ACQUISITION AGREEMENT
This Acquisition Agreement (the "Agreement") is entered into
as of May 29, 2001, by and among Allegheny Ventures, Inc., a
Delaware corporation, or its designee (the "Buyer"), Allegheny
Energy, Inc., a Maryland corporation ("Allegheny"), Conoco Inc.,
a Delaware corporation ("Conoco"), Alliance Gas Services, Inc., a
Kentucky corporation ("AGS"), Xxxx X. XxXxxx, an individual
("XxXxxx"), and Xxxxxx X. Xxxxxx, an individual ("Fellon," and
together with Conoco, AGS and XxXxxx, the "Sellers"). The Buyer
and the Sellers are referred to collectively herein as the
"Parties."
WHEREAS, Fellon and XxXxxx in the aggregate own all of the
outstanding shares of stock of both AGS and Xxxxxx-XxXxxx
Associates, Inc., a Kentucky corporation ("FMA" and together with
AGS, the "Target Corporations"); and
WHEREAS, each of AGS and Conoco owns a 50% partnership
interest in Alliance Energy Services Partnership, a Kentucky
general partnership ("AES" or the "Target Partnership" and
together with the Target Corporations, the "Targets").
This Agreement contemplates a transaction in which (1) the
Buyer will purchase from Fellon and XxXxxx, and Xxxxxx and XxXxxx
will sell to the Buyer, all of the outstanding capital stock of
the Target Corporations in return for notes and performance
payments and (2) the Buyer will purchase from Conoco, and Conoco
will sell to the Buyer, its 50% partnership interest in the
Target Partnership.
Now, therefore, in consideration of the premises and the
mutual promises herein made, and in consideration of the
representations, warranties, and covenants herein contained, the
Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in
Regulation D promulgated under the Securities Act.
"Actual EBITDA" has the meaning set forth in Section 2(d)
below.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable
attorneys' fees and expenses.
"AES Disclosure Schedule" has the meaning set forth in
Section 4 below.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the
meaning of Code Section 1504(a).
"AGS Disclosure Schedule" has the meaning set forth in
Section 4 below.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or
transaction that forms the basis for any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
"COBRA" means the requirements of Part 6 of Subtitle B of
Title I of ERISA and Code Section 4980B.
"Confidential Information" means any information concerning
the businesses and affairs of the Targets that is not already
generally available to the public.
"Disclosure Schedules" has the meaning set forth in Section
4 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified
defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d) Employee
Welfare Benefit Plan or material fringe benefit or other
retirement, severance, bonus, or incentive plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(1).
"Energy Commodities" has the meaning set forth in Section
4(r) below.
"Environmental, Health and Safety Requirements" shall mean
all federal, state, local and foreign statutes, regulations,
ordinances and other provisions having the force or effect of
law, all judicial and administrative orders and determinations,
all contractual obligations and all common law concerning public
health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation, all
those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls,
noise or radiation, each as amended and as now or hereafter in
effect.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means each entity which is treated as a
single employer with Seller for purposes of Code Section 414.
"FMA Disclosure Schedule" has the meaning set forth in
Section 4 below.
"Fiduciary" has the meaning set forth in ERISA Section
3(21).
"Financial Statement" has the meaning set forth in Section
4(g) below.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Indemnified Party" has the meaning set forth in Section
8(d) below.
"Indemnifying Party" has the meaning set forth in Section
8(d) below.
"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations,
and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in
connection therewith, (c) all copyrightable works, all
copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all
trade secrets and confidential business information (including
ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (f) all computer
software (including data and related documentation), (g) all
other proprietary rights and (h) all copies and tangible
embodiments thereof (in whatever form or medium).
"ISDA" means the International Swaps Dealers Association,
Inc.
"Knowledge" means actual, not implied or imputed, then
present knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for
Taxes.
"Material Adverse Effect" means, with respect to any entity
or entities any state of facts, event, change, or effect that is
materially adverse to the business, financial condition, assets,
or operations or business prospects of the entity or entities
taken as a whole or on the ability of such entity or entities to
perform its obligations hereunder in all material respects.
EBITDA as forecasted is not intended to be a representation with
respect to the business prospects of the Targets and the failure
to achieve forecasted EBITDA results will not, in itself,
constitute a Material Adverse Effect.
"Most Recent Balance Sheet" means the balance sheet
contained within the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth
in Section 4(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in
Section 4(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in
Section 4(g) below.
"Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37).
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with
respect to quantity and frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Performance Payments" has the meaning set forth in Section
2(c) below.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture,
an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2(b)
below.
"Regulatory Approvals" has the meaning set forth in Section
5(h).
"Reportable Event" has the meaning set forth in ERISA
Section 4043.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a)
mechanic's, materialmen's, and similar liens, (b) liens for Taxes
not yet due and payable or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under
capital lease arrangements, (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with
the borrowing of money, (e) statutory liens not yet delinquent or
the validity of which are being contested in good faith by
appropriate actions and (f) liens in connection with liabilities
reflected on the Most Recent Financial Statement.
"Sellers" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the
outstanding shares of common stock or has the power to vote or
direct the voting of sufficient securities to elect a majority of
the directors.
"Target Corporations" has the meaning set forth in the
preface above.
"Target Partnership" has the meaning set forth in the
preface above.
"Targets" has the meaning set forth in the preface above.
"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 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 or penalty whether disputed or not.
"Tax Return" means any material return, declaration, report,
claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section
8(d) below.
2. Purchase and Sale of Target Shares.
(a) Basic Transaction. On and subject to the terms and
conditions of this Agreement, (1) the Buyer will purchase from
Fellon and XxXxxx, and Xxxxxx and XxXxxx will sell to the Buyer,
all the outstanding capital stock of the Target Corporations,
free and clear of all claims, liens, encumbrances, pledges or
charges of any nature whatsoever and (2) the Buyer will purchase
from Conoco, and Conoco will sell to the Buyer, its 50%
partnership interest in the Target Partnership, free and clear of
all claims, liens, encumbrances, pledges or charges of any nature
whatsoever for the consideration specified below in this Section
2.
(b) Purchase Price. The aggregate Purchase Price for the
Targets (the "Purchase Price") shall be in an amount not to
exceed $48,299,905 (the "Maximum Purchase Price") and shall be
paid and determined as set forth in this Section 2. At Closing,
the Buyer will (i) in exchange for all the shares of stock of the
Target Corporations held by Fellon, issue Fellon a note in the
principal sum of $7,962,000 payable seven days after Closing (the
"Fellon Note Payment") and agree to the payment to Fellon of 50%
of the Performance Payments as described below, (ii) in exchange
for all the shares of stock of the Target Corporations held by
XxXxxx, issue XxXxxx a note in the principal sum of $7,962,000
payable seven days after Closing (the "XxXxxx Note Payment") and
agree to the payment to XxXxxx of 50% of the Performance Payments
as described below and (iii) in exchange for Conoco's 50%
partnership interest in the Target Partnership, pay Conoco the
sum of $13,670,000 in cash (the "Conoco Cash Payment"). In the
event that Buyer shall fail to satisfy all or any part of its
obligation to pay the Performance Payments determined as set
forth below, Allegheny shall pay the net amount due at such time
to each of Fellon and XxXxxx.
(c) Performance Payments. Performance Payments are based
on the Letter of Intent, dated March 5, 2001, and the
Confidential and Preliminary Valuation, dated February 21, 2001,
as set forth on Schedule A, and are calculated as follows:
(i) On the first anniversary of the Closing Date
("Year 1"), the Performance Payment shall be an amount equal
to (1) $6,045,180, in the event that Year 1 Actual EBITDA is
equal to or greater than $5.99 million; or (2) an amount
equal to Year 1 Actual EBITDA divided by $5.99 million
multiplied by $6,045,180, if Actual EBITDA is less than
$5.99 million ("Year 1 Performance Payment").
(ii) On the second anniversary of the Closing Date
("Year 2"), the Performance Payment shall be an amount equal
to (1) $6,407,891, in the event the Year 2 Actual EBITDA is
equal to or greater than $7.18 million, or (2) an amount
equal to Year 2 Actual EBITDA divided by $7.18 million
multiplied by $6,407,891, if Actual EBITDA is less than
$7.18 million ("Year 2 Performance Payment"). In the event
that (1) Year 2 Actual EBITDA is greater than $8.98 million,
and (2) Year 1 Actual EBITDA was less than $5.99 million,
then Fellon and XxXxxx shall receive an additional payment
("First Additional Payment") in an aggregate amount equal to
the lesser of (a) (Year 2 Actual EBITDA minus $8.98 million)
divided by $5.99 million multiplied by $6,045,180, and (b)
$6,045,180 minus the Year 1 Performance Payment.
(iii) On the third anniversary of the Closing Date
("Year 3"), the Performance Payment shall be an amount equal
to (1) $6,252,834, if cumulative EBITDA for Year 1, Year 2
and Year 3 (the "Cumulative EBITDA") is greater than $27.24
million, (2) $0 if the Cumulative EBITDA is less than $21.79
million, or (3) (the Cumulative EBITDA minus $21.79 million)
divided by $5.45 million multiplied by $6,252,834 if
Cumulative EBITDA is greater than $21.79 million and less
than $27.24 million. In the event that (1) Year 3 Actual
EBITDA is greater than $10.77 million and (2) Year 1 Actual
EBITDA was less than $5.99 million, then Fellon and XxXxxx
shall receive an additional Performance Payment in an
aggregate amount equal to the lesser of (a) (Year 3 Actual
EBITDA minus $10.77 million) divided by $5.99 million
multiplied by $6,045,180, and (b) $6,045,180 minus the Year
1 Payment minus the First Additional Payment (the "Second
Additional Payment"). In the event that (1) Year 3 Actual
EBITDA is greater than $10.77 million and (2) Year 2 Actual
EBITDA was less than $7.18 million, then Fellon and XxXxxx
shall receive a Performance Payment in the aggregate amount
equal to the lesser of (a) (Year 3 Actual EBITDA minus
$10.77 million minus (the Second Additional Payment divided
by $6,407,891 multiplied by $5.99 million)) divided by $7.18
million multiplied by $6,407,891, and (b) $6,407,891 minus
the Year 2 Payment.
(iv) In order to permit Fellon and XxXxxx to maximize
the Performance Payments, Allegheny and Buyer agree, until
the end of Year 3, to the following:
(1) Not to change either the corporate and
partnership structure of the Target Partnership or FMA,
except for such changes as may be necessary or
appropriate for Allegheny to satisfy its obligations
pursuant to the Participation Agreement, dated December
20, 1999, by and between Allegheny and Energy
Corporation of America;
(2) Not to change either the corporate or
partnership names of the Target Partnership or FMA;
(3) Not to move the principal offices of the
Targets out of Louisville, Kentucky;
(4) Not to cause or permit any default under the
Management Agreement, by and among AES, FMA and Fellon
(the "Fellon Management Agreement") or the Management
Agreement, by and among AES, FMA and XxXxxx (the
"XxXxxx Management Agreement");
(5) To provide parent guaranties or other credit
as necessary to continue the current business
operations of AES and FMA as now conducted and on
mutually agreeable terms and to fund any expansion of
the core business of the Targets that may be mutually
agreed upon by Fellon and XxXxxx, on one hand, and
Buyer, on the other; and
(6) Fellon and XxXxxx will have such executive
management duties as are assigned to them by the Boards
of AES and FMA consistent with the powers, duties and
responsibilities normally associated with the positions
referred to in the respective Management Agreements of
Fellon and XxXxxx.
(v) The portion of the Maximum Purchase Price
allocable to the period of time remaining for which
Performance Payments are to be determined and paid shall be
immediately due and payable to the Sellers in the event of a
Change of Control at any time prior to the payment date of
the Year 3 Performance Payment. For purposes of this
Agreement, Change of Control shall mean (i) any sale of all
the equity interests of either of AES or FMA to a third
party which is not an Affiliate of Buyer, (ii) any
consolidation or merger of either of AES or FMA with or into
any other entity, other than a merger or consolidation in
which an Affiliate of Buyer remains the ultimate owner of
such entity or (iii) any sale or disposition by either AES
or FMA of all or substantially all of its assets other than
a sale to a third party which is an Affiliate of the Buyer.
(d) Calculation of EBITDA and Payment of Performance
Payments.
(i) "Actual EBITDA" is to be calculated as the
combined net income of the Targets on an accrual basis in
accordance with GAAP (as converted with respect to the
Target Corporations and consistent with past practices with
respect to the Target Partnerships) and as set forth in the
EBITDA Forecast attached hereto as Schedule A, plus
depreciation and amortization (not including depreciation or
amortization from any capital investments made after Closing
and agreed to by Fellon and XxXxxx), plus all taxes based on
all federal, state and local net income, plus interest
expenses (not including any interest charges relating to
funds borrowed or advanced by Buyer or any of its Affiliates
and agreed to by Fellon and XxXxxx, which shall be for the
accounts of FMA or AES, as appropriate) minus interest
income. For purposes of this calculation, income for FMA
and AES must be derived from the core services of Targets
set forth in Section 1 of Exhibit A attached hereto and
shared revenues from the complimentary services set forth in
Section 3 of Exhibit A attached hereto. Actual EBITDA shall
be calculated prior to bonus payments to Fellon and XxXxxx
under their Management Agreements and prior to amortization
of good will arising from the transactions contemplated by
this Agreement. Actual EBITDA shall not include any
management fees, charges for parent guaranties or other
corporate charges imposed by Buyer or any of its Affiliates
unless such other charges relate to services requested by
Fellon and XxXxxx to be performed by Buyer or any of its
Affiliates.
(ii) As soon as practicable, but in no event later
than 90 calendar days following each of Years 1, 2 and 3,
Fellon and XxXxxx shall prepare and deliver to the Buyer a
calculation (the "EBITDA Calculation") of EBITDA for the
foregoing years. After receipt of the applicable EBITDA
Calculation, the Buyer shall have 30 calendar days to review
the EBITDA Calculation, together with the workpapers used in
the preparation thereof. The Buyer and its accountants
shall have full access during regular business hours with
reasonable advance notice to all relevant books, records and
employees of the Targets relating to the applicable EBITDA
Calculation and the Targets accountants and their relevant
supporting workpapers relating to the applicable EBITDA
Calculation. Unless the Buyer delivers written notice to
Fellon and XxXxxx on or prior to the 30th calendar day after
the receipt by it of the EBITDA Calculation, stating that
the Buyer has objections to the EBITDA Calculation and
describing in reasonable detail any such objections, the
Buyer shall be deemed to have accepted and agreed to the
EBITDA Calculation and shall pay the Performance Payment
within 10 calendar days after such 30 day review period.
If, on or prior to the 30th calendar day after the delivery
of the EBITDA Calculation, the Buyer shall give such notice
to Fellon and XxXxxx, the Buyer and Fellon and XxXxxx shall,
within ten calendar days (or such longer period as such
Parties may agree) following the giving of such notice (the
"Resolution Period"), attempt in good faith to resolve any
objections by the Buyer, and any resolution by them as to
any disputed amounts shall be final, binding and conclusive.
In such case, Buyer shall pay the undisputed portion of the
Performance Payment within 10 calendar days after such
Resolution Period. Any amounts remaining in dispute at the
conclusion of the Resolution Period ("Unresolved Changes")
shall be submitted to an accounting firm mutually acceptable
to the Parties (such firm being referred to as the "Auditing
Firm"), within ten calendar days after the expiration of the
Resolution Period. In the event that the Buyer and Fellon
and XxXxxx cannot agree on a mutually acceptable accounting
firm, then the Buyer shall select an accounting firm and
Fellon and XxXxxx shall, collectively, select an accounting
firm, and the two accounting firms shall together select a
third independent accounting firm to serve as the Auditing
Firm. Each Party agrees to execute, if requested by the
Auditing Firm, an engagement letter containing reasonable
terms. All fees and expenses relating to the work, if any,
to be performed by the Auditing Firm in accordance with this
Section 2(d) shall be borne equally by Fellon and XxXxxx, on
the one hand, and the Buyer, on the other. The Auditing
Firm shall be instructed not to apply any materiality
standard in making its determination and shall endeavor to
provide the most accurate answer attainable without
incurring expense that is unreasonable, in light of the
amount in issue. The Auditing Firm shall be instructed to
make such determination in accordance with this Agreement.
The Auditing Firm's determination of the Unresolved Changes
shall be made within 30 calendar days of the submission of
the Unresolved Changes thereto, shall be set forth in a
written statement delivered to the Buyer and Fellon and
XxXxxx and shall be final, binding and conclusive on the
Parties for all purposes. The Buyer shall pay any remaining
Performance Payment within 10 calendar days of the Auditing
Firm's determination of Unresolved Changes.
(e) The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place
at the offices of Xxxxxx & Xxxxxxxx, 000 Xxxx Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000 commencing at 9:00 a.m. local time on
the last business day of the month in which the satisfaction or
waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby have occurred or
been waived (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other
date as the Buyer and the Sellers may mutually determine (the
"Closing Date").
(f) Deliveries at the Closing. At the Closing, (i) the
Sellers will deliver to the Buyer the various certificates,
instruments, and documents referred to in Section 7(a) below,
(ii) the Buyer will deliver to the Sellers the various
certificates, instruments, and documents referred to in Section
7(b) below, (iii) Fellon will deliver to the Buyer stock
certificates representing all of his 50% interest in shares of
stock of each of the Target Corporations, endorsed in blank or
accompanied by duly executed assignment documents, (iv) XxXxxx
will deliver to the Buyer stock certificates representing all of
his 50% interest in shares of stock of each of the Target
Corporations, endorsed in blank or accompanied by duly executed
assignment and/or amendment documents, (v) Conoco will deliver to
the Buyer evidence of its ownership of 50% of the Target
Partnership accompanied by duly executed assignment documents,
and (vi) the Buyer will deliver to each of the Sellers the
consideration specified in Section 2(b) above to Conoco in cash
by wire transfer of immediately available funds and to each of
Fellon and XxXxxx a Promissory Note in the form of Exhibits E-1
and E-2, as applicable.
(g) Net Asset Value Determination and Accounting Transition
Adjustment. Determination of net asset value at Closing will be
determined in accordance with the accounting method used to
determine the net asset value threshold in Section 5(c) below.
In the event that the tangible net asset value on the combined
FMA and AES balance sheets is less than negative $597,000 at
Closing, Conoco, Fellon and XxXxxx shall each contribute his or
its proportionate share of such deficit to AES and FMA. In the
event that the tangible net asset value on the combined FMA and
AES balance sheets is more than negative $597,000 at Closing
(determined without any adjustment otherwise prescribed by FAS
133) (the "Minimum NAV"), such excess amount shall be distributed
to Conoco, Fellon and XxXxxx in an amount equal to his or its
proportionate share thereof. Buyer shall be entitled to offset
the amount of any deficit due from Fellon and XxXxxx pursuant to
this Section 2(g) against the payments due to such parties under
Section 2 hereof.
(h) Closing Reconciliation. As soon as practicable, but in
no event later than 90 calendar days following the Closing Date,
Sellers shall prepare and deliver to the Buyer unaudited
consolidating balance sheets and statements of income, changes in
stockholders' equity and cash flow of Targets as of the Closing
Date for the current calendar year determined in accordance with
the accounting method used to determine the net asset value
threshold in Section 5(c) below (inclusive of the effect of the
Accounting Transition Adjustment as described in subsection (g)
above) and as set forth in the EBITDA Forecast attached hereto as
Schedule A (the "Closing Reconciliation"). After receipt of the
Closing Reconciliation, the Buyer shall be entitled to the same
periods of time in which to respond and resources to review the
Closing Reconciliation as are set forth in Section 2(d) with
respect to the calculation of EBITDA. Additionally, any disputes
between the Sellers and the Buyer with respect to the Closing
Reconciliation shall be resolved in the manner and time periods
described above in Section 2(d).
3. Representations and Warranties Concerning the
Transaction.
(a) Representations and Warranties of the Sellers. Each of
Fellon, McCord, AGS and Conoco, as applicable and subject to
Section 11(a), represent and warrant to the Buyer that the
statements contained in this Section 3(a) are correct and
complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this
Agreement throughout this Section 3(a)) with respect to himself
or itself, except as set forth in Annex I(a) (as to Fellon),
Annex I(b) (as to XxXxxx), Annex I(c) (as to AGS) and Annex I(d)
(as to Conoco), attached hereto.
(i) Organization of Conoco. Conoco is a corporation
duly organized, validly existing, and in good standing under
the laws of Delaware.
(ii) Authorization of Transaction. Such Seller has
full power and authority to execute and deliver this
Agreement and to perform his or its obligations hereunder in
all material respects. This Agreement constitutes the valid
and legally binding obligation of such Seller, enforceable
in accordance with its terms and conditions. Such Seller
need not give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any person,
government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any
constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court
to which such Seller is subject and, as to AGS and Conoco,
any provision of its charter and bylaws or (B) conflict
with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license,
instrument, or other arrangement to which such Seller is a
party or by which he or it is bound or to which any of his
or its assets is subject.
(iv) Brokers' Fees. Such Seller has no Liability or
obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions
contemplated by this Agreement for which the Buyer could
become liable or obligated.
(v) Ownership Interests. Such Seller holds of record
and owns beneficially the number of shares of stock of the
Target Corporations or the partnership interest in the
Target Partnership set forth next to his or its name in
Section 4(b) of the applicable Disclosure Schedule, free and
clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities
laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims,
and demands. Such Seller is not a party to any option,
warrant, purchase right, or other contract or commitment
that could require such Seller to sell, transfer, or
otherwise dispose of any shares of stock of either of the
Target Corporations or the partnership interest in the
Target Partnership (other than this Agreement). Such Seller
is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any
shares of stock of the Target Corporations or the
partnership interest in the Target Partnership.
(b) Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers that the statements
contained in this Section 3(b) are correct and complete as of the
date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement throughout this
Section 3(b)), except as set forth in Annex II attached hereto.
(i) Organization of the Buyer. The Buyer is a
corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
(ii) Authorization of Transaction. The Buyer has full
power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and
conditions. The Buyer need not give any notice to, make any
filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order
to consummate the transactions contemplated by this
Agreement.
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any
constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court
to which the Buyer is subject or any provision of its
charter or bylaws or (B) conflict with, result in a breach
of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject.
(iv) Brokers' Fees. The Buyer has no Liability or
obligation to pay any fees or commissions to any broker,
finder, agent or employee with respect to the transactions
contemplated by this Agreement for which any Seller could
become liable or obligated.
(v) Investment. The Buyer is not acquiring the shares
of stock of the Target Corporations or the partnership
interest in the Target Partnership with a view to, or for
sale in connection with, any distribution thereof. The
Buyer is acquiring such shares for investment within the
meaning of the Securities Act. The Buyer agrees that such
shares may not be sold, transferred, offered for sale,
pledged, hypothecated or otherwise disposed of without
registration under the Securities Act, except pursuant to an
exemption from registration available under such Act. The
Buyer will not sell, offer to sell or solicit offers to buy
any of the shares in violation of the Securities Act or the
securities law of any state. The Buyer understands that
such shares have not been registered under federal or any
state's securities laws.
4. Representations and Warranties Concerning the Target
Corporations and the Target Partnership. As to the Target
Corporations, Fellon and XxXxxx, and as to the Target
Partnership, Fellon, McCord, AGS and Conoco, represent and
warrant to the Buyer that the statements contained in this
Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this
Section 4), except as set forth in the disclosure schedule
delivered by Fellon and XxXxxx relating to AGS (the "AGS
Disclosure Schedule"), the disclosure schedule delivered by
Fellon and XxXxxx relating to FMA (the "FMA Disclosure Schedule")
or the disclosure schedule delivered by Fellon, McCord, AGS and
Conoco relating to the Target Partnership (the "AES Disclosure
Schedule," and together with the AGS Disclosure Schedule and the
FMA Disclosure Schedule, the "Disclosure Schedules") to the Buyer
on the date hereof and initialed by the respective Parties. Each
of the Disclosure Schedules will be headed and arranged in
paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 4.
(a) Organization, Qualification, and Power. Each of the
Target Corporations is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation, and the Target Partnership is a partnership
duly formed, validly existing and in good standing under the laws
of the jurisdiction of its formation. Each of the Targets is
duly authorized to conduct business in each jurisdiction in which
it engages in business activity and is in good standing under the
laws of each jurisdiction where such authorization is required.
Each of the Targets has full power and authority and all
licenses, permits, and authorizations necessary to carry on the
businesses in which it is engaged and in which it presently
proposes to engage and to own and use the properties owned and
used by it. Section 4(a) of the Disclosure Schedules lists the
directors and officers, or such other persons with equivalent
authority, of each of the Targets. The Sellers have delivered to
the Buyer correct and complete copies of the organizational and
governance documents (as amended to date) of each of the Targets.
The minute books (containing the records of meetings of the
stockholders), the board of directors, and any committees of the
board of directors, or of such other person (or groups of persons
with equivalent authority), the stock certificate books, and the
stock record books, or the partnership interest holder record
books, as applicable, of each of the Targets are correct and
complete in all material respects. None of the Targets is in
default under or in violation of any provision of its
organizational and governance documents.
(b) Capitalization. The entire authorized capital stock of
FMA consists of 10,000 shares of common stock, no par value per
share, consisting of 9,500 shares of Class A voting stock and 500
shares of Class B non-voting stock, of which 200 shares of Class
A voting stock are issued and outstanding. There is no treasury
stock. The entire authorized capital stock of AGS consists of
10,000 shares of common stock, no par value per share, consisting
of 9,500 shares of Class A voting stock and 500 shares of Class B
non-voting stock, of which 200 shares of Class A voting stock are
issued and outstanding. There is no treasury stock. Conoco and
AGS are the only partners of the Target Partnership, each holding
a 50% partnership interest. All of the issued and outstanding
shares of stock of the Target Corporations have been duly
authorized, are validly issued, fully paid, and nonassessable,
and are held of record and beneficially by Fellon and XxXxxx as
set forth in Section 4(b) of the AGS Disclosure Schedule and the
FMA Disclosure Schedule, as applicable. There are no outstanding
or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or
commitments that could require either Target Corporation to
issue, sell, or otherwise cause to become outstanding any of
either Target Corporations' capital stock or cause the Target
Partnership to admit any additional partners. There are no
outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to the
Targets. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the
stock of the Target Corporations.
(c) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which any of the
Targets is subject or any provision of the organizational or
governance documents of any of the Targets or (ii) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other
arrangement to which any of the Targets is a party or by which it
is bound or to which any of its assets is subject (or result in
the imposition of any Security Interest upon any of its assets).
None of the Targets is required to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, the
failure of which would result in a Material Adverse Effect.
(d) Brokers' Fees. None of the Targets has any Liability
or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by
this Agreement.
(e) Title to Assets. Each of the Targets have good and
marketable title to, or a valid leasehold interest in, the
properties and assets owned by them, or shown on the Most Recent
Balance Sheet or acquired after the date thereof, free and clear
of all Security Interests, except for properties and assets
disposed of in the Ordinary Course of Business since the date of
the Most Recent Balance Sheet.
(f) Subsidiaries. None of the Targets has any
Subsidiaries. None of the Targets controls directly or
indirectly or has any direct or indirect equity participation in
any corporation, partnership, trust, or other business
association which is not a Subsidiary of the Target, other than
each of AGS' and Conoco's 50% partnership interest in the Target
Partnership.
(g) Financial Statements. Attached hereto as Exhibit B-1
(as to FMA), Exhibit B-2 (as to AGS) and Exhibit B-3 (as to the
Target Partnership) are the following financial statements
(collectively the "Financial Statements"): (i) unaudited balance
sheets and statements of income for the fiscal years ended
December 31, 1998, December 31, 1999 and December 31, 2000 (the
"Most Recent Fiscal Year End") for each of the Target
Corporations; (ii) audited balance sheets and related statements
of income, of partners' capital and of cash flows for the fiscal
years ended December 31, 1999 and December 31, 2000 for the
Target Partnership (the "Audited Partnership Statements"); (iii)
unaudited balance sheets and statements of income for the fiscal
year ended December 31, 1998, for the Target Partnership; and
(iv) unaudited balance sheets and statements of income for the
one month ended January 31, 2001 (the "Most Recent Fiscal Month
End") (the "Most Recent Financial Statements") for each of the
Targets. The Financial Statements (including the notes thereto)
of AES, not including the 1998 year end statement, have been
prepared in accordance with GAAP, applied on a consistent basis
throughout the periods covered thereby, present fairly the
financial condition of AES as of such dates, and the results of
operations of each of AES for such periods, are correct and
complete, and are consistent with the books and records of AES
(which books and records are correct and complete); provided,
however, that the Most Recent Financial Statements are subject to
normal year-end adjustments (which will not be material
individually or in the aggregate) and lack footnotes and other
presentation items.
(h) Events Subsequent to Most Recent Fiscal Year End. Since
the Most Recent Fiscal Year End, there has not been any Material
Adverse Effect on the Targets. Without limiting the generality of
the foregoing, since that date:
(i) None of the Targets has sold, leased, transferred,
or assigned any of its assets, tangible or intangible, other
than in the Ordinary Course of Business;
(ii) None of the Targets has entered into any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either
involving more than $50,000 or outside the Ordinary Course
of Business;
(iii) No party (including any of the Targets) has
accelerated, terminated, modified, or canceled in any
material respect any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and
licenses) involving more than $50,000 to which any of the
Targets is a party or by which any of them is bound;
(iv) None of the Targets has granted a Security
Interest upon any of its assets, tangible or intangible;
(v) None of the Targets has made any capital
expenditure (or series of related capital expenditures)
either involving more than $50,000 or outside of the
Ordinary Course of Business;
(vi) None of the Targets has made any capital
investment in, any loan to, or any acquisition of the
securities or assets of, any other Person (or series of
related capital investments, loans, and acquisitions) either
involving more than $50,000 or outside of the Ordinary
Course of Business;
(vii) There has been no change in any accounting policy
of any of the Targets;
(viii) None of the Targets has issued any note, bond,
or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or
capitalized lease obligation either involving more than
$25,000 singly or $50,000 in the aggregate;
(ix) None of the Targets has delayed, postponed or
failed to pay the payment of accounts payable or other
Liabilities outside of the Ordinary Course of Business;
(x) None of the Targets has canceled, compromised,
waived, or released any right or claim (or series of related
rights and claims) either involving more than $50,000 or
outside of the Ordinary Course of Business;
(xi) None of the Targets has granted any license or
sublicense of any rights under or with respect to any
Intellectual Property;
(xii) There has been no change made or authorized in
the organizational or governance documents of any of the
Targets;
(xiii) None of the Targets has issued or sold any
capital stock or partnership interests, as applicable, of
the Targets or any options, warrants or convertible
securities with respect thereto;
(xiv) None of the Targets has authorized, declared, set
aside, or paid any dividend or made any distribution with
respect to its authorized capital stock or partnership
interests, as applicable (whether in cash or in kind)
outside of the Ordinary Course of Business;
(xv) None of the Targets has experienced any damage,
destruction, or loss (whether or not covered by insurance)
to its property;
(xvi) None of the Targets has made any loan to, or
entered into any other transaction with, any of its
directors, officers, managers or employees;
(xvii) None of the Targets has entered into any
employment contract or collective bargaining agreement,
written or oral, or modified the terms of any such existing
contract or agreement, outside of the Ordinary Course of
Business;
(xviii) None of the Targets has granted any increase in
the base compensation of any of its directors, managers or
officers, or of any of its employees, outside of the
Ordinary Course of Business;
(ixx) None of the Targets has adopted, amended,
modified, or terminated any bonus, profit-sharing,
incentive, severance, or other plan, contract, or commitment
for the benefit of any of its directors, managers, officers,
or employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xx) None of the Targets has made any other change in
employment terms for any of its directors, officers or
managers, or for any of its employees, outside of the
Ordinary Course of Business;
(xxi) None of the Targets has made or pledged to make
any charitable or other capital contribution; and
(xxii) None the Targets has committed to any of the
foregoing.
(i) Undisclosed Liabilities. None of the Targets has any
Liability (and there is no Basis for any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any Liability), except
for (i) Liabilities set forth on the Most Recent Financial
Statements and (ii) Liabilities which have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business (none
of which results from, arises out of, or was caused by any breach
of contract, breach of warranty, tort, or violation of law.
(j) Legal Compliance. Each of the Targets has complied
with all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed against any of them alleging any
failure to so comply.
(k) Tax Matters.
(i) Each of the Targets has filed all Tax Returns that
it was required to file. All such tax returns were true,
accurate, correct and complete in all material respects.
All Taxes owed by the Targets (whether or not shown on any
Tax Return) have been paid. None of the Targets currently
is the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where any of the Targets does
not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security
Interests on any of the assets of the Targets that arose in
connection with any failure (or alleged failure) to pay any
Tax.
(ii) Each of the Target Corporations has withheld and
paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other
third party.
(iii) There is no dispute or claim concerning any Tax
Liability of any of the Targets either (A) claimed or raised
by any authority in writing or (B) as to which any of the
Sellers and the directors, managers or officers (and
employees responsible for Tax matters) of the Targets has
Knowledge based upon personal contact with any agent of such
authority. Section 4(k) of the applicable Disclosure
Schedule lists all federal, state, local, and foreign income
Tax Returns filed with respect to any of the Targets for
taxable periods ended on or after December 31, 1997,
indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject
of audit. The Sellers have delivered to the Buyer correct
and complete copies of all such federal income Tax Returns.
With respect to each of the Target Corporations, Sellers
have also delivered all examination reports, and statements
of deficiencies assessed against or agreed to by any of the
Target Corporations, since January 1, 1998. With respect to
the Target Partnership, Conoco agrees to deliver any such
examination reports and statements of deficiencies as are
applicable.
(iv) None of the Targets has waived any statute of
limitations in respect to Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
(v) None of the Targets has made any payments, is
obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it
to make any payments that will not be deductible under Code
Section 280G. None of the Targets has been a United States
real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in
Code Section 897(c)(1)(A)(ii). Each of the Targets has
disclosed on its federal income Tax Returns all positions
taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of
Code Section 6662. None of the Targets (A) has been a
member of an Affiliated Group filing a consolidated federal
income Tax Return (other than a group the common parent of
which was the Target Corporations or the Target Partnership)
or (B) has any Liability for the Taxes of any Person (other
than any of the Targets), as a transferee or successor, by
contract, or otherwise.
(vi) The unpaid Taxes of each of the Targets (A) did
not, as of the Most Recent Fiscal Month End, 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
Most Recent Balance Sheet (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 each of the Targets in
filing their Tax Returns.
(vii) Each of the Target Corporations (and any
predecessor of such Target) has been a validly electing S
corporation within the meaning of Code Sections 1361 and
1362 at all times during its existence and each Target
Corporation will be an S corporation up to and including the
Closing Date.
(viii) The Target Partnership is a partnership under
the laws of the Commonwealth of Kentucky and has been
taxable as a partnership under Subchapter K of the Code at
all times during its existence and will continue to be a
partnership up to and including the Closing Date.
(l) Real Property.
(i) None of the Targets owns, directly or indirectly,
any interest in any real property.
(ii) Section 4(l)(ii) of the applicable Disclosure
Schedule lists and describes briefly all real property
leased or subleased to any of the Targets. The Sellers have
delivered to the Buyer correct and complete copies of the
leases and subleases (as amended to date) listed in Section
4(l)(ii) of the applicable Disclosure Schedule. With
respect to each lease and sublease listed in Section
4(l)(ii) of the applicable Disclosure Schedule:
(A) the lease or sublease is legal, valid,
binding, enforceable against such Target, and, to the
Knowledge of Seller, is in full force and effect;
(B) to the Knowledge of Seller, no party to the
lease or sublease is in breach or default, and no event
has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(C) to the Knowledge of Seller, no party to the
lease or sublease has repudiated any provision thereof;
(D) to the Knowledge of Seller, there are no
disputes, oral agreements, or forbearance programs in
effect as to the lease or sublease;
(E) with respect to each sublease, the
representations and warranties set forth in subsections
(A) through (D) above are true and correct with respect
to the underlying lease;
(F) none of the Targets has assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or
subleasehold;
(G) all facilities leased or subleased thereunder
have received all approvals of governmental authorities
(including licenses and permits) required in connection
with the operation thereof and have been operated and
maintained in accordance with applicable laws, rules,
and regulations, except where such failure may not
result in a Material Adverse Effect;
(H) all facilities leased or subleased thereunder
are supplied with utilities and other services
necessary for the operation of said facilities; and
(I) to the Knowledge of Seller, the owner of the
facility leased or subleased has good and marketable
title to the parcel of real property, free and clear of
any Security Interest, easement, covenant, or other
restriction, except for installments of special
easements not yet delinquent and recorded easements,
covenants, and other restrictions which do not impair
the current use, occupancy, or value, or the
marketability of title, of the property subject
thereto.
(m) Intellectual Property.
(i) Each of the Targets owns or has the right to use
pursuant to license, sublicense, agreement or permission,
all Intellectual Property necessary for the operation of the
businesses of the Targets as presently conducted. Each item
of Intellectual Property owned or used by any of the Targets
immediately prior to the Closing hereunder will be owned or,
to the Knowledge of Seller, available for use by the Targets
on substantially identical terms and conditions immediately
subsequent to the Closing hereunder. Each of the Targets
has taken all necessary action to maintain and protect each
item of Intellectual Property that it owns or uses.
(ii) None of the Targets has infringed upon or
violated any Intellectual Property rights of third parties,
and none of the Sellers or the directors or officers (or
employees with responsibility for Intellectual Property
matters) of the Targets have ever received any charge,
complaint, claim, demand, or notice alleging any such
infringement or violation (including any claim that any of
the Targets must license or refrain from using any
Intellectual Property rights of any third party). To the
Knowledge of any of the Sellers no third party has infringed
upon or violated any Intellectual Property rights of any of
the Targets.
(iii) Section 4(m)(iii) of the applicable Disclosure
Schedule identifies each patent or registration which has
been issued to any of the Targets with respect to any of its
Intellectual Property, identifies each pending patent
application or application for registration which any of the
Targets has made with respect to any of its Intellectual
Property, and identifies each license, agreement, or other
permission which any of the Targets has granted to any third
party with respect to any of its Intellectual Property
(together with any exceptions). The Sellers have delivered
to the Buyer correct and complete copies of all such
patents, registrations, applications, licenses, agreements,
and permissions (as amended to date) and have made available
to the Buyer correct and complete copies of all other
written documentation evidencing ownership and prosecution
(if applicable) of each such item. Section 4(m)(iii) of the
applicable Disclosure Schedule also identifies each trade
name or unregistered trademark used by any of the Targets in
connection with its business. With respect to each item of
Intellectual Property required to be identified in Section
4(m)(iii) of the applicable Disclosure Schedule:
(A) each of the Targets possess all right, title,
and interest in and to the item, free and clear of any
Security Interest or license;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree or ruling;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is
pending or, to the Knowledge of any of the Sellers, is
threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) None of the Targets has ever agreed to
indemnify any Person for or against any infringement,
or violation with respect to the item.
(iv) Section 4(m)(iv) of the applicable Disclosure
Schedule identifies each item of Intellectual Property that
any third party owns and that any of the Targets uses
pursuant to license, sublicense, agreement, or permission.
The Sellers have delivered to the Buyer correct and complete
copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each item
of Intellectual Property required to be identified in
Section 4(m)(iv) of the applicable Disclosure Schedule:
(A) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding,
enforceable against such Target, and, to the Knowledge
of Seller, is in full force and effect;
(B) to the Knowledge of Seller, no party to the
license, sublicense, agreement, or permission is in
breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or
default or permit termination, modification, or
acceleration thereunder;
(C) to the Knowledge of Seller, no party to the
license, sublicense, agreement, or permission has
repudiated any provision thereof;
(D) with respect to each sublicense, the
representations and warranties set forth in subsections
(A) through (C) above are true and correct with respect
to the underlying license;
(E) to the Knowledge of Seller, the underlying
item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree,
ruling, or charge;
(F) no action, suit, proceeding, hearing, charge,
complaint, claim, or demand is pending or, to the
Knowledge of any of the Sellers, is threatened which
challenges the legality, validity, or enforceability of
the underlying item of Intellectual Property; and
(G) None of the Targets has granted any sublicense
or similar right with respect to the license,
sublicense, agreement, or permission.
(v) To the Knowledge of the Sellers, none of the
Targets will infringe upon or violate any Intellectual
Property rights of third parties as a result of the
continued operation of its businesses as presently
conducted.
(vi) None of the Sellers has any Knowledge of any new
products, inventions or procedures that any competitors or
other third parties have developed which reasonably could be
expected to supersede or make obsolete any services provided
by any of the Targets.
(n) Tangible Assets. Each of the Targets owns or leases
all buildings, machinery, equipment, and other tangible assets
necessary for the conduct of its businesses as presently
conducted. Each such tangible asset has been maintained in
accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear) and is
adequate for the purposes for which it presently is used.
(o) Inventory. The inventory of the Targets consists of
gas storage and/or banking service all of which is merchantable
and none of which is slow-moving, obsolete, obsolescent, damaged,
or defective, subject only to the reserve for inventory writedown
set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and
practice of the Targets.
(p) Contracts. Section 4(p) of the applicable Disclosure
Schedule lists the following contracts and other agreements to
which any of the Targets is a party.
(i) any master agreement, purchase agreement or order
form pursuant to which individual purchase orders or
confirmations may be issued;
(ii) any ISDA agreement;
(iii) any form agreement for services performed, or
gas or electricity sold, by any of the Targets;
(iv) any agreement for the lease of personal property
to or from any Person providing for lease payments in excess
of $25,000 per annum;
(v) any agreement for the purchase or sale of raw
materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period
of more than one year, result in a material loss to any of
the Targets or involve consideration in excess of $50,000;
(viii) any agreement concerning a partnership or joint
venture;
(ix) any agreement under which it has created,
incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in
excess of $25,000 or under which it has imposed a Security
Interest on any of its assets, tangible or intangible;
(x) any agreement concerning confidentiality or
noncompetition or nonsolicitation;
(xi) any agreement with any of the Sellers or their
Affiliates (other than the Target Corporations or the Target
Partnership);
(xii) any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation,
severance, or other material plan or arrangement for the
benefit of its current or former directors, officers, and
employees;
(xiii) any collective bargaining agreement;
(xiv) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other
basis providing annual compensation in excess of $50,000 or
providing severance benefits;
(xv) any agreement under which it has advanced or
loaned any amount to any of its directors, managers,
officers, or employees outside the Ordinary Course of
Business;
(xvi) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect
on any of the Targets; or
(xvii) any other agreement the performance of which
involves consideration in excess of $25,000.
The Sellers have made available to the Buyer a correct and
complete copy of each written agreement (as amended to date)
listed in Section 4(p) of the applicable Disclosure Schedule and
a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 4(p) of the applicable
Disclosure Schedule. With respect to each such agreement: (A)
the agreement is legal, valid, binding, enforceable against such
Target, and to the Knowledge of the Seller, in full force and
effect; (B) to the Knowledge of the Seller, no party is in breach
or default, and no event has occurred which with notice or lapse
of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement;
and (C) to the Knowledge of the Seller, no party has repudiated
any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts
receivable of the Targets are reflected on their books and
records, are valid receivables subject to no setoffs or
counterclaims, are current and collectible, and will be collected
within 120 days at their recorded amounts, subject only to the
reserve for bad debts set forth on the Most Recent Balance Sheet
in accordance with the past custom and practice of the Targets.
(r) Energy Commodities. The Target Partnership trades or
holds Energy Commodities or rights in, to or for the purchase,
sale, transportation or storage of Energy Commodities for its own
account. The Target Partnership is at risk for performance or
payment with respect to Energy Commodities, or rights or
obligations with respect to the purchase, sale, transportation or
storage thereof. Any purchase or sale of Energy Commodities or
rights, contracts, agreements or arrangements with respect to the
transportation or storage of Energy Commodities effected or
obtained by the Target Partnership is solely for its account and
risk, except to the extent that such Target Partnership purchases
derivatives to cover such risk. For purposes of this subsection
(r) "Energy Commodities" means petroleum, petroleum products,
natural gas, natural gas liquids, electricity, emissions
allowances, coal, energy in any form, and commodities that are
derivatives or products or by-products of any of the foregoing
(including, but not limited to, gasoline, heating oil and gas
oil) as well as any swap, cap, floor, collar, futures contract,
forward contract, option and any other derivative instrument,
contract or arrangement, based on any of the aforementioned
energy commodities, regardless of whether such instrument,
contract or arrangement provides for or results in physical
delivery of such energy commodities or cash settlement,
including, but not limited to, contracts for the forward delivery
of physical output of assets or physical load obligations.
(s) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of any of the Targets.
(t) Insurance. Section 4(t) of the applicable Disclosure
Schedule sets forth the following information with respect to
each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond
and surety arrangements) to which any of the Targets has been a
party, a named insured, or otherwise the beneficiary of coverage
at any time within the past three years:
(i) the name, address, and telephone number of the
agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis)
and amount of coverage; and
(v) a description of any retroactive premium
adjustments or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy
is legal, valid, binding, enforceable, and in full force and
effect; (B) none of the Targets nor any other party to the policy
is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred
which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination, modification, or
acceleration, under the policy; and (C) no party to the policy
has repudiated any provision thereof. Each of the Targets has
been covered during the past three years by insurance in scope
and amount customary and reasonable for the business in which it
has engaged during the aforementioned period. Section 4(t) of
the applicable Disclosure Schedule describes any self-insurance
arrangements affecting any of the Targets.
(u) Litigation. Section 4(u) of the applicable Disclosure
Schedule sets forth each instance in which any of the Targets (i)
is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party or, to the Knowledge
of the Seller, is threatened to be made a party to any action,
suit, proceeding (including, but not limited to, any proceedings
with respect to workers' compensation claims), hearing, or
investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the actions,
suits, proceedings, hearings, and investigations set forth in
Section 4(u) of the applicable Disclosure Schedule could result
in any Material Adverse Effect on the Targets.
(v) Product and Service Warranty. Each product sold,
leased, or delivered and service provided by or on behalf of any
of the Targets has been in conformity with all applicable
contractual commitments and all express and implied warranties
and performance guaranties, and none of the Targets has any
Liability for replacement thereof or other damages in connection
therewith. No product sold, leased, or delivered or service
provided by or on behalf of any of the Targets is subject to any
guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease. Section 4(v) of
the applicable Disclosure Schedule includes copies of the
standard terms and conditions of sale or lease for each of the
Targets (containing applicable guaranty, warranty, and indemnity
provisions).
(w) Product and Service Liability. None of the Targets has
any Liability arising out of any injury to individuals or
property as a result of the ownership, possession, receipt or use
of any product or service sold, leased, or delivered by or on
behalf of any of the Targets.
(x) Employees. To the Knowledge of the Sellers, no
executive, key employee, or group of employees has any plans to
terminate employment with any of the Targets. None of the
Targets is a party to, or bound by any collective bargaining
agreement, nor have any of them experienced any strikes,
grievances, claims of unfair labor practices or other collective
bargaining disputes. None of the Targets has engaged in any
unfair labor practice or discriminated on the basis of race, age,
sex, color, national origin, religion, mental or physical
disability, status as a special disabled veteran or Vietnam-era
veteran or otherwise in its employment conditions or practices
with respect to its employees. None of the Sellers has any
Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to
employees of any of the Targets.
(y) Employee Benefits.
(i) Section 4(y) of the applicable Disclosure Schedule
lists each Employee Benefit Plan that any of the Targets
maintains or to which any of the Targets contributes or has
any obligation to contribute.
(A) Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in
form and in operation in all respects with the
applicable requirements of ERISA, the Code, and other
applicable laws.
(B) All required reports and descriptions
(including Form 5500 Annual Reports, summary annual
reports, PBGC-1's, and summary plan descriptions) have
been timely filed and distributed appropriately with
respect to each such Employee Benefit Plan. The
requirements of COBRA have been met in all material
respects with respect to each such Employee Benefit
Plan which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction
contributions) which are due have been paid to each
such Employee Benefit Plan which is an Employee Pension
Benefit Plan and all contributions for any period
ending on or before the Closing Date which are not yet
due, have been paid to each such Employee Pension
Benefit Plan or accrued in accordance with the past
custom and practice of the Targets. All premiums or
other payments for all periods ending on or before the
Closing Date have been paid with respect to each such
Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
(D) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the requirements of
a "qualified plan" under Code Section 401(a), has
received, within the last two years, a favorable
determination letter from the Internal Revenue Service
that it is a "qualified plan," and none of the Sellers
is aware of any facts or circumstances that could
result in the revocation of such determination letter.
(E) The market value of assets under each such
Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) equals
or exceeds the present value of all vested and
nonvested Liabilities thereunder determined in
accordance with PBGC methods, factors, and assumptions
applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
(F) The Sellers have delivered to the Buyer
correct and complete copies of the plan documents and
summary plan descriptions, the most recent
determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, and
all related trust agreements, insurance contracts, and
other funding agreements which implement each such
Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that
any of the Targets maintains or ever has maintained or to
which any of them contributes, ever has contributed, or ever
has been required to contribute:
(A) No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially
terminated or been the subject of a Reportable Event as
to which notices would be required to be filed with the
PBGC. No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or, to the
Knowledge of any of the Sellers threatened.
(B) There have been no Prohibited Transactions
with respect to any such Employee Benefit Plan. No
Fiduciary has any Liability for breach of fiduciary
duty or any other failure to act or comply in
connection with the administration or investment of the
assets of any such Employee Benefit Plan. No action,
suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the
assets of any such Employee Benefit Plan (other than
routine claims for benefits) is pending or, to the
Knowledge of any of the Sellers threatened.
(C) None of the Targets has incurred, and none of
the Sellers any reason to expect that any of the
Targets will incur, any Liability to the PBGC (other
than PBGC premium payments) or otherwise under Title IV
of ERISA (including any withdrawal liability as defined
in ERISA Section 4201) or under the Code with respect
to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan.
(iii) None of the Targets contributes to, ever has
contributed to, or ever has been required to contribute to
any Multiemployer Plan or has any Liability (including
withdrawal liability as defined in ERISA Section 4201) under
any Multiemployer Plan.
(iv) None of the Targets maintains or ever has
maintained or contributes, ever has contributed, or ever has
been required to contribute to any Employee Welfare Benefit
Plan providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents
(other than in accordance with COBRA).
(z) Guaranties. None of the Targets is a guarantor, surety
or otherwise is liable for any material Liability or obligation
(including indebtedness) of any other Person.
(aa) Environmental, Health and Safety Matters.
(i) Each of the Targets has complied and is in
compliance with all Environmental, Health and Safety
Requirements.
(ii) Without limiting the generality of the foregoing,
each of the Targets has obtained and complied with, and is
in compliance with, all permits, licenses and other
authorizations that are required pursuant to Environmental,
Health and Safety Requirements for the occupation of its
facilities and the operation of its business; a list of all
such permits, licenses and other authorizations is set forth
on the applicable Disclosure Schedule.
(iii) None of the Targets has received any written
notice, report or other information regarding any actual or
alleged violation of Environmental, Health and Safety
Requirements, or any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or
corrective obligations, relating to any of them or its
facilities arising under Environmental, Health and Safety
Requirements.
(iv) None of the following exists at any property or
facility operated by any of the Targets: (1) underground
storage tanks, (2) asbestos-containing material in any form
or condition, (3) materials or equipment containing
polychlorinated biphenyls, or (4) landfills, surface
impoundments, or disposal areas.
(v) None of the Targets has treated, stored, disposed
of, arranged for or permitted the disposal of, transported,
handled, or released any substance, including without
limitation any hazardous substance, or owned or operated any
property or facility (and no such property or facility is
contaminated by any such substance) in a manner that has
given rise to liabilities, including any liability for
response costs, corrective action costs, personal injury,
property damage, natural resources damages or attorney fees,
pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended
("CERCLA"), the Solid Waste Disposal Act, as amended
("SWDA") or any other Environmental, Health and Safety
Requirements.
(vi) Neither this Agreement nor the consummation of
the transaction that is the subject of this Agreement will
result in any obligations for site investigation or cleanup,
or notification to or consent of government agencies or
third parties, pursuant to any of the so-called "transaction-
triggered" or "responsible property transfer" Environmental,
Health, and Safety Requirements.
(vii) None of the Targets has either expressly or by
operation of law, assumed or undertaken any liability,
including without limitation any obligation for corrective
or remedial action, of any other Person relating to
Environmental, Health and Safety Requirements.
(viii) No facts, events or conditions relating to the
present facilities, properties or operations of the Targets
will prevent, hinder or limit continued compliance with
Environmental, Health and Safety Requirements, give rise to
any investigatory, remedial or corrective obligations
pursuant to Environmental, Health and Safety Requirements,
or give rise to any other liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) pursuant to
Environmental, Health and Safety Requirements, including
without limitation any relating to onsite or offsite
releases or threatened releases of hazardous materials,
substances or wastes, personal injury, property damage or
natural resources damage.
(bb) Certain Business Relationships with the Targets.
Except as set forth on the applicable Disclosure Schedule, none
of the Sellers has been involved in any business arrangement or
relationship with any of the Targets within the past 12 months,
and none of the Sellers owns any asset, tangible or intangible,
which is used in the business of any of the Targets.
(cc) Customers. Except as set forth on the applicable
Disclosure Schedule, no other customer of AES or FMA has
terminated its contract or failed to renew its contract with AES
or FMA.
(dd) Disclosure. The representations and warranties
contained in this Section 4 do not contain any untrue statement
of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this
Section 4 not misleading.
(ee) Disclosure Schedules. Notwithstanding any specific
reference to the disclosure of any matter pursuant to the
Disclosure Schedules or the Annexes, all disclosures made
pursuant to any section hereunder or of the Disclosure Schedules
or the Annexes shall be deemed made for all other sections to
which such disclosure may apply, and any headings or captions on
any section herein or therein are for convenience of reference
only. Sellers shall be entitled to supplement or amend the
Disclosure Schedules and Annexes delivered in connection herewith
with respect to any matter which, if existing, occurring or known
at the date of this Agreement, would have been required to be set
forth or described in any such Disclosure Schedule or Annex or
which is necessary to correct any information in any such
Disclosure Schedule or Annex which has been rendered inaccurate
thereby, and whether or not such matter is material. No
supplement or amendment shall have any effect for the purpose of
determining satisfaction of the conditions set forth in Section 7
hereof or the compliance by Sellers with the covenants set forth
in Section 5 hereof; provided, however, that by consummating the
transactions contemplated hereby, Buyer waives any right or claim
it may have or have had on account of such failure to satisfy
such conditions or comply with such covenant or on account of or
relating to any such breach of representation or warranty of
Sellers each of which has been corrected by the supplemental or
amended disclosure.
(ff) Modification of Representations and Warranties. Each
of the foregoing representations and warranties shall be deemed
modified by any matter expressly set forth or expressly disclosed
herein, in the Disclosure Schedules and Annexes hereto, or in the
Financial Statements.
5. Pre-Closing Covenants. The Parties agree as follows
with respect to the period between the execution of this
Agreement and the Closing.
(a) General. Each of the Parties will use his or its
reasonable best efforts to take all action and to do all things
necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing
conditions set forth in Section 7 below).
(b) Notices and Consents. The Sellers will cause the
Targets to give any notices to third parties, and will cause each
of the Targets to use its commercially reasonable best efforts to
obtain any third party consents, that the Buyer reasonably may
request in connection with the matters referred to in Section
4(c) above. Each of the Parties will (and the Sellers will cause
the Targets to) give any notices to, make any filings with, and
use its commercially reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to
in Sections 3(a)(ii), (b)(ii) and 4(c) above.
(c) Operation of Business. The Sellers will not cause or
permit the Targets to engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of
Business without the prior written consent of the Buyer. Without
limiting the generality of the foregoing, the Sellers, without
the prior written consent of the Buyer, will not cause or permit
the Targets to (i) authorize, declare, set aside, or pay any
dividend or make any distribution with respect to its capital
stock or partnership interests, as applicable, or redeem,
purchase, or otherwise acquire any of its capital stock, (ii)
incur any Liabilities other than as contemplated in the financial
projections delivered to the Buyer in connection with its due
diligence, or (iii) otherwise engage in any practice, take any
action, or enter into any transaction of the sort described in
Section 4(h) above. Without limiting the generality of the
foregoing, Buyer acknowledges and agrees that the Targets may pay
to AGS and Conoco monthly distributions and to Fellon and XxXxxx
monthly salaries and bonuses, consistent with past practices;
provided, however, that no distributions or dividends shall be
paid if, after giving effect thereto, the net asset value on a
combined basis of FMA and AES would be less than the Minimum NAV.
(d) Preservation of Business. The Sellers will cause each
of the Targets to use its commercially reasonable best efforts to
keep its business and properties intact, including its present
operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and
employees.
(e) Full Access. Each of the Sellers will permit, and the
Sellers will cause the Targets to permit, representatives of the
Buyer to have full access at all reasonable times with prior
notice and during regular business hours, and in a manner so as
not to interfere with the normal business operations of the
Targets to all premises, properties, personnel, books, records
(including Tax records), contracts, and documents of or
pertaining to the Targets.
(f) Notice of Developments. The Sellers will give prompt
written notice to the Buyer of any material adverse development
causing or potentially causing a breach of any of the
representations and warranties in Section 4 above. Each Party
will give prompt written notice to the others of any material
adverse development causing or potentially causing a breach of
any of his or its own representations and warranties in Section 3
above.
(g) Exclusivity. None of the Sellers will (and the Sellers
will not cause or permit the Targets to) (i) solicit, initiate,
or encourage the submission of any proposal or offer from any
Person relating to the acquisition of any capital stock, other
voting securities or partnership interests, as applicable, or any
substantial portion of the assets, of the Targets (including any
acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. None
of the Sellers will vote their shares of stock in the Target
Corporations, or partnership interest in the Target Partnership
in favor of any such acquisition structured as a merger,
consolidation, or share exchange. The Sellers will notify the
Buyer immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
(h) Regulatory Approvals. The Buyer, at its own expense,
will file for approval with the Securities Exchange Commission
for authorization for the consummation of the transactions
contemplated by this Agreement and all additional regulatory
approvals necessary for the efficient operation of the Targets.
Notwithstanding the foregoing, the Sellers, at their own expense,
will file with the Federal Energy Regulatory Commission for
Section 203 approval for disposition of a jurisdictional asset.
The Buyer and the Sellers will execute such documents and take
such actions as may be necessary for the Buyer or Sellers to
obtain all necessary regulatory approvals.
(i) Supplemental Balance Sheets and Statements of Income.
Sellers will provide supplemental unaudited balance sheets and
statements of income for each month from, and including, February
2001 through the month immediately prior to Closing from time to
time during the interim as such balance sheets and statements of
income are prepared.
6. Post-Closing Covenants. The Parties agree as follows
with respect to the period following the Closing.
(a) General. In case at any time after the Closing, any
further action is necessary or desirable to carry out the
purposes of this Agreement, each of the Parties will take such
further action (including the execution and delivery of such
further instruments and documents) as any other Party reasonably
may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification
therefor under Section 8 below). The Sellers acknowledge and
agree that from and after the Closing, the Buyer will be entitled
to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to
the Targets.
(b) Litigation Support. In the event and for so long as
any Party actively is contesting or defending against any action,
suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving any of the
Targets, each of the other Parties will cooperate with him or it
and his or its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their
books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under Section 8
below).
(c) Transition. None of the Sellers will take any action
that is designed or intended to have the effect of discouraging
any lessor, licensor, customer, supplier, or other business
associate of the Targets from maintaining the same business
relationships with the Targets after the Closing as it maintained
with the Targets prior to the Closing. Each of the Sellers will
refer all customer inquiries relating to the businesses of the
Targets to the Buyer from and after the Closing.
(d) Confidentiality. Each of the Sellers will treat and
hold as such all of the Confidential Information, refrain from
using any of the Confidential Information except in connection
with this Agreement, and deliver promptly to the Buyer or
destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information
which are in his or its possession. In the event that any of the
Sellers is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, that Seller will notify
the Buyer promptly of the request or requirement, so that the
Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 6(d). If, in the
absence of a protective order or the receipt of a waiver
hereunder, any of the Sellers is, on the advice of counsel,
compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, that Seller may
disclose the Confidential Information to the tribunal; provided,
however, that the disclosing Seller shall use his or its
reasonable best efforts to obtain, at the reasonable request of
the Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall
designate. The foregoing provisions shall not apply to any
Confidential Information which is generally available to the
public immediately prior to the time of disclosure.
(e) Protection of Business. For a period of one year from
the Closing Date, Conoco will not solicit (i) any employees of
the Targets that were employees on the Closing Date or within two
years prior to the Closing Date or (ii) any natural gas sales
customers of the Targets, who are not existing or previous
customers of Conoco, that were customers of the Targets on the
Closing Date or within two years prior to the closing date. If
the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section 6(e) is invalid or
unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the
power to reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified
after the expiration of the time within which the judgment may be
appealed.
(f) Books and Records; Personnel. Buyer hereby covenants
and agrees with Sellers as follows:
(i) Retention of Records. Buyer shall cause the
Targets not to for a period of seven years after the Closing
Date, dispose of or destroy any of the business records and
files of the Targets relating to the period prior to the
Closing Date without first offering to turn over possession
thereof to Sellers by written notice at least 30 days prior
to the proposed date of such disposition or destruction.
(ii) Access to Records. Buyer shall cause the Targets
to, for a period of three years after the Closing Date and
at any time within seven years after the Closing Date in the
event that any of the Sellers are the subject of a tax
audit, allow Sellers access to all business records and
files of the Targets relating to the period prior to the
Closing Date, upon prior written request of Sellers and
during normal working hours at the principal place of
business of the Targets or at any location where such
records are stored, and Sellers shall have the right, at
their own expense, to make copies of any such records and
files; provided, however, that any such access or copying
shall be had or done in such a manner so as not to interfere
unreasonably with the normal conduct of the business of the
Targets.
(iii) Assistance with Records. Buyer shall cause the
Targets to make available to Sellers, consistent with the
business requirements of the Targets (i) the Targets'
personnel to assist Sellers in locating and obtaining
records and files maintained by the Targets, and (ii) any of
the Targets' personnel whose assistance or participation is
reasonably required by Sellers in anticipation of, or
preparation for, any existing or future litigation, tax or
other matters in which Sellers or any of their past, present
or future affiliates are involved and which related to the
business of the Targets.
(g) Net Asset Value. In the event that the tangible net
asset value on the combined FMA and AES balance sheets is less
than the Minimum NAV at Closing, Conoco, Fellon and XxXxxx shall
each contribute his or its proportionate share of such deficit to
AES and FMA. In the event that the tangible net asset value on
the combined FMA and AES balance sheets is more than the Minimum
NAV at Closing, such excess amount shall be distributed to
Conoco, Fellon and XxXxxx in an amount equal to his or its
proportionate share thereof.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation
of the Buyer to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in
Sections 3(a) and 4 above shall be true, complete and
correct in all material respects at and as of the Closing
Date;
(ii) the Sellers shall have performed and complied
with all of their covenants hereunder in all material
respects through the Closing;
(iii) each of the Targets shall have procured all of
the third party consents specified in Section 5(b) above;
(iv) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any
of the transactions contemplated by this Agreement to be
rescinded following consummation, (C) have a Material
Adverse Effect on the right of the Buyer to own the shares
of stock of the Target Corporations or the partnership
interests in the Target Partnership and to control the
Targets or (D) have a Material Adverse Effect on the right
of any of the Targets to own its assets and to operate its
business (and no such material injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(v) the Sellers shall have delivered to the Buyer a
certificate to the effect that each of the conditions
specified above in Section 7(a)(i)-(iv) is satisfied in all
material respects;
(vi) the Targets shall have received all material
authorizations, consents, and approvals of governments and
governmental agencies referred to in Sections 3(a)(ii) and
(b)(ii), and 4(c) above;
(vii) Fellon and XxXxxx shall have each entered into
his respective Management Agreement with the Buyer as set
forth in its final form and not subject to further
negotiation in Exhibits C-1 and C-2 attached hereto and the
same shall be in full force and effect;
(viii) the tangible net asset value as shown on the
combined FMA and AES balance sheets as of the last day of
the month prior to the month in which the Closing occurs,
will not be less than the Minimum NAV.
(ix) there will not have been any Material Adverse
Effect on the Targets between the date of this Agreement and
the Closing;
(x) all necessary regulatory approvals, including the
approvals set forth in Section 5(h) above, shall have been
obtained;
(xi) the Buyer shall have received from counsel to the
Sellers an opinion in form and substance reasonably
acceptable to counsel for Buyer, addressed to the Buyer, and
dated as of the Closing Date;
(xii) the Buyer shall have received the resignations,
effective as of the Closing, of each director of the Targets
other than those whom the Buyer shall have specified in
writing at least five business days prior to the Closing;
and
(xiii) all actions to be taken by the Sellers in
connection with consummation of the transactions
contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
(xiv) AES will have entered into a long term supply
contract and an ISDA Agreement with Conoco.
The Buyer may waive any condition specified in this Section
7(a) if it executes a writing so stating at or prior to the
Closing.
(b) Conditions to Obligation of the Sellers. The
obligation of the Sellers to consummate the transactions to be
performed by them in connection with the Closing is subject to
satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 3(b) above shall be true, complete and correct in
all material respects at and as of the Closing Date;
(ii) the Buyer shall have performed and complied with
all of its covenants hereunder in all material respects
through the Closing;
(iii) no action, suit, or proceeding shall be pending
or threatened before any court or quasi judicial or
administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any
of the transactions contemplated by this Agreement to be
rescinded following consummation or (C) have a Material
Adverse Effect on the right of the Buyer to own its assets
and to operate its business (and no such material
injunction, judgment, order, decree, ruling, or charge shall
be in effect);
(iv) the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the conditions
specified above in Section 7(b)(i)-(iii) is satisfied in all
material respects;
(v) the Targets shall have received all material
authorizations, consents, and approvals of governments and
governmental agencies referred to in Section 3(a)(ii),
Section 3(b)(ii), and Section 4(c) above;
(vi) the Buyer shall have entered into a Management
Agreement with each of Fellon and XxXxxx in the form and
substance as set forth in Exhibits C-1 and C-2 attached
hereto and the same shall be in full force and effect;
(vii) there will not have been any Material Adverse
Effect on the Buyer between the date of this Agreement and
the Closing;
(viii) the Sellers shall have received from counsel to
the Buyer an opinion in form and substance reasonably
acceptable to counsel for Sellers, addressed to the Sellers,
and dated as of the Closing Date;
(ix) Fellon and XxXxxx shall have been released from
all personal guaranties of obligations of FMA, AGS and AES
which guaranties are set forth on Exhibit D attached hereto;
(x) all actions to be taken by the Buyer in connection
with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated
hereby will be reasonably satisfactory in form and substance
to the Sellers; and
(xi) all necessary regulatory approvals, including the
approvals set forth in Section 5(h) above, still have been
obtained.
The Sellers may waive any condition specified in this
Section 7(b) if they execute a writing so stating at or prior to
the Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Sellers contained in
Sections 4(a)-(j) and 4(l)-(cc) above shall survive the Closing
hereunder and continue in full force and effect for a period of
two years after the Closing Date. All of the other
representations and warranties of the Parties contained in this
Agreement (including the representations and warranties of the
Sellers contained in Sections 4(k) above) shall survive the
Closing and continue in full force and effect forever thereafter
(subject to any applicable statutes of limitations).
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event any of the Sellers breaches (or in
the event any third party alleges facts that, if true, would
mean any of the Sellers has breached) any of their
representations, warranties, and covenants contained herein
(other than the covenants in Section 2(a) above and the
representations and warranties in Section 3(a) above), and,
if there is an applicable survival period pursuant to
Section 8(a) above, provided that the Buyer makes a written
claim for indemnification against any of the Sellers
pursuant to Section 11(h) below within such survival period,
then each of the Sellers shall indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer
may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the
Buyer may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach);
provided, however, that the Sellers shall not have any
obligation to indemnify the Buyer from and against any
Adverse Consequences resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or
alleged breach) of any representation or warranty of the
Sellers contained in Section 4(a)-(j) and 4(l)-(cc) above
until the Buyer has suffered Adverse Consequences by reason
of all such breaches (or alleged breaches) in excess of a
$295,940 aggregate threshold (at which point the Sellers
will be obligated to indemnify the Buyer from and against
all such Adverse Consequences relating back to the first
dollar).
(ii) In the event any of the Sellers breaches (or in
the event any third party alleges facts that, if true, would
mean any of the Sellers has breached) any of his or its
covenants in Section 2(a) above or any of his or its
representations and warranties in Section 3(a) above, and,
if there is an applicable survival period pursuant to
Section 8(a) above, provided that the Buyer makes a written
claim for indemnification against the Seller pursuant to
Section 11(h) below within such survival period, then the
Seller shall indemnify the Buyer from and against the
entirety of any Adverse Consequences the Buyer may suffer
through and after the date of the claim for indemnification
(including any Adverse Consequences the Buyer may suffer
after the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach).
(iii) Each of the Sellers shall indemnify the Buyer
from and against the entirety of any Adverse Consequences
the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any Liability of
any of the Targets (x) for any Taxes of any of the Targets
with respect to any Tax year or portion thereof ending on or
before the Closing Date (or for any Tax year beginning
before and ending after the Closing Date to the extent
allocable (determined in a manner consistent with Section
9(h)) to the portion of such period beginning before and
ending on the Closing Date), to the extent such Taxes are
not reflected in the reserve for Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the face
of the Most Recent Balance Sheet (rather than in any notes
thereto), as such reserve is adjusted for the passage of
time through the Closing Date in accordance with the past
custom and practice of the Targets, as applicable, in filing
their Tax Returns, and (y) for the unpaid Taxes of any
Person (other than any of the Targets) under Reg. Section
1.1502-6 of the Code (or any similar provision of state,
local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(iv) Each of the Sellers shall indemnify the Buyer
pursuant to the terms of this Section 8, but without regard
to the aggregate threshold for any Adverse Consequences
relating to any matter identified on Disclosure Schedule
4(u).
(c) Indemnification Provisions for Benefit of the Sellers.
In the event the Buyer breaches (or in the event any third party
alleges facts that, if true, would mean the Buyer has breached)
any of its representations, warranties, and covenants contained
herein, and, if there is an applicable survival period pursuant
to Section 8(a) above, provided that any of the Sellers makes a
written claim for indemnification against the Buyer pursuant to
Section 11(h) below within such survival period, then the Buyer
agrees to indemnify each of the Sellers from and against the
entirety of any Adverse Consequences the Seller may suffer
through and after the date of the claim for indemnification
(including any Adverse Consequences the Seller may suffer after
the end of any applicable survival period) resulting from,
arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach); provided, however, that the Buyer
shall not have any obligation to indemnify the Sellers from and
against any Adverse Consequences resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or
alleged breach) of any of its representations, warranties, and
covenants contained herein, and, if there is an applicable
survival period pursuant to Section 8(a) above until the Seller
has suffered Adverse Consequences by reason of all such breaches
(or alleged breaches) in excess of a $295,940 aggregate threshold
(at which point the Buyer will be obligated to indemnify the
Sellers from and against all such Adverse Consequences relating
back to the first dollar).
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third
Party Claim") which may give rise to a claim for
indemnification against any other Party (the "Indemnifying
Party") under this Section 8, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim
with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as (A) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third
Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any
Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim, (B) the Indemnifying
Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to
defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (C) the Third Party
Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or
an adverse judgment with respect to, the Third Party Claim
is not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice
materially adverse to the continuing business interests of
the Indemnified Party, (E) the Indemnifying Party conducts
the defense of the Third Party Claim actively and diligently
and (F) the Indemnifying Party keeps the Indemnified Party
informed of all material developments in connection with the
Third Party Claim.
(iii) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with
Section 8(d)(ii) above, (A) the Indemnified Party may retain
separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and
(C) the Indemnifying Party will not consent to the entry of
any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of
the Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section
8(d)(ii) above is or becomes unsatisfied, however, (A) the
Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party
need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the
Indemnifying Parties will reimburse the Indemnified Party
promptly and periodically for the costs of defending against
the Third Party Claim (including reasonable attorneys' fees
and expenses), and (C) the Indemnifying Parties will remain
responsible for any Adverse Consequences the Indemnified
Party may suffer, resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim to
the fullest extent provided in this Section 8.
(e) Determination of Adverse Consequences. The Parties
shall take into account the time cost of money (using the
Applicable Rate as the discount rate) in determining Adverse
Consequences for purposes of this Section 8. All indemnification
payments under this Section 8 shall be deemed adjustments to the
Purchase Price.
(f) Recoupment Under Performance Payments. Each Seller
acknowledges and agrees that the Buyer shall be entitled to
offset any indemnity claim under Section 8 against any payment
due to such Seller under Section 2 hereof at Buyer's sole option;
provided, however, that any such offset shall be asserted first
against any accrued but unpaid amount payable pursuant to Section
2 before any such indemnity claim may be asserted against the
Sellers. Buyer shall deliver to Sellers written notice not less
than ten days prior to exercising its right of offset pursuant to
this Section (f) which notice shall set forth in reasonable
detail Buyer's basis for exercising its right of offset and the
amount of the proposed offset. If within ten days of receiving
Buyer's notice of its intent to exercise its right of offset,
Seller delivers to Buyer written notice setting forth Seller's
objections to Buyer's exercise of its right of offset, then Buyer
shall place into an interest-bearing escrow account the amount of
the proposed offset, which amount, along with all accrued
interest, shall be distributed to the Buyer or Seller or both, as
appropriate, upon final, non-appealable resolution of any
disputed claim or upon the mutual written consent of Buyer and
Sellers.
(g) Mitigation. Each indemnified party shall be required
to mitigate losses, and shall reasonably consult and cooperate
with each indemnifying party with a view towards mitigating
losses, in connection with claims for which a party seeks
indemnification under this Section 8.
(h) Certain Limitations on Remedies. The Buyer's right to
indemnification or reimbursement pursuant to Section 8 hereof
shall be limited (1) as to Conoco, to 25% of the Conoco Cash
Payment, (2) as to Fellon, to 25% of the Fellon Note Payment
except for any claim for indemnification arising under Section
4(u), which shall be indemnified at 100% of the Fellon Note
Payment and (3) as to XxXxxx, to 25% of the XxXxxx Note Payment
except for any claim for indemnification arising under Section
4(u), which shall be indemnified at 100% of the XxXxxx Note
Payment. Irrespective of any allocation of the Purchase Price to
be delivered at closing to a particular Target, indemnification
for the breach of any representation, warranty, covenant,
agreement of Sellers contained in this Agreement or in any
closing certificate executed and delivered by Sellers in
connection herewith, relating to a particular Target is not
limited to the allocation of Purchase Price to that Target.
Notwithstanding anything to the contrary in this Agreement, Buyer
acknowledges that the indemnification provisions set forth in
this Section 8 constitute the sole and exclusive recourse and
remedy of the Buyer with respect to the breach of any
representation, warranty, covenant, agreement of Sellers
contained in this Agreement or in any closing certificate
executed and delivered by Sellers in connection herewith.
Notwithstanding anything contained herein to the contrary, no
Seller shall be liable to the Buyer with respect to and shall not
include under any circumstances, any indirect, consequential,
incidental, exemplary or punitive damages or other special
damages or lost profits.
(i) Amount of Losses. The amount of any Adverse
Consequences payable hereunder shall be reduced by any insurance
proceeds to which the indemnified party may be entitled with
respect to the event or occurrence giving rise to such Adverse
Consequences, shall be reduced by any amounts to which the Buyer
may be entitled from third parties in connection with losses for
which indemnification is sought under this Section 8 and shall be
reduced appropriately to take into account any tax benefit
recognized by the indemnified party in connection with such
Adverse Consequences based upon the highest blended (federal,
state, local and foreign) marginal income tax rate applicable to
the indemnified party during the taxable year for which a return
was most recently filed with the IRS (based on the date of the
indemnity claim). The indemnified party shall use commercially
reasonable best efforts to pursue insurance claims or third party
claims that may reduce or eliminate Adverse Consequences. If the
indemnified party both collects proceeds from any insurance
company or third party and receives a payment from the
indemnifying party hereunder, and the sum of such proceeds and
payment is in excess of the amount payable with respect to the
matter that is the subject of the indemnity, then the indemnified
party shall promptly refund to the indemnifying party the amount
of such excess.
(j) Subrogation. After any indemnification payment is made
to the Buyer pursuant to this Section 8, the Sellers shall, to
the extent of such payment, be subrogated to all rights (if any)
of the Buyer against any third party in connection with the
Adverse Consequences to which such payment relates. Without
limiting the generality of the preceding sentence, the Buyer
receiving an indemnification payment pursuant to the preceding
sentence shall execute, upon the written request of the
indemnified party, any instrument reasonably necessary to
evidence such subrogation rights.
(k) Actual Knowledge. If the Buyer or any of its
Affiliates or agents has actual knowledge on the Closing Date of
an existing breach of any representation, warranty, covenant or
agreement of Sellers then, notwithstanding the provisions of this
Section 8, the Sellers shall not be liable for, nor in any manner
responsible for, any Adverse Consequences resulting from such
breach, and the Buyer shall not be entitled to indemnification
under this Section 8 for such Adverse Consequences. No Party has
knowledge of any inaccuracies in the representations or
warranties of any other Party.
9. Tax Matters.
(a) Section 338(h)(10) Election. Each of the Target
Corporations will join with Buyer at the Closing in making an
election under Code Section 338(h)(10) (and any corresponding
election under state, local, and foreign tax law) with respect to
the purchase and sale of the stock of each Target Corporation
hereunder (a "Section 338(h)(10) Election"). Sellers will include
any income, gain, loss, deduction, or other tax item resulting
from the Section 338(h)(10) Election on their Tax Returns to the
extent required by applicable law. Sellers shall also pay any Tax
imposed on Targets attributable to the making of the Section
338(h)(10) Election, including, but not limited to, (i) any Tax
imposed under Code Section 1374, (ii) any tax imposed under Reg.
Section 1.338(h)(10)-1T(d)(2), or (iii) any state, local or
foreign Tax imposed on Targets gain, and Sellers shall indemnify
Buyer and Targets against any failure to pay any such Taxes.
(b) Allocation of Purchase Price. Buyer, Targets and
Sellers agree that the Purchase Price and the liabilities of
Targets (plus other relevant items) will be allocated to the
assets of Targets for all purposes (including Tax and financial
accounting) in accordance with the method shown on the Allocation
Schedule attached hereto. For purposes of this Allocation
Schedule, interest on the Performance Payments shall be
calculated using the lowest minimal annual federal rate necessary
to avoid imputed interest. Buyer, Targets and Sellers will file
all Tax Returns (including amended returns and claims for refund)
and information reports in a manner consistent with such
allocation.
(c) S Corporation Status. Targets and Sellers will
not revoke the Target Corporations' election to be taxed as S
corporations within the meaning of Code Sections 1361 and 1362.
The Target Corporations and Sellers will not take or allow any
action other than the sale of the Target Corporations' stock
pursuant to this Agreement that would result in the termination
of Target Corporations' status as a validly electing S
corporations within the meaning of Code Sections 1361 and 1362.
(d) Section 754 Election. The Target Partnership will
make an election under Code Section 754 (and any corresponding
election under state, local, and foreign tax law) with respect to
the purchase and sale of the partnership interests of Target
Partnership hereunder and the deemed sale of Target Partnership
interests pursuant to the Code Section 338(h)(10) Election in
connection with the purchase of the shares of the Target
Corporations (a "Section 754 Election"). AGS and Conoco will
include any income, gain, loss, deduction, or other tax item
arising on or prior to the Closing Date on their Tax Returns to
the extent required by applicable law.
(e) Partnership Status. The Target Partnership and
Sellers will not take or allow any action other than the sale of
Target's stock pursuant to this agreement that would result in
the termination of the Target Partnership's status as a
partnership under federal tax laws.
(f) Tax Periods Ending on or before the Closing Date.
Sellers shall prepare or cause to be prepared and file or cause
to be filed all Tax Returns for the Targets for all periods
ending on or prior to the Closing Date which are filed after the
Closing Date. Fellon and XxXxxx shall permit Buyer to review and
comment on each such Target Corporation Tax Return described in
the preceding sentence prior to filing and shall make such
revisions to such Tax Returns as are reasonably requested by
Buyer. To the extent permitted by applicable law, AGS shall
include any income, gain, loss, deduction or other tax items for
such periods on its Tax Return in a manner consistent with the
Schedule K-1s furnished by the Target Partnership to AGS for such
periods. Fellon and XxXxxx shall reimburse Buyer for any Taxes
of the Target Corporations with respect to such periods within
fifteen (15) days after payment by Buyer or the Target
Corporations of such Taxes to the extent such Taxes are not
reflected in the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown in the Closing
Reconciliation.
(g) Cooperation on Tax Matters.
(i) Buyer, Targets 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 this Section 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. Each of the
Targets and Sellers agree to retain all books and records
with respect to Tax matters pertinent to Targets 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.
(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).
(h) Certain Taxes. Sellers shall pay when due all of
their respective transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this
Agreement (including any corporate-level gains tax triggered by
the sale of Target Corporations stock, sale of the Target
Partnership interest or deemed sale resulting from the Code
Section 338(h)(10) Election, any similar tax imposed in other
states or subdivisions), and Sellers will, at their own expense,
file all necessary Tax Returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by
applicable law, Buyer will, and will cause its affiliates to,
join in the execution of any such Tax Returns and other
documentation.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) the Buyer and the Sellers may terminate this
Agreement by mutual written consent at any time prior to the
Closing;
(ii) either Buyer or Sellers may terminate this
Agreement by giving written notice to the other in the event
that Closing has not occurred on or before March 31, 2002;
(iii) the Buyer may terminate this Agreement by giving
written notice to the Sellers at any time prior to the
Closing in the event any of the Sellers has breached any
representation, warranty, or covenant contained in this
Agreement in any material respect, the Buyer has notified
the Sellers of the breach, and the breach has continued
without cure for a period of 30 days after the notice of
breach; and
(iv) the Sellers may terminate this Agreement by
giving written notice to the Buyer at any time prior to the
Closing in the event the Buyer has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, any of the Sellers has
notified the Buyer of the breach, and the breach has
continued without cure for a period of 30 days after the
notice of breach.
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to Section 10(a) above, all rights and
obligations of the Parties hereunder shall terminate without any
Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
11. Miscellaneous.
(a) Nature of Certain Obligations.
(i) The covenants of each of the Sellers in Section
2(a) above concerning the sale of his or its shares of stock
in the Target Corporations or partnership interest in the
Target Partnership to the Buyer and the representations and
warranties of each of the Sellers in Section 3(a) above
concerning the transaction are several obligations. This
means that the particular Seller making the representation,
warranty or covenant will be solely responsible to the
extent provided in Section 8 above for any Adverse
Consequences the Buyer may suffer as a result of any breach
thereof.
(ii) As to the Target Corporations, the remainder of
the representations, warranties and covenants in this
Agreement are joint and several obligations of Fellon and
XxXxxx. This means that Fellon and XxXxxx will be
responsible to the extent provided in Section 8 above for
the entirety of any Adverse Consequences the Buyer may
suffer as a result of any breach thereof as such breach
relates to the Target Corporations.
(iii) As to the Target Partnership, the remainder of
the representations, warranties and covenants in this
Agreement are 50% several obligations of Fellon and XxXxxx,
on one hand, and 50% several obligations of Conoco, on the
other. This means that Fellon and XxXxxx, on one hand, and
Conoco, on the other, each will be responsible to the extent
provided in Section 8 above for 50% of any Adverse
Consequences the Buyer may suffer as a result of any breach
thereof as such breach relates to the Target Partnership.
(b) Press Releases and Public Announcements. No Party
shall issue any press release or make any public announcement
relating to the subject matter of this Agreement, other than the
joint press release approved by both the Buyer and Sellers, prior
to the Closing without the prior written approval of the Buyer
and the Sellers; provided, however, that any Party may make any
public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party
will use its reasonable best efforts to advise the other Parties
prior to making the disclosure). Notwithstanding the foregoing,
the Buyer may make such filings, without the consent or review of
such filings by the Sellers, with the SEC as may be necessary to
consummate the transactions contemplated by this Agreement. The
Buyer will provide the Sellers a copy of all such filings.
(c) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement
among the Parties and supersedes any prior understandings,
agreements, or representations by or among the Parties, written
or oral, to the extent they related in any way to the subject
matter hereof. This Agreement supersedes all prior negotiations,
discussions, correspondence, communications, understandings and
agreements among the parties relating to the subject matter of
this Agreement and such other agreements and all prior drafts of
this Agreement and such other agreements, all of which are merged
into this Agreement and no Seller shall have any liability for
statements, claims, forecasts, projections or other information,
financial or otherwise, provided by or on behalf of any Seller,
the Targets or in connection with the business of the Targets
prior to the Closing including information contained in the
Confidential Information Memorandum dated January 19, 2001.
Buyer agrees that it is not relying on any financial data,
statements, claims, projections, forecasts or other information
other than as expressly set forth in Sections 3 and 4 in entering
into this Agreement or consummating the transactions contemplated
hereby.
(e) Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein
and their respective successors and permitted assigns. No Party
may assign either this Agreement or any of his or its rights,
interests, or obligations hereunder without the prior written
approval of the Buyer and the Sellers; provided, however, that
the Buyer may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one
or more of its Affiliates to perform its obligations hereunder
(in any or all of which cases the Buyer nonetheless shall remain
responsible for the performance of all of its obligations
hereunder).
(f) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but
all of which together will constitute one and the same
instrument.
(g) Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder shall be
deemed duly given if (and then two business days after) it is
sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set
forth below:
If to the Sellers: Copy to:
Xxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxxxx, Esq.
3161 Xxxxxxxxxx Xxxxx Xx. Xxxxxx & Xxxxxxxx, PLLC, Ste. 1800
Xxxxxxxxxx, XX 00000 000 X. Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Xxxx X. XxXxxx Facsimile: (000) 000-0000
0 Xxxxxxxx Xx.
Xxxxxxxxxx, XX 00000
Alliance Gas Services, Inc.
0000 Xxxxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Xxxxx X. Xxxxxx
Director of Gas Marketing East
Conoco, Inc.
X.X. Xxx 0000
Xxxxxxx, XX 00000
If to the Buyer: Copies to:
Allegheny Ventures, Inc. Xxxxxxx X. Xxxxx, Esq.
Hagerstown Corporate Center Deputy General Counsel
00000 Xxxxxxxxxx Xxxx Facsimile: (000) 000-0000
Xxxxxxxxxx, XX 00000-0000
Xxxxx X. Xxxxx, Xx., Esq.
Xxxxxxx Xxxxx Xxxxxxx & Ingersoll, LLP
19th Floor
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Any Party may send any notice, request, demand, claim or
other communication hereunder to the intended recipient at the
address set forth above using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex,
ordinary mail or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the
intended recipient. Any Party may change the address to which
notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of
Maryland without giving effect to any choice or conflict of law
provision or rule (whether of the State of Maryland or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Maryland.
(j) Amendments and Waivers. No amendment of any provision
of this Agreement shall be valid unless the same shall be in
writing and signed by the Buyer and Sellers. No waiver by any
Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation,
or breach of warranty or covenant hereunder or affect in any way
any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties will bear his or its own
costs and expenses (including legal fees and expenses) incurred
in connection with this Agreement and the transactions
contemplated hereby. The Targets may bear the Sellers' costs and
expenses (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions
contemplated hereby as long as the condition set forth in Section
7(a)(viii) is satisfied in full.
(m) Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal,
state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word "including" shall mean
including without limitation. The Parties intend that each
representation, warranty, and covenant contained herein shall
have independent significance.
(n) Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
(o) Specific Performance. Each of the Parties acknowledges
and agrees that the other Parties would be damaged irreparably in
the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise
are breached. Accordingly, each of the Parties agrees that the
other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions
hereof in any action instituted in any court of the United States
or any state thereof having jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 11(p)
below), in addition to any other remedy to which they may be
entitled, at law or in equity.
(p) Submission to Jurisdiction. Each of the Parties
submits to the jurisdiction of any state or federal court sitting
in Maryland, in any action or proceeding arising out of or
relating to this Agreement and agrees that all claims in respect
of the action or proceeding may be heard and determined in any
such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any
other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding
so brought and waives any bond, surety, or other security that
might be required of any other Party with respect thereto. Any
Party may make service on any other Party by sending or
delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in
Section 10(h) above. Nothing in this Section 10(p), however,
shall affect the right of any Party to serve legal process in any
other manner permitted by law or at equity. Each Party agrees
that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment
or in any other manner provided by law or at equity.
(q) Dispute Resolution.
(i) The parties will first attempt to settle each
and every dispute, controversy or claim, whether based
in contract, tort, statute, fraud, misrepresentation or
any other legal theory, arising out of or relating to
this Agreement ("Dispute(s)"), through good faith
negotiations. Except with respect to Disputes arising
with respect to Performance Payments (which shall be
resolved pursuant to the procedure set forth in Section
2(d) above) and any claims arising under Section 11(o),
any Dispute not thus resolved within 30 calendar days
or such other period as the parties shall mutually
agree in writing, shall be then settled by final and
binding arbitration conducted in Cincinnati, Ohio by
one neutral arbitrator, in accordance with this Section
and the then effective Commercial Arbitration Rules of
the American Arbitration Association ("AAA"). Each
party shall bear its own expenses and the parties shall
equally share the filing and other administrative fees
of the AAA and the expenses of the arbitrator. An
award may be confirmed and judgment entered in any
court having competent jurisdiction. The decision and
award of the arbitrator shall not be subject to review.
The arbitrator shall determine the permitted scope of
all pre-hearing discovery. The arbitrator shall not
have the power to order any type of pre-hearing
discovery other than the production of documents and
the disclosure of the identity and production of
persons with knowledge of disputes to be resolved by
the arbitrator. Any question as to the arbitrability
of any Dispute, including those as to the questions of
issue preclusion, shall be determined solely by the
arbitrator. This Section 11(q) shall be governed and
enforced under the United States Arbitration Act, 9
U.S.C. Sections 1 to 16 ("FAA"). The local law of the
State of Maryland, except its laws of arbitration and
choice of laws, shall apply to all substantive matters
pertaining to this Agreement. Any party may seek a
temporary injunction in any court of competent
jurisdiction to the limited extent necessary to
preserve the status quo during the pendency of final
resolution of a Dispute in accordance with this
Section. The statute(s) of limitation applicable to
any Dispute shall be tolled upon initiation of the
Dispute resolution procedures under this Section and
shall remain tolled until the Dispute is resolved under
this Section. However, tolling shall cease if the
aggrieved party does not file a demand for arbitration
of the Dispute with the AAA within fifteen (15)
calendar days after good faith negotiations have been
terminated by either party.
(ii) The parties, their representative and
participants and the arbitrator shall hold the
existence, content and result of the arbitration in
confidence, except to the limited extent necessary to
enforce a final settlement agreement or to obtain or
enforce a judgment on an arbitration decision and
award.
(r) Indemnification of Officers and Directors.
Notwithstanding any provision to the contrary in Section 11(c)
hereof, the Buyer acknowledges that each Person who served prior
to the Closing as an officer, director or authorized
representative of any Target shall be entitled to all rights to
indemnification existing in favor of the directors, officers or
authorized representatives of such Target, as applicable, as
provided in its articles of incorporation, bylaws or partnership
agreement during the time any such Person served as an officer,
director or authorized representative.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
WITNESS: SELLERS:
___________________________ ______________________________
Xxxx X. XxXxxx
WITNESS:
___________________________ ______________________________
Xxxxxx X. Xxxxxx
ATTEST: ALLIANCE GAS SERVICES, INC.
___________________________ By:___________________________
Xxxx X. XxXxxx
Chairman
ATTEST: CONOCO, INC.
___________________________ By:___________________________
J. Xxxx Xxxxx
President
Conoco Gas & Power Marketing,
a division of Conoco, Inc.
ATTEST: BUYER:
ALLEGHENY VENTURES, INC.
___________________________ By:____________________________
Xxxx X. Xxxxxx
President
Allegheny Energy, Inc. is party to this Agreement solely
with respect to its obligations set forth in Sections 2(a), (b)
and (c).
ATTEST: ALLEGHENY ENERGY, INC.
___________________________ By:_____________________________
Xxxx X. Xxxxxx
Corporate Vice President
EXHIBITS, ANNEXES AND SCHEDULES
Schedule A - EBITDA Forecast
Exhibit A - Permitted Revenues for EBITDA Calculation
Exhibit B-1 - FMA Financial Statements
Exhibit B-2 - AGS Financial Statements
Exhibit B-3 - AES Financial Statements
Exhibit C-1 - Fellon Management Agreement
Exhibit C-2 - XxXxxx Management Agreement
Exhibit D - Fellon/XxXxxx Guaranty Obligations
Exhibit E-1 - Fellon Promissory Note
Exhibit E-2 - XxXxxx Promissory Note
Annex I(a) - Fellon Disclosures
Annex I(b) - XxXxxx Disclosures
Annex I(c) - AGS Disclosures
Annex I(d) - Conoco Disclosures
Annex II - Buyer Disclosures
AGS Disclosure Schedule
FMA Disclosure Schedule
AES Disclosure Schedule
Allocation Schedule
ANNEX II
1. The authorization for use of funds in connection with
the consummation of the contemplated transactions by the
Securities and Exchange Commission ("SEC") is required pursuant
to the Public Utility Holding Company Act of 1935, as amended,
and the rules and regulations thereunder. The Buyer or one of
its Affiliates will file for approval with the SEC.
2. Notice to Energy Corporation of America, a West
Virginia corporation ("ECA"), of the contemplated transactions is
required pursuant to the terms of the Participation Agreement,
dated as of December 20, 1999, between Allegheny and ECA (the
"Participation Agreement"). In accordance with the Participation
Agreement, ECA may, at its option, participate in the acquisition
of gas related assets.
EXHIBIT A
Description of Services
1. Core Services of FMA and AES.
(a) Services Related to Natural Gas.
* Evaluate natural gas supply arrangements and potential
natural gas suppliers then develop and implement a supply plan
for reliable, cost-effective natural gas delivery to the
customer.
* Evaluate transportation arrangements and potential
transporters, both intrastate and interstate, and develop and
implement a transportation portfolio to ensure firm delivery to
the customer.
* Provide complete nomination and scheduling service (24
hour/day, 365 days/year), along with imbalance management,
account reconciliation, and balancing on all transporters.
* Monitor international, federal, state, and local gas orders,
rules, policies, and procedures. Analyze tariffs and regulations
to ensure customer is under correct rate schedule and is paying
minimum cost required. Negotiate discounts or changes to rate
terms to lower customer cost.
* Provide NYMEX natural gas futures and related tools to
customers for hedging of forward purchases. Provide market
analysis, both technical and fundamental, and recommendations on
hedging strategies. Implement customer strategies in a timely
and cost effective manner.
* Evaluate bypass opportunities and other gas handling
facilities, including feasibility studies, cost estimates, and
implementation strategies. Provide expertise in engineering,
design, project and construction management of new gas
facilities.
* Provide expert witness testimony in energy-related
litigation, complaints, petitions, etc. for customers or
customers' related industrial groups.
* Maintain market intelligence sources from all industry
segments and provide customers with regular updates on industry
trends, price forecasts, and new opportunities for cost reduction
or natural gas supply reliability enhancement.
* Procure on behalf of customers all physical supply and
transportation capacity requirements, as well as sell (trade) any
supply and transportation capacity excesses on short and long-
term basis.
* Provide complete and total invoice reconciliation (i.e.
consolidated billing) on behalf of customers/facilities.
(b) Services Related to Electricity.
* Evaluate current supply, transmission and distribution and
rates arrangements and electric power contracts for the
customer's facilities.
* Develop and implement a supply plan in response to market,
supply and distribution changes brought about by the deregulated
electric power environment, or modify existing methods of
procurement as needed.
* Evaluate potential electric power suppliers (producers,
generators and/or marketers).
* Evaluate electric power sources, marketers and generators.
* Evaluate potential distributors on intrastate and interstate
electric power supply systems.
* Evaluate and enhance current Firm Electrical Power Service
and Interruptible or Surplus Power Service agreements.
* Develop and implement action plans to optimize service,
including supply agreements with appropriate Firm, Interruptible
and Real Time Pricing Options.
* Reconcile monthly or other periodic electricity accounts,
xxxxxxxx and/or invoices.
* Manage and reconcile local electric power distribution
company service accounts and other service accounts.
* Evaluate and communicate to customer opportunities for the
purchase and resale of electric power, including compensation for
voluntary curtailment opportunities.
* Monitor international, federal, state and local electric
power policies, procedures and occurrences including interstate
and intrastate tariffs, rates, etc.
* Provide Interstate and Intrastate tariff rate analysis.
* Negotiate electric power tariff rate discounts.
* Evaluate electric power reserve opportunities.
* Provide regular updates and/or meetings with the customer.
* Participate in electric power generation, distribution and
related industry group meetings and trade shows.
* Propose alternative supply plans in the event of curtailment
threat.
* Assist the customer to identify, understand, and quantify
electric power supply risks (i.e. firm vs. interruptible and
other).
* Scheduling of electricity requirements to customer's
facilities.
* Perform business level analysis of opportunities for on-site
generation.
* Continuous evaluation of the quality, reliability and cost
of service.
* Expert witness testimony in energy-related litigation.
* Management of generation or demand-management (i.e. load
curtailment) assets.
* Marketing of generation or demand management output to the
wholesale or retail markets.
* Purchase of power to displace generation or demand
management output.
* Management and execution of arbitrage opportunities.
* Marketing of financial and physical options around
generation or demand management opportunities.
2. Core Services of Allegheny Energy Solutions.
AE Solutions works with clients to create customized turnkey
energy solutions that improve clients' businesses by meeting
their operational, financial, and risk-management needs. AE
Solutions' core business is considered to be power house
projects, including distributed generation and cogeneration
projects and combined cycle projects, and also the design,
construction, operation, and financing of generation facilities
and power quality and reliability applications. The specific core
business functions are as detailed below:
* Generation Applications
* Procurement
* Engineering
* Construction
* Permitting/Environmental
* Feasibility Study
* Financing
* Operation
* Power Quality and Reliability Applications
3. General Agreement.
The parties agree that FMA and AES ("FMA/AES") and Allegheny
Energy Solutions ("AE Solutions") have complementary product and
service offerings. AE Solutions Core Services are as outlined in
Section 2 above. FMA/AES Core Services are as outlined in Section
1 above. The parties agree that both FMA/AES and AE Solutions
shall receive "fair market value" for services rendered
regardless of the transaction originator. Likewise, AE Solutions
and FMA/AES acknowledge that each company provides services in
addition to those listed above, but agree to share revenue in
areas of complementary skills and services to the extent that one
party is the originator of said services and the other party
performs the actual service on behalf of a customer. AE
Solutions and FMA/AES acknowledge that this transaction creates
an organization with assets, skills, and capabilities greater
than those of both FMA/AES and AE Solutions. AE Solutions and
FMA/AES acknowledge that all possible working arrangements cannot
be anticipated. Consequently, FMA/AES Management and AE
Solutions Management will jointly agree on the sharing of
revenues in excess of "fair market value" on a case-by-case
basis.
SCHEDULE A
($ in Thousands) 2001 2002 2003 2004
Plan EBITDA (1) 6,803.0 8,164.0 9,795.0 11,754.0
Year 1 Year 2 Year 3 Total
Forecasted EBITDA (2) $7,483.5 $8,979.5 $10,774.5 $27,237.5
80% of Forecasted EBITDA 5,986.8 7,183.6 8,619.6 21,790.0
50% of Forecasted EBITDA 13,618.8
1) Projections based on AES ad FMA Financial Overview,
1995-2003 for Fiscal Years ending December 31, and assume
a 20% growth rate.
2) Forecasted EBITDA represents Plan EBITDA shifted to
reflect a June 30, 2001 transaction closing date.
Forecasted EBITDA for Year 1 = 50% x (Plan EBITDA 2001 +
Plan EBITDA 2002). All subsequent years are calculated
using this convention.
ALLOCATION SCHEDULE
I. Assumptions/Required Adjustments. The allocations
set forth below assume that the Maximum Purchase Price will be
paid. To the extent that the final Purchase Price is less than
the Maximum Purchase Price, appropriate adjustments, consistent
with the methodology set forth below, will need to be made. The
allocations below do not take into account the need to impute
interest to each of the Performance Payments. All amounts
reported for tax purposes (including required interest income and
interest expense amounts) will be based upon the proper
application of the appropriate original issue discount rules.
Finally, the numbers shown below reflect the assets and
liabilities of AGS and FMA as of February 28, 2001. Final
allocations, prepared in a manner consistent with the methodology
set forth below, will be based upon actual Closing Date numbers.
II. Initial Allocation of Purchase Price. An initial
allocation of the Purchase Price must be made among the stock of
AGS, the stock of FMA, and the AES interest of Conoco.
$13,670,000 will be allocated to the AES interest of Conoco. The
remaining Purchase Price will be allocated $17,314,952 to the
stock of AGS and $17,314,952 to the stock of FMA.
III. Allocation to Assets of AGS. AGS has only one
asset (other than cash), its interest in AES. The amount of the
Purchase Price allocable to AGS, $17,314,952, will be allocated
$19,522 to cash (the balance at February 28, 2001), and
$17,295,430 to the AES interest.
IV. Allocation to Assets of FMA. The table below
indicates the assets and liabilities of FMA as of February 28,
2001. The total amount allocable among the assets is $17,981,405,
which is $17,314,952 (the portion of the Purchase Price
determined above) plus the amount of liabilities that will be
deemed assumed ($666,453). The fair market value of the
depreciable assets is equal to depreciated cost.
Cost/Face Amount Allocation
Cash $220,475 $220,475
Accounts Receivable 159,842 159,842
Prepaid Expenses 10,551 10,551
Property and 387,137 387,137
Equipment
(net of depreciation)
Accounts Payable (169,953)
Bank Debt (496,500)
Goodwill 0 17,203,400
$111,552 $17,981,405
V. Allocation to Assets of AES. Subject to the
adjustments described in the following sentence, the table below
indicates the assets and liabilities of AES as of February 28,
2001. The amounts set forth below do not take into account the
effect of year end 2000 audit adjustments relating to (i)
derivative transactions, and (ii) the June 2000 acquisition by
AES of certain intangible assets from Duke Solutions, Inc. Such
adjustments will be reflected in the AES financial statements
prepared for month end March 2001 and thereafter. Based on the
foregoing, the total amount allocable among the assets is
$92,502,711, which is the sum of (a) $13,670,000 (the Purchase
Price paid to Conoco for its AES interest), (b) $17,295,430 (the
amount deemed paid to AGS for its AES interest), and (c)
$61,537,281 (the amount of liabilities that will be deemed
assumed. The fair market value of the inventory and derivative
positions is, in each case, equal to its cost. The fair market
value of the intangibles and the software is, in each case, equal
to its amortized cost.
Cost/Face Amount Allocation
Cash $ 2,465,802 $ 2,465,802
Accounts Receivable 58,285,276 58,285,276
(net of allowance)
Inventory 498,762 498,762
Prepaid Expenses 144,941 144,941
Intangible Assets
(net of amoritization) 990,625 990,625
Software
(net of amoritization) 42,500 42,500
Accounts Payable (61,537,281)
Goodwill 30,074,805
0
$ 890,625 $92,502,711
