EXHIBIT 10.1
PURCHASE AGREEMENT
BY AND AMONG
XXXXXXXX GAS PIPELINE COMPANY, LLC
AS SELLER,
THE XXXXXXXX COMPANIES, INC.
(SOLELY WITH RESPECT TO ITS OBLIGATIONS UNDER SECTION 4.10)
AND
LOEWS PIPELINE HOLDING CORP.,
AS BUYER,
FOR THE PURCHASE AND SALE OF
ALL THE CAPITAL STOCK
OF
TEXAS GAS TRANSMISSION CORPORATION,
A DELAWARE CORPORATION
DATED AS OF
APRIL 11, 2003
TABLE OF CONTENTS
PAGE
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ARTICLE I. SALE AND PURCHASE............................................................................. 1
SECTION 1.1. Agreement to Sell and to Purchase; Closing............................................... 1
SECTION 1.2. Purchase Price; Payment of Estimated Purchase Price at Closing........................... 2
SECTION 1.3. Adjustment to Purchase Price............................................................. 2
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF SELLER..................................................... 5
SECTION 2.1. Corporate Organization................................................................... 5
SECTION 2.2. Capitalization; Title.................................................................... 5
SECTION 2.3. Subsidiaries and Equity Interests........................................................ 5
SECTION 2.4. Validity of Agreement; Authorization..................................................... 6
SECTION 2.5. No Conflict or Violation................................................................. 6
SECTION 2.6. Consents and Approvals................................................................... 6
SECTION 2.7. Financial Statements..................................................................... 6
SECTION 2.8. Absence of Certain Changes or Events..................................................... 7
SECTION 2.9. Tax Matters.............................................................................. 7
SECTION 2.10. Absence of Undisclosed Liabilities...................................................... 9
SECTION 2.11. Real Property........................................................................... 9
SECTION 2.12. Intellectual Property and Computer Hardware............................................. 10
SECTION 2.13. Licenses, Permits and Governmental Approvals............................................ 10
SECTION 2.14. Compliance with Law..................................................................... 11
SECTION 2.15. Litigation.............................................................................. 11
SECTION 2.16. Contracts............................................................................... 11
SECTION 2.17. Brokers................................................................................. 12
SECTION 2.18. Employee Plans.......................................................................... 13
SECTION 2.19. Insurance............................................................................... 16
SECTION 2.20. Environmental; Health and Safety Matters................................................ 16
SECTION 2.21. Regulatory Matters...................................................................... 17
SECTION 2.22. Customers............................................................................... 18
SECTION 2.23. No Other Representations................................................................ 18
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BUYER..................................................... 18
SECTION 3.1. Corporate Organization................................................................... 18
SECTION 3.2. Validity of Agreement.................................................................... 18
SECTION 3.3. No Conflict or Violation; No Defaults.................................................... 19
SECTION 3.4. Consents and Approvals................................................................... 19
SECTION 3.5. Financial Ability........................................................................ 19
SECTION 3.6. Brokers.................................................................................. 19
SECTION 3.7. Independent Investigation................................................................ 19
SECTION 3.8. Investment Intent; Investment Experience; Restricted Securities.......................... 20
ARTICLE IV. COVENANTS.................................................................................... 20
SECTION 4.1. Certain Changes and Conduct of Business.................................................. 20
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Table of Contents
(Continued)
PAGE
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SECTION 4.2. Access to Properties and Records......................................................... 22
SECTION 4.3. Employee Matters......................................................................... 23
SECTION 4.4. Consents and Approvals................................................................... 28
SECTION 4.5. Further Assurances....................................................................... 28
SECTION 4.6. Reasonable Efforts....................................................................... 29
SECTION 4.7. Disclosure Schedule Updates.............................................................. 29
SECTION 4.8. Confidential Information................................................................. 29
SECTION 4.9. Negotiations............................................................................. 30
SECTION 4.10. Tax Covenants and Indemnity............................................................. 30
SECTION 4.11. Insurance, Bonds and Collateral......................................................... 33
SECTION 4.12. Information Technology.................................................................. 34
SECTION 4.13. Software License........................................................................ 35
SECTION 4.14. Non-software Copyright License.......................................................... 36
SECTION 4.15. Transitional Trademark License.......................................................... 36
SECTION 4.16. Reporting Cooperation................................................................... 37
SECTION 4.17. Termination of Certain Related Party Contracts.......................................... 37
SECTION 4.18. Other Matters........................................................................... 38
SECTION 4.19. Guaranties.............................................................................. 38
SECTION 4.20. Company Officers and Directors.......................................................... 38
SECTION 4.21. Work Protocol........................................................................... 38
ARTICLE V. CONDITIONS TO OBLIGATIONS OF BUYER............................................................ 39
SECTION 5.1. Receipt of Documents..................................................................... 39
SECTION 5.2. Representations and Warranties of Seller................................................. 39
SECTION 5.3. Performance of Seller's Obligations...................................................... 40
SECTION 5.4. Consents and Approvals................................................................... 40
SECTION 5.5. No Violation of Orders................................................................... 40
SECTION 5.6. Transition Services Agreement............................................................ 40
ARTICLE VI. CONDITIONS TO OBLIGATIONS OF SELLER.......................................................... 40
SECTION 6.1. Representations and Warranties of Buyer.................................................. 40
SECTION 6.2. Performance of Buyer's Obligations....................................................... 41
SECTION 6.3. Consents and Approvals................................................................... 41
SECTION 6.4. No Violation of Orders................................................................... 41
SECTION 6.5. Purchase Price........................................................................... 41
SECTION 6.6. Opinion of Buyer's Counsel............................................................... 41
ARTICLE VII. TERMINATION AND ABANDONMENT................................................................. 42
SECTION 7.1. Methods of Termination; Upset Date....................................................... 42
SECTION 7.2. Procedure Upon Termination............................................................... 42
ARTICLE VIII. SURVIVAL; INDEMNIFICATION.................................................................. 43
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Table of Contents
(Continued)
PAGE
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SECTION 8.1. Survival................................................................................. 43
SECTION 8.2. Indemnification Coverage................................................................. 43
SECTION 8.3. Procedures............................................................................... 45
SECTION 8.4. Waiver of Consequential, Etc. Damages.................................................... 47
SECTION 8.5. Compliance with Express Negligence Rule.................................................. 47
SECTION 8.6. Liquidated Damages....................................................................... 47
SECTION 8.7. Remedy................................................................................... 47
SECTION 8.8. Tax Treatment of Indemnity Payments...................................................... 48
SECTION 8.9. Litigation Assistance.................................................................... 48
ARTICLE IX. MISCELLANEOUS PROVISIONS..................................................................... 48
SECTION 9.1. Publicity................................................................................ 48
SECTION 9.2. Successors and Assigns; No Third-Party Beneficiaries..................................... 48
SECTION 9.3. Investment Bankers, Financial Advisors, Brokers and Finders.............................. 48
SECTION 9.4. Fees and Expenses........................................................................ 49
SECTION 9.5. Notices.................................................................................. 49
SECTION 9.6. Entire Agreement......................................................................... 50
SECTION 9.7. Waivers and Amendments................................................................... 50
SECTION 9.8. Severability............................................................................. 51
SECTION 9.9. Titles and Headings...................................................................... 51
SECTION 9.10. Signatures and Counterparts............................................................. 51
SECTION 9.11. Enforcement of the Agreement............................................................ 51
SECTION 9.12. Governing Law........................................................................... 51
SECTION 9.13. Disclaimer of Warranties................................................................ 51
SECTION 9.14. [Intentionally Omitted]................................................................. 52
SECTION 9.15. Bulk Sales or Transfer Laws............................................................. 52
SECTION 9.16. Certain Definitions..................................................................... 53
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Exhibits
Exhibit 4.12 Transition Services Agreement
Exhibit 4.18 Assumption and Agreement
Exhibit 4.19(a) Buyer's Guaranty
Exhibit 4.19(b) Seller's Guaranty
Disclosure Schedules
Schedule 1.2 Description of Funded Debt
Schedule 1.3 Working Capital
Schedule 2.1 Corporate Organization
Schedule 2.3 Ownership Interests
Schedule 2.5 No Conflict or Violation
Schedule 2.6 Seller Consents and Approvals
Schedule 2.8 Absence of Certain Changes or Events
Schedule 2.9 Tax Matters
Schedule 2.10 Absence of Company Undisclosed Liabilities
Schedule 2.11(a) Rights-of-Way
Schedule 2.11(b) Property Restrictions
Schedule 2.12(a) Intellectual Property
Schedule 2.12(a)(v) Company and Seller Trademarks
Schedule 2.12(b) Shared Computer Hardware
Schedule 2.13 Licenses, Permits and Governmental Approvals
Schedule 2.14 Compliance with Law
Schedule 2.15 Litigation
Schedule 2.16 Contracts
Schedule 2.17 Brokers - Seller
Schedule 2.18(a) Employee Plans
Schedule 2.18(b) Business Employees
Schedule 2.18(c) Employee Plan Qualification
Schedule 2.18(d) Union/Collective Bargaining Agreement Matters
Schedule 2.19 Insurance
Schedule 2.20 Environmental; Health and Safety Matters
Schedule 2.22 Customer List
Schedule 3.4 Buyer Consents and Approvals
Schedule 3.6 Brokers - Buyer
Schedule 4.1 Certain Changes and Conduct of Business
Schedule 4.1(a)(vii) Budgeted Capital Expenditures
Schedule 4.11 Bonds, Letters of Credit and Cash Collateral
Schedule 4.17 Related Party Contracts
Schedule 8.2(v) Retained Litigation
Schedule 8.2(vii) Retained Contracts
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of this 11th day of April, 2003, by and among XXXXXXXX GAS PIPELINE
COMPANY, LLC, a Delaware limited liability company ("SELLER"), THE XXXXXXXX
COMPANIES, INC., a Delaware corporation ("PARENT") (solely with respect to its
obligations under Section 4.10 hereof), and LOEWS PIPELINE HOLDING CORP., a
Delaware corporation ("BUYER").
W I T N E S S E T H:
WHEREAS, Seller owns 100% of the issued and outstanding
capital stock (the "SHARES") of Texas Gas Transmission Corporation, a Delaware
corporation (the "COMPANY"); and
WHEREAS, Parent owns 100% of the issued and outstanding
limited liability company interests of Seller; and
WHEREAS, Buyer desires to purchase the Shares from Seller, and
Seller desires to sell the Shares to Buyer, in each case upon the terms and
subject to the conditions set forth in this Agreement;
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; CLOSING.
(a) On the Closing Date (as hereinafter defined), and upon the terms
and subject to the conditions set forth in this Agreement, Seller shall sell,
assign, transfer, convey and deliver to Buyer, and Buyer shall purchase and
accept from Seller, all of the Shares, 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 other than as may be set
forth in the Organizational Documents (as defined in Section 2.2) of the Company
("ENCUMBRANCES").
(b) The closing of such sale and purchase (the "CLOSING") shall take
place at 10:00 a.m. (Houston, Texas time) at the offices of Xxxxxxx & Xxxxx LLP
in Houston, Texas (or at such other location as the parties hereto shall agree
in writing) no later than five (5) business days after the satisfaction of the
conditions to Closing contained in Articles 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
DATE"). At the Closing, Seller shall deliver to Buyer the stock certificates
representing the Shares duly endorsed in blank, or accompanied by stock powers
duly executed in blank in form and substance reasonably acceptable to Buyer and
Seller (the "STOCK TRANSFER"). In full consideration and exchange for the
Shares, Buyer shall thereupon pay to Seller the Purchase Price as provided in
Section 1.2 at the times and in the manner described in Sections 1.2 and 1.3.
Notwithstanding that the Purchase Price shall be
subject to subsequent adjustment pursuant to Section 1.3, the delivery of the
Estimated Purchase Price to Seller under Section 1.2(b) shall result in the full
and final sale of the Shares.
SECTION 1.2. PURCHASE PRICE; PAYMENT OF ESTIMATED PURCHASE
PRICE AT CLOSING.
(a) The purchase price for the Shares (the "PURCHASE PRICE") shall be
$795,000,000.00 as such amount is adjusted in accordance with Section 1.3. In
addition, Buyer acknowledges that the Company has outstanding Funded Debt in the
principal amount of $250,000,000.00 (as of December 31, 2002), as further
described on Schedule 1.2, plus accrued and unpaid interest thereon.
(b) On the Closing Date, Buyer shall deliver to Seller $795,000,000.00
as adjusted pursuant to subsection (c) below (the "ESTIMATED PURCHASE PRICE").
Payment to Seller shall be paid by wire transfer to Seller of immediately
available funds made to a bank account in the United States of America
designated in writing by Seller not less than three (3) business days before the
Closing Date.
(c) At the Closing, Seller shall deliver to Buyer a certificate setting
forth its best estimate of the Working Capital as of the Closing Date based on
the same procedures described in Section 1.3 for determining the Working Capital
(the "ESTIMATED WORKING CAPITAL"). If Estimated Working Capital exceeds Working
Capital on the Base Statement, then the amount to be paid to Seller at Closing
under subsection (b) above shall be increased by the amount of such excess. If
Working Capital on the Base Statement exceeds Estimated Working Capital, then
the amount to be paid to Seller under subsection (b) above shall be decreased by
the amount of such excess.
SECTION 1.3. ADJUSTMENT TO PURCHASE PRICE.
(a) Schedule 1.3 sets forth the Working Capital of the Company as of
December 31, 2002 (the "BASE STATEMENT") based on the Financial Statements and
as such is determined in accordance with this Agreement. "WORKING CAPITAL" shall
mean Current Assets less Current Liabilities. "CURRENT ASSETS" shall mean
current assets of the Company as reflected in the consolidated financial
statements of the Company as of the relevant date of determination. "CURRENT
LIABILITIES" shall mean the current liabilities of the Company as reflected in
the consolidated financial statements of the Company as of the relevant date of
determination. Notwithstanding the foregoing, for purposes of calculating
Working Capital, none of the following shall be included in Current Assets or
Current Liabilities: (i) the current assets and current liabilities, if any, of
the Retained Entities; (ii) assets or liabilities of the Company related to
deferred Taxes or the payment of Taxes (including Taxes for which Seller is
liable under Section 4.10); (iii) the current portion of any principal payment
obligation of Funded Debt; (iv) assets related to prepaid insurance; (v)
intercompany receivables or intercompany payables (that is, receivables from or
payables to Seller or any of its Affiliates (other than the Company)); (vi) any
current assets or current liabilities related to the matters being retained by
the Seller under Section 8.2(a)(iv), Section 8.2(a)(v), and Section 8.2(a)(vi);
(vii) transportation and exchange gas receivables and payables, storage gas
receivables and payables, costs recoverable from customers and gas stored
underground; (viii) any reversal of current liability reserves or reversals of
current assets reserves, including contra-assets accounts for current assets
(including
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allowances for doubtful accounts); (ix) any current liabilities relating to
checks that have been issued but have not yet cleared the bank accounts; (x) any
changes to current assets and current liabilities resulting from a
reclassification of any assets and liabilities included in the Financial
Statements; or (xi) any changes to current assets or current liabilities
resulting from the accrual of liability in respect of FAS 112 long term
disability to the extent relating to the salary component. Within 60 days
following the Closing Date, Buyer shall prepare and deliver to Seller a
statement (the "CLOSING STATEMENT"), which shall set forth in reasonable detail
(A) the amount of Working Capital of the Company as of the Closing Date based
upon a detailed balance sheet prepared as of the Closing Date on a basis
consistent with the balance sheet included in the Base Statement; (B) a copy of
such Closing Date balance sheet and (C) a calculation of the adjustment to the
Purchase Price that is payable based upon the difference between the Estimated
Working Capital (as defined in Section 1.2(c)) and the Working Capital in the
Closing Statement. Seller agrees, at no cost to Buyer, to give Buyer and its
authorized representatives reasonable access (provided that in their sole
discretion Seller or its representatives may accompany Buyer and its
representatives) to such employees, officers and other facilities and such books
and records of Seller as are reasonably necessary to allow Buyer and its
authorized representatives to prepare the Closing Statement. The Base Statement
shall be prepared in accordance with GAAP (as defined in Section 2.7) and on a
basis consistent with the Financial Statements using the same accounting
methods, policies, practices, procedures and adjustments as were used in the
preparation of the Financial Statements (except as set forth in this Section 1.3
and in Schedule 1.3). The Closing Statement shall be prepared in accordance with
GAAP and on a basis consistent with the Financial Statements, using the same
accounting methods, policies, practices, procedures and adjustments as were used
in the preparation of the Base Statement, except that Current Liabilities in the
Closing Statement shall include as a liability the amount, if any, by which the
accrual of liability (whether current or long term) in respect of FAS 112 long
term disability to the extent relating to the salary component exceeds
$2,500,000.00.
(b) Following its receipt from Buyer of the Closing Statement, Seller
shall have 30 days to review the Closing Statement and to inform Buyer in
writing of any disagreement which it may have with the Closing Statement, which
objection (i) shall specify in reasonable detail Seller's disagreement with the
Closing Statement and (ii) shall include a detailed adjusted balance sheet
prepared as of the Closing Date reflecting the adjustments and changes requested
by Seller (the "OBJECTION"). Buyer agrees, at no cost to Seller, to give Seller
and its authorized representatives reasonable access to such employees, officers
and other facilities and such books and records of the Company as are reasonably
necessary to allow Seller and its authorized representatives to review and
confirm the Closing Statement prepared by Buyer. If Buyer does not receive the
Objection within such 30-day period, the amount of Working Capital set forth on
the Closing Statement delivered pursuant to Section 1.3(a) shall be deemed to
have been accepted by Seller and shall become binding upon Seller. If Seller
does timely deliver an Objection to Buyer, Buyer shall then have 10 days from
the date of receipt of such Objection (the "REVIEW PERIOD") to review and
respond to the Objection. Buyer and Seller shall attempt in good faith to
resolve any disagreements with respect to the determination of Working Capital
of the Company as of the Closing Date or the amount of the adjustment to the
Purchase Price. If they are unable to resolve all of their disagreements with
respect to the determination of Working Capital of the Company as of the Closing
Date or the amount of the adjustment to the Purchase Price within 10 days
following the expiration of Buyer's Review Period, they may refer, at the
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option of either Buyer or Seller, their differences to PriceWaterhouseCoopers,
L.L.C., or if PriceWaterhouseCoopers, L.L.C. declines to accept such engagement,
a nationally recognized firm of independent public accountants selected jointly
by Buyer and Seller, 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 the Closing Date set forth in the Closing Statement requires
adjustment. If Buyer and Seller are unable to so select the independent public
accountants within five days of PriceWaterhouseCoopers, L.L.C. declining to
accept such engagement, either Buyer or Seller may thereafter request that the
CPR Institute for Dispute Resolution make such selection (as applicable,
PriceWaterhouseCoopers, L.L.C., the firm selected by Buyer and Seller or the
firm selected by the CPR Institute for Dispute Resolution is referred to as the
"CPA FIRM"). Buyer and Seller shall direct the CPA Firm to use its reasonable
best efforts to render its determination within 30 days after the issue is first
submitted to the CPA Firm. The CPA Firm's determination shall be conclusive and
binding upon Buyer and Seller. The fees and disbursements of the CPA Firm shall
be shared equally by Buyer and Seller. Buyer and Seller shall make readily
available to the CPA Firm all relevant books and records relating to the Closing
Statement and all other items reasonably requested by the CPA Firm. The Closing
Statement as agreed to by Buyer and Seller or as determined by the CPA Firm
shall be referred to as the "FINAL CLOSING STATEMENT."
(c) If Working Capital on the Final Closing Statement exceeds Estimated
Working Capital, then Buyer shall pay to Seller in cash the amount of such
excess. If Estimated Working Capital exceeds Working Capital on the Final
Closing Statement, then Seller shall pay to Buyer in cash the amount of such
excess. All amounts payable under this Section 1.3(c) shall be paid within three
business days of the 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.
(d) Seller and Buyer hereby agree that, on or before the Closing Date,
Seller shall take all such actions as may be necessary or appropriate to pay in
full, offset, dividend or distribute to the Seller or its Affiliates or
otherwise to cancel without payment, all intercompany accounts (whether
classified as short-term or long term accounts) between the Company, on the one
hand, and Seller and any Person which, as of the date of this Agreement, is or,
prior to Closing, becomes an Affiliate of Seller (other than the Company), on
the other hand, other than amounts due under the contract described in Item 2 of
Schedule 2.16(e); provided, however, that Buyer may, on or prior to May 1, 2003,
notify Seller that Buyer shall assume from Seller, as of the Closing Date,
Seller's obligations to Company that are reflected in the outstanding balance as
of the Closing Date of "Advances to Affiliates" shown in the Closing Statement
pursuant to the Intercompany Note Agreement described on Schedule 2.16(c). Any
assumption of liabilities by Buyer under the previous sentence shall be
implemented by an assignment and assumption agreement reasonably acceptable to
Seller. Seller shall be responsible for all checks issued in connection with the
Company prior to the Closing Date but that have not cleared as of the Closing
Date.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SELLER
As of the date hereof, Seller hereby represents and warrants
to Buyer as follows:
SECTION 2.1. CORPORATE ORGANIZATION.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware. Seller is a limited
liability company, duly formed, validly existing and in good standing under the
laws of the state of Delaware. The Company has all requisite power and authority
and all governmental licenses, authorizations, permits, consents and approvals
to own its properties and assets and to conduct its business as now conducted,
except where the failure to have such licenses, authorizations, permits,
consents and approvals would not have a Material Adverse Effect (as defined in
Section 9.16). The Company is duly qualified to do business as a foreign entity
and is in good standing in each jurisdiction where the character of the
properties owned or leased by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not individually or in the aggregate be reasonably
likely to have a Material Adverse Effect. Schedule 2.1 sets forth all of the
jurisdictions in which the Company is qualified to do business.
SECTION 2.2. CAPITALIZATION; TITLE.
All of the outstanding Shares of the Company are owned of record and
beneficially by Seller. All of the Shares have been validly issued and are fully
paid and nonassessable. Except for this Agreement, there are no outstanding
options, warrants, agreements, conversion rights, preemptive rights or other
rights to subscribe for, purchase or otherwise acquire the Shares. There are no
voting trusts or other agreements or understandings to which Seller or the
Company is a party with respect to the voting of the Shares. 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 Shares or any securities
convertible into or exchangeable for any Shares. Seller has valid and marketable
title to the Shares free and clear of any Encumbrances. True and correct copies
of the Organizational Documents (defined below) of the Company with all
amendments thereto to the date hereof, have been made available by Seller to the
Buyer or its representatives. "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 2.3. SUBSIDIARIES AND EQUITY INTERESTS.
TGT Sub and the LLC are the only subsidiaries, direct or indirect, of
the Company, and except for the ownership interests in the Retained Entities and
as provided in Schedule 2.3, the Company does not own, directly or indirectly,
any shares of capital stock, voting rights or other equity interests or
investments in any other Person. The Company is not subject to any obligation or
requirement to make any investment (in the form of a loan, capital contribution
or similar payment) to or in any other Person, except as provided in Schedule
2.3. The Company
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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.
Each of Seller and Parent has the power to enter into this Agreement
and the Transaction Documents (as defined herein) to which such Person is a
party and to carry out its obligations hereunder and thereunder. The execution
and delivery of this Agreement and the Transaction Documents to which Seller or
Parent is a party and the performance by Seller or Parent of its obligations
hereunder and thereunder have been duly authorized by the Board of Directors of
Parent and the Management Committee of Seller, and no other proceedings on the
part of Seller or Parent are necessary to authorize such execution, delivery and
performance. This Agreement and the Transaction Documents to which Seller or
Parent is a party have been duly executed by such Person and constitute such
Person's valid and binding obligation enforceable against such Person in
accordance with their 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 Seller and Parent of this Agreement and the Transaction Documents
to which Seller or Parent is a party does not and will not: (a) violate or
conflict with any provision of the Organizational Documents of Seller or Parent;
(b) violate any applicable provision of 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)
violate, result in a breach of, constitute (with due notice or lapse of time or
both) a default or cause any obligation, penalty or premium to arise or accrue
under any contract, lease, loan agreement, mortgage, security agreement, trust
indenture or other agreement or instrument to which Seller, Parent or the
Company is a party or by which either of them is bound or to which any of their
respective properties or assets is subject; (d) result in the creation or
imposition of any Encumbrance upon any of the properties or assets of the
Company; or (e) result in the cancellation, modification, revocation or
suspension of any License (as defined in Section 2.13) of the Company, except in
the cases of clauses (b) - (e) above as would not be reasonably likely to have a
Material Adverse Effect.
SECTION 2.6. CONSENTS AND APPROVALS.
Except as disclosed 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 Seller or the
Company), is required as a condition to the execution and delivery of this
Agreement and the Transaction Documents to which either of them is a party or
the performance of their respective obligations hereunder or thereunder.
SECTION 2.7. FINANCIAL STATEMENTS.
(a) Seller has heretofore furnished to Buyer copies of the audited
consolidated financial statements of the Company as of December 31, 2002 and the
notes thereto (the "FINANCIAL
6
STATEMENTS"). The Financial Statements were prepared from the books and records
of the Company in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered thereby ("GAAP").
The Financial Statements present fairly in all material respects the
consolidated financial position, results of operations and cash flows of the
Company as of such dates and for the periods then ended.
(b) The Company has filed all required forms, reports and documents,
and amendments thereto, with the SEC since January 1, 2001 (the "SEC REPORTS"),
each of which complied in all material aspects with all applicable requirements
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), and the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), each as in
effect on the dates such forms, reports, and documents, and amendments thereto
were filed. None of the SEC Reports, including without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The consolidated financial
statements of the Company included in the SEC Reports complied in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto as in effect on the dates such SEC
Reports were filed, and fairly present, in all material respects and in
conformity with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and statements of cash flows for the periods then ended
(subject, in the case of the unaudited interim financial statements, to normal
year end adjustments consistent with prior periods).
SECTION 2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth in Schedule 2.8 and except for the intercompany
receivables or payables that may be paid, cancelled or offset prior to Closing
as contemplated in Section 1.3(d) hereof, since December 31, 2002, the business
of the Company has been conducted in the ordinary course consistent with past
practices and the Company has not taken any of the actions described in Section
4.1(a), except in connection with entering into this Agreement. Since December
31, 2002, there has not been any event or condition that has had or is
reasonably likely to have a Material Adverse Effect, except as disclosed in
Schedule 2.8.
SECTION 2.9. TAX MATTERS.
(a) For purposes of this Agreement, "TAX RETURNS" shall mean returns,
reports, declarations, forms, claims for refund, 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 (defined below), whether or not any Tax is actually imposed, and shall
include any amended returns, whether or not required as a result of examination
adjustments made by the Internal Revenue Service ("IRS") 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 and duties of
whatever kind (including any interest, penalties or additions to the tax imposed
in connection therewith or with respect thereto), including, without
7
limitation, taxes imposed on, or measured by, income, franchise, profits or
gross receipts, and also ad valorem, 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, environmental, alternative or add-on minimum 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 other than those Tax Returns the failure of
which to file would not have a Material Adverse Effect; (ii) all such Tax
Returns were true, correct and complete in all material respects as of the time
of such filing; (iii) all material Taxes owed by the Company (whether or not
shown on any Tax Return) if required to have been paid, have been timely paid in
full (except for Taxes which are being contested in good faith in appropriate
proceedings); (iv) any material liability of the Company for Taxes not yet due
and payable, or which are being contested in good faith in appropriate
proceedings, has been fully provided for on the financial statements of the
Company; (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 Tax assessment, nor is any claim for additional material Tax or Tax
assessment asserted in writing by any Tax authority; (vi) since January 1, 1999,
no written claim has been made by any Tax authority in a jurisdiction where the
Company does not currently file a Tax Return that it is or may be subject to Tax
by such jurisdiction, nor to Seller's Knowledge has any such assertion been
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) Seller and
the LLC have at all times since their inception been treated as disregarded
entities of Parent and the Company, respectively, for federal income tax
purposes; (x) neither Parent nor Seller is 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 Tax sharing or other
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 and
paid by the Company; (xiii) there are no liens for Taxes upon the Shares or any
assets of the Company except for Taxes not yet due and payable; (xiv) no
property of the Company is subject to the provisions of former Section 168(f)(8)
of the Code; (xv) the Company has not made, is not obligated to make and is not
a party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Section 162(m) of the Code
(or any corresponding provision of state, local or foreign law) or that would
constitute an "excess parachute payment" under Section 280G of the Code (or any
corresponding provisions of state, local or foreign law) without regard to
whether such payment is reasonable compensation for personal services performed
or to be performed in the future; (xvi) the Company has never been a member of
an affiliated group filing a consolidated federal income Tax Return other than a
group the common parent of which was Parent, and Parent is eligible to make the
Section 338(h)(10) Election (as defined in Section 4.10(e)); (xvii) the Company
will not be required to include any item of income in, or exclude any item of
deduction or loss from, taxable income for any taxable period or portion thereof
beginning on or after the Closing Date as a result of (A) a change in method of
accounting for a taxable period beginning on or before the Closing Date, (B) any
"closing agreement", as
8
described in Section 7121 of the Code (or any corresponding provision of state,
local or foreign law) executed on or before the Closing Date, (C) any sale
reported on the installment or open transaction method where such sale occurred
on or prior to the Closing Date, (D) any prepaid amount received on or prior to
the Closing Date, or (E) any intercompany transaction or excess loss account
described in Treasury Regulations under Section 1502 of the Code (or similar
provisions of state, local or foreign law); (xviii) the Company has not filed a
consent under Section 341(f) of the Code; and (xix) Schedule 2.9 lists all
income Tax Returns filed with respect to the Company for tax periods ending
after December 31, 1998 and indicates those income Tax Returns that have been
audited or which are currently under audit.
(c) Except for the representations and warranties in Section 2.18, the
only representations and warranties given in respect of Tax matters are those
contained in this Section 2.9 and none of the other representations and
warranties herein shall be deemed to constitute, directly or indirectly, a
representation and warranty in respect of Tax matters.
SECTION 2.10. ABSENCE OF UNDISCLOSED LIABILITIES.
Except as disclosed on Schedule 2.10, none of the Company, TGT
Sub or the LLC has any material indebtedness, material obligation or material
liability of any kind (whether known or unknown, accrued, absolute, contingent
or otherwise), which is not shown or provided for on the consolidated balance
sheet of the Company included in the 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, 2002.
SECTION 2.11. REAL PROPERTY.
(a) Except as disclosed on Schedule 2.11(a) and except for Permitted
Encumbrances:
(i) the Company owns valid and defensible fee title to, or
holds a valid leasehold interest in, or a right-of-way or easement
through (collectively, the "RIGHTS-OF-WAY"), all real property ("REAL
PROPERTY") used or necessary for the conduct of its business as it is
presently conducted; and
(ii) except for the Rights-of-Way and Real Property that are
subject to clause (i), the Company has good and valid title to, or a
valid leasehold interest in, all of the other material tangible assets
and properties which it owns or leases.
(b) All Real Property and Rights-of-Way and such other material assets
and properties owned or leased by the Company are owned or leased free and clear
of all Encumbrances, except for, in each case, (i) Encumbrances set forth on
Schedule 2.11(b), (ii) liens for current Taxes not yet due and payable or for
Taxes the validity of which is being contested in good faith, (iii) Encumbrances
which will be discharged on or prior to the Closing Date, (v) 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, (v)
mechanics', carriers', workmen's and repairmen's liens and other similar liens,
charges, and claims arising or incurred in the ordinary course of business
relating to obligations as to which
9
there is no default on the part of the Company or the validity of which are
being contested in good faith by the Company, and (vi) Encumbrances, Property
Restrictions, and Rights-of-Way that, individually and in the aggregate, do not
materially detract from the value or materially interfere with the present use
of the asset subject thereto (clauses (i) through (vi) above referred to
collectively as "PERMITTED ENCUMBRANCES").
SECTION 2.12. INTELLECTUAL PROPERTY AND COMPUTER HARDWARE.
(a) Except as set forth in Schedule 2.12(a),
(i) Schedule 2.12(a) sets forth a complete and accurate list
of all material Intellectual Property owned or used by the Company or
by third parties on behalf of the Company in connection with its
business. Except as set forth on Schedule 2.12(a), the Company owns all
right, title and interest in and to, or has a valid and enforceable
license or other right to use, in all material respects, all material
Intellectual Property used by the Company in connection with its
business, which represents all material Intellectual Property rights
necessary for the Company to conduct its business as presently
conducted;
(ii) to Seller's Knowledge, the Intellectual Property owned or
used by the Company does not infringe upon the rights of any third
party;
(iii) neither Seller nor any of its Affiliates (including the
Company) has received any written notice or written claim challenging
or questioning the validity or effectiveness of the Company's rights to
any of the material Intellectual Property used by the Company in the
conduct of its business;
(iv) the Company is not liable to any Person for any royalty
or other compensation for any of the Intellectual Property used by the
Company or by third parties on behalf of the Company in the conduct of
its business; and
(v) Schedule 2.12(a)(v) sets forth a complete and accurate
list of all material trademarks, material service marks and material
trade names used exclusively by the Company; Schedule 2.12(a)(v) also
sets forth a complete and accurate list of the trademarks, service
marks and trade names owned by Seller or any of its Affiliates (other
than the Company) that are used by the Company in the conduct of its
business (collectively "SELLER'S MARKS").
(b) Computer hardware that is shared between other subsidiaries and the
Company, and which is not owned by the Company, is not included in the
transaction contemplated under this Agreement. A listing of such hardware, any
related Software and the owner thereof, is identified in Schedule 2.12(b). None
of the items listed in Schedule 2.12(b) is included as an asset in the balance
sheet constituting a part of the Financial Statements.
SECTION 2.13. LICENSES, PERMITS AND GOVERNMENTAL APPROVALS.
Except as set forth on Schedule 2.13, the Company has all material
licenses, material permits, material certificates, material franchises, material
authorizations and material approvals
10
required to be issued or granted to the Company by any Governmental Authority
necessary for the conduct of its business as currently conducted (each a
"LICENSE" and, collectively, the "LICENSES"). Each such License has been issued
to, and duly obtained and fully paid for by, the holder thereof and, in all
material respects, is valid, in full force and effect. As used in this Section
2.13, the term License does not include any matters with respect to Intellectual
Property, which are subject to Section 2.12, or any Environmental Permits, which
are subject to Section 2.20(a)(iv).
SECTION 2.14. COMPLIANCE WITH LAW.
Except as relates to Tax matters (which are provided for in Section
2.9), or environmental (which are provided for in Section 2.20) and except as
set forth on Schedule 2.14, since January 1, 2001, the operations of the Company
have been conducted in material compliance with all applicable laws,
regulations, orders and other requirements of all Governmental Authorities
having jurisdiction over the Company and its assets, properties and operations.
Neither Seller nor the Company has received written notice of any material
violation of any such law, license, regulation, order or other legal
requirement, or is in material default with respect to any order, writ,
judgment, award, injunction or decree of any Governmental Authority, applicable
to the Company or any of its assets, properties or operations.
SECTION 2.15. LITIGATION.
(a) Except as set forth on Schedule 2.15,
(i) there are no Legal Proceedings (defined below) pending or,
to the Knowledge of Seller, threatened against or involving the
Company,
(ii) there are no Legal Proceedings pending or, to the
Knowledge of Seller, threatened against or involving the Seller that,
individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect or materially impair or delay the ability of
Seller to perform its obligations under this Agreement or consummate
the transactions contemplated by this Agreement, and
(iii) there is no order, judgment, injunction or decree of any
Governmental Authority outstanding against Seller or the Company that,
individually or in the aggregate, would have a Material Adverse Effect
or materially impair or delay the ability of Seller to perform its
obligations under this Agreement or consummate the transactions
contemplated by this Agreement.
(b) "LEGAL PROCEEDING" shall mean any judicial, administrative or
arbitral actions, suits, proceedings (public or private), or governmental
proceedings before any Governmental Authority but shall not include any such
actions, suits or proceedings that are subject to Section 2.20(a)(iii).
SECTION 2.16. CONTRACTS.
Schedule 2.16 sets forth (subject to the dollar amount limitations of
clauses (a) or (b) below) a true and complete list of the following contracts,
agreements, instruments and
11
commitments to which the Company is a party or otherwise relating to or
affecting any of its assets, properties or operations, whether written or oral:
(a) contracts which require or could require future payments by the
Company in excess of $100,000.00 per year;
(b) contracts which require or could require future payments to the
Company of amounts greater than $250,000.00 but excluding all interruptible
transportation agreements of the Company;
(c) loan agreements, letters of credit, repurchase 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 for which the Company has or could have any obligations or
liability after the Closing;
(d) contracts that cannot be cancelled or terminated by the Company on
12 months' prior notice or less, but excluding all pipeline transportation
contracts and contracts and agreements relating to the Company's Real Property
or Rights-of-Way;
(e) contracts which are with an Affiliate of the Seller (the "AFFILIATE
CONTRACTS"); and
(f) partnership or joint venture or non-compete agreements ((a) - (f)
collectively, "MATERIAL CONTRACTS");
Each Material Contract is, in all material respects, (i) valid, binding
and enforceable against the Company and, to Seller's Knowledge, each of the
other parties thereto in accordance with its terms and (ii) in full force and
effect on the date hereof. The Company and, to Seller's Knowledge, the other
party or parties to any Material Contract have performed in all material
respects all obligations required to be performed by them under, and are not in
material default or material breach of in respect of, any Material Contract, and
no event has occurred which, with due notice or lapse of time or both, would
constitute such a material default or material breach. The Company has not, and
to Seller's Knowledge, the other party or parties to any Material Contract have
not, terminated, canceled, modified or waived any material term or condition of
any Material Contract. Seller has made available to Buyer or its representatives
true and complete originals or copies of all the Material Contracts (other than
Material Contracts that are subject to a confidentiality agreement, the material
terms of which have been described to Buyer) and a copy of every default notice
received by Seller, the Company or any of their Affiliates during the past one
year with respect to any of the Material Contracts. Other than the List C
Contracts (as defined in Section 9.16), there are no contracts, agreements,
instruments or commitments that are subject to the Agency Agreement, dated as of
May 1, 1995, between the Company and Xxxxxxxx Energy Services Company, as
amended.
SECTION 2.17. BROKERS.
Except as disclosed on Schedule 2.17, Seller has not employed the
services of an investment banker, financial advisor, broker or finder in
connection with this Agreement or any of the transactions contemplated hereby.
12
SECTION 2.18. EMPLOYEE PLANS.
(a) Except as disclosed on Schedule 2.18(a), none of Seller, the
Company, or any of their Affiliates, sponsors or maintains, 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, stock appreciation right, equity incentive, welfare,
profit-sharing, retirement, disability, vacation, severance, hospitalization,
insurance, incentive, deferred compensation, compensation, fringe benefit,
excess benefit plan, top-hat plan, rabbi trust, secular trust, nonqualified
annuity contract, golden parachute payment (including all frozen plans and
terminated plans that have not completed final distribution of their assets) or
other material employee benefit plan, fund, trust, program or arrangement, in
each of the foregoing cases which cover, are maintained for the benefit of, or
relate to any or all current or former employees, directors or independent
contractors of the Company or any of their dependents, survivors or
beneficiaries, whether or not legally binding and whether oral or in writing
("EMPLOYEE PLANS"). Seller or the Company has made available to the Buyer
complete and correct copies of each Employee Plan (or a written description
thereof), and where applicable: (i) the most recent annual report on Form 5500,
together with schedules, as required, and any required financial statements and
opinions; (ii) the most recent determination letter issued by the IRS; (iii) the
most recent summary plan description and all modifications (iv) any trust,
insurance or annuity contracts maintained in connection therewith; and (v) the
most recent actuarial valuation.
(b) Schedule 2.18(b) sets forth a list (i) showing the names of all of
the employees of the Company (the "BUSINESS EMPLOYEES") showing for each: (i)
hire date, current job title or description, current salary level (including any
bonus or deferred compensation arrangements) and any bonus, commission or other
remuneration paid during fiscal year 2002 describing any contractual
arrangements with such employee; and (ii) identifying any Business Employees
either currently on short-term or long-term disability under any Employee Plan.
Neither Buyer nor the Company will incur any liability under any severance
agreement, deferred compensation agreement, employment agreement or Employee
Plan as a result of the consummation of the transactions contemplated under this
Agreement. To Seller's Knowledge, none of the Business Employees 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 Buyer or that would conflict
with the Company's business as presently conducted. Neither Seller nor the
Company has received notice from any officer or group of Business Employees,
that such person(s) intends to terminate their employment.
(c) Except as set forth on the applicable section of Schedule 2.18(c):
(i) each Employee Plan has been maintained and operated in
substantial compliance with its terms and the requirements of
applicable law, including the Code and ERISA; all required filings that
are due for each such plan have been made; and any such plan that has
terminated has completed the final distribution of its assets in
accordance with its terms and such termination;
13
(ii) each Employee Plan intended to be "qualified" within the
meaning of Section 401(a) or Section 501(c)(9) of the Code has received
a favorable determination letter from the IRS (or timely filed for such
determination); since the date of such determination letter, if any,
there are, to the Seller's Knowledge, no circumstances that are likely
to adversely affect the qualification of such plan; to Seller's
Knowledge, there is no issue with respect to any such plan currently
under examination by or pending before the IRS, the Department of
Labor, the Pension Benefit Guaranty Corporation ("PBGC") or any court,
other than applications pending before the IRS; and any trust forming
part of such plan is exempt from U.S. federal income tax under Section
501(a) of the Code;
(iii) all contributions (including all employee contributions
and employee salary reduction contributions) and premium payments
required to have been paid under or with respect to any Employee Plan
have been timely paid; all contributions to such Employee Plans for any
period ending on or prior to the Closing Date that are not yet due and
payable have been accrued for in the books and records of the Company;
all excess contributions, if any (together with any income allocable
thereto) have been distributed (or, if forfeitable, forfeited) before
the close of business of the first two and one-half months of the
following plan year; and there is no material liability for excise
Taxes under Section 4979 of the Code with respect to excess
contributions, if any, for any such plan;
(iv) no Employee Plan provides health, life insurance or other
welfare benefits to retirees or other terminated employees of the
Company other than continuation coverage required by Section 4980B of
the Code or Part 6 of Subtitle B of Title of ERISA ("COBRA") and
Seller, the Company or their Affiliates, as applicable, has reserved
the right to terminate any such postretirement health, life insurance
or other welfare benefits upon thirty (30) days' notice or less without
any material liability therefor and has taken no action, including,
without limitation, adopting any board resolutions, that would
contravene such reservation of rights; and there is no material
liability for Taxes with respect to disqualified benefits under Section
4976 of the Code;
(v) no Employee Plan is a multi-employer plan within the
meaning of Section 3(37) or 4001 (a)(3) of ERISA which is covered by
Title IV of ERISA, and the Company does not have any liability (direct
or indirect, contingent or otherwise) with respect to any such plan;
(vi) within five calendar years preceding the year in which
the Closing Date occurs, with respect to any "DEFINED BENEFIT PLAN",
within the meaning of Section 3(35) of ERISA, maintained or contributed
to by Seller, the Company or any entity treated as a single employer
with Seller or the Company in accordance with Section 414(b) or (c) of
the Code: (a) no such plan has been terminated and to Seller's
Knowledge, no proceedings or other actions have been instituted by the
PBGC to terminate or appoint a trustee to administer any such plan and
no written notice has been received by Seller of any intention to
commence or seek commencement of any such proceeding or action and
there is no material liability for Taxes with respect to a reversion of
qualified plan assets under Section 4980 of the Code; (b) no
"reportable event" (as defined in Section 4043 of
14
ERISA for which the thirty-day notice requirement has not been waived
by the PBGC) has occurred with respect to any such plan or will occur
as a result of the transactions contemplated by this Agreement, (c) no
such plan has incurred any accumulated funding deficiency within the
meaning of Section 412 of the Code or Section 302 of ERISA, or obtained
a waiver of any minimum funding standard or an extension of any
amortization period under Section 412 of the Code or Section 303 or 304
of ERISA; and (d) there is no material liability for Taxes under
Section 4971 or 4972 of the Code with respect to any such plan;
(vii) the assets under each Employee Plan which is an
"employee pension benefit plan" within the meaning of Section 3(2) of
ERISA that is subject to the minimum funding standards of Section 412
of the Code or Section 302 of ERISA equal or exceed the present value
of all vested and unvested liabilities accrued thereunder, as
determined in accordance with the terms of such plan; provided,
however, that the calculations (including all variables and assumptions
necessary to make such calculations) made under this Section
2.18(c)(vii) shall be determined as of December 31, 2002, on an ABO
basis in accordance with the assumptions specified in FASB 87 and used
for Seller's disclosure statements filed (or to be filed) with the
Securities and Exchange Commission for the year ended December 31,
2002, shall use a discount rate of 7.0% and shall otherwise be mutually
agreed to by Seller and Buyer (or their designated representatives);
(viii) no Employee Plan is subject to Title IV of ERISA and
there is no liability of the Company for Taxes with respect to
disqualified benefits under Section 4976 of the Code;
(ix) none of Seller, the Company nor any of their
subsidiaries, nor, to Seller's Knowledge, any other "Disqualified
Persons" or "Party in Interest" (as defined in Section 4975(e)(2) of
the Code and Section 3(14) of ERISA, respectively) has engaged in any
transactions (including prohibited transactions as defined in Section
406 of ERISA) in connection with any Employee Plan that could
reasonably be expected to result in the imposition of a penalty
pursuant to Section 502 of ERISA, liability pursuant to Section 409 of
ERISA or a tax pursuant to Section 4975 of the Code; and
(x) (A) there are no actions, suits, or claims (other than
routine claims for benefits in the ordinary course and appeals of
denied such claims) with respect to any Employee Plan pending which
could give rise to a material liability and (B) no Employee Plan is
currently under governmental investigation or audit and, to Seller's
Knowledge, no such investigation or audit is contemplated or under
consideration.
(d) Except as set forth on Schedule 2.18(d), no Business Employees are
covered by a collective bargaining agreement. Seller or the Company has
delivered to Buyer a complete and correct copy of any collective bargaining
agreement applicable to Business Employees. Notwithstanding anything contained
in any such collective bargaining agreement to the contrary, and consistent with
past practices, the Company may amend or terminate any Employee Plan without
negotiating with the applicable union. Except as set forth in Schedule 2.18(d),
or except as would not, individually or in the aggregate, be reasonably likely
to have a Material Adverse Effect, there is no strike, work slowdown or other
material labor dispute with respect to Business
15
Employees, nor to Seller's Knowledge, is there pending or threatened (i) any
strike, work slowdown or other material labor dispute involving Business
Employees or (ii) any grievance or arbitration proceeding involving Business
Employees, whether arising out of any collective bargaining agreement or
otherwise.
SECTION 2.19. INSURANCE.
(a) Schedule 2.19 sets forth a correct summary of each current policy
of all material property, material casualty and other material insurance
insuring the properties, assets, employees (other than policies related to
Employee Plans), directors and officers and/or operations of the Company
(collectively, the "POLICIES"). All premiums payable under such Policies have
been paid in a timely manner and the Company has complied with the terms and
conditions of all such Policies.
(b) All Policies are in full force and effect. Coverage for the Company
under the Policies or the May 1, 2003 renewals thereof shall terminate on the
Closing Date except to the extent provided in Section 4.11(b). The Company is
not in default under any provisions of the Policies, and there is no claim by
the Company pending under any of the Policies as to which coverage has been
questioned, denied or disputed by the underwriters or issuers of such Policies.
SECTION 2.20. ENVIRONMENTAL; HEALTH AND SAFETY MATTERS.
(a) Except as set forth on Schedule 2.20:
(i) the Company and its operations are in material
compliance with all applicable Environmental Laws;
(ii) neither Seller nor the Company has received any
written request for information, nor has any of such Persons received
written notification that it is a potentially responsible party, under
CERCLA or any similar state law with respect to any on-site or off-site
location with respect to the activities or operations of the Company;
(iii) there are no writs, injunctions, decrees,
orders or judgments outstanding, or any judicial, administrative, or
arbitral actions, suits, proceedings (public or private) or
investigations pending or, to Seller's Knowledge, threatened involving
the Company relating to (A) its compliance with any Environmental Law,
or (B) the release, disposal, discharge, spill, treatment, storage,
transport, or recycling of Hazardous Materials into the environment at
any location which, in the case of clauses (A) and (B) above,
individually or in the aggregate, could reasonably be expected to
result in the Company incurring any material liability under
Environmental Laws;
(iv) the Company has obtained, currently maintains
and is in material compliance with all Licenses which are required
under Environmental Laws for the operation of its business
(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; and
16
(v) To Seller's Knowledge, no underground tank (as
that term is used in the Resources Conservation and Recovery Act, 42
U.S.C. Section 6991(1)), either presently or previously in service on
any of the properties owned or leased by the Company, has ever
contained or now contains any Hazardous Materials.
(b) The following terms shall have the following meanings:
"ENVIRONMENTAL LAW" shall mean 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, including, without limitation, the Comprehensive Environmental
Response Compensation and Liability Act (42 U.S.C. section 9601 et seq.), as
amended, the Resource Conservation and Recovery Act (42 U.S.C. section 6901 et
seq.), as amended, the Federal Water Pollution Control Act (33 U.S.C. section
1251 et seq.), as amended, the Clean Air Act (42 U.S.C. section 7401 et seq.),
as amended, the Toxic Substances Control Act (15 U.S.C. section 2601 et seq.),
as amended, the Hazardous Materials Transportation Act (49 U.S.C., sections
1801, et seq.), as amended, the Oil Pollution Act (33 U.S.C. sections 2701, et
seq.), the Safe Drinking Water Act (42 U.S.C. sections 300(f) et seq.), as
amended, the Endangered Species Act (16 U.S.C. sections 1531, et seq.), as
amended, the National Environmental Policy Act (42 U.S.C. sections 4321 et
seq.), as amended, analogous state, tribal or local laws, and any similar,
implementing or successor law, and any amendment, rule, regulation, directive or
other legal obligation 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.
(c) Except for the representation and warranty set forth in the second
sentence of Section 2.8, the only representations and warranties given in
respect of environmental matters and compliance with and liability under
Environmental Laws are those contained in this Section 2.20 and none of the
other representations and warranties shall be deemed to constitute, directly or
indirectly, a representation and warranty in respect of environmental matters or
compliance with and liability under Environmental Laws.
SECTION 2.21. 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"). Except for the matter described in Item E.6. of Schedule 2.15, the
Company is in material compliance with (x) all provisions of the NGA and all
rules and regulations promulgated by FERC pursuant thereto and (y) all orders
issued by FERC that pertain to the business or operations of the Company. 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 Seller or the consummation of the
transactions contemplated hereby with respect to Seller or the Company. The Form
No. 2 Annual Report filed by the Company with FERC for the year ended
17
December 31, 2001 was, and when filed the Form 2 Annual Report of the Company
for the year ended December 31, 2002 will be, true and correct in all material
respects as of the date thereof and since December 31, 2002 none of the Company,
TGT Sub or the LLC has become subject to any proceeding under Section 5 of the
NGA or any general rate case proceeding commenced under Section 4 of the NGA by
reason of a filing made with the FERC after December 31, 2002.
SECTION 2.22. CUSTOMERS.
Schedule 2.22 sets forth a complete and accurate list of the
twenty-five (25) largest (by dollar volume) customers of the Company during
fiscal year 2002. Except as set forth on Schedule 2.22, there are no outstanding
and unresolved material disputes with any customer listed thereon.
SECTION 2.23. NO OTHER REPRESENTATIONS.
Except as and to the extent set forth in this Agreement, Seller makes
no representations or warranties whatsoever to Buyer and hereby disclaims all
liability and responsibility for any representation, warranty, statement, or
information made, communicated, or furnished (orally or in writing) to Buyer or
its representatives (including any opinion, information, projection, or advice
that may have been or may be provided to Buyer by any director, officer,
employee, agent, consultant, or representative of Seller or any Affiliate
thereof). Seller makes no representations or warranties to Buyer regarding the
probable success or profitability of the Company or its business.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF BUYER
As of the date hereof, Buyer hereby represents and warrants to
Seller as follows:
SECTION 3.1. CORPORATE ORGANIZATION.
Buyer is a corporation 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 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.
Buyer 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 Buyer's obligations hereunder have been duly authorized by the
Board of Directors of Buyer, and no other proceedings on the part of Buyer are
necessary to authorize such execution, delivery and performance. This Agreement
has been duly executed by Buyer and constitutes the valid and binding obligation
of Buyer enforceable against Buyer 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).
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SECTION 3.3. NO CONFLICT OR VIOLATION; NO DEFAULTS.
The execution, delivery and performance by Buyer of this Agreement does
not and will not violate or conflict with any provision of its 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 Buyer is a party or by
which it is bound or to which any of its properties or assets is subject, nor
result in the creation or imposition of any Encumbrance upon any of its
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 Buyer.
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 Buyer), is required
as a condition to the execution and delivery of this Agreement or the
performance of its obligations hereunder.
SECTION 3.5. FINANCIAL ABILITY.
At the Closing, Buyer will have sufficient immediately available funds,
in cash, to pay the Estimated Purchase Price under Section 1.2 and to pay any
other amounts payable under Article I.
SECTION 3.6. BROKERS.
Except as disclosed on Schedule 3.6, Buyer has not employed the
services of an investment banker, financial advisor, broker or finder in
connection with this Agreement or any of the transactions contemplated hereby.
SECTION 3.7. INDEPENDENT INVESTIGATION.
Buyer has conducted its own independent investigation, review and
analysis of the business, operations, assets, liabilities, results of
operations, financial condition and prospects of the Company, which
investigation, review and analysis was done by Buyer and its Affiliates and, to
the extent Buyer deemed necessary or appropriate, by Buyer's representatives.
Buyer acknowledges that it and its representatives have been provided adequate
access to the personnel, properties, premises and records of the Company for
such purpose. In entering into this Agreement, Buyer acknowledges that it has
relied solely upon the aforementioned investigation, review and analysis and not
on any factual representations of Seller or any of Seller's representatives
(except the specific representations and warranties of Seller set forth in this
Agreement). Notwithstanding anything herein to the contrary, the foregoing shall
not be construed to diminish or adversely affect the rights of Buyer under this
Agreement.
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SECTION 3.8. INVESTMENT INTENT; INVESTMENT EXPERIENCE;
RESTRICTED SECURITIES.
Buyer is acquiring the Shares for its own account for investment and
not with a view to, or for sale or other disposition in connection with, any
distribution of all or any part thereof in violation of federal or state
securities laws. In acquiring the Shares, Buyer is not offering or selling, and
will not offer or sell, for Seller in connection with any distribution of the
Shares, and Buyer does not have a participation and will not participate in any
such undertaking or in any underwriting of such an undertaking except in
compliance with applicable federal and state securities laws. Buyer acknowledges
that it is able to fend for itself, can bear the economic risk of its investment
in the Shares, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment
in the Shares. Buyer is an "accredited investor" as such term is defined in
Regulation D under the Securities Act of 1933, as amended (the "SECURITIES
ACT"). Buyer understands that the Shares will not have been registered pursuant
to the Securities Act or any applicable state securities laws, that the Shares
will be constituted as "restricted securities" under federal securities laws and
that under such laws and applicable regulations the Shares cannot be sold or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom.
ARTICLE IV.
COVENANTS
SECTION 4.1. CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
Date, Seller will cause the Company to (except as required or permitted pursuant
to the terms hereof or as set forth on Schedule 4.1) conduct its business solely
in the ordinary course consistent with past practices and to use all reasonable
commercial efforts to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
relationships and good will with suppliers, customers, creditors, employees,
agents and others having business relationships with the Company. From and after
the date of this Agreement and until the Closing Date, without the prior written
consent of Buyer (which consent will not be unreasonably withheld or delayed),
Seller will not, except as required or permitted pursuant to the terms hereof or
as set forth on Schedule 4.1, permit the Company to:
(i) 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;
(ii) (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 (including any issuance of additional debt securities pursuant
to the Company's shelf registration statement) or (B) issue any
securities convertible or exchangeable for debt securities of the
Company, TGT Sub or the LLC;
(iii) make any sale, assignment, transfer, abandonment or
other conveyance of any assets or properties or any part thereof having
an aggregate value in excess of
20
$250,000.00, except (A) sales of capacity on the pipeline system or in
the storage properties of the Company made in the ordinary course of
business consistent with past practices or (B) under Section 4.17;
(iv) subject any of its assets, or any part thereof, to any
Encumbrance except Permitted Encumbrances;
(v) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of its equity interests or (except as permitted
pursuant to Section 1.3(d) and subsection (b) below) declare, set aside
or pay any dividends or other distribution in respect of such equity
interests in excess of the cash and cash equivalents and advances
reflected on the Base Statement;
(vi) (A) except as may be required by applicable law or except
to the extent consistent with amendments or modifications made to
similar plans or arrangements of Seller or its corporate parent that,
in the aggregate, do not result in a material increase in benefits or
compensation expenses to the Company, enter into, adopt or make any
material amendments to, permit the acceleration of benefits under or
terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase, pension,
retirement, deferred compensation, employment, severance or other
employee benefit agreement, trust, plan, fund or other arrangement for
the benefit or welfare of any current or former director, officer or
employee of the Company; (B) except for normal increases in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or
compensation expense to the Company, increase the benefits or
compensation to any current or former director, officer, or employee of
the Company; or (C) pay to any current or former director, officer, or
employee of the Company any benefit not permitted by any employee
benefit agreement, trust, plan, fund, or other arrangement as in effect
on the date hereof;
(vii) acquire any assets or properties, except for (A)
inventory in the ordinary course of business consistent with past
practices, (B) budgeted capital expenditures described on Schedule
4.1(a)(vii), and (C) any acquisitions of assets or properties with a
fair market value of up to $250,000.00 in the aggregate;
(viii) except in the ordinary course of business consistent
with past practices (including any sweep by Seller of the cash in the
accounts of the Company, the LLC, and TGT Sub prior to Closing), pay,
loan, distribute 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;
(ix) make any loan or investment in any Person;
(x) make any change in any financial accounting principle,
method, estimate or practice, except as may be required by law or
regulation;
(xi) make, amend or revoke any material election with respect
to Taxes of the Company or any of its assets;
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(xii) other than routine compliance filings, make any filings
or submit any documents or information to FERC or any other
Governmental Authority without prior consultation with Buyer;
(xiii) enter into any agreement (or series of related
agreements) or amendment, modification, or termination of any contract,
lease, or license to which the Company is a party, or by which any of
its assets or properties are bound, except an agreement (or series of
related agreements taken as one) or an amendment, modification or
termination of a contract, lease or license entered into in the
ordinary course of business consistent with past practice that would
not have been considered to have been a Material Contract had it been
entered into prior to the date of this Agreement;
(xiv) cancel, compromise, waive, release or settle any right,
claim or lawsuit, other than rights, claims or lawsuits (A) with
respect to matters subject to the Seller's indemnity obligation in
Section 8.2(a)(iv) or Section 8.2(a)(v) provided that the sole relief
provided is monetary damages or (B) in the ordinary course of business
to the extent that the amount involved or required to be paid under (I)
any such single cancellation, compromise, waiver, release or settlement
does not exceed $100,000.00 or (II) all such cancellations,
compromises, waivers, releases or settlements do not exceed $250,000.00
in the aggregate;
(xv) terminate, initiate proceedings to terminate or appoint a
trustee to administer any plan described in Section 2.18(c)(vi);
(xvi) submit an invoice for payment of, or otherwise collect
payment of, any amounts due under the contract described in Item 2 of
Schedule 2.16(e); and
(xvii) commit itself to do any of the foregoing.
(b) Prior to Closing, Seller shall cause the Company to distribute or
transfer to Seller or its Affiliates all ownership interests in the Retained
Entities. From and after the date of this Agreement, until the distribution or
transfer of the Company's ownership interests in the Retained Entities to Seller
or its Affiliates, Seller will not permit any of the Retained Entities to engage
in any activity, conduct any operations or incur any liabilities or obligations
of any kind whatsoever.
SECTION 4.2. ACCESS TO PROPERTIES AND RECORDS.
(a) Seller shall afford, and shall cause the Company and Seller's other
Affiliates to afford, to Buyer and Buyer's accountants, counsel and
representatives upon reasonable advance notice reasonable access during normal
business hours throughout the period commencing on the date hereof and ending on
the Closing Date (or the earlier termination of this Agreement pursuant to
Article VII hereof) to all the Company's properties, books, contracts, and
records and, during such period, shall furnish promptly to Buyer all information
concerning the Company's business, properties, liabilities and personnel as
Buyer may reasonably request. Additionally, Buyer shall hold in confidence all
such information on the terms and subject to the conditions contained in the
Confidentiality Agreement. Buyer shall have no right of access to, and Seller
shall have no obligation to provide to Buyer, (1) bids received from others in
22
connection with the transactions contemplated by this Agreement and information
and analysis (including financial analysis) relating to such bids or (2) any
information the disclosure of which Seller has reasonably concluded after
consultation with counsel may jeopardize any privilege available to the Company
or Seller relating to such information or would cause the Company or Seller to
breach a confidentiality obligation or any applicable law. Buyer agrees that if
Buyer or its authorized representatives receive, or if the information (whether
in electronic mail format, on computer hard drives or otherwise) held by the
Company as of the Closing includes information that relates to the business
operations or other strategic matters of Seller, its corporate parent or any of
their Affiliates (other than the Company) such information shall be held in
confidence on the terms and subject to the conditions contained in the
Confidentiality Agreement, but the term of the restriction on the disclosure and
use of such information shall continue in effect as to such information for a
period of two (2) years from the Closing. Buyer further agrees that if Seller or
the Company inadvertently furnishes to Buyer copies of or access to information
that is subject to clause (2) of the second preceding sentence, Buyer will, upon
Seller's request, promptly return same to Seller together with any and all
extracts therefrom or notes pertaining thereto (whether in electronic or other
format). Buyer shall indemnify, defend, and hold harmless Seller and its
Affiliates from and against any Losses asserted against or suffered by Seller
Indemnified Parties relating to, resulting from, or arising out of, examinations
or inspections made by Buyer or its authorized representatives under this
Section 4.2(a).
(b) Upon the reasonable request by Buyer from time to time prior to
Closing, Seller shall allow Buyer to have reasonable access to the Company and
its management. Such access shall be provided in a mutually agreed upon manner,
in accordance with such policies as the parties may mutually agree and in
accordance with all guidelines, guidances or legal counsel regarding the
appropriate manner in which to conduct such pre-Closing activities.
Notwithstanding anything herein to the contrary, Buyer, on the one hand, and
Seller and the Company, on the other hand, will continue to operate as
independent companies prior to Closing.
(c) Each of the parties agrees that it shall preserve and keep, and
make available to the other party for reasonable business needs, all books and
records relating to the business or operations of the Company on or before the
Closing Date in its possession (including with respect to Seller, to the extent
in its possession, the most recent rate case records and files of the Company
and all of the records and files of the Company and Seller necessary for the
Company to make a future rate case filing with the FERC) for a period of at
least 6 years from the Closing Date. After such 6-year period, before a party
may dispose of any of such books and records, at least 90 calendar days prior
notice to such effect shall be given to the other party, and such other party
shall be given an opportunity, at its cost and expense, to remove and retain all
or any part of such books and records that the notifying party elects to dispose
of. Notwithstanding the foregoing, each party agrees that it shall preserve and
keep all books and records of the Company, TGT Sub and the LLC in its possession
relating to any audit or investigation instituted by a Governmental Authority or
any litigation (whether or not existing on the Closing Date), in each case of
which it has actual knowledge, until any such audit, investigation or proceeding
has been completed or finally resolved (and became non-appealable), if it is
reasonably likely that such audit investigation or litigation may relate to
matters occurring prior to the Closing, without regard to the 6-year period set
forth in this Section 4.2(c).
23
SECTION 4.3. EMPLOYEE MATTERS.
(a) Within fifteen (15) days after the execution of this Agreement,
representatives of Buyer and Seller shall meet to identify employees of Seller
or any of its Affiliates who are not Business Employees and to whom Buyer and
Seller agree that Buyer, the Company or any Affiliate of Buyer may make offers
of employment (collectively, the "AVAILABLE EMPLOYEES"). Buyer, the Company or
any other Affiliate of Buyer may offer employment effective as of the Closing
Date to each Available Employee, any such offers of employment made by the Buyer
to an Available Employee shall be made in accordance with subsection (n) below.
Buyer shall notify Seller of the names of those Available Employees that
accepted such employment offers from Buyer, the Company, or any other Affiliate
of Buyer (the "ADDITIONAL EMPLOYEES") no later than ten (10) days prior to the
Closing Date. Additional Employees and all of the Business Employees shall be
referred to as "TRANSFERRED EMPLOYEES." Prior to Closing, Buyer shall not
initiate any contact with any of the employees of Seller and its Affiliates
except for Business Employees and Available Employees. After the date hereof and
prior to Closing, Seller shall afford, and shall cause the Company and its
Affiliates to afford, to Buyer or its Affiliates reasonable access to the
Available Employees for the purpose of enabling Buyer and its Affiliates to
determine to which of such employees it desires to extend offers of employment.
(b) Effective as of the Closing Date, Seller or its Affiliates shall
take, or shall cause the Company to take, all necessary action to effect the
cessation of, and withdrawal from, participation by the Company in any Employee
Plans which are not sponsored or maintained by the Company solely for the
benefit of eligible Business Employees (and, if applicable, their eligible
dependents and beneficiaries).
(c) On or as soon as practicable after the Closing Date, Seller shall
cause to be transferred from The Xxxxxxxx Companies, Inc. Master Trust to a
trust established or maintained by the Buyer, the Company or another Affiliate
of Buyer an amount of cash equal to the fair market value of the assets
attributable to the Texas Gas Retirement Plan as of the Closing Date. If the
amount transferred to Buyer is less than $93,778,415, then Seller shall promptly
pay to Buyer in cash the amount of such shortfall less Seller's and its
Affiliates' transaction costs to convert non-cash assets to cash.
(d) On or as soon as practicable after the Closing Date, provided that
Treasury Regulation 1.414(l)-1(h) is satisfied under the de minimis rule, Seller
shall cause to be transferred from the trust(s) of any "employee pension benefit
plan(s)" within the meaning of Section 3(2) of ERISA, which is qualified under
Section 401(a) of the Code, covering any Additional Employees to a trust
maintained by Buyer, the Company or another Affiliate of Buyer contemplated in
the foregoing paragraph, an amount of cash equal to the greater of (A) the
Projected Benefit Obligation ("PBO" ) reflected in Seller's or its applicable
Affiliate's audited financial statements as of December 31, 2002 for such
Additional Employees, and (B) the amount required to be transferred, if any,
under section 414(l) of the Code as reasonably determined by Seller's or its
applicable Affiliate's enrolled actuary and agreed to by Buyer's enrolled
actuary. The determination of such PBO shall be in accordance with the actuarial
assumptions used to determine Seller's or its applicable Affiliate's December
31, 2002 PBO in total, as such is disclosed in such entity's audited financial
statements. If the de minimus rule in Treasury Regulation 1.414(1)-1(h) is not
satisfied, then at Buyer's sole election, Seller shall either (i) transfer the
maximum amount of cash permitted to be transferred for any affected Additional
Employee pursuant to such Treasury Regulation, or (ii) retain the assets and
related
24
benefits accrued through the Closing Date with respect to such Additional
Employee. For any transfer(s) made to Buyer in accordance with this subsection
(d), from and after the date of such transfer(s), the Texas Gas Retirement Plan
shall be responsible for the benefits accrued through the Closing Date with
respect to such Additional Employees.
(e) Effective as of the Closing Date, Buyer shall assume, or shall
cause the Company or another Affiliate of Buyer to assume, Seller's obligation
for providing severance to former employees of the Company and for providing
retiree medical and retiree life benefits to Retiree Plan Participants (and
their eligible dependents) under the Employee Plans set forth in Schedule
2.18(a), in each case, to the extent accrued on the books of the Company as of
December 31, 2002 or reflected as a current liability on the Final Closing
Statement. On or as soon as practicable after the Closing Date, Seller shall
cause to be transferred from the Transco Energy Company Master Employee Welfare
Benefit Trust to a VEBA trust established or maintained by Buyer, the Company or
another Affiliate of Buyer an amount of cash equal to the fair market value as
of the Closing Date of the assets attributable to providing retiree medical
benefits and/or life benefits to Retiree Plan Participants. If the amount
transferred to Buyer from such trust is less than $60,788,820, then Seller shall
promptly pay to a VEBA trust established or maintained by Buyer in cash the
amount of such shortfall less Seller's and its Affiliates' transaction costs to
convert non-cash assets to cash.
(f) With respect to Additional Employees, effective as of the date of
hire, Buyer shall assume, or shall cause the Company or another Affiliate of
Buyer to assume, Seller's or its applicable Affiliate's obligation for providing
retiree medical and retiree life benefits to such employees if such employees
have met the eligibility requirements for participation in any employee plan
sponsored or maintained by Seller or the applicable Affiliate that provides
health, life insurance or other welfare benefits to retirees. On or as soon as
practicable after the date of hire of those Additional Employees for whom Seller
maintains an account in Seller's VEBA trust, Seller shall cause to be
transferred from the Seller's VEBA trust to a VEBA trust established or
maintained by Buyer, the Company, or another Affiliate of Buyer an amount of
cash equal to the Accumulated Post-retirement Benefit Obligations as of December
31, 2002 reflected in Seller's or its applicable Affiliate's audited financial
statements as of such date for such Additional Employees.
(g) Effective as of the Closing Date, Buyer shall assume, or shall
cause the Company or another Affiliate of Buyer to assume, Seller's obligation
for providing long-term disability benefits to the Business Employees as well as
to those former employees of the Company, who, immediately prior to the Closing
Date, are totally disabled, and therefore receiving benefits under The Xxxxxxxx
Companies, Inc. Long-Term Disability Plan to the extent accrued on the books of
the Company as of December 31, 2002 or reflected as a current liability on the
Final Closing Statement. In addition, effective as of the Closing Date, Buyer
shall assume, or cause the Company or another Affiliate of Buyer to assume,
Seller's obligation for providing medical, dental, vision and life insurance
benefits to such Business Employees and former employees of the Company
(including their eligible dependents and beneficiaries) who, immediately prior
to the Closing Date, are totally disabled, and therefore receiving benefits
under The Xxxxxxxx Companies, Inc. Long-Term Disability Plan to the extent
accrued on the books of the Company as of December 31, 2002 or reflected as a
current liability on the Final Closing Statement.
25
(h) Effective as of the Closing Date, Transferred Employees shall
become fully vested in their account balances in any defined contribution or
401(k) Plan maintained by 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
Closing Date, in accordance with, the provisions of Seller Savings Plan and
applicable law. Thereafter, Buyer shall accept or shall cause the Company or the
appropriate Affiliate of Buyer to accept, eligible rollover contributions from
Seller Savings Plan into a defined contribution or 401(k) Plan maintained by
Buyer, the Company or another Affiliate of Buyer (the "BUYER SAVINGS PLAN") of
the account balances distributed to the Transferred Employees from the Seller
Savings Plan in accordance with the provisions of the Buyer Savings Plan and
applicable law. Such eligible rollovers shall be made in cash.
(i) Seller or the appropriate Affiliate of Seller shall be responsible
for any continuation of group health coverage required under Section 4980B of
the Code or Sections 601 through 608 of ERISA with respect to any Business
Employee or any "QUALIFIED BENEFICIARY" (as defined in Section 4980B of the
Code) of any such employee who incurs a "QUALIFYING EVENT" (as defined in
Section 4980B of the Code) on or prior to the Closing Date. Buyer, the Company
or the appropriate Affiliate of Buyer shall be responsible for any continuation
of group health coverage required under Section 4980B of the Code or Sections
601 through 608 of ERISA with respect to any Transferred Employee or any
"QUALIFIED BENEFICIARY" (as defined in Section 49808 of the Code) who incurs a
"QUALIFYING EVENT" (as defined in Section 4980B of the Code) after the Closing
Date.
(j) Buyer shall assume, or shall cause the Company or another Affiliate
of Buyer to assume, all paid-time-off obligations of Seller or its Affiliates
with respect to each Transferred Employee to the extent reflected as a current
liability and included in Working Capital on the Final Closing Statement.
(k) Seller shall retain no liability, obligation or responsibility for,
and Buyer shall assume, or shall cause the Company or another Affiliate of Buyer
to assume, the full liability, obligation and responsibility to pay, any portion
of any bonus or incentive plan benefit for year 2003 with respect to any former
employees of the Company or any Business Employee or Additional Employee to the
extent reflected as a current liability and included in Working Capital on the
Final Closing Statement. Seller shall retain no liability, obligation or
responsibility for, and Buyer shall assume, or shall cause the Company or
another Affiliate of Buyer to assume, the full liability, obligation and
responsibility to pay, any portion of any bonus or incentive plan benefit for
the year 2002, accrued but not yet paid, with respect to any former employees of
the Company or any Business Employee or Additional Employee to the extent
reflected as a current liability and included in Working Capital on the Final
Closing Statement.
(l) For a period of one (1) year after the Closing Date:
(i) neither the Buyer nor any of its Affiliates that engage in
the business of the transportation of hydrocarbons shall, directly or
indirectly, induce any employee of Seller or any of its Affiliates
(other than the Transferred Employees) to leave the employ of Seller or
any of its Affiliates or employ or otherwise engage or retain (as an
independent contractor, consultant or otherwise) any such employee,
except that Buyer and its
26
Affiliates shall not be precluded from hiring any such employee who (y)
initiates discussions regarding such employment without any direct or
indirect solicitation by Buyer or its Affiliates or (z) responds to any
public advertisement placed by Buyer or its Affiliates; and
(ii) neither Seller nor any of its Affiliates shall, directly
or indirectly, induce any of the Transferred Employees to leave the
employ of Buyer or any of its Affiliates that engages in the business
of the transportation of hydrocarbons or employ or otherwise engage or
retain (as an independent contractor, consultant or otherwise) any such
Transferred Employee, except that Seller and its Affiliates shall not
be precluded from hiring any such employee who (y) initiates
discussions regarding such employment without any direct or indirect
solicitation by Seller or its Affiliates or (z) responds to any public
advertisement placed by Seller or its Affiliates.
(m) As of the Closing Date, Buyer agrees to cause the Company's
cafeteria plan established pursuant to subsection (o) below (the "BUYER'S 125
PLAN") to accept a spin-off of the flexible spending reimbursement accounts from
the Seller's cafeteria plan in which Transferred Employees participated as of
the Closing (the "SELLER'S 125 PLAN") and to honor and continue through the end
of the calendar year in which the Closing Date occurs the elections made by each
Transferred Employee under the Seller's 125 Plan in respect of the flexible
spending reimbursement accounts that are in effect immediately prior to the
Closing Date. As soon as practicable following the Closing Date, Seller shall
cause to be transferred to Buyer an amount in cash equal to the excess of the
aggregate accumulated contributions to the flexible spending reimbursement
accounts made during the year in which the Closing Date occurs by the
Transferred Employees over the aggregate reimbursement payouts made for such
year from such accounts to the Transferred Employees. If the aggregate
reimbursement payouts made to a Transferred Employee prior to Closing from the
flexible reimbursement account of such employee in the Seller's 125 Plan during
the year in which the Closing Date occurs exceeds the aggregate accumulated
contributions to such account prior to Closing for such year by such employee,
Buyer shall cause such excess to be transferred to Seller as soon as
practicable, and solely to the extent of, the receipt of contributions from such
employee to Buyer's 125 Plan. On and after the Closing Date, Buyer shall assume
and be solely responsible for all reimbursable claims by the Transferred
Employees under the Seller's 125 Plan, whether incurred prior to, on or after
the Closing Date, that have not been paid in full as of the Closing Date.
(n) Except for Business Employees covered under a collective bargaining
agreement, until at least December 31, 2003, Buyer shall provide or cause to be
provided to all Transferred Employees a salary or wage level at least equal to
90% of the salary or wage level to which they were entitled immediately prior to
the Closing Date and bonus opportunity at least equal to 90% of the bonus
opportunity to which they were entitled immediately prior to the Closing Date;
provided, however, that nothing contained in this Section 4.3(n) shall affect
Buyer's right to terminate any Transferred Employee for cause.
(o) Prior to the Closing, Buyer and Seller shall each use its
commercially reasonable efforts to take all reasonably necessary actions, in a
timely manner, to enable Buyer to establish welfare plans for the Company
essentially identical to the Employee Plans listed as items 1-12 on Schedule
2.18(a) with such conforming and other changes to reflect the change in
ownership
27
of the Company as a result of the transactions contemplated hereunder and the
transition of benefits to such plans (the "MIRROR PLANS"). Buyer and Seller
agree to otherwise cooperate as necessary to effectuate the provisions of this
Section 4.3 and to ensure an orderly transition of payroll and benefits coverage
with respect to the Transferred Employees from the Employee Plans to the
appropriate Mirror Plans, including without limitation, (i) the administrative
and processing services to be provided by Seller to Buyer pursuant to the
Transition Services Agreement, and (ii) causing the Company to establish one or
more bank accounts for the payroll of the Transferred Employees. (p) Prior to
the Closing Date, Seller shall provide a list to Buyer of (i) the names of all
retirees of the Company currently receiving benefits under any Employee Plan and
any Transferred Employees and former employees of the Company who have met the
requirements for a vested or deferred vested pension in such plans
(collectively, the "RETIREE PLAN PARTICIPANTS"); (ii) any survivors of employees
who died in active employment or who are on disability that are entitled to
benefits under any Employee Plan; and (iii) target bonus for 2003 for each
Transferred Employee.
SECTION 4.4. CONSENTS AND APPROVALS.
Seller and Buyer each shall use all commercially reasonable efforts to
obtain, or in the case of Seller, 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 and will cooperate fully with the other
party in promptly seeking to obtain all such authorizations, consents, orders,
and approvals, giving such notices, and making such filings. To the extent
required by the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX
XXX"), each party shall (i) file or cause to be filed, as promptly as
practicable but in no event later than five business days after the execution
and delivery of this Agreement, with the Federal Trade Commission and the United
States Department of Justice, all reports and other documents required to be
filed by such party under the HSR Act concerning the transactions contemplated
hereby and (ii) promptly comply with or cause to be complied with any requests
by the Federal Trade Commission or the United States Department of Justice for
additional information concerning such transactions, in each case so that the
waiting period applicable to this Agreement and the transactions contemplated
hereby under the HSR Act shall expire as soon as practicable after the execution
and delivery of this Agreement. Each party agrees to request, and to cooperate
with the other party in requesting, early termination of any applicable waiting
period under the HSR Act.
SECTION 4.5. FURTHER ASSURANCES.
Upon the request of Buyer at any time after the Closing Date, Seller
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 to perfect title of Buyer and its successors and assigns to
the Shares or otherwise to effectuate the purposes of this Agreement.
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SECTION 4.6. REASONABLE EFFORTS.
Upon the terms and subject to the conditions of this Agreement, each of
the parties hereto will use all commercially reasonable 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.
SECTION 4.7. DISCLOSURE SCHEDULE UPDATES
(a) Seller shall have the right, until five (5) business days prior to
the Closing, to supplement the Disclosure Schedules with respect to any matter
or matters arising before the date hereof which would have been required to be
set forth on or described in the Disclosure Schedules as of the execution date
hereof that relate to the representations and warranties in Article II (other
than the last sentence of Section 2.8) (an "EXECUTION UPDATE"). Any such
Execution Update furnished to Buyer will not be deemed to have been disclosed as
of the date of this Agreement for purposes of determining whether the conditions
to Closing set forth in Article V have been satisfied. If the Closing occurs and
the Execution Update includes a matter or matters that (i) were inadvertently
omitted by Seller from the applicable Disclosure Schedules on the execution date
hereof, then the Deductible shall be reduced, as of the Closing Date, by
one-half of the amount of the Loss incurred by Buyer as a result of the breach
of the applicable representation or warranty caused by such matter or matters
and (ii) were intentionally and willfully omitted by Seller from the Disclosure
Schedules on the execution date hereof, then the Deductible shall not apply with
respect to Buyer's right to seek indemnity under Article VIII with respect to
the Loss incurred by Buyer as a result of the breach of the applicable
representation or warranty.
(b) Seller shall have the right, until five (5) business days prior to
the Closing, to supplement the Disclosure Schedules relating to the Seller's
representations and warranties in Article II and the covenant in Section 4.11
with respect to any matter or matters arising on or after the date hereof which
would have been required to be set forth on or described in such Disclosure
Schedules to correct any information in any such Disclosure Schedule which has
been rendered inaccurate thereby; provided that the addition of such matter or
matters added with respect to the covenant in Section 4.11 were permitted
actions by Seller or the Company under Section 4.1(a) (a "POST-EXECUTION UPDATE
"). Any such Post-Execution Update furnished to Buyer will not be deemed to have
been disclosed as of the date of this Agreement for purposes of determining
whether the conditions to Closing set forth in Article V have been satisfied but
if Closing occurs, such Post-Execution Update shall be deemed to have cured any
breach of a representation or warranty relating to the matters set forth in such
Post-Execution Update for purposes of indemnification pursuant to Article VIII.
SECTION 4.8. CONFIDENTIAL INFORMATION.
For two (2) years after the Closing, Seller and its Affiliates shall
not, directly or indirectly, disclose to any Person 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 solely to the business and
operations of the Company. Notwithstanding the foregoing, Seller may disclose
29
any information relating to the business and operations of the Company (i) if
required by law or applicable stock exchange rule, (ii) to other Persons in the
conduct of Seller's or its Affiliates' other businesses which have a valid
business purpose for requiring such information, and such other Persons enter
into a confidentiality agreement with Seller similar to the confidentiality
agreement between Seller and Buyer dated February 3, 2003 (the "CONFIDENTIALITY
AGREEMENT"), and provided, further, that Seller shall be responsible for any
improper disclosure by any such other Person as if Seller itself had made such
improper disclosure, and (iii) to such other Persons if, at the time such
information is provided, such Person is already in the possession of such
information.
SECTION 4.9. NEGOTIATIONS.
From and after the date hereof, none of Seller, the Company nor its
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 (other than Buyer or its representatives) concerning
any merger, sale of assets, purchase or sale of Shares or similar transaction
involving the Company unless this Agreement is terminated pursuant to and in
accordance with Article VII hereof.
SECTION 4.10. TAX COVENANTS AND INDEMNITY.
(a) Parent shall cause to be included in the consolidated federal
income Tax Returns (and the state income Tax Returns of any state that permits
consolidated, combined or unitary income Tax Returns, if any) of the Parent
Group (as hereinafter defined) for all periods ending on or before the Closing
Date, all items of income, gain, loss, deduction or credit of the Company that
are required to be included therein, shall cause such Tax Returns to be timely
filed with the appropriate Tax authorities, and shall be responsible for the
timely payment of all Taxes due with respect to the periods covered by such Tax
Returns. On any such Tax Returns for a taxable period ending on the Closing
Date, the income of the Company will be apportioned between the period up to and
including the Closing Date and the period after the Closing Date by closing the
books of the Company as of the end of the Closing Date. For purposes hereof, the
"PARENT GROUP" shall mean the affiliated group of corporations of which Parent
(or any Affiliate of Parent other than the Company) is the common parent, which
join in the filing of a consolidated federal income Tax Return (and any similar
group under state law).
(b) Seller shall prepare and file all Tax Returns relating to the
Company which are due prior to the Closing Date with the appropriate federal,
state, local and foreign Tax authorities, and shall pay, or cause to be paid,
the Taxes due thereon. For periods ending on or prior to the Closing Date, but
for which Tax Returns are not due prior to the Closing Date, Seller shall, not
later than 15 days before the applicable due date, prepare and submit to Buyer
for review, signature, and filing all such Tax Returns required to be filed by
the Company, and Seller shall timely pay the Taxes due thereon; provided,
however, that Buyer shall prepare and file all Tax Returns required to be filed
by the Company for taxable periods ending after the Closing Date and shall pay
all Taxes due thereon; provided, further, that Seller shall reimburse Buyer for
its allocable share of any Taxes attributable to Tax periods including the
Closing Date and ending after the Closing Date ("STRADDLE PERIOD") within twenty
(20) days of a request by Buyer for such reimbursement. Buyer and Seller shall
utilize appropriate methods to allocate liability for
30
purposes of the preceding sentence, which appropriate methods shall include the
following, without limitation: (i) for any transactional Taxes, including,
without limitation, Taxes based on sales, revenue, or gross or net income, the
allocation of liability between Seller and Buyer shall be determined using a
closing-of-the-books method assuming that the applicable Tax period consists of
two taxable periods, one ending at the close of the Closing Date and one
beginning at the opening of the day after the Closing Date, and (ii) for any
real estate Taxes or other property or asset-based Taxes, the allocation of
liability between Seller and Buyer shall be based on the number of days the
applicable asset was held by the Company in the applicable Tax period prior to
and including the Closing Date as compared to the number of days the applicable
asset was held by the Company in the applicable Tax period after the Closing
Date.
(c) Seller will cause any tax sharing agreement or similar arrangement
with respect to Taxes involving the Company to be terminated effective as of the
Closing Date, to the extent any such agreement or arrangement relates to the
Company, and after the Closing Date the Company shall not be bound by or have
any obligation under any such agreement or arrangement for any past, present or
future period.
(d) 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 equally by Buyer and Seller. Notwithstanding anything to the contrary in
this Section 4.10, 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. If such a Tax Return is not timely filed, any interest and
penalties incurred as a result shall be the responsibility of the filing party.
In the event that any dispute between the parties concerning the form or content
of such Tax Returns cannot be timely resolved prior to their due date through
good-faith negotiation, the determination of the filing party shall be
controlling.
(e) At the request of Buyer, in Buyer's sole discretion, Parent agrees
to join Buyer in making a timely, irrevocable and effective election under
section 338(h)(10) of the Code (and any comparable elections under state, local
or foreign Tax law) (collectively, the "SECTION 338(h)(10) ELECTION") with
respect to the acquisition of the Shares by Buyer pursuant to this Agreement.
Prior to the due date for filing IRS Form 8023 and any similar forms under
applicable state, local or foreign income Tax law (the "FORMS"), Buyer and
Parent shall cause the Forms to be duly executed by an authorized Person for
Buyer and Parent, respectively. Buyer shall duly and timely file the Forms as
prescribed by Treasury Regulation Section 1.338(h)(10)-1 or the corresponding
provisions of applicable state, local or foreign income Tax law. Buyer and
Parent agree that the Purchase Price and the liabilities of the Company (plus
other relevant items) shall be allocated among the assets of the Company for Tax
purposes in the manner required under section 338 of the Code and the Treasury
Regulations promulgated thereunder. Buyer and Parent shall endeavor in good
faith to reach timely agreement on such allocation. Buyer, Seller, Parent and
the Company shall duly and timely file the Forms and all Tax Returns (including
IRS Form 8883) in a manner consistent with the two preceding
31
sentences. Buyer and Parent shall cooperate fully with each other in the making
of the Section 338(h)(10) Election. Parent shall be responsible for all federal,
state, local and foreign income, franchise or similar Taxes resulting from the
Section 338(h)(10) Election. In the event a state or local Tax authority does
not allow or respect the Section 338(h)(10) Election and treats the federal
Section 338(h)(10) Election as an election under Code Section 338(g) for state
or local income Tax purposes, Buyer shall be responsible (up to a maximum
responsibility of $100,000) for the excess, if any, of (1) the net amount of
state and local income, franchise or similar Taxes imposed by such Tax authority
on the actual sale of the Shares to Buyer and the deemed sale of assets by the
Company over (2) the amount of such Taxes that would have been so imposed if
such sale had instead been treated as a sale of the assets of the Company
followed by the liquidation of the Company, and Parent shall be responsible for
the remainder of such Taxes.
(f) Seller and Buyer shall each promptly provide the other with such
assistance as may reasonably be requested by either of them in connection with
the preparation of any Tax Return, any audit or other examination by any Tax
authority or any judicial or administrative proceeding with respect to Taxes;
and each shall retain in accordance with its customary document retention
policies (but at least until the expiration of the applicable statute of
limitations) and promptly provide the other with any records or other
information which may be relevant to any such return, audit examination or
proceeding.
(g) Buyer shall, in the event that Buyer or, following the Closing
Date, the Company receives notice (whether orally or in writing) of any audit,
examination or claim by any taxing authority with respect to Taxes for which
Buyer or its Affiliates may be indemnified hereunder (a "TAX CLAIM"), promptly
notify Seller thereof, provided, however, that failure to give such notification
shall not affect the right of Buyer to indemnification provided hereunder except
to the extent that Seller has been actually prejudiced by such failure. Except
in the case of Taxes imposed with respect to a Straddle Period, Seller shall
have the right to contest, at its own expense, any Tax Claim, and shall be
entitled to control any such contest, provided, however, that Seller shall not
be entitled to settle or compromise any such contest without the consent of
Buyer, which consent shall not be unreasonably withheld or delayed, if such
settlement or compromise could affect the tax liability of Buyer or any of its
Affiliates for any period after the Closing Date, and provided, further that
Buyer may elect to participate, at its sole cost, with counsel of its choice in
any such contest. In the case of the contest of a Tax Claim with respect to any
Straddle Period, Seller shall have the right to participate at its own expense
in any such contest to the extent that the outcome could affect the liability of
Seller hereunder, and Buyer shall not settle any such contest in a manner that
could affect the liability of Seller without Seller's consent, which consent
shall not be unreasonably withheld or delayed. If Seller fails timely to defend,
contest or otherwise protect against any Tax Claim that it is entitled to
control pursuant to this Section 4.10(g), Buyer shall have the right to do so,
including, without limitation, the right to make any compromise or settlement
thereof, and Buyer shall be entitled to recover the entire cost thereof from
Seller, including, without limitation, reasonable attorneys' fees, disbursements
and amounts paid as a result of such Tax Claim.
(h) Seller shall indemnify, defend and hold harmless Buyer, the Company
and any members of any group filing consolidated, combined or unitary, federal,
state or local income Tax Returns with Buyer or the Company (collectively, the
"BUYER TAX INDEMNITEES") from and against all Losses (as defined in Section
8.2(a)) attributable to (i) Taxes of the Company for any
32
Tax period ending on or before the Closing Date and the portion of any Straddle
Period ending on the Closing Date (determined in accordance with Section
4.10(b)), (ii) Taxes attributable to the ownership interests of the Company in,
or the activities of, any of the Retained Entities, and through the Closing
Date, Alaskan Northwest Natural Gas Transportation Company (iii) Taxes of any
member of an affiliated, consolidated, combined or unitary group of which the
Company (or any predecessor) is or was a member on or prior to the Closing Date,
including pursuant to Treasury Regulation Section 1.1502-6 or any analogous or
similar state, local or foreign law or regulation, (iv) Taxes of any other
Person imposed on the Company as a transferee or successor, by contract or
otherwise, which Taxes relate to an event or transaction occurring on or before
the Closing Date, (v) except as provided in the last sentence of Section
4.10(e), any Taxes attributable to the Section 338(h)(10) Election, or (vi) any
breach of any representation or warranty made in Section 2.9 or any covenants or
agreements made by Seller or Parent in this Section 4.10. Seller shall reimburse
the appropriate Buyer Tax Indemnitee for any Losses which are the responsibility
of Seller under this Section 4.10(h) within twenty (20) days after the payment
of the underlying Taxes by the Buyer Tax Indemnitee.
(i) Buyer shall indemnify, defend and hold harmless Seller, Parent and
any members of any group filing consolidated, combined or unitary, federal,
state or local income Tax Returns with Seller or Parent (collectively, the
"SELLER TAX INDEMNITEES") from and against all Losses (as defined in Section
8.2(a)) attributable to any breach of any covenants or agreements made by Buyer
in this Section 4.10. Buyer shall reimburse the appropriate Seller Tax
Indemnitee for any Losses which are the responsibility of Buyer under this
Section 4.10(i) within twenty (20) days after the payment of the underlying
Taxes by the Seller Tax Indemnitee.
(j) Article VIII, other than Section 8.2(a)(i) (with respect to the
representations and warranties in Section 2.18), Section 8.2(a)(ii) (with
respect to employee benefit matters), Section 8.2(a)(iii), Section 8.8 and the
limitations in Section 8.1, shall not be applicable to Losses attributable to
Taxes and the rights and liabilities of the parties for indemnification of
Losses attributable to Taxes shall be governed solely by this Section 4.10.
SECTION 4.11. INSURANCE, BONDS AND COLLATERAL.
(a) Prior to the Closing, Buyer shall use its commercially reasonable
efforts to take such actions as may be necessary or appropriate so that all
surety bonds, letters of credit, and cash collateral issued in respect of the
Company listed on Schedule 4.11 (collectively, the "SELLER'S BONDS") will be
released and replaced immediately after the Closing, and Buyer shall take such
actions as are necessary to replace and release all the Seller's Bonds not later
than 30 days after the Closing Date by comparable surety bonds, letters of
credit and cash collateral provided by Buyer or an Affiliate of Buyer ("BUYER'S
BONDS"). Buyer shall reimburse Seller and its Affiliates for any and all Losses
(in each case without deduction or set off) incurred on account of claims and
payments made under or for the Seller's Bonds on or after the Closing Date upon
the receipt by Buyer of a written request accompanied by reasonable
documentation of the Losses for which reimbursement is requested.
(b) From and after the Closing Date, except as provided in this Section
4.11(b), coverage for the Company under the Policies will terminate, and no new
claims by or on behalf of the Company will accrue under the Policies. Seller
shall purchase and pay in full any premium for a
33
discovery period under the Specified Policies (as such term is defined in
Section 9.16). This discovery period shall be effective as of the Closing Date
and shall terminate on May 1, 2006 at 12:01 a.m. Central time. Such discovery
period shall permit the Company to make claims under such excess liability
policies through April 30, 2006 to the extent such claims relate to occurrences
prior to the Closing Date and shall provide coverage to the full extent of the
policies in respect of such extended discovery period. Seller will cause the
Company to be named as an insured or additional insured under such policies to
the extent of such discovery period. After the Closing Date, Seller or Parent
shall continue to manage all workers' compensation and general liability and
automobile liability claims of the Company, which are known and reported on or
prior to the Closing Date, or which are covered under any insurance policy shown
on Schedule 2.19. Seller shall be responsible for workmen's compensation claims
by employees of the Company based upon pre-Closing occurrences, including
related deductibles and administrative costs. Buyer shall be responsible for the
deductible (to the extent not previously satisfied) in respect of claims (other
than workmen's compensation claims) made against or by or on behalf of the
Company prior to the Closing under the automobile general liability and excess
liability policies of Parent maintained for the Xxxxxxxx Companies' group, but
Seller shall be responsible for the other costs on account of such claims,
including, without limitation, third party administration charges. Buyer shall
be responsible for all costs on account of claims (other than workmen's
compensation claims) made by or on behalf of the Company based on a pre-Closing
occurrence when the claim is made after the Closing for all costs in excess of
insurance on account of such claims, including, without limitation, deductibles
and third party administration charges.
SECTION 4.12. INFORMATION TECHNOLOGY.
(a) Upon the execution of this Agreement, the parties shall each
designate representatives to a migration team ("IT MIGRATION TEAM") that shall
be responsible for identifying all data, the specific software and hardware and
related documentation and development materials, and agreements for the use,
maintenance, training, support or service thereof necessary for Buyer to
continue operations of the Company including, without limitation, all financial,
accounting, operations, maintenance, billing, human resources and other aspects
of the operations of the Company in the ordinary course at a level of quality
and efficiency at least equal to the level experienced by the Company for the
period commencing January 1, 2002 through the Closing Date (the "IT STANDARD"),
including any Software listed on Schedule 2.12(a) that the IT Migration Team
determines should be transferred to the Company in order to meet the IT Standard
("IT ASSETS"). The IT Migration Team shall also be responsible for developing a
detailed plan to include cost estimates and timetables for: (i) successful
conversion and loading of existing Company data, (ii) integration of the IT
Assets into Buyer's or its Affiliate's information technology systems, (iii)
transfer or replacement of IT Asset licenses and maintenance agreements not
currently held in Company's name and (iv) any post-closing transitional services
reasonably required by Buyer or the Company to meet the IT Standard ("IT
MIGRATION PLAN"). The Migration Team shall complete the preparation of the IT
Migration Plan no later than 30 days after execution of this Agreement. If the
members of the IT Migration Team are unable to agree on aspects of the IT
Migration Plan within such 30-day period, Buyer and Seller may request, at the
option of either party and by notice to the other party, that their differences
be resolved by a nationally recognized information technology consulting firm
selected jointly by Buyer and Seller. If Buyer and Seller are unable to so
select the nationally
34
recognized information technology consulting firm within five days of any such
notice, either Buyer or Seller may thereafter request that the CPR Institute for
Dispute Resolution make such selection (as applicable, the firm selected by
Buyer and Seller or the firm selected by the CPR Institute for Dispute
Resolution is referred to as the "IT FIRM"). The parties shall direct the IT
Firm to use its reasonable best efforts to render its resolution within 30 days
after any disagreement is submitted by the parties. The fees and expenses of the
IT Firm shall be shared equally by Buyer and Seller. Upon completion of the IT
Migration Plan, the IT Migration Team promptly shall begin the pre-Closing
implementation of the IT Migration Plan in order for the parties to complete the
post-Closing transfer, conversion and loading of the Company data from Seller to
Buyer or Buyer's designated Affiliates, all in accordance with the IT Migration
Plan. The time for completion and execution of the IT Migration Plan shall be
referred to as the "IT MIGRATION PERIOD." The respective rights, benefits and
obligations of the parties, their Affiliates and the Company shall be addressed
in the IT Migration Plan, including the provision of various services and
products by Seller and its Affiliates to Buyer. The obligations of Seller, Buyer
and the Company for the respective post-Closing transition period specified for
such services or products in the IT Migration Plan, will be set forth in an
agreement to be substantially in the form of the Transition Services Agreement
attached as Exhibit 4.12 to be executed and delivered by Seller, Buyer and the
Company at Closing (the "TRANSITION SERVICES AGREEMENT").
(b) On or before the expiration of the IT Migration Period and in
accordance with the IT Migration Plan, Seller shall, and shall cause its
Affiliates to either: (i) assign to Buyer or the Company all of their respective
right, title and interest in the IT Assets, including license and contract
rights and secure any consents necessary for such assignment; (ii) with respect
to license and software rights that, in accordance with the IT Migration Plan,
are to be retained by Seller and its Affiliates during the IT Migration Periods,
secure any consents necessary for the use by Seller and its Affiliates of the IT
Assets on behalf of the Company or Buyer during the IT Migration Period; or
(iii) if requested by Buyer, obtain for the Buyer or its designated Affiliate,
on commercially reasonable terms and at Buyer's expense, comparable replacements
for any IT Assets not assigned pursuant to (i) above. Fees for license transfers
or comparable replacements shall be borne by Buyer. Costs related to Seller's
employees and contractors involved in the preparation and implementation of the
IT Migration Plan shall be borne by Seller, and costs and expenses related to
Buyer's employees and contractors involved in the preparation and implementation
of the IT Migration Plan shall be borne by Buyer.
SECTION 4.13. SOFTWARE LICENSE.
Effective upon the Closing Date, Seller, for itself and on behalf of
its Affiliates, hereby grants to the Company, Buyer and its Affiliates, an
irrevocable, nonexclusive, royalty-free, perpetual license, without right to
sublicense (other than to its Affiliates), to use, copy, modify, enhance, and
upgrade, and to have modified, used, enhanced and upgraded, solely for their
internal business purposes and not as a service bureau, all computer software
owned by Seller and/or its Affiliates which is used in connection with the
business of the Company as conducted as of the Closing Date ("LICENSED
SOFTWARE"). Any copies of the Licensed Software and any documentation related
thereto must contain all copyright and other intellectual property rights
notices included thereon. Except to the extent expressly provided in the
Transition Services Agreement, the Company and Buyer shall not be entitled to
receive, and Seller and its Affiliates shall have no obligation to provide, any
modifications, enhancements, or upgrades made to the
35
Licensed Software by Seller subsequent to the Closing Date. Ownership of all
Intellectual Property rights in the Licensed Software remains with Seller and
its Affiliates. Buyer shall not, and shall not permit any of its Affiliates to,
take any action inconsistent with Seller's and its Affiliates' rights in the
Licensed Software. All rights not expressly granted herein to the Company and
Buyer are retained by Seller and its Affiliates. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN THIS AGREEMENT, THE LICENSED SOFTWARE AND ANY RELATED DOCUMENTATION
ARE PROVIDED ON AN "AS IS" BASIS. SELLER AND ITS AFFILIATES HEREBY EXPRESSLY
DISCLAIM ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. SELLER AND ITS AFFILIATES DO NOT WARRANT THAT THE LICENSED SOFTWARE OR
DOCUMENTATION ARE ERROR-FREE OR THAT COMPANY'S OR BUYER'S USE THEREOF WILL BE
UNINTERRUPTED. ALL RIGHTS NOT EXPRESSLY GRANTED TO BUYER AND ITS AFFILIATES ARE
RETAINED BY SELLER AND ITS AFFILIATES.
SECTION 4.14. NON-SOFTWARE COPYRIGHT LICENSE.
Effective upon the Closing Date, Seller, for itself and on behalf of
its Affiliates, hereby grants to the Company, Buyer and its Affiliates, a
nonexclusive royalty-free, perpetual license, without right to sublicense, to
use, copy, modify, enhance, and upgrade, solely for their internal business
purposes and not as a service bureau, all manuals, user guides, standards and
operation procedures and similar documents owned by Seller and/or its Affiliates
and used by the Company. All copies of the foregoing must reproduce and include
all copyright and other Intellectual Property rights notices provided by Seller.
All rights not expressly granted to Buyer and its Affiliates are retained by
Seller and its Affiliates.
SECTION 4.15. TRANSITIONAL TRADEMARK LICENSE.
Effective upon the Closing Date, Seller and Seller's Affiliates, hereby
grant to the Company and Buyer a nonexclusive, nontransferable, royalty-free
license, without right to sublicense, to use, solely in the Company's business
as it is then conducted, any and all of Seller's Marks solely to the extent
appearing on existing inventory, advertising materials and property of the
Company (such as signage, vehicles, and equipment) for a period of six (6)
months from the Closing Date ("LICENSE PERIOD"). Buyer and the Company may use
such existing inventory, advertising materials and property during the License
Period, but shall not create new inventory, advertising materials or property
using Seller's Marks. Buyer and the Company shall promptly replace or remove
Seller's Marks on inventory, advertising materials 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 Seller's Marks by Buyer and the Company shall conform
to Seller's existing quality standards in existence as of the date hereof (a
copy of which has been furnished to Buyer). Immediately upon expiration of the
License Period, the Buyer and the Company shall cease all further use of
Seller's Marks and shall adopt new trademarks, service marks, and trade names
which are not confusingly similar to Seller's Marks. All rights not expressly
granted in this section with respect to Seller's Marks are hereby reserved. If
Buyer or the Company breaches the provisions of this section, Seller may
immediately terminate the License Period upon 15 days advance written notice.
Seller shall not use, from and after the Closing Date, any trademarks, service
marks or trademarks owned by the Company.
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SECTION 4.16. REPORTING COOPERATION.
Seller will cooperate with the independent auditors chosen by
Buyer and its Affiliates, in connection with their audit of any annual
consolidated financial statements of the Company that Buyer or any of its
Affiliates requires to comply with Regulations S-X and S-K, and their review of
any interim quarterly consolidated financial statements of the Company that
Buyer or any of its Affiliates requires to comply with the reporting
requirements of the SEC set forth in Regulations S-K and S-X, but in no event
shall Seller be required pursuant to this Section 4.16 to cooperate with respect
to more than five (5) years of such annual consolidated financial statements of
the Company. Seller's cooperation will include (i) such access to Seller's
employees who were responsible for preparing the consolidated financial
statements and to workpapers and other supporting documents used in the
preparation of the consolidated financial statements as may be required by such
auditors to perform an audit in accordance with generally accepted auditing
standards, (ii) delivery of one or more customary representation letters from
Seller to such auditors that are requested by Buyer or any of its Affiliates to
allow such auditors to complete an audit (or review of any interim quarterly
financials), and to issue an opinion that in such Buyer Affiliate's experience
is acceptable to the SEC with respect to an audit or review of those
consolidated financial statements required pursuant to Section 4.16, (iii)
cooperation with Buyer and its Affiliates to obtain any necessary consents from
Ernst & Young, LLC to the use of the consolidated financial statements in any
filings Buyer or any of its Affiliates pursuant to the Securities Act of 1933,
as amended ("SECURITIES ACT") or the Securities and Exchange Act of 1934 and to
cooperate in seeking to obtain any related comfort letters from Ernst & Young,
LLC, and (iv) using commercially reasonable efforts to have Ernst & Young, LLC
provide such other assistance as Buyer may reasonably request with respect to
the foregoing. Buyer will reimburse Ernst & Young, LLC or Seller for any
reasonable overhead costs with respect to the providing any comfort letters or
consents or other assistance as provided above. Buyer or its appropriate
Affiliate will be responsible for any fees due to its independent auditors for
preparing the consolidated financial statements.
SECTION 4.17. TERMINATION OF CERTAIN RELATED PARTY CONTRACTS.
Effective as of the Closing Date, except as otherwise provided
in Schedule 4.17, Seller shall have terminated, or caused the Company and
Seller's other Affiliates to terminate the Affiliate Contracts and any
commitments of the Company with respect to the 1Line customer service
application being developed by Seller and its Affiliate. Seller shall be solely
liable for any contractual or other claims, express or implied, arising out of
the termination, cancellation and elimination of any of the foregoing and
performance by the Company thereunder prior to Closing. Prior to Closing, Seller
shall take such actions that are necessary to have the relevant parties amend
the credit agreement described in Item 1 of Schedule 2.16(c) (the "PARENT CREDIT
AGREEMENT") to remove the Company at or prior to the Closing as a borrower or
guarantor, as applicable, under such credit agreement, to release the Company
from any and all obligations under such credit agreement, and to obtain the
release of any Encumbrances against the Shares or any assets and properties of
the Company pledged in connection therewith.
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SECTION 4.18. OTHER MATTERS.
(a) On or prior to Closing, Seller and the Company shall execute and
deliver the Assumption and Agreement in the form of Exhibit 4.18.
(b) On or prior to Closing, Seller shall cause the List C Contracts (as
such term is defined in Section 9.16) to be assigned to, and assumed by, Seller
or one of its Affiliates (other than the Company), such assignment and
assumption to be effected pursuant to an assignment and assumption agreement
which provides for indemnification by Seller of the Company against Losses (as
defined in Section 8.2(a)) with respect to the List C Contracts and is otherwise
in a form reasonably acceptable to Buyer.
(c) Prior to the Closing, the Seller shall take such actions as may be
necessary or appropriate to cause the liens and security interests evidenced by
those certain filings on Standard Forms-UCC 1 (including any continuations
thereof) filed in Daviess County, Kentucky by Citicorp North America, Inc., as
Agent, as Secured Party in respect of the Company, or Debtor, and relating to
the Trade Receivable Purchase and Sale Agreements identified therein, to be
released, and evidence of such release shall be furnished to Buyer (which
evidence shall be reasonably acceptable to Buyer).
SECTION 4.19. GUARANTIES.
Loews Corporation will execute, upon execution of this Agreement, a
guaranty substantially in the form of Exhibit 4.19(a), and Parent will execute,
upon execution of this Agreement, a guaranty substantially in the form of
Exhibit 4.19(b).
SECTION 4.20. COMPANY OFFICERS AND DIRECTORS.
(a) Prior to Closing, Seller shall furnish to Buyer a list of the
Persons then serving as an officer or director of the Company.
(b) Seller shall use its reasonable efforts to cause the resignations
delivered under Section 5.1(h) for the officers, directors or managers of the
Company who are not Transferred Employees to include releases of the Company in
a form reasonably satisfactory to Buyer. If Seller is not able to obtain such a
release from any such Person prior to the Closing, Seller shall agree to
indemnify the Company and Buyer from any claims by such Person against the
Company arising from such Person acting as an officer, director, or manager of
the Company, in a form reasonably acceptable to Buyer.
SECTION 4.21. WORK PROTOCOL.
Upon the receipt by Seller of a written notice timely given under
Schedule 4.21, the parties shall follow and comply with the protocols and
procedures set forth in Schedule 4.21.
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ARTICLE V.
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer 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 Buyer in
its sole discretion:
SECTION 5.1. RECEIPT OF DOCUMENTS.
Seller shall have delivered, or be standing ready to deliver, to Buyer:
(a) a duly executed Stock Transfer dated the Closing Date.
(b) any documents Buyer may reasonably require relating to the
existence of Seller, the Company and the authority of Seller and the Company and
its shareholders for this Agreement and the Transaction Documents, all in form
and substance reasonably satisfactory to Buyer;
(c) the books of account, minute books, stock ledgers and
Organizational Documents of the Company and copies of the employee records of
the Additional Employees who have accepted offers of employment from Buyer
(other than copies of medical records and other records that require the consent
of the employee to be disclosed to Buyer relating to such Additional Employees);
(d) evidence, reasonably satisfactory to Buyer, of the dividend or
transfer to Seller or its Affiliates effective prior to Closing of all ownership
interests in the Retained Entities;
(e) evidence, reasonably satisfactory to Buyer, of the termination of
the agreements described in Section 4.17, the amendment of the Parent Credit
Agreement and the releases described in Section 4.17;
(f) an opinion of Seller's counsel in a form reasonably satisfactory to
Buyer;
(g) a properly executed statement, dated as of the Closing Date, in
form and substance reasonably acceptable to Buyer conforming to the requirements
of Treasury Regulation Section 1.1445-2(b)(2), and any other certificate or
similar documents reasonably requested by Buyer that may be required by any
relevant Tax authority in order to relieve Buyer of any obligation to withhold
any portion of the Purchase Price;
(h) if requested by Buyer, duly executed letters of resignation from
any or all of the officers, directors and managers of the Company, in a form
reasonably acceptable to Buyer; and
(i) certificates of insurance naming Buyer and the Company as an
insured or additional insured under the extended discovery period coverage
described in Section 4.11(b).
SECTION 5.2. REPRESENTATIONS AND WARRANTIES OF SELLER.
All representations and warranties made by Seller in this Agreement (i)
that are qualified as to materiality or Material Adverse Effect or similar
exception or qualifier shall be true and
39
correct in all respects, (ii) in Section 2.9(b)(xvii) shall be true and correct
in all respects and (iii) except for the representation and warranty referred to
in clause (ii), that are not qualified as to materiality or Material Adverse
Effect or similar exception or qualifier shall be true and correct in all
material respects, in each case, on and as of the Closing Date as if again made
by Seller on and as of such date, and Buyer shall have received a certificate
dated the Closing Date and signed by a senior executive officer of Seller to
that effect.
SECTION 5.3. PERFORMANCE OF SELLER'S OBLIGATIONS.
Seller shall have performed all obligations required under this
Agreement to be performed by it on or before the Closing Date in all material
respects, and Buyer shall have received a certificate dated the Closing Date and
signed by a senior executive officer of Seller to that effect.
SECTION 5.4. CONSENTS AND APPROVALS.
The consents, waivers, authorizations and approvals set forth on
Schedule 2.6 or that are required under the documents listed in Schedule 2.6
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, which declares this Agreement or any of the Transaction
Documents invalid or unenforceable in any respect or which 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 any of the Transaction Documents
or which challenges the validity or enforceability of this Agreement.
SECTION 5.6. TRANSITION SERVICES AGREEMENT.
The parties shall have executed and delivered prior to or at Closing
the Transition Services Agreement.
ARTICLE VI.
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller 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 Seller in
its sole discretion:
SECTION 6.1. REPRESENTATIONS AND WARRANTIES OF BUYER.
All representations and warranties made by Buyer in this Agreement (i)
that are qualified as to materiality or Material Adverse Effect or similar
exception or qualifier shall be true and
40
correct in all respects and (ii) that are not qualified as to materiality or
material adverse effect or similar exception or qualifier shall be true and
correct in all material respects, in each case, on and as of the Closing Date as
if again made by Buyer on and as of such date, and Seller shall have received a
certificate dated the Closing Date and signed by a senior executive officer of
Buyer to that effect.
SECTION 6.2. PERFORMANCE OF BUYER'S OBLIGATIONS.
Buyer shall have performed all obligations required under this
Agreement to be performed by it on or before the Closing Date except for such
non-performance as would not, individually or in the aggregate, have a material
adverse effect on Buyer's ability to perform its obligations under this
Agreement, and Seller shall have received a certificate dated the Closing Date
and signed by a senior executive officer of Buyer to that effect.
SECTION 6.3. CONSENTS AND APPROVALS.
All consents, waivers, authorizations and approvals set forth on
Schedule 3.4 or that are required under the documents listed in Schedule 3.4
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 6.4. NO VIOLATION OF ORDERS.
No preliminary or permanent injunction or other order issued by any
Governmental Authority, that declares this Agreement invalid or unenforceable in
any respect or which 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 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. PURCHASE PRICE.
Buyer shall have paid and delivered to Seller, or be standing ready to
pay and deliver to Seller, the Estimated Purchase Price.
SECTION 6.6. OPINION OF BUYER'S COUNSEL.
Buyer shall have delivered, or be standing ready to deliver, to Seller
an opinion of Buyer's counsel in a form reasonably satisfactory to Seller.
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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 Seller and Buyer;
(b) by Seller, if Buyer fails to comply with any of its covenants or
agreements contained herein, or breaches its representations and warranties
contained herein, which failure to comply or breach is not cured within 30 days
after receipt by Buyer from Seller of written 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 to Closing set forth in Sections
6.1 and/or 6.2;
(c) by Buyer, if Seller fails to comply with any of its covenants or
agreements contained herein, or breaches its representations and warranties
contained herein, which failure to comply or breach is not cured within 30 days
after receipt by Seller from Buyer of written 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 to Closing set forth in Sections
5.2 and/or 5.3;
(d) by Seller or Buyer, if 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; or
(e) by Seller or Buyer at any time after June 30, 2003, provided that
the terminating party is not in default of its obligations hereunder in any
material respect.
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 Seller or
Buyer. 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 8.4, 8.6, 9.3, 9.4, 9.11 and 9.12
hereof; provided, however, that no termination of this Agreement pursuant to
this Article VII shall relieve any party of liability for a willful and material
breach of any representation or warranty contained in this Agreement or for any
material breach of a covenant or agreement contained in this Agreement, in each
case occurring before such termination.
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ARTICLE VIII.
SURVIVAL; INDEMNIFICATION
SECTION 8.1. SURVIVAL.
The representations and warranties of Seller contained herein or in any
certificates or other documents delivered pursuant to this Agreement on the
Closing and Seller's covenants in Section 4.1 hereof shall survive the Closing
until the first anniversary of the Closing Date, provided, however, that the
representations and warranties set forth in Section 2.2 (Capitalization; Title),
Section 2.4 (Validity of Agreement; Authorization), and Section 2.17 (Brokers)
shall survive indefinitely and the representations and warranties set forth in
Section 2.9 (Tax Matters) and the covenants set forth in Section 4.10 (Tax
Covenants) shall survive for a period equal to thirty (30) days after the
applicable statute of limitations (as the same may be extended) for each Tax and
taxable year. The other agreements, covenants and terms of this Agreement and
the agreements delivered in connection herewith shall survive the Closing.
SECTION 8.2. INDEMNIFICATION COVERAGE.
(a) From and after the Closing, Seller shall indemnify and defend, save
and hold Buyer, the Company and their Affiliates and each of their officers,
directors, employees and agents (collectively, the "BUYER INDEMNIFIED PARTIES")
harmless if any such Buyer Indemnified Party shall 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 Seller or the breach of any warranty by Seller
contained in this Agreement or any certificates or other documents
delivered pursuant to this Agreement on Closing;
(ii) any failure by Seller to perform or observe
any term, provision, covenant, or agreement on the part of Seller to be
performed or observed under this Agreement;
(iii) any Loss for which the Company has joint and
several liability with Parent or any Affiliate of Parent under Title IV
of ERISA or the Code or to the PBGC with respect to termination of any
employee pension benefit plan that is or was maintained or sponsored by
Seller or any of its Affiliates (other than the Company)), and is
subject to Title IV of ERISA but excluding any such liability covered
under Section 4.10 hereof;
(iv) any claim arising out of a Person's exposure
to asbestos containing material that originated from or that was used
in any buildings or other facilities owned or leased by the Company on
or prior to the Closing Date but only to the extent such exposure
occurred on or prior to the Closing Date;
(v) actions, investigations, suits or
proceedings set forth on Schedule 8.2(v);
43
(vi) matters or claims arising out of
the operations of or the participation by the Company in the Retained
Entities or the Company's ownership interest therein;
(vii) claims made under the contracts
described in Schedule 8.2(vii); and
(viii) the enforcement of the provisions
of this Section 8.2(a).
For purposes of determining the amount of
any Loss incurred under subsection (i) above (but not for purposes of
determining whether or not a breach has occurred), each representation and
warranty shall be read without giving effect to any materiality or Material
Adverse Effect or similar exception or qualifier set forth therein.
(b) From and after the Closing, Buyer and the Company shall indemnify
and defend, save and hold Seller and its Affiliates and its and their officers,
directors, employees and agents (collectively, the "SELLER INDEMNIFIED PARTIES")
harmless if Seller Indemnified Parties shall suffer any Loss arising out of,
relating to, or resulting from:
(i) any breach or inaccuracy in any
representation by Buyer or the breach of any warranty by Buyer
contained in this Agreement or any certificates or other documents
delivered pursuant to this Agreement on Closing;
(ii) any failure by Buyer to perform or
observe any term, provision, covenant, indemnity, or agreement on the
part of Buyer to be performed or observed under this Agreement; and
(iii) the enforcement of the provisions
of this Section 8.2(b).
For purposes of determining the amount of
any Loss incurred under subsection (i) above (but not for purposes of
determining whether or not a breach has occurred), each representation and
warranty shall be read without giving effect to any materiality or Material
Adverse Effect or similar exception or qualifier set forth therein.
(c) The foregoing indemnification obligations shall be subject to the
following limitations:
(i) Seller's aggregate liability under
Section 8.2(a)(i) shall not exceed $78,000,000.00;
(ii) no indemnification for any Losses
asserted against Seller under Section 8.2(a)(i) shall be required
unless and until the cumulative aggregate amount of such Losses against
Seller exceeds $7,500,000.00 (the "DEDUCTIBLE"), at which point Seller
shall be obligated to indemnify the Buyer Indemnified Parties (as
hereinafter defined) only as to the amount of such Losses in excess of
the Deductible, subject to the limitation in Section 8.2(c)(i) and as
the Deductible may be reduced under Section 4.7;
44
(iii) the amount of any Losses suffered by a
Seller Indemnified Party or a Buyer Indemnified Party, as the case may
be (such party seeking indemnification, the "INDEMNIFIED PARTY," and
the other party, the "INDEMNIFYING PARTY"), shall be reduced by any
third-party insurance or other indemnification benefits which such
party receives in respect of or as a result of such Losses. If any
Losses for which indemnification is provided hereunder are 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;
(iv) any calculation of Losses for purposes
of Article VIII hereof shall take into account any U.S. federal, state
or local tax consequences to Seller Indemnified Party or Buyer
Indemnified Party seeking indemnification pursuant to this Article VIII
hereof, as the case may be;
(v) no claim may be asserted nor may any
action be commenced against Seller for breach or inaccuracy of any
representation or breach of a warranty or covenant, unless written
notice of such claim or action is received by Seller 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 or covenant on which such claim or
action is based ceases to survive as set forth in Section 8.1;
(vi) an Indemnified Party shall not be
entitled under this Agreement to multiple recovery for the same Losses;
(vii) the limitations on indemnification set
forth in clauses (i) and (ii) of this Section 8.2(c) shall not apply to
any Losses arising from any inaccuracy or breach of Sections 2.2 or
2.17; and
(viii) any indemnification for Losses
asserted by Buyer under Section 8.2(a)(iv) that relate to a Person's
exposure both before and after the Closing Date shall be reduced to the
extent such Losses resulted from Buyer's, the Company's or any of its
or their representatives' or contractors' failure to comply with
applicable Environmental Laws when abating, managing, treating, or
otherwise handling asbestos after the Closing Date in any of the
buildings or facilities that are subject to the indemnity in Section
8.2(a)(iv).
SECTION 8.3. PROCEDURES.
(a) Any Indemnified Party shall notify the Indemnifying Party (with
reasonable specificity) promptly after it becomes aware of facts supporting the
commencement of or the assertion of any claim or action, suit or proceeding by a
third party in respect of which indemnification under this Article VIII may be
sought (each, a "THIRD PARTY CLAIM"), and shall provide to the Indemnifying
Party as soon as practicable thereafter copies of all papers served (if any)
with respect to such Third Party Claim. Subject to Section 8.2(c)(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
45
Party is 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. If the
Indemnifying Party does not dispute its potential liability to the Indemnified
Party with respect to such Third Party Claim, then the Indemnifying Party shall
have the right, exercisable by written notice to the Indemnified Party within
ten days after receipt of notice from the Indemnified Party of the Third Party
Claim (each, a "ELECTION PERIOD"), to participate in and defend, contest or
otherwise protect the Indemnified Party against any such claim, action, suit or
proceeding with counsel of the Indemnifying Party's choice (which counsel shall
be reasonably satisfactory to the Indemnified Party) 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 disputes its potential liability to the Indemnified Party, does not elect
within the Election Period to defend the claim or action or fails to timely and
diligently 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. Payments of all amounts owing
by the Indemnifying Party pursuant to this Section 8.l3(a) shall be made not
later than thirty (30) days after the latest of (A) the settlement of the Third
Party Claim, (B) the expiration of the period for appeal of a final adjudication
of such Third Party Claim or (C) the expiration of the period for appeal of a
final adjudication of the Indemnifying Party's liability to the Indemnified
Party under this Agreement.
(b) If an Indemnified Party should have a claim against an Indemnifying
Party hereunder which does not involve a Third Party Claim, the Indemnified
Party shall transmit a written indemnity notice to the Indemnifying Party
describing in detail the nature of the claim and the basis of the Indemnified
Party's request for indemnification under this Agreement and including all
supporting documentation. If the Indemnifying Party notifies the Indemnified
Party that it does not dispute such claim, the Indemnifying Party shall pay the
Indemnified Party the amount of such claim within thirty (30) days of such
notice. If the Indemnifying Party disputes such claim, the Indemnifying Party
shall notify the Indemnified Party and such dispute shall be resolved by
litigation in an appropriate court of competent jurisdiction.
(c) Notwithstanding anything to the contrary in this Section 8.3,
should any Third Party Claim hereunder involve a situation where the Indemnified
Party reasonably anticipates that part of the claim will be borne by it and part
of the claim will be borne by the Indemnifying Party due to the existence of the
limitations in Section 8.2(c)(i) or (ii), the parties shall jointly consult and
proceed as to any such Third Party Claim.
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SECTION 8.4. WAIVER OF CONSEQUENTIAL, ETC. DAMAGES.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, BUYER SHALL
NOT BE LIABLE TO ANY OF THE SELLER INDEMNIFIED PARTIES, NOR SHALL SELLER BE
LIABLE TO ANY OF THE BUYER INDEMNIFIED PARTIES, FOR ANY EXEMPLARY, PUNITIVE,
SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE, OR SPECULATIVE DAMAGES OR LOSSES
(INCLUDING, WITHOUT LIMITATION, ANY DAMAGES OR LOSSES ON ACCOUNT OF LOST PROFITS
OR OPPORTUNITIES) RESULTING FROM OR ARISING OUT OF THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY, EXCEPT FOR ANY OF THE FOREGOING CONSTITUTING
OR RESULTING FROM A THIRD PARTY CLAIM.
SECTION 8.5. COMPLIANCE WITH EXPRESS NEGLIGENCE RULE.
ALL RELEASES, DISCLAIMERS, LIMITATIONS ON LIABILITY, AND INDEMNITIES IN
THIS AGREEMENT, INCLUDING THOSE IN THIS ARTICLE VIII, SHALL APPLY EVEN IN THE
EVENT OF THE SOLE, JOINT, AND/OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR
OTHER FAULT OF THE PARTY WHOSE LIABILITY IS RELEASED, DISCLAIMED, LIMITED, OR
INDEMNIFIED.
SECTION 8.6. LIQUIDATED DAMAGES.
If (a) Seller terminates this Agreement as provided in Section 7.1(b),
or (b) (i) the conditions to the obligations of Buyer set forth in Article V
have been satisfied, (ii) this Agreement has not been terminated pursuant to
Sections 7.1(a), (c), or (d), and (iii) the Closing has not occurred by June 30,
2003, then Buyer shall pay to Seller a sum equal to $40,000,000.00 by wire
transfer of immediately available funds to a bank account in the United States
of America designated in writing by Seller not later than three days following
receipt of such designation. BUYER HEREBY ACKNOWLEDGES THAT (1) THE EXTENT OF
DAMAGES TO SELLER CAUSED BY THE FAILURE OF THIS TRANSACTION TO BE CONSUMMATED
WOULD BE IMPOSSIBLE OR EXTREMELY DIFFICULT TO ASCERTAIN (2) THE AMOUNT OF THE
LIQUIDATED DAMAGES PROVIDED FOR IN THIS SECTION 8.6 IS A FAIR AND REASONABLE
ESTIMATE OF SUCH DAMAGES UNDER THE CIRCUMSTANCES AND (3) RECEIPT OF SUCH AMOUNT
BY SELLER DOES NOT CONSTITUTE A PENALTY AND WILL BE SELLER'S SOLE AND EXCLUSIVE
REMEDY FOR SUCH TERMINATION OF THIS AGREEMENT.
SECTION 8.7. REMEDY.
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, Section
4.10 or Section 9.3.
47
SECTION 8.8. TAX TREATMENT OF INDEMNITY PAYMENTS.
Each party, to the extent permitted by applicable law, agrees to treat
any payments made pursuant to Section 4.10 or this Article VIII as adjustments
to the Purchase Price for all federal and state income and franchise Tax
purposes.
SECTION 8.9. LITIGATION ASSISTANCE.
From and after the Closing, Buyer shall cause the Company to provide,
at no cost to Seller, (a) access to all records, files and information
maintained or held by the Company with respect to the litigation and claims
referred to in Section 8.2(a)(v) and Schedule 8.2(v), the Retained Entities and
the contracts referred to in Section 8.2(a)(vii) and Schedule 8.2(vii) and (b)
make available all employees of the Company who have knowledge of such
litigation and claims, the Retained Entities and such contracts, in each case,
upon the reasonable request by Seller from time to time.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
SECTION 9.1. 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 9.2. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY
BENEFICIARIES.
Neither party shall assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of the other
party, except that Buyer, and after the Closing, Seller may assign its rights or
delegate its obligations under this Agreement to an Affiliate without such
consent (but no such assignment or delegation shall relieve the assignor or
delegator of its obligations hereunder). Except as provided in the preceding
sentence, this Agreement shall inure to the benefit of, and be binding upon, the
parties hereto and their respective successors and permitted assigns. Except as
contemplated by Article VIII, Section 4.10 or Section 9.3, nothing in this
Agreement shall confer upon any Person not a party to this Agreement, or the
legal representatives of such Person, any rights or remedies of any nature or
kind whatsoever under or by reason of this Agreement.
SECTION 9.3. INVESTMENT BANKERS, FINANCIAL ADVISORS, BROKERS
AND FINDERS.
(a) Seller shall indemnify and agrees to defend and hold the Buyer
Indemnified Parties harmless against and in respect of all claims, losses,
liabilities and expenses which may be asserted against any Buyer Indemnified
Party by any broker or other person who claims to be
48
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 Seller or the Company or any of their respective Affiliates.
(b) Buyer shall indemnify and agrees to save and hold the Seller
Indemnified Parties harmless against and in respect of all claims, losses,
liabilities, fees, costs and expenses which may be asserted against any Seller
Indemnified Party 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
Buyer or any of their respective Affiliates.
SECTION 9.4. 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. Seller and Buyer shall
each bear one-half of the costs of HSR Act filing fees.
SECTION 9.5. 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 Buyer, to:
Loews Pipeline Holding Corp.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attention: Corporate Secretary
with a copy to:
Xxxxxxxxx Xxxxxxx Xxxxx & Xxxxxxxx LLP
0000 X Xxxxxx X.X.
Xxxxxxxxxx, X.X. 00000
Facsimile: 000-000-0000
Attention: Xxxxxxx X. Xxxxx
(b) If to Seller, to:
Xxxxxxxx Gas Pipeline Company, LLC
Xxx Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
49
Facsimile: 000-000-0000
Attention: General Counsel
with a copy to:
Xxxxxxx & Xxxxx L.L.P.
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
Attention: G. Xxxxxxx X'Xxxxx or Xxx X. Xxxxxx, Xx.
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 9.5 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 9.5.
SECTION 9.6. ENTIRE AGREEMENT.
This Agreement, together with the Transaction Documents and
the exhibits and schedules hereto and thereto, and the Confidentiality Agreement
represent the entire agreement and understanding of the parties with respect to
the transactions contemplated herein and therein and no representations or
warranties have been made in connection with the transactions contemplated
hereby or thereby other than those expressly set forth herein or therein. This
Agreement, together with the Transaction Documents and the exhibits and
schedules hereto and thereto, and the Confidentiality Agreement supersede all
prior negotiations, discussions, correspondence, communications, understandings
and agreements between the parties relating to the subject matter of this
Agreement, the Transaction Documents and the Confidentiality Agreement and all
prior drafts of this Agreement, the Transaction Documents and the
Confidentiality Agreement, all of which are merged into this Agreement, the
Transaction Documents and the Confidentiality Agreement, respectively. No prior
drafts of this Agreement, the Transaction Documents or the Confidentiality
Agreement and no words or phrases from any such prior drafts shall be admissible
into evidence in any action or suit involving this Agreement, the Transaction
Documents or the Confidentiality Agreement.
SECTION 9.7. WAIVERS AND AMENDMENTS.
Seller or Buyer 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
50
breach, whether or not 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 9.8. 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 9.9. 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 9.10. 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 Buyer or Seller, the parties will
confirm facsimile transmission by signing a duplicate original document. This
Agreement may 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 9.11. 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.
SECTION 9.12. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the internal and substantive laws of New York and without regard to any
conflicts of laws concepts which would apply the substantive law of some other
jurisdiction.
SECTION 9.13. DISCLAIMER OF WARRANTIES.
(a) INFORMATION. EXCEPT AS PROVIDED IN THIS AGREEMENT, SELLER MAKES NO
REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, STATUTORY OR
OTHERWISE, WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION,
RECORDS, AND DATA NOW, HERETOFORE, OR HEREAFTER MADE AVAILABLE TO BUYER IN
CONNECTION
51
WITH THIS AGREEMENT (INCLUDING ANY DESCRIPTION OF THE COMPANY OR ITS FACILITIES
OR EQUIPMENT, REVENUE, PRICE AND EXPENSE ASSUMPTIONS, FORECASTS, OR
ENVIRONMENTAL INFORMATION, OR ANY OTHER INFORMATION FURNISHED TO BUYER BY SELLER
OR ANY AFFILIATE OF SELLER OR ANY DIRECTOR, OFFICER, EMPLOYEE, COUNSEL, AGENT,
OR ADVISOR THEREOF).
(b) FACILITIES. NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN
ANY OTHER PROVISION OF THIS AGREEMENT, IT IS THE EXPLICIT INTENT OF EACH PARTY
TO THIS AGREEMENT THAT, EXCEPT FOR THE REPRESENTATIONS OR WARRANTIES GIVEN IN
THIS AGREEMENT, (I) SELLER IS NOT MAKING ANY REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS, IMPLIED, AT COMMON LAW, STATUTORY OR OTHERWISE, AND (II)
BUYER ACKNOWLEDGES AND AGREES THAT THE FACILITIES, EQUIPMENT AND OTHER ASSETS OF
THE COMPANY ARE BEING TAKEN BY BUYER, SUBJECT TO ALL FAULTS, "AS IS" AND "WHERE
IS." WITHOUT LIMITING THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE,
EXCEPT AS PROVIDED IN THIS AGREEMENT, SELLER HEREBY EXPRESSLY DISCLAIMS AND
NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW,
STATUTORY, OR OTHERWISE, RELATING TO (I) THE CONDITION OF THE FACILITIES,
EQUIPMENT AND OTHER ASSETS OF THE COMPANY (INCLUDING ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR OF
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, OR THE PRESENCE OR ABSENCE OF ANY
HAZARDOUS MATERIALS IN OR ON, OR DISPOSED OR DISCHARGED FROM, SUCH FACILITIES,
EQUIPMENT AND OTHER ASSETS) OR (II) ANY INFRINGEMENT BY SELLER, THE COMPANY, OR
ANY OF THEIR AFFILIATES OF ANY PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY.
BUYER HAS AGREED NOT TO RELY ON ANY REPRESENTATION MADE BY SELLER WITH RESPECT
TO THE CONDITION, QUALITY, OR STATE OF THE FACILITIES, EQUIPMENT AND OTHER
ASSETS OF THE COMPANY EXCEPT FOR THOSE IN THIS AGREEMENT, BUT RATHER, AS A
SIGNIFICANT PORTION OF THE CONSIDERATION GIVEN TO SELLER FOR THIS PURCHASE AND
SALE, HAS AGREED, EXCEPT AS PROVIDED IN THIS AGREEMENT, TO RELY SOLELY AND
EXCLUSIVELY UPON ITS OWN EVALUATION OF THE COMPANY AND THE FACILITIES, EQUIPMENT
AND OTHER ASSETS OF THE COMPANY. THE PROVISIONS CONTAINED IN THIS AGREEMENT ARE
THE RESULT OF EXTENSIVE NEGOTIATIONS BETWEEN BUYER AND SELLER AND NO OTHER
ASSURANCES, REPRESENTATIONS OR WARRANTIES ABOUT THE QUALITY, CONDITION, OR STATE
OF THE COMPANY, TGT SUB, THE LLC AND THE FACILITIES, EQUIPMENT AND OTHER ASSETS
OF THE COMPANY WERE MADE BY SELLER IN THE INDUCEMENT THEREOF, EXCEPT AS PROVIDED
HEREIN.
SECTION 9.14. [INTENTIONALLY OMITTED]
SECTION 9.15. BULK SALES OR TRANSFER LAWS.
Buyer hereby waives compliance by Seller with the provisions of any
applicable bulk sales or transfer laws.
52
SECTION 9.16. 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) "FUNDED DEBT" shall mean the Company's 7 1/4% debentures due 2027
and 8 5/8% Notes due 2004, as more fully described in Schedule 1.2.
(c) "INTELLECTUAL PROPERTY" means proprietary inventions, marks
(including trademarks and service marks), copyrights, mask works, applications
therefor, patents thereon, registrations and licenses thereof, royalty rights,
proprietary technical information, trade secrets, secret processes and
procedures, know-how (including technical drawings and specifications), and
Software including all property listed or described on Schedule 2.12(a).
(d) "KNOWLEDGE" means the actual knowledge of Xxxx Xxxxxxxxx, Xxxxx
Xxxxx, Xxxx Xxxxx, Xxxx Xxxxxxxxx, Xxxxx Xxxx, Xxxxx Xxxxxxx, Xxx Xxxxxxxxxx,
Xxxx Xxxxx, Xxx Xxxxxxx, Xxxx Xxxxxxxxx and Xxxxxxx Xxxxxxxx.
(e) "LIST C CONTRACTS" means those 37 contracts, identified by Contract
Number, set forth under the heading "Response - List C Contracts managed by
Marketing Company" to Question No. GSR-1-(3k) (Requirements and has Supply) set
forth in the Company's Response to Data Request of Customer Group 1 GSR Group
(GSR-1) of Docket No. RP94-119.
(f) "MATERIAL ADVERSE EFFECT" shall mean any condition, change,
circumstance or event, individually or when taken together with all other
conditions, changes, circumstances and events that have occurred during any
relevant period of time prior to determination of Material Adverse Effect, that
has a material adverse effect on (x) the assets, properties, business, results
of operations or financial condition of the Company, 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, (ii) any effect resulting
from changes in general economic conditions in the industry in which the Company
operates, and (iii) any effect resulting from changes in the United States or
global economy as a whole, or (y) the ability of Seller to timely perform in all
material respects its obligations under this Agreement and the Transaction
Documents.
(g) "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).
(h) "RETAINED ENTITIES" shall mean TGT Enterprises, LLC, a Delaware
limited liability company and a wholly owned subsidiary of the Company (the
"LLC"), TGT Enterprises, Inc., a Delaware corporation and a wholly owned
subsidiary of the LLC ("TGT SUB"), and Unitary GH&C Products, LLC, a limited
liability company.
53
(i) "SEC" means the Securities and Exchange Commission.
(j) "SOFTWARE" means computer software programs and software systems
(including, without limitation, all data, databases, compilations, tool sets,
related documentation and materials, whether in source code, object code or
human readable form and regardless of media).
(k) "SPECIFIED POLICIES" shall mean the following insurance policies
(or the May 1, 2003 renewals thereof):
Insurer Policy Number Limits
1. Associated Electric & Gas X0559A1A02 $35,000,000 excess of a
Insurance Services (AEGIS) $2,000,000 SIR
2. Energy Insurance Mutual (EIM) 501184-01GL $100,000,000 excess of
AEGIS
3. (a) Lloyd's - 65% EL0200289 $100,000,000 excess of EIM
(b) Scor/General Security
(c) Indemnity Company - 5%
(d) Axis - 10%
(e) Swiss Re/SR International
(f) Business Insurance
(g) Company - 10%
(h) Atrium - 10%
(l) "TRANSACTION DOCUMENTS" shall mean the agreements, contracts,
documents, instruments and certificates provided for in this Agreement to be
entered into by one or more of the parties hereto or any of their Affiliates in
connection with the transactions contemplated by this Agreement.
54
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
SELLER: XXXXXXXX GAS PIPELINE COMPANY, LLC
By: /s/ Xxxxx X. Xxxx
----------------------------------------
Name: Xxxxx X. Xxxx
Title: Assistant Treasurer
BUYER: LOEWS PIPELINE HOLDING CORP.
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President
Parent is executing this Agreement solely with respect to its
obligations under Section 4.10.
PARENT: THE XXXXXXXX COMPANIES, INC.
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: Senior Vice President
Index of Defined Terms
1935 ACT......................................................................................................... 17
ADDITIONAL EMPLOYEES............................................................................................. 24
AFFILIATE........................................................................................................ 53
AFFILIATE CONTRACTS.............................................................................................. 12
AGREEMENT........................................................................................................ 1
AVAILABLE EMPLOYEES.............................................................................................. 24
BASE STATEMENT................................................................................................... 2
BUSINESS EMPLOYEES............................................................................................... 13
BUYER............................................................................................................ 1
BUYER INDEMNIFIED PARTIES........................................................................................ 43
BUYER TAX INDEMNITEES............................................................................................ 32
BUYER'S 125 PLAN................................................................................................. 27
BUYER'S BONDS.................................................................................................... 33
BUYERS SAVINGS PLAN.............................................................................................. 26
CLOSING.......................................................................................................... 1
CLOSING DATE..................................................................................................... 1
CLOSING STATEMENT................................................................................................ 3
COBRA............................................................................................................ 14
CODE............................................................................................................. 8
COMPANY.......................................................................................................... 1
CONFIDENTIALITY AGREEMENT........................................................................................ 30
CPA FIRM......................................................................................................... 4
CURRENT ASSETS................................................................................................... 2
CURRENT LIABILITIES.............................................................................................. 2
DEDUCTIBLE....................................................................................................... 44
DEFINED BENEFIT PLAN............................................................................................. 14
ELECTION PERIOD.................................................................................................. 46
EMPLOYEE PLANS................................................................................................... 13
ENCUMBRANCES..................................................................................................... 1
ENVIRONMENTAL LAW................................................................................................ 17
ENVIRONMENTAL PERMITS............................................................................................ 16
ERISA............................................................................................................ 13
ESTIMATED PURCHASE PRICE......................................................................................... 2
ESTIMATED WORKING CAPITAL........................................................................................ 2
EXCHANGE ACT..................................................................................................... 7
EXECUTION UPDATE................................................................................................. 29
FINAL CLOSING STATEMENT.......................................................................................... 4
FINANCIAL STATEMENTS............................................................................................. 7
FORMS............................................................................................................ 31
FUNDED DEBT...................................................................................................... 53
GAAP............................................................................................................. 7
GOVERNMENTAL AUTHORITY........................................................................................... 6
HAZARDOUS MATERIAL............................................................................................... 17
HSR ACT.......................................................................................................... 28
INDEMNIFIED PARTY................................................................................................ 45
i
INDEMNIFYING PARTY............................................................................................... 45
INTELLECTUAL PROPERTY............................................................................................ 53
IRS.............................................................................................................. 7
IT ASSETS........................................................................................................ 34
IT FIRM.......................................................................................................... 35
IT MIGRATION PERIOD.............................................................................................. 35
IT MIGRATION PLAN................................................................................................ 34
IT MIGRATION TEAM................................................................................................ 34
IT STANDARD...................................................................................................... 34
KNOWLEDGE........................................................................................................ 53
LEGAL PROCEEDING................................................................................................. 11
LICENSE.......................................................................................................... 11
LICENSE PERIOD................................................................................................... 36
LICENSED SOFTWARE................................................................................................ 35
LICENSES......................................................................................................... 11
LIST C CONTRACTS................................................................................................. 53
LLC.............................................................................................................. 53
LOSS............................................................................................................. 43
MATERIAL ADVERSE EFFECT.......................................................................................... 53
MATERIAL CONTRACTS............................................................................................... 12
MIRROR PLANS..................................................................................................... 28
NGA.............................................................................................................. 17
OBJECTION........................................................................................................ 3
ORGANIZATIONAL DOCUMENTS......................................................................................... 5
PARENT........................................................................................................... 1
PARENT CREDIT AGREEMENT.......................................................................................... 37
PARENT GROUP..................................................................................................... 30
PBGC............................................................................................................. 14
PBO.............................................................................................................. 24
PERMITTED ENCUMBRANCES........................................................................................... 10
PERSON........................................................................................................... 53
POLICIES......................................................................................................... 16
POST EXECUTION UPDATE............................................................................................ 29
PROPERTY RESTRICTIONS............................................................................................ 9
PURCHASE PRICE................................................................................................... 2
QUALIFIED BENEFICIARY............................................................................................ 26
QUALIFYING EVENT................................................................................................. 26
REAL PROPERTY.................................................................................................... 9
RETAINED ENTITIES................................................................................................ 53
RETIREE PLAN PARTICIPANTS........................................................................................ 28
REVIEW PERIOD.................................................................................................... 3
RIGHTS-OF-WAY.................................................................................................... 9
SEC.............................................................................................................. 54
SEC REPORTS...................................................................................................... 7
SECTION 338(h)(10) ELECTION...................................................................................... 31
SECURITIES ACT................................................................................................... 7, 20, 37
ii
SELLER........................................................................................................... 1
SELLER INDEMNIFIED PARTIES....................................................................................... 44
SELLER SAVINGS PLAN.............................................................................................. 26
SELLER TAX INDEMNITEES........................................................................................... 33
SELLER'S 125 PLAN................................................................................................ 27
SELLER'S BONDS................................................................................................... 33
SELLER'S MARKS................................................................................................... 10
SHARES........................................................................................................... 1
SOFTWARE......................................................................................................... 54
SPECIFIED POLICIES............................................................................................... 54
STOCK TRANSFER................................................................................................... 1
STRADDLE PERIOD.................................................................................................. 30
TAX.............................................................................................................. 7
TAX CLAIM........................................................................................................ 32
TAX RETURNS...................................................................................................... 7
TAXES............................................................................................................ 7
TGT SUB.......................................................................................................... 53
THIRD PARTY CLAIM................................................................................................ 45
TRANSACTION DOCUMENTS............................................................................................ 54
TRANSFER TAXES................................................................................................... 31
TRANSFERRED EMPLOYEES............................................................................................ 24
TRANSITION SERVICES AGREEMENT.................................................................................... 35
WORKING CAPITAL.................................................................................................. 2
iii
