EXECUTION VERSION
by and among
Pueblo Holdings, Inc.,
as Buyer,
Bear Cub Investments, LLC,
the Members of Bear Cub Investments, LLC identified herein,
as Sellers,
and
Xxxxxx X. Xxxxx,
as Sellers’ Representative
Dated
April 2, 2007
TABLE OF CONTENTS
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ARTICLE I CERTAIN DEFINITIONS |
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1.1 Certain Defined Terms |
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1.2 Other Definitional Provisions |
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1.3 Headings |
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1.4 Other Terms |
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ARTICLE II THE TRANSACTION |
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2.1 The Transaction |
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2.2 Consideration |
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2.3 Adjustments |
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2.4 Escrow |
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2.5 Delivery to Sellers’ Representative |
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF MEMBERS |
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3.1 Organization, Good Standing and Authority of Sellers |
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3.2 Title to Interests |
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3.3 No Conflicts |
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3.4 Investor Status |
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3.5 Status of Transaction Units; Disposition |
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BEAR CUB |
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4.1 Organization, Good Standing and Authority; Capitalization of Bear Cub |
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4.2 Organization, Good Standing, Authority, Capitalization of Pueblo Companies |
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4.3 No Conflicts |
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4.4 Regulation and Authorizations |
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4.5 Consents and Authorizations |
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4.6 Properties |
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4.7 Taxes |
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4.8 Compliance with Laws |
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4.9 Insurance |
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4.10 Material Contracts |
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4.11 Intellectual Property |
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4.12 Broker’s or Finder’s Fees |
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4.13 Employees |
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4.14 Financial Statements; Absence of Undisclosed Liabilities; Controls and
Procedures |
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4.15 Internal and Disclosure Controls |
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4.16 Environmental Matters |
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4.17 Litigation |
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4.18 Bankruptcy |
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4.19 Absence of Certain Changes |
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4.20 Pipeline Matters |
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4.21 Affiliate Relationships |
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4.22 FCC Matters |
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4.23 Bear Cub Financial Statements; Absence of Undisclosed Liabilities |
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4.24 Powers of Attorney |
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYERS |
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5.1 Organization, Standing and Power |
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5.2 Authority; No Violations, Consents and Approvals |
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5.3 SEC Documents |
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5.4 Absence of Certain Changes or Events |
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5.5 Litigation |
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5.6 Taxes |
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5.7 Broker’s or Finder’s Fees |
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5.8 Investment Intent |
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ARTICLE VI COVENANTS |
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6.1 Conduct of Business |
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6.2 Access, Information and Access Indemnity |
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6.3 Due Diligence Indemnification |
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6.4 Further Assurances |
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6.5 Termination of Agreements |
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6.6 Payoff Letters; Mutual Releases |
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6.7 Cooperation and Reasonable Efforts |
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6.8 Tax Matters |
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6.9 Transaction Units |
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6.10 Intentionally Omitted |
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6.11 Transition Services Agreement |
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6.12 Intentionally Omitted |
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6.13 Stock Powers |
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6.14 Conduct of Members |
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6.15 Environmental Insurance |
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6.16 Bear Cub Liquidity |
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6.17 Preservation and Access to Records; and Further Assurances |
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6.18 Railroad Commission of Texas Matters |
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ARTICLE VII CONDITIONS TO CLOSING |
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7.1 Sellers’ Conditions |
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7.2 Buyer’s Conditions |
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ARTICLE VIII CLOSING |
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8.1 Time and Place of Closing |
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8.2 Deliveries at Closing |
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ARTICLE IX TERMINATION |
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9.1 Termination at or Prior to Closing |
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9.2 Effect of Termination |
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ARTICLE X INDEMNIFICATION |
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10.1 Survival |
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10.2 Indemnification by Buyer |
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10.3 Indemnification by Sellers |
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10.4 Certain Limitations |
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10.5 Intentionally Omitted |
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10.6 Notice of Asserted Liability; Opportunity to Defend |
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10.7 Exclusive Remedy |
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10.8 Limitation on Damages |
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10.9 Bold and/or Capitalized Letters |
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10.10 Disclaimer |
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ARTICLE XI MISCELLANEOUS PROVISIONS |
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11.1 Expenses |
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11.2 Assignment |
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11.3 Entire Agreement, Amendments and Waiver |
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11.4 Severability |
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11.5 Counterparts |
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11.6 Dispute Resolution |
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11.7 Governing Law and Dispute Resolution |
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11.8 Notices and Addresses |
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11.9 Press Releases |
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11.10 Offset |
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11.11 No Partnership; Third Party Beneficiaries |
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11.12 Negotiated Transaction |
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11.13 Time of the Essence |
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11.14 Specific Performance |
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11.15 Affiliate Liability |
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11.16 No Waiver of Claims for Fraud |
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11.17 No Recovery |
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11.18 Appointment of Sellers’ Representative |
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SCHEDULES |
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Schedule A
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Members |
Schedule B
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Defined Terms |
Schedule C
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Sample Balance Sheet |
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EXHIBITS |
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Exhibit A
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Power of Attorney |
Exhibit B
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Purchaser’s Representation Letter |
Exhibit C
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Escrow Agreement |
Exhibit D-1
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Mutual Release (Individual) |
Exhibit D-2
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Mutual Release (Entity) |
Exhibit E
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Registration Rights Agreement |
Exhibit F
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Termination Agreement |
Exhibit G
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Transition Services Agreement |
Exhibit H
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Acknowledgement and Appointment of Agent and Power of Attorney |
iv
This
STOCK PURCHASE AGREEMENT (this “
Agreement”) dated April 2, 2007 is by and among
Regency Energy Partners LP, a Delaware limited partnership (the “
Partnership”), Pueblo
Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of the Partnership
(“
Pueblo Holdings” and, together with the Partnership, the “
Buyers”), Bear Cub
Investments, LLC, a Colorado limited liability company (“
Bear Cub”), and each of the
members of Bear Cub set forth on
Schedule A attached hereto (collectively, the
“
Members,” and together with Bear Cub, the “
Sellers”). The Buyers, Bear Cub and
Sellers are sometimes referred to collectively herein as the “
Parties” and individually as
a “
Party.”
RECITALS
1. As of the date hereof, the Members own all of the outstanding Equity Interests (the
“
Interests”) of Pueblo Midstream Gas Corporation, a
Texas corporation (“
Pueblo”),
as set forth on
Schedule A attached hereto.
2. Concurrently with the execution and delivery of this Agreement, each Member shall execute
and deliver to Bear Cub a stock transfer power (“Stock Powers”) with respect to the
Interests owned by such Member, and Bear Cub shall retain such Stock Powers and any and all stock
certificates evidencing the Interests for delivery to Buyers at Closing.
3. Prior to the execution and delivery of this Agreement, each Member has executed and
delivered to each of Bear Cub and Buyers a power of attorney in substantially the form attached
hereto as Exhibit A appointing Xxxxxx X. Xxxxx to act as attorney-in-fact for such Member
with respect to the matters set forth therein (the “Power of Attorney”).
4. Concurrently with the execution and delivery of this Agreement, each Member listed on
Section 3.4(e) of the Disclosure Letter has executed and delivered a purchaser’s
representative letter in the form attached hereto as Exhibit B.
5. Buyers desire to purchase, and Sellers desire to sell to Buyers, the Interests for the
consideration set forth below, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Defined Terms. Capitalized terms used in this Agreement that are not
defined in the text of the body of this Agreement shall have the meanings given such terms as set
forth in Schedule B attached to this Agreement, which Schedule B is incorporated
herein by reference with the same force and effect as is set forth herein in full.
1.2 Other Definitional Provisions. As used in this Agreement, unless expressly stated
otherwise or the context requires otherwise, (a) all references to an “Article,” “Section,” or
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“subsection” shall be to an Article, Section, or subsection of this Agreement, (b) the words
“this Agreement,” “hereof,” “hereunder,” “herein,” “hereby,” or words of similar import shall refer
to this Agreement as a whole and not to a particular Article, Section, subsection, clause or other
subdivision hereof, (c) the words used herein shall include the masculine, feminine and neuter
gender, and the singular and the plural, (d) the word “including” shall mean “including, without
limitation” and (e) the word “day” or “days” shall mean a calendar day or days, unless denoted as a
Business Day.
1.3 Headings. The headings of the Articles and Sections of this Agreement and of the
Schedules and Exhibits are included for convenience only and shall not be deemed to constitute part
of this Agreement or to affect the construction or interpretation hereof or thereof.
1.4 Other Terms. Other terms may be defined elsewhere in the text of this Agreement
and shall have the meanings indicated throughout this Agreement.
ARTICLE II
THE TRANSACTION
2.1 The Transaction. Subject to and upon the terms and conditions of this Agreement,
at the Closing, each Member shall sell, transfer, convey, assign and deliver to Buyers, and Buyers
shall purchase and acquire from each Member, all of such Member’s Equity Interest in Pueblo,
including all of such Member’s Interests, free and clear of all Liens. The Interests to be
acquired by Buyers at Closing shall constitute all of the outstanding Equity Interests in Pueblo.
2.2 Consideration.
(a) The aggregate consideration to be paid by Buyers for the Interests shall consist of (i)
Transaction Units and (ii) the Cash Amount (together, the “Aggregate Consideration”). The
“Cash Amount” of the Aggregate Consideration shall be $34,735,049.00 (Thirty Four Million
Seven Hundred Thirty Five Thousand Forty Nine and no/100 dollars) less (i) the sum of (A)
the Debt Payoff Amount, (B) to the extent not paid prior to the Measurement Time, the Expenses, and
(C) the Working Capital Deficit, if any, plus (ii) the Working Capital Surplus, if any. The
Aggregate Consideration shall be payable in the manner described in Section 2.2(b) and
Section 2.3.
(b) At the Closing:
(i) (A) Pueblo Holdings shall pay to the Sellers’ Representative, by wire transfer of
immediately available funds to the account designated in writing by Sellers’ Representative to
Buyer at least two Business Days prior to Closing, an amount in Cash equal to the Estimated Cash
Amount minus the Escrow Deposit and (B) the Partnership shall deliver to the Sellers’
Representative irrevocable instructions to the Partnership’s transfer agent to prepare and deliver
to the Sellers’ Representative a share certificate in the name of each Member and in the amount
set forth opposite such Member’s name as set forth on Schedule A;
(ii) the Partnership shall deposit with the Escrow Agent the Escrow Deposit to secure and be
available to satisfy the rights of Buyers under Section 2.3(d)(i);
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(iii) to the extent unpaid, Pueblo Holdings shall pay to the payees of any Expenses by wire
transfer of immediately available funds to the account(s) designated by such Persons in the
applicable Payoff Letters; the amounts specified in the Payoff Letters; and
(iv) Pueblo Holdings shall pay to each holder of any Third-Party Debt, by wire transfer of
immediately available funds to the account(s) designated by such Persons in the applicable Debt
Payoff Letters, the amounts specified in the Debt Payoff Letters.
2.3 Adjustments.
(a) Preparation of Estimated Closing Statement. The Sellers’ Representative shall
prepare in good faith and deliver to Pueblo Holdings, at least four Business Days prior to the
Closing Date and at the sole expense of Sellers, a statement as of the Closing Date (the
“Estimated Closing Statement”), setting forth a detailed determination of the Estimated
Cash Amount. The “Estimated Cash Amount” shall be $34,735,049.00 minus (i) the sum
of (A) the Debt Payoff Amount, (B) to the extent unpaid as of the Measurement Time, the Expenses,
and (C) the estimated amount of Working Capital Deficit, if any, plus (ii) the estimated
amount of Working Capital Surplus, if any. The Debt Payoff Amount and the Expenses shall be based
on amounts set forth in the Debt Payoff Letters or the Payoff Letters, or, to the extent a Debt
Payoff Letter or a Payoff Letter has not been provided for a Third-Party Debt or Expense, an
estimate of such amounts, and in each case, shall be subject to final determination in the Final
Closing Statement. Each estimation set forth in the Estimated Closing Statement shall be made as
of the Measurement Time. Appropriate adjustments to the Aggregate Consideration Price shall be
made after the Closing pursuant to Sections 2.3(b), (c), and (d).
(b) Preparation of Closing Statement. As soon as reasonably practicable after the
Closing Date (and, in any event, within 90 days after the Closing Date), Pueblo Holdings shall
prepare and deliver to Sellers’ Representative, at the sole expense of Pueblo Holdings, a closing
statement as of the Measurement Time (the “Proposed Closing Statement”), setting forth the
proposed final calculation of (i) Net Working Capital, (ii) Debt Payoff Amount, (iii) Expenses, and
(iv) the Cash Amount of the Aggregate Consideration. If Pueblo Holdings does not deliver the
Proposed Closing Statement when required, Sellers’ Representative may prepare and deliver it to
Pueblo Holdings, and, in such case, Pueblo Holdings shall have Sellers’ Representative objection
rights under this Section 2.3.
(c) Examination of Proposed Closing Statement. Sellers’ Representative shall review
the Proposed Closing Statement to confirm the accuracy of the Proposed Closing Statement and Pueblo
Holdings’ calculations. If Sellers’ Representative fails to give Pueblo Holdings written notice of
any disputed amounts within 30 days after Sellers’ Representative receives the Proposed Closing
Statement (the “Review Period”), then the Proposed Closing Statement shall become the Final
Closing Statement for purposes hereof. If Sellers’ Representative gives Pueblo Holdings written
notice of any disputed items within the Review Period, Pueblo Holdings and Sellers’ Representative
shall attempt in good faith to agree on any adjustments that should be made to the Proposed Closing
Statement. If Pueblo Holdings and Sellers’ Representative fail to resolve any disputed amounts
within 60 days after Sellers’ Representative receives the Proposed Closing Statement, Pueblo
Holdings and Sellers’ Representative will engage the Audit Firm to resolve any such disputed
matters in accordance
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with the terms of this Agreement, and, in connection with such engagement Pueblo Holdings,
Pueblo and Sellers’ Representative shall execute any engagement, indemnity and other agreements as
the Audit Firm may require as a condition to such engagement. The Audit Firm’s engagement shall be
limited to the resolution of disputed amounts set forth in the Proposed Closing Statement that have
been identified by Sellers’ Representative, and no other matter relating to the Final Closing
Statement shall be subject to determination by the Audit Firm except to the extent affected by
resolution of the disputed amounts. The Parties shall cooperate diligently with any reasonable
request of the Audit Firm in an effort to resolve any disputed matter as soon as reasonably
possible after the Audit Firm is engaged. If possible, the decision of the Audit Firm shall be
made within 30 days after being engaged. In any event, the decision shall be final and binding on
the Parties. The Proposed Closing Statement shall be revised, if necessary, to reflect the final
determination of (i) Net Working Capital, (ii) Debt Payoff Amount, (iii) Expenses and (iv) the Cash
Amount of the Aggregate Consideration (the final form of the Proposed Closing Statement, including
any revisions that are made thereto pursuant to this Section 2.3(c), is referred to herein
as the “Final Closing Statement”).
(d) Adjustments.
(i) If the Cash Amount of the Aggregate Consideration as reflected on the Final Closing
Statement is less than the Estimated Cash Amount (the amount of such shortfall, if any, being
hereinafter referred to as the “Aggregate Consideration Deficit”), then an amount of Cash
equal to such Aggregate Consideration Deficit shall be released promptly from the Escrow Fund and
paid to Pueblo Holdings in accordance with Section 2.4(b)(i).
(ii) If the Cash Amount of the Aggregate Consideration as reflected on the Final Closing
Statement is greater than the Estimated Cash Amount (the amount of such excess being hereinafter
referred to as the “Aggregate Consideration Surplus”), then Pueblo Holdings shall
immediately tender payment of such Aggregate Consideration Surplus, in Cash, to the Sellers’
Representative.
(e) No Duplicative Effect. The provisions of this Section 2.3 and of any
other Transaction Document shall apply in such a manner so as not to include in the components and
calculations any duplicative effect of any item of adjustment and, except as otherwise expressly
provided in this Agreement or as described in the Sample Balance Sheet, the Parties covenant and
agree that no amount shall be (or is intended to be) included, in whole or in part (either as an
increase or reduction) more than once in the calculation of Net Working Capital, the Debt Payoff
Amount, Expenses, or the Unpaid Environmental Deductible in each case, if any, or the Cash Amount
of the Aggregate Consideration or any component of any of the foregoing, or any other calculated
amount pursuant to this Agreement if the effect of such additional inclusion (either as an increase
or reduction) would be to cause such amount to be overstated or understated for purposes of such
calculation. The Parties acknowledge and agree that, if there is a conflict between a
determination, calculation or methodology set forth in the Sample Balance Sheet or the definitions
contained in this Agreement, as applicable, on the one hand, and those provided by GAAP, on the
other hand, (i) the determination, calculation or methodology set forth in the Sample Balance Sheet
or the definitions contained in this Agreement, as applicable, shall control to the extent that the
matter is included in the Sample Balance Sheet or the definitions contained
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in this Agreement as a line item or specific adjustment and (ii) the determination,
calculation or methodology prescribed by GAAP shall otherwise control.
(f) Fees and Expenses of the Audit Firm. If the Parties submit any disputed amounts
to the Audit Firm for resolution as provided in Section 2.3(c) above, the fees and expenses
of the Audit Firm (the “Audit Fees”) will be paid by and apportioned between Pueblo
Holdings and the Sellers based on the aggregate dollar amount of the amount in dispute and the
relative recovery as determined by the Audit Firm of Sellers and Pueblo Holdings, respectively.
The Sellers and Pueblo Holdings shall promptly, and in any event within five Business Days after
the final determination of the Final Closing Statement, pay to the Audit Firm the amount of Audit
Fees payable by Sellers and Pueblo Holdings pursuant to the preceding sentence.
2.4 Escrow.
(a) Escrow Deposit. At or prior to the Closing, Pueblo Holdings, Sellers’
Representative, Bear Cub and the Escrow Agent shall enter into the Escrow Agreement.
Notwithstanding any other provision in this Agreement to the contrary, in order to secure the
indemnity obligations of the Sellers to the Buyer Indemnities under this Agreement and the recovery
by the Buyers of any Aggregate Consideration Deficit, Buyers shall deposit the Escrow Deposit with
the Escrow Agent at Closing to be held in escrow pursuant to the terms of this Agreement and the
Escrow Agreement.
(b) Distribution of Escrow Fund.
(i) Upon the Buyers becoming entitled to a distribution of all or a portion of the Escrow
Fund pursuant to Section 2.3(d)(i), the Escrow Agent shall deliver (A) to the Buyers out
of the Escrow Fund, Cash in an amount equal to the Aggregate Consideration Deficit, (B) to the
Audit Firm an amount in Cash equal to the amount payable to the Audit Firm by Sellers in
accordance with Section 2.3(f), if applicable, and (C) to Sellers’ Representative any Cash
remaining in the Escrow Fund after the payments in clauses (A) and (B) of this Section
2.4(b)(i) have been made. If the Aggregate Consideration Deficit is greater than the amount
of Cash in the Escrow Fund (such excess, the “Escrow Cash Shortfall”), then, in addition
to the Cash distribution as provided above, each Member shall deliver to Pueblo Holdings, within
10 days after written notice of an Escrow Cash Shortfall to the Seller Representative (a
“Shortfall Notice”), an amount in Cash equal to the Escrow Cash Shortfall multiplied by
such Member’s Pro Rata Portion; provided that if any amounts are unpaid pursuant to this
Section 2.4(b)(i), Buyers shall be allowed to pursue a claim for such unpaid amounts in
accordance with the procedures set forth in Section 10.4(h). If it is determined that
Buyers are not entitled to a distribution of the Escrow Fund pursuant to Section
2.3(d)(i), the Escrow Agent shall deliver (A) to the Audit Firm an amount in Cash equal to the
amount payable to the Audit Firm by Sellers in accordance with Section 2.3(f), if
applicable, and (B) to Sellers’ Representative all of the Cash remaining in the Escrow Fund upon
such distribution.
(ii) Notwithstanding anything in this Agreement to the contrary, the Escrow Agent shall
distribute on a quarterly basis to the Sellers’ Representative, all interest, distributions,
dividends and other income earned on the Escrow Fund.
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(c) Written Instructions. Sellers’ Representative and Pueblo Holdings hereby covenant
and agree that when any Person becomes entitled to any distribution from the Escrow Fund pursuant
to any provision of this Agreement, Pueblo Holdings and Sellers’ Representative shall promptly
execute and deliver to the Escrow Agent joint written instructions setting forth the amounts to be
paid to such Person, if any, from the Escrow Fund in accordance with this Agreement and all other
means of calculating amounts due under this Agreement (a “Joint Direction”). Each of
Pueblo Holdings and Sellers’ Representative agree to confer as promptly as practicable and to use
its reasonable best efforts to reach agreement as to the calculation of and entitlement to such
amounts and the applicable Escrow Fund(s) from which such amounts will be distributed. In
furtherance and not in limitation of the foregoing:
(i) if the Sellers’ Representative or Pueblo Holdings shall fail to execute and deliver a
Joint Direction, either of the Sellers’ Representative or Buyers, as applicable, shall be entitled
to receive distributions from the Escrow Fund from the Escrow Agent promptly upon delivery to the
Escrow Agent of a written instruction, order or judgment issued or entered by a court of competent
jurisdiction setting forth the amount to be paid to such Party pursuant to Section
2.4(b)(i) (a “Court Direction”);
(ii) Pueblo Holdings and Sellers’ Representative covenant and agree jointly to instruct the
Escrow Agent in writing, (1) within five Business Days after the final determination, of the Final
Closing Statement to make the Cash distributions, if any, required by Section 2.3(d)(i),
(2) if applicable, promptly within five Business Days after the determination by the Audit Firm of
Net Working Capital, the Credit Agreement Balance, Third-Party Debt, Expenses, the Unpaid
Environmental Deductible or the Cash Amount of the Aggregate Consideration, as applicable, to
release, if applicable, to the Audit Firm out of the Escrow Fund the amount payable to the Audit
Firm by the Sellers in accordance with Section 2.3(f).
2.5 Delivery to Sellers’ Representative. Each Member acknowledges and agrees that
delivery to the Sellers’ Representative of any amounts and all Transaction Units to which such
Member is entitled under this Agreement shall constitute delivery to such Member for all purposes
and the Buyer shall have no further liability to such Member with respect to such amounts or
Transaction Units so delivered to the Sellers’ Representative.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MEMBERS
Subject to the limitations set forth in Article X, each Member, severally and not
jointly with any other Member, represents and warrants as to itself to Buyers as follows (such
representations and warranties being deemed to be made as of the date hereof and on a continuous
basis until the Closing) except as set forth in the Disclosure Letter:
3.1 Organization, Good Standing and Authority of Sellers.
(a) Such Member, if other than an individual, is a corporation, limited liability company,
limited partnership or trust duly organized or formed, validly existing and in good standing under
the laws of its jurisdiction of incorporation, organization or formation, has all
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requisite power and authority to own, lease and operate its properties and to carry on its
business as now being conducted.
(b) Such Member has the full right, power and authority to enter into this Agreement and the
Transaction Documents to which it shall be a party and to transfer, convey and sell to Buyers at
the Closing the Interests owned by it. If such Member is other than an individual, the execution,
delivery and performance of this Agreement and the other Transaction Documents to which it is or is
intended to be a party have been duly authorized by all requisite corporate, limited liability
company or limited partnership action on the part of such Member. This Agreement and the other
Transaction Documents to which such Member is or shall be a party have been or will be duly
executed and delivered by such Member, and (assuming due authorization, execution and delivery
hereof by the other parties hereto and thereto) such Transaction Documents constitute or, if not
yet executed, will at Closing constitute, legal, valid and binding obligations of such Member,
enforceable against such Member in accordance with their terms, subject, as to enforceability, to
bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating
to or affecting creditors’ rights and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3.2 Title to Interests. Such Member has good and valid record and beneficial title to
the Interests as set forth beside such Member’s name on Schedule A, free and clear of any
and all Liens. The Interests set forth opposite such Member’s name on Schedule A
constitute all of the Equity Interests of Pueblo held of record or beneficially by such Member.
Upon the Closing, Buyers will acquire good title to all of the Equity Interests of Pueblo as set
forth opposite such Member’s name on Schedule A, free and clear of any Liens, other than
any Liens created by Buyers. Neither such Member, nor, to the knowledge of such Member, Bear Cub
or any other Member is a party to (i) any option, warrant, purchase right or other Contract (other
than this Agreement) that could require any such Seller or, after the Closing, Buyers, to sell,
transfer or otherwise dispose of any Equity Interest of Pueblo or (ii) any voting trust, proxy or
other agreement or understanding with respect to the voting of any Equity Interest of Pueblo. As
of the Closing, except for the Interests in Pueblo set forth opposite such Member’s name on
Schedule A, such Member will not own any Equity Interests of Pueblo.
3.3 No Conflicts. Neither the execution and delivery by such Member of this
Agreement, any other Transaction Documents to which such Member is or shall be a party or any
instrument required hereby or thereby to be executed and delivered by it at Closing nor the
performance by such Member of its obligations hereunder or thereunder will require any consent
under, conflict with, violate or breach the terms of, cause a default (with or without notice or
lapse of time or both) or give rise to right of termination, cancellation or acceleration of any
obligation or to the loss of a benefit under, or result in the creation of any Lien on any of such
Member’s Interests under (i) if such Member is other than an individual, the Organizational
Documents of such Member, (ii) any Contract or other instrument to which such Member is a party or
by which it or any of its properties or assets are bound, or (iii) assuming the consents,
approvals, authorizations or permits and filings or notifications referred to in Section
4.5 are duly and timely obtained any Law, Regulation or Order applicable to such Member.
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3.4 Investor Status
(a) The Transaction Units are being acquired by such Member for investment purposes only, for
such Member’s own account and not as nominee or agent for any other Person or entity, and not with
a view to, or for resale in connection with, any distribution thereof within the meaning of the
Securities Act. Such Member is not a party to or bound by, and does not intend or have any plans
to enter into, any Contract with any Person to sell, transfer or pledge any part of the Transaction
Units, except for bona fide pledges or sales or transfers made in compliance with all applicable
securities laws.
(b) Such Member has such expertise, knowledge and sophistication in financial and business
matters generally that it is capable of evaluating, and has evaluated, the merits and economic
risks of its investment in the Partnership and the suitability of the Transaction Units as an
investment.
(c) In connection with the acquisition of the Transaction Units hereunder, such Member (or
such Member’s Purchaser Representative) has had the opportunity to examine all aspects of the
Partnership, its operations, and its financial condition that such Member (or such Member’s
Purchaser Representative) has deemed relevant, and has had access to all information with respect
to the Partnership and its business in order to make an evaluation thereof. In connection with the
acquisition of the Transaction Units hereunder, such Member (or such Member’s Purchaser
Representative) has had the opportunity to ask such questions of and receive answers from
directors, officers, employees and representatives of the Managing General Partner concerning the
Partnership and to obtain such additional information about the Partnership as such Member (or such
Member’s Purchaser Representative) deems necessary for an evaluation thereof. The investment
decision of such Member to acquire the Transaction Units has been based solely upon the evaluation
made by such Member (or such Member’s Purchaser Representative) of the Partnership. In evaluating
the suitability of an investment in the Partnership, such Member has not been furnished and no
Member (or such Member’s Purchaser Representative) has relied upon any representations or other
information (whether oral or written) other than as contained in the representations and warranties
of the Buyers in this Agreement.
(d) Such Member acknowledges that copies have been made available to it, sufficiently in
advance of this Agreement as such Member (or such Member’s Purchaser Representative) deems
necessary to evaluate an investment in the Transaction Units, of each of the Partnership SEC
Documents, and has been informed that copies of Exhibits to each of the Partnership SEC Documents
will be made available to any Member (or such Member’s Purchaser Representative) upon such Member’s
written request.
(e) Such Member (i) is an “Accredited Investor” as defined in Rule 501 of Regulation D under
the Securities Act or (ii) either alone or with his Purchaser’s Representative has such knowledge
and experience in financial and business matters that he is capable of evaluating the merits and
risks of an investment in the Partnership.
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(f) Such Member acknowledges that the Transaction Units have not been offered or sold by means
of any form of general solicitation or general advertising or by means of publicly disseminated
advertisements or sales literature.
3.5 Status of Transaction Units; Disposition.
(a) Such Member acknowledges that no registration statement relating to the Transaction Units
has been filed under the Securities Act or any state securities law and that, consequently, the
Transaction Units are “restricted securities” within the meaning of Rule 144 under the Securities
Act, may not be sold, pledged, hypothecated or otherwise transferred (and, therefore, must be held
by such Member) unless the Transaction Units subsequently are registered under the Securities Act
and such state laws or until an exemption from such registration requirements is available.
(b) Neither such Member nor anyone acting on such Member’s behalf has offered or sold or will
offer or sell any of the Transaction Units by means of any form of general solicitation or general
advertising or has taken or will take any action that would constitute a distribution of the
Transaction Units under the Securities Act, would render the disposition of the Transaction Units a
violation of Section 5 of the Securities Act or any state or other applicable securities law, or
would require registration or qualification pursuant thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BEAR CUB
Subject to the limitations set forth in Article X, Bear Cub represents and warrants to
Buyers as follows (such representations and warranties being deemed to be made as of the date
hereof and on a continuous basis until the Closing) except as set forth in the Disclosure Letter:
4.1 Organization, Good Standing and Authority; Capitalization of Bear Cub.
(a) Bear Cub is a limited liability company duly formed, validly existing and in good standing
under the Laws of the State of Colorado and has all requisite limited liability company power and
authority to carry on its business as it is now being conducted and to own, operate and lease the
assets it now owns, operates or holds under lease.
(b) Bear Cub has the full right, power and authority to enter into this Agreement and the
Transaction Documents to which it shall be a party. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which it is or is intended to be a Party have
been duly authorized by all requisite limited liability company action on the part of Bear Cub.
This Agreement and the other Transaction Documents to which it is or shall be a Party have been or
will be duly executed and delivered by Bear Cub, and (assuming due authorization, execution and
delivery hereof by the other parties hereto and thereto) such Transaction Documents constitute or,
if not yet executed, will at Closing constitute, legal, valid and binding obligations of Bear Cub,
enforceable against Bear Cub in accordance with their terms, subject, as to enforceability, to
bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating
to or affecting creditors’ rights and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
9
4.2 Organization, Good Standing, Authority, Capitalization of Pueblo Companies.
(a) Pueblo is a corporation duly organized, validly existing and in good standing under the
Laws of the State of
Texas and has all requisite corporate power and authority to carry on its
business as it is now being conducted and to own, operate and lease the assets it now owns,
operates or holds under lease. Pueblo is duly qualified to transact business and is in good
standing in each jurisdiction listed on
Section 4.2(a) of the Disclosure Letter, which
constitute all of the jurisdictions in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification necessary, except jurisdictions in
which the failure to be so qualified would not have a Material Adverse Effect on Pueblo.
(b) The authorized capital stock of Pueblo consists of 2,500,000 shares of capital stock, no
par value per share, of which 588,600 shares (being all the Interests) are issued and outstanding
and listed on Schedule A. No shares of capital stock or other Equity Interests are
reserved for issuance, there are no Equity Interest Equivalents outstanding and Pueblo is not
obligated, by Contract or otherwise, to issue any Equity Interests. All the outstanding Interests
have been duly authorized, validly issued and are fully paid and nonassessable and were not issued
in violation of any preemptive rights or other preferential rights of subscription or purchase of
any Person.
(c) Pueblo Subsidiary is a corporation duly organized, validly existing and in good standing
under the Laws of the State of
Texas and has all requisite corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease the assets it now owns,
operates or holds under lease. Pueblo Subsidiary is duly qualified to transact business and is in
good standing in each of the jurisdictions listed on
Section 4.2(c) of the Disclosure
Letter which constitute all of the jurisdictions in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such qualification necessary, except
jurisdictions in which the failure to be so qualified would not have a Material Adverse Effect on
Pueblo.
(d) The authorized capital stock of Pueblo Subsidiary consists of 1,000 shares of capital
stock, no par value per share, of which 1,000 shares are issued and outstanding. No shares of
capital stock or other Equity Interests are reserved for issuance, there are no Equity Interest
Equivalents outstanding and Pueblo Subsidiary is not obligated, by Contract or otherwise, to issue
any Equity Interests. Pueblo owns, of record and beneficially, all of the outstanding Equity
Interests of Pueblo Subsidiary free and clear of all Liens. All the outstanding shares of capital
stock of Pueblo Subsidiary have been duly authorized, validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive rights or other preferential
rights of subscription or purchase of any Person.
(e) Pueblo Subsidiary is the only corporation, limited partnership, limited liability company
or other Person in which Pueblo owns, directly or indirectly, an Equity Interest.
(f) Bear Cub has heretofore delivered to Buyers true and complete copies of the Organizational
Documents of each of Pueblo and the Pueblo Subsidiary.
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4.3 No Conflicts. Neither the execution and delivery by Bear Cub of this Agreement,
any other Transaction Documents to which Bear Cub is or shall be a party or any instrument required
hereby or thereby to be executed and delivered by it at Closing nor the performance by Bear Cub of
its obligations hereunder or thereunder will conflict with, violate or breach the terms of, cause a
default (with or without notice or lapse of time or both) or give rise to right of termination,
cancellation or acceleration of any obligation or to the loss of a material benefit under, or
result in the creation of any Lien on any of the Assets of any Pueblo Company under, or otherwise
result in a material detriment to Bear Cub or any Pueblo Company under, any provision of (i) the
Organizational Documents of Bear Cub or Pueblo (each as amended to date) or any provision of the
comparable charter or organizational documents of Pueblo Subsidiary, (ii) any Contract, instrument,
permit, concession, franchise or license to which any of Bear Cub, any of its Subsidiaries, or any
Pueblo Company is a party or by which or to which any of their respective properties or assets are
bound or subject, (iii) any joint venture or other ownership arrangement applicable to Bear Cub or
any Pueblo Company or (iv) assuming the consents, approvals, authorizations or permits and filings
or notifications referred to in Section 4.5 are duly and timely obtained or made, any Law,
Regulation or Order applicable to Bear Cub, either Pueblo Company or any of their respective
properties or assets.
4.4 Regulation and Authorizations. To Bear Cub’s Knowledge, no Pueblo Company has
engaged in any activities that would subject any Pueblo Company, its activities, or its facilities
to the NGA jurisdiction of the FERC. All of the facilities of Pueblo used to transport natural gas
are intrastate pipelines or “gathering” facilities and, as such, are not currently subject to
regulation by any Governmental Authority under the NGA or the NGPA. The representations made by
Bear Cub and the Pueblo Companies concerning the jurisdictional status of their facilities and
operations to natural gas purchasers and interstate or intrastate pipelines in order to effect
sales or to facilitate transportation transactions (whether for any Pueblo Company or any Third
Person) were true when made and are true and correct in all material respects, and the Pueblo
Companies have complied in all material respects with the terms and conditions of such sales,
transportation or interconnect or similar arrangements (including “on behalf of” certificates).
4.5 Consents and Authorizations.
(a) Except for (i) Post-Closing Notifications, (ii) any Notifications set forth in Section
4.5(a)(ii) of the Disclosure Letter (the “Required Notifications”), (iii) any
Third-Party Consent set forth in Section 4.5(a)(iii) of the Disclosure Letter (a
“Required Third-Party Consent”), and (iv) any Authorizations set forth in Section
4.5(a)(iv) of the Disclosure Letter (a “Required Authorization”), no Authorization,
Notification or Third-Party Consent is necessary for Bear Cub to execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents to which it is or it shall be
a party.
(b) Each Pueblo Company possesses all material Authorizations, including all certificates of
public convenience and necessity and rate authorizations required by the Governmental Authority of
each state with jurisdiction over such matters, as are necessary to carry on its business as
currently conducted. Such Authorizations are in full force and effect and have not been violated
in any material respect and no suspension, revocation or cancellation thereof has been threatened.
Neither Bear Cub nor any Pueblo Company has received any
11
written notification that any event has occurred or any circumstance or condition exists, and,
to Bear Cub’s Knowledge, no event has occurred, and no circumstance or condition does exist, that
(with or without notice or lapse of time) could reasonably be expected to constitute or result in a
material violation or non-compliance by any of the Pueblo Companies with any such Authorization.
Neither Bear Cub nor any of the Pueblo Companies has received from any Governmental Authority
written notification that any such Authorizations (A) are not in full force and effect, (B) have
been violated in any material respect or (C) are subject to any suspension, revocation,
modification or cancellation. There is no Proceeding pending or, to Bear Cub’s Knowledge,
threatened regarding suspension, revocation, modification or cancellation of any of such
Authorizations.
4.6 Properties.
(a) Pueblo and the Pueblo Subsidiaries, individually or together, (i) have such title or
interest in and to the Pipeline Assets as is sufficient to enable them to conduct their business as
currently conducted without material interference, and (ii) own or hold by valid leaseholds all of
the other assets reflected in the Consolidated Balance Sheet (other than any assets reflected in
the Consolidated Balance Sheet that have been sold or otherwise disposed of since the date of the
Consolidated Balance Sheet consistent with Section 4.19(a)) and all other assets (including
Real Property Interests but excluding the Pipeline Assets) ((i) and (ii) collectively, the
“Assets”) free and clear of all Title Defects. Neither Bear Cub nor any Pueblo Company has
received any written notice of any claim asserting the existence of a Title Defect in connection
with any material Assets. To Bear Cub’s Knowledge, there are no assessments against the Assets for
public improvements. As of the date of this Agreement, there has been no actual or, to Bear Cub’s
Knowledge, threatened taking (whether permanent, temporary, whole or partial) of any part of the
Assets by reason of condemnation or, to Bear Cub’s Knowledge, the threat of condemnation.
(b) The Assets, including the personal property owned or leased by the Pueblo Companies,
constitute all of the assets, rights and properties, tangible or intangible, real or personal, that
are used or, to Bear Cub’s Knowledge, necessary for use in connection with the operation of the
business of the Pueblo Companies consistent with past practice and as currently operated. There
are no preferential rights, rights of first refusal, rights of first offer or similar rights to
purchase or with respect to the sale of any material Asset or material portion of the Assets.
(c) Neither Bear Cub nor any Pueblo Company has received any notice of default or termination
or, to Bear Cub’s Knowledge, is in default, under the terms of any leases, easements or rights of
way with respect to the Real Property Interests, that has resulted in or could reasonably be
expected to result in a material impairment or loss of title to the Real Property Interests or the
value thereof or that has or would hinder or impede the operations of the assets of any Pueblo
Company or adversely affect the ability of the Pueblo Companies to own and operate their assets
from and after the Closing in the ordinary course of business as conducted by the Pueblo Companies
prior to Closing.
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(d) The assets of the Pueblo Companies that are tangible assets are, in all material respects,
in good operating and working order, repair and condition, subject to ordinary wear and tear.
4.7 Taxes.
(a) All Tax Returns required to be filed by or with respect to each Pueblo Company have been
filed when due. All such Tax Returns are true, correct and complete in all material respects. All
Taxes of each Pueblo Company (or for which any Pueblo Company could be liable), whether or not
shown on any Tax Return, have been paid when due. All Tax withholding and deposit requirements
imposed on or with respect to any Pueblo Company have been satisfied in full in all respects.
There are no Liens on any of the Assets that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) No Pueblo Company has made any payments, is obligated to make any payments, or is a party
to any plan or agreement that under certain circumstances could obligate it to make any payments
that would not be deductible under Sections 162(m), 280G (determined without regard to the
exceptions contained in Sections 280G(b)(4) and 280G(b)(6)), 404 or 409A of the Code.
(c) No Pueblo Company has granted (or is subject to) any waiver or extension that is currently
in effect of the period of limitations for the assessment or payment of any Tax or the filing of
any Tax Return. No unpaid Tax assessment, deficiency or adjustment has been assessed or asserted
against or with respect to any Pueblo Company by any Governmental Authority; there are no currently
pending or, to Bear Cub’s Knowledge, threatened, audits, administrative or judicial proceedings, or
any deficiency or refund litigation, with respect to Taxes of any Pueblo Company.
(d) All of the Pueblo Companies are members of an affiliated group within the meaning of
Section 1504(a) of the Code, of which Pueblo is the common parent, and such affiliated group files
a consolidated federal income Tax Return. No Pueblo Company (1) has been a member of an affiliated
group (other than the affiliated group of which Pueblo is the common parent) or (2) has any
liability for the Taxes of any Person (other than another Pueblo Company) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise.
(e) Bear Cub has previously made available to Buyers true, correct and complete copies of (1)
all income and other material Tax Returns filed by or on behalf of each Pueblo Company for all
completed Tax years that remain open for audit or review by the relevant Governmental Authority and
(2) all ruling requests, private letter rulings, notices of proposed deficiencies, closing
agreements, settlement agreements and any similar documents or communications sent or received by
any Pueblo Company relating to Taxes.
(f) None of the property of the Pueblo Companies is held in an arrangement that could be
classified as a partnership for Tax purposes, and no Pueblo Company owns any interest in any
controlled foreign corporation (as defined in Section 957 of the Code), passive
13
foreign investment company (as defined in Section 1297 of the Code) or other entity the income
of which is or could be required to be included in the income of any Pueblo Company.
(g) No claim has ever been made by any Governmental Authority in any jurisdiction in which a
Pueblo Company does not file Tax Returns that such Pueblo Company is or may be subject to Taxation
by that jurisdiction.
(h) There are no intercompany transactions within the meaning of Treasury Regulation Section
1.1502-13 (deferred intercompany gain) or Treasury Regulation Section 1.1502-19 (excess loss
accounts) and no Pueblo Company has any such gain or excess loss accounts.
(i) No Pueblo Company will be required to include any item of income in, or exclude any item
of deduction from, taxable income for any Taxable period ending after the Closing Date as a result
of a change in accounting method for any Taxable period ending on or before the Closing Date or
pursuant to any agreement with any Governmental Authority with respect to any such Taxable period.
No Pueblo Company will be required to include in any period ending after the Closing Date any
income that accrued in a prior period but was not recognized in any prior period as a result of the
installment method of accounting, the completed contract method of accounting, the long-term
contract method of accounting, the cash method of accounting, or otherwise.
(j) No Pueblo Company is party to or has any obligation under any tax-sharing, tax indemnity
or tax allocation agreement or similar arrangement, nor does any Pueblo Company have any Liability
or potential Liability to another party under any such agreement or arrangement.
(k) No Pueblo Company has constituted either a “distributing corporation” or a “controlled
corporation” in a distribution of stock intended to qualify for tax-free treatment under Section
355 of the Code (1) in the two years prior to the date of this Agreement or (2) in a distribution
that could otherwise constitute part of a “plan” or “series of related transactions” (within the
meaning of Section 355(e) of the Code) in conjunction with the transactions contemplated by the
Transaction Documents.
(l) No Pueblo Company has consummated, has participated in, or is currently participating in
any transaction that was or is a “tax shelter,” “listed transaction” or “reportable transaction” as
defined in Sections 6662, 6662A, 6011, 6012, 6111 or 6707A of the Code or the Treasury Regulations
promulgated thereunder, including transactions identified by the IRS by notice, regulation or other
form of published guidance as set forth in Treasury Regulation Section 1.6011-4(b)(2).
(m) None of the Assets (directly or indirectly) secures any debt the interest on which is
exempt from Tax under Section 103(a) of the Code, and none of the Assets consist of “tax-exempt use
property” within the meaning of Section 168(h) of the Code.
(n) No Pueblo Company has executed or entered into with the IRS, or any other Governmental
Authority, a closing agreement pursuant to Section 7121 of the Code or any similar provision of
state, local, foreign or other Tax law, that will require any increase in
14
Taxable income or alternative minimum Taxable income, or any reduction in Tax deductions or
Tax credits for, any Pueblo Company for any Taxable period ending after the Closing Date.
4.8 Compliance with Laws.
(a) Each Pueblo Company is in compliance in all material respects with all applicable Laws and
Regulations and no Pueblo Company has received specific written notice from any Governmental
Authority that it is not in compliance in any material respects with any applicable Law.
(b) To Bear Cub’s Knowledge, subject to Section 4.4, no provision of any existing Law,
Regulation or Order applicable to any Pueblo Company (i) would preclude any Pueblo Company from
charging and collecting, without the necessity for approvals of any Governmental Authority and
without refund obligation, market based rates for gathering, transporting, treating, processing,
compressing, purchasing, or selling Hydrocarbons; (ii) would preclude any Pueblo Company from
constructing additions to, modifications of or interconnections with Third Persons with respect to,
its gathering, transportation, treating, processing or compression facilities; or (iii) has
required or could reasonably be expected to require any Pueblo Company to make refunds of amounts
collected for sales or services.
(c) None of the Pueblo Companies is engaged in any natural gas or other futures or options
trading or is a party to any price swaps, xxxxxx, futures or similar instruments.
4.9 Insurance. Section 4.9 of the Disclosure Letter sets forth a list,
including the name of the insurer, the risks insured, and related limits of the insurance policies
currently maintained by the Pueblo Companies and any material claim outstanding under such
insurance policies. All such policies are in full force and effect. Except as otherwise
disclosed, there is no material claim outstanding under any such insurance policy and, to Bear
Cub’s Knowledge, no event has occurred, and no circumstance or condition exists, that has given
rise to or serves as the basis for or (with or without notice or lapse of time) could reasonably be
expected to give rise to or serve as the basis for any such claim under any such policy. No Pueblo
Company has received any written notice from any insurer or reinsurer of any reservation of rights
with respect to pending or paid claims. No Pueblo Company is a party to any Contract, and the
insurance policies listed on Section 4.9 of the Disclosure Letter do not contain any
provision, that would abrogate or limit the rights of any Pueblo Company under such insurance
policies upon or as a result of the consummation of the transactions contemplated by this
Agreement. As of the date hereof, Pueblo has paid $378,321.00 toward the deductible under the
Current Environmental Insurance Policy.
4.10 Material Contracts.
(a) Section 4.10 of the Disclosure Letter contains a list of all Material Contracts.
A true, correct and complete copy of each written Material Contract, and a written description of
each oral Material Contract which is true, correct and complete in all material respects, has been
provided to Buyers. None of the Pueblo Companies has received from any other party to a Material
Contract any written notice of any material breach or material violation by any Pueblo Company of
any Material Contract or termination or intention to terminate such
15
Material Contract. No event has occurred which (with notice or lapse of time, or both) would
constitute a default or an event of default by any Pueblo Company under the terms of any Material
Contract or give any other party to a Material Contract the right to terminate or modify the terms
of such Material Contract. The Pueblo Companies have performed all of their obligations under the
Material Contracts in all material respects. Each of the Material Contracts is enforceable and in
full force and effect and constitutes a legal, valid and binding obligation of the Pueblo Company
that is a party thereto and, to Bear Cub’s Knowledge, each other party thereto, and, to Bear Cub’s
Knowledge, no other party to any Material Contract is in material breach of the terms, provisions
or conditions of such Material Contract.
(b) There are no Contracts that, upon the consummation of the transactions contemplated by
this Agreement or the Transaction Documents, will restrict the ability of the Buyers from
processing the Hydrocarbons currently dedicated to the Xxxxxxx Facility under the Treatment and
Processing Agreements from being transported to and processed at any other location owned by Buyers
or its Subsidiaries.
(c) There are no other Co-Owner Agreements and Co-Owner has no other rights with respect to
the Xxxxxxx Plant.
4.11 Intellectual Property. There are no material trademarks, trade names, patents,
service marks, brand names, computer programs, databases, industrial designs, copyrights or other
intangible property (“Intellectual Property”), that are, to Bear Cub’s Knowledge, necessary
for the operation, or continued operation, of the business of any Pueblo Company, or for the
ownership and operation, or continued ownership and operation, of any assets of any Pueblo Company,
for which the Pueblo Companies do not hold valid and continuing authority in connection with the
use thereof. No Pueblo Company has received any written notice of infringement, misappropriation
or conflict with respect to Intellectual Property from any Person with respect to the operation of
the Assets owned by any Pueblo Company.
4.12 Broker’s or Finder’s Fees. No investment banker, broker, finder or other Person
is entitled to any brokerage or finder’s fee or similar commission in respect of the transactions
contemplated by this Agreement or any Transaction Document based in any way on agreements,
arrangements or understandings made by or on behalf of any Pueblo Company for which Buyer or any
Pueblo Company shall have any obligation or liability.
4.13 Employees.
(a) No Pueblo Company has, or since October 1, 2003 has had, any employees or Employee Benefit
Plans and no Pueblo Company has any liability (including any contingent liability) to any employee
or with respect to any Employee Benefit Plan.
(b) Section 4.13(a) of the Disclosure Letter lists all employees of Bear Cub the
primary duties or activities of which are to perform services for the Pueblo Companies or the
Assets (the “Pueblo Employees”), their current annual salary or hourly rate, as applicable,
date of employment and employee benefits (the “Current Salary/Benefits”).
(c) None of the Pueblo Companies has agreed to recognize any labor union or other collective
bargaining representative and, to Bear Cub’s Knowledge, no labor union or other
16
collective bargaining representative claims to or is seeking to represent any Pueblo
Employees. To Bear Cub’s Knowledge, no union organizational campaign or representation petition is
currently pending with respect to any Pueblo Employee.
(d) Neither any Pueblo Company nor any ERISA Affiliate contributes to or has an obligation to
contribute to, nor has contributed to or had an obligation to contribute to, a multiemployer plan
within the meaning of Section 3(37) of ERISA or any other employee benefit plan subject to Title IV
of ERISA.
(e) The execution, delivery and performance of, and consummation of the transactions
contemplated by, this Agreement and the Transaction Documents will not (either alone or in
conjunction with any other event) entitle any current or former employee, director, officer,
consultant, independent contractor, contingent worker or leased employee (or any of their
dependents, spouses or beneficiaries) of the Pueblo Companies to any (1) Severance Obligations, or
(2) Change of Control Amounts (for each of clause (1) and (2), except as set forth in the
Transition Services Agreement). Further, neither Pueblo Company has made any payments, is
obligated to make any payments, or is a party to any Contract that, under certain circumstances,
would obligate it to make any payments that would not be deductible under (or the deduction of
which would be limited by) Section 280G or 162(m) of the Code or would be subject to tax under
Section 209A of the Code.
4.14 Financial Statements; Absence of Undisclosed Liabilities; Controls and
Procedures.
(a) Bear Cub has delivered to Buyers the unaudited consolidated balance sheets (the
“Consolidated Balance Sheet”) and related unaudited consolidated statements of operations
and statements of cash flows of Pueblo and its Subsidiary for the year ended December 31, 2004,
December 31, 2005 and December 31, 2006 (such financial statements for the year ended December 31,
2004, December 31, 2005 and December 31, 2006 being the “Financial Statements”); and
(b) The Financial Statements have been prepared in accordance with the books and records of
Pueblo and the Pueblo Subsidiaries in all material respects. Each of the balance sheets included
in the Financial Statements fairly presents in all material respects the consolidated financial
position of the Pueblo Companies, as of the date thereof, and each of the consolidated income
statements and statements of cash flows included in the Financial Statements fairly presents in all
material respects the consolidated results of operations and cash flows, as the case may be, of the
Pueblo Companies for the periods set forth therein, in each case in accordance with GAAP, subject
to the absence of notes or other textual disclosures required under GAAP that are not, indirectly
or in the aggregate, material.
(c) There are no Liabilities of Pueblo or any Pueblo Subsidiaries that are not reflected or
reserved against in the Financial Statements, other than Liabilities that are (i) current
liabilities incurred in the ordinary course of business and consistent with past practices of the
Pueblo Companies since December 31, 2006, (ii) not required to be presented in unaudited year end
financial statements prepared in conformity with GAAP and that are not, individually or in the
aggregate, material to the Pueblo Companies, taken as a whole and which, in any event, do
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not exceed $25,000 in the aggregate, (iii) Liabilities under this Agreement or (iv)
Liabilities for Expenses. Neither Pueblo Company has any Liability for funded indebtedness.
(d) Each of the Pueblo Companies maintains books and records reflecting in all material
respects its assets and liabilities and that in reasonable detail accurately and fairly reflect in
all material respects the transactions and dispositions of the assets of the Pueblo Companies, and
maintains proper and adequate internal accounting controls that provide reasonable assurance that
(i) transactions are executed with management’s authorization; (ii) transactions are recorded as
necessary to permit preparation of the consolidated financial statements of the Pueblo Companies
and to maintain accountability for the consolidated assets; (iii) access to the Pueblo Companies’
assets is permitted only in accordance with management’s authorization; (iv) the reporting of the
Pueblo Companies’ assets is compared with existing assets at regular intervals; and (v) accounts,
notes and other receivables and inventory are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a current and timely basis.
(e) Bear Cub has delivered to the Buyers all unaudited financial statements of the Pueblo
Companies prepared to date.
(f) Pueblo’s accountants have not advised Pueblo of any material deficiencies in Pueblo’s
disclosure controls and procedures.
4.15 Internal and Disclosure Controls. Bear Cub and the Pueblo Companies are not and
have not been at any time subject to the Xxxxxxxx-Xxxxx Act of 2002 and as such, no specific
internal or external review of Bear Cub’s or the Pueblo Companies’ internal and disclosure controls
has been performed. Bear Cub has disclosed to Buyers in summary form the existence, to Bear Cub’s
Knowledge, of each of the following (i) any material deficiency in the internal controls of the
Pueblo Companies that could adversely affect the Pueblo Companies’ ability to record, process,
summarize and report financial data; (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Pueblo Companies’ internal
controls and (iii) any change in the internal controls or disclosure controls and procedures of the
Pueblo Companies effected since January 1, 2006.
4.16 Environmental Matters.
(a) No Pueblo Company is in violation in any material respect of any Environmental Law. No
Governmental Authority or other Third Person has alleged that any Pueblo Company is in violation of
any Environmental Law, except for such allegations of violation that have been resolved to the
satisfaction of the party making such allegation.
(b) None of the Real Property Interests, none of any other properties used by any Pueblo
Company, and none of the properties to which Hazardous Materials generated by any Pueblo Company or
as a result of the operations of any Pueblo Company may have migrated or been transported is (i)
listed on the CERCLA National Priorities List or any other similar list of sites of environmental
concern maintained by any Governmental Authority or (ii) is the subject of any remediation,
removal, cleanup, investigation, response action, claim, judgment, or enforcement action regarding
any actual or alleged presence or release of Hazardous Materials.
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(c) No Pueblo Company has released, and to Bear Cub’s Knowledge there have not been any
releases of, Hazardous Materials on, under, from, or into any of the Real Property Interests or any
other property formerly owned, operated, or used by any Pueblo Company during or before the time of
such Pueblo Company’s ownership, operation, or use of such properties.
(d) To Bear Cub’s Knowledge, each Pueblo Company currently holds all material permits,
licenses, and approvals required under any Environmental Law for its ownership, operation, or use
of the Real Property Interests and the conduct of its operations. There are no outstanding or
unresolved notices of violation or notices of noncompliance with respect to such permits, licenses,
and approvals.
(e) There are no civil, criminal, or administrative actions, suits, demands, claims, hearings,
proceedings, or notices pending or, to Bear Cub’s Knowledge, threatened against any Pueblo Company
under any Environmental Law, including without limitations those related to allegations of economic
loss, personal injury, illness, or damage to real or personal property or the environment.
(f) No Pueblo Company is a party or, to Bear Cub’s Knowledge, a successor in interest to any
Contract under which any Pueblo Company has assumed or agreed to be responsible for any current or
contingent Liabilities with respect to any Hazardous Materials or any matters arising under
Environmental Laws.
(g) To Bear Cub’s Knowledge, there are no actual or contingent Environmental Costs or
Liabilities that any Pueblo Company may sustain in connection with any remediation, clean-up,
modification, monitoring, repairs, work, construction, alterations or installations required as a
result of any existing condition, fact or circumstance, including any Environmental Costs or
Liabilities relating to capital improvements, physical upgrading or maintenance and repairs
required by, or otherwise required to correct any Pueblo Company’s noncompliance with, any
Environmental Law.
4.17 Litigation.
(a) There are no Proceedings pending or, to Bear Cub’s Knowledge, threatened against any
Pueblo Company or the Assets, including any Proceeding that questions the validity or
enforceability of this Agreement or any other Transaction Document.
(b) To Bear Cub’s Knowledge, there are no facts or circumstances existing that could
reasonably give rise to any litigation, arbitration, investigation or proceeding that, if resolved
in a manner adverse to the Pueblo Companies, could reasonably be expected to give rise to a
material Liability or have a Material Adverse Effect on Pueblo.
(c) No Pueblo Company is subject to any outstanding Order (other than routine oil and gas
field regulatory orders) or any executory compliance or settlement agreement, conciliation
agreement, memorandum of understanding, or letter of commitment with a Third Party.
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4.18 Bankruptcy. There are no bankruptcy, reorganization or receivership proceedings
pending, planned or being contemplated by any Pueblo Company or with respect to any of their
respective Assets, or, to Bear Cub’s Knowledge, being threatened against Pueblo or any of the
Pueblo Subsidiaries.
4.19 Absence of Certain Changes. Except as reflected in the Financial Statements,
since December 31, 2006, (a) neither Pueblo nor any Pueblo Subsidiary has acted or failed to act in
a manner that would have been prohibited by Section 6.1 if the terms of such Section had
been in effect as of and after such date and (b) there has not occurred, and neither Pueblo nor any
Pueblo Subsidiary has incurred or suffered, any result, occurrence, change, fact, event,
circumstance or effect of any of the foregoing that has had or could reasonably be expected to
have, a Material Adverse Effect on Pueblo.
4.20 Pipeline Matters. Section 4.20 of the Disclosure Letter sets forth
summary historical throughput data and information (but only to the extent Pueblo possesses such
throughput data and information) for the periods January 1, 2005 through January 31, 2007 relating
to the Assets, including volumes of Hydrocarbons transported through the Pipeline Assets for the
periods indicated. Such throughput data and information are accurate and complete in all material
respects with respect to such periods. Subsequent to such periods, there have been no material
adverse changes in the volumes of Hydrocarbons transported through the Pipeline Assets and no
Person has provided written notice or, to Bear Cub’s Knowledge, oral notice to Bear Cub or any
Pueblo Company of its intent to reduce materially the volume of Hydrocarbons transported through
the Pipeline Assets. No fact or circumstance exists that would result in a material decrease in
such volumes excluding, however, changes that may result from (a) market conditions, (b) matters
that affect the energy industry in general or in the area in which the Assets are located, (c)
non-performance by a party under the Hydrocarbon Contracts other than a Pueblo Company or (d)
normal well decline or depletion in the ordinary course of operations or well volume declines
caused by well operations.
4.21 Affiliate Relationships. There are no Contracts or other arrangements between
Bear Cub and any Pueblo Company or involving any Pueblo Company in which any member, manager,
officer, director, or Affiliate of any Pueblo Company or Bear Cub is a party or has a financial
interest.
4.22 FCC Matters. Pueblo has properly filed with the FCC such application(s) as may
be required to cancel in accordance with the FCC Rules all FCC Licenses set forth on Section
4.22 of the Disclosure Letter pursuant to the FCC’s Universal Licensing System (ULS) and has
provided to Buyers copies of all such application(s) filed. No Pueblo Company holds any FCC
Licenses.
4.23 Bear Cub Financial Statements; Absence of Undisclosed Liabilities.
(a) Bear Cub has delivered to Buyers the unaudited consolidated balance sheet (the “Bear
Cub Consolidated Balance Sheet”) and related unaudited consolidated income statement of Bear
Cub and its Subsidiaries for the year ended December 31, 2006 (such financial statements being the
“Bear Cub Year End Financial Statements”).
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(b) The Bear Cub Year End Financial Statements have been prepared in accordance with the books
and records of Bear Cub and its Subsidiaries in all material respects. The consolidated balance
sheet included in the Bear Cub Year End Financial Statements fairly presents in all material
respects the consolidated financial position of Bear Cub, as of the date thereof, and the
consolidated income statement included in the Bear Cub Year End Financial Statements fairly
presents in all material respects the consolidated results of operations of Bear Cub for the
periods set forth therein, in each case in accordance with GAAP, subject to the absence of notes or
other textual disclosures required under GAAP that are not, indirectly or in the aggregate,
material.
(c) There are no Liabilities of Bear Cub that are not reflected or reserved against in the
Bear Cub Year End Financial Statements, other than Liabilities that are (A) current liabilities
incurred in the ordinary course of business and consistent with past practices of Bear Cub since
December 31, 2006, (B) not required to be presented in unaudited year end financial statements
prepared in conformity with GAAP and that are not, individually or in the aggregate, material to
Bear Cub, taken as a whole and which, in any event, does not exceed $25,000 in the aggregate, or
(C) Liabilities under this Agreement.
4.24 Powers of Attorney. The total consideration to be received for the sale of the
Members’ Interest under this Agreement satisfies the condition in the Powers of Attorney executed
by each Member, each Power of Attorney remains in full force and effect and no Member has revoked
any Power of Attorney.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
The Buyers jointly and severally represent and warrant to Sellers as follows (such
representations and warranties being deemed to be made as of the date hereof and on a continuous
basis until the Closing), in each case except as to matters disclosed in the Partnership SEC
Documents:
5.1 Organization, Standing and Power. Each of the Partnership and Pueblo Holdings and
its Significant Subsidiaries is a corporation, limited liability company or limited partnership
duly organized or formed, validly existing and in good standing under the laws of its jurisdiction
of incorporation, organization or formation, has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted, and is duly
qualified and licensed, as may be required, and in good standing to do business in each
jurisdiction in which the business it is conducting, or the operation, ownership or leasing of its
properties, makes such qualification and licensing necessary, other than in such jurisdictions in
which the failure so to be qualified and licensed could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the Partnership. Each of the
Partnership and Pueblo Holdings has heretofore made available to Sellers complete and correct
copies of its Organizational Documents, each as amended to date.
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5.2 Authority; No Violations, Consents and Approvals.
(a) Other than approval by the General Partner, which approval has been obtained, no vote of
holders of any Equity Interest of the Partnership is necessary to approve this Agreement, the other
Transaction Documents to which the Buyers are or will be a party, or the performance by the Buyers
of their respective obligations hereunder or thereunder. The Buyers have all requisite limited
partnership and corporate power and authority to enter into this Agreement and the other
Transaction Documents to which it shall be a party and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary partnership and corporate action on
the part of each of the Buyers. This Agreement has been duly executed and delivered by each of the
Buyers and, assuming this Agreement constitutes the valid and binding obligation of Sellers and
Sellers’ Representative, constitutes a valid and binding obligation of each of the Buyers
enforceable in accordance with its terms, subject as to enforceability to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applicability relating to or affecting
creditors’ rights and to general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(b) The execution and delivery of this Agreement by the Buyers does not, and the consummation
of the transactions contemplated hereby and compliance with the provisions hereof will not,
conflict with, or result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or acceleration of any
material obligation or to the loss of a material benefit under, or give rise to a right of purchase
under, result in the creation of any Lien upon any of the properties or assets of the Partnership
or any of its Subsidiaries under, or otherwise result in a material detriment to the Partnership or
any of its Subsidiaries under, any provision of (i) the Organizational Documents of the Partnership
(each as amended to date) or any provision of the comparable charter or organizational documents of
any of its Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise or license or other Contract
applicable to the Partnership or any of its Subsidiaries, (iii) any joint venture or other
ownership arrangement or (iv) assuming each Notification and Authorization referred to in
Section 5.2 is duly and timely made or obtained, any Law, Regulation or Order applicable to
the Partnership or any of its Subsidiaries or any of their respective properties or assets, other
than, in the case of clause (ii) or (iii), any such conflicts, violations, defaults, rights, Liens
or detriments that, individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect on the Partnership.
(c) No Notification to, and no Authorization from, any Governmental Authority is required by
or with respect to the Partnership or any of its Subsidiaries in connection with the execution and
delivery by the Buyers of this Agreement and the other Transaction Documents to which they are or
will be a party or the performance by the Buyers of their respective obligations hereunder or
thereunder, except for: (i) such filings and/or notices as may be required under the Securities Act
or the Exchange Act; (ii) filings with the Nasdaq; (iii) such filings and approvals as may be
required by any applicable state securities, “blue sky” or takeover laws or environmental laws;
(iv) any Post-Closing Notifications; and (v) any such
22
Notification or Authorization that the failure to obtain or make could not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect on the Partnership.
5.3 SEC Documents. The Partnership has made available to Bear Cub and each Member a
true and complete copy of each of the Partnership SEC Documents and exhibits to each of the
Partnership SEC Documents. The Partnership SEC Documents constitute each registration statement,
prospectus (other than preliminary prospectuses), and other material report and schedule filed by
the Partnership with the SEC since December 31, 2005 (other than any registration statement and
related prospectus relating to any employee benefit plan) and include all the material reports and
schedules (other than preliminary material) that the Partnership was required to file with the SEC
since December 31, 2005. As of their respective dates, the Partnership SEC Documents complied as
to form in all material respects with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder applicable to such
Partnership SEC Documents, and none of the Partnership SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Partnership included in the Partnership SEC Documents
were prepared from the books and records of the Partnership and its subsidiaries, complied as to
form in all material respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Rule 10.01 of Regulation S-X of the SEC) and fairly present in
accordance with applicable requirements of GAAP (subject, in the case of the unaudited statements,
to normal, recurring adjustments, none of which is material) the consolidated financial position of
the Partnership and its consolidated subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of the Partnership and its consolidated
Subsidiaries for the periods presented therein. Notwithstanding the foregoing statements, the
Buyers make no representation or warranty and shall have no liability with respect to any current
report on Form 8-K of the Partnership that has been “furnished” rather than “filed” with the SEC.
5.4 Absence of Certain Changes or Events. Except as disclosed in, or reflected in the
financial statements included in, the Partnership SEC Documents, since December 31, 2005, the
Partnership has conducted its business only in the ordinary course of business, and there has not
been: (a) any material damage, destruction or other casualty loss (whether or not covered by
insurance) affecting the business or assets owned or operated by the Partnership and its
subsidiaries; or (b) any other transaction, commitment, dispute or other event or condition
(financial or otherwise) of any character (whether or not in the ordinary course of business) that,
individually or in the aggregate, has resulted in or could reasonably be expected to result in a
Material Adverse Effect on the Partnership.
5.5 Litigation. Except as disclosed in the Partnership SEC Documents, there is no
suit, action or proceeding pending, or, to Buyers’ Knowledge, threatened against or affecting the
Partnership or any Subsidiary of the Partnership (“Partnership Litigation”), and, to the
Buyers’ Knowledge, there are no facts that are likely to give rise to any Partnership Litigation,
that, individually or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect on the Partnership, nor is there any judgment, decree, injunction, rule or order of
any
23
Governmental Authority or arbitrator outstanding against the Partnership or any Subsidiary of
the Partnership that could reasonably be expected to result in a Material Adverse Effect on the
Partnership.
5.6 Taxes. From and at all times since its formation, the Partnership has qualified
as a partnership for U.S. federal income tax purposes under Section 7704(c) of the Code, and all
Tax Returns have been prepared consistently therewith.
5.7 Broker’s or Finder’s Fees. No investment banker, broker, finder or other Person
is entitled to any brokerage or finder’s fee or similar commission in respect of the transactions
contemplated by this Agreement or any Transaction Document based in any way on agreements,
arrangements or understandings made by or on behalf of Buyers or any of its Affiliates that is, or
following the Closing would be, an obligation of Pueblo, Sellers or any of their respective
Affiliates.
5.8 Investment Intent. Buyers are acquiring the Interests for their own account for
investment and not with a view to, or for sale in connection with, any distribution thereof, nor
with any present intention of distributing or selling the same; and neither Buyer has any present
or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof.
ARTICLE VI
COVENANTS
6.1 Conduct of Business.
(a) Bear Cub covenants and agrees that until the earlier of the Closing or the termination of
this Agreement, except as otherwise set forth in Section 6.1(a) of the Disclosure Letter or
unless Pueblo Holdings otherwise consents in writing, Bear Cub shall (A) use commercially
reasonable efforts to retain the services of the Pueblo Employees, and (B) cause the Pueblo
Companies:
(i) to operate in the usual and ordinary course of business consistent with past practice;
(ii) to preserve substantially intact their business organizations, to use commercially
reasonable efforts to maintain their rights, privileges and immunities, and to maintain their
relationships with their customers and suppliers;
(iii) to use commercially reasonable efforts consistent with past practice to maintain and to
keep their properties and assets in good repair and condition, ordinary wear and tear excepted (if
there is any casualty loss or damage to any properties or assets of any Pueblo Company prior to
Closing, Bear Cub shall consult, and shall cause Pueblo to consult, with Pueblo Holdings regarding
the replacement or repair of such property or asset);
(iv) to use commercially reasonable efforts to keep in full force and effect insurance
applicable to their Assets and operations comparable in amount and scope of
24
coverage to that currently maintained, including the insurance policies described in
Section 4.9 of the Disclosure Letter; and
(v) (A) to keep and maintain accurate books, Records and accounts; (B) to pay or accrue all
Taxes, assessments and other governmental charges imposed upon any of their Assets or with respect
to their franchises, business, or income when due and before any penalty or interest accrues
thereon, except for any Taxes the validity of which is being contested in good faith by
appropriate legal proceedings and for which adequate reserves have been set aside; (C) to accrue
and pay when due and payable all wages and other compensation incurred with respect to all
employees of and consultants to the Pueblo Companies; and (D) to comply in all material respects
with the requirements of all applicable Laws, Regulations and Orders, (E) to obtain or take all
Governmental Actions necessary in the operation of its business, and (F) to comply and enforce (in
all material respects) the provisions of all Material Contracts.
(b) Except pursuant to the terms of this Agreement, as otherwise set forth in Section
6.1(b) of the Disclosure Letter or unless Pueblo Holdings otherwise agrees in writing from and
after the execution of this Agreement and until the earlier of the Closing or the termination of
this Agreement,
(A) Sellers shall not:
(i) sell, transfer or otherwise dispose of, or grant any Lien with respect to, the Interests
or any other Equity Interests of any Pueblo Company; or
(ii) engage in any practice or take any action that would cause or result in, or permit by
inaction, any of the representations and warranties contained in Article IV to become
untrue; and
(B) Except as set forth on Section 6.1(b) of the Disclosure Letter, Bear Cub
shall not, and shall not permit either Pueblo Company to:
(i) increase any Pueblo Employee’s compensation (including salary, bonuses, benefits and
other forms of current and deferred compensation);
(ii) enter into, (1) any employee benefit, pension or other plan (whether or not subject to
ERISA), (2) any other equity based, incentive or deferred compensation plan or arrangement or
other fringe benefit plan, (3) any consulting, employment, severance, bonus, termination or
similar Contract with any Person or (4) any amendment or extension of any such plan or Contract;
(iii) except for payments made pursuant to any existing Plans, grant, pay, otherwise become
liable for or obligated to pay, any bonus or increase in compensation or benefits to any Pueblo
Employee;
(iv) grant, pay or otherwise become liable for or obligated to pay any Severance Obligation
or Change of Control Obligation;
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(v) forgive any Indebtedness of any Pueblo Employee or any consultant of either Pueblo
Company; or
(vi) (A) make any loan to, or enter into any other transaction with, any of its directors,
officers or employees; (B) engage in any practice or take any action that would cause or result
in, or permit by inaction, any of the representations and warranties contained in Article
IV to become untrue; and (C) authorize or permit any Pueblo Company to take any of the
following actions (and shall take all action necessary (including exercising its rights with
respect to the Interests) to prevent any Pueblo Company from taking any action prohibited by this
Section 6.1(b));
(vii) (A) redeem, purchase or acquire, or offer to purchase or acquire, any of the
outstanding Equity Interests of any Pueblo Company, (B) effect any reorganization or
recapitalization, (C) split, combine or reclassify any of the Equity Interests of any Pueblo
Company, or (D) declare, set aside or pay any dividend or other distribution, other than wholly in
Cash, in respect of its Equity Interests;
(viii) (A) offer, sell, transfer, issue, dispose of or grant, or authorize the offering,
sale, transfer, issuance, grant or disposition of any of its Equity Interests or (B) grant, or
authorize the grant of, any Lien by Pueblo with respect to any of its Equity Interests held by it
in Pueblo Subsidiary;
(ix) acquire, directly or indirectly, (A) whether by merger or consolidation, by purchasing
an Equity Interest or otherwise, any business or division of any Person or (B) any material assets
or properties other than the acquisition of assets from suppliers or vendors in the ordinary
course of business and consistent with past practice;
(x) sell, lease, exchange or otherwise dispose of, any of their respective assets, except for
dispositions of Hydrocarbon inventories in the ordinary course of business consistent with past
practice or to grant any Lien with respect to any of their respective assets;
(xi) adopt any amendments to their respective Organizational Documents;
(xii) (A) make any change in their methods of accounting in effect on the date hereof, except
as may be required to comply with changes in GAAP, (B) make or revoke any Tax election or change
(or make a request to change) its Tax accounting methods, policies, or procedures, (C) settle or
compromise any Proceeding relating to Taxes, except, in each case, as may be required by Law; or
(D) revalue any asset except as required by GAAP consistently applied on a basis consistent with
past practice and the preparation of the Interim Financial Statements;
(xiii) incur any Indebtedness;
(xiv) incur, or commit to incur any liability or obligation to make capital expenditures;
26
(xv) adopt a plan of complete or partial liquidation or resolutions providing for or
authorizing a liquidation, dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization;
(xvi) amend, modify, cancel, waive or assign any rights or obligations under or otherwise
change in any respect any Material Contract other than in the ordinary course of business;
(xvii) enter into or assume (A) any Contract that would constitute a Material Contract or (B)
any other Contract with any Person (including an Affiliate), other than in the case of this clause
(B) Contracts entered into in the ordinary course of business with a Third Person consistent with
past practice;
(xviii) (A) fail to maintain in full force and effect all Pueblo FCC Licenses, and timely to
comply with FCC Rules with respect to the Pueblo FCC Licenses, (B) enter into any agreement on or
with respect to spectrum capacity under any Pueblo FCC License without the prior consultation with
and the prior approval of Pueblo Holdings, or (C) enter into any agreements to accept interference
as prescribed by the FCC Rules in connection with any Pueblo FCC License without the prior
consultation with and the prior approval of Pueblo Holdings; and
(xix) agree in writing or otherwise to do any of the foregoing.
(c) The parties agree that, if Pueblo Holdings agrees in writing to any action requiring
Pueblo Holdings’ consent or agreement under any of the preceding Sections 6.1(a) and
(b), each applicable section of Disclosure Letter shall be automatically updated for all
purposes under this Agreement to include such action to which Pueblo Holdings agreed.
6.2 Access, Information and Access Indemnity.
(a) Until the earlier of the Closing or the termination of this Agreement, on Business Days
and during the business hours of 8:00 a.m. to 5:00 p.m. (local time), Bear Cub shall and shall
cause each Pueblo Company to make available to Pueblo Holdings and its authorized representatives
for examination as Pueblo Holdings may reasonably request all Records and Contracts in the
possession or control of Bear Cub or any Pueblo Company relating to the assets and operations of
any Pueblo Company; provided, however, such material shall not include (i) any
information described in Section 6.2(a) of the Disclosure Letter subject to Third Person
confidentiality agreements for which a consent or waiver cannot be secured by Pueblo after
reasonable efforts or (ii), subject to prompt disclosure to Pueblo Holdings of the general nature
thereof, information that, if disclosed, would violate an attorney-client privilege or would
constitute a waiver of rights as to attorney work product or attorney-client privileged
communications; and provided, further that, Pueblo Holdings shall not unreasonably
interfere with the day-to-day operations of the business of any Pueblo Company.
(b) Subject to Section 6.2(a) above, Bear Cub shall permit Pueblo Holdings and Pueblo
Holdings’ authorized representatives to consult with the Pueblo Employees on Business Days and
during the business hours of 8:00 a.m. to 5:00 p.m. (local time) provided that the prior notice is
given to an Officer and such Officer is permitted to be present, and to conduct,
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at Pueblo Holdings’ sole risk and expense, inspections, including on-site field inspecting and
environmental investigations, and inventories of the assets owned by any Pueblo Company over which
any Pueblo Company has control. Pueblo shall also coordinate, in advance, with Pueblo Holdings to
allow site visits and inspections at the field sites on Saturdays unless operational conditions
would reasonably prohibit such access.
6.3 Due Diligence Indemnification. PUEBLO HOLDINGS SHALL PROTECT, DEFEND, INDEMNIFY
AND HOLD THE SELLER INDEMNITEES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS AND LOSSES CAUSED
DIRECTLY OR INDIRECTLY BY THE ACTS OR OMISSIONS OF PUEBLO HOLDINGS, PUEBLO HOLDINGS’ AFFILIATES OR
ANY PERSON ACTING ON PUEBLO HOLDINGS’ OR ITS AFFILIATE’S BEHALF IN CONNECTION WITH ANY DUE
DILIGENCE CONDUCTED PURSUANT TO OR IN CONNECTION WITH THIS AGREEMENT, INCLUDING ANY SITE VISITS AND
ENVIRONMENTAL SAMPLING; PROVIDED, HOWEVER, THAT THIS PROVISION SHALL NOT APPLY TO
ANY ENVIRONMENTAL CLAIM OR LIABILITY OF ANY PUEBLO COMPANY DISCOVERED BY BUYERS THROUGH DUE
DILIGENCE. Pueblo Holdings shall comply fully with all rules, regulations, policies and
instructions issued by either Pueblo Company or any Third Person operator and provided to Pueblo
Holdings regarding Pueblo Holdings’ actions while upon, entering or leaving any property, including
any insurance requirements that any Pueblo Company reasonably may impose on contractors authorized
to perform work on any property owned or operated by either Pueblo Company.
6.4 Further Assurances. From time to time, and without further consideration, each
Party will execute and deliver to any other Party such documents and take such actions as any other
Party may reasonably request in order more effectively to implement and carry into effect the
transactions contemplated by this Agreement and the other Transaction Documents.
6.5 Termination of Agreements. On or prior to the Closing, Bear Cub shall cause
Pueblo and Bear Cub Energy, LLC, a Colorado limited liability company (“Bear Cub Energy”),
to enter into the Termination Agreement.
6.6 Payoff Letters; Mutual Releases.
(a) At least two, but no more than five Business Days prior to the Closing Date, Bear Cub
shall, and shall cause Pueblo to, use its commercially reasonable efforts to cause each payee of
Third-Party Debt and Expenses, as the case may be, to deliver a Debt Payoff Letter or a Payoff
Letter to Pueblo, copies of which shall be promptly delivered to Pueblo Holdings.
(b) Bear Cub shall use, and shall cause Pueblo to use, its commercially reasonable efforts to
cause by Bear Cub, each Officer, each Director, and each officer and director of Bear Cub to
reaffirm each Mutual Release delivered prior to the Closing or to deliver to Buyers at the Closing
an executed Mutual Release to the extent such Person has not delivered a Mutual Release prior to
the Closing.
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6.7 Cooperation and Reasonable Efforts. The Parties agree to cooperate with each
other and to use commercially reasonable efforts to cause all of the conditions precedent to
Closing to be satisfied as promptly as practicable. Bear Cub shall use, and shall cause each
Pueblo Company to use, commercially reasonable efforts to obtain prior to Closing each Required
Authorization and each Required Third-Party Consent and to deliver each Required Notification that
is required to be obtained or made prior to the Closing of the transactions contemplated by this
Agreement, and, in addition, Bear Cub shall cooperate, and shall cause each Pueblo Company to
cooperate with Buyers, upon Buyers’ request, to obtain the consent of any Third Person that may be
required under any Law, Regulation or Order or any Contract to which any Pueblo Company is a party
and that requires consent as a result of the transactions contemplated by this Agreement.
6.8 Tax Matters.
(a) Filing of Tax Returns. With respect to any Tax Return covering a Pre-Closing
Period that is required to be filed after the Closing Date with respect to any Pueblo Company,
Sellers’ Representative shall prepare or cause to be prepared such Tax Return. With respect to any
Tax Return covering a Straddle Period, Pueblo Holdings shall, and shall cause each Pueblo Company
to, cause such Tax Return to be prepared. Not later than 30 days prior to the due date (including
extensions) of each Tax Return covering a Pre-Closing Period or Straddle Period the Party preparing
such Tax Return shall deliver a copy of such Tax Return to the other Party for its review and
comment. Not later than 10 days prior to the due date for the payment of Taxes with respect to
such Tax Return, Sellers shall pay to Buyers the amount of Buyer Indemnified Taxes with respect to
such Tax Return. Upon receipt thereof, Buyers shall cause such Tax Return to be filed and pay the
Taxes shown due thereon.
(b) Proration of Straddle Period. In the case of Taxes that are payable with respect
to any Straddle Period, the portion of any such Tax that is attributable to the portion of the
period ending on the Closing Date shall be:
(i) in the case of Taxes that are either (A) based upon or related to income or receipts, or
(B) imposed in connection with any sale or other transfer or assignment of property (real or
personal, tangible or intangible), deemed equal to the amount that would be payable if the Taxable
years of the Pueblo Companies (and each partnership in which any Pueblo Company is a partner)
ended with (and included) the Closing Date; and
(ii) in the case of Taxes that are imposed on a periodic basis with respect to the assets of
any Pueblo Company, deemed to be the amount of such Taxes for the entire period (or, in the case
of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately
preceding period), multiplied by a fraction the numerator of which is the number of calendar days
in the portion of the period ending on the Closing Date and the denominator of which is the number
of calendar days in the entire period; and
(iii) for purposes of determining such Taxes, exemptions, relief allowances or deductions
that are calculated on an annual basis, such as the deduction for depreciation, shall be
apportioned in the manner specified in clause (ii) above.
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(c) Cooperation; Procedures Relating to Tax Claims. Pueblo Holdings and Sellers shall
cooperate fully, as and to the extent reasonably requested, in connection with the filing of Tax
Returns, any audit, litigation or other Proceeding with respect to Taxes and Tax Returns (other
than a Proceeding relating to a Third Person Claim described in Section 10.6 which shall be
governed by Section 10.6). Such cooperation shall include the retention, and (upon the
other Party’s request) the provision, of records and information which are reasonably relevant to
any such 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; provided, however, the Party requesting assistance shall pay the
reasonable out-of-pocket expenses incurred by the Party providing such assistance;
provided, further, no Party shall be required to provide assistance at times or in
amounts that would interfere unreasonably with the business and operations of such Party. Bear Cub
agrees to retain all books and records with respect to Tax matters pertinent to the Pueblo
Companies relating to the Tax periods ending prior to the Closing Date, until the expiration of any
applicable statute of limitations or extensions thereof.
(d) Taxes Related to Transaction. All sales, use, transfer, real property transfer,
value added, recording, registration, notary, stamp, stamp duty or similar Taxes and fees
(“Transfer Taxes”), and all recording costs, arising out of the transfer of the Interests
pursuant to this Agreement and all costs and expenses incurred in connection with the transferring
and recording of title to the Interests shall be borne by Buyers. Sellers shall cooperate with
Buyers to reduce or eliminate any Transfer Tax and to prepare and file any related Tax Returns.
6.9 Transaction Units.
(a) Members agree that the Transaction Units shall not be offered for sale, sold, assigned,
pledged, hypothecated, transferred, exchanged or otherwise disposed of (a “transfer”)
unless the offer and sale is registered under the Securities Act and applicable state securities
laws or an exemption from such registration is available and complied with, and that, if any such
transfer or offer thereof, is proposed to be effected pursuant to any such exemption, then the
holder of the Transaction Units must, prior to such transfer, furnish to the Partnership and the
transfer agent such certifications, legal opinions or other information as they may reasonably
require to confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act or any state or
foreign securities law.
(b) Members acknowledge the following:
(i) The following legend may be placed on the certificates representing the Transaction
Units:
THE UNITS (THE “UNITS”) EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER AGREES THAT IT WILL NOT DISTRIBUTE, OFFER, RESELL,
PLEDGE OR
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OTHERWISE TRANSFER (INDIVIDUALLY AND COLLECTIVELY, A “TRANSFER”) THE UNITS
EVIDENCED HEREBY, EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT SUCH AS THE EXEMPTION SET FORTH IN RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE). IF THE PROPOSED TRANSFER IS TO BE MADE OTHER THAN PURSUANT TO
CLAUSE (A) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE ISSUER AND
THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT OR ANY STATE OR FOREIGN SECURITIES LAW.
The legend set forth in the first paragraph above shall be removed when the Transaction Units
represented by such certificate are disposed of pursuant to an effective registration statement
under the Securities Act, the opinion of counsel referred to above has been provided to the
Partnership, or, in the opinion of counsel to the Partnership, the same are no longer required
under the applicable requirements of such securities laws. The unit certificates shall also bear
any additional legends required by applicable federal, state or foreign securities laws, which
legends may be removed when, in the opinion of counsel to the Partnership, the same are no longer
required under the applicable requirements of such securities laws.
(ii) Stop transfer instructions have been or will be placed with respect to the Transaction
Units so as to restrict the distribution, resale, pledge, hypothecation or other transfer thereof
in accordance with this Agreement.
(iii) The legend and stop transfer instructions described in subparagraphs (i) and (ii) above
will be replaced with respect to any new certificate issued upon presentment by the undersigned of
a certificate for transfer.
(c) Members are aware that the Partnership has relied on the representations and warranties of
Members set forth in Section 3.4 and Section 3.5 and on the covenants of Members
set forth in this Section 6.9 in determining that an exemption from registration under the
Securities Act, applicable state securities laws and the rules promulgated thereunder is available
for the issuance of the Transaction Units by the Partnership to Members, and that, but for such
representations, no issuance of the Transaction Units would be made by the Partnership to Members
pursuant to this Agreement.
6.10 Intentionally Omitted.
6.11 Transition Services Agreement. At the Closing, Bear Cub shall cause Bear Cub
Energy to execute and deliver the Transition Services Agreement and shall cause Bear Cub Energy to
perform all its obligations thereunder.
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6.12 Intentionally Omitted.
6.13 Stock Powers. Bear Cub shall retain the Stock Powers and any and all
certificates evidencing the Interests for delivery to Buyers at Closing.
6.14 Conduct of Members. Each Member agrees that it shall take any and all actions
and exercise any and all rights under its power, including exercising rights as a holder of Equity
Interests in Bear Cub, to cause Bear Cub to perform its duties and obligations under this Agreement
and the other Transaction Documents to which Bear Cub is a party.
6.15 Environmental Insurance. From and after the Closing, Pueblo shall not remove
Bear Cub or Bear Cub Energy as an additional named insured under the Current Environmental
Insurance Policy for so long as the Current Environmental Insurance Policy remains in force;
provided, that Pueblo may terminate the Current Environmental Insurance Policy at any time
after the Closing. In the event that Pueblo terminates the Current Environmental Insurance Policy
after the Closing and obtains a new insurance policy covering the same matters as the Current
Environmental Insurance Policy, then Pueblo shall, and the Buyers shall cause Pueblo to, name Bear
Cub and Bear Cub Energy as additional insured parties under the newly obtained insurance policy
with respect to the matters covered by the Current Environmental Insurance Policy that are covered
by such new insurance policy.
6.16 Bear Cub Liquidity.
(a) From and after the date hereof and until the Survival Date, Bear Cub shall maintain
Liquidity of at least $10 million; provided that such time period shall be extended until
the Final Resolution of any claims for which a Claim Notice has been provided on or prior to the
Survival Date.
(b) From time to time as requested by Buyers, prior to the Survival Date, Bear Cub shall
deliver to Buyers the most recently available balance sheet of Bear Cub, together with a
calculation reflecting Bear Cub’s Liquidity as of the date of such balance sheet and a certificate
executed by the chief financial or accounting officer of Bear Cub certifying that Bear Cub has
Liquidity of at least $10 million as of the date of such certification.
6.17 Preservation and Access to Records; and Further Assurances. For a period of at
least five years after the Closing Date, the Party in possession of the originals of the Records
will retain such Records at its sole cost and expense and will make such Records (including
reasonable access during regular office hours to personnel familiar therewith) available to any
other Party upon reasonable notice for inspection or copying, or both, at the expense of the
requesting Party, at the headquarters of the Party in possession (or at such other location in the
United States as the Party in possession may reasonably designate in writing to the requesting
Party) at reasonable times during regular office hours. If either Buyer, at any time, directly or
indirectly, transfers the Records to a Third Person, then Buyer will obligate the transferee to
maintain the Records as herein required and will retain access to the Records for the benefit of
itself and the other Parties.
6.18
Railroad Commission of Texas Matters. Within thirty (30) days after the Closing
Date, Buyers shall post, or cause to be posted, with the Railroad Commission of
Texas
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(“TRRC”), in such form and amount as approved by the TRRC, in compliance with Rule
3.1(a)(1) of the TRRC Rules and Regulations to enable Bear Cub to withdraw the financial security
it has posted with the TRRC in the name of Pueblo in compliance with said Rule 3.1(a)(1).
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Sellers’ Conditions. The obligation of Sellers to close the transaction
contemplated by this Agreement is subject to the satisfaction of the following conditions, any of
which (other than the condition in Sections 7.1(c) and 7.1(f)) may be waived by
Bear Cub in its sole discretion (which also shall constitute a waiver by each of the Sellers):
(a) The representations and warranties of the Buyers contained in Article V of this
Agreement shall be true and correct in all material respects (provided, however,
that any such representation or warranty of the Buyers contained in Article V that is
qualified by a materiality standard or a Material Adverse Effect on the Partnership qualification
shall not be further qualified by materiality for purposes of this Section 7.1(a)) on and
as of the Closing Date as if made on and as of such date, except (i) as affected by actions
specifically permitted by this Agreement, and (ii) to the extent that any such representation or
warranty is made as of a specified date, in which case such representation or warranty shall have
been true and correct in all material respects as of such specified date;
(b) Each of the Buyers shall have performed in all material respects its obligations,
covenants and agreements contained herein and in the Transaction Documents to which it is a party
and required before Closing;
(c) No temporary restraining order, preliminary or permanent injunction or other Order issued
by any court of competent jurisdiction that restrains, enjoins or otherwise prohibits the
consummation of the transactions contemplated by this Agreement shall be effective as of the
Closing;
(d) The Buyers shall have delivered the items required to be delivered by the Buyers pursuant
to Section 8.2(c) and 8.2(d);
(e) There shall have been no event or other occurrence that, individually or in the aggregate,
has had or reasonably could be expected to have a Material Adverse Effect which results in or
reasonably could be expected to result in a Loss (to the extent not covered by insurance) of $5
million or more to the Partnership; and
(f) Each Required Notification shall have been delivered.
7.2 Buyer’s Conditions. The obligation of the Buyers to close the transactions
contemplated by this Agreement is subject to the satisfaction of the following conditions, any of
which may be waived (other than the condition in Section 7.2(d)) by Pueblo Holdings in its
sole discretion (which also constitutes a waiver by the Partnership):
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(a) The Title Representations shall be true and correct on and as of the Closing Date as if
made on the Closing Date;
(b) All representations and warranties of Members in Article III and Bear Cub in
Article IV, other than the Members Title Representations and the Bear Cub Title
Representations, shall be true and correct in all material respects (provided,
however, that any such representation or warranty of Members and Bear Cub contained in
Article III or Article IV, respectively, that is qualified by a materiality
standard or a Material Adverse Effect qualification shall not be further qualified by materiality
for purposes of this Section 7.2(b)) on and as of the Closing Date as if made on and as of
such date, except (i) as affected by actions specifically permitted by this Agreement and (ii) to
the extent any such representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true or correct in all material respects as of such
specified date;
(c) Sellers shall have performed, in all material respects, their obligations, covenants and
agreements contained herein and in the Transaction Documents required to be performed before
Closing;
(d) No temporary restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction that restrains, enjoins or otherwise prohibits the
consummation of the transactions contemplated by this Agreement shall be effective as of the
Closing;
(e) No event or other occurrence shall have occurred that, individually or in the aggregate,
has had or could reasonably be expected to have a Material Adverse Effect which results in or
reasonably could be expected to result in a Loss (to the extent not covered by insurance proceeds
received after the date of this Agreement with respect to such Loss) of $5 million or more to the
Pueblo Companies;
(f) Members shall have delivered the items required to be delivered by Members pursuant to
Section 8.2(a);
(g) Bear Cub shall have delivered the items required to be delivered by Bear Cub pursuant to
Section 8.2(b);
(h) The Termination Agreement shall remain in full force and effect without any amendment
thereto or waiver of any right thereunder;
(i) Each Required Third-Party Consent and each Required Authorization shall have been obtained
and each Required Notification shall have been delivered; and
(j) Bear Cub shall have cancelled, or shall have caused Pueblo to cancel, the Pueblo FCC
Licenses via the FCC’s Universal Licensing System (ULS).
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ARTICLE VIII
CLOSING
8.1 Time and Place of Closing. The consummation of the transactions contemplated
hereby (the “Closing”) shall take place at 10:00 a.m. local time on April 2, 2007 in the
offices of Xxxxxx & Xxxxxx, L.L.P, Xxxxxxxx Xxxx Center, 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx,
Xxxxx 00000 or such other time and place as to which the Parties agree in writing (the “Closing
Date”). Subject to the provisions of Article IX hereof, failure to consummate the
Closing on the date and at the place determined pursuant to this Section 8.1 will not
result in the termination of this Agreement and will not relieve any Party of any obligation under
this Agreement.
8.2 Deliveries at Closing. At the Closing,
(a) Each Member will:
(i) Intentionally omitted.
(ii) deliver to Buyers an executed Power of Attorney;
(iii) deliver to Buyers a certificate of non-foreign status of such Member that meets the
requirements of Treasury Regulation Section 1.1445-2(b)(2); and
(iv) deliver to the Partnership executed counterparts to the Registration Rights Agreement
from the Registration Rights Parties.
(b) Bear Cub will:
(i) Intentionally omitted.
(ii) deliver to Buyers the Stock Powers, together with the stock certificates to which they
relate, comprising 100% of the Interests;
(iii) deliver to Buyers a certificate of the Secretary of State of the State of each of
Colorado and
Texas as to the legal existence and good standing (including tax, if available) of
Bear Cub and each Pueblo Company in Colorado and
Texas, respectively;
(iv) deliver to Buyers a certificate of the Secretary of State of each of the jurisdictions
listed in Section 4.2(a) of the Disclosure Letter and Section 4.2(c) of the Disclosure
Letter as to the qualification to transact business and good standing of each of Pueblo and
Pueblo Subsidiary in each such jurisdiction, respectively;
(v) deliver to Buyers the original minute books of each Pueblo Company;
(vi) deliver to each of the Partnership and Pueblo Holdings counterparts to the Transition
Services Agreement signed by each of Bear Cub Energy and Pueblo;
35
(vii) deliver to each of the Partnership and Pueblo Holdings counterparts to the Termination
Agreement signed by each of Bear Cub Energy and Pueblo;
(viii) cause the Directors and Officers, and any other Person serving as an officer or
director of any Pueblo Company at Closing to execute and deliver to Buyers the written resignation
of each such Person in his or her capacity as such, effective as of the Closing Date;
(ix) execute and deliver to Pueblo Holdings a counterpart to the Escrow Agreement;
(x) deliver to Buyers a certificate of non-foreign status of Bear Cub that meets the
requirements of Treasury Regulation Section 1.1445-2(b)(2).
(c) Pueblo Holdings will:
(i) Intentionally omitted.
(ii) deliver to Bear Cub a certificate of the Secretary of State of the State of Delaware as
to the legal existence and good standing (including tax, if available) of Pueblo Holdings in
Delaware and a certificate of the Secretary of State of the State of
Texas as to the
qualifications to transact business and good standing of Pueblo Holdings in
Texas;
(iii) execute and deliver to Bear Cub a counterpart to the Transition Services Agreement;
(iv) make by wire transfer those Cash payments specified in Sections 2.2(b)(i),
2.2(b)(iii) and 2.2(b)(iv); and
(v) execute and deliver to the Seller’s Representative and Bear Cub counterpart to the Escrow
Agreement.
(d) The Partnership will:
(i) deliver to the Sellers’ Representative irrevocable instructions to the Partnership’s
transfer agent to prepare and deliver to the Sellers’ Representative a share certificate in the
name of Member and in the amount set forth opposite each Member’s name as set forth on
Schedule A pursuant to Section 2.2.
(ii) deliver to Bear Cub a certificate of the Secretary of State of the State of Delaware as
to the legal existence and good standing (including tax) of the Partnership in Delaware; and
(iii) execute and deliver to the Registration Rights Parties (upon receipt of counterparts
from such parties) a counterpart to the Registration Rights Agreement.
(e) The Sellers’ Representative shall execute and deliver to Pueblo Holdings a counterpart to
the Escrow Agreement.
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ARTICLE IX
TERMINATION
9.1 Termination at or Prior to Closing. This Agreement may be terminated prior to
Closing and the transactions contemplated hereby may be abandoned as follows:
(a) Bear Cub and the Partnership may elect to terminate this Agreement at any time prior to
the Closing by mutual written consent;
(b) Bear Cub or the Partnership may terminate this Agreement by written notice to the other if
the Closing shall not have occurred on or before May 1, 2007 (the “Termination Date”);
(c) Bear Cub may terminate this Agreement by written notice to the Partnership given at any
time prior to the Closing if the Buyers shall have breached any representations, warranty or
covenant of the Buyers herein contained in such a manner such that the conditions to Closing
contained in Section 7.1(a) and 7.1(b) would not be satisfied; provided,
however, that, if such breach may be cured by the Buyers through the use of its
commercially reasonable efforts and for so long as the Buyers continue to use such efforts, Bear
Cub may not terminate this Agreement under this Section 9.1(c) until after the Termination
Date;
(d) The Partnership may terminate this Agreement by written notice to Bear Cub given at any
time prior to the Closing if the Sellers shall have breached any representation, warranty or
covenant of the Sellers herein contained in such a manner such that the conditions to Closing
contained in Section 7.2(a), 7.2(b) and 7.2(c) would not be satisfied;
provided, however, that, if such breach may be cured by the Sellers through the use
of their commercially reasonable efforts and for so long as Sellers continue to use such efforts,
the Partnership may not terminate this Agreement under this Section 9.1(d) until after the
Termination Date;
(e) The Partnership by written notice may terminate this Agreement upon the occurrence of an
event or other occurrence that, individually or in the aggregate, has had or could reasonably be
expected to cause the conditions to closing in Section 7.2(e) to not be satisfied; or
(f) Bear Cub by written notice may terminate this Agreement upon the occurrence of an event or
other occurrence that, individually or in the aggregate, has had or could reasonably be expected to
cause the conditions to closing in Section 7.1(e) to not be satisfied.
Notwithstanding anything in the foregoing to the contrary, a Party that is in material breach
of any provision of this Agreement, or whose breach caused a condition to Closing under Article
VIII not to have been satisfied, shall not be entitled to terminate this Agreement except, in
the case of a material breach by Bear Cub or Sellers, with the consent of the Partnership, or in
the case of a material breach by the Buyers, with the consent of Bear Cub.
9.2 Effect of Termination. If the Closing does not occur as a result of a Party
exercising its right to terminate pursuant to Section 9.1, then no Party shall have any
further rights or obligations under this Agreement, except that (a) nothing herein shall relieve a
Party from any liability for any breach of this Agreement, and (b) the provisions of Section
6.3, this
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Section 9.2 and Section 11.1 and the Confidentiality Agreement shall survive
any termination of this Agreement.
ARTICLE X
INDEMNIFICATION
10.1 Survival.
(a) Representations and Warranties. Regardless of any investigation at any time made
by or on behalf of any Party hereto or of any information any Party may have in respect thereof,
each of the representations and warranties made in this Agreement or any other Transaction Document
shall survive the Closing as follows:
(i) the Members Title Representations and the Bear Cub Title Representations (collectively,
the “Title Representations”) shall survive indefinitely, subject to any applicable statute
of limitations,; and
(ii) each of the other representations and warranties set forth in Article III,
Article IV and Article V shall terminate on the first anniversary of the Closing
Date (the “Survival Date”).
(b) Pending Claims. Notwithstanding the foregoing, if a Claim Notice is provided in
accordance with Article X before the termination of the applicable representation or
warranty pursuant to Section 10.1(a), then (notwithstanding such termination) the
representation or warranty giving rise to such claim will survive until, but only for the purpose
of, the Final Resolution of such claim.
10.2 Indemnification by Buyer. Effective upon the Closing and subject to the other
provisions of this Article X, Buyers shall defend, indemnify and hold harmless Sellers,
their Affiliates and all of their respective managers, partners, directors, officers, and owners
(collectively, the “Seller Indemnitees”) from and against any and all Losses asserted
against, resulting from, imposed upon or incurred by any of the Seller Indemnitees as a result of
or arising out of any breach by Buyers of their representations, warranties, covenants or
agreements contained in this Agreement.
10.3 Indemnification by Sellers. Effective upon the Closing and subject to the other
provisions of this Article X, the Indemnifying Members (solely for the purpose of a breach
of the Title Representations and in accordance with Section 10.4(f)) and Bear Cub shall
defend, indemnify and hold harmless Buyers, their Affiliates and all of their respective managers,
partners, directors, officers, and owners (collectively, the “Buyer Indemnitees”) from and
against any and all Losses asserted against, resulting from, imposed upon or incurred by any of the
Buyer Indemnitees as a result of or arising out of:
(a) the Escrow Cash Shortfall, Buyer Indemnified Taxes and any breach of the Title
Representations;
(b) any breach of any representation or warranty in Article III, Article IV
(other than the Title Representations or Section 4.7);
38
(c) any failure by any Member or Bear Cub to comply with any covenant or agreement contained
in this Agreement;
(d) any Claim for indemnification by a current or former director or officer of any Pueblo
Company under the Organizational Documents of any Pueblo Company related to or arising out of or
based upon such director’s or officer’s activities as such prior to the Closing; and
(e) any environmental condition listed on Section 4.16 of the Disclosure Letter to the
extent that any Losses related thereto are not covered by the Expired Environmental Insurance
Policy and a Claim Notice is delivered by a Buyer Indemnitee with respect to such environmental
condition prior to the Survival Date.
10.4 Certain Limitations. The rights of the Buyer Indemnitees and Seller Indemnitees
to indemnification under this Article X shall be limited as follows:
(a) No Claim Notice for indemnification may be provided with respect to any Claim for breach
of a representation or warranty in this Agreement beyond the survival period specified in
Section 10.1;
(b) The recovery of Losses by any Buyer Indemnitee pursuant to Section 10.3(b),
Section 10.3(c), Section 10.3(d) or Section 10.3(e), together with all
Losses recovered by other Buyer Indemnitees under such provisions, shall be limited to an aggregate
of $5,000,000;
(c) The recovery of Losses by any Seller Indemnitee pursuant to Section 10.2, together
with all Losses recovered by other Seller Indemnitees under such provision, shall be limited to an
aggregate of $5,000,000;
(d) No Buyer Indemnitee or Seller Indemnitee shall be entitled to recover Losses pursuant to
Section 10.3(b), Section 10.3(c), Section 10.3(d), Section 10.3(e)
or Section 10.2, respectively, unless:
(i) with respect to each individual Claim, the Buyer Indemnitees, collectively, or the Seller
Indemnitees, collectively, shall have suffered or incurred Losses with respect to the individual
Claim or series of related Claims that arise out of substantially the same facts and circumstances
for which recovery is sought in excess of $25,000, in which case the full amount of such Losses
shall be recoverable, subject to the limitations imposed by the other provisions of this
Section 10.4; provided, however, that this clause (i) shall not apply for
purposes of determining whether the Deductible shall have been satisfied; and
(ii) the Buyer Indemnitees, collectively, or the Seller Indemnitees, collectively, shall have
suffered or incurred aggregate Losses otherwise recoverable under this Article X in an
amount in excess of the Deductible, and then recovery shall be permitted only to the extent of
such excess.
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Notwithstanding the foregoing, any claim for indemnification (and the Losses recoverable therefrom)
that may be brought under Section 10.3(a) shall not be subject to any limitation specified
in this Section 10.4(d).
(e) Notwithstanding anything to the contrary in this Agreement:
(i) For purposes of determining whether a representation or warranty contained herein, other
than those set forth in Sections 4.14, 4.19 and 5.3, has been breached for
purposes of this Article X and determining the amount of Losses suffered thereby by any
Buyer Indemnitee or Seller Indemnitee, as the case may be, each representation and warranty set
forth in this Agreement (other than as aforesaid), and any qualification with respect to any such
representation or warranty set forth in the Disclosure Letter in the case of representations or
warranties by the Members or Bear Cub, shall be read without regard or giving effect to any
“material,” “materiality,” “Material Adverse Effect,” and “substantial” qualifications that may be
contained in any such representation or warranty; provided, however, that the
defined term “Material Contract” and all “material,” “materiality,” “Material Adverse Effect,” and
“substantial” qualifications that are contained in any defined term shall be given effect;
(ii) No investigation or knowledge of any Party, whenever undertaken or however obtained,
shall limit such Party’s right to indemnification hereunder in any manner; and
(iii) The provisions of this Article X shall apply in such a manner as not to give
duplicative effect to any item of adjustment and if there has been an adjustment to the Aggregate
Consideration for any Loss, there shall not be any charge against the Deductible and no Indemnitee
may claim a breach of any representation or warranty with respect to any Loss that gave rise to
such adjustment in the Aggregate Consideration pursuant to Section 2.3 to the extent of
the amount of such Loss given effect in such adjustment to the Aggregate Consideration.
(f) Subject to Section 10.4(h), if a Claim for indemnification is asserted with
respect to a breach of a Title Representation:
(i) each Indemnifying Member shall be severally liable for 50% of all Losses incurred by the
Indemnified Party with respect to such breach and the Indemnified Party shall be entitled to
recover from, and shall have personal recourse to and against, each Indemnifying Member for 50% of
such Loss; and
(ii) Until the Survival Date, Bear Cub shall be jointly and severally liable with the
Indemnifying Members for the full amount of such Loss.
(g) If a Claim for indemnification is asserted by any Buyer Indemnitee under Section
10.3, the Buyer Indemnitee may, except as set forth in Section 10.4(h), only assert
such Claim against, and attempt to recover the Losses with respect to such Claim from, Bear Cub.
(h) If a Claim for indemnification is asserted by any Buyer Indemnitee under
Section
10.3(a) with respect to a breach of a Title Representation, the Buyer Indemnitee must first
only assert such Claim against, and attempt to recover the Losses with respect to such Claim
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from, Bear Cub. If Bear Cub does not satisfy the Losses associated with any such Claim within
30 days following the day that the Claim is first asserted against Bear Cub, the Buyer Indemnitees
shall be entitled to assert and pursue any and all rights to indemnification from Bear Cub and, in
accordance with Section 10.4(f), the Indemnifying Members;
(i) Notwithstanding any other provision of this Agreement, except as provided in Section
10.4(f) and Section 10.4(h) the Buyer Indemnitees shall not be entitled to recover
Losses from or have any other recourse against any Member relating to any claim arising from this
Agreement.
10.5 Intentionally Omitted.
10.6 Notice of Asserted Liability; Opportunity to Defend.
(a) All claims for indemnification hereunder shall be asserted and handled pursuant to this
Section 10.6. Any Person claiming indemnification hereunder is referred to herein as the
“Indemnified Party” or “Indemnitee” and any Person against whom such claims are
asserted hereunder is referred to herein as the “Indemnifying Party” or
“Indemnitor.”
(b) If any Claim is asserted against or any Loss is sought to be collected from an
Indemnifying Party, the Indemnified Party shall with reasonable promptness (and in any event prior
to the expiration of the relevant survival period set forth in Section 10.1(a)) provide to
the Indemnifying Party a Claim Notice. The failure to notify the Indemnifying Party shall not
relieve it of any liability that it may have to any Indemnified Party with respect to such Claim or
Loss except to the extent the Indemnifying Party shall have been prejudiced by such failure or to
the extent the Claim Notice was provided after the expiration of the relevant survival period set
forth in Section 10.1.
(c) The Indemnifying Party shall have 30 days from receipt of the Claim Notice (the
“Notice Period”) to notify the Indemnified Party in writing (i) whether or not the
Indemnifying Party disputes the liability to the Indemnified Party hereunder with respect to the
Claim or Loss, (ii) in any case in which Losses are asserted against or sought to be collected from
an Indemnifying Party by an Indemnified Party, whether or not the Indemnifying Party desires at its
own sole cost and expense to attempt to remedy such Losses or (iii) in any case in which Claims are
asserted against or sought to be collected from an Indemnified Party by a Third Person (“Third
Person Claim”), whether or not the Indemnifying Party desires at its own sole cost and expense
to defend the Indemnified Party against such Third Person Claim.
(d) If the Indemnifying Party notifies the Indemnified Party within the Notice Period that it
desires to defend the Indemnified Party against a Third Person Claim, the Indemnifying Party shall
have the right to defend all appropriate Proceedings with counsel of its own choosing (but
reasonably satisfactory to the Indemnified Party) and such Proceedings shall be diligently
prosecuted by it to settlement or a final conclusion. If the Indemnified Party desires to
participate in any such defense or settlement, other than at the request of the Indemnifying Party,
it may do so at its sole cost and expense. If the Indemnified Party joins in defending in any such
Third Person Claim, the Indemnifying Party shall have full authority to determine all action to be
taken with respect thereto. If the Indemnifying Party elects not to defend the
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Indemnified Party against a Third Person Claim or does not provide an answer within the Notice
Period, the Indemnified Party shall be entitled to assume the defense of all appropriate
Proceedings related thereto with counsel of its choosing and the Indemnifying Party shall be
responsible for paying for counsel for the Indemnified Party if it is otherwise entitled to
indemnification with respect to such matter. If a Proceeding is asserted against both the
Indemnifying Party and the Indemnified Party and there are defenses available to the Indemnified
Party that are not available to the Indemnifying Party or there is a conflict of interest that
renders it inappropriate for the same counsel to represent both the Indemnifying Party and the
Indemnified Party, the Indemnifying Party shall be responsible for paying for separate counsel for
the Indemnified Party; provided, however, that, if there is more than one
Indemnified Party, the Indemnifying Party shall not be responsible for paying for more than one
separate firm of attorneys (in addition to local counsel) to represent the Indemnified Parties,
regardless of the number of Indemnified Parties. No compromise or settlement of any Proceeding may
be effected by the Indemnifying Party without the Indemnified Party’s written consent unless the
sole relief provided is monetary damages that are paid in full by the Indemnifying Party and such
settlement includes the granting by each claimant or plaintiff to each Indemnified Party of an
unconditional release from all liability in respect of such Third Person Claim and the related
Proceeding.
(e) If requested by the Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel, at the cost and expense of the Indemnifying Party, in
contesting any Third Person Claim, in making any counterclaim against the Third Person asserting
the Third Person Claim or in making any cross-complaint against any Person. Notwithstanding
anything to the contrary contained in this Agreement, no Third Person Claim may be settled or
otherwise compromised without the prior written consent of the Indemnifying Party.
(f) The costs and expenses of a Buyer Indemnitee or Seller Indemnitee, including the fees,
costs and expenses of its separate counsel, experts (including expert witnesses), consultants and
any other representatives engaged by it, incurred in connection with the defense and settlement or
final resolution of any Third Person Claim as to which such Buyer Indemnitee or Seller Indemnitee,
as the case may be, has the right to control shall be treated as “Losses” for all purposes
hereunder.
10.7 Exclusive Remedy. AS BETWEEN THE SELLER INDEMNITEES AND BEAR CUB AND MEMBERS, ON
ONE HAND, AND THE BUYER INDEMNITEES AND THE BUYERS, ON THE OTHER, AFTER CLOSING, OTHER THAN WITH
RESPECT TO CLAIMS FOR FRAUD, (A) THE PROVISIONS SET FORTH IN THIS ARTICLE X SHALL BE THE
SOLE AND EXCLUSIVE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES WITH RESPECT TO THIS AGREEMENT,
THE EVENTS GIVING RISE THERETO, AND THE TRANSACTIONS PROVIDED FOR HEREIN OR CONTEMPLATED HEREBY AND
(B) NO PARTY OR ANY OF ITS SUCCESSORS OR ASSIGNS SHALL HAVE ANY RIGHTS AGAINST ANY OTHER PARTY OR
ITS AFFILIATES UNDER THIS AGREEMENT OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY OTHER
THAN AS IS EXPRESSLY PROVIDED IN THIS ARTICLE X.
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10.8 Limitation on Damages. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, IN NO EVENT SHALL ANY PARTY BE LIABLE AFTER THE CLOSING TO ANY OTHER PARTY, OR TO ANY
INDEMNITEE, UNDER THIS AGREEMENT FOR ANY EXEMPLARY, PUNITIVE, REMOTE, SPECULATIVE, CONSEQUENTIAL,
INDIRECT OR SPECIAL DAMAGES, AND NO CLAIM SHALL BE MADE OR AWARDED AGAINST ANY PARTY, FOR ANY SUCH
DAMAGES; PROVIDED, HOWEVER, SUBJECT TO THE LIMITATIONS IN SECTION 10.4,
THIS SECTION 10.8 SHALL NOT LIMIT THE RIGHT OF THE OR BUYERS TO RECOVER ANY LOSS TO THE
EXTENT (A) ACTUALLY SUFFERED, INCURRED OR PAID BY THE BUYERS TO ANY THIRD PARTY OR WITH RESPECT TO
ANY THIRD PARTY OBLIGATION OR (B) ARISING OR RESULTING FROM A BREACH OF SECTION 4.14 OR
4.20.
10.9 Bold and/or Capitalized Letters. THE PARTIES ACKNOWLEDGE THAT THE BOLD AND
CAPITALIZED LETTERS IN THIS AGREEMENT CONSTITUTE CONSPICUOUS LEGENDS.
10.10 Disclaimer. WITHOUT DIMINISHING THE REPRESENTATIONS AND WARRANTIES MADE BY BEAR
CUB IN ARTICLE IV, BUYERS ACKNOWLEDGE THAT BUYERS HAVE HAD AN OPPORTUNITY TO INSPECT THE
ASSETS AND HAVE BEEN ADVISED BY BEAR CUB THAT: (1) THE ASSETS OWNED BY THE PUEBLO COMPANIES HAVE
BEEN USED FOR NATURAL GAS, NATURAL GAS LIQUIDS, CONDENSATE OR REFINED PRODUCT OPERATIONS AND
PHYSICAL CHANGES IN SUCH ASSETS AND IN THE LANDS BURDENED THEREBY MAY HAVE OCCURRED AS A RESULT OF
SUCH USES, AND (2) SUCH ASSETS INCLUDE BURIED PIPELINES AND OTHER EQUIPMENT, THE LOCATIONS OF WHICH
MAY NOT BE READILY APPARENT BY A PHYSICAL INSPECTION OF SUCH ASSETS OR THE LANDS BURDENED THEREBY;
AND BUYERS ACKNOWLEDGE AND AFFIRM THAT, EXCEPT AS EXPRESSLY REPRESENTED AND WARRANTED BY BEAR CUB
IN THIS AGREEMENT, THE ASSETS ARE ACCEPTED AS IS WHERE IS.
EXCEPT AS EXPRESSLY SET OUT IN THIS AGREEMENT, SELLERS MAKE NO REPRESENTATION, WARRANTY OR
COVENANT, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTIBILITY AND FITNESS FOR
A PARTICULAR PURPOSE WITH RESPECT TO THE ASSETS, TO THE BUYERS WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Expenses. Each Party will bear its own respective costs and expenses (including
legal fees and expenses) incurred in connection with the negotiation of this Agreement and the
transactions contemplated hereby (and the Buyers acknowledge that Pueblo shall pay the costs and
expenses of the Sellers, the Officers, the Directors, the Managers and the officers and directors
of Bear Cub and the Pueblo Companies relating to the negotiation, execution and
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performance of this Agreement and each Transaction Document and such costs and expenses shall
constitute Expenses).
11.2 Assignment. No Party may assign this Agreement or any of its rights or
obligations arising hereunder without the prior written consent of the other Parties;
provided, however, that, without the consent of Sellers or Sellers’ Representative,
Buyers may, without relieving Buyers from their liabilities or obligations hereunder, (a) assign
this Agreement, and its rights and obligations hereunder, to an Affiliate of Buyers or to an entity
formed, controlled and primarily owned by Buyers, (b) collaterally assign this Agreement to any
entity providing financing to Buyers or (c) both.
11.3 Entire Agreement, Amendments and Waiver. This Agreement (together with any
Exhibits and schedules hereto) and all certificates, documents, instruments and writings that are
delivered pursuant hereto contain the entire understanding of the Parties with respect to the
transactions contemplated hereby and supersede all prior agreements, arrangements and
understandings relating to the subject matter hereof other than the Confidentiality Agreement which
is hereby ratified by Buyers, as if Buyers were a party thereto, and shall hereafter bind the
Buyers, as well as the parties thereto. This Agreement may be amended, superseded or canceled only
by a written instrument duly executed by Bear Cub, the Sellers’ Representative and the Buyers,
specifically stating that it amends, supersedes or cancels this Agreement. Any of the terms of
this Agreement and any condition to a Party’s obligations hereunder may be waived only in writing
by that Party specifically stating that it waives a term or condition hereof. No waiver by a Party
of any one or more conditions or defaults by the other in performance of any of the provisions of
this Agreement shall operate or be construed as a waiver of any future conditions or defaults,
whether of a like or different character, nor shall the waiver constitute a continuing waiver
unless otherwise expressly provided.
11.4 Severability. Each portion of this Agreement is intended to be severable. If
any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or
invalidity shall not affect the validity of the remainder of this Agreement.
11.5 Counterparts. This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
11.6 Dispute Resolution. If any dispute or controversy arises out of this Agreement
or any of the other Transaction Documents or the performance, breach, validity, interpretation or
enforcement thereof, it is in the best interests of the Parties for such dispute or controversy to
be resolved in the shortest time and with the lowest cost of resolution practicable. Consequently,
the Parties shall first attempt to resolve any dispute or controversy without resort to the courts.
If any dispute or controversy arises, the Parties will comply with the following procedures:
(a) The Party believing a dispute to exist will give the other Parties prompt written notice
thereof, setting forth in reasonable detail the facts alleged to give rise to such dispute, any
relevant contractual provisions, the nature of any claimed default or breach and a statement of the
manner in which such Party believes the dispute should be resolved.
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(b) Within 20 days after receipt of such notice, each Party against whom relief is sought in
connection with such dispute will deliver a written response, setting forth in reasonable detail
its views of the facts alleged to give rise to such dispute, any relevant contractual provisions,
the nature of the claimed default or breach and a statement of the manner in which such Party
believes the dispute should be resolved.
(c) If the Parties do not agree on the manner in which the dispute should be resolved, they
will arrange to hold a meeting within 10 days after delivery of the response. Each Party will have
in attendance at such meeting a representative with the authority to resolve such dispute. At the
meeting (and any adjournments thereof), the Parties will negotiate in an attempt to agree as to
whether a dispute exists, the exact nature of the dispute and the manner in which the dispute
should be resolved. Any resolution of the dispute will be evidenced by a written agreement setting
forth in reasonable detail the actions to be taken by each Party. If no such written agreement is
reached within 20 days after the first meeting, each Party shall be entitled to pursue any and all
remedies available to it, including pursuing an action in a court of law or equity.
11.7 Governing Law and Dispute Resolution.
(a) Governing Law. This Agreement, and all rights and obligations arising hereunder,
shall be governed by, enforced in accordance with, and interpreted under, the Laws of the State of
Texas, without reference to applicable principles of conflicts of Laws.
(b) Consent to Jurisdiction. The Parties hereby irrevocably submit to the
jurisdiction of the courts of the State of Texas and the federal courts of the United States of
America located in Dallas, Texas, and appropriate courts of appeal therefrom, over any dispute
arising out of or relating to this Agreement, the rights and obligations arising hereunder, or any
of the transactions contemplated hereby, and each Party hereby irrevocably agrees that all claims
in respect of such dispute or proceeding shall be heard and determined in such courts. The Parties
hereby irrevocably waive, to the fullest extent permitted by Law, (i) any objection that they may
now or hereafter have with respect to venue in such court for any dispute arising out of or
relating to this Agreement, the rights and obligations arising hereunder, or any of the
transactions contemplated hereby and (ii) any defense of inconvenient forum for the maintenance of
such dispute. Each Party agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by Law. This consent to
jurisdiction is being given solely for purposes of this Agreement and is not intended to confer,
and shall not confer, consent to jurisdiction with respect to any other dispute in which a Party to
this Agreement may become involved. Each Party consents to process being served by any other Party
to this Agreement in any Proceeding of the nature specified in this Section 11.7(b) by the
mailing of a copy thereof in the manner specified by the provisions of Section 11.8.
(c) Recovery of Costs and Attorneys’ Fees. If there are any Proceedings arising out
of or relating to this Agreement or the transactions contemplated hereby resulting in the entry of
a final written non-appealable order and if one Party has predominantly prevailed in the dispute,
that Party shall be entitled to recover from the other Party all court costs, fees and expenses
relating to such Proceeding, including reasonable attorneys’ fees.
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(d) Settlement Proceedings. All aspects of any settlement proceedings,
including discovery, testimony and other evidence, negotiations and communications pursuant to this
Section 11.7, briefs and the award shall be held confidential by each Party, and shall be
treated as compromise and settlement negotiations for the purposes of the federal and state rules
of evidence.
11.8 Notices and Addresses. Any notice, request, instruction, waiver or other
communication to be given hereunder by any Party shall be in writing and shall be considered duly
delivered if personally delivered, mailed by certified mail with the postage prepaid (return
receipt requested), sent by messenger or overnight delivery service, or sent by facsimile to the
addresses of the Parties as follows:
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BUYERS: |
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Regency Energy Partners LP |
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0000 Xxxxxxx Xxxxxx, Xxxxx 0000 |
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Xxxxxx, Xxxxx 00000 |
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Telephone: 000-000-0000 |
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Facsimile: 000-000-0000 |
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Attention: Chief Legal Officer |
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With a copy to (which shall not constitute notice): |
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Xxxxxx & Xxxxxx LLP |
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3700 Xxxxxxxx Xxxx Center |
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0000 Xxxx Xxxxxx |
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Xxxxxx, Xxxxx 00000 |
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Telephone: 000-000-0000 |
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Facsimile: 000-000-0000 |
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Attention: Xxxxxx X. Xxxxx, Esq. |
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BEAR CUB: |
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Bear Cub Investments, LLC |
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000 00xx Xxxxxx, Xxxxx 0000 |
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Xxxxxx, Xxxxxxxx 00000 |
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Telephone: 000-000-0000 |
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Facsimile: 000-000-0000 |
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Attention: Chief Financial Officer |
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With a copy to (which shall not constitute notice): |
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Xxxxxx & Xxxxxxx, P.C. |
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000 00xx Xxxxxx |
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Xxxxxxxxx Place Building |
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Suite 1100 |
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Xxxxxx, Xxxxxxxx 00000 |
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Telephone: 000-000-0000 |
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Facsimile: 000-000-0000 |
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Attention: Xxxxxxx X. Xxxxxxx |
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SELLERS’ REPRESENTATIVE: |
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Xxxxxx X. Xxxxx |
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Bear Cub Investments, LLC |
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000 00xx Xxxxxx, Xxxxx 0000 |
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Xxxxxx, Xxxxxxxx 00000 |
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Telephone: 000-000-0000 |
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Facsimile: 000-000-0000 |
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With a copy to (which shall not constitute notice): |
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Xxxxxx & Xxxxxxx, P.C. |
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000 00xx Xxxxxx |
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Xxxxxxxxx Place Building |
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Suite 1100 |
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Xxxxxx, Xxxxxxxx 00000 |
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Telephone: 000-000-0000 |
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Facsimile: 000-000-0000 |
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Attention: Xxxxxxx X. Xxxxxxx |
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PUEBLO: |
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Prior to closing
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Pueblo Midstream Gas Corporation |
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000 00xx Xxxxxx, Xxxxx 0000 |
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Xxxxxx, Xxxxxxxx 00000 |
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Telephone: 000-000-0000 |
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Facsimile: 000-000-0000 |
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Attention: Xxxxxxxx Xxxxxxxx |
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Prior to and after the Closing, with a copy to (which shall not constitute
notice): |
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Xxxxxx & Xxxxxxx, P.C. |
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000 00xx Xxxxxx |
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Xxxxxxxxx Place Building |
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Suite 1100 |
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Xxxxxx, Xxxxxxxx 00000 |
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Telephone: 000-000-0000 |
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Facsimile: 000-000-0000 |
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Attention: Xxxxxxx X. Xxxxxxx |
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After the Closing: |
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Pueblo Midstream Gas Corporation |
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0000 Xxxxxxx Xxxxxx, Xxxxx 0000 |
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Xxxxxx, Xxxxx 00000 |
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Telephone: 000-000-0000 |
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Facsimile: 000-000-0000 |
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Attention: Chief Legal Officer |
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After the Closing, with a copy to (which shall not constitute notice): |
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Xxxxxx & Xxxxxx LLP |
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3700 Xxxxxxxx Xxxx Center |
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0000 Xxxx Xxxxxx |
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Xxxxxx, Xxxxx 00000 |
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Telephone: 000-000-0000 |
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Facsimile: 000-000-0000 |
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Attention: Xxxxxx X. Xxxxx, Esq. |
or at such other address as a Party may designate by written notice to the other Parties in the
manner provided in this Section 11.8. Notice by mail shall be deemed to have been given
and received on the third day after posting. Notice by messenger, overnight delivery service,
facsimile transmission or personal delivery shall be deemed given on the date of actual delivery.
11.9 Press Releases. Except as may otherwise be required by securities Laws and
public announcements or disclosures that are, in the reasonable opinion of the Party proposing to
make the announcement or disclosure, legally required to be made, there shall be prior to Closing
no press release or public communication concerning the transactions contemplated by this Agreement
by any Party except with the prior written consent of the Party not originating such press release
or communication, which consent shall not unreasonably be withheld or delayed. Prior to Closing
the Partnership and Bear Cub will consult in advance on the necessity for, and the timing and
content of, any communications to be made to the public and, subject to legal
48
constraints, to the form and content of any application or report to be made to any
Governmental Authority that relates to the transactions contemplated by this Agreement.
11.10 Offset. Nothing contained herein shall impair or constitute a waiver of any
right of offset or setoff for any Party.
11.11 No Partnership; Third Party Beneficiaries. Nothing in this Agreement shall be
deemed to create a joint venture, partnership, tax partnership, or agency relationship between the
Parties. Nothing in this Agreement shall provide any benefit to any Third Person or entitle any
Third Person to any claim, cause of action, remedy or right of any kind, it being the intent of the
Parties that this Agreement shall not be construed as a third-party beneficiary contract;
provided, however, that the indemnification provisions of Article X shall
inure to the benefit of the Buyer Indemnitees and the Seller Indemnitees as provided therein.
11.12 Negotiated Transaction. The Parties, each represented by legal counsel, have
each participated in the negotiation and drafting of this Agreement. If an ambiguity or question
of intent or interpretation should arise, this Agreement shall be construed as if drafted by all
Parties and no presumption or burden of proof shall arise favoring or burdening any Party hereto by
virtue of the authorship of any of the provisions of this Agreement.
11.13 Time of the Essence. With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
11.14 Specific Performance. The Parties recognize that, if Sellers should refuse to
perform under the provisions of this Agreement, monetary damages alone will not be adequate. The
Buyers shall therefore be entitled, in addition to any other remedies that may be available,
including money damages, to obtain specific performance of the terms of this Agreement. In the
event of any action to enforce this Agreement specifically, Sellers and Sellers’ Representative
hereby waives the defense that there is an adequate remedy at law. The parties recognize, however,
that, if the Buyers should refuse to perform under the provisions of this Agreement monetary
damages will be adequate. Sellers shall therefore be entitled as its sole remedy in lieu of
specific performance to recover damages with respect to the failure of the Buyers to comply with
their obligations arising under this Agreement.
11.15 Affiliate Liability. Each of the following is herein referred to as a
“Buyer Affiliate”: (i) any direct or indirect holder of the Common Units, Subordinated
Units, General Partner Units or other Equity Interests in the Partnership (whether limited or
general partners, members, stockholders or otherwise), and (ii) any director, officer, manager,
employee, representative or agent of (A) the Partnership or Pueblo Holdings or any Subsidiary of
either of them or (B) any Person who directly or indirectly controls the Partnership. Except to
the extent that a Buyer Affiliate is an express signatory thereto or an express assignee of the
Partnership, or Pueblo Holdings, no Buyer Affiliate shall have any liability or obligation to
Sellers of any nature whatsoever in connection with or under this Agreement, any of the Transaction
Documents or the transactions contemplated herein or therein, and Sellers on behalf of themselves
and each Pueblo Company and Seller Affiliate hereby waive and release all claims of any such
liability and obligation. Notwithstanding the foregoing, no Seller shall be deemed an Affiliate of
the Partnership.
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11.16 No Waiver of Claims for Fraud. The liability of any Party under Article
X shall be in addition to, and not exclusive of, any other liability that such Party may have
at law or equity based on such Party’s fraudulent acts or omissions. None of the provisions set
forth in this Agreement shall be deemed a waiver by any Party of any right or remedy which such
Party may have at law or equity based on any other Party’s fraudulent acts or omissions, nor shall
any such provisions limit, or be deemed to limit, (a) the amounts of recovery sought or awarded in
any such claim for fraud, (b) the time period during which a claim for fraud may be brought, or (c)
the recourse which any such Party may seek against another Party with respect to a claim for fraud;
provided, however, that, with respect to such rights and remedies at law or equity,
the Parties further acknowledge and agree that none of the provisions of this Section 11.16
shall be deemed a waiver of any defenses that may be available in respect of actions or claims for
fraud, including defenses of statutes of limitations or limitations of damages.
11.17 No Recovery. No Seller shall be entitled to indemnification or contribution
from any Pueblo Company for any Losses that it is obligated to pay pursuant to any Claim brought by
a Buyer Indemnitee. Sellers hereby waive and release any and all rights that they may have to
assert claims of indemnification or contribution against any Pueblo Company under this Agreement,
any other Transaction Document, any other Contract or any provision of their Organizational
Documents for any Losses that any Seller is obligated to pay pursuant to any Claim brought by a
Buyer Indemnitee.
11.18 Appointment of Sellers’ Representative.
(a) If at any time Xxxxxx X. Xxxxx (or any successor Sellers’ Representative) dies or becomes
disabled or is otherwise unable or refuses to perform his duties as the Sellers’ Representative,
the Members shall designate a successor as soon as practicable and shall notify the Partnership in
writing of such designation. Upon written notice delivered to the Partnership, the Members may
change the identity of the Sellers’ Representative by written consent signed by each Member. In
either case, each Member shall execute and deliver a power of attorney substantially in the form of
Exhibit H attached hereto appointing such Sellers’ Representative upon the terms and
conditions stated therein (including as a result of the resignation by the Sellers’
Representative). If any Member does not deliver a power of attorney, such Sellers’ Representative
shall nonetheless have all of the rights, powers and obligations to the same extent of the previous
Sellers’ Representative as set forth on Exhibit H hereto.
(b) By execution of this Agreement, Xxxxxx X. Xxxxx has accepted his appointment as Sellers’
Representative and in consideration for Xxxxxx X. Xxxxx’x (or any successor Sellers’
Representative) agreement to act as the Sellers’ Representative.
[SIGNATURE PAGES FOLLOW]
50
THE PARTIES HAVE signed this Agreement as of the date first set forth above.
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PUEBLO HOLDINGS: |
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PUEBLO HOLDINGS, INC. |
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By:
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/s/ Xxxxxxx X. Xxxx III
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Xxxxxxx X. Xxxx III |
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Vice President and Secretary |
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THE PARTNERSHIP: |
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REGENCY ENERGY PARTNERS LP |
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By:
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Regency GP LP, its general partner |
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By:
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Regency GP LLC, its general partner |
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By:
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/s/ Xxxxxxx X. Xxxx III |
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Xxxxxxx X. Xxxx III |
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Executive Vice President and |
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Chief Legal and Administrative Officer |
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BEAR CUB: |
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BEAR CUB INVESTMENTS, LLC |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx |
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President |
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MEMBERS: |
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XXXXX X. XXXXX
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx |
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Attorney-in-fact |
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S-1
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XXXXXXXXX X. XXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx |
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Attorney-in-fact |
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XXXXX X. XXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx |
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Attorney-in-fact |
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XXXXXX X. XXXXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx
Attorney-in-fact |
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XXXXXX X. XXXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx |
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Attorney-in-fact |
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XXX X. XXXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx |
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Attorney-in-fact |
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XXXXXXX X. XXXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx |
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Attorney-in-fact |
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S-2
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XXXXXXX X. XXXXXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx |
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Attorney-in-fact |
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XXXXXXXX XXXXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx |
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Attorney-in-fact |
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R&K VENTURES, LLLP |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx |
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Attorney-in-fact |
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XXXXXX X. XXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
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XXXXXXX XXXXXXXXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx |
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Attorney-in-fact |
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S-3
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THE XXXXXX X. & XXXXXXX X. XXXXXXX & XXXXXX X. XXXXXXX IRREVOCABLE TRUST FBO XXXXXXXX X. XXXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx
Attorney-in-fact |
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THE XXXXXX X. & XXXXXXX X. XXXXXXX & XXXXXX X. XXXXXXX IRREVOCABLE TRUST FBO XXXX X. XXXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx
Attorney-in-fact |
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THE XXXXXX X. & XXXXXXX X. XXXXXXX & XXXXXX X. XXXXXXX IRREVOCABLE TRUST FBO XXXXXXXX XXXXXXX XXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx
Attorney-in-fact |
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THE XXXXXX X. XXXXXXX IRREVOCABLE TRUST FBO XXXXXXX X. XXXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx
Attorney-in-fact |
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THE XXXXXX X. XXXXXXX IRREVOCABLE TRUST FBO XXXXXXXXX X. XXXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx |
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Attorney-in-fact |
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S-4
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XXXXXX X. XXXXXXX |
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By:
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/s/ Xxxxxx X. Xxxxxxx |
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Xxxxxx X. Xxxxxxx |
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SELLERS’ REPRESENTATIVE: |
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/s/ Xxxxxx X. Xxxxx |
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Xxxxxx X. Xxxxx |
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S-5
Schedule A
Members
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Percent |
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Shares of |
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Ownership |
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Number |
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Pueblo |
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Interest in Pueblo |
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Of |
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Midstream Gas |
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Midstream Gas |
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Common |
Members |
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Corporation |
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Corporation |
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Units |
Xxxxx X. Xxxxx |
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13,161 |
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2.24 |
% |
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16,836 |
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Xxxxxxxxx X. Xxxxxx |
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4,211 |
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0.72 |
% |
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5,411 |
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Xxxxx X. Xxxxxx |
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2,106 |
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0.36 |
% |
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2,706 |
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Xxxxxx X. Xxxxxxxx |
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2,106 |
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0.36 |
% |
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2,706 |
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Xxxxxx X. Xxxxxxx |
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7,261 |
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1.24 |
% |
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9,320 |
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Xxx X. Xxxxxxx |
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2,106 |
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0.36 |
% |
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2,706 |
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Xxxxxxx X. Xxxxxxx |
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2,106 |
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0.36 |
% |
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2,706 |
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Xxxxxxx X. Xxxxxxxxx |
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16,846 |
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2.86 |
% |
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21,496 |
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Xxxxxxxx Xxxxxxxx |
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1,888 |
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0.32 |
% |
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2,405 |
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R&K Ventures, LLLP |
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22,534 |
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3.83 |
% |
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28,786 |
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Xxxxxx X. Xxxxx |
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178,777 |
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30.37 |
% |
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228,260 |
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Xxxxxxx Xxxxxxxxxxxx |
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1,053 |
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0.18 |
% |
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1,352 |
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The Xxxxxx X. & Xxxxxxx
X. Xxxxxxx & Xxxxxx X.
Xxxxxxx Irrevocable
Trust fbo Xxxxxxxx X.
Xxxxxxx |
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6,317 |
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1.07 |
% |
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8,042 |
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The Xxxxxx X. & Xxxxxxx
X. Xxxxxxx & Xxxxxx X.
Xxxxxxx Irrevocable
Trust fbo Xxxx X.
Xxxxxxx |
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6,317 |
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1.07 |
% |
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8,042 |
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The Xxxxxx X. & Xxxxxxx
X. Xxxxxxx & Xxxxxx X.
Xxxxxxx Irrevocable
Trust fbo Xxxxxxxx
Xxxxxxx Xxxxxx |
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6,317 |
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1.07 |
% |
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8,042 |
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Schedule A-1
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Percent |
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Shares of |
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Ownership |
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Number |
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Pueblo |
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Interest in Pueblo |
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Of |
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Midstream Gas |
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Midstream Gas |
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Common |
Members |
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Corporation |
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Corporation |
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Units |
The Xxxxxx X. Xxxxxxx
Irrevocable Trust fbo
Xxxxxxx X. Xxxxxxx |
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11,267 |
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1.91 |
% |
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14,355 |
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The Xxxxxx X. Xxxxxxx
Irrevocable Trust fbo
Xxxxxxxxx X. Xxxxxxx |
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11,267 |
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1.91 |
% |
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14,355 |
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Xxxxxx X. Xxxxxxx |
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292,960 |
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49.77 |
% |
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374,071 |
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Schedule A-2
Schedule B
Defined Terms
(c) Capitalized terms used in this Agreement have the following meanings:
“Affiliate” shall mean, when used with respect to a specified Person, any other Person
directly or indirectly (through one or more intermediaries or otherwise) controlling, controlled by
or under common control with the specified Person. For purposes of this definition, “control,”
when used with respect to any specified Person, shall mean the power to direct or cause the
direction of the management and policies of the Person whether through the ownership of voting
securities, by contract or otherwise; and the term “controlled” has the meanings correlative to the
foregoing.
“Audit Firm” shall mean Ernst & Young (“E&Y”) or if E&Y shall not accept the
engagement as Audit Firm, a national accounting firm with no prior material relationship with
Buyers, Buyer Affiliates or Sellers that has experience in auditing the financial statements of a
natural gas pipeline company, reasonably acceptable to Pueblo Holdings and Sellers’ Representative.
“Authorization” shall mean any franchise, permit, license, authorization, order,
certificate, registration or other consent or approval that a Governmental Authority has the legal
authority to grant or issue.
“Base Working Capital” shall mean zero dollars.
“Bear Cub Interests” shall mean the membership interests of Bear Cub.
“Bear Cub Title Representations” shall mean the representations and warranties in
Section 4.2(b) and Section 4.2(d).
“Bear Cub’s Knowledge” or any similar term, shall mean the actual knowledge, after due
inquiry, of each of Xxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxx and Xxxxx X. Xxxxxxxx.
“Business Day” shall mean any day, other than Saturday and Sunday, on which
federally-insured commercial banks in Dallas, Texas are generally open for business and capable of
sending and receiving wire transfers.
“Buyers” shall have the meaning given such term in the opening paragraph of this
Agreement.
“Buyer Indemnified Taxes” shall mean any and all Taxes, together with any Losses
(including court and administrative costs and reasonable legal fees and expenses incurred in
investigating and preparing for any Proceeding relating to Taxes) arising out of, in connection
with, or incident to the determination, assessment or collection of such Taxes, (i) imposed on any
Pueblo Company or for which any Pueblo Company is otherwise liable for any Taxable period ending on
or prior to the Closing Date or the portion of any Straddle Period ending on the Closing Date
(determined in accordance with the provisions of Section 6.8(b), (ii) as a result of
Schedule B-1
or arising out of (A) a breach of any representation or warranty set forth in Section
4.7 (without giving effect to any materiality or knowledge qualifiers that may be contained
therein and without regard to any items set forth in the Disclosure Letter) or (B) a breach by
Sellers of any covenant set forth in Section 6.8, (iii) of any member of an affiliated,
consolidated, combined or unitary group of which any Pueblo Company (or any predecessor) is or was
a member on or prior to the Closing Date by reason of Treasury Regulation § 1.1502-6(a) or any
analogous or similar state or local law, or (iv) of any other Person for which any Pueblo Company
is or has been liable as a transferee or successor, by contract or otherwise; provided,
however, that any such Tax described in this definition shall not be a Buyer Indemnified
Tax to the extent such Tax was included as a Current Liability in the determination of Net Working
Capital included on the Final Closing Statement.
“Buyers’ Knowledge” or any similar term, shall mean the actual knowledge, after due
inquiry, of any of the officers of the Partnership.
“Cash” shall mean cash on deposit with financial institutions net of overdrafts and
outstanding checks.
“Change of Control Amounts” shall mean any bonus, retention bonus, consent or other
fee, compensation (including the estimated costs of benefits required to be provided) or other
similar payments (including the employee’s portion of any Medicare, Social Security or unemployment
Taxes in respect of such payments) that any Pueblo Company upon Closing, to the extent not paid as
of the Measurement Time, will become obligated to pay (other than Expenses and Severance
Obligations) as a result of the consummation of the transactions contemplated by this Agreement and
the Transaction Documents, regardless of whether such amounts are payable at or after Closing.
“Claim” shall mean any demand, claim or notice sent or given by a Person to another
Person in which the former asserts that it has suffered a Loss or has become party to a Proceeding
that is the responsibility of the latter.
“Claim Notice” shall mean a written notice of a claim for indemnification pursuant to
this Agreement specifying in reasonable detail the specific nature of the Claim for which
indemnification is sought.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Common Units” shall mean units representing limited partner interest of the
Partnership designated as Common Units and having the rights, obligations and such other terms as
set forth in the Partnership Agreement.
“Confidentiality Agreement” shall mean the Confidentiality Agreement and Disclaimer
Statement between Bear Cub and Regency Gas Services, LP, a Delaware limited partnership, dated
August 31, 2006.
“Contract” shall mean any binding agreement, contract, lease, commitment, consensual
obligation, note, bond, mortgage, indenture, arrangement, promise or undertaking (whether written
or oral and whether express or implied).
Schedule B-2
“Co-Owner” shall mean Xxxxxx Oil Company, a Texas corporation.
“Co-Owner Agreements” shall mean all Contracts between Co-Owner and Bear Cub or any
Pueblo Company and all other Contracts that relate to or provide rights to Co-Owner with respect to
its interest in the Xxxxxxx Plant, each of which is listed on Section 4.10(c) of the Disclosure
Letter.
“Current Assets” shall mean the sum of all current assets of the Pueblo Companies as
of the Measurement Time as determined in accordance with GAAP (as applied on a basis consistent
with past practice and the preparation of the Financial Statements), as adjusted (whether or not in
accordance with GAAP) (1) to give effect to this Agreement, (2) to utilize the methodologies and
procedures otherwise specified in or consistent with the Sample Balance Sheet and (3) to give
effect to the exclusion of the following: (a) Restricted Cash, (b) accounts receivable evidencing
Indebtedness, accounts and obligations owed by any one or more of Sellers, any Pueblo Company or
any of its or their Affiliates to any of the Pueblo Companies, (c) amounts receivable from
Officers, Directors, Managers or any other employees of any Pueblo Company or from any officers,
directors or managers of any Seller, (d) current and deferred Tax assets, (e) prepaid expenses and
deposits except to the extent usable in or benefiting the business of the Pueblo Companies, and (f)
assets from risk management activities in connection with derivatives. The computation of Current
Assets as of December 31, 2006, is illustrated in the Sample Balance Sheet.
“Current Environmental Insurance Policy” shall mean the Pollution and Remediation
Legal Liability Police No. PEC000364901 issued by Indian Harbor Insurance Company for the policy
period June 27, 2005 to June 27, 2008.
“Current Liabilities” shall mean the sum of all current liabilities of the Pueblo
Companies as of the Measurement Time as determined in accordance with GAAP (as applied on a basis
consistent with past practice and the preparation of the Financial Statements), as adjusted
(whether or not in accordance with GAAP) (1) to give effect to this Agreement, (2) to utilize the
methodologies and procedures otherwise specified in or consistent with the Sample Balance Sheet,
(3) to give effect to the inclusion of the following, if any, to the extent unpaid as of the
Measurement Time: (a) Expenses, (b) the Debt Payoff Amount, and (c) the Unpaid Environmental
Deductible and (4) to give effect to the exclusion of the following: (a) accounts payable
evidencing obligations owed by any one or more Pueblo Company to any other Pueblo Company, (b)
deferred Tax liabilities, (c) escrow accounts payable to the extent corresponding amounts held in
escrow are excluded from Current Assets, and (d) liabilities from risk management activities in
connection with derivatives. For purposes of determining Current Liabilities to be used in the
determination of Net Working Capital, (y) subject to clause (4) of the immediately preceding
sentence, no reserves, allowances or accrued Liability of the Pueblo Companies reflected in the
balance sheet included in the Financial Statements shall be reduced or eliminated, except in the
case of a reduction or elimination by reason of a payment or credit occurring in the ordinary
course of business consistent with the past practice of the Pueblo Companies and (z) all capital
expenditures accrued but not paid as of the Measurement Time shall be reflected as a Current
Liability. The computation of Current Liabilities as of December 31, 2006, is illustrated by the
Sample Balance Sheet.
Schedule B-3
“Debt Payoff Amount” shall mean the amount of all unpaid Third-Party Debt of the
Pueblo Companies as of the Closing Date (including principal, accrued and unpaid interest, breakage
costs and prepayment fees or penalties or change in control payments that will be incurred in
connection with the payment and discharge of such Third-Party Debt as contemplated by this
Agreement).
“Debt Payoff Letters” shall mean a payoff letter, in form and substance reasonably
satisfactory to Buyers, from each lender of Third-Party Debt setting forth (i) the aggregate
amount, including interest, breakage costs, prepayment penalties, and other fees, required to be
paid to satisfy fully all Third-Party Debt owed to such lender and (ii) wire transfer instructions
for such lender. Each Debt Payoff Letter shall provide for the release and termination of all
Liens, recourse and other obligations associated with the Third-Party Debt that is the subject of
such Debt Payoff Letter upon receipt of the amount specified in such Debt Payoff Letter to be paid
on the Closing Date.
“Deductible” shall mean $75,000.
“Directors” shall mean each director of each Pueblo Company.
“Disclosure Letter” shall mean the disclosure letter dated the date this Agreement is
delivered by Sellers to Buyers.
“Easement” shall mean all easements, rights-of-way, servitudes, property use
agreements, line rights and real property licenses (including right-of-way permits from railroads
and road crossing permits or other right-of-way permits from Governmental Authorities) held by any
Pueblo Company relating to real property used in the business of the Pueblo Companies.
“Employee Benefit Plans” means each of the following (whether oral or in writing) that
is or has been sponsored, maintained or contributed to since January 1, 2000 by any Pueblo Company
or any trade or business, whether or not incorporated, that together with any Pueblo Company would
be considered affiliated with Pueblo under Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA (an “ERISA Affiliate”) for the benefit of any person who, as of the
Closing, is a current or former employee or subcontractor of any Pueblo Company: (i) each
“employee benefit plan,” as such term is defined in Section 3(3) of ERISA (each, a “Plan”);
and (ii) each equity compensation, bonus, incentive award, severance, deferred compensation,
executive compensation, supplemental income, retiree benefit, fringe benefit (whether or not
taxable), employee loan, vacation, or change of control agreement or plan, policy or agreement,
each employment and consulting agreement, each personnel policy and each other employee benefit
plan, contract, program or practice.
“Environmental Law” shall mean any and all Laws, Regulations or rules of common law,
or Orders of any Governmental Authority in existence and as amended on the Closing Date pertaining
to the protection of the environment, health or natural resources or to Hazardous Materials in any
and all jurisdictions in which the party in question owns property or conducts business, including
the Clean Air Act, the Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (“CERCLA”), the Federal Water Pollution Control Act, the Occupational Safety and
Health Act of 1970, the Resource Conservation and Recovery
Schedule B-4
Act of 1976, the Safe Drinking Water Act, the Toxic Substances Control Act, the Hazardous &
Solid Waste Amendments Act of 1984, the Superfund Amendments and Reauthorization Act of 1986, the
Hazardous Materials Transportation Act, the Oil Pollution Act of 1990, any state or local Laws
implementing, analogous to, or similar to the foregoing federal Laws, and any state or local Laws
pertaining to the handling of oil and gas exploration, production, gathering, and processing wastes
or the use, maintenance, and closure of pits and impoundments.
“Equity Interest” shall mean (i) the equity ownership rights in a business entity,
whether a corporation, company, joint stock company, limited liability company, general or limited
partnership, joint venture, association, trust, trust company, land trust, business trust, sole
proprietorship or other business entity or organization, and whether in the form of capital stock,
ownership unit, limited liability company interest, limited or general partnership interest or any
other form of ownership, and (ii) also includes all Equity Interest Equivalents.
“Equity Interest Equivalents” shall mean all rights, warrants, options, convertible
securities or indebtedness, exchangeable securities or other instruments, or other rights that are
outstanding and exercisable for or convertible or exchangeable into, directly or indirectly, any
Equity Interest described in clause (i) of the definition thereof at the time of issuance or upon
the passage of time or occurrence of some future event.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.
“Escrow Agent” means Xxxxx Fargo Bank, National Association, and includes its
successors and assigns.
“Escrow Agreement” means the Escrow Agreement to be entered into among Buyers, the
Sellers’ Representative and the Escrow Agent at or prior to the Closing substantially in the form
attached hereto as Exhibit C, subject to any modifications that the Escrow Agent may
require prior to execution that do not adversely affect the rights to the Escrow Deposit of any of
the Parties or the Sellers’ Representative or any other rights or obligations under this Agreement.
“Escrow Deposit” means an amount in Cash equal to $2,000,000.
“Escrow Fund” means an amount equal to the Escrow Deposit, including all interest,
dividends and other income earned thereon.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
“Exhibits” shall mean any or all of the exhibits attached to and made a part of this
Agreement.
“Expenses” shall mean, to the extent existing as of the Measurement Time, the
aggregate amount of unpaid fees, expenses and other similar amounts that have been or are expected
to be incurred by any Pueblo Company on or prior to the Closing Date arising from the provision of
services through the Closing for Sellers, any of the Pueblo Companies, the Officers,
Schedule B-5
the Directors, the Managers or any officers or directors of Sellers or the Pueblo Companies in
connection with the preparation, negotiation and execution of this Agreement and the other
Transaction Documents and the consummation of this Agreement and the transactions contemplated
hereby, including the following: (i) the fees and disbursements of, or other similar amounts
charged by, counsel to any such Persons, (ii) the out-of-pocket expenses, if any, of any such
Persons and (iii) the fees and expenses of, or other similar amounts charged by, any accountants,
agents, financial advisors, consultants and experts employed by Sellers or the Pueblo Companies, or
both.
“Expired Environmental Insurance Policy” means the Pollution and Remediation Legal
Liability Policy No. PEC0003649 issued by Greenwich Insurance Company for the policy period June
27, 2000 to June 27, 2005.
“Xxxxxxx Facility” shall mean the gas treating plant, processing plant, sulphur
recovery plant, gas gathering lines and related equipment located in Atasca and Xxxxxx Counties,
Texas, including without limitation the facilities for the removal of hydrogen sulfide and other
objectionable substances from the sour gas delivered to it, said facilities being located on that
certain 20-acre tract described in deed from Xxxxxxx X. Xxxxx, et al., to Gulf Oil Corporation,
dated January 2, 1958, and recorded in Vol. 261, page 207 of the Deed Records of Atascosa County,
Texas.
“FCC” means the Federal Communications Commission.
“FCC Licenses” means any licenses, permits, certificates, approvals, franchises,
consents, waivers, registrations or other authorizations issued by the FCC to any Pueblo Company.
“FCC Rules” means Title 47 of the Code of Federal Regulations, as amended from time to
time, and any policies or published decisions issued pursuant to such regulations or the
Communications Act of 1934, as amended (47 U.S.C. 151 et seq.).
“FERC” shall mean the Federal Energy Regulatory Commission of the United States
Government.
“Final Order” means an action, order, judgment or decree: (i) that has not been
reversed, stayed, enjoined, set aside, annulled or suspended; (ii) in relation to which no request
for stay, motion or petition for reconsideration or rehearing, application or request for review,
or notice of appeal or other administrative or judicial petition for review or reconsideration
(collectively, an “Appeal”) is pending or has been granted; and (iii) as to which the
prescribed time for filing an Appeal, and for the entry of orders staying, reconsidering, or
reviewing the applicable Governmental Authority’s own motion, has expired.
“Final Resolution” means the dismissal with prejudice, resolution by final
non-appealable judgment of a court of competent and proper jurisdiction or by final settlement
without any further liability or obligation of any named party thereto.
“GAAP” shall mean generally accepted accounting principles used in the United States
for financial reporting applied consistently with such Party’s past practices.
Schedule B-6
“General Partner” shall mean Regency GP LP, a Delaware limited partnership and the
general partner of the Partnership.
“Governmental Authorities” shall mean (a) the United States of America or any state or
political subdivision thereof and (b) any court or any governmental or administrative department,
commission, board, bureau, agency or arbitration tribunal of the United States of America or of any
state or political subdivision thereof.
“Hazardous Materials” shall mean: (a) any chemicals, materials or substances defined
or included in the definition of “hazardous substances,” “hazardous materials,” “toxic substances,”
“solid wastes,” “pollutants,” “contaminants,” or words of similar import intended to define, list
or classify substances by reason of deleterious properties under any Environmental Law, (b) any
radioactive materials, asbestos, and polychlorinated biphenyls, (c) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any Governmental Authority, or
(d) oil, waste oil, petroleum, waste petroleum, natural gas, natural gas liquids or liquefied
natural gas.
“Hydrocarbon Contracts” means (a) all Hydrocarbon Purchase Contracts, (b) all
Hydrocarbon Sales Contracts, (c) all water disposal agreements to which any Pueblo Company is a
party or that is binding on any Pueblo Company and (d) all other Contracts materially affecting oil
and gas operations on, or which impose any material monetary liability or obligation or other
material liability or obligation, monetary or otherwise, on any of the Pueblo Companies.
“Hydrocarbon Purchase Contract” means any sales, purchase, exchange or marketing
Contract that is currently in effect and under which any Pueblo Company is a buyer of Hydrocarbons
for resale in whole or in part (other than purchase agreements with Persons who are not Affiliates
of any Pueblo Company and that (i) have been entered into in the ordinary course of business, (ii)
have a term of one month or less or are terminable by the Pueblo Company that is a party thereto
without penalty on 30 days’ notice or less, and (iii) that do not obligate the purchaser to take
any specified quantity of Hydrocarbons or to pay for any deficiencies in quantities of Hydrocarbons
not taken).
“Hydrocarbon Sales Contract” means any sales, purchase, exchange or marketing Contract
that is currently in effect and under which any Pueblo Company is a seller of Hydrocarbons (other
than “spot” sales agreements with Persons who are not Affiliates of any Pueblo Company entered into
in the ordinary course of business with a term of one month or less.
“Hydrocarbons” shall mean crude oil, condensate, natural gas, casinghead gas and other
liquid or gaseous hydrocarbons.
“Indebtedness” shall mean, without duplication, (i) any obligations of any Pueblo
Company for borrowed money (including all obligations for principal, interest, premiums, penalties,
fees, expenses and breakage costs), (ii) any obligations of any Pueblo Company evidenced by any
note, bond, debenture or other debt security, (iii) any obligations of any Pueblo Company for or on
account of capitalized leases, (iv) any obligations of a Person other than a Pueblo Company secured
by a Lien against any Pueblo Company’s Assets, (v) any obligations of
Schedule B-7
any Pueblo Company for the reimbursement of letters of credit, bankers’ acceptance or similar
credit transactions, (vi) any obligations of any Pueblo Company under any currency, commodity or
interest rate swap, hedge or similar protection device, (vii) any obligations of the types
described in clauses (i) through (vii) above of any Person other than any Pueblo Company, the
payment of which is guaranteed, directly or indirectly, by any Pueblo Company.
“Indemnifying Members” means each of Xxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxx.
“Interests” shall have the meaning given such term in the first recital to this
Agreement.
“IRS” shall mean the United States Internal Revenue Service.
“Laws” shall mean all laws, statutes and ordinances of the United States, any state of
the United States and any political subdivision thereof, including all decisions of any
Governmental Authority having the effect of law in each such jurisdiction.
“Liability” shall mean any direct or indirect liability, Indebtedness, obligation,
commitment, expense, claim, deficiency, guaranty or endorsement of or by any Person of any type,
whether known or unknown, and whether accrued, absolute, contingent, matured or unmatured.
“Lien” shall mean any lien, mortgage, pledge, adverse or other claim, charge, security
interest, production payment, restriction, burden, encumbrance, right of purchase, rights of a
vendor under any title retention or conditional sale agreement, or lease or other arrangement
substantially equivalent thereto or other encumbrance, option or defect in title.
“Liquidity” means the sum of each of the following: (i) Cash, (ii) Marketable
Securities and (iii) any amounts of Cash that can be then currently borrowed under any bank credit
facility and the use of such funds to satisfy Bear Cub’s obligations under Article X of
this Agreement is permitted under such bank credit facility.
“Loss” or “Losses” shall mean any and all damages, payments, penalties,
assessments, disbursements, costs and expenses, including interest, awards, judgments, settlements,
fines, Taxes, costs of remediation, fees, costs of defense and reasonable attorneys’ fees, costs of
accountants, expert witnesses and other professional advisors and costs of investigation and
preparation of any kind or nature whatsoever.
“Managing General Partner” shall mean Regency GP LLC, a Delaware limited liability
company and the general partner of the General Partner.
“Marketable Securities” means securities that are traded on a national United States
or foreign securities exchange, or traded on PORTAL (in the case of securities eligible for trading
pursuant to Rule 144A); provided, that any such securities shall be deemed Marketable
securities only if they are freely tradable and are not subject to any material restrictions on
transfer as a result of applicable law or contractual provisions. Freely tradable for this purpose
includes securities that are: (i) transferable by the holder thereof pursuant to a then effective
registration statement (including a shelf registration statement) under the Securities Act or
Schedule B-8
regulations thereunder (or similar applicable statutory provision in the case of foreign
securities); (ii) transferable by the holders thereof who are not Affiliates of the issuer pursuant
to Rule 144(k) under the Securities Act or any successor rule thereto (or similar applicable rule
in the case of foreign securities); or (iii) transferable by the holders thereof pursuant to Rule
144A which shall include (A) a covenant by the issuer of such security to comply with the reporting
and informational requirements under Rule 144A and (B) eligibility for trading such securities on
PORTAL.
“Material Adverse Effect” shall mean:
(i) with respect to a specified Person, other than a Member, any result, occurrence, change,
fact, event, circumstance or effect of any of the foregoing (whether or not (A) foreseeable as of
the date of this Agreement or (B) covered by insurance) that, individually or in the aggregate with
any such other result, occurrence, change, fact, event, circumstance or effect (whether or not such
result, occurrence, condition, change, fact, event, circumstance or effect has, during the period
or time in question, manifested itself in the historical statements of such Person), has had, has,
or could reasonably be expected to have a material adverse effect on (x) the near-term or long-term
condition (financial or otherwise), business, prospects, properties or results of operations of
such Person and its Subsidiaries, taken as a whole, (y) the ability of such Person to own its
assets and conduct its business in the ordinary course as presently owned and conducted or (z) the
ability of such Person and its Subsidiaries to perform their obligations under or consummate the
transactions contemplated by the Transaction Documents to which it is a party; provided,
however, that a Material Adverse Effect shall not be deemed to occur pursuant to clause
(i)(x) solely as a result of (1) the effect of any change that is generally applicable to the
industry and markets in which such Person and its Subsidiaries operate or (2) the effect of any
change that is generally applicable to the United States economy or securities markets, provided
that the changes and effects in the case of clauses (1) or (2) of this sentence do not
disproportionately affect such Person and its Subsidiaries as compared to other Persons in the
industry;
(ii) with respect to each Member, any result, occurrence, change, fact, event, circumstance or
effect of any of the foregoing (whether or not (A) foreseeable as of the date of this Agreement or
(B) covered by insurance) that, individually or in the aggregate with any such other result,
occurrence, change, fact, event, circumstance or effect, has had, has, or could reasonably be
expected to have a material adverse effect on the ability of such Member to perform its obligations
under or consummate the transactions contemplated by the Transaction Documents to which it is a
party.
“Material Contract” shall mean each of the following Contracts to which any Pueblo
Company is a party, to the extent such Contract is currently executory:
(a) each of the Hydrocarbon Contracts;
(b) each of the Treating and Processing Agreements;
(c) each of the Co-Owner Agreements;
Schedule B-9
(d) each Contract, other than any of the Hydrocarbon Contracts or Treating and Processing
Agreements, that is reasonably expected to require payments of Cash to or by the Pueblo Companies,
or the incurrence of Liabilities by the Pueblo Companies during the period of twelve months
following the date of this Agreement in an amount of more than $100,000;
(e) each Contract restricting or otherwise affecting the ability of such Pueblo Company to
conduct or compete in any line of business in any jurisdiction;
(f) joint venture, limited liability company and partnership (including limited partnership)
Contracts;
(g) each Contract with any of the Directors, Officers or other employees of any Pueblo Company
or any of the directors, officers, managers or other employees of Bear Cub, any Member or any of
their respective Affiliates;
(h) each Contract with any financial advisor or consultants to Bear Cub or any Pueblo Company
under which there are remaining indemnity or other obligations of any party thereto after the
Closing;
(i) agreements for the acquisition or disposition of assets or Assets (other than Hydrocarbon
Contracts);
(j) each lease for capital equipment that provides for ongoing payments by any Pueblo Company
in excess of $25,000 annually;
(k) any indenture, mortgage, promissory note, loan or other similar Contract for Indebtedness;
and
(l) each other existing Contract not otherwise covered by clauses (a) through (k) that (i)
otherwise is material to the Pueblo Companies (ii) was not entered into in the ordinary course of
business, (iii) requires or reasonably could be expected to require payments to or by the Pueblo
Companies of an amount of $100,000 during the remaining term of the Contract or (iv) the loss of
which could reasonably be expected to have a Material Adverse Effect on any Pueblo Company.
“Measurement Time” shall mean 12:01 a.m. on April 1, 2007.
“Members Title Representations” shall mean the representations and warranties in
Section 3.2.
“Mutual Releases” shall mean Mutual Releases in the form attached hereto as
Exhibit D-1 or D-2 that are either (i) executed concurrently with the execution and
delivery of this Agreement, but to be effective and reaffirmed as of the Closing, by Bear Cub, each
Officer, each director, officer and manager of Bear Cub, and each director of any Pueblo Company,
on one hand, and the Buyers and the Pueblo Companies, on the other hand, or (ii) delivered at the
Closing pursuant to Section 6.6(b).
“Nasdaq” shall mean The Nasdaq Global Market.
Schedule B-10
“Net Working Capital” shall mean the amount by which Current Assets exceed Current
Liabilities as of the Measurement Time.
“NGA” shall have the mean the Natural Gas Act of 1938, as amended.
“NGPA” shall mean the Natural Gas Policy Act of 1978.
“Notification” shall mean any notice to or filing with any Person or Governmental
Authority required under the terms of any Contract to which any Pueblo Company or Seller is a
party, by the terms of any Authorization held by or applicable to any Pueblo Company or Seller or
by Law that is necessary for Seller to execute, deliver and perform its obligations under this
Agreement and the Transaction Documents to which it is or shall be a party or is otherwise required
in connection with the consummation by any Pueblo Company of the transactions contemplated hereby
or thereby.
“Officer” shall mean each officer of each Pueblo Company.
“Order” shall mean all applicable writs, judgments, injunctions, decrees and other
official acts of or by any Governmental Authority.
“Organizational Documents” shall mean with respect to any particular entity: (a) if a
corporation, its articles or certificate of incorporation and its bylaws; (b) if a limited
partnership, its limited partnership agreement and its articles or certificate of limited
partnership; (c) if a limited liability company, its articles of organization or certificate of
formation and its limited liability company agreement or operating agreement; (d) all related
equityholders’ agreements, voting agreements, voting trust agreements, joint venture agreements or
registration rights agreements; (e) if a trust, the will, trust agreement or indenture of trust
under which such trust was created; and (f) any amendment or supplement to any of the foregoing.
“Partnership Agreement” shall mean the Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of February 3, 2006, as amended on August 15, 2006, and
September 21, 2006.
“Partnership SEC Documents” shall mean the Prospectus dated January 30, 2006,
comprising a part of the Partnership’s Registration Statement on Form S-1 (Registration No.
333-128332), and all reports filed by the Partnership under Section 13(a) of the Exchange Act since
December 31, 2005 and all other reports filed by the Partnership with the SEC prior to Closing.
“Payoff Letters” shall mean the payoff letters, in form and substance reasonably
satisfactory to Sellers’ Representative and Buyers, from each Person to whom Expenses are owed,
setting forth the aggregate amount required to be paid to fully satisfy such obligation(s) and wire
transfer instructions for such payee.
“Permitted Encumbrances” shall mean the following:
(a) terms, conditions, restrictions, exceptions, reservations, limitations, and other matters
contained in any document filed or recorded in the appropriate county or parish to
Schedule B-11
reflect title thereto, creating or transferring any Real Property Interests, or in any
Authorizations or material Contract that, singly or in the aggregate, do not materially adversely
affect the value of the Real Property Interest to which such matters relate or materially interfere
with the ownership, use or operation of such Real Property Interests and that are of a nature that
would be reasonably acceptable to a prudent pipeline or plant operator and, in any event, do not
prevent or prohibit the use of such Real Property Interests by the Pueblo Companies for their
intended uses in the conduct of their respective businesses as presently conducted or proposed to
be conducted;
(b) Liens for Taxes and assessments that are not yet due and payable (or that are being
contested in good faith by appropriate Proceedings and for which adequate reserves have been made
in the Financial Statements);
(c) mechanic’s, materialmen’s, repairmen’s and other statutory Liens arising in the ordinary
course of business and securing obligations incurred prior to the Closing Date that are not
delinquent, that will be paid and discharged in the ordinary course of business and for which
adequate reserves have been made in the Financial Statements;
(d) utility easements, restrictive covenants, defects and other irregularities in title, that,
singly or in the aggregate, do not materially adversely affect the value of the assets to which
such matters relate or materially interfere with the ownership, use or operation of such assets and
that are of a nature that would be reasonably acceptable to a prudent pipeline or plant operator
and, in any event, do not prevent or prohibit the use of such assets by the Pueblo Companies for
their intended uses in the conduct of their respective business as presently conducted or proposed
to be conducted;
(e) required Third Person consents to assignment, preferential purchase rights and other
similar agreements with respect to which consents or waivers are obtained from the appropriate
Person prior to Closing for the transactions contemplated hereby, or as to which the appropriate
time for asserting such rights has expired as of the Closing without an exercise of such right, or
the effects of which, singly or in the aggregate, could not reasonably be expected to interfere
materially with the ownership, use or operation of the assets to which such matters relate and that
are of a nature that would be reasonably acceptable to a prudent pipeline or plant operator and, in
any event, do not prevent or prohibit the use of such assets by the Pueblo Companies for their
intended uses in the conduct of their respective business as presently conducted or proposed to be
conducted;
(f) any Post-Closing Notification; and
(g) Liens created by Buyer or its successors or assigns.
“Person” shall mean any natural person, corporation, company, partnership (general or
limited), limited liability company, trust, joint venture, joint stock company, unincorporated
organization, Governmental Authority or other entity or association.
“Pipeline Assets” shall mean the pipelines, equipment, other tangible personal
property, Easements and other similar assets and rights used by any Pueblo Company in connection
with its natural gas pipeline, gathering, compression, treating and processing operations as
presently conducted.
Schedule B-12
“Plan” shall have the meaning given such term in the definition of Employee Benefit
Plans.
“Post-Closing Notification” shall mean any Notification to or with any Person or
Governmental Authority that is customarily effected following the closing of a transaction similar
to the transaction contemplated hereby, including those listed in Section 1.1(c) of the
Disclosure Letter, but shall not include any Notification that constitutes a Required Consent.
“Pre-Closing Period” shall mean any Tax period ending on or prior to the Closing Date.
“Proceeding” shall mean any action, suit, claim, investigation, review or other
judicial or administrative proceeding, at law or in equity, before or by any Governmental Authority
or arbitration proceeding.
“Pro Rata Portion” means, with respect to each Seller, the percentage specified in the
column entitled “Percent Ownership Interest in Pueblo Midstream Gas Corporation” of Schedule
A.
“Pueblo Company” shall mean any of Pueblo or any Pueblo Subsidiary, individually, and
“Pueblo Companies” shall mean Pueblo and the Pueblo Subsidiary, collectively.
“Pueblo Subsidiary” shall mean Pueblo Energy Marketing, Inc., a Texas corporation.
“Real Property Interests” shall mean all interests in real property used or held for
use by any Pueblo Company, including fee properties, rights-of-way, Easements, surface use
agreements, licenses and leases that are used or held for use in connection with the ownership,
operation or maintenance of the assets owned by or leased by any Pueblo Company, and all fixtures,
pipelines, gathering facilities, buildings and improvements located thereon or appertaining thereto
that are owned or held by leasehold interest by any Pueblo Company.
“Records” shall mean all Contract, land, title, engineering, environmental,
regulatory, operating, accounting, business, marketing, and other data, files, documents,
instruments, notes, papers, ledgers, journals, reports, abstracts, surveys, title opinions, maps,
drawings, books, records and studies that relate to the ownership, operation or maintenance of the
assets owned by any Pueblo Company.
“Registration Rights Agreement” shall mean the Registration Rights Agreement in
substantially the form attached hereto as Exhibit E.
“Regulation” shall mean any rule or regulation of any Governmental Authority having
the effect of Law or of any rule or regulation of any self-regulatory organization.
“Regulation S-X” means Regulation S-X promulgated by the SEC.
Schedule B-13
“Restricted Cash” shall mean, as of the Measurement Time, the amount of Cash of the
Pueblo Companies that would be deemed to be “restricted” in accordance with GAAP as consistently
applied by Pueblo in the preparation of the Financial Statements; provided,
however, that the amount so determined shall (whether or not in compliance with GAAP)
include the following: (i) amounts held in escrow, (ii) restricted balances, (iii) the proceeds of
any casualty loss with respect to any asset (to the extent any such asset has not been repaired or
replaced or the liability for the repair or replacement of such asset has not been paid or accrued
as a current liability) and (iv) proceeds of indemnification settlements to the extent that the
indemnified losses have not been paid or accrued as current liabilities.
“Rule 144A” means Rule 144A under the Securities Act or any successor rule thereto.
“Sample Balance Sheet” shall mean the sample calculation of Current Assets and Current
Liabilities and sample calculation of Net Working Capital as of the Sample Balance Sheet Date as
set forth on Schedule C attached hereto.
“Sample Balance Sheet Date” shall mean December 31, 2006.
“Schedules” shall mean the schedules referenced in this Agreement and attached hereto.
“SEC” shall mean the U.S. Securities and Exchange Commission.
“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“Sellers’ Representative” shall mean Xxxxxx X. Xxxxx.
“Severance Obligations” shall mean any payment or other obligation of any Pueblo
Company or Bear Cub to any Director, Officer, manager or other employee, or any independent
contractor or agent, of any Pueblo Company, pursuant to any Contract with such Person existing as
of or prior to the Closing that would arise from the termination (including termination with or
without cause and voluntary termination) of the position, office, employment or engagement of such
Person upon or at any time after Closing, or that exists as of the Closing as a result of any such
termination prior to Closing, including any severance, bonus, accrued vacation or tax
indemnification obligations or other similar payments and the Pueblo Companies’ portion of any
Medicaid, Social Security or unemployment Taxes in respect of such payments, but excluding salary
through the date of any such termination.
“Significant Subsidiary” means any Subsidiary of the Partnership that would constitute
a Significant Subsidiary of the Partnership within the meaning of Rule 1.02 of Regulation S-X of
the SEC.
“Straddle Period” shall mean any Tax period beginning on or before and ending after
the Closing Date.
Schedule B-14
“Subordinated Units” shall mean units representing limited partner interest of the
Partnership designated as Subordinated Units and having the rights, obligations and such other
terms as set forth in the Partnership Agreement.
“Subsidiary” means, with respect to any Person, any corporation or other organization,
whether incorporated or unincorporated, of which (a) such Person or any other Subsidiary of such
Person is a general partner, managing member or sole or controlling member or (b) at least a
majority of the Equity Interest or other interests having by their terms ordinary voting power to
elect a majority of the board of directors, managers or others performing similar functions with
respect to such corporation, partnership, limited partnership, limited liability company or other
organization is, directly or indirectly, owned or controlled by such Person or by any one or more
of its Subsidiaries, or by such Person and any one or more of its Subsidiaries.
“Tax” or “Taxes” means (a) any and all federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock, franchise, profits,
withholding, social security (or similar tax, including FICA), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added, alternative or add-on
minimum or estimated tax or other tax, assessment or governmental charge of any kind in the nature
of (or similar to) taxes whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not, and (b) any liability for the payment of any amounts of the type described in
clause (a) of this definition as a result of being a member of an affiliated, consolidated,
combined or unitary group for any period, as a result of any tax sharing, tax indemnity or tax
allocation agreement, arrangement or understanding, or as a result of being liable for another
Person’s taxes as a transferee or successor, by contract or otherwise.
“Tax Return” shall mean any declaration, report, statement, form, claim for refund,
return or other document or information required to be supplied to a Governmental Authority in
connection with Taxes including any schedule or attachment thereto, and including any amendment
thereof.
“Termination Agreement” shall mean the Termination Agreement in substantially the form
attached hereto as Exhibit F.
“Third-Party Consent” shall mean any consent, waiver, permission, authorization or
approval of, or exemption by, any Third Person (other than a Governmental Authority).
“Third-Party Debt” shall mean all (i) outstanding Indebtedness for borrowed money of
any Pueblo Company from any Person other than another Pueblo Company and (ii) outstanding
Indebtedness of any Person other than a Pueblo Company which is secured by a Lien on any assets or
Equity Interests of any Pueblo Company or guaranteed by any Pueblo Company.
“Third Person” shall mean (i) any Person other than a Party or its Affiliates and (ii)
any Governmental Authority.
“Title Defect” shall mean any Lien or defect in title associated with a Pueblo
Company’s title to the Assets, other than a Permitted Encumbrance, that (a) causes any Pueblo
Company’s title in any Asset not to constitute good, valid and, with respect to owned Real
Schedule B-15
Property Interest only, but excluding rights-of-way, Easements, surface use agreements,
licenses and leases, marketable title or (b) adversely affects in any material respect the value of
such Asset or the ability of any Pueblo Company to own, operate or maintain the Assets in the
ordinary course of business consistent with past practice.
“Transaction Documents” shall mean this Agreement, the Mutual Releases, the
Registration Rights Agreement, the Transition Services Agreement, the Escrow Agreement, the
Termination Agreement and any other Contract among the Parties that is expressly agreed by the
Parties to constitute a Transaction Document for purposes of this Agreement.
“Transaction Units” shall mean an aggregate of 751,597 Common Units to be issued by
the Partnership and delivered to Sellers’ Representative at the consummation of the transactions
contemplated hereby in discharge of a portion of the Aggregate Consideration.
“Transition Services Agreement” shall mean the Transition Services Agreement in
substantially the form attached hereto as Exhibit G.
“Treatment and Processing Dedication Agreements” means all Hydrocarbon gathering,
treating or processing agreements and compressor agreements to which any Pueblo Company is a Party
or that is binding on any Pueblo Company, including the (i) Gas Processing Agreement, entered into
on October 22, 1959, between the Processor (as defined therein) and Gulf Oil Corporation, a
Pennsylvania corporation, (ii) Agreement Respecting the Treating and Processing of Gas, entered
into on July 1, 2001, between the Processor (as defined therein) and EEX Operating L.P., a Texas
limited partnership, and (iii) Gas Gathering, Treating and Compression Agreement, entered into on
August 9, 2001, between the Processor (as defined therein) and Chevron U.S.A. Inc., a Pennsylvania
corporation.
“Unpaid Environmental Deductible” means the difference between (i) $500,000, which
represents the amount of the deductible under the Expired Environmental Insurance Policy, and (ii)
the amount Pueblo has paid towards the deductible as of the Closing under the Expired Environmental
Insurance Policy.
“Working Capital Deficit” shall mean the amount, if any, by which the Net Working
Capital as reflected on the Final Closing Statement is less than the applicable Base Working
Capital.
“Working Capital Surplus” shall mean the amount, if any, by which Net Working Capital
as reflected on the Final Closing Statement exceeds the Base Working Capital.
(d) The following terms shall have the meanings defined in the Section indicated:
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Defined Term |
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Section Reference |
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Aggregate Consideration
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Section 2.2(a) |
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Aggregate Consideration Deficit
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Section 2.3(d)(i) |
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Aggregate Consideration Surplus
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Section 2.3(d)(ii) |
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Agreement
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Opening Paragraph |
Schedule B-16
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Defined Term |
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Section Reference |
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Assets
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Section 4.6(a) |
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Audit Fees
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Section 2.3(f) |
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Bear Cub
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Opening Paragraph |
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Bear Cub Consolidated Balance Sheet
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Section 4.23(a) |
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Bear Cub Energy
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Section 6.5 |
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Bear Cub Year End Financial Statements
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Section 4.23(a) |
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Buyer Affiliate
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Section 11.15 |
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Buyer Indemnitees
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Section 10.3 |
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Cash Amount
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Section 2.2(a) |
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Closing
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Section 8.1 |
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Closing Date
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Section 8.1 |
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Consolidated Balance Sheet
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Section 4.14(a) |
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Court Direction
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Section 2.4(c)(i) |
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Current Salary/Benefits
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Section 4.13(b) |
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Escrow Cash Shortfall
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Section 2.4(b)(i) |
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Estimated Cash Amount
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Section 2.3(a) |
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Estimated Closing Statement
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Section 2.3(a) |
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FCC Transfer Applications
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Section 6.12 |
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Final Closing Statement
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Section 2.3(c) |
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Financial Statements
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Section 4.14(a) |
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Indemnified Party or Indemnitee
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Section 10.6(a) |
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Indemnifying Party or Indemnitor
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Section 10.6(a) |
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Intellectual Property
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Section 4.11 |
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Joint Direction
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Section 2.4(c) |
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Member
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Opening Paragraph |
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Notice Period
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Section 10.6(c) |
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Partners
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Opening Paragraph |
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Partnership
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Opening Paragraph |
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Partnership Litigation
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Section 5.5 |
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Power of Attorney
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Third Recital |
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Proposed Closing Statement
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Section 2.3(b) |
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Pueblo
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Opening Paragraph |
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Pueblo Holdings
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Opening Paragraph |
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Pueblo Employees
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Section 4.13(b) |
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Required Authorization
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Section 4.5(a) |
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Required Notifications
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Section 4.5(a) |
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Required Third-Party Consent
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Section 4.5(a) |
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Review Period
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Section 2.3(c) |
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Seller Indemnitees
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Section 10.2 |
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Sellers
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Opening Paragraph |
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Shortfall Notice
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Section 2.4(b)(i) |
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Stock Powers
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Second Recital |
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Survival Date
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Section 10.1(a)(ii) |
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Termination Date
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Section 9.1(b) |
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Third Person Claim
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Section 10.6(c) |
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Title Representations
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Section 10.1(a)(i) |
Schedule B-17
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Defined Term |
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Section Reference |
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Transfer Taxes
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Section 6.8(d) |
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Transferred Employee
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Section 6.10 |
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Transition Services Agreement
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Section 6.11 |
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TRCC
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Section 6.18 |
Schedule B-18
Schedule C
Sample Balance Sheet
[See Attached]
C-1
Exhibit A
Power of Attorney
[See Attached]
A-1
Exhibit B
Purchaser’s Representation Letter
[See Attached]
B-1
Exhibit C
Escrow Agreement
[See Attached]
C-1
Exhibit D-1
Mutual Release
(Individual)
[See Attached]
D-1-1
Exhibit D-2
Mutual Release
(Entity)
[See Attached]
D-2-1
Exhibit E
Registration Rights Agreement
[See Attached]
E-1
Exhibit F
Termination Agreement
[See Attached]
Exhibit G
Transition Services Agreement
[See Attached]
G-1
Exhibit H
Acknowledgement and Appointment
of Agent and Power of Attorney
[See Attached]