PURCHASE AND SALE AGREEMENT by and among SRCG, Ltd. and SRCG Genpar, L.P., as Sellers, and SOUTHERN UNION PANHANDLE LLC and SOUTHERN UNION GATHERING COMPANY LLC, as Buyers, dated as of December 15, 2005
Exhibit
10.1
by
and among
SRCG,
Ltd.
and
SRCG
Genpar, L.P.,
as
Sellers,
and
SOUTHERN
UNION PANHANDLE LLC
and
SOUTHERN
UNION GATHERING COMPANY LLC,
as
Buyers,
dated
as of
December
15, 2005
ARTICLE
I
|
DEFINITIONS
AND RULES OF CONSTRUCTION
|
1
|
Section
1.1
|
Definitions.
|
1
|
Section
1.2
|
Rules
of Construction.
|
10
|
ARTICLE
II
|
PURCHASE
AND SALE; CLOSING
|
11
|
Section
2.1
|
Purchase
and Sale of Purchased Interests.
|
11
|
Section
2.2
|
Purchase
Price
|
11
|
Section
2.3
|
Estimated
Net Working Capital
|
11
|
Section
2.4
|
The
Closing
|
11
|
Section
2.5
|
Post-Closing
Purchase Price Reconciliation
|
12
|
ARTICLE
III
|
REPRESENTATIONS
AND WARRANTIES RELATING TO SELLERS
|
14
|
Section
3.1
|
Organization
of Sellers
|
14
|
Section
3.2
|
Authorization;
Enforceability
|
14
|
Section
3.3
|
No
Conflict
|
14
|
Section
3.4
|
Litigation
|
15
|
Section
3.5
|
Brokers’
Fees
|
15
|
Section
3.6
|
Ownership
of Purchased Interests
|
15
|
ARTICLE
IV
|
REPRESENTATIONS
AND WARRANTIES RELATING TO THE PARTNERSHIP
COMPANIES
|
16
|
Section
4.1
|
Organization
of the Partnerships
|
16
|
Section
4.2
|
Organization
and Capitalization of the SRES Subsidiaries and Grey
Ranch
|
16
|
Section
4.3
|
No
Conflict
|
18
|
Section
4.4
|
Financial
Statements
|
18
|
Section
4.5
|
Absence
of Certain Changes
|
19
|
Section
4.6
|
Contracts
|
19
|
Section
4.7
|
Intellectual
Property
|
21
|
Section
4.8
|
Litigation
|
21
|
Section
4.9
|
Employee
Benefit Plans
|
22
|
Section
4.10
|
Taxes
|
26
|
Section
4.11
|
Environmental
Matters
|
27
|
Section
4.12
|
Legal
Compliance
|
28
|
Section
4.13
|
Permits
|
28
|
Section
4.14
|
Insurance
|
28
|
Section
4.15
|
Employees;
Labor Relations
|
29
|
Section
4.16
|
Properties
|
29
|
Section
4.17
|
Governmental
Regulation
|
30
|
Section
4.18.
|
Imbalances;
Certain Impairments
|
30
|
Section
4.19. Companies
|
Certain
Business Relationships with Partnership Companies
|
30
|
ARTICLE
V
|
REPRESENTATIONS
AND WARRANTIES RELATING TO BUYERS
|
31
|
Section
5.1
|
Organization
of Buyers.
|
31
|
Section
5.2
|
Authorization;
Enforceability
|
31
|
Section
5.3
|
No
Conflict
|
31
|
Section
5.4
|
Litigation
|
32
|
Section
5.5
|
Brokers’
Fees
|
32
|
Section
5.6
|
Financial
Ability
|
32
|
Section
5.7
|
Investment
Representation
|
32
|
ARTICLE
VI
|
COVENANTS
|
32
|
Section
6.1
|
Conduct
of Business
|
32
|
Section
6.2
|
Access
|
35
|
Section
6.3
|
Third
Party Approvals and Cooperation
|
36
|
Section
6.4
|
Regulatory
Filings.
|
36
|
Section
6.5
|
No-Hire/Non-Solicitation
|
37
|
Section
6.6
|
Partnership
Guarantees
|
37
|
Section
6.7
|
Indebtedness;
Termination of Related Party Transactions
|
38
|
Section
6.8
|
Update
Information
|
38
|
Section
6.9
|
Change
of Name; Seller Marks.
|
38
|
Section
6.10
|
Books
and Records
|
39
|
Section
6.11
|
Permits
|
40
|
Section
6.12
|
Insurance.
|
40
|
Section
6.13
|
Further
Assurances
|
41
|
Section
6.14
|
Exclusivity
|
41
|
Section
6.15
|
Release
Related to Due Diligence Activities
|
41
|
Section
6.16
|
Identification
of Transferred Employees
|
42
|
Section
6.17
|
Employment
of Transferred Employees
|
43
|
Section
6.18
|
No
Duplicate Benefits
|
44
|
Section
6.19
|
Employees
on LTD
|
44
|
Section
6.20
|
Defined
Benefit Plan, Deferred Compensation Plan and Defined Contribution
Plans
|
44
|
Section
6.21
|
Welfare
Benefit Plans
|
45
|
Section
6.22
|
Vacation
|
46
|
Section
6.23
|
No
Third Party Beneficiaries
|
46
|
Section
6.24
|
Plan
Terms Controlling
|
46
|
Section
6.25
|
WARN
Act Requirements
|
46
|
Section
6.26
|
Successors
and Assigns
|
47
|
Section
6.27
|
Financial
Statements
|
47
|
Section
6.28
|
Certain
Contracts
|
47
|
Section
6.29
|
Capital
Expenditures
|
47
|
ARTICLE
VII
|
TAX
MATTERS
|
47
|
Section
7.1
|
[Intentionally
Omitted]
|
47
|
Section
7.2
|
Tax
Returns
|
47
|
Section
7.3
|
Transfer
Taxes
|
50
|
Section
7.4
|
Tax
Indemnity
|
50
|
Section
7.5
|
Scope
|
51
|
ARTICLE
VIII
|
CONDITIONS
TO OBLIGATIONS
|
52
|
Section
8.1
|
Conditions
to Obligations of Buyers
|
52
|
Section
8.2
|
Conditions
to the Obligations of Sellers
|
54
|
ARTICLE
IX
|
INDEMNIFICATION
|
55
|
Section
9.1
|
Survival
|
55
|
Section
9.2
|
Indemnification
|
55
|
Section
9.3
|
Indemnification
Procedures
|
56
|
Section
9.4
|
Limitations
on Liability of Sellers
|
58
|
Section
9.5
|
Waiver
of Other Representations.
|
59
|
Section
9.6
|
Purchase
Price Adjustment
|
60
|
Section
9.7
|
Exclusive
Remedy
|
60
|
Section
9.8
|
Waiver
of Consequential Damages
|
60
|
Section
9.9
|
Tax
Indemnity
|
60
|
Section
9.10
|
Security
|
60
|
ARTICLE
X
|
TERMINATION
|
61
|
Section
10.1
|
Termination
|
61
|
Section
10.2
|
Effect
of Termination
|
61
|
ARTICLE
XI
|
MISCELLANEOUS
|
62
|
Section
11.1
|
Notices.
|
62
|
Section
11.2
|
Assignment
|
63
|
Section
11.3
|
Benefits
of Agreement
|
64
|
Section
11.4
|
Expenses
|
64
|
Section
11.5
|
Counterparts
|
64
|
Section
11.6
|
Entire
Agreement
|
64
|
Section
11.7
|
Disclosure
Schedule
|
65
|
Section
11.8
|
Acknowledgment
by Buyer
|
65
|
Section
11.9
|
Amendments
and Waivers
|
65
|
Section
11.10
|
Publicity
|
65
|
Section
11.11
|
Severability
|
66
|
Section
11.12
|
Governing
Law; Jurisdiction
|
66
|
Disclosure
Schedule
Schedule
1.1(a) - Buyers
Knowledge
Schedule
1.1(b) - Sellers
Knowledge
Schedule
1.1(c) - Permitted
Liens
Schedule
1.1(d) - Capital
Expenditure Budget
Schedule
1.1(e) - Current
Assets
Schedule
1.1(f) - Current
Liabilities
Schedule
3.3 - Seller
Approvals
Schedule
4.1 - Partnerships
Schedule
4.2(b) - Foreign
Qualifications
Schedule
4.2(d) - SRES
Subsidiaries
Schedule
4.2(e)(i) - Grey
Ranch Foreign Qualifications
Schedule
4.2(e)(ii) - Grey
Ranch Ownership
Schedule
4.4 - Financial
Statements
Schedule
4.5 - Absence
of Certain Changes
Schedule
4.6(a) - Material
Contracts
Schedule
4.6(b) - Certain
Contracts
Schedule
4.6(c) - Enforceability
of Material Contracts
Schedule
4.7(a) - Intellectual
Property
Schedule
4.8 - Litigation
Schedule
4.9(a) - Employee
Benefit Plans
Schedule
4.9(b) - Qualified
Plans
Schedule
4.9(c) - Plans
Subject to Title IV of ERISA
Schedule
4.10(a) - Taxes
Schedule
4.10(c) - Tax
Jurisdictions
Schedule
4.11(a) - Environmental
Matters
Schedule
4.11(b) - Underground
Storage Tanks
Schedule
4.12 - Legal
Compliance
Schedule
4.13 - Permits
Schedule
4.14 - Insurance
Schedule
4.16(a) - Properties
Schedule
4.16(b) - Preferential
Purchase Rights
Schedule
4.17 - Governmental
Regulation
Schedule
4.18 - Imbalances
Schedule
4.19 - Certain
Business Relationships
Schedule
5.3 - Buyer
Approvals
Schedule
6.1 - Conduct
of Business
Schedule
6.6 - Partnership
Guarantees
Schedule
6.7(c) - Excluded
Contracts
Schedule
6.7(d) - Commodity
Positions
Schedule
6.16(a) - Active
Employees
Schedule
6.16(b) - Non-Transferred
Employees
Schedule
6.16(c) - Other
Employees
Schedule
6.19 - Employees
on Long Term Disability
Schedule
6.22 - Vacation
Pay
Schedule
8.1(l) - Persons
Executing Retention Agreements
Schedule
8.1(m) - Environmental
Policy
Exhibits
Exhibit
2.4(b)(i) Assignment
and Assumption Agreement
Exhibit
2.4 (b)(ii)
Certificate
of Non-Foreign Status
Exhibit
8.1(l)
Retention
Agreements
Exhibit
8.1(n) Transition
Services Agreement
THIS
PURCHASE AND SALE AGREEMENT, dated as of December 15, 2005 (this “Agreement”), is entered
into by and among SRCG, Ltd., a Texas limited partnership (“SRCG”),
SRCG
Genpar, L.P., a Delaware limited partnership (“Genpar”
and,
together with SRCG, “Sellers”),
SOUTHERN UNION GATHERING COMPANY LLC, a Delaware limited liability company
(“LP
Interest Buyer”),
and
SOUTHERN UNION PANHANDLE LLC, a Delaware limited liability company (“GP
Interest Buyer”
and,
together with LP Interest Buyer, “Buyers”).
RECITALS
WHEREAS,
SRCG owns and desires to sell to LP Interest Buyer, and LP Interest Buyer
desires to purchase from SRCG, on the terms and subject to the conditions
set
forth herein, (i) 100% of the limited partner interests in Xxx Xxxxxxxxxx
Energy
Services, Ltd., a Texas limited partnership (“SRES”),
and
(ii) 100% of the limited partner interests in Richardson Energy Marketing,
Ltd.,
a Texas limited partnership (“REM”);
WHEREAS,
Genpar owns and desires to sell to GP Interest Buyer, and GP Interest Buyer
desires to purchase from Genpar, on the terms and subject to the conditions
set
forth herein, (i) 100% of the general partner interests in SRES, (ii) 100%
of
the general partner interests in REM and (iii) 100% of the general partner
interests in Leapartners, L.P., a Texas limited partnership (“Leapartners”);
WHEREAS,
SRES (itself or through the SRES Subsidiaries) owns and operates a system
of
natural gas transportation, gathering, treating, compression and processing
facilities in Texas and New Mexico; and
WHEREAS,
REM provides necessary gas control and ensures the sale of SRES’s controlled and
owned natural gas and natural gas liquids;
NOW,
THEREFORE, in consideration of the premises and mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the Parties agree as follows:
ARTICLE
I
DEFINITIONS
AND RULES OF CONSTRUCTION
Section
1.1 Definitions.
As
used
herein, the following terms shall have the following meanings:
“Accounting
Firm”
has the
meaning provided such term in Section 2.5(d).
“Active
Employees”
has
the
meaning provided such term in Section 6.16(a).
1
“Affiliate” means,
with respect to any Person, any other Person that, directly or indirectly,
controls, is controlled by or is under common control with, such specified
Person through one or more intermediaries or otherwise. For the purposes
of this
definition, “control” means, where used with respect to any Person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the
ownership of voting securities, by contract or otherwise, and the terms
“controlling” and “controlled” have correlative meanings.
“Agreement”has
the
meaning provided such term in the preamble to this Agreement.
“Allocation”has
the
meaning provided such term in Section 7.2(i).
“Assets”has
the
meaning provided such term in Section 4.16(a).
“Audited
Financial Statements”has
the
meaning provided such term in Section 4.4(a).
“Bank
Credit Facility”
means
the Amended and Restated Credit Agreement, dated as of October 8, 2004,
among
Xxx Xxxxxxxxxx Energy Services, Ltd., as borrower, the lenders party thereto,
XX
Xxxxxx Chase Bank, as administrative agent, and Fleet National Bank, Xxxxx
Fargo
Bank, N.A. and U.S. Bank National Association, as managing agents.
“Benefit
Plan”means
(i)
each “employee benefit plan,” as such term is defined in Section 3(3) of ERISA,
(ii) each plan that would be an employee benefit plan if it were subject
to
ERISA, (iii) each stock bonus, stock ownership, stock option, stock purchase,
stock appreciation rights, phantom stock or other stock plan (whether qualified
or nonqualified) and (iv) each bonus, deferred compensation or incentive
compensation plan; provided,
however, that
such
term shall not include (a) routine employment policies and procedures developed
and applied in the ordinary course of business, including wage, vacation,
holiday, and sick or other leave policies, (b) workers’ compensation insurance,
(c) directors’ and officers’ liability insurance and (d) Material
Contracts.
“Business
Day”means
any
day that is not a Saturday, Sunday or legal holiday in the State of Texas
or a
federal holiday in the United States.
“Buyers”has
the
meaning provided such term in the preamble to this Agreement.
“Buyer
Approvals”has
the
meaning provided such term in Section 5.3.
“Buyer
Indemnified Parties”has
the
meaning provided such term in Section 9.2(a).
“Buyers’
401(k) Plan”
has the
meaning provided such term in Section 6.20(c).
“Cap
Amount”
has the
meaning provided such term in Section 9.4(c).
2
“Capital
Expenditure Budget”
means
the 2006 capital expenditure budget of the Partnership Companies attached
hereto
as Schedule
1.1(d).
“Cause”means
termination because of a material dereliction of duty, commission of a
felony or
crime of moral turpitude, material violation of any written policy of the
employer, willfully engaging in conduct the employee knows or should know
is
materially injurious to the employer or its Affiliates or termination because
of
any other “termination for cause” provision in the applicable individual’s
employment agreement, if any.
“Closing”has the
meaning provided such term in Section 2.4(a).
“Closing
Date”has
the
meaning provided such term in Section 2.4(a).
“Closing
Statement”has
the
meaning provided such term in Section 2.5(a).
“COBRA”
has the
meaning provided such term in Section 6.21.
“Code”means
the
Internal Revenue Code of 1986, as amended.
“Competitive
Business”
has the
meaning provided such term in Section 6.9(c).
“Confidentiality
Agreement”means
the
Confidentiality Agreement between SRES and Panhandle Eastern Pipe Line
Company,
LP dated December 8, 2005.
“Continuation
Period”
has the
meaning provided such term in Section 6.17(c).
“Contract”means
any
legally binding agreement, commitment, lease, license or contract, instrument
or
other arrangement but excluding Benefit Plans.
“Current
Assets”means
the
sum of all current assets of the Partnership Companies as of the Closing
Date,
calculated on a basis consistent with the methodology reflected on Schedule
1.1(e)
and
otherwise computed in accordance with GAAP adjusted consistent with the
methodology reflected on Schedule
1.1(e)
(provided that: (i) all commodity price xxxxxx regardless of their term
shall be
marked to market as of the Closing Date and the resulting gain, if any,
shall be
included in Current Assets; and (ii) natural gas imbalances, if any, shall
be
marked to market), as adjusted to give effect to the exclusion of 50% of
the
current assets of Grey Ranch. For illustrative purposes only, as of September
30, 2005, Current Assets totaled $304,464,312, as reflected on the calculations
attached hereto as Schedule
1.1(e).
“Current
Liabilities”means
the
sum of all current liabilities and all Indebtedness of the Partnership
Companies
as of the Closing Date, calculated on a basis consistent with the methodology
reflected on Schedule
1.1(f)
hereto
and otherwise computed in accordance with GAAP adjusted consistent with
the
methodology reflected on Schedule
1.1(f)
(provided that: (i) all commodity price xxxxxx, regardless of their term,
shall
be marked to market as of the Closing Date and the resulting loss, if any,
shall
be included in Current Liabilities; (ii) natural gas imbalances, if any,
shall
be marked to market), as adjusted to give effect to the terms of
3
this
Agreement and the consummation of the transactions contemplated hereby
on the
Closing Date and to the exclusion of 50% of the current liabilities and
Indebtedness of Grey Ranch. For illustrative purposes only, as of September
30,
2005, Current Liabilities totaled $288,746,196, as reflected on the calculations
attached hereto as Schedule
1.1(f).
“Direct
Claim”
has the
meaning provided such term in Section 9.3(c).
“Disclosure
Schedule”
means
the schedules attached hereto.
“Dollars”and“$”
mean the
lawful currency of the United States.
“Easements”
means
all easements, rights-of-way, servitudes, property use agreements, line
rights,
permits and licenses associated with or related to the Facilities.
“Eligible
Transferred Employees”
has the
meaning provided such term in Section 6.20(a).
“Employees”
means
the employees of any Partnership Company.
“Engage
In”has
the
meaning provided such term in Section 6.9(c).
“Environmental
Law”means
any
applicable Law relating to human health, the environment (including natural
resources) or the protection thereof and Hazardous Materials, including
any
applicable provisions of the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. § 9601 et
seq.,
the
Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et
seq.,
the
Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et
seq.,
the
Clean Water Act, 33 U.S.C. § 1251 et
seq.,
the
Clean Air Act, 42 U.S.C. § 7401 et seq.,
the
Toxic Substances Control Act, 15 U.S.C. § 2601 et
seq.,
the
Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. § 136
et
seq.,
and
the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et
seq.,
and
all analogous state or local Laws including those pertaining to oil and
gas
exploration, production, gathering and processing wastes.
“ERISA”means
the
Employee Retirement Income Security Act of 1974, as amended.
“ERISA
Affiliate”
has the
meaning provided such term in Section 4.9(b)(iii).
“Estimated
Net Working Capital Amount”
means
$25,000,000.
“Estimated
Purchase Price”means
an
amount equal to $1,600,000,000 ($1,580,386,500 in respect of the Limited
Partner
Interests and $19,613,500 in respect of the General Partner
Interests).
“Exchange
Act”has
the
meaning provided such term in Section 6.3(b).
“Excluded
Subsidiary”
has the
meaning provided such term in Section 4.2(f).
“Expiration
Date”
has the
meaning provided such term in Section 9.1.
4
“Facilities” means
the
pipelines, compressors, processing plants, meters and treaters, together
with
all fixtures and appurtenances associated principally with the maintenance
or
operation of such pipelines, compressors, processing plants, meters and
treaters, used or held for use by the Partnership Companies in connection
with
the operation of the business of the Partnership Companies.
“Fee
Interests”
means
all fee property interests associated with or related to the Facilities.
“FERC” means
the
U.S. Federal Energy Regulatory Commission.
“Financial
Statements”has
the
meaning provided such term in Section 4.4.
“Financing”
has the
meaning provided such term in Section 6.3(b).
“GAAP”
means
accounting principles generally accepted in the United States as in effect
from
time to time, as consistently applied.
“General
Partner Interests”
means
the 100% general partner interests of Genpar in each of SRES, REM and
Leapartners, as more particularly described in the recitals to this
Agreement.
“Genpar” has
the
meaning provided such term in the preamble to this Agreement.
“Genpar
GP” has
the
meaning provided such term in Section 8.1(d).
“Governmental
Authority”means
any
federal, state, municipal, local, foreign or similar governmental authority,
regulatory or administrative agency, court or arbitral body.
“GP
Interest Buyer”
has the
meaning provided such term in the preamble to this Agreement.
“Grey
Ranch”
means
Grey Ranch Plant, L.P., a Texas limited partnership.
“Hazardous
Materials”
means
any product, substance, waste, pollutant, or contaminant that is defined
or
listed as hazardous or toxic or that is otherwise regulated under any applicable
Environmental Law including radioactive materials (other than naturally
occurring radioactive materials), asbestos, polychlorinated biphenyls,
petroleum
hydrocarbons, petroleum products, natural gas, crude oil and any fractions,
or
derivatives thereof.
“HSR
Act” means
the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and
regulations and rules promulgated pursuant to that act, or any successor
law.
“Indebtedness”means
for
any Person (i) indebtedness for borrowed money, including any obligation
to
reimburse any bank or other Person in respect of amounts paid or payable
5
under
a
standby letter of credit; (ii) obligations of such Person to pay the deferred
purchase or acquisition price of property or services, other than trade
accounts
payable arising, and accrued expenses incurred, in the ordinary course
of
business; (iii) indebtedness for borrowed money of others secured by a
Lien on
the property of such Person, whether or not the respective indebtedness
so
secured has been assumed by such Person; (iv) capital lease obligations
of such
Person or (v) any guarantee with respect to Indebtedness of another
Person.
“Indemnified
Party”has
the
meaning provided such term in Section 9.3(a).
“Indemnifying
Party”has
the
meaning provided such term in Section 9.3(a).
“Indemnified
Tax Claim”has
the
meaning provided such term in Section 7.4(b).
“Intellectual
Property”means
intellectual property rights, statutory or common law, worldwide, including
(i)
trademarks, service marks, trade dress, slogans, logos and all goodwill
associated therewith, and any applications or registrations for any of
the
foregoing; (ii) copyrights and any applications or registrations for any
of the
foregoing; and (iii) patents, all confidential know-how, trade secrets
and
similar proprietary rights in confidential inventions, discoveries,
improvements, processes, techniques, devices, methods, patterns, formulae,
specifications, and lists of suppliers, vendors, customers, and
distributors.
“Interim
Financial Statements”
has the
meaning provided such term in Section 4.4.
“Knowledge”as
to
Buyers means the actual knowledge, after reasonable inquiry, of those persons
listed in Schedule
1.1(a)
and as
to Sellers means the actual knowledge, after reasonable inquiry, of those
persons listed in Schedule
1.1(b).
“Law”means
any
applicable law, rules of common law, rule, regulation, ordinance, order,
judgment, decree or other legally enforceable requirement of a Governmental
Authority.
“Leapartners”
has the
meaning provided such term in the recitals to this Agreement.
“Lien(s)”means
any
charges, pledges, options, mortgages, deeds of trust, hypothecations, security
interests or other encumbrances or restrictions (whether on voting, sale,
transfer, disposition or otherwise).
“Limited
Partner Interests”
means
the 100% limited partner interests of SRCG in each of SRES and REM, as
more
particularly described in the recitals to this Agreement.
“Losses”
means
all claims, liabilities, losses, damages, fines, penalties, judgments,
settlements, awards, costs and expenses (including reasonable fees and
expenses
of counsel, consultants, experts and other professional fees and any and
all
costs and expenses (including reasonable legal fees and accounting fees)
incident to the enforcement of the indemnification provisions of this
Agreement); provided,
however, that
Losses shall not include any special, punitive, exemplary, consequential
or
indirect damages or any lost profits, damage to reputation or loss to goodwill;
provided,
however, that
in
the case of Third Party Claims,
6
Losses
shall be deemed to include all forms of relief, monetary and otherwise
asserted
therein without any of the foregoing exceptions.
“LP
Interest Buyer” has
the
meaning provided such term in the preamble to this Agreement.
“Material
Adverse Effect”means,
with respect to any Person, any circumstance, change or effect that (i)
is
materially adverse to the business, operations (including results of operation),
assets, liabilities or financial condition of such Person (and, in the
case of a
Partnership Company, of the Partnership Companies taken as a whole) or
(ii)
materially impedes the ability of such Person to complete the transactions
contemplated herein or to perform its obligations hereunder, but in the
case of
clause (i) above, shall exclude any circumstance, change or effect (except,
as
to clauses (a) and (c) below, to the extent that such circumstance, change
or
effect shall have a disproportionate impact (vis a vis other entities with
operations in the counties where the Partnership Companies have physical
assets)
on the Partnership Companies) resulting or arising from:
(a) any
change in general economic conditions in the industries or markets in which
a
Partnership Company operates;
(b) seasonal
reductions in revenues and/or earnings of the Partnership Companies in
the
ordinary course of their respective businesses;
(c) national
or international political, diplomatic or military conditions, including
any
engagement in hostilities, whether or not pursuant to a declaration of
war, or
the occurrence of any military or terrorist attack; and
(d) changes
in GAAP or other accounting principles after the date hereof.
“Material
Contracts”has
the
meaning provided such term in Section 4.6(a).
“Net
Working Capital Change Amount,”
which
may be positive or negative, means (x) the Estimated Net Working
“Non-Compete
Area”
has the
meaning provided such term in Section 6.9(c).
“Non-Transferred
Employees”has
the
meaning provided such term in Section 6.16(b).
“Organizational
Documents”means
any
charter, certificate of incorporation, articles of association, bylaws,
operating
“Other
Employees”
has the
meaning provided such term in Section 6.16(c).
“Parties”means
Sellers and Buyers.
7
“Partnership
Company”
means
any of SRES, REM, Grey Ranch or any SRES Subsidiary.
“Partnership
Companies”
means
REM, SRES, Grey Ranch and the SRES Subsidiaries, collectively.
“Partnership
Guarantees”means
all
guarantees, letters of credit, bonds, sureties and other credit support
or
assurances provided by Sellers or their respective Affiliates (other than
the
Partnership Companies) in support of any obligations of any Partnership
Company
listed on Schedule
6.6.
and any
other guarantees, letters of credit, bonds, sureties and other credit support
or
assurances that in the aggregate subject Sellers and their respective Affiliates
(other than the Partnership Companies) to total aggregate exposure of no
more
than $5,000,000.
“Partnerships”means
SRES and REM.
“PBGC”
means
the Pension Benefit Guaranty Corporation.
“Permits”means
authorizations, licenses, permits, registrations, exemptions or certificates
issued by Governmental Authorities; provided,
however, that
right-of-way agreements and similar approvals are not included in the definition
of Permits.
“Permitted
Liens”means
(i)
Liens for Taxes, impositions, assessments, fees, rents or other governmental
charges levied or assessed or imposed not yet delinquent or being contested
in
good faith by appropriate proceedings, (ii) statutory Liens (including
materialmen’s, warehousemen’s, mechanic’s, repairmen’s, landlord’s, and other
similar Liens) arising in the ordinary course of business securing payments
not
yet delinquent or being contested in good faith by appropriate proceedings,
(iii) the rights of lessors and lessees under leases executed in the ordinary
course of business, (iv) the rights of licensors and licensees under licenses
executed in the ordinary course of business, (v) restrictive covenants,
easements and defects, imperfections or irregularities of title, if any,
that do
not or would not impair in any material respect the use or occupancy of
any
applicable asset or property in the operation of the business of the Partnership
Companies, (vi) Liens securing rental payments under capital lease arrangements
executed in the ordinary course of business, (vii) Liens listed on Schedule
1.1(c)
and
(viii) Liens created by Buyers or its successors and assigns.
“Person”means
any
individual, firm, corporation, partnership, limited liability company,
incorporated or unincorporated association, joint venture, joint stock
company,
Governmental Authority or other entity of any kind.
“Personal
Property”
means
all items of personal property owned or leased by the Partnership Companies
in
connection with the operation of their business including, without limitation,
all vehicles, equipment, furniture, files, records and operating inventories
(which shall include, without limitation, chemicals, lubrications, fuels,
corrosion inhibitors, field supplies, computers and office supplies located
at
the Facilities).
“Policies”has
the
meaning provided such term in Section 4.14.
8
“Pre-Closing
Date Period Tax Claims”has
the
meaning provided such term in Section 7.2(e).
“Pre-Closing
Date Tax”has
the
meaning provided such term in Section 7.2(c).
“Purchase
Price”has
the
meaning provided such term in Section 2.2.
“Purchased
Interests”means
the
Limited Partner Interests and the General Partner Interests.
“Qualified
Beneficiary” has
the
meaning provided such term in Section 6.21.
“Reasonable
Efforts”means
efforts in accordance with reasonable commercial practice and without the
incurrence of unreasonable expense.
“REM”
has the
meaning provided such term in the recitals to this Agreement.
“Representatives”means,
as
to any Person, its officers, directors, employees, counsel, accountants,
financial advisers and consultants.
“Sellers”has
the
meaning provided such term in the preamble to this Agreement.
“Seller
Approvals”has
the
meaning provided such term in Section 3.3.
“Seller
Indemnified Parties”has
the
meaning provided such term in Section 9.2(b).
“Seller
Marks”has
the
meaning provided such term in Section 6.9(b).
“Sellers’
401(k) Plan”
has the
meaning provided such term in Section 6.20(c).
“Sellers’
Pension Plan” has
the
meaning provided such term in Section 6.20(a).
“SRCG” has
the
meaning provided such term in the preamble to this Agreement.
“SRCG
Restoration Plan”
has the
meaning provided such term in Section 6.20(b).
“SRES”
has the
meaning provided such term in the recitals to this Agreement.
“SRES
Subsidiaries”
means
Leapartners, SRCG-West Texas Gathering Company, Inc., a Texas corporation,
Mi
Vida Genpar, L.L.C., a Texas limited liability company, Xxx Xxxxxxxxxx
Pipeline,
Ltd., a Texas limited partnership, West Texas Gathering Company, a Delaware
corporation, and Xxx Xxxxxxxxxx Gas Pipeline, Ltd., a Texas limited
partnership.
“Straddle
Period”
has the
meaning provided such term in Section 7.2(c).
9
“Straddle
Period Tax Claim”
has the
meaning provided such term in Section 7.2(c).
“Tax
Authority”means
any
Governmental Authority having jurisdiction over the assessment, determination,
collection or imposition of any Tax.
“Tax
Benefit”means,
with respect to a Loss, an amount by which the Tax liability of a Person
(or
group of corporations filing a Tax Return that includes the Person), with
respect to a taxable period, is reduced as a result of such Loss or the
amount
of any Tax refund or Tax credit that is generated (including, by deduction,
loss, credit or otherwise) as a result of such Loss, and any related interest
received from any relevant Tax Authority.
“Tax
Indemnified Party”has
the
meaning provided such term in Section 7.4(b).
“Tax
Indemnifying Party”has
the
meaning provided such term in Section 7.4(b).
“Tax
Proceeding”has
the
meaning provided such term in Section 7.2(f).
“Tax
Returns”means
any
report, return, election, document, estimated tax filing, declaration or
other
filing provided to any Tax Authority including any amendments
thereto.
“Taxes” means
all
taxes, assessments, charges, duties, fees, levies, imposts or other similar
charges imposed by a Governmental Authority, including all income, franchise,
profits, capital gains, capital stock, transfer, gross receipts, sales,
use,
transfer, service, occupation, ad valorem, property, excise, severance,
windfall
profits, premium, stamp, license, payroll, employment, social security,
unemployment, disability, environmental (including taxes under Code Section
59A), alternative minimum, add-on, value-added, withholding and other taxes,
assessments, charges, duties, fees, levies, imposts or other similar charges
of
any kind whatsoever (whether payable directly or by withholding and whether
or
not requiring the filing of a Tax Return), and all estimated taxes, deficiency
assessments, additions to tax, additional amounts imposed by any Governmental
Authority, penalties and interest.
“Third
Party Claim”has
the
meaning provided such term in Section 9.3(a).
“Threshold
Amount”
has the
meaning provided such term in Section 9.4(b).
“Transferred
Employees”has
the
meaning provided such term in Section 6.17(a).
“United
States”means
the
United States of America.
“Welfare
Benefit Plan”has
the
meaning provided such term in Section 6.21.
10
Section
1.2 Rules
of Construction.
(a) All
article, section, schedule and exhibit references used in this Agreement
are to
articles, sections, schedules and exhibits to this Agreement unless otherwise
specified. The schedules and exhibits attached to this Agreement constitute
a
part of this Agreement and are incorporated herein for all
purposes.
(b) If
a term
is defined as one part of speech (such as a noun), it shall have a corresponding
meaning when used as another part of speech (such as a verb). Terms defined
in
the singular have the corresponding meanings in the plural, and vice versa.
Unless the context of this Agreement clearly requires otherwise, words
importing
the masculine gender shall include the feminine and neutral genders and
vice
versa. The term “includes” or “including” shall mean “including without
limitation.” The words “hereof,”“hereto,”“hereby,”“herein,”“hereunder” and words
of similar import, when used in this Agreement, shall refer to this Agreement
as
a whole and not to any particular section or article in which such words
appear.
The phrase “ordinary course of business” shall mean, with respect to the subject
Person, the ordinary course of business consistent with past
practice.
(c) The
Parties acknowledge that each Party and its attorney has reviewed this
Agreement
and that any rule of construction to the effect that any ambiguities are
to be
resolved against the drafting Party, or any similar rule operating against
the
drafter of an agreement, shall not be applicable to the construction or
interpretation of this Agreement.
(d) The
captions in this Agreement are for convenience only and shall not be considered
a part of or affect the construction or interpretation of any provision
of this
Agreement.
(e) All
references to currency herein shall be to, and all payments required hereunder
shall be paid in, Dollars.
ARTICLE
II
PURCHASE
AND SALE; CLOSING
Section
2.1 Purchase
and Sale of Purchased Interests. At
the
Closing, upon the terms and subject to the conditions set forth in this
Agreement, Sellers shall sell, assign, transfer and convey to Buyers, and
Buyers
shall purchase and acquire from Sellers, the Purchased Interests, free
and clear
of any Liens other than transfer restrictions imposed thereon by applicable
securities Laws.
Section
2.2 Purchase
Price. The
aggregate consideration payable by Buyers to Sellers for the Purchased
Interests
(the “Purchase
Price”) shall
consist of $1,600,000,000 ($1,580,386,500 in respect of the Limited
11
Partner
Interests and $19,613,500 in respect of the General Partner Interests)
minus the
Net Working Capital Change Amount (which shall be divided as between the
Buyers
in the same proportion).
Section
2.3 [Intentionally
Omitted]
Section
2.4 The
Closing.
(a)
The
closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place at the offices of Xxxxx, Xxxx & Xxxxxxx, P.C., 000 Xxxx Xxxxxx,
Xxxxx 0000, Xxxx Xxxxx, Xxxxx 00000, commencing at 10:00 a.m. local time
on the
first day of the calendar month following the calendar month in which all
of the
conditions to Closing shall have been satisfied (with an effective time
of 12:01
a.m. on such date), or such other date as Buyers and Sellers may mutually
determine (the “Closing
Date”).
(b) At
the
Closing, Sellers will deliver the following documents and deliverables
to
Buyers:
(i) an
Assignment and Assumption Agreement in the form of Exhibit 2.4(b)(i) effecting
the transfer to Buyers of ownership of all of the Purchased
Interests;
(ii) a
certificate certifying that the transactions contemplated hereby are exempt
from
withholding under Section 1445 of the Code in the form of Exhibit 2.4(b)(ii);
and
(iii) such
other certificates, instruments of conveyance, and documents as may be
reasonably requested by Buyers and agreed to by Sellers prior to the Closing
Date to carry out the intent and purposes of this Agreement, including
such
certificates, instruments of conveyance and documents specified in Section
8.1.
(c) At
the
Closing, Buyers will deliver the following documents and deliverables to
Sellers:
(i) an
Assignment and Assumption Agreement in the form of Exhibit 2.4(b)(i) effecting
the transfer to Buyers of ownership of all of the Purchased
Interests;
(ii) an
amount
equal to the Estimated Purchase Price by wire transfer of immediately available
funds to an account or accounts specified by Sellers; and
(iii) such
other certificates, instruments, and documents as may be reasonably requested
by
Sellers and agreed to by Buyers prior to the Closing Date to carry out
the
intent and purposes of this Agreement, including such certificates, instruments
and documents specified in Section 8.2.
Section
2.5 Post-Closing
Purchase Price Reconciliation.
12
(a) As
soon
as reasonably practicable following the Closing Date, and in any event
within 45
days thereafter, Sellers shall deliver to Buyers a closing statement of
the
Partnership Companies as of the Closing Date (the “Closing
Statement”),
prepared by Sellers in good faith and on a reasonable basis, setting forth
in
reasonable detail the proposed final determination of the Net Working Capital
Change Amount, including such information relating thereto as may be specified
in Article
VII
hereof.
(b) From
and
after the delivery of the Closing Statement, and in order for Buyers to
review
the Closing Statement and the calculation of the Net Working Capital Change
Amount, Sellers shall provide to Buyers and their Representatives prompt
and
full access to the personnel, accountants, books and records used by Sellers
or
their Representatives in the preparation of the Closing Statement and the
calculation of the Net Working Capital Change Amount (and shall provide
copies
of applicable portions of such books and records as may be reasonably
requested), and shall cause the employees of Sellers to cooperate in all
reasonable respects with Buyers in connection with their review of such
work
papers and other documents and information relating to the preparation
of the
Closing Statement and the calculation of the Net Working Capital Change
Amount.
(c) Within
45
days after Buyers’ receipt of the Closing Statement, Buyers shall notify Sellers
in writing whether Buyers agree or disagree with the Closing Statement.
If
Buyers accept the Closing Statement, Buyers or Sellers, as appropriate,
shall,
within five Business Days of such acceptance, make the following adjustments:
(i) if the Net Working Capital Change Amount calculated based on the Closing
Statement is a negative number, Buyers shall pay to Sellers in cash (by
means of
federal funds wire or interbank transfer in immediately available funds)
a
positive amount equal to the Net Working Capital Change Amount, or (ii)
if the
Net Working Capital Change Amount calculated based on the Closing Statement
is a
positive number, Sellers shall pay to Buyers in cash (by means of federal
funds
wire or interbank transfer in immediately available funds) an amount equal
to
the Net Working Capital Change Amount. In the event that any payment required
by
this Section 2.5(c) is not made by the appropriate Party when due pursuant
to
the terms of this Section 2.5(c), such payment shall accrue interest from
the
date such payment was due at the lesser of 15% per annum or the maximum
rate
permitted by applicable law. Such interest shall be paid by the appropriate
Party upon demand by the other Party.
(d) If
Buyers
disagree with the Closing Statement, Buyers’ notice as aforesaid shall specify
in reasonable detail the nature and extent of such disagreement, and Buyers
and
Sellers shall have a period of 30 days from Sellers’ receipt of such notice in
which to resolve such disagreement. If such notice of disagreement is not
received by Sellers within the time specified in subsection (c) above,
it shall
be deemed that Buyers have accepted the Closing Statement with respect
to all
items set forth therein and within three Business Days after the expiration
of
such 30 day period, Buyers or Sellers, as appropriate, shall make the payments
described in Section 2.5(c) hereof. Any disputed amounts which cannot be
agreed
to by the Parties within 30 days from Sellers’ receipt of Buyers’ notice of
disagreement to the Closing Statement shall be determined by a mutually
agreeable nationally recognized accounting firm that does not have a
relationship with either Sellers or Buyers, or any of their respective
13
Affiliates
(the “Accounting
Firm”).
The
engagement of and the determination by the Accounting Firm (or any other
accounting firm designated by the Accounting Firm as set forth below) shall
be
completed within 60 days after such assignment is given to the Accounting
Firm
and shall be binding on and shall, absent manifest error, be nonappealable
by
Sellers and Buyers. If for any reason the Accounting Firm is unable to
act in
such capacity, such determination will be made by any other nationally
recognized accounting firm selected by the Accounting Firm. The fees and
expenses payable to the Accounting Firm (or any other accounting firm designated
by the Accounting Firm) in connection with such determination will be borne
50%
by Sellers and 50% by Buyers.
(e) Within
five Business Days of the date on which the last disputed item required
to
determine the Net Working Capital Change Amount as of the Closing Date
is
resolved by the Accounting Firm, Buyers or Sellers, as appropriate, shall
make
the payments described in Section 2.5(c) hereof.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES RELATING TO SELLERS
Sellers,
jointly and severally, represent and warrant to Buyers as follows:
Section
3.1Organization
of Sellers. SRCG
is a
limited partnership duly organized, validly existing and in good standing
under
the Laws of the State of Texas. Genpar is a limited partnership duly organized,
validly existing and in good standing under the Laws of the State of
Delaware.
Section
3.2 Authorization;
Enforceability. Each
Seller has all requisite partnership power and authority to execute and
deliver
this Agreement and to perform all obligations to be performed by it hereunder.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized
and
approved by all requisite partnership action of each of SRCG and Genpar.
This
Agreement has been duly and validly executed and delivered by each Seller
and
constitutes a valid and binding obligation of each such Seller, enforceable
against each such Seller in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and
similar Laws affecting creditors’ rights generally and subject, as to
enforceability, to general principles of equity.
Section
3.3 No
Conflict. The
execution and delivery of this Agreement by Sellers and the consummation
of the
transactions contemplated hereby by them (assuming all filings, consents,
approvals, authorizations and notices set forth on Schedule
3.3
(collectively, the “Seller
Approvals”) have
been
made, given or obtained) do not and shall not:
14
(a) violate
any Law applicable to either Seller or any of its subsidiaries (other than
the
Partnership Companies);
(b) require
any filing with, consent, approval or authorization of, or notice to, any
Governmental Authority or any other Person;
(c) violate
any Organizational Document of either Seller or any of its subsidiaries
(other
than the Partnership Companies); or
(d) (i)
breach or conflict with or constitute a default under any Contract, Benefit
Plan
or Permit to which either Seller or any of its subsidiaries (other than
the
Partnership Companies) is a party or by which either Seller or any of its
subsidiaries (other than the Partnership Companies) or any of its assets
may be
bound, (ii) result in the acceleration, termination or modification of
any such
Contract, Benefit Plan or Permit, (iii) result in the creation of any Lien
upon
any of the Purchased Interests, or (iv) constitute an event which, after
notice
or lapse of time or both, would result in any such breach, acceleration,
termination, modification or creation of a Lien upon any of the Purchased
Interests or would create in any party the right to accelerate, terminate,
modify or cancel any Contract, Benefit Plan or Permit of any Seller or
any of
its subsidiaries (other than the Partnership Companies);
except,
in the case of clause (b) and (d) above, as would not reasonably be expected,
either individually or in the aggregate, to have a Material Adverse Effect
on
the Partnership Companies and on the ability of Sellers to enter into and
timely
perform their obligations under this Agreement and the other agreements
contemplated hereby to be executed by Sellers.
Section
3.4 Litigation.
Except
as
set forth on Schedule
4.8,
(a)
there are no lawsuits, actions, investigations or proceedings by or before
any
Governmental Authority, arbitrator or mediator, pending or, to the Knowledge
of
either of the Sellers, threatened against either of the Sellers or any
of their
subsidiaries that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Partnership Companies
or the
ability of either Seller to perform its obligations under this Agreement
and (b)
there are no orders or unsatisfied judgments from any Governmental Authority,
arbitrator or mediator binding upon either Seller or any of their subsidiaries
that, individually or in the aggregate, would reasonably be expected to
have a
Material Adverse Effect on the Partnership Companies or the ability of
either
Seller to perform its obligations under this Agreement. Notwithstanding
anything
in this Agreement to the contrary, the provisions of this Section 3.4 shall
not
relate to or cover any matters relating to Taxes, Benefit Plans, Employees
or
Environmental Laws, which are addressed in Sections 4.10, 4.9, 4.15 and
4.11,
respectively.
Section
3.5 Brokers’
Fees. Except
for Xxxxxx Brothers, Inc., no broker, finder, investment banker or other
Person
is entitled to any brokerage fee, finders’ fee or other commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by Sellers or any of their respective Affiliates (including the Partnership
Companies); provided that any
15
brokerage
fee, finders’ fee or other commission payable to Xxxxxx Brothers, Inc. shall in
no event be payable by the Partnership Companies.
Section
3.6 Ownership
of Purchased Interests.
(a) SRCG
has
good title to, holds of record and owns beneficially, the Limited Partner
Interests free and clear of any Liens, other than transfer restrictions
imposed
thereon by applicable securities Laws. All the Limited Partner Interests
are
held by SRCG, and the Limited Partner Interests represent 100% of the
outstanding limited partner interests of SRES and REM. On the Closing Date,
upon
payment of the Estimated Purchase Price in accordance with Section 2.4,
the
Limited Partner Interests will be acquired by Buyers free and clear of
all Liens
(other than restrictions imposed thereon by applicable securities
Laws).
(b) Genpar
has good title to, and holds of record and owns beneficially, the General
Partner Interests free and clear of any Liens, other than transfer restrictions
imposed thereon by applicable securities laws. All the General Partner
Interests
are held by Genpar, and the General Partner Interests represent 100% of
the
general partner interests of SRES, REM and Leapartners. On the Closing
Date,
upon payment of the Estimated Purchase Price in accordance with Section
2.4, the
General Partner Interests will be acquired by Buyers free and clear of
all Liens
(other than restrictions imposed thereon by applicable securities
laws).
(c) (i)
There
are no outstanding options, warrants, rights or other securities convertible
into or exchangeable or exercisable for partnership or other equity interests
of
any of the Partnership Companies, (ii) there are not any other commitments
or
agreements providing for the issuance of additional partnership or other
equity
interests of any of the Partnership Companies or the repurchase or redemption
of
partnership or other equity interests of any of the Partnership Companies,
and
(iii) there are no agreements of any kind which may obligate the Partnership
Companies to issue, purchase, redeem or otherwise acquire any of their
respective partnership or other equity interests. There are no voting
agreements, proxies or other similar agreements or understandings with
respect
to the partnership or other equity interests of any of the Partnership
Companies.
(d) All
of
the outstanding partnership interests of the Partnerships (i) have been
duly
authorized and validly issued and (ii) were not issued in violation of
any
preemptive rights or other preferential rights of subscription or purchase
of
any Person.
(e) The
Sellers, directly or indirectly, own all of the equity interests of Xxx
Xxxxxxxxxx Carbon, Ltd.
16
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES RELATING TO THE PARTNERSHIP COMPANIES
Sellers,
jointly and severally, represent and warrant to Buyers as follows:
Section
4.1 Organization
of the Partnerships. Each
of
the Partnerships is duly organized, validly existing and in good standing
under
the Laws of the jurisdiction of its organization and has the requisite
partnership power and authority to own or lease its assets and to conduct
its
business as it is now being conducted. Each of the Partnerships is duly
licensed
or qualified in each jurisdiction in which the ownership or operation of
its
assets or the character of its activities is such as to require it to be
so
licensed or qualified, except where the failure to be so licensed or qualified
would not, individually or in the aggregate, have a Material Adverse Effect
on
such Partnership. Schedule
4.1
sets
forth the jurisdiction of organization of each Partnership, the jurisdictions
in
which each Partnership is qualified or licensed to do business as a foreign
limited partnership and the authorized, issued and outstanding equity interests
and the record and beneficial owners thereof of each Partnership. Sellers
have
made available through the electronic data room or otherwise provided to
Buyers
true copies of all existing Organizational Documents of the
Partnerships.
Section
4.2 Organization
and Capitalization of the SRES Subsidiaries and Grey
Ranch.
(a) With
the
exception of the general partner interest of Genpar in Leapartners, SRES,
directly or indirectly through another SRES Subsidiary, owns, of record
and
beneficially, all of the outstanding equity interests of each other SRES
Subsidiary. Other than SRES’s indirect equity interest in Grey Ranch, the SRES
Subsidiaries are the only corporations, limited partnerships, limited liability
companies and other Persons in which SRES owns, directly or indirectly,
an
equity interest. REM does not own any equity interest in any corporation,
limited partnership, limited liability company or any other Person.
(b) Each
SRES
Subsidiary is duly organized or incorporated, validly existing and in good
standing under the Laws of its respective jurisdiction of organization
or
incorporation, is duly qualified to do business as a foreign limited liability
company, limited partnership or corporation in each jurisdiction set forth
opposite such SRES Subsidiary’s name on Schedule
4.2(b),
which
are all the jurisdictions in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such qualification
necessary, except jurisdictions in which the failure to be so qualified,
individually or in the aggregate, would not have a Material Adverse Effect
on
the Partnership Companies. Each SRES Subsidiary has the requisite power
and
authority (as a corporation, limited partnership or limited liability company)
to carry on its respective business as it is now being conducted and to
own,
operate and lease the assets it now owns, operates or holds under
lease.
17
(c) All
the
outstanding shares of capital stock, partnership interests, membership
interests
and other equity interests of each SRES Subsidiary (i) have been duly authorized
and validly issued (and, with respect to each of SRCG-West Texas Gathering
Company, Inc. and West Texas Gathering Company, are fully paid and
non-assessable), (ii) were not issued in violation of any preemptive rights
or
other preferential rights of subscription or purchase of any Person and
(iii)
are owned of record and beneficially by SRES or another SRES Subsidiary
(or, in
the case of Leapartners, are owned of record and beneficially by SRES and
Genpar), free and clear of all Liens (other than restrictions imposed thereon
by
applicable securities Laws).
(d) Sellers
have heretofore made available through the electronic data room or otherwise
provided to Buyers true and complete copies of the Organizational Documents
of
each SRES Subsidiary. Schedule
4.2(d)
sets
forth a true and complete list of the SRES Subsidiaries together with (i)
a
specification of the nature of the legal organization of each such entity,
and
(ii) the jurisdiction of organization of each such entity and (iii) the
authorized, issued and outstanding equity interests and record and beneficial
owners thereof of each SRES Subsidiary.
(e) Grey
Ranch is a limited partnership duly organized, validly existing and in
good
standing under the Laws of the State of Texas, is duly qualified to do
business
as a foreign limited partnership in each jurisdiction set forth on Schedule
4.2(e)(i),
which
are all the jurisdictions in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such qualification
necessary, except jurisdictions in which the failure to be so qualified,
individually or in the aggregate, would not have a Material Adverse Effect
on
the Partnership Companies. Grey Ranch has the requisite partnership power
and
authority to carry on its business as it is now being conducted and to
own,
operate and lease the assets it now owns, operates or holds under lease.
All
outstanding partnership or other equity interests in Grey Ranch have been
duly
authorized and validly issued, were not issued in violation of any preemptive
rights or other preferential rights of subscription or purchase of any
Person
and are owned of record and beneficially by the Persons set forth on
Schedule
4.2(e)(ii).
Xxx
Xxxxxxxxxx Pipeline, Ltd's partnership or other equity interests in Grey
Ranch
are owned free and clear of all Liens (other than restrictions imposed
thereon
by applicable securities Laws). Sellers have heretofore made available
through
the electronic data room or otherwise provided to Buyers true and complete
copies of the Organizational Documents of Grey Ranch.
(f) In
addition, Sellers own a non-controlling interest in PetroSource Energy
Company,
LP (the “Excluded
Subsidiary”).
Section
4.3 No
Conflict. The
execution and delivery of this Agreement by Sellers and the consummation
of the
transactions contemplated hereby by Sellers (assuming all of the Seller
Approvals have been made, given or obtained) do not and shall not:
(a) violate
any Law applicable to any Partnership Company;
18
(b) require
any filing with, consent, approval or authorization of, or notice to, any
Governmental Authority or any other Person;
(c) violate
any Organizational Document of any Partnership Company; or
(d) (i)
breach or conflict with or constitute a default under any Contract, Benefit
Plan
or Permit to which any Partnership Company is a party or by which any
Partnership Company or any of its assets may be bound, (ii) result in the
acceleration, termination or modification of any such Contract, Benefit
Plan or
Permit, (iii) result in the creation of any Lien under any such Contract
or on
any assets of any Partnership Company or (iv) constitute an event which,
after
notice or lapse of time or both, would result in any such breach, acceleration,
termination, modification or creation of a Lien or would create in any
party the
right to accelerate, terminate, modify, or cancel a Contract, Benefit Plan
or
Permit of any Partnership Company;
except,
in the case of clause (b) and (d) above, as would not, either individually
or in
the aggregate, have a Material Adverse Effect on the Partnership Companies,
or
on the ability of Sellers to enter into and timely perform their obligations
under this Agreement and the other agreements contemplated hereby to be
executed
by Sellers.
Section
4.4 Financial
Statements.
(a) Schedule
4.4
sets
forth true and complete copies of the following financial statements
(collectively, the “Financial
Statements”): (a)
the
audited consolidated balance sheets of SRES as of December 31, 2003 and
2004,
with related statements of income, cash flows and changes in partners’ capital
for the years ended December 31, 2002, 2003 and 2004, (b) the audited balance
sheets of REM as of December 31, 2003 and 2004, with related statements
of
income, cash flows and changes in partners’ capital for the years ended December
31, 2002, 2003 and 2004, (c) the unaudited consolidated balance sheet of
SRES
(with related statements of income and cash flows) as of, and for the period
ended, September 30, 2005 and (d) the unaudited balance sheet of REM (with
related statements of income and cash flows) as of, and for the period
ended,
September 30, 2005. The Financial Statements referred to in clauses (a)
and (b)
above are sometimes collectively referred to herein as the “Audited
Financial Statements,”
and the
Financial Statements referred to in clauses (c) and (d) above are sometimes
collectively referred to herein as the “Interim
Financial Statements.”
The
Financial Statements have been prepared in accordance with GAAP applied
on a
consistent basis throughout the periods presented thereby and present fairly
in
accordance with GAAP, the financial position, the results of operations
and cash
flows of the Partnerships as of, and for the periods ended on, such dates.
(b) The
Partnership Companies have not received any written notice from any Governmental
Authority concerning noncompliance with, or deficiencies in, the Partnership
Companies’ financial reporting practices. All material transactions have been
properly recorded in the accounting records underlying the Financial Statements.
There are no significant deficiencies, including material weaknesses, in
the
design or operation of internal
19
control
over the Partnership Companies’ financial reporting. To the Knowledge of the
Sellers, no member of the Partnership Companies’ management nor any other
employee with a significant role in the Partnership Companies’ internal controls
has committed any act of fraud having a material effect on the Financial
Statements.
(c) The
Partnership Companies have not received or otherwise had, nor do the Sellers
have any Knowledge of, any complaint, allegation, assertion or claim, whether
written or oral, alleging fraud or suspected fraud affecting the Partnership
Companies.
(d) All
liabilities that are required by GAAP to be reflected or reserved against
in the
balance sheet included in the Interim Financial Statements have been so
reflected or reserved against in such balance sheet. Since September 30,
2005,
the Partnership Companies have not incurred any material liability other
than in
the ordinary course of business.
Section
4.5 Absence
of Certain Changes. Except
as
disclosed on Schedule
4.5,
since
September 30, 2005, (a) there has not been any Material Adverse Effect
on any
Partnership Company and (b) the business of each Partnership Company has
been
conducted, in all material respects, only in the ordinary course of business.
Without limiting the generality of the foregoing, and except as set forth
on
Schedule
4.5,
since
September 30, 2005, none of the Partnership Companies has taken any of
the
actions described in Section 6.1(b).
Section
4.6 Contracts.
(a)
Schedule
4.6(a)
contains
a true and complete listing of the following contracts, agreements, commitments
or arrangements (other than (x) Contracts of a nature described on Schedule
4.6(b)
and (y)
the Contracts listed on Schedule
6.7(c))
to
which any Partnership Company (or any Seller if such contract, agreement,
commitment or arrangement relates to the business of any of the Partnership
Companies) is a party in effect on the date of this Agreement (each contract,
agreement, commitment or arrangement that is required to be listed on
Schedule
4.6(a),
together with any other Contract that Sellers would have been required
to
disclose on Schedule
4.6(a) but
for
the fact that they have been disclosed on Schedule
4.6(b),
being
“Material
Contracts”):
(i) each
Contract for Indebtedness for borrowed money involving an obligation in
excess
of $100,000 and each Contract for other Indebtedness involving an obligation
in
excess of $1,000,000;
(ii) each
natural gas transportation, gathering, treating, processing or other Contract
and each natural gas purchase Contract that individually involves annual
revenues or payments of the Partnership Companies in excess of
$1,000,000;
(iii) each
Contract involving a remaining commitment by a Partnership Company to pay
capital expenditures with respect to its business in excess of
$1,000,000;
20
(iv) each
Contract for lease of personal property or real property involving aggregate
payments in excess of $500,000 in any calendar year;
(v) each
employment contract respecting a Transferred Employee involving aggregate
payments in excess of $100,000 in any calendar year, and each Contract
providing
retention, severance or project bonus payments in excess of $50,000 individually
or $200,000 in the aggregate, in each case that have not been paid in full
as of
the date of this Agreement;
(vi) each
Contract providing for any compensation payable as a result of the consummation
of the transaction contemplated by this Agreement in excess of $50,000
individually or $200,000 in the aggregate whether or not some other subsequent
action or event would be required to cause such compensation to be
payable;
(vii) except
for Contracts of the nature described in clause (ii) above, each Contract
between a Seller or such Seller’s Affiliate (other than the Partnership
Companies), on the one hand, and a Partnership Company, on the other hand,
identifying those Contracts that will survive the Closing and those that
will
terminate on or prior to the Closing;
(viii) each
Contract that provides for a limit on the ability of a Partnership Company
to
compete in any line of business or with any Person or in any geographic
area
during any period of time after the Closing;
(ix) except
for Contracts of the nature described in clauses (i) through (viii) above,
each
Contract involving aggregate payments by or to a Partnership Company in
excess
of $1,000,000 in any future calendar year;
(x) any
agreement concerning a partnership or joint venture;
(xi) any
confidentiality or standstill agreements;
(xii) any
agreement under which any of the Partnership Companies has advanced or
loaned
any amount of money to any of its officers, directors, employees or consultants;
and
(xiii) any
Contract with independent contractors, any service agreement or any consulting
agreement, in each case relating to the Assets and involving an aggregate
payment in excess of $100,000.
(b) True
and
complete copies of all Material Contracts (other than any Material Contracts
listed on Schedule
4.6(b)),
including all amendments thereto, have been made available through the
electronic data room or otherwise provided to Buyers.
(c) Except
as
set forth on Schedule
4.6(c),
each
Material Contract (other than Material Contracts with respect to which
all
performance and payment obligations have been
21
fully
performed or otherwise discharged by all parties thereto prior to the Closing)
and Partnership Guarantee (i) is in full force and effect, (ii) represents
the
legal, valid and binding obligation of the Partnership Company or Seller
that is
party thereto and, to the Knowledge of Sellers, represents the legal, valid
and
binding obligation of the other parties thereto, in each case enforceable
in
accordance with its terms. Except to the extent that any such Material
Contract
expires according to its terms, each Material Contract will continue to
be
legal, valid, binding, enforceable, and in full force and effect on identical
terms immediately following the consummation of the transactions contemplated
by
this Agreement. The Partnership Companies and the Sellers are not in breach
or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default by the Partnership Companies, or permit
termination, modification, or acceleration, under the Material Contract.
Except
as set forth on Schedule
4.6(c),
no
Partnership Company has received from any other party to a Material Contract
any
written notice or, to Sellers’ Knowledge, any oral notice of any material breach
or material violation by any such Partnership Company or Sellers of any
Material
Contract. To the Knowledge of the Sellers, no other party is in breach
or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default by such other party, or permit termination,
modification, or acceleration, under any Material Contract nor has any
other
party repudiated any provision of any Material Contract.
Section
4.7 Intellectual
Property.
To the
Knowledge of Sellers, (a) except as set forth on Schedule
4.7(a),
the
Partnership Companies own or have the valid right to use pursuant to license,
sublicense, agreement or otherwise all Intellectual Property that individually
or in the aggregate is material to the operation of the business of the
Partnership Companies as presently conducted, (b) no third party has asserted
that any Partnership Company is infringing the Intellectual Property of
such
third party or has challenged or questioned the validity or effectiveness
of any
Partnership Company’s rights to its Intellectual Property, (c) the ownership,
use and operation of its assets and properties and the conduct of any
Partnership Company’s business have not infringed, misappropriated or otherwise
conflicted with any Intellectual Property of any other Person and (d) no
third
party is infringing the Intellectual Property of the Partnership
Companies.
Section
4.8 Litigation.
Except
as
set forth on Schedule
4.8,
(a)
there are no lawsuits or actions before any Governmental Authority, arbitrator
or mediator pending or, to the Knowledge of Sellers, threatened by any
Person
against any Partnership Company that involve claims in excess of $1,000,000
or
that would otherwise, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on the Partnership Companies and (b)
to the
Knowledge of Sellers, there is no injunction, order or unsatisfied judgment
from
any Governmental Authority that requires payments in excess of $1,000,000
or
that would otherwise, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on the Partnership Companies. Notwithstanding
anything in this Agreement to the contrary, the provisions of this Section
4.8
shall not relate to or cover any matters relating to Taxes, Benefit Plans,
Employees or Environmental Laws, which are addressed in Sections 4.10,
4.9, 4.15
and 4.11, respectively.
22
Section
4.9 Employee
Benefit Plans.
(a) Employee
Benefit Plans, Collective Bargaining and Employment Agreements, and Similar
Arrangements.
(i) Schedule
4.9(a)
lists
all Benefit Plans and collective bargaining, labor and employment agreements,
or
other similar arrangements (including but not limited to bonus or incentive
arrangements, retention and/or change of control agreements, severance
plans or
policies, vacation, sick leave and personal time off policies) to which
any of
the Partnership Companies is a party or by which any of them is bound,
legally
or otherwise or that are sponsored, maintained or contributed to by any
of the
Partnership Companies, or with respect to Benefit Plans, which any of such
entities have sponsored, maintained, or to which they have been obligated
to
contribute within six years prior to the Closing Date. Schedule
4.9(a)
identifies the sponsor as to each Benefit Plan listed thereon.
(ii) Sellers
have delivered to Buyers true and complete copies of all documents, summary
plan
descriptions and summaries of material modifications thereto with respect
to the
Benefit Plans, agreements and arrangements described in this Section 4.9,
or
summary descriptions of any such Benefit Plans, agreements or arrangements
not
otherwise in writing as well as all personnel policies applicable to the
Employees, if any.
(iii) There
are
no negotiations, demands or proposals that are pending or have been made
which
concern matters now covered, or that would be covered, by Benefit Plans,
agreements or arrangements described in this Section 4.9.
(iv) The
Partnership Companies are in full compliance with the applicable provisions
of
ERISA (as amended through the date of this Agreement), the regulations
and
published authorities thereunder, and all other Laws applicable with respect
to
all such Benefit Plans, agreements and arrangements. The Partnership Companies
and their ERISA Affiliates have performed all of their obligations under
all
such Benefit Plans, agreements and arrangements including, but not limited
to,
the full payment when due of all amounts required to be made as contributions
thereto or otherwise. To the Knowledge of Sellers, there are no actions,
suits
or claims (other than routine claims for benefits) pending or threatened
against
such Benefit Plans or their assets, or arising out of such Benefit Plans,
agreements or arrangements, and, to the Knowledge of Sellers, no facts
exist
which could give rise to any such actions, suits or claims that might have
a
material adverse effect on such Benefit Plans, agreements and arrangements.
To
the Knowledge of the Sellers, there is no matter pending (other than routine
qualification determination filings) with respect to any of the Benefit
Plans
described on Schedule 4.9(a)
before
the Internal Revenue Service, the Department of Labor, the PBGC, or any
other
Governmental Authority.
(v) The
Partnership Companies may unilaterally withdraw from and terminate participation
in each of the Benefit Plans within a period of 30 days, without payment
of any
additional compensation or amount or the additional vesting or acceleration
of
any benefits. No Benefit Plan, agreement or arrangement described in
Schedule
4.9(a)
provides
retiree
23
medical
or retiree life insurance benefits to any Person and none of the Partnership
Companies or any ERISA Affiliate is contractually or otherwise obligated
(whether or not in writing) to provide any Person with life insurance or
medical
benefits upon retirement or termination of employment, other than as required
by
the provisions of Sections 601 through 608 of ERISA and Section 4980B of
the
Code.
(vi) To
the
Knowledge of Sellers, with respect to each such Benefit Plan which is an
“employee benefit plan” (within the meaning of Section 3(3) of ERISA) or a
“Plan” (within the meaning of Section 4975(e)(1) of the Code), there has
occurred no transaction prohibited by Section 406 of ERISA and no “prohibited
transaction” (within the meaning of Section 4975(c) of the Code). No act,
omission or transaction has occurred which would result in imposition on
any of
the Partnership Companies of (A) breach of fiduciary duty liability damages
under Section 409 of ERISA, (B) a civil penalty assessed pursuant to subsections
(c), (i) or (l) of Section 502 of ERISA, or (C) a tax imposed pursuant
to
Chapter 43 of Subtitle D of the Code.
(vii) The
Partnership Companies have classified correctly all individuals who perform
services for the Partnership Companies under the Benefit Plans, ERISA and
the
Code as common law employees, independent contractors or leased
employees.
(viii) Each
trust funding a Benefit Plan described in Schedule
4.9(a),
which
trust is intended to be exempt from federal income taxation pursuant to
Section
501(c)(9) of the Code, satisfies the requirements of such section and has
received a favorable determination letter from the Internal Revenue Service
regarding such exempt status and has not, since receipt of the most recent
favorable determination letter, been amended or operated in a way which
would
adversely affect such exempt status.
(ix) The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not (A) require any of the Partnership
Companies to make a larger contribution to, or pay greater benefits or
provide
other rights under, any Benefit Plan, agreement or arrangement described
on
Schedule
4.9(a) than
it
otherwise would, whether or not some other subsequent action or event would
be
required to cause such payment or provision to be triggered, or (B) create
or
give rise to any additional vested rights or service credits under any
such
Benefit Plan, agreement or arrangement.
(x) In
connection with the consummation of the transactions contemplated by this
Agreement, no payments of money or other property, acceleration of benefits,
or
provisions of other rights have or will be made hereunder, under any Benefit
Plan, agreement or arrangement described on Schedule
4.9(a) that
would be reasonably likely to result in imposition of the sanctions imposed
under Sections 280G and 4999 of the Code, whether or not some other subsequent
action or event would be required to cause such payment, acceleration,
or
provision to be triggered.
(b) Qualified
Plans.
(i) Schedule
4.9(b)
lists
each Benefit Plan on Schedule
4.9(a)
which is
also a stock bonus, pension or profit-sharing plan within the meaning of
Section
401(a) of the Code to which any of the Partnership Companies is a party
or by
which any of them is bound, legally or
24
otherwise
or that has been sponsored, maintained, or contributed to by any of the
Partnership Companies or to which any of the Partnership Companies has
been
obligated to contribute during the six years prior to the Closing Date.
Participation as an employer in each such Benefit Plan identified on
Schedule
4.9(b) has
been
duly authorized by the appropriate general partner or the board of directors,
as
applicable, of the Partnership Companies. Each such Benefit Plan which
is
intended to so qualify is qualified in form and operation under Section
401(a)
of the Code, each trust under each such Benefit Plan is exempt from tax
under
Section 501(a) of the Code, and such Benefit Plans and trusts have each
received
a favorable determination letter from the Internal Revenue Service. To
the
Knowledge of Sellers, no event has occurred that will or could give rise
to
disqualification or loss of tax-exempt status of any such Benefit Plan
or trust
under Sections 401(a) and 501(a) of the Code. To the Knowledge of Sellers,
no
event has occurred that will or could subject any such Benefit Plans to
tax
under Section 511 of the Code. There has been no termination or partial
termination of any such Plan within the meaning of Section 411(d)(3) of
the
Code.
(ii) Sellers
have delivered to Buyers for each Benefit Plan listed on Schedule
4.9(b) copies
of
the following documents: (A) the Form 5500 filed in the most recent plan
year,
including but not limited to all schedules thereto and financial statements
with
attached opinions of independent accountants, (B) the most recent determination
letter from the Internal Revenue Service, (C) the consolidated statement
of
assets and liabilities of such Benefit Plan as of its most recent valuation
date, and (D) the statement of changes in fund balance and in financial
position
or the statement of changes in net assets available for benefits under
such
Benefit Plan for the most recently ended plan year.
(iii) With
respect to each Benefit Plan subject to Section 412 of the Code maintained
for
employees of any of the Partnership Companies and any ERISA Affiliate,
or
maintained, sponsored or contributed to by any of such entities within
six years
prior to the Closing Date, there has occurred no failure to meet the minimum
funding standard of Section 412 of the Code or Section 302 of ERISA (whether
or
not waived in accordance with Section 412(d) of the Code) or failure to
make by
its due date a required installment under Section 412(m) of the Code.
“ERISA
Affiliate,”
as
applied to any person, means (A) any corporation which is a member of a
controlled group of corporations within the meaning of Section 414(b) of
the
Code of which that person is a member, (B) any trade or business (whether
not
incorporated) which is a member of a group of trades or business under
common
control within the meaning of Section 414(c) of the Code of which that
person is
a member, and (C) any member of an affiliated service group within the
meaning
of Section 414(m) and (o) of the Code of which that person, any corporation
described in clause (A) above or any trade or business described in clause
(B)
above is a member.
(c) Title
IV Plans.
(i) Schedule
4.9(c)
lists
all Benefit Plans on Schedules
4.9(a)
and
4.9(b)
which
are also subject to Title IV of ERISA to which any of the Partnership Companies
or any ERISA Affiliate is a party or by which any of them is bound, legally
or
otherwise or which has been maintained, sponsored or contributed to by
any of
the Partnership Companies or any ERISA Affiliates within six years prior
to the
Closing Date.
25
(ii) With
respect to each Benefit Plan which is an “employee pension benefit plan” (within
the meaning of Section 3(2) of ERISA) to which any of the Partnership Companies
is a party or by which any of them is bound, legally or otherwise, or which
has
been maintained, sponsored or contributed to by any of the Partnership
Companies
or any ERISA Affiliates within six years prior to the Closing Date (A)
none of
the Partnership Companies or any ERISA Affiliate has withdrawn from such
Benefit
Plan during a plan year in which it was a “substantial employer” (as defined in
Section 4001(a)(2) of ERISA) where such withdrawal could result in liability
of
such substantial employer pursuant to Section 4062(e) or 4063 of ERISA,
(B) none
of the Partnership Companies or any ERISA Affiliate has filed a notice
of intent
to terminate any such Benefit Plan or adopted any amendment to treat any
such
Benefit Plan as terminated, (C) PBGC has not instituted proceedings to
terminate
any such Benefit Plan, (D) no other event or condition has occurred which
might
constitute grounds under Section 4042 of ERISA for the termination of,
or the
appointment of a trustee to administer, any such Benefit Plan, (E) no
accumulated funding deficiency, whether or not waived, exists with respect
to
any such Benefit Plan, and no condition has occurred or exists which by
the
passage of time would be expected to result in an accumulated funding deficiency
as of the last day of the current plan year of any such Benefit Plan, (F)
all
required premium payments to the PBGC have been paid when due and no other
liability to the PBGC has been incurred, (G) no reportable event, as described
in Section 4043 of ERISA, has occurred with respect to any such Benefit
Plan,
(H) no excise taxes are payable or could be imposed under the Code, (I)
no
amendment with respect to which security is required under Section 307
of ERISA
has been made or is reasonably expected to be made, (J) Section 4043(b)
of ERISA
is not applicable to any such Benefit Plan, (K) all contributions (including
installments) to such Benefit Plan required by Section 302 of ERISA and
Section
412 of the Code have been timely made, and (L) and the assets of each Benefit
Plan equal or exceed the actuarial present value of the benefit liabilities,
within the meaning of Section 4041 of ERISA, under such Benefit Plan, based
upon
reasonable actuarial assumptions and the asset valuation principles established
by the PBGC.
(iii) All
costs
of any Benefit Plans subject to Title IV of ERISA and listed on Schedule
4.9(c)
have
been provided for on the basis of consistent methods in accordance with
sound
actuarial assumptions and practices. Schedule
4.9(c)
includes
for each such Benefit Plan, as of its last valuation date, the amount by
which
its assets exceeded (or were less than) its “benefit liabilities” (within the
meaning of Section 4001 of ERISA). Since the last valuation date for each
such
Benefit Plan, there has been no amendment or change to such plan that would
increase the amount of benefits thereunder and, to the Knowledge of Sellers,
there has been no event or occurrence that would cause the excess of assets
over
benefit liabilities as listed on Schedule
4.9(c)
to be
reduced or the amount by which benefit liabilities exceed assets as listed
on
Schedule
4.9(c)
to be
increased.
(iv) In
addition to the documents listed in subsection (b)(ii) above, Sellers have
delivered to Buyers for each Benefit Plan listed on Schedule
4.9(c) copies
of
the following documents (A) the Form PBGC-1 filed in each of the most recent
three plan years, and (B) the actuarial report as of the last valuation
date.
Each such actuarial report fairly presents the financial condition and
the
results of operations of each such Benefit Plan as of the date described
therein.
26
(d) Multiemployer
Plans. None
of
the Partnership Companies or any of their ERISA Affiliates is a party to
or is
bound, legally or otherwise, to any Benefit Plan that is a multiemployer
plan
within the meaning of Section 4001(a)(3) of ERISA nor have any of such
entities
been a party to, bound by, legally or otherwise, contributed to or had
an
obligation to contribute to such a Benefit Plan within the six years preceding
the Closing Date.
Section
4.10 Taxes.
(a) Except
as
set forth on Schedule
4.10(a),
as of
the Closing Date, (a) all Tax Returns required to be filed by the Partnership
Companies have been duly and timely filed with the appropriate Tax Authority
and
all such Tax Returns are complete and correct in all material respects,
(b) all
Taxes for which any Partnership Company is liable have been timely paid
in full,
(c) there are no Liens (other than Permitted Liens) on any of the assets
of the
Partnership Companies that arose in connection with any failure (or alleged
failure) to pay any Tax, (d) there is no claim pending, and no assessment,
deficiency or adjustment asserted, proposed or threatened by any applicable
Tax
Authority in connection with any Tax for which any Partnership Company
is
liable, (e) none of such Tax Returns is now under audit or examination
by any
Tax Authority, (f) there are no agreements or waivers with respect to any
Partnership Company providing for an extension of time with respect to
the
filing of any Tax Returns or the assessment or collection of any Tax, (g)
no
written claim has been made by any Tax Authority in a jurisdiction where
any
Partnership Company does not file a Tax Return that it is or may be subject
to
taxation in that jurisdiction, (h) none of the Partnership Companies is
a party
to any Tax allocation or sharing arrangement, (i) except for SRCG-West
Texas
Gathering Company, Inc. and West Texas Gathering Company, none of the
Partnership Companies has any liabilities for Taxes under Treasury Regulations
section 1.1502-6 (or any similar provision of state or local law), as a
transferee or successor, by contract or otherwise, (j) neither Seller is
a
“foreign person” (as that term is defined in Section 1445 of the Code), (k) none
of the Partnership Companies has entered into any agreement or arrangement
with
any Tax Authority that requires any of the Partnership Companies to take
any
action or refrain from taking any action, (l) none of the Partnership Companies
will be required to include in a taxable period ending after the Closing
Date
any amount of taxable income attributable to cash or other property that
was
received, but was not, or will not be, included in income in a taxable
period
ending before the Closing Date, as a result of an adjustment under Section
481
of the Code or any comparable provision of state or local Tax law, (m)
none of
the Partnership Companies (and no entity to which any of the Partnership
Companies is a successor by statutory merger or consolidation) has joined,
or is
required to join in the filing of any consolidated, combined or unitary
income
Tax Returns, apart from the Federal consolidated group comprised of SRCG-West
Texas Gathering Company, Inc. and West Texas Gathering Company, and (n)
none of
the Partnership Companies is a “foreign person” within the meaning of Section
1445 of the Code.
(b) Except
for SRCG-West Texas Gathering Company, Inc. and West Texas Gathering Company
(each of which is classified as a corporation for Federal income tax purposes
under Treasury Regulations section 301.7701-2), none of the Partnership
Companies have elected or will elect under Treasury Regulations section
301.7701-3 to be treated as a
27
corporation
and each of the Partnership Companies has been treated as either a partnership
or a disregarded entity pursuant to Treasury Regulations sections 301.7701.2
and
301.7701-3 since their formation.
(c) Schedule
4.10(c)
sets
forth of list of all jurisdictions in which any Partnership Company Tax
Return
has been filed since October 15, 2004.
Section
4.11 Environmental
Matters.
(a) Except
as
set forth on Schedule
4.11(a)
or as
would not, individually or in the aggregate, reasonably be expected to
have a
Material Adverse Effect on the Partnership Companies:
(i) the
Partnership Companies, the Assets, and their operations are and, within
the term
of all applicable statute of limitations, have been in compliance with
all
Environmental Laws, which compliance includes the possession and maintenance
of,
and compliance with, all Permits required under all applicable Environmental
Laws and, since January 1, 2000, no Partnership Company has received any
notice
from any Person that it is not in such compliance and that has not been
resolved
or withdrawn;
(ii) none
of
the Partnership Companies or their Assets is the subject of any unsatisfied
order or judgment or arbitration award from any Governmental Authority
under any
Environmental Laws requiring corrective action or the payment of a fine
or
penalty;
(iii) none
of
the Partnership Companies or their Assets is the subject of any action,
lawsuit,
inquiry, or proceeding pending or, to the Knowledge of the Sellers, threatened,
alleging noncompliance with, or potential liability under, any Environmental
Law
or with respect to any exposure to, or release or disposal of, Hazardous
Materials or naturally occurring radioactive materials;
(iv) there
has
been no release or disposal of any Hazardous Materials arising out of the
Partnership Companies’ operations on, under, or from the Assets or, to Sellers’
Knowledge, at any offsite properties where such Hazardous Materials have
been
transported or disposed that required investigation, remediation, or other
corrective action under Environmental Laws;
(v) to
Sellers’ Knowledge, there has been no exposure to, or release or disposal of,
naturally occurring radioactive materials arising out of the Partnership
Companies’ operations on, under, or from the Assets, or at any offsite
properties where such naturally occurring radioactive materials have been
transported or disposed, that required investigations, remediation or other
corrective action under Environmental Laws; and
(vi) To
Sellers’ Knowledge, Schedule
4.11(a)
lists
all environmental matters of the Partnership Companies requiring corrective
action to achieve compliance with Environmental Laws.
28
(b) To
Sellers’ Knowledge, the only regulated underground storage tanks owned or
operated by the Partnership Companies are listed on Schedule
4.11(b).
(c) Sellers
have made available through the electronic data room or otherwise provided
to
Buyers copies of all material environmental site assessment reports that
are in
Sellers’ or the Partnership Companies’ possession with respect to the
Assets.
Section
4.12 Legal
Compliance. Except
with respect to (a) matters set forth in Schedule
4.12,
(b)
matters that could not reasonably be expected to have a Material Adverse
Effect
on the Partnership Companies or the operation of the business of the Partnership
Companies, (c) compliance with Laws concerning employee benefits (which
is
addressed in Section 4.9 hereof), (d) compliance with Laws concerning Taxes
(which is addressed in Section 4.10 hereof) and (e) compliance with
Environmental Laws (which is addressed in Section 4.11 hereof), since January
1,
2004, the Partnership Companies have complied and are in compliance with
all
applicable Laws. Since January 1, 2004, the Partnership Companies have
not
received any communication from any Governmental Authority or any other
Person
that alleges that the business of the Partnership Companies may not be
in
compliance in any material respect, or may be subject to material liability,
under any Law; and to the Sellers’ Knowledge, there are no investigations or
reviews pending or threatened by any Governmental Authority relating to
any
alleged violation arising out of the operation of the business of the
Partnership Companies.
Section
4.13 Permits.
Except
as
set forth on Schedule
4.13,
each of
the Partnership Companies possesses all Permits that in the aggregate are
material to the ownership of its assets and the operation of its business
as
currently conducted. All such Permits are in full force and effect, the
Partnership Companies have not received any notifications concerning violations
of any such Permits, and there are no lawsuits or other proceedings pending
or,
to the Knowledge of Sellers, threatened before any Governmental Authority,
arbitrator or mediator that seek the revocation, cancellation, suspension
or
adverse modification thereof.
Section
4.14 Insurance.
Schedule 4.14
contains
(i) a summary description of all policies of property, fire, casualty,
commercial general liability/product liability, workers’ compensation, pollution
and remediation, bond and surety arrangements and other insurance held
by or for
the benefit of the Partnership Companies as of the date of this Agreement
(collectively, the “Policies”),
(ii) a
description of each material claim under any insurance policy made by or
on
behalf of any Partnership Company during the past three years, which claim
was
denied by the insurer and (iii) a description of each application for insurance
coverage made by or on behalf of any Partnership Company during the last
three
years that was rejected by the proposed insurer. Until
the
Closing, each Policy is in full force and effect and all premiums due and
payable on such policies have been paid. No notice of cancellation of,
or
indication of an intention not to renew, any such insurance policy has
been
received by any Partnership Company.
29
Section
4.15 Employees;
Labor Relations.
(a) All
Employees of the Partnership Companies are listed on one of Schedule
6.16(a),
Schedule
6.16(b), or
Schedule
6.19.
(b) No
officer of any Partnership Company is currently on short-term or long-term
disability. To the Knowledge of Sellers, none of the officers of the Partnership
Companies is obligated under any agreement restricting competition or requiring
confidentiality or is subject to any judgment, decree or order of any court
or
administrative agency that would materially interfere with the use of such
officer’s efforts to promote the interests of the Partnership Companies or that
would materially conflict with the Partnership Companies’ business as presently
conducted.
(c) As
of the
date of this Agreement, none of the Partnership Companies (i) is a party
to any
collective bargaining agreement or other labor union contract applicable
to
persons employed by any Partnership Company, and, to the Knowledge of Sellers,
there are no organizational campaigns, petitions or other unionization
activities focusing on persons employed by any Partnership Company which
seeks
recognition of a collective bargaining unit or (ii) is subject (or has
been
subject during the past three years) to any strikes, material slowdowns,
lock
outs, or other material work stoppages pending or, to the Knowledge of
Sellers,
threatened in writing between a Partnership Company and any group of its
respective employees. There are no pending or, to the Knowledge of Sellers,
threatened unfair labor practice charges, grievances or complaints filed
with
any Governmental Authority based on the employment or termination by any
Partnership Company of any individual or other pending or, to the Knowledge
of
Sellers, threatened litigation between a Partnership Company and a current
or
former employee.
(d) The
compensation and benefits (including vacation benefits) paid or provided
with
respect to all Employees of the Partnership Companies have been reflected
in the
Financial Statements for the periods covered thereby. All such compensation
and
benefits that have accrued and were due and payable prior to the Closing
Date
have been (or, by the Closing Date, will have been) timely paid in accordance
with the compensation and benefit policies of the Partnership Companies
and
applicable Law.
Section
4.16 Properties.
(a) Subject
to the second sentence of this Section 4.16 and except (i) as set forth
on
Schedule
4.16(a)
and (ii)
as would not reasonably be expected to, individually or in the aggregate,
have a
Material Adverse Effect on the Partnership Companies, SRES, REM, the SRES
Subsidiaries and Grey Ranch, individually or together, have (1) good title
to
all of the properties reflected in the Financial Statements (other than
any
properties reflected in the Financial Statements that have been sold or
otherwise disposed of since the date of the Financial Statements, all of
which
sales or dispositions were made in the ordinary course of business), and
(2)
good title to the Facilities, the Fee Interests and the Personal Property
and
all other assets owned by them or held by them under valid leaseholds (the
“Assets”),
in
each case
30
free
and
clear of all Liens other than Permitted Liens. Notwithstanding anything
to the
contrary contained in the foregoing sentence, as to the Easements, SRES,
REM,
the SRES Subsidiaries and Grey Ranch, individually or together, have such
title
to or interest in the Easements as is sufficient to enable them to conduct
their
business as currently conducted without material interference and free
and clear
of Liens other than Permitted Liens. No Partnership Company has received
any
written notice of any adverse claim to the title to any material Assets
owned by
it or with respect to any lease under which any material Assets are held
by it.
To Seller’s Knowledge, no Partnership Company has received written notice of any
claims or disputes which challenge the rights of any Partnership Company
to use,
or allege a breach or default of agreements granting to any Partnership
Company
rights to pipeline easements, right-of-way, licenses and land use permits,
other
than any such claims or disputes, breaches or defaults that, individually
or in
the aggregate, would not have a Material Adverse Effect. There has been
no
actual or, to Sellers’ Knowledge, threatened taking (whether permanent,
temporary, whole or partial) of any part of the Assets by reason of condemnation
or, to Sellers’ Knowledge, the threat of condemnation.
(b) The
Assets constitute all of the assets, rights and properties, tangible or
intangible, real or personal, which are used in connection with the operation
of
the business of the Partnership Companies consistent with past practice
and as
currently operated. The Personal Property owned or leased by the Partnership
Companies is sufficient to enable them to conduct their business as currently
conducted. Except as specified on Schedule
4.16(b),
there
are no options, preferential or similar rights to purchase any material
Asset or
material portion of the Assets.
Section
4.17 Governmental Regulation.
Except
as specified on Schedule
4.17,
the
operations of neither Seller nor any Partnership Company currently subjects
them
to regulation under the Public Utility Holding Company Act of 1935, the
Federal
Power Act, the Interstate Commerce Act, the Natural Gas Act, the Investment
Company Act of 1940 or any state public utilities laws.
Section
4.18. Imbalances; Certain Impairments.
To
Seller’s Knowledge, Schedule
4.18
sets
forth all material natural gas imbalances affecting the Assets to which
the
Sellers or any Partnership Company are subject as of September 30, 2005.
All
natural gas imbalances affecting the Assets existing as of September 30,
2005
are properly recorded on the balance sheet contained in the Interim Financial
Statements in accordance with GAAP.
Section
4.19. Certain Business Relationships with Partnership
Companies.
Except
as set forth in Schedule
4.19,
(i)
neither Sellers nor any of their respective officers, directors, stockholders,
partners or Affiliates (excluding the Partnership Companies) has been involved
in any material business arrangement or relationship with the Partnership
Companies within the past twenty-four (24) months, (ii) neither Sellers
nor any
of their respective officers, directors, stockholders, partners or Affiliates
(excluding the Partnership Companies) owns any material asset, tangible
or
intangible, that is used in any Partnership Company’s business and (iii) neither
Sellers nor any of their respective officers, directors, stockholders,
partners
or Affiliates (excluding the Partnership Companies) is a party to any material
contract or
31
commitment
(whether written or oral) with any Partnership Company or relating to the
business of the Partnership Companies.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES RELATING TO BUYERS
Buyers,
jointly and severally, represent and warrant to Sellers as follows:
Section
5.1 Organization
of Buyers. Each
Buyer is duly organized or incorporated, validly existing and in good standing
under the Laws of its respective jurisdiction of organization or
incorporation.
Section
5.2 Authorization;
Enforceability. Each
Buyer has all requisite limited liability company power and authority to
execute
and deliver this Agreement and to perform all obligations to be performed
by it
hereunder. The execution and delivery of this Agreement and the consummation
of
the transactions contemplated hereby have been duly and validly authorized
and
approved by each Buyer, and no other limited liability company proceeding
on the
part of each such Buyer is necessary to authorize this Agreement. This
Agreement
has been duly and validly executed and delivered by each Buyer, and this
Agreement constitutes a valid and binding obligation of each such Buyer,
enforceable against each such Buyer in accordance with its terms, subject
to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar Laws affecting creditors’ rights generally and subject,
as to enforceability, to general principles of equity.
Section
5.3 No
Conflict. The
execution and delivery of this Agreement by each Buyer and the consummation
of
the transactions contemplated hereby by each such Buyer (assuming all filings,
consents, approvals authorizations and notices set forth on Schedule
5.3
(collectively, the “Buyer
Approvals”) have
been
made, given or obtained) does not and shall not:
(a) violate
any Law applicable to either Buyer or any of its subsidiaries;
(b) require
any filing with, consent, approval or authorization of, or, notice to,
any
Governmental Authority or any other Person;
(c) violate
any Organizational Document of either Buyer or any of its subsidiaries;
or
(d) (i)
breach or conflict with or constitute a default under any Contract to which
either Buyer or any of its subsidiaries is a party or by which either Buyer
or
any of its subsidiaries may be bound, (ii) result in the acceleration,
termination or modification of any such Contract, (iii) result in the creation
of any Lien upon any of the properties or assets of either Buyer or (iv)
constitute an event which, after notice or
32
lapse
of
time or both, would result in any such breach, acceleration, termination,
or
modification or creation of a Lien or would create in any party the right
to
accelerate, terminate, modify or cancel any Contract, of either Buyer or
any of
its subsidiaries;
except,
in the case of clause (b) and (d) above, as would not reasonably be expected,
either individually or in the aggregate, to have a Material Adverse Effect
on
the ability of Buyers to enter into and timely perform its obligations
under
this Agreement and the other agreements contemplated hereby to be executed
by
Buyers.
Section
5.4 Litigation.
As
of the
date of this Agreement (a) there are no lawsuits, actions, investigations
or
proceedings by or before any Governmental Authority, arbitrator or mediator
pending or, to the Knowledge of Buyers, threatened against either of the
Buyers
that would reasonably be expected to have a material adverse effect on
the
ability of either Buyer to perform its obligations under this Agreement
and (b)
there are no orders or unsatisfied judgments from any Governmental Authority,
arbitrator or mediator binding upon either Buyer that would reasonably
be
expected to have a material adverse effect on the ability of either Buyer
to
perform its obligations under this Agreement.
Section
5.5 Brokers’
Fees. No
broker, finder, investment banker or other Person is entitled to any brokerage
fee, finders’ fee or other commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by Buyers or
any of
their Affiliates for which either Seller could become liable or
obligated.
Section
5.6 Financial
Ability. At
the
Closing, Buyers will have sufficient cash resources to enable them to make
payment in immediately available funds of the Purchase Price when
due.
Section
5.7 Investment
Representation. Buyers
are purchasing the Purchased Interests for their own account with the present
intention of holding the Purchased Interests for investment purposes and
not
with a view to or for sale in connection with any public distribution of
the
Purchased Interests in violation of any federal or state securities Laws.
Buyers
have such knowledge and experience in financial and business matters that
they
are capable of evaluating the merits and risks of an investment in the
Purchased
Interests. Buyers acknowledge that the Purchased Interests have not been
registered under applicable federal and state securities Laws and that
the
Purchased Interests may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of unless such transfer, sale, assignment,
pledge, hypothecation or other disposition is registered under applicable
federal and state securities Laws or pursuant to an exemption from registration
under any federal or state securities Laws.
ARTICLE
VI
COVENANTS
33
Section
6.1 Conduct
of Business. From
the
date of this Agreement through the Closing, except as set forth on Schedule
6.1,
as
required by this Agreement, or as consented to by Buyers in writing (which
consent shall not be unreasonably withheld, conditioned or delayed), (a)
Sellers
shall cause each of the Partnership Companies to, except to the extent
required
or expressly permitted by Section 6.1(b), operate in the ordinary course
of
business and use Reasonable Efforts to preserve intact its business and
its
relationship with customers, suppliers and others having business relationships
with such Partnership Company and (b) Sellers shall not permit any Partnership
Company to:
(i) amend
its
Organizational Documents;
(ii) liquidate,
dissolve, recapitalize or otherwise wind up its business;
(iii) enter
into any employment agreements or enter into or grant any change in control
agreements or arrangements or, except as required by Law or in the ordinary
course of business, (A) grant or increase any bonus, salary, severance,
retention, termination or other compensation or benefits or other enhancement
to
the terms or conditions of employment to any of its employees or other
individuals who provide services to such Partnership Company (other than
bonuses
granted at or prior to the Closing in connection with the transactions
contemplated hereby and paid prior to the Closing), (B) accelerate vesting
or
waive any performance criteria under any Benefit Plan, (C) make any change
in
its key management structure or (D) adopt, enter into or amend in any material
respect any Benefit Plan or any contract, agreement, commitment, arrangement
or
practice relating to any compensation or benefit for its Employees or other
individuals who provide services to such Partnership Company;
(iv) change
its accounting methods, policies or practices;
(v) make,
amend or revoke any election with respect to Taxes;
(vi) sell,
assign, transfer, lease or otherwise dispose of any assets in excess of
$250,000
individually or $1,000,000 in the aggregate, except for fair consideration
in
the ordinary course of business or pursuant to the terms of a Material
Contract;
(vii) create
any Liens on any of its assets except Permitted Liens;
(viii) other
than compliance filings, or routine, tariff, comments, interventions or
response
filing made in the ordinary course of business, make any substantive filings
or
submit any documents or information to FERC or any other Governmental
Authority;
(ix) cancel,
compromise, waive, release or settle any right, claim or lawsuit other
than
immaterial rights and claims in the ordinary course of
business;
34
(x) except
as
required by Law or in accordance with the Capital Expenditure Budget, make
capital expenditures in excess of $1,000,000 in the aggregate, other than
reasonable capital expenditures in connection with any emergency or force
majeure events affecting such Partnership Company or as required by Contracts
scheduled elsewhere in this Agreement;
(xi) merge
or
consolidate with, or purchase substantially all of the assets or business
of, or
equity interests in, or make an investment in any Person or make any loan
to any
Person (other than in a Partnership Company or extensions of credit to
customers
in the ordinary course of business);
(xii) except
as
contemplated by this Agreement, enter into any transactions with Sellers
or
their respective Affiliates outside the ordinary course of
business;
(xiii) issue
or
sell any equity interests, notes, bonds or other securities of such Partnership
Company or incur, assume or guarantee any Indebtedness for borrowed money
(except for intercompany loans from or to Sellers or their respective Affiliates
in the ordinary course of business which will be settled or cancelled prior
to
Closing), or any option, warrant or right to acquire same;
(xiv) make
any
distribution with respect to its equity interests other than solely in
cash or
redeem, purchase, or otherwise acquire any of its equity interests; provided,
however, that prior to the Closing, the Partnership Companies shall distribute
all of their respective equity interests in the Excluded Subsidiary to
the
Sellers;
(xv) amend
in
any material respect, terminate, cancel or renew any Material Contract
or enter
into any contract that would be a Material Contract if in effect on the
date of
this Agreement, provided that, for the avoidance of doubt, to the extent
any
such contract is entered into after the date of this Agreement in accordance
with this Agreement, such contract shall be deemed to be a Material Contract
for
purposes of this Agreement; provided, further, that, subject to the giving
of
prior notice to Buyers and no objection being made by Buyers thereto, this
clause (xv) shall not prohibit amendments, terminations, cancellations
or
renewals of, or the entry into, any contract that is described in clauses
(ii),
(iii), (ix) or (xiii) of the definition of Material Contracts in the ordinary
course of business;
(xvi) modify
or
waive the Partnership Companies’ rights under existing confidentiality or
non-compete agreements under which the Partnership Companies are the
beneficiaries;
(xvii) fail
to
maintain in full force and effect insurance policies covering the Partnership
Companies and their respective properties, assets and businesses in a form
and
amount consistent with good industry practice and to promptly and diligently
prosecute claims under such policies;
35
(xviii) enter
into any commodity price hedge or, except in the ordinary course of business,
any open fixed price positions;
(xix) take
any
action that would reasonably be expected to result in any representation
and
warranty of the Sellers set forth in this Agreement becoming untrue in
any
material respect;
(xx) fail
to
take any action that would reasonably be expected to, directly or indirectly,
prevent or materially impair or delay the consummation of the transactions
contemplated hereby; or
(xxi) agree,
whether in writing or otherwise, to do any of the foregoing.
Section
6.2 Access.
(a) From
the
date hereof through the Closing, Sellers shall afford to Buyers and their
authorized Representatives full access, during normal business hours and
in such
manner as not to unreasonably interfere with normal operation of the business,
to the properties, property records, title insurance, title opinions and
reports, books, contracts, leases, records and appropriate officers and
employees of the Partnership Companies (and of Sellers to the extent related
to
the business of the Partnership Companies), and shall furnish such authorized
Representatives with all financial and operating data, title and property
information and records and other information concerning the affairs of
any
Partnership Company (and of Sellers to the extent related to the business
of the
Partnership Companies) as Buyers and such Representatives may reasonably
request
(including, without limitation, planning and preliminary arrangements (including
data mapping and testing) for the transfer of data from Sellers to Buyers
necessary for post-Closing provision of payroll, benefits and data services);
provided,
however, that
Buyers shall not be entitled to conduct any environmental testing or sampling
on
or at any properties or Facilities of the Partnership Companies without
Sellers’
prior written consent, which consent will not be unreasonably withheld
or
delayed. Sellers shall have the right to have a Representative present
at all
times during any such inspections, interviews, and examinations.
(b) Buyers
shall hold in confidence all information referred to in subsection (a)
above on
the terms and subject to the conditions contained in the Confidentiality
Agreement. Notwithstanding the foregoing, Buyers shall have no right of
access
to, and Sellers shall have no obligation to provide to Buyers, information
relating to (i) bids received from others in connection with the transactions
contemplated by this Agreement and information and analysis (including
financial
analysis) relating to such bids, (ii) any information the disclosure of
which
Sellers have reasonably concluded after consultation with counsel would
jeopardize any privilege available to a Partnership Company, Sellers or
any of
their respective Affiliates relating to such information, (iii) any information
the disclosure of which would cause a Partnership Company, Sellers or any
of
their respective Affiliates to breach a confidentiality obligation or (iv)
any
information the disclosure of which would result in a violation of Law.
With
respect to clause (iii) above, Sellers represent and warrant that the
information not being
36
disclosed
to Buyers could not reasonably be expected to have a Material Adverse Effect
on
the Partnership Companies or the operation of the business of the Partnership
Companies.
(c) From
and
after the Closing Date until the fifth anniversary of the Closing Date,
Sellers
will, and will cause each of their subsidiaries and Representatives to,
hold in
confidence, unless compelled to disclose by judicial or administrative
process
or by other requirements of applicable Law, all confidential information
concerning the Partnership Companies or the business and assets of the
Partnership Companies, except to the extent that such information can be
shown
to have been (i) in the public domain through no fault of Sellers or any
of
their Representatives, (ii) disclosed by Buyers, their Affiliates or their
respective Representatives to a third party without a duty of confidentiality
on
such third party or (iii) lawfully acquired by Sellers or their Representatives
after the Closing Date on a non-confidential basis from sources other than
Buyers or the Partnership Companies, but only to the extent that any such
source
is not bound by a confidentiality agreement or other duty to keep such
information confidential.
Section
6.3 Third
Party Approvals and Cooperation.
(a) Buyers
and Sellers shall (and shall each cause their respective Affiliates to)
use
Reasonable Efforts to obtain all material consents and approvals of third
parties that any of Buyers, Sellers or their respective Affiliates are
required
to obtain in order to consummate the transactions contemplated
hereby.
(b) Each
of
the Parties will cooperate with each other and use Reasonable Efforts to
take
all actions 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
Article VIII). Sellers agree to provide, and shall cause the Partnership
Companies and each of its officers and employees to provide, all cooperation
reasonably requested by Buyers, at Buyers’ sole cost and expense, and necessary
in connection with (x) the arrangement of any equity or debt financing
by Buyers
(“Financing”),
including (i) preparation of financial statements for use in any offering
document prepared by Buyers or their Affiliates and (ii) delivery by the
Partnership Companies of any pledge and security documents, lien releases,
other
definitive financing documents, including any indemnity agreements or other
requested certificates or documents relating to the Financing, and (y)
the
filing of Form 8-K by Buyers or any of their Affiliates under the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”)
as a
result of the consummation of the transactions contemplated hereby; provided,
however,
that no
such agreements or documents shall impose any monetary obligation or liability
on the Partnership Companies prior to the Closing Date or on such officers,
employees or Sellers at any time. Sellers and the Partnership Companies
shall
take all actions reasonably requested by Buyers, at Buyers’ sole cost, to cause
KPMG LLP to provide any unqualified opinions, consents or customary comfort
letters with respect to the financial statements needed in connection with
the
Financing and the filing of such Form 8-K. The obligations set forth in
this
Section 6.3(b) shall survive until the third anniversary of the Closing
Date.
37
Section
6.4 Regulatory
Filings. From
the
date of this Agreement until the Closing:
(a) Each
of
Buyers and Sellers shall, and shall cause their respective Affiliates to
(i)
make or cause to be made the filings required of such party or any of its
Affiliates under any Laws with respect to the transactions contemplated
by this
Agreement and to pay any fees due of it in connection with such filings,
as
promptly as is reasonably practicable, and in any event within 15 Business
Days
after the date hereof, (ii) cooperate with the other Party and furnish
all
information in such Party’s possession that is necessary in connection with such
other Party’s filings, (iii) use Reasonable Efforts to cause the expiration of
the notice or waiting periods under the HSR Act and any other Laws with
respect
to the transactions contemplated by this Agreement as promptly as is reasonably
practicable, (iv) promptly inform the other Party of any communication
from or
to, and any proposed understanding or agreement with, any Governmental
Authority
in respect of such filings, (v) consult and cooperate with the other Party
in
connection with any analyses, appearances, presentations, memoranda, briefs,
arguments and opinions made or submitted by or on behalf of any Party in
connection with all meetings, actions and proceedings with Governmental
Authorities relating to such filings, (vi) comply, as promptly as is reasonably
practicable, with any requests received by such Party or any of its Affiliates
under the HSR Act and any other Laws for additional information, documents
or
other materials, and (vii) use Reasonable Efforts to resolve any objections
as
may be asserted by any Governmental Authority with respect to the transactions
contemplated by this Agreement. If a Party intends to participate in any
meeting
with any Governmental Authority with respect to such filings, it shall
give the
other Party reasonable prior notice of, and an opportunity to participate
in,
such meeting.
(b) In
connection with any such filings, Buyers shall cooperate in good faith
with
Governmental Authorities and undertake promptly any and all action required
to
complete lawfully the transactions contemplated by this Agreement.
Notwithstanding the foregoing, in no event shall Buyers be required to
take any
action, or agree to take any action, that in the judgment of Buyers would
have a
material adverse effect on Buyers or on the Partnership Companies or any
of
their respective Affiliates.
Section
6.5 No-Hire/Non-Solicitation.
(a) For
a
period of 12 months following the Closing Date, neither Buyers nor any
Affiliate
of Buyers shall, directly or indirectly, hire or solicit (with the exception
of
any general solicitation of employment through any general advertising
medium in
the ordinary course of business) for employment as an employee or consultant,
any employee of Sellers or their Affiliates other than a Transferred Employee,
unless such employee’s employment is or has been terminated by Sellers and their
Affiliates.
38
(b) For
a
period of 12 months following the Closing Date, neither Sellers nor any
of their
Affiliates shall, directly or indirectly, hire or solicit (with the exception
of
any general solicitation of employment through any general advertising
medium in
the ordinary course of business) for employment as an employee or consultant,
any individual who is identified as a Transferred Employee on the date
hereof or
who was a Transferred Employee as of the Closing Date, unless such employee’s
employment is or has been terminated by Buyers and their Affiliates (including,
after the Closing, the Partnership Companies).
Section
6.6 Partnership
Guarantees.
(a) Buyers
shall use Reasonable Efforts to obtain from the respective beneficiary,
in form
and substance reasonably satisfactory to Sellers, on or before the Closing,
valid and binding written releases of Sellers and their respective Affiliates
(other than the Partnership Companies), as applicable, from any liability
or
obligation, whether arising before, on or after the Closing Date, under
any
Partnership Guarantees in effect as of the Closing. If any Partnership
Guarantee
has not been released as of the Closing Date, then Buyers shall continue
to use
their Reasonable Efforts after the Closing to cause each such unreleased
Partnership Guarantee to be released promptly. The Buyers shall be deemed
to
have met their obligations described in the two immediately preceding sentences
if they shall have offered to provide a substitute guarantee, a substitute
letter of credit or a substitute surety or performance bond, as applicable,
with
terms and provisions that are not less favorable to such beneficiary in
any
material respect than the guarantee, letter of credit or surety or performance
bond being replaced. In no event shall the Buyers be obligated to offer
to
provide guarantees, letters of credit or surety or performance bonds with
terms
and provisions more favorable to the beneficiary than the guarantee, letter
of
credit or surety or performance bond being replaced.
(b) Notwithstanding
anything to the contrary herein, the Parties acknowledge and agree that
at any
time on or after 90 days following the Closing Date, the expiration of
the
Transition Services Agreement, any of SRCG, Genpar and their respective
Affiliates may, in its sole discretion, take any action to terminate, obtain
release of or otherwise limit its liability under any and all outstanding
Partnership Guarantees.
(c) Buyers
shall reimburse Sellers for any and all Losses incurred on account of claims
and
payments made under or for the Partnership Guarantees on or after the Closing
Date and the obligations of Buyers hereunder to reimburse Sellers for such
Losses shall not be subject to the limitations or conditions contained
in
Article IX hereof. Notwithstanding the foregoing, Buyers shall not be required
to indemnify the Sellers for any Losses attributable to an event or condition,
the occurrence or existence of which results in a valid claim by Buyers
against
the Sellers for indemnity pursuant to Article IX hereof.
Section
6.7 Indebtedness;
Termination of Related Party Transactions.
39
(a) Immediately
prior to the Closing, (i) Sellers shall cause the Partnership Companies
to
distribute to Sellers any Indebtedness due to the Partnership Companies
from
Sellers or their respective Affiliates (other than the Partnership Companies)
and (ii) Sellers shall cancel (or, as applicable, cause their respective
Affiliates to cancel) any Indebtedness due from the Partnership Companies
to
Sellers or their respective Affiliates (other than the Partnership Companies),
in each case including interest and other amounts accrued thereon or due
in
respect thereof.
(b) Prior
to
or at the Closing, Sellers will pay in full the Bank Credit
Facility.
(c) On
or
prior to the Closing Date, the Partnership Companies shall assign the Contracts
listed on Schedule
6.7(c) to
one of
the Sellers.
(d) On
or
prior to the Closing Date, the commodity positions set forth on Schedule
6.7(d)
shall
have expired or been terminated, in each case at Sellers’ expense.
Section
6.8 Update
Information. Prior
to
the Closing, each of Sellers and Buyers shall give the other Party prompt
written notice of (i) any development that is reasonably likely to result
in a failure of a condition to the Closing or (ii) the breach of any of
its
respective representations and warranties or covenants. No such disclosure
by
any such party shall be deemed to cure any such breach.
40
Section
6.9 Change
of Name; Seller Marks.
(a) As
soon
as practicable following the Closing Date, but in no event later than 30
days
following the Closing Date, Buyers shall cause each of the Partnership
Companies, as applicable, to change its name to a name that does not include
“Sid,”“Xxx Xxxxxxxxxx,”“SRCG,”“Xxxxxxxxxx” or “Keystone” and to make any
necessary legal filings with the appropriate Governmental Authorities to
effectuate such changes. Buyers shall hold harmless and indemnify Sellers
against all costs, expenses, and damages resulting from or arising in connection
with Buyers’ or the Partnership Companies use of the “Sid,”“Xxx
Xxxxxxxxxx,”“SRCG,”“Xxxxxxxxxx” or “Keystone” names as provided in this Section
6.9.
(b) Buyers
shall obtain no right, title, interest, license or any other right whatsoever
to
use the words “Sid,”“Xxx Xxxxxxxxxx,”“SRCG,”“Xxxxxxxxxx,”“Keystone” or any
trademarks containing or comprising the foregoing, or any trademark confusingly
similar thereto or dilutive thereof (collectively, the “Seller
Marks”). From
and
after the Closing, Buyers agree that they shall (i) cause each Partnership
Company to cease using the Seller Marks in any manner, directly or indirectly,
except for such limited uses as cannot be promptly terminated (e.g.,
signage, e-mail addresses and the like), and to cease such limited usage
of the
Seller Marks as promptly as possible after the Closing and in any event
within
12 months following the Closing Date, (ii) remove, strike over or otherwise
obliterate all Seller Marks from all assets and all other materials owned,
possessed or used by any of the Partnership Companies to the extent reasonably
practicable and (iii) use Reasonable Efforts to cause any third parties
using or
licensing Seller Marks on behalf of or with the consent of any Partnership
Company, to remove, strike over or otherwise obliterate all Seller Marks
from
all materials owned, possessed or used by such third parties. The Parties
agree,
because damages would be an inadequate remedy, that a Party seeking to
enforce
this Section 6.9 shall be entitled to seek specific performance and injunctive
relief as remedies for any breach thereof in addition to other remedies
available at law or in equity.
(c) Subject
to the last sentence of this Section 6.9(c), each of the Sellers shall
not, and
shall cause each of their Affiliates not to, directly or indirectly, during
the
period commencing on the Closing Date and ending on the second anniversary
of
the Closing Date engage in, or own, manage, operate, control or participate
in
the management, operation or control of, or have any controlling interest,
financial or otherwise, in (collectively, “Engage
In”)
the
conduct of any business that is a Competitive Business. For purposes of
this
Section 6.9(c), the term “Competitive
Business”
shall
mean the business engaged in by the Partnership Companies as it exists
immediately after the Closing, including without limitation the business
of
gathering, treating, processing, storing, transporting and selling natural
gas
and transporting, fractionating and selling natural gas liquids. The
restrictions contained in this Section 6.9(c) shall be limited to the Texas
and
New Mexico counties in which the Partnership Companies’ physical properties and
assets are located as of the Closing Date together with any counties that
are
adjacent thereto (the “Non-Compete
Area”).
For
purposes hereof, “control” of a Person means the ownership of more than 50% of
the equity of such Person or the power to exercise more than 50% of the
general
voting rights of such Person. Notwithstanding anything to the
41
contrary
contained in this Section 6.9(c), nothing in this Section 6.9(c) shall
be deemed
to prohibit the continued business and operations of Xxx Xxxxxxxxxx Carbon,
Ltd., Xxxxxxxxxx Fuels, Inc. and Bass Enterprises Production Co. as currently
conducted.
Section
6.10 Books
and Records. From
and
after the Closing:
(a) Sellers
and their respective Affiliates may retain a copy of all of the data room
materials and other books and records (other than Tax records which are
addressed in Article VII) relating to the business or operations of the
Partnership Companies on or before the Closing Date. Notwithstanding the
foregoing, and in addition to the provisions of Article VII, Sellers and
their
respective Affiliates shall be entitled to retain originals of (i) any
Tax
Return covering a taxable period ending on or prior to the Closing Date
and (ii)
any Benefit Plan documentation. Sellers and their respective Affiliates
shall
provide Buyers with reasonable access, during normal business hours and
upon
reasonable prior notice, to any original books and records that remain
in the
possession of Sellers and their respective Affiliates which relate primarily
to
the business or operations of the Partnership Companies on or before the
Closing
Date and are reasonably required by Buyers in connection with the business
and
operations of the Partnership Companies, copies of which books and records
are
not in the possession of Buyers or their Affiliates. Sellers and their
respective Affiliates shall cooperate with and provide reasonable assistance
to
Buyers in connection with their accessing of such books and
records.
(b) Buyers
shall preserve and keep a copy of all data room materials and all books
and
records (other than Tax records which are addressed in Article VII) relating
to
the business or operations of the Partnership Companies on or before the
Closing
Date in Buyers’ possession for a period of at least seven years after the
Closing Date.
Section
6.11 Permits.
The
Partnership Companies shall provide all notices and otherwise take all
actions
required to transfer or reissue any Permits, including those required under
Environmental Laws, as a result of or in furtherance of the transactions
contemplated by this Agreement. Buyers and Sellers shall use Reasonable
Efforts
to cooperate with the Partnership Companies to provide information necessary
to
apply for such Permits.
Section
6.12 Insurance.
(a) With
the
exception of the crime and pollution and remediation coverages, all Policies
listed in Schedule
4.14
are
written on an occurrence basis. Claims covered by the occurrence based
Policies,
occurring before the Closing Date, will be reported into these occurrence
forms.
Because the occurrence Policies are shared with entities not involved in
the
transactions contemplated by this Agreement, and therefore cannot be transferred
to Buyers, coverage for occurrences after the Closing shall be obtained
by
Buyers under separate policies. Claims arising under the crime and pollution
and
remediation Policies shall be governed by the applicable policy terms and
conditions.
42
(b) After
the
Closing, Buyers and the Partnership Companies shall be responsible for,
and
neither Sellers nor their Affiliates shall have any responsibility for,
the
payment of any deductible amounts attributable to the Policies specified
in
subsection (a) above and the predecessor policies arising from the operations
of
the Partnership Companies. Buyers acknowledge that certain of the Policies
require Sellers or their respective Affiliates to provide an indemnity
to the
insurance carrier for deductible amounts and to provide collateral to secure
such indemnity obligations. Buyers and Sellers will cooperate and use Reasonable
Efforts to cause Buyers to be substituted for Sellers or any of their respective
Affiliates (as applicable) with respect to such indemnities and to have
such
collateral replaced with a letter of credit or other adequate collateral
from
Buyers. Sellers shall indemnify and hold harmless Buyers for any and all
charges
made against such collateral or indemnification payments required to be
paid by
Buyers in connection with claims arising or alleged to arise from the operations
of any entity other than the Partnership Companies. In the event that such
substitution of indemnitor and collateral cannot be accomplished prior
to the
Closing, Buyers shall enter into an indemnification agreement in form mutually
acceptable to Buyers and Sellers wherein Buyers agree to indemnify and
hold
harmless Sellers or any of their respective Affiliates (as applicable)
for any
and all of the costs of maintaining such collateral and for any charges
made
against such collateral or indemnification payments in connection with
claims
arising or alleged to arise from the operations of the Partnership Companies
required to be paid by Sellers or any of their respective Affiliates (as
applicable) under or with respect to such Policies from and after the Closing
Date.
(c) If,
at
any time after the date hereof, Sellers or any of their respective Affiliates
are entitled to receive proceeds under the Policies or receive any notices
or
proceeds under the Policies which are related to the business of the Partnership
Companies, Sellers shall (and shall cause their Affiliates to) (i) use
Reasonable Efforts to collect any such Proceeds from the insurance carrier
and
accept and hold such proceeds and notices for the account and sole benefit
of
Buyers, (ii) have no equitable or beneficial interest in such proceeds
and
notices and (iii) deliver such proceeds and notices (free of any withholding,
setoff, recoupment, or deduction of any kind except as required by Law)
promptly
to Buyers in the same form received.
Section
6.13 Further
Assurances. Upon
the
request of any Party at any time after the Closing Date, the other Parties
will
promptly execute and deliver such further instruments of assignment, transfer,
conveyance, endorsement, direction or authorization and other documents
as the
requesting Party or its counsel may reasonably request to perfect title
of
Buyers and their successors and assigns to the Purchased Interests or otherwise
to effectuate the purposes of this Agreement.
Section
6.14 Exclusivity.
From
the
date of this Agreement through the Closing Date, Sellers will not (and
Sellers
will not permit the Partnership Companies or any of their officers, partners,
directors, managers or advisors to), directly or indirectly, solicit, initiate,
encourage, negotiate with, engage in discussions with, accept any proposal
or
offers from, or provide any information or access to any Person relating
to the
acquisition of all or substantially all of the equity securities or assets
of
the
43
Partnership
Companies by such Person (including any acquisition structured as a merger,
consolidation, or share exchange).
Section
6.15 Release
Related to Due Diligence Activities.
BUYERS
HEREBY RELEASE AND AGREE TO INDEMNIFY, DEFEND, SAVE AND HOLD HARMLESS THE
SELLER
INDEMNIFIED PARTIES (AS HEREAFTER DEFINED) FROM ANY CLAIM ARISING OUT OF
OR
RELATED TO DUE DILIGENCE ACTIVITIES BY OR ON BEHALF OF BUYERS, INCLUDING
DUE
DILIGENCE ACTIVITIES CONDUCTED PURSUANT TO SECTION 6.2 OF THIS AGREEMENT
;
PROVIDED, HOWEVER, THAT BUYERS SHALL NOT BE LIABLE TO THE SELLER INDEMNIFIED
PARTIES FOR ANY ACT OR OMISSION OF SELLERS, THE PARTNERSHIP COMPANIES OR
ANY OF
THEIR RESPECTIVE EMPLOYEES OR AGENTS IN CONNECTION WITH ANY DUE DILIGENCE
ACTIVITIES BY OR ON BEHALF OF BUYERS.
THE
OBLIGATIONS OF BUYERS UNDER THIS SECTION 6.15 SHALL NOT BE SUBJECT TO THE
CONDITIONS AND LIMITATIONS SET FORTH IN ARTICLE IX HEREOF.
Section
6.16 Identification
of Transferred Employees.
(a) Schedule
6.16(a)
identifies each Active Employee as of the date of this Agreement (other
than
Non-Transferred Employees, as such term is defined in Section 6.16(b)),
together
with the Employee’s title or job position, work location, service, compensation
and maximum amount of severance liability if such Employee were not to
be
retained for the Continuation Period in a manner complying with Section
6.17(c).
Schedule
6.16(a)
shall be
updated by Sellers on or before the Closing Date to identify individuals
who
become Active Employees after the date of this Agreement (and who are not
otherwise identified on an updated schedule), to remove those individuals
who
cease to be Active Employees prior to the Closing (without regard to the
reason
or circumstance for such termination of Active Employee status) and to
identify
any other changes in the information listed thereon. Except as provided
in
Section 6.16, in hiring new Employees and terminating Employees after the
date
of this Agreement and prior to the Closing, Sellers and the Partnership
Companies shall follow their usual and ordinary course of business in accordance
with past practice. For purposes of this Section 6.16, the term “Active
Employees”
shall
include all full-time and part-time Employees; Employees on workers’
compensation, military leave, maternity leave, leave under the Family and
Medical Leave Act of 1993, or short-term disability; and Employees on other
approved leaves of absence with a legal or contractual right to
reinstatement.
(b) Schedule
6.16(b)
identifies those Employees as of the date of this Agreement who will be
retained
by Sellers and who shall not in any event be considered “Transferred
Employees”
for
purposes of this Agreement (“Non-Transferred
Employees”).
Neither Buyers nor any of the Partnership Companies (after the Closing)
shall
have any liability with respect to the Active Employees listed in Schedule
6.16(b).
(c) Schedule
6.16(c)
identifies each other non-Partnership Company employee of Sellers or their
other
Affiliates who principally provides services in connection with the
44
Partnership
Companies (hereinafter collectively referred to as “Other
Employees”)
and who
would be an Active Employee if he or she were employed by any of the Partnership
Companies, together with such employee’s title or job position, work location,
service, compensation and maximum amount of severance liability if such
employee
were not to be retained for the Continuation Period in a manner complying
with
Section 6.17(c). Schedule
6.16(c) shall
be
updated by Sellers on or before the Closing Date to identify individuals
who
become Other Employees after the date of this Agreement (and who are not
otherwise identified on an updated schedule), to remove those individuals
who
cease to be Other Employees prior to the Closing (without regard to the
reason
or circumstance for such termination of Other Employee status), and to
identify
any other changes in the information listed thereon.
Section
6.17 Employment
of Transferred Employees.
(a) Buyers
shall cause all Employees listed in Schedule
6.16(a)
to
remain employed by the Partnership Companies as of the Closing Date in
the same
or comparable positions, and with at least the same base pay as was in
effect
immediately prior to the Closing Date (subject to Section 6.1(iii)). Such
Employees, together with the Other Employees who meet the conditions for
employment with Buyers or their Affiliates on and after the Closing Date
as
described in Section 6.17(b), are hereinafter collectively referred to
as the
“Transferred
Employees.”
(b) On
or
before the Closing Date, but effective as of the Closing Date, Buyers or
their
Affiliates shall make offers of employment to each Other Employee who they
desire to employ. The terms and conditions of each such offer of employment
shall be on the terms and conditions determined by Buyers in their sole
discretion; provided, that, the Buyers shall cause the Other Employees
who
become employed by a Partnership Company or another Affiliate of Buyers
as of
the Closing Date to be employed in the same or comparable positions, and
with at
least the same base pay as was in effect immediately prior to the Closing
Date.
For purposes of this Section, with respect to the compensation and benefits
of
the Other Employees between the date of this Agreement and the Closing
Date,
Sellers shall observe the covenants contained in Section 6.1(iii) as if
the
Other Employees were covered by such covenants. For
an
Other Employee to become an employee of Buyers or their Affiliates, the
Other
Employee must (i) accept Buyers’ or their Affiliates offer of employment under
the terms and conditions provided in such offer, (ii) remain employed by
the
Sellers or any of their Affiliates until the Closing Date, and (iii) commence
active employment with Buyers or their Affiliates immediately upon the
Closing
Date or such later date as otherwise agreed by Buyers. Sellers shall be
responsible for all wages and benefits of Other Employees who become Transferred
Employees for all periods prior to the Closing Date (or such later date
as such
employee commences employment with Buyers or their Affiliates, as agreed
with
Buyers).
(c) Except
as
provided in Section 6.17(f), this Section 6.17 shall not limit Buyers’ ability
to change a Transferred Employee’s position, compensation or benefits for
performance-related or other business reasons or require Buyers to continue
the
employment of a Transferred Employee for any particular period of time
after the
Closing; provided,
however,
45
that
in
the event that (A) a Transferred Employee is terminated without Cause during
the
one year period following the Closing Date (the “Continuation
Period”),
(B)
during the Continuation Period, Buyers fail to provide a Transferred Employee
with a base compensation level at least as high as such Transferred Employee’s
base compensation level (i.e., base hourly wages or base salary, as applicable)
as of the day immediately preceding the Closing (subject to Section 6.1(iii)),
or (C) during the Continuation Period, if a Transferred Employee resigns
his
employment with the Partnership Companies and their Affiliates after Buyers
fail
to provide such Transferred Employee with a principal place of work that
is no
more than 20 miles from such Transferred Employee’s place of work as of the day
immediately preceding the Closing, then Buyers shall be responsible for
and
shall pay (or shall cause the Partnership Companies or another of their
Affiliates to pay) the severance payment due to such Transferred Employee
in
accordance with the provisions of Sellers’ severance pay program reflected in
the form of the April 4, 2005 communication to Employees provided to
Buyers.
(d) Sellers
shall be responsible for and shall pay all retention payments due to Active
Employees (including Transferred Employees and Non-Transferred Employees)
and
the Other Employees in accordance with the terms of Sellers’ retention pay
program reflected in the form of the April 4, 2005 communication to Employees
provided to Buyers. In addition, Sellers shall be responsible for and shall
pay
all severance payments due to Active Employees and Other Employees who
do not
become Transferred Employees and to any other employees of Sellers or their
Affiliates; provided,
however,
that if
an Active Employee or Other Employee who is not a Transferred Employee
is
subsequently hired by Buyers, a Partnership Company or any of their Affiliates
during the Continuation Period, Buyers shall reimburse Sellers for the
severance
payment made to such employee.
(e) On
and
after the Closing Date, Buyers shall cause the Partnership Companies to
recognize the service of each Transferred Employee for Sellers and the
Partnership Companies before the Closing Date for all employee benefit
and
employment-related purposes, except for benefit accrual under any defined
benefit pension plan, whether non-qualified or subject to Title IV of
ERISA.
(f) Sellers
shall pay to Transferred Employees any quarterly bonus payments due to
Transferred Employees for the full and partial quarterly periods prior
to the
Closing Date.
(g) Upon
request, Sellers shall provide or cause to be provided to Buyers copies
of the
personnel files of Transferred Employees and such spreadsheets and other
data as
may be necessary or appropriate to establish payroll records and benefit
enrollment records for such Transferred Employees.
Section
6.18 No
Duplicate Benefits.
Nothing
in this Agreement shall cause duplicate benefits to be paid or provided
to or
with respect to a Transferred Employee under any employee benefit policies,
plans, arrangements, programs, practices, or agreements. References herein
to a
benefit with respect to a Transferred Employee shall include, where applicable,
benefits with respect to any eligible dependents and beneficiaries of such
Transferred Employee under the same employee benefit policy, plan, arrangement,
program, practice or agreement.
46
Section
6.19 Employees
on LTD.
Any
individual who as of the Closing Date is eligible for long-term disability
benefits shall be covered under Sellers’ long-term disability plan. Neither
Buyers nor, after the Closing Date, the Partnership Companies shall have
any
liability with respect to such an individual and such responsibility shall
remain or be assumed, as between the Parties, by Sellers. Employees on
long-term
disability shall be identified on Schedule
6.19.
Section
6.20 Defined
Benefit Plan, Deferred Compensation Plan and Defined Contribution
Plans.
(a) Effective
as of the Closing Date, benefit accruals under the Retirement Plan for
Employees
of Bass Enterprises Production Co. (the “Sellers’
Pension Plan”)
shall
cease as to all Transferred Employees (the “Eligible
Transferred Employees”)
and
Sellers’ Pension Plan shall be amended to exclude all other employees
of SRES,
REM
and Leapartners and their ERISA Affiliates from and after the Closing Date.
Sellers shall cause Sellers’ Pension Plan to fully vest and make nonforfeitable
all accrued benefits of the Transferred Employees under such Plan, effective
as
of the Closing Date. None of SRES, REM, Leapartners or their ERISA Affiliates
from and after the Closing Date shall have any further funding obligation
with
respect to Sellers’ Pension Plan as of and following the Closing Date and
Sellers shall indemnify and hold harmless Buyers, SRES, REM, Leapartners
and
their ERISA Affiliates from and after the Closing Date from any liability
arising thereunder. Benefits shall be payable under Sellers’ Pension Plan in
accordance with its terms, subject to the vesting and freezing of benefit
accruals and eligibility subsequent to the Closing Date.
(b) Sellers
or an identified ERISA Affiliate of the Sellers shall assume sponsorship
of and
all obligations under the Xxx Xxxxxxxxxx Energy Restoration Plan and the
Xxxxxxxxxx Energy Marketing Restoration Plan (collectively, the “SRCG
Restoration Plan”)
effective as of the Closing Date. Benefit accruals for all Transferred
Employees
eligible to participate under the SRCG Restoration Plan shall cease effective
as
of the Closing Date and no other employees of SRES, REM, Leapartners or
their
ERISA Affiliates from and after the Closing Date shall be eligible to
participate thereafter. Transferred Employees under the SRCG Restoration
Plan
shall be made fully vested as of the Closing Date. Benefits under the SRCG
Restoration Plan shall be payable to Eligible Transferred Employees in
accordance with its terms, subject to the vesting of benefits subsequent
to the
Closing Date. Sellers shall indemnify and hold harmless Buyers, SRES, REM,
Leapartners and their ERISA Affiliates from and after the Closing Date
from any
liability arising under the SRCG Restoration Plan.
(c) Effective
as of the Closing Date, Sellers will make necessary modifications and/or
amendments to The Bass Thrift 401(k) Plan
(“Sellers’ 401(k) Plan”),
so that
SRES, REM and Leapartners shall cease to be participating employers. If
the
Transferred Employees will be covered under Buyers’ qualified defined
contribution plan
(“Buyers’ 401(k) Plan”),
then
as soon as administratively reasonable following the Closing Date, Buyers
shall
direct the trustee of Buyers’ 401(k) Plan to accept the transfer of the account
balances of the Transferred Employees who participate in Sellers’ 401(k)
Plan;
provided however,
that
Sellers’ 401(k) Plan shall not be required to effect such transfer of the
accounts of the Transferred Employees to
47
Buyers’
401(k) Plan until the receipt of reasonable evidence that Buyers’ 401(k) Plan is
tax-qualified. In the event that Buyers’ do not intend to cover the Transferred
Employees under Buyers’ 401(k) Plan, or no such plan exists, then SRES, REM and
Leapartners shall consent to a “termination spinoff” of the portion of Sellers’
401(k) Plan attributable to Transferred Employees, in which case the Transferred
Employees with account balances in Sellers’ 401(k) Plan shall be entitled to a
distribution in accordance with the terms of Sellers’ 401(k) Plan.
Section
6.21 Welfare
Benefit Plans Coverage
of all Transferred Employees under each Benefit Plan which is an “employee
welfare benefit plan” within the meaning of Section 3(1) of ERISA (“Welfare
Benefit Plan”)
to
which SRES, REM and/or Leapartners is a party or by which any of them is
bound,
shall cease as of the Closing Date, subject to the health coverage continuation
rights described below. If an Employee, former Employee, or dependent,
beneficiary, or spouse with respect to an Employee or former Employee (a
“Qualified
Beneficiary”)
has
elected or is entitled to elect to continue health coverage under the
Consolidated Omnibus Reconciliation Act of 1986 (“COBRA”)
due to
a “qualifying event” (within the meaning of Section 4980B(f)(3) of the Code)
occurring on or before the Closing Date, then Sellers shall remain obligated
to
provide such coverage (or an election for such coverage, as applicable)
through
the remaining period of required coverage under a health plan of Sellers
or
their ERISA Affiliates in accordance with COBRA. If the employment of an
Employee of SRES, REM, or Leapartners is terminated by reason of the
transactions contemplated hereby on the Closing Date, then Sellers or their
ERISA Affiliates shall provide health continuation coverage under COBRA
(or an
election for such coverage, as applicable) through the period of required
coverage under a health plan of Sellers or their ERISA Affiliates for such
Employee and all Qualified Beneficiaries with respect to such Employee
in
accordance with COBRA. Sellers and their ERISA Affiliates shall have no
health
care continuation obligation with respect to any Transferred Employee (including
any Other Employee who becomes a Transferred Employee), such obligation
(if any)
to be that solely of Buyers and their ERISA Affiliates.
Section
6.22 Vacation.
Schedule
6.22
specifies the accrued but unused vacation pay (including personal days),
as of
the date hereof, of each Transferred Employee and any such accrued and
unused
vacation pay, calculated as of the Closing Date, shall be deemed to be
a Current
Liability as of the Closing Date for purposes of determining the Net Working
Capital Change Amount as of the Closing Date. On or after the Closing Date,
Buyers and their Affiliates shall allow Transferred Employees to receive
paid
time off for any unused vacation time (including personal days) specified
on
Schedule
6.22,
as
adjusted to reflect actual vacation through the Closing Date. Except as
required
otherwise by applicable Laws, Sellers and their Affiliates shall have no
liability to Transferred Employees for the vacation payments described
in the
immediately preceding sentence. Notwithstanding Buyers’ obligations set forth in
this Section 6.22, nothing in this Section 6.22 shall obligate Buyers to
maintain the Partnership Companies’ vacation plans in effect at the
Closing.
Section
6.23 No
Third Party Beneficiaries.
Nothing
expressed or implied in Section 6.16 through Section 6.22 shall confer
upon any
employee of Sellers or their Affiliates (including but not limited to the
Partnership Companies), or Buyers or their Affiliates, or upon any legal
representative of any such employees, any rights or remedies, including
any
right to employment or continued
48
employment
for any specified period, of any nature or kind whatsoever under or by
reason of
this Agreement. Nothing in this Agreement, express or implied, shall create
a
third party beneficiary relationship or otherwise confer any benefit,
entitlement, or right upon any person or entity other than the parties
hereto.
Nothing in this Agreement shall cause Buyers or their Affiliates or Sellers
or
their Affiliates to have any obligation to provide employment or any employee
benefits to any individual who is not a Transferred Employee.
Section
6.24 Plan
Terms Controlling.
Nothing
in this Agreement shall be deemed to confer upon any Person (or any beneficiary
thereof) any rights under or with respect to any plan, program, or arrangement
described in or contemplated by Section 6.16 through Section 6.22, and
each
Person (and any beneficiary thereof) shall be entitled to look only to
the
express terms of any such plan, program, or arrangement for his or her
rights
thereunder.
Section
6.25 WARN
Act Requirements.
On and
after the Closing Date, Buyers and the Partnership Companies shall be
responsible with respect to Transferred Employees and their beneficiaries
for
compliance, if required, with The Worker Adjustment and Retraining Notification
Act of 1988 and any other similar, applicable law (the “Warn
Act”),
including any requirement to provide for and discharge any and all
notifications, benefits, and liabilities to Transferred Employees and government
agencies that might be imposed as a result of the consummation of the
transactions contemplated by this Agreement or otherwise. On and after
the
Closing Date, Sellers shall retain all liabilities and obligations with
respect
to the WARN Act for all employees of Sellers and their Affiliates and their
beneficiaries other than Transferred Employees.
Section
6.26 Successors
and Assigns.
In the
event Buyers or any of their successors and assigns (a) consolidate with
or
merge into any other Person and shall not be the continuing or surviving
corporation or entity in such consolidation or merger or (b) transfer all
or
substantially all of their assets to any Person, then, and in each case,
proper
provision shall be made so that such successors and assigns of Buyers honor
the
obligations of Buyers and their Affiliates set forth in Section 6.16 through
Section 6.26.
Section
6.27 Financial
Statements.
The
Sellers shall provide Buyers access to Sellers’ personnel, books and records to
the extent reasonably necessary to enable Buyers to prepare financial statements
of the Partnership Companies in such form and covering such periods as
may be
required by any applicable securities laws to be filed with the Securities
and
Exchange Commission by Buyers as a result of the transactions contemplated
by
this Agreement.
Section
6.28 Certain
Contracts.
To the
extent, if any, that any contract rights, agreements, commitments or other
arrangements relating to the business of the Partnership Companies exist
and
will not be, after the Closing Date, held of record by the Partnership
Companies, Sellers (or their Affiliates) will hold such contract rights,
agreements, commitments or other arrangements as nominee for and on behalf
of
Buyers and for Buyers’ sole account.
49
Section
6.29 Capital
Expenditures.
Sellers
shall cause the Partnership Companies to make Capital Expenditures substantially
in accordance with the Capital Expenditure Budget and, on or before the
Closing
Date, shall notify Buyers of any expected variance between actual capital
expenditures and budgeted amounts.
ARTICLE
VII
TAX
MATTERS
Section
7.1
[Intentionally Omitted]
Section
7.2 Tax
Returns.
(a) The
income of the Partnership Companies will be apportioned to the period up
to and
including the Closing Date, and the period after the Closing Date by closing
the
books and records of the Partnership Companies as of 11:59 p.m. local time
on
the day immediately preceding the Closing Date.
(b) With
respect to any Tax Return of a Partnership Company covering a taxable period
ending on or before the Closing Date that is required to be filed after
the
Closing Date, Sellers shall cause such Tax Return to be prepared and shall
cause
to be included in such Tax Return all items required to be included therein.
Not
later than 30 days prior to the due date of each such Tax Return, Sellers
shall
deliver a copy of such Tax Return to Buyers together with a statement of
the
difference, if any, of the amount of Tax shown due on such Tax Return over
the
amount set up as a liability for such Tax in the Closing Statement. If
the Tax
shown on the Tax Return exceeds the amount set up as a liability for the
Tax in
the Closing Statement, not later than 5 days prior to the due date of such
Tax
Return, Sellers shall pay to Buyers the amount of such excess. If the amount
set
up as a liability for the Tax in the Closing Statement exceeds the Tax
shown on
the Tax Return, not later than 5 days prior to the due date of such Tax
Return,
Buyers shall pay to Sellers the amount of such excess. Buyers shall cause
such
Partnership Company to file such Tax Return and timely pay the Taxes shown
due
on such Tax Return.
(c) With
respect to any Tax Return of a Partnership Company covering a taxable period
beginning on or before the Closing Date and ending after the Closing Date
(the
“Straddle
Period”)
that is
required to be filed after the Closing Date, Buyers shall cause such Straddle
Period Tax Return to be prepared and shall cause to be included in such
Straddle
Period Tax Return all Tax items required to be included therein. Buyers
shall
determine the Tax which would have been due with respect to the Straddle
Period
if such Straddle Period ended on the Closing Date (the “Pre-Closing
Date Tax”). Not
later
than 45 days prior to the due date of each such Straddle Period Tax Return,
Buyers shall deliver a copy of the Straddle Period Tax Return to Sellers
for
their review. If Sellers agree with the Straddle Period Tax Return, Sellers
shall pay to Buyers an amount equal to the excess, if any, of the Pre-Closing
Date Tax over the amount set up as a liability for such Tax in the Closing
Statement not later than 5 days prior to the due date
50
of
the
Straddle Period Tax Return. If, within 15 days of the receipt of the Straddle
Period Tax Return, Sellers notify Buyers that they dispute the manner of
preparation of the Straddle Period Tax Return or the amount of the Pre-Closing
Date Tax, then Buyers and Sellers shall attempt to resolve their disagreement
within the five-day period following Sellers’ notification to Buyers of such
disagreement. If Buyers and Sellers are unable to resolve their disagreement,
the dispute shall be submitted to a mutually agreed upon Accounting Firm,
whose
expense shall be borne equally by Buyers and Sellers, for resolution within
20
days of such submission. The decision of such accounting firm with respect
to
such dispute shall, absent manifest error, be binding upon Buyers and Sellers,
and Sellers shall pay to Buyers an amount equal to the excess, if any,
of the
Pre-Closing Date Tax over the amount set up as a liability for such Tax
in the
Closing Statement as decided by such Accounting Firm not later than 5 days
prior
to the due date of the Straddle Period Tax Return. In the event of (i)
any Tax
Authority review of a Straddle Period Tax Return or (ii) any proposed audit,
notice, proposed adjustment, assessment, claim, liability, or other potential
tax proceeding relating to a Straddle Period Tax Return (each, a “Straddle
Period Tax Claim”),
Buyers
and Sellers shall handle such review and/or Straddle Period Tax Claim on
a joint
basis and in a reasonable manner.
(d) Any
Tax
Return prepared pursuant to the provisions of this Section 7.2 shall be
prepared
in a manner consistent with practices followed in prior years with respect
to
similar Tax Returns, except as otherwise required by Law or fact.
(e) Because
Treasury Regulations section 301.6109-(1)(d)(2)(iii) requires that Buyers
retain
the Employer Identification Number of each Partnership Company, the following
shall apply for purposes of (i) Tax Authority reviews of any Partnership
Company
Tax Return covering a taxable period ending on or prior to the Closing
Date and
(ii) any Pre-Closing Date Period Tax Claim; provided,
however,
that in
the event that (A) a Pre-Closing Date Period Tax Claim is also an Indemnified
Tax Claim, the provisions of Section 7.4 shall control and (B) a Pre-Closing
Date Period Tax Claim could result in Tax liability to Buyers that is not
an
Indemnified Tax Claim, such Pre-Closing Date Period Tax Claim shall be
handled
on a joint basis in a reasonable manner. Buyers
shall promptly notify Sellers of any written or oral notice that any applicable
Tax Authority has proposed a review of any Partnership Company Tax Return
for
taxable periods ending on or prior to the Closing Date, and Buyers shall
promptly send to Sellers a copy of any written notice or other document
received
by Buyers from any Tax Authority with respect to any Partnership Company
Tax
Return covering a taxable
period ending on or prior to the Closing Date.
Sellers
shall have the sole and exclusive right to control, handle, dispose of,
and/or
settle any and all proposed audits, notices, proposed adjustments, assessments,
claims, liabilities, or other potential tax proceedings relating to a Tax
Return
of any Partnership Company covering a taxable period ending on or prior
to the
Closing Date (“Pre-Closing
Date Period Tax Claims”),
and
Buyers shall execute or cause to be executed any and all documents and
forms
(including, without limitation, powers of attorney) necessary to enable
Sellers
to carry out the provisions of this Section 7.2(e). Sellers shall have
the sole
right, at Sellers' cost, to select counsel and other tax professionals
for any
Pre-Closing Date Period Tax Claim; provided,
however,
that
Buyers may monitor any such Pre-Closing Date Period Tax Claim and shall
pay for
any costs associated with such monitoring. Buyers and Sellers shall, and
Buyers
shall cause the Partnership Companies to, cooperate to the extent necessary
to
resolve any Pre-Closing Date Period Tax Claims. So long as Sellers have
not
agreed in writing to settle a Pre-Closing Date Period Tax Claim and a challenge
of such Pre-Closing Date Period Tax Claim can continue (by
51
any
available means), neither Buyers, the Partnership Companies nor any of
their
respective representatives shall consent or otherwise agree to any element
relating to such Pre-Closing Date Period Tax Claim. All positions taken
herein
by Sellers, Buyers and the Partnership Companies shall be in good faith.
(f) Buyers
and Sellers shall cooperate fully, and Buyers shall cause each of the
Partnership Companies to cooperate fully, as and to the extent reasonably
requested by the other Party, in connection with the preparation and filing
of
Tax Returns pursuant to this Section 7.2, any audit, litigation or other
proceeding (each, a “Tax
Proceeding”)
with
respect to Taxes and any Pre-Closing Date Period Tax Claims. Such cooperation
shall include access to, the retention and (upon the other Party’s request) the
provision of records and information which are reasonably relevant to any
such
Tax Return, Tax Proceeding or Pre-Closing Date Period Tax Claim, and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Sellers
will,
and Buyers will and will cause the Partnership Companies to, retain all
books
and records with respect to Tax matters pertinent to the Partnership Companies
relating to any taxable period beginning before the Closing Date until
the
earlier of six years after the Closing Date or the expiration of the applicable
statute of limitations of the respective taxable periods, and to abide
by all
record retention agreements entered into with any Tax Authority. Buyers
and
Sellers each agree, upon request, to use Reasonable Efforts to obtain any
certificate or other document from any Tax Authority or any other Person
as may
be necessary to mitigate, reduce or eliminate any Tax that could be imposed
with
respect to the transactions contemplated by this Agreement.
(g) From
and
after the Closing Date, Buyers and their respective Affiliates (including
the
Partnership Companies) will not file any amended Tax Return or other adjustment
request with respect to the Partnership Companies for taxable periods ending
on
or prior to the Closing Date without the prior written consent of
Sellers.
(h) Subject
to the second sentence of this Section 7.2(h), Tax refunds of any kind
relating
to any taxable period ending (or treated as ending) on or prior to the
Closing
Date shall inure to the benefit of Sellers, and Buyers shall pay the full
amount
of any such refund (including interest thereon), net of any tax liability
related to the receipt of such refund, to Sellers promptly upon receipt
of such
refund by Buyers. Buyers shall be entitled to any Tax refunds resulting
from the
carryback of any loss or credit arising in a taxable period beginning on
or
after the Closing Date except for Tax refunds for which Buyers were given
credit
as a reduction in Purchase Price to which Sellers shall be
entitled.
(i) At
least
30 days prior to the Closing, Sellers (or, at Buyers’ option, Buyers) shall
prepare and deliver to the other Parties an allocation (the “Allocation”)
of the
Purchase Price (and all other capitalized costs) among the Assets of the
Partnership Companies in accordance with Treasury Regulations section 1.755
- 1
(and any similar provision of state, local or foreign law, as appropriate).
Within 45 days after the date the Purchase Price is finally determined
pursuant
to Section 2.5 hereof, Sellers and Buyers shall use their best efforts
to agree
to the final Allocation. If the Parties agree to such Allocation, as
contemplated by the foregoing sentence, such Allocation shall be binding
upon
Sellers and Buyers. Further, Sellers, Buyers and their respective Affiliates
shall then report, act, and file Tax Returns in all respects
52
and
for
all purposes consistent with the Allocation and shall not take any position
(whether in audits, Tax Returns or otherwise) that is inconsistent with
the
Allocation unless required to do so by applicable law. Buyers shall timely
and
properly prepare, execute, file and deliver all such documents, forms and
other
information as Sellers may reasonably request in their preparation of the
Allocation.
Section
7.3 Transfer
Taxes. Buyers
shall be responsible for and indemnify Sellers for the payment of all state
and
local transfer, sales, use, stamp, registration or other similar Taxes
resulting
from the transactions contemplated by this Agreement.
Section
7.4 Tax
Indemnity.
(a) Sellers
shall be solely liable for, shall pay and shall protect, defend, indemnify
and
hold harmless (x) Buyers and any Person holding a direct or indirect interest
in
either Buyer that is required to include for Tax purposes on its Tax Return
all
or a portion of the income, gain, loss, deduction or credit of the Partnership
Companies or the Buyers, and (y) the Partnership Companies from any and
all
Losses attributable to (i) any breach of any representation or warranty
made by
Sellers in Section 4.10 or any covenants and agreements made by Sellers
in this
Article VII and (ii) Taxes in excess of any liability for Taxes reflected
on the
Closing Statement which relate to or result from the income, business,
property,
status or operations of a Partnership Company prior to or on the Closing
Date,
or for which a Partnership Company is liable with respect to such period
(whether pursuant to Treasury Regulations section 1.1502-6 or any similar
state,
local or foreign law or regulation, as a transferee or successor, by contract
or
otherwise). Buyers shall be solely liable for, shall pay and shall protect,
defend, indemnify and hold harmless Sellers from any and all Taxes which
relate
to or result from the income, business, property, status or operations
of the
Partnership Companies after the Closing Date.
(b) If
any
claim (an “Indemnified
Tax Claim”)
is made
by
any Tax Authority that, if successful, would result in indemnification
of any
Party (the “Tax
Indemnified Party”)
or its
Affiliate by another Party (the “Tax
Indemnifying Party”)
under
this Section 7.4, the Tax Indemnified Party shall promptly, but in no event
later than the earlier of (i) 45 days after receipt of notice from the
Tax
Authority of such claim or (ii) 15 days prior to the date required for
the
filing of any protest of such claim, notify the Tax Indemnifying Party
in
writing of such fact; provided,
however, that
the
failure of the Tax Indemnified Party to so notify the Tax Indemnifying
Party
shall not relieve the Tax Indemnifying Party of its obligations hereunder,
unless and only to the extent that such failure to notify prejudices the
Tax
Indemnifying Party.
(c) The
Tax
Indemnifying Party shall control all decisions with respect to any Tax
Proceeding involving an Indemnified Tax Claim and the Tax Indemnified Party
shall take such action (including settlement with respect to such Tax Proceeding
or the prosecution of such Tax Proceeding to a determination in a court
or other
tribunal of initial or appellate jurisdiction) in connection with a Tax
Proceeding involving an Indemnified Tax Claim as the Tax Indemnifying Party
shall reasonably request in writing from time to time, including with respect
to
the selection of counsel and experts and the execution of powers of attorney;
provided,
however, that
(i)
within 30 days after the notice required by Section 7.4(b) has been
53
delivered
(or such earlier date that any payment of Taxes with respect to such claim
is
due but in no event sooner than five days after the Tax Indemnifying Party’s
receipt of such notice), the Tax Indemnifying Party requests that such
claim be
contested and (ii) if the Tax Indemnified Party is requested by the Tax
Indemnifying Party to pay the Tax claimed and xxx for a refund, the Tax
Indemnifying Party shall have advanced to the Tax Indemnified Party, on
an
interest-free basis, the amount of such claim. The Tax Indemnified Party
shall
not make any payment of an Indemnified Tax Claim for at least 30 days (or
such
shorter period as may be required by applicable law) after the giving of
the
notice required by Section 7.4(b) with respect to such claim, shall give
to the
Tax Indemnifying Party any information requested related to such claim,
and
otherwise shall cooperate with the Tax Indemnifying Party in order to contest
effectively any such claim. Notwithstanding the foregoing, the Parties
shall
jointly control all decisions with respect to any Tax Proceeding which,
in the
event of an adverse determination, may result in each Party having
responsibility for an amount of Taxes hereunder.
(d)
No
claim
for indemnity for any Losses or Taxes relating to any single Tax Return
or any
single item or group of related items shall be permitted pursuant to this
Section 7.4 if such claim is for less than $10,000.
Section
7.5 Scope.
Notwithstanding
anything to the contrary herein, this Article VII shall be the exclusive
remedy
for any claims relating to Taxes (including any claims relating to
representations and warranties respecting Tax matters). The rights hereunder
relating to Taxes shall survive the Closing until 30 days after the expiration
of the statute of limitations (including extensions) applicable to such
Tax
matter. No claim may be made or brought by any Party hereto after the expiration
of the applicable survival period unless such claim has been asserted by
written
notice specifying the details supporting the claim on or prior to the expiration
of the applicable survival period.
ARTICLE
VIII
CONDITIONS
TO OBLIGATIONS
Section
8.1 Conditions
to Obligations of Buyers. The
obligation of Buyers to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following conditions, any
one or
more of which may be waived in writing by Buyers:
(a) The
Buyer
Approvals and the Seller Approvals shall have been duly made, given or
obtained
and shall be in full force and effect, and all applicable waiting periods
(and
any extensions thereof) under the HSR Act shall have expired or otherwise
been
terminated;
(b) The
representations and warranties of Sellers contained in this Agreement that
are
qualified by materiality (whether by reference to the terms “material,”“Material
Adverse Effect,” any other dollar threshold amount or otherwise) and the
representations and warranties of Sellers contained in Sections 3.2 and
3.6
shall be true and correct in all respects as of the date of this Agreement
and
as of the Closing, as if made at and as of that time (other than such
representations and warranties that
54
expressly
address matters only as of a certain date, which need only be true as of
such
certain date), and the representations and warranties of Sellers contained
in
this Agreement that are not so qualified by materiality (whether by reference
to
the terms “material,”“Material Adverse Effect,” any other dollar threshold
amount or otherwise) shall be true and correct in all material respects
as of
the date of this Agreement and as of the Closing, as if made at and as
of that
time (other than such representations and warranties that expressly address
matters only as of a certain date, which need only be true as of such certain
date);
(c) Sellers
shall have performed or complied in all material respects with all of the
covenants and agreements required by this Agreement to be performed or
complied
with by them at or before the Closing;
(d) Sellers
shall have delivered to Buyers a certificate from an officer of SRCG Genpar
GP,
L.L.C., a Delaware limited liability company and general partner of Genpar
(“Genpar
GP”),
dated
as of the Closing Date, certifying that the conditions specified in Section
8.1(b) and 8.1(c) have been fulfilled;
(e) Sellers
shall have delivered to Buyers a certificate from the Secretary of Genpar
GP,
dated as of the Closing Date, attaching and certifying the Organizational
Documents and authorizing resolutions of each Seller and certifying the
incumbency and signatures of the persons signing this Agreement and the
other
agreements contemplated hereby;
(f) Sellers
shall have delivered to Buyers a certificate from the Secretary or other
authorized Person of each Partnership Company, each dated as of the Closing
Date, attaching and certifying the Organizational Documents and authorizing
resolutions, if any, of each Partnership Company;
(g) Sellers
shall have delivered to Buyers a good standing certificate or certificate
of
existence, as applicable, of recent date for each of the Partnership Companies
and for each Seller from their state of organization or
incorporation;
(h) Sellers
or Sellers’ Affiliate, as applicable, shall have executed and delivered a lease
with respect to the Partnership Companies’ Ft. Worth headquarters location, on
terms and conditions mutually satisfactory to the Parties;
(i) There
shall not be in force any Law, preliminary or permanent injunction, judgment,
order, decree, ruling, or charge restraining or prohibiting the consummation
of
the transactions contemplated by this Agreement or any investigation, suit,
action or proceeding pending or threatened by any Governmental Authority
or
other Person seeking to enjoin or restrain consummation of the transactions
contemplated hereby or to recover damages in connection therewith;
(j) Sellers
shall have delivered to Buyers (i) a payoff letter from each lender or
secured
party, in form and substance reasonably acceptable to Buyers and its lenders
and
in proper form for filing, if applicable, providing that upon receipt by
or on
behalf
55
of
Sellers of the amount specified in such payoff letters, (a) all guarantees,
security agreements and other financing documents to which SRES, REM and
Leapartners, their respective subsidiaries are a party or are otherwise
obligated or their respective property is encumbered are fully and finally
terminated, (b) all Liens relating thereto are released without further
action
and (c) Buyers are authorized to file releases and termination statements
to
effectuate such release, (ii) completed UCC-3 termination statements for
any UCC
financing statements or other UCC Liens identified on Schedule
4.16(a)
(other
than Permitted Liens), each in a proper form for filing and in form and
substance satisfactory to Buyers and its lenders, (iii) fully executed
and
acknowledged releases with respect to any mortgage, deed of trust or similar
instrument identified on Schedule
4.16(a)
(other
than Permitted Liens), each in form and substance satisfactory to Buyers
and its
lenders, and (iv) evidence, reasonably satisfactory to Buyers, of the expiration
or termination, in each case at Sellers’ expense, of any commodity positions
specified in Section 6.7(d);
(k) Sellers
shall have delivered to Buyers an engagement letter, in form and substance
satisfactory to Buyers, with KPMG LLP for auditing services associated
with the
fiscal year of the Partnership Companies ending December 31, 2005, provided
that
the fees associated with such auditing services shall be payable by
Sellers;
(l) each
of
the officers of the Partnership Companies listed in Schedule
8.1(l)
shall
have executed and delivered to Buyers a retention agreement substantially
in the
form attached hereto as Exhibit 8.1(l);
(m) insurers
reasonably acceptable to Buyers shall have committed to enter into an
environmental insurance policy, at Buyers’ cost, covering the assets of the
Partnership Companies having a term of at least five years from the Closing
Date, the terms set forth on Schedule
8.1(m)
and on
such other terms as are reasonably satisfactory to Buyers;
(n) the
Sellers shall have executed and delivered a Transition Services Agreement
in
form and substance mutually acceptable to the Parties, which agreement
shall, at
a minimum, include the terms and conditions set forth on Exhibit
8.1(n);
(o) Sellers
shall have delivered written resignations or evidence of removal of each
of the
directors and officers of the Partnership Companies, except as otherwise
specified by Buyers.
Section
8.2 Conditions
to the Obligations of Sellers. The
obligation of Sellers to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following conditions, any
one or
more of which may be waived in writing by Sellers:
(a) The
Seller Approvals and the Buyer Approvals shall have been duly made, given
or
obtained and shall be in full force and effect, and all applicable waiting
periods (and any extensions thereof) under the HSR Act shall have expired
or
otherwise been terminated;
56
(b) All
of
the representations and warranties of Buyers contained in this Agreement
shall
be true and correct in all respects as of the date of this Agreement and
as of
the Closing, as if made anew at and as of that time (other than such
representations and warranties that expressly address matters only as of
a
certain date, which need only be true as of such certain date), except
where the
failure to be so true would not, individually or in the aggregate, reasonably
be
expected to have a Material Adverse Effect on the ability of Buyers to
consummate the Closing;
(c) Buyers
shall have performed or complied with all of the covenants and agreements
required by this Agreement to be performed or complied with by Buyers on
or
before the Closing, except where the failure to perform or comply would
not
reasonably be expected to have a Material Adverse Effect on the ability
of
Buyers to consummate the Closing;
(d) Each
Buyer shall have delivered to Sellers a certificate from an officer of
such
Buyer, dated the Closing Date, certifying that the conditions specified
in
Section 8.2(b) and 8.2(c) have been fulfilled;
(e) Each
Buyer shall have delivered to Sellers a certificate from the Secretary
of such
Buyer dated as of the Closing Date attaching and certifying the Organizational
Documents and authorizing resolutions of such Buyer and certifying the
incumbency and signatures of the persons signing this Agreement and the
other
agreements contemplated hereby;
(f) Each
Buyer shall have delivered to Sellers a good standing certificate of recent
date
for such Buyer from its state of organization; and
(g) There
shall not be in force any Law, injunction, judgment, order, decree, ruling,
or
charge restraining or prohibiting the consummation of the transactions
contemplated by this Agreement or any investigation, suit, action or proceeding
pending or threatened by any Governmental Authority or other Person seeking
to
enjoin or restrain consummation of the transactions contemplated hereby
or to
recover damages in connection therewith.
ARTICLE
IX
INDEMNIFICATION
Section
9.1 Survival.
The
representations and warranties of the Parties contained in this Agreement
or in
any certificates or other writing delivered pursuant to this Agreement
or in
connection with this Agreement will survive the Closing for a period of
twelve
months following the Closing Date; provided,
however,
that
(a) the representations and warranties contained in Sections 3.2, 3.5,
3.6, 4.9,
5.2 and 5.5 will survive the Closing indefinitely, (b) the representations
and
warranties contained in Section 4.10 will survive the Closing in accordance
with
the provisions of Article VII
57
hereof,
(c) the representations and warranties contained in Section 4.11 shall
survive
the Closing for a period of three years following the Closing Date, and
(d) the
representations and warranties and certifications contained in the certificates
delivered pursuant to Sections 8.1(d) and 8.2(d) shall survive for the
same
duration that the representations and warranties to which they are applicable
survive. Unless otherwise expressly provided herein, all covenants, agreements
and obligations made by any party hereunder which are to be performed on
or
prior to the Closing Date shall expire at the Closing, and all covenants,
agreements and obligations made by any party hereunder which are to be
performed
after the Closing Date shall survive in accordance with their terms until
the
applicable statute of limitations therefor has expired with respect to
any
breach thereof. Any right of indemnification or reimbursement pursuant
to this
Article IX with respect to a claimed breach, inaccuracy or non-fulfillment
of
any representation, warranty, covenant, agreement or obligation shall expire
on
the applicable date of termination of the representation, warranty, covenant,
agreement or obligation claimed to be breached as set forth in Section
9.2(a) or
9.2(b) (provided,
however,
that a
Party may make a claim for indemnification for a breach of any covenant
that
expires on the Closing Date until one year after the Closing Date) (the
“Expiration
Date”),
unless
on or prior to the applicable Expiration Date, the Indemnifying Party has
received written notice from the Indemnified Party of such breach, inaccuracy
or
non-fulfillment, in which case the Indemnified Party may continue to pursue
its
right of indemnification or reimbursement hereunder beyond the Expiration
Date
of the applicable representation, warranty, covenant, agreement or obligation.
Section
9.2 Indemnification.
(a) Subject
to the provisions of this Article IX (including, without limitation, the
provisions of Section 9.4 hereof), from and after the Closing, Sellers
shall
indemnify, defend and hold harmless Buyers, Buyers’ Affiliates (including the
Partnership Companies from and after the Closing) and their respective
Representatives and their respective successors and permitted assigns (the
“Buyer
Indemnified Parties”) from
and
against all Losses incurred or suffered by them as a result of, relating
to or
arising out of (i) any breach of or any inaccuracy in any representation
or
warranty of Sellers contained in Sections 3.2 or 3.6 of this Agreement
as of the
date hereof or as of the Closing Date or in any certificates delivered
pursuant
to or in connection with this Agreement, (ii) any breach of or any
inaccuracy in any representation or warranty of Sellers contained in Article
III
(other than Sections 3.2 or 3.6) or Article IV of this Agreement as of the
date hereof or as of the Closing Date, (iii) any breach of or failure by
Sellers
to perform any covenant or obligation of Sellers contained in this Agreement,
and (iv) assets or lines of business that have been sold, transferred,
relinquished or abandoned by the Partnership Companies, including assets
that
have reverted to landowner ownership, as of the Closing Date. For purposes
of
Section 9.2(a)(ii), in determining whether the Sellers have breached any of
their representations and warranties contained in Article III or IV, all
qualifications of such representations and warranties by materiality (whether
by
reference to the terms “material,”“Material Adverse Effect” or any threshold
amount or otherwise) shall be disregarded.
(b) Subject
to the provisions of this Article IX, from and after the Closing, Buyers
shall
indemnify, defend and hold harmless Sellers, their respective Affiliates,
their
respective Representatives and their respective permitted successors and
assigns
(the “Seller
Indemnified Parties”)
from
and against all Losses incurred or suffered by them as a result of, relating
to
or
58
arising
out of (i) any breach of or any inaccuracy in any representation or warranty
of
Buyers contained in this Agreement as of the date hereof or as of the Closing
Date or in any certificates delivered pursuant to or in connection with
this
Agreement, (ii) any breach of or failure by Buyers to perform any covenant
or
obligation of Buyers contained in this Agreement and (iii) the businesses
and
operations of the Partnership Companies (whether relating to periods prior
to or
after the Closing Date) to the extent such Losses (A) arise out of a matter
for
which a Partnership Company has liability, (B) are not subject to the provisions
of Section 9.2(a) hereof or any other provision of this Agreement that
requires
the Sellers to assume such liability or indemnify Buyers or the Partnership
Companies for such liability and (C) are not the subject of a written notice
delivered by the Buyer Indemnified Parties in accordance with, and by the
date
specified in, Section 9.1.
Section
9.3 Indemnification
Procedures. Claims
for indemnification under this Agreement (other than claims involving a
Tax
Proceeding, the procedures for which are set forth in Article VII) shall
be
asserted and resolved as follows:
(a) If
any
Person who or which is entitled to seek indemnification under Section 9.2
(an
“Indemnified
Party”)
receives notice of the assertion or commencement of any claim, demand,
action,
suit or proceeding made or brought by any third party (a “Third
Party Claim”)
against
such Indemnified Party with respect to which the Person against whom or
which
such indemnification is being sought (an “Indemnifying
Party”)
is
obligated to provide indemnification under this Agreement, the Indemnified
Party
will give such Indemnifying Party reasonably prompt written notice thereof,
but
in any event not later than 30 days after receipt of such written notice
of such
Third Party Claim. Such notice by the Indemnified Party will describe the
Third
Party Claim in reasonable detail, will include copies of all available
material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of the Losses that have been or may be sustained by the Indemnified
Party. The Indemnifying Party will have the right to participate in, or,
by
giving written notice to the Indemnified Party, to assume, the defense
of any
Third Party Claim at such Indemnifying Party’s own expense and by such
Indemnifying Party’s own counsel (reasonably satisfactory to the Indemnified
Party), and the Indemnified Party will cooperate in good faith in such
defense.
(b) If,
within 10 days after giving notice of a Third Party Claim to an Indemnifying
Party pursuant to Section 9.3(a), an Indemnified Party receives written
notice
from the Indemnifying Party that the Indemnifying Party has elected to
assume
the defense of such Third Party Claim as provided in the last sentence
of
Section 9.3(a), the Indemnifying Party will not be liable for any legal
expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof; provided,
however,
that
(i) if the Indemnifying Party fails to take reasonable steps necessary
to defend
diligently such Third Party Claim within 10 days after receiving written
notice
from the Indemnified Party that the Indemnified Party believes the Indemnifying
Party has failed to take such steps or if the Indemnifying Party has not
undertaken fully to indemnify the Indemnified Party in respect of all Losses
relating to the matter, the Indemnified Party may assume its own defense,
and
the Indemnifying Party will be liable for all
59
reasonable
costs and expenses paid or incurred in connection therewith and (ii) the
Indemnified Party may employ separate counsel, and the Indemnifying Party
will
bear the expenses of such separate counsel, if in the written opinion of
counsel
to the Indemnified Party use of counsel of the Indemnifying Party’s choice would
be expected to give rise to a conflict of interest. Without the prior written
consent of the Indemnified Party, the Indemnifying Party will not enter
into any
settlement of any Third Party Claim that would lead to loss, liability
or create
any financial or other obligation on the part of the Indemnified Party
for which
the Indemnified Party is not entitled to indemnification hereunder, or
which
provides for injunctive or other non-monetary relief applicable to the
Indemnified Party, or does not include an unconditional release of all
Indemnified Parties.
(c) Any
claim
by an Indemnified Party on account of Losses that do not result from a
Third
Party Claim (a “Direct
Claim”)
will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than 30 days after the Indemnified
Party
becomes aware of such Direct Claim. Such notice by the Indemnified Party
will
describe the Direct Claim in reasonable detail, will include copies of
all
available material written evidence thereof and will indicate the estimated
amount, if reasonably practicable, of Losses that has been or may be sustained
by the Indemnified Party. The Indemnifying Party will have a period of
five
Business Days within which to respond in writing to such Direct Claim.
If the
Indemnifying Party does not so respond within such five Business Day period,
the
Indemnifying Party will be deemed to have rejected such claim, in which
event
the Indemnified Party will be free to pursue such remedies as may be available
to the Indemnified Party on the terms and subject to the provisions of
this
Agreement.
(d) A
failure
to give timely notice or to include any specified information in any notice
as
provided in Section 9.3(a), 9.3(b) or 9.3(c) will not affect the rights
or
obligations of any party hereunder, except and only to the extent that,
as a
result of such failure, any party that was entitled to receive such notice
was
materially prejudiced as a result of such failure.
(e) Notwithstanding
anything contained herein to the contrary, the amount of any Losses incurred
or
suffered by any Indemnified Person shall be calculated after giving effect
to
(i) any insurance proceeds (net of any premiums paid or costs incurred
in
connection therewith) received by the Indemnified Person (or any of its
Affiliates) with respect to such Losses, (ii) any net Tax Benefit actually
and
currently realized by the Indemnified Person (or any of its Affiliates)
arising
from the facts or circumstances giving rise to such Losses and (iii) any
indemnification or reimbursement payments or other recoveries obtained
by the
Indemnified Person (or any of its Affiliates) from any other third party
with
respect to such Losses. Each Indemnified Person shall exercise Reasonable
Efforts to obtain such proceeds, benefits, payments and recoveries. If
any such
proceeds, benefits, payments or recoveries are received by an Indemnified
Person
(or any of its Affiliates) with respect to any Losses after an Indemnifying
Person has made a payment to the Indemnified Person with respect thereto,
the
Indemnified Person (or such Affiliate) shall pay to the Indemnifying Person
the
amount of such proceeds, benefits, payments or recoveries (up to the amount
of
the Indemnifying Person's
60
payment).
An indemnified party shall use reasonable efforts to mitigate damages in
respect
of any claim for which it is seeking indemnification.
(f) Upon
making any payment to an Indemnified Person in respect of any Losses, the
Indemnifying Person will, to the extent of such payment, be subrogated
to all
rights of the Indemnified Person (and its Affiliates) against any third
party in
respect of the Losses to which such payment relates. Such Indemnified Person
(and its Affiliates) and Indemnifying Person will execute upon request
all
instruments reasonably necessary to evidence or further perfect such subrogation
rights.
(g) In
the
event an Indemnified Party shall recover Losses in respect of a claim of
indemnification under this Article IX, no other Indemnified Party shall
be
entitled to recover the same Losses in respect of a claim for
indemnification.
Section
9.4 Limitations
on Liability of Sellers. Notwithstanding
anything to the contrary herein, Sellers’ obligations to indemnify the Buyer
Indemnified Parties pursuant to Section 9.2(a)(ii) hereof shall be subject
to
the following limitations:
(a) A
breach
of any representation, warranty or covenant of Sellers in this Agreement
in
connection with any single item or group of related items that results
in Losses
of less than $100,000 shall be deemed, for all purposes of this Article
IX, not
to be a breach of such representation, warranty or covenant, and therefore
shall
not be applied towards the Threshold Amount or be indemnifiable
hereunder.
(b) Sellers
shall have no liability arising out of or relating to Section 9.2(a)(ii)
until
the aggregate amount of all such Losses actually incurred by the Buyer
Indemnified Parties thereunder exceeds an amount equal to 1% of the Purchase
Price (the “Threshold
Amount”),
in
which event Sellers’ indemnity obligations shall apply to Losses actually
incurred in excess of the Threshold Amount (subject to the maximum liability
provided for in subsection (c) below); provided, however, that in respect
of
Losses incurred or suffered by the Buyer Indemnified Parties as a result
of,
relating to or arising out of any breach of the representations and warranties
contained in Section 4.11, the Threshold Amount shall be deemed to be
$5,000,000.
(c) In
no
event shall Sellers’ aggregate liability arising out of or relating to Section
9.2(a)(ii) exceed 10% of the Purchase Price (the “Cap
Amount”),
and
each Buyer Indemnified Party waives and releases and shall have no recourse
against Sellers pursuant to Section 9.2(a)(ii) in excess of such Cap
Amount.
(d) No
Buyer
Indemnified Party shall be entitled to indemnification under Section 9.2(a)(ii)
to the extent Buyers have otherwise been compensated by reasons of adjustments
(pursuant to Section 2.5) in the calculation of the Purchase Price relative
to
what it would have been absent such Loss.
Section
9.5 Waiver
of Other Representations.
61
(a) NOTWITHSTANDING
ANYTHING TO THE CONTRARY HEREIN, IT IS THE EXPLICIT INTENT OF EACH PARTY
HERETO,
AND THE PARTIES HEREBY AGREE, THAT NONE OF THE SELLERS OR ANY OF THEIR
RESPECTIVE AFFILIATES OR REPRESENTATIVES HAS MADE OR IS MAKING ANY
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WRITTEN OR ORAL,
INCLUDING ANY IMPLIED REPRESENTATION OR WARRANTY AS TO THE CONDITION,
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE
WITH
RESPECT TO THE PURCHASED INTERESTS, THE PARTNERSHIP COMPANIES, THEIR ASSETS,
OR
ANY PART THEREOF, EXCEPT THOSE REPRESENTATIONS AND WARRANTIES CONTAINED
IN THIS
AGREEMENT, AND WITHOUT IN ANY WAY LIMITING THE FOREGOING, SELLERS MAKE
NO
REPRESENTATION OR WARRANTY TO BUYERS WITH RESPECT TO ANY FINANCIAL PROJECTIONS
OR FORECASTS RELATING TO THE PARTNERSHIP COMPANIES.
(b) EXCEPT
AS
OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLERS’ INTERESTS IN THE PARTNERSHIP
COMPANIES AND THEIR ASSETS ARE BEING TRANSFERRED THROUGH THE SALE OF THE
PURCHASED INTERESTS “AS IS, WHERE IS, WITH ALL FAULTS,” AND, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, SELLERS EXPRESSLY DISCLAIM ANY REPRESENTATIONS
OR
WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION,
VALUE
OR QUALITY OF THE PARTNERSHIP COMPANIES AND THEIR ASSETS OR THE PROSPECTS
(FINANCIAL OR OTHERWISE), RISKS AND OTHER INCIDENTS OF THE PARTNERSHIP
COMPANIES
AND THEIR ASSETS.
(c) Buyers
acknowledge and agree that none of Sellers, their Affiliates, any of their
Representatives and any other Person has made any representation or warranty,
express or implied, as to the accuracy or completeness of any memoranda,
charts,
summaries or schedules heretofore made available by Sellers, their Affiliates
or
their Representatives to Buyers, any of their Affiliates or their
Representatives (including, without limitation, the Executive Summary dated
May
2005 prepared by Xxxxxx Brothers, Inc.) or any information that is not
included
in this Agreement or the Disclosure Schedule, and none of Sellers, their
Affiliates, any of their Representatives nor any other Person will have
or be
subject to any liability to Buyers, any of their Affiliates or their
Representatives resulting from the distribution of any such information
to, or
the use of any such information by, Buyers, any of their Affiliates or
any of
their agents, consultants, accountants, counsel or other
Representatives.
(d) The
representations and warranties contained in Section 4.11 shall be the exclusive
representations and warranties with regard to Environmental Laws and related
matters.
Section
9.6 Purchase
Price Adjustment. The
Parties agree to treat all payments made pursuant to this Article IX as
adjustments to the Purchase Price for Tax purposes.
62
Section
9.7 Exclusive
Remedy.
Except
for the indemnification provisions set forth in Article VII hereof, the
right of
indemnification set forth in this Article IX (subject to all limitations
provided for herein) shall be the sole and exclusive remedy of the Parties
and
all Indemnified Parties under or by reason of this Agreement (including
for any
breach of any representation, warranty, covenant or agreement set forth
in this
Agreement) and each Party covenants and agrees not to seek or assert any
other
remedy following the Closing; provided,
however,
that the
foregoing shall not limit the right of any Party to seek any equitable
remedy
available to enforce the rights of such Party under this Agreement.
Section
9.8 Waiver
of Consequential Damages.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, NO PARTY SHALL BE LIABLE
FOR
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON CONTRACT,
TORT,
STRICT LIABILITY, OTHER LAW OR OTHERWISE AND WHETHER OR NOT ARISING FROM
ANY
OTHER PARTY’S SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER
FAULT.
Section
9.9 Tax
Indemnity.
Notwithstanding anything in this Article IX to the contrary, all Losses
relating
to Taxes which are the subject of Article VII shall only be subject to
indemnification under Article VII.
Section
9.10 Security.
Until
the third anniversary of the Closing Date, Sellers shall provide security
to
Buyers in the form of a letter of credit, in form and substance reasonably
satisfactory to Buyers, in an initial amount equal to the Cap Amount (such
amount to be reduced by the amount of any payments made by Sellers in respect
of
their indemnification obligations under this Article IX) for the purpose
of
satisfying claims by Buyers for indemnification under this Article IX.
After
such third anniversary, in the event that Buyers shall have submitted to
Sellers, prior to such third anniversary, written notice of a claimed breach,
inaccuracy or non-fulfillment of any representation, warranty, covenant,
agreement or obligation, Sellers shall provide such further security to
Buyers
(in the form of a bond, letter of credit or other means reasonably acceptable
to
Buyers) in an amount equal to the lesser of the Cap Amount and the amount
of the
Loss in question.
ARTICLE
X
TERMINATION
Section
10.1 Termination.
At
any
time prior to the Closing, this Agreement may be terminated and the transactions
contemplated hereby abandoned:
(a) by
the
mutual consent of Buyers and Sellers as evidenced in writing signed by
each of
Buyers and Sellers;
63
(b) by
Buyers, if there has been a material breach by Sellers of any representation,
warranty or covenant contained in this Agreement which has prevented the
satisfaction of any condition to the obligations of Buyers at the Closing
and,
if such breach is of a character that it is capable of being cured, such
breach
has not been cured by Sellers within 30 days after written notice thereof
from
Buyers;
(c) by
Sellers, if there has been a material breach by Buyers of any representation,
warranty or covenant contained in this Agreement which has prevented the
satisfaction of any condition to the obligations of Sellers at the Closing
and,
if such breach is of a character that it is capable of being cured, such
breach
has not been cured by Buyers within 30 days after written notice thereof
from
Sellers;
(d) by
either
Buyers or Sellers if any Governmental Authority having competent jurisdiction
has issued a final, non-appealable order, decree, ruling or injunction
(other
than a temporary restraining order) or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by
this Agreement; or
(e) by
either
Buyers or Sellers, if the Closing has not occurred on or before March 1,
2006
(provided that if the Closing shall not have occurred by such date solely
as a
result of the conditions relating to the HSR Act set forth in either Section
8.1(a) or 8.2(a) not being satisfied, such date shall be extended to June
30,
2006), or such later date as the Parties may agree upon.
Section
10.2 Effect
of Termination. In
the
event of the termination of this Agreement pursuant to Section 10.1, this
Agreement, except for the provisions of Section 6.2(b), Section 6.15, this
Section 10.2 and all of Article XI, shall become void and have no effect,
without any liability on the part of any Party hereto or its directors,
officers, managers, members or partners; provided,
however,
that
(i) nothing in this Section 10.2 shall relieve any Party hereto of liability
for
a material breach of any of its obligations under this Agreement or a material
breach of any of its representations and warranties hereunder and (ii)
all
filings, applications and other submissions made pursuant to this Agreement,
to
the extent practicable, shall be withdrawn from the agency or other Person
to
which they were made or appropriately amended to reflect the termination
of the
transactions contemplated hereby. If it shall be judicially determined
that
termination of this Agreement was caused by an intentional breach of this
Agreement, then, in addition to other remedies at law or equity for breach
of
this Agreement, the Party so found to have intentionally breached this
Agreement
shall indemnify and hold harmless the other Parties hereto for their respective
out-of-pocket costs, including the fees and expenses of their counsel,
accountants, financial advisors and other experts and advisors, as well
as fees
and expenses incident to the negotiation, preparation and execution of
this
Agreement and related documentation. The Confidentiality Agreement shall
not be
affected by a termination of this Agreement.
64
ARTICLE
XI
MISCELLANEOUS
Section
11.1 Notices.
All
demands, notices, consents, approvals, reports, requests and other
communications hereunder must be in writing and shall be considered duly
delivered if personally delivered, mailed by certified mail with postage
prepaid
(return receipt requested), sent by messenger or nationally recognized
overnight
courier service, or sent by facsimile to the addresses of the Parties as
follows:
(a) If
to LP
Interest Buyer, to:
Southern
Union Gathering LLC
0000
Xxxxxxxxxx Xxxx
Xxxxxxx,
XX 00000
Attn:
Xxxxxx X. Xxxxxxxx, Esq.
Telecopy:
713/989-1213
with
a
copy to:
Xxxxxxxxxx
and Xxxxx, LLP
0000
Xxxxxxxxxxxx Xxxxxx, XX, Xxxxx 000
Xxxxxxxxxx,
XX 00000
Attn:
Xxxx Xxxxxx, Esq.
Telecopy:
202/265-5706
(b) If
to GP
Interest Buyer, to:
Southern
Union Panhandle LLC
0000
Xxxxxxxxxx Xxxx
Xxxxxxx,
XX 00000
Attn:
Xxxxxx X. Xxxxxxxx, Esq.
Telecopy:
713/989-1213
with
a
copy to:
Xxxxxxxxxx
and Xxxxx, LLP
0000
Xxxxxxxxxxxx Xxxxxx, XX, Xxxxx 000
Xxxxxxxxxx,
XX 00000
Attn:
Xxxx Xxxxxx, Esq.
Telecopy:
202/265-5706
(c)If
to
SRCG, to:
SRCG,
Ltd.
000
Xxxx
Xxxxxx, Xxxxx 0000
Xxxx
Xxxxx, Xxxxx 00000
Attention:
Xxxxxxx X. Xxxxxxx
Telecopy:
(000) 000-0000
65
with
a
copy to:
Xxxxx,
Xxxx & Xxxxxxx, P.C.
000
Xxxx
Xxxxxx, Xxxxx 0000
Xxxx
Xxxxx, Xxxxx 00000
Attention:
Xxxxxx X. Xxxxxx, Esq.
Xxxxx
X.
Xxxxxx, Esq.
Telecopy:
(000) 000-0000
(d) If
to
Genpar, to:
SRCG
Genpar, L.P.
000
Xxxx
Xxxxxx, Xxxxx 0000
Xxxx
Xxxxx, Xxxxx 00000
Attention:
Xxxxxxx X. Xxxxxxx
Telecopy:
(000) 000-0000
with
a
copy to:
Xxxxx,
Xxxx & Xxxxxxx, P.C.
000
Xxxx
Xxxxxx, Xxxxx 0000
Xxxx
Xxxxx, Xxxxx 00000
Attention:
Xxxxxx X. Xxxxxx, Esq.
Xxxxx
X.
Xxxxxx, Esq.
Telecopy:
(000) 000-0000
or
to
such other address or addresses as a Party may from time to time designate
by
written notice to the other Parties in the manner in this Section 11.1.
Notice
by mail shall be deemed to have been duly given and received on the third
day
after posting. Notice by messenger, nationally recognized overnight courier
service, facsimile transmission or personal delivery shall be deemed given
on
the date of actual delivery.
Section
11.2 Assignment.
(a) Except
as
set forth in Section 11.2(b), no Party may assign this Agreement or any
part of
its rights or obligations hereunder without the prior written consent of
the
other Parties. Any attempted assignment in violation of this Section 11.2
shall
be null and void.
(b) Buyers
shall have the right to structure this transaction so that it qualifies,
in
whole or in part, under the exchange provisions of Section 1031 of the
Code. In
the event Buyers elect to structure this transaction so that it qualifies
under
such provisions, Sellers shall cooperate with Buyers at no cost or liability
to
Sellers in connection with efforts to effect the exchange transaction,
including
any reasonable use of a “qualified intermediary” or an “exchange accommodation
titleholder” within the meaning of the United States Treasury Regulations and
related authority (collectively, the “Qualified
Intermediary”).
In
order to
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implement
such structure, (i) Buyers may, upon written notice to Sellers, assign
all or
part of their rights under this Agreement to a third party designated by
Buyers
to act as a Qualified Intermediary; (ii) Sellers shall, and hereby agree
to,
acknowledge such assignment in writing and to accept payment of all or
a portion
of the Purchase Price from the Qualified Intermediary; and (iii) at Closing,
Sellers shall convey the Purchased Interests directly to Buyers, Buyers'
designee, or the Qualified Intermediary, as the case may be. Sellers shall
have
no responsibility or liability to Buyers or any other person for the
qualification of Buyers' purported exchange transaction under Section 1031
of
the Code. Sellers shall not be required to incur any additional expense
or
liability as a result of such cooperation, exchange or assignment. Buyers
shall
indemnify, defend and hold Sellers harmless from and against any and all
claims,
damages, liabilities, losses, costs and expenses, including, without limitation,
court costs and reasonable attorneys’ fees and paralegals’ fees and
disbursements, arising out of or in any way connected with the exchange
that
Sellers would not have incurred but for the exchange.
Section
11.3 Benefits
of Agreement. All
of
the terms and provisions of this Agreement shall be binding upon and inure
to
the benefit of the parties hereto and their respective successors and permitted
assigns. Except for the provisions of Article IX, this Agreement is for
the sole
benefit of the parties hereto and not for the benefit of any third
party.
Section
11.4 Expenses.
Except
as
otherwise provided herein, each Party shall bear its own expenses incurred
in
connection with this Agreement and the transactions contemplated hereby
whether
or not such transactions shall be consummated, including all fees of its
legal
counsel, financial advisers and accountants.
Section
11.5 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which
shall be
deemed an original, but all of which together shall constitute one and
the same
instrument. Delivery of an executed counterpart of a signature page to
this
Agreement by facsimile or other electronic transmission shall be effective
as
delivery of a manually executed original counterpart of this
Agreement.
Section
11.6 Entire
Agreement. This
Agreement (together with the Disclosure Schedule and any Exhibits hereto),
the
Confidentiality Agreement and all certificates, documents, instruments
and
writings that are delivered pursuant hereto constitute the entire understanding
among the Parties with respect to the transactions contemplated hereby
and
supersede all prior arrangements, understandings and agreements, whether
written
or oral, relating to the subject matter of this Agreement and all prior
drafts
of this Agreement, all of which are merged into this Agreement.
Section
11.7 Disclosure
Schedule. Unless
the context otherwise requires, all capitalized terms used in the Disclosure
Schedule shall have the respective meanings assigned in this Agreement.
No
reference to or disclosure of any item or other matter in the Disclosure
Schedule shall be construed as an admission or indication that such item
or
other matter is material or that such item or other
67
matter
is
required to be referred to or disclosed in the Disclosure Schedule. No
disclosure in the Disclosure Schedule relating to any possible breach or
violation of any agreement or Law shall be construed as an admission or
indication that any such breach or violation exists or has actually occurred.
The inclusion of any information in the Disclosure Schedule shall not be
deemed
to be an admission or acknowledgment by Sellers, in and of itself, that
such
information is material to or outside the ordinary course of the business
of the
Partnership Companies or required to be disclosed on the Disclosure Schedule.
Each disclosure in the Disclosure Schedule shall constitute disclosure
for
purposes of the corresponding Sections or subsections of this Agreement
expressly referred to in the Disclosure Schedule and any other Section
or
subsection to the extent such disclosure is made in such a way as to make
its
relevance to such other Section or subsection readily apparent on its face.
Section
11.8 Acknowledgment
by Buyers. Buyers
have not relied on any representation or warranty from Sellers or any of
their
respective Affiliates, except as set forth in this Agreement.
Section
11.9 Amendments
and Waivers. This
Agreement may be amended, modified, superseded or cancelled, in whole or
in
part, only by a written instrument duly executed by each of the Parties
hereto.
Any of the terms of this Agreement and any condition to a Party’s obligations
hereunder may be waived at any time by the Party that is entitled to the
benefit
thereof, but no such waiver shall be effective unless set forth in a written
instrument duly executed by or on behalf of the Party or Parties waiving
such
term or condition. No waiver by any Party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed
as a
waiver of the same or any other term or condition of this Agreement on
any
future occasion. All remedies, either under this Agreement or by law or
other
afforded, will be cumulative and not alternative.
Section
11.10 Publicity.
Except
as
may otherwise be required by securities Laws and public announcements or
disclosures that are, in the reasonable opinion of the Party proposing
to make
the announcement or disclosure, legally required to be made, prior to the
Closing there shall be no press release or public communication concerning
the
transactions contemplated by this Agreement by any Party except with the
prior
written consent of the Party not originating such press release or
communication, which consent shall not be unreasonably withheld or delayed.
Prior to the Closing, Buyers and Sellers will consult in advance on the
necessity for, and the timing and content of, any communications to be
made to
the public and, subject to legal constraints, to the form and content of
any
application or report to be made to any Governmental Authority that relates
to
the transactions contemplated by this Agreement.
Section
11.11 Severability.
If
any
provision of this Agreement is held invalid or unenforceable by any court
of
competent jurisdiction, the other provisions of this Agreement shall remain
in
full force and effect. The Parties further agree that if any provision
contained
herein is, to any extent, held invalid or unenforceable in any respect
under the
Laws governing this Agreement, they shall take any actions necessary to
render
the remaining provisions of this Agreement valid and enforceable to the
fullest
extent permitted by Law and, to the extent necessary, shall amend or otherwise
68
modify
this Agreement to replace any provision contained herein that is held invalid
or
unenforceable with a valid and enforceable provision giving effect to the
intent
of the Parties to the greatest extent legally permissible.
Section
11.12 Governing
Law; Jurisdiction.
(a) This
Agreement shall be governed and construed in accordance with the Laws of
the
State of Texas without regard to the Laws that might be applicable under
conflicts or choice of law rules or principles.
(b) Each
Party hereby irrevocably consents to the exclusive personal jurisdiction
and
venue of the courts of the State of Texas and the federal courts of the
United
States of America sitting in Xxxxxx County, Texas, and appropriate appellate
courts therefrom over any dispute arising out of or relating to this Agreement
or any of the transactions contemplated hereby, and each Party hereby
irrevocably agrees that all claims in respect of such dispute or proceeding
may
be heard and determined in such courts. The Parties hereby irrevocably
waive, to
the fullest extent permitted by Law, any objection which they may now or
hereafter have to the laying of venue of any dispute arising out of or
relating
to this Agreement or any of the transactions contemplated hereby brought
in such
court or any defense of lack of personal jurisdiction or inconvenient forum
or
any similar defense for the maintenance of such dispute. Each Party agrees
that
a judgment in any such dispute may be enforced in other jurisdictions by
suit on
the judgment or in any other manner provided by Law. This consent to
jurisdiction is being given solely for purposes of this Agreement and is
not
intended for and shall not confer consent to jurisdiction with respect
to any
other dispute in which a Party to this Agreement may become
involved.
69
IN
WITNESS WHEREOF this Agreement has been duly executed and delivered by
each
Party as of the date first above written.
SELLERS:
SRCG,
LTD.
By:
SRCG Genpar, L.P., general partner
By:
SRCG Genpar GP, L.L.C., general
partner
By:
/s/
Xxxxx X. Xxxxxx
Name:
Xxxxx
X. Xxxxxx
Title:
President
SRCG
GENPAR, L.P.
By:
SRCG
Genpar GP, L.L.C., general partner
By:
/s/
Xxxxx X. Xxxxxx
Name:
Xxxxx
X. Xxxxxx
Title:
President
BUYERS:
SOUTHERN
UNION PANHANDLE LLC
By:
/s/
Xxxxxx X. Xxxx
Name:
Xxxxxx
X. Xxxx
Title:
Manager
SOUTHERN
UNION GATHERING COMPANY LLC
By:
Southern Union Company, its sole member
By:
/s/
Xxxxx X. Xxxxxxx
Name:
Xxxxx
X. Xxxxxxx
Title:
Senior
Vice President and Chief Financial Officer
70