-------------------------------
PURCHASE AND SALE AGREEMENT
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By and Between
AMERICAN NATURAL OFFSHORE COMPANY,
TEXAS OFFSHORE PIPELINE SYSTEM, INC.,
UNITEX OFFSHORE TRANSMISSION COMPANY, and
ANR WESTERN GULF HOLDINGS, L.L.C.
(Sellers)
and
EL PASO ENERGY PARTNERS DEEPWATER, L.L.C.
(Buyer)
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Covering the Acquisition of
A 50% MEMBERSHIP INTEREST
(Deepwater Interest)
IN
DEEPWATER HOLDINGS, L.L.C.
(Deepwater)
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Relating to the Acquisition of an Interest in
DEEPWATER HOLDINGS, L.L.C.
WESTERN GULF HOLDINGS, L.L.C.
EAST BREAKS GATHERING COMPANY, L.L.C. and
HIGH ISLAND OFFSHORE SYSTEM, L.L.C.
(Acquired Companies)
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September 27, 2001
TABLE OF CONTENTS
PAGE
----
1. Definitions..............................................................................................2
2. Purchase and Sale........................................................................................8
(a) Sale of Deepwater Interest.........................................................................8
(b) Purchase Price.....................................................................................8
(c) The Closing........................................................................................8
(d) Deliveries at the Closing..........................................................................9
(e) Proposed Closing Statement and Post-Closing Adjustment.............................................9
3. Representations and Warranties Concerning the Transaction...............................................10
(a) Representations and Warranties of Sellers.........................................................10
(b) Representations and Warranties of the Buyer.......................................................11
4. Representations and Warranties Concerning the Acquired Companies........................................13
(a) Organization, Qualification, and Company Power....................................................13
(b) Noncontravention..................................................................................13
(c) Title to and Condition of Assets..................................................................13
(d) Material Change...................................................................................14
(e) Legal Compliance..................................................................................15
(f) Tax Matters.......................................................................................16
(g) Contracts and Commitments.........................................................................16
(h) Litigation........................................................................................16
(i) Environmental Matters.............................................................................16
(j) Preferential Purchase Rights......................................................................18
(k) Financial Statements..............................................................................18
(l) Employee Matters..................................................................................18
(m) Prohibited Events.................................................................................19
(n) Disclaimer of Representations and Warranties Concerning Personal Property, Equipment, and
Fixtures..........................................................................................19
5. Pre-Closing Covenants...................................................................................19
(a) General...........................................................................................19
(b) Notices and Consents..............................................................................19
(c) Operation of Business.............................................................................19
(d) Intercompany Transactions.........................................................................21
(e) Deepwater Loan Obligations........................................................................21
(f) Full Access.......................................................................................21
6. Post-Closing Covenants..................................................................................21
(a) General...........................................................................................21
(b) Litigation Support................................................................................21
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(c) Surety Bonds; Guarantees..........................................................................21
(d) Delivery and Retention of Records.................................................................22
7. Conditions to Obligation to Close.......................................................................22
(a) Conditions to Obligation of the Buyer.............................................................22
(b) Conditions to Obligation of the Sellers...........................................................23
8. Remedies for Breaches of this Agreement.................................................................24
(a) Survival of Representations and Warranties........................................................24
(b) Indemnification Provisions for Benefit of the Buyer...............................................24
(c) Indemnification Provisions for Benefit of the Sellers.............................................26
(d) Matters Involving Third Parties...................................................................27
(e) Determination of Amount of Adverse Consequences...................................................27
(f) Tax Treatment of Indemnity Payments...............................................................28
(g) Joint and Several Liability.......................................................................28
9. Tax Matters.............................................................................................28
(a) Post-Closing Tax Returns..........................................................................28
(b) Pre-Closing Tax Returns...........................................................................28
(c) Straddle Periods..................................................................................28
(d) Straddle Returns..................................................................................28
(e) Claims for Refund.................................................................................29
(f) Indemnification...................................................................................29
(g) Cooperation on Tax Matters........................................................................29
(h) Certain Taxes.....................................................................................30
(i) Confidentiality...................................................................................30
(j) Audits............................................................................................30
(k) Control of Proceedings............................................................................30
(l) Powers of Attorney................................................................................30
(m) Remittance of Refunds.............................................................................31
(n) Purchase Price Allocation.........................................................................31
(o) Closing Tax Certificate...........................................................................31
(p) Like Kind Exchanges...............................................................................31
10. Termination.............................................................................................31
(a) Termination of Agreement..........................................................................31
(b) Effect of Termination.............................................................................32
11. Miscellaneous...........................................................................................32
(a) Press Releases and Public Announcements...........................................................32
(b) Insurance.........................................................................................33
(c) No Third Party Beneficiaries......................................................................33
(d) Succession and Assignment.........................................................................33
(e) Counterparts......................................................................................33
(f) Headings..........................................................................................33
(g) Notices...........................................................................................33
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(h) Governing Law.....................................................................................34
(i) Amendments and Waivers............................................................................34
(j) Severability......................................................................................34
(k) Transaction Expenses..............................................................................34
(l) Construction......................................................................................34
(m) Incorporation of Exhibits and Schedules...........................................................35
(n) Entire Agreement..................................................................................35
(o) Nature of Obligations.............................................................................35
EXHIBITS AND SCHEDULES
Exhibit A: Form of Assignment
Exhibit B: Form of ANR Sponsor Agreement
Exhibit C: Form of Partnership Sponsor Agreement
Exhibit D: Principal Tangible Assets
Schedule 1(a): Subject Insurance Policies
Schedule 3(a)(ii): Consents (Sellers)
Schedule 3(a)(iii): Noncontravention (Sellers)
Schedule 3(b)(ii): Consents (Buyers)
Schedule 3(b)(iii): Noncontravention (Buyer)
Schedule 4(b): Noncontravention (Acquired Companies)
Schedule 4(c)(i): Encumbrances
Schedule 4(c)(ii): Condition of Subject Assets
Schedule 4(d): Material Changes
Schedule 4(f): Tax Matters
Schedule 4(g): Acquired Company Contracts
Schedule 4(h): Litigation
Schedule 4(i): Environmental Matters
Schedule 4(i)(ii): Environmental Permits
Schedule 4(j): Preferential Purchase Rights
Schedule 4(k): Financial Statements
Schedule 5(c): Operation of Business
Schedule 6(c): Surety Bonds
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PURCHASE AND SALE AGREEMENT
THIS
PURCHASE AND SALE AGREEMENT (this "Agreement") dated as of
September 27, 2001 is by and among American Natural Offshore Company, a Delaware
corporation ("American Offshore"),
Texas Offshore Pipeline System, Inc., a
Delaware corporation ("TOPSI"), Unitex Offshore Transmission Company, a Delaware
corporation ("Unitex"), ANR Western Gulf Holdings, L.L.C., a Delaware limited
liability company ("ANR LLC" and together with American Offshore, TOPSI and
Unitex, the "Sellers"), and El Paso Energy Partners Deepwater, L.L.C., a
Delaware limited liability company (the "Buyer"). The Sellers and the Buyer are
sometimes referred to collectively herein as the "Parties" and individually as a
"Party."
RECITALS
WHEREAS, El Paso Energy Partners, L.P., a Delaware limited partnership
(the "Partnership"), and ANR Pipeline Company, a Delaware corporation ("ANR"),
each beneficially owns 50% of the issued and outstanding equity interest in
Deepwater Holdings, L.L.C., a Delaware limited liability company ("Deepwater"),
which beneficially owns 100% of the equity interest in Western Gulf Holdings,
L.L.C., a Delaware limited liability company ("Western Gulf"), East Breaks
Gathering Company, L.L.C., a Delaware limited liability company ("East Breaks"),
and High Island Offshore System, L.L.C., a Delaware limited liability company
("HIOS");
WHEREAS, the Partnership desires to acquire, and ANR desires to dispose
of, ANR's beneficial 50% interest in Deepwater and each of its subsidiaries
(such subsidiaries collectively with Deepwater, the "Acquired Companies"), such
subsidiaries being East Breaks, HIOS and Western Gulf;
WHEREAS, the Partnership owns its beneficial 50% interest in the
Acquired Companies through the Buyer, which is a wholly-owned subsidiary of the
Partnership and a record holder of 50% of the equity interest of Deepwater;
WHEREAS, ANR owns its beneficial 50% interest in the Acquired Companies
through the Sellers, each of which is a wholly-owned (direct or indirect)
subsidiary of ANR and a record holder of the equity interest in Deepwater
indicated below:
American Offshore...........................14.819%
ANR LLC.....................................17.645%
TOPSI.......................................14.819%
Unitex.....................................02.7170%
WHEREAS, this Agreement contemplates a transaction in which the Buyer
shall purchase, and the Sellers shall sell, all of the equity interest in
Deepwater that is not owned of record by the Buyer, which shall result in the
Buyer owning (of record) all of the equity interest in Deepwater and owning
(beneficially) all of the equity interest
in the other Acquired Companies, in return for the consideration specified
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Definitions.
"Acquired Companies" has the meaning set forth in the Recitals.
"Acquired Company Contracts" has the meaning set forth in Section 4(g).
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses, but excluding
punitive (except as provided in Section 8), exemplary, special or consequential
damages.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act; provided, however, that (i) with
respect to the Buyer, the term "Affiliate" shall exclude each member of the El
Paso Group, (ii) with respect to the Seller, the term "Affiliate" shall exclude
each member of the Partnership Group, and (iii) the Acquired Companies shall be
deemed to be Affiliates (x) prior to the Closing, of none of the Parties and (y)
on and after the Closing, of the Buyer.
"Agreement" has the meaning set forth in the preface.
"ANR" has the meaning set forth in the Recitals.
"ANR Sponsor Agreement" means the sponsor agreement and performance
guaranty in the form of Exhibit B.
"Assignment" means the assignment of the Deepwater Interest in the form
of Exhibit A.
"Audited Financial Statements" has the meaning set forth in Section
4(k).
"Best Efforts" means the efforts, time, and costs that a prudent Person
desirous of achieving a result would use, expend, or incur in similar
circumstances to ensure that such result is achieved as expeditiously as
possible; provided, however, that no such use, expenditure, or incurrence shall
be required if it would have a material adverse effect on such Person.
"Buyer" has the meaning set forth in the preface.
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"Buyer Indemnitees" means, collectively, the Buyer and its Affiliates
and its and their officers (or Persons performing similar functions), directors
(or Persons performing similar functions), employees, agents and representatives
to the extent acting in such capacity.
"Closing" has the meaning set forth in Section 2(c).
"Closing Date" has the meaning set forth in Section 2(c).
"Closing Statement" has the meaning set forth in Section 2(e)(i).
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Law.
"Commitment" means (a) options, warrants, convertible securities,
exchangeable securities, subscription rights, conversion rights, exchange rights
or other contracts that could require a Person to issue any of its Equity
Interests or to sell any Equity Interests it owns in another Person; (b) any
other securities convertible into, exchangeable or exercisable for, or
representing the right to subscribe for any Equity Interest of a Person or owned
by a Person; (c) statutory pre-emptive rights or pre-emptive rights granted
under a Person's Organizational Documents; and (d) stock appreciation rights,
phantom stock, profit participation, or other similar rights with respect to a
Person.
"Deepwater" has the meaning set forth in the Recitals.
"Deepwater Interest" means a 50.0% (record and beneficial) Equity
Interest in Deepwater.
"Deepwater Loan Documents" means (i) the Amended and Restated Credit
Agreement dated as of September 30, 1999 by and among Deepwater and The Chase
Manhattan Bank, individually and as Administrative Agent, First Union National
Bank, individually and as Syndication Agent, Credit Lyonnais, individually and
as Documentation Agent, and each of the other lenders party thereto; (ii) the
Amended and Restated Guarantee and Collateral Agreement dated as of September
30, 1999, made by Deepwater, Western Gulf, East Breaks, and West Cameron
Dehydration Company, L.L.C. in favor of The Chase Manhattan Bank, as
Administrative Agent for the lenders party to the credit agreement described in
(i); (iii) the Amended and Restated Sponsor Agreement made by the Partnership in
favor of The Chase Manhattan Bank; (iv) the Amended and Restated Sponsor
Agreement made by ANR Pipeline Company in favor of The Chase Manhattan Bank; and
(v) any other documents and instruments executed in connection with those
described in (i) - (iv), as each document in (i) - (v) are amended, restated,
supplemented or otherwise modified from time to time.
"East Breaks" has the meaning set forth in the Recitals.
"El Paso" means El Paso Corporation, a Delaware corporation.
"El Paso Group" means, other than members of the Partnership Group, El
Paso and each of its Subsidiaries and other Affiliates.
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"Encumbrance" means any mortgage, pledge, lien, encumbrance, charge,
security interest or defect in title.
"Environmental Law" or "Environmental Laws" has the meaning set forth
in Section 4(i).
"Equity Interest" means (a) with respect to a corporation, any and all
shares of capital stock and any Commitments with respect thereto, (b) with
respect to a partnership, limited liability company, trust or similar Person,
any and all units, interests or other partnership/limited liability company
interests, and any Commitments with respect thereto, and (c) any other direct
equity ownership or participation in a Person.
"Exchange Agreement" has the meaning set forth in Section 9(p).
"Financial Statements" has the meaning set forth in Section 4(k).
"FTC" has the meaning set forth in Section 3(a)(ii).
"GAAP" means generally accepted accounting principles in the United
States.
"General Partner" means El Paso Energy Partners Company, a Delaware
corporation and the general partner of the Partnership.
"Governmental Authority" means the United States or any agency thereof
and any state, county, city or other political subdivision, agency, court or
instrumentality.
"Hazardous Substances" means all materials, substances, chemicals, gas
and wastes which are regulated under any Environmental Law or which may form the
basis for liability under any Environmental Law.
"HIOS" has the meaning set forth in the Recitals.
"Indebtedness" means, to the extent not classified as a current
liability on the Purchase Price Adjustment Date, on a consolidated basis, all
Obligations of the applicable Person to other Persons for (a) borrowed money,
(b) any capital lease Obligation, (c) any Obligation (whether fixed or
contingent) to reimburse any bank or other Person in respect of amounts paid or
payable under a standby letter of credit, (d) any guarantee with respect to
indebtedness (of the kind otherwise described in this definition) of any Person,
and (e) any liability, indebtedness or other Obligation of any Acquired Company.
"Indemnified Party" has the meaning set forth in Section 8(d).
"Indemnifying Party" has the meaning set forth in Section 8(d).
"Interim Financial Statements" has the meaning set forth in Section
4(k).
"Knowledge": an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is consciously aware of such
fact or other matter at the time of determination. A Person other than an
individual will be deemed to have "Knowledge" of a
4
particular fact or other matter if (i) any individual who is serving as a
director, executive officer, partner, member, executor, or trustee of such
Person (or in any similar capacity) or (ii) any employee (or natural person
serving in a similar capacity) who is charged with the ultimate responsibility
for a particular area of the Acquired Companies' operations (e.g., the manager
of the environmental section with respect to knowledge of environmental
matters), at the time of determination had, Knowledge of such fact or other
matter.
"Laws" means any statute, code, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any applicable
Governmental Authority.
"Legal Right" means the legal authority and right (without risk of
liability, criminal, civil or otherwise), such that the contemplated conduct
would not, to the extent arising from, related to or in any way connected with
any Acquired Company, including any Organizational Documents thereof or
contracts, agreements or arrangements related thereto, constitute a violation,
termination or breach of, or require any payment or termination under, any
contract or agreement, applicable Law, fiduciary, quasi-fiduciary or similar
duty or any other obligation of or by any Acquired Company.
"Material Adverse Effect" means any change or effect relating to the
Deepwater Interest, or the businesses, operations (financial or otherwise) and
properties of the Acquired Companies taken as a whole, that, individually or in
the aggregate with other changes or effects, materially adversely effects the
value of the Deepwater Interest, provided that in determining whether a Material
Adverse Effect has occurred, changes or effects relating to (i) the natural gas
pipeline industry generally (including, but not limited to, the price of natural
gas and the costs associated with the drilling and/or production of natural
gas), (ii) United States or global economic conditions or financial markets in
general, or (iii) the transactions contemplated by this Agreement, shall not be
considered.
"Obligations" means duties, liabilities and obligations, whether
vested, absolute or contingent, known or unknown, asserted or unasserted,
accrued or unaccrued, liquidated or unliquidated, due or to become due, and
whether contractual, statutory or otherwise.
"Ordinary Course of Business" means the ordinary course of business
consistent with the applicable Person's past custom and practice (including with
respect to quantity and frequency).
"Organizational Documents" means the articles of incorporation,
certificate of incorporation, charter, bylaws, articles or certificate of
formation, regulations, operating agreement, certificate of limited partnership,
partnership agreement, and all other similar documents, instruments or
certificates executed, adopted, or filed in connection with the creation,
formation, or organization of a Person, including any amendments thereto.
"Partnership" has the meaning set forth in the Recitals.
"Partnership Group" means (i) the General Partner, (ii) the
Partnership, (iii) each Affiliate of the Partnership in which the Partnership
owns (directly or indirectly) an Equity Interest and (iv) each natural person
that is an Affiliate of the Partnership or the General Partner solely
5
because of such person's position as an officer, director or other
representative of any Person described in (i) - (iii) above, but only to the
extent that such natural person is an officer, director or representative of
such Person.
"Partnership Sponsor Agreement" means the sponsor agreement and
performance guaranty in the form of Exhibit C.
"Party" and "Parties" have the meanings set forth in the preface.
"Permitted Encumbrances" means any of the following: (i) any liens for
Taxes and assessments not yet delinquent or, if delinquent, that are being
contested in good faith in the Ordinary Course of Business, provided that
adequate reserve accounts have been established in accordance with GAAP; (ii)
mechanic's, materialmen's, and similar liens; (iii) any liens or other
Encumbrances created pursuant to operating, farmout, construction, operation and
maintenance, space lease or similar agreements or the Organizational Documents
of any of the Acquired Companies; and (iv) easements, rights-of-way,
restrictions and other similar encumbrances incurred in the Ordinary Course of
Business which, in the aggregate, are not substantial in amount and which do not
in any case materially detract from the value of the property subject thereto as
it is currently being used or materially interfere with the ordinary conduct of
the business.
"Person" means an individual or entity, including, without limitation,
any partnership, corporation, association, joint stock company, trust, joint
venture, limited liability company, unincorporated organization, or Governmental
Authority (or any department, agency or political subdivision thereof).
"Post-Closing Tax Period" means any Tax period beginning after the
Closing Date.
"Post-Closing Tax Return" means any Tax Return that is required to be
filed for any of the Acquired Companies with respect to a Post-Closing Tax
Period.
"Pre-Closing Tax Period" means any Tax periods or portions thereof
ending on or before the Closing Date.
"Pre-Closing Tax Return" means any Tax Return that is required to be
filed for any Acquired Companies with respect to a Pre-Closing Tax Period.
"Prime Rate" means the Prime Rate reported in the Wall Street Journal
at the time such rate must be determined under the terms of this Agreement.
"Proposed Closing Statement" has the meaning set forth in Section
2(e)(i).
"Purchase Price" means $85,000,000 plus (i) the amount, if any, by
which the total of the Purchase Price Increases exceeds the total of the
Purchase Price Decreases, or minus (ii) the amount, if any, by which the total
of the Purchase Price Decreases exceeds the total of the Purchase Price
Increases.
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"Purchase Price Adjustment Date" means immediately after the close of
business on August 31, 2001.
"Purchase Price Decreases" means the following: (i) 50% of the amount,
if any, of negative consolidated working capital of the Acquired Companies as of
the Purchase Price Adjustment Date, as determined and calculated in accordance
with GAAP; (ii) 50% of the amount, if any, of all of the consolidated
Indebtedness of the Acquired Companies as of the Purchase Price Adjustment Date;
(iii) 100% of the amount, if any, of all dividends and/or distributions made by
Deepwater to the Sellers between the Purchase Price Adjustment Date and the
Closing Date; and (iv) 50% of the amount, if negative, of the UTOS Disposition
Adjustment.
"Purchase Price Increases" means (i) 50% of the amount, if any, of
positive consolidated working capital of the Acquired Companies as of the
Purchase Price Adjustment Date, as determined and calculated in accordance with
GAAP, and (ii) 50% of the amount, if positive, of the UTOS Disposition
Adjustment.
"Records" has the meaning set forth in Section 6(d).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Sellers" has the meaning set forth in the preface.
"Seller Indemnitees" means, collectively, the Sellers and their
Affiliates and each of their respective officers (or Persons performing similar
functions), directors (or Persons performing similar functions), employees,
agents, and representatives.
"Straddle Period" means a Tax period or year commencing before and
ending after the Closing Date.
"Straddle Return" means a Tax Return for a Straddle Period.
"Subject Assets" means the assets and other interests reflected in the
books and records of the Acquired Companies, including the record Equity
Interests in Deepwater's Subsidiaries, the natural gas gathering system and
related facilities commonly known as the East Breaks Gathering System and the
natural gas transmission system and related facilities commonly known as the
High Island Offshore System. Exhibit D contains a summary description of the
principal tangible assets included in the Subject Assets.
"Subject Insurance Policies" means those material policies of
insurance, the current policies of which are listed on Schedule 1(a), which the
Seller or any of its Affiliates maintain covering any Acquired Company with
respect to its assets and operations.
"Subsidiary" means, with respect to any relevant Person, any other
Person that is controlled (directly or indirectly) and more than 50%-owned
(directly or indirectly) by the
7
relevant Person. For purposes of this definition, the term "control" means the
ability to direct the management or policies of such Person by ownership of
voting interest, contract or otherwise.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
ss.59A), custom duties, capital stock, franchise, profits, withholding, social
security (or similar excises), unemployment, disability, ad valorem, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or not.
"Tax Records" means all Tax Returns and Tax-related work papers
relating to any Acquired Company.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d).
"UTOS Disposition Adjustment" means, to the extent not reflected in the
net consolidated working capital of the Acquired Companies on the Purchase Price
Adjustment Date, the net consolidated effect to the Acquired Companies of (i)
any post-closing purchase price adjustments for the disposition of U-T Offshore
System, L.L.C. pursuant to the
Purchase and Sale Agreement dated December 22,
2000 between Deepwater and Mid Louisiana Gas Transmission Company and (ii) any
other accounting adjustments related thereto.
"Western Gulf" has the meaning set forth in the Recitals.
2. Purchase and Sale.
(a) Sale of Deepwater Interest. Subject to the terms and
conditions of this Agreement, the Sellers agree to sell to the Buyer (or its
designee), and the Buyer agrees to purchase from the Sellers, the Deepwater
Interest, free and clear of any Encumbrances.
(b) Purchase Price. In consideration for the sale of the
Deepwater Interest, the Buyer agrees to pay the Purchase Price to the Sellers by
wire transfer of immediately available funds. All payment(s) with respect to the
Purchase Price due hereunder from the Buyer will be paid by the Buyer to TOPSI,
for the benefit of all of the Sellers, and the Sellers shall be responsible for
allocating and distributing such payment(s) among themselves. As provided below,
the Buyer shall pay the estimated Purchase Price on the Closing Date, subject to
adjustment.
(c) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of the
Sellers, commencing at 10:00 a.m., local time, on the third business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
8
conditions with respect to actions each Party shall take at the Closing itself)
or such other date as the Parties may mutually determine (the "Closing Date").
(d) Deliveries at the Closing. At the Closing, (i) the Sellers
shall deliver to the Buyer the various certificates, instruments, and documents
referred to in Sections 7(a) and 9(o), (ii) the Buyer shall deliver to the
Sellers the various certificates, instruments, and documents referred to in
Section 7(b), (iii) the Sellers shall execute and deliver to the Buyer the
Assignment, one or more certificate(s) representing the Deepwater Interest, and
evidence that (x) Deepwater owns Western Gulf and (y) Western Gulf owns East
Breaks and HIOS, (iv) the Buyer shall execute and deliver to the Sellers the
Assignment, (v) the Sellers shall cause ANR to execute and deliver to the Buyer
the ANR Sponsor Agreement; (vi) the Buyer shall cause the Partnership to execute
and deliver to the Sellers the Partnership Sponsor Agreement; and (vii) the
Buyer shall deliver to the Sellers (as described above) the estimated Purchase
Price as set forth on the Proposed Closing Statement.
(e) Proposed Closing Statement and Post-Closing Adjustment.
(i) At least three business days prior to the Closing
Date, the Sellers shall cause to be prepared and delivered to
the Buyer a statement (the "Proposed Closing Statement"), as
prepared and determined in accordance with GAAP to the extent
applicable, setting forth Sellers' good faith estimate,
including reasonable detail, of the Purchase Price. As soon as
practicable, but in any event no later than 60 days following
the Closing Date, Sellers shall cause to be prepared and
delivered to the Buyer a statement, including reasonable
detail, of the actual Purchase Price (such statement, as it
may be adjusted pursuant to Section 2(e)(ii), the "Closing
Statement").
(ii) Upon receipt of the Closing Statement, the Buyer
and the Buyer's independent accountants shall be permitted
during the succeeding 30-day period to examine the work papers
used or generated in connection with the preparation of the
Closing Statement and such other documents as the Buyer may
reasonably request in connection with its review of the
Closing Statement. Within 30 days of receipt of the Closing
Statement, the Buyer shall deliver to the Sellers a written
statement describing in reasonable detail its objections (if
any) to any amounts or items set forth on the Closing
Statement. If the Buyer does not raise objections within such
period, then, except with respect to any UTOS Disposition
Adjustment, the Closing Statement shall become final and
binding upon all Parties at the end of such period. If the
Buyer raises objections, the Parties shall negotiate in good
faith to resolve any such objections. If the Parties are
unable to resolve any disputed item within 60 days after the
Buyer's receipt of the Closing Statement, any such disputed
item shall be submitted to a nationally recognized independent
accounting firm mutually agreeable to the Parties who shall be
instructed to resolve such disputed item within 30 days. The
resolution of disputes by the accounting firm so selected
shall be set forth in writing and shall be conclusive, binding
and non-appealable upon the Parties and the Closing Statement
shall become final and binding upon the date of such
resolution. The
9
fees and expenses of such accounting firm shall be paid
one-half by the Buyer and one-half by Sellers. Notwithstanding
the finalization or resolution of the Closing Statement, if
the UTOS Disposition Adjustment changes after such
finalization or resolution, the Parties shall adjust the
Purchase Price for, and make appropriate payment in connection
with, any such changes to the UTOS Disposition Adjustment as
soon as practicable thereafter.
(iii) If the Purchase Price as set forth on the
Closing Statement exceeds the estimated Purchase Price as set
forth on the Proposed Closing Statement, the Buyer shall pay
TOPSI, for the benefit of the Sellers, the amount of such
excess (such amount which the Sellers shall share and allocate
among themselves). If the estimated Purchase Price as set
forth on the Proposed Closing Statement exceeds the Purchase
Price as set forth on the Closing Statement, the Sellers shall
pay to the Buyer (or its designee) the amount of such excess.
After giving effect to the foregoing adjustments, any amount
to be paid by the Buyer to the Sellers, or to be paid by the
Sellers to the Buyer, as the case may be, shall be paid in the
manner and with interest as provided in Section 2(e)(iv) at a
mutually convenient time and place within five business days
after the later of acceptance of the Closing Statement or the
resolution of the Buyer's objections thereto pursuant to
Section 2(e)(ii).
(iv) Any payments pursuant to this Section 2(e) shall
be made by causing such payments to be credited in immediately
available funds to such account or accounts of the Buyer or
the Sellers, as the case may be, as may be designated by the
buyer or the Sellers, as the case may be. If payment is being
made after the fifth business day referred to in Section
2(e)(iii), the amount of the payment to be made pursuant to
this Section 2(e) shall bear interest from and including such
fifth business day to, but excluding, the date of payment at a
rate per annum equal to the Prime Rate plus 2%. Such interest
shall be payable at the same time as the payment to which it
relates and shall be calculated on the basis of a year of 365
days and the actual number of days for which due.
(v) The Buyer shall cooperate in the preparation of
the Closing Statement, including providing customary
certifications to the Sellers, and, if requested, to the
Sellers' independent accountants or the accounting firm
selected by mutual agreement of the Parties pursuant to
Section 2(e)(ii).
(vi) Except as set forth in Section 2(e)(ii), each
Party shall bear its own expenses incurred in connection with
the preparation and review of the Closing Statement.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of Sellers. Each Seller
hereby represents and warrants to the Buyer with as to itself as follows:
10
(i) Organization and Good Standing. Each Seller is an
entity duly organized, validly existing, and in good standing
under the Laws of the state of Delaware. Each Seller is in
good standing under the Laws of the state of
Texas and each
other jurisdiction which requires such qualification.
(ii) Authorization of Transaction. Each Seller has
full power and authority (including full company power and
authority) to execute and deliver this Agreement and to
perform their obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of each
Seller, enforceable against such Seller in accordance with its
terms and conditions, subject, however, to the effects of
bankruptcy, insolvency, reorganization, moratorium or similar
Laws affecting creditors' rights generally, and to general
principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law). Except as set forth on Schedule 3(a)(ii), the Sellers
need not give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any Governmental
Authority or any other Person in order to consummate the
transactions contemplated by this Agreement, except for the
prior approval of the Federal Trade Commission ("FTC"), if
applicable.
(iii) Noncontravention. Except for prior approval of
the FTC (if applicable) and filings specified in Schedule
3(a)(ii) or as set forth in Schedule 3(a)(iii), neither the
execution and delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, shall (A) violate any
statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any
Governmental Authority to which any Seller is subject or any
provision of its Organizational Documents or (B) conflict
with, result in a breach of, constitute a default under,
result in the acceleration of, create in any Person the right
to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license,
instrument, or other arrangement to which any Seller is a
party or by which it is bound or to which any of its assets
are subject, except for such violations, defaults, breaches,
or other occurrences that do not, individually or in the
aggregate, have a material adverse effect on the ability of
the Sellers to consummate the transactions contemplated by
this Agreement.
(iv) Brokers' Fees. The Sellers have no liability or
obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated
by this Agreement for which the Buyer could become liable or
obligated.
(b) Representations and Warranties of the Buyer. The Buyer
hereby represents and warrants to the Sellers as to itself as follows:
(i) Organization of the Buyer. The Buyer is a limited
liability company duly organized, validly existing, and in
good standing under the Laws of the state of Delaware. The
Buyer is in good standing under the Laws of the state of
Texas
and each other jurisdiction which requires such qualification.
11
(ii) Authorization of Transaction. The Buyer has full
power and authority (including full company power and
authority) to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms and
conditions, subject, however, to the effects of bankruptcy,
insolvency, reorganization, moratorium or similar Laws
affecting creditors' rights generally, and to general
principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law). Except as set forth on Schedule 3(b)(ii), the Buyer need
not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Governmental
Authority or any other Person in order to consummate the
transactions contemplated by this Agreement, except for the
prior approval of the FTC, if applicable.
(iii) Noncontravention. Except for the prior approval
of the FTC (if applicable) and filings specified in Schedule
3(b)(ii) or as set forth in Schedule 3(b)(iii), neither the
execution and delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, shall (A) violate any
statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any
Governmental Authority to which the Buyer is subject or any
provision of its Organizational Documents or (B) conflict
with, result in a breach of, constitute a default under,
result in the acceleration of, create in any Person the right
to accelerate, terminate, modify, or cancel, or require any
notice, approval or consent under any agreement, contract,
lease, license, instrument, or other arrangement to which the
Buyer is a party or by which it is bound or to which any of
its assets is subject, except for such violations, defaults,
breaches, or other occurrences that do not, individually or in
the aggregate, have a material adverse effect on the ability
of the Buyer to consummate the transactions contemplated by
this Agreement.
(iv) Brokers' Fees. The Buyer has no liability or
obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated
by this Agreement for which the Seller could become liable or
obligated.
(v) Investment. The Buyer is not acquiring the
Deepwater Interest (or the Equity Interest in any Acquired
Company) with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act.
The Buyer is familiar with investments of the nature of the
Deepwater Interest, understands that this investment involves
substantial risks, has adequately investigated Deepwater, the
Deepwater Interest and the Acquired Companies, and has
substantial knowledge and experience in financial and business
matters such that it is capable of evaluating, and has
evaluated, the merits and risks inherent in purchasing the
Deepwater Interest, and is able to bear the economic risks of
such investment. The Buyer has had the opportunity to visit
with the Sellers and the Acquired Companies and meet with
their representative officers and other
12
representatives to discuss the business, assets, liabilities,
financial condition, and operations of the Acquired Companies,
has received all materials, documents and other information
that Buyer deems necessary or advisable to evaluate the
Deepwater Interest and the Acquired Companies, and has made
its own independent examination, investigation, analysis and
evaluation of the Acquired Companies, including its own
estimate of the value of the Deepwater Interest. The Buyer has
undertaken such due diligence (including a review of the
assets, properties, liabilities, books, records and contracts
of the Acquired Companies) as the Buyer deems adequate.
4. Representations and Warranties Concerning the Acquired Companies.
Each Seller hereby represents and warrants to the Buyer as to itself as follows:
(a) Organization, Qualification, and Company Power. (x) Each
Acquired Company is a limited liability company duly organized, validly
existing, and in good standing under the Laws of the state of Delaware; (y) is
in good standing under the Laws of the state of
Texas and each other
jurisdiction which requires qualification, except where the lack of such
qualification would not have a Material Adverse Effect; and (z) has full power
and authority to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it.
(b) Noncontravention. Except for the need to obtain prior
approval of the FTC or as set forth in Schedule 4(b), neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, shall (i) violate any statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
Governmental Authority to which any Acquired Company (or any of the Subject
Assets) is subject or any provision of any Acquired Company's Organizational
Documents or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or trigger any
rights to payment or other compensation, or result in the imposition of any
Encumbrance on any of the Subject Assets, under any agreement, contract, lease,
license, instrument, or other arrangement to which any Acquired Company (or any
of the Subject Assets) is subject, except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, right to payment or other compensation, or Encumbrance would not have a
Material Adverse Effect, or would not materially adversely affect the ability of
any Seller to consummate the transactions contemplated by this Agreement.
(c) Title to and Condition of Assets.
(i) The Acquired Companies have good, marketable and
indefeasible title to all of the Subject Assets, free and
clear of all Encumbrances, except for (a) Permitted
Encumbrances and (b) Encumbrances disclosed in Schedule
4(c)(i). The Subject Assets are all of the assets and
interests of the Acquired Companies, the operations of which
are reflected in the Financial Statements.
13
(ii) To the Sellers' Knowledge, except as disclosed
in Schedule 4(c)(ii), the Subject Assets are in good operating
condition and repair (normal wear and tear excepted), are free
from defects (patent and latent), are suitable for the
purposes for which they are currently used and are not in need
of maintenance or repairs except for ordinary routine
maintenance and repairs.
(iii) Capitalization of Deepwater. The Sellers own
(beneficially and of record) 100% of the Deepwater Interest,
which interests are denominated below:
In Deepwater:
American Offshore 14.819% Equity Interest
TOPSI 14.819% Equity Interest
Unitex 2.717% Equity Interest
ANR LLC 17.645% Equity Interest
------
Total 50.000% Equity Interest
======
The Deepwater Interest constitutes 50% of the issued and
outstanding Equity Interest of Deepwater and has been duly
authorized, and is validly issued and fully paid and
non-assessable. Except to the extent created under the
Securities Act, state securities Laws, limited liability
company Laws and general corporation Laws of Deepwater's
jurisdiction of formation, and as created by Deepwater's
Organizational Documents, (x) the Deepwater Interest is held
as set forth above, free and clear of any Encumbrances and (y)
there are no Commitments with respect to any Equity Interest
of Deepwater. No Seller is party to any voting trusts,
proxies, or other agreements or understandings with respect to
voting any Equity Interest of Deepwater.
(iv) Acquired Company Capitalization. Deepwater does
not own an Equity Interest in any Person other than Western
Gulf, East Breaks and HIOS. Deepwater owns 100% of the Equity
Interests of Western Gulf. Western Gulf does not own an Equity
Interest in any Person other than East Breaks and HIOS.
Western Gulf owns 100% of the Equity Interests of East Breaks
and HIOS. Neither East Breaks nor HIOS owns an Equity Interest
in any Person. There are no Commitments with respect to an
Equity Interest in any Acquired Company.
(d) Material Change. Except as set forth in Schedule 4(d),
since December 31, 2000:
(i) there has not been any Material Adverse Effect;
(ii) the Subject Assets have been operated and
maintained in the Ordinary Course of Business;
14
(iii) to the Sellers' Knowledge, there has not been
any material damage, destruction or loss to any material
portion of the Subject Assets, whether or not covered by
insurance;
(iv) there has been no purchase, sale or lease of any
material asset included in the Subject Assets;
(v) there has been no actual, pending, or to the
Sellers' Knowledge, threatened change affecting any of the
Subject Assets with any customers, licensors, suppliers,
distributors or sales representatives of any Acquired Company,
except for changes that do not have a Material Adverse Effect;
(vi) there has been no (x) amendment or modification
in any material respect to any contract or agreement material
to any Acquired Company, or (y) termination of any contract or
agreement material to any Acquired Company before the
expiration of the term thereof other than to the extent any
such material contract or agreement terminated pursuant to its
terms in the Ordinary Course of Business;
(vii) there is no contract, commitment or agreement
to do any of the foregoing, except as expressly permitted
hereby.
(e) Legal Compliance. The Acquired Companies have complied
with all applicable Laws of all Governmental Authorities, except where the
failure to comply would not have a Material Adverse Effect. The Sellers make no
representations or warranties in this Section 4(e) with respect to Taxes or
Environmental Laws, for which the sole representations and warranties of the
Sellers are set forth in Sections 4(i) and 4(f), respectively.
15
(f) Tax Matters. Except as set forth in Schedule 4(f) or as
would not have a Material Adverse Effect, the Sellers, their Affiliates and the
Acquired Companies have filed all Tax Returns with respect to the Acquired
Companies that they were required to file and such Tax Returns are accurate in
all material respects. All Taxes shown as due by any Acquired Company on any
such Tax Returns have been paid.
(g) Contracts and Commitments. (i) Schedule 4(g) contains a
list of all the contracts, agreements, rights of way, licenses, permits, and
other documents and instruments of the Acquired Companies (the "Acquired Company
Contracts"), and each such Acquired Company Contract is in full force and
effect, except where the failure to be in full force and effect would not have a
Material Adverse Effect; (ii) the Acquired Company Contracts constitute all of
the contracts, agreements, rights of way, licenses, permits, and other documents
and instruments necessary for the operation and business of the Acquired
Companies consistent with prior operation; (iii) the Acquired Companies have
performed all material obligations required to be performed by them to date
under the Acquired Company Contracts, and are not in default under any material
obligation of any such contract, except when such default would not have a
Material Adverse Effect; and (iv) to the Sellers' Knowledge, no other party to
any Acquired Company Contract is in default thereunder.
(h) Litigation. Schedule 4(h) sets forth each instance in
which any Acquired Company or any of the Subject Assets (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is
the subject of any action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction, or is the subject of any pending or, to
the Sellers' Knowledge, threatened claim, demand, or notice of violation or
liability from any Person, except where any of the foregoing would not have a
Material Adverse Effect.
(i) Environmental Matters. Except as set forth in Schedule
4(i):
(i) The Acquired Companies have been in compliance
with all applicable federal, state, and local Laws (including
common law, ordinances, judgements, injunctions, directives,
environmental permits and other governmental authorizations)
relating to the environment, human health, safety, natural
resources or any Hazardous Substance (as each may be amended,
supplemented or supplanted from time to time), including,
without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C.
section 9601, et seq. ("CERCLA"), the Resource Conservation
and Recovery Act of 1976, as amended, 42 U.S.C. section 6901,
et seq., the Clean Air Act, as amended, 42 U.S.C. section
7401, et seq., the Federal Water Pollution Control Act, as
amended, 33 U.S.C. section 1251, et seq., and the Oil
Pollution Act of 1990, 33 U.S.C. section 2701, et seq.
(collectively, the "Environmental Laws" and individually an
"Environmental Law"), except for such instances of
noncompliance that individually or in the aggregate do not
have a Material Adverse Effect.
16
(ii) The Acquired Companies have obtained all
permits, licenses, franchises, authorities, consents,
registrations, orders, certificates, waivers, exceptions,
variances and approvals, and have made all filings, paid all
fees, and maintained all material information, documentation,
and records, as necessary under applicable Environmental Laws
for operating the Subject Assets and their business as they
are presently conducted, and all such permits, licenses,
franchises, authorities, consents, approvals, and filings
remain in full force and effect, except for such matters that
individually or in the aggregate do not have a Material
Adverse Effect. To the Sellers' Knowledge, Schedule 4(i)(ii)
sets forth a complete list of all permits, licenses,
franchises, authorities, consents, and approvals, as necessary
under applicable Environmental Laws for operating the Subject
Assets and the Acquired Companies' businesses as they are
presently conducted, each of which is held in the name of the
appropriate Acquired Company as indicated on such schedule.
(iii) Except as would not have a Material Adverse
Effect, (x) there are no pending or threatened claims,
demands, actions, administrative proceedings or lawsuits
against any Acquired Company, and none of the Sellers, their
Affiliates or the Acquired Companies has received notice of
any of the foregoing and (y) no Acquired Company, and none of
the Subject Assets, is subject to any outstanding injunction,
judgment, order, decree or ruling under any Environmental
Laws.
(iv) None of the Sellers, their Affiliates or the
Acquired Companies have received any written notice that any
Acquired Company is or may be a potentially responsible party
under CERCLA or any analogous state law in connection with any
site actually or allegedly containing or used for the
treatment, storage or disposal of Hazardous Substances.
(v) All Hazardous Substances or solid wastes
generated, transported, handled, stored, treated or disposed
by, in connection with or as a result of the operation or
possession of the Acquired Companies or the conduct of the
Acquired Companies, have been transported only by carriers
maintaining valid authorizations under applicable
Environmental Laws and treated, stored, disposed of or
otherwise handled only at facilities maintaining valid
authorizations under applicable Environmental Laws and such
carriers and facilities have been and are operating in
compliance with such authorizations and are not the subject of
any existing, pending or threatened action, investigation or
inquiry by any Governmental Authority or other Person in
connection with any of the Environmental Laws.
The Sellers make no representation or warranty regarding any compliance or
failure to comply with, or any actual or contingent liability under, any
Environmental Law, except as expressly set forth in this Section 4(i). For
purposes of this Section 4(i), each reference to the Acquired Companies shall be
deemed to include the Sellers.
17
(j) Preferential Purchase Rights. Except as set forth on
Schedule 4(j), there are no preferential purchase rights, options or other
rights held by any Person not a party to this Agreement to purchase or acquire
any or all of the Deepwater Interest, any or all of the Equity Interest in any
Acquired Company other than Deepwater, or any of the Subject Assets, that would
be triggered or otherwise affected as a result of the transactions contemplated
by this Agreement.
(k) Financial Statements.
(i) Schedule 4(k) sets forth (A) audited consolidated
financial statements for Deepwater as of, and for the twelve
month period ended, December 31, 2000; (B) audited
consolidated financial statements for Western Gulf as of, and
for the twelve month period ended, December 31, 2000; (C)
audited financial statements for HIOS as of, and for the
twelve month period ended, December 31, 2000; and (D) audited
financial statements for East Breaks as of, and for the twelve
month period ended, December 31, 2000 (the statements referred
to in clauses (A) - (D) are the "Audited Financial
Statements"); and (E) an unaudited consolidated balance sheet
and income statement for Deepwater as of, and for the six
month period ended, June 30, 2001 (such statements are the
"Interim Financial Statements", and the Interim Financial
Statements together with the Audited Financial Statements are
the "Financial Statements").
(ii) (A) The Financial Statements were prepared in
accordance with GAAP (except as expressly set forth therein,
except (with respect to the Interim Financial Statements) for
the absence of footnotes (other than to the extent footnotes
are included in Schedule 4(k)), and (with respect to the
Interim Financial Statements) except for normal year-end
adjustments) and fairly present, in all material respects, the
financial position and income, cash flows and owner's equity
for the consolidated Acquired Companies as of the dates and
for the periods indicated, except with respect to any UTOS
Disposition Adjustment; (B) the Financial Statements do not
omit to state any liability required to be stated therein in
accordance with GAAP (except as expressly set forth therein,
except (with respect to the Interim Financial Statements) for
the absence of footnotes (other than to the extent footnotes
are included in Schedule 4(k)), and except (with respect to
the Interim Financial Statements) for normal year-end
adjustments), and except for any negative UTOS Disposition
Adjustment; (C) except for any negative UTOS Disposition
Adjustment, none of the Acquired Companies has, or has had,
any lease obligations or contingent liabilities which, if the
Interim Financial Statements had contained footnotes, would
have been required by GAAP to have been disclosed or reflected
in such footnotes; and (D) except for any negative UTOS
Disposition Adjustment, none of the Acquired Companies has any
Obligations other than those reflected in the Financial
Statements.
(l) Employee Matters. No Acquired Company has any employees.
18
(m) Prohibited Events. None of the matters described in
Section 5(c) have occurred since the Purchase Price Adjustment Date.
(n) Disclaimer of Representations and Warranties Concerning
Personal Property, Equipment, and Fixtures. The Buyer acknowledges that (a) it
has had and pursuant to this Agreement shall have before Closing access to the
Acquired Companies and the officers and employees of the Sellers and (b) in
making the decision to enter into this Agreement and consummate the transactions
contemplated hereby, the Buyer has relied solely on the basis of its own
independent investigation and upon the express representations, warranties,
covenants, and agreements set forth in this Agreement. Accordingly, the Buyer
acknowledges that, except as expressly set forth in this Agreement, the Sellers
have not made, and SELLERS MAKE NO AND DISCLAIM ANY REPRESENTATIONS OR
WARRANTIES, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE, OR
OTHERWISE, REGARDING (i) THE QUALITY, CONDITION, OR OPERABILITY OF ANY PERSONAL
PROPERTY, EQUIPMENT, OR FIXTURES, (ii) THEIR MERCHANTABILITY, (iii) THEIR
FITNESS FOR ANY PARTICULAR PURPOSE, (iv) THEIR CONFORMITY TO MODELS, SAMPLES OF
MATERIALS OR MANUFACTURER DESIGN, OR (v) AS TO WHETHER ANY SUBJECT ASSETS ARE
YEAR 2000 COMPLIANT, AND ALL PERSONAL PROPERTY AND EQUIPMENT IS DELIVERED "AS
IS, WHERE IS" IN THE CONDITION IN WHICH THE SAME EXISTS.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the date of this Agreement and the Closing:
(a) General. Each Party shall use its Best Efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement.
(b) Notices and Consents. Each of the Parties shall give any
notices to, make any filings with, and use its Best Efforts to obtain any
authorizations, consents, and approvals of Governmental Authorities and third
parties it is required to obtain in connection with the matters referred to in
Sections 3(a)(ii), 3(a)(iii), 3(b)(ii), and 3(b)(iii), including the
corresponding Schedules, so as to permit the Closing to occur not later than
5:00 p.m. (Houston time) on December 31, 2001. Without limiting the generality
of the foregoing, the Parties agree to work in good faith with the FTC in order
to consummate the transactions contemplated hereby as soon as reasonably
practicable, but in no event later than 5:00 p.m. (Houston time) on December 31,
2001; provided, that, notwithstanding anything to the contrary contained herein,
this sentence shall not obligate the Buyer to divest or hold separate any assets
or enter into any agreement not contemplated by this Agreement or modify this
Agreement.
(c) Operation of Business. The Sellers shall not, without the
consent of the Buyer (which consent shall not be unreasonably withheld or
delayed), except as expressly contemplated by this Agreement or as contemplated
by Schedule 5(c), cause or (to the extent the Sellers have the Legal Right)
permit any Acquired Company to engage in any practice, take any action, or enter
into any transaction outside the Ordinary Course of Business. Without limiting
the generality of the foregoing, the Sellers shall not, without the consent of
the Buyer (which consent
19
shall not be unreasonably withheld or delayed), except as expressly contemplated
by this Agreement or as contemplated by Schedule 5(c), and shall not cause or
(to the extent the Sellers have the Legal Right) permit any Acquired Company to,
do any of the following:
(i) issue, sell, pledge, dispose of, grant, encumber,
or authorize the issuance, sale, pledge, disposition, or grant
of any Equity Interest of any Acquired Company, or any
Commitments with respect to any Equity Interest of any
Acquired Company;
(ii) cause or allow any part of the Deepwater
Interest or any asset of an Acquired Company to become subject
to an Encumbrance, except for Permitted Encumbrances and other
Encumbrances identified in Section 4(d);
(iii) amend in any material respect any contract or
agreement material to any Acquired Company (including any
Acquired Company's Organizational Documents) or terminate any
such material contract or agreement before the expiration of
the term thereof other than to the extent any such material
contract or agreement terminates or is terminable pursuant to
its terms in the Ordinary Course of Business;
(iv) except as required by Law, make, change or
revoke any Tax election relevant to any Acquired Entity;
(v) (A) acquire (including, without limitation, by
merger, consolidation or acquisition of stock or assets) any
corporation, partnership, or other business organization or
any division thereof or any material amount of assets except
for acquisitions of assets in the Ordinary Course of Business;
(B) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee, endorse, or otherwise as
an accommodation become responsible for, the obligations of
any Person, or make any loans or advances except for
intercompany borrowing in the Ordinary Course of Business; (C)
sell, lease or otherwise dispose of any property or assets,
other than sales of goods or services in the Ordinary Course
of Business; or (D) enter into or amend a contract, agreement,
commitment, or arrangement with respect to any matter set
forth in this Section 5(c)(v); provided that notwithstanding
any provision of this Agreement, if the Buyer expressly
consents in writing (x) each Acquired Company shall be
entitled to dividend and/or distribute to its Equity Interest
holders, at any time, and from time to time, such cash
generated by such company's business to which such Equity
Interest holder would otherwise be entitled (other than cash
arising from borrowings by such company or sales of assets by
such company outside of the Ordinary Course of Business) and
(y) each Acquired Company may make or incur capital
expenditures in accordance with the terms of its
Organizational Documents;
(vi) change any Acquired Company's accounting
practices in any material respect with the exception of any
changes in accounting methodologies
20
that have already been agreed upon by such company's Equity
Interest holders, consistent with such company's
Organizational Documents; or
(vii) initiate or settle any litigation, complaint,
rate filing or administration proceeding.
(d) Intercompany Transactions. All outstanding receivables,
payables and other intercompany transactions and arrangements between Sellers or
any of their Affiliates, on the one hand, and any Acquired Company, on the other
hand, shall remain in full force and effect through and after the Closing.
(e) Deepwater Loan Obligations. Prior to or at the Closing,
the Buyer shall cause the obligations under the Deepwater Loan Documents to be
paid in full.
(f) Full Access. The Sellers shall permit, and shall cause
their Affiliates to permit, representatives of the Buyer to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of the Sellers, to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to the Acquired Companies and the Deepwater Interest.
6. Post-Closing Covenants. The Parties agree as follows:
(a) General. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties shall take such further action (including the execution and delivery of
such further instruments and documents) as the other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 8).
(b) Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or before
the Closing Date involving any Acquired Company, any portion of the Subject
Assets or any portion of the Deepwater Interest, the other Party shall cooperate
with the contesting or defending Party and its counsel in the defense or
contest, make available its personnel, and provide such testimony and access to
its books and records (other than books and records which are subject to
privilege or to confidentiality restrictions) as shall be necessary in
connection with the defense or contest, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8).
(c) Surety Bonds; Guarantees. The Buyer agrees to be
substituted as the surety or guarantor of any surety bonds or guarantees issued
by any of the Sellers or any of their Affiliates in connection with the Acquired
Companies, including, but not limited to, the surety bonds and guarantees listed
on Schedule 6(c). The Buyer and the Sellers shall cooperate to effect all such
substitutions and the Buyer shall indemnify and hold the Sellers harmless from
and against any
21
Adverse Consequences arising from the failure of the Buyer to be so substituted.
The Buyer shall use commercially reasonable efforts to obtain a release of the
Sellers from any surety or guaranty obligations with respect to the Acquired
Companies.
(d) Delivery and Retention of Records. On or promptly after
the Closing Date, the Sellers shall deliver or cause to be delivered to the
Buyer, copies of Tax Records which are relevant to Post-Closing Tax Periods and
all other files, books, records, information and data relating to the Acquired
Companies (other than Tax Records) that are in the possession or control of the
Sellers (the "Records"). The Buyer agrees to (i) hold the Records and not to
destroy or dispose of any thereof for a period of ten years from the Closing
Date or such longer time as may be required by Law, provided that, if it desires
to destroy or dispose of such Records during such period, it shall first offer
in writing at least 60 days before such destruction or disposition to surrender
them to the Sellers and if the Sellers do not accept such offer within 20 days
after receipt of such offer, the Buyer may take such action and (ii) following
the Closing Date to afford the Sellers, their accountants, and counsel, during
normal business hours, upon reasonable request, at any time, full access to the
Records and to the Buyer's employees to the extent that such access may be
requested for any legitimate purpose at no cost to the Sellers (other than for
reasonable out-of-pocket expenses); provided that such access shall not be
construed to require the disclosure of Records that would cause the waiver of
any attorney-client, work product, or like privilege; provided, further that in
the event of any litigation nothing herein shall limit any Party's rights of
discovery under applicable Law.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of
the Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties of the Sellers
contained in Section 3(a) and Section 4 must be true and
correct in all material respects (without giving effect to any
supplement to the Schedules, any qualification as to
materiality, Material Adverse Effect, Knowledge, awareness or
concepts of similar import, or any qualification or limitation
as to monetary amount or value) as of the date of this
Agreement and at Closing (except for those which refer to a
specific date, which must be true and correct as of such
date), without giving effect to any supplements to the
Schedules;
(ii) The Sellers must have performed and complied in
all material respects with each of their covenants hereunder
through the Closing (without giving effect to any supplement
to the Schedules, any qualification as to materiality,
Material Adverse Effect, Knowledge, awareness or concepts of
similar import, or any qualification or limitation as to
monetary amount or value);
(iii) there must not be any injunction, judgment,
order, decree, ruling, or charge in effect preventing
consummation of any of the transactions contemplated by this
Agreement or any suit or action pending by a Governmental
22
Authority to enjoin the consummation of any of the
transactions, contemplated by this Agreement;
(iv) The Sellers must have obtained all Governmental
Authority and third party consents specified in Sections
3(a)(ii), 3(a)(iii), and 4(b), including the corresponding
Schedules;
(v) The Sellers must have delivered to the Buyer a
certificate to the effect that each of the conditions
specified in subsections 7(a)(i)-(iv) is satisfied in all
respects;
(vi) the FTC must have approved the transactions
contemplated hereunder;
(vii) The Closing Date shall be no earlier than
October 1, 2001;
(viii) The Board of Directors of the General Partner
shall have received a fairness opinion acceptable to such
Board (in its sole discretion) from Fleet Securities, Inc. or
any other financial advisor acceptable to such Board (in its
sole discretion) with respect to the transactions contemplated
herein;
(ix) The transactions contemplated herein shall have
been approved by at least a majority of the Board of Directors
of the General Partner and at least a majority of the
independent members of the Board of Directors of the General
Partner; and
(x) The obligations under the Deepwater Loan
Documents shall have been paid in full.
The Buyer may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or before the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of
the Sellers to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties of the Buyer
contained in Section 3(b) must be true and correct in all
material respects (without giving effect to any supplement to
the Schedules, any qualification as to materiality, Material
Adverse Effect, Knowledge, awareness or concepts of similar
import, or any qualification or limitation as to monetary
amount or value) as of the date of this Agreement and at
Closing (except for those which refer to a specific date,
which must be true and correct as of such date), without
giving effect to any supplements to the Schedules;
(ii) the Buyer must have performed and complied in
all material respects with each of its covenants hereunder
through the Closing (without giving
23
effect to any supplement to the Schedules, any qualification
as to materiality, Material Adverse Effect, Knowledge,
awareness or concepts of similar import, or any qualification
or limitation as to monetary amount or value);
(iii) there must not be any injunction, judgment,
order, decree, ruling, or charge in effect preventing
consummation of any of the transactions contemplated by this
Agreement or any suit or action pending by a Governmental
Authority to enjoin the consummation of any of the
transactions, contemplated by this Agreement;
(iv) the Buyer must have delivered to the Sellers a
certificate to the effect that each of the conditions
specified in subsections 7(b)(i)-(ii) is satisfied in all
respects;
(v) the FTC must have approved the transactions
contemplated hereunder; and
(vi) The obligations under the Deepwater Loan
Documents shall have been paid in full.
The Sellers may waive any condition specified in this Section 7(b) if
it executes a writing so stating at or before the Closing.
8. Remedies for Breaches of this Agreement.
(a) Survival of Representations and Warranties. (i) All of the
representations and warranties of the Sellers contained in Section 3(a) and
Section 4 (other than Sections 4(c)(i), 4(c)(iii) and 4(f)) shall survive the
Closing hereunder for a period of 3 years after the Closing Date; (ii) the
representations and warranties of the Sellers contained in Sections 4(c)(i) and
4(c)(iii) shall survive the Closing forever; and (iii) the representations and
warranties of the Sellers contained in Section 4(f) shall survive the Closing
with respect to any given claim that would constitute a breach of such
representation or warranty until the expiration of the statute of limitations
applicable to the underlying Tax matter giving rise to that claim. The
representations and warranties of the Buyer contained in Section 3(b) shall
survive the Closing for a period of 3 years after the Closing Date. The
covenants and obligations contained in Sections 2 and 6 and all other covenants
and obligations contained in this Agreement shall survive the Closing forever.
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event: (x) the Sellers breach any of their
representations or warranties (without giving effect to any
supplement to the Schedules, any qualification as to
materiality, Material Adverse Effect, Knowledge, awareness or
concepts of similar import, or any qualification or limitation
as to monetary amount or value) contained herein (other than a
representation or warranty contained in Section 4(c)(iii));
(y) there is an applicable survival period pursuant to Section
8(a); and (z) the Buyer makes a written claim for
indemnification against the Sellers pursuant to Section 11(g)
within such survival period, then the
24
Sellers agree to indemnify the Buyer Indemnitees from and
against any Adverse Consequences to the extent they are caused
proximately by the breach and suffered by such the Buyer
Indemnitees; provided, that the Sellers shall not have any
obligation to indemnify the Buyer Indemnitees from and against
any such Adverse Consequences (A) until the Buyer Indemnitees,
in the aggregate, have suffered Adverse Consequences by reason
of all such breaches in excess of an aggregate deductible
amount equal to 1% of the Purchase Price (after which point
the Sellers shall be obligated only to indemnify the Buyer
Indemnitees from and against further such Adverse
Consequences) or thereafter (B) to the extent the Adverse
Consequences the Buyer Indemnitees, in the aggregate, have
suffered by reason of all such breaches exceeds an aggregate
ceiling amount equal to 50% of the Purchase Price (after which
point the Seller shall have no obligation to indemnify the
Buyer Indemnitees from and against further such Adverse
Consequences).
(ii) In the event: (x) the Sellers breach any of
their covenants or obligations in Sections 2 or 6 or any other
covenants or obligations in this Agreement or any
representation or warranty contained in Section 4(c)(iii) (in
each case above without giving effect to any supplement to the
Schedules, any qualification as to materiality, Material
Adverse Effect, Knowledge, awareness or concepts of similar
import, or any qualification or limitation as to monetary
amount or value); (y) there is an applicable survival period
pursuant to Section 8(a); and (z) the Buyer makes a written
claim for indemnification against the Sellers pursuant to
Section 11(g) within such survival period, then the Sellers
agree to indemnify the Buyer Indemnitees from and against the
entirety of any Adverse Consequences caused proximately by
such breach and suffered by the Buyer Indemnitees.
(iii) The Sellers shall indemnify and hold harmless
the Buyer Indemnitees against any and all Adverse Consequences
resulting by reason of (a) joint and several liability with
the Sellers arising by reason of having been required to be
aggregated with the Sellers under Section 414(o) of the Code,
or having been under "common control" with the Sellers, within
the meaning of Section 4001(a)(14) of ERISA.
(iv) In the event: (x) there is an applicable
survival period pursuant to Section 8(a) and (y) the Buyer
makes a written claim for indemnification against the Sellers
pursuant to Section 11(g) within such survival period, then
the Sellers agree to indemnify the Buyer Indemnitees from and
against the entirety of any Adverse Consequences caused
proximately by, and suffered by the Buyer Indemnitees with
respect to, any environmental condition, claim or loss with
respect to the Acquired Companies arising as a result of
events occurring on or prior to the Closing Date, including
without limitation, the matters disclosed in Schedule 4(i).
25
(v) To the extent any Buyer Indemnitee becomes liable
to, and is ordered to and does pay to any third party,
punitive, exemplary, special or consequential damages
proximately caused by a breach by any Seller of any
representation, warranty or covenant contained in this
Agreement, then such punitive, exemplary, special or
consequential damages shall be deemed actual damages to such
Buyer Indemnitee and included within the definition of Adverse
Consequences for purposes of this Section 8.
(vi) Except for the rights of indemnification
provided in this Section 8, the Buyer hereby waives any claim
or cause of action pursuant to common or statutory law or
otherwise against the Sellers arising from any breach by the
Sellers of any of their representations, warranties or
covenants under this Agreement or the transactions
contemplated hereby.
(c) Indemnification Provisions for Benefit of the Sellers.
(i) In the event: (x) the Buyer breaches any of its
representations, warranties or covenants contained herein
(without giving effect to any supplement to the Schedules, any
qualification as to materiality, Material Adverse Effect,
Knowledge, awareness or concepts of similar import, or any
qualification or limitation as to monetary amount or value);
(y) there is an applicable survival period pursuant to Section
8(a); and (z) the Sellers make a written claim for
indemnification against the Buyer pursuant to Section 11(g)
within such survival period, then the Buyer agrees to
indemnify the Seller Indemnitees from and against the entirety
of any Adverse Consequences arising after the Closing Date
caused proximately by the breach and suffered by such Seller
Indemnitees.
(ii) Except for those liabilities for which the
Sellers have agreed to indemnify the Buyer Indemnitees
pursuant to Section 8(b), the Buyer agrees to indemnify the
Seller Indemnitees from and against the entirety of any
Adverse Consequences relating to the ownership and operation
of Deepwater arising after the Closing Date.
(iii) To the extent any Seller Indemnitee becomes
liable to, and is ordered to and does pay to any third party,
punitive, exemplary, special or consequential damages
proximately caused by a breach by the Buyer of any
representation, warranty or covenant contained in this
Agreement, then such punitive, exemplary, special or
consequential damages shall be deemed actual damages to such
Seller Indemnitee and included within the definition of
Adverse Consequences for purposes of this Section 8.
(iv) Except for the rights of indemnification
provided in this Section 8, the Sellers hereby waive any claim
or cause of action pursuant to common or statutory law or
otherwise against the Buyer arising from any breach by the
Buyer of any of its representations, warranties or covenants
under this Agreement or the transactions contemplated hereby.
26
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third
Party Claim") that may give rise to a claim for
indemnification against any other Party (the "Indemnifying
Party") under this Section 8, then the Indemnified Party shall
promptly (and in any event within five business days after
receiving notice of the Third Party Claim) notify the
Indemnifying Party thereof in writing.
(ii) The Indemnifying Party shall have the right to
assume and thereafter conduct the defense of the Third Party
Claim with counsel of its choice reasonably satisfactory to
the Indemnified Party; provided, however, that the
Indemnifying Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless the
judgment or proposed settlement involves only the payment of
money damages and does not impose an injunction or other
equitable relief upon the Indemnified Party.
(iii) Unless and until the Indemnifying Party assumes
the defense of the Third Party Claim as provided in subsection
8(d)(ii), the Indemnified Party may defend against the Third
Party Claim in any manner it reasonably may deem appropriate.
(iv) In no event shall the Indemnified Party consent
to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written
consent of the Indemnifying Party which consent shall not be
withheld unreasonably.
(e) Determination of Amount of Adverse Consequences. The
Adverse Consequences giving rise to any indemnification obligation hereunder
shall be limited to the actual loss suffered by the Indemnified Party (i.e.
reduced by any insurance proceeds or other payment or recoupment received,
realized or retained by the Indemnified Party as a result of the events giving
rise to the claim for indemnification net of any expenses related to the receipt
of such proceeds, payment or recoupment, including retrospective premium
adjustments, if any), but not any reduction in Taxes of the Indemnified Party
(or the affiliated group of which it is a member) occasioned by such loss or
damage. The amount of the actual loss and the amount of the indemnity payment
shall be computed by taking into account the timing of the loss or payment, as
applicable, using a Prime Rate plus 2% interest or discount rate, as
appropriate. Upon the request of the Indemnifying Party, the Indemnified Party
shall provide the Indemnifying Party with information sufficient to allow the
Indemnifying Party to calculate the amount of the indemnity payment in
accordance with this Section 8(e). An Indemnified Party shall take all
reasonable steps to mitigate damages in respect of any claim for which it is
seeking indemnification and shall use reasonable efforts to avoid any costs or
expenses associated with such claim and, if such costs and expenses cannot be
avoided, to minimize the amount thereof.
27
(f) Tax Treatment of Indemnity Payments. All indemnification
payments made under this Agreement, including any payment made under Section 9
hereof, shall be treated as purchase price adjustments for Tax purposes.
(g) Joint and Several Liability. With respect to any and all
indemnification payments for which the Sellers are liable under this Agreement,
the liability of the Sellers shall be joint and several. The indemnification
obligations of the Sellers are absolute, present and continuing obligations and
are in no way conditional or contingent upon any other action, occurrence or
circumstance whatsoever. It shall not be necessary for the Buyer, in order to
enforce such indemnification obligations of any Seller, first to institute suit
or exhaust its remedies against any other Seller or any other Person with
respect to the indemnity obligations.
9. Tax Matters.
(a) Post-Closing Tax Returns. The Buyer shall prepare or cause
to be prepared and file or cause to be filed any Post-Closing Tax Returns with
respect to the Acquired Companies. The Buyer shall pay (or cause to be paid) any
Taxes due with respect to such Tax Returns.
(b) Pre-Closing Tax Returns. The Sellers shall prepare or
cause to be prepared and file or cause to be filed all Pre-Closing Tax Returns
with respect to the Acquired Companies. The Sellers shall pay or cause to be
paid any Taxes due with respect to such Tax Returns.
(c) Straddle Periods. The Buyer shall be responsible for Taxes
of the Acquired Companies related to the portion of any Straddle Period
occurring after the Closing Date. The Sellers shall be responsible for Taxes of
the Acquired Companies relating to the portion of any Straddle Period occurring
before and the Closing Date. With respect to any Straddle Period, to the extent
permitted by applicable Law, the Sellers or the Buyer shall elect to treat the
Closing Date as the last day of the Tax period. If applicable Law shall not
permit the Closing Date to be the last day of a period, then (i) real or
personal property Taxes of the Acquired Companies shall be allocated based on
the number of days in the partial period before and after the Closing Date, (ii)
in the case of all other Taxes based on or in respect of income, the Tax
computed on the basis of the taxable income or loss attributable to the Acquired
Companies for each partial period as determined from their books and records,
and (iii) in the case of all other Taxes, on the basis of the actual activities
or attributes of the Acquired Companies for each partial period as determined
from their books and records.
(d) Straddle Returns. The Buyer shall prepare any Straddle
Returns. The Buyer shall deliver, at least 45 days prior to the due date for
filing such Straddle Return (including any extension) to the Sellers a statement
setting forth the amount of Tax that the Sellers owe, including the allocation
of taxable income and Taxes under Section 9(c), and copies of such Straddle
Return. The Sellers shall have the right to review such Straddle Returns and the
allocation of taxable income and liability for Taxes and to suggest to the Buyer
any reasonable changes to such Straddle Returns no later than 15 days prior to
the date for the filing of such Straddle Returns. The Sellers and the Buyer
agree to consult and to attempt to resolve in good faith any issue arising as a
result of the review of such Straddle Returns and allocation of taxable
28
income and liability for Taxes and mutually to consent to the filing as promptly
as possible of such Straddle Returns. Not later than 5 days before the due date
for the payment of Taxes with respect to such Straddle Returns, the Sellers
shall pay or cause to be paid to the Buyer an amount equal to the Taxes as
agreed to by the Buyer and the Sellers as being owed by the Sellers. If the
Buyer and the Sellers cannot agree on the amount of Taxes owed by the Sellers
with respect to a Straddle Return, the Sellers shall pay or cause to be paid to
the Buyer the amount of Taxes reasonably determined by the Sellers to be owed by
the Sellers. Within 10 days after such payment, the Sellers and the Buyer shall
refer the matter to an independent "Big-Five" accounting firm agreed to by the
Buyer and the Sellers to arbitrate the dispute. The Sellers and the Buyer shall
equally share the fees and expenses of such accounting firm and its
determination as to the amount owing by the Sellers with respect to a Straddle
Return shall be binding on the Sellers and the Buyer. Within five days after the
determination by such accounting firm, if necessary, the appropriate Party shall
pay the other Party any amount which is determined by such accounting firm to be
owed. The Sellers shall be entitled to reduce their obligation to pay Taxes with
respect to a Straddle Return by the amount of any estimated Taxes paid with
respect to such Taxes on or before the Closing Date.
(e) Claims for Refund. The Buyer shall not, and shall cause
the Acquired Companies and any of their Affiliates not to, file any claim for
refund of taxes with respect to the Acquired Companies for whole or partial
taxable periods on or before the Closing Date.
(f) Indemnification. The Buyer agrees to indemnify the Sellers
against all Taxes of or with respect to the Acquired Companies for any
Post-Closing Tax Period and the portion of any Straddle Period occurring after
the Closing Date. The Sellers agree to indemnify the Buyer against all Taxes of
or with respect to the Acquired Companies for any Pre-Closing Tax Period and the
portion of any Straddle Period occurring on or before the Closing Date.
(g) Cooperation on Tax Matters.
(i) The Buyer and the Sellers shall cooperate fully,
as and to the extent reasonably requested by the other Party,
in connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding and
making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder.
(ii) The Buyer and the Sellers further agree, upon
request, to use their Best Efforts to obtain any certificate
or other document from any Governmental Authority or any other
Person as may be necessary to mitigate, reduce or eliminate
any Tax that could be imposed (including, but not limited to,
with respect to the transactions contemplated hereby).
(iii) The Buyer and the Sellers agree, upon request,
to provide the other Parties with all information that such
other Parties may be required to report pursuant to Section
6043 of the Code and all Treasury Department Regulations
promulgated thereunder.
29
(h) Certain Taxes. The Sellers shall file all necessary Tax
Returns and other documentation with respect to all transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable Law, the Buyer shall, and shall cause its Affiliates to, join in the
execution of any such Tax Returns and other documentation. Notwithstanding
anything set forth in this Agreement to the contrary, the Buyer shall pay to the
Sellers, on or before the date such payments are due from the Sellers, any
transfer, documentary, sales, use, stamp, registration and other Taxes and fees
incurred in connection with this Agreement and the transactions contemplated
hereby.
(i) Confidentiality. Any information shared in connection with
Taxes shall be kept confidential, except as may otherwise be necessary in
connection with the filing of Tax Returns or reports, refund claims, tax audits,
tax claims and tax litigation, or as required by Law.
(j) Audits. The Sellers and the Buyer shall provide prompt
written notice to the other Parties of any pending or threatened tax audit,
assessment or proceeding that it becomes aware of related to the Acquired
Companies for whole or partial periods for which it is indemnified by any other
Party hereunder. Such notice shall contain factual information (to the extent
known) describing the asserted tax liability in reasonable detail and shall be
accompanied by copies of any notice or other document received from or with any
tax authority in respect of any such matters. If an indemnified party has
knowledge of an asserted tax liability with respect to a matter for which it is
to be indemnified hereunder and such party fails to give the indemnifying party
prompt notice of such asserted tax liability, then (I) if the indemnifying party
is precluded by the failure to give prompt notice from contesting the asserted
tax liability in any forum, the indemnifying party shall have no obligation to
indemnify the indemnified party for any Taxes arising out of such asserted tax
liability, and (II) if the indemnifying party is not so precluded from
contesting, but such failure to give prompt notice results in a detriment to the
indemnifying party, then any amount which the indemnifying party is otherwise
required to pay the indemnified party pursuant to this Section 9(j) shall be
reduced by the amount of such detriment, provided, the indemnified party shall
nevertheless be entitled to full indemnification hereunder to the extent, and
only to the extent, that such party can establish that the indemnifying party
was not prejudiced by such failure. This Section 9(j) shall control the
procedure for Tax indemnification matters to the extent it is inconsistent with
any other provision of this Agreement.
(k) Control of Proceedings. The party responsible for the Tax
under this Agreement shall control audits and disputes related to such Taxes
(including action taken to pay, compromise or settle such Taxes). The Sellers
and the Buyer shall jointly control, in good faith with each other, audits and
disputes relating to Straddle Periods. Reasonable out-of-pocket expenses with
respect to such contests shall be borne by the Sellers and the Buyer in
proportion to their responsibility for such Taxes as set forth in this
Agreement. Except as otherwise provided by this Agreement, the noncontrolling
party shall be afforded a reasonable opportunity to participate in such
proceedings at its own expense.
(l) Powers of Attorney. The Buyer, the Acquired Companies, and
their respective Affiliates shall provide the Sellers and their Affiliates with
such powers of attorney or other authorizing documentation as are reasonably
necessary to empower them to execute and file
30
returns they are responsible for hereunder, file refund and equivalent claims
for Taxes they are responsible for, and contest, settle, and resolve any audits
and disputes that they have control over under Section 9(k) hereof (including
any refund claims which turn into audits or disputes).
(m) Remittance of Refunds. If the Buyer or any Affiliate of
the Buyer receives a refund of any Taxes that the Sellers are responsible for
hereunder, or if the Sellers or any Affiliate of the Sellers receive a refund of
any Taxes that the Buyer is responsible for hereunder, the party receiving such
refund shall, within 30 days after receipt of such refund, remit it to the party
who has responsibility for such Taxes hereunder. For the purpose of this Section
9(m), the term "refund" shall include a reduction in Tax and the use of an
overpayment as a credit or other tax offset, and receipt of a refund shall occur
upon the filing of a return or an adjustment thereto using such reduction,
overpayment or offset or upon the receipt of cash.
(n) Purchase Price Allocation. The Sellers and the Buyer agree
that the actual Purchase Price allocable to the Subject Assets shall be
allocated to the Subject Assets for all purposes (including Tax and financial
accounting purposes) as jointly agreed between the Buyer and the Sellers within
ninety (90) days after the Closing Date. The Buyer, the Sellers and their
applicable Affiliates shall file all Tax Returns (including amended Tax Returns
and claims for refund) and information reports in a manner consistent with such
allocation.
(o) Closing Tax Certificate. At the Closing, the Sellers shall
deliver to the Buyer a certificate signed under penalties of perjury (i) stating
that none of them are a foreign corporation, foreign partnership, foreign trust
or foreign estate, (ii) providing their U.S. Employer Identification Numbers,
and (iii) providing their addresses, all pursuant to Section 1445 of the Code.
(p) Like Kind Exchanges. The Buyer shall cooperate fully, as
and to the extent reasonably requested by the Sellers, in connection with
enabling the transactions contemplated herein to qualify in whole or in part as
a "like kind" exchange pursuant to Section 1031 of the Code. The Sellers agree
to indemnify the Buyer against any and all costs and expenses the Buyer shall
incur with respect to cooperating with the Sellers in enabling the transactions
contemplated herein to qualify in whole or in part as a "like-kind exchange"
pursuant to Section 1031 of the Code.
The Sellers may assign their rights under this Agreement to a qualified
intermediary to facilitate a like-kind exchange. The agreement between the
Sellers and qualified intermediary ("Exchange Agreement") shall be as agreed
between such parties.
10. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement, as provided below:
(i) the Buyer and the Sellers may terminate this
Agreement by mutual written consent at any time before the
Closing;
31
(ii) the Buyer may terminate this Agreement by giving
written notice to the Sellers at any time before Closing (A)
in the event the Sellers have breached any representation,
warranty or covenant contained in this Agreement in any
material respect, the Buyer has notified the Sellers of the
breach, the breach has continued without cure for a period of
10 days after the notice of breach and such breach would
result in a failure to satisfy a condition to the Buyer's
obligation to consummate the transactions contemplated hereby;
(B) if the Closing shall not have occurred on or before
December 31, 2001 (unless the failure results primarily from
the Buyer itself breaching any representation, warranty or
covenant contained in this Agreement); or (C) if the
transactions contemplated hereby do not receive all required
approvals of the FTC;
(iii) the Sellers may terminate this Agreement by
giving written notice to the Buyer at any time before the
Closing (A) in the event the Buyer has breached any
representation, warranty or covenant contained in this
Agreement in any material respect, the Sellers have notified
the Buyer of the breach, the breach has continued without cure
for a period of 10 days after the notice of breach and such
breach would result in a failure to satisfy a condition to the
Sellers' obligation to consummate the transactions
contemplated hereby; (B) if the Closing shall not have
occurred on or before December 31, 2001 (unless the failure
results primarily from the Sellers themselves breaching any
representation, warranty or covenant contained in this
Agreement); or (C) if the transactions contemplated hereby do
not receive all required approvals of the FTC; and
(iv) the Buyer or the Sellers may terminate this
Agreement if any court of competent jurisdiction or any
governmental, administrative or regulatory authority, agency
or body shall have issued an order, decree or ruling or shall
have taken any other action permanently enjoining, restraining
or otherwise prohibiting the transactions contemplated hereby
and such order, decree, ruling or other action shall have
become final and nonappealable.
(b) Effect of Termination. Except for the obligations under
Section 8, Section 10 and Section 11, if any Party terminates this Agreement
pursuant to Section 10(a), all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party (except
for any liability of any Party then in breach).
11. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement before the Closing without notifying the other Party
thereof, either in writing or by email or telephone call to the appropriate
representative within the other Party. If the transactions contemplated
hereunder are not consummated, each Party shall return all confidential
information concerning the Deepwater Interest, the Acquired Companies, the
Subject Assets and the other Party as such other Party may reasonably request.
Further, if the transactions are consummated, the Sellers
32
agree to keep confidential and not disclose any confidential information related
to the Deepwater Interest, the Acquired Companies and the Subject Assets.
(b) Insurance. The Buyer acknowledges and agrees that,
following the Closing, any Subject Insurance Policies shall be terminated or
modified to exclude coverage of all or any portion of the Acquired Companies by
the Sellers or any of its Affiliates, and, as a result, the Buyer shall be
obligated at or before Closing to obtain at its sole cost and expense
replacement insurance, including insurance required by any third party to be
maintained by the Acquired Companies. The Buyer further acknowledges and agrees
that the Buyer may need to provide to certain Governmental Authorities and third
parties evidence of such replacement or substitute insurance coverage for the
continued operations of the businesses of the Acquired Companies. If any claims
are made or losses occur prior to the Closing Date that relate solely to the
business activities of the Acquired Companies and such claims, or the claims
associated with such losses, properly may be made against the policies retained
by the Sellers or their Affiliates after the Closing, then the Sellers shall use
their Best Efforts so that the Buyer can file, notice, and otherwise continue to
pursue these claims pursuant to the terms of such policies; provided, however,
nothing in this Agreement shall require the Sellers to maintain or to refrain
from asserting claims against or exhausting any retained policies.
(c) No Third Party Beneficiaries. Except for the
indemnification provisions, this Agreement shall not confer any rights or
remedies upon any Person other than the Parties and their respective successors
and permitted assigns.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. The Parties may assign either this Agreement
or any of their respective rights, interests or obligations hereunder to an
Affiliate without the prior approval of the other Party; provided, however, that
no such assignment shall relieve any Party from any of its respective
obligations or liabilities under this Agreement.
(e) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given 2 business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to Sellers:
Texas Offshore Pipeline System, Inc.,
Attn: President
El Paso Building
0000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
33
If to the Buyer: El Paso Energy Partners, L.P.
Attn: President
0 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
(000) 000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the addresses set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic Laws of the State of
Texas without
giving effect to any choice or conflict of law provision or rule (whether of the
State of
Texas or any other jurisdiction) that would cause the application of
the Laws of any jurisdiction other than the State of
Texas.
(i) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(k) Transaction Expenses. Each of the Buyer and the Sellers
shall bear their own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. All personal pronouns
used in this Agreement, whether used in the masculine, feminine or neuter
34
gender, shall include all other genders; the singular shall include the plural,
and vice versa. All references herein to Exhibits, Schedules, Articles, Sections
or subdivisions thereof shall refer to the corresponding Exhibits, Schedules,
Article, Section or subdivision thereof of this Agreement unless specific
reference is made to such exhibits, articles, sections or subdivisions of
another document or instrument. The terms "herein," "hereby," "hereunder,"
"hereof," "hereinafter," and other equivalent words refer to this Agreement in
its entirety and not solely to the particular portion of the Agreement in which
such word is used.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) Entire Agreement. THIS AGREEMENT (INCLUDING THE DOCUMENTS
REFERRED TO HEREIN) CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES AND
SUPERSEDES ANY PRIOR UNDERSTANDINGS, AGREEMENTS, OR REPRESENTATIONS BY OR AMONG
THE PARTIES, WRITTEN OR ORAL, TO THE EXTENT THEY HAVE RELATED IN ANY WAY TO THE
SUBJECT MATTER HEREOF.
(o) Nature of Obligations. Notwithstanding anything to the
contrary in this Agreement, the covenants and obligations of, and the
representations and warranties made by or attributable to, any Seller pursuant
to this Agreement shall be deemed to be made by and attributable to each Seller
and all of the Sellers, jointly and severally, and the Buyer shall have the
right to pursue remedies against any one or more Sellers without any obligation
to give notice to or pursue all Sellers or to give notice to or pursue any
individual Seller before pursuing any other Seller.
(p) Member Consent. Notwithstanding anything to the contrary
contained herein or in the Organizational Documents of Deepwater, each Party, in
its capacities as a member in Deepwater and a member of the management committee
of Deepwater, (i) hereby consents to the disposition by the Sellers of their
Equity Interests in Deepwater contemplated by this Agreement and (ii) agrees
that this Agreement is acceptable in form and substance to cause the disposition
of such Equity Interests.
*****
35
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
EL PASO ENERGY PARTNERS DEEPWATER, L.L.C.
By: /s/ D. XXXX XXXXXX
----------------------------------------
Name: D. Xxxx Xxxxxx
----------------------------------------
Title: Senior Vice President
----------------------------------------
AMERICAN NATURAL OFFSHORE COMPANY
By: /s/ X.X. XXXX
----------------------------------------
Name: X.X. Xxxx
----------------------------------------
Title: Vice President
----------------------------------------
TEXAS OFFSHORE PIPELINE SYSTEM, INC.
By: /s/ X.X. XXXX
----------------------------------------
Name: X.X. Xxxx
----------------------------------------
Title: Vice President
----------------------------------------
UNITEX OFFSHORE TRANSMISSION COMPANY
By: /s/ X.X. XXXX
----------------------------------------
Name: X.X. Xxxx
----------------------------------------
Title: Vice President
----------------------------------------
ANR WESTERN GULF HOLDINGS, L.L.C.
By: /s/ X.X. XXXX
----------------------------------------
Name: X.X. Xxxx
----------------------------------------
Title: Vice President
----------------------------------------
PURCHASE AND SALE AGREEMENT SIGNATURE PAGE
