1 A:\Asset8.doc
11/18/99 10:03 AM
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into
as of November 5, 1999, by and among K-PIPE MERGER
CORPORATION, a Delaware corporation (the "Seller"),
MIDCOAST ENERGY RESOURCES, INC., a Texas corporation
("MERI"), MIDCOAST KANSAS PIPELINE, INC., a Delaware
corporation ("Midcoast Pipeline"), and MIDCOAST KANSAS
GENERAL PARTNER, INC., a Delaware corporation ("Midcoast
General Partner"). Midcoast Pipeline and Midcoast
General Partner are hereinafter sometimes collectively
referred to as the "Buyers". The Seller, MERI and the
Buyers are hereinafter sometimes collectively referred
to as the "Parties" and individually as a "Party".)
RECITALS
WHEREAS, the Seller has contracted to acquire the
businesses known as Kansas Pipeline Company, MarGasCo
Partnership, MidKansas Partnership and Riverside
Pipeline Company (more specifically defined herein as
the "Assets");
WHEREAS, the Seller desires to sell or cause to be
sold to the Buyers, and the Buyers desire to purchase the
Assets;
WHEREAS, the Buyers are wholly owned direct or
indirect subsidiaries of MERI;
WHEREAS, this Agreement contemplates a
transaction in which the Buyers will purchase, and the
Seller will sell or cause to be sold to the Buyers, the
Assets for the consideration hereinafter specified;
AGREEMENT
In consideration of the mutual agreements, promises
and covenants set forth herein and the recitals set forth
above, and other good and valuable consideration, the
receipt and adequacy of which are acknowledged, the
Parties hereto, intending to be legally bound, agree as
follows.
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the following terms
shall have the following meanings:
Adverse Consequences shall mean all debts,
obligations, losses, costs of investigation and defense,
damages, liabilities, claims, judgments, awards,
settlements, taxes, penalties, fines, assessments and
other costs and expenses (including any prejudgment
interest in any litigated or arbitrated matter) which may
be incurred, made or levied; provided, however, that such
term shall not include any punitive or exemplary damages.
Adjustment Amount shall have the meaning set
forth in Section 2.3(b).
Adjustment Value shall have the meaning set forth in
Section 2.3(b).
Affiliated Entity or Affiliate, Entities or Persons
shall be deemed Affiliated as to each other to the extent:
a) one of the
Entities directly or indirectly controls, or is controlled
by, the operations of the other, or the direct or indirect
control of one of the Entities is exercised by the
officers, directors, stockholders, or partners of the
other Entity (whether or not such persons exercise
such control in their capacities as officers,
directors, stockholders, or partners); and b) one of the
Entities directly or indirectly owns, and/or its officers,
directors, stockholders or partners (limited or general)
directly or indirectly own, a five percent (5%) or greater
interest in the capital and/or profits of the other
Entity. By way of
illustration, if Corporation A owns 51% of the stock of
Corporation B, which owns 51% of the stock of
Corporation C, which owns 51% of the stock of Corporation
D; then each of A, B, C and D would be an Affiliate of
each and every one of the other three corporations.
Agreement shall mean this Asset Purchase
Agreement, including the preamble, recitals, schedules and
exhibits hereto, all of which are hereby incorporated
herein by reference and made a part hereof.
Agreement-Related Litigation shall have the meaning
set forth in Section 9.5.
Assets shall mean all of those Partnership
Interests together with certain other assets, properties, rights,
holdings and interests described or referred to on Schedule
1.1(A) hereto.
Butcher Interests shall have the meaning set
forth on Schedule 1.1(B) hereto.
Buyers' Disclosure Schedule shall mean that schedule
from the Buyers to the Seller to be delivered upon the
execution of this Agreement, and updated, subject to the
approval of the Seller, and redelivered at Closing,
which sets forth certain disclosures concerning the
Buyers and their businesses.
Buyers' Indemnified Parties shall have the meaning set
forth in Section 6.2.
Buyers' Indemnified Party shall have the meaning set
forth in Section 6.2.
Buyers' Revised Adjustment Value shall have the meaning
set forth in Section 2.3(c).
Close shall mean the concluding of the Transaction.
Closing shall mean a meeting for the purpose of
concluding the Transaction to be held at the place and on
the date fixed in accordance with Section 2.6.
Closing Approval shall mean the expiration or
early termination of any waiting period pursuant to the
HSR Act in connection with Filing Number 20000034.
Closing Date shall mean the date upon which the
Preliminary Cash Consideration is paid to the Seller by
the Escrow Agent pursuant to the Escrow Agreement.
Code shall mean the Internal Revenue Code of
1986, as amended.
Companies shall mean collectively MGC, MID-KANSAS, KPC,
and RIVERSIDE.
Companies' Financial Statements shall have the meaning
set forth in Section 3.5.
Cut-Off Date shall mean November 5, 1999 at 4:00
p.m. central time.
Debt shall mean (i) the principal of long term debt,
current principal portion of long term debt, and the
principal portion of short term notes payable of the
Companies, all as defined by generally accepted
accounting principles, and (ii) the debt obligations of
Syenergy described in Schedule 1.1(C), but
specifically shall not include the Retained Liabilities.
Effective Time shall mean 12:01 a.m. as of the Closing
Date.
Entity shall mean any corporation,
proprietorship, partnership (general or limited), trust,
estate, foundation, association or any other entity or
group.
Environmental Claim shall mean any action, cause of
action, claim, investigation, demand or notice by any
Person alleging liability under or non-compliance with any
Environmental Law.
ERISA shall mean The Employee Retirement Income
Security Act of 1974, as amended.
Escrow Agent shall mean Cooperative Centrale
RaiffeisenBoerenleenbank B.A., "Rabobank International", New
York branch.
Escrow Agreement shall mean the Agreement attached
hereto as Schedule 2.6.
Excluded Assets shall have the meaning set forth in
Section 2.5.
GAAP shall mean generally accepted accounting
principles consistently applied.
Gas Contracts shall have the meaning set forth
in Section 3.16.
Governmental Authority shall mean the federal
government, any state, county, municipal, local or foreign
government and any governmental agency, bureau, commission,
authority or body.
HSR Act shall mean The Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended.
Indemnified Party shall have the meaning set
forth in Section 6.4(a).
Indemnifying Party shall have the meaning set
forth in Section 6.4(a).
Judgment shall mean any judgment, writ, injunction,
order or decree of or by any court, judge, justice
or magistrate, including any bankruptcy court or judge,
having appropriate jurisdiction, and any adjudicative order
of or by a Governmental Authority.
KPC shall mean Kansas Pipeline Company, a Kansas
general partnership.
Law shall mean the common law and any statute,
ordinance, code or other law, rule, regulation, order,
requirement or procedure enacted, adopted, promulgated,
applied or followed by any Governmental Authority or court.
Lien shall mean any mortgage, lien or encumbrance,
which (i) creates or confers an interest in property to
secure payment or performance of a liability, obligation
or claim, or which retains or reserves such an
interest for such purpose; (ii) grants to any Person
the right to purchase or otherwise acquire, or obligates
any Person to sell or otherwise dispose of, or otherwise
results or may result in any Person acquiring, any property
or interest in property; (iii) restricts the transfer of,
or the exercise of any rights in or the enjoyment of any
benefits arising by reason of ownership of, any
property; or (iv) otherwise constitutes an interest in,
or claim against, property, whether arising pursuant to
any Law, Judgment or any binding contract.
Material Adverse Effect shall mean any change,
event, occurrence or state of facts which is or which would
reasonably be expected to lead to an adverse change or
effect on in the business or operations pertaining to
the Assets and/or Adverse Consequences as the case may be,
which is material to the Assets other than any change
or effect (i) arising out of general economic conditions,
(ii) arising with respect to the industry to which the
Assets are related, but not specifically relating to the
Assets, (iii) arising out of or as a result of the public
announcement of the Transaction, or (iv) arising out of
events or facts set forth on the Seller's Disclosure
Schedule or the Buyers' Disclosure Schedule. No
change or event shall be material unless it is
individually greater than $250,000 (not including
multiples of revenues or earnings in the case of
changes or events affecting the revenue or earnings of
the relevant company).
MID-KANSAS shall mean Mid-Kansas Partnership, a
Kansas general partnership.
MRG shall mean MarGasCo Partnership, an Oklahoma
general partnership.
Partnership Interests shall mean one-hundred percent
(100%) of the partnership interests in each of KPC, MGC,
MIDKANSAS, and RIVERSIDE.
Pending Claims shall have the meaning set forth in
Section 3.6.
Partnership Debt Instruments shall mean the debt
obligations of SYENERGY and MGC described in Schedule
1.1(C).
Person shall mean any natural person, corporation,
limited liability company, general or limited partnership,
joint venture, trust, association, unincorporated entity
of any kind or Governmental Authority.
Preliminary Cash Consideration shall mean a sum of
cash equal to $179,216,444.00, plus or minus the Adjustment
Amount as defined in Section 2.3(b) below and minus the
Debt as of the Closing.
Purchase Price shall mean the Preliminary
Cash Consideration, as adjusted at and following Closing as
set forth in Article II.
Revised Adjustment Amount shall have the meaning set
forth in Section 2.3(c).
Revised Adjustment Value shall have the meaning set
forth in Section 2.3(c).
Representatives shall mean officers, employees,
legal counsel, financial advisors, accountants or other
authorized representatives of any of the Parties, to be
provided access to information.
Retained Liabilities shall have the meaning set
forth in Section 2.4.
RIVERSIDE shall mean Riverside Pipeline Company,
L.P., a Kansas general partnership.
Seller's Disclosure Schedule shall mean that schedule
from the Seller to the Buyers to be delivered upon the
execution of this Agreement, and updated, subject to
approval of the Buyers, and redelivered at the
Closing, which sets forth certain disclosures concerning
the Seller and its Partnership Interests.
Seller's Revised Adjustment Value shall have the
meaning set forth in Section 2.3(c).
Subsidiary shall mean in reference to any entity,
any corporation, limited liability company, limited
partnership or general partnership, a majority of the
outstanding voting securities or voting control of
which are owned directly or indirectly by such entity.
SYENERGY shall mean Syenergy Pipeline Company,
L.P., a Kansas limited partnership.
Taxes shall mean all Federal, state, local, foreign
and other taxes of any kind, including without limitation,
those on or measured by or referred to as income, gross
receipts, sales, use, ad valorem, franchise, profits,
withholding, payroll, employment, excise, severance,
stamp, occupation, value added, windfall profits taxes,
customs duties or similar fees and assessments of any
kind, including interest, penalties and additions to
tax or additional amounts imposed by any
governmental authority with respect thereto.
Tax Returns shall mean all returns, declarations,
reports, information returns and statements with respect
to Taxes of whatsoever kind.
Third Party Claim shall have the meaning set
forth in Section 6.4.
Threshold shall have the meaning set forth in Section
6.5.
Transaction shall mean the transaction contemplated by
this Agreement.
True-up Date shall have the meaning set forth in
Schedule 2.3(b).
1.2 Additional Terms. Terms not set forth in Section
1.1, but otherwise defined in the body of this Agreement,
shall have the specific meanings attributed to them in the
text. Terms in the singular shall have the same meanings
when used in the plural and vice versa.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the
terms and conditions of this Agreement at the Closing, but
effective as of the Effective Time, the Buyers will purchase
directly from the Affiliates of the Seller that own the
Assets, and the Seller will cause its Affiliates that own
the Assets to sell and transfer to the Buyers, the Assets
for the Purchase Price.
2.2 Preliminary Cash Consideration. The Buyers agree to
pay to the Seller, at the Closing, the Preliminary Cash
Consideration with the adjustments set forth in Section 2.3.
2.3 Adjustments.
(a) The Preliminary Cash Consideration shall be paid
to the Seller at Closing.
(b) The Preliminary Cash Consideration paid to the
Seller at Closing shall be increased or decreased (as the
case may be) (with such difference being paid in cash as
hereinafter provided by either the Buyers or the Seller, as
the case may be) to the extent the Adjustment Value
(based on the Seller's estimate as provided below) is
greater or less than Twenty-Five Thousand Dollars
($25,000) (such difference is referred to as the
"Adjustment Amount"). "Adjustment Value" shall be
calculated on a consolidated basis as of the True-up Date,
in accordance with GAAP, for the Companies as set forth
on Schedule 2.3(b).
The Seller shall submit to the Buyers its good faith estimate of
the Adjustment Value as of and including November 4, 1999.
(c) After the True-up Date, the Seller and the Buyers
shall true up Seller's estimate of the Adjustment Value
made prior to True-up Date. The Revised Adjustment Value
or Revised Adjustment Amount shall be determined based on
Schedule 2.3(b) as follows:
(i) Seller shall submit to the Buyers, not more
than thirty (30) days after the True-up Date, its good
faith estimate of the Adjustment Value as revised based on
any information then available to the Seller (the "Revised
Adjustment Value").
The Seller shall also provide the Buyers with the work papers
and back-up materials used in preparing its estimated
Revised Adjustment Value.
(ii) Within thirty (30) days after receiving
the Revised Adjustment Value from the Seller, the
Buyers shall prepare and deliver to the Seller a detailed
statement as to their calculation of the Adjustment Value
(the "Buyers' Revised Adjustment Value").
(iii) If the Seller has any objections to
the Buyers' Revised Adjustment Value calculation, it shall
deliver a detailed statement describing its objections to
the Buyers and setting its calculation of the Revised
Adjustment Value (the "Seller's Revised Adjustment
Value") within thirty (30) days after receiving the
Buyers' Revised Adjustment Value calculation. The Seller and
the Buyers shall use reasonable efforts to resolve any such
objections themselves. If they do not resolve such
objection within thirty (30) days after the Seller has
delivered its statement of objections, the Buyers and the
Seller shall select an accounting firm mutually acceptable
to them which shall resolve any remaining objections. If
they are unable to agree on the choice of accounting firm,
they shall select a nationallyrecognized accounting firm
by lot (after excluding their respective regular
outside accounting firms), which such selection shall
occur no later than ten (10) days following the expiration
of the foregoing thirty (30) day time period.
The determinations made by the accounting firm so selected
shall be set forth in writing and shall be conclusive and binding
upon all parties hereto. The determinations made by the
accounting firm shall be delivered to the Buyers and the
Seller no later than thirty (30) days following selection
of the accounting firm. The Seller and the Buyers shall
revise the statement of the Revised Adjustment Value as
appropriate to effect the resolution of any objections
thereto pursuant to this Section 2.3 and such revised
statement shall be the Revised Adjustment Value. The
difference (positive or negative) between the Revised
Adjustment Value and the Adjustment Value shall be paid by
the Seller or the Buyers, as appropriate, within three (3)
business days after the final determination of the Revised
Adjustment Amount.
(iv) In the event the Buyers and the Seller
submit any unresolved objections to an accounting firm for
resolution as provided in this section, they shall share
responsibility for the fees and expenses of the accounting
firm as follows:
(A) if the accounting firm resolves all of
the unresolved objections in favor of the Buyers, the Seller
shall be responsible for all of the fees and expenses of
the accounting firm;
(B) if the accounting firm resolves all of
the unresolved objections in favor of the Seller, the Buyers
shall be responsible for all of the fees and expenses of
the accounting firm;
(C) if the accounting firm resolves some of
the unresolved objections in favor of the Buyers and the
rest of the unresolved objections in favor of the Seller,
the Buyers shall be responsible for the fraction of the
fees and expenses of the accounting firm equal to (x)
the difference between the Revised Adjustment Value and
the Buyers' Revised Adjustment Value, divided by (y)
the difference between the Seller's Revised Adjustment
Value and the Buyers' Revised Adjustment Value.
Example #1:
If the Buyers' Revised Adjustment Value is 100,
the Revised Adjustment Value is 125, and the
Seller's Revised Adjustment Value is 175, then the
Buyers shall pay 25/75 or 1/3 of the fees and
expenses of the accounting firm, and the Seller
shall pay the remaining 2/3.
125-100 = 25 or 1/3
175-100 75
Example #2:
If the Buyers' Revised Adjustment Value is 50,
the Revised Adjustment Value is 150, and the
Seller's Revised Adjustment is 200, then the
Buyers' shall pay 100/150 or 2/3 of the fees
and expenses of the accounting firm, and the
Seller shall pay the remaining 1/3.
150-50 = 100 or 2/3
000-00 000
(v) The Buyers shall make the books and records
of the Companies and its Affiliates available for
inspection, review and copying to
the Seller and its accountants and other
representatives. The Buyers shall cooperate with the Seller
and will make the work papers and backup materials used in
preparing the statement of the Buyers' Revised Adjustment
Value available to the Seller and its accountants and
other representatives in each case at reasonable times and
upon reasonable notice at any time during (A) the
preparation by the Buyers of the statement of Buyers'
Revised Adjustment Value, (B) the review by the Seller of
the statement of Buyers' Revised Adjustment Value, and (C)
the resolution by the Buyers and the Seller of any
objections thereto.
2.4 Assumption of Debt. Subject to the Closing, the
Buyers
agree to pay or cause to be paid, substantially simultaneous
with the Closing, all indebtedness evidences by the
Partnership Debt Instruments. The Buyers shall pay
any and all principal, interest, make whole premium,
and any and all other premiums, costs, fees (including
assumption fees), penalties, due or which may be due at
Closing or at any date thereafter, pursuant to the terms of
the Partnership Debt Instruments. The Partnership Debt
Instruments are identified in the Seller's Disclosure
Schedule. Except for the Debt, the Buyers shall not assume
by virtue of this Agreement or transactions contemplated
hereby, and shall have no liability for, any liabilities
of the Seller (or any Affiliates of the Seller) of any
kind, character or description whatsoever (the "Retained
Liabilities").
2.5 Excluded Assets. The following assets associated with
the
businesses of the Companies are specifically excluded from
the purchase and sale contemplated by this Agreement:
(a) The Butcher Interests;
(b) The $10,000,000 principal balance in the Cash
Reserve
Account held in the name of Syenergy Pipeline Company,
L.P. at State Street Bank and Trust Company, Boston,
Massaschusetts; and
(c) Any and all causes of action, tort or
breach of
contract, or otherwise, held by Companies and/or their
Affiliated Entities against Western Resources, Inc. and/or
OneoK, Inc. or their Affiliated Entities arising out of
or related to the failure of Western Resources, Inc. to
sell Companies and/or their Affiliated Entities the gas
local distribution company assets and business which is now
KGS, a division of OneoK, Inc.
2.6 Closing. On November 8, 1999, the Preliminary
Cash Consideration and all documents required by Section 2.7
shall be deposited by the Parties with the Escrow Agent
pursuant to the Escrow Agreement attached hereto as
Schedule 2.6. The Closing of the Transaction shall occur
at the offices of LeBoeuf, Lamb, Xxxxxx & XxxXxx LLP,
000 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 100195389, commencing
at 10:00 A.M., local time, on November 9, 1999, unless
extended by reason of any cure periods which the Buyers or
the Seller may have pursuant to Article VIII with which to
cure a breach of warranty, a misrepresentation or perform
a covenants, in which event the Closing shall occur on the
first day following such cure period or the date otherwise
mutually agreed to by the Parties.
2.7 Deliveries at Closing. At Closing, (i) the Seller
will deliver to the Buyers the various certificates,
instruments and documents referred to in Section 7.2,
(ii) the Buyers will deliver to the Seller the various
certificates, instruments and documents referred to in
Section 7.3, (iii) the Seller will deliver to the Buyers
such instruments of assignment, conveyance and transfer,
with general warranty of title, and otherwise in form and
content mutually acceptable to the Seller and the
Buyers, as shall be necessary to transfer and convey to
the Buyers all of the Assets, (iii) the Escrow Agent will
deliver the Preliminary Cash Consideration to the Sellers,
and (v) the Buyers will deliver to the Seller such
instruments which evidence, in form and content reasonably
acceptable to the Seller, compliance with the provisions of
Section 2.4 hereof.
2.8 Apportionments. The Buyers shall be responsible
for the actual payment of all ad valorem and property taxes
with respect to the Assets for the calendar year in which
the Closing occurs; provided, however, that the Seller shall
reimburse the Buyers for its pro rata share of such taxes
to the extent not previously paid by the Seller. An
estimate of such taxes shall be made at the Closing and
such amount shall be paid to the Buyers at Closing.
The ad valorem and property taxes for the year of
Closing for which the Seller is responsible shall be
determined by applying a fraction based on the number
of days in the calendar year prior to the Effective Time
to such taxes for the calendar year. Payment of any
amount owed by the Buyers to the Seller or by the Seller
to the Buyers shall be made within thirty (30) days after
the actual ad valorem and property taxes with respect to
the Assets for the calendar year in which Closing occurs
have been determined.
2.9 Purchase Price Allocation. Within sixty (60) days
from Closing, the Buyers will provide to the Seller a
schedule of the Buyers' estimated allocation of the
Purchase Price among the Assets acquired.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER AND
THE COMPANIES
Except as provided in this Agreement and except as set
forth in the Seller's Disclosure Schedule (each section
of which qualifies all of the relevant representations or
warranties), the Seller represents and warrants to the
Buyers as follows:
3.1 Corporate Organization, Qualification and Power. The
Seller and each of the Companies is duly formed, validly
existing and in good standing under the Laws of the
jurisdiction of its formation, and is duly qualified to
conduct its business and each is in good standing in
every other jurisdiction in which its business is
conducted, except where failure to be so qualified,
licensed or to be in good standing would not have a
Material Adverse Effect. The Seller and each of the
Companies has the power to own or lease its respective
properties and to carry on its business as now being
conducted, wherever located.
3.2 Authorization of Agreement and the Transaction.
The Seller has all requisite corporate power and
authority to approve, authorize, execute and deliver this
Agreement and to consummate the Transaction. This
Agreement and the consummation of the Transaction by the
Seller have been duly and validly authorized by the
Seller's Board of Directors and no other corporate
proceedings on the part of the Seller are necessary to
authorize this Agreement or to consummate the Transaction.
3.3 Enforceable Agreement. This Agreement has been
duly and validly executed and delivered by the Seller and,
assuming it constitutes the valid and binding agreement
of MERI and the Buyers, constitutes a valid and binding
obligation of the Seller, enforceable against the Seller
according to its terms, subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and
similar Laws affecting the enforceability of
contractual obligations and creditor's rights generally
and by the application of equitable principles by courts
of competent jurisdiction, sitting at law or in equity.
3.4 No Conflicts, Violations, Breaches or Defaults.
Except as set forth on the Seller's Disclosure Schedule
or in this Section 3.4,
the execution and delivery of this Agreement by the
Seller and its performance of the obligations hereunder and
the consummation of the Transaction, do not (a) conflict
with or result in any breach of any provision of the
Articles of Incorporation, as amended, or Bylaws, as
amended, of the Seller or the Companies; (b)
require any consent,
approval,
authorization or permit of, or filing with, or notification
to, any Governmental Authority, except (i) in connection
with the applicable requirements, if any, of the HSR Act;
(ii) the filing of appropriate documents with the relevant
authorities of states in which the Seller or any of its
Affiliates or Subsidiaries is authorized to do business,
(iii) approvals, if any, required of the Federal Energy
Regulatory Commission ("FERC") and any Governmental
Authorities having jurisdiction over the Seller or any of
its Affiliates or Subsidiaries; (iv) approvals of the
lenders to Seller; or (v) where the failure to obtain
such consent, approval, authorization or permit, or to
make such filing or notification, would not have a
Material Adverse Effect or materially adversely affect the
ability of the Seller to consummate the Transaction;
(c) except as would not have a Material Adverse
Effect, conflict with or result in a breach or violation
of, or constitute a default under, or result in (or
create in any party the right to cause) the acceleration of
any performance required by the Seller under, (i) any
Judgment or Law to which it is subject or bound
(subject to any consents, approvals, authorizations,
permits, filings or notifications required under (b)
above), or (ii) any mortgage, bond, indenture, agreement,
contract, license or other instrument or obligation to which
the Seller is subject or bound; or (d) result in the
creation of any Lien on any of the assets of the Seller,
its Subsidiaries and Affiliates, which would have a Material
Adverse Effect, except for liens created under this
Agreement, Schedules or Exhibits hereto and related
transactions and as accepted by the Buyers.
3.5 Financial Statements. The consolidated balance
sheets and the related consolidated statements of earnings,
stockholders' equity and cash flows (including the related
notes thereto) of the Companies for and as of December 31,
1997 and 1998 and for and as of June 30, 1999
(collectively, "Companies' Financial
Statements") and included in Seller's Disclosure
Schedule, have been prepared in accordance with GAAP applied
on a basis consistent with prior periods (except as
otherwise noted therein), and present fairly the
financial position of the Companies as of their
respective dates, and the consolidated results of their
operations and their cash flows for the periods presented
therein (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments and
except that the unaudited interim financial statements do
not contain all of the footnote disclosure required by
GAAP).
3.6 Litigation. Except as set forth on the
Seller's Disclosure Schedule (the "Pending Claims"), there
is no action, suit, claim, governmental investigation,
arbitration or other proceeding pending, or, to the
actual knowledge of the Seller's present or former
officers, threatened in writing, against the Companies or
their present Affiliates, the Seller, any of its
Subsidiaries or any of the Affiliates which, if
adversely determined, would have a Material Adverse Effect.
3.7 Taxes. The Companies have timely filed all
material Tax Returns required to be filed (taking into
account extensions approved by Governmental Authorities)
and as of the Effective Time will have paid all Taxes for
periods prior to the Effective Time to be due and have
provided reserves in accordance with GAAP in their
respective financial statements for any Taxes that have not
been paid, whether or not shown as being due on any Tax
Returns, except as set forth in the Seller's Disclosure
Schedule or where the failure to pay or provide for such
Taxes would not have a Material Adverse Effect, and (i)
no material claim for unpaid Taxes has been asserted
against the Companies or the Assets in writing by a tax
authority or has become a Lien (except for Liens for Taxes
not yet due and payable or for Taxes that are being disputed
in good faith by appropriate proceedings and that have
been reserved against in accordance with GAAP) against
Assets or the property of the Companies, except as to
such matters as would not have a Material Adverse Effect,
(ii) as of the date of this Agreement, no audit of any
material Tax Return of the Companies is being conducted
by a tax authority, and (iii) as of the date of this
Agreement, no extension of the statute of limitations on
the assessment of any Taxes has been granted by the
Companies and is currently in effect.
3.8 Environmental Laws and Regulations. Except as set
forth on Seller's Disclosure Schedule, the Companies and
their present Affiliates, the Seller and each of its
Subsidiaries and the Affiliates (a) are in compliance
with Environmental Laws (as defined below) except for
noncompliance that will not have a Material Adverse
Effect, and (b) have not received written notice of, or to
the actual knowledge of any of the present or former
officers of the Companies and their present Affiliates,
the Seller, its Subsidiaries and the Affiliates, are the
subject of an Environmental Claim which would have a
Material Adverse Effect.
The term "Environmental Laws" shall mean any state or
federal environmental statute or regulation, including but
not limited to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (collectively,
"Environmental Laws").
3.9 Compliance with Applicable Laws. Except as set
forth on the Seller's Disclosure Schedule or for violations
that will not have a Material Adverse Effect, the
businesses of the Companies and their present Affiliates,
the Seller, its Subsidiaries and the Affiliates are not
being conducted in violation of any Laws.
3.10 Title to Properties. The Companies and their
present Affiliates, the Seller and each of its
Subsidiaries and the Affiliates have good and marketable
title to, or valid leasehold interests in, all their
respective material properties and assets except for such as
are no longer used or useful in the conduct of their
respective businesses or as have been disposed of in the
ordinary course of business and except for defects in
title, easements, encroachments, restrictive covenants
and similar
encumbrances or impediments that would not have a
Material Adverse Effect. All such assets and properties of
the Companies, other than assets and properties in which
the Companies have leasehold interests, are free and
clear of all Liens except for Liens that would not have a
Material Adverse Effect and those set forth on the Seller's
Disclosure Schedule.
3.11 Employee Benefit Matters.
(a) The Seller has furnished to the Buyers true and
complete copies of all material employee benefit plans
within the meaning of Section 3(3) of ERISA that covers
employees, directors, former employees or former directors
of the Companies, all as listed on
the Seller's Disclosure Schedule. In addition, the Seller
has furnished all trust agreements or insurance contracts
forming a part of any such employee benefit plans
maintained by or for the Companies, a copy of the most
recent determination letter for any such employee benefit
plan which is an employee pension benefit plan within the
meaning of Section 3(2) of ERISA and is intended to comply
with Section 401(a) of the Code, and a copy of the most
recent Form 5500, if applicable.
(b) Each of the employee benefit plans maintained by
or for the Companies is in substantial compliance with all
applicable Laws including ERISA and the Code, except for
any noncompliance that would not have a Material Adverse
Effect
(c) No employee benefit plan is a "multiemployer
plan" as such term is defined in Section 4001(a)(3) of
ERISA or Section 414(f) of the Code or a multiemployer
plan described in clauses (i) or (ii) of Section
3(37)(A) of ERISA; or is a part of a "multiple employer
welfare arrangement" within the meaning of Section 3(40)
of ERISA.
(d) There are no pending, threatened, or anticipated
claims (other than routine claims for benefits or immaterial
claims) by, on behalf of or against any of the employee
benefit plans or any trusts related thereto that would have
a Material Adverse Effect.
3.12 Broker's Fees. The Seller has not employed any
investment bank, broker, finder, consultant or other
intermediary which would be entitled to any fee or
commission from the Buyers in connection with this Agreement
or the Transaction.
3.13 Absence of Certain Changes or Events. Since
December 31, 1998, the Companies and their present
Affiliates, the Seller and its Subsidiaries and the
Affiliates have conducted their business in all
material respects in the ordinary course consistent
with past practice, and there is not and has not been: (i)
any change which has had a Material Adverse Effect, or (ii)
any condition, event or occurrence which is reasonably
likely to have a Material Adverse Effect.
3.14 Labor Matters. As of the date of this
Agreement, neither the Companies nor their present
Affiliates, nor the Seller nor any of its Subsidiaries or
the Affiliates, is a party to or bound by, and none of
their employees is subject to, any collective bargaining
agreement relating to the term
and
conditions of employment for any group of employees (any
such agreement, memorandum or document, a "Collective
Bargaining Agreement"), and as of the date of this
Agreement there are no labor unions or other
organizations representing or, to the knowledge of any
of the present or former officers of the Companies or
their present Affiliates, the Seller, purporting to
represent, any employees employed by the Seller or its
Subsidiaries. As of the date of this Agreement, no labor
union is currently engaged in or, to the knowledge of
any of the present or former officers of the Companies
or their present Affiliates or the Seller, threatening,
organizational efforts with respect to any employees of
the Seller or any of its Subsidiaries.
3.15 Year 2000 Compatibility. Except as set forth on
the Seller's Disclosure Schedule, the Companies have
developed and are executing a plan (the "Y2K Plan") to
address significant year 2000 compatibility issues. In the
case of certain equipment with imbedded chips where
testing for year 2000 compliance is impossible or
impractical, the Y2K Plan may include plans and strategies
for replacing such capability with redundant capacity
within the Companies or with alternative third party
sourcing with comparable quality and pricing, excluding any
provider of basic services and utilities.
3.16 Gas Contracts. All material gas sales, purchase
and transportation contracts (the "Gas Contracts") to which
the Companies, or either of them, is a party or is
otherwise bound are listed on the Seller's Disclosure
Schedule. Copies of all such Gas Contracts, together
with all amendments, modifications, revocations and notices
pertaining thereto have been delivered or made available to
the Buyers. Except as set forth and expressly noted on the
Seller's Disclosure Schedule, none of the Companies or
their present Affiliates, or the Seller, its Subsidiaries
and the Affiliates is party to any arrangement under which
it will be obligated, by virtue of a prepayment arrangement,
a "take-or-pay" arrangement or any other arrangement, to
transport or deliver hydrocarbons at some future time
without then or thereafter receiving full payment
therefor, or to pay for hydrocarbons or their
transportation without then receiving such hydrocarbons.
3.18 No Defaults. Except as set forth on the
Seller's Disclosure Schedule, to the actual knowledge of the present
and former officers of the Companies or their present
Affiliates, the Seller, its Subsidiaries and the
Affiliates, (i) none of the Seller, its Subsidiaries
and the Affiliates is in breach or default under any
term or provision of any of the Gas Contracts, except where
such breaches or defaults would not, either
individually or in the aggregate, have a Material Adverse
Effect, (ii) all of the Gas Contracts are in full force and
effect, and constitute legal, valid and binding obligations
of the Companies, and to the Companies and their
present Affiliates and the Seller's knowledge, the other
Parties thereto except where the failure to be in full
force and effect and legal, valid and binding would not
have a Material Adverse Effect, (iii) none of the
Companies and their present Affiliates has received any
written notice from any other party indicating any
intent to rescind or dishonor any material provision
contained in any of the Contracts. Except as set forth
on the Seller's Disclosure Schedule, none of the Companies
and their present Affiliates, the Seller, its Subsidiaries
and the Affiliates is a party to any contract to sell
any portion of its assets other than in the ordinary
course of business.
3.18 Insurance. To the actual knowledge of the present
and former officers of the Companies and their present
Affiliates, the Seller, its Subsidiaries and the Affiliates,
the Companies or their Affiliates maintain in effect
insurance on their respective assets as described on the
Seller's Disclosure Schedule and such insurance policies
are in full force and effect on the date hereof and
will remain in effect through the Closing.
To the actual knowledge of the present and former officers of
the Companies and their present Affiliates, the
Seller, its Subsidiaries and the Affiliates, none of the Companies and
their Affiliates is in default with respect to any provision
contained in any insurance policy covering any portion of
their assets, except where such default would not have
a Material Adverse Effect.
3.19 Tariffs. To the actual knowledge of the present
and former officers of the Companies and their present
Affiliates and the Seller, except as set forth on the
Seller's Disclosure Schedule or for noncompliance that
will not have a Material Adverse Effect, all operations
of any of the Companies which are subject to a tariff
approved by FERC are in compliance with each such tariff.
3.20 Gas Imbalances. To the actual knowledge of the
present and former officers of the Companies and their present
Affiliates, the Seller, its Subsidiaries and the
Affiliates, as of September 30, 1999 the KPC and MRG
imbalances are as set forth in the Seller's Disclosure
Schedule.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERI AND BUYERS
Except as set forth in th e Buyers' Disclosure
Schedule (each section of which qualifies the
correspondingly numbered representation or warranty) MERI
and the Buyers jointly and severally represent and
warrant to the Seller as follows:
4.1 Corporate Organization, Qualification and Power.
Each of MERI and the Buyers is a corporation duly
organized, validly existing and in good standing
under the Laws of the jurisdiction
of its incorporation and is duly qualified to conduct
its business in every other jurisdiction in which its business is
conducted, except where failure to be so qualified or
licensed would not have a Material Adverse Effect on the
Seller. Each of MERI and the Buyers has the corporate
power to own or lease its respective properties and to
carry on its business as now being conducted, wherever
located.
4.2 Authorization of Agreement and the Transaction.
MERI and the Buyers have all requisite corporate power and
authority to approve,
authorize, execute and deliver this Agreement and to
consummate the Transaction. This Agreement and the
consummation of the Transaction by MERI and the Buyers
have been duly and validly authorized by the Boards of
Directors of MERI and each of the Buyers and no other
corporate proceedings on the part of MERI or either of the
Buyers are necessary to authorize this Agreement or to
consummate the Transaction.
4.3 Enforceable Agreement. This Agreement has been
duly and
validly executed and delivered by MERI and the Buyers
and, assuming it
constitutes the valid and binding agreement of the
Seller, constitutes a valid and binding obligation of
each of MERI and the Buyers, enforceable against each of
them according to its terms, subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium and similar Laws affecting the enforceability
of contractual obligations and creditor's rights
generally and by the application of equitable principles by
courts of competent jurisdiction, sitting at law or in
equity.
4.4 No Conflicts, Violations, Breaches or Defaults. The
execution and delivery of this Agreement by each of MERI and
the Buyers and their performance of the obligations
hereunder and the consummation of the Transaction, do not
(a) conflict with or result in any breach of any
provision of the respective Articles of Incorporation,
Certificate of Incorporation or Bylaws of MERI or the
Buyers; (b) require any consent, approval, authorization or
permit of, or filing with or notification to, any
Governmental Authority, except (i) in connection with
the applicable requirements, if any, of the HSR Act;
(ii) approvals, if any, required of Governmental
Authorities having jurisdiction over
MERI or either of the Buyers; or (iii) where the
failure to
obtain such consent, approval, authorization or permit,
or to make such filing or notification, would not have
a Material Adverse Effect on MERI or the Buyers or
materially adversely affect the ability of the Buyers to
consummate the Transaction; (c) except as would not,
individually or in the aggregate, have a Material
Adverse Effect,conflict with or result in a breach or
violation of, or constitute a default under, or result in
(or create in any party the right to cause) the
acceleration of any
performance of MERI or the Buyers under, (i) any Judgment or
Law to which they are subject or bound (subject to any
consents, approvals, authorizations, permits, filings or
notifications required under (b) above), or (ii) any
mortgage, bond, indenture, agreement, contract, license or
other instrument or obligations to which MERI or either
of the Buyers are subject or bound; or (d) result in the
creation of any Lien on any of the assets of MERI or
either of the Buyers which would have a Material Adverse
Effect on MERI or either of the Buyers.
4.5 Litigation. There is no action, suit,
claim,
governmental investigation, arbitration or other
proceeding pending, or, to the actual knowledge of the
officers of MERI or either of the Buyers, threatened in
writing, against MERI or either of the Buyers which, if
adversely determined would have a Material Adverse Effect.
4.6 Taxes. Each of MERI and the Buyers and its
Subsidiaries
has (a) filed all material Tax Returns that they are
required to file through the date hereof and shall
prepare and file all material Tax Returns required to be
filed after the date hereof and on or before the Closing
and (b) paid or provided for the payment of all Taxes
due and owing for the periods covered by such Tax Returns
and all Taxes, if any, required to be paid for which no
return is required, except in either case where the
failure to file such returns or to pay or provide for such
Taxes would not have a Material Adverse Effect.
4.7. Environmental Laws and Regulations. Except as
set
forth on the Buyers' Disclosure Schedule or for non-
compliance that will not have a Material Adverse Effect,
MERI and each of the Buyers and each of its Subsidiaries
(a) are in compliance with Environmental Laws, and (b)
have not received written notice of, or, to the actual
knowledge of the officers of MERI or either of the Buyers,
is the subject of an Environmental Claim.
4.8 Compliance with Applicable Laws. Except as set
forth on
the Buyers' Disclosure Schedule or for violations that will
not have a Material Adverse Effect, the businesses of MERI
and the Buyers and its Subsidiaries are not being
conducted in violation of any Laws.
4.9 Broker's Fees. Neither MERI nor either of the
Buyers has
employed any investment bank, broker, finder, consultant or
other intermediary which would be entitled to any fee or
commission from the in connection with the Transaction.
ARTICLE V
CONDUCT PENDING THE CLOSING AND COVENANTS
5.1 Conduct of Business by the Seller. Except as set
forth in this Agreement or on the Seller's Disclosure
Schedule, the Seller covenants and agrees that prior to
Closing, unless MERI and the Buyers otherwise agree in
writing or as otherwise contemplated by this Agreement, it
will cause the Companies to conduct their business and
day to day operations in the ordinary and usual course of
business, consistent with its past custom and practice, and
will seek to preserve intact the business organizations and
goodwill of the Companies keep in full force and effect
all material rights, licenses, permits and franchises
relating to such businesses, and maintain satisfactory
relationships with suppliers, customers and others having
business relationships with the Companies. The Seller
specifically agrees that, prior to Closing, unless MERI and
the Buyers otherwise agree in writing or as otherwise
contemplated by this Agreement, neither the Seller nor
any its Seller's Subsidiaries or Affiliates, will:
(a) except as contemplated by this Agreement, take
any action which would render, or which reasonably may be
expected to render, any representation or warranty made
by it in this Agreement untrue in any material respect at
the Effective Time;
(b) take any action that would, or that could
reasonably be expected to, cause any condition to
Closing, as set forth in Article VII hereof, to not be
satisfied; or
(c) authorize, propose or announce an intention to do
any of the foregoing, or enter into any contract or
agreement to do any of the foregoing.
5.2 All Reasonable Efforts. Subject to the terms
and conditions herein, each of the Parties shall use
reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws to
consummate and make effective the Transaction (but shall
not be required to file or prosecute any lawsuits or
administrative proceedings, or otherwise expend any
sums in excess of $200,000 in connection with its
reasonable efforts), including using reasonable efforts
to obtain all necessary or appropriate waivers, consents
and approvals, to effect all necessary registrations,
filings and submissions, including, but not limited to,
(i) filings under the HSR Act and any other submissions
required by any Governmental Authority, including FERC,
and (ii) required approvals under the applicable Laws and
to lift any injunction or other legal bar to the
Transaction (and, in such case, to proceed with the Closing
as expeditiously as possible).
5.3 Access to/Confidentiality of Information.
Upon reasonable notice, the Seller, MERI, and the Buyers
shall (and shall cause their Subsidiaries and the
Affiliates to) afford to each other's Representatives, so
that they may evaluate the Transaction, reasonable
access during normal business hours throughout the
period prior to the Closing, to all properties, personnel,
books and records and other information as reasonably
requested under the circumstances, and, during such
period, furnish promptly to such Representatives the
specific information concerning the Assets and the business,
properties and personnel, including, but not limited to,
that listed on the Seller's Disclosure Schedule. Each
of MERI and the Buyers agrees that it will not, and will
cause its Representatives not to, use any information
obtained pursuant to this Section 5.3 for any purpose
unrelated to the consummation of the Transaction.
5.4 Publicity. The Parties will consult with each
other and will mutually agree upon any press
releases or public announcements pertaining to the
Transaction and shall not issue any such press releases
or make any such public announcements prior to such
consultation and agreement.
5.5 Employee Matters. MERI and the Buyers shall cause
the Companies after the Closing to maintain and continue to
pay the healthcare insurance, dental insurance,
life insurance, disability insurance premiums, car
purchase and/or lease payments and/or car allowances and
auto insurance currently in effect as of the date of
Closing of this Agreement, or substantially comparable
benefits, for all employees of the Companies and its
Affiliates as of the date of Closing for a period of six
(6) months after Closing, with the exception of those
employees and other persons listed on Schedule 5.5. After
said six (6) month period, upon termination of any such
employees, the Companies shall provide all such
employees all of the Federal COBRA
benefits mandated relating to any of the above described
employee benefits.
5.6 MERI's and the Buyers' Diligence. MERI and the
Buyers acknowledge that they have conducted an extensive
investigation of the financial condition and the properties
and operations of the Companies and that during the
course of such investigation, the
Seller has caused the facilities, books, records and
personnel of the Companies to be made available to MERI and
the Buyers, and have caused to be provided to MERI and
the Buyers such other information with respect to the
Companies as they have requested. MERI and the Buyers have
received from the Seller all information which they have
requested to their satisfaction, and MERI and the Buyers
have been given the opportunity to discuss the Assets and
the business and prospects of the Companies and to have
such representatives answer any questions regarding the
Assets and the business of the Companies, all of which
questions have been answered to their satisfaction, and
to obtain any additional information which MERI or the
Buyers possess that is necessary to verify the accuracy
of the information supplied during the course of such
investigation. MERI and the Buyers have had access to
the Assets and to the facilities and properties of
the Companies and have inspected them to their
satisfaction. Further, MERI and the Buyers acknowledge that
(i) they have been advised that the Companies have certain
Pending Claims, including without limitation a rate case by
KPC, pursuant to Section 4 of the Natural Gas Act, (ii) the
outcomes of Pending Claims, including the rate case, are
impossible to predict, (iii) the Seller is not making any
representations or warranties of any kind or nature with
respect to the Pending Claims (including the rate case)
including without limitation with respect to the outcome
thereof, (iv) the outcome of the Pending Claims,
including the rate case, could have a Material Adverse
Effect and (v) the Preliminary Cash Consideration and the
assumption of obligations pursuant to Section 2.4 hereof
and the consummation of the Transaction by MERI and the
Buyers are based on their independent evaluation of the
Pending Claims, including the rate case. As a result of
the foregoing, as of the Closing, and without any
further action required and except as specifically set
forth in Article VI hereof, MERI and the Buyers, on behalf
of themselves and all of their Affiliates, shall be
deemed to release and discharge, as of the Closing, the
Seller and its Subsidiaries and each of their former
and present officers, directors, stockholders, employees,
agents and representatives from and against all claims
which could be made in any AgreementRelated Litigation
pursuant to Rule 10(b)-5 of the Exchange Act or common law
fraud.
5.7 Representations Cut-Off. On or prior to the Cut-Off
Date, MERI and the Buyers must submit to the Seller a
statement (the "Representations Statement") describing in
detail any breaches of representations or warranties by
Seller then known to MERI or either of the Buyers. The
Seller will then have 30 days to cure said breaches of
representations or warranties. MERI and the Buyers will
be barred from seeking any indemnities or other remedies
hereunder or from refusing to Close pursuant to Section
7.2(b) for any breaches of representations or warranties by
the Seller known to MERI or either of the Buyers prior to
the Cut-Off Date and not set forth in the Representations
Statement.
5.8 Employee Benefits. MERI and the Buyers agree that
after the Closing it will not allow the Companies (or any
successor or assign thereof) to take any action or omit
to take any action which would, directly or indirectly,
reduce any COBRA benefits being made available or which
may be due to employees of the Companies after the
Closing for any employees terminated prior to
the Closing or within 6 months after Closing.
5.9 Update Representations. MERI and the Buyers, on one
hand, and the Seller, on the other hand, each shall promptly
notify the other party in writing if they become aware after
the date hereof and before the Closing of any fact,
information or condition that causes or constitutes a
breach of any representation or any warranty made by
them in this Agreement, whether such fact, information or
condition (i) existed (whether or not known by the
representing/warranting party for representations or
warranties not predicated on such Party's knowledge) before
the date hereof (a "Breach Event") or (ii) came into
existence after the date hereof (a "Subsequent
Development"). Such fact, information or condition shall
be set forth in a supplemental schedule specifying
the applicable section of this Agreement to which such
information relates (a "Supplemental Schedule"). The
Supplemental Schedule shall be delivered to the other party,
and if not objected to in writing within five (5) business
days of delivery, shall amend and, if applicable, replace
the section of the original Seller's Disclosure Schedule
or Buyers' Disclosure Schedule to which it relates. If
objected to in writing within five (5) business days of
delivery, the Supplemental Schedule shall not be deemed to
amend the relevant Disclosure Schedule. 5.10 Tax Matters.
The Seller shall be responsible for the payment of
Taxes which relate to the Companies and which are
attributable to time periods up to and including the Closing
Date (whether or not the liability, obligation or claim for
such Taxes exists as of such date), including Taxes imposed
on the Seller as a result of the transfer of the Assets to
the Buyers. The Buyers shall be responsible for the payment
of Taxes which relate to the Companies and which are
attributable to time periods beginning after the Closing
Date. The party which has the primary obligation to
do so under applicable law shall file any Tax Return
that is required to be filed in respect of Taxes, and that
party shall pay the Taxes shown on such Tax Return.
ARTICLE VI
INDEMNIFICATION; REMEDIES
6.1. Survival of Representations and Warranties. The
representations, warranties and agreements of the Parties
made herein shall survive Closing, any investigation by the
Parties, and the execution and delivery of the documents
contemplated by this Agreement, and shall continue in force
and effect until terminated, as hereinafter provided in
Sections 6.2 and 6.3.
6.2 General Indemnity by the Seller. The Seller agrees to
protect, defend, indemnify and hold MERI and the Buyers,
their successors and assigns as to all or part of the assets
of the Companies (collectively, the "Buyers' Indemnified
Parties" and individually a "Buyers' Indemnified Party")
harmless from and against and shall reimburse the Buyers'
Indemnified Parties for, all Adverse Consequences to the
Buyers' Indemnified Parties and the Companies, or any of
them, which arise from any of the following:
(a) the breach of any of the Seller's representations and
warranties contained in this Agreement;
(b) any severance obligation (excluding Federal COBRA
benefits) to any employees or consultants listed on Schedule 6.2;
and
(c) all actions, suits, proceedings, demands,
assessments, costs and expenses (including reasonable
attorneys' fees and expenses of investigation and defense)
incident to any such
breach.
The representations and warranties of Seller under
Article III and the indemnity obligations of Seller under
this Section 6.2 shall terminate and be of no further force
and effect as of 10:59 a.m. central time on October 29,
2000, except as to matters which are the subject of a
written claim made to the Seller by any and all Buyers'
Indemnified Parties prior thereto and except for matters
covered by Section 3.7 (which shall survive until the
expiration of the applicable statute of limitations period
with respect to such Taxes). Further, the Seller shall not
be liable to MERI and/or the Buyers for any breaches of
representations or warranties of which MERI or either or the
Buyers had actual knowledge (without any duty of inquiry) as
of the Cut-Off Date.
6.3 General Indemnity by MERI and the Buyers. MERI and
the Buyers agree to protect, defend, indemnify and hold the
Seller harmless from and against, and shall reimburse the
Seller for, all Adverse Consequences which arise from any of
the following:
(a) the breach of any of MERI's and the Buyers'
representations and warranties contained in this Agreement;
and
(b) all actions, suits, proceedings, demands,
assessments, costs and expenses (including reasonable
attorneys' fees and expenses of investigation and defense)
incident to any such breach.
The representations and warranties of MERI and the Buyers
under Article IV and the indemnity obligations of MERI and
the Buyers to the Seller under this Section 6.3 shall
terminate and be of no further force and effect as of 10:59
a.m. central time on October 29, 2000, except as to matters
which are the subject of a written claim made to MERI and/or
the Buyers by the Seller prior thereto. Further, MERI and
the Buyers shall not be liable to the Seller for any
breaches of representations or warranties of which the
Seller had actual knowledge (without any duty of inquiry) as
of the Cut-Off Date.
6.4 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the
"Indemnified Party") with respect to any claim ("Third Party
Claim") that may give rise to a claim for indemnification
against any other Party (the "Indemnifying Party") under
this Article 6, then the Indemnified Party shall promptly
(and in any event within five (5) business days after
receiving notice of the Third Party Claim) notify the
Indemnifying Party thereof in writing.
(b) The Indemnifying Party will have the right to
assume and thereafter conduct the defense of the Third Party
Claim with counsel of its choice reasonably satisfactory to
the Indemnified Party; provided, however, that the
Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless
the judgment or proposed settlement involves only the
payment of money damages and does not impose an injunction
or other equitable relief upon the Indemnified Party.
(c) Unless and until the Indemnifying Party assumes the
defense of the Third Party Claim as provided in subsection
6.4(b) above, however, the Indemnified Party may defend
against the Third Party Claim in any manner it reasonably
may deem appropriate.
(d) In no event will the Indemnified Party consent to the
entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written
consent of the Indemnifying Party which consent shall not be
withheld unreasonably.
6.5 Monetary Limitations on the Seller's
Indemnification. Notwithstanding anything herein to the
contrary, in no event and under no circumstances shall the
Seller be required to pay any amounts to the Buyers'
Indemnified Parties under or in connection with the Seller's
warranties, representations and indemnities under this
Agreement to the extent such amounts for any single claim
(other than claims in connection with a breach of the
representations and warranties in Section 3.7 for which the
Seller shall be liable from the first dollar of Adverse
Consequences as a result of a breach of the representations
and warranties in Section 3.7) are less than Two Hundred
Fifty Thousand Dollars ($250,000) (the "Threshold");
provided, however, that once the Threshold for a claim is
met, the Seller shall be liable for all Adverse Consequences
from such claim (and not just the amount that exceeds the
Threshold). Notwithstanding the foregoing, the Seller's
liability to all Buyers' Indemnified Parties for all Adverse
Consequences from all claims under this Article VI shall not
exceed Five Million Dollars ($5,000,000) in the aggregate.
For purposes of this Section 6.5, the representations and
warranties of the Seller contained in this Agreement shall
be read without giving effect to any "Material Adverse
Effect" exception.
6.6 Computation of Adverse Consequences.
(a) Computation of Losses. The amount of any
Adverse Consequences for which indemnification is provided
under this Article VI shall be reduced by (x) any related
tax benefits to be received by the Indemnified Party as a
result of such Adverse Consequence, and (y) any insurance
recovery if and when actually received or realized, in each
case in respect of such Adverse Consequence. Any such
recovery shall be promptly repaid by the Indemnified Party
to the Indemnifying Party following the time at which such
recovery is realized or received pursuant to the previous
sentence, minus all reasonably allocable costs, charges, and
expenses incurred by the Indemnified Party in obtaining such
recovery.
(b) Characterization of Indemnification Payments.
All amounts paid by any of the Parties, as the case may be,
under this Article VI shall be treated as adjustments to the
Purchase Price for purposes of all relevant Taxes.
6.7 Exclusive Remedy if Closing Occurs. The provisions
of this Article VI shall constitute the exclusive remedy of
the Parties if Closing shall occur with respect to any
claims or Adverse Consequences resulting from or arising out
of the provisions of this Agreement and any other claims or
Adverse Consequences, whether based on tort, contract, Law,
or otherwise, resulting from or arising out of the
Transaction which may be asserted after the Closing.
6.8 Post-Closing Access. From and after the Closing,
MERI and the Buyers shall afford to authorized
representatives of the Seller reasonable access during
normal business hours to the Assets and related records and
personnel as the Seller may reasonably require to prosecute
or defend any claim, litigation, or investigation by any
Governmental Authority or third party or pursuant to Article
VI hereof (including without limitation tax audits);
provided, that the Seller shall reimburse MERI and the
Buyers for all reasonable out-of-pocket expenses and costs
incurred in connection therewith.
ARTICLE VII
CONDITIONS
7.1 Conditions to Each Party's Obligation to Close. The
obligations of each of the Parties to consummate the
Transaction is subject to the satisfaction, or mutual
waiver, on or prior to the Closing of each of the following
conditions:
(a) Injunction. There shall not be in effect any Law or
any Judgment directing that the Transaction not be
consummated; provided, however, that prior to invoking this
condition each Party shall use all reasonable efforts to
have any such Judgment vacated; and there shall have been no
Law enacted or promulgated which would make consummation of
the Transaction illegal.
(b) HSR Act. Any waiting period (and any extension
thereof) applicable to the consummation of the Transaction
under the HSR Act shall have expired or shall have been
earlier terminated.
(c) Escrow Agreement. All conditions precedent to
Closing under the Escrow Agreement shall have been satisfied
or otherwise excused.
7.2 Additional Conditions to the Obligation of the
Buyers to Close. The obligation of the Buyers to consummate
the Transaction is subject to satisfaction, or, to the
extent permitted by Law, waiver on or prior to the Cut-Off
Date of each of the following conditions:
(a) Performance. The Seller shall have performed, in
all material respects, all the obligations required to be
performed by it under this Agreement at or prior to the
Closing.
(b) Representations and Warranties. The representations
and warranties of the Seller under this Agreement shall be
true and correct, in each such case as of the date of this
Agreement and as of the Cut-Off Date as though made on the
Cut-Off Date (except that representations and warranties
that speak as of a specific date shall be true and correct
as of such date), provided that for purposes of determining
the satisfaction of the foregoing, such representations and
warranties shall be deemed true and correct if the failure
or failures of such representations and warranties to be so
true and correct have not caused and could not reasonably be
expected to cause a Material Adverse Effect; provided
further, however, that to assert this Section 7.2(b) as a
reason for not Closing the Transaction, MERI and the Buyers
must provide written notice to the Seller at or prior to the
CutOff Date asserting its right to refuse to Close pursuant
to this Section 7.2(b).
(c) Ownership of Assets. The Seller, through its wholly
owned subsidiary, shall have acquired ownership of the
Assets.
(d) Deliveries. MERI and the Buyers shall have received
at the Closing the following documents:
(i) a certificate dated the Closing and executed
by the Chief Executive Officer or President of the Seller
certifying to the fulfillment of the conditions specified in
Sections 7.2(a), (b), (c), and (e);
(ii) assignment of the Assets in form and content
reasonably satisfactory to the Buyers; and
(iii) an executed assumption agreement in the
form of that attached hereto as Schedule 7.2(c)(iii)
assuming the debt obligations of Syenergy described in
Schedule 1.1(C).
(e) Consents and Approvals. All other consents,
approvals and authorizations legally required to be obtained
to consummate the Transaction shall have been obtained from
all Governmental Authorities and third persons, except for
such consents, approvals and authorizations the failure of
which to obtain would not have a Material Adverse Effect
(assuming for purposes of this Section 7.2(e) that the
Closing shall have been effected).
7.3 Additional Conditions to the Seller's Obligation to
Close. The obligation of the Seller to consummate the
Transaction is subject to satisfaction, or, to the extent
permitted by Law, waiver on or prior to the Closing of each
of the following conditions:
(a) Performance. MERI and the Buyers shall have
performed, in all material respects, all the obligations
required to be performed by them under this Agreement at or
prior to the Closing.
(b) Representations and Warranties. The representations
and warranties of MERI and the Buyers under this Agreement
shall be true and correct, in each such case as of the date
of this Agreement and as of the Closing as though made on
the Closing Date (except that representations and warranties
that speak as of a specific date shall be true and correct
as of such date), provided that for purposes of determining
the satisfaction of the foregoing, such representations and
warranties shall be deemed true and correct if the failure
or failures of such representations and warranties to be so
true and correct have not caused and could not reasonably be
expected to cause a Material Adverse Effect.
(c) Deliveries. The Seller shall have received at the
Closing Date the following documents:
(i) a certificate dated the Closing and executed
by the Chief Executive Officer or President of both MERI and
each of the Buyers certifying to the fulfillment of the
conditions specified in Sections 7.3(a), (b) and (d); and
(ii) an executed guaranty in the form of that
attached hereto as Schedule 7.3.
(d) Consents and Approvals. All consents, approvals and
authorizations legally required to be obtained to consummate
the Transaction shall have been obtained from all
Governmental Authorities and third persons (including those
listed in Section 3.4), except for such consents, approvals
and authorizations the failure of which to obtain would not
have a Material Adverse Effect (assuming for purposes of
this Section 7.3(d) that the Closing shall have been
effected).
7.4 Frustration of Closing Conditions. Neither the Seller
nor the Buyers may rely on the failure of any condition set
forth in Section 7.1, 7.2 or 7.3, as the case may be, to be
satisfied if such failure was caused by such Party's failure
to use reasonable efforts to consummate the Transaction
contemplated by this Agreement, or otherwise occurred
because of a breach of this Agreement by such Party.
ARTICLE VIII
TERMINATION AND REMEDIES
8.1 Termination. This Agreement may be terminated and
the Transaction may be abandoned at any time prior to the
Closing:
(a) by the mutual written consent of the Parties;
(b) by any Party, if:
(i) any court of competent jurisdiction in the
United States, or some other Governmental
Authority, shall have issued an order, decree
or ruling or taken any other action
permanently restraining, enjoining or otherwise
prohibiting the Transaction and such order,
decree, ruling or other action shall have become
final and nonappealable; provided, however, that
the Party seeking to
terminate this Agreement under this
Section 8.1(b)(i) shall have used its
reasonable
commercial efforts to remove such injunction,
order or decree; or
(ii) the Transaction shall not have been
consummated by December 8, 1999 (plus any cure
periods permitted by either 8.1(c) or (d)
below); provided, that the right to terminate
this Agreement pursuant to this Section
8.1(b)(ii) shall not be available to any Party
whose failure to fulfill any of its obligations
under this Agreement results in the failure of
the Transaction to occur on or before such date.
(c) by MERI and the Buyers if there has
been a misrepresentation or breach of warranty or failure
to perform a covenant on the part of Seller, in each case
of which Seller has been given notice in writing by MERI or
the Buyers on or prior to the Cut-Off Date and which has
not been cured by Seller or the Seller within thirty
(30) days of such notice and which misrepresentation,
breach or failure to perform
(provided,
however, that no cure period need be given as to a
failure to make the deliveries required by Section 2.7),
in the aggregate with all other misrepresentations,
breaches or failures to perform, caused or would cause a
Material Adverse Effect.
(d) by Seller if there has been a
misrepresentation or breach of warranty or failure to
perform a covenant on the part of MERI or the Buyers of
which MERI or the Buyers have been given notice in writing
by Seller or the Seller and which has not been cured by
MERI or Buyers, as the case may be, within thirty (30) days
of such notice and which misrepresentation, breach or
failure to perform (provided, however, that no notice or
cure period need be given as to a failure to make the
deliveries required by Section 2.7 or to timely execute
and deliver the Escrow Agreement or to timely make
deposits with the Escrow Agent as set forth in the Escrow
Agreement), in the aggregate with all other
misrepresentations, breaches, or failures to perform,
caused or would cause a Material Adverse Effect.
8.2 Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section
8.1, this Agreement shall become void and have no
effect, provided, however, that any such termination shall
not affect any Party's ability to seek damages or
specific performance for breach of this Agreement;
further provided, however, if MERI or the Buyers terminates
this Agreement pursuant to Section 8.1(c) or if Seller or
the Seller terminates this Agreement pursuant to
Section 8.1(d) and at the time of termination (a) the non-
breaching Party
shall have been legally permitted to and shall have
offered in writing (i) to waive all misrepresentations,
breaches or failures to perform on the part of the
defaulting Party (other than the deliveries required to
be made at Closing to the non-defaulting Party pursuant to
Section 2.7) as to which the defaulting Party has been
given notice in writing by the non-defaulting Party and (ii)
to proceed with the Closing, and (b) all of the conditions
to Closing set forth in Article VII required to be
fulfilled by the non-breaching party shall have either
been fulfilled or waived by the breaching party, then
the breaching Party shall thereupon be obligated to pay to
the non-breaching Party (within 3 days after
termination) the sum of $15,000,000 cash (the "Fee"),
as agreed liquidated damages and as the sole remedy of the
non-defaulting Party for the failure or refusal of the
defaulting party to close the Transaction.
Specifically, however, if the Buyers have not timely
submitted a Representation Statement or if all matters
listed on the Representation Statement have been cured,
then if the Buyers refuse to Close on November 9, 1999
(other than a failure by the Seller to make the deliveries
required by Section 2.7), then the Fee shall be paid by
the Buyers on November 10, 1999.
ARTICLE IX
GENERAL PROVISIONS
9.1 Expenses. Whether or not the Transaction is
consummated, all costs and expenses, incurred in
connection with this Agreement and the Transaction shall
be paid by the Party incurring such expense, except that
any filing fee under the HSR Act shall be paid by MERI.
9.2 Modification or Amendment. This Agreement may be
amended by an instrument in writing executed and delivered
on behalf of each of the Parties hereto at any time prior to
the Closing.
9.3 Waiver. The conditions to each of the Parties'
obligations to consummate the Transaction are for the sole
benefit of such Party and may be waived, at any time
prior to the Closing, by such Party in whole or in part
to the extent permitted by Law. Any agreement on the part
of a Party to any extension or waiver shall be valid only
if set forth in writing signed on behalf of such Party,
and shall not be inferred by the failure of any such Party
to assert any of its rights hereunder. Waiver of any
provision of this Agreement or of any breach hereof shall
be a waiver of only said specific provision or breach and
shall not be deemed a waiver of any other provision or any
future breach hereof.
9.4 Notices. All notices, documents, or other
communications to be given hereunder shall be in writing
and shall be deemed validly given if delivered by
messenger, facsimile transmission (with a confirming copy
sent by overnight courier), or express overnight delivery,
or sent by certified mail, return receipt requested, as
follows:
(a) If to Seller, to:
K-Pipe Merger Corporation
c/o SCALP
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telephone:(21
2) 826-0770
Telecopier:(2
12) 826-0077
with a copy
to:
Xxxxxx Xxxx, CPA
000 Xxxxxxx Xxxxxxxx,
Xxxxx 000 Xxxxxxx, XX
00000 Telephone:(516)
931-5506
Telecopier:(516) 931-
5327
(b) If to MERI and/or
Seller, to:
Midcoast Energy
Resources, Inc. 0000
Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: General
Counsel
Telephone: (713) 650-
8900 Telecopier:
(000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxx,
Esq.
000 X. Xxxxx
Xxxxxxxx, Xxxxx 000
Xxxxxx Xxxxxxx,
Xxxxx 00000
Telephone: (361) 883-
2356 Telecopier:
(000) 000-0000
or such other Persons or addresses as may be
designated in writing by the Party to receive
such notice. Any notice delivered by messenger
shall be deemed received when such delivery is
tendered; notices sent by facsimile transmission
shall be deemed received upon faxed confirmation
of receipt; notices mailed in the manner provided
above, shall be deemed received on the third day
after such are postmarked; and notices delivered by
other methods shall be deemed received when actually
received by the addressee or its authorized agent.
9.5 Governing Law; Jurisdiction; Venue. This
Agreement shall be governed by, and construed and
enforced in accordance with, the Laws of the
State of Kansas, without giving effect to the
principles of the conflicts of law thereof. The
Parties agree that the Federal Court of the
District of Kansas shall have exclusive
jurisdiction and venue to hear and determine any
claims or disputes between the parties hereto,
pertaining directly or indirectly to this
Agreement, the Transaction, any additional
agreements or to any matter arising out of, in
connection with or related to any thereof
(collectively, "Agreement-Related
Litigation"). Each Party expressly submits and
consents in advance to such jurisdiction in
any action or proceeding
commenced in such courts, hereby waiving personal
service of the summons and complaint or other
process or papers issued therein and agreeing that
service of such summons and complaint or other
process or papers may be made by registered or
certified mail addressed to the relevant Party at
the address set forth in Section 9.4, which
service shall be deemed made upon receipt
thereof. The exclusive choice of forum set forth in
this Section shall not be deemed to preclude the
enforcement of any judgment obtained in such forum
or the taking of any action under this Agreement to
enforce the same in any appropriate jurisdiction.
9.6 Entire Agreement. This Agreement, including the
Schedules, constitute the entire agreement and
understanding of the Parties with respect to the
Transaction and supersedes any and all prior
agreements, representations and understandings
relating to the subject matter hereof. There are no
representations or warranties except as specifically
set forth in this Agreement.
9.7 Construction. The section and article headings
contained in this Agreement are inserted for
convenience of reference only and shall not affect
the meaning or interpretation of this Agreement.
The preamble hereof, the recitals hereto, and
all schedules attached hereto are hereby
incorporated herein by reference and made a part
hereof.
9.8 Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the
Parties, and their respective successors and
assigns, to the extent allowed hereby. Nothing in
this Agreement, express or implied, is intended
to or shall confer upon any other Person any
rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement,
except as provided in Section 6.2.
9.9 Assignment. None of the Parties may assign any
rights or delegate any obligations provided for in
this Agreement without the prior written consent of
all the other Parties, which consent shall not be
unreasonably withheld. Any assignment in violation
of the preceding sentence shall be void.
Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and
be enforceable by, the parties and their respective
successors and assigns.
9.10 Counterparts. This Agreement may be executed in
any number of separate counterparts, each of which
shall be deemed to be an original, but which
together shall constitute one and the same
instrument and may be executed by facsimile.
9.11 Obligations of Subsidiaries. Whenever this Agreement
requires a Subsidiary of MERI or either of the Buyers
to take any action, such requirement shall be
deemed to include an
undertaking on the part of MERI and/or either of the
Buyers, as the case may be, to cause such Subsidiary
to take such action and a guarantee of the
performance thereof. Whenever this Agreement
requires a Subsidiary of the Seller to take any
action, such requirement shall be deemed to include
an undertaking on the part of the Seller to cause
such Subsidiary to take such action and a guarantee
of the performance thereof.
9.12 Severability. The provisions of this
Agreement shall be deemed severable and the
invalidity or unenforceability of any provision
shall not affect the validity or enforceability or
the other provisions hereof. If any provision of
this Agreement, or the application thereof to any
Person or any circumstance, is invalid or
unenforceable, (a) a suitable or equitable provision
shall be substituted therefor in order to carry out,
so far as may be valid or enforceable, the
intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement
and the application of such provision to other
Persons or circumstances shall not be affected by
such invalidity or unenforceability, nor shall
such invalidity or unenforceability affect the
validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
9.13 Costs and Fees. In connection with
Agreement-Related Litigation (regardless of whether
the action alleges breach of contract, tort,
violation of a statute, or any other cause of
action), the prevailing Party will be entitled to
recover from the nonprevailing Party its
reasonable costs in bringing or defending such
claims, including its reasonable attorneys' fees,
accounting fees, professional and/or expert witness
fees, court costs, and travel and out-of-pocket
expenditures incurred in preparation for and during
such proceedings. If a Party prevails on some
aspects of its claims but not on others, the court
shall apportion any award of costs in bringing or
defending such claims in such manner as it deems
equitable.
9.14 Cy Pres. The doctrine of Cy Pres shall be
applicable to
the Agreement such that in interpreting the terms and
conditions hereunder the intentions of the parties are
to be carried out as near as may be, when it would
otherwise be impossible or illegal to give it literal
effect. In any dispute arising out of this
Agreement, the doctrine of Cy Pres shall be applied by
the Court.
IN WITNESS WHEREOF, the Parties have caused this
Agreement to be executed by their respective duly
authorized officers as of the date first above written.
K-PIPE MERGER CORPORATION
By_______________________
__________ Name:
Title:
MIDCOAST ENERGY
RESOURCES, INC.
By_______________________
__________ Name:
Title:
MIDCOAST KANSAS PIPELINE,
INC.
By_______________________
__________ Name:
Title:
MIDCOAST KANSAS GENERAL
PARTNER, INC.
By_______________________
__________ Name:
Title:
