EXHIBIT 10.77
EXECUTION COPY
PURCHASE AGREEMENT
by and between
The Xxxxxxxx Companies, Inc., Xxxxxxxx Gas Pipeline Company, LLC,
Xxxxxxxx Western Pipeline Company LLC, and Kern River Acquisition, LLC,
as Sellers
and
MidAmerican Energy Holdings Company, KR Holding, LLC,
KR Acquisition I, LLC and KR Acquisition 2, LLC,
as Buyers,
for the purchase and sale of
all general partnership interests of
Kern River Gas Transmission Company,
a Texas general partnership
Dated as of
March 7, 2002
TABLE OF CONTENTS
Page
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ARTICLE I.
SALE AND PURCHASE
SECTION 1.1. Agreement to Sell and to Purchase 2
SECTION 1.2. Closing 2
SECTION 1.3. Purchase Price 2
SECTION 1.4. Adjustment to Purchase Price 2
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
SECTION 2.1. Corporate Organization 6
SECTION 2.2. Capitalization; Title 6
SECTION 2.3. Subsidiaries and Equity Interests 6
SECTION 2.4. Validity of Agreement; Authorization 7
SECTION 2.5. No Conflict or Violation 7
SECTION 2.6. Consents and Approvals 7
SECTION 2.7. Financial Statements 7
SECTION 2.8. Absence of Certain Changes or Events 8
SECTION 2.9. Tax Matters 8
SECTION 2.10. Absence of Undisclosed Liabilities 9
SECTION 2.11. Real and Personal Property; Sufficiency of Assets of the
Company 9
SECTION 2.12. Regulatory Matters 11
SECTION 2.13. Intellectual Property 11
SECTION 2.14. Licenses, Permits and Governmental Approvals 14
SECTION 2.15. Compliance with Law 14
SECTION 2.16. Litigation 15
SECTION 2.17. Contracts 15
SECTION 2.18. Books and Records of the Company 16
SECTION 2.19. Expansion Projects 16
SECTION 2.20. Employee Plans 16
SECTION 2.21. Existing Firm Transportation Customers; Expansion
Customers 17
SECTION 2.22. Insurance 17
SECTION 2.23. Transactions with Directors, Officers and Affiliates 18
SECTION 2.24. Environmental; Health and Safety Matters 18
SECTION 2.25. Brokers 21
Table of Contents
(continued)
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
SECTION 3.1. Corporate Organization 21
SECTION 3.2. Validity of Agreement 21
SECTION 3.3. No Conflict or Violation; No Defaults 21
SECTION 3.4. Consents and Approvals 21
SECTION 3.5. Brokers 22
SECTION 3.6. Financial Ability 22
ARTICLE IV.
COVENANTS
SECTION 4.1. Certain Changes and Conduct of Business 22
SECTION 4.2. Access to Properties and Records 24
SECTION 4.3. Employee Matters 24
SECTION 4.4. Consents and Approvals 26
SECTION 4.5. Further Assurances 26
SECTION 4.6. Reasonable Best Efforts 26
SECTION 4.7. Notice of Breach 27
SECTION 4.8. Confidential Information 27
SECTION 4.9. Non-Solicitation of Clients and Employees 27
SECTION 4.10. Negotiations 29
SECTION 4.11. Tax Covenants 29
SECTION 4.12. Development of Migration Plan 30
SECTION 4.13. Guarantees 31
SECTION 4.14. Bonds 31
SECTION 4.15. Insurance 31
SECTION 4.16. Audited Financial Statements 31
SECTION 4.17. Master Alliance Agreement 31
SECTION 4.18. Expansion Projects 32
SECTION 4.19. Covenant to Assign 32
SECTION 4.20. Manuals 33
SECTION 4.21. Trademark License 33
SECTION 4.22. Software License 34
ARTICLE V.
CONDITIONS TO OBLIGATIONS OF THE BUYERS
SECTION 5.1. Receipt of Documents 35
SECTION 5.2. Representations and Warranties of the Sellers 35
SECTION 5.3. Performance of the Sellers' Obligations 35
Table of Contents
(continued)
Page
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SECTION 5.4 Consents and Approvals 35
SECTION 5.5. No Violation of Orders 35
SECTION 5.6. No Material Adverse Change 36
SECTION 5.7. Intentionally deleted 36
SECTION 5.8. Opinion of Counsel 36
SECTION 5.9. Transition Services and Construction Management
Agreement 36
SECTION 5.10. Resignations 36
SECTION 5.11. Seller Parent Stock Purchase 36
SECTION 5.12. Tax Certificate 36
SECTION 5.13. Financial Statements 37
SECTION 5.14. Ratings 37
SECTION 5.15. Workforce Agreement 37
ARTICLE VI.
CONDITIONS TO OBLIGATIONS OF THE SELLERS
SECTION 6.1. Representations and Warranties of the Buyers 37
SECTION 6.2. Performance of the Buyers' Obligations 37
SECTION 6.3. Consents and Approvals 37
SECTION 6.4. No Violation of Orders 38
SECTION 6.5. Seller Parent Stock Purchase 38
SECTION 6.6. Opinion of Counsel 38
SECTION 6.7. Services Agreement 38
SECTION 6.8. Ratings 38
SECTION 6.9. Workforce Agreement 38
SECTION 6.10. Receipt of Documents 38
ARTICLE VII.
TERMINATION AND ABANDONMENT
SECTION 7.1. Methods of Termination; Upset Date 38
SECTION 7.2. Procedure Upon Termination 39
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.1. Survival 40
SECTION 8.2. Indemnification Coverage 40
SECTION 8.3. Procedures 42
SECTION 8.4. Remedy 42
Table of Contents
(continued)
ARTICLE IX.
MISCELLANEOUS PROVISIONS
SECTION 9.1. Common Facilities 42
SECTION 9.2. Publicity 42
SECTION 9.3. Successors and Assigns; No Third-Party Beneficiaries 43
SECTION 9.4. Investment Bankers, Financial Advisors, Brokers and
Finders 43
SECTION 9.5. Fees and Expenses 43
SECTION 9.6. Notices 43
SECTION 9.7. Entire Agreement 45
SECTION 9.8. Waivers and Amendments 45
SECTION 9.9. Severability 45
SECTION 9.10. Titles and Headings 45
SECTION 9.11. Signatures and Counterparts 45
SECTION 9.12. Enforcement of the Agreement 45
SECTION 9.13. Governing Law 46
SECTION 9.14. Certain Definitions 46
SECTION 9.15. Consent to Jurisdiction; Exclusive Forum 47
Disclosure Schedules
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Schedule 1.4 Working Capital
Schedule 2.1 Corporate Organization
Schedule 2.2 Capitalization; Title
Schedule 2.5 No Conflict or Violation
Schedule 2.6 Consents and Approvals
Schedule 2.7 Financial Statements
Schedule 2.8 Absence of Certain Changes or Events
Schedule 2.9 Tax Matters
Schedule 2.10 Absence of Undisclosed Liabilities
Schedule 2.11 Real and Personal Property; Sufficiency of Assets of the Company
Schedule 2.13 Intellectual Property
Schedule 2.14 Licenses, Permits and Governmental Approvals
Schedule 2.15 Compliance with Law
Schedule 2.16 Litigation
Schedule 2.17 Contracts
Schedule 2.19 Expansion Projects
Schedule 2.20 Employee Plans
Schedule 2.21 Existing Firm Transportation Customers; Expansion Customers
Schedule 2.22 Insurance
Schedule 2.23 Transactions with Directors, Officers and Affiliates
Schedule 2.24 Environmental; Health and Safety Matters
Schedule 2.25 Sellers' Brokers
Schedule 3.4 Consents and Approvals
Schedule 3.5 Buyers' Brokers
Schedule 4.1 Certain Changes and Conduct of Business
Schedule 4.12 Development of Migration Plan
Schedule 4.17 Master Alliance Agreement
Schedule 4.18 Expansion Projects
Schedule 5.4 Consents arid Approvals
Schedule 5.7 Discharge of Indebtedness; Release of Liens
Schedule 5.8 Opinion of Counsel
Schedule 5.9 Transition Services and Construction Management Agreement
Schedule 5.10 Resignations
Schedule 5.12 Tax Certificate
Schedule 5.15 Workforce Agreement
Schedule 6.3 Consents and Approvals
Schedule 6.6 Opinion of Counsel
Schedule 8.2 Indemnification Coverage
Index of Defined Terms
1935 Act 11
1Line System 46
2000 Audited Financial Statements 7
2001 Financial Statements 7
2002 Expansion Project 47
2003 Expansion Project 47
Adjusted Holdback Amount 5
affiliate 46
Agreement 1
Assigned Assets 13
Audited Financial Statements 37
Base Statement 2
Base Statement Working Capital 2
Xxxx of Sale 2
Bonds 31
Business Employees 16
Buyer Holdco 1
Buyer Indemnified Parties 40
Buyer Parent 1
Buyer1 1
Buyer2 1
Buyers 1
Buyers Savings Plan 25
Cap 41
CERCLA 20
Closing 2
Closing Date 2
Closing Statement 2
Code 9
COM 10
Commitment 15
Commitments Is
Common Facilities 10
Company 1
Company Customer 28
CPA Firm 3
Current Assets 2
Current Liabilities 2
Deductible 41
Disclosure Schedule Update 27
Employee Plans 16
Encumbrances 2
Environmental Claim 19
Environmental Costs and Liabilities 20
Environmental Law 20
Environmental Permits 18
ERISA 16
Expansion Certificate 5
Expansion Customers 17
Expansion Projects 46
Fee Property 10
FERC 7
Final Closing Statement 3
Financial Statements 7
Firm Transportation Customers 17
Governmental Authority 7
Hazardous Material 20
High Desert Project 46
Holdback Amount 4
Holdback Payment Date 4
Holdco 1
HSR Act 26
Intellectual Property 12
Interests 1
Legal Proceeding 15
LIBOR 5
License 14
License Period 33
Licensed Software 34
Licenses 14
Listed Intellectual Property 12
LLC1 1
LLC2 1
Loss 40
Material Adverse Effect 46
Migration Plan 30
Mixed Information 27
NGA 11
Notes Indenture 37
Objection 3
Organizational Documents 6
Permitted Encumbrances 10
Person 46
Pipeline 46
Policies 17
Pre-Closing Tax Period 30
Property Restrictions 10
Protected Information 27
Purchase Price 2
RAP 7
RCRA 20
Real Property 9
Release 20
Restricted GTC Employees 25
Review Period 3
Rights of Way 9
Securities Act 18
Seller Customer 29
Seller Indemnified Parties 40
Seller Parent 1
Seller Parent and its Other Subsidiaries 27
Seller Plans 16
Seller Savings Plan 25
Sellers 1
Sellers Marks 33
Services Agreement 36
Straddle Period 30
Straddle Tax Return 30
Subsidiary 6
Tax 8
Tax Returns 8
Taxes 8
Threshold 41
Transfer Date 25
Transfer Taxes 30
Transferred Employees 25
Workforce Agreement 37
Working Capital 2
PURCHASE AGREEMENT
THIS
PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 7th day of March, 2002, by and between The Xxxxxxxx Companies,
Inc., a
Delaware corporation ("Seller Parent"), Xxxxxxxx Gas Pipeline Company,
LLC, a
Delaware limited liability Company ("Holdco"), Xxxxxxxx Western Pipeline
Company LLC, a
Delaware limited liability company ("LLC1"), Kern River
Acquisition, LLC, a
Delaware limited liability company ("LLC2", and together
with Seller Parent, Holdco and LLC1, the "Sellers"), MidAmerican Energy Holdings
Company, an Iowa corporation ("Buyer Parent"), KR Holding, LLC, a
Delaware
limited liability company ("Buyer Holdco"), KR Acquisition 1, LLC, a
Delaware
limited liability company ("Buyer1") and KR Acquisition 2, LLC, a
Delaware
limited liability company ("Buyer2", and together with Buyer Parent, Buyer
Holdco and Buyer1, the "Buyers").
WITNESSETH:
WHEREAS, Seller Parent owns 100% of the issued and outstanding
limited liability company interests of Holdco; and
WHEREAS, Holdco owns 100% of the issued and outstanding
limited liability company interests of LLC1 and 100% of the issued and
outstanding limited liability company interests of LLC2; and
WHEREAS, LLC1 and LLC2 each own 50% of the partnership
interests (collectively, the "Interests") of Kern River Gas Transmission
Company, a Texas general partnership (the "Company"); and
WHEREAS, Buyer Parent owns 100% of the issued and outstanding
limited liability company interests of Buyer Holdco; and
WHEREAS, Buyer Holdco owns 100% of the issued and outstanding
limited liability company interests of Buyer1 and 100% of the issued and
outstanding limited liability company interests of Buyer2; and
WHEREAS, Buyer1 desires to purchase all of the Interests held
by LLC1, and LLC1 desires to sell its Interests to Buyer1, in each case upon the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS, Buyer2 desires to purchase all of the Interests held
by LLC2, and LLC2 desires to sell its Interests to Buyer2, in each case upon the
terms and subject to the conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of the mutual terms,
conditions and other agreements set forth herein, the parties hereto hereby
agree as follows:
ARTICLE I.
SALE AND PURCHASE
SECTION 1.1. Agreement to Sell and to Purchase. On the Closing
Date (as hereinafter defined) and upon the terms and subject to the conditions
set forth in this Agreement: (a) LLC1 shall sell, assign, transfer, convey and
deliver all of its Interests, free and clear of any pledges, restrictions on
transfer, proxies and voting or other agreements, liens, claims, charges,
mortgages, security interests or other legal or equitable encumbrances,
limitations or restrictions of any nature whatsoever ("Encumbrances" ), to
Buyer, and Buyer shall purchase and accept such Interests from LLC1; and (b)
LLC2 shall sell, assign, transfer, convey and deliver all of its Interests, free
and clear of any Encumbrances to Buyer2, and Buyer2 shall purchase and accept
such Interests from LLC2.
SECTION 1.2. Closing. The closings of such sales and purchases
of the Interests (together, the "Closing") shall take place at 10:00 A.M., one
day after the satisfaction of the conditions contained in Article V and VI
(other than those conditions that by their nature are to be fulfilled at
Closing), or at such other time and date as the parties hereto shall agree in
writing (the "Closing Xxxx"), at the offices of Xxxxxxx Xxxx & Xxxxxxxxx, 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as the parties
hereto shall agree in writing. At the Closing, the Sellers shall deliver to the
Buyers or their designees a duly executed xxxx of sale, in form and substance
reasonably satisfactory to the Buyers and the Sellers, transferring the
Interests in the Company (the "Xxxx of Sale"). In full consideration and
exchange for the Interests, (a) Buyer I shall thereupon pay to LLC I one-half of
the Purchase Price as provided in Section 1.3 hereof; and (b) Buyer2 shall
thereupon pay to LLC2 one-half of the Purchase Price as provided in Section 1.3
hereof. Neither Buyer1 nor Buyer2 shall have any obligation to purchase, nor
LLC1 or LLC2 an obligation to sell, any Interests unless all of the Interests
are to be sold on the Closing Date.
SECTION 1.3. Purchase Price. The aggregate purchase price for
the Interests shall be $450,000,000 as adjusted by Section 1.4 (the "Purchase
Price").
SECTION 1.4. Adjustment to Purchase Price. (a) Schedule 1.4(a)
contains a statement prepared by the Sellers setting forth in reasonable detail
the amount of Working Capital of the Company as of December 31, 2001 (the "Base
Statement"). For purposes of this Agreement, "Working Capital" shall mean
Current Assets less Current Liabilities; "Current Assets" shall mean current
assets, excluding inventories, materials and supplies and prepaid amounts; and
"Current Liabilities" shall mean current liabilities, excluding the current
portion of long-term debt and any accounts payable to the Sellers or any of the
Sellers' affiliates related to the 1Line System (as defined in Section 9.14). On
the Closing Date, the Sellers shall pay to the Buyers $13,702,000, which is the
aggregate excess of the Current Liabilities over the Current Assets on the Base
Statement and is shown as a negative amount on the Base Statement ("Base
Statement Working Capital"). At least three days prior to the Closing Date, the
Sellers shall prepare and deliver to the Buyers a statement (the "Closing
Statement"), which shall set forth in reasonable detail the amount of Working
Capital of the Company as of December 31, 2001 based upon the Audited Financial
Statements (as hereinafter defined). The Base Statement shall be
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prepared in accordance with RAP (as hereinafter defined) and on a basis
consistent with the 2001 Financial Statements (as defined in Section 2.7(a),
using the same accounting methods, policies, practices. procedures and
adjustments as were used in the preparation of the 2001 Financial Statements.
The Closing Statement shall be prepared in accordance with RAP and on a basis
consistent with the 2001 Financial Statements and the Audited Financial
Statements, using the same accounting methods, policies, practices, procedures
and adjustments as were used in the preparation of the 2001 Financial Statements
and the Audited Financial Statements.
(b) The Buyers shall have 20 days to review the Closing
Statement and to inform the Sellers in writing of any disagreement (the
"Objection") which they may have with the Closing Statement. If the Sellers do
not receive the Objection within such 20-day period, the amount of Working
Capital set forth on the Closing Statement delivered pursuant to Section 1.4(a)
shall be deemed to have been accepted by the Buyers and shall become the Final
Closing Statement. If the Buyers do timely deliver an Objection to the Sellers,
the Sellers shall then have 20 days from the date of receipt (the "Review
Period") to review and respond to the Objection. The Buyers and the Sellers
shall attempt in good faith to resolve any disagreements with respect to the
determination of the Working Capital of the Company as of December 31, 2001. If
they are unable to resolve all of their disagreements with respect to the
determination of Working Capital of the Company as of December 31, 2001, within
10 days following the expiration of the Sellers' Review Period, they may refer,
at the option of either the Buyers or the Sellers, their differences to Price
Waterhouse Coopers, or if Price Waterhouse Coopers declines to accept such
engagement, to an internationally recognized firm of independent public
accountants selected jointly by the Buyers and the Sellers, who shall determine
only with respect to the differences so submitted, whether and to what extent,
if any, the amount of Working Capital of the Company as of December 31, 2001 set
forth in the Closing Statement requires adjustment. If the Buyers and the
Sellers are unable to so select the independent public accountants within five
days of Price Waterhouse Coopers declining to accept such engagement, either the
Buyers or the Sellers may thereafter request that the American Arbitration
Association make such selection (as applicable, Price Waterhouse Coopers, the
firm selected by the Buyers and the Sellers or the firm selected by the American
Arbitration Association is referred to as the "CPA Firm"). The Buyers and the
Sellers shall direct the CPA Firm to use its reasonable best efforts to render
its determination within 30 days. The CPA Firm's determination shall be
conclusive and binding upon the Buyers and the Sellers. The fees and
disbursements of the CPA Firm shall be shared equally by the Buyers and the
Sellers. The Buyers and the Sellers shall make readily available to the CPA Firm
all relevant books and records relating to the determination of Working Capital
and all other items reasonably requested by the CPA Firm. The Closing Statement
as agreed to by the Buyers or the Sellers or as determined by the CPA firm shall
be referred to as the "Final Closing Statement."
(c) Within three business days after the Closing Statement
becomes the Final Closing Statement, if Working Capital on the Final Closing
Statement exceeds Base Statement Working Capital, the Buyers shall pay such
excess to the Sellers, or if Base Statement Working Capital exceeds Working
Capital on the Final Closing Statement, the Sellers shall pay such excess to the
Buyers. All amounts payable under this Section 1.4(c) shall be paid within three
business days of determination of the Final Closing Statement by wire transfer
of immediately available funds to a bank account in the United States of America
designated in writing by the recipient not less than one business day before
such payment.
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(d) At Closing, the Sellers shall pay to the Buyers an
aggregate cash amount equal to any dividends or distributions made by the
Company after December 31, 2001 and through the Closing.
(e) On the Holdback Payment Date (as defined in Section
1.4(i)), the Buyers or the Company shall pay to the Sellers an aggregate cash
amount equal to any inter-company accounts payables and any inter-company notes
payables in each case of the Company, outstanding on the Closing Date; provided,
however, that any payables in accordance with The Xxxxxxxx Companies, Inc.
Federal and State Tax Allocation Procedure as of May 1, 1995 or any other
agreement or contractual arrangement attributable to Federal, state or local
income Taxes related to taxable income of the Company for any period after
December 31, 2001 shall be excluded from the payment required pursuant to this
Section 1.4(e).
(t) On the Holdback Payment Date, the Sellers or the Sellers'
affiliates shall pay to the Company an aggregate cash amount equal to any
inter-company accounts receivables and any inter-company notes receivables, in
each case of the Company, outstanding on the Closing Date.
(g) Prior to the Closing Date, the Sellers shall pay to the
Company an amount equal to any amounts paid by the Company to the Sellers or any
of the Sellers' affiliates after December 31, 2001 and prior to the Closing Date
for the accounts payable to the Sellers or any of the Sellers' affiliates
related to the 1Line System reflected in the Audited Financial Statements and
any remaining payable to the Sellers or any of the Sellers' affiliates related
to the 1Line System shall be cancelled. The Sellers shall separately pay to the
Buyers any amounts paid by the Company prior to December 31, 2001 for the I Line
System.
(h) The Sellers shall pay to the Buyers at Closing $11.5
million which represents $6 million for the portion of the January capital
expenditures for the 2003 Expansion Project agreed to be reimbursed and $5.5
million for certain payments pursuant to the Workforce Agreement, as defined in
Section 5.15.
(i) (A) If the Expansion Certificate (as defined below) has
not been issued by FERC on or prior to the 30th day after the Closing Date, then
on the next business day following such 30th day (the "Holdback Payment Date")
(i) LLC1 shall pay to Buyer1 an amount of cash equal to one-half of the Holdback
Amount, and (ii) LLC2 shall pay to Buyer2 an amount of cash equal to one-half of
the Holdback Amount. All amounts payable under this Section 1 .4(i)(A) shall be
paid by wire transfer of immediately available funds to a bank account in the
United States of America designated in writing by Buyers not less than one
business day before such payment. For purposes of this Agreement "Holdback
Amount" shall mean $32,500,000.
(B) If LLC 1 and LLC2 are required to make a payment pursuant
to Section 1 .4(i)(A) then, within three business days of the issuance by FERC
of the Expansion Certificate, (i) Buyer1 shall pay LLC1 an amount of cash equal
to one-half of the Adjusted Holdback Amount (as defined below), plus interest
accruing on such Adjusted Holdback Amount at
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LIBOR from the Holdback Payment Date up and through the date Buyer1 makes such
payment and (i) Buyer2 shall pay to LLC2 an amount of cash equal to one-half of
the Adjusted Holdback Amount, plus interest accruing on such Adjusted Holdback
Amount at LIBOR from the Holdback Payment Date up and through the date Buyer2
makes such payment. The interest referred to in this paragraph is a per annum
interest rate and shall be computed on the basis of a 360-day year consisting of
twelve 30-day months. All amounts payable under this Section 1.4(i)(5) shall be
paid by wire transfer of immediately available funds to a bank account in the
United States of America designated in writing by the Sellers not less than one
business day before such payment. For purposes of clarity, if the Expansion
Certificate is issued by FERC on or after February 1, 2003 then Buyer1 and
Buyer2 shall not be obligated to make any payment under this Section 1.4(i)(B).
(C) For purposes of this Section 1.4(i), the
following terms shall have the following meanings:
"Adjusted Holdback Amount" shall mean (i) $32,500,000 if the
Expansion Certificate is issued by FERC prior to August 1, 2002, (ii)
$27,625,000 if the Expansion Certificate is issued by FERC on or after August 1,
2002 and prior to September 1, 2002, (iii) $22,750,000 if the Expansion
Certificate is issued by FERC on or after September 1, 2002 and prior to October
1, 2002, (iv) $17,875,000 if the Expansion Certificate is issued by FERC on or
after October 1, 2002 and prior to November 1, 2002, (v) $13,000,000 if the
Expansion Certificate is issued by FERC on or after November 1, 2002 and prior
to December 1, 2002, (vi) $8,125,000 if the Expansion Certificate is issued by
FERC on or after December 1, 2002 and prior to January 1, 2003, (vii) $3,250,000
if the Expansion Certificate is issued by FERC on or after January 1,2003 arid
prior to February 1, 2003, and (viii) $0 if the Expansion Certificate is issued
by FERC on or after February 1, 2003.
"Expansion Certificate" shall mean a certificate of public
necessity and convenience in the Matter of Kern River Gas Transmission Company,
Docket No. CP0l-422, authorizing the Company to construct and operate the
additional facilities needed to expand its transportation capacity as described
in the Application for Certificate of Public Convenience and Necessity filed by
the Company in such proceeding and provided that such certificate does not
contain any terms or conditions that would materially adversely affect the
ability of the Company to construct, own and operate the expansion facilities as
contemplated by the parties as of the date of this Agreement.
"LIBOR" shall mean the average 30-day daily closing London
Interbank Offered Rate in effect on the dates between the Holdback Payment Date
and the date the Adjusted Holdback Amount is paid.
(j) The Buyers will have the right to dispute all amounts
calculated by the Sellers in Sections 1.4(d), 1.4(e), 1.4(1) and 1.4(g) (other
than such amounts which were outstanding on December 31, 2001) using similar
dispute resolution provisions described in Section 1.4(b).
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby jointly and severally represent and warrant
as follows:
SECTION 2.1. Corporate Organization. The Company is a general
partnership duly organized and validly existing under the laws of Texas. Each of
the Sellers is duly formed, validly existing and in good standing under the laws
of its jurisdiction of formation. The Company and each of its Subsidiaries (as
defined below) have all requisite power and authority and all governmental
licenses, authorizations, permits, consents and approvals to own their
respective properties and assets and to conduct their businesses as now
conducted, except for immaterial failures to have such licenses, authorizations,
permits, consents and approvals. The Company and each of its Subsidiaries are
duly qualified to do business as a foreign entity and are in good standing in
every jurisdiction where the character of the properties owned or leased by them
or the nature of the business conducted by them makes such qualification
necessary, except where the failure to be so qualified or in good standing would
not individually or in the aggregate have a Material Adverse Effect (as defined
in Section 9.14). Schedule 2.1 sets forth all of the jurisdictions in which the
Company and its Subsidiaries are qualified to do business. Copies of the
Organizational Documents of the Company and each of its Subsidiaries with all
amendments thereto to the date hereof, have been furnished by the Sellers to the
Buyers or their representatives, and such copies are accurate and complete as of
the date hereof. "Organizational Documents" shall mean certificates of
incorporation, by-laws, certificates of formation, limited liability company
operating agreements, partnership or limited partnership agreements or other
formation or governing documents of a particular entity.
SECTION 2.2. Capitalization; Title. All of the outstanding
partnership interests of the Company are owned of record and beneficially by
LLC1 and LLC2. All of the outstanding limited liability company interests of
each of LLC1 and LLC2 are owned of record and beneficially by a wholly-owned
subsidiary of the Seller Parent. All of the Interests have been duly authorized
and validly issued. Except for this Agreement and as set forth on Schedule 2.2,
there are no outstanding options, warrants, agreements, conversion rights,
preemptive rights or other rights to subscribe for, purchase or otherwise
acquire the Interests. There are no voting trusts or other agreements or
understandings to which any of the Sellers or the Company is a party with
respect to the voting of the Interests. There is no indebtedness of the Company
having general voting rights issued and outstanding. Except for this Agreement,
there are no outstanding obligations of any person to repurchase, redeem or
otherwise acquire outstanding Interests or any securities convertible into or
exchangeable for any Interests. LLC 1 and LLC2 have valid and marketable title
to the Interests and the sale and transfer of the Interests by LLC1 and LLC2 to
Buyer1 and Buyer2 hereunder will transfer title to the Interests to such buyers
free and clear of any Encumbrances.
SECTION 2.3. Subsidiaries and Equity Interests. The Company
has no Subsidiaries except Kern River Funding Corp. and does not own, directly
or indirectly, any shares of capital stock, voting rights or other equity
interests or investments in any other person.
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"Subsidiary" shall mean, with respect to the Company, any person of which (a) at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by the Company or by
any one or more of its other Subsidiaries or (b) the Company or any other
Subsidiary is a general partner (excluding any such partnership where the
Company or any Subsidiary of such party does not have a majority of the voting
interest in such partnership). The Company or any Subsidiary does not have any
rights to acquire by any means, directly or indirectly, any capital stock,
voting rights, equity interests or investments in another person.
SECTION 2.4. Validity of Agreement; Authorization. The Sellers
have the power to enter into this Agreement and to carry out their obligations
hereunder. The execution and delivery of this Agreement and the performance of
their obligations hereunder have been duly authorized by the Management
Committees of LLC1, LLC2 and Holdco and the Board of Directors of Seller Parent,
and no other proceedings on the part of the Sellers are necessary to authorize
such execution, delivery and performance. This Agreement has been duly executed
by the Sellers and constitutes the Sellers' valid and binding obligation
enforceable against the Sellers in accordance with its terms (except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar law affecting the enforcement of
creditors' rights generally or by general equitable principles).
SECTION 2.5. No Conflict or Violation. Except as set forth on
Schedule 2.5, the execution, delivery and performance by the Sellers of this
Agreement does not and will not: (a) violate or conflict with any provision of
the Organizational Documents of the Sellers; (b) materially violate any
applicable provision of a material law, statute, judgment, order, writ,
injunction, decree, award, rule, or regulation of any foreign, federal, tribal,
state or local government, court, arbitrator, agency or commission or other
governmental or regulatory body or authority ("Governmental Authority"); (c)
materially violate, result in a material breach of, constitute (with due notice
or lapse of time or both) a material default or cause any material obligation,
penalty or premium to arise or accrue under any material contract, lease, loan
agreement, mortgage, security agreement trust indenture or other material
agreement or instrument to which the Sellers, the Company, or any of its
Subsidiaries are a party or by which any of them is bound or to which any of
their respective properties or assets is subject; or (d) result in the creation
or imposition of any Encumbrance except Permitted Encumbrances upon any of the
properties or assets of the Company or any of its Subsidiaries.
SECTION 2.6. Consents and Approvals. Except as set forth on
Schedule 2.6, no material consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority, or any other
person (on the part of the Sellers or the Company), is required as a condition
to the execution and delivery of this Agreement by the Sellers or the
performance of the Sellers' obligations hereunder.
SECTION 2.7. Financial Statements. (a) The Sellers have
heretofore furnished to the Buyers copies of the unaudited balance sheet of the
Company as of December 31, 2001, together with the related statements of income,
partners' equity and cash flow for the period then ended and the notes thereto
("2001 Financial Statements" or the "Financial Statements"). Except
7
as set forth on Schedule 2.7(a), the 2001 Financial Statements, including the
notes thereto: (i) were prepared in accordance with the accounting principles
("]RAF') prescribed or permitted by the Federal Energy Regulatory Commission
("FERC") applied on a consistent basis with the audited balance sheet of the
Company as of December 31, 2000, together with the related statements of income,
partners' equity and cash flow for the period then ended and the notes thereto
("2000 Audited Financial Statements"); (ii) present fairly in all material
respects the consolidated financial position, results of operations and changes
in cash flow of the Company as of such date and for the period then ended
(subject to normal year-end audit adjustments consistent with prior periods);
and (iii) are complete and correct in all material respects, and have been
prepared based upon the books of account and records of the Company.
(b) The Audited Financial Statements, including the notes
thereto: (i) will be prepared in accordance with RAP applied on a consistent
basis with the 2000 Audited Financial Statements; (ii) will present fairly in
all material respects the consolidated financial position, results of operations
and changes in cash flow of the Company as of such date and for the period then
ended; and (iii) will be complete and correct in all material respects, and will
be prepared based upon the books of account and records of the Company.
SECTION 2.8. Absence of Certain Changes or Events. Except as
set forth in Schedule 2.8. since December 31, 2001, the business of the Company
and its Subsidiaries has been conducted in the ordinary course consistent with
past practices and neither the Company nor any of its Subsidiaries has taken any
of the actions described in Section 4.l(a)(i) through (xviii), except in
connection with entering into this Agreement. Since December 31, 2001 there has
not been:
(a) Destruction of, damage to, or loss of, any material asset
of the Company or any Subsidiary (whether or not covered by insurance);
(b) Any material citation received, or to the Sellers'
knowledge, any other citation received by the Company, the Sellers or any
Subsidiary for any violations of any act, law, rule, regulation, or code of any
Governmental Authority related to the activities or business of the Company or
any of its Subsidiaries; or
(c) Other event or condition of any character that has had, or
would reasonably be expected to have, a Material Adverse Effect.
SECTION 2.9. Tax Matters. (a) For purposes of this Agreement,
"Tax Returns" shall mean returns, reports, exhibits, schedules, information
statements and other documentation (including any additional or supporting
material) filed or maintained, or required to be filed or maintained, in
connection with the calculation, determination, assessment or collection of any
Tax and shall include any amended returns required as a result of examination
adjustments made by the Internal Revenue Service or other Tax authority. For
purposes of this Agreement, "Tax" or "Taxes" shall mean any and all Federal,
state, local, foreign and other taxes, levies, fees, imposts, duties and charges
of whatever kind (including any interest, penalties or additions to the tax
imposed in connection therewith or with respect thereto), including, without
limitation, taxes imposed on, or measured by, income, franchise, profits or
gross receipts, and also ad valorem,
8
value added, sales, use, service, real or personal property, capital stock,
license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premium, windfall profits, transfer and gains taxes and
customs duties.
(b) Except as disclosed on Schedule 2.9. (i) the Company has
filed (or joined in the filing of) when due all Tax Returns required by
applicable law to be filed with respect to the Company; (ii) all such Tax
Returns were true, correct and complete in all material respects as of the time
of such filing; (iii) all Taxes relating to periods ending on or before the
Closing Date owed by the Company (whether or not shown on any Tax Return) at any
time on or prior to the Closing Date, if required to have been paid, have been
paid (except for Taxes which are being contested in good faith inappropriate
proceedings), (iv) any liability of the Company for Taxes not yet due and
payable, or which are being contested in good faith in appropriate proceedings,
has been provided for on the financial statements of the Company in accordance
with RAP; (v) there is no action, suit, proceeding, investigation, audit or
claim now pending against, or with respect to, the Company in respect of any
material Tax or material Tax assessment, nor is any claim for additional
material Tax or material assessment asserted by any Tax authority; (vi) since
January 1, 1998, no written claim has been made by any Tax authority in a
jurisdiction where the Company (or the Sellers with respect to the Company) does
not currently file a Tax Return that it is or may be subject to Tax by such
jurisdiction, nor to the Sellers' knowledge is any such assertion threatened in
writing; (vii) the Company has no outstanding request for any extension of time
within which to pay its Taxes or file its Tax Returns; (viii) there has been no
waiver or extension of any applicable statute of limitations for the assessment
or collection of any Taxes of the Company; (ix) each of LLC1, LLC2 and the
Company have been disregarded entities for Federal income tax purposes for all
taxable periods beginning January 1, 2001 through and including the Closing
Date; (x) Seller Parent is not a "foreign person" within the meaning of Section
1445 of the United States Internal Revenue Code of 1986, as amended (the
"Code"); (xi) the Company is not a party to any agreement, whether written or
unwritten, providing for the payment of Taxes, payment for Tax losses,
entitlements to refunds or similar Tax matters; (xii) the Company has withheld
and paid all material Taxes required to be withheld by the Company in connection
with any amounts paid or owing to any employee, creditor, independent contractor
or other third party.
SECTION 2.10. Absence of Undisclosed Liabilities. Except as
disclosed on Schedule 2.10, the Company and its Subsidiaries have no material,
individually or in the aggregate, indebtedness or liability, absolute or
contingent, direct or indirect, which is not shown or provided for on the
consolidated balance sheets of the Company included in the 2001 Financial
Statements other than liabilities incurred or accrued in the ordinary course of
business (including liens of current taxes and assessments not in default) since
December 31, 2001.
SECTION 2.11. Real and Personal Property; Sufficiency of
Assets of the Company. (a) (i) Except as Set forth on Schedule 2.11(a)., the
Company or one of its Subsidiaries owns marketable fee title to, or holds a
valid leasehold, interest in or right-of-way easement (collectively, the "Rights
of Way") through, all real property ("Real Property") used or necessary for the
conduct of the Company's and its Subsidiaries' business as it is presently
conducted and as the Company's and its Subsidiaries' business is proposed to be
conducted in
9
connection with the 2002 Expansion Project, including, without limitation, all
real property required for the construction, operation and maintenance of the
Pipeline and have good and valid title to all of the material tangible assets
and properties which they own and which are reflected on the 2001 Financial
Statements (except for assets and properties sold, consumed or otherwise
disposed of in the ordinary course of business since the date of the 2001
Financial Statements), (ii) Schedule 2.11(a) sets forth a summary of types of
the Rights of Way obtained or to be obtained for the High Desert Project and the
2003 Expansion Project, and (iii) all such Real Property, assets and properties
(other than Rights of Way) are owned or leased free and clear of all
Encumbrances, except for (A) Encumbrances set forth on Schedule 2.11 (p), (B)
liens for current Taxes not yet due and payable or for Taxes the validity of
which is being contested in good faith, (C) Encumbrances to secure indebtedness
reflected on the 2001 Financial Statements, (D) Encumbrances which will be
discharged on or prior to the Closing Date, (E) Rights of Way, written
agreements, laws, ordinances and regulations affecting building use and
occupancy or reservations of interest in title (collectively, "Property
Restrictions") imposed or promulgated by law or any Governmental Authority with
respect to Real Property, including zoning regulations, provided they do not
materially adversely affect the current use of the applicable Real Property or
the use proposed in connection with the Expansion Projects, (F) mechanics',
carriers', workmen's and repairmen's liens and other Encumbrances, Property
Restrictions and other limitations of any kind, if any, which do not materially
detract from the value of or materially interfere with the present use or the
use proposed in connection with the Expansion Projects of any Real Property
subject thereto or affected thereby and which have arisen or been incurred in
the ordinary course of business and (G) Encumbrances that do not materially
detract from the value or materially interfere with the present use of the asset
subject thereto or the proposed use of the asset in connection with the
Expansion Projects (clauses (A) through (G) above referred to collectively as
"Permitted Encumbrances"). Schedule 2.11(a) sets forth a list of all Real
Property which the Company or one of its Subsidiaries owns in fee (such Real
Property, "Fee Property") and all Rights of Way owned by the Company or one of
its Subsidiaries. Except as set forth in Schedule 2.11(a), to the Company's
knowledge its interests in (1) the Fee Property are exclusive, indefeasible and
perpetual and (2) all Rights of Way are perpetual.
(b) There are no material structural defects relating to any
of the improvements to the Real Property and all tangible assets and property
owned or used by the Company or any of its Subsidiaries are in good operating
condition, ordinary wear and tear excepted. To the Company's knowledge, all
improvements to the real property owned or used by the Company or any of its
Subsidiaries do not encroach in any respect on property of others (other than
encroachments that would not materially impair the operations of the Company and
its Subsidiaries).
(c) Except as set forth on Schedule 2.11(c), and except for
Intellectual Property, the assets owned or licensed by the Company and its
Subsidiaries constitute all of the assets, properties and rights customarily
used by the Sellers, the Sellers' affiliates, the Company and the Subsidiaries
to conduct the business of the Company and its Subsidiaries and the operation of
its Pipeline as currently conducted.
(d) The Company has good and valid title to at least a 63.6%
tenancy-in-common interest in the assets comprising a certain jointly owned
segment of the Pipeline in California
10
(the "Common Facilities") extending from Daggett, California to Bakersfield,
California and the real estate associated therewith. After completion of the
2003 Expansion Project and pursuant to the Construction Operation and
Maintenance Agreement (the "COM") by and among the Company, Mojave Pipeline
Company and Mojave Pipeline Operation Company, dated August 29, 1989, as amended
November 30, 1990, November 1, 1993, May 30, 1995, March 27, 1996, November 27,
1996 and March 29, 1999, the Company will (i) have good and valid title to a
greater percentage interest in such Common Facilities than its current
percentage which percentage interest will be determined upon final determination
of the 2003 Expansion capital costs, (ii) be entitled to the exclusive use of
the incremental Theoretical Capacity (as defined in the COM) resulting from the
construction of the 2003 Expansion Project and (iii) be entitled to all revenues
arising from the provision of transportation services associated with its
marketing of such expanded capacity.
(e) Except as set forth on Schedule 2.11(e), there is no
pending or, to the Sellers' knowledge, threatened condemnation of any part of
the Real Property by any Governmental Authority which would materially adversely
affect the Company's (or its Subsidiaries') current use of the applicable Real
Property.
(f) With respect to those assets assigned to the Company or
the Buyers pursuant to Section 4.19, the Sellers and the Sellers' affiliates own
all right, title and interest in and to, or have valid and enforceable right to
use all equipment (including, without limitation, computer hardware, servers,
routers and PBX equipment) set forth on Schedule 2.11(c), free and clear of all
material Encumbrances (other than Permitted Encumbrances), and (ii) all such
equipment is in good operating condition, ordinary wear and tear excepted.
SECTION 2.12. Regulatory Matters. The Company is a "Natural
Gas Company" as that term is defined in Section 2 of the Natural Gas Act
("NGA"). The Company is not a "public utility company," "holding company" or
"subsidiary" or "affiliate" of a holding company as such terms are defined in
the Public Utility Holding Company Act of 1935 (the "1935 Act"). The Company is
in material compliance with all provisions of the NGA and all rules and
regulations promulgated by FERC pursuant thereto. The Company is in material
compliance with all orders issued by FERC that pertain to all terms and
conditions and rates charged for services. No approval of (i) the Securities and
Exchange Commission under the 1935 Act or (ii) FERC under the NGA or the Federal
Power Act is required in connection with the execution of this Agreement by the
Sellers or the transaction contemplated hereby with respect to the Sellers.
SECTION 2.13. Intellectual Property. (a) Except as set forth
on Schedule 2.13(a), the Company or its Subsidiaries own all right, title and
interest in and to, or have a valid license (enforceable by the Company or its
Subsidiaries in accordance with its terms (except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar law affecting the enforcement of creditors'
rights generally or by general equitable principles)) or other rights to use
(other than through the Sellers or their affiliates), all the material
Intellectual Property used by the Company, its Subsidiaries, the Sellers or the
Sellers' affiliates in connection with the Company's business, which
Intellectual Property represents all material intellectual property rights (i)
used by the Company, its Subsidiaries, the Sellers or the Sellers' affiliates to
conduct the business of the Company and its Subsidiaries and
11
the operation of its Pipeline as currently conducted or (ii) owned or licensed
by the Company, its Subsidiaries, the Sellers or the Sellers' affiliates and
intended to be used in connection with the Expansion Projects. All Intellectual
Property owned by the Company and its Subsidiaries is owned free and clear of
material Encumbrances other than Permitted Encumbrances. The Company and its
Subsidiaries are in compliance in all material respects with their contractual
obligations relating to the protection of such of the Intellectual Property they
use pursuant to material licenses or other material agreements. To the Sellers'
knowledge, there are no material conflicts with or infringements of any material
Intellectual Property owned by the Company or its Subsidiaries by any third
party. To the Sellers' and the Sellers' affiliates' knowledge, the conduct of
the business of the Company and its Subsidiaries as conducted does not conflict
with or infringe any intellectual property or other proprietary right of any
third party. Neither (a) the Intellectual Property owned by the Company nor (b)
the Licensed Software, as of the date of delivery, infringes any intellectual
property or other proprietary rights of any third party. There is no claim (in
writing), suit, action or proceeding pending or, to the knowledge of the Sellers
or the Sellers' affiliates or the Company or its Subsidiaries, threatened
against the Company or its Subsidiaries: (i) alleging any conflict or
infringement with any third party's intellectual property or other proprietary
rights; or (ii) challenging the Company's or any Subsidiary's ownership or use
of, or the validity or enforceability of, any material Intellectual Property.
The consummation of the transactions contemplated hereby will not alter or
impair any material Intellectual Property. As used herein, "Intellectual
Property" shall mean all of the following, to the extent owned or used by the
Company or its Subsidiaries in the business of the Company or its Subsidiaries
as of the Closing Date: (i) trademarks and service marks, logos, trade dress,
product configurations, trade names and other indications of origin,
applications or registrations in any jurisdiction pertaining to the foregoing
and all goodwill associated therewith; (ii) inventions (whether or not
patentable), discoveries, improvements, ideas, know-how, formula, methodology,
research and development, business methods, processes, technology, and patent
applications or patents in any jurisdiction pertaining to the foregoing,
including re-issues, continuations, divisions, continuations-in-part, renewals
or extensions; (iii) trade secrets, including confidential information and the
Company's and its Subsidiaries' right in any jurisdiction to limit the use or
disclosure thereof; (iv) copyrights in writings, designs, software (including
password unprotected interpretive code or source code, object code, development
documentation, programming tools, drawings, specifications and data), mask works
or other works and applications or registrations in any jurisdiction for the
foregoing; (v) database rights; and (vi) Internet Web sites, Web pages, domain
names and applications and registrations pertaining thereto and all items in
clauses (i) - (v) above to the extent used in connection with or contained in
all versions of the Company's or any Subsidiary's Web sites.
(b) Schedule 2.13(b) sets forth a complete and current list of
all copyright and trademark applications and registrations and patent
applications and issued patents and material unregistered trademarks and
copyrights owned by the Company or its Subsidiaries ("Listed Intellectual
Property"). All Listed Intellectual Property is valid, subsisting, unexpired and
all renewal fees and other maintenance fees that have fallen due on or prior to
the date of this Agreement have been paid. Except as listed in Schedule 2.13(b),
no Listed Intellectual Property is the subject of any proceeding before any
governmental, registration or other authority in any jurisdiction, including any
office action or other form of preliminary or final refusal of registration.
12
(c) Schedule 2.13(c) sets forth a complete list of all
material agreements relating to the Intellectual Property or to the right of the
Company or any of its Subsidiaries to use the proprietary rights of any third
party excluding "shrink-wrap" and "off-the-shelf" software and any agreement, in
each case, with a replacement cost of less than $500. Each agreement set forth
on Schedule 2.13(c) is valid, binding and enforceable by the Company or its
Subsidiaries (except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other similar law affecting
the enforcement of creditors' rights generally or by general equitable
principles) in accordance with its terms on the date of this Agreement. The
Company and each Subsidiary, as the case may be, have performed all material
obligations required to be performed by them under, and are not in material
default or breach of, any agreement set forth in Schedule 2.13(c), and no event
has occurred, which with due notice or lapse of time or both, would constitute
such a material default by the Company or its Subsidiaries. To the knowledge of
the Sellers and the Company, (1) no other party to any agreement set forth in
Schedule 2.13(c) is in material default thereof, and (2) no event has occurred
which, with due notice or lapse of time or both, would constitute such a
material default by such other party.
(d) To the extent a representation or warranty is set forth in
this Section 2.13 and the same subject matter is covered in another
representation or warranty in this Agreement (other than with respect to the
representation regarding Licensed Software in Section 4.22), the provisions
concerning such subject matter in this Section 2.13 shall govern.
(e) To the Sellers' knowledge, the Company and its
Subsidiaries each take reasonable measures to protect the confidentiality of
their trade secrets. To the Sellers' knowledge, (i) none of the material
Intellectual Property has been used, disclosed or appropriated to the detriment
of the Company or any of its Subsidiaries for the benefit of any third party;
and (ii) no employee, independent contractor or agent of the Company or any
Subsidiaries has misappropriated any material trade secrets or other material
confidential information of any third party in the course of the performance of
his or her duties as an employee, independent contractor or agent of the Company
or any of its Subsidiaries.
(f) With respect to intellectual property assets to be
assigned to the Company or the Buyers from the Sellers or Seller's affiliates
pursuant to Section 4.19 (the "Assigned Assets"):
(i) The Sellers and the Sellers' affiliates are in
compliance in all material respects with their material contractual obligations.
To the Sellers' knowledge, there are no material conflicts with or infringements
by any third party of any Assigned Assets owned by the Sellers or the Sellers'
affiliates. The Assigned Assets owned by the Sellers and the Sellers' affiliates
do not infringe any intellectual property or other proprietary rights of any
third party;
(ii) There is no claim (in writing), suit, action or
proceeding pending or, to the knowledge of the Sellers or the Sellers'
affiliates, threatened against Sellers or the Sellers' affiliates challenging
the Sellers' or the Sellers' affiliates' ownership or use of, or the validity or
enforceability of, any Assigned Assets; and
13
(iii) Neither the Sellers nor any of their affiliates
will be, as a result of the execution and delivery of this Agreement or the
performance of their obligations under this Agreement, in breach of any
agreement set forth in Schedule 2.13(a). Each Assigned Asset that is a license
or other agreement is valid, binding and enforceable against the parties thereto
in accordance with its terms (except to the extent its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
law affecting the enforcement of creditors' rights generally or by general
equitable principles). The Sellers and the Sellers' affiliates, as the case may
be, have performed all material obligations to be performed by them under, and
are not in material default or breach of any Assigned Asset that is a license or
an agreement and no event has occurred, which with due notice or lapse of time
or both, would constitute such a material default by the Sellers or the Sellers'
affiliates. To the knowledge of the Sellers and the Sellers' affiliates, no
other party to any Assigned Asset is in material default thereof, and no event
has occurred which, with due notice or lapse of time or both, would constitute
such a material default by such other party.
SECTION 2.14. Licenses, Permits and Governmental Approvals.
(a) Schedule 2.14(a) sets forth a true and complete list of all material
licenses, permits, certificates, franchises, authorizations and approvals issued
or granted to the Company and any Subsidiary by any Governmental Authority
(including the date issued or applied for and the dates of any amendments
thereto) (each a "License" and, collectively, the "Licenses") necessary for the
conduct of its business presently and as proposed to be conducted in connection
with the Expansion Projects. Schedule 2.14(a) also sets forth a true and
complete list of all pending applications for Licenses necessary for the conduct
of the Company's business as proposed to be conducted in connection with the
Expansion Projects. Each License (other than Licenses proposed to be obtained in
connection with the Expansion Projects) has been issued to, and duly obtained
and fully paid for by, the holder thereof and is valid, in full force and
effect, and not subject to any pending or known threatened administrative or
judicial proceeding to suspend, revoke, cancel or declare such License invalid
in any respect.
(b) In the case of Licenses that have been applied for but not
yet granted, all necessary applications have been made in a timely fashion and
the Company has no knowledge as to why any License that has been applied for but
not yet granted (as indicated on Schedule 2.14(a)), will not be obtained without
undue burden and in form and substance to permit the continued lawful conduct of
the Company's business during construction of the Expansion Projects and in
connection with the operation of the Expansion Projects. No License will in any
way be cancelled or suspended or required to be modified (other than in a
ministerial manner) as a result of, or terminate or lapse by reason of, the
execution, delivery and performance of this Agreement by the Sellers.
SECTION 2.15. Compliance with Law. Except as relates to Tax
matters (which are provided for in Section 2.9), regulatory matters (which are
provided for in Section 2.12), or environmental, health and safety matters
(which are provided for in Section 2.24) and except as set forth on Schedule
2.15, the operations of the Company and each Subsidiary have been conducted in
material compliance since January 1, 2000 with all applicable material laws,
licenses, regulations, orders and other material requirements of all
Governmental Authorities
14
having jurisdiction over the Company and any Subsidiary arid their assets,
properties and operations. Except as relates to Tax matters (which are provided
for in Section 2.9), regulatory matters (which are provided for in Section 2.12)
or environmental, health and safety matters (which are provided for in Section
2.24), neither the Sellers, nor the Company or any Subsidiary have received
written notice of any material violation of any such law, license, regulation,
order or other legal requirement, or are in material default with respect to any
material order, writ, judgment, award, injunction or decree of any Governmental
Authority, applicable to the Company, the Subsidiaries or any of their assets,
properties or operations. Neither the Sellers, nor the Company or any Subsidiary
have knowledge of any proposed change in any such laws, rules or regulations
(other than laws of general applicability) or the terms of any such license that
would materially adversely affect the transactions contemplated by this
Agreement or materially adversely affect all or a substantial part of the assets
or the businesses of the Company and the Subsidiaries, individually or in the
aggregate, or the Expansion Projects.
SECTION 2.16. Litigation. Except as set forth on Schedule
2.16, as of the date hereof, there are no Legal Proceedings pending or, to the
knowledge of the Sellers or the Company and its Subsidiaries, threatened against
or involving any Seller, the Company or any Subsidiary that, individually or in
the aggregate, are reasonably likely to (a) have a Material Adverse Effect or
(b) materially impair or delay the ability of the Sellers to perform their
obligations under this Agreement or consummate the transactions contemplated by
this Agreement. Except as set forth on Schedule 2.16, as of the date hereof,
there is no order, judgment, injunction or decree of any Governmental Authority
outstanding against any Seller, the Company or any Subsidiary that, individually
or in the aggregate, would have any effect referred to in the foregoing clauses
(a) and (b). "Legal Proceeding" shall mean any judicial, administrative or
arbitral actions, suits, proceedings (public or private), investigations or
governmental proceedings before any Governmental Authority.
SECTION 2.17. Contracts. Except for Commitments (as defined
below) listed on Schedule 2.13 or Schedule 2.20, Schedule 2.17 sets forth
(subject to the dollar amount limitations of clauses (b) or (c) below) a true
and complete list of the following contracts, agreements, instruments and
commitments to which the Company or any Subsidiary is a party or otherwise
relating to or affecting any of their assets, properties or operations whether
written or oral: (a) other than those that are immaterial, any contracts,
agreements and commitments not made in the ordinary course of business; (b)
contracts calling for payments by the Company of amounts greater than $200,000;
(c) contracts, loan agreements, letters of credit, re
purchase agreements,
mortgages, security agreements, guarantees, pledge agreements, trust indentures
and promissory notes and similar documents relating to the borrowing of money or
for lines of credit in any case for amounts in excess of $200,000; (d)
agreements with respect to the sharing or allocation of taxes or tax costs; (e)
agreements for the sale of any material assets, property or rights other than in
the ordinary course of business or for the grant of any options or preferential
rights to purchase any material assets, property or rights; (f) documents
granting any power of attorney with respect to the material affairs of the
Company or any Subsidiary; (g) suretyship contracts, performance bonds, working
capital maintenance, support agreements, contingent obligation agreements or
other forms of guaranty agreements; (h) other than those that are immaterial,
any contracts or commitments limiting or restraining the Company or any
Subsidiary from engaging or competing in any lines of business or with any
person; (i) other than those that
15
are immaterial, partnership or joint venture agreements; (j) shareholder
agreements or agreements relating to the issuance of any securities of the
Company or any Subsidiary or the granting of any registrations rights with
respect thereto; and (k) all amendments, modifications, extensions or renewals
of any of the foregoing (the foregoing contracts, agreements and documents are
hereinafter referred to collectively as the "Commitments" and individually as a
"Commitment"). Each Commitment is valid, binding and enforceable against the
parties thereto in accordance with its terms, and in full force and effect on
the date hereof. The Company and each Subsidiary, as the case may be, have
performed in all material respects all obligations required to be performed by
them under, and are not in material default or breach of in respect of, any
Commitment, and no event has occurred which, with due notice or lapse of time or
both, would constitute such a default. To the knowledge of the Sellers and the
Company or any of its Subsidiaries, no other party to any Commitment is in
default in any material respect thereof, and no event has occurred which, with
due notice or lapse of time or both, would constitute such a default. The
Sellers have made available to the Buyers or their representatives true and
complete originals or copies of all the Commitments and a copy of every material
default notice received by the Sellers or the Company or any of its Subsidiaries
during the past one year with respect to any of the Commitments.
SECTION 2.18. Books and Records of the Company. The books of
account, minute books, record books, and other records of the Company and each
Subsidiary, all of which have been made available to the Buyers or their
representatives, are complete and correct in all material respects.
SECTION 2.19. Expansion Projects. (a) The capital expenditures
set forth on Schedule 2.1 9(a) hereto are reasonably expected to be sufficient
to maintain the Company's existing facilities in good working order through
December 31, 2002.
(b) The Construction Budgets and Schedules of the respective
Expansion Projects are attached hereto as Schedule 2.19(b) and have been
prepared by the Company in good faith and based upon assumptions that are
believed to be reasonable, and the Sellers have no knowledge of any fact or
circumstance that will or is reasonably likely to cause the Expansion Projects
not to be completed in accordance with such Construction Budgets and Schedules.
SECTION 2.20. Employee Plans. (a) The Company does not
sponsor or maintain, and at any time during the past five years has not
sponsored or maintained, any "employee benefit plan," as defined under Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any other bonus, pension, stock option, stock purchase, benefit,
welfare, profit-sharing, retirement, disability, vacation, severance,
hospitalization, insurance, incentive, deferred compensation and other similar
fringe or employee benefit plans, funds, programs or arrangements, whether
written or oral ("Employee Plans" ), in each of the foregoing cases which cover,
are maintained for the benefit of, or relate to any or all current or former
employees of the Company. As of the Closing Date, the Company will have no
obligation or liability under any Employee Plans. Schedule 2.20(a) sets forth a
true and complete list of all Employee Plans which cover, are maintained for the
benefit of, or relate to any or all employees of the Sellers who are assigned to
the business of the Company (the "Business Employees," and such Employee Plans
hereinafter referred to as the "Seller Plans").
16
(b) The Company has no current employees, and no present or contingent liability
to any former employees. Schedule 2.20(b) sets forth a true and complete list
showing the names of all Business Employees. There are no contracts, agreements,
plans or arrangements covering any Business Employee with "change of control" or
similar provisions that would be triggered as a result of the consummation of
this Agreement or the Stock
Purchase Agreement dated of even date herewith
between Seller Parent and Buyer Parent or that could otherwise result in
liability to the Company. To the Sellers' and the Company's knowledge, no
Business Employee is obligated under any contract (including licenses, covenants
or commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of such employee's efforts to promote the interests of the Company or
the Buyers or that would conflict with the Company's business as conducted or
proposed to be conducted. Except for those employees who are eligible for early
retirement benefits, neither the Sellers nor the Company have received notice
from any officer of the Company or its Subsidiaries or key Business Employee or
group of Business Employees, that such person(s) intends to terminate their
employment.
SECTION 2.21. Existing Firm Transportation Customers;
Expansion Customers. (a) Schedule 2.21(a) sets forth a complete and correct list
of existing firm transportation customers of the Pipeline during the last fiscal
year ("Firm Transportation Customers") and the amount of business done with each
Firm Transportation Customer in such year. As of the date of this Agreement,
except as set forth on Schedule 2.21(a), (i) the Company is not engaged in any
material dispute with any Firm Transportation Customer; (ii) there has been no
material adverse change in the business relationship of the Company with any
Firm Transportation Customer since January 1,2001; and (iii) no Firm
Transportation Customer has proposed in writing any material adverse
modification or change in the business relationship with the Company. Except as
disclosed on Schedule 2.2 1(a), since January 1,2001, the Company has not at any
time delivered to, or received from, any Firm Transportation Customer any formal
written notice or written allegation of a default or breach with respect to any
agreement, contract or other arrangement and none of such Firm Transportation
Customers has, or, to the Sellers' knowledge, intends to terminate or not
exercise any option to renew or otherwise change significantly its relationship
with the Company.
(b) Schedule 2.21(b) sets forth a complete arid correct list
of the expansion customers for the Expansion Projects ("Expansion Customers").
As of the date of this Agreement, the Expansion Customers set forth on Schedule
2.21(b) have signed, valid and enforceable firm transportation service
agreements or precedent agreements.
SECTION 2.22. Insurance. (a) Schedule 2.22 sets forth a true
and complete list of all policies of property and casualty insurance, including
crime insurance, liability and casualty insurance, property insurance, business
interruption insurance, workers' compensation, excess or umbrella liability
insurance and any other type of property and casualty insurance insuring the
properties, assets, employees and/or operations of the Company or any Subsidiary
(collectively, the "Policies"). Upon request, the Sellers will make available to
the Buyers certificates of insurance and insurance summaries from the insurance
broker evidencing the existence of the Policies. All premiums payable under such
Policies have been paid in a timely manner and the Company has complied fully
with the terms and conditions of all such Policies.
17
(b) Except as set forth on Schedule 2.22, all such Policies
are in full force and effect and except as provided in Section 4.15, coverage of
the Company and its Subsidiaries under the Policies will terminate upon the
Closing Date. The Sellers shall use their reasonable best efforts to cause the
Company and its Subsidiaries to maintain the coverage under all Policies (or
replacements thereof for Policies expiring prior to the Closing Date) in full
force and effect through the Closing Date. Neither the Company nor any
Subsidiary is in default under any provisions of the Policies, and there is no
claim by the Company, any Subsidiary or any other person pending under any of
the Policies as to which coverage has been questioned, denied or disputed by the
underwriters or issuers of such Policies. Except as set forth on Schedule 2.22,
neither the Company nor any Subsidiary has received written notice from an
insurance carrier issuing any Policies that alteration of any equipment or any
improvements located on Real Property, purchase of additional equipment, or
modification of any of the methods of doing business of the Company or any
Subsidiary, will be required or suggested after the date hereof. The Policies
maintained by the Company and each Subsidiary are adequate in accordance with
industry standards, the requirements of any applicable agreements and are in at
least the minimum amounts required by, and are otherwise sufficient for purposes
of, any currently applicable law, rule, or regulation of any Federal, state or
local government, agency or authority, including, without limitation,
environmental regulations. All Policies are of at least like character and
amount as are customarily carried by like businesses similarly situated.
SECTION 2.23. Transactions with Directors, Officers and
Affiliates. Except as set forth on Schedule 2.23 and for inter-company services
in the ordinary course of business, since January 1, 2001, there have been no
transactions between the Company or any Subsidiary and any director, officer,
employee, stockholder or other "affiliate" (as such term is defined in Rule 405
under the Securities Act of 1933, as amended (the "Securities Act")) of the
Company, or any Subsidiary or the Sellers, including, without limitation, loans,
guarantees or pledges to, by or for the Company or Subsidiary from, to, by or
for any of such persons. Except as set forth on Schedule 2.11(c), neither the
Sellers nor any of their "affiliates" (as such term is defined in Rule 405 under
the Securities Act) (other than the Company or any Subsidiary) owns or has any
rights in or to any of the assets, properties or rights used by the Company or
any Subsidiary in the ordinary course of their business.
SECTION 2.24. Environmental; Health and Safety Matters. (a)
Except as set forth on Schedule 2.24:
(i) the Company and each Subsidiary and their
respective operations are in material compliance with all applicable
Environmental Laws and, in the case of pipeline safety, prudent industry
practices, and have been in material compliance with Environmental Laws and, in
the case of pipeline safety, prudent industry practices, except for historical
noncompliance that would not reasonably be expected to result in the Company or
any Subsidiary incurring material Environmental Costs and Liabilities;
(ii) none of the Sellers, the Company or any
Subsidiary has received any written request for information, or has been
notified that it is a potentially responsible party,
18
under CERCLA (as hereinafter defined) or any similar state law with respect to
any on-site or off-site location for which liability is currently being asserted
against them with respect to the activities or operations of the Company or its
Subsidiaries;
(iii) there are no material writs, injunctions,
decrees, orders or judgments outstanding, or any actions, suits, proceedings or
investigations pending or to their knowledge threatened, involving the Company
or any Subsidiary relating to (A) their compliance with any Environmental Law,
or (B) the release, disposal, discharge, spill, treatment, storage or recycling
of Hazardous Materials into the environment at any location which would
reasonably be expected to result in the Company or any Subsidiary incurring any
material liability under Environmental Laws;
(iv) the Company and each Subsidiary have obtained,
currently maintain and are in material compliance with all Licenses which are
required under Environmental Laws for the operation of their respective
businesses (collectively, "Environmental Permits"), all such Environmental
Permits are in effect and no appeal nor any other action is pending to revoke
any such Environmental Permit;
(v) to the extent that the Company will require
additional Environmental Permits for the operation of its business during
construction of the Expansion Projects or in connection with the Expansion
Projects, all necessary applications for such Environmental Permits due as of
the Closing in accordance with the Construction Budgets and Schedules set forth
on Schedule 2.19(b) have been or will be made in a timely fashion;
(vi) the Company has no knowledge of any reason why
any such Environmental Permit that has been applied for, but not yet granted,
will not be obtained without undue burden and in form and substance sufficient
to permit (A) the continued lawful conduct of the Company's business during
construction of the Expansion Projects, and (B) the lawful conduct of the
Company's business with respect to the Expansion Projects as such business is
expected to be conducted;
(vii) the Company has no knowledge of any reason why
any Environmental Permit required for the operation of its business during
construction of the Expansion Projects or in connection with the Expansion
Projects that has not yet been applied for will not be obtained without undue
burden and in form and substance sufficient to permit the (A) continued lawful
conduct of the Company's business during construction of the Expansion Projects,
and (B) the lawful conduct of the Company's business with respect to the
Expansions Projects as such business is expected to be conducted;
(viii) all such Environmental Permits are
transferable and the Sellers and the Company will cooperate with the Buyers to
secure any required transfer of those Environmental Permits;
(ix) no cleanup, investigation or remedial action has
occurred at the properties that are currently owned, leased, operated or
otherwise used by the Company or any Subsidiary that could result in the
assertion or creation of a lien on such property by any
19
Governmental Authority with respect thereto and for which the Company or any
Subsidiary would be responsible, nor has any such assertion of a lien been made
by any Governmental Authority with respect thereto which has not been removed;
(x) there are no material Environmental Costs and
Liabilities which may arise against them based on their activities prior to the
Closing Date at the properties that are currently, or previously were, owned,
leased, operated or otherwise used by the Company or any Subsidiary;
(xi) there have been no Pipeline ruptures resulting
in injury, loss of life, or material property damage; and
(xii) to the knowledge of the Company and its
Subsidiaries, there are no defects, corrosion or other damage to the Pipeline
that would create a material risk of pipeline integrity failure.
(b) The following terms shall have the following meanings:
"Environmental Claim" shall mean any notice of violation,
action, claim, lien, demand, abatement or other order or directive (conditional
or otherwise) by any Person or Governmental Authority for personal injury
(including sickness, disease or death), tangible or intangible property damage,
damage to the environment (including natural resources), nuisance, pollution,
contamination, trespass or other adverse effects on the environment, or for
fines, penalties or restrictions resulting from or based upon (i) the existence,
or the continuation of the existence, of a Release (including, without
limitation, sudden or non-sudden accidental or non-accidental Releases) of, or
exposure to, any Hazardous Material, odor or audible noise; (ii) the
transportation, storage, treatment or disposal of Hazardous Materials; or (iii)
the violation, or alleged violation, of any Environmental Laws or Permits issued
thereunder.
"Environmental Costs and Liabilities" shall mean any and all
claims (including Environmental Claims), actions, suits, proceedings,
liabilities (whether absolute or contingent), obligations, losses (including
liquidated damages or losses arising out of lender liability claims), damages
(including any penalty or punitive damages), judgments, offsets, equitable
relief granted, amounts paid in settlement, awards, demands, counterclaims,
clean-up obligations, interest, costs and expenses (including the reasonable
fees of attorneys, consultants, engineers and other experts), and court costs
(and other out-of-pocket expenses incurred in investigating, preparing, or
defending the foregoing or with respect to any appeal) arising under or pursuant
to any Environmental Law.
"Environmental Law" shall mean current local, county, state,
federal, and/or foreign law (including common law), statute, code, ordinance,
rule, regulation or other legal obligation relating to the protection of the
environment or natural resources, including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C.
section 9601 et seq.), as amended ("CERCLA"), the Resource Conservation and
Recovery Act (42 U.S.C. section 6901 et seq.), as amended ("RCRA"), the Federal
Water Pollution Control Act (33 U.S.C. section 1251 et seq.), as amended, the
Clean Air Act (42 U.S.C.
20
section 7401 et seq.), as amended, the Toxic Substances Control Act (15 U.S.C.
section 2601 et seq.), as amended, the Occupational Safety and Health Act (29
U.S.C. section 651 et seq.), as amended, the Federal Natural Gas Pipeline Safety
Act of 1968, as amended, the Hazardous Materials Transportation Act (49 U.S.C.
section 1801 et seq.), as amended, the Oil Pollution Act (33 U.S.C. section 2701
et seq.), the Safe Drinking Water Act (42 U.S.C. section 300(f) et seq.), as
amended, analogous state, tribal or local laws, and any similar, implementing or
successor law, and any amendment, rule, regulation, or directive issued
thereunder.
"Hazardous Material" shall mean any substance, material or
waste which is regulated by any Environmental Law as hazardous, toxic, a
pollutant, contaminant or words of similar meaning including, without
limitation, petroleum, petroleum products, asbestos, urea formaldehyde and
polychlorinated biphenyls.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of a Hazardous Material.
(c) To the extent a representation or warranty is set forth in
this Section 2.24 and the same subject matter is covered in another
representation or warranty in this Agreement, the provisions covering such
subject matter in this Section 2.24 shall govern.
SECTION 2.25. Brokers. Except as set forth on Schedule 2.25.
the Sellers have not employed the services of a broker or finder in connection
with this Agreement or any of the transactions contemplated hereby.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
The Buyers hereby jointly and severally represent and warrant
as follows:
SECTION 3.1. Corporate Organization. Each of Buyer Holdco,
Buyer1 and Buyer2 is a limited liability company duly organized, validly
existing and in good standing under the laws of the state of
Delaware and has
all requisite power and authority to own its properties and assets and to
conduct its business as now conducted. Buyer Parent is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Iowa and has all requisite power and authority to own its properties and assets
and to conduct its business as now conducted. Each of Buyer1 and Buyer2 is duly
qualified to do business as a foreign entity in every jurisdiction where the
character of the properties owned or leased by it or the nature of the business
conducted by it makes such qualifications necessary.
SECTION 3.2. Validity of Agreement. Each of the Buyers has the
power to enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement and the performance of the Buyers'
obligations hereunder have been duly authorized by the Boards of Directors of
the Buyers, and no other proceedings on the part of the Buyers are necessary to
authorize such execution, delivery and performance. This Agreement has been duly
executed by the Buyers and constitutes the valid and binding obligation of the
Buyers enforceable against the Buyers in accordance with its terms (except to
the extent that its
21
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar law affecting the enforcement of creditors'
rights generally or by general equitable principles).
SECTION 3.3. No Conflict or Violation; No Defaults. The
execution, delivery and performance by the Buyers of this Agreement does not and
will not violate or conflict with any provision of their Organizational
Documents and does not and will not violate any applicable provision of law, or
any order, judgment or decree of any Governmental Authority, nor violate or
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any contract, lease, loan agreement, mortgage, security agreement,
trust indenture or other agreement or instrument to which the Buyers are a party
or by which they are bound or to which any of their properties or assets is
subject, nor result in the creation or imposition of any Encumbrance upon any of
their properties or assets where such violations, breaches or defaults in the
aggregate would have a material adverse effect on the transactions contemplated
hereby or on the assets, properties, business, operations, net income or
financial condition of the Buyers.
SECTION 3.4. Consents and Approvals. Except as disclosed on
Schedule 3.4, no material consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority or any other
person (on the part of the Buyers) is required as a condition to the execution
and delivery of this Agreement by the Buyers or the performance of the Buyers'
obligations hereunder.
SECTION 3.5. Brokers. Except as Set forth on Schedule 3.5, the
Buyers have not employed the services of an investment broker, financial
advisor, broker or finder in connection with the Agreement or any of the
transactions contemplated hereby.
SECTION 3.6. Financial Ability. Buyer1 and Buyer2 will have
sufficient immediately available funds, in cash, at the Closing to pay the
Purchase Price, other amounts payable pursuant to this Agreement and to effect
the transactions contemplated hereby.
ARTICLE IV.
COVENANTS
SECTION 4.1. Certain Changes and Conduct of Business. (a)
Except as expressly provided by this Agreement or Schedule 4.1, from and after
the date of this Agreement and until the Closing Date, (x) the Company shall,
and shall cause each of its Subsidiaries to, conduct and maintain its business
solely in the ordinary course consistent with past practices and, (y) without
the prior written consent of the Buyers (not to be unreasonably withheld or
delayed), the Sellers will not permit the Company or any of its Subsidiaries to:
(i) make any material change in the conduct of its
businesses and operations;
(ii) make any change in its Organizational Documents
or issue any additional equity securities or grant any option, warrant or right
to acquire any equity securities or issue any security convertible into or
exchangeable for its equity securities or alter any term of
22
any of its outstanding securities or make any change in its outstanding equity
securities or other ownership interests or in its capitalization, whether by
reason of a reclassification, recapitalization, stock split or combination,
exchange or readjustment of shares, stock dividend or otherwise;
(iii) other than inter-company advances to fund the
Expansion Projects or otherwise in the ordinary course of business, (A) incur,
assume or guarantee any indebtedness for borrowed money, issue any notes, bonds,
debentures or other corporate securities or grant any option, warrant or right
to purchase any thereof, or (B) issue any securities convertible or exchangeable
for debt securities of the Company or any Subsidiary;
(iv) make any sale, assignment, transfer, abandonment
or other conveyance of any of its assets or any part thereof except for
dispositions of inventory or of worn-out or obsolete equipment for fair or
reasonable value in the ordinary course of business consistent with past
practices;
(v) subject any of its assets, or any part thereof,
to any Encumbrance other than a Permitted Encumbrance, or permit the imposition
of any Encumbrance other than a Permitted Encumbrance;
(vi) redeem, retire, purchase or otherwise acquire,
directly or indirectly, any of its equity interests or declare, set aside or pay
any dividends or other distribution in respect of such equity interests;
(vii) acquire any assets or properties other than in
the ordinary course of business consistent with past practices;
(viii) enter into any new employee benefit plan,
program or arrangement or any new employment, severance or consulting agreement,
grant any general increase in the compensation of officers or employees
(including any such increase pursuant to any bonus, pension, profit-sharing or
other plan or commitment) or grant any increase in the compensation payable or
to become payable to any employee, except in accordance with pre-existing
contractual provisions;
(ix) make or commit to make any capital expenditure
or to invest, advance, loan, pledge or donate any monies to any clients or other
persons or to make any similar commitments with respect to outstanding bids or
proposals except as disclosed on Schedule 4.1
(x) pay, except in the ordinary course of business
consistent with past practices, loan or advance any amount to, or sell, transfer
or lease any properties or assets to, or enter into any agreement or arrangement
with, any of its affiliates;
(xi) take any other action that would cause any of
the representations and warranties made herein not to remain true and correct in
all material respects;
(xii) make any loan, advance or capital contribution
to or investment in any person except as disclosed on Schedule 2.7
23
(xiii) make any change in any method of accounting or
accounting principle, method, estimate or practices except for any such change
required by reason of a concurrent change in RAP or write-down the value of any
inventory, revalue any asset or write-off as uncollectible any accounts
receivable except in the ordinary course of business consistent with past
practices;
(xiv) make, change or revoke, or permit to be made,
changed or revoked, any election or method of accounting with respect to Taxes
affecting or relating to the Company;
(xv) enter into, or permit to be entered into, any
closing or other agreement or settlement with respect to Taxes affecting or
relating to the Company;
(xvi) other than routine compliance filings, make any
filings or submit any documents or information to FERC without prior
consultation with the Buyers;
(xvii) Entry into any agreement or amendment,
modification, or termination of any contract, lease, or license to which the
Company or any Subsidiary is a party, or by which it or any of its assets or
properties are bound, except those agreements, amendments, modifications or
terminations affected in the ordinary course of business consistent with past
practices; or
(xviii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date,
the Sellers shall cause the Company and each Subsidiary to:
(i) keep its books of account, records and files in
the ordinary course and in accordance with existing practices;
(ii) use reasonable efforts to continue to maintain
existing business~ relationships with affiliates, suppliers and customers to the
extent that such relationships are, at the same time, reasonably judged by the
Sellers to be economically beneficial to the Company acting reasonably;
(iii) use reasonable efforts to keep available the
services of its present officers;
(iv) comply in all material respects with all
Environmental Laws, and should any Seller or the Company receive notice that
there exists a material violation of any Environmental Law or a material
condition requiring removal or other remedial measures with respect to the real
properties owned, operated or leased by the Company or any Subsidiary or their
respective operations, the Sellers shall promptly notify the Buyers in writing
and unless such notice is being contested in good faith, shall promptly (and in
any event within the time permitted by the applicable Governmental Authority)
(A) as to areas over which the Sellers
24
exercise control, remove or remedy such violation or condition in accordance
with all Environmental Laws and (B) as to other areas, use their reasonable best
efforts to have such violation or condition removed or remedied in accordance
with all Environmental Laws; and
(v) comply in all material respects with its Licenses
and terms and conditions of service provided by FERC.
(c) From and after the date hereof and until the Closing Date,
the Sellers shall continue to provide services to the Company and its
Subsidiaries in the ordinary course of business consistent with past practices.
SECTION 4.2. Access to Properties and Records. The Sellers
shall afford, and shall cause the Company to afford, to the Buyers and the
Buyers' accountants, counsel and representatives full reasonable access during
normal business hours throughout the period prior to the Closing Date (or the
earlier termination of this Agreement pursuant to Article VII hereof) to all the
Company's and its Subsidiaries' properties, books, contracts, Commitments and
records (including, but not limited to, all environmental studies, reports and
other environmental records) and, during such period, shall furnish promptly to
the Buyers all information concerning the Company's and its Subsidiaries'
business, properties, liabilities and personnel as the Buyers may request,
provided that no investigation or receipt of information pursuant to this
Section 4.2 shall affect any representation or warranty of the Sellers or the
conditions to the obligations of the Buyers. At the Closing, all of the books of
accounts, minute books, record books and other records (including safety,
health, environmental, maintenance and engineering records and drawings) of the
Company and each Subsidiary will be delivered to the Buyers.
SECTION 4.3. Employee Matters. (a) The Buyers may offer to
employ Business Employees under such terms and conditions as the Buyers may
determine subject, however, to the terms and provisions of this Section 4.3 and
the Workforce Agreement. All Business Employees that accept the Buyers' offer of
employment shall become the Buyers' employees as of the Transfer Date and all
such Business Employees are hereinafter referred to as the "Transferred
Employees." The "Transfer Date" shall be the Closing Date for all Transferred
Employees except those Transferred Employees identified as "Restricted GTC
Employees" pursuant to the terms and provisions of the Workforce Agreement. The
Transfer Date for the Restricted GTC Employees shall be 180 days after the
Closing Date, or such other date as mutually agreed by the parties to this
Agreement.
(b) Transferred Employees shall participate in employee
benefit plans and programs of the Buyers on the same basis as other similarly
situated employees of the Buyers.
(c) Each Transferred Employee shall, without duplication of
benefits, be given credit for all service with the Sellers prior to the Transfer
Date, using the same methodology used by the Sellers as of immediately prior to
the Transfer Date for crediting service and determining levels of benefits (i)
under all employee benefit plans, programs and arrangements maintained by or
contributed to by the Buyers (including, without limitation, the Company) in
which the Transferred Employees become participants for purposes of eligibility
to participate, vesting and determination of level of benefits (excluding,
however, benefit accrual under any
25
defined benefit plans), and (ii) for purposes of calculating the amount of each
Transferred Employee's severance benefits, if any.
(d) The Buyers will, or will cause the Company to, (i) waive
all limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Transferred
Employees under any welfare benefit plans that such employees may be eligible to
participate in after the Transfer Date, other than limitations or waiting
periods that are already in effect with respect to such employees and that have
not been satisfied as of the Transfer Date under any welfare plan maintained for
the Transferred Employees immediately prior to the Transfer Date, and (ii)
provide each Transferred Employee with credit for any co-payments and
deductibles paid prior to the Transfer Date in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Transfer Date.
(e) Effective as of the Transfer Date, Transferred Employees
shall become fully vested in their account balances in any defined contribution
or 401(k) Plan maintained by the Seller on behalf of such Transferred Employees
(the "Seller Savings Plan") and distributions of such account balances shall be
made available to such Transferred Employees as soon as practicable following
the Transfer Date, in accordance with, the provisions of the Seller Savings Plan
and applicable law. Except as provided in this Section 4.3(e), all such
distributions shall be in cash. Thereafter, the Buyers shall accept rollover
contributions from the Seller Savings Plan into a defined contribution or 40
1(k) Plan maintained by the Buyers (the "Buyers Savings Plan") of the account
balances distributed to the Transferred Employees from the Seller Savings Plan.
With respect to any Transferred Employee who elects to make a direct rollover to
the Buyers Savings Plan and whose account is subject to an outstanding loan as
of the Transfer Date, such employee's distribution shall include a promissory
note for the outstanding balance of the Loan as of the date of distribution.
With respect to any Transferred Employee whose account balance includes shares
of Seller Parent stock, such employee may elect to have such shares of stock
rolled over into the directed investments option under the Buyers Savings Plan.
(f) With respect to the transition of benefits coverage, any
Transferred Employee who is unable to participate in the health plans of the
Buyers as of the Transfer Date and elects continuation coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, with respect
to the health plans of the Sellers, shall be reimbursed by the Buyers for the
period commencing on the Transfer Date and ending on the date health plan
coverage is made available to such Transferred Employee under the Buyers' health
plans, for the portion of the health care premium that would have been paid by
the Sellers had such Transferred Employee continued in the employment of the
Sellers during such period.
(g) The Buyers and the Sellers agree to cooperate as necessary
to effectuate the provisions of this Section 4.3, including such steps as may
reasonably be required to (i) service any outstanding Seller Savings Plan loans
under account balances of Transferred Employees between the date of such
employees commence employment with the Buyers and the date that such employees'
account balances are distributed, and (ii) ensure an orderly transition of
benefits coverage with respect to the Transferred Employees from the Employee
Plans to the Buyers' plans.
26
(h) Each Transferred Employee shall, without duplication of
benefits, be given credit for all accrued but unused paid-time-off under the
Sellers' paid-time-off program as of the Transfer Date, using the same
methodology used by the Sellers immediately prior to the Transfer Date for
crediting service and determining the amount of such paid-time-off benefits.
SECTION 4.4. Consents and Approvals. The Sellers and the
Buyers shall each use their reasonable best efforts to obtain, or, in the case
of the Sellers, cause the Company to obtain, all necessary consents, waivers,
authorizations and approvals of all Governmental Authorities, and of all other
persons required in connection with the execution, delivery and performance by
them of this Agreement.
SECTION 4.5. Further Assurances. Upon the request of the
Buyers at any time after the Closing Date, the Sellers will promptly execute and
deliver such further instruments of assignment, transfer, conveyance,
endorsement, direction or authorization and other documents as the requesting
party or parties or its or their counsel may reasonably request in order to
perfect title of the Buyers and its successors and assigns to the Interests or
otherwise to effectuate the purposes of this Agreement.
SECTION 4.6. Reasonable Best Efforts. Upon the terms and
subject to the conditions of this Agreement, each of the parties hereto will use
its reasonable best efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary, proper or advisable consistent
with applicable law to consummate and make effective in the most expeditious
manner practicable the transactions contemplated hereby. The Sellers and the
Buyers shall seek early termination of the waiting period under the Xxxx Xxxxx
Xxxxxx Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder (the "HSR Act").
SECTION 4.7. Notice of Breach. Through the Closing Date, each
of the parties hereto shall promptly give to the other parties written notice
with particularity upon having knowledge of any matter that may constitute a
breach of any representation, warranty, agreement or covenant contained in this
Agreement. The Sellers shall have the right to supplement the Disclosure
Schedules with respect to any matter arising after the date hereof which would
have been required to be set forth on or described in such Disclosure Schedule
(a "Disclosure Schedule Update"). Any such supplemental disclosure will not be
deemed to have been disclosed as of the date of this Agreement for purposes of
determining whether the conditions set forth in Article V have been satisfied,
but such update shall be deemed to have cured any breach of representation,
warranty, covenant or agreement relating to the matters set forth in such update
for purposes of indemnification pursuant to Article VIII.
SECTION 4.8. Confidential Information. During the period
commencing on the date of this Agreement and ending on the second anniversary of
the Closing Date hereunder, except as required by law or stock exchange rule or
under its obligations pursuant to the Services Agreement (as defined in Section
5.9), the Sellers and their affiliates shall not, directly or indirectly,
disclose to any person or entity or use any information not in the public domain
or generally known in the industry, in any form, whether acquired prior to or
after the Closing Date, relating to the business and operations of the Company
or any Subsidiary, including but not
27
limited to information regarding customers, vendors, suppliers, trade secrets,
training programs, manuals or materials, technical information, contracts,
systems, procedures, mailing lists, know-how, trade names, improvements, price
lists, financial or other data (including the revenues, costs or profits
associated with any of the Company's services), business plans, code books,
invoices and other financial statements, computer programs, software systems,
databases, discs and printouts, plans (business, technical or otherwise),
customer and industry lists, correspondence, internal reports, personnel files,
sales and advertising material, telephone numbers, names, addresses or any other
compilation of information, written or unwritten, which is or was used by the
Company or any Subsidiary, regardless of whether such information was or is
owned on the date hereof by the Company or any Subsidiary (collectively,
"Protected Information"); provided, however, that if any of the Sellers or their
affiliates are presently in possession of Protected Information that (x) is
necessary to use in the ordinary course of business of Seller Parent or any
controlled affiliate of Seller Parent other than the Company or any of its
Subsidiaries (collectively, "Seller Parent and its Other Subsidiaries") and (y)
cannot reasonably be redacted, segregated or otherwise separated from
information about or owned by Seller Parent and its Other Subsidiaries which is
necessary to use in the ordinary course of business of Seller Parent and its
Other Subsidiaries (hereinafter, "Mixed Information"), then the Protected
Information which is so imbedded in such Mixed Information may be used by Seller
Parent and its Subsidiaries in the ordinary course of business; provided, that
Seller Parent and its Subsidiaries may not use any such Protected Information to
compete or seek to compete with the business or operations of the Company or any
of its Subsidiaries. Upon the request of the Company, Seller Parent and its
Other Subsidiaries shall reasonably cooperate with the Company in the
development of procedures intended to further implement the intent of this
Section 4.8.
SECTION 4.9. Non-Solicitation of Clients and Employees. (a)
During the period commencing on the date of this Agreement and ending on the
second anniversary of the Closing Date hereunder, neither the Sellers nor any
affiliate thereof shall for themselves or on behalf of or in conjunction with
any person, directly or indirectly, solicit, endeavor to entice away from the
Company, or otherwise directly or indirectly interfere with the relationship of
the Company with any person who, to the knowledge of the Sellers, is employed by
the Company; provided, however neither the Sellers nor any affiliates thereof
shall be precluded from soliciting or hiring any such employee (i) who initiates
discussions regarding such employment without any direct or indirect
solicitation by the Sellers; (ii) whose employment with the Company has been
terminated prior to commencement of employment with the Sellers; or (iii) who
responds to a general solicitation of employment not specifically addressed to
such employees. Notwithstanding the foregoing, the Sellers may continue to
employ each Business Employee until such time as such Business Employee becomes
a Transferred Employee.
(b) During the period commencing on the date of this Agreement
and ending on the second anniversary of the Closing Date hereunder, neither the
Buyers nor any affiliate thereof shall for themselves or on behalf of or in
conjunction with any person, directly or indirectly, solicit, endeavor to entice
away from the Sellers, or otherwise directly or indirectly interfere with the
relationship of the Sellers with any person who, to the knowledge of the Buyers,
is employed by the Sellers; provided, however, neither the Buyers nor any
affiliates thereof shall be precluded from soliciting or hiring any such
employee (i) who initiates discussions regarding such employment without any
direct or indirect solicitation by the Buyers;
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(ii) whose employment with the Sellers has been terminated prior to commencement
of employment with the Buyers; or (iii) who responds to a general solicitation
of employment not specifically addressed to such employees. Notwithstanding the
foregoing, the Buyers shall be permitted to solicit, make offers of employment
to, engage in follow-up discussions with and hire Business Employees as
permitted under Section 4.3 and the Workforce Agreement.
(c) During the period commencing on the date of this Agreement
and ending on the second anniversary of the Closing Date hereunder, neither the
gas transportation pipeline companies owned by the Sellers on the date hereof
nor any controlled affiliate thereof shall for themselves or on behalf of or in
conjunction with any person, directly or indirectly, for purposes of providing
interstate transportation of natural gas and related services, solicit, endeavor
to entice away from the Company, or otherwise interfere with the relationship of
the Company with any person who, to the knowledge of the Sellers is, or was
within the then most recent 12 month period, a customer of the Company
(hereinafter, a "Company Customer"); provided, that, notwithstanding the
foregoing, the Sellers and their affiliates may solicit additional business from
any Company Customer who is then a customer of the Seller or any of its
affiliates if such additional business relates primarily to gas transportation
or related services to be provided by the Seller or such affiliate entirely
within the geographic area in which the Seller or such affiliate then conducts
business or if such solicitation would not otherwise compete with services which
are provided by the Company on the Closing Date to such Company Customer or any
proposed expansion or extension of such services to such Company Customer as
contemplated on the Closing Date.
(d) During the period commencing on the date of this Agreement
and ending on the second anniversary of the Closing Date hereunder, neither the
Company nor any controlled affiliate thereof shall for themselves or on behalf
of or in conjunction with any person, directly or indirectly, for purposes of
providing interstate transportation of natural gas and related services,
solicit, endeavor to entice away from the Sellers, or otherwise interfere with
the relationship of the Sellers with any person who, to the knowledge of the
Buyers is, or was within the then most recent 12 month period, a customer of the
Sellers (hereinafter, a "Seller Customer"); provided, that, notwithstanding the
foregoing. the Buyers and their affiliates may solicit additional business from
any Seller Customer who is then a customer of the Buyer or any of its affiliates
if such additional business relates primarily to gas transportation or related
services to be provided by the Buyers or such affiliate entirely within the
geographic area in which the Buyers or such affiliate then conducts business or
if such solicitation would not otherwise compete with services which are
provided by the Sellers on the Closing Date to such Seller Customer or any
proposed expansion or extension of such services to such Seller Customer as
contemplated on the Closing Date.
SECTION 4.10. Negotiations. From and after the date hereof,
neither the Sellers nor the Company, nor their officers, directors, employees,
affiliates, stockholders, representatives, agents, nor anyone acting on behalf
of them shall, directly or indirectly, encourage, solicit, engage in discussions
or negotiations with, or provide any information to, any person, firm, or other
entity or group (other than the Buyers or their representatives) concerning any
merger, sale of assets, purchase or sale of Interests or similar transaction
involving the Company or any division or Subsidiary thereof unless this
Agreement is terminated pursuant to
29
and in accordance with Article VII hereof. The Sellers shall promptly
communicate to the Buyers any inquiries or communications concerning any such
transaction which they may receive or of which they may become aware.
SECTION 4.11 Tax Covenants. (a) The Sellers shall prepare and
file all Federal, state and local income Tax Returns with the appropriate
Federal, state, local and foreign governmental agencies relating to the Company
for periods ending on or prior to the Closing Date and shall pay all Taxes due
with respect to such Tax Returns. The Sellers covenant that the Sellers shall be
responsible for (i) to the extent not reflected in the Final Closing Statement,
all liability for Federal, state or local income Taxes of the Company for all
periods ending on or before the Closing Date; (ii) to the extent not reflected
on the Final Closing Statement, all liability for other Taxes of the Company for
Pre-Closing Tax Periods (as defined herein); and (iii) all liability imposed
upon the Company or any Subsidiary for Taxes of any other person pursuant to
Treasury Regulation Section 1.1502-6 or any similar provision of state or local
law, but only to the extent such liability relates to periods ending on or prior
to the Closing Date. The Sellers shall cause the Company to prepare and file all
other Tax Returns related to the Company that are due on or prior to the Closing
Date and shall cause the Company to pay all Taxes due with respect to such Tax
Returns. For all other Tax Returns related to the Company for periods ending on
or prior to the Closing Date, but for which such Tax Returns are not due until
after the Closing Date, the Sellers shall (i) prepare such Tax Returns in
accordance with the terms and conditions set forth in the Services Agreement (as
defined herein), and (ii) submit such Tax Returns to the Buyers for signature,
filing and payment of Tax, all in accordance with the terms and conditions set
forth in the Services Agreement. The Sellers shall prepare and shall submit to
the Buyers for signature, filing and payment of Tax, all Straddle Tax Returns
required to be filed by the Company, provided, however, that the Sellers shall
promptly reimburse the Buyers for the portion of such Tax that relates to a
Pre-Closing Tax Period to the extent not reflected on the Final Closing
Statement. The Buyers will furnish to the Sellers all information and records
reasonably requested by the Sellers for use in preparation of any Tax Returns.
The Sellers shall allow the Buyers to review, comment upon and reasonably
approve without undue delay any Straddle Tax Return at any time during the
45-day period immediately preceding the filing of such Tax Return. The Buyers
and the Sellers agree to cause the Company to file all Tax Returns for any
Straddle Period on the basis that the relevant taxable period ended as of the
close of business on the Closing Date, unless the relevant Tax authority will
not accept a Tax Return filed on that basis. For purposes of this Agreement,
"Pre-Closing Tax Period" shall mean any taxable period ending on or before
December 31, 2001 and the portion ending on and including December 31, 2001 of
any Straddle Period. For purposes of this Agreement, "Straddle Period" shall
mean any taxable period that includes (but does not end on) December 31, 2001
and ends after the Closing Date. For purposes of this Agreement, "Straddle Tax
Return" shall mean any Tax Return with respect to Taxes other than income taxes
required to be filed by the Company covering a taxable period commencing prior
to December 31, 2001 and ending after the Closing Date. The Sellers' covenants
in respect of responsibility for Taxes as set forth above in this Section
4.11(a) are in no way intended to be duplicative of the adjustments reflected in
the Purchase Price pursuant to Section 1.4.
(b) The Sellers will cause any tax sharing agreement or
similar arrangement with respect to Taxes involving the Company or any
Subsidiary to be terminated effective as of the
30
Closing Date, to the extent any such agreement or arrangement relates to the
Company or any Subsidiary, and after the Closing Date neither the Company nor
any Subsidiary shall have any obligation under any such agreement or arrangement
for any past, present or future period.
(c) All excise, sales, use, transfer (including real property
transfer or gains), stamp, documentary, filing, recordation and other similar
taxes, together with any interest, additions or penalties with respect thereto
and any interest in respect of such additions or penalties, resulting directly
from the transactions contemplated by this Agreement (the "Transfer Taxes"),
shall be borne by the party on which such Transfer Taxes are imposed by
applicable law. Notwithstanding anything to the contrary in this Section 4.11,
any Tax Returns that must be filed in connection with Transfer Taxes shall be
prepared and filed when due by the party primarily or customarily responsible
under the applicable local law for filing such Tax Returns, and such party will
use reasonable commercial efforts to provide such Tax Returns to the other party
at least 10 days prior to the due date for such Tax Returns.
(d) The Sellers and the Buyers will use their reasonable best
efforts to agree on an allocation of the Purchase Price within 90 days of the
Closing Date and such agreed upon allocation of the Purchase Price shall be
binding on both the Buyers and the Sellers for Tax purposes.
SECTION 4.12. Development of Migration Plan. The parties agree
to negotiate in good faith to develop, document and implement a mutually agreed
upon migration plan that shall set forth the details and process for the
creation of the Company's computer technology systems (the "Migration Plan").
The Migration Plan shall include without limitation, the terms set forth in, and
be prepared consistent with the guidelines set forth on Schedule 4.12 and be
implemented by the Sellers on or before the expiration of the Service Period (as
defined in the Services Agreement). The costs for implementation of the
Migration Plan shall be as set forth in Section 3 of the Services Agreement.
SECTION 4.13. Guarantees. Buyer Parent guarantees performance
by Buyer Holdco, Buyer1 and Buyer2 of their obligations under this Agreement.
Seller Parent guarantees performance by Holdco, LLC1 and LLC2 of their
obligations under this Agreement.
SECTION 4.14. Bonds. The Sellers shall use their reasonable
best efforts to maintain the Bonds until they are released and replaced by the
Buyers. "Bonds" shall mean all surety bonds, letters of credit, guarantees,
cash collateral, performance bonds and bid bonds issued by the Seller and their
affiliates (other than the Company and its Subsidiaries) on behalf of the
Company or any Subsidiary. The Buyers shall use their reasonable best efforts to
replace and release the Bonds as promptly as reasonably practicable after the
Closing Date but in no event Later than 60 days from the Closing Date. The
Buyers shall indemnify, defend and hold harmless the Sellers and their
affiliates for any and all liability, loss, damage, cost and expense incurred on
account of such Bonds after the Closing Date.
SECTION 4.15. Insurance. The Sellers shall maintain coverage
of the Company and its Subsidiaries under the Property/Time Element Policy
listed on Schedule 2.22 until its scheduled expiration date at no cost to the
Buyers or the Company. The Sellers shall use their
31
reasonable best efforts to maintain the coverage of the Company and its
Subsidiaries under each of the other Policies set forth on Schedule 2.22 (except
the Directors and Officers Liability Policy) until their scheduled expiration
dates, for the proportionate premium cost of such Policies as set forth on
Schedule 2.22 for the period such Policies remain in effect. To the extent after
the Closing such Policies still cover the Company and its Subsidiaries, the
Company shall promptly notify the Sellers of any potential claim or loss under
such Policies and it shall be the Sellers' responsibility to notify the
insurance company of any claims or losses and to submit and diligently pursue
any claims or losses under such Policies with respect to the Company and its
Subsidiaries. The Buyers, the Company and its Subsidiaries agree that they shall
not notify the insurance company or submit any claim or loss to the insurance
company under such Policies. After the Closing, the Buyers, the Company and its
Subsidiaries shall be responsible for any deductible or retention amounts with
respect to claims or losses relating to the Company or its Subsidiaries under
such Policies.
SECTION 4.16. Audited Financial Statements. The Sellers shall
use their reasonable best efforts to provide the Audited Financial Statements
(as defined in Section 5.13) to the Buyers no later than March 15, 2002.
SECTION 4.17. Master Alliance Agreement. Prior to the
Closing, the Sellers and the Company shall use their reasonable best efforts to
seek amendments to each Master Alliance Agreement and each request for service,
contract, agreement or commitment relating thereto set forth on Schedule 4.17 to
provide that upon the Closing, the Buyers and the Company will have the right to
request and receive, and the other party thereto the obligation to perform, the
services provided therein in accordance with the terms of each request for
service and the Master Alliance Agreement; provided, however that the foregoing
shall not obligate the Sellers to incur any costs (other than nominal costs) to
amend the terms of their agreements with such parties unrelated to the Company
or otherwise agree to any non-ministerial concession or other arrangement with
such parties or any other person.
SECTION 4.18. Expansion Projects. Between the date of the
execution of this Agreement and the Closing Date, the Sellers shall cause the
Company to:
(a) develop the Expansion Projects diligently in accordance
with the applicable material contracts and permits and Budgets and Schedules for
the Expansion Projects, not make any material changes to the Budgets and
Schedules, and consult with the Buyers on a regular basis regarding
same(including cooperating with reasonable requests by the Buyers);
(b) promptly notify the Buyers of, and reasonably consult with
the Buyers on, any material event or circumstance that arises affecting any of
the Expansion Projects;
(c) promptly deliver to the Buyers copies of any notices or
correspondence received from, or provided to, any Governmental Authority or from
any party to any contract which is material to the Expansion Projects; and
(d) without the prior consent of the Buyers (not to be
unreasonably withheld or delayed), not enter into any material contract relating
to the Expansion Projects except those
32
contracts set forth on Schedule 4.18, and not grant any consent or waiver under,
terminate, or amend any contract material to the Expansion Projects.
SECTION 4.19. Covenant to Assign. (a) Prior to or concurrent
with Closing the Sellers shall, and shall cause the Sellers' affiliates to, at
the Sellers' sole option, either (i) assign to the Company all of their
respective right, title and interest in the Operational Assets (as defined
below), and secure any consents necessary for such assignment and for the use of
such Operational Assets by the Sellers and the Sellers' affiliates on behalf of
the Company or the Buyers as part of the Transition Services and the Migration
Plan (as applicable), or (i) obtain for the Buyers, on terms acceptable to the
Buyers (such acceptance not to be unreasonably withheld or delayed), comparable
replacements for any Operational Assets not assigned pursuant to (ii) above. All
such assignments shall be effectuated pursuant to instruments in form and
substance reasonably satisfactory to the Buyers, executed copies of which shall
be delivered to the Buyers at Closing. The "Operational Assets" shall mean each
item contained in Schedule 2.11(c) (other than the Headquarters Building located
in Salt Lake City identified on Schedule 2.11(c) and the lease related thereto),
and any other property, rights, and equipment (including without limitation,
furniture, computer hardware, servers, routers and PBX equipment) owned by,
leased or licensed to the Sellers or the Sellers' affiliates which can be
assigned prior to or concurrent with the Closing and which is (1) used by the
Sellers, the Sellers' affiliates, the Company or its Subsidiaries, to conduct
the business of the Company or the Subsidiaries, as currently conducted, or (2)
intended to be used in connection with the Expansion Projects, as well as any
Sellers or Sellers' affiliate agreements for the maintenance, support or service
of any of the foregoing listed in (1) or (2).
(b) On or before the expiration of the Services Period (as
defined in the Services Agreement), the Sellers shall, and shall cause the
Sellers' affiliates to, at the Sellers' sole option, either (i) assign to the
Company all of their respective right, title and interest in the Operational IT
Assets (as defined below), including license and contract rights, and secure any
consents necessary for such assignment and for the use by the Sellers and the
Sellers' affiliates on behalf of the Company or the Buyers as part of the
Transition Services and the Migration Plan (as applicable), or (ii) obtain for
the Buyers, on terms acceptable to the Buyers (such acceptance not to be
unreasonably withheld or delayed), comparable replacements for any Operational
IT Assets not assigned pursuant to (i) above. All such assignments shall be
effectuated pursuant to instruments in form and substance reasonably
satisfactory to the Buyers, executed copies of which shall be delivered to the
buyers on or before the expiration of the Services Period. The "Operational IT
Assets" shall mean each item contained in Schedule 2.13(a), other property,
rights and equipment that could not be assigned as of Closing, and all
intellectual property that, in each case, is owned by, leased or licensed to the
Sellers and the Sellers' affiliates (including through application service
providers) and (1) used by the Sellers, the Sellers' affiliates, the Company or
its Subsidiaries to conduct the business of the Company or the Subsidiaries, as
currently conducted, or (2) intended to be used in connection with the Expansion
Projects, as well as any Sellers or Sellers' affiliate agreements for the
maintenance, support or service of any of the foregoing listed in (1) or (2).
(c) All of the Operational Assets and Operational IT Assets
shall be assigned or replaced, as the case may be, at no cost to the Buyers or
the Company except for replacement
33
costs of hardware and software acquired pursuant to the Migration Plan, the
costs for which shall be borne by the parties as set forth in Section 3 of the
Services Agreement.
SECTION 4.20. Manuals. The Sellers shall deliver (and shall
cause the Sellers' affiliates to deliver) to the Company, and the Buyers copies
of, and hereby grant to the Company, its Subsidiaries, the Buyers and their
affiliates a nonexclusive, nontransferable (except in connection with the sale
or transfer of all or substantially all of the assets of the Company), royalty
free license, without right to sublicense, in perpetuity to use, copy, and
modify solely for their internal business purposes in connection with the
business of the Company, all manuals, user guides, standards and operating
procedures and similar documents used by the Company, the Subsidiaries, the
Sellers and/or the Sellers' affiliates in connection with the business of the
Company. All copies of the foregoing must reproduce and include all copyright
and other intellectual property rights notices provided by Sellers.
SECTION 4.21. Trademark License. Effective upon the Closing,
the Sellers and the Sellers' affiliates hereby grant to the Company, its
Subsidiaries and the Buyers a nonexclusive, nontransferable, royalty free
license to use, solely in the Company's and its Subsidiaries' businesses as
presently conducted or as contemplated to be conducted in connection with the
Expansion Projects, any and all trademarks, service marks, and trade names owned
by the Sellers and the Sellers' affiliates solely to the extent appearing on
existing inventory of the Company and its Subsidiaries (such as on marketing and
other materials), advertisements, or property (such as on vehicles, equipment,
pipelines and signs) (collectively "Sellers' Marks"), without right to
sublicense, for a period of one year from the Closing Date (the "License
Period"). The Buyers and the Company may use such existing inventory,
advertising and property during the License Period. The Buyers and the Company
shall not create new inventory, advertising and property using the Sellers'
Marks, and shall otherwise use commercially reasonable efforts to replace or
remove the Sellers' Marks on inventory, advertising and property, provided that,
all such use shall cease no later than the end of the License Period. The nature
and quality of all uses of the Sellers' Marks made by the Buyer, the Company and
its Subsidiaries shall conform to the Sellers' existing quality standards;
provided, that, the way in which the Sellers' Marks are currently used is hereby
deemed to meet such quality standards. Immediately upon termination of the
License Period, the Buyers, the Company and its Subsidiaries shall cease and
desist from all further use of the Sellers' Marks and will adopt new trademarks,
service marks, and trade names related thereto which are not confusingly similar
to Sellers' Marks. All rights not expressly granted in this Section 4.21 with
respect to the Sellers' Marks are hereby reserved. Any inadvertent failure of
the Buyers to comply with their obligations under this provision shall not be a
breach of this Agreement unless the Buyers fail to use commercially reasonable
efforts to promptly remedy such failure after receipt of written notice from the
Sellers or to remedy such failure within 30 days of such notice, in which case
the Sellers may terminate this trademark license upon Written notice to the
Buyers and the Company.
SECTION 4.22. Software License. Effective upon the Closing,
the Sellers, for themselves and on behalf of the Sellers' affiliates, hereby
grant to the Company, the Buyers and their affiliates, a nonexclusive, royalty
free, perpetual license, without right to sublicense, to use, copy, modify,
enhance, and upgrade all computer software (object code and source code) owned
34
by the Sellers and/or the Sellers' affiliates and used in connection with the
business of the Company as presently conducted or as contemplated to be
conducted in connection with the Expansion Projects (the "Licensed Software")
solely for their internal business purposes. The modifications, enhancements and
upgrades made to the Licensed Software by the Buyers or the Company after the
date of delivery pursuant to the Migration Plan shall not infringe any
intellectual property or other proprietary rights of any third party. All copies
of the Licensed Software and related documentation must reproduce all copyright
and other intellectual property rights notices included thereon. As specified in
the Migration Plan (and if not specified therein, at the Closing) the Sellers
shall deliver (or shall cause the Sellers' affiliates to deliver) copies of the
Licensed Software and alt manuals and documentation related thereto including
(at no charge to the Company or the Buyers) all modifications, enhancements and
upgrades made to or for the Licensed Software to the date of delivery.
Notwithstanding the foregoing, neither the Buyers nor the Company have the right
to transfer to a third party (other than an affiliate of the Buyers or the
Company for use in accordance with the restrictions of this Section) any rights
in the Licensed Software except in connection with the sale or transfer of all
or substantially all of the Company's assets. The Company and the Buyers shall
not be entitled to receive, and Sellers and the Sellers' affiliates shall have
no obligation to provide, any modifications, enhancements, or upgrades made to
the Licensed Software which they develop subsequent to the delivery date;
provided that, any such modifications, enhancement or upgrades made by the
Sellers or the Sellers' affiliates during the Service Period, as defined in the
Services Agreement, shall be delivered to the Buyers at the Buyers' request and
shall be paid for by the Buyers as Transition Services (as defined in the
Services Agreement). The parties hereby acknowledge and agree that, as between
Sellers and the Sellers' affiliates on the one hand, and the Company and the
Buyers on the other: (a) except as set forth in this section, all right, title
and interest, including all intellectual property rights, in the Licensed
Software are the exclusive property of the Sellers and the Sellers' affiliates;
(b) Sellers and the Sellers' affiliates shall at all times retain ownership of
the intellectual property rights in the Licensed Software; (c) the Company and
the Buyer have no rights in the Licensed Software except as expressly granted
herein; and (d) the Company and the Buyer will not take any action or permit any
action to be taken with respect to such intellectual property rights
inconsistent with the foregoing acknowledgment. The Sellers represent and
warrant that the Sellers or the Sellers' affiliates own all right, title and
interest in and to the Licensed Software or otherwise have the right to grant
the license granted herein and the Licensed Software does not infringe any third
party rights. Except as expressly provided in this Section 4.22, the Licensed
Software and associated materials are provided on an "as is" basis. The Sellers
and the Sellers' affiliates shall not be deemed to have made, and the Sellers
and the Sellers' affiliates hereby expressly disclaim, any implied guarantee or
implied warranty (whether arising under statute or otherwise in law or from a
course of dealing or usage of trade) as to the: (i) condition; (ii) design;
(iii) operation; (iv) performance; (v) reliability of the results generated or
output; (vi) non-infringement; (vii) merchantability; and (viii) fitness for a
particular purpose or intended use, of the Licensed Software and associated
materials. The Sellers and the Sellers' affiliates do not warrant that the
Licensed Software or associated materials provided are error-free or that the
Company's and the Buyer's use thereof will be uninterrupted.
35
ARTICLE V.
CONDITIONS TO OBLIGATIONS OF The BUYERS
The obligations of the Buyers to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before the
Closing Date, of the following conditions, any one or more of which may be
waived by the Buyers in their sole discretion:
SECTION 5.1. Receipt of Documents. The Sellers shall have
delivered to the Buyers, a duly executed Xxxx of Sale and any other documents
the Buyers may reasonably require relating to the existence of the Sellers, the
Company, any Subsidiary and the authority of the Sellers and the Company for
this Agreement, all in form and substance reasonably satisfactory to the Buyers.
SECTION 5.2. Representations and Warranties of the Sellers.
All representations and warranties made by the Sellers in this Agreement shall
be true and correct in all material respects on and as of the Closing Date as if
again made by the Sellers on and as of such date, and, the Buyers shall have
received a certificate dated the Closing Date and signed by the President or any
Vice President of each of the Sellers to that effect.
SECTION 5.3. Performance of the Sellers' Obligations. Each of
the Sellers shall have performed in all material respects all obligations
required under this Agreement to be performed by it on or before the Closing
Date, and the Buyers shall have received a certificate dated the Closing Xxxx
and signed by the President or any Vice President of each of the Sellers to that
effect.
SECTION 5.4. Consents and Approvals. The consents, waivers,
authorizations and approvals set forth on Schedule 5.4 shall have been duly
obtained and shall be in full force and effect on the Closing Date. All
applicable waiting periods under the HSR Act shall have expired or been
terminated.
SECTION 5.5. No Violation of Orders. No preliminary or
permanent injunction or other order issued by any Governmental Authority, nor
any statute, rule, regulation, decree or executive order promulgated or enacted
by any Governmental Authority, which declares this Agreement invalid or
unenforceable in any respect or prevents the consummation of the transactions
contemplated hereby, shall be in effect; and no action or proceeding before any
Governmental Authority, shall have been instituted by a Governmental Authority
or other person or threatened by any Government Authority, which seeks to
prevent or delay the consummation of the transactions contemplated by this
Agreement or which challenges the validity or enforceability of this Agreement.
SECTION 5.6. No Material Adverse Change. During the period
from December 31, 2001 to the Closing Date, there shall not have been any
change, or any event which has had, or would reasonably be expected to have a
Material Adverse Effect, nor shall there have been (a) the loss of Firm
Transportation Customers that have generated in the aggregate more than 4% of
the Company's revenues in the last 12 months; (b) a general rate proceeding
initiated by the
36
Company under Section 4 or by FERC under Section 5 of the NGA; (c) physical
damage to the Company's Pipeline which significantly impairs the operation of
the Pipeline or causes a substantial decrease in the output of the Pipeline for
a period of more than two weeks; (d) aggregate losses to the Company in excess
of $25 million or bona fide claims for damages against the Company in aggregate
in excess of $50 million, in each case net of reasonably expected insurance
recoveries; and/or (e) a material adverse development in the Company's
application pending before the FERC for a certificate of public convenience and
necessity related to the 2003 Expansion Project that is reasonably expected to
delay commencement of project construction beyond December 31, 2002.
SECTION 5.7. Intentionally deleted.
SECTION 5.8. Opinion of Counsel. The Buyers shall have
received a favorable opinion, dated as of the Closing Date, from counsel to the
Sellers, in form and substance reasonably satisfactory to the Buyers and its
counsel, substantially in the form of Schedule 5.8 hereto.
SECTION 5.9. Transition Services and Construction Management
Agreement. Seller Parent shall have executed a Transition Services and
Construction Management Agreement (the "Services Agreement"), the form of which
is attached as Schedule 5.9 hereto.
SECTION 5.10. Resignations. The officers and directors of the
Company and its Subsidiaries set forth on Schedule 5.10 shall have delivered
letters of resignation from their respective positions to the Buyers in a form
reasonably acceptable to the Buyers.
SECTION 5.11. Seller Parent Stock Purchase. All conditions to
the obligations of the parties to the Stock
Purchase Agreement dated of even
date herewith between Seller Parent and Buyer Parent to consummate the
transactions contemplated by such agreement shall have been satisfied or waived
(other than conditions set forth in Sections 6(g) and 7(e) of such agreement)
and Seller Parent shall be ready, willing and able to close such transaction.
SECTION 5.12. Tax Certificate. (a) The Sellers shall have
delivered to the Buyers a FIRPTA Certificate in the form of Schedule 5.12.
(b) The Sellers shall have delivered to the, Buyers any
clearance certificates or similar documents that may be required by any state
Tax authority in order to relieve the Buyers of any obligation to withhold any
portion of the Purchase Price.
SECTION 5.13. Financial Statements. (a) The Sellers shall have
delivered to the Buyers, at least three (3) business days prior to the Closing
Date, a true and correct copy of the audited balance sheet of the Company as of
December 31, 2001, together with the related statements of income, partners'
equity and cash flow for the period then ended and the notes thereto (the
"Audited Financial Statements").
37
(b) The Audited Financial Statements shall not reflect a
negative variance of more than 5% from any of the amounts shown as Total Assets,
Total Liabilities, Partner's Capital, Operating Revenue, Operating Expenses or
Net Income in the unaudited 2001 Financial Statements and shall not reflect any
other material change in any disclosures contained in any of the Notes thereto
or Contain any material Notes not contained in the unaudited 2001 Financial
Statements, from the unaudited 2001 Financial Statements.
SECTION 5.14. Ratings. After giving effect to the transactions
contemplated by this Agreement, there shall be No Ratings Downgrade (as such
term is defined in that certain Indenture, dated as of August 13, 2001, by and
among Kern River Funding Corporation, the Company and The Chase Manhattan Bank
(the "Notes Indenture").
SECTION 5.15. Workforce Agreement. The Sellers shall have
entered into a Workforce Agreement (the "Workforce Agreement"), the form of
which is attached as Schedule 5.15 hereto.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before the
Closing Date, of the following conditions, any one or more of which may be
waived by the Sellers in their sole discretion:
SECTION 6.1. Representations and Warranties of the Buyers. All
representations and warranties made by the Buyers in this Agreement shall be
true and correct in all material respects on and as of the Closing Date as if
again made by the Buyers on and as of such date, and, the Sellers shall have
received a certificate dated the Closing Date and signed by the President or any
Vice President of each of Buyer Holdco, Buyer 1 and Buyer 2 and Buyer Parent to
that effect.
SECTION 6.2. Performance of the Buyers' Obligations. Each of
the Buyers shall have performed in all material respects all obligations
required under this Agreement to be performed by it on or before the Closing
Date, and the Sellers shall have received a certificate dated the Closing Date
and signed by the President or any Vice President of each of Buyer Holdco, Buyer
1 and Buyer 2 and Buyer Parent to that effect.
SECTION 6.3. Consents and Approvals. All consents, waivers,
authorizations and approvals as set forth on Schedule 6.3 shall have been duly
obtained and shall be in full force and effect on the Closing Date. All
applicable waiting periods under the HSR Act shall have expired or been
terminated.
SECTION 6.4. No Violation of Orders. No preliminary or
permanent injunction or other order issued by any Governmental Authority, nor
any statute, rule, regulation, decree or executive order promulgated or enacted
by any Governmental Authority, that declares this Agreement invalid or
unenforceable in any respect or prevents the consummation of the transactions
contemplated hereby shall be in effect; and no action or proceeding before any
Governmental Authority, shall have been instituted by a Governmental Authority
or other person
38
or threatened by any Governmental Authority which seeks to prevent or delay the
consummation of the transactions contemplated by this Agreement or which
challenges the validity or enforceability of this Agreement.
SECTION 6.5. Seller Parent Stock Purchase. All conditions to
the obligations of the Parties to the Stock
Purchase Agreement dated of even
date herewith between Seller Parent and Buyer Parent to consummate the
transactions contemplated by such agreement shall have been satisfied or waived
(other than conditions set forth in Sections 6(g) and 7(e) of such agreement)
and Buyer Parent shall be ready, willing and able to close such transaction.
SECTION 6.6. Opinion of Counsel. The Sellers shall have
received a favorable opinion, dated as of the Closing Date, from counsel to the
Buyers, in form and substance reasonably satisfactory to the Sellers and its
counsel, substantially in the form of Schedule 6.6 hereto.
SECTION 6.7. Services Agreement. Buyer Parent shall have
executed the Services Agreement, the form of which is attached as Schedule 5.9
hereto.
SECTION 6.8. Ratings. After giving effect to the transactions
contemplated by this Agreement, there shall be No Ratings Downgrade (as such
term is defined in the Notes Indenture).
SECTION 6.9. Workforce Agreement. The Buyers shall have
entered into a Workforce Agreement, the form of which is attached as Schedule
5.15 hereto.
SECTION 6.10. Receipt of Documents. The Buyers shall have
delivered to the Sellers such duly executed documents as the Sellers may
reasonably require relating to the existence of the Buyers and the authority of
the Buyers, all in form and substance reasonably satisfactory to the Sellers.
ARTICLE VII.
TERMINATION AND ABANDONMENT
SECTION 7.1. Methods of Termination; Upset Date. This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned at any time before the Closing:
(a) by the mutual written consent of the Sellers and the
Buyers;
(b) by the Sellers, in the event that the Buyers fail to
comply with any of their covenants or agreements contained herein, or breach
their representations and warranties contained herein, and such failure to
comply or breach, if curable, is not cured within 10 days after receipt by the
Buyers of notice specifying particularly such failure to comply or breach, and
such failure to comply or breach would result in a failure to satisfy the
conditions set forth in Section 6.1 and/or 6.2;
39
(c) by the Buyers, in the event that the Sellers fail to
comply with any of their covenants or agreements contained herein, or breach
their representations and warranties contained herein, and such failure to
comply or breach, if curable, is not cured within 10 days after receipt by the
Sellers of notice specifying particularly such failure to comply or breach, and
such failure to comply or breach would result in the failure to satisfy the
conditions set forth in Sections 5.2 and/or 5.3;
(d) by the Sellers or the Buyers, in the event that a
Governmental Authority shall have issued an order, decree or ruling or taken any
other action (which order, decree or ruling the parties hereto shall use their
reasonable best efforts to lift), which permanently restrains, enjoins or
otherwise prohibits the transactions contemplated by this Agreement and which
order, decree, ruling or other action is not subject to appeal;
(e) by the Sellers or the Buyers at any time after June 15,
2002; or
(f) by the Sellers or the Buyers, in the event that the Stock
Purchase Agreement dated even date herewith between Seller Parent and Buyer
Parent has been terminated.
SECTION 7.2. Procedure Upon Termination. In the event of
termination and abandonment of this Agreement pursuant to Section 7.1, written
notice thereof shall forthwith be given to the other party hereto and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by the Sellers or the Buyers. If this
Agreement is terminated as provided herein, no party to this Agreement shall
have any liability or further obligation to any other party to this Agreement
except as provided in Sections 9.4 and 9.5 hereof; provided, however, that no
termination of this Agreement pursuant to this Article VII shall relieve any
party of liability for a grossly negligent or willful, and in either case,
material breach of any provision of this Agreement occurring before such
termination; and, provided, further, that (x) if this Agreement is terminated by
the Sellers or the Buyers pursuant to Section 7.1(e) and (y) at such time,
assuming that the specified consents under the Revolvers and the "progeny"
agreements described on Schedule 6.3 (the "Specified Consents") had been
obtained (i) all of the conditions to the obligations of the Sellers to
consummate the transactions contemplated by this Agreement set forth in Article
VI shall have been fulfilled or shall have been waived by the Sellers and (ii)
all of the conditions of the Buyers to consummate the transactions contemplated
by this Agreement set forth in Article V shall have been fulfilled or shall have
been waived by the Buyers or could reasonably have been expected to be waived by
the Buyers, then the Sellers shall pay to the Buyers the sum of $25,000,000.00
in immediately available funds on or prior to the second business day after the
date of delivery of notice of such termination. Notwithstanding the foregoing,
if all of the conditions to the obligations of both the Sellers and the Buyers
to consummate the transactions contemplated by this Agreement shall have been
fulfilled or shall have been waived and pursuant to Section 1.2 the Closing
would occur on June 16, 2002, then the date referred to in Section 7.1(e) shall
be deemed to be June 16, 2002.
40
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.1. Survival. The respective representations and
warranties of the parties hereto contained herein or in any certificates or
other documents delivered pursuant to this Agreement on the Closing shall
survive the Closing until July 31, 2003; provided however, that the
representations and warranties set forth in Section 2.2 (Capitalization; Title)
shall survive indefinitely, the representations and warranties set forth in
Section 2.24 (Environmental; Health and Safety Matters) shall survive until the
fifth anniversary of the Closing Date and the representations and warranties in
Section 2.9 (Taxes) shall survive for a period equal to the applicable statute
of limitations.
SECTION 8.2. Indemnification Coverage.
(a) Notwithstanding the Closing or the delivery of the
Interests and regardless of any investigation at any time made by or on behalf
of the Buyers or of any knowledge or information that the Buyers may have the
Sellers shall indemnify and agree to defend, save and hold the Buyers, the
Company and each of their officers, directors, employees, agents and affiliates
(other than the Sellers) (collectively, the "Buyer Indemnified Parties")
harmless if any such Buyer Indemnified Party shall at any time or from time to
lime suffer any damage, judgment, fine, penalty, demand, settlement, liability,
loss, cost, Tax, expense (including reasonable attorneys', consultants' and
experts' fees), claim or cause of action (each, a "Loss") arising out of,
relating to or resulting from:
(i) any breach or inaccuracy in any representation by
the Sellers or the breach of any warranty by the Sellers contained in this
Agreement or any certificates or other documents delivered pursuant to this
Agreement on Closing;
(ii) any failure by the Sellers to perform or observe
any term, provision, covenant, or agreement on the part of the Sellers to be
performed or observed under this Agreement; and
(iii) Legal Proceedings set forth on Schedule 8.2.
(b) Notwithstanding the Closing or the delivery of the
Interests and regardless of any investigation at any time made by or on behalf
of the Sellers or of any knowledge or information that the Sellers may have, the
Buyers shall indemnify and agree to defend, save and hold the Sellers and their
officers, directors, employees, agents and affiliates (collectively, the "Seller
Indemnified Parties") harmless if any such Seller Indemnified Party shall at any
time or from time to time suffer any Loss arising out of, relating to, or
resulting from:
(i) any breach or inaccuracy in any representation by
the Buyers or the breach of any warranty by the Buyers contained in this
Agreement or any certificates or other documents delivered pursuant to this
Agreement on Closing; and
41
(ii) any failure by the Buyers to perform or observe
any term, provision, covenant, or agreement on the part of the Buyers to be
performed or observed under this Agreement.
(c) The foregoing indemnification obligations shall be subject
to the following limitations:
(i) the Sellers' aggregate liability under Section
8.2(a) and the Buyers' aggregate liability under Section 8.2(b) shall not, in
either case, exceed 75% of the Purchase Price (the "Cap"); provided, however,
that the Cap shall not be applicable to breaches under Section 2.2, 2.9 or 4.11
or Losses asserted against the Sellers under Section 8.2(a)(iii);
(ii) no indemnification for any Losses asserted
against the Buyers or the Sellers, as the case may be, under Section 8.2(a) or
Section 8.2(b) shall be required unless and until the cumulative aggregate
amount of such Losses exceeds $8,000,000 (the "Threshold"), at which point the
Sellers or the Buyers, as the case may be, shall be obligated to indemnify the
indemnified Party (as hereinafter defined) only as to the amount of such Losses
in excess of $1,000,000 (the "Deductible"), subject to the limitation in Section
8.2(c)(i); provided, however, that the Threshold and the Deductible shall not be
applicable to breaches under Sections 1.4, 2.2, 2.9 or 4.11 or Losses asserted
against the Sellers under Section 8.2(a)(iii);
(iii) no indemnification for any Losses asserted
against the Sellers under Section 8.2(a) for a breach or inaccuracy of any
representation under Section 2.9 or failure by The Sellers to perform any
covenant under Section 4.11 shall be required unless and until the cumulative
aggregate amount of such Losses exceeds $50,000, at which point the Sellers
shall be obligated to indemnify the Indemnified Party the full amount of such
Losses;
(iv) the amount of any Losses suffered by a Seller
Indemnified Party or a Buyer Indemnified Party, as the case may be, shall be
reduced by any third-party insurance which such party receives in respect of or
as a result of such Losses. If any Losses for which indemnification is provided
hereunder is subsequently reduced by any third-party insurance or other
indemnification benefit or recovery, the amount of the reduction shall be
remitted to the Indemnifying Party (as hereinafter defined);
(v) no claim may be asserted nor may any action be
commenced (A) against the Sellers for breach or inaccuracy of any representation
or breach of a warranty, unless written notice of such claim or action is
received by the Sellers describing in reasonable detail the facts and
circumstances with respect to the subject matter of such claim or action on or
prior to the date on which the representation or warranty on which such claim or
action is based ceases to survive as set forth in Section 8.1 (it being agreed
and understood that if a claim for a breach of a representation or warranty is
timely made, the representation or warranty shall survive until the date on
which such claim is finally liquidated or otherwise resolved), or (B) against
the Buyers for breach or inaccuracy of any representation or breach of a
warranty, unless written notice of such claim or action is received by the
Buyers describing in reasonable detail the facts and circumstances with respect
to the subject matter of such claim or action on or prior to the date on which
the representation or warranty on which such claim or action is based ceases to
42
survive as set forth in Section 8.1 (it being agreed and understood that if a
claim for a breach of a representation or warranty is timely made, the
representation or warranty shall survive until the date on which such claim is
finally liquidated or otherwise resolved); and
(vi) an Indemnified Party shall not be entitled under
this Agreement to multiple recovery for the same Losses.
SECTION 8.3. Procedures. Any Indemnified Party shall notify
the Indemnifying Party (with reasonable specificity) promptly after it becomes
aware of facts supporting a claim or action for indemnification under this
Article VIII, and shall provide to the Indemnifying Party as soon as practicable
thereafter all information and documentation reasonably necessary to support and
verify any Losses associated with such claim or action. Subject to Section
8.2(v), the failure to so notify or provide information to the Indemnifying
Party shall not relieve the Indemnifying Party of any liability that it may have
to any indemnified Party, except to the extent that the Indemnifying Party
demonstrates that it has been materially prejudiced by the Indemnified Party's
failure to give such notice, in which case the Indemnifying Party shall be
relieved from its obligations hereunder to the extent of such material
prejudice. The Indemnifying Party shall defend, contest or otherwise protect the
Indemnified Party against any such claim or action by counsel of the
Indemnifying Party's choice at its sole cost and expense; provided, however,
that the Indemnifying Party shall not make any settlement or compromise without
the prior written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed) unless the sole relief provided is monetary
damages that are paid in full by the Indemnifying Party. The Indemnified Party
shall have the right, but not the obligation, to participate at its own expense
in the defense thereof by counsel of the indemnified Party's choice and shall in
any event use its reasonable best efforts to cooperate with and assist the
Indemnifying Party. If the Indemnifying Party fails timely to defend, contest or
otherwise protect against such suit, action, investigation, claim or proceeding,
the Indemnified Party shall have the right to do so, including, without
limitation, the right to make any compromise or settlement thereof, and the
Indemnified Party shall be entitled to recover the entire cost thereof from the
Indemnifying Party, including, without limitation, reasonable attorneys' fees,
disbursements and amounts paid as the result of such suit, action,
investigation, claim or proceeding.
SECTION 8.4. Remedy. Absent fraud, and except for seeking
equitable relief, from and after the Closing the sole remedy of a party in
connection with (i) a breach or inaccuracy of the representations, or breach of
warranties, in this Agreement or any certificates or other documents delivered
pursuant to this Agreement on Closing, or (ii) any failure by a party to perform
or observe any term, provision, covenant, or agreement on the part of such party
to be performed or observed under this Agreement, shall, in each case, be as set
forth in this Article VIII.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
SECTION 9.1. Common Facilities. For purposes of this
Agreement, it is assumed that the Company's tenant-in-common interest in the
Common Facilities is an asset of the Company. It is also understood that any
representations (except in Section 2.11(d)) regarding such asset are limited to
the Sellers' knowledge.
43
SECTION 9.2. Publicity. On or prior to the Closing Date,
neither party shall, nor shall it permit its affiliates to, issue or cause the
publication of any press release or other announcement with respect to this
Agreement or the transactions contemplated hereby without the consent of the
other party hereto. Notwithstanding the foregoing, in the event any such press
release or announcement is required by law or stock exchange rule to be made by
the party proposing to issue the same, such party shall use its reasonable best
efforts to consult in good faith with the other party prior to the issuance of
any such press release or announcement.
SECTION 9.3. Successors and Assigns; No Third-Party
Beneficiaries. This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective successors and assigns; provided,
however, that neither party shall assign or delegate any of the obligations
created under this Agreement without the prior written consent of the other
party. Except as contemplated by Article VIII, nothing in this Agreement shall
confer upon any person or entity not a party to this Agreement, or the legal
representatives of such person or entity, any rights or remedies of any nature
or kind whatsoever under or by reason of this Agreement.
SECTION 9.4. Investment Bankers, Financial Advisors, Brokers
and Finders. (a) The Sellers shall indemnify and agree to defend and hold the
Buyers and the Company harmless against and in respect of all claims, losses,
liabilities and expenses which may be asserted against the Buyers (or any
affiliate of the Buyers) by any broker or other person who claims to be entitled
to an investment banker's, financial advisor's, broker's, finder's or similar
fee or commission in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby, by reason of his acting at
the request of the Sellers or the Company.
(b) The Buyers shall indemnify and agree to save and hold the
Sellers harmless against and in respect of all claims, losses, liabilities,
fees, costs and expenses which may be asserted against them by any broker or
other person who claims to be entitled to an investment banker's, financial
advisor's, broker's, finder's or similar fee or commission in respect of the
execution of this Agreement or the consummation of the transactions contemplated
hereby, by reason of his acting at the request of the Buyers.
SECTION 9.5. Fees and Expenses. Except as otherwise expressly
provided in this Agreement, all legal, accounting and other fees, costs and
expenses of a party hereto incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees,
costs or expenses; provided, however that the Sellers shall be solely
responsible for all legal, accounting and other fees, costs and expenses
incurred by the Sellers and the Company. The Sellers, as a group, and the
Buyers, as a group, shall each bear one-half of the costs of HSR Act filing
fees.
44
Section 9.6. Notices. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given or made if delivered personally or sent by overnight courier or
sent by facsimile (with evidence of confirmation of receipt) to the parties at
the following addresses:
(a) If to the Buyers, to:
MidAmerican Energy Holdings Company,
KR Holding, LLC, KR Acquisition 1, LLC and KR Acquisition 2,
LLC
c/o MidAmerican Energy Holdings Company 000 Xxxxx 00xx Xx.
Xxxxx 000
Xxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000)000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
000 Xxxx 00xx Xx.
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
(b) If to the Sellers, to:
The Xxxxxxxx Companies, Inc., Xxxxxxxx Gas Pipeline
Company, LLC, Xxxxxxxx Western Pipeline Company
LLC and Kern River Acquisition, LLC
Xxx Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx von Xxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
45
or to such other persons or at such other addresses as shall be furnished by
either party by like notice to the other, and such notice or communication shall
be deemed to have been given or made as of the date so delivered or mailed. No
change in any of such addresses shall be effective insofar as notices under this
Section 9.6 are concerned unless such changed address is located in the United
States of America and notice of such change shall have been given to such other
party hereto as provided in this Section 9.6.
SECTION 9.7. Entire Agreement. This Agreement, together with
the Disclosure Schedules and the exhibits hereto, represent the entire agreement
and understanding of the parties with reference to the transactions set forth
herein and no representations or warranties have been made in connection with
this Agreement other than those expressly set forth herein or in the Disclosure
Schedules, exhibits, certificates and other documents delivered in accordance
herewith. This Agreement supersedes all prior negotiations, discussions,
correspondence, communications, understandings and agreements between the
parties relating to the subject matter of this Agreement and all prior drafts of
this Agreement, all of which are merged into this Agreement. No prior drafts of
this Agreement and no words or phrases from any such prior drafts shall be
admissible into evidence in any action or suit involving this Agreement.
SECTION 9.8. Waivers and Amendments. The Sellers, as a group,
or the Buyers, as a group, may by written notice to the other: (a) extend the
time for the performance of any of the obligations or other actions of the
other; (b) waive any inaccuracies in the representations or warranties of the
other contained in this Agreement or in any document delivered pursuant to this
Agreement by the other party; (c) waive compliance with any of the covenants of
the other contained in this Agreement; (d) waive performance of any of the
obligations of the other created under this Agreement; or (e) waive fulfillment
of any of the conditions to its own obligations under this Agreement or in any
documents delivered pursuant to this Agreement by the other party. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach, whether or riot
similar, unless such waiver specifically states that it is to be construed as a
continuing waiver. This Agreement may be amended, modified or supplemented only
by a written instrument executed by the parties hereto,
SECTION 9.9. Severability. This Agreement shall be deemed
severable, and the invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of this Agreement or of
any other term or provision hereof. Furthermore, in lieu of any such invalid or
unenforceable term or provision, the parties hereto intend that there shall be
added as a part of this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible and be valid and
enforceable.
SECTION 9.10. Titles and Headings. The Article and Section
headings and any table of contents contained in this Agreement are solely for
convenience of reference and shall not affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
SECTION 9.11. Signatures and Counterparts. Facsimile
transmission of any signed original document and/or retransmission of any signed
facsimile transmission shall be the same as delivery of an original. At the
request of the Buyers or the Sellers, the parties will confirm facsimile
transmission by signing a duplicate original document. This Agreement may
46
be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall be considered one and the same
agreement.
SECTION 9.12. Enforcement of the Agreement. The parties hereto
agree that irreparable damage would occur if any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereto, this being in addition to
any other remedy to which they are entitled at law or in equity. In no event
shall any party hereto be entitled to any punitive, incidental, indirect,
special or consequential damages resulting from or arising out of this Agreement
or the transactions contemplated hereby.
SECTION 9.13. Governing Law. This Agreement shall be governed
by and construed in accordance with the internal and substantive laws of
Delaware and without regard to any conflicts of laws concepts which would apply
the substantive law of some other jurisdiction.
SECTION 9.14. Certain Definitions. For purposes of this
Agreement, the term:
(a) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned person;
(b) "Expansion Projects" means the 2002 Expansion Project, the
2003 Expansion Project and the High Desert Project.
(c) "High Desert Project" means the design, construction and
placing in service of the additional lateral facilities to the Pipeline
described in the Application for Public Convenience and Necessity filed by the
Company with the FERC on July 18, 2001 for authority to construct, own and
operate the High Desert Lateral, Docket CP 00-000-000.
(d) "Material Adverse Effect" means a material adverse effect
on the assets, properties, business, operations, net income or financial
condition of the Company and its Subsidiaries taken as a whole, or the prospects
of the Company and its Subsidiaries taken as a whole as such prospects relate to
the Expansion Projects, it being understood that none of the following shall be
deemed to constitute a Material Adverse Effect: (i) any effect resulting from
entering into this Agreement or the announcement of the transactions
contemplated by this Agreement; and (ii) any effect resulting from changes in
the United States or global economy as a whole, except for such effects which
disproportionately impact the Company and its Subsidiaries.
(e) "1 Line System" means the nomination and scheduling system
software developed internally by the Sellers to replace the Rapids II system.
(f) "person" means an individual, corporation, association,
trust, limited liability company, limited partnership, limited liability
partnership, partnership, incorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934).
47
(g) "Pipeline" means the natural gas pipelines, lateral lines,
Rights of Way, easements, compressors, compressor stations and other related
machinery and equipment owned by the Company and used by the Company in the
conduct of its business.
(h) "2002 expansion Project" means the design, construction
and placing in service of the facilities to expand the transportation capacity
of the Pipeline as described in the Application for Certificate of Public
Convenience and Necessity filed by the Company with the FERC on November 24,
2000 and now pending in Docket CP 00-00-000 for authority to construct, own and
operate the 2002 Expansion Project facilities.
(i) "2003 Expansion Project" means the design, construction
and placing in service of the facilities to expand the transportation capacity
of the Pipeline as described in the Application for Certificate of Public
Convenience and Necessity filed by the Company with the FERC on August 1, 2001,
and now pending in Docket No. CPOI-422-000, for authority to construct, own and
operate the 2003 Expansion Project facilities.
SECTION 9.15. Consent to Jurisdiction; Exclusive Forum. With
respect to any suit, action or proceeding initiated by a party to this
Agreement arising out of, under or in connection with this Agreement or the
transactions contemplated hereby, each of the Sellers and the Buyers hereby
submit to the exclusive jurisdiction of any state or federal court sitting in
the State of
Delaware and irrevocably waive, to the fullest extent permitted by
law, any objection that they may now have or hereafter obtain to the laying of
venue in any such court in any such suit, action or proceeding.
48
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: Signature Illegible
Title:
KR HOLDINGS, LLC
By: Signature Illegible
Title:
KR ACQUISITION 1, LLC
By: Signature Illegible
Title:
KR ACQUISITION 2, LLC
By: Signature Illegible
Title:
