................................49
Section 6.11. CMS SEC Information.............................................................................50
Section 6.12. Director Indemnification........................................................................50
Section 6.13. Notice of Default...............................................................................50
ARTICLE VII ADDITIONAL COVENANTS AND AGREEMENTS............................................................................51
Section 7.1. Tax-Free Nature; Tax Consequences...............................................................51
Section 7.2. Taxes...........................................................................................51
Section 7.3. [Intentionally Omitted].........................................................................53
Section 7.4. [Intentionally Omitted].........................................................................53
Section 7.5. Power Marketing Certificate.....................................................................53
Section 7.6. Pooling of Interests............................................................................54
ARTICLE VIII CONDITIONS PRECEDENT TO CLOSING...............................................................................54
Section 8.2. Conditions to CMS Energy's Obligations..........................................................55
Section 8.3. Conditions to CNG's Obligations.................................................................58
ARTICLE IX INDEMNIFICATION; SURVIVAL.......................................................................................59
Section 9.1. Indemnification by the Majority Stockholders....................................................59
Section 9.2. [Intentionally Omitted].........................................................................60
Section 9.3. Notice of Claims................................................................................60
Section 9.4. Third Party Claims..............................................................................60
Section 9.5. [Intentionally Omitted].........................................................................62
Section 9.6. Survival of Obligations.........................................................................62
Section 9.7. Update of the Representations and Warranties....................................................62
ARTICLE X TERMINATION......................................................................................................64
Section 10.1. Termination.....................................................................................64
Section 10.2. Effect of Termination...........................................................................65
Section 10.3. Effect of Termination and Abandonment...........................................................65
ARTICLE XI OTHER PROVISIONS................................................................................................66
Section 11.1. Confidential Nature of Information..............................................................66
Section 11.2. Fees and Expenses...............................................................................69
Section 11.3. Notices.........................................................................................69
Section 11.4. Definitions.....................................................................................71
Section 11.5. Partial Invalidity..............................................................................72
Section 11.6. Successors and Assigns..........................................................................72
Section 11.7. Execution in Counterparts.......................................................................72
Section 11.8. Titles and Headings.............................................................................72
Section 11.9. Schedules and Exhibits..........................................................................73
Section 11.10. Entire Agreement/No Third Party Rights/Assignment...............................................73
Section 11.11. Independent Investigation and Scope of Representations..........................................73
Section 11.12. Governing Law; Arbitration......................................................................74
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Section 11.13. No Third-Party Beneficiaries....................................................................74
Section 11.14. Interpretation..................................................................................75
Section 11.15. Guarantee.......................................................................................75
Section 11.16. [Intentionally Omitted].........................................................................75
Section 11.17. Time of Essence.................................................................................75
Section 11.18. Attorneys Fees..................................................................................75
Section 11.19. Amendment.......................................................................................75
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EXHIBITS
Exhibit A Certificate of Merger and Articles of Merger
Exhibit B Affiliate Letter
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SCHEDULE OF DEFINED TERMS
TERM DEFINITION SECTION
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AAA 11.12(b)
Acquisition Expenses 11.2
Acquisition Proposal 6.9(a)
affiliate 11.4(a)
Agreement Preamble
Applicable Environmental Laws 3.29(c)(i)
associate 11.4(b)
Average Price 2.1(b)
Balance Sheet 3.5
Balance Sheet Date 3.5
BCA 1.1
Best Knowledge 11.4(c)
Business Combination 10.3(c)
CERCLA 3.29(a)(iv)
CERCLIS 3.29(a)(iv)
Certificates 2.4
Claim Notice 9.3
Closing 2.2
Closing Date 2.2
CMS Common Shares 2.1(b), 2.7
CMS Common Stock First Recital
CMS Energy Preamble
CMS Energy SEC Documents 4.7
CMS Option Agreement Ninth Recital
CNG Preamble
CNG Agreements 3.30(b)
CNG Business Fifth Recital
CNG Common Stock Third Recital
Code Eighth Recital
Company Group 3.8(d)(i)
Disclosure Schedule 3.1
Dispute 11.12(b)
Dissenting Shares 2.3
Easements 3.10(b)
Effective Date 1.2
Effective Time 1.2
ERISA 3.22(a)
ERISA Affiliate 3.22(a)
Evaluation Documents 11.1(a)
Exchange Act 4.7, 11.1(e)
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Exchange Agent 2.4(c)
Exchange Ratio 2.1(b)
Expense 9.1
FERC 7.5
GAAP 3.5
Hazardous Substance 3.29(c)(ii)
HSR Act 3.4(c)
Loss 9.1
Majority Stockholders Preamble
Market Conditions 11.4(d)
material 3.8(d)(ii), 3.29(c)(iii)
Material Adverse Change or Effect 11.4(e)
Merger 1.1
Merger Consideration 2.1(b)
Non-Wholly Owned Subsidiaries 3.2(b)
NPL 3.29(a)(iv)
NYSE 2.1(b)
OGCA 1.1
Option(s) 3.3(a)
Participants 3.22(a)
Partnerships 3.2(b)
Partnerships Agreements 3.2(b)
Permits 3.20
Permitted Encumbrances 11.4(f)
Per Share Amount 2.1(b)
person 11.4(g)
Phase I 6.4(b)
Pipeline Assets 3.10(a)
Plans 3.22(a)
Power Marketing Certificate 7.5
Property 3.29(c)(iv)
Proprietary Information 11.1(a)
Prospectus 6.1
Real Property 3.15
Registration Statement 3.34(b)
Release 3.29(c)(v)
Remedial Action 3.29(c)(vi)
Representatives 6.4(g)
representatives 11.1(a)
Requisite Regulatory Approvals 8.1(b)
SEC 4.2
Securities Act 4.2
Seller Filings 3.34(a)
Statement of Income 3.5
Sub Preamble
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Sub Common Stock Second Recital
Subsidiary 3.8(d)(iii)
Subsidiaries 3.2(a)
Surviving Corporation 1.1
Tax, Taxes, and Taxable 3.8(d)(iv)
Tax Partnership 3.8(d)(v)
Tax Return 3.8(d)(vi)
Tax Sharing Arrangement 3.8(d)(vii)
Title IV Plan 3.22(b)
Unaudited Balance Sheet 3.5
Unaudited Balance Sheet Date 3.5
Unaudited Statement of Income 3.5
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AGREEMENT AND PLAN OF MERGER
AGREEMENT and Plan of Merger, dated as of July 31, 1998 (this
"Agreement") among CMS Energy Corporation, a Michigan Corporation ("CMS
Energy"), CMS Merging Corporation, a Michigan corporation and a wholly-owned
subsidiary of CMS Energy ("Sub"), Continental Natural Gas, Inc., an Oklahoma
Corporation ("CNG"), Xxxxx Affiliates, Inc., an Oklahoma corporation, and
Cottonwood Partnership, an Oklahoma general partnership (the latter two parties
collectively, the "Majority Stockholders"). Unless otherwise indicated,
capitalized terms used herein are those as defined herein.
W I T N E S S E T H :
WHEREAS, CMS Energy is a Michigan corporation having an
authorized capital of (i) 250,000,000 shares of common stock, $0.01 par value
(the "CMS Common Stock"), of which, as of June 30, 1998, 101,512,647 shares were
issued and outstanding, (ii) 10,000,000 shares of preferred stock, $0.01 par
value, none of which, on the date hereof, is issued and outstanding, and (iii)
60,000,000 shares of Class G common stock, no par value, of which, as of June
30, 1998, 8,341,097 shares were issued and outstanding;
WHEREAS, Sub is a Michigan corporation formed by CMS Energy
solely for the purpose of consummating the transactions contemplated herein
having an authorized capital of 60,000 shares of common stock, no par value (the
"Sub Common Stock"), of which, on the date hereof, 10 shares are issued and
outstanding;
WHEREAS, Continental is an Oklahoma corporation having an
authorized capital of 60,000,000 shares of common stock, $0.01 par value (the
"CNG Common Stock"), of which, on the date hereof, 6,315,000 shares are issued
and outstanding;
WHEREAS, the Majority Stockholders directly control
approximately 54% of the CNG Common Stock and exercise management control over
CNG.
WHEREAS, CNG, itself and through its Subsidiaries, is engaged
in the purchasing, gathering, treating, processing and marketing of natural gas
and natural gas liquids related thereto (hereinafter generally referred to as
the "CNG Business");
WHEREAS, the respective Boards of Directors of CMS Energy, Sub
and CNG have approved the Merger of Sub into CNG pursuant to the terms and
conditions of this Agreement and the related transactions contemplated by this
Agreement, the Board of
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Directors of CNG has directed that this Agreement be submitted to its
stockholders for adoption, and CMS Energy as the sole stockholder of Sub has
adopted this Agreement;
WHEREAS, the Merger is intended to be treated as a pooling of
interests for financial accounting purposes;
WHEREAS, the parties hereto intend the Merger to constitute a
reorganization described in Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code");
WHEREAS, CMS Energy, Sub, CNG and the Majority Stockholders
desire to make certain representations, warranties and agreements in connection
with the Merger and the related transactions contemplated by this Agreement and
also to prescribe various conditions to the Merger and such transactions;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, 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 contained herein, and in accordance with the provisions of this
Agreement and the Michigan Business Corporation Act (the "BCA") and the Oklahoma
General Corporation Act (the "OGCA"), at the Effective Time (as hereinafter
defined), CNG shall be merged with and into Sub (the "Merger") pursuant to the
Certificates of Merger in substantially the form of Exhibit A hereto or in such
other form as the parties may agree to accomplish the Merger. As the corporation
surviving in the Merger (the "Surviving Corporation"), Sub shall continue
unaffected and unimpaired by the Merger to exist under and be governed by the
laws of the State of Michigan. Upon the effectiveness of the Merger, the
separate existence of CNG shall cease except to the extent provided by law in
the case of a corporation after its merger into another corporation.
SECTION 1.2. FILING CERTIFICATE OF MERGER AND EFFECTIVENESS.
Upon the satisfaction or waiver of the conditions to the obligations of each of
the parties contained herein, the Certificates of Merger, executed in accordance
with the laws of the State of Michigan and Oklahoma, shall be filed in the
office of the
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Corporation, Securities and Land Development Bureau, Department of Consumers and
Industry Services, of the State of Michigan and the Oklahoma Secretary of State.
The Merger shall become effective on the date specified in the Certificate of
Merger to be filed as provided in the BCA and the OGCA. The Effective Time of
the Merger shall be 11:59 p.m. on the Effective Date or such other time as the
parties may mutually agree and specify in the Articles of Merger and
Certificates of Merger. The date and the time on such date of effectiveness of
the Merger are herein called, respectively, the "Effective Date" and the
"Effective Time."
SECTION 1.3. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 724 of the BCA and in Section 1081 of the OGCA.
SECTION 1.4. ARTICLES OF INCORPORATION, BY-LAWS, DIRECTORS AND
OFFICERS. The Articles of Incorporation and By-Laws of Sub, as in effect at the
Effective Time, shall continue in full force and effect as the Articles of
Incorporation and By-Laws of the Surviving Corporation. The initial directors of
the Surviving Corporation shall consist of the directors of Sub immediately
prior to the Effective Time, who shall serve until their respective successors
are duly elected and qualified. The initial officers of the Surviving
Corporation shall consist of the officers of Sub immediately prior to the
Effective Time, who shall serve until their respective successors are duly
elected and qualified.
SECTION 1.5. FURTHER ASSURANCES. From time to time after the
Effective Time, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of CNG or
otherwise, such deeds and other instruments and to take or cause to be taken
such further or other action as shall be necessary or desirable in order to vest
or perfect in or to confirm, of record or otherwise, in the Surviving
Corporation title to, and possession of, all of the property, rights,
privileges, powers, immunities and franchises of CNG and otherwise carry out the
purposes of this Agreement.
ARTICLE II
CONVERSION OF SHARES
SECTION 2.1. CONVERSION OF SECURITIES. As of the Effective
Time, by virtue of the Merger and without any action on the part of any of the
parties:
(a) All shares of CNG Common Stock that immediately prior to the
Effective Time are held in the treasury of CNG or by any
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wholly-owned Subsidiary of CNG or by CMS Energy or any wholly-owned subsidiary
of CMS Energy shall be canceled and no capital stock of CMS Energy or other
consideration shall be delivered in exchange therefor.
(b) Subject to the provisions of Sections 2.6 and 2.7 hereof, each
share of CNG Common Stock issued and outstanding immediately prior to the
Effective Time (exclusive of shares of CNG Common Stock referred to in Section
2.1(a) and Dissenting Shares); shall be converted into the number of shares of
CMS Common Stock (such shares of CMS Common Stock, are referred to herein as
"CMS Common Shares") and represent the right to receive the consideration
payable as set forth below, rounded to the nearest thousandth of a share, equal
to the quotient of (i) $10.00 (Ten Dollars) ("Per Share Amount"); divided by
(ii) the average of the per share Daily Prices (as hereinafter defined) on the
New York Stock Exchange, Inc. (the "NYSE") of CMS Common Stock (the "Average
Price") as reported in the New York Stock Exchange Composite Transactions (on
the Transaction Reporting System operated by the Consolidated Tape Association)
during the ten (10) consecutive trading days ending on the fifth trading day
prior to the Effective Time of the Merger (the "Exchange Ratio").
All such shares of CNG Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and each holder of a
Certificate (as hereinafter defined) theretofore representing any such shares
shall cease to have any rights with respect thereto, except the right to
receive, upon surrender of such Certificate in accordance with Section 2.4,
shares of CMS Common Stock and cash in lieu of fractional shares as contemplated
by Section 2.6 (The "Merger Consideration"). As used herein, the term Daily
Price shall mean the average of the high and low prices per share of CMS Common
Stock, or the closing bid price if no sale occurred, on the day in question.
(c) Each share of CMS Common Stock and of Sub Common Stock which is
issued and outstanding immediately prior to the Effective Time shall continue to
be outstanding without any change thereto.
SECTION 2.2. CLOSING. Upon the terms and subject to the
conditions hereof, as soon as practicable after the vote of the shareholders of
CNG in favor of the approval and adoption of this Agreement has been obtained,
and the satisfaction or waiver, if permissible, of the conditions set forth in
Article VIII hereof, CNG and CMS Energy shall execute and deliver the Articles
of Merger and the Certificates of Merger, as described in Section 1.1, and the
parties hereto shall take all such other and further actions as may be required
by law to make the Merger effective. Prior to the
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filing referred to in this Section, a closing (the "Closing") will be held at
such place as the parties may agree for the purpose of confirming all of the
foregoing. The date on which the Closing actually occurs is herein referred to
as the "Closing Date".
SECTION 2.3. DISSENTING SHARES. Notwithstanding anything in
this Agreement to the contrary, shares of CNG Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by
shareholders who have not voted such shares in favor of the Merger and who shall
have delivered a written demand for payment of the fair value of such shares
within the time and in the manner provided in Section 1091 of the OGCA (the
"Dissenting Shares") shall not be converted into or be exchangeable for the
right to receive the Merger Consideration provided in Section 2.1 of this
Agreement, unless and until such holder shall have failed to perfect or shall
have effectively withdrawn or lost his right to appraisal and payment under the
OGCA. If any such holder shall have so failed to perfect or shall have
effectively withdrawn or lost such right, such holder's shares shall thereupon
be deemed to have been converted into and to have become exchangeable for, at
the Effective Time, the right to receive the Merger Consideration without any
interest thereon. All payments in respect of Dissenting Shares shall be made by
CNG from funds contributed by CMS.
SECTION 2.4. PAYMENT OF CASH AND DELIVERY OF CERTIFICATES. (a)
At or after the Effective Time, each holder, except for any holder referred to
in Section 2.1(a), of a certificate or certificates representing issued and
outstanding shares of record of CNG Common Stock immediately prior to the
Effective Time (collectively, the "Certificates") may surrender such Certificate
or Certificates to the Exchange Agent, and the Exchange Agent shall deliver or
cause to be delivered, in exchange therefor, (i) cash in lieu of fractional
shares or interests pursuant to Section 2.6, by check or wire transfer of funds
to the account or accounts designated by such holder in a notice to the Exchange
Agent, and (ii) one or more certificates representing the aggregate number of
whole CMS Common Shares into which the CNG Common Stock represented by the
Certificate or Certificates so surrendered shall have been converted pursuant to
Section 2.1.
(b) Any certificates representing CMS Common Shares or cash in lieu of
fractional shares deliverable pursuant to Section 2.1(b) shall be deliverable
upon the surrender to CMS Energy of a Certificate or Certificates representing
issued and outstanding shares of record of CNG Common Stock immediately prior to
the Effective Time. Until so surrendered, each outstanding certificate
representing issued and outstanding shares of record of CNG Common Stock
immediately prior to the Effective Time shall not be
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transferable on the books of the Surviving Corporation or CMS Energy, but shall
be deemed for all corporate purposes, subject to Section 2.5, to evidence the
right to receive such cash and ownership of the number of whole CMS Common
Shares, as the case may be, into which the shares of CNG Common Stock which
immediately prior to the Effective Time were represented thereby shall have been
converted pursuant to Sections 2.1 and 2.4. At the close of business on the
business day next preceding the Effective Date, the stock transfer books of CNG
shall be closed and no transfer of CNG Common Stock shall thereafter be made or
consummated. Notwithstanding the foregoing, holders of certificates representing
shares of CNG Common Stock immediately prior to the Effective Time shall
thereafter cease to be, and shall have no rights as, shareholders of CNG or CMS
Energy until such holders surrender such certificates in accordance with this
Agreement.
(c) Promptly after the Effective Time but in no event later than five
business days after the Effective Time, CMS Energy's stock transfer agent acting
in the role of exchange agent (the "Exchange Agent") shall mail to each record
holder of Certificates, a form letter of transmittal approved by CNG and CMS
Energy (which shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates for payment therefore. Upon surrender to the
Exchange Agent of a Certificate, together with such letter of transmittal duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor cash and CMS Common Stock in the amount provided in Sections
2.1 and 2.4, and such Certificate shall forthwith be canceled. CMS Energy shall
provide the Exchange Agent with certificates for CMS Common Stock, as requested
by the Exchange Agent, in the amounts provided in Section 2.1(b) hereof. No
interest will be paid or accrued on the cash payable upon surrender of the
Certificate and no dividend will be disbursed with respect to the shares of CMS
Common Stock until the holder's Certificates are surrendered in exchange
therefor. If payment or delivery of CMS Common Stock is to be made to a person
other than the person in whose name the Certificate surrendered is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment and delivery of CMS Common Stock to a person other than the
registered holder of the Certificate surrendered or establish to the
satisfaction of CMS Energy that such tax has been paid or is not applicable.
Until surrendered in accordance with the provisions of this Section 2.4, each
Certificate (other than Certificates
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representing Dissenting Shares) shall represent for all purposes the right to
receive the Merger Consideration.
SECTION 2.5. DIVIDENDS AND DISTRIBUTIONS. Any dividend or
other distribution paid in respect of CMS Common Stock to holders of record on
or after the Effective Date and otherwise payable to the holder of an
outstanding Certificate which, immediately prior to the Effective Time,
represented issued and outstanding shares of CNG Common Stock until the
surrender of such Certificate and the issuance of a certificate or certificates
for CMS Common Shares in respect thereof, shall be retained by CMS Energy
pending such surrender, and no such dividend or other distribution payable in
respect of CMS Common Stock shall be paid to the holder of such Certificate
representing CNG Common Stock until such Certificate shall have been so
surrendered to CMS Energy and a certificate or certificates for CMS Common
Shares shall have been so issued. Upon surrender of each such Certificate and
issuance in exchange therefor of CMS Common Shares, there shall be paid by CMS
Energy to or at the direction of the holder of the certificate for such CMS
Common Shares the amount of all dividends and distributions which became payable
to holders of record on or after the Effective Date in respect of the number of
whole CMS Common Shares represented by the certificate or certificates so
issued. In no event shall any holder of any Certificate which, immediately prior
to the Effective Time, represented issued and outstanding shares of CNG Common
Stock be entitled to receive interest on any of the funds to be received in the
Merger or any dividends or distributions which became payable to holders of
record of CMS Common Shares on or after the Effective Date.
SECTION 2.6. FRACTIONAL SHARES. No certificates for fractions
of shares of CMS Common Stock and no scrip or other certificates evidencing
fractional interests in such shares shall be issued pursuant to Section 2.1. If
the exchange or conversion of a person's aggregate holdings of CNG Common Stock
or other right to obtain CMS Common Shares at any time results in a fractional
share of CMS Common Stock or interest therein, such person shall, in lieu
thereof, be paid in cash within 21 days after receipt by Exchange Agent of
completed transfer documents, including certificates, in an amount equal to the
value of such fractional share or interest based on the Average Price of CMS
Common Stock. Any person otherwise entitled to a fractional share or interest
shall not be entitled by reason thereof to any voting, dividend or other rights
as a stockholder of CMS Energy.
SECTION 2.7. CHANGES IN CMS COMMON STOCK. In the event that,
during the period of ten (10) trading days which is used to determine the
Average Price, or subsequent to such period but prior to the Effective Time,
there has occurred the record date of any
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reclassification, stock split, stock dividend or similar change in respect of
the CMS Common Stock, then appropriate adjustment shall be made in the number of
shares of CMS Common Stock and/or kind of securities issued in respect to CMS
Common Shares in order to provide holders of CNG Common Stock or of any other
right to obtain CMS Common Shares pursuant to the transactions contemplated by
this Agreement with the same number of shares of CMS Common Stock and/or
securities that they would have received after such reclassification, stock
split, stock dividend or similar change if the Effective Time had occurred
immediately prior to the record date of such reclassification, stock split,
stock dividend or similar change (and all references herein to the "CMS Common
Shares" shall refer to such adjusted number and/or kind of securities).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CNG AND THE MAJORITY
STOCKHOLDERS
As an inducement to CMS Energy and Sub to enter into this
Agreement and to consummate the transactions contemplated hereby, CNG and the
Majority Stockholders jointly and severally represent and warrant to CMS Energy
and Sub and agree, as follows:
SECTION 3.1. ORGANIZATION OF CNG. CNG is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Oklahoma. Except as set forth on Schedule 3.1 of the Disclosure Schedule
delivered to CMS Energy by CNG and the Majority Shareholders on the date hereof
and as incorporated herein by reference for all purposes (the "Disclosure
Schedule") CNG is duly qualified to transact business as a foreign corporation
and is in good standing in each of the jurisdictions in which the ownership or
leasing of the properties used in its business or the conduct of its business
requires such qualification, other than in such jurisdictions where the failure
to be so qualified and in good standing would not have a Material Adverse
Effect. CNG has full corporate power and authority necessary to own or lease and
operate its properties and to carry on its business as now conducted. CNG has
made available to CMS Energy complete and correct copies of the articles of
incorporation and by-laws of CNG, in each case as amended and in effect on the
date hereof.
SECTION 3.2. SUBSIDIARIES AND INVESTMENTS. (a) CNG owns
beneficially and of record, or indirectly, all of the issued and outstanding
shares of capital stock of each of the corporations listed under the heading
"Subsidiaries" on Schedule 3.2 of the Disclosure Schedule (each such
corporation, together with any
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partnership or limited liability company (whether or not a Tax Partnership, of
which CNG or any such corporation is a general or managing partner or member or
of which CNG or any such corporation owns at least 50% of the partnership or
membership interest, each of which is identified in Schedule 3.2 of the
Disclosure Schedule, referred to as "Subsidiaries"). Except as disclosed on
Schedule 3.2 of the Disclosure Schedule, CNG does not, directly or indirectly,
(i) own, of record or beneficially, any outstanding securities or other interest
in any corporation, limited liability company, partnership, joint venture or
other entity (other than investments in publicly traded securities, cash
equivalents and short-term investment grade debt) or (ii) control any
corporation, limited liability company, partnership, joint venture or other
entity.
(b) Except as disclosed on Schedule 3.2 of the Disclosure Schedule,
each of the Subsidiaries is duly organized, validly existing and, in the case of
corporate Subsidiaries, in good standing, under the laws of its jurisdiction of
organization, and each has full corporate, partnership or limited liability
company power and authority, as the case may be, necessary to own or lease and
operate its properties as now conducted. Each of the Subsidiaries is duly
qualified to transact business as a foreign corporation, foreign partnership or
foreign limited liability company, as the case may be, and is in good standing
in each of the jurisdictions in which conduct of its business requires such
qualification, other than in such jurisdictions where the failure to be so
qualified and in good standing would not have a Material Adverse Effect.
Schedule 3.2 of the Disclosure Schedule contains a list of each jurisdiction in
which each Subsidiary is duly qualified to transact business. Schedule 3.2 of
the Disclosure Schedule sets forth the authorized, and issued and outstanding
shares of, capital stock of each corporate Subsidiary and a complete and
accurate list of each corporation in which CNG directly or indirectly owns at
least 20% but less than 100% of the issued and outstanding shares of capital
stock (the "Non-Wholly Owned Subsidiaries") and a complete and accurate list of
each partnership or limited liability company (whether or not a Tax Partnership)
of which CNG or any Subsidiary is or at any time within the last seven (7) years
has been a managing, general or limited partner or a member or has served in a
similar capacity (the "Partnerships"), together with the state and date of
organization of each Partnership, the name and address of each general or
limited partner or member of each Partnership as they appear in the records of
CNG or such subsidiary, and the percentage interest of CNG or any of its
Subsidiaries in each Partnership. CNG has made available to CMS Energy true and
complete copies of each partnership agreement, limited liability company
agreement, regulations or similar governing instrument and all amendments
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thereto pursuant to which each Partnership was organized (the "Partnership
Agreements").
SECTION 3.3. CAPITALIZATION. (a) The authorized capital of CNG
consists of 60,000,000 shares of common stock, $0.01 par value, of which
6,315,000 shares are duly and validly issued and outstanding and, except for
shares issuable upon exercise of the Options (as hereinafter defined) granted by
CNG. All of the outstanding shares of CNG Common Stock are duly authorized,
validly issued, fully paid and nonassessable. The record owners of the CNG
Common Stock as of April 22, 1998 are listed in Schedule 3.3(a) of the
Disclosure Schedule and a list of the record owners of the CNG Common Stock as
of the Effective Time will be provided to CMS Energy on the Effective Date. CNG
has issued to its employees or directors options (individually an "Option",
collectively the "Options") to purchase shares of CNG Common Stock. The
aggregate outstanding Options and the exercise price thereof are listed in
Schedule 3.3(a) of the Disclosure Schedule hereto. Complete and correct copies
of the material agreements relating to the Options have been made available to
CMS Energy. Except for the Options, there are no options, warrants or other
rights to acquire, or agreements or commitments of CNG to issue, sell, purchase
or redeem, or of the holders of any CNG Common Stock to sell or purchase, shares
of capital stock or any other equity interest of CNG, whether on conversion of
other securities or otherwise. None of the issued and outstanding shares of CNG
Common Stock has been issued in violation of, or is subject to, any preemptive
or subscription rights. Except as set forth in Schedule 3.3(b) of the Disclosure
Schedule, there are no stockholder agreements, voting trust agreements or any
other similar contracts, agreements, arrangements, commitments, plans or
understandings restricting or otherwise relating to voting, dividend, ownership
or transfer rights with respect to any shares of capital stock of CNG.
(b) Each Majority Stockholder severally represents and warrants as to
himself that (i) he is the beneficial owner of the shares of CNG Common Stock
listed in Schedule 3.3(a) of the Disclosure Schedule opposite his name; (ii) all
such shares are owned free from all liens, claims, encumbrances or other
restrictions of any kind, other than liens, claims, encumbrances or other
restrictions listed on Schedule 3.3(b) of the Disclosure Schedule.
(c) All outstanding shares of capital stock of each corporate
Subsidiary are duly authorized, validly issued, fully paid and nonassessable.
CNG or another wholly-owned Subsidiary is the record and beneficial owner of all
of the issued and outstanding shares of capital stock of each such Subsidiary is
the record and beneficial owner of the shares of capital stock of each
Non-Wholly
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Owned Subsidiary as indicated on Schedule 3.2 of the Disclosure Schedule. All
such shares of capital stock are so owned free from all liens, claims,
encumbrances or other restrictions of any kind, other than liens, claims,
encumbrances or other restrictions listed on Schedule 3.3(c) of the Disclosure
Schedule. Except as set forth on Schedule 3.3(c) of the Disclosure Schedule,
there are no options, warrants or other rights to acquire, or agreements or
commitments to issue, sell, purchase or redeem, shares of capital stock of any
corporate Subsidiary, whether on conversion of other securities or otherwise.
None of the issued and outstanding shares of common stock of any corporate
Subsidiary has been issued in violation of, or is subject to, any preemptive or
subscription rights. There are no voting trust agreements or any other similar
contracts, agreements, arrangements, commitments, plans or understandings
restricting or otherwise relating to voting, dividend, ownership or transfer
rights with respect to any shares of common stock of any corporate Subsidiary.
(d) All outstanding partnership or membership interests in each
Partnership Subsidiary (including any limited liability company Subsidiary) are
duly authorized and validly issued. CNG or another Subsidiary is the record and
beneficial owner of such partnership or membership interests of each such
Partnership Subsidiary to the extent set forth in Schedule 3.2 of the Disclosure
Schedule. All such partnership or membership interests are so owned free from
all liens, claims, encumbrances or other restrictions of any kind, other than
liens, claims, encumbrances or other restrictions listed on Schedule 3.3(d) of
the Disclosure Schedule and other than as set forth in the relevant Partnership
Agreements. There are no options, warrants or other rights to acquire, or
agreements or commitments to issue, sell, purchase or redeem, any partnership or
membership interests in any Partnership Subsidiary, other than as set forth in
the relevant Partnership or Limited Liability Company Agreements.
SECTION 3.4. AUTHORITY. (a) CNG has full corporate power and
authority to enter into this Agreement and, subject to adoption of this
Agreement by the stockholders of CNG, to consummate the transactions
contemplated hereby.
(b) The execution, delivery and performance of this Agreement
by CNG and the consummation by CNG of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of CNG,
subject to adoption of this Agreement by the stockholders of CNG. This Agreement
has been duly executed and delivered by CNG and is, and each other agreement or
instrument of CNG contemplated hereby when executed and delivered by or on
behalf of CNG will be, the legal, valid and binding agreement of CNG,
enforceable against CNG in accordance with its
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respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
(c) Each Majority Stockholder severally represents and
warrants as to himself and as to CNG that neither the execution or delivery of
this Agreement by CNG or such Majority Stockholder nor consummation of the
transactions contemplated hereby or compliance with or fulfillment of the terms
and provisions hereof by CNG or such Majority Stockholder will (i) conflict
with, result in a breach of the terms, conditions or provisions of, or
constitute a default, an event of default or an event creating rights of
acceleration, termination or cancellation or a loss of rights, or result in the
creation or imposition of any encumbrance upon any of the material assets of CNG
or any Subsidiary, under the articles of incorporation or the by-laws or
partnership agreement, limited liability company agreement, regulations or
similar governing instrument of CNG or any Subsidiary, any instrument, agreement
(including any partnership agreement), mortgage, debt instrument, indenture,
deed of trust, permit, concession, grant, franchise, license, judgment, order,
award, decree or other restriction to which CNG or any Subsidiary is a party or
any of its respective properties is subject or by which it is bound or any
statute, other law or regulatory provision affecting it, except for such
conflicts, breaches, defaults, events, creations and impositions that are set
forth on Schedule 3.4(a) of the Disclosure Schedule or (ii) to CNG's and each
Majority Stockholder's best knowledge require the approval, consent or
authorization of, or the making of any declaration, filing or registration with,
any third party or any foreign, federal, state or local court, governmental
authority or regulatory body, by or on behalf of CNG or any Subsidiary, except
for the applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 0000 (xxx "XXX Xxx"), the filing of a Certificate of Merger with the
Corporation and Securities Bureau, Department of Commerce, of the State of
Michigan, the filing of the Certificate of Merger with the Oklahoma Secretary of
State and appropriate documents with the relevant authorities of other
jurisdictions in which CNG is qualified to do business, adoption of this
Agreement by the stockholders of CNG and as set forth in Schedule 3.4(a) of the
Disclosure Schedule.
SECTION 3.5. FINANCIAL STATEMENTS. CNG has previously provided
CMS Energy with: (i) the consolidated balance sheet (the "Balance Sheet") of CNG
as of December 31, 1997(the "Balance Sheet Date") and the consolidated
statements of income (the "Statement of Income"), shareholders' equity and cash
flows for the year then ended, together with the notes and any schedules to such
financial
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statements, as audited by Coopers and Xxxxxxx L.L.P. independent public
accountants, and (ii) the consolidated unaudited balance sheet (the "Unaudited
Balance Sheet") of CNG as of June 30, 1998 (the "Unaudited Balance Sheet
Date"),the related unaudited consolidated statement of income (the "Unaudited
Statement of Income"),cash flow statement and statement of shareholders' equity
for the six months then ended. Except as set forth on Schedule 3.5 of the
Disclosure Schedule or disclosed in the notes or any schedules to the
consolidated financial statements referred to in clause (i) of the preceding
sentence to the best knowledge of CNG, the consolidated balance sheets and
statements of income, shareholders' equity and cash flows referred to in such
clause (i) have been prepared in conformity with generally accepted accounting
principles ("GAAP") consistently applied and fairly present in all material
respects the consolidated financial position of CNG and its consolidated
subsidiaries at the dates of such balance sheets and the consolidated results of
its operations and consolidated cash flows for the respective periods indicated.
SECTION 3.6. OPERATIONS SINCE BALANCE SHEET DATE.
(a) Except as set forth in Schedule 3.6(a) of the Disclosure Schedule,
since the Balance Sheet Date, there has been: (i) no Material Adverse Change in
CNG and its Subsidiaries taken as a whole, and (ii) no damage, destruction, loss
or claim with respect to, whether or not covered by insurance, or condemnation
or other taking of, assets having a Material Adverse Effect on CNG and its
Subsidiaries taken as a whole.
(b) Except as set forth in Schedule 3.6(b)of the Disclosure Schedule,
as contemplated hereby or with the prior written consent of CMS Energy after the
date hereof, since the Balance Sheet Date, CNG has conducted its business only
in the ordinary course and in general conformity with past practice. Without
limiting the generality of the foregoing, except as set forth in Schedule 3.6(b)
of the Disclosure Schedule, as contemplated by any provision of this Agreement
or with the prior written consent of CMS Energy after the date hereof, since the
Balance Sheet Date, neither CNG nor any of its Subsidiaries has: (i) issued,
delivered or agreed (actually or contingently) to issue or deliver any of its
capital stock, or granted any option, warrant or right to purchase any of its
capital stock or other equity interest, or security convertible into its capital
stock or other equity interest, or, other than in the ordinary course of
business consistent with past practice, any of its bonds, notes or other
securities, or borrowed or agreed to borrow any funds; (ii) paid any obligation
or liability (absolute or contingent) other than current liabilities reflected
on the balance sheets referred to in Section 3.5 and current liabilities
incurred since the Balance Sheet Date in the ordinary course of
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business consistent with past practice; (iii) declared or made, or agreed to
declare or make, any payment of dividends or distributions to stockholders or
purchased or redeemed, or agreed to purchase or redeem, any of its capital stock
or other equity interest, (iv) mortgaged, pledged or encumbered any assets other
than in the ordinary course of business consistent with past practice; (v)
except for assets sold, leased or transferred in the ordinary course of business
consistent with past practice and except for the sale of the Sycamore gas
gathering system effective June 1, 1998 sold, leased or transferred or agreed to
sell, lease or transfer any material assets or rights; (vi) to the best
knowledge of CNG, except in the ordinary course of business consistent with past
practice, canceled or agreed to cancel any material debts or claims, waived or
agreed to waive any rights of material value, or allowed to lapse or failed to
keep in force any material franchise, permit or other material right; (vii) to
the best knowledge of CNG, except in the ordinary course of business consistent
with past practice, made or permitted any material amendment or termination of
any material contract, excluding, however, the expiration of the primary term of
any such contract, agreement or license; (viii) undertaken or committed to
capital expenditures exceeding $100,000 for any single project or related series
of projects;(ix) made any increase in the compensation paid or to become payable
to, or paid any bonus or incentive compensation to, any of its directors,
officers or employees except for increases in base compensation in the normal
course of business consistent with past practice, increases required to be made
pursuant to the terms of any written employment or other agreement or employee
benefit plan entered into prior to the Balance Sheet Date, any bonus or
incentive compensation the payment of which has been approved in writing by CMS
Energy, and any bonus or incentive compensation which is referred to in Section
6.6(a)(xiii); (x) amended its articles of incorporation or by-laws; (xi) to the
best knowledge of CNG, undergone any Material Adverse Change in its relationship
with any material supplier, purchaser, distributor, lessor, governmental body,
or consultant; (xii) made charitable donations in excess of $20,000 in the
aggregate; (xiii) incurred any liability or obligation (whether absolute,
accrued, contingent or otherwise and whether direct or as guarantor or otherwise
with respect to obligations of others) material to the business or assets of CNG
and its Subsidiaries, taken as a whole, except in the ordinary course of
business consistent with past practice and except as contemplated hereunder;
(xiv) instituted, settled or agreed to settle any litigation, action, or
proceeding before any court or governmental body relating to the business or
assets of CNG or any of its Subsidiaries and involving an amount in excess of
$100,000 or materially affecting CNG or its Subsidiaries; (xv) entered into, or
amended in any material respect, any employment, collective bargaining, deferred
compensation, retention, change of
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control, termination or other material agreement or arrangement for the benefit
of employees (whether or not legally binding) or entered into, adopted or
amended in any material respect any Plan (as hereinafter defined); (xvi)
suffered any strike or other employment related problem which would have a
Material Adverse Effect on CNG and its Subsidiaries taken as a whole; (xvii)
suffered the loss of any key employees, consultants or agents which would have a
Material Adverse Effect on CNG and its Subsidiaries taken as a whole or, to the
best knowledge of CNG, had any Material Adverse Change in its relations with its
employees, consultants or agents; (xviii) received any notice of termination of
any material contract other than termination at the expiration of the primary
term of any such contract, or lease or other material agreement; (xix)
transferred or expressly granted any rights under, or entered into any
settlement regarding the breach or infringement of, any material United States
or foreign license, patent, copyright, trademark, trade name, invention or other
material intellectual property or modified in any material respect any existing
rights with respect thereto; (xx) changed its accounting reference period; (xxi)
entered into any transaction of the type described in Section 3.30 except as
permitted hereunder; or (xxii) entered into or become committed to enter into
any other material transaction except in the ordinary course of business
consistent with past practice.
SECTION 3.7. NO UNDISCLOSED LIABILITIES. Neither CNG nor any
of its Subsidiaries is subject to any material liability which is required in
accordance with GAAP to be shown on the Balance Sheet but which is not so shown,
and, to the best knowledge of CNG, neither CNG nor any of its Subsidiaries is
subject to any material liability, absolute or contingent, which is not shown on
the Balance Sheet or which is in excess of amounts shown or reserved for in the
Balance Sheet, other than, in each case, (i) as referred to in the notes to the
Balance Sheet or in the discussion of the accounting methodologies contained
therein, (ii) as disclosed in Schedule 3.7 of the Disclosure Schedule and (iii)
liabilities incurred after the Balance Sheet Date in the ordinary course of its
business consistent with past practice.
SECTION 3.8. TAXES. (a) Except as set forth on Schedule 3.8 of
the Disclosure Schedule: (i) each of CNG and its Subsidiaries (as hereinafter
defined) has filed on or before the date hereof (or will timely file) all Tax
Returns (as hereinafter defined) that are required to be filed on or before the
date hereof or the Effective Date; (ii) all such Tax Returns for taxable years
or periods ending on or before December 31, 1997 are (or will be) complete and
accurate in all material respects and disclose all Taxes (as hereinafter
defined) required to be paid by CNG and its
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Subsidiaries for the periods covered thereby and all Taxes shown to be due on
such Tax Returns have been timely paid;(iii) none of CNG or any Subsidiary has
waived or been requested to waive any statute of limitations in respect of
Taxes; (iv) the period for assessment of Taxes in respect of the Tax Returns
referred to in clause (i) for taxable years or periods ending on or before
December 31, 1993 has expired; (v) except as disclosed on Schedule 3.8 of the
Disclosure Schedule there is no action, suit, investigation, audit, claim or
assessment pending or, to the best knowledge of CNG, proposed or threatened with
respect to Taxes of CNG or any Subsidiary for taxable years or periods ending on
or before December 31, 1997 and, to the best knowledge of CNG, no basis exists
therefor for which adequate reserves have not been established; (vi) all
deficiencies actually asserted or assessments actually made as a result of any
examination of the Tax Returns referred to in clause (i) for taxable years or
periods ending on or before December 31, 1997 have been paid in full; (vii) all
Tax Sharing Arrangements (as hereinafter defined) will terminate prior to the
Effective Date and neither CNG nor any Subsidiary will have any liability
thereunder on or after the Effective Date; (viii) there are no Tax indemnity
agreements to which CNG or any Subsidiary is a party or is bound; (ix) there are
no liens for Taxes upon the assets of CNG or any Subsidiary except liens
relating to current Taxes not yet due; (x) all Taxes which CNG or any Subsidiary
is required by law to withhold or to collect for payment (and with respect to
the bonuses referred to in Section 6.6(a)(xiii), collection of withholding due
with respect thereto) have been duly withheld and collected, and have been paid
or accrued; (xi) none of CNG or any of its Subsidiaries has been a member of any
consolidated group other than the Company Group of which it is a member on the
date hereof; (xii) to the best knowledge of CNG, the accruals for deferred Taxes
reflected in the Balance Sheet are adequate to cover any deferred tax liability
of CNG and its Subsidiaries determined in accordance with GAAP through the date
thereof; (xiii) there are no Tax rulings, requests for private letter rulings or
requests for technical advice, in each case initiated by CNG or any Subsidiary,
or requests for a change in method of accounting or closing agreements relating
to CNG or any Subsidiary, which in each case could affect the liability of CNG
or any Subsidiary for Taxes for any period after December 31, 1997; (xiv) none
of CNG or any Subsidiary has filed a consent under Section 341(f) of the Code or
any comparable provision of state statutes; (xv) since January 1, 1994, none of
CNG or any Subsidiary has taken any action not in accordance with past practice
that would have the effect of deferring any Tax liability for CNG or any
Subsidiary from any taxable period ending on or before December 31, 1997 to any
taxable period ending after December 31, 1997; (xvi) no income or gain of CNG or
any Subsidiary has been deferred pursuant to Treasury Regulation Sections
1.1502-13 or -14, or Temporary Treasury
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Regulation Sections 1.1502-13T or -14T; (xvii) no power of attorney has been
granted with respect to any matter relating to Taxes of CNG or any Subsidiary
which is currently in force; (xviii) none of the property of CNG or any
Subsidiary is required to be treated as owned by another person pursuant to
Section 168(f)(8) of the Code (as in effect prior to its amendment by the Tax
Equity and Fiscal Responsibility Act of 1982) or is "tax exempt use property"
within the meaning of Section 168(h) of the Code or is subject to a so-called
TRAC lease under Section 7701(h) of the Code or any predecessor provision; (xix)
CNG and each Subsidiary is the owner for income tax purposes of all property
which it has leased to any other person; (xx) neither CNG nor any Subsidiary has
participated in or cooperated with an international boycott, within the meaning
of Section 999 of the Code, and all filing requirements imposed by Section 999
of the Code with respect to CNG and its Subsidiaries have been and will be
complied with; (xxi) neither CNG nor any Subsidiary has disposed of property in
a transaction being accounted for under the installment method pursuant to
Section 453 or 453A of the Code; (xxii) neither CNG nor any Subsidiary has any
corporate acquisition indebtedness, as described in Section 279(b) of the Code;
and (xxiii) no taxes with respect to any period ending on or before December 31,
1997 were paid by CNG or any Subsidiary (or charged to CNG or any Subsidiary
through any intercompany account or payment) after December 31, 1997 which were
not included in the provision for income taxes on the Statement of Income;
(xxiv) all facts contained in Schedule 3.8(a) of the Disclosure Schedule are
complete and accurate in all material respects.
(b) No disposition by CNG or any of the Majority Stockholders pursuant
to this Agreement is subject to withholding under Section 1445 of the Code and
no stock transfer taxes, real estate transfer taxes, or other similar taxes will
be imposed in respect of the Merger.
(c) As a result of the Merger and the transactions contemplated by this
Agreement, none of CNG, any Subsidiary or the Surviving Corporation will be
obligated (limited, in the case of the Surviving Corporation, to obligations to
which the Surviving Corporation becomes subject as a result of any agreement or
arrangement entered into by CNG or any Subsidiary prior to the Merger) to make a
payment to an individual that would be an "excess parachute payment" to a
"disqualified individual" as those terms are defined in Section 280G of the
Code, without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
(d) For purposes of this Section 3.8 and Section 7.2, notwithstanding
any other provision hereof, the following definitions shall apply:
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(i) "Company Group" shall mean any "affiliated group" (as
defined in Section 1504(a) of the Code without regard to the
limitations contained in Section 1504(b) of the Code) that, at any time
on or before the Effective Date, includes or has included CNG, any of
its Subsidiaries or any predecessor of or successor to CNG or any of
its Subsidiaries (or another such predecessor or successor), or any
other group of corporations which, at any time on or before the
Effective Date, files or has filed Tax Returns on a combined,
consolidated or unitary basis with CNG or any of its Subsidiaries or
any predecessor of or successor to CNG or any of its Subsidiaries (or
another such predecessor or successor).
(ii) "material" shall mean, with respect to Taxes, that the
failure on a timely basis to pay all such Taxes would result in an
aggregate Tax liability of not less than $25,000.
(iii) "Subsidiary" shall have the meaning ascribed thereto in
Section 3.2(a).
(iv) "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") shall mean (i) any federal, state, local or foreign net
income, gross income, gross receipts, windfall profits, severance,
property, production, sales, use, value added, license, excise,
franchise, employment, payroll, withholding, alternative or add-on
minimum, ad valorem, transfer, excise, stamp, or environmental tax, or
any other tax, custom, duty, governmental fee or import or export duty
or other like assessment or charge of any kind whatsoever, together
with any interest or penalty, addition to tax or additional amount
imposed by any governmental authority, and (ii) liability of CNG or any
of its Subsidiaries for the payment of amounts with respect to payments
of a type described in clause (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group, or as a result of
any obligation of CNG or any of its Subsidiaries under any Tax Sharing
Arrangement or Tax indemnity arrangement.
(v) "Tax Partnership" shall mean any entity, organization,
agreement or group deemed to be a partnership within the meaning of
Section 761 of the Code or any similar state or federal statute, rule
or regulation and that is not excluded from the application of the
partnership provisions of Subchapter K of Chapter 1 of Subtitle A of
the Code and of all similar provisions
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of state tax statutes or regulations by reason of elections made,
pursuant to Section 761(a) of the Code and all such similar state or
federal statutes, rules and regulations.
(vi) "Tax Return" shall mean any return, report or similar
statement required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any information
return, claim for refund, amended return and declaration of estimated
Tax.
(vii) "Tax Sharing Arrangement" shall mean any written or
unwritten agreement or arrangement for the allocation or payment of Tax
liabilities or payment for Tax benefits with respect to a consolidated,
combined or unitary Tax Return, which Tax Return includes CNG or any of
its Subsidiaries.
SECTION 3.9. CONDITION OF TANGIBLE ASSETS. Except as otherwise
disclosed in Schedule 3.9 of the Disclosure Schedule and subject to Section
11.11, to the best knowledge of CNG, the tangible personal property and
equipment owned or leased by CNG or any of its Subsidiaries and having a book or
fair market value in excess of $100,000 as to any single item is in good
operating condition (subject to reasonable wear and tear and immaterial
impairments of value and damage) and generally suitable for the uses for which
intended.
SECTION 3.10. TITLE TO PROPERTY. (a) Except for Permitted
Encumbrances and liens arising in the ordinary course of business after the date
hereof and properties and assets disposed of in the ordinary course of business
after the date of the Balance Sheet and except as otherwise set forth in
Schedule 3.10(a) of the Disclosure Schedule, CNG and its Subsidiaries have
defensible title (or, with respect to pipelines, equipment, other tangible
personal property, easements, rights-of-way, servitudes, permits, surface leases
and other similar assets and rights used in connection with CNG's natural gas
gathering and processing operations (collectively, "Pipeline Assets"), title to
or interest in the applicable Pipeline Asset sufficient to enable CNG, its
Subsidiaries and Surviving Corporation to conduct their business with respect
thereto without material interference as it is currently being conducted), free
and clear of all liens, the existence of which would have Material Adverse
Effect on CNG and its Subsidiaries taken as a whole. All buildings, and all
fixtures, equipment and other property and assets which are material to its
business on a consolidated basis, held under leases by any of CNG or its
Subsidiaries are held under valid instruments
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enforceable by CNG or its Subsidiaries in accordance with their respective
terms.
(b) Except as set forth in Schedule 3.10(b); (i) the business of CNG
and its Subsidiaries has been operated in a manner which does not violate the
material terms of any easements, rights-of-way, permits, servitudes, licenses,
leasehold estates and similar rights relating to real property used by CNG and
its Subsidiaries in such business (collectively, "Easements") material to such
business (ii) to the best knowledge of CNG, all material Easements are valid and
enforceable and grant the rights purported to be granted thereby and all rights
necessary thereunder for the current operation of such business; and (iii) there
are no spacial gaps in the Easements which would materially impair the conduct
of such business, and no material part of the Pipeline Assets is located on
property which is not owned in fee by CNG or a Subsidiary or subject to an
Easement in favor of CNG or a Subsidiary.
SECTION 3.11. AVAILABILITY AND OWNERSHIP OF ASSETS. The assets
shown on the Balance Sheet and as reflected on the Unaudited Balance Sheet,
taken as a whole, include all the material properties and assets owned or used
or held by CNG or its Subsidiaries during the period covered thereby and
required, in accordance with GAAP, to be reflected on the Balance Sheet (except
properties and assets sold, cash disposed of, accounts receivable collected,
prepaid expenses realized, contracts fully performed, and properties or assets
which had become worn out, obsolete or surplus, in each case in the ordinary
course of business or as contemplated by this Agreement). Except as set forth on
Schedule 3.11 of the Disclosure Schedule, there are no material assets used in
the CNG Business owned by any person other than CNG or its Subsidiaries which
are leased or licensed pursuant to a lease or license that will terminate as a
result of the consummation of the Merger and the other transactions contemplated
hereby.
SECTION 3.12. PERSONAL PROPERTY LEASES. Schedule 3.12 of the
Disclosure Schedule identifies each lease or other agreement or right, whether
written or oral, under which CNG or any of its Subsidiaries is lessee of, or
holds or operates, any machinery, equipment, vehicle or other tangible personal
property owned by a third person having scheduled rental payments in excess of
$10,000 per year.
SECTION 3.13. ACCOUNTS RECEIVABLE. To the best knowledge of
CNG, all outstanding accounts receivable of CNG and its Subsidiaries have arisen
from bona fide transactions, except to the extent that a reserve in respect
thereof shall have been established on the Balance Sheet or the Unaudited
Balance Sheet. To the best knowledge of CNG, (i) the accounts receivable
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reflected in the Balance Sheet, taken as a whole, are good and collectible in
all material respects in the ordinary course of business at the aggregate
recorded amounts thereof, net of any applicable allowances for doubtful accounts
reflected therein; and (ii) the accounts receivable to be reflected in the books
and records of CNG and its Subsidiaries as of the Effective Date, taken as a
whole, will be good and collectible on the Effective Date in all material
respects in the ordinary course of business at the aggregate recorded amounts
thereof, net of any applicable allowances for doubtful accounts reflected
thereon, which allowances will be determined on a basis consistent with the
basis used in determining the allowances for doubtful accounts reflected in the
Balance Sheet.
SECTION 3.14. INTELLECTUAL PROPERTY. (a) Except for the
corporate names under which they operate their respective businesses, neither
CNG nor any Subsidiary has any trade names, trademarks, service marks, patents
or copyrights or any pending applications for any of the foregoing. Except as
listed on Schedule 3.14 of the Disclosure Schedule, neither CNG nor any
Subsidiary has any material technology, know-how or processes which it is
licensed or authorized to use by others. CNG and each Subsidiary owns or is
licensed or otherwise has the full and exclusive right to use all trade names,
trademarks, service marks, patents and copyrights necessary for its business as
presently conducted and the actual and contemplated use thereof does not, to the
knowledge of CNG, conflict with or infringe upon or otherwise violate any
material rights of others. Except as set forth in Schedule 3.14 of the
Disclosure Schedule, no claim has been asserted by any person against CNG or any
Subsidiary with respect to the use of any trademark, trade name, service xxxx,
patent, copyright, know-how or process used by any Subsidiary challenging or
questioning the validity or effectiveness of such use or any such license or
agreement and to the best knowledge of CNG, there exists no valid basis for any
such claim.
(b) To the best knowledge of CNG, no infringement of any patent, patent
right, trademark, service xxxx, trade name, or copyright or registration thereof
has occurred or results in any way from the operations or business of CNG or its
Subsidiaries, except for such infringements that would not have a Material
Adverse Effect on CNG and its Subsidiaries taken as whole.
SECTION 3.15. REAL PROPERTY. Schedule 3.15 of the Disclosure
Schedule contains a brief description of each parcel of the real property
(excluding, however, rights-of-way, easements or surface leases held by CNG or
any Subsidiary in connection with such entity's operations) owned or leased by
CNG or any of its Subsidiaries (the "Real Property") and of each option held by
CNG
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or any of its Subsidiaries to acquire any such Real Property. Complete and
correct copies of any title opinions, surveys and appraisals in the possession
of CNG or any of its Subsidiaries or any policies of title insurance currently
in force and in the possession of CNG or any of its Subsidiaries with respect to
each such parcel have heretofore been made available by CNG to CMS Energy.
Except as set forth in Schedule 3.15 of the Disclosure Schedule, CNG or a
Subsidiary has the right to quiet enjoyment of all the leased Real Property for
the full term of each such lease or similar agreement (and any renewal option)
relating thereto, and the leasehold or other interest of CNG or such Subsidiary
in such leased real property is not subject or subordinate to any encumbrance,
except for any failure to have such right or the existence of any such
encumbrance that would not have a Material Adverse Effect on CNG and its
Subsidiaries taken as whole.
SECTION 3.16. [INTENTIONALLY OMITTED]
SECTION 3.17. LITIGATION. Except as set forth in Schedule 3.17
of the Disclosure Schedule, there are no claims, actions, suits or proceedings
to which CNG or any of its Subsidiaries is a party or any of their respective
properties is subject or by which any of them is bound, pending or, to the best
knowledge of CNG, threatened before or by any court or governmental agency,
which in the case of threatened claims, actions, suits or proceedings, would, if
adversely determined, have a Material Adverse Effect on CNG and its Subsidiaries
taken as a whole, or prevent or hinder the consummation of the transactions
contemplated hereby.
SECTION 3.18. NO GUARANTIES; EXTENSIONS OF CREDIT. Except as
set forth in Schedule 3.18 of the Disclosure Schedule, except for customary
indemnification and guaranty provisions and extensions of credit made in the
ordinary course of business, no material obligations or liabilities of CNG or
any of its Subsidiaries are guaranteed by or subject to a similar contingent
obligation of any other person, nor has CNG or any of its Subsidiaries
guaranteed or become subject to a similar contingent obligation in respect of
the obligations or liabilities of, or extended credit to any other person.
SECTION 3.19. COMPLIANCE WITH LAWS. To the knowledge of CNG,
except as disclosed in Schedule 3.19 of the Disclosure Schedule, CNG and its
Subsidiaries are in compliance with the provisions of all applicable existing
laws and regulations (but excluding environmental laws and regulations, which
are the subject of Section 3.29, and also excluding laws and regulations
pertaining to employee benefits matters, which are the subject of Section
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3.22) of all federal, state, local and foreign governments, except to the extent
that the failure to comply therewith would not have a Material Adverse Effect on
CNG and its Subsidiaries taken as whole. Except as disclosed in Schedule 3.19 of
the Disclosure Schedule, there are no proposed or pending orders, judgments,
decrees, governmental takings, condemnations or other proceedings, in each case
binding upon the business, operations or properties of CNG or any of its
Subsidiaries and which would have a Material Adverse Effect on CNG and its
Subsidiaries taken as a whole.
SECTION 3.20. PERMITS. To the best knowledge of CNG, each of
CNG and its Subsidiaries possesses all material federal, state, local and
foreign governmental and regulatory franchises, rights, privileges, permits,
grants, concessions, licenses, certificates, variances, authorizations,
approvals, and other material authorizations (including any amendments to any
thereof) necessary to own or lease and operate its assets and material
properties and to conduct its business as now conducted (collectively, the
"Permits"), excluding environmental Permits, which are the subject of Section
3.29.
To the best knowledge of CNG, all Permits are in full force
and effect and will continue in full force and effect immediately following the
consummation of the Merger without the breach of any terms or conditions thereof
or the forfeiture or impairment of any rights thereunder and no consent,
approval or act of, or the making of any filing with, any governmental body,
regulatory commission or other party will be required to be obtained or made by
CNG or any of its Subsidiaries in respect of any Permit as a result of the
consummation of the Merger and the other transactions contemplated hereby.
Neither CNG nor any of its Subsidiaries is in default in any material respect
under the terms of any such Permit nor has received notice of any material
default thereunder which has not been resolved.
SECTION 3.21. INSURANCE. Schedule 3.21 of the Disclosure
Schedule contains a list and brief description (including type of coverage,
policy number(s), limits, claims made or occurrence coverage for liability
policies, deductibles, carriers, retroactive date of liability policies, if any,
and effective and termination dates) of all policies of fire, liability
(general, product and other liability), workers' compensation and other forms of
insurance and bonds maintained by CNG or any of its Subsidiaries since December
31, 1995 up to and including the Effective Date, and except as disclosed in
Schedule 3.21 of the Disclosure Schedule, each of CNG and its Subsidiaries is a
named insured or is otherwise covered under each such policy, and each such
policy is in full force and effect and will not in any
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material way be affected by or terminate or lapse by reason of the transactions
contemplated by this Agreement.
CNG has made available to CMS Energy complete and correct
copies of all policies listed on Schedule 3.21 of the Disclosure Schedule,
together with all riders and amendments thereto, and, to the best knowledge of
CNG, no insurer under such policies has a basis to void such policies on grounds
of non-disclosure on the part of the policyholder or the insured thereunder.
(i) Schedule 3.21 of the Disclosure Schedule hereto includes a
list of each claim and each notice of claim submitted under any such policy
since December 31, 1995 and all open claims which occurred prior to December 31,
1995; (ii) except for any such claims or notices of claim, the full policy
limits (subject to deductibles provided therein) are available and unimpaired
under each such policy; and (iii) each of CNG and its Subsidiaries and
affiliates has complied with each such policy in all material respects and has
not failed to give any notice or present any claim thereunder in a due and
timely manner.
SECTION 3.22. EMPLOYEE BENEFIT PLANS. (a) Schedule 3.22 of the
Disclosure Schedule sets forth a list of and CNG has made available to CMS
Energy copies of, any pension, profit sharing, retirement, disability, health,
welfare or other "employee benefit plan", as that term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), bonus, stock option or other equity based, incentive, severance,
termination, retention or other material employee benefit or compensation plan,
policy, arrangement or agreement, whether written or unwritten, (i) under which
any employee or former employee of CNG or any of its Subsidiaries or the
beneficiary or dependent of any such employee or former employee (collectively,
the "Participants") is eligible to participate or derive a benefit and (ii) that
is established, maintained or contributed to by CNG or any of its Subsidiaries
or any trade or business, whether or not incorporated, which would be treated as
a single employer together with CNG and its Subsidiaries under Section 414 of
the Code, as of any date of determination (each, an "ERISA Affiliate") or to
which CNG or any of its Subsidiaries or any ERISA Affiliate is obligated to
contribute (collectively, the "Plans"). Neither CNG nor, to the best knowledge
of CNG, any such Plan nor any trust created thereunder has engaged in a
transaction prohibited by Section 406 of ERISA or Section 4975 of the Code that
would result in any material liability to CNG or any of its Subsidiaries. Except
as set forth in Schedule 3.22 of the Disclosure Schedule, each of the Plans has
been operated and administered in material compliance with ERISA, the Code and
all other applicable laws, regulations and rules, except where any such
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noncompliance would not result in a material liability to CNG or any of its
Subsidiaries. There are no material pending or, to the best knowledge of CNG,
threatened, claims by or on behalf of any Plan, by or on behalf of any
Participant or otherwise involving any Plan (other than routine claims for
benefits). Each Plan which is subject to the minimum funding standards of
Section 412 of the Code or Section 302 of ERISA satisfies such standards, and no
such Plan has incurred an "accumulated funding deficiency," whether or not
waived, within the meaning of such Sections of the Code or ERISA. To CNG's best
knowledge, all contributions required to have been made by CNG or any of its
Subsidiaries and each ERISA Affiliate to each Plan under the terms of any such
Plan or pursuant to applicable law or any applicable collective bargaining
agreement have been made within the time prescribed by any such Plan, law or
agreement, as the case may be.
(b) Except as set forth in Schedule 3.22 of the Disclosure Schedule,
neither CNG or any of its Subsidiaries nor any ERISA Affiliate would be liable
for any material amount pursuant to Title IV of ERISA if any employee pension
benefit plan (within the meaning of Section 3(2) of ERISA) subject to such Title
(a "Title IV Plan") were to terminate. Except as disclosed on Schedule 3.22 of
the Disclosure Schedule hereto, as of the last day of the 1994 plan year of each
Plan which is a Title IV Plan, the "projected benefit obligations" (within the
meaning of the Financial Accounting Standards Board Statement No. 87) under each
such Plan did not exceed the fair market value of the assets of each such Plan,
determined on the basis of actuarial assumptions each of which is reasonable.
Neither CNG or any of its Subsidiaries nor any ERISA Affiliate has engaged in a
transaction which could cause CNG or any such Subsidiary or such ERISA Affiliate
to be subject to liability under Section 4069 or 4212 of ERISA. Neither CNG nor
any of its Subsidiaries nor any ERISA Affiliate has incurred any material
liability under or pursuant to Title I or IV of ERISA or the penalty, excise tax
or joint and several liability provisions of the Code or ERISA relating to
employee benefit plans for failure to comply with such provisions with respect
to the Plans and no event or condition has occurred or exists which could result
in any material liability following the Effective Date to CMS Energy under or
pursuant to Title I or IV of ERISA or such penalty, excise tax or liability
provisions of the Code or ERISA for failure to comply with such provisions with
respect to the Plans.
(c) Except as set forth in Schedule 3.22 of the Disclosure Schedule, no
Plan is a "multiemployer plan" or a "multiple employer plan" within the meaning
of ERISA or the Code.
(d) No Participant is or may become entitled to post-employment welfare
benefits of any kind by reason of employment
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with CNG or any of its Subsidiaries, including, without limitation, death or
medical benefits (whether or not insured), other than coverage mandated by
Section 4980B of the Code or Part 6 of Title I of ERISA. Except as set forth in
Schedule 3.22 of the Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement will not result in an increase in the amount of
compensation or benefits or accelerate the vesting or timing of payment of any
compensation or benefits payable under any Plan to or in respect of any
participant.
SECTION 3.23. EMPLOYEES AND AGENTS AND RELATED AGREEMENTS. (a)
Except as set forth in Schedules 3.23(a) or 3.30 of the Disclosure Schedule,
neither CNG nor any of its Subsidiaries is a party to or bound by any material
oral or written employment agreement, consulting agreement (other than
employment or consulting agreements under which the obligations of CNG or such
Subsidiary are terminable by CNG or such Subsidiaries without premium or penalty
(other than statutory severance or termination benefits) on notice of 30 days or
less), deferred compensation agreement, confidentiality agreement or covenant
not to compete with any officer, director, Majority Stockholder, employee, agent
or attorney-in-fact of CNG or any of its Subsidiaries. CNG has delivered to CMS
Energy complete and correct copies of each such agreement or instrument.
SECTION 3.24. EMPLOYEE RELATIONS AND LABOR MATTERS. (a) To the
best knowledge of CNG, CNG and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations which relate to wages,
hours, discrimination in employment and collective bargaining and are not liable
for any material arrearages of wages or any material taxes or penalties for
failure to comply with any of the foregoing. CNG believes that the relations of
CNG and its Subsidiaries with their employees are generally good.
(b) Neither CNG nor any of its Subsidiaries is a party to any
collective bargaining agreement. Neither CNG nor any of its Subsidiaries is a
party to or, to the best knowledge of CNG, is threatened with, any dispute or
controversy with a union or with respect to unionization or collective
bargaining involving its employees. Neither CNG nor any of its Subsidiaries is
materially affected by any dispute or controversy with a union or with respect
to unionization or collective bargaining involving any of its suppliers or
customers. Schedule 3.24(b) of the Disclosure Schedule hereto sets forth a list
of any union organizing or election activities involving any non-union employees
of CNG or any of its Subsidiaries known to CNG which have occurred since
December
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31, 1997 or, to the best knowledge of CNG, are threatened as of the date hereof.
SECTION 3.25. ABSENCE OF CERTAIN BUSINESS PRACTICES. None of
CNG or any of its Subsidiaries, any officer, employee or agent of CNG or any of
its Subsidiaries or any other person acting on its behalf, has, directly or
indirectly, given or agreed to give any gift or similar benefit (other than with
respect to bona fide payments for which adequate consideration has been given)
to any customer, supplier, governmental employee or other person who is or may
be in a position to help or hinder the business of CNG or any of its
Subsidiaries (or assist CNG or any of its Subsidiaries in connection with any
actual or proposed transaction) (a) which might subject CNG or any of its
Subsidiaries to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (b) which, if not continued in the future, would have
a Material Adverse Effect on CNG or any of its Subsidiaries or which would
subject CNG or any of its Subsidiaries to suit or penalty in any private or
governmental litigation or proceeding, (c) for any of the purposes described in
Section 162(c) of the Code, or (d) for establishment or maintenance of any
concealed fund or concealed bank account.
SECTION 3.26. TERRITORIAL RESTRICTIONS. Except as set forth on
Schedule 3.26 of the Disclosure Schedule, neither CNG nor any of its
Subsidiaries is restricted in any material respect by any written agreement or
understanding (including area of mutual interest or similar agreements or
provisions, but excluding confidentiality agreements or provisions) with third
parties from carrying on its business in any geographical area.
SECTION 3.27. TRANSACTIONS WITH CERTAIN PERSONS. Except as set
forth in Schedule 3.27 of the Disclosure Schedule hereto since January 1, 1995
neither CNG nor any of its Subsidiaries has purchased, leased or otherwise
acquired any material property or obtained any material services from, or sold,
leased or otherwise disposed of any material property or furnished any material
services to (except with respect to remuneration for services rendered as a
director, officer or employee of CNG or any of its Subsidiaries), in the
ordinary course of business or otherwise, (i) any Majority Stockholder, (ii) any
affiliate of CNG or any of its Subsidiaries or (iii) any person who is an
officer or director of CNG or any of its Subsidiaries or except as set forth in
Schedule 3.27 of the Disclosure Schedule hereto and except for the transactions
contemplated by this Agreement, neither CNG nor any of its Subsidiaries owes any
amount in excess of $50,000 to, or has any contract with or commitment to, any
Majority Stockholder, director, officer or employee of CNG or any of its
Subsidiaries (other than for compensation for current services not yet due and
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payable and reimbursement of expenses arising in the ordinary course of
business) and none of such persons owes any amount in excess of $50,000 to CNG
or any of its Subsidiaries.
SECTION 3.28. [INTENTIONALLY OMITTED]
SECTION 3.29. ENVIRONMENTAL MATTERS. (a) Except as set forth
in Schedule 3.29 of the Disclosure Schedule, to the best knowledge of CNG, each
of CNG and its Subsidiaries:
(i) is in material compliance with all Applicable
Environmental Laws, including without limitation those with respect to
the use, handling, transportation, discharge, release and/or disposal
of any Hazardous Substance;
(ii) is not the subject of any investigation, judicial or
administrative proceeding, or settlement concerning (A) a Release (as
hereinafter defined) or threatened Release of any Hazardous Substance
or (B) the violation of any Applicable Environmental Laws or permits
issued thereunder;
(iii) is not under a duty to file any notice under any
Applicable Environmental Laws reporting the violation of any Applicable
Environmental Laws or the Release or threatened Release of any
Hazardous Substance;
(iv) has no material liability or contingent liability, either
on-site or off-site in connection with any Release or threatened
Release of any Hazardous Substance nor has any present Property or past
Property been listed or proposed for listing on the National Priorities
List ("NPL") pursuant to the federal Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et
seq., ("CERCLA") or on the Comprehensive Environmental Response
Compensation Liability Information System List ("CERCLIS") or any
similar state or foreign list of sites requiring Remedial Action;
(v) has generated, treated, stored, recycled, transported or
disposed of any Hazardous Substances in material accordance with
Applicable Environmental Laws;
(vi) has installed underground storage tanks or surface
impoundments on its Property only in connection with the treating or
transportation of, oil, gas or other hydrocarbons and in accordance
with Applicable
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Environmental Laws and, to the extent that underground
storage tanks have been removed, all underground storage tanks have
been removed in accordance with applicable Environmental Laws;
(vii) is operating all pipelines, storage tanks and other
storage vessels operated by it in material compliance with all
secondary containment, spill prevention and financial assurance
requirements of Applicable Environmental Laws;
(viii) has no outstanding Lien filed on its assets in favor of
any governmental agency in connection with any Applicable Environmental
Laws;
(ix) is in material compliance with all permits and has no
unresolved notices of violation or letters of violation with respect to
any permit; and
(x) has received no claims, demands, suits or threats alleging
common law nuisance or a violation of Applicable Environmental Laws
based upon allegations of odors, noises, dust or other particulate
matter emanating from its Property.
(b) To the best knowledge of CNG, each of CNG and its Subsidiaries
possess all material federal, state, local and foreign rights, privileges,
permits and other material authorizations (including any amendments to any
thereof) under Applicable Environmental Laws necessary to own or lease and
operate its properties and to conduct its business as now conducted.
(c) For purposes of this Section 3.29, the following definitions shall
apply:
(i) "Applicable Environmental Laws" shall mean any
environmental, health, safety statutes, laws, rules, regulations,
ordinances, common law decisions and codes, relating to land use, air,
soil, surface water, groundwater (including the protection, cleanup,
removal, remediation or damage thereof) and including, without
limitation, those imposing liability or standards of care with respect
to the handling, transport, treatment or disposal of Hazardous
Substances, and any governmental agency orders, guidelines, directives
and instructions, whether United States federal or state or any foreign
government or political subdivision thereof, applicable to the relevant
operation;
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(ii) "Hazardous Substance" means any hazardous or toxic waste,
substance, material or any constituent thereof, pollutant, contaminant,
including petroleum and its various fractions, natural gas, drilling
mud or production wastes, and equipment and Property affected thereby,
as defined, listed or regulated under any Applicable Environmental
Laws;
(iii) "material" means any fines, penalties, natural resource
damages, costs or expenses, including without limitation attorney fees,
consultant fees and expert fees, arising under Applicable Environmental
Laws that would result in an aggregate liability to CNG and its
Subsidiaries taken as a whole of more than $250,000 per year;
(iv) "Property" means any real or personal property, plant,
building, facility, structure, well, pipeline, storage tank, equipment
or unit, or other asset owned, leased or operated by CNG or any of its
Subsidiaries;
(v) "Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal; leaching
or migration into the indoor or outdoor environment or into or out of
any Property, including the movement of Hazardous Substances through or
in the air, soil, surface water, groundwater or Property; and
(vi) "Remedial Action" shall mean any action required to (A)
clean up, remove, treat or in any other way address Hazardous
Substances in the indoor or outdoor environment; (B) prevent the
Release or threat of Release or minimize the further Release of any
Hazardous Substance; or (C) perform pre-remedial studies and
investigations and post remedial care.
SECTION 3.30. CONTRACTS. (a) Except as contemplated hereby or
as set forth in Schedule 3.30 of the Disclosure Schedule, or in another Schedule
to this Agreement, neither CNG nor any of its Subsidiaries is a party to or is
bound by any written or material oral contract, agreement, commitment or
instrument or amendment with respect to any of the following (excluding any of
the following which has been fully performed by all parties):
(i) for the purchase, sale or lease (except if the scheduled
lease payments are less than $50,000 per year) of real property;
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(ii) gas purchase contracts, gas sales contracts,
transportation and fractionation agreements, processing agreements and
gathering agreements;
(iii) natural gas hedging and swap agreements or other
financial derivative products;
(iv) which individually provides for, or relates to, the
guarantee by CNG or any of its Subsidiaries of any obligation of any
customers, suppliers, officers, directors, employees or affiliates of
CNG or such Subsidiaries;
(v) which provides for, or relates to, the incurrence by CNG
or any of its Subsidiaries of debt for borrowed money in excess of
$500,000;
(vi) which provides for, or relates to, any non-competition,
confidentiality or exclusive arrangement with any person, including any
current or former director, officer or employee of CNG or any of its
Subsidiaries;
(vii) for capital expenditures in excess of $100,000 for any
single project or related series of projects;
(viii) any partnership, joint venture or other similar
arrangements or agreements involving a sharing of profits or losses;
(ix) which (other than contracts, agreements, commitments and
instruments of the nature described in clauses (i) through (viii)
above) involve payments or receipts by CNG or any of its Subsidiaries
of more than $100,000; and
(x) for any purpose (whether or not made in the ordinary
course of the business or otherwise not required to be listed or
described in Schedule 3.30 of the Disclosure Schedule) which is
material to the business of CNG and its Subsidiaries taken as a whole.
(b) To the best knowledge of CNG, except as set forth in Schedule 3.30
of the Disclosure Schedule, (i) CNG and its Subsidiaries have fulfilled and
performed their obligations in all material respects under each of the leases,
contracts and other agreements listed in Schedule 3.30 of the Disclosure
Schedule or
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referred to in clause (ii) of Section 3.30 (collectively, together with other
leases, contracts and other agreements listed in other Schedules under this
Article III, the "CNG Agreements") and are not, and are not alleged to be, in
breach or default in any material respect under, nor is there or is there
alleged to be any basis for termination of, other than termination at the
expiration of the primary term thereof, any of the CNG Agreements, and (ii) no
event has occurred and no condition or state of facts exists which, with the
passage of time or the giving of notice or both, would constitute such a default
or breach by CNG or any of its Subsidiaries.
The CNG Agreements (i) have been duly authorized, executed and
delivered or duly entered into by CNG or the Subsidiaries of CNG that are a
party thereto, and (ii) are in full force and effect and constitute legal,
valid, binding and enforceable obligations of CNG or such Subsidiaries and will
continue in full force and effect according to the terms thereof following the
consummation of the Merger without the breach of any terms or conditions thereof
or the forfeiture or impairment of any rights thereunder and without the
consent, approval or act of, or the making of any filing with, any other person
or party.
SECTION 3.31. [INTENTIONALLY OMITTED]
SECTION 3.32. GAS IMBALANCES. Except as disclosed on Schedule
3.32, there are no material gas imbalances pertaining to the marketing of gas as
between CNG or any of its subsidiaries and any third party.
SECTION 3.33. [INTENTIONALLY OMITTED]
SECTION 3.34. CNG FILINGS; REGISTRATION STATEMENT INFORMATION.
(a) Since August 1, 1997, CNG and its Subsidiaries have filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, copies of which have been made available to CMS
Energy except to the extent prohibited by law, that were required to be filed
with (a) the Federal Energy Regulatory Commission; (b) the Oklahoma and Texas
regulatory authorities; (c) the Securities and Exchange Commission; and (d) any
other federal, state or local governmental or regulatory authority, except to
the extent failure to make such filings would not have a Material Adverse Effect
on CNG and the Subsidiaries, taken as a whole. All such reports, registrations
and filings are collectively referred to as the "Seller Filings". As of their
respective filing dates, each of the past Seller
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Filings (a) was true and complete in all material respects (or was amended so as
to be so promptly following discovery of any discrepancy); and (b) complied in
all material respects with all of the statutes, rules and regulations enforced
or promulgated by the governmental or regulatory authority with which it was
filed (or was amended so as to be so promptly following discovery of any such
noncompliance) and none contained any untrue statement of a material fact or
omitted 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.
(b) None of the information supplied or to be supplied by CNG and/or
the Majority Stockholders for inclusion or incorporation by reference in, or
relating to CNG and/or the Majority Stockholders and included or incorporated by
reference in, (i) the Registration Statement on Form S-4 to be filed with the
SEC by CMS Energy in connection with the issuance of shares of CMS Common Stock
in the Merger (including, the Proxy Statement and prospectus constituting a part
thereof, the "Registration Statement") will, at all times from the date the
Registration Statement becomes effective under the Securities Act (through the
Effective time of the Merger), 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; (ii) the Proxy Statement and any amendment or supplement
thereto will, at all times from the date of the mailing to shareholders of CNG
through the date of the meeting of shareholders of CNG to be held in connection
with the Merger, 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; and (iii) the statements, correspondence, applications and forms
to be filed with securities or "blue sky" authorities, self regulatory
authorities, the NYSE or any governmental entity in connection with the Merger,
or any requisite regulatory approvals will, at the time filed, during their
pendency, or at the time they become effective, 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 were made, not misleading. The Proxy Statement (except for such
portions thereof that related only to CMS Energy and its Subsidiaries) will
comply in all material respects with the provisions of the Securities Exchange
Act of 1934, as amended and the rules and regulations thereunder.
SECTION 3.35. DISCLOSURE. To the best knowledge of CNG, none
of the representations and warranties contained herein, the
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information contained in the Schedules referred to in this Article III or the
other information or documents referred to in this Article III as having been
furnished or to be furnished or made available to CMS Energy or any of its
representatives by CNG, the Majority Stockholders or their representatives
pursuant to the terms of this Agreement is false or misleading in any material
respect or omits to state a fact necessary to make the statements herein or
therein not misleading in any material respect.
SECTION 3.36. BROKERS. Other than the fee to be paid to CIBC
Xxxxxxxxxxx Corp. as disclosed on Schedule 3.36 of the Disclosure Schedule, no
broker, investment banker, financial advisor or other person is entitled to any
broker's, financial advisor's or other finder's fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of CNG.
SECTION 3.37. PUHCA. Public Utility Holding Company Act, Etc.
None of CNG or the Subsidiaries is a "public utility company" or a "holding
company": or a "subsidiary company" of a "holding company", or an affiliate of
"holding company" or a "subsidiary company" of a "holding company", in each case
within the meaning of the Public Utility Holding Company Act of 1935, as
amended, and, except to the extent CNG or Subsidiary is a utility under the
definitions of the Texas Railroad Commission regulations, or may deemed a
utility by virtue of CNG's Section 7(c) under the Natural Gas Act, none of CNG
the Subsidiaries is a utility under federal or any state law.
SECTION 3.38. VOTE REQUIRED. The only vote of the holders of
any class or series of CNG capital stock necessary to approve the Merger and
adopt this Agreement is the affirmative vote of the holders of a majority of the
outstanding shares of CNG Common Stock.
SECTION 3.39. KNOWLEDGE OF FACTS OR CIRCUMSTANCES.
Notwithstanding the foregoing, except as heretofore disclosed to CMS Energy or
except as contemplated in this Agreement, CNG, the Subsidiaries and the Majority
Stockholders have not taken and will not take any action and do not have
knowledge of any fact or circumstance, that would (i) materially impede or delay
the consummation of the transactions contemplated by this Agreement or the
ability of CMS Energy, CNG or the Subsidiaries to obtain any approval of any
Regulatory Authority required for the transactions contemplated by this
Agreement or to perform its covenants and agreements under this Agreement, or
(ii) prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code, or (iii) make any of the representations and
warranties in Article III of this Agreement untrue or incorrect in
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any material respect if made anew after engaging in such activity, entering into
such transaction, or taking such other act.
SECTION 3.40. INFORMATION SUPPLIED. Without limiting any of
the representations and warranties contained herein, no representation or
warranty of CNG or the Majority Stockholders and no statement by CNG or the
Majority Stockholders or other information contained in the Disclosure Schedule,
Schedules, Exhibits or any document incorporated herein by reference as of the
date of such representation, warranty, statement or document, contains or
contained any untrue statement of material fact, or, at the date thereof, omits
or omitted to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which such statements are
or were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CMS ENERGY
As an inducement to CNG and the Majority Stockholders to enter
into this Agreement and to consummate the transactions contemplated hereby, CMS
Energy hereby warrants and represents to CNG and the Majority Stockholders as
follows:
SECTION 4.1. ORGANIZATION OF CMS ENERGY. CMS Energy is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Michigan. CMS Energy is duly qualified to transact business
as a foreign corporation and is in good standing in each of the jurisdictions in
which the ownership or leasing of the properties used in its business or the
conduct of its business requires such qualification, other than in such
jurisdictions where the failure to be so qualified and in good standing would
not have a Material Adverse Effect on the financial condition or results of
operation of CMS Energy and its consolidated subsidiaries taken as a whole. CMS
Energy has full corporate power and authority to own or lease and operate its
properties and to carry on its business as now conducted.
SECTION 4.2. AUTHORITY. CMS Energy has full corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by CMS Energy and the consummation by CMS Energy of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of CMS Energy, subject to the adoption of this Agreement by CMS
Energy as the sole stockholder of Sub. This Agreement is, and each other
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agreement or instrument of CMS Energy contemplated hereby when executed and
delivered by CMS Energy will be, the legal, valid and binding obligation of CMS
Energy enforceable against CMS Energy in accordance with its respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
Neither the execution and delivery of this Agreement by CMS
Energy nor consummation of the transactions contemplated hereby or compliance
with or fulfillment of the terms and provisions hereof by CMS Energy will (a)
result in a breach of the terms, conditions or provisions of, or constitute a
default, an event of default or an event creating rights of acceleration,
termination or cancellation or a loss of rights, or result in the creation or
imposition of any encumbrance upon any of the material assets of CMS Energy,
under (i) the articles of incorporation or the by-laws of CMS Energy, (ii) any
material instrument, agreement, mortgage, indenture, deed of trust, permit,
concession, grant, franchise, license, judgment, order, award, decree or other
restriction to which CMS Energy is a party or any of its material properties is
subject or by which it is bound or (iii) any material statute, other law or
regulatory provision affecting CMS Energy other than, in the case of clauses
(ii) or (iii), any such breaches, defaults, rights or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
the financial condition or results of operation of CMS Energy and its
consolidated subsidiaries taken as a whole, materially impair the ability of CMS
Energy to perform its obligations hereunder or prevent the consummation of any
of the transactions contemplated hereby, or (b) require the approval, consent or
authorization of, or the making of any declaration, filing or registration with,
any third party or any foreign, federal, state or local court, governmental
authority or regulatory body, by or on behalf of CMS Energy or Sub, except for
the filing of a Form S-4 Registration Statement with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act") and the declaration of effectiveness thereof by the SEC, and
for the applicable requirements of the HSR Act, the filing of a Certificate of
Merger in the proper office of the State of Michigan and Articles of Merger in
the office of the Oklahoma Secretary of State, and appropriate documents with
the relevant authorities of other jurisdictions in which CMS Energy is qualified
to do business, such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the corporation, takeover or blue sky laws of various states, and such other
consents, orders, authorizations, registrations, declarations and
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filings the failure of which to be obtained or made would not, individually or
in the aggregate, have a Material Adverse Effect on the financial condition or
results of operation of CMS Energy and its consolidated subsidiaries taken as a
whole, materially impair the ability of CMS Energy to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby.
SECTION 4.3. SHARES OF CMS COMMON STOCK. The CMS Common Shares
to be delivered to the CNG stockholders pursuant to this Agreement will, when
issued and delivered in accordance with the terms hereof, be duly and validly
issued and outstanding, fully paid and nonassessable shares of CMS Common Stock
free and clear of all Liens other than those arising by or through any such
stockholder, and the issuance of all shares of CMS Common Stock issuable in
connection with the consummation of the transactions contemplated hereby will be
duly registered with the SEC on a Form S-4 Registration Statement under the
Securities Act and prior to the Effective Time all CMS Common Shares issuable in
connection with the consummation of the transactions contemplated hereby shall
have been listed, or approved for listing upon notice of issuance, on the NYSE.
Upon delivery of the CMS Common Stock in exchange for the CNG Common Stock in
accordance with the terms of this Agreement, the holders of the CNG Common Stock
will be the owners of the CMS Common Stock.
SECTION 4.4. CAPITALIZATION. The authorized capital of CMS
Energy consists of (i) 250,000,000 shares of CMS Common Stock, of which, as of
June 30, 1998, 101,512,647 shares were issued and outstanding, (ii) 10,000,000
shares of preferred stock, $.01 par value, none of which is issued and
outstanding or reserved for any purpose, and (iii) 60,000,000 shares of Class G
common stock, no par value, of which, as of June 30, 1998, 8,341,097 shares were
issued and outstanding. All of the outstanding shares of CMS Common Stock are
duly authorized, validly issued, fully paid and nonassessable. Except for
options granted, CMS Common Stock issuable pursuant to certain CMS Energy
compensation plans, and shares issuable upon conversion of certain affiliated
trust preferred securities and as contemplated hereby, there are no options,
warrants or other rights to acquire from CMS Energy or agreements or commitments
by CMS Energy to issue or sell shares of its capital stock, whether on
conversion of other securities or otherwise. None of the issued and outstanding
shares of CMS Common Stock has been issued in violation of, or is subject to,
any preemptive or subscription rights. There are no shareholder agreements,
voting trust agreements or any other similar contracts,
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agreements, arrangements, commitments, plans or understandings to which CMS
Energy is a party restricting or otherwise relating to voting, dividend,
ownership or transfer rights with respect to any shares of capital stock of CMS
Energy.
SECTION 4.5. OPERATIONS SINCE MARCH 31, 1998. Except as set
forth in the CMS Energy SEC Documents, since March 31, 1998, there has been: (i)
no material adverse change in the financial condition or results of operation of
CMS Energy and its consolidated subsidiaries taken as a whole; and (ii) no
damage, destruction, loss or claim with respect to, whether or not covered by
insurance, or condemnation or other taking of, assets having a material adverse
effect on the financial condition or results of operation of CMS Energy and its
consolidated subsidiaries taken as a whole.
SECTION 4.6. COMPLIANCE WITH LAWS. To the knowledge of CMS
Energy, it is in compliance with the provisions of all applicable laws and
regulations of the federal, state, local and foreign governments, except to the
extent that the failure to comply therewith would not have a Material Adverse
Effect on the financial condition or results of operation of CMS Energy and its
consolidated subsidiaries taken as a whole. Except as set forth in the CMS
Energy SEC Documents, to the knowledge of CMS Energy, there are no proposed
orders, judgments, decrees, governmental takings, condemnations or other
proceedings, in each case binding upon the business, operations or properties of
CMS Energy or any subsidiary thereof, which would have a Material Adverse Effect
on the financial condition or results of operation of CMS Energy and its
consolidated subsidiaries taken as a whole.
SECTION 4.7. SEC DOCUMENTS. CMS Energy has previously made
available to CNG and the Majority Stockholders complete and correct copies of
all reports (including annual reports on Form 10-K, current reports on Form 8-K,
quarterly reports on Form 10-Q and proxy statements) filed by it with the SEC
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")
since December 31, 1997 (the "CMS Energy SEC Documents"). None of the
information supplied by CMS Energy and to be included in the Registration
Statement, the Prospectus (as hereinafter defined)or the Proxy Statement, as
they may be amended or supplemented, or the documents filed under the Exchange
Act which are incorporated by reference therein, as of their respective
effective, issue, filing mailing or meeting dates, does or will, as the case may
be, 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 were made,
not misleading. The Registration Statement and Prospectus will comply as to form
in all material respects with
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the applicable provisions of the Securities Act and the rules and regulations
promulgated thereunder. All documents that CMS Energy is responsible for filing
with any regulatory or governmental agency in connection with the Merger will
comply in all material respects with the provisions of applicable law.
SECTION 4.8. NO FINDER. Except for discussions with CIBC
Xxxxxxxxxxx Corp., neither CMS Energy nor any party acting on its behalf has
paid or become obligated to pay any fee or any commission to any broker, finder
or intermediary for or on account of the transactions contemplated herein.
SECTION 4.9. SECTION 368 REPRESENTATIONS. (a) Prior to the
Merger, CMS Energy will be in control of Sub within the meaning of Section
368(c) of the Code.
(b) Following the transaction, CMS Energy has no plan or intention to
issue additional shares of the Surviving Corporation's stock that would result
in CMS Energy losing control of the Surviving Corporation within the meaning of
Section 368(c) of the Code.
(c) CMS Energy has no plan or intention to reacquire any of the CMS
Common Stock issued in the Merger.
(d) CMS Energy has no plan or intention to liquidate the Surviving
Corporation; to merge the Surviving Corporation with and into another
corporation; to sell or otherwise dispose of the stock of the Surviving
Corporation except that the stock will be contributed to CMS Enterprises Company
which will, in turn, contribute the stock to CMS Gas Transmission and Storage
Company; or to cause the Surviving Corporation to sell or otherwise dispose of
any of the assets of the Surviving Corporation acquired in the transaction,
except for dispositions made in the ordinary course of business or transfers
described in Section 368(a)(2)(C) of the Code.
(e) Following the Merger, the Surviving Corporation will continue the
historical business of CNG or use a significant portion of the Surviving
Corporation business assets in a business.
SECTION 4.10 INFORMATION SUPPLIED. Without limiting any of the
representations and warranties contained herein, no representation or warranty
of CMS Energy or the Sub and no statement by CMS Energy, or the Sub or other
information contained in the Disclosure Schedule, Exhibits, Schedules or any
document incorporated herein by reference as of the date of such representation,
warranty, statement or document, contains or contained any untrue statement of
material fact, or, at the date
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thereof, omits or omitted to state a material fact necessary in order to make
the statements contained therein, in light of the circumstances under which such
statements are or were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SUB
As an inducement to CNG and the Majority Stockholders to enter
into this Agreement and to consummate the transactions contemplated hereby, CMS
Energy and Sub hereby jointly and severally warrant and represent to CNG and the
Majority Stockholders as follows:
SECTION 5.1. ORGANIZATION AND STANDING. Sub is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Michigan. Sub was organized solely for the purpose of engaging in the
transactions contemplated by this Agreement and has not engaged in any business
since it was incorporated which is not in connection with this Agreement and has
no material assets or liabilities (other than the rights and obligations
referred to in this Agreement).
SECTION 5.2. CAPITAL STRUCTURE. The authorized capital stock
of Sub consists of 60,000 shares of common stock, no par value, of which 10
shares are validly issued and outstanding, fully paid and nonassessable and are
owned by CMS Energy free and clear of all liens, claims and encumbrances.
SECTION 5.3. AUTHORITY. Sub has full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the
performance by Sub of its obligations hereunder and the consummation of the
transactions contemplated hereby have been duly authorized by its Board of
Directors and by CMS Energy as its sole shareholder, and, except for the
corporate filings required by state law, no other corporate proceedings on the
part of Sub are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Sub and this Agreement is, and each other agreement or instrument
of Sub contemplated hereby when executed and delivered by Sub will be, the
legal, valid and binding agreement of Sub enforceable against Sub in accordance
with its respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights
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generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law).
ARTICLE VI
ACTIONS PRIOR TO THE EFFECTIVE DATE
CMS Energy, Sub, CNG and the Majority Stockholders covenant
and agree to take the following respective actions between the date hereof and
the Effective Date:
SECTION 6.1. ISSUANCE OF CMS COMMON SHARES. (a) CMS Energy
shall prepare and, subject to the timely contribution, review and consent of
CNG, will file as soon as reasonably practicable, the Registration Statement on
Form S-4 with the SEC containing the combined Proxy Statement for CNG and
prospectus (the "Prospectus") covering the issuance and sale of the CMS Common
Shares to be delivered hereunder. CMS Energy will use all reasonable efforts to
cause such Registration Statement and the related Proxy Statement to be
effective at least twenty (20) Business Days prior to the date on which the
meeting of the CNG stockholders is scheduled pursuant to Section 6.2. CMS Energy
will use its best efforts to respond to the comments of the SEC in connection
therewith and to furnish all information required to prepare such Registration
Statement for which it has drafting responsibility. CMS Energy shall also take
any reasonable action required to be taken under any applicable state "blue sky"
or securities laws in connection with the issuance of such shares. CMS Energy
shall advise CNG promptly when the Registration Statement has become effective
and of any supplements or amendments thereto, and shall furnish CNG with copies
of all such documents. Each of the parties will use all reasonable efforts to
mail the Proxy Statement mailed to the CNG stockholders as promptly as
practicable after such Registration Statement is deemed effective by the SEC.
(b) CMS Energy shall use all reasonable efforts to list the CMS Common
Shares to be issued hereunder on the NYSE.
SECTION 6.2. ACTION BY MAJORITY STOCKHOLDERS OF CNG. CNG,
acting through its Board of Directors, shall duly call, give notice of, convene
and hold a meeting of its stockholders for the purpose of approving the Merger
and adopting this Agreement. Unless required to do otherwise by the fiduciary
obligations of its Board of Directors under applicable law, CNG, acting through
its Board of Directors, will recommend to its stockholders that they vote for
the adoption of this Agreement. In lieu of such meeting,
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the stockholders of CNG may take the actions described in the preceding sentence
by unanimous written consent in accordance with the OGCA. Each of the Majority
Stockholders agrees to take all necessary action to cause this Agreement to be
adopted including voting their shares of CNG Common Stock in favor of the Merger
and adopting this Agreement.
SECTION 6.3. SUBSEQUENT FINANCIAL STATEMENTS. Prior to the
Effective Date, CNG shall deliver to CMS Energy, not later than forty-five (45)
days after the end of each monthly period beginning after June 30, 1998 and in
the form customarily prepared by CNG, the unaudited internal consolidated
financial statements of CNG, including an income statement, for the monthly
period then ended and for the period from the beginning of the fiscal year to
the end of such monthly period.
SECTION 6.4. INVESTIGATION OF CNG. (a) CNG shall afford to the
officers, employees and authorized representatives of CMS Energy (including,
without limitation, independent public accountants, attorneys, environmental
consultants and financial advisors, if any, of CMS Energy), reasonable access
during normal business hours to the offices, properties, employees, agents and
business, environmental and financial records (including, without limitation,
computer files, retrieval programs and similar documentation) of CNG to the
extent CMS Energy shall deem necessary or desirable, and shall furnish to CMS
Energy or its authorized representatives such additional information concerning
the operations, properties and businesses of CNG as may be reasonably requested
in writing, to enable CMS Energy or its authorized representatives to verify the
accuracy of the representations and warranties contained in this Agreement, to
verify the accuracy of the financial statements referred to in Section 3.5 and
to determine whether the conditions set forth in Article VIII have been
satisfied. CMS Energy agrees that such investigations shall be conducted in such
manner as not to interfere unreasonably with the operation of the business of
CNG.
(b) CMS Energy is hereby granted a license, without any obligation to
pay rent or other charges, to enter the Property to conduct a site inspection of
the Property and to conduct a Phase I environmental assessment and, at CMS's
election, soils and/or groundwater analysis (collectively the "Phase I");
provided, however: (i) all documents (including the Phase I report) generated as
a result of such activity shall be provided to CNG within five (5) calendar days
of receipt by CMS Energy and (ii) the Phase I shall (A) be addressed to CMS
Energy and CNG, (B) include a legend indicting that the report is a privileged,
compliance report (i.e., "COMPLIANCE REPORT: PRIVILEGED DOCUMENT") and (C)
within ten (10) days after completion of field work and laboratory testing, be
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prepared in written form and provided to CMS Energy and CNG. CMS Energy and CNG
specifically acknowledge and agree that CMS Energy shall not undertake any other
activity on the Property until such time as CMS Energy is authorized to do so in
writing by CNG, which authorization shall not be unreasonably withheld.
(c) Such license shall be for a period ending on the earlier of the
Effective Date or termination of this Agreement in accordance with Section 10.1.
(d) CMS Energy shall maintain in full force and effect a policy
providing commercial general liability insurance coverage in a minimum amount of
One Million Dollars ($1,000,000.00) combined single limit, which policy shall
insure against bodily injury, and property damage. Such policy shall name CNG or
the Subsidiaries, as applicable depending upon ownership of the subject
Property, as an additional insured and shall contain a cross-liability
endorsement. Such policy shall be non-cancellable with respect to CNG and the
Subsidiaries, as applicable, except upon thirty (30) days written notice. A
certificate of such insurance shall be delivered by CMS Energy to CNG and the
Subsidiaries as soon as reasonably practicable after the date of this Agreement.
(e) If, because of any actual or alleged act or omission of CMS
Energy's agents, employees or contractors any lien, affidavit, charge or order
for the payment of money shall be filed against CNG or the Subsidiaries, the
Property or any portion thereof or interest therein, whether or not such lien,
affidavit or charge or order is valid or enforceable, shall, at its own cost and
expense, cause the same to be discharged of record by payment, bonding or
otherwise as soon as reasonably practicable after notice to CMS Energy of the
filing thereof, but in all events prior to the foreclosure thereof.
(f) EXCEPT FOR THE FAULT OR NEGLIGENCE OF CNG, THE SUBSIDIARIES, ITS
AGENTS OR EMPLOYEES, FOR WHICH EITHER OR BOTH BE LEGALLY LIABLE, UPON CMS
ENERGY's ENTERING THE PROPERTY, CMS ENERGY AGREES TO INDEMNIFY AND HOLD CNG AND
THE SUBSIDIARIES, THEIR RESPECTIVE OFFICERS, AGENTS, REPRESENTATIVES AND
EMPLOYEES HARMLESS FROM ALL LOSSES, CLAIMS, SUITS, ACTIONS, DAMAGES AND
LIABILITY INCLUDING COSTS AND EXPENSES OF DEFENDING AGAINST ALL OF THE
AFORESAID) ARISING OR ALLEGED TO ARISE FROM ANY ACT OR OMISSION OF CMS ENERGY OR
CMS ENERGY'S AGENTS, EMPLOYEES, ASSIGNEES, LICENSEES, CONTRACTORS,
SUBCONTRACTORS, LABORERS OR INVITEES, OR ARISING FROM ANY INJURY OR DEATH OF ANY
PERSON OR PERSONS OR DAMAGE OR DESTRUCTION OF THE PROPERTY OF ANY PERSON OR
PERSONS OCCURRING OR ALLEGED TO HAVE OCCURRED INCIDENT TO CMS ENERGY'S PRESENCE
ON THE PROPERTY OR THE PERFORMANCE OF THE PHASE I, AND CMS ENERGY ASSUMES
RESPONSIBILITY FOR THE CONDITION OF THE PROPERTY. THIS PROVISION
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SHALL SURVIVE TERMINATION OF THIS CONTRACT OR THE CLOSING OF THIS TRANSACTION,
WHICHEVER IS APPLICABLE.
(g) Upon entering the Property, CMS Energy shall perform and complete
the Phase I at CMS Energy's sole cost and expense in a timely manner in
accordance with all applicable statutes, ordinances and other regulations
applicable thereto. Notwithstanding the foregoing: (i) CNG and the Subsidiaries
acknowledge that disclosure of certain materials relating to the Phase I will
need to be made to CMS Energy's attorneys and environmental consultants (for
convenience, collectively the "Representatives") in order to evaluate such
information and the feasibility of the Property for CMS Energy's proposed use,
and it shall be permissible for CMS Energy to disclose such information to its
Representatives so long as such disclosure is made on the condition that: (A)
such Representatives, prior to CMS Energy's disclosure of such information,
provide CNG with a signed agreement binding such Representatives to maintain the
confidentiality of such information, except as otherwise required by law, and
(B) such Representatives treat such information in a confidential manner; and
(ii) in the event CMS Energy in good faith reasonably believes that information
contained or revealed in the Phase I may require remedial action or reporting to
any governmental authority under applicable environmental laws, then prior to
CMS Energy's disclosure of same to any governmental authority, CMS Energy shall
promptly notify CNG of the existence of such information and CMS Energy's
responsibility(ies) for disseminating such information to the applicable
governmental authorities in accordance with applicable environmental laws.
(h) Within twenty-four (24) hours of the termination of the license
contemplated herein, CMS Energy shall return the Property to the safe, clean and
level condition the Property existed on the date of this Agreement.
SECTION 6.5. LAWSUITS, PROCEEDINGS, ETC. Each of CMS Energy
and CNG shall notify the other promptly of any lawsuit, proceeding, claim or
investigation that may be threatened, brought, asserted or commenced against any
party hereto involving in any way the transactions contemplated by this
Agreement or that would have been listed in Schedule 3.17 of the Disclosure
Schedule or the CMS Energy SEC Documents if such lawsuit, proceeding, claim or
investigation had arisen prior to the date hereof.
SECTION 6.6. CONDUCT OF BUSINESS BY CNG PENDING THE MERGER.
(a) During the period from the date of this Agreement through the Effective
Time, except as set forth in Schedule 6.6 of the Disclosure Schedule or any
other Schedules to this Agreement or
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as expressly contemplated by this Agreement, CNG will carry on its business in,
and will not enter into, any material transaction other than in, the ordinary
course of business consistent with past practice and, to the extent consistent
therewith, will use its reasonable efforts to preserve intact its current
business organization, to keep available the services of its current officers
and employees and to preserve its relationships with material customers,
material suppliers and others having material business dealings with it (except
with the written consent of CMS Energy and except as set forth in any Schedules
to this Agreement or the Disclosure Schedule or as contemplated by this
Agreement). Without limiting the generality of the foregoing, and except as set
forth in any Schedules to this Agreement or the Disclosure Schedule or as
expressly contemplated by this Agreement, CNG and its Subsidiaries shall not,
without the prior written consent of CMS Energy, which, as to matters relating
to clauses (vii), (viii) or (xii) of this Section 6.6(a), CMS Energy agrees not
to unreasonably withhold or delay:
(i) (A) declare, set aside or pay any dividends on, or make
any other actual, constructive or deemed distributions in respect of,
any of its capital stock, or otherwise make any payments to the
stockholders in their capacity as such, (B) split, combine or
reclassify any of its capital stock or issue, sell or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (C) purchase, redeem
or otherwise acquire any shares of capital stock of CNG or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock or other securities
(including, without limitation, any rights, warrants or options to
acquire any securities);
(iii) amend its articles of incorporation or by-laws;
(iv) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial portion of the assets of or equity
in, or in any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof;
(v) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease
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exchange, mortgage, pledge, transfer or otherwise dispose of, any of
its material assets or any material assets of any of its subsidiaries,
except for dispositions of inventories and of assets in the ordinary
course of business and consistent with past practice; a material asset
for this purpose is defined as 10 percent or more of the book value or
market value of CNG's total assets, or contributing 10 percent or more
of total annual CNG revenues or earnings, or resulting in a gain or
loss on disposition of 10 percent or more of annual CNG net income.
(vi) incur any indebtedness for borrowed money or guarantee
any such indebtedness material to the business or assets of CNG and its
Subsidiaries, taken as a whole, except in the ordinary course of
business consistent with past practice and except as contemplated
hereunder or issue or sell any debt securities or guarantee any debt
securities of others, or make any loans, advances or capital
contributions to, or investments in, any other person, except the
incurrence and/or guarantee of indebtedness to fund working capital;
(vii) with respect to its operations, make or incur any new
capital expenditure or capital expenditures for any single project or
related series of projects which are in excess of $100,000.
(viii) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than such payment, discharge or satisfaction in the
ordinary course of business consistent with past practice;
(ix) alter through merger, liquidation, reorganization,
restructuring or in any other fashion its corporate structure;
(x) enter into or adopt, or amend, any existing, bonus,
incentive, deferred compensation, insurance, medical, hospital,
disability or severance plan, agreement or arrangement or enter into or
amend any Plan or material employment, consulting or management
agreement, other than any such amendment to a Plan that is made to
maintain the qualified status of such Plan or its continued compliance
with applicable law and except as contemplated hereunder;
(xi) make any change in accounting practices or policies
applied in the preparation of the financial
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statements referred to in Section 3.5 except as required by GAAP;
(xii) except in the ordinary course of business consistent
with past practice, knowingly make any material modifications to any
material agreements, understandings, obligations, commitments,
indebtedness or other material obligations or enter into any agreement,
understanding, obligation or commitment, or incur any indebtedness or
obligation, of the type that would have been required to be listed on
Schedule 3.30 of the Disclosure Schedule or that would otherwise would
have been included in the CNG Agreements if in existence on the date
hereof; provided that no such modifications, agreements or incurrences
of indebtedness shall in any event cause the representations and
warranties contained in Section 3.6(a) hereof to be untrue or incorrect
in any material respect;
(xiii) pay or commit to pay any bonus to or increase the
salary of any director, officer or employee of CNG other than payment
to employees of bonuses or the increase of salary of employees made in
the ordinary course of business; or
(xiv) enter into any other transaction materially affecting
the business of CNG, other than in the ordinary course of business
consistent with past practice or as expressly contemplated by this
Agreement.
(b) CNG shall promptly advise CMS Energy orally and in writing of any
change or event having a Material Adverse Effect on CNG and its Subsidiaries
taken as a whole.
SECTION 6.7. MUTUAL COOPERATION; REASONABLE BEST EFFORTS. The
respective parties hereto shall cooperate with each other, and shall use their
respective reasonable best efforts, to cause the fulfillment, to the extent
within their reasonable control, of the conditions to each party's obligations
hereunder which are within such reasonable control and to obtain as promptly as
possible, to the extent within their reasonable control, all consents,
authorizations, orders or approvals from each and every third party, whether
private or governmental, required in connection with the transactions
contemplated by this Agreement; provided, however, that the foregoing shall not
require CMS Energy or CNG to make any divestiture or consent to any divestiture
in order to obtain any waiver, consent or approval.
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SECTION 6.8. PUBLIC ANNOUNCEMENT. Other than required filings
with the SEC, CNG and CMS Energy shall consult with each other before issuing
any press release or otherwise making any public statements with respect to the
Merger and shall not issue any such press release or make any such public
statement prior to such consultation; provided, that nothing herein shall be
deemed to interfere with the filing by (i) CMS Energy of a Form 8-K or the
Registration Statement or (ii) CNG of a Form 8-K or the Proxy Statement. The
press release announcing the execution and delivery of this Agreement shall be a
joint press release of CNG and CMS Energy.
SECTION 6.9. NO SOLICITATION. (a) CNG shall not, nor shall it
authorize or permit any officer, director or employee of it or its Subsidiaries
or affiliates or any investment banker, attorney or other adviser or
representative of CNG or any of its Subsidiaries or affiliates to, (i) solicit,
initiate, or encourage the submission of, any Acquisition Proposal (as
hereinafter defined), (ii) enter into any agreement with respect to any
Acquisition Proposal or (iii) except to the extent required by law as advised by
independent legal counsel in writing, participate in any discussions or
negotiations regarding, or furnish to any person any information for the purpose
of facilitating the making of, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal. CNG shall advise CMS Energy
immediately of any Acquisition Proposal and any inquiries with respect to any
Acquisition Proposal. For purposes of this Agreement, "Acquisition Proposal"
means any proposal for a merger or other business combination involving CNG or
any of its Subsidiaries or affiliates or any proposal or offer to acquire in any
manner, directly or indirectly, an equity interest in CNG or any of its
Subsidiaries or affiliates, any of the voting securities of CNG or any of its
Subsidiaries or affiliates or substantially all of the assets of CNG and its
Subsidiaries taken as a whole.
(b) Notwithstanding the foregoing, the Board of Directors of CNG may,
if it has received a bona fide offer, and if it concludes in good faith (after
consultation with its independent legal and financial advisors) that it is
required to do so in order to comply with its fiduciary duties to CNG's
shareholders under applicable law, (i) withdraw or modify its approval or
recommendation of this transaction or this Agreement or (ii) approve or
recommend such other bona fide offer or, subject to compliance with the
requirements of Sections 10.1 and 10.3, terminate this Agreement (and
concurrently with or after such termination, if it so chooses cause CNG to enter
into any agreement with respect to any other bona fide offer) but only at a time
that is after the fifth Business Day following CMS Energy's receipt of written
notice from
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CNG advising CMS Energy that the Board of Directors of CNG has received a bona
fide offer, specifying the material terms and conditions of such bona fide offer
and identifying the persons making such bona fide offer.
(c) Nothing contained in this Section 6.9 shall prohibit CNG from
taking and disclosing to its shareholders a position contemplated by Rule
14e2(a) promulgated under the Exchange Act or from making any disclosure to
CNG's shareholders if, in the good faith judgment of the Board of Directors of
CNG (after consultation with its independent legal and financial advisors), it
determines that it is legally required to do so in order to comply with its
fiduciary duties to CNG's shareholders under applicable law.
SECTION 6.10. ANTITRUST LAW COMPLIANCE. CMS Energy and CNG
shall file and CNG shall cause to be filed with the Federal Trade Commission and
the United States Department of Justice the notification and other information
required to be filed with respect to the transactions contemplated hereby under
the HSR Act and the rules and regulations promulgated thereunder. CMS Energy
warrants that all such filings by it shall be, and CNG warrants that all such
filings by it shall be, accurate as of the date filed and in accordance with the
requirements of the HSR Act and all such rules and regulations. CMS Energy and
CNG agree to make available, or cause to be made available, to the other parties
such information as may reasonably be requested relative to the businesses,
assets and property of CMS Energy and CNG, as the case may be, as may be
required to file any additional information requested by such agencies under the
HSR Act and such rules and regulations. CMS Energy agrees to pay all filing fees
related to the HSR Act compliance.
SECTION 6.11. CMS SEC INFORMATION. Promptly following their
availability, CMS Energy will provide CNG with copies of all filings it makes
with the SEC or the NYSE, including but not limited to Form 10-Q's and Form
10-K's.
SECTION 6.12. DIRECTOR INDEMNIFICATION. The Surviving
Corporation shall indemnify the present and former officers, directors,
employees and agents of CNG and the Subsidiaries with respect to any matter
including the transactions contemplated hereby, occurring at or prior to the
Effective Time to the full extent permitted by CNG's Articles of Incorporation
or Bylaws or the organizational documents of the Subsidiaries, in each case as
in effect as of the date of this Agreement, for a period of six years commencing
at the Effective Time. This Section 6.12 shall survive the closing of the
transactions contemplated hereby, is intended to benefit CNG and each of the
indemnified parties (each of whom shall be entitled to enforce this Section 6.12
against CNG
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and CMS Energy, as the case may be) and shall be binding on all successors and
assigns of CMS Energy and CNG. In the event CMS Energy or any of its successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case, proper provisions shall be made so
that the successors and assigns of CMS Energy shall assume the obligations set
forth in this Section 6.12. CMS agrees to provide coverage under CMS director's
and officer's liability policy for the period referenced herein.
SECTION 6.13. NOTICE OF DEFAULT. Each party will promptly give
notice to the other party of the occurrence of any event or the failure of any
event to occur that results in a breach of any representation or warranty by
that party contained herein or a failure by that party to comply with any
covenant, condition or agreement contained herein.
SECTION 6.14. DISSENTING SHAREHOLDERS' APPRAISAL RIGHTS. CMS
Energy and CNG, as applicable, will comply with all applicable notification and
other provisions of regulations or statutes relating to Dissenting Shares.
SECTION 6.15. CNG OPTIONS. CNG and CMS shall use their
reasonable efforts to permit CMS or Surviving Corporation to exchange shares of
CMS Common Stock for Options, consistent with the provisions of the Merger
Agreement (whether or not vested or exercisable), in satisfaction of such Option
holders' rights under that certain CNG 1997 Stock Plan; including, but not
limited to, CNG seeking the consent of all Option holders under the 1997 Plan to
the receipt of CMS Common Stock, consistent with the provisions of the Merger
Agreement, in lieu of cash as provided for in the 1997 Plan.
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 7.1. TAX-FREE NATURE; TAX CONSEQUENCES.
(a) CNG and CMS Energy intend the Merger to constitute a reorganization
described in Section 368(a) of the Code and shall use their best efforts to
cooperate in achieving such a tax-free reorganization. Each party is not
relying, and will not rely, on any representations or assurances of any other
party regarding such consequences other than the representations and covenants
set forth
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in writing in this Agreement or any other agreement or certificate delivered in
connection herewith. In the event that the Merger does not qualify as such a
tax-free reorganization, the validity of the Merger and the transactions
contemplated thereby shall nevertheless be binding and final upon the parties to
this Agreement. Neither CNG nor CMS Energy will take any tax reporting positions
or make any tax elections inconsistent with the characterization of the Merger
as a reorganization described in Section 368(a) of the Code except as may be
required upon examination (or the result of a prior determination) by the
Internal Revenue Service or any other Tax authority.
SECTION 7.2. TAXES.
(a) Tax Returns. CNG shall file when due (after taking into account all
extensions properly obtained) all Tax Returns that are required to be filed by
or with respect to CNG and its Subsidiaries on or before the Effective Date and
shall remit or cause to be remitted any Taxes shown to be due on such Tax
Returns, and the Surviving Corporation shall file when due (after taking into
account all extensions properly obtained) all Tax Returns that are required to
be filed by CNG and its Subsidiaries after the Effective Date and shall remit or
cause to be remitted any Taxes due in respect of such Tax Returns. All Tax
Returns which CNG is required to file in accordance with this paragraph (a)
shall be prepared and filed in a manner consistent with past practice and, on
such Tax Returns, no position shall be taken or method adopted that is
inconsistent with positions taken or methods used in preparing and filing
similar Tax Returns in prior periods except for changes required by law or
changes in facts.
(b) Assistance and Cooperation. After the Effective Date, each of the
Majority Stockholders shall:
(i) assist (and cause their respective affiliates to assist)
the other parties in preparing any Tax Returns which such other parties
are responsible for preparing and filing in accordance with paragraph
(b) of this Section 7.2;
(ii) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns of CNG and
its Subsidiaries;
(iii) make available to the other parties and to any taxing
authority as reasonably requested all information, records, and
documents relating to Taxes of CNG and its Subsidiaries;
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(iv) provide timely notice to the other parties in writing of
any pending or threatened Tax audits or assessments of CNG and its
Subsidiaries for taxable periods for which the other may have a
liability under this Section 7.2; and
(v) furnish the other with copies of all correspondence
received from any taxing authority in connection with any Tax audit or
information request with respect to any such taxable period.
(c) Survival of Obligations. Notwithstanding Article X, the obligations
of the Majority Stockholders set forth in this Section 7.2 shall be
unconditional and absolute and shall remain in effect until thirty (30) days
after the expiration of the applicable statute of limitations.
(d) Section 338 Elections. CMS Energy and Sub jointly and severally
represent and warrant that their acquisition of the CNG Common Stock will not
result in Taxes to the shareholders or their affiliates pursuant to or as a
result of Section 338 of the Code or provisions under other tax Laws which are
comparable to Section 338 of the Code and that no election (express or
otherwise) will be made or suffered by CMS Energy or Sub or their affiliates
which will result in any such Taxes.
(e) Tax Records. On the Effective Date, Surviving Corporation shall
retain possession of Tax records currently in CNG's possession; provided,
however, that the Majority Shareholders and their affiliates may retain copies
of such records as are necessary or required by the Majority Shareholders or
their affiliates in connection with (a) the filing of tax returns, (b) ongoing
businesses or responsibilities or (c) other legal purposes. The Majority
Shareholders, CMS Energy, Surviving Corporation and their affiliates shall make
available to each other for inspection and copying during normal business hours,
and provide to any taxing authority as reasonably requested, all Tax records in
their possession relating to CNG or the business (unless the same is subject to
legal or confidentiality restrictions). The Majority Shareholders, CMS Energy,
Surviving Corporation and their affiliates shall preserve and keep all such Tax
records in their possession until the expiration of any applicable statutes or
limitation or extensions thereof and as otherwise required by law, but in any
event for a period not less than ten years after the Effective Date. Before any
such Tax records are disposed of by the Majority Shareholders, CMS Energy,
Surviving Corporation or their affiliates (through a future sale of Surviving
Corporation, the business or otherwise), notice to that effect shall be given
the
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other parties who shall have the opportunity to at their own cost and expense to
copy within thirty (30) days after the date of such notice, all or any part of
such tax Records. For the purpose of this Section 7.2, tax Records shall include
journal vouchers, cash vouchers, general ledgers, and authorizations for
expenditures.
SECTION 7.3. [INTENTIONALLY OMITTED]
SECTION 7.4. [INTENTIONALLY OMITTED]
SECTION 7.5. POWER MARKETING CERTIFICATE. CNG shall file a
Notice of Termination and Notice of Cessation of Services with the Federal
Energy Regulatory Commission ("FERC") with regard to a power marketing
certificate currently issued to one of the Subsidiaries ("Power Marketing
Certificate").
SECTION 7.6. POOLING OF INTERESTS. Neither CNG or any of its
Subsidiaries shall intentionally take, cause to be taken or intentionally fail
to take any action, other than as may be required by a governmental agency,
after the date of this Agreement that would disqualify the Merger as a pooling
of interests for accounting purposes or would prevent CMS from receiving an
opinion from Xxxxxx Xxxxxxxx L.L.P. pursuant to Section 8.2(k) of this Agreement
to the effect that the Merger will be treated for accounting purposes as a
pooling of interests.
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ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING
SECTION 8.1. CONDITIONS TO THE PARTIES' OBLIGATIONS. The
obligations of all the parties to effect the Merger shall be subject to the
fulfillment of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been
validly approved by the holders of a majority of the outstanding CNG Common
Stock entitled to vote.
(b) Consents Obtained. All permits, approvals (including Notice of
Termination and Cessation by FERC with regard to the Power Marketing
Certificate) and consents required to be obtained, and all waiting periods
required to expire, prior to the consummation of the Merger under applicable
federal laws of the United States or applicable laws of any state having
jurisdiction over the transactions contemplated by the Merger shall have been
obtained or expired, as the case may be (all such permits, approvals and
consents and the lapse of all such waiting periods being referred to as the
"Requisite Regulatory Approvals"), without the imposition of any condition
which in the reasonable judgment of the party on which it is imposed is
materially burdensome to such party.
(c) Governmental Action. There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any governmental entity which: (i) makes the
consummation of the Merger illegal; (ii) requires the divestiture by CMS Energy
or CNG of any material Subsidiary or of a material portion of the business of
CMS Energy or CNG; or (iii) imposes any condition upon CMS Energy, CNG or their
Subsidiaries which in the judgment of the party on which it is imposed would be
materially burdensome.
(d) Registration Statement. The Registration Statement covering the CMS
Common Stock to be issued in the Merger shall become effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall
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have been issued and shall remain in effect. No legal, administrative,
arbitration, investigatory or other proceeding by any governmental entity shall
have been instituted and, at what would otherwise have been the Effective Time,
remain pending by or before any governmental entity to restrain or prohibit the
transactions contemplated hereby.
(e) CMS Energy Shares. The shares of CMS Common Stock deliverable
pursuant to this Agreement shall have been duly authorized for listing, subject
to notice of issuance, on the New York Stock Exchange.
(f) Section 368 Reorganization. CMS Energy and CNG shall have received
an opinion from counsel to CMS Energy dated the Effective Time, subject to
assumptions and exceptions customarily included, and in form and substance
reasonably satisfactory to CMS Energy and CNG to the effect that the Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the IRC and that CMS Energy and CNG will each be a
party to that reorganization within the meaning of Section 368(b) of the IRC.
(g) Legal Opinions. CMS Energy and CNG shall receive opinions of their
respective counsel addressed to the parties and dated the date the Registration
Statement becomes effective relating to the Registration Statement and the Proxy
Statement and any amendments and supplements thereto (except for the financial
statements and notes thereto and other financial statistical and accounting data
included in, incorporated by reference in or which should have been included in
or incorporated by reference in the Registration Statement or the Proxy
Statement as to which they need express no opinion) in substantially the forms
agreed to by the parties.
SECTION 8.2. CONDITIONS TO CMS ENERGY'S OBLIGATIONS. The
obligations of CMS Energy to effect the Merger shall be subject to the
fulfillment (or waiver by CMS Energy) of the following conditions:
(a) Representations and Warranties True. Except as otherwise provided
in this Section 8.2, (i) the representations and warranties of CNG and the
Majority Stockholders contained in Article III shall be true and correct as of
the Effective Date as though made at the Effective Date, except to the extent
they expressly refer to an earlier time and except where the failure to be true,
individually or in the aggregate, would not have or would not be reasonably
likely to have, a Material Adverse Effect on CNG
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and its Subsidiaries taken as a whole or upon the consummation of the
transactions contemplated hereby; (ii) CNG and the Majority Stockholders shall
have duly performed and complied with all agreements and covenants required by
this Agreement to be performed or complied with by them prior to or at the
Effective Date, except where the failure to so perform and comply, individually
or in the aggregate, would not have or would not be reasonably likely to have, a
Material Adverse Effect on CNG and its Subsidiaries taken as a whole, or upon
the consummation of the transactions contemplated hereby; (iii) none of the
events or conditions entitling CMS Energy to terminate this Agreement under
Article X shall have occurred and be continuing; and (d) CNG shall have
delivered to CMS Energy a certificate dated the Effective Date and signed by its
Chief Executive Officer to the effect set forth in subsections 8.2(a)(i) and
(ii) and (b).
(b) Required Consents. Any consent required for the consummation of the
Merger under any agreement, contract or license to which CNG is a party or by or
under which it is bound or licensed, the withholding of which might have a
Material Adverse Effect on CNG and its Subsidiaries taken as a whole or upon the
transactions contemplated by this Agreement, shall have been obtained.
(c) Schedules. CMS Energy shall have received the schedules to the
Disclosure Schedule and such schedules shall not reflect any item that was not
on such schedules delivered on the date of execution of this Agreement that
would have or would be reasonably likely to have, a Material Adverse Effect on
CNG and its Subsidiaries taken as a whole or upon the consummation of the
transactions contemplated hereby.
(d) No Material Adverse Effect. Between the date of this Agreement and
the Effective Time, no event or circumstances shall have occurred which had a
Material Adverse Effect on CNG and its Subsidiaries taken as a whole, and CMS
Energy shall have received a certificate signed on behalf of CNG by the Chief
Executive Officer of CNG to such effect.
(e) CNG Outstanding Common Stock. CMS Energy shall have received from
CNG's transfer agent, letters dated the Effective Time, after customary review
but without audit in form and substance satisfactory to CMS Energy, setting
forth, as of the Business Day immediately prior to the Closing Date, the total
number of shares of CNG Common Stock outstanding;
(f) CNG's Legal Opinion. CMS Energy shall have received from counsel to
CNG an opinion as to securities and corporate matters in form and substance
customary for transactions of this nature and reasonably satisfactory to CMS
Energy.
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(g) Approval of Counsel. Counsel for CMS Energy shall have approved, in
the exercise of counsel's reasonable discretion, the validity of all
transactions herein contemplated, as well as the form and substance of all
opinions, certificates, instruments of transfer and other documents to be
delivered to CMS Energy hereunder or that are reasonably requested by such
counsel.
(h) Blue Sky. The sale of the CMS Energy Common Stock resulting from
the Merger shall have been qualified or registered with the appropriate State
securities law or "blue sky" regulatory authorities of all States in which
qualification or registration is required under the State securities laws, and
such qualifications or registrations shall not have been suspended or revoked.
(i) Affiliate Agreement. CNG shall have delivered to CMS Energy not
later than ten (10) days after the date of this Agreement the executed
agreements from CNG's Affiliates pursuant to Rule 145 in the form attached
hereto as Exhibit B.
(j) No Material Restrictions. None of CNG or any of its Subsidiaries
shall be subject to any order or other agreement with any governmental entity
restricting the conduct of CNG's and its Subsidiaries' business, prospects and
operations, so as to have a Material Adverse Effect thereon.
(k) Pooling Opinion. CMS Energy shall have received from Xxxxxx
Xxxxxxxx L.L.P., an opinion, dated the date of the Effective Time, in form and
substance satisfactory to CMS Energy, to the effect that the Merger on the terms
and conditions contained in this Agreement will be treated for accounting
purposes as a pooling of interests; provided, that in the event the pooling
opinion referenced herein cannot be issued due to certain actions taken by CMS
Energy and through no fault of CNG, then such opinion shall not be a condition
to CMS Energy's obligations to effect the Merger as contemplated herein; further
provided that in the event CNG and CMS are unable to cause an amendment to the
CNG 1997 Stock Plan pursuant to Section 6.13 hereof or, notwithstanding such
amendment, the pooling opinion cannot be obtained as a consequence of the terms
of or existence of the 1997 Stock Plan, then such opinion shall not be a
condition to CMS Energy's obligations to effect the Merger contemplated herein.
(l) Letters of Termination. CMS Energy shall have received from Xxxxx
X. Xxxxxxxx, Xxxxx X. Xxxxx and Xxxxx X. Xxxxxxx letters satisfactory in form
and substance to CMS Energy, terminating any and all rights granted pursuant to
the terms and conditions of that certain 1996 CNG Incentive Stock Option Plan
and the Grant of Incentive Stock Options dated February 28, 1996.
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(m) Resignation of Directors. CMS Energy shall have received the
resignation of each of the directors of CNG and the directors of each of its
Subsidiaries.
SECTION 8.3. CONDITIONS TO CNG'S OBLIGATIONS. The obligation
of CNG to effect the Merger shall be subject to the fulfillment of the following
conditions:
(a) Representations and Warranties True. Except as otherwise provided
in this Section 8.3, (i) the representations and warranties of CMS Energy and
the Sub contained in Articles IV and V shall each be true in all material
respects as of the Effective Time as though made at the Effective Time, except
to the extent they expressly refer to an earlier time and except where the
failure to be true, individually or in the aggregate, would not have or would
not be reasonably likely to have, a Material Adverse Effect on CMS Energy or
upon the consummation of the transactions contemplated hereby; (ii) CMS Energy
and Sub shall have each duly performed and complied in all materials respects
with all agreements and covenants required by this Agreement to be performed or
complied with by it prior to or at the Effective Time, except where the failure
to so perform and comply, individually or in the aggregate, would not have or
would not be reasonably likely to have, a Material Adverse Effect on CMS Energy
or upon the consummation of the transactions contemplated hereby; (iii) none of
the events or conditions entitling CNG to terminate this Agreement under Article
X shall have occurred and be continuing; and (d) CMS Energy shall have delivered
to CNG a certificate dated the date of the Effective Time and signed by a duly
authorized officer to the effect set forth in subsections 8.3(i)and (ii) and(b).
(b) Required Consents. Any consent required for the consummation of the
Merger under any agreement, contract or license to which CMS Energy is a party
or by or under which it is bound or licensed, the withholding of which might
have a Material Adverse Effect on CNG or CMS Energy and its Subsidiaries taken
as a whole or the transactions contemplated by this Agreement shall have been
obtained.
(c) Approval of Counsel. Counsel for CNG shall have approved, in the
exercise of counsel's reasonable discretion, the validity of all transactions
herein contemplated, as well as the form and substance of all opinions,
certificates, instruments of transfer and other documents to be delivered to CNG
hereunder or reasonably requested by such counsel.
(d) Fairness Opinion. Prior to the mailing of the Prospectus/Proxy
Statement to the shareholders of CNG and at
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Closing, CNG shall have received an opinion of CIBC Xxxxxxxxxxx Corp. dated the
date of the Prospectus/Proxy Statement, to the effect that, as of such date, the
Merger Consideration is fair to CNG's shareholders from a financial point of
view.
(e) No Material Adverse Effect. There shall not have been any change in
the consolidated financial condition, aggregate net assets, shareholders'
equity, business, or operating results of CMS Energy and its Subsidiaries taken
as a whole, from March 31, 1998 to the Effective Time that results in a Material
Adverse Effect as to CMS Energy and its Subsidiaries taken as a whole. CNG shall
have received a certificate signed on behalf of CMS Energy by the President or
Chief Executive Officer of CMS Energy to such effect.
(f) CMS Energy's Legal Opinion. CNG shall have received from the
general counsel or assistant general counsel to CMS Energy an opinion as to
securities and corporate matters in form and substance customary for
transactions of this nature and reasonably satisfactory to CNG.
(g) Blue Sky. The sale of the CNG Common Stock resulting from the
Merger shall have been qualified or registered with the appropriate State
securities law or "blue sky" regulatory authorities of all States in which
qualification or registration is required under the State securities laws, and
such qualifications or registrations shall not have been suspended or revoked.
ARTICLE IX
INDEMNIFICATION; SURVIVAL
SECTION 9.1. INDEMNIFICATION BY THE MAJORITY STOCKHOLDERS.
From and after the Effective Time, each of the Majority Stockholders shall
jointly and severally indemnify and hold harmless CMS Energy, the Surviving
Corporation and their subsidiaries, affiliates and successors from and against
any and all (a) liabilities, losses, costs or damages ("Loss") and (b)
reasonable attorneys', consultants' and accountants' fees and expenses, court
costs and all other reasonable out-of-pocket expenses ("Expense") incurred by
CMS Energy, the Surviving Corporation and their subsidiaries, affiliates and
successors in connection with or arising from any breach of any warranty or the
inaccuracy of any representation of CNG or any Majority Stockholder contained in
Sections 3.1, 3.2, 3.3, 3.4(a), 3.4(b) and 3.8, as updated in accordance with
Section 9.7 hereof, or in any certificate delivered by or on behalf of CNG or
any Majority Stockholder pursuant thereto; provided, however, that the Majority
Stockholders shall be required to indemnify and hold harmless CMS
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Energy and the Surviving Corporation under this Section 9.1 with respect to the
breach or inaccuracy of any representations or warranties as hereinabove
provided only to the extent that the aggregate amount of Loss and Expense
referred to above in this Section 9.1 relating thereto exceeds $100,000; and
provided further, that the obligation of the Majority Stockholders to indemnify
and hold harmless CMS Energy and the Surviving Corporation pursuant to this
Section 9.1 shall be limited to the aggregate payment by such Majority
Stockholders of an amount equal to $3,100,000, which indemnification obligation
shall be satisfied by a return of the number of CMS Common Shares necessary to
meet any such obligation and as further deposited in escrow pursuant to an
agreement in a form mutually acceptable to the parties; which return and deposit
into escrow shall occur within 10 day of issuance of certificates for the CMS
Common Shares.
SECTION 9.2. [INTENTIONALLY OMITTED]
SECTION 9.3. NOTICE OF CLAIMS. If CMS Energy (with respect to
Section 9.1) believes that any of the persons entitled to indemnification under
this Article IX has suffered or incurred any Loss or incurred any Expense, CMS
Energy, shall so notify the Majority Stockholder promptly in writing (a "Claim
Notice")describing such Loss or Expense, the amount thereof, if known, and the
method of computation of such Loss or Expense, all with reasonable particularity
and containing a reference to the provisions of this Agreement or any
certificate delivered pursuant hereto in respect of which such Loss or Expense
shall have occurred; provided, however, CMS Energy must deliver its Claims
Notice within the survival period set forth in Section 9.6. In the event CMS
Energy fail to deliver a Claim Notice during the survival period set forth in
Section 9.6, CMS Energy shall not thereafter be able to claim indemnification
with respect to any matter which has not been made the subject of a Claim Notice
during the survival period.
SECTION 9.4. THIRD PARTY CLAIMS. Subject to the limitations on
indemnification set forth in Section 9.1 and 9.6 in the event of any claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceeding by a third party, the indemnified persons shall give such
notice thereof to the indemnifying party not later than twenty (20) days prior
to the time any response to the asserted claim is required, if possible, and in
any event within fifteen (15) days following the date such indemnified person
has actual knowledge thereof; provided, however, that the omission by such
indemnified party to give notice as provided herein shall relieve the
indemnifying party of its indemnification obligation under this Article IX only
if such omission
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results in a failure of actual notice to the indemnifying party and then only to
the extent that such indemnifying party is materially damaged as a result of
such failure to give notice. In the event of any such claim for indemnification
resulting from or in connection with a claim or legal proceeding by a third
party, the indemnifying party may, at its sole cost and expense, assume the
defense thereof; provided, however, that counsel for the indemnifying party, who
shall conduct the defense of such claim or legal proceeding, shall be reasonably
satisfactory to the indemnified party; and provided, further, that if the
defendants in any such actions include both the indemnified persons and the
indemnifying party and the indemnified persons shall have reasonably concluded
that there may be legal defenses or rights available to them which have not been
waived and are in actual or potential conflict with those available to the
indemnifying party, the indemnified persons shall have the right to select one
law firm reasonably acceptable to the indemnifying party to act as separate
counsel, on behalf of such indemnified persons, at the expense of the
indemnifying party. Subject to the second proviso of the immediately preceding
sentence, if an indemnifying party assumes the defense of any such claim or
legal proceeding, such indemnifying party shall not consent to entry of any
judgment, or enter into any settlement, that (a) is not subject to full
indemnification hereunder, (b) provides for injunctive or other non-monetary
relief affecting the indemnified persons or (c) does not include as an
unconditional term thereof the giving by each claimant or plaintiff to such
indemnified persons of a release from all liability with respect to such claim
or legal proceeding, without the prior written consent of the indemnified
persons (which consent, in the case of clauses (b) and (c), shall not be
unreasonably withheld); provided, however, that subject to the second proviso of
the immediately preceding sentence, the indemnified persons may, at their own
expense, participate in any such proceeding with the counsel of their choice
without any right of control thereof. So long as the indemnifying party is in
good faith defending such claim or proceeding, the indemnified persons shall not
compromise or settle such claim or proceeding without the prior written consent
of the indemnifying party, which consent shall not be unreasonably withheld. If
the indemnifying party does not assume the defense of any such claim or
litigation in accordance with the terms hereof, the indemnified persons may
defend against such claim or litigation in such manner as they may deem
appropriate, including, without limitation, settling such claim or litigation
(after giving prior written notice of the same to the indemnifying party and
obtaining the prior written consent of the indemnifying party, which consent
shall not be unreasonably withheld) on such terms as the indemnified persons may
deem appropriate, and the indemnifying party will promptly indemnify the
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indemnified persons in accordance with the provisions of this Section 9.4.
SECTION 9.5. [INTENTIONALLY OMITTED]
SECTION 9.6. SURVIVAL OF OBLIGATIONS. All representations,
warranties, covenants and obligations contained in this Agreement shall survive
the consummation of the transactions contemplated by this Agreement; provided,
however, that each and every representation and warranty contained in this
Agreement, except for those representation and warranties contained in Sections
3.1, 3.2, 3.3, 3.4(a), 3.4(b), 3.8., 4.1, 4.2, 4.3 and 4.4 which shall each
survive for the lessor of (i) one year or (ii) the time allowed to satisfy the
requirements for pooling-of-interests accounting, shall expire with, and be
terminated and extinguished by, the Effective Date and thereafter neither CNG,
the Majority Shareholder, CMS Energy or the Sub or their respective directors,
officers, employees, agents and representatives shall be under any liability
whatsoever with respect to any such representation or warranty contained in this
Agreement. This Article IX shall have no effect upon any other obligation of the
parties hereto, whether performed before or after the Effective Time; further
provided, that the indemnity obligation of Majority Shareholders under this
article IX shall be CMS' sole and exclusive remedy for breach of the
representations and warranties set forth in Sections 3.1, 3.2, 3.3, 3.4(a),
3.4(b) and 3.8 of this Agreement.
SECTION 9.7. UPDATE OF THE REPRESENTATIONS AND WARRANTIES. (a)
Not later than five (5) days prior to the Effective Date, CNG and/or any
Majority Stockholder may deliver a written notice to CMS Energy setting forth
any and all facts, conditions, occurrences, changes and other matters, in each
case, occurring after the date hereof, that has caused or may cause the
representations and warranties of CNG and/or the Majority Stockholders
contained herein (including the Schedules to the Disclosure Schedule hereto)
not to be true and correct in all respects (in the case of any representation
or warranty containing any materiality qualification) or in all material
respects (in the case of any representation or warranty without any materiality
qualification). In the event that any of such facts, conditions, occurrences,
changes and other matters shall have caused or will cause, on or prior to the
Effective Date, any such representation or warranty not to be true and correct
in all respects (in the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) on the
Effective Date with the same effect as though made on the Effective Date, CMS
Energy may elect to terminate this Agreement pursuant to Section 10.1(b) based
on such facts, conditions,
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occurrences, changes or other matters. If CMS Energy shall nevertheless proceed
to consummate the Merger, such facts, conditions, occurrences, changes and other
matters so disclosed as to each such representation or warranty of the Majority
Stockholders contained herein (including the Schedules) shall be deemed to
constitute an exception to such representation or warranty reflecting the facts,
conditions, occurrences, changes and other matters so disclosed with the same
effect as if such exception had been made in such representation or warranty as
of the date hereof in this Agreement to the extent, but only to the extent, of
such disclosure.
(b) Not later than five (5) days prior to the Effective Date, CMS
Energy may deliver a written notice to CNG, the Majority Stockholders setting
forth any and all facts, conditions, occurrences, changes and other matters, in
each case, occurring after the date hereof, that has caused or may cause the
representations and warranties of CMS Energy contained herein (including the
Schedules to the Disclosure Schedules hereto) not to be true and correct in all
respects (in the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification). In the event
that any of such facts, conditions, occurrences, changes and other matters shall
have caused or will cause, on or prior to the Effective Date, any such
representation or warranty not to be true and correct in all respects (in the
case of any representation or warranty containing any materiality qualification)
or in all material respects (in the case of any representation or warranty
without any materiality qualification) on the Effective Date with the same
effect as though made on the Effective Date, CNG may elect to terminate this
Agreement pursuant to Section 10.1(c) based on such facts, conditions,
occurrences, changes or other matters. If CNG shall nevertheless proceed to
consummate the Merger, such facts, conditions, occurrences, changes or other
matters so disclosed as to each such representation or warranty of CMS Energy
contained herein (including the Schedules) shall be deemed to constitute an
exception to such representation or warranty reflecting the facts, conditions,
occurrences, changes and other matters so disclosed with the same effect as if
such exception had been made in such representation or warranty as of the date
hereof in this Agreement to the extent, but only to the extent, of such
disclosure.
ARTICLE X
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TERMINATION
SECTION 10.1. TERMINATION. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement may be terminated at
any time prior to the Effective Time:
(a) by the mutual consent of CMS Energy and CNG;
(b) by CMS Energy upon any material breach by CNG or any Majority
Stockholder of any of the covenants contained in Article VI or VII or Section
11.1;
(c) by CNG upon any material breach by CMS Energy or Sub of any of the
covenants contained in Article VI or VII or Section 11.1;
(d) by CMS Energy if any of the conditions to CMS Energy's obligations
specified in Article VIII have not been met in all material respects or waived
by CMS Energy at such time as such condition can no longer be satisfied;
(e) by CNG if any of the conditions to CNG's obligations specified in
Article VIII has not been met in all material respects or waived by CNG and the
Majority Stockholders, as applicable, at such time as such condition can no
longer be satisfied;
(f) by CMS Energy or CNG if the Merger shall not have been consummated
on or before October 31, 1998; provided, that the parties agree to extend such
time period for a reasonable period of time in the event the Registration
Statement did not become effective in a time frame so as to allow the CNG
Stockholders' meeting to occur prior to October 31, 1998; or
(g) By CNG if it shall receive any Acquisition Proposal after the date
hereof from a third party or parties and the Board of Directors of CNG shall
have received a written opinion from independent legal counsel to the effect
that, and the Board of Directors shall have determined in good faith in the
exercise of its fiduciary duties that, CNG is legally required to pursue such
Acquisition Proposal.
SECTION 10.2. EFFECT OF TERMINATION. Except to the extent
provided in Section 10.3, in the event that this Agreement shall be terminated
pursuant to Section 10.1, all further obligations of the parties under this
Agreement (other than this Section and Sections 6.4, 6.12, 7.2, 10.3, 11.1, 11.2
and 11.12) shall terminate without further liability of any party to the others;
provided, however, that nothing herein shall relieve any
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party from liability for its breach of this Agreement during its effectiveness.
SECTION 10.3. EFFECT OF TERMINATION AND ABANDONMENT. CNG
agrees that if this Agreement is terminated pursuant to: (a) Section 10.1(b) and
(i) such termination is the result of a wilful breach of any covenant or
agreement of CNG contained herein, (ii) CNG shall have had contacts or entered
into negotiations relating to an Acquisition Proposal, in any such case at any
time within the period commencing on the date of this Agreement through the date
of termination of this Agreement, and (iii) within ten months after the date of
termination of this Agreement, and with respect to any person or group with whom
the contacts or negotiations referred to in clause (ii) have occurred, a
Business Combination (as defined below) shall have occurred or CNG shall have
entered into a definitive agreement providing for a Business Combination; or (b)
Section 10.1(d) or 10.1(e) because this Agreement and the Merger shall fail to
receive the requisite vote for approval and adoption by the stockholders of CNG
at the CNG stockholders meeting and at the time of such meeting there shall
exist an Acquisition Proposal; or (c) Section 10.1(g) and at the time of the
withdrawal, modification or change (or resolution to do so) of its
recommendation by the Board of Directors of CNG, there shall exist an
Acquisition Proposal; then CNG shall pay to CMS Energy an amount equal to $3
Million which amount is inclusive of all of CMS Energy's Acquisition Expenses,
and is CMS' sole and exclusive remedy as against CNG for termination under this
Section 10.3.
(b) Any payment required to be made pursuant to Section 10.3(a) of this
Agreement shall be made as promptly as practicable but not later than three
business days after termination of this Agreement, and shall be made by wire
transfer of immediately available funds to an account designated by CMS Energy;
(c) For purposes of this Section 10.3, the term "Business Combination"
means (i) a merger, consolidation, share exchange, business combination or
similar transaction involving CNG, (ii) a sale, lease, exchange, transfer or
other disposition of 35% or more of the assets of CNG and the Subsidiaries,
taken as a whole, in a single transaction or a series of the transactions, or
(iii) the acquisition, by a person (other than CMS Energy or any affiliate
thereof) or group (as such term is defined under Section 13(d) of the Exchange
Act and the rules and regulations thereunder) of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act) of 35% or more of the CNG Common
Stock whether by tender or exchange offer or otherwise.
ARTICLE XI
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OTHER PROVISIONS
SECTION 11.1. CONFIDENTIAL NATURE OF INFORMATION. (a) All
information about CNG furnished by CNG, the Majority Shareholders and their
affiliates, and by their respective directors, officer, members, managers,
partners, employees and agents (all such affiliates and other persons are
collectively referred to herein as "representatives"), whether furnished to CMS
Energy or to CMS Energy's representatives before or after the date hereof and
regardless of the manner in which it is furnished, is referred to in this
Section 11.1 as "Proprietary Information". For purposes of this Section 11.1,
Proprietary Information (a) shall include all documents which are prepared by
CMS Energy and CMS Energy's representatives, including all correspondence,
memoranda, notes, summaries, analysis, studies, models, extracts of and
documents and records reflecting, based on or derived from Proprietary
Information as well as all copies and other reproductions thereof, whether in
writing or stored or maintained in or by electronic, magnetic or other means,
media or devices (all such documents and writings which are prepared by CMS
Energy or CMS Energy's representatives are sometimes referred to herein as
"Evaluation Documents") and (b) shall not include information which (i) is or
becomes generally available to the public other than as a result of a disclosure
by CMS Energy or CMS Energy's representatives, (ii) was available to CMS Energy
on a nonconfidential basis prior to its disclosure by CNG or its representatives
or (iii) becomes available to CMS Energy on a nonconfidential basis from a
person other than CNG or its representatives who is not otherwise bound by a
confidentiality agreement with CNG or its representatives, or is otherwise
prohibited from transmitting the information to CMS Energy.
(b) CMS Energy agrees that (i) CMS Energy and CMS Energy's
representatives will keep all Proprietary Information confidential and not
disclose or reveal any Proprietary Information to any person other than those of
CMS Energy's representatives who are actively and directly participating in the
evaluation of the Merger or who otherwise need to know the Proprietary
Information for the purpose of evaluating the Merger and to cause those persons
to observe the terms of this Agreement, (ii) CMS Energy and CMS Energy's
representatives will not use the Proprietary Information for any purpose other
than in connection with the consummation of the Merger in a manner which CNG has
approved and (iii) CMS Energy and CMS Energy's representatives will not, without
CNG's prior written consent, disclose to any person (other than to CMS Energy's
representatives actively and directly participating in the Merger) any
information about the Merger, or the terms, conditions or other facts relating
thereto, including the fact that discussions are
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taking place with respect thereto or the status thereof, or the fact that the
Proprietary Information has been made available to CMS Energy. CMS Energy will
be responsible for any breach of the terms hereunder by CMS Energy or CMS
Energy's representatives.
(c) In the event that CMS Energy or any of CMS Energy's representatives
is requested pursuant to, or required by, applicable law or regulation or by
legal process to disclose any Proprietary Information or any other information
concerning CNG or the Merger (including any facts or information referred to in
paragraph (b)(3) above), CMS Energy agree that CMS Energy will provide CNG with
prompt notice of such request(s) or the receipt(s) of legal process to enable
CNG to seek an appropriate protective order, to consult with CMS Energy with
respect to CNG or CMS Energy taking steps to resist or narrow the scope of such
request or process and/or to waive compliance in whole or in part with CMS
Energy's agreement to maintain the confidentiality of the Proprietary
Information. If and to the extent that after the foregoing notice, in the
absence of a protective order or receipt of a waiver under this Agreement, CMS
Energy or CMS Energy's representatives are, in the written opinion of CMS
Energy's counsel, compelled to disclose Proprietary Information or other
information concerning CNG or the Merger (including any facts or information
referred to in paragraph (b)(3) above) or risk being liable for contempt or
suffer censure or penalty or violate applicable laws or regulation, CMS Energy
and CMS Energy's representatives may disclose such Proprietary Information or
other information without liability to CNG under this Agreement.
(d) If this Agreement is terminated, CMS Energy agrees that it will,
upon CNG's request, promptly deliver to CNG all of the Proprietary Information,
as more completely described above, in CMS Energy's possession or control or in
the possession or control of any of CMS Energy's representatives. CMS Energy
may, however, destroy such of the Proprietary Information as constitutes
Evaluation Documents in CMS Energy's and CMS Energy's representative's
possession or control, whether prepared by CMS Energy or CMS Energy's
representatives, in which case CMS Energy will do so promptly and, if requested
by CNG, will provide a written statement by an officer of CMS Energy's
organization familiar with CMS Energy's consideration of the Merger certifying
that all such Evaluation Documents, including all copies thereof, have been
destroyed.
(e) In consideration of CMS Energy's receipt of the Proprietary
Information and except as otherwise provided in this Agreement, CMS Energy
hereby agrees that for a period of two (2) years from the date hereof neither
CMS Energy, nor CMS Energy's affiliates, as defined in Rule 12b-2 of the
Securities Exchange Act
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of 1934, as amended (the "Exchange Act"), will (and CMS Energy and they will not
assist or encourage others to), directly or indirectly, unless specifically
requested in writing to do so in advance or consented prior thereto in writing
by CNG:
(1) acquire or agree, offer, seek or propose to acquire, or
cause to be acquired, ownership (including, but not limited to,
beneficial ownership as defined in Rule 13d-3 of the Exchange Act) of
any of CNG's assets or business or any of its subsidiaries or any
securities issued by CNG or any of its subsidiaries, or any rights or
options to acquire such ownership (including from a third party); or
(2) make, or in any way participate in, any "solicitation" of
"proxies" (as such terms are defined in Regulation 14A of the Exchange
Act) to vote or seek to advise or influence in any matter whatsoever
any person or entity with respect to the voting or any securities of
CNG or any of its subsidiaries; or
(3) form, join or in any way participate in a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with respect to
any voting securities of CNG or any of its subsidiaries; or
(4) arrange, or in any way participate in, any financing for
the purchase of any voting securities or securities convertible or
exchangeable into or exercisable for any voting securities or assets of
CNG or any of its subsidiaries; or
(5) otherwise act, whether alone or in concert with others, to
seek to propose to CNG or any of its stockholders any merger, business
combination, restructuring, recapitalization or similar transaction to
or with CNG or any of its subsidiaries or otherwise seek or propose to
influence or control CNG's management or policies; or
(6) seek to negotiate or influence the terms and conditions of
employment of key employees of CNG or any of its subsidiaries or any
agreement of collective bargaining with employees of CNG or any of its
subsidiaries; or
(7) enter into any discussions, negotiations, arrangements or
understandings with or advise, or assist any third party with respect
to any of the foregoing.
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CMS Energy will promptly advise CNG of any inquiry or proposal
made to CMS Energy with respect to any of the foregoing.
(f) Without prejudice to the rights and remedies otherwise available to
CNG, CMS Energy agrees that CNG shall be entitled to equitable relief by way of
injunction if CMS Energy or any of CMS Energy's representatives breach or
threaten to breach any of the provisions of this Agreement. It is understood
that any failure or delay by CNG in exercising any right, power or privilege
hereunder shall not operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof.
SECTION 11.2. FEES AND EXPENSES. Except as otherwise provided
in this Agreement, each of the parties hereto shall bear its own costs and
expenses (including, without limitation, fees and disbursements of its counsel,
accountants and other financial, legal, accounting or other advisors), incurred
by it or its affiliates in connection with the preparation, negotiation,
execution, delivery and performance of this Agreement and each of the other
documents and instruments executed in connection with or contemplated by this
Agreement, and the consummation of the transactions contemplated hereby and
thereby (collectively "Acquisition Expenses").
SECTION 11.3. NOTICES. All notices and other communications
under this Agreement shall be in writing and shall be deemed given when
delivered personally or by overnight mail, or four (4) days after being mailed
(by registered mail, return receipt requested) to a party at the following
address (or to such other address as such party may have specified by notice
given to the other parties pursuant to this provision):
If to CMS Energy to:
CMS Energy Corporation
Fairlane Plaza South, Suite 1100
000 Xxxx Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
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with a copy to:
Xxxxxx X. Xxxxxxxx
CMS Energy Corporation
Fairlane Plaza South, Suite 1100
000 Xxxx Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
If to Sub to:
CMS Merging Corporation
c/o CMS Energy Corporation
Fairlane Plaza South, Suite 1100
000 Xxxx Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
with a copy to:
Xxxxxx X. Xxxxxxxx
CMS Energy Corporation
Fairlane Plaza South, Suite 1100
000 Xxxx Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
If to CNG to:
Continental Natural Gas, Inc.
0000 X. Xxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx
with a copy to:
Xxxxxx X. Xxxxxxx
0000 X. Xxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxxx 00000
If to the Majority Stockholders to the Majority Stockholders'
Representative as follows:
Cottonwood Partnership
0000 X. Xxxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx
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SECTION 11.4. DEFINITIONS. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) an "associate" of any person means (i) a corporation or
organization of which such person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of a class of equity
securities, (ii) any trust or other estate in which such person has substantial
beneficial interest or as to which such person serves as trustee or in a similar
capacity and (iii) any relative or spouse of such person, or any relative of
such spouse, who has the same home as such person or who is a director or
officer of the person or any of its parents or subsidiaries.
(c) "Best Knowledge" shall mean that any such representations,
warranties and other statements made by a party to this Agreement is made to the
best of the actual knowledge and belief, after due inquiry, of the officers of
the party making such statement.
(d) "Market Conditions" means fluctuation in the price of natural gas
and natural gas liquids or other general economic market conditions (including
conditions in the overall natural gas, natural gas liquids and securities
markets) outside the control of CNG that affect the United States economy, stock
and bond markets or the energy industry (or segment thereof) generally, but not
specifically CNG.
(e) "Material Adverse Change"or "Material Adverse Effect" means any
change or effect (or any development that, insofar as can reasonably be
foreseen, would result in any change or effect) that is materially adverse to
the business, properties, operations, assets, condition (financial or otherwise)
or results of operations of the applicable person or persons; provided, however,
that no Material Adverse Change or Effect shall occur or shall be deemed to
occur as a result of a change in Market Conditions or any change, event,
circumstance or occurrence permitted in this Agreement (or in any Schedule
hereto).
(f) "Permitted Encumbrances" shall mean (i) liens for taxes,
assessments and similar governmental charges incurred or payable by CNG or its
Subsidiaries that are not delinquent or, if delinquent, that are being contested
in good faith by CNG and for which
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adequate reserves have been established by CNG and reflected on the Statement of
Income and/or the Balance Sheet (and taken into account in determining CNG
Consolidated Net Working Capital); (ii) liens and encumbrances securing CNG
Debt; (iii) liens and encumbrances that shall be released at or prior to the
Effective Time at no cost to CNG; (iv) easements, servitudes, rights-of-way and
other similar rights relating to the Leases that do not materially interfere
with the use of the Leases; and (v) rights reserved to or vested in any
municipality or to governmental, statutory or public authority to control or
regulate any of the Interest in any manner, and all applicable laws, rules and
orders of governmental authorities.
(g) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization or other entity.
SECTION 11.5. PARTIAL INVALIDITY. In case any one or more of
the provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be unreasonable.
SECTION 11.6. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors or assigns.
SECTION 11.7. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be considered an
original counterpart, and shall become a binding agreement when CMS Energy, Sub,
CNG and the Majority Stockholders shall have each executed one counterpart.
SECTION 11.8. TITLES AND HEADINGS. Titles and headings to
Articles and Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.
SECTION 11.9. SCHEDULES AND EXHIBITS. The Schedules, Exhibits,
Disclosure Schedule and CMS Option Agreement referred to in this Agreement shall
be construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
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SECTION 11.10. ENTIRE AGREEMENT/NO THIRD PARTY RIGHTS/
ASSIGNMENT. This Agreement (including the Schedules to the Disclosure Schedule,
Exhibits, documents and instruments referred to herein): (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;
(b) except as expressly set forth herein, is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder; and (c)
shall not be assigned by a party, by operation of law or otherwise, without the
consent of the other parties. successors and assigns.
SECTION 11.11. INDEPENDENT INVESTIGATION AND SCOPE OF
REPRESENTATIONS. CMS Energy acknowledges and confirms that (i) in making the
decision to enter into this Agreement and to consummate the transactions
contemplated hereby, it has relied on the representations, warranties, covenants
and agreements of CNG and the Majority Stockholder set forth in the Agreement
(including the exhibits and schedules) and on no other representations,
warranties, covenants and agreements, and (ii) it has made its own independent
investigation, analysis and evaluation of CNG's properties (including CMS
Energy's own estimate and appraisal of the extent and value of CNG's pipelines
and contracts), business, financial condition, operations and prospects. Except
to the extent expressly set forth in this Agreement, including Section 3.35, no
party makes any representation or warranty whatsoever. Without limiting the
generality of the foregoing, except as set forth in Article III, NO
REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, ARE MADE WITH RESPECT
TO THE MERCHANTABILITY, USEFULNESS OR SUITABILITY FOR ANY PURPOSE OF ANY
PERSONAL PROPERTY OF CNG OR ITS SUBSIDIARIES, INCLUDING WITHOUT LIMITATION (a)
ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, (b) ANY RIGHTS OF CMS ENERGY UNDER APPROPRIATE STATUTES TO CLAIM
DIMINUTION OF CONSIDERATION, (c) THE QUALITY OF THE LABOR OR MATERIALS INCLUDED
IN THE PROPERTIES OR ASSETS, INCLUDING ANY LATENT OR PATENT DEFECTS; (d) ANY
FEATURES OR CONDITIONS, INCLUDING ANY LATENT OR PATENT DEFECTS, AT OR WHICH
AFFECT THE PROPERTIES OR ASSETS WITH RESPECT TO ANY PARTICULAR PURPOSE, USE,
POTENTIAL OR OTHERWISE; (e) THE SIZE, SHAPE, CONFIGURATION, CAPACITY, QUANTITY,
QUALITY, CASH FLOW, EXPENSES, VALUE, MAKE, MODEL OR CONDITION OF THE PROPERTIES
OR ASSETS; (f) ALL EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES CREATED BY
ANY AFFIRMATION OF FACT OR PROMISE OR BY ANY DESCRIPTION OF THE PROPERTIES OR
ASSETS; (g) ANY ENVIRONMENTAL, STRUCTURAL OR OTHER CONDITION OR HAZARD OR THE
ABSENCE THEREOF HERETOFORE, NOW, OR HEREAFTER AFFECTING IN ANY MANNER ANY OF THE
PROPERTIES OR ASSETS; (h) ALL OTHER EXPRESS OR IMPLIED WARRANTIES AND
REPRESENTATIONS BY CNG WHATSOEVER, AND (i) ANY CLAIM FOR DAMAGES BECAUSE OF
DEFECTS, WHETHER KNOWN OR UNKNOWN, WITH RESPECT TO SUCH REAL OR PERSONAL
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PROPERTY, IT BEING UNDERSTOOD THAT, EXCEPT AS AFORESAID, SUCH PERSONAL PROPERTY
SHALL EXIST IN ITS PRESENT CONDITION AND STATE OF REPAIR, "AS IS" AND "WHERE
IS," WITH ALL FAULTS.
SECTION 11.12. GOVERNING LAW; ARBITRATION. (a) This Agreement,
and the application or interpretation thereof, shall be governed by its terms
and by the internal laws of the State of Michigan, without regard to principles
of conflicts of laws as applied in the State of Michigan or any other
jurisdiction which, if applied, would result in the application of any laws
other than the internal laws of the State of Michigan except to the extent that
the OGCA governs aspects of the Merger.
(b) Any action, dispute, claim or controversy arising under, out of, in
connection with, or relating to, this Agreement, or any amendment hereof, or the
breach hereof (a "Dispute"), shall be determined and settled by binding
arbitration in Chicago, Illinois, by a person or persons mutually agreed upon,
or in the event of a disagreement as to the selection of the arbitrator or
arbitrators, in accordance with the rules of the American Arbitration
Association ("AAA"). Any award rendered therein shall specify the findings of
fact of the arbitrator or arbitrators and the reasons for such award, with the
reference to and reliance on relevant law. Any such award shall be final and
binding on each and all of the parties thereto and their personal
representatives, and judgment may be entered thereon in any court having
jurisdiction thereof. Any party may, by summary proceedings, bring an action in
court to compel arbitration of any Dispute. Any arbitration hereunder shall be
administered by the AAA in accordance with the terms of this Section 11.12, the
Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable,
the Federal Arbitration Act. Each party agrees to keep all Disputes and
arbitration proceedings strictly confidential except for disclosure of
information required by applicable law.
SECTION 11.13. NO THIRD-PARTY BENEFICIARIES. Except for
Section 7.2 and Article X, nothing in this Agreement, expressed or implied, is
intended or shall be construed to confer upon any person other than the parties
hereto and successors and assigns permitted by Section 11.6 any right, remedy or
claim under or by reason of this Agreement (but excluding for the purpose of
this provision the Exhibits and Schedules).
SECTION 11.14. INTERPRETATION. Except as expressly stated
otherwise, any reference herein to "he," "she" or "it", or comparable terms,
with respect to any person or entity shall mean and include references to any or
all of the same as applicable whether or not so stated and regardless of gender,
and any reference herein to "this Agreement," "herein," "hereof," "hereby,"
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"hereunder," or comparable terms shall mean and include references to this
Agreement and the Schedules and Exhibits to this Agreement.
SECTION 11.15. GUARANTEE. CMS Energy guarantees all of the
obligations of the Sub under this Agreement.
SECTION 11.16. [INTENTIONALLY OMITTED]
SECTION 11.17. TIME OF ESSENCE. Time is of the essence in the
performance of the obligations stated herein.
SECTION 11.18. ATTORNEYS FEES. If any action at law, in
arbitration or in equity, including an action for declaratory relief, is brought
to enforce or interpret the provisions of this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys fees from the other party,
which fees may be set by the court or the arbitrators in the trial of such
action or may be enforced in a separate action brought for that purpose, and
which fees shall be in addition to any other relief which may be awarded.
SECTION 11.19. AMENDMENT. To the extent permitted by
applicable law, this Agreement may be amended by action taken by or on behalf of
CNG, CMS Energy and the Sub at any time before or after adoption of this
Agreement by the shareholders of CNG but, after any submission of this Agreement
to such shareholders for approval, no amendment shall be made which reduces the
Merger consideration or which materially and adversely affects the rights of
CNG's shareholders hereunder without any required approval of such shareholders.
This Agreement may not be amended except by an instrument signed on behalf of
all the parties.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto or by their duly authorized officers, all as of
the date first above written.
CMS ENERGY CORPORATION,
a Michigan corporation
By: /s/ XXXXXX X. XXXXXXX
--------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and COO
CMS MERGING CORPORATION,
a Michigan corporation
By: /s/ XXXXXXX X. XXXXXX
--------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and CEO
CONTINENTAL NATURAL GAS, INC.,
an Oklahoma corporation
By: /s/ XXXX X. XXXXX
--------------------------------
Name: Xxxx X. Xxxxx
Title: President
XXXXX AFFILIATES, INC.,
an Oklahoma corporation
By: /s/ XXXX X. XXXXX
--------------------------------
Name: Xxxx X. Xxxxx
Title: Chairman of the Board
COTTONWOOD PARTNERSHIP,
an Oklahoma general partnership
By: /s/ XXXX X. XXXXX
--------------------------------
Name: Xxxx X. Xxxxx
Title: Chief Executive Officer
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EXHIBIT A
CERTIFICATE OF MERGER/ARTICLES OF MERGER/OKLAHOMA
77
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EXHIBIT B
______________, 1998
CMS Energy Corporation
000 Xxxx Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
I have been advised that as of the date hereof, I may be deemed to be an
"affiliate" of Continental Natural Gas, Inc., an Oklahoma corporation ("CNGL"),
as that term is defined for purposes of paragraphs (c) and (d) of Rule 145 of
the Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "Securities Act").
Pursuant to the terms and subject to the conditions of that certain Agreement
and Plan of Merger by and among CMS Energy Corporation, a Michigan corporation
("CMS"), CMS Merging Corporation, a Michigan corporation and a wholly-owned
subsidiary of CMS ("Merger Sub"), CNGL, Xxxxx Affiliates, Inc., an Oklahoma
corporation, and Cottonwood Partnership, an Oklahoma partnership dated as of
July 31, 1998 (the "Merger Agreement"), providing for, among other things, the
merger of Merger Sub with and into CNGL (the "Merger"), I will be entitled to
receive shares of common stock, par value $0.01 per share, of CMS ("CMS Common
Stock"), in exchange for shares of common stock, par value $.01 per share, of
CNGL ("CNGL Common Stock") owned by me at the Effective Time (as defined in the
Merger Agreement) of the Merger as determined pursuant to the Merger Agreement.
I further understand that the Merger is intended to be treated for financial
accounting purposes as a "pooling of interests" in accordance with generally
accepted accounting principles and that the staff of the SEC has issued certain
guidelines that should be followed to ensure the pooling of the entities.
In consideration of the agreements contained herein, CMS's reliance on this
letter in connection with the consummation of the Merger and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, I hereby represent, warrant and agree that (i) I will not make any
sale, transfer or other disposition of CMS Common Stock owned by me during the
period commencing 30 days before the Effective time and ending at the earlier of
the Effective Time
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CMS Energy Corporation
July 31, 1998
Page 2
and the termination of the Merger Agreement and (ii) I will not make any sale,
transfer or other disposition of CMS Common Stock acquired by me in the Merger
owned by me after the Effective Time until such time as financial results
covering at least 30 days of combined operations of CNGL and CMS after the
Merger shall have been publicly reported, unless (a) I shall have delivered to
CMS prior to any such sale, transfer or other disposition, a written opinion
from Xxxxxx Xxxxxxxx, independent public accountants for CMS, or a written
no-action letter from the accounting staff of the SEC, in either case in form
and substance reasonably satisfactory to CMS, to the effect that such sale,
transfer or other disposition will not cause the Merger not to be treated as a
"Pooling of interests" for financial accounting purposes in accordance with
generally accepted accounting principles and the rules, regulations and
interpretations of the SEC or (b) I desire to pledge such CMS Common Stock to
secure loans and the lender accepts in writing such pledge of the CMS Common
Stock subject to the terms of this letter and (iii) I will not make any sale,
transfer or other disposition of any shares of CMS Common Stock received by me
pursuant to the Merger in violation of the Securities Act or the Rules and
Regulations. I have been advised that the issuance of the shares of CMS Common
Stock pursuant to the Merger will have been registered with the SEC under the
Securities Act on a Registration Statement on Form S-4. However, I have also
been advised, and I agree, that since I may be deemed to be an affiliate of CNGL
at the time the Merger is submitted for a vote of the stockholders of CNGL, the
CMS Common Stock received by me pursuant to the Merger can be sold by me only
(i) pursuant to an effective registration statement under the Securities Act,
(ii) in conformity with the volume and other limitations of Rule 145 promulgated
by the SEC under the Securities Act, or (iii) in reliance upon an exemption from
registration that is available under the Securities Act.
I also understand and agree that stop transfer instructions consistent with this
letter will be given to CMS's transfer agent with respect to the CMS Common
Stock to be received by me pursuant to the Merger and that there will be placed
on the certificates representing such shares of CMS Common Stock, or any
substitutions therefore, a legend stating in substance as follows:
"These shares were issued in a transaction to which Rule 145
promulgated under the Securities Act of 1933 applies. These shares may
only be transferred in accordance with the terms of such Rule and an
Affiliate's Agreement between the original holder of such shares and
CMS Energy Corporation, a copy of which agreement is on file at the
principal offices of CMS Energy Corporation."
At the request of the undersigned, CMS agrees to instruct its transfer agent to
remove the restrictive legend from any certificates evidencing shares subject
hereto promptly following the expiration of the period of restrictions required
by Rule 145.
By its execution hereof, CMS agrees that it will, as long as I own any CMS
Common Stock to be received by me pursuant to the Merger which remains subject
to Rule 145 under the Securities Act,
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CMS Energy Corporation
July 31, 1998
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take all reasonable efforts to make timely filings with the SEC of all reports
required to be filed by it pursuant to the Securities Exchange Act of 1934, as
amended, and will promptly furnish upon written request of the undersigned a
written statement confirming that such reports have been so timely filed.
The terms of this letter shall be binding upon our heirs, distributees and
assigns. The terms of this letter shall not be amended other than by an
instrument in writing signed by all of the parties executing or accepting this
letter.
All notices and other communications required or permitted by the terms of this
letter must be in writing, by facsimile transmission with a copy by registered
mail, postage prepaid, return receipt requested or by receipted courier for next
business day delivery to the address shown herein (or to such other address for
a party as is specified by notice pursuant hereto).
The terms of this letter constitutes the entire agreement between us pertaining
to the subject matter hereof. If any portion of this letter is declared by a
court of competent jurisdiction to be invalid or unenforceable, such declaration
shall not affect the validity of the remaining provisions.
If any action at law or in equity, including an action for declaratory relief,
is brought to enforce or interpret the provisions of this letter, the prevailing
party shall be entitled to recover a reasonable attorneys' fees from the other
party, which fees may be set by the court in the trial of such action or may be
enforced in a separate action brought for that purpose, and which fees shall be
in addition to any other relief which may be awarded.
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CMS Energy Corporation
July 31, 1998
Page 4
If you are in agreement with the foregoing, please so indicate by signing below
and returning a copy of this letter to the undersigned, at which time this
letter shall become a binding agreement between us.
Very truly yours,
By:___________________________
Name:_________________________
Title:________________________
Date:_________________________
Address:______________________
______________________________
ACCEPTED THIS ____ DAY OF JULY, 1998.
CMS ENERGY CORPORATION
By:___________________________
Name:_________________________
Title:__________________________
