[EXECUTION COPY]
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SECURITIES PURCHASE AGREEMENT,
DATED AS OF JUNE 10, 2004,
AMONG
SPECTRUM FIELD SERVICES, INC.,
AS THE COMPANY,
ENERGY SPECTRUM PARTNERS II LP
AND
ENERGY SPECTRUM PARTNERS III LP,
AND
THE MANAGEMENT SELLERS WHOSE NAMES
APPEAR ON THE SIGNATURE PAGE HERETO,
AS SELLERS,
AND
ATLAS PIPELINE OPERATING PARTNERSHIP, L.P.,
AS BUYER
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..................................................................................1
SECTION 1.1. Certain Definitions.......................................................1
ARTICLE II THE CLOSING................................................................................10
SECTION 2.1. Closing..................................................................10
SECTION 2.2. Deliveries by Sellers to Buyer...........................................10
SECTION 2.3. Deliveries by Buyer to Sellers...........................................12
SECTION 2.4. Escrow Agreement.........................................................13
SECTION 2.5. Proceedings at Closing...................................................13
SECTION 2.6. Sellers' Representative..................................................13
ARTICLE III CONSIDERATION.............................................................................13
SECTION 3.1. Amount and Form of Consideration.........................................13
SECTION 3.2. Payment of Consideration and Delivery of Shares at Closing...............14
SECTION 3.3. Post-Closing Adjustment..................................................14
SECTION 3.4. Escrow Arrangements......................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY..................................17
SECTION 4.1. Organization; Power and Authority........................................17
SECTION 4.2. Authorizations; Execution and Validity...................................18
SECTION 4.3. No Conflict; Consents....................................................18
SECTION 4.4. Subsidiaries; Investments................................................19
SECTION 4.5. Capitalization of the Company............................................19
SECTION 4.6. Financial Statements.....................................................19
SECTION 4.7. Indebtedness; Undisclosed Liabilities; Off Balance Sheet Arrangements....20
SECTION 4.8. Absence of Certain Changes...............................................20
SECTION 4.9. Litigation; Orders.......................................................21
SECTION 4.10. Employees................................................................21
SECTION 4.11. Employee Benefits........................................................22
SECTION 4.12. Taxes....................................................................23
SECTION 4.13. Title to Securities......................................................25
SECTION 4.14. Dividends and Certain Other Payments.....................................26
SECTION 4.15. Bank Accounts; Powers of Attorney........................................26
SECTION 4.16. Environmental Laws.......................................................26
SECTION 4.17. Material Contracts.......................................................28
SECTION 4.18. Title to Property; Leases................................................28
SECTION 4.19. Intellectual Property....................................................29
SECTION 4.20. Intercompany Liabilities.................................................29
SECTION 4.21. Insurance Coverage.......................................................29
SECTION 4.22. Permits..................................................................29
SECTION 4.23. Hedging..................................................................30
SECTION 4.24. Gas Imbalances...........................................................30
SECTION 4.25. No Untrue Statements.....................................................30
SECTION 4.26. Regulatory Agencies......................................................30
SECTION 4.27. Certain Payments.........................................................31
SECTION 4.28. Indemnity Claims.........................................................31
SECTION 4.29. Preferences..............................................................31
SECTION 4.30. Operational Standards and Maintenance Programs...........................31
SECTION 4.31. Fees.....................................................................31
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER.....................................................32
SECTION 5.1. Organization; Power and Authority........................................32
SECTION 5.2. Authorizations; Execution and Validity...................................32
SECTION 5.3. No Conflicts; Consents...................................................32
SECTION 5.4. Litigation...............................................................32
SECTION 5.5. Access to Documents......................................................33
SECTION 5.6. Investment Intent; Sophisticated Buyer...................................33
SECTION 5.7. Financing................................................................33
SECTION 5.8. Fees.....................................................................33
ARTICLE VI COVENANTS OF SELLERS AND THE COMPANY.......................................................33
SECTION 6.1. Conduct of Business......................................................34
SECTION 6.2. Certain Regulatory Matters...............................................35
SECTION 6.3. Further Actions..........................................................36
SECTION 6.4. Options; Tax Withholding on Management Compensation Amounts..............36
SECTION 6.5. Tax Matters..............................................................36
SECTION 6.6. Access to Information; Confidentiality; Financial Statements.............37
SECTION 6.7. Notices of Certain Events................................................39
SECTION 6.8. Curative Actions with respect to Rights of Way...........................39
SECTION 6.9. Permits..................................................................39
ARTICLE VII COVENANTS OF BUYER........................................................................39
SECTION 7.1. Certain Regulatory Matters...............................................39
SECTION 7.2. Further Actions..........................................................40
SECTION 7.3. Third-Party Reports......................................................40
SECTION 7.4. Certain Confidential Information.........................................41
SECTION 7.5. Return of Information....................................................41
SECTION 7.6. Sellers' Access to Documents; Preservation of Books and Records..........41
SECTION 7.7. Exclusive Representations................................................42
SECTION 7.8. Use of Seller Marks......................................................42
SECTION 7.9. Decommissioning of Identified Compressors................................42
ARTICLE VIII CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS..............................................43
SECTION 8.1. Accuracy of Representations and Warranties...............................43
SECTION 8.2. Performance of Covenants.................................................43
SECTION 8.3. Certificates.............................................................43
SECTION 8.4. HSR Clearance............................................................43
SECTION 8.5. Prohibition..............................................................43
SECTION 8.6. Certified Resolutions....................................................44
SECTION 8.7. Secretary's Certificate..................................................44
SECTION 8.8. FIRPTA...................................................................44
SECTION 8.9. Employment Contracts.....................................................44
SECTION 8.10. Escrow Agreement.........................................................44
SECTION 8.11. Required Permits and Notifications.......................................44
SECTION 8.12. Opinion of Counsel.......................................................44
SECTION 8.13. Other Documents..........................................................45
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ARTICLE IX CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS........................................45
SECTION 9.1. Accuracy of Representations and Warranties...............................45
SECTION 9.2. Performance of Covenants.................................................45
SECTION 9.3. Officer's Certificate....................................................45
SECTION 9.4. HSR Clearance............................................................45
SECTION 9.5. No Prohibition...........................................................45
SECTION 9.6. Delivery of Initial Purchase Price; Repayment of Subordinated Notes......45
SECTION 9.7. Certified Resolutions....................................................46
SECTION 9.8. Secretary's Certificate..................................................46
SECTION 9.9. Escrow Agreement.........................................................46
SECTION 9.10. Other Documents..........................................................46
ARTICLE X CERTAIN TAX MATTERS........................................................................46
SECTION 10.1. Tax Matters..............................................................46
ARTICLE XI TERMINATION................................................................................48
SECTION 11.1. Termination of Agreement.................................................48
SECTION 11.2. Effect of Termination....................................................48
ARTICLE XII INDEMNIFICATION...........................................................................49
SECTION 12.1. Sellers' Indemnification.................................................49
SECTION 12.2. Buyer's Indemnification..................................................50
SECTION 12.3. Indemnification Procedures...............................................51
SECTION 12.4. Limits on Indemnification................................................53
SECTION 12.5. Mitigation; Insurance....................................................54
ARTICLE XIII SELLER REPRESENTATIVE....................................................................55
SECTION 13.1. Seller Representative....................................................55
SECTION 13.2. Engagement of Agents.....................................................56
SECTION 13.3. Payment of Expenses......................................................57
SECTION 13.4. Compensation.............................................................57
SECTION 13.5. Exculpation..............................................................57
SECTION 13.6. Successors; Removal......................................................57
SECTION 13.7. Survival.................................................................58
ARTICLE XIV GENERAL...................................................................................58
SECTION 14.1. Amendments...............................................................58
SECTION 14.2. Waivers..................................................................58
SECTION 14.3. Notices..................................................................58
SECTION 14.4. Successors and Assigns; Parties in Interest..............................59
SECTION 14.5. Severability.............................................................59
SECTION 14.6. Entire Agreement.........................................................59
SECTION 14.7. Governing Law............................................................60
SECTION 14.8. Remedies.................................................................60
SECTION 14.9. Arbitration..............................................................60
SECTION 14.10. Expenses.................................................................61
SECTION 14.11. Survival.................................................................61
SECTION 14.12. Release of Information...................................................61
SECTION 14.13. Certain Construction Rules...............................................61
SECTION 14.14. Counterparts.............................................................62
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT, dated as of June 10, 2004 (this
"Agreement"), is entered into by and among SPECTRUM FIELD SERVICES, INC., a
Delaware corporation (the "Company"), ENERGY SPECTRUM PARTNERS II LP, a Delaware
limited partnership ("ESP II"), ENERGY SPECTRUM PARTNERS III LP, a Delaware
limited partnership ("ESP III" and, together with ESP II, the "Energy Spectrum
Sellers"), Xxxxxx X. Xxxxx, Xxxxx X. Xxxx, Xxxx X. Xxxxxxx, J. Xxxxxx Xxxxxx and
Xxxx X. Xxxxxx (collectively, the "Management Sellers"), and Atlas Pipeline
Operating Partnership, L.P., a Delaware limited partnership ("Buyer").
WHEREAS, the Energy Spectrum Sellers and the Management Sellers
(collectively, the "Sellers") own all of the outstanding Capital Stock (as
hereinafter defined) of the Company, which consists of (i) 2,084,891 shares (the
"Common Shares") of Common Stock (as hereinafter defined) and (ii) 11,052,304
shares (the "Preferred Shares" and, together with the Common Shares, the
"Shares") of Preferred Stock (as hereinafter defined);
WHEREAS, the Sellers are the holders of an aggregate of $15,603,462 in
principal amount of Subordinated Notes (as hereinafter defined) issued by the
Company;
WHEREAS, Buyer desires to purchase the Shares from the Sellers, and the
Sellers are willing to sell the Shares to Buyer, upon the terms and subject to
the conditions set forth in this Agreement; and
WHEREAS, (i) the Buyer is willing to provide funds to the Company to
enable the Company to repay in full the Subordinated Notes, (ii) the Sellers are
willing to allow a credit against the Purchase Price (as hereinafter defined)
for the Shares in respect of the funds so provided by the Buyer and (ii) the
Company is willing to cause the Subordinated Notes to be repaid in full,
discharged and marked cancelled at Closing (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises, the terms and
provisions set forth herein, the mutual benefits to be gained by the performance
thereof and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Definitions.
(a) As used in this Agreement, the terms set forth below shall have the
following respective meanings:
"Adverse Claim" means, with respect to any security or other financial
instrument, an "adverse claim" as defined in Section 8-102(a)(1) of the Uniform
Commercial Code as in effect in the State of Delaware.
"Affiliate" means, with respect to any Person, (a) any Subsidiary of
such Person or (b) any other Person that, directly or indirectly, through any
one or more intermediaries, controls, is controlled by, or is under common
control with, such Person; provided, however, that to the extent the term
"Affiliate" is used with reference to the Energy Spectrum Sellers, a portfolio
company in which an Energy Spectrum Seller or one of its Affiliates has made an
investment shall not be deemed an Affiliate of the Energy Spectrum Sellers for
purposes of this Agreement, regardless of whether the Energy Spectrum Sellers or
such Affiliate controls such portfolio company. For the purposes of this
definition, "control" means the possession of the power to direct or cause the
direction of management and policies of such Person, whether through the
ownership of voting securities, by contract, as trustee or executor, or
otherwise.
"Bank Credit Facility" means the Credit Agreement, dated as of July 13,
2000, as amended, between the Company and the Lenders.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks located in the City of New York are required or authorized by
executive order to close.
"Buyer Confidentiality Agreement" means the letter agreement, dated as
of January 30, 2004, between the Company and Buyer.
"Buyer's Knowledge" means the actual (but not the constructive)
knowledge of the officers of Buyer that are involved in the negotiation,
structuring or effectuation of the transactions contemplated by this Agreement
or the due diligence review of the operations of the Company conducted by or on
behalf of Buyer in connection therewith
"Capital Stock" means, (i) with respect to any corporation, all shares,
interests, participations or other equivalents of capital stock of such
corporation, however designated, and (ii) with respect to any partnership or
limited liability company, all partnership or limited liability company
interests, units, participations or equivalents of partnership or limited
liability company interests of such partnership or limited liability company,
however designated; provided, however, that the term "Capital Stock" shall not
include options, warrants or other rights to acquire Capital Stock or securities
convertible into or exchangeable for Capital Stock.
"Change of Control" means, with respect to the Company at any time
after the Closing, (i) any Person or Persons other than Buyer and its Affiliates
(including Atlas America, Inc. and Resource America, Inc. and their respective
subsidiaries) becoming the beneficial owner or beneficial owners (as defined for
purposes of Rule 13d-3 under the Exchange Act) of securities representing in the
aggregate more than 50% of the outstanding Capital Stock of the Company, or if
less, the percentage of the outstanding Capital Stock of the Company
beneficially owned (as defined in the manner provided in Rule 13d-3 under the
Exchange Act) by Buyer and its Affiliates (including Atlas America, Inc. and
Resource America, Inc. and their respective subsidiaries), (ii) any merger or
consolidation of the Company with or into any Person if either the surviving or
resulting Person is not an Affiliate of Buyer or if, as a result of such merger
or consolidation, Buyer and its Affiliates (including Atlas America, Inc. and
Resource America, Inc. and their respective subsidiaries) do not beneficially
own (as defined for purposes of Rule 13d-3 under the Exchange Act) more than 50%
of the Capital Stock of the surviving or resulting Person or, if less, the
percentage of the outstanding Capital Stock of such Person beneficially owned
(as defined in the manner provided in Rule 13d-3 under the Exchange Act) by a
Person other than Buyer and its Affiliates (including Atlas America, Inc. and
Resource America, Inc. and their respective subsidiaries) or (iii) any sale by
the Company or its successors of all or substantially all of its assets to any
Person or Persons other than an Affiliate of Buyer (including Atlas America,
Inc. and Resource America, Inc. and their respective subsidiaries).
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"Claim" means any demand, claim or action that is asserted or arises
in a Legal Proceeding or has been overtly threatened to be the subject of a
Legal Proceeding.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock, par value $0.01 per share, of
the Company.
"Contract" means any written contract or other legally binding oral or
written arrangement, including but not limited to, any agreement, indenture,
note, bond, loan, instrument, lease, conditional sale contract, mortgage or
insurance policy.
"Employee Benefit Plan" means any "employee benefit plan" within the
meaning of Section 3(3) of ERISA which is sponsored, maintained or contributed
to by the Company.
"Energy Spectrum Authorizing Entity" means (i) with respect to ESP II,
Energy Spectrum II LLC, a Texas limited liability company, in its capacity as
general partner of Energy Spectrum Capital II LP, a Texas limited partnership,
in its capacity as general partner of ESP II, and (ii) with respect to ESP III,
Energy Spectrum III LLC, a Texas limited liability company, in its capacity as
general partner of Energy Spectrum Capital III LP, a Delaware limited
partnership, in its capacity as general partner of ESP III.
"Environmental Laws" means any and all Laws relating to pollution,
protection of the environment, persons or the public health or welfare from
actual or potential exposure (or the effects of exposure) to any actual or
threatened release, discharge, spill or emission of, or relating to the
manufacture, processing, production, gathering, transportation, distribution,
handling, generation, use, treatment, storage or disposal of, any Hazardous
Materials. The term "Environmental Laws" includes, without limitation, the
following statutes and their implementing regulations, all as amended from time
to time and in effect as of the Closing Date:
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(a) the Comprehensive Environmental Response, Compensation and
Liability Act;
(b) the Resource Conservation and Recovery Act;
(c) the Federal Water Pollution Control Act;
(d) the Clean Air Act;
(e) the Toxic Substances Control Act;
(f) the Hazardous Materials Transportation Act;
(g) the Safe Drinking Water Act;
(h) the Emergency Planning and Community Right to Know Act;
(i) the Oil Pollution Act; and
(j) the state and local counterparts to the statutes listed in
paragraphs (a) through (i).
"Environmental Representation" means any representation or warranty
made by the Company pursuant to this Agreement relating to the presence or
absence of Hazardous Materials, the existence or absence of liabilities under
Environmental Laws or compliance or noncompliance with Environmental Laws,
including, but not limited to, the representations and warranties contained in
Section 4.16.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Tax Benefit Amount" means the amount by which (i) 39% of the
excess of (a) the sum of (1) $14,257,000, (2) $36,020,000, (3) the Management
Compensation Amount, (4) the Investment Banking Fee Amount and (5) the Other
Transaction Cost Amount, over (b) $48,000,000 exceeds (ii) $500,000.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Facilities" means all of the real estate assets of the Company and the
associated facilities and improvements located thereon, whether owned or leased
(to the extent of the Company's interest therein), beginning with the metering
facilities, and including the gathering lines, compressor stations, and the gas
processing plant, as more commonly known as the Xxxxx Gas Plant, the Xxxx
Booster Station, the Xxxxxx Compressor Station, the Comanche Compressor Station,
the Xxxxxxx Compressor Station, the East Xxxxx Booster Station, the Enville
Booster Station, the Greehey Compressor Station, the Harley Hills Compressor
Station, the New Xxxxxx Compressor Station, the Xxxxxx Compressor Station, the
Xxxxxxx Compressor Station, the 107 Compressor Station, the Xxxx Booster
Station, the Xxxxxx Booster Station, and the Walnut Bend Compressor Station, and
ending at the tailgate of the Xxxxx Gas Plant, and the Waynoka Plant, and the
Thackerville, Horseshoe Bend, Xxxxxx, Xxxx-Xxxxxx, Xxxxxxx and Xxxxxxxx
facilities as such real estate assets and facilities are further identified on
the maps included in Exhibit A hereto.
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"Final Net Working Capital" means Net Working Capital as of the Closing
Date, as finally determined in accordance with the provisions of Section 3.3.
"GAAP" means United States generally accepted accounting principles.
"Governmental Authority" means any federal, state, provincial or local
government or governmental regulatory body and any of their respective
subdivisions, agencies, instrumentalities, authorities or tribunals.
"Hazardous Materials" means any contaminant, pollutant, toxic
substance, hazardous material, hazardous waste, hazardous substance, or
hazardous chemical as those terms are defined by any Environmental Law, or any
other substance that is declared or defined to be hazardous under or pursuant to
Environmental Law, including any petroleum products that become wastes.
"HSR Act" means Section 7A of the Xxxxxxx Act (Title II of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976), as amended (including any
successor statute).
"Intellectual Property" means patents, trademarks, trade names, service
marks, service names, copyrights and other proprietary intellectual property
rights and all pending applications for the registration of any of the
foregoing.
"Law" means any federal, state, provincial or local law, statute, rule,
ordinance, code or regulation.
"Legal Proceeding" means any judicial, administrative or arbitral
action, suit or proceeding (public or private) by or before any court or other
Governmental Authority.
"Lenders" means Union Bank of California, N.A. and Bank of Oklahoma,
N.A.
"Lien" means any lien, pledge, mortgage, deed of trust, security
interest, attachment, levy or other similar encumbrance affecting title.
"Material Adverse Effect" means any change, effect, event, occurrence
or circumstance affecting the Company that (i) results in, or could reasonably
be expected to result in, a material adverse effect on the business, assets,
results of operations or financial condition of the Company taken as a whole, or
(ii) prevents the Company from performing its obligations hereunder or makes
impossible the consummation of the transactions contemplated by this Agreement,
but excluding, in the case of clause (i) above:
(a) any change, effect, event, occurrence or circumstance generally
affecting the international, national, regional or local natural gas gathering,
treatment or processing industry and not adversely affecting the operations of
the Company in any manner or degree materially different from the operations of
other companies engaged in similar lines of business;
5
(b) any change, effect, event, occurrence or circumstance resulting
from changes in the international, national, regional or local markets for oil,
natural gas or other hydrocarbons or in prices paid for any such hydrocarbons;
(c) any change, effect, event, occurrence or circumstance which is
cured prior to Closing to the reasonable satisfaction of the Buyer, other than
through the payment of money (provided, however, that Sellers or the Company
shall be permitted to effect a cure through (i) the payment of money out of the
Company's Net Working Capital not in excess of the positive balance of the
Company's Net Working Capital (or, if less, the Company's good faith estimate of
the positive balance of its Net Working Capital as of the Closing Date) or (ii)
the application of insurance proceeds actually received by the Company); or
(d) any Order or act of any Governmental Authority applicable to the
hydrocarbon gathering, treatment or processing industries generally that imposes
restrictions, regulations or other requirements thereon and not adversely
affecting the operations of the Company in any manner or degree materially
different from the operations of other companies engaged in similar lines of
business.
Any determination as to whether any change, effect, event, occurrence or
circumstance constitutes a Material Adverse Effect shall be made in accordance
with a standard of good faith and commercial reasonableness with respect to the
facts and circumstances then prevailing.
"Material Contract" means any Contract to which Company is a party:
(a) that (i) resulted in aggregate monetary payments by the Company
during the calendar year ended December 31, 2003, or that can reasonably be
expected to result in aggregate monetary payments by the Company during the
current calendar year, in an amount exceeding $1,000,000, or (ii) provides for
aggregate monetary payments by the Company during the remaining portion of the
life of the Contract that commences on the date of this Agreement of $3,000,000
or more;
(b) that (i) resulted in aggregate monetary receipts by the Company
during the calendar year ended December 31, 2003, or that can reasonably be
expected to result in aggregate monetary receipts by the Company during the
current calendar year, in an amount exceeding $500,000, or (ii) provides for
aggregate monetary receipts by the Company during the remaining portion of the
life of the Contract that commences on the date of this Agreement of $750,000 or
more; or
(c) that provides for the borrowing of funds or incurrence of
indebtedness by the Company or the deferred purchase price of Property including
any indenture, mortgage, loan, credit, sale-leaseback or similar Contract or
whether incurred, assumed, guaranteed or secured but excluding those Contracts
listed on Schedule II; or
6
(d) any other Contract to which the Company is a party, the loss or
termination of which would have, or could reasonably be expected to have, a
Material Adverse Effect.
"Net Working Capital" means the excess of (i) the current assets of the
Company, plus the present value of non-current pre-payments (as calculated by
discounting to the Closing Date the non-current pre-payment follow-on cash flows
at a discount rate equal to the Company's pre-tax weighted average cost of
senior debt of 7.0%), over (ii) the current liabilities (excluding current
maturities of and accrued interest on long-term debt and excluding any
liabilities included in the Investment Banking Fee Amount, the Other Transaction
Cost Amount or the Management Compensation Amount) of the Company, as calculated
in accordance with and in a manner consistent with the illustration set forth in
Schedule I, including the notes thereto. Unless otherwise provided in Schedule
I, terms used in such Schedule which have a recognized meaning under GAAP shall
be deemed to be used on such Schedule with such recognized meaning.
"Optionholders" means Xxxxx X. Xxxx and Xxxxxx X. Xxxxx as the holders
of the Options.
"Options" mean the options to purchase an aggregate of 111,110 shares
of Common Stock, all of which options as of the date of this Agreement are held
by the Optionholders.
"Order" means any order, judgment, injunction, ruling or decree of any
court or other Governmental Authority.
"Party" means Buyer or a Seller.
"Permit" means any permit, certificate, license, franchise,
authorization, registration, required plan, consent or approval issued or
required by a Governmental Authority.
"Person" means any natural person, corporation, partnership, limited
liability company, trust, unincorporated organization, Governmental Authority,
or other entity.
"Pipeline Assets" means all pipelines and associated real property
owned or leased by the Company or which the Company is otherwise entitled to use
for the gathering, transmission or distribution of natural gas in its business.
"Preferred Stock" means the Preferred Stock, par value $0.01 per share,
of the Company.
"Property" means any property or asset, whether real, personal or
mixed, or tangible or intangible, however owned, leased, managed or otherwise
held, including but not limited to, any easements, rights of way or other
licenses or rights of use of a same or similar nature.
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"Schedule" means the disclosure schedule provided by the Sellers to the
Buyer at the time of execution of this Agreement, which is attached hereto, as
supplemented from time to time after the date hereof with the consent of the
Buyer (which consent may be granted or withheld in the discretion of Buyer,
unless such consent relates to information contained in a final third party
report required to be delivered to Sellers, but not delivered, in accordance
with Section 7.3, as to which no consent shall be required).
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers' Knowledge" means, the actual (but not constructive) knowledge
of (i) Xxxxxx Xxxxx, Xxxxx Xxxx, Xxxx Xxxxxxx, Xxxxxx Xxxxxx, Xxxx Xxxxx and,
with respect to the Environmental Representations only, Xxxxx Xxxxxxxx and Xxx
Xxxxxx; (ii) each of the officers or key employees of the Energy Spectrum
Sellers or the Energy Spectrum Authorizing Entities or any other Person who
controls the Energy Spectrum Sellers that is involved in the operations or
administration of, or acts as a director or officer of, the Company and (iii)
the Management Sellers.
"Subordinated Notes" means the 8% Subordinated Notes due July 13, 2007
of the Company.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which a majority of the shares of Capital Stock or other equity securities
having ordinary voting power to elect a majority of the board of directors are
owned, directly or indirectly, by such Person or (ii) any partnership, limited
liability company or other entity (other than a corporation) of which Capital
Stock or other equity securities that are entitled to receive more than 50% of
the distributions made by such entity to its partners or members or other equity
owners are owned, directly or indirectly, by such Person.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not, and including any obligations to
indemnify or otherwise assume or succeed to the Tax liability of any other
person.
"Tax Return" means any return, declaration, report, claim for refund,
information return or similar statement relating to Taxes, including any
schedule or attachment thereto or amendment thereof.
8
(b) Each of the terms set forth below has the meaning set forth in the
provision set forth opposite such term in the following table:
TERM PROVISION
AAA Section 14.9(b)
Agreement Preamble
Audited Balance Sheet Section 4.6
Audited Financial Statements Section 4.6
Bank Credit Facility Pay-off Amount Section 2.2(c)(i)
Basket Amount Section 12.4(a)
Books and Records Section 7.6(a)
Buyer Preamble
Buyer Indemnified Parties Section 12.1
CFO Certificate Section 2.2(c)
Closing Section 2.1
Closing Date Section 2.1
Common Shares Recitals
Company Preamble
Company Plans Section 4.11(a)
Confidential Information Section 7.4
Energy Spectrum Sellers Preamble
Escrow Agent Section 2.4
Escrow Agreement Section 2.4
Escrow Deposit Section 2.4
Escrow Funds Section 3.4
ESP II Preamble
ESP III Preamble
FASB 133 Section 4.23
Environmental Insurance Policy Section 12.5(b)
FCC Permits Section 4.22
Final Arbiter Section 3.3(e)
Final Balance Sheet Section 3.3(b)
Financial Statements Section 4.6
Indemnified Party Section 12.3(a)
Indemnifying Party Section 12.3(a)
Identified Compressors Section 7.9
Initial Net Working Capital Section 2.2(c)
Initial Purchase Price Section 3.1(a)
Insurer Section 12.5(b)
Interim Financial Statements Section 4.6
Investment Banking Fee Amount Section 2.2(c)
Latest Balance Sheet Section 4.7
Litigation Escrow Amount Section 3.4(a)
Losses Section 12.1
Management Compensation Amount Section 2.2(c)
Management Sellers Preamble
MCA Recipient Section 2.2(c)
Net Working Capital Adjustment Amount Section 3.3(a)
Nonconsenting Party Section 3.4(e)
Objection Notification Date Section 3.3(c)
Other Party Section 3.4(e)
Other Transaction Cost Amount Section 2.2(c)(v)
Pending Claims Section 3.4(d)
Pre-Closing Tax Period Section 10.1(b)
Preferred Shares Recitals
Purchase Price Section 3.1(b)
Regulatory Agencies Section 4.26(a)
Related Litigation Section 12.1(f)
Seller Marks Section 7.8(a)
Sellers Recitals
Seller Representative Section 13.1
Shares Recitals
Straddle Period Section 10.1(a)
Subject Litigation Section 12.1(f)
Subordinated Notes Pay-off Amount Section 2.2(c)
Tax Contest Section 12.3(e)
Tax Losses Section 12.1(g)
Tax Withholding Amounts Section 6.4(b)
Texaco Agreement Section 4.28
Third Party Claim Section 12.3(a)
9
ARTICLE II
THE CLOSING
SECTION 2.1. Closing. The closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Xxxxx Xxxxx L.L.P.,
0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000 at 10:00 a.m., Dallas, Texas time, on the
fifth Business Day after the satisfaction of the conditions to the obligations
of the Parties set forth in Sections 8.4, 8.11 and 9.4 (or, if (i) the FCC
Permits are required to be transferred in order to consummate the transactions
contemplated by this Agreement and (ii) any governmental consent or
authorization required to effect the transfer thereof has not been obtained, on
the earlier of (A) the 25th Business Day after the satisfaction of such
conditions, (B) the date on which the FCC Permits are obtained or (C) the date
on which the FCC Permits are terminated in accordance with Section 6.9);
provided, however, that if the other conditions to the obligations of the
Parties at the Closing set forth in Articles VIII and IX are not satisfied or
waived on such date (other than any conditions to be satisfied through the
making of payments or the delivery of documents to be made or delivered at the
Closing), the Closing shall be held as soon as practicable after the
satisfaction or waiver of such conditions (but in no event more than five days
thereafter). The date on which the Closing is to be held in accordance with the
foregoing provisions, or such other time and date as the parties shall agree,
shall be the "Closing Date."
SECTION 2.2. Deliveries by Sellers to Buyer. At the Closing, the
Sellers shall deliver, or shall cause to be delivered, to Buyer the following:
(a) the certificates evidencing the Shares, which certificates shall be
duly endorsed for transfer to Buyer or accompanied by stock powers in form
reasonably satisfactory to Buyer duly executed in blank;
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(b) the Subordinated Notes, which Notes shall have been delivered to
the Company and marked cancelled upon payment in full of the Subordinated Notes
Pay-off Amount in accordance with Section 2.3(c);
(c) a certificate of the chief financial officer of the Company, dated
as of the Closing Date (the "CFO Certificate"), setting forth the following
amounts:
(i) the amount of the payment required to be made by the
Company in order to pay all principal, premium, if any, and interest
due under the Bank Credit Facility on the Closing Date, such that, if
such amount were applied to the notes executed by the Company under the
Bank Credit Facility, all such notes would be fully repaid and
cancelled (the "Bank Credit Facility Pay-off Amount");
(ii) the amount of the payment required to be made by the
Company in order to pay all principal, premium, if any, and interest
due on the Subordinated Notes on the Closing Date, such that, if such
amount were applied to the Subordinated Notes, all such Subordinated
Notes would be fully repaid and cancelled (the "Subordinated Notes
Pay-off Amount");
(iii) a good faith calculation by such officer of the Net
Working Capital as of the Closing Date (the "Initial Net Working
Capital"), together with a schedule showing how such amount was
calculated (which schedule shall have been delivered to the Buyer in
draft form at least two Business Days prior to the Closing);
(iv) a good faith calculation by such officer of the fees and
expenses payable by the Company to the Persons identified in Schedule
4.31 in connection with the consummation of the transactions
contemplated by this Agreement, to the extent not paid prior to Closing
(the "Investment Banking Fee Amount");
(v) a good faith calculation by such officer of the legal and
accounting fees and expenses incurred by the Company in connection with
the transactions contemplated by this Agreement, to the extent not paid
prior to Closing (the "Other Transaction Cost Amount");
(vi) a statement (A) setting forth the aggregate amount of
cash payments required to be made at Closing to officers and employees
of the Company as cash bonuses, as consideration for the cancellation
of Options, or as consideration for the rights of officers or employees
under any phantom stock or equity plan or arrangement of the Company,
to the extent not paid prior to Closing (the "Management Compensation
Amount") and (B) identifying the payees (the "MCA Recipients") of such
Management Compensation Amounts and the amount thereof payable to each
such MCA Recipient; and
(vii) a good faith calculation by such officer of the Tax
Withholding Amount.
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(d) the certificates referred to in Section 8.3;
(e) a certificate of the Secretary or an Assistant Secretary of each
Energy Spectrum Authorizing Entity attesting to (i) the resolutions of the Board
of Managers of the Energy Spectrum Authorizing Entity referred to in Section 8.5
and (ii) the incumbency and signature of each officer of the Energy Spectrum
Authorizing Entity who has executed this Agreement and any other agreement or
certificate executed and delivered by such Energy Spectrum Authorizing Entity in
connection with this Agreement or the Closing;
(f) resignations by all members of the Board of Directors of the
Company and such officers of the Company as are specified by Buyer (in a written
notice delivered to the Seller Representative at least five Business Days prior
to the Closing Date) from their positions as directors or officers of the
Company (or, if any resignations of any directors or officers have not been
obtained, evidence of the removal of such directors or officers);
(g) a certificate from the Secretary of State of the State of Delaware
with respect to the existence and good standing of the Company;
(h) evidence reasonably satisfactory to Buyer that the Options have
been cancelled in accordance with Section 6.4(a); and
(i) such other certificates and documents as Buyer or its counsel may
reasonably request.
SECTION 2.3. Deliveries by Buyer to Sellers. At the Closing, Buyer
shall deliver to the Seller Representative for the account of the Sellers the
following:
(a) a wire transfer of immediately available funds (to such account or
accounts as the Seller Representative shall have specified to Buyer at least two
Business Days prior to the Closing) in an amount equal to the Initial Purchase
Price, less the sum of (i) the Escrow Deposit and (ii) the Tax Withholding
Amounts;
(b) a wire transfer of immediately available funds (to such account or
accounts as the Lenders shall have specified to Buyer at least two Business Days
prior to the Closing) in an amount equal to the Bank Credit Facility Pay-Off
Amount;
(c) a wire transfer of immediately available funds (to such account or
accounts as the Seller Representative shall have specified to Buyer at least two
Business Days prior to the Closing) in an amount equal to the Subordinated Notes
Pay-off Amount;
(d) the certificate referred to in Section 9.3;
(e) a certificate of the Secretary or an Assistant Secretary of the
general partner of Buyer attesting to (i) the resolutions of the Board of
Directors of the general partner of Buyer referred to in Section 9.6 and (ii)
the incumbency and signature of each officer of the general partner of Buyer who
has executed this Agreement and any other agreement or certificate executed and
delivered by or on behalf of Buyer in connection with this Agreement or the
Closing; and
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(f) such other certificates and documents as the Seller Representative
on behalf of all the Sellers or its counsel may reasonably request.
SECTION 2.4. Escrow Agreement. In order to provide security for the
obligations of Sellers to provide indemnification to Buyer pursuant to Section
12.1, the Seller Representative shall cause a portion of the Purchase Price
equal to $14,000,000 in cash to be deposited in escrow at the Closing (the
"Escrow Deposit") with JPMorgan Chase Bank, as escrow agent (the "Escrow
Agent"). At the Closing, Buyer and the Sellers shall execute and deliver the
Escrow Agreement, substantially in the form attached as Exhibit B hereto (the
"Escrow Agreement"), and shall take all action required to cause JPMorgan Chase
Bank to accept its appointment as Escrow Agent by executing the Escrow Agreement
and acknowledging receipt of the Escrow Deposit.
SECTION 2.5. Proceedings at Closing. All proceedings to be taken and
all documents to be executed and delivered by the Parties at the Closing shall
be deemed to have been taken and executed and delivered simultaneously, and no
proceedings shall be deemed taken nor any documents executed or delivered until
all have been taken, executed and delivered.
SECTION 2.6. Sellers' Representative. Each Seller shall deposit with
the Seller Representative at least five Business Days prior to the scheduled
Closing Date certificates representing the Shares and Subordinated Notes owned
by such Seller, the written agreements pursuant to which the Options were
granted by the Company and counterparts of the Escrow Agreement executed by such
Seller. The Seller Representative shall hold such certificates, agreements until
the earlier of Closing or the termination of this Agreement in accordance with
Section 11.1. The Seller Representative shall also act as agent for the Sellers
in connection with all matters specified in Article XIII, including (i) the
receipt of certificates and documents from Buyer at the Closing, (ii) the
execution of the Escrow Agreement, (iii) the matters set forth in Section 3.3
relating to the review and objections to the Final Balance Sheet and the
calculation of the Final Net Working Capital, (iv) the matters set forth in
Section 3.4 relating to the release of the Escrow Funds and (v) for purposes of
(A) receiving and distributing to Sellers all payments made pursuant to Section
3.3(a) or 3.4 or (B) receiving from the Sellers and delivering to Buyer any
amounts required to be paid by the Sellers pursuant to Section 3.3(a), all in
accordance with such arrangements as shall be made among the Seller
Representative and Sellers.
ARTICLE III
CONSIDERATION
SECTION 3.1. Amount and Form of Consideration
(a) The purchase price to be paid by Buyer to the Sellers in
consideration of the Shares shall be an amount (the "Initial Purchase Price") in
cash equal to:
(i) $104,000,000; plus
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(ii) the sum of (A) the amount of the Initial Net Working
Capital and (B) the Excess Tax Benefit Amount; minus
(iii) the sum of (A) the Bank Credit Facility Pay-off Amount,
(B) the Subordinated Notes Pay-off Amount, (C) the Investment Banking
Fee Amount, (D) the Other Transaction Costs Amount, and (E) the
Management Compensation Amount other than the portion thereof payable
to Sellers pursuant to Section 6.4(a).
(b) The final purchase price to be paid by Buyer to Sellers in
consideration of the Shares shall be the Initial Purchase Price, as adjusted by
virtue of the payment by Buyer or Seller of the Net Working Capital Adjustment
Amount in accordance with Section 3.3 (the "Purchase Price").
(c) The Purchase Price shall be allocated (i) first to the Preferred
Shares, to the extent of the full face amount and preferred return thereon and
(ii) second, to the Common Shares.
(d) Subject to Section 3.4, the Purchase Price shall be paid to Sellers
in such proportions as the Seller Representative shall specify in a written
notice, which shall be delivered to Buyer by the Seller Representative at least
two Business Days prior to the Closing Date.
SECTION 3.2. Payment of Consideration and Delivery of Shares at
Closing. At the Closing, Buyer shall pay the Initial Purchase Price (less the
Escrow Deposit) to the Sellers and the Sellers shall deliver to Buyer the Shares
or certificates representing the same, in each case in the appropriate form for
transfer to Buyer as specified in Article II. At the Closing, the Shares shall
be sold and delivered to Buyer free and clear of all Liens other than Liens that
may be imposed thereon by or on behalf of Buyer. At the Closing, the Buyer shall
also pay, on behalf of the Company, the Investment Banking Fee Amount, the Other
Transaction Cost Amount and the Management Compensation Amount (other than the
portion thereof payable to Sellers pursuant to Section 6.4(a)), which such
amounts and the identities of the payees thereof shall be specified in a written
notice provided by Seller Representative to Buyer, to the extent not provided in
the CFO Certificate provided pursuant to Section 2.2(c). The Parties (i)
acknowledge that Buyer's payment, on behalf of the Company, of the Investment
Banking Fee Amount, the Other Transaction Cost Amount and the Management
Compensation Amount pursuant to this Section 3.2 shall be treated for income tax
purposes as a contribution by the Buyer to the Company, followed by a payment of
the Investment Banking Fee Amount, the Other Transaction Cost Amount and the
Management Compensation Amount by the Company to the recipients thereof and (ii)
shall report the payment of such amounts in a manner that is consistent with
such treatment.
SECTION 3.3. Post-Closing Adjustment.
(a) In accordance with the terms and provisions of this Section 3.3,
Buyer shall pay to Seller Representative for the account of the Sellers (in the
same proportions in which the Initial Purchase Price is to be paid to them in
accordance with Section 3.1(d) or such other proportions as they shall agree in
writing), or Sellers (in the same proportions) shall pay to Buyer (as the case
may be), an amount (the "Net Working Capital Adjustment Amount") equal to the
amount by which the Final Net Working Capital is greater (in which case Buyer
shall pay the Net Working Capital Adjustment Amount to the Seller Representative
for the account of the Sellers) or is less (in which case Sellers shall pay the
Net Working Capital Adjustment Amount to Buyer) than the Initial Net Working
Capital.
14
(b) Within 60 days after the Closing Date, Buyer shall deliver to the
Seller Representative (i) an unaudited balance sheet of the Company as of the
Closing Date (the "Final Balance Sheet") and (ii) a certificate executed by an
executive officer of each of Buyer and the Company setting forth their proposed
calculation of Final Net Working Capital, which shall be made in accordance with
and in a manner consistent with the illustration set forth in Schedule I. The
calculation of Final Net Working Capital set forth in such certificate shall be
binding upon the Buyer and Sellers, unless the Seller Representative objects to
such calculation in accordance with clause (c) below.
(c) For a period of 60 days following the delivery of the Final Balance
Sheet and officers' certificate referred to in clause (b) above, Buyer and the
Company shall give to the Seller Representative access during normal business
hours to the books and records of the Company reasonably necessary for the
Seller Representative to confirm the accuracy of the Final Net Working Capital.
If, within such 60-day period, the Seller Representative notifies Buyer of any
objections to the calculation by Buyer of the Final Net Working Capital (the
date upon which the Seller Representative notifies Buyer of any such objections
shall be referred to herein as the "Objection Notification Date"), Buyer and the
Seller Representative will attempt in good faith to agree upon the Net Working
Capital Adjustment Amount prior to or on the date that is 30 days after the
Objection Notification Date.
(d) If Buyer and the Seller Representative agree prior to or on the
date that is 30 days after the Objection Notification Date to a Net Working
Capital Adjustment Amount that is different from the amount that would be
calculated based upon the officers' certificate delivered to the Seller
Representative, the payment described in clause (a) above shall be in the agreed
upon amount.
(e) If, on the other hand, Buyer and the Seller Representative do not
agree prior to or on the date that is 30 days after the Objection Notification
Date to a Net Working Capital Adjustment Amount, the matters in dispute (but no
other matters) shall be submitted to (i) a firm of independent public
accountants mutually agreed upon by Buyer and the Seller Representative, or (ii)
if Buyer and the Seller Representative do not agree upon such independent public
accountants within 30 days after the Objection Notification Date, Deloitte &
Touche LLP, or (iii) if the firm specified in clause (i) or (ii) above is
unwilling or unable to undertake the engagement contemplated by this provision,
a firm of independent public accountants selected by the Seller Representative
from among the "big four" accounting firms (other than any firms that have been
engaged to audit the financial statements of, or perform any other significant
services for, the Sellers or any of their Affiliates at any time during the past
five years) (in either case, the "Final Arbiter"), which firm shall make a final
and binding determination as to all matters in dispute with respect to the
calculation of the Net Working Capital Adjustment Amount as promptly as
practicable but no later than 45 days after its appointment. The Final Arbiter
shall send its written determination of Final Net Working Capital to Buyer and
the Seller Representative, together with a calculation of the Net Working
Capital Adjustment Amount that results from that determination, at which point
the determination of the Final Arbiter, and the resulting calculation of the Net
Working Capital Adjustment Amount, shall be binding on Buyer and Sellers, absent
fraud or manifest error. The fees and expenses of the Final Arbiter shall be
borne equally by Buyer on the one hand and Sellers on the other hand.
15
(f) The payment of the Net Working Capital Adjustment Amount as
contemplated by clause (a) above will be made on the day that is five days after
the date upon which such amount has been finally determined in accordance with
the provisions of this Section 3.3. Such payment will be made to Buyer or the
Seller Representative for the account of the Sellers, as the case may be, by
wire transfer of immediately available funds to an account specified by Buyer or
the Seller Representative, as applicable.
SECTION 3.4. Escrow Arrangements. The Parties shall take all action
required to cause the Escrow Agent to hold all funds deposited with or held by
the Escrow Agent pursuant to the Escrow Agreement, including the Escrow Deposit
and any interest or earnings accrued thereon (the "Escrow Funds"), until such
time as they are to be released to the parties in accordance with this Section
3.4. The fees and expenses of the Escrow Agent shall be borne equally by the
Sellers on the one hand and Buyer on the other hand. The Parties shall promptly
execute and deliver such instructions and other documents and take all other
action as may be required to cause the Escrow Agent to release the Escrow Funds
to the Parties as follows:
(a) Except as set forth in Section 3.4(d), within one Business Day
after the earlier of (i) the date upon which a binding settlement or compromise
of the Subject Litigation has been reached, which settlement or compromise
provides for an unconditional release of the Company or any successor in
interest identified by Buyer to Sellers (whether by merger, consolidation or
otherwise) from any liability or obligation arising with respect to the Subject
Litigation or (ii) the date upon which a final judgment of a court of competent
jurisdiction has been entered to the effect that the Company or any such
successor in interest is not subject to liability in respect of the Subject
Litigation, the Escrow Agent shall release to the Sellers (to such account or
accounts as shall be designated by the Seller Representative) an amount equal to
$7,000,000, plus one half of all interest or earnings included in the Escrow
Funds (or, if less, the total amount of remaining Escrow Funds not previously
released in accordance with this Section 3.4) (the "Litigation Escrow Amount");
(b) Within one Business Day after the date upon which (A) Buyer, the
Company or any such successor in interest to the Company pays or becomes
unconditionally obligated to pay (whether as a result of any final judgment or
arbitral award or as a result of any settlement to which the Sellers have
granted their consent in accordance with Section 12.3) any Losses for which it
is entitled to receive indemnification from Sellers under Section 12.1 arising
from a Third Party Claim, including in respect of the Subject Litigation, or (B)
Sellers become unconditionally obligated to pay to Buyer (whether by agreement
of the Parties or as a result of an arbitral award entered in favor of Buyer)
any Losses for which Buyer is entitled to receive indemnification from Sellers
under Section 12.1 arising from a Claim other than a Third Party Claim, the
Escrow Agent shall release to the Buyer (to such account or accounts as shall be
designated by the Buyer) an amount equal to such Losses; and
16
(c) Except as set forth in Section 3.4(d), immediately upon the second
anniversary of the Closing Date, the Escrow Agent shall release to the Sellers
(to such account or accounts as shall be designated by the Seller
Representative) all remaining Escrow Funds, other than the Litigation Escrow
Amount (which may only be released in accordance with the terms of Section
3.4(a) above).
(d) Notwithstanding Sections 3.4(a) and (c) above, the parties shall
not be required to take action to cause the Escrow Agent to release Escrowed
Funds to the Sellers in accordance with such provisions if Buyer shall have
asserted good faith claims for indemnity under Section 12.1 which have not been
finally resolved (the "Pending Claims"), to the extent that, after the release
of such funds by the Escrow Agent as contemplated by Sections 3.4(a) or (c), the
remaining Escrowed Funds held by the Escrow Agent would be insufficient to pay
the amount necessary to cover Sellers' indemnification obligations in respect of
such Pending Claims.
(e) If, in order to secure the release of any Escrowed Funds in
accordance with this Section 3.4, it is necessary for Buyer on the one hand or
Sellers on the other hand to commence arbitration proceedings in accordance with
Section 14.9, the arbitrator may, if it determines that the other party or
parties (the "Nonconsenting Party") failed or refused to take action to release
all or part of the Escrowed Funds to the other party (the "Other Party") as
required by this Agreement and did not have a good faith basis for such failure
or refusal, order the Nonconsenting Party to pay to the Other Party an amount
equal to the interest that would have accrued on the portion of the Escrowed
Funds that would have been released but for the failure or refusal on the part
of the Nonconsenting Party, at a rate at 10% per annum, for each day from and
after the commencement of such failure or refusal until the date upon which
applicable portion of the Escrowed Funds was actually released to the Other
Party.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SELLERS AND THE COMPANY
Each Seller (to the extent that the representations and warranties set
forth below specifically refer to such Seller) and the Company (except to the
extent that the representations and warranties set forth below are made by the
Sellers) hereby represents and warrants to Buyer as follows:
SECTION 4.1. Organization; Power and Authority. The Energy Spectrum
Sellers are limited partnerships duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company is duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company is qualified to transact business and is in good standing in each
jurisdiction in which such qualification is required by Law, except where the
failure to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has all requisite power
and authority (corporate and other) to own, lease and operate its assets and
properties and conduct its businesses and operations as presently being
conducted.
17
SECTION 4.2. Authorizations; Execution and Validity. Each of the Energy
Spectrum Sellers and the Company has all requisite corporate or partnership
power and authority (as the case may be) to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by each of the Energy
Spectrum Sellers and the Company, the performance by each of the Energy Spectrum
Sellers and the Company of its obligations hereunder and the consummation by
each of the Energy Spectrum Sellers and the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate or partnership action (as the case may be) on the part of each of the
Energy Spectrum Sellers and the Company. This Agreement has been duly and
validly executed and delivered by each of the Sellers and the Company and
constitutes a valid and binding obligation of each of the Sellers and (to the
extent it relates to actions to be taken or covenants to be performed prior to
or at Closing) the Company, enforceable against each of the Sellers and the
Company in accordance with its terms, except to the extent that enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
Laws now or hereafter in effect affecting creditors' rights generally or general
principles of equity.
SECTION 4.3. No Conflict; Consents. Except as set forth on Schedule
4.3, none of the execution and delivery by the Sellers or the Company of this
Agreement, the performance by the Sellers or the Company of their obligations
under this Agreement or the consummation by the Sellers or the Company of the
transactions contemplated hereby will (a) assuming compliance with the matters
referred to in clause (d) below, violate any Law, except for violations as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (b) violate the certificate of incorporation or bylaws of the
Company or the certificate of limited partnership or limited partnership
agreement of any Energy Spectrum Seller, (c) violate any Order to which the
Company or a Seller is a party or by which the Company or a Seller or any of
their assets is bound, except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, (d) require any
consent from or filing with any Governmental Authority (other than (i) the
filing of notification under the HSR Act and the expiration or early termination
of the applicable waiting period thereunder or (ii) any informational filing
with any utility regulatory authority in Texas or Oklahoma) or any consent from
any other Person, except where the failure to be, to make or obtain the same
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, (e) conflict with, constitute a breach of or a default
under, or give rise to any right of termination, cancellation or acceleration of
any right or obligation of the Company or to the loss of any benefit to which
the Company is entitled under the provisions of any agreement or instrument
binding on the Company, except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, or (f) result in the
creation or imposition of any Lien on any material asset of the Company.
18
SECTION 4.4. Subsidiaries; Investments. The Company has no
Subsidiaries. Except as set forth on Schedule 4.4, as of the date hereof, the
Company does not own any Capital Stock or other equity or similar ownership
interests in, or any interest convertible into or exchangeable or exercisable
for any equity or similar ownership interest in, any Person.
SECTION 4.5. Capitalization of the Company. The total authorized
Capital Stock of the Company consists of (i) 5,000,000 shares of Common Stock
and (ii) 20,000,000 shares of Preferred Stock. As of the date hereof, there are
outstanding an aggregate of 2,084,891 shares of Common Stock and 11,052,304
shares of Preferred Stock, all of which are owned by the Sellers, free and clear
of all Liens and other Adverse Claims, except for such restrictions on transfer
as are described on Schedule 4.5. All of the outstanding shares of Common Stock
and Preferred Stock of the Company have been duly authorized and validly issued
and are fully paid and non-assessable. Except as set forth on Schedule 4.5,
there are no outstanding options, subscriptions, convertible securities,
warrants, calls, rights, commitments or other rights obligating the Company to
issue, transfer, deliver or sell any shares of its Capital Stock. None of the
outstanding shares of Capital Stock of the Company were issued in violation of
any preemptive rights, anti-dilution rights or other similar rights of third
parties. There are no outstanding obligations of the Company to repurchase,
redeem or otherwise acquire any Capital Stock of the Company.
SECTION 4.6. Financial Statements. Attached as Schedule 4.6 are (i) the
audited consolidated balance sheets of the Company as of December 31, 2003 (the
"Audited Balance Sheet") and December 31, 2002, together with the related
consolidated statements of income, changes in shareholders' equity and cash
flows of the Company for the two years then ended (collectively, the "Audited
Financial Statements"), in each case accompanied by the report of the Company's
independent public accountants with respect thereto, and (ii) the unaudited
consolidated balance sheets of the Company for each of the four months ended
January 30, 2004, February 29, 2004, March 31, 2004 and April 30, 2004, together
with the related consolidated statements of income the four-month periods then
ended (the "Interim Financial Statements" and, together with the Audited
Financial Statements, the "Financial Statements"). Except as described on
Schedule 4.6, the Financial Statements fairly present, in all material respects,
the consolidated financial position of the Company as of the dates indicated,
and the consolidated results of operations and cash flows of the Company for the
periods presented. The Audited Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, and, except as set forth on Schedule 4.6, the Interim Financial
Statements have been prepared substantially in accordance with GAAP applied on a
basis consistent with the Audited Financial Statements. The Company has in place
internal controls over financial reporting that are effective to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
GAAP. Except as described in Schedule 4.6, the accounts receivable recorded by
the Company in the Financial Statements are fairly stated in accordance with
GAAP and, to Sellers' Knowledge, there is no basis under GAAP to write off any
such accounts receivable.
19
SECTION 4.7. Indebtedness; Undisclosed Liabilities; Off Balance Sheet
Arrangements. As of the date hereof, the Company has no indebtedness for
borrowed money, other than (i) the principal amount of and interest accrued on
the indebtedness under the Bank Credit Facility and the Subordinated Notes and
(ii) as disclosed on Schedule 4.7. In addition, as of the date hereof, the
Company has no liabilities or obligations of a type required to be reflected on
a balance sheet prepared in accordance with GAAP or described in the notes
thereto, except for liabilities or obligations (i) reflected or reserved against
in the balance sheet dated April 30, 2004 included in the Interim Financial
Statements (the "Latest Balance Sheet"), (ii) incurred by the Company in the
ordinary course of business consistent with past practice after the date of the
Latest Balance Sheet or (iii) described on Schedule 4.7. Schedule 4.7 lists all
documentation creating or governing all "off-balance sheet arrangements" (as
defined in Item 303(a)(4) of Regulation S-K promulgated by the Securities and
Exchange Commission) which the Company would be required to disclose under Item
303(a) of Regulation S-K if the Company were subject to the periodic reporting
requirements of the Exchange Act. No representation or warranty is made in this
Section 4.7 with respect to any liability for Taxes.
SECTION 4.8. Absence of Certain Changes. Except as set forth in
Schedule 4.8, since the date of the Latest Balance Sheet, the business of the
Company has been conducted in the ordinary course of business consistent in all
material respects with past practice and there has not been: (i) any event,
occurrence or development which, individually or in the aggregate, has had, or
could reasonably be expected to have, a Material Adverse Effect on the Company;
(ii) any incurrence, assumption or guarantee by the Company of any indebtedness
for borrowed money (other than interest accrued under the terms of the Bank
Credit Facility) or any obligation to pay the deferred purchase price of
property of a type that should be reflected as indebtedness on a balance sheet
in accordance with GAAP (other than trade payables incurred in the ordinary
course of business consistent with past practice); (iii) any making of any loan,
advance or capital contribution to or investment in any Person; (iv) any damage,
destruction, loss or casualty (whether or not covered by insurance) affecting
the business, properties or assets of the Company which, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect on the Company; (v) any material change in the method of accounting or
accounting practice by the Company, except for any such change required by
reason of a concurrent change in GAAP; (vi) any transaction or commitment made,
or any contract or agreement entered into, by the Company that is material to
the business or operations of the Company (including the acquisition or
disposition of assets) or any relinquishment by the Company of any material
contract or other right, in either case, other than transactions and commitments
in the ordinary course of business consistent in all material respects with past
practices and those contemplated by this Agreement; (vii) any material increase
in compensation payable or benefits to directors, executive officers or key
employees of the Company or any grant of any severance, termination or retention
payment to any director, officer or key employee of the Company; (viii) any
labor dispute, other than routine grievances, or any lock out, strikes,
slowdowns, work stoppages or threats thereof by or with respect to any employees
of the Company; (ix) any capital expenditure, or commitment for capital
expenditure, for additions or improvements to property, plant and equipment in
excess of $200,000, that was not part of the Company's capital budget included
in Schedule 4.8 hereto (other than as required to effect a cure as permitted
under paragraph (c) of the definition of the term "Material Adverse Effect"); or
(x) any commitment or agreement to do any of the foregoing.
20
SECTION 4.9. Litigation; Orders.
(a) Schedules 4.9, 4.16(c) and 4.16(d) list all Legal Proceedings
pending or, to Sellers' Knowledge, threatened in writing against the Company.
There are no Legal Proceedings pending against the Sellers or the Company, or,
to Sellers' Knowledge, threatened in writing that question the validity or
enforceability of this Agreement or any action taken or to be taken by the
Sellers or the Company in connection with, or which seek to enjoin, alter, or
materially delay or obtain monetary damages in respect of, this Agreement or the
consummation by the Sellers or the Company of the transactions contemplated
hereby or that could reasonably be expected to adversely affect in any material
respect the ability of either the Sellers or the Company to perform its
obligations under and consummate the transactions contemplated by this
Agreement.
(b) The Company is not in violation of and, to Sellers' Knowledge, is
not under any investigation with respect to, and has not been overtly threatened
or charged with or given notice of any violation of, any Law or Order, except
for violations that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
SECTION 4.10. Employees.
(a) Schedule 4.10 sets forth the name and title of each current
employee of the Company, including such employee's (i) rate of compensation,
(ii) job title, (iii) date of hire, and (iv) whether such employee is a
part-time or full-time employee. None of the employees is represented by a
union, and no union organizing efforts have been conducted within the last five
(5) years or are now being conducted or threatened. The Company has not at any
time during the last five (5) years had, nor to the knowledge of the Company, is
there now threatened, a strike, picket, work stoppage, work slowdown or other
labor dispute. None of the employees of the Company has formally notified the
Company that he or she intends to terminate his or her employment with the
Company as a result of the execution and delivery of this Agreement or within
three months following the Closing.
(b) The Company has not violated any provision of any Law or Order of
any Governmental Authority regarding the terms and conditions of employees,
former employees or prospective employees or other labor-related matters,
including, without limitation, Laws, rules, regulations, orders, rulings,
decrees, judgments and awards relating to immigration, discrimination, fair
labor standards and occupational health and safety, wrongful discharge or
violation of the personal rights of employees, former employees or prospective
employees, except for such violations which have not had or would not reasonably
be expected to have, a Material Adverse Effect on the Company. The Company is
not party to nor has ever been party to any collective bargaining agreements.
There is no dispute, claim or proceeding pending with, or to the knowledge of
the Company, threatened by, the Immigration and Naturalization Service with
respect to the Company or any employee.
21
(c) Except as set forth on Schedule 4.10, the Company is not a party to
any written employment agreement with any of its employees. The Company has
provided or made available to Buyer true and correct copies of each employment
agreement listed on Schedule 4.10 and each amendment thereto executed by the
Company.
(d) Prior to the date hereof, the Company has not incurred any
liability or obligation under the Worker Adjustment and Retraining Notification
Act.
(e) The Company has not had and is not reasonably expected to have any
liability, either direct or indirect, absolute or contingent, as a result of any
misclassification of a person (i) as an independent contractor rather than as an
employee, or (ii) as an exempt or non-exempt employee.
SECTION 4.11. Employee Benefits.
(a) Schedule 4.11 contains a true and complete list of each Employee
Benefit Plan, and each other option, incentive, deferred compensation or fringe
benefit plan, program or arrangement maintained or contributed to or required to
be contributed to by the Company for the benefit of any employee or former
employee of the Company (the "Company Plans").
(b) The Company is not part of a controlled group of corporations and
is not under common control with any other entity, within the meaning of Section
414(b) or (c) of the Code. The Company does not have any liability in connection
with a multiemployer plan, as defined in Sections 3(37) of ERISA, or any plan
subject to Section 412 of the Code or Section 302 of ERISA.
(c) With respect to the Company Plans, a true and complete copy of (i)
each of the Plans and related trust agreements, insurance contracts and other
funding agreements, (ii) the most recent Summary Plan Description for each
Company Plan for which a summary plan description is required and any summary of
material modification with respect to an amendment to a Company Plan, and (iii)
the most recent Annual Report (Form 5500) filed with the IRS have been furnished
to Buyer. All contributions required with respect to each Company Plan for all
periods through the Closing Date shall have been made by such date (or provided
for by the Company by adequate reserves on its financial statements).
(d) Each Company Plan has been administered in all material respects in
accordance with its terms and in compliance with the provisions of ERISA, the
Code (including rules and regulations thereunder) and other Laws applicable
thereto. The Company and each Company ERISA Affiliate have performed all
material obligations required to be performed by them under, are not in any
material respect in default under or in violation of, and have no knowledge of
any default or violation by any party to, any Company Plan. With respect to the
Company Plans, no event has occurred and, to the knowledge of the Company, there
exists no condition or set of circumstances, in connection with which the
Company is reasonably likely to be subject to any material liability under the
terms of such Company Plans, ERISA, the Code, or any other applicable Law. The
Company does not have any actual or contingent liability under Title IV of
ERISA, including, without limitation, any liability in connection with the
termination or reorganization of any employee benefit plan subject to Title IV
of ERISA and no fact or event exists which is reasonably likely to give rise to
such liability.
22
(e) The Company has made available to Buyer: (i) copies of all material
severance agreements, programs and policies of the Company; and (ii) copies of
all material plans, programs, agreements and other arrangements of the Company
with or relating to its employees which contain change in control provisions.
Except as described in Schedule 4.11, neither the execution nor delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (A)
result in any payment becoming due to any director, officer or employee of the
Company under any Company Plan or otherwise, which payment is material in
relation to the compensation previously provided to such individual, (B)
materially increase any benefits otherwise payable under any Company Plan, which
increase is material in relation to the benefits previously provided, or (C)
result in any acceleration of the time of payment or vesting of any material
benefits.
(f) The Company sponsors, maintains and contributes to only one
Employee Benefit Plan that is intended to be "qualified" within the meaning of
Section 401(a) of the Code and Section 401(k) of the Code (the "401(k) Plan").
The 401(k) Plan document, together with any amendments thereto, contains the
material provisions required to be contained in such a plan, or any such
provisions that are missing from the 401(k) Plan would be able to be added to
the 401(k) Plan with Internal Revenue Service approval without material cost to
the Company. To the Sellers' Knowledge, there exists no condition or set of
circumstances which is likely to adversely affect the qualified status of the
401(k) Plan or that would prevent the IRS from issuing a favorable determination
letter with respect to the qualified status of the 401(k) Plan.
SECTION 4.12. Taxes.
(a) Except as set forth on Schedule 4.12:
(i) (A) all federal and all material state and local Tax
Returns required to be filed by or with respect to the Company as of
the date hereof have been timely filed, and were correct and complete
in all material respects and have been prepared in substantial
compliance with all applicable laws and regulations, (B) all material
Taxes owed by the Company which are due and payable have been paid in
full, (C) all material Tax withholding and deposit requirements imposed
on or with respect to the Company have been satisfied in full in all
respects, and (D) there are no mortgages, pledges, Liens, encumbrances,
charges or other security interests on any of the assets of the Company
that arose in connection with any failure (or alleged failure) to pay
any Tax;
23
(ii) (A) there is no claim against the Company for any Taxes,
(B) no assessment, deficiency or adjustment has been asserted,
proposed, or threatened in writing with respect to any Tax Return of or
with respect to the Company; and (C) no claim has ever been made by any
authority in a jurisdiction where the Company does not file a Tax
Return that it is or may be subject to taxation by that jurisdiction;
(iii) there is not in force any extension of time with respect
to the due date for the filing of any Tax Return of or with respect to
the Company or any waiver or agreement for any extension of time for
the assessment or payment of any Tax of or with respect to the Company;
(iv) the Company does not own any interest in any controlled
foreign corporation (as defined in section 957 of the Code), foreign
personal holding company (as defined in Section 552 of the Code),
passive foreign investment company (as defined in section 1297 of the
Code);
(v) none of the Property of the Company is subject to a
safe-harbor lease (pursuant to section 168(f)(8) of the Internal
Revenue Code of 1954 as in effect after the Economic Recovery Tax Act
of 1981 and before the Tax Reform Act of 1986) or is "tax-exempt use
property" (within the meaning of section 168(h) of the Code) or
"tax-exempt bond financed property" (within the meaning of section
168(g)(5) of the Code);
(vi) the Company will not be required to include any amount in
income for any taxable period ending the Closing Date as a result of a
change in accounting method for any taxable period ending on or before
the Closing Date, pursuant to any written agreement with any Tax
authority with respect to any such taxable period, installment sale or
open transaction disposition made prior to the Closing Date, or as a
result of prepaid amounts received on or prior to the Closing Date;
(vii) the Company has not entered into any written agreement
with any taxing authority that requires the Company to take any action
or to refrain from taking any action that could have a Material Adverse
Effect on the Tax liabilities of the Company after the Closing Date;
(viii) No Seller or director or officer (or employee
responsible for Tax matters) of the Company expects any authority to
assess any material additional Taxes for any period for which Tax
Returns have been filed. No foreign, federal, state, or local tax
audits or administrative or judicial Tax proceedings are pending or
being conducted with respect to the Company. The Company has not
received from any foreign, federal, state, or local taxing authority
(including jurisdictions where the Company has not filed Tax Returns)
any (i) notice indicating an intent to open an audit or other review,
(ii) request for information related to Tax matters, or (iii) notice of
deficiency or proposed adjustment for any amount of Tax proposed,
asserted, or assessed by any taxing authority against the Company.
Schedule 4.12 lists all federal, state, local, and foreign income Tax
Returns filed with respect the Company for taxable periods ended on or
after July 13, 2000, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject
of audit. Sellers have delivered to Buyer correct and complete copies
of all federal income Tax Returns, examination reports, and statements
of deficiencies assessed against or agreed to by the Company filed or
received since July 13, 2000;
24
(ix) The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in
the aggregate, in the payment of any "excess parachute payment" within
the meaning of Code ss.280G (or any corresponding provision of state,
local or foreign Tax law). The Company is not a party to or bound by
any Tax allocation or sharing agreement. The Company (A) has not been a
member of an affiliated group filing a consolidated federal income Tax
Return and (B) has no Liability for the Taxes of any Person under Reg.
ss.1.1502-6 (or any similar provision of state, local, or foreign law),
or as a transferee or successor.
(x) As of December 31, 2003, the Company had an aggregate tax
basis in its assets of not less than $36.020 million and the Company
had net operating loss carryovers of not less than $14.257 million;
(xi) The due and unpaid Taxes of the Company (A) did not, as
of the date of the Audited Balance Sheet or the Latest Balance Sheet,
exceed the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book
and Tax income) set forth on the face of the Audited Balance Sheet or
the Latest Balance Sheet, respectively (rather than in any notes
thereto), and (B) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the past
custom and practice of the Company in filing its Tax Returns. Since the
date of the Latest Balance Sheet, the Company has not incurred any
liability for Taxes arising from extraordinary gains or losses, as that
term is used in GAAP, outside the ordinary course of business
consistent with past custom and practice; and
(xii) The Company has not distributed stock of another person,
nor has had its stock distributed by another Person, in a transaction
that was purported or intended to be governed in whole or in part by
Code ss.355 or ss.361.
(b) Notwithstanding anything to the contrary set forth in this Article
IV, the Sellers and the Company make no representation or warranty to Buyer
relating to Taxes or the absence of liabilities with respect thereto other than
pursuant to Section 4.6 and this Section 4.12, which are intended to contain the
sole and exclusive representations and warranties of the Sellers or the Company
relating to Taxes or the absence of liabilities with respect thereto.
SECTION 4.13. Title to Securities. The delivery by the Sellers to Buyer
at the Closing of the Shares or the certificates representing the same in
accordance with the terms of this Agreement will vest Buyer on the Closing Date
with good and valid title to all of the Shares, free and clear of all Liens and
other Adverse Claims, other than any Liens or other Adverse Claims imposed by or
arising as a result of any action on the part of Buyer. The Shares to be
purchased by Buyer pursuant to this Agreement represent 100% of the outstanding
shares of Capital Stock of the Company on a fully-diluted basis (after giving
effect to the transactions described in Section 6.4(a)).
25
SECTION 4.14. Dividends and Certain Other Payments. Except as set forth
on Schedule 4.14, since the date of the Latest Balance Sheet, the Company has
not paid or declared any dividends or made or agreed to make any distributions
in respect of its Capital Stock or purchased, redeemed or otherwise acquired any
Capital Stock or other securities of the Company. Except for regularly scheduled
interest payments on the Subordinated Notes, the Company has not made any
payments of any portion of the principal amount or interest of the Subordinated
Notes since the date of the Latest Balance Sheet. The Company has not made any
other payments to the Sellers or any of its Affiliates since the date of the
Latest Balance Sheet, except for routine expense reimbursements made in the
ordinary course of business.
SECTION 4.15. Bank Accounts; Powers of Attorney. Schedule 4.15 sets
forth (a) the name of each financial institution with which the Company has
borrowing or investment agreements, deposit or checking accounts or safe deposit
boxes, (b) the types of those arrangements and accounts including the names in
which the accounts or boxes are held, the account or box numbers and the name of
each Person authorized to draw thereon or have access thereto and (c) the names
of all Persons, if any, holding powers of attorney (other than powers of
attorney incidental to commercial relationships entered into in the ordinary
course of business) from the Company and a summary statement of the terms
thereof. None of the Energy Spectrum Sellers or their Affiliates (other than the
Company) or their respective officers, directors or employees hold any powers of
attorney from the Company.
SECTION 4.16. Environmental Laws. Except as otherwise disclosed in
Schedules 4.16(a), (b), (c), (d), (f), (g), (h) and (i):
(a) The Company has obtained or filed applications for all Permits
required under applicable Environmental Laws to operate its Facilities and
conduct its businesses as they are currently being operated or conducted.
Schedule 4.16(a) sets forth a true and correct list of all Permits required
under all applicable Environmental Laws which are held by the Company or for
which the Company has filed applications.
(b) Since July 13, 2000 and, to the Sellers' Knowledge, prior to such
date, the Company has operated its Facilities and conducted its businesses in
substantial compliance with all applicable Environmental Laws and in substantial
compliance with the requirements and conditions of the Permits listed in
Schedule 4.16(a).
(c) Since July 13, 2000 and, to the Sellers' Knowledge, prior to such
date, no investigation, review, demand, information request, notice of violation
or non-compliance, notice of potential responsibility or liability, citation,
order, legal proceeding, or other type of enforcement action has been (i) issued
to or filed against the Company, or (ii) is pending or, to the Sellers'
Knowledge, threatened against the Company, by any Governmental Authority or
other Person, in each case under or in connection with any Environmental Law in
connection with the operation of its facilities or the conduct of its business,
that could give rise to a material Loss or material Claim under an Environmental
Law.
26
(d) To the Sellers' Knowledge, there are no releases or threatened
releases of Hazardous Materials on any property owned, leased or otherwise used
by the Company that, if such releases or threatened releases of Hazardous
Materials were brought to the attention of any Governmental Authority or other
Person, would likely give rise to a material Loss or material Claim under an
Environmental Law.
(e) The Company has provided or made available to Buyer true and
correct copies of all internal and external environmental reports or assessments
with respect to the environmental condition of any Property or Facilities owned
or leased by the Company or the compliance by the Company with Environmental
Laws prepared by or on behalf of the Company or within the possession and
control of the Company relating to all Property, Pipeline Assets or Facilities
owned or leased by the Company, including, but not limited to, the Xxxx oil
pipeline system acquired by the Company in connection with the Texaco Agreement
or the Waynoka Plant.
(f) Neither the Sellers nor the Company are parties to any
indemnification or other contractual agreements that are likely to give rise to
liability or responsibility under any Environmental Laws, except where those
contractual obligations are not likely to have a Material Adverse Effect upon
the Company.
(g) Neither the Sellers nor the Company are aware of any proposed or
pending changes to applicable Environmental Laws (other than changes that have
been publicly proposed to be applicable to the national or regional natural gas
gathering, treatment or processing industry generally) that are likely to become
effective in the next 18 months and that could reasonably be expected to have a
Material Adverse Effect upon the Company.
(h) To the Sellers' Knowledge, there are no presently existing facts,
circumstances, conditions or occurrences involving the Facilities, properties or
operations of the Company that could reasonably be expected to form the basis of
a Claim under an Environmental Law against the Company that could reasonably be
expected to result in a material Loss under an Environmental Law or that could
reasonably be expected to materially increase the operating or compliance costs
for the Facilities over the next 18 months.
(i) Since July 13, 2000 and, to the Sellers' Knowledge, prior to such
date, all hazardous substances, solid waste, and oil and gas exploration and
production wastes, if any, generated at any and all Property of the Company have
been transported, treated and disposed of in all material respects in accordance
with Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and, to the
Sellers' Knowledge, all such transport carriers and treatment and disposal
facilities have been and are operating in compliance in all material respects
with Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and are not the
subject of any existing, pending or threatened action, investigation or inquiry
by any Governmental Authority as to any of the matters covered by this
paragraph (i).
27
SECTION 4.17. Material Contracts. Except as set forth on Schedule 4.17,
the Company is not a party to or bound by (i) any partnership, joint venture or
similar agreement or arrangement, (ii) any agreement relating to the acquisition
or disposition of any business (whether by merger, sale of stock, sale of assets
or otherwise), (iii) any agreement with the Sellers or any of their Affiliates
or any director or officer of the Energy Spectrum Sellers or any of their
Affiliates that will continue in effect after the Closing (provided that for
purpose of this Section 4.17 the proviso to the first sentence of the definition
of Affiliate will not apply), (iv) any contract with a labor union, (v) any
agreement that limits in any material respect the ability of the Company to
compete in any line of business or with any Person, (vi) any Contract with a
Governmental Authority, or (vii) any Material Contract. The Company has provided
or made available to Buyer true and correct copies of each Contract listed in
Schedule 4.17 and each amendment thereto executed by the Company. The Company is
not in breach or default in the performance of its duties or obligations under
any Contract listed in Schedule 4.17, where such breach or default, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect. Each Contract listed in Schedule 4.17 is in full force and effect and
constitutes the enforceable obligations of the Company and, to the Sellers'
Knowledge, the other parties thereto and, except as set forth on Schedule 4.17,
will continue in effect without requirement for any consent by any party as a
result of this Agreement and the consummation of the transactions contemplated
hereby.
SECTION 4.18. Title to Property; Leases. The Company has good,
sufficient and clear title to all of its Property, in each case free and clear
of Liens, adverse possession or abandonment claims, other than those defects in
title or, with respect to the Pipeline Assets or Facilities, failures in title
which, individually or in the aggregate, would not have a Material Adverse
Effect on the Company. Except as set forth in Schedule 4.18 hereto, (i) the
consummation of the transactions contemplated by this Agreement will not result
in any material violation of, or result in any material default under, any
contract or agreement between the Company and any third parties with respect to
the ownership or operation of the Property and (ii) the Company is not in
material violation of or material default under any such contract or agreement
and there is no notice of material default or formally announced potential
material default or event of default with respect to any such contract or
agreement. Schedule 4.18 hereto lists all material leases to which the Company
is a party or is bound, whether as lessee or lessor, with respect to any real
property and all material surface easements and railroad crossing rights of the
Company. All leases, surface easements and railroad crossing agreements held by
the Company are valid and subsisting and are in full force and effect, with such
exceptions as could not reasonably be expected to have a material adverse effect
on the ability of the Company to conduct its operations in a manner consistent
with past practice. Except as set forth on Schedule 4.18 hereto, there is no
default, notice of default or formally announced potential default or event of
default with respect to any lease, surface easement or railroad crossing rights
of the Company that could reasonably be expected to interfere in any material
respect with the conduct of the business of the Company. All material leases,
surface easements and railroad crossing rights of the Company will continue in
effect without requirement for any consent by any party as a result of this
Agreement and the consummation of the transactions contemplated hereby.
28
SECTION 4.19. Intellectual Property. To the Sellers' Knowledge, the
Company owns or has a valid right to use all Intellectual Property that is
individually or in the aggregate material to the conduct of the business of the
Company. The Company has not received any written notice asserting that, and, to
the Sellers' Knowledge, there is no reason to believe that, the conduct of the
business of the Company infringes upon or violates any Intellectual Property of
any Person, except for any infringement or violation that could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 4.20. Intercompany Liabilities. Except as set forth on Schedule
4.20 there are no intercompany liabilities (other than the liabilities evidenced
by the Subordinated Notes) as of the date of the Latest Balance Sheet between
the Energy Spectrum Sellers and their Affiliates, on the one hand, and the
Company, on the other hand. Since the date of the Latest Balance Sheet, other
than accrued interest on the Subordinated Notes there has not been any accrual
of liability by the Company to the Energy Spectrum Sellers or any of their
Affiliates or any transaction between the Company and the Energy Spectrum
Sellers and any of their Affiliates.
SECTION 4.21. Insurance Coverage. Schedule 4.21 sets forth a list of
all insurance policies and fidelity bonds currently in effect (or, in the case
of occurrence-based policies, in effect since May 18, 2000) providing insurance
coverage to the Company with respect to the assets, business, operations,
employees, officers or directors of the Company. There is no claim by the
Company pending under any such policies or bonds to which coverage has been
questioned, denied or disputed by the underwriters or issuers of such policies
or bonds nor has any denial of coverage or reservation of rights notice been
given or, to Sellers' Knowledge, proposed to be given, by any such underwriter
and issuer with respect to a claim that is still pending. All premiums due under
such policies and bonds have been timely paid and the Company has otherwise
complied in all material respects with the terms and conditions of all such
policies and bonds. Such policies of insurance and bonds are in full force and
effect. To Sellers' Knowledge, there is no threatened termination of, or
material alteration of coverage under, any such policies and bonds. No such
policies and bonds will become terminable, in whole or in part, as a result of
the transactions contemplated by this Agreement.
SECTION 4.22. Permits. Schedules 4.16(a) and 4.22 list all Permits held
by the Company affecting, or relating to, the assets or business of the Company.
Except as set forth in Schedules 4.16(a) and 4.22, (i) the Permits are valid and
in full force and effect, (ii) the Company has not received any notice that any
Governmental Authority intends to cancel, terminate or not renew any such
Permit, (iii) the Company is not in default under and, to the Sellers'
Knowledge, no condition exists that with or without the giving of notice or the
passage of time, or both, would constitute a default under, any such Permit and
(iv) no Permit will be terminated or become terminable, in whole or in part, as
a result of the transactions contemplated by this Agreement. The Permits listed
under the caption "FCC Permits" in such Schedule (the "FCC Permits") are not
material to the business, operations or financial condition of the Company, and
the failure to obtain any required transfer of such Permits in connection with
the transactions contemplated by this Agreement would not interfere in any
material respect with the business, operations or financial condition of the
Company after the Closing.
29
SECTION 4.23. Hedging. Except as set forth on Schedule 4.23, (a) the
Company is not engaged in any natural gas or other futures or options trading in
respect of which it has any material future liability, or a party to any swaps,
xxxxxx futures or similar instruments, and (b) the Company is in full compliance
with all applicable provisions of Statement of Financial Accounting Standards
No. 133 ("FASB 133") and as of December 31, 2003 was in a xxxx-to-market
position with regard to all hedging or futures commodities transactions as of
such date. The Latest Balance Sheet reflects a xxxx-to-market position as of the
date thereof in accordance with FASB 133.
SECTION 4.24. Gas Imbalances. Schedule 4.24 sets forth all material gas
imbalances affecting the Pipeline Assets to which the Company was subject as of
December 31, 2003.
SECTION 4.25. No Untrue Statements. No statement by the Company or any
Seller contained in this Agreement or the Schedules, contains or will contain
any untrue statement of a material fact, or, in the case of the Schedules, omits
or will omit to state a material fact necessary in order to make the statements
therein not misleading. To the Sellers' Knowledge, no written materials provided
to the Buyer by the Company or the Sellers or their respective representatives
in connection with the transactions contemplated by this Agreement, as the
statements made in any such written materials have been or may be supplemented
or amended by the Schedules, contained or will contain any untrue statement of
material fact.
SECTION 4.26. Regulatory Agencies.
(a) All currently effective filings heretofore made by the Company with
the Texas Railroad Commission and the Oklahoma Corporation Commission
(collectively, "Regulatory Agencies") were made in compliance in all materials
respects applicable laws and the factual information contained therein was true
and correct in all material respects as of the respective dates of such filings.
(b) Neither the Company nor any portion of its assets is subject to the
jurisdiction of the Federal Energy Regulatory Commission under the Natural Gas
Act of 1938.
(c) The Company is not (i) a "public utility company", a "holding
company" or a "subsidiary company" of a "holding company" or (ii) to the
Sellers' Knowledge, an "affiliate" of a "holding company", in each case within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
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SECTION 4.27. Certain Payments. Since December 31, 2000, neither the
Company nor, to the Sellers' Knowledge, any director, officer, agent, or
employee of the Company, or any other Person associated with or acting for or on
behalf of the Company, has directly or indirectly, in violation of applicable
Law or as a part of a transaction or scheme in violation of applicable Law, (a)
made any contribution, gift, bribe, rebate, payoff, influence payment, kickback,
or other payment to any Person, private or public, regardless of form, whether
in money, property, or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured or (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of the Company or (b) established or maintained any fund or asset for
any of the purposes described above that has not been recorded in the books and
records of the Company.
SECTION 4.28. Indemnity Claims. Schedule 4.28 hereto contains a true
and complete list of all written indemnification claims submitted by the Company
pursuant to the terms of that certain Purchase and Sale Agreement, dated as of
May 18, 2000, between the Company and Texaco Exploration & Production, Inc., as
amended (the "Texaco Agreement").
SECTION 4.29. Preferences. To the Sellers' Knowledge, Schedule 4.29
hereto sets forth a list of all current and past customers of the Company, if
any, which have filed a petition in bankruptcy or otherwise become subject to
bankruptcy proceedings before any United States Bankruptcy Courts during the
past 24 months and from which the Company has received payments in excess of
$100,000 during the 90-day period preceding the commencement of such bankruptcy
proceedings. Except as set forth on Schedule 4.29, none of the customers
identified on Schedule 4.29, or any other Person on behalf of such customers,
has filed a claim alleging that the Company received a preferential payment or
transfer in violation of the United States Bankruptcy Code.
SECTION 4.30. Operational Standards and Maintenance Programs. Except as
disclosed in Schedule 4.30, the Company has, at all times since the beginning of
its last full fiscal year, operated the Pipeline Assets and Facilities in a good
and workmanlike manner (as determined by reference to operating standards for
companies engaged in similar lines of business in the geographic areas in which
the Company operates) and subject to prudent and customary maintenance programs
(of the type employed by companies engaged in similar lines of business in the
geographic areas in which the Company operates), in each case with such
exceptions as could not reasonably be expected to interfere in any material
respect with the conduct of the business of the Company.
SECTION 4.31. Fees. Except as set forth in Schedule 4.31, neither the
Sellers nor the Company has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary in connection with the
transactions contemplated hereby.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer hereby represents and warrants to the Sellers as follows:
SECTION 5.1. Organization; Power and Authority. Buyer is a partnership
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is qualified to transact business in the State of
Oklahoma. Buyer has all requisite partnership power and authority to own and
operate its assets and properties and conduct its business and operations as
presently being conducted.
SECTION 5.2. Authorizations; Execution and Validity. The execution and
delivery of this Agreement by Buyer, the performance by Buyer of its obligations
under this Agreement and the consummation by Buyer of the transactions
contemplated hereby have been duly authorized by all necessary partnership
action on the part of the Buyer. This Agreement has been duly executed and
delivered by Buyer, constitutes a valid and binding obligation of Buyer and is
enforceable against Buyer in accordance with its terms, except to the extent
that enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect affecting creditors'
rights generally or general principles of equity.
SECTION 5.3. No Conflicts; Consents. None of the execution and delivery
by Buyer of this Agreement, the performance by Buyer of its obligations under
this Agreement or the consummation by Buyer of the transactions contemplated
hereby will (a) assuming compliance with the matters referred to in clause (d)
below, violate any Law, except as would not reasonably be expected to materially
adversely affect the ability of Buyer to perform its obligations under and
consummate the transactions contemplated by this Agreement; (b) violate the
certificate of limited partnership or partnership agreement of Buyer, (c)
violate any Order to which Buyer is a Party or by which it is bound, except as
would not reasonably be expected to materially adversely affect the ability of
Buyer to perform its obligations under and consummate the transactions
contemplated by this Agreement, (d) require any consent from or filing with any
Governmental Authority (other than (i) the filing of notification under the HSR
Act and the expiration or early termination of the applicable waiting period
thereunder, or (ii) any informational filing with an utility regulating
authority in Texas or Oklahoma), or any consent from any other Person, except as
would not, individually or in the aggregate, reasonably be expected to adversely
affect the ability of Buyer to perform its obligations under and consummate the
transactions contemplated by this Agreement, or (e) violate or breach any
material contract of the Buyer, except as would not, individually or in the
aggregate, reasonably be expected to adversely affect the ability of Buyer to
perform its obligations under and consummate the transactions contemplated by
this Agreement.
SECTION 5.4. Litigation. There are no Legal Proceedings pending against
Buyer or, to Buyer's Knowledge, threatened (i) that question the validity of
this Agreement or any action taken or to be taken by Buyer in connection with,
or which seek to enjoin, alter, materially delay or obtain monetary damages in
respect of, this Agreement or the consummation by Buyer of the transactions
contemplated hereby or (ii) that, if adversely determined, would adversely
affect in any material respect the ability of Buyer to perform its obligations
under and consummate the transactions contemplated by this Agreement.
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SECTION 5.5. Access to Documents. Each of the Sellers and the Company
has made available for inspection by Buyer and its representatives the corporate
records, books of account, Contracts and other documents relating to the
business, operations and affairs of the Company requested by Buyer. All access
and information will be deemed to be subject to, and remain subject to, the
provisions of Section 7.3.
SECTION 5.6. Investment Intent; Sophisticated Buyer. Buyer (a) is an
informed sophisticated entity with sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the risks and
merits of its purchase of the Shares, (b) acknowledges that the purchase of the
Shares is consistent with its general investment objectives, (c) understands
that the purchase of the Shares involves a high degree of risk, (d) is
financially able to bear the economic risks of purchasing the Shares, (e) has
had an opportunity to discuss the business, management and financial affairs of
the Company with the Sellers and the management of the Company and, in entering
into this Agreement, is relying upon the representations, warranties and other
terms and provisions of this Agreement and on its informed conclusions of its
own investigations of such businesses, (f) is acquiring the Shares for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, (g) was not organized for the specific
purpose of acquiring the Shares, (h) understands that the Shares have not been
registered under the Securities Act or the applicable securities or blue sky
laws of any state and, accordingly, must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, (i) is an "accredited investor" as defined in
Rule 501(a) under the Securities Act, (j) understands that the exemptions from
registration under the Securities Act relied upon by the Sellers are based in
part on the fact that the Buyer is an "accredited investor" as defined in Rule
501(a) under the Securities Act and the other matters addressed in this Section
5.6 and (k) has no present need for liquidity that might need to be satisfied
through a sale of the Shares.
SECTION 5.7. Financing. Buyer has, and will have as of the Closing
Date, sufficient funds with which to pay the Purchase Price and consummate the
transactions contemplated by this Agreement.
SECTION 5.8. Fees. Except as set forth in Schedule 5.8, Buyer has not
paid or become obligated to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated hereby.
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ARTICLE VI
COVENANTS OF SELLERS AND THE COMPANY
Each of the Sellers and the Company hereby covenants and agrees, as
applicable, that:
SECTION 6.1. Conduct of Business. Until the Closing Date, the Company
shall, unless Buyer shall otherwise consent in writing (which consent shall not
be unreasonably withheld or delayed) or except as otherwise specifically
contemplated by this Agreement:
(a) operate only in the usual, regular and ordinary manner consistent
with past practice, and use its commercially reasonable efforts to preserve and
maintain its present business operations, organization and goodwill and
relationships with third parties;
(b) maintain books, accounts and records in the usual, regular and
ordinary manner, on a basis consistent with prior years, and not change any of
its accounting principles, except as required by GAAP;
(c) comply in all material respects with all applicable Laws and Orders
to which they are subject;
(d) not enter into any merger or consolidation with any Person and not
engage in any new business, or except pursuant to Contracts or commitments
existing on the date of this Agreement and indicated in Schedule 6.1(d), make a
loan, advance or capital contribution to any Person;
(e) not sell, lease, license or otherwise dispose of or pledge or
otherwise encumber any material assets or Property of the Company except (i)
pursuant to Contracts or commitments existing on the date of this Agreement and
(ii) in the ordinary course of business consistent with past practice;
(f) not amend or modify the Company's certificate of incorporation or
bylaws;
(g) not issue, redeem, exchange or sell any Capital Stock or other
equity securities nor enter into any obligation convertible into or exchangeable
or exercisable for any of its Capital Stock or other equity securities nor make
any changes (by split-up, combination, reorganization or otherwise) in the
capitalization of the Company, nor purchase, redeem or otherwise acquire any
Capital Stock of the Company;
(h) not pay, declare or set aside for payment any dividend or make or
agree to make any distribution in respect of the Capital Stock or other
securities of the Company or rights or obligations convertible into or
exchangeable or exercisable for any shares of the Capital Stock or other
securities of the Company or obligations convertible into such, or any options,
warrants or other rights to purchase or subscribe to any of the foregoing;
(i) not make any other payments to the Sellers or their Affiliates,
except (i) pursuant to Contracts or commitments existing on the date of this
Agreement and (ii) in the ordinary course of business consistent with past
practice;
(j) not waive, compromise or settle any right or Claim in an amount in
excess of $25,000;
34
(k) not modify, amend or terminate any Material Contract, any Company
Plan or any employment agreement with any officer or employee of the Company,
except for renewals thereof in accordance with their terms, or enter into any
new employment or severance agreement with any officer or employee of the
Company;
(l) use commercially reasonable efforts to continue to carry and
maintain in all material respects all existing insurance;
(m) not (i) create, incur, assume, guarantee or otherwise become liable
with respect to any indebtedness for borrowed money, issue or cause to be issued
any notes, bonds, debentures, letters of credit or grant any option, warrant or
right to purchase any thereof, other than pursuant to credit facilities existing
on the date of this Agreement and consistent with past practice, or (ii) issue
any securities convertible into or exercisable or exchangeable for any debt
securities of the Company;
(n) use commercially reasonable efforts to maintain in full force and
effect all material Permits held by the Company; and
(o) not agree to take any action or actions prohibited by any of the
foregoing clauses (a) through (n).
SECTION 6.2. Certain Regulatory Matters. Sellers or (in the case of
paragraphs (b) and (c) below) the Company agree that they will take, or cause to
be taken, the following actions:
(a) HSR Act. Cause the "ultimate parent entity" of the Company to (i)
file any notification and report form and related material required under the
HSR Act in connection with the transactions contemplated by this Agreement as
soon as practicable and in any event not later than ten Business Days after the
date hereof; and (ii) provide promptly to the Department of Justice or Federal
Trade Commission such information and documents as are requested by them or are
necessary, proper or advisable to permit consummation of the transactions
contemplated by this Agreement; provided, however, that nothing contained in
this Agreement will require Sellers or any of their Affiliates to enter into any
agreement, consent decree or other commitment requiring Sellers or any of their
Affiliates to (a) divest or hold separate any material assets of Sellers or any
of their Affiliates, (b) litigate, pursue or defend any contested proceeding
challenging the transactions contemplated hereby as violations of any antitrust
laws or (c) take any other action that would, individually or in the aggregate,
materially adversely affect Sellers or any of their Affiliates.
(b) Regulatory compliance in Oklahoma and Texas. (i) File any
notification, or cooperate with the Buyer in filing such notification, with the
Oklahoma Corporation Commission and Texas Railroad Commission as may be required
by statute or regulation within the time frames prescribed therein and (ii)
provide promptly to said Commissions such information and documents that are
requested by them either for purposes of their own regulatory needs or insofar
as they may act as agents or instrumentalities of the United States Department
of Transportation.
35
(c) Environmental and Other Regulatory Permits; Cooperation. To the
extent that any Permits held by the Company under Environmental Laws or any
other Law (including, but not limited to, any Law administered by the Federal
Communications Commission) are required to be transferred, reissued or confirmed
as a result of the transactions contemplated hereby, (i) file any notifications,
forms, letters or other documents, or cooperate with the Buyer in filing such
notifications, forms, letters or other documents, with the applicable
Governmental Authority as may be required by statute or regulation within the
time frames prescribed therein, (ii) provide promptly to the applicable
Governmental Authority such information and other documentation that they may
require or request and (iii) use their commercially reasonable efforts to
cooperate fully in the transfer, reissue or confirmation of all Permits
identified in Schedule 4.16(a) and Schedule 4.22 that are necessary to the
continued operation of the businesses of the Company, including any actions that
are required Post-Closing. The obligations of the Sellers under this Section
6.2(c) shall survive the Closing.
SECTION 6.3. Further Actions. Each of the Sellers and the Company shall
execute and deliver such instruments and take such other actions as may
reasonably be required to (a) carry out the intent of this Agreement and (b)
consummate the transactions contemplated hereby, including but not limited to,
the obtaining of all consents, if any, required under Material Contracts.
SECTION 6.4. Options; Tax Withholding on Management Compensation
Amounts.
(a) The Sellers who hold any Options shall take all action required to
cause such Options to be cancelled and surrendered to the Company at Closing.
The Sellers shall allocate the Purchase Price among the Sellers in such a manner
as to reflect the cancellation and surrender of such Options in accordance with
those certain Sale Agreements, dated as of September 17, 2002, between the
Energy Spectrum Sellers and the Optionholders.
(b) The Parties acknowledge that the Management Compensation Amounts
payable pursuant to Section 3.2 and this Section 6.4 are subject to wage
withholding, social security withholding, and other related Taxes and
withholdings under applicable Law. Each Seller, MCA Recipient, and the Company
hereby authorizes the Buyer to withhold, from the Management Compensation
Amounts payable to the Sellers and the other MCA Recipients pursuant to this
Section 6.4, any and all such Taxes which are required to be withheld by the
Company with respect to such Management Compensation Amounts under applicable
Law (the "Tax Withholding Amounts"). For all other purposes, such Tax
Withholding Amounts will be treated as having been paid by the Buyer, on behalf
of the Company, to the MCA Recipients.
36
SECTION 6.5. Tax Matters. Without the prior written consent of Buyer,
the Company shall not change any election, change an annual accounting period or
change any accounting method, file any amended Tax Return, enter into any
closing agreement, settle any Tax claim or assessment relating to the Company,
surrender any right to claim a refund of Taxes, consent to any extension or
waiver of the limitation period applicable to any Tax claim or assessment
relating to the Company, or take any other similar action relating to the filing
of any Tax Return or the payment of any Tax, if such change, amendment,
agreement, settlement, surrender, consent or other action would have the effect
of increasing the Tax liability of the Company for any period ending after the
Closing Date or decreasing any Tax attribute of the Company existing on the
Closing Date. Without the prior written consent of Buyer, the Company shall not
make any election or adopt any accounting method that is inconsistent with any
such election or accounting method previously made or adopted by the Company, if
such election or adoption would have the effect of increasing the Tax liability
of the Company for any period ending after the Closing Date or decreasing any
Tax attribute of the Company existing on the Closing Date.
SECTION 6.6. Access to Information; Confidentiality; Financial
Statements.
(a) From the date hereof until the Closing Date, Sellers will (i) give
and will cause the Company to give, Buyer, its counsel, financial advisors,
auditors and other authorized representatives reasonable access during normal
business hours to the offices, properties, assets, books, records and other
documents of the Company and to the books and records of the Sellers relating to
the Company (provided, however, that the Buyer shall not be entitled to conduct
any environmental testing or sampling on or at any properties or Facilities of
the Company without the prior written consent of the Seller Representative
(which consent shall not be unreasonably withheld or delayed)), (ii) furnish,
and will cause the Company to furnish, to Buyer, its counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data and other information relating to the Company as such person may
reasonably request, (iii) instruct the employees, counsel, auditors and
financial advisors of Sellers and the Company to cooperate with Buyer in its
investigation of the Company and (iv) permit Buyer to make such inquiries of
such persons having business relationships with the Company (including, but not
limited to, suppliers, licensees and customers) as Buyer shall determine and
Sellers will cooperate fully, and will cause the Company to cooperate fully,
with Buyer in connection therewith. Any investigation pursuant to this Section
6.6 shall be conducted in such manner as not to interfere unreasonably with the
conduct of the business of Sellers or the Company. No investigation by Buyer or
other information received by Buyer shall operate as a waiver or otherwise
affect any representation, warranty, covenant or agreement given or made by
Sellers or the Company hereunder.
(b) From the date hereof until the Closing Date, the Company shall
deliver to Buyer, no later than 30 days after the end of each month, an
unaudited consolidated balance sheet of the Company as of the end of such month,
together with the related consolidated statement of income of the Company for
such month, which financial statements shall be prepared in a manner consistent
with the Interim Financial Statements.
37
(c) Without limiting the generality of Section 6.6(a), prior to the
Closing, (i) the Company shall, upon the written request of Buyer, prepare and
furnish to Buyer and any Affiliate of Buyer, as promptly as reasonably
practicable after receipt of such request, such audited and unaudited financial
statements of the Company as are required under applicable law to be filed as a
part of or incorporated into any registration statement (or amendment thereto)
filed or to be filed by Buyer or any Affiliate of Buyer under the Securities Act
or any periodic, current or other reports under the Exchange Act, and (ii) the
Company and the Sellers shall use their reasonable best efforts to cause the
independent public accountants of the Company (A) to perform any review of any
such unaudited financial statements required to be performed under the
provisions of Statement of Accounting Standards No. 100 as a condition to the
filing or incorporation of such unaudited financial statements, (B) to cooperate
in the preparation of any pro forma financial statements required to be filed by
Buyer with the Securities and Exchange Commission under the Exchange Act in
connection with the transactions contemplated by this Agreement and (C) to
deliver to the Buyer and/or any applicable Affiliate of Buyer such consents to
the use of any audited financial statements to be so filed or incorporated.
(d) From the date hereof until the Closing Date, subject to the last
sentence of this Section 6.6(d), Sellers shall cooperate, and shall cause the
Company to cooperate, in any manner reasonably requested by Buyer in order to
facilitate the obtaining of financing by Buyer to pay the Purchase Price and
consummate the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, Sellers shall cause the Company, as and when
reasonably requested by Buyer, to execute and deliver loan and/or security
agreements and other related certificates, instruments and other documents which
provide that from and after Closing the Company will be unconditionally
obligated either as primary obligor or as a guarantor of such indebtedness
and/or that such indebtedness will be secured by the assets of the Company or
that provide other customary assurances on the part of the Company; provided,
however, that no such agreements shall become effective except in connection
with the Closing. In connection with any request for the cooperation of the
Company by Buyer pursuant to this Section 6.6(d), the Seller Representative
shall provide to Buyer a reasonable estimate of all out-of pocket costs and
expenses associated with any such actions requested by Buyer. The Company shall
not be obligated to take such actions unless satisfactory arrangements are made
so that (i) if the Closing is consummated, any such expenses paid or incurred by
the Company will be added to the amount of Net Working Capital as of the Closing
Date for purposes of Section 3.3 and (ii) if the Closing is not consummated for
any reason, Buyer shall reimburse the Company for all out-of-pocket costs and
expenses associated with such actions immediately upon termination of this
Agreement, without reduction or offset.
(e) After the Closing, the Energy Spectrum Sellers and their Affiliates
will hold, and will use their best efforts to cause their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents to
hold, in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information concerning the Company, except to the extent that such information
can be shown to have been (i) previously known on a non-confidential basis by
such Energy Spectrum Sellers, (ii) in the public domain through no fault of such
Energy Spectrum Sellers or their Affiliates or (iii) later lawfully acquired by
such Energy Spectrum Sellers from sources other than those related to their
prior ownership of the Company. The obligation of the Energy Spectrum Sellers
and their Affiliates to hold any such information in confidence shall be
satisfied if they exercise the same degree of care with respect to such
information as they would take to preserve the confidentiality of their own
similar information.
38
SECTION 6.7. Notices of Certain Events. Sellers shall promptly notify
the Buyer of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement;
(c) any written notice or threat of the cancellation of any insurance
policy of the Company or any denial of coverage or reservation of rights notice
received with respect to any claim for which insurance is or may be available;
and
(d) any actions, suits, claims, investigations or proceedings
commenced, or, to the Sellers' Knowledge, threatened against, or relating to or
involving or otherwise affecting Sellers or the Company that, if pending on the
date of this Agreement, would have been required to have been disclosed pursuant
to Section 4.9 or that relate to the consummation of the transactions
contemplated by this Agreement.
SECTION 6.8. Curative Actions with respect to Rights of Way. From and
after the date hereof, the Company shall use commercially reasonable efforts, at
its sole cost and expense, to proceed to cure or correct the defects and
irregularities in the Company's title to rights of way or easements described on
Schedule 6.8; provided, however, that the failure to cure or correct all such
defects and irregularities prior to the Closing Date shall not give rise to a
condition to the obligations of Buyer to consummate the transactions
contemplated by this Agreement.
SECTION 6.9. Permits. If any governmental consent or authorization is
required to be obtained with respect to any of the FCC Permits in order to
consummate the transactions contemplated by this Agreement and such consent or
authorization has not been obtained prior to the Closing Date, then at the sole
and complete discretion of the Buyer, upon written notice to the Company, the
Company shall either (i) terminate such FCC Permits prior to the Closing Date;
or (ii) cease to engage in any activities for which such FCC Permits are
required until such time as the Company obtains authorization required from the
FCC to resume such activities.
ARTICLE VII
COVENANTS OF BUYER
Buyer hereby covenants and agrees that:
SECTION 7.1. Certain Regulatory Matters. Buyer agrees that it will
take, or cause to be taken, the following actions:
39
(a) HSR Act. Take, or cause its "ultimate parent entity" to take, the
following actions: (i) file any notification and report form and related
material required under the HSR Act in connection with the transactions
contemplated by this Agreement as soon as practicable and in any event not later
than ten Business Days after the date hereof; (ii) pay any fee required in
connection with the filing of such notification and report form; and (iii)
provide promptly to the Department of Justice or Federal Trade Commission such
information and documents as are requested by them or are necessary, proper or
advisable to permit consummation of the transactions contemplated by this
Agreement; provided, however, that nothing contained in this Agreement will
require Buyer or any of its Affiliates to enter into any agreement, consent
decree or other commitment requiring Buyer or any of its Affiliates to (a)
divest or hold separate any material assets of Buyer or any of its Affiliates,
(b) litigate, pursue or defend any contested proceeding challenging the
transactions contemplated hereby as violations of any antitrust laws or (c) take
any other action that would, individually or in the aggregate, materially
adversely affect Buyer or any of its Affiliates. Buyer shall notify Sellers of
all requests made or terms or conditions sought to be imposed by the Department
of Justice or Federal Trade Commission in connection with the transactions
contemplated by this Agreement.
(b) Certain Permits. Use its commercially reasonable efforts and take
all commercially reasonable actions within its control to ensure that the
Permits referred to in Schedule 8.11 are obtained as promptly as reasonably
practicable after the date hereof.
SECTION 7.2. Further Actions. Buyer agrees to execute and deliver such
instruments and take such other actions as may reasonably be required to (a)
carry out the intent of this Agreement and (b) consummate the transactions
contemplated hereby, including full cooperation in the transfer of all Permits.
SECTION 7.3. Third-Party Reports. Buyer has delivered to the Seller
Representative copies of the final reports identified in Schedule 7.3, which
represent all final reports prepared by any consultant, professional or other
third party (other than Holland & Knight LLP, in its capacity as counsel to
Buyer) for or on behalf of Buyer with respect to any matter that is addressed by
any of the representations or warranties of Sellers or the Company hereunder,
including, but not limited to, (i) any report prepared by any attorney or land
consultant relating to the rights of way or other real property rights of the
Company, (ii) any report prepared by any environmental consultant with respect
to compliance by the Company with Environmental Laws or similar matters and
(iii) any report prepared with respect to the insurance coverage held or
maintained by the Company. In addition, Schedule 7.3 identifies any reports that
are being or will be prepared for or on behalf or Buyer but which have not been
delivered in final form as of the date hereof. If any reports of the type
described in the first sentence of this Section 7.3 are prepared, completed or
delivered in final form after the date hereof (or after the date of the reports
delivered pursuant to the first sentence of this Section 7.3) and prior to or on
the Closing Date, Buyer shall deliver a copy of such reports to the Seller
Representatives at least three Business Days (to the extent practicable) prior
to the Closing Date. All reports delivered to Sellers pursuant to this Section
7.3 shall be held in confidence in accordance with Section 6.6(e).
40
SECTION 7.4. Certain Confidential Information. Buyer hereby
acknowledges that in connection with the transactions contemplated by this
Agreement it has received certain Confidential Information, as defined in the
Buyer Confidentiality Agreement. Buyer acknowledges that it is bound by the
Buyer Confidentiality Agreement and agrees that it will not, and it will not
permit any of its Affiliates, directors, officers, independent accountants,
agents or other representatives to, use or disclose any Confidential Information
except as permitted by such agreement. The provisions of this Section 7.4,
insofar as they relate to Confidential Information that relates to or affects
the Company, shall terminate upon the Closing. Except as provided in the
immediately preceding sentence, the provisions of this Section 7.4 shall survive
the Closing and any termination of this Agreement.
SECTION 7.5. Return of Information. In the event of termination of this
Agreement, Buyer will return or cause to be returned to the Sellers and the
Company all Confidential Information and all other documents and materials
obtained from, or on behalf of, the Sellers or the Company in connection with
the transactions contemplated hereby and will continue to keep confidential any
such information, all in accordance with the provisions of Section 7.4.
SECTION 7.6. Sellers' Access to Documents; Preservation of Books and
Records.
(a) For a period of seven years from the Closing Date, (i) Buyer shall
cause the Company not to dispose of or destroy any of the books and records of
the Company relating to periods prior to the Closing ("Books and Records")
without first offering to turn over possession thereof to the Seller
Representative by written notice to the Seller Representative at least 90 days
prior to the proposed date of such disposition or destruction, (ii) Buyer shall
cause the Company to allow the Seller Representative and its agents access
during normal business hours to all Books and Records or any other documents
(provided, however, that any such access or copying shall be had or done in such
a manner so as not to unduly interfere with the normal conduct of the Company's
businesses) and (iii) Buyer shall cause the Company to make available to the
Seller Representative upon reasonable written request (1) the Company's
personnel to assist the Seller Representative in locating and obtaining any
Books and Records or other documents, and (2) any of the Company's personnel
whose assistance or participation is reasonably required by the Seller
Representative or any of their Affiliates in anticipation of, or preparation
for, existing or future Legal Proceeding (other than any Legal Proceedings in
which the Buyer and the Sellers are or could reasonably be expected to be
adverse parties).
(b) The seven-year period referred to in Section 7.6(a) shall be
extended in the event that the Seller Representative advises Buyer in writing
that any Legal Proceeding or investigation is pending or threatened at the
termination of such seven-year period and such extension shall continue until
any such Legal Proceeding or investigation has been settled through judgment or
otherwise and/or is no longer pending or threatened.
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SECTION 7.7. Exclusive Representations. BUYER EXPRESSLY ACKNOWLEDGES
AND AGREES THAT THE SELLERS AND THE COMPANY HAVE NOT MADE AND SHALL NOT BE
DEEMED TO HAVE MADE TO BUYER ANY REPRESENTATION OR WARRANTY THAT WILL SURVIVE
THE CLOSING OTHER THAN THOSE EXPRESSLY MADE BY THE SELLERS AND THE COMPANY IN
THIS AGREEMENT OR IN ANY CERTIFICATE DELIVERED PURSUANT HERETO.
SECTION 7.8. Use of Seller Marks.
(a) Within two years after the Closing Date, Buyer shall change the
name of the Company to remove the word "Spectrum" and any derivatives thereof
from its name. Except as is necessary to allow Buyer's use of the name of the
Company for the period set forth in the preceding sentence, Buyer acknowledges
and agrees that it is not obtaining any rights or licenses with respect to the
names "Spectrum" or any derivative thereof (including, but not limited to,
"Spectrum Services" or "Energy Spectrum") or associated logos or trade dress
(the "Seller Marks").
(b) After the Closing, the Company shall have the right to maintain on
the Pipeline Assets and Facilities all Seller Marks and to sell existing
inventory and to use existing packaging, labeling, containers, supplies,
advertising materials, technical data sheets and any similar materials bearing
Seller Marks until two years after the Closing Date. Buyer shall cause the
Company to comply with all applicable laws or regulations in any use by the
Company of packaging or labeling containing the Seller Marks. The obliteration
of the Seller Marks shall be deemed compliance with the covenant not to use the
Seller Marks pursuant to this Section 7.8.
(c) Buyer agrees to cause the Company to use reasonable efforts to
cease using the Seller Marks on buildings, cars, trucks and other fixed assets
not later than two years after the Closing Date.
(d) Sellers agree that their consent to the amendment or extension of
this Section will not be unreasonably withheld if the Company cannot exhaust
existing inventory within two years of the Closing Date.
SECTION 7.9. Decommissioning of Identified Compressors. Within two
years after the Closing Date, Buyer may cause the Company to decommission the
compressors identified in Schedule 7.9 hereto (the "Identified Compressors") in
a reasonable and cost-effective manner. In the event that the costs incurred by
the Company in decommissioning the Identified Compressors in the aggregate are
less than $500,000, Buyer shall promptly cause the Company to pay to the Sellers
an amount equal to the excess of (i) $500,000 over (ii) the costs so incurred by
the Company, and the amount so paid to the Sellers shall be deemed to be added
to the Purchase Price for purposes of this Agreement.
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ARTICLE VIII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of Buyer to consummate the transactions contemplated
hereby on the Closing Date is subject to the satisfaction of the following
conditions at or prior to the Closing:
SECTION 8.1. Accuracy of Representations and Warranties. Each of the
representations and warranties of the Sellers and the Company contained herein
and in any certificate or other writing delivered by the Sellers or the Company
pursuant to this Agreement shall be true and correct (provided, however, for
purposes of this Section 8.1 any materiality or Material Adverse Effect
qualification in any such representation or warranty shall be disregarded), in
each case at and as of the Closing Date as if made at and as of the Closing Date
(except for the representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time, which need
only be true and accurate as of such date or with respect to such period), with
such exceptions as could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect. Notwithstanding anything
contained herein to the contrary, in construing the preceding sentence,
inaccuracies in representations and warranties that result solely from actions
or inactions expressly requested or consented to in writing by Buyer shall not
be considered.
SECTION 8.2. Performance of Covenants. The Sellers and the Company
shall have performed and complied in all material respects with the covenants
and provisions of this Agreement required to be performed or complied with by
them on or prior to the Closing Date.
SECTION 8.3. Certificates. Buyer shall have received certificates from
each of the Energy Spectrum Sellers and the Company to the effect set forth in
Sections 8.1 and 8.2, dated the Closing Date, signed on behalf of each of the
Energy Spectrum Sellers by a duly authorized officer of their respective Energy
Spectrum Authorizing Entity, and signed on behalf of the Company by a duly
authorized officer of the Company. Buyer shall have also received certificates
from each of the Management Sellers to the effect set forth in Sections 8.1 and
8.2, dated the Closing Date, signed by each such Management Seller.
SECTION 8.4. HSR Clearance. Any waiting period applicable under the HSR
Act to the transactions contemplated by this Agreement shall have expired or
been terminated.
SECTION 8.5. Prohibition.
(a) No provision of applicable law and no Order shall prohibit, enjoin
or restrain the consummation of the transactions contemplated in this Agreement.
(b) There shall not be threatened, instituted or pending any action or
proceeding by any Person before any court or Governmental Authority (i) seeking
to restrain, prohibit or otherwise interfere with the ownership or operation by
Buyer or any of its Affiliates of all or any material portion of the business or
assets of the Company or to compel Buyer or any of its Affiliates to dispose of
all or any material portion of the business or assets of the Company or of Buyer
or any of their Affiliates, (ii) seeking to impose or confirm limitations on the
ability of Buyer or any of its Affiliates effectively to exercise full rights of
ownership of the Shares, including without limitation, the right to vote any
Shares acquired or owned by Seller or any of its Affiliates on all matters
properly presented to the Company's stockholders or (iii) seeking to require
divestiture by Buyer or any of its Affiliates of any Shares or any material
assets of the Company.
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(c) After the date hereof, there shall not be any statute, rule,
regulation, injunction, order or decree enacted, enforced, promulgated, issued
or deemed applicable to the purchase of the Shares, by any court, government or
Governmental Authority other than the application of the waiting period
provisions of the HSR Act to the purchase of the Shares, that has any of the
consequences referred to in clauses 8.5(b)(i) through 8.5(b)(iii) above.
SECTION 8.6. Certified Resolutions. Buyer shall have received a
certificate of the Secretary or an Assistant Secretary of each of the Energy
Spectrum Authorizing Entities, dated the Closing Date, setting forth resolutions
of the Board of Managers of such Energy Spectrum Authorizing Entity authorizing
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and certifying that such resolutions were duly
adopted and have not been rescinded or amended as of the Closing Date.
SECTION 8.7. Secretary's Certificate. Buyer shall have received a
certificate of the Secretary or an Assistant Secretary of each of the Energy
Spectrum Authorizing Entities and the Company attesting as to the incumbency and
signature of each officer of each such Energy Spectrum Authorizing Entities and
the Company, respectively, who shall have executed this Agreement or any
certificate delivered pursuant hereto.
SECTION 8.8. FIRPTA. Buyer shall have received Certifications from each
of the Sellers as to its non-foreign status in accordance with Treas. Reg.
Section 1.1445-2(b)(2).
SECTION 8.9. Employment Contracts. Each of the employees of the Company
identified in Schedule 8.9 hereto shall have entered into employment contracts
with the Company and Atlas America, Inc. or any affiliate thereof on terms that
are mutually agreed upon by the parties.
SECTION 8.10. Escrow Agreement. The Escrow Agreement shall have been
executed and delivered by the Seller Representative and the Escrow Agent.
SECTION 8.11. Required Permits and Notifications. The Permits
identified on Schedule 8.11 shall have been obtained and shall remain in full
force and effect.
SECTION 8.12. Opinion of Counsel. Xxxxx Xxxxx L.L.P., counsel to the
Sellers, shall have delivered an opinion dated the Closing Date and addressed to
Buyer in the form previously agreed upon by the Parties.
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SECTION 8.13. Other Documents. Buyer shall have received all documents
it may reasonably request relating to the existence of the Company, the Energy
Spectrum Sellers and the authority of the Company and the Sellers to enter into
this Agreement and to consummate the transactions contemplated hereby, all in
form and substance reasonably satisfactory to Buyer. Without limiting the
foregoing, (i) Buyer, the Company and the Energy Spectrum Sellers shall have
entered into an agreement with regard to confidential information relating to
the Company and certain related matters in the form previously agreed upon by
the Buyer and the Energy Spectrum Sellers and (ii) the Release (as such term is
defined in that certain letter agreement of even date herewith among Buyer, the
Sellers and the Company) shall have been obtained.
ARTICLE IX
CONDITIONS PRECEDENT TO
THE OBLIGATIONS OF SELLERS
The obligation of the Sellers to consummate the transactions
contemplated hereby on the Closing Date is subject to the satisfaction of the
following conditions at or prior to the Closing:
SECTION 9.1. Accuracy of Representations and Warranties. Each of the
representations and warranties of Buyer contained herein shall be true and
correct in all material respects, in each case at and as of the Closing Date as
if made at and as of the Closing Date (except for the representations and
warranties that address matters only as of a particular date or only with
respect to a specific period of time which need only be true and accurate as of
such date or with respect to such period).
SECTION 9.2. Performance of Covenants. Buyer shall have performed and
complied in all material respects with the covenants and provisions in this
Agreement required herein to be performed or complied with by it between the
date hereof and the Closing Date.
SECTION 9.3. Officer's Certificate. The Sellers shall have received a
certificate from Buyer to the effect set forth in Sections 9.1 and 9.2 hereof,
dated the Closing Date, signed by a duly authorized officer thereof.
SECTION 9.4. HSR Clearance. Any waiting period applicable under the HSR
Act to the transactions contemplated by this Agreement shall have expired or
been terminated.
SECTION 9.5. No Prohibition. No provision of applicable Law and no
Order shall prohibit, enjoin or restrain the consummation of the transactions
contemplated hereby.
SECTION 9.6. Delivery of Initial Purchase Price; Repayment of
Subordinated Notes. The Sellers shall have received (i) the Initial Purchase
Price (less the Escrow Deposit) and (ii) the Subordinated Notes Pay-Off Amount.
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SECTION 9.7. Certified Resolutions. The Seller Representative shall
have received a certificate of a duly authorized officer of the general partner
of the Buyer, dated the Closing Date, setting forth the resolutions of the Board
of Directors of the general partner of the Buyer authorizing the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, and certifying that such resolutions were duly adopted and have not been
rescinded or amended as of the Closing Date.
SECTION 9.8. Secretary's Certificate. The Seller Representative shall
have received a certificate of the Secretary or an Assistant Secretary of the
general partner of the Buyer attesting as to the incumbency and signature of
each officer of the general partner of the Buyer who shall have executed this
Agreement or any certificate delivered pursuant hereto.
SECTION 9.9. Escrow Agreement. The Escrow Agreement shall been executed
and delivered by Buyer and the Escrow Agent.
SECTION 9.10. Other Documents. Sellers shall have received all
documents that the Seller Representative may reasonably request relating to the
existence of the Buyer and the authority of the Buyer to enter into this
Agreement and to consummate the transactions contemplated hereby, all in form
and substance reasonably satisfactory to the Seller Representative.
ARTICLE X
CERTAIN TAX MATTERS
SECTION 10.1. Tax Matters. The following provisions shall govern the
allocation of responsibility as between Buyer and Sellers for certain tax
matters following the Closing Date:
(a) Straddle Period. In the case of any taxable period that includes
(but does not end on) the Closing Date (a "Straddle Period"), the amount of
Taxes which is attributable to the portion of the Straddle Period ending on the
Closing Date shall (i) in the case of Taxes based on or measured by income or
receipts of the Company, be determined based on an interim closing of the books
as of the close of business on the Closing Date; and (ii) in the case of other
Taxes of the Company, be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction the numerator of which is the number of
days in the taxable period ending on the Closing Date and the denominator of
which is the number of days in such Straddle Period.
(b) Straddle Period Tax Returns and Taxes. With respect to any Tax
Return of the Company covering a Straddle Period or covering a period ending on
the Closing Date, but which is required to be filed after the Closing Date (a
"Pre-Closing Tax Period"), Buyer shall cause such Tax Return to be prepared, and
shall cause to be included in such Tax Return all items required to be included
therein. Buyer shall prepare each such Tax Return in a manner consistent with
practices followed in prior years with respect to similar Tax Returns and in
compliance with the Laws of each respective jurisdiction. At least thirty (30)
days prior to the due date (including any extensions) of any such Tax Return,
Buyer shall furnish a copy of such Tax Return to the Seller Representative.
Buyer shall permit the Seller Representative to review and comment on such Tax
Return and shall make such revisions to such Tax Return as are reasonably
requested by the Seller Representative. Each Seller shall pay to Buyer its pro
rata share (based upon the ratio of the Purchase Price paid by Buyer to such
Seller pursuant to this Agreement to the aggregate Purchase Price) of such Taxes
which relates to the Pre- Closing Tax Period (as determined under Section
10.1(a)), but only to the extent that such amounts have not been taken into
account as a reduction in determining Final Net Working Capital, no later than
the due date of the Tax Return. Buyer shall, or shall cause the Company to,
timely file such Tax Returns with the appropriate taxing authority and Buyer
shall cause the Company to pay all Taxes due with respect to such Tax Returns.
46
(c) Cooperation on Tax Matters.
(i) Buyer, the Company, and Sellers shall cooperate fully, as
and to the extent reasonably requested by the other Party, in
connection with the filing of Tax Returns pursuant to Section 10.1(b)
and any audit, litigation or other proceeding with respect to Taxes.
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. The Company and Sellers agree (A) to retain all books and
records with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified
by Buyer or Sellers, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into
with any taxing authority, and (B) to give the other Party reasonable
written notice prior to transferring, destroying or discarding any such
books and records and, if the other Party so requests, the Company or
Sellers, as the case may be, shall allow the other Party to take
possession of such books and records.
(ii) Buyer and Sellers further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
Governmental Authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including,
but not limited to, with respect to the transactions contemplated
hereby).
(d) Tax Sharing Agreements. All Tax sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as of
the Closing Date and, after the Closing Date, the Company shall not be bound
thereby or have any liability thereunder.
(e) Certain Taxes and Fees. All transfer, documentary, sales, use,
stamp, registration and other similar Taxes, fees and charges (including any
penalties and interest) incurred in connection with the sale of the Shares and
the other transactions consummated at the Closing in accordance with Article II
shall be borne equally by Buyer on the one hand and the Sellers on the other
hand.
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ARTICLE XI
TERMINATION
SECTION 11.1. Termination of Agreement. Anything herein to the contrary
notwithstanding, this Agreement and the transactions contemplated hereby, may be
terminated at any time before the Closing Date, as follows:
(a) Mutual Consent. By mutual written consent of the Energy Spectrum
Sellers and Buyer;
(b) Expiration Date. By the Energy Spectrum Sellers or Buyer, if the
Closing shall not have occurred prior to or on August 10, 2004, or if later, 20
days after the date upon which the conditions set forth in Sections 8.4, 8.11
and 9.4 shall have been satisfied (or if (i) the FCC Permits are required to be
transferred in order to consummate the transactions contemplated by this
Agreement and (ii) any governmental consent or authorization required to effect
the transfer thereof has not been obtained, the earlier of (A) 45 days after the
date upon which such conditions have been satisfied, (B) the date on which the
FCC Permits have been obtained or (C) the date on which the FCC Permits are
terminated in accordance with Section 6.9), which date may be extended in
writing by the mutual agreement of the Energy Spectrum Sellers and Buyer;
provided that, no Party may terminate this Agreement pursuant to this clause (b)
if the failure of the Closing to occur on or before such date is attributable to
any significant extent to the breach by such Party of any covenant or obligation
of such Party contained in this Agreement; and
(c) Consummation Prohibited. By the Energy Spectrum Sellers or Buyer,
if consummation of the transactions contemplated hereby would violate any Law or
non-appealable final Order of any court or Governmental Authority having
competent jurisdiction.
SECTION 11.2. Effect of Termination. If this Agreement shall be
terminated pursuant to Section 11.1, all further obligations of the Parties to
this Agreement shall terminate without further liability of any Party (or any
stockholder, director, officer, employee, agent, consultant or representative of
such Party) to another except for obligations under this Section 11.2 and
Sections 6.6(d), 7.4, 7.5, 13.5, 13.7, 14.1, 14.3, 14.5, 14.6, 14.7, 14.8, 14.9,
14.10 and 14.13 and each Party shall pay all costs and expenses incident to its
negotiation and preparation of this Agreement and to its performance of and
compliance with all agreements and conditions contained herein on its part to be
performed or complied with, including the fees, expenses and disbursements of
its counsel; provided, however, that if such termination shall result from (i)
the willful failure of a Party to fulfill a condition to the performance of the
obligations of another Party, (ii) the willful failure to perform a covenant of
this Agreement, or (iii) the intentional breach by a Party hereto or any
representation or warranty or agreement contained in this Agreement, such Party
shall be fully liable for any and all Damages incurred or suffered by another
Party as a result of such failure or breach.
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ARTICLE XII
INDEMNIFICATION
SECTION 12.1. Sellers' Indemnification. Subject to the limitations set
forth in 12.5 and (to the extent applicable) Section 12.4, from and after the
Closing Date, each of the Sellers, severally, but not jointly, hereby agrees to
indemnify and hold harmless Buyer, its Affiliates, each of their officers,
directors, partners, members, employees and agents, and, without duplication,
the Company (collectively, the "Buyer Indemnified Parties") from and against any
and all Claims, judgments, causes of action, liabilities, obligations, damages,
losses, deficiencies, costs, penalties, interest and expenses, including costs
of investigation and attorneys' fees and expenses in connection with any action,
suit or proceeding (collectively, "Losses") arising out of, based upon,
attributable to or resulting from any of the following:
(a) any breach of any representation or warranty of such Seller
contained in this Agreement or any inaccuracy in any certificate delivered to
Buyer by such Seller pursuant to this Agreement with respect to any such
representation or warranty;
(b) any breach of any representation or warranty of the Company
contained in this Agreement (other than Section 4.12) or any inaccuracy in any
certificate delivered to Buyer by the Company pursuant to this Agreement (except
to the extent that any such certificate relates to a representation or warranty
contained in Section 4.12);
(c) any breach of any agreement or covenant on the part of such Seller
contained in this Agreement (other than any covenant or agreement set forth in
Article X);
(d) any breach prior to the Closing Date of any agreement or covenant
on the part of the Company contained in this Agreement (other than any covenant
or agreement set forth in Section 6.5 or Article X);
(e) any Claim by any Person for brokerage or finder's fees or
commissions or similar payments (other than any Claim for the payment by the
Company of the Investment Banking Fee Amount) based upon any agreement or
understanding alleged to have been made by any such Person with a Seller or the
Company (or any Person acting on their behalf) in connection with the
transactions contemplated by this Agreement,
(f) the pending actions and proceedings identified in Schedule 12.1(f)
(the "Subject Litigation") and any other actions or proceedings that may be
brought against the Company, at any time prior to the later of (i) one year
after the Closing Date and (ii) six months after the date upon which a binding
settlement or compromise of the Subject Litigation has been reached, which
involve substantially similar claims or causes of action and are based upon the
same type of factual allegations, in each case as pleadings for the Subject
Litigation identified in Schedule 12.1(f) (the "Related Litigation"), to the
extent that Claims asserted in the Subject Litigation or the Related Litigation
are based on events occurring prior to the Closing Date (it being understood and
agreed that Sellers shall have no liability to Buyer Indemnified Parties in
connection with Claims asserted in such litigation to the extent such Claims are
based on events occurring after the Closing Date); and
49
(g) any Taxes, together with any reasonable out-of-pocket costs and
expenses, including reasonable expenses arising out of or incident to the
determination, assessment or collection of such Taxes and those incurred in the
contest in good faith in appropriate proceedings relating to the imposition,
assessment, or assertion of any such Taxes (collectively, "Tax Losses") (i)
imposed upon the Company or its assets, properties or operations (including,
without limitation, pursuant to Treas. Reg. ss.1.1502-6 or any analogous state,
local or foreign law or regulation or as a transferee, successor, custodian, by
contract or otherwise) (A) in respect of any Tax Period, other than a
Pre-Closing Tax Period, ending on or before the Closing Date or (B) which relate
to a Pre-Closing Tax Period, as determined under Section 10.1(a) and (b), or
(ii) arising out of, based upon, attributable to or resulting from (A) any
breach of the representations and warranties set forth in Section 4.12, (B) any
inaccuracy in any certificate delivered to Buyer by the Company pursuant to this
Agreement to the extent such certificate relates to Section 4.12 or is described
in clauses (iv), (v) or (vi) of Section 2.2(c), (C) any breach of the covenants
and obligations of the Sellers and the Company in Section 6.5 and Article X, or
(D) a final determination by any Governmental Authority that any portion of the
Investment Banking Fee Amount, the Other Transaction Cost Amount, or the
Management Compensation Amount is not properly deductible by the Company either
in connection with or prior to the merger or liquidation of the Company into
Buyer or the conversion of the Company into an entity that is treated as a
partnership or a disregarded entity for U.S. federal tax purposes;
provided, however, that the liability of a Seller for Losses arising out of,
based upon, attributable to or resulting from any breach of the type described
in clauses (b), (d), (e) (to the extent such clause (e) is applicable as a
result of an agreement with the Company), (f) and (g) of this Section 12.1 shall
in each case be limited to that portion of such Losses which equals the amount
of such Losses multiplied by a fraction the numerator of which equals the
portion of the Purchase Price paid by Buyer to such Seller pursuant to this
Agreement and the denominator of which equals the aggregate Purchase Price;
provided, further, that the provisions of Section 12.1(g)(ii)(D) shall apply
only if, within six (6) months after the Closing Date, the Company is merged or
liquidated into Buyer or is converted into an entity that is treated as a
partnership or a disregarded entity for U.S. federal tax purposes.
SECTION 12.2. Buyer's Indemnification. Subject to the limitations set
forth in Section 12.4, from and after the Closing Date, Buyer hereby agrees to
indemnify and hold each Seller and each of their officers, directors, partners,
employees and agents, harmless from and against any and all Losses arising out
of, based upon, attributable to or resulting from any of the following:
(a) any breach of any representation or warranty of Buyer contained in
this Agreement or any inaccuracy in any certificate delivered to the Sellers
pursuant to this Agreement with respect to any such representation and warranty;
50
(b) any breach of any agreement or covenant on the part of Buyer
contained in this Agreement;
(c) any Claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Buyer (or any Person acting on
its behalf) in connection with the transactions contemplated by this Agreement;
(d) any Taxes required to be paid by the Company pursuant to Article X
which are not paid by the Company when due.
SECTION 12.3. Indemnification Procedures.
(a) Promptly after receipt by a Person entitled to indemnification
under Sections 12.1 or 12.2 of a notice of any Claim asserted or brought by a
third party (a "Third Party Claim"), such Person (the "Indemnified Party") will,
if the Indemnified Party believes that it is or may be entitled to
indemnification in respect of such Claim by another Party to this Agreement (the
"Indemnifying Party"), give notice of such Claim to each Indemnifying Party;
provided, however, that the failure to so notify the Indemnifying Party will not
relieve the Indemnifying Party from any liability that the Indemnifying Party
may have hereunder with respect to such Claim except to the extent that such
failure to so notify the Indemnifying Party results in the forfeiture by the
Indemnifying Party of substantial rights or defenses otherwise available to the
Indemnifying Party with respect to such Claim.
(b) If any Third Party Claim is asserted or brought against an
Indemnified Party and such Indemnified Party gives notice to the Indemnifying
Party of such Third Party Claim, the Indemnifying Party will be entitled to
participate in the defense of the Third Party Claim and, to the extent that it
so elects (unless the Indemnifying Party is also a party to the Proceeding in
which the Third Party Claim is asserted and the Indemnified Party determines in
good faith that (i) joint representation would present a conflict of interest
under applicable standards of professional conduct, (ii) the conduct of the
defense by the Indemnifying Party would result in material prejudice to the
Indemnified Party due to actual or potential differing interests between the
Parties in the Proceeding or (iii) the Indemnified Party or any of its
Affiliates could be adversely affected in any material respect in such
Proceeding other than as a result of monetary damages, in which case the
Indemnified Party shall promptly notify the Indemnified Party of such
determination) to assume the defense of such Third Party Claim with counsel
reasonably satisfactory to the Indemnified Party and, after such notice from the
Indemnifying Party to the Indemnified Party of its election to assume the
defense of such Third Party Claim, the Indemnifying Party will not, as long as
it continues to conduct such defense in good faith, be liable to the Indemnified
Party under this Article XII for any fees of other counsel or any other expenses
with respect to the defense of such Third Party Claim, in each case subsequently
incurred by the Indemnified Party in connection with the defense of such Third
Party Claim, other than reasonable costs of investigation; and, in any event,
the Indemnified Party shall have the right to participate in the defense of the
Third Party Claim. Unless and until a Third Party Claim has been assumed by the
Indemnifying Party, the Indemnified Party shall conduct the defense of such
Third Party Claim. If the Indemnifying Party assumes the defense of a Third
51
Party Claim, no compromise or settlement of such Third Party Claim may be
effected by the Indemnifying Party without the prior written consent of the
Indemnified Party, unless (i) such compromise or settlement includes a complete
and unconditional release of liability on the part of the Indemnified Party,
(ii) there is no finding or admission of any violation of Law or any violation
of the rights of any Person on the part of the Indemnified Party, and (iii) the
sole relief provided is monetary damages that are paid in full by the
Indemnifying Party and any other Persons (other than the Indemnified Party).
Subject to the last sentence of this Section 12.3(b), if the Indemnified Party
conducts the defense of a Third Party Claim, the Indemnifying Party shall be
bound by any judgment entered by a court of competent jurisdiction with respect
to such Third Party Claim, except to the extent that such judgment has not yet
become final or has been appealed or stayed (it being understood that any
decision on the part of the Indemnified Party as to whether such judgment should
be appealed shall be made in good faith and after consultation with the
Indemnifying Party). Whether a Third Party Claim is assumed by the Indemnifying
Party or conducted by the Indemnified Party, the Indemnifying Party and the
Indemnified Party shall cooperate in providing information to and consulting
with each other about the Third Party Claim. In no event shall the Indemnified
Party consent to the entry of judgment or enter into any compromise or
settlement with respect to a Third Party Claim for which it is seeking or will
seek indemnification without the prior written consent of the Indemnifying
Party.
(c) Notwithstanding anything to the contrary contained herein (and
without regard to any of the qualifications contained in paragraph (b) above),
Sellers shall conduct the defense of and control the Subject Litigation and any
Related Litigation, with counsel of their choice and shall be entitled to settle
or compromise the Subject Litigation and any Related Litigation, without the
prior written consent of Buyer. In addition, Sellers shall be entitled to
receive and retain any amounts awarded to the Company or the Sellers in
connection with the Subject Litigation or any Related Litigation, whether in
respect of fees and disbursements of counsel, based upon counterclaims asserted
by the Company or the Sellers or otherwise.
(d) A Claim for indemnification for any matter that does not constitute
a Third Party Claim may be asserted by written notice from an Indemnified Party
to the Indemnifying Party from whom indemnification is sought, which notice
shall set forth with reasonable specificity the nature, basis and dollar amount
(where ascertainable) of such Claim.
(e) Buyer shall promptly notify Seller Representative in writing upon
receipt by Buyer, any of its Affiliates or the Company of notice of any pending
or threatened Tax audits, administrative proceeding, assessments, or other Tax
proceedings that may result in Tax Losses for which any Seller would be required
to indemnify Buyer pursuant to Section 12.1(g) (a "Tax Contest").
Notwithstanding anything to the contrary contained herein (and without regard to
any of the qualifications contained in paragraph (b) above), Seller
Representative shall have the sole right to conduct, control, and settle any
such Tax Contest. and to employ counsel of its choice at its expense, subject to
the following conditions:
52
(i) Seller Representative shall promptly provide a copy of any
written communications received by Seller Representative from any
taxing authority with respect to such Tax Contest to Buyer upon receipt
by Seller Representative and shall keep Buyer reasonably informed of
all material developments in any such Tax Contest.
(ii) Buyer shall be entitled to participate, at its own
expense and with counsel of its choice, in (but not control) such Tax
Contest.
(iii) Seller shall not be entitled to settle, either
administratively or after the commencement of litigation, any Tax
Contest that would materially adversely affect the liability for Taxes
of Buyer or the Company for any period after the Closing Date without
the prior written consent of Buyer. Such consent shall not be
unreasonably withheld and shall not be necessary to the extent that
Seller has indemnified Buyer against the effects of any such
settlements.
SECTION 12.4. Limits on Indemnification. Notwithstanding anything to
the contrary contained in this Agreement:
(a) The Sellers shall not have any obligation to provide
indemnification for Losses pursuant to Section 12.1(a) or (b) arising out of or
related to breaches of representations and warranties referred to therein,
except to the extent that the aggregate amount of all such Losses pursuant to
such Section exceeds $600,000 (the "Basket Amount"), in which case the Sellers
shall be liable to the Buyer Indemnified Parties only for such Losses in excess
of the Basket Amount; provided, however, that any materiality or Material
Adverse Effect qualification with respect to any such representation or warranty
shall be disregarded solely for purposes of calculating the magnitude of Losses
resulting from the breach of such representation or warranty to determine
whether the Basket Amount has been met. The maximum obligation of the Sellers to
provide indemnification for all Losses pursuant to Section 12.1(a), (b), (c) and
(d) arising out of or related to breaches of representations and warranties and
in respect of covenants and agreements to be performed by the Sellers or the
Company referred to therein prior to the Closing Date shall be limited to an
aggregate amount equal to $36,000,000. Notwithstanding the foregoing, it is
expressly understood and agreed that the limitations contained in this Section
12.4(a) shall not apply to (i) the obligation of the Sellers to provide
indemnification pursuant to Section 12.1(e), (f) and (g) or (ii) a breach of the
representations and warranties of the Sellers or the Company contained in
Sections 4.5 and 4.12.
(b) Buyer shall not have any obligation to provide indemnification for
Losses pursuant to Section 12.2(a) arising out of or related to breaches of
representations and warranties referred to therein, except to the extent that
the aggregate amount of all such Losses pursuant to such Section exceeds the
Basket Amount, in which case Buyer shall be liable to the Sellers only for such
Losses in excess of the Basket Amount, provided, however, that any materiality
or material adverse effect qualification in any such representation or warranty
shall be disregarded solely for purposes of calculating the magnitude of Losses
resulting from the breach of such representation or warranty to determine
whether the Basket Amount has been met. The maximum obligation of Buyer to
provide indemnification for Losses pursuant to Section 12.2(a) and (b) arising
out of or related to breaches of representations and warranties and in respect
of covenants and agreements to be performed by Buyer prior to the Closing Date
shall be limited to an aggregate amount equal to $36,000,000. It is expressly
understood and agreed that the limitations contained in this Section 12.4(b)
shall not apply to the obligation of Buyer to provide indemnification pursuant
to Section 12.2(c) or (d).
53
(c) The representations and warranties of the Sellers and the Company
on the one hand and Buyer on the other contained in this Agreement or in any
certificate delivered pursuant hereto, and rights to indemnification in respect
thereof, shall survive the Closing and continue in effect until the second
anniversary of the Closing Date; provided that (i) the representations and
warranties set forth in Sections 4.2, 4.5, 4.13 and 5.2 shall survive
indefinitely and without limitation, (ii) the representations and warranties set
forth in Section 4.12 shall survive until the expiration of the statute of
limitations applicable to the matters covered thereby and (iii) all
Environmental Representations shall survive until the earlier of the fifth
anniversary of the Closing Date or the expiration of the statute of limitations
applicable to the matters covered thereby. Notwithstanding the foregoing, in the
event that a Change of Control of the Company occurs at any time after the
Closing, all Environmental Representations, and rights to indemnification in
respect thereof, shall terminate and cease to be of any further force or effect
on the later of (i) the date of such Change of Control and (ii) the third
anniversary of the Closing Date.
(d) Other than in respect of Claims based upon actual fraud, the
indemnification provisions of this Article XII shall be the sole and exclusive
remedy with regard to money damages (but not equitable relief) for any breaches
of representations and warranties that survive the Closing and in respect of any
inaccuracy or omission in any certificate, documents or other information
furnished to Buyer in connection with this Agreement or the transactions
contemplated hereby and for any breaches of covenants and agreements under this
Agreement occurring prior to the Closing.
SECTION 12.5. Mitigation; Insurance.
(a) The Parties shall cooperate with each other in connection with
resolving any Claims as to which indemnification is provided by any Party in
accordance with the terms of this Agreement. In the case of any Claim for which
it is reasonably likely that a Party may have a direct or indirect right of
recovery against one or more third parties (including, but not limited to,
rights of recovery under insurance policies or indemnification arrangements with
third parties), such Party shall seek recovery of such Claim from such third
parties for so long as pursuit of such recovery is commercially reasonable,
provided that the foregoing shall not prohibit or restrict an Indemnified Party
from initiating or pursuing any Claims under this Article XII. To the extent
that a Party obtains an actual dollar recovery in respect of any such Claim from
any third parties, (i) such Party shall use the funds provided by such recovery
(in lieu of funds provided by any other Party pursuant to the indemnification
provisions of this Article XII) to pay or otherwise satisfy such Claims, (ii)
the recovery shall reduce the amount of Losses for purposes of determining the
amount of the Sellers' indemnity obligations under this Article XII in respect
of such Claim and (iii) if received after any indemnity payment by the Sellers
under this Article XII, the amount actually recovered (but not in excess of the
amount of the indemnity payment previously paid by the Sellers) shall be paid to
the Sellers.
54
(b) If after the Closing Date the Company becomes subject to any
obligation to remedy or otherwise address any condition, occurrence or other
matter that is the subject of an Environmental Representation, the Company shall
proceed to remedy such condition, occurrence or other matter in an appropriate,
cost-effective and reasonable manner and (unless claims in respect of such
condition, occurrence or other matter are excluded from the scope of coverage
provided under the Environmental Insurance Policies) in compliance with any
notice requirements, cooperation conditions and other guidelines, policies or
provisions applicable to claims made by the Company under the terms of the
insurance policies identified in Schedule 12.5(b) hereto (such policies and any
substitute policies referred to herein, the "Environmental Insurance Policies").
The costs actually incurred in remedying or otherwise addressing any such
condition, occurrence or other matter shall be paid by the Company, and the
Company shall comply with all provisions of the Environmental Insurance Policies
applicable to the recovery of any such costs and use its commercially reasonable
efforts to seek recovery thereof from the insurers that issued the Environmental
Insurance Policies or its successors (the "Insurers"), which efforts shall
include, without limitation, taking all commercially reasonable actions
necessary to maintain the Environmental Insurance Policies (including one or
more substitute policies providing for substantially the same coverage) in full
force and effect (it being understood and agreed that the Company and Buyer will
not effect an assignment of any such policies after the Closing that would
result in a termination of coverage under such policies) and, if requested by
Sellers, filing an action, suit or proceeding against the Insurers and taking
reasonable steps to prosecute the same (provided, that Sellers shall agree to
pay the costs and expenses incurred in connection with such action, suit or
proceeding, and shall be entitled to receive and retain any portion of such
costs and expenses that are repaid in connection with such action, suit or
proceeding). The Company shall keep the Sellers informed regarding any
significant communications with the Insurers, and shall promptly deliver to
Sellers copies of any written communications delivered to or received from the
Insurers in connection with claims made under the Environmental Insurance
Policies.
ARTICLE XIII
SELLER REPRESENTATIVE
SECTION 13.1. Seller Representative. Each Seller, by executing this
Agreement, does hereby, for itself or himself and its or his heirs,
representatives and successors, irrevocably constitute and appoint Energy
Spectrum Capital II LP as its or his agent and representative (in such capacity,
the "Seller Representative") to take any and all actions required or permitted
to be taken by the Seller Representative under or in connection with this
Agreement, and for the following additional purposes:
(a) To execute and deliver such waivers and consents in connection with
this Agreement or any of the transactions contemplated hereby as the Seller
Representative, in its sole discretion, determines to be necessary or desirable;
55
(b) To take any action on the part of the Sellers contemplated by the
Escrow Agreement and authorize the release of the Escrow Funds pursuant thereto;
(c) To collect and receive all moneys and other proceeds and property
payable to the Sellers pursuant to the terms of this Agreement and, subject to
the withholding of amounts necessary to pay expenses in accordance with Section
13.3, to cause the same to be disbursed to the Sellers;
(d) To enforce and protect the rights and interests of the Sellers or
any of them arising out of or under or in any manner relating to this Agreement
or any other agreement, document, instrument or certificate relating to the
transactions contemplated hereby and, in connection therewith, to assert,
institute, investigate, defend, contest, litigate, prosecute and appeal any
claim with respect thereto; to compromise or settle any such claim on such terms
as the Seller Representative shall determine to be appropriate; and give
receipts, releases and discharges on behalf of all of the Sellers with respect
to any such claim;
(e) To refrain from enforcing any rights and interests of the Sellers
arising out of or under or in any manner relating to this Agreement and each
other agreement, document, instrument or certificate relating to the
transactions contemplated hereby (provided, however, that no such failure to act
on the part of the Seller Representative shall, except as otherwise expressly
provided in any of the foregoing agreements, instruments or documents, be deemed
a waiver of any such right or interest by the Seller Representative or the
Sellers); and
(f) To make, execute, acknowledge and deliver all such other
agreements, guarantees, orders, receipts, endorsements, notices, requests,
instructions, certificates, stock powers, letters and other writings, and, in
general, to do any and all things and to take any and all action that the Seller
Representative, in its sole discretion, may consider necessary, proper or
convenient in connection with or to carry out the activities described in
paragraphs (a) through (d) above.
The grant of authority provided for in this Section 13.1 (i) is coupled with an
interest, shall be irrevocable and (to the maximum extent permitted by law)
shall survive the death, incompetency, bankruptcy or liquidation of any Seller
and shall be binding on its or his heirs, representatives and successors; and
(ii) may be exercised by the Seller Representative by signing separately as
Seller Representative for each of the Sellers or, after listing all of the
Sellers executing an instrument, by the signing as Seller Representative for all
of them.
SECTION 13.2. Engagement of Agents. In connection with the performance
of its responsibilities as Seller Representative under this Agreement, the
Seller Representative shall have the right at any time and from time to time to
select and engage, at the cost and expense of the Sellers, such attorneys,
accountants, investment bankers, advisors, consultants and clerical personnel
and obtain such other professional and expert assistance, as the Seller
Representative determines is necessary or desirable.
56
SECTION 13.3. Payment of Expenses. The Seller Representative may
withhold and retain from any payments to be made to the Sellers such amount or
amounts as it shall determine are necessary to pay all known (or reasonably
anticipated) expenses that are required to be paid or borne by the Sellers
pursuant to this Agreement, or are otherwise incurred by the Seller
Representative in the performance of its duties under this Agreement (including,
but not limited to, its own out-of-pocket expenses) and shall pay all such
expenses out of the amount or amounts so withheld. If the amounts so withheld
are insufficient to pay all such expenses, the Seller Representative may request
that each Seller deliver to the Seller Representative payment of his or her
ratable share of the amount of such deficiency in accordance with the portion of
the Purchase Price payable to each such Seller.
SECTION 13.4. Compensation. Unless otherwise agreed in writing by each
of the Sellers, the Seller Representative shall not be entitled to any fee,
commission or other compensation for the performance of its services hereunder,
but shall be entitled, in accordance with Section 13.3, to the payment of all
its expenses incurred as Seller Representative.
SECTION 13.5. Exculpation. In performing its responsibilities under
this Agreement or any instruments, agreements or documents relating hereto, and
in exercising or failing to exercise all or any of the powers conferred upon the
Seller Representative hereunder, (i) the Seller Representative assumes and shall
incur no responsibility whatsoever to any Seller by reason of any error in
judgment or other act or omission performed or omitted hereunder, excepting only
responsibility for any act or failure to act that represents gross negligence or
willful misconduct, and (ii) the Seller Representative shall be entitled to rely
on the advice of counsel, public accountants or other independent experts
experienced in the matter at issue, and any error in judgment or other act or
omission of the Seller Representative pursuant to such advice shall in no event
subject the Seller Representative to liability to any Seller.
SECTION 13.6. Successors; Removal
(a) The Seller Representative shall have the power to appoint one or
more successor Seller Representatives in accordance with this Section 13.6. A
successor Seller Representative need not be a Seller. Any successor Seller
Representative shall have all of the authority and responsibilities conferred
upon or delegated to the Seller Representative pursuant to this Article XIII.
(b) The Seller Representative may be removed at any time pursuant to a
written instrument executed by each of the Sellers.
(c) If the Seller Representative has been removed or is unable or
unavailable to perform the duties hereunder, or the Seller Representative shall
have resigned without appointing a successor Seller Representative, a successor
Seller Representative shall be appointed by the Sellers. In the event that the
Sellers fail to agree upon a successor Seller Representative with 30 days of the
removal, resignation or other termination of the Seller Representative, the
successor Seller Representative shall be appointed by Energy Spectrum Capital
III LP.
57
SECTION 13.7. Survival. All of the immunities and powers granted to the
Seller Representative under this Agreement shall survive the Closing and
continue thereafter in full force and effect.
ARTICLE XIV
GENERAL
SECTION 14.1. Amendments. This Agreement may only be amended by an
instrument in writing executed by each of Buyer and the Sellers.
SECTION 14.2. Waivers. The observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) by the Party entitled to enforce such term, but such waiver
shall be effective only if it is in a writing signed by the Party entitled to
enforce such term and against which such waiver is to be asserted. Unless
otherwise expressly provided in this Agreement, no delay or omission on the part
of any Party in exercising any right or privilege under this Agreement shall
operate as a waiver thereof, nor shall any waiver on the part of any Party of
any right or privilege under this Agreement operate as a waiver of any other
right or privilege under this Agreement nor shall any single or partial exercise
of any right or privilege preclude any other or further exercise thereof or the
exercise of any other right or privilege under this Agreement.
SECTION 14.3. Notices. Any notices, waivers, consents, approvals or
other communications required or permitted hereunder shall be in writing and
shall be sufficiently given (and shall be deemed to have been duly given upon
receipt) if sent by overnight mail, registered mail or certified mail, postage
prepaid, or by hand, to the Parties at the following addresses (or at such other
address for a Party as shall be specified by like notice).
(a) If to the Sellers or the Company, to:
Energy Spectrum Partners II LP
Energy Spectrum Partners III LP
0000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxx
With a copy (which shall not constitute effective
notice) to:
Xxxxx Xxxxx L.L.P.
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxxx X. Xxxxxx
58
(b) If to Buyer, to:
Atlas Pipeline Partners, L.P.
0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
With a copy (which shall not constitute effective
notice) to:
Holland & Knight LLP
000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxx Esq. and Xxxxxx X. Xxxxxxxx,
Esq.
SECTION 14.4. Successors and Assigns; Parties in Interest. This
Agreement shall be binding upon and shall inure solely to the benefit of the
Parties hereto and their respective successors, legal representatives and
permitted assigns. Neither this Agreement nor any rights or obligations
hereunder may be assigned without the written consent of the other Parties;
provided, that Buyer may assign this Agreement and its rights and obligations
hereunder to one or more Affiliates of Buyer without the written consent of the
Sellers (it being understood that Buyer may assign its rights to acquire a
portion of the Securities to one Affiliate of Buyer and the remainder of the
Securities to another Affiliate of Buyer), but in the event of any such
assignment Buyer shall remain directly liable and responsible for the payment
and performance for all obligations under this Agreement (as fully and to the
same extent as if such assignment had not occurred). Nothing in this Agreement,
express or implied, is intended to or shall confer upon any Person, other than
the Parties hereto and their respective successors, legal representatives and
permitted assigns, any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement, and no Person shall be deemed a third
Party beneficiary under or by reason of this Agreement.
SECTION 14.5. Severability. If any provision of this Agreement or the
application of any such provision to any Person or circumstance, shall be
declared judicially to be invalid, unenforceable or void, such decision shall
not have the effect of invalidating or voiding the remainder of this Agreement,
it being the intent and agreement of the Parties that this Agreement shall be
deemed amended by modifying such provision to the extent necessary and
reasonable to render it valid, legal and enforceable while preserving its intent
or, if such modification is not possible, by substituting therefor another
provision that is valid, legal and enforceable and that reasonably achieves the
same objective.
SECTION 14.6. Entire Agreement. This Agreement (including the Exhibits
and Schedules hereto, and the documents and instruments executed and delivered
in connection herewith) constitutes the entire agreement among the Parties with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, whether written or oral, among
the Parties or any of them with respect to the subject matter hereof, and there
are no representations, understandings or agreements relating to the subject
matter hereof that are not fully expressed in this Agreement and the documents
and instruments executed and delivered in connection herewith. All Exhibits and
Schedules attached to this Agreement, and the documents and instruments executed
and delivered in connection herewith, are expressly made a part of, and
incorporated by reference into, this Agreement.
59
SECTION 14.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York for contracts
made and to be fully performed in such state, without giving effect to any
choice-of-law rules that may require the application of the laws of another
jurisdiction.
SECTION 14.8. Remedies. Each of the Parties hereto acknowledges and
agrees that (i) the provisions of this Agreement are reasonable and necessary to
protect the proper and legitimate interests of the other Parties hereto and (ii)
the other Parties hereto would be irreparably damaged in the event any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
Parties hereto shall be entitled to seek preliminary and permanent injunctive
relief to prevent breaches of the provisions of this Agreement by other Parties
hereto without the necessity of proving actual damages or of posting any bond,
and to enforce specifically the terms and provisions hereof and thereof, which
rights shall be cumulative and in addition to any other remedy to which the
Parties hereto may be entitled hereunder or at law or equity.
SECTION 14.9. Arbitration. The Sellers, the Company and Buyer agree
that all disputes, controversies or claims that may arise out of the
transactions contemplated by this Agreement, or the breach, termination or
invalidity thereof (other than a suit to obtain specific performance or
otherwise compel performance with the provisions of this Agreement through
injunctive relief), shall be submitted to, and determined by, binding
arbitration in accordance with the following procedures:
(a) Either Buyer or the Sellers may submit a dispute, controversy or
claim to arbitration by giving the other Party written notice to such effect,
which notice shall describe, in reasonable detail, the facts and legal grounds
forming the basis for the filing Party's request for relief. The arbitration
shall be held before one neutral arbitrator in Dallas, Texas.
(b) Within 30 days after the other Party's receipt of such demand,
Buyer and the Sellers shall mutually determine who the arbitrator will be. If
the Parties are unable to agree on the arbitrator within that time period, the
arbitrator shall be selected by the American Arbitration Association ("AAA"). In
any event, the arbitrator shall have a background in, and knowledge of,
transactions in the oil and gas industry and shall otherwise be an appropriate
person based on the nature of the dispute. If a person with experience in such
matters is not available, the arbitrator shall be chosen from the retired
federal judges pool maintained by AAA.
60
(c) The arbitration shall be governed by the Commercial Arbitration
Rules of the AAA, except as otherwise expressly provided in this Section 14.9.
However, the arbitration shall be administered by any organization mutually
agreed to in writing by the Parties. If the Parties are unable to agree on the
organization to administer the arbitration, it shall be administered by the AAA.
(d) Discovery shall be limited to the request for and production of
documents, depositions and interrogatories. All discovery shall be guided by the
Federal Rules of Civil Procedure. All issues concerning discovery upon which the
Parties cannot agree shall be submitted to the arbitrator for determination.
(e) In rendering an award, the arbitrator shall determine the rights
and obligations of the Parties according to the substantive and procedural laws
of the State of Delaware.
(f) The decision of, and award rendered by, the arbitrator shall be
determined no more than 30 days after the selection of the arbitrator and shall
be final and binding on the Parties and shall not be subject to appeal. Judgment
on the award may be entered in and enforced by any court of competent
jurisdiction.
(g) Each Party shall bear its own costs and expenses (including filing
fees) with respect to the arbitration, including one-half of the fees and
expenses of the arbitrator.
SECTION 14.10. Expenses. Each of the Parties hereto shall bear its own
expenses (including, without limitation, fees and disbursements of its counsel,
accountants and other experts) incurred by it in connection with the
preparation, negotiation, execution, delivery and performance of this Agreement,
each of the other documents and instruments executed in connection with or
contemplated by this Agreement and the consummation of the transactions
contemplated hereby.
SECTION 14.11. Survival. Except as otherwise set forth in this
Agreement, the representations and warranties made in this Agreement or in any
agreement, certificate or other document executed in connection herewith shall
not survive the Closing.
SECTION 14.12. Release of Information. The Parties shall cooperate with
each other in releasing information concerning this Agreement and the
transactions contemplated hereby. No press releases or other public
announcements concerning the transactions contemplated by this Agreement shall
be made by any Party without prior consultation with, and agreement of, the
other Parties, except for any legally required communication by any Party and
then only with prior consultation and as much advance notice as is practicable
under the circumstances requiring any announcement, together with copies of all
drafts of the proposed text.
SECTION 14.13. Certain Construction Rules. The article and section
headings and the table of contents contained in this Agreement are for
convenience of reference only and shall in no way define, limit, extend or
describe the scope or intent of any provisions of this Agreement. Whenever the
context may require, any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns, pronouns and verbs shall include the plural and vice versa. In addition,
as used in this Agreement, unless otherwise provided to the contrary, (a) all
references to days, months or years shall be deemed references to calendar days,
months or years and (b) any reference to a "Section," "Article," "Exhibit," or
"Schedule" shall be deemed to refer to a section or article of this Agreement or
an exhibit or schedule attached to this Agreement. The words "hereof," "herein,"
and "hereunder" and words of similar import referring to this Agreement refer to
this Agreement as a whole and not to any particular provision of this Agreement.
The words "include," "includes," or "including" shall be deemed to be followed
by the words "without limitation." Unless otherwise specifically provided for
herein, the term "or" shall not be deemed to be exclusive.
61
SECTION 14.14. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one instrument binding on all the Parties,
notwithstanding that all the Parties are not signatories to the original or the
same counterpart.
[signature page follows]
62
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first above written.
SELLERS:
ENERGY SPECTRUM PARTNERS II LP,
a Delaware limited partnership
By: Energy Spectrum Capital II LP,
its general partner
By: Energy Spectrum II LLC, its general
partner
By:
------------------------------------
Name:
------------------------------
Title:
-----------------------------
ENERGY SPECTRUM PARTNERS III LP,
a Delaware limited partnership
By: Energy Spectrum Capital III LP,
its general partner
By: Energy Spectrum III LLC, its general
partner
By:
------------------------------------
Name:
------------------------------
Title:
-----------------------------
------------------------------
Xxxxxx X. Xxxxx
------------------------------
Xxxxx X. Xxxx
63
------------------------------
Xxxx X. Xxxxxxx
------------------------------
J. Xxxxxx Xxxxxx
------------------------------
Xxxx X. Xxxxxx
COMPANY:
SPECTRUM FIELD SERVICES, INC.,
a Delaware corporation
By:
--------------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
BUYER:
ATLAS PIPELINE OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: Atlas Pipeline Partners GP, LLC, its General
Partner
By:
--------------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
64
