EXHIBIT 2.1
by and among
Regency Gas Services LP,
as Buyer,
and
HMTF Gas Partners II, L.P.,
as Seller
Dated
July 12, 2006
TABLE OF CONTENTS
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ARTICLE CERTAIN DEFINITIONS |
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1 |
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1.1 |
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Certain Defined Terms |
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1 |
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1.2 |
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Other Definitional Provisions |
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26 |
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1.3 |
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Headings |
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27 |
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1.4 |
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Other Terms |
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27 |
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ARTICLE II THE TRANSACTION |
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27 |
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2.1 |
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The Transaction |
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27 |
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2.2 |
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Consideration |
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27 |
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2.3 |
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Adjustments |
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28 |
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2.4 |
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Como Acquisition |
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30 |
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER |
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31 |
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3.1 |
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Organization, Good Standing and Authority of Seller |
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31 |
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3.2 |
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Title to Interests |
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3.3 |
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Organization, Good Standing, Authority, Capitalization of TexStar Companies |
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3.4 |
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[reserved] |
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33 |
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3.5 |
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No Conflicts |
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33 |
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3.6 |
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Regulation and Authorizations |
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34 |
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3.7 |
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Consents and Authorizations |
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34 |
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3.8 |
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Properties |
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35 |
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3.9 |
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Taxes |
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35 |
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3.10 |
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Compliance with Laws |
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37 |
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3.11 |
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Insurance |
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37 |
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3.12 |
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Material Contracts |
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37 |
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3.13 |
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Intellectual Property |
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38 |
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3.14 |
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Broker’s or Finder’s Fees |
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38 |
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3.15 |
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Employees |
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39 |
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3.16 |
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Employee Benefit Plans |
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39 |
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3.17 |
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Financial Statements; Absence of Undisclosed Liabilities; Controls and Procedures |
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40 |
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3.18 |
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Environmental Matters |
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42 |
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3.19 |
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Litigation |
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43 |
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3.20 |
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Bankruptcy |
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44 |
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3.21 |
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Absence of Certain Changes |
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44 |
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3.22 |
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Pipeline Matters |
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44 |
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3.23 |
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Affiliate Relationships |
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45 |
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3.24 |
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Investor Status |
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45 |
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3.25 |
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Status of Transaction Units; Disposition |
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46 |
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3.26 |
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FCC Matters |
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46 |
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP AND BUYER |
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47 |
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4.1 |
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Organization, Standing and Power |
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47 |
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4.2 |
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Capital Structure |
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47 |
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4.3 |
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Authority; No Violations, Consents and Approvals |
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48 |
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4.4 |
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SEC Documents |
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49 |
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4.5 |
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Absence of Certain Changes or Events |
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49 |
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4.6 |
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Litigation |
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50 |
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4.7 |
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Taxes |
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50 |
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4.8 |
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Broker’s or Finder’s Fees |
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50 |
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4.9 |
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Investment Intent |
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50 |
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4.10 |
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Financing |
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50 |
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ARTICLE V COVENANTS |
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5.1 |
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Conduct of Business |
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5.2 |
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Access, Information and Access Indemnity |
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53 |
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5.3 |
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Regulatory Filings |
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54 |
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5.4 |
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Preservation and Access to Records; and Further Assurances |
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55 |
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5.5 |
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Termination of Agreements |
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55 |
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5.6 |
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Payoff Letters; Mutual Releases |
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55 |
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5.7 |
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Cooperation and Reasonable Efforts |
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55 |
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5.8 |
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Tax Matters |
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56 |
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5.9 |
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Financing; Financial Statements; Controls and Procedures |
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58 |
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5.10 |
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Transfer Taxes |
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59 |
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5.11 |
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Tax Treatment; Aggregate Consideration Allocation |
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60 |
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5.12 |
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Transaction Units |
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60 |
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5.13 |
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Director and Officer Indemnification |
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62 |
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5.14 |
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Control of the Xxxxxx Litigation |
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63 |
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5.15 |
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Employees |
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64 |
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5.16 |
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Gas Gathering Agreement |
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65 |
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5.17 |
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Transition Services Agreement; Sublease |
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65 |
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5.18 |
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Notice of Breaches of Representations and Warranties |
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65 |
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5.19 |
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Financing Rebate |
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65 |
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5.20 |
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FCC Filings |
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66 |
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ARTICLE VI CONDITIONS TO CLOSING |
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66 |
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6.1 |
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Seller’s Conditions |
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66 |
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6.2 |
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Buyer’s Conditions |
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67 |
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ARTICLE VII CLOSING |
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68 |
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7.1 |
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Time and Place of Closing |
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68 |
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7.2 |
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Deliveries at Closing |
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68 |
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ARTICLE VIII TERMINATION |
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70 |
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8.1 |
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Termination at or Prior to Closing |
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70 |
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8.2 |
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Effect of Termination |
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71 |
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ARTICLE IX INDEMNIFICATION |
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71 |
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9.1 |
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Survival |
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71 |
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9.2 |
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Indemnification by Buyer |
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72 |
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9.3 |
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Indemnification by Seller |
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72 |
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9.4 |
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Certain Limitations |
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73 |
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9.5 |
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Notice of Asserted Liability; Opportunity to Defend |
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75 |
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9.6 |
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Exclusive Remedy |
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76 |
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9.7 |
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Limitation on Damages |
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76 |
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9.8 |
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Bold and/or Capitalized Letters |
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77 |
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9.9 |
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Independent Investigation |
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77 |
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9.10 |
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Disclaimer |
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77 |
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ARTICLE X MISCELLANEOUS PROVISIONS |
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77 |
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10.1 |
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Expenses |
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77 |
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10.2 |
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Assignment |
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78 |
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10.3 |
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Entire Agreement, Amendments and Waiver |
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78 |
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10.4 |
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Severability |
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78 |
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10.5 |
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Counterparts |
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78 |
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10.6 |
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Governing Law and Dispute Resolution |
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78 |
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10.7 |
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Notices and Addresses |
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79 |
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10.8 |
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Press Releases |
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81 |
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10.9 |
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Offset |
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81 |
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10.10 |
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No Partnership; Third Party Beneficiaries |
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81 |
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10.11 |
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Negotiated Transaction |
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81 |
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10.12 |
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Disclosure Schedule |
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81 |
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10.13 |
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Time of the Essence |
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82 |
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10.14 |
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Specific Performance |
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82 |
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10.15 |
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Affiliate Liability |
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82 |
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10.16 |
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No Waiver of Claims for Fraud |
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83 |
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10.17 |
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No Recovery |
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83 |
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iii
EXHIBITS
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Exhibit A–1
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Mutual Release (Individual) |
Exhibit A–2
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Mutual Release (Entity) |
Exhibit B
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Partnership Agreement Amendment |
Exhibit C
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Registration Rights Agreement |
Exhibit D
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Assignment of Membership Interests |
Exhibit E
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Assignment of Partnership Interests |
Exhibit F
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Gas Gathering Agreement |
SCHEDULES
TexStar Disclosure Schedule
Section 1.1(a) — Managers
Section 1.1(b) — Liens
Section 1.1(c) — Post-Closing Notifications
Section 3.3(c) —Equity Interests
Section 3.3(d) — TexStar Subsidiaries — Qualification to do Business
Section 3.3(f) — TexStar Subsidiaries — Organization
Section 3.5 — No Conflicts
Section 3.7(a)(ii) — Notifications
Section 3.7(a)(iii) — Third-Party Consents and Governmental Authorizations
Section 3.8 — Title Defects
Section 3.10(a) — Compliance with Laws
Section 3.10(b) — Compliance with Laws — Rates, Modifications and Refunds
Section 3.11 — Insurance List
Section 3.12(a)(i) — Material Contracts
Section 3.12(a)(ii) — Material Contract Defaults
Section 3.12(b) — Certain Contracts Relating to Acquisition Agreements
Section 3.12(c) — Indemnification Claims
Section 3.14 — Broker’s or Finder’s Fees
Section 3.16(b) — Employee Benefit Plans
Section 3.17(c) — No Liabilities
Section 3.18(f) — Responsibility for Environmental Liabilities
Section 3.19(a) — Litigation
Section 3.19(b) — Possible Litigation
Section 3.22 — Pipeline Throughput Data
Section 3.23 — Affiliate Relationships
Section 3.24(a) — Investor Status
Section 3.26 — FCC Licenses
Section 5.1(a) — Conduct of Business
Section 5.1(b) — Sale or Transfer of Assets
Section 5.2(a) — Third Party Confidentiality Agreements
Section 5.5 — Termination Fees
Section 5.15(a) — Employee Salary and Benefit Information
Section 5.15(b) — Employees of BlackBrush O&G
iv
Schedule A Sample Balance Sheet
Schedule B Capital Expenditures
v
This
CONTRIBUTION AGREEMENT (this “
Agreement”) dated July 12, 2006 is by and among
Regency Energy Partners LP, a Delaware limited partnership (the “
Partnership”), Regency Gas
Services LP, a Delaware limited partnership (“
Buyer”) and a wholly owned subsidiary of the
Partnership, and HMTF Gas Partners II, L.P., a Delaware limited partnership (“
Seller”).
The Partnership, Buyer and Seller are sometimes referred to collectively herein as the
“
Parties” and individually as a “
Party”.
1. |
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Seller owns all of the outstanding membership interests (the “LLC Interests”) of
TexStar GP, LLC, a Delaware limited liability company (“TexStar GP”) and a 99.999%
limited partnership interest (the “LP Interest”) in TexStar Field Services, L.P., a
Delaware limited partnership and successor by conversion to TGG Corp., a Delaware corporation
(“TexStar”). |
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2. |
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TexStar GP owns a .001% general partnership interest (the “GP Interest”) in TexStar. |
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3. |
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The GP Interest and the LP Interest constitute 100% of the outstanding partnership interests
in TexStar (collectively, together with any and all other partnership interest or other Equity
Interest of TexStar hereafter issued to or otherwise held by Seller or TexStar GP, the
“Partnership Interests”). |
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4. |
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Buyer desires to acquire, and Seller desires to contribute to Buyer, the LLC Interests and
the LP Interest (collectively, the “Interests”) for the consideration set forth below,
subject to the terms and conditions of this Agreement. |
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Defined Terms. Capitalized terms used in this Agreement shall have the
meanings given such terms as are set forth below.
“Acquisition Agreements” shall mean the BlackBrush Acquisition Agreement, the Como
Acquisition Agreement, the Crosstex Acquisition Agreement, the Duke Acquisition Agreement, the
Eustace Acquisition Agreement, the GulfTerra Acquisition Agreement, the Xxxxx Acquisition
Agreement, the Plains Acquisition Agreement, the Xxxxxx Acquisition Agreement, the PPM Acquisition
Agreement, and the Triumph Acquisition Agreement.
“Affiliate” shall mean, when used with respect to a specified Person, any other
Person directly or indirectly (through one or more intermediaries or otherwise) controlling,
controlled by or under common control with the specified Person. For purposes of this definition,
“control,” when used with respect to any specified Person, shall mean the power to
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direct or cause the direction of the management and policies of the Person whether through the
ownership of voting securities, by contract or otherwise; and the term “controlled” has the
meanings correlative to the foregoing.
“Aggregate Consideration” shall have the meaning given such term in Section
2.2(a).
“Aggregate Consideration Deficit” shall have the meaning given such term in
Section_2.3(d)(i).
“Aggregate Consideration Surplus” shall have the meaning given such term in
Section_2.3(d)(ii).
“Agreement” shall have the meaning given such term in the opening paragraph of this
Agreement.
“Approved Acquisition” shall mean any acquisition of any business or division of any
Person or any material assets by any TexStar Company that has been approved by Buyer. The
acquisition by TexStar of certain natural gas gathering and processing assets pursuant to the Como
Acquisition Agreement, having been approved by the Partnership, shall be deemed to be an Approved
Acquisition.
“Assets” shall have the meaning given such term in Section 3.8(a).
“Audit Fees” shall have the meaning given such term in Section 2.3(f).
“Audit Firm” shall mean Ernst & Young (“E&Y”) or if E&Y shall not accept the
engagement as Audit Firm, a national accounting firm with no prior material relationship with
Buyer, Buyer Affiliates or Seller with experience in auditing the financial statements of a natural
gas pipeline company, reasonably acceptable to the Partnership, Buyer and Seller.
“Audited Financial Statements” shall have the meaning given such term in Section
3.17(a)(i).
“Authorization” shall mean any franchise, permit, license, authorization, order,
certificate, registration or other consent or approval that a Governmental Authority has the legal
authority to grant or issue.
“Base Working Capital” shall mean zero dollars.
“Benefit Program” or “Benefit Agreement” shall have the meaning given such
terms in Section 3.16(b).
“BlackBrush Acquisition Agreement” shall mean that certain Xxxx of Sale between
Blackbrush O&G and TexStar FS dated January 1, 2005.
“BlackBrush Employees” shall have the meaning ascribed to such term in Section
5.15(b).
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“BlackBrush O&G” means BlackBrush Oil & Gas, L.P., a Delaware limited partnership,
successor by conversion to BlackBrush Oil & Gas, Inc., a Delaware corporation which is the
successor by merger to BlackBrush Oil & Gas, Inc., a Minnesota corporation formerly named Xxxxx Oil
& Gas, Inc.
“
Business Day” shall mean any day, other than Saturday and Sunday, on which
federally-insured commercial banks in Dallas,
Texas are generally open for business and capable of
sending and receiving wire transfers.
“Buyer” shall have the meaning given such term in the opening paragraph of this
Agreement.
“Buyer Affiliate” shall have the meaning given such term in Section 10.15(a).
“Buyer Indemnified Taxes” shall mean any and all Taxes together with any Losses
(including court and administrative costs and reasonable legal fees and expenses incurred in
investigating and preparing for any Proceeding) arising out of or incident to the determination,
assessment or collection of such Taxes (i) imposed on any TexStar Company or for which any TexStar
Company is otherwise liable for any Taxable period ending on or prior to the Closing Date or the
portion of any Straddle Period ending on the Closing Date (determined in accordance with the
provisions of Section 5.8(c)), or (ii) resulting from a breach of the representations and
warranties set forth in Section 3.9 (without giving effect to any materiality or knowledge
qualifiers that may be contained therein and without regard to any scheduled items) or resulting
from a breach by Seller of the covenants set forth in Section 5.8, (iii) of any member of
an affiliated, consolidated, combined or unitary group of which any TexStar Company (or any
predecessor) is or was a member on or prior to the Closing Date by reason of Treasury Regulation §
1.1502-6(a) or any analogous or similar state or local law, or (iv) of any other Person for which
any TexStar Company is or has been liable as a transferee or successor, by contract or otherwise;
provided, however, that any such Tax described in this definition shall not be a
Buyer Indemnified Tax to the extent such Tax was included as a Current Liability in the
determination of Net Working Capital included on the Final Closing Statement.
“Buyer Indemnitees” shall have the meaning given such term in Section 9.3(a).
“Buyer’s Knowledge” or any similar term, shall mean the actual knowledge, after due
inquiry, of any of the Officers of the Managing General Partner.
“
Capital Expenditures” shall mean capital expenditures, as determined in accordance
with GAAP (as applied on a basis consistent with past practice), accrued by any TexStar Company
with respect to (A) any project described in
Schedule B from the date such project began to
11:59 p.m. on the Measurement Date or (B) any project approved by Buyer in writing pursuant to
Section 5.1(b)(viii) from the date of such approval to 11:59 p.m. on the Measurement Date,
in each case whether paid or unpaid;
provided, that, Capital Expenditures (i) shall include
only authorizations for expenditures that are greater than $1,000 and that are related to (1) new
capital improvement projects that have a useful life of greater than one year, or (2) improvements
to existing property, plant and equipment that extend such existing asset’s useful life by greater
than one year, and (ii) shall exclude any increases in the property, plant and
3
equipment accounts as a result of purchase accounting revaluations related to past
transactions or the transactions contemplated by this Agreement.
“Cash” shall mean cash on deposit with financial institutions net of overdrafts and
outstanding checks.
“Cash Amount” shall have the meaning specified in Section 2.2(a).
“Change of Control Amounts” shall mean any bonus, retention bonus, consent or other
fee, compensation (including the estimated costs of benefits required to be provided) or other
similar payments that any TexStar Company upon Closing, to the extent not paid as of 11:59 p.m. on
the Measurement Date, will become obligated to pay (other than Expenses, Severance Obligations and
Termination Fees) as a result of the consummation of the transactions contemplated by the
Transaction Documents, regardless of whether such amounts are payable at or after Closing.
“Claim” shall mean any demand, claim or notice sent or given by a Person to another
Person in which the former asserts that it has suffered a Loss or has become party to a Proceeding
that is the responsibility of the latter.
“Claim Notice” shall mean a written notice of a claim for indemnification pursuant to
this Agreement specifying in reasonable detail the specific nature of the Claim for which
indemnification is sought.
“Class B Common Units” shall mean units representing limited partner interests of the
Partnership designated as Class B Common Units and having the rights, privileges, preferences,
limitations, obligations and such other terms as set forth in the Partnership Agreement Amendment.
“Closing” shall have the meaning given such term in Section 7.1.
“Closing Amount” shall have the meaning given such term in Section 2.2(b)(i).
“Closing Date” shall have the meaning given such term in Section 7.1.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Commitment” shall mean the commitment of UBS Loan Finance LLC and Wachovia Bank,
National Association, pursuant to a commitment letter dated June 30, 2006, to provide $850 million
in debt financing to Buyer in order to consummate the transactions contemplated by this Agreement.
“Common Units” shall mean units representing limited partner interest of the
Partnership designated as Common Units and having the rights, obligations and such other terms as
set forth in the Partnership Agreement.
“
Como Acquisition Agreement” shall mean that certain Asset Purchase and Sale Agreement
dated June 16, 2006, by and between Valence Midstream, Ltd. and EEC Midstream,
4
Ltd., as seller, and TexStar EasTex I and TexStar EasTex II, as buyer, including all exhibits
and schedules thereto.
“Como Adjustment Amount” shall mean an amount of Cash equal to $10,000,000.
“Como Acquisition Debt” shall mean 80,000,000 (or, if the Plant Option (as defined in
the Como Acquisition Agreement) is exercised, $77,000,000) of the Como Bank Debt (or such lesser
amount as constitutes the Cash Payment (as defined in the Como Acquisition Agreement) if the Como
Acquisition shall have closed).
“Como Bank Debt” means Indebtedness under the Credit Agreement incurred by the TexStar
Companies to finance (i) the transactions contemplated by the Como Acquisition Agreement in an
amount up to the Como Acquisition Debt and (ii) the Como Expenses.
“Como Closing” shall mean the consummation of the asset purchase pursuant to the Como
Acquisition Agreement.
“Como Expenses” shall mean fees, expenses and similar amounts that have been or are
expected to be incurred by or on behalf of any TexStar Companies in connection with the
transactions contemplated by the Como Acquisition Agreement, including the following: (i) the fees
and disbursements of, or other similar amounts charged by, counsel to the TexStar Companies, (ii)
the fees and expenses of, or other similar amounts charged by, any accountants, agents, financial
advisors (including HMCO), consultants and experts employed by the TexStar Companies, (iii) the
out-of-pocket expenses, if any, of the TexStar Companies, (iv) financing commitment and other bank
fees and (v) the fees paid by the TexStar Companies pursuant to the HSR Act in connection with the
HSR Approval for the transactions contemplated by the Como Acquisition Agreement. Como Expenses
shall include the Como FAA Fees.
“Como FAA Fees” shall mean FAA Fees, up to a maximum of $1.2 million payable by Seller
or any TexStar Company with respect to the Como Acquisition.
“Confidentiality Agreement” shall mean the Confidentiality Agreement between the
Partnership and TexStar dated February 20, 2006.
“Consolidated Balance Sheet” shall have the meaning given such term in Section
3.17(a)(i).
“Contract” shall mean any binding agreement, contract, lease, commitment, consensual
obligation, arrangement, promise or undertaking (whether written or oral and whether express or
implied).
“
Credit Agreement” shall mean that certain Credit Agreement dated as of December 6,
2005 among TexStar Operating, TexStar Guarantor, TexStar Operating GP, the subsidiaries of TexStar
Operating that are signatories thereto, UBS AG, Stamford Branch, as administrative agent and
issuing lender, UBS Securities LLC, as lead arranger and syndication agent, UBS Loan Finance LLC,
as swingline lender, Amegy Bank, N.A., Compass Bank and
5
Guaranty Bank, as co-documentation agents, and each of the other banks or other lending
institutions signatory thereto, as it may be amended to effect the Como Acquisition.
“Credit Agreement Balance” shall mean the amount of all unpaid Indebtedness under the
Credit Agreement as of the Closing Date (including principal, accrued and unpaid interest, breakage
costs and prepayment fees or penalties or change in control payments that would be incurred if such
Indebtedness were to be paid and discharged on the Closing Date), such amount to be determined by
the lenders under the Credit Agreement and confirmed by TexStar; provided, however,
that the Credit Agreement Balance shall exclude an amount equal to the Como Bank Debt.
“Crosstex Acquisition Agreement” shall mean that certain Purchase and Sale Agreement
dated July 20, 2005 by and between Crosstex Acquisition Management, L.P. and TGG, L.P., predecessor
to TexStar, including all exhibits and schedules thereto.
“Current Assets” shall mean the sum of all current assets of the TexStar Companies as
of 11:59 p.m. on the Measurement Date as determined in accordance with GAAP (as applied on a basis
consistent with past practice and the preparation of the Audited Financial Statements), as adjusted
(whether or not in accordance with GAAP) (1) to give effect to this Agreement, (2) to utilize the
methodologies and procedures otherwise specified in or consistent with the Sample Balance Sheet and
(3) to give effect to the exclusion of the following: (a) Restricted Cash, (b) accounts receivable
evidencing Indebtedness, accounts and obligations owed by any one or more of Seller, any TexStar
Company or any of its or their Affiliates (other than the Partnership and Partnership Controlled
Affiliates) to any of the TexStar Companies, (c) amounts receivable from Officers, Directors,
Managers or any other employees of any TexStar Company or from any officers, managers or directors
of Seller, (d) deferred Tax assets, (e) prepaid expenses and deposits except to the extent usable
in or benefiting the business of the TexStar Companies, (f) any accounts receivable from Enbridge
or any Affiliate thereof under the Eustace Acquisition Agreement or the Xxxxxx Acquisition
Agreement, (g) any accounts receivable from Valence or any Affiliate thereof under the Como
Acquisition Agreement and (h) assets from risk management activities in connection with
derivatives. The computation of Current Assets as of April 30, 2006, is illustrated in the Sample
Balance Sheet.
“
Current Liabilities” shall mean the sum of all current liabilities of the TexStar
Companies as of 11:59 p.m. on the Measurement Date as determined in accordance with GAAP (as
applied on a basis consistent with past practice and the preparation of the Audited Financial
Statements), as adjusted (whether or not in accordance with GAAP) (1) to give effect to this
Agreement, (2) to utilize the methodologies and procedures otherwise specified in or consistent
with the Sample Balance Sheet, (3) to give effect to the inclusion of the following, if any, to the
extent unpaid as of 11:59 p.m. on the Measurement Date: (a) Severance Adjustment Amount, (b) Change
of Control Amounts, (c) Expenses, (d) the Debt Payoff Amount, (e) FAA Fees (excluding the Como FAA
Fees), (f) Termination Fees and (g) if the Como Acquisition shall not have closed, the Como
Expenses (excluding contingent Como Expenses that have not been incurred) and (4) to give effect to
the exclusion of the following: (a) accounts payable evidencing obligations owed by any one or more
TexStar Company to any other TexStar Company, (b) deferred Tax liabilities, (c) escrow payables to
the extent corresponding amounts held in escrow are excluded from Current Assets, (d) liabilities
from risk management activities in connection
6
with derivatives, (e) any accounts payable to Enbridge or any Affiliate thereof under the
Eustace Acquisition Agreement or the Xxxxxx Acquisition Agreement, and (f) any accounts payable to
Valence or any Affiliate thereof under the Como Acquisition Agreement. For purposes of determining
Current Liabilities to be used in the determination of Net Working Capital, (x), subject to clause
(4) of the immediately preceding sentence, no reserves, allowances or accrued Liability of the
TexStar Companies reflected in the Consolidated Balance Sheet or the balance sheet included in the
Interim Financial Statements shall be reduced or eliminated, except in the case of a reduction or
elimination by reason of a payment or credit occurring in the ordinary course of business
consistent with the past practice of the TexStar Companies, (y) the full amount of the Xxxxxx
Reserve shall be reflected as a Current Liability and (z) all capital expenditures (including
Capital Expenditures) accrued but not paid as of 11:59 p.m. on the Measurement Date shall be
reflected as a Current Liability. The computation of Current Liabilities as of April 30, 2006, is
illustrated by the Sample Balance Sheet.
“Current Salary/Benefits” shall have the meaning specified in Section 5.15(a).
“Debt Payoff Amount” shall mean the amount of all unpaid Third-Party Debt of the
TexStar Companies as of the Closing Date (including principal, accrued and unpaid interest,
breakage costs and prepayment fees or penalties or change in control payments that will be incurred
in connection with the payment and discharge of such Third-Party Debt as contemplated by this
Agreement).
“Debt Payoff Letters” shall mean the Payoff letters, in form and substance reasonably
satisfactory to Buyer, from each lender of Third-Party Debt setting forth (i) the aggregate amount,
including interest, breakage costs, prepayment penalties, and other fees, required to be paid to
satisfy fully all Third-Party Debt and (ii) wire transfer instructions for such lender. Each Debt
Payoff Letter shall provide for the release and termination of all Liens, recourse and other
obligations associated with the Third-Party Debt that is the subject of such Debt Payoff Letter
upon receipt of the amount specified in such Debt Payoff Letter to be paid on the Closing Date.
“Deductible” shall mean $1,000,000 with respect to Losses recoverable by a Buyer
Indemnitee and $25,000 with respect to Losses recoverable by a Seller Indemnitee.
“Distributee” shall mean each partner of the Partnership to whom Transaction Units are
distributed and each subsequent Person to whom Transaction Units are transferred or assigned by
such parties.
“DOJ” shall mean the Department of Justice of the United States of America.
“Duke Acquisition Agreement” shall mean that certain Purchase and Sale Agreement dated
April 1, 2005 by and between Duke Energy Field Services, LP and TexStar FS, including all exhibits
and schedules thereto.
“
Easement” shall mean all easements, rights-of-way, servitudes, property use
agreements, line rights and real property licenses (including right-of-way permits from railroads
and road crossing permits or other right-of-way permits from Governmental Authorities) held by
7
any TexStar Company relating to real property used in the business of the TexStar Companies
but owned by other Persons.
“Employee Benefit Plans” shall have the meaning given such term in Section
3.16(b).
“
Enbridge” means, collectively, Enbridge Pipelines (NE
Texas) L.P., a Delaware limited
partnership, Enbridge Pipelines (NE
Texas Liquids), L.P., a Delaware limited partnership, Enbridge
Pipelines (
Texas Intrastate) L.P., a
Texas limited partnership, Enbridge Pipelines (
Texas
Gathering) L.P., a Delaware limited partnership, and Enbridge Employer Services, Inc, a Delaware
corporation.
“Environmental Costs and Liabilities” shall mean those Losses incurred (i) under or
pursuant to the requirements of any Environmental Law, (ii) under or pursuant to any Order issued
pursuant to Environmental Law prior to the Closing, (iii) with respect to any monitoring or cleanup
required by any Environmental Law, and (iv) under any Contract between any TexStar Company and any
Third Person relating to environmental matters that existed prior to the Closing.
“Environmental Law” shall mean any and all Laws, Regulations or rules of common law,
or Orders of any Governmental Authority in existence and as amended on the Closing Date pertaining
to the protection of the environment, health or natural resources or to Hazardous Materials in any
and all jurisdictions in which the party in question owns property or conducts business, including
the Clean Air Act, the Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (“CERCLA”), the Federal Water Pollution Control Act, the Occupational Safety and
Health Act of 1970, the Resource Conservation and Recovery Act of 1976, the Safe Drinking Water
Act, the Toxic Substances Control Act, the Hazardous & Solid Waste Amendments Act of 1984, the
Superfund Amendments and Reauthorization Act of 1986, the Hazardous Materials Transportation Act,
the Oil Pollution Act of 1990, any state or local Laws implementing, analogous to, or similar to
the foregoing federal Laws, and any state or local Laws pertaining to the handling of oil and gas
exploration, production, gathering, and processing wastes or the use, maintenance, and closure of
pits and impoundments.
“Equity Interest” shall mean (i) the equity ownership rights in a business entity,
whether a corporation, company, joint stock company, limited liability company, general or limited
partnership, joint venture, bank, association, trust, trust company, land trust, business trust,
sole proprietorship or other business entity or organization, and whether in the form of capital
stock, ownership unit, limited liability company interest, limited or general partnership interest
or any other form of ownership, and (ii) also includes all Equity Interest Equivalents.
“Equity Interest Equivalents” shall mean all rights, warrants, options, convertible
securities or indebtedness, exchangeable securities or other instruments, or other rights that are
outstanding and exercisable for or convertible or exchangeable into, directly or indirectly, any
Equity Interest described in clause (i) of the definition thereof at the time of issuance or upon
the passage of time or occurrence of some future event.
8
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” shall have the meaning given such term in Section 3.16(b).
“Estimated Cash Amount” shall have the meaning given such term in Section
2.3(a).
“Estimated Closing Statement” shall have the meaning given such term in Section
2.3(a).
“
Eustace Acquisition Agreement” shall mean that certain Asset Purchase and Sale
Agreement dated October 20, 2005 by and between Enbridge Pipelines (NE
Texas) L.P. and Enbridge
Pipelines (NE
Texas Liquids), L.P., as sellers, Enbridge Employee Services, Inc., and TexStar
Acquisition, as buyer, including all exhibits and schedules thereto.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
“Exhibits” shall mean any or all of the exhibits attached to and made a part of this
Agreement.
“Expenses” shall mean, to the extent existing at 11:59 p.m. on the Measurement Date,
the aggregate amount of unpaid fees, expenses and other similar amounts that have been or are
expected to be incurred by any TexStar Company on or prior to the Closing Date arising from the
provision of services through the Closing for Seller, any of the TexStar Companies, the Officers,
the Directors, the Managers or any officers or directors of Seller or the TexStar Companies in
connection with the preparation, negotiation and execution of this Agreement and the other
Transaction Documents and the consummation of this Agreement and the transactions contemplated
hereby, including the following: (i) the fees and disbursements of, or other similar amounts
charged by, counsel to Seller, the TexStar Companies, the Officers, the Directors, the Managers or
any officers or directors of Seller or the TexStar Companies (ii) the fees and expenses of, or
other similar amounts charged by, any accountants, agents, financial advisors (including HMCO),
consultants and experts employed by Seller or the TexStar Companies, or both, (iii) the
out-of-pocket expenses, if any, of Seller, the TexStar Companies, the Officers, the Directors, the
Managers or any officers or directors of Seller or the TexStar Companies incurred in such capacity,
and (iv) 50% of the fees paid by the Parties pursuant to the HSR Act in connection with the HSR
Approval for the transactions contemplated by this Agreement. Expenses shall include all FAA Fees,
if any, payable with respect to the acquisition of the Interests pursuant to this Agreement.
“FAA Fees” shall mean fees and other amounts payable by any TexStar Company pursuant
to the Financial Advisory Agreement.
“
FAA/MO Termination Agreement” means the Financial Advisory and Monitoring and
Oversight Termination Agreement entered into simultaneously with the execution and delivery of this
Agreement by and among the parties to the Financial Advisory
9
Agreement providing for the termination of the Financial Advisory Agreement and the Monitoring
and Oversight Agreement as of the Closing Date.
“FCC” means the Federal Communications Commission.
“FCC Licenses” means any licenses, permits, certificates, approvals, franchises,
consents, waivers, registrations or other authorizations issued by the FCC to any TexStar Company.
“FCC Rules” means Title 47 of the Code of Federal Regulations, as amended from time to
time, and any policies or published decisions issued pursuant to such regulations or the
Communications Act.
“FCC Transfer Applications” shall have the meaning given such term in Section
5.20.
“FERC” shall mean the Federal Energy Regulatory Commission of the United States
Government.
“Final Closing Statement” shall have the meaning given such term in Section
2.3(c).
“Final Order” means an action, order, judgment or decree: (i) which has not been
reversed, stayed, enjoined, set aside, annulled or suspended; (ii) in relation to which no request
for stay, motion or petition for reconsideration or rehearing, application or request for review,
or notice of appeal or other administrative or judicial petition for review or reconsideration
(collectively, an “Appeal”) is pending or has been granted; and (iii) as to which the
prescribed time for filing an Appeal, and for the entry of orders staying, reconsidering, or
reviewing the applicable Governmental Authority’s own motion has expired.
“Final Resolution” means the dismissal with prejudice, resolution by final
non-appealable judgment of a court of competent and proper jurisdiction or by final settlement
without any further liability or obligation of any named party thereto.
“Finally Resolved” shall mean that a matter is or has been resolved by a Final
Resolution.
“Financial Advisory Agreement” shall mean the Amended and Restated Financial Advisory
Agreement dated effective December 1, 2005, by and among each of the TexStar Companies and HMTF US
Operating.
“Financial Statements” shall have the meaning given such term in Section
3.17(a)(ii).
“FN GP” shall mean FN GP, LLC, a Delaware limited liability company and indirect
wholly-owned subsidiary of TexStar.
10
“Frio NewLine” shall mean Frio NewLine, L.P., a Delaware limited partnership and
indirect wholly-owned subsidiary of TexStar.
“FTC” shall mean the Federal Trade Commission of the United States of America.
“Future Adjustments” shall have the meaning given such term in Section
3.17(b)(i).
“GAAP” shall mean generally accepted accounting principles used in the United States
for financial reporting applied consistently with such Party’s past practices.
“Gas Gathering Agreement” shall mean the Gas Gathering Agreement in the form of
Exhibit F attached hereto.
“Gas Gathering Corollary Agreements” shall mean agreements corollary to the Gas
Gathering Agreement implementing the terms set forth in the term sheets attached as exhibits to the
Gas Gathering Agreement.
“General Partner” shall mean Regency GP LP, a Delaware limited partnership and the
general partner of the Partnership.
“Governmental Authorities” shall mean (a) the United States of America or any state or
political subdivision thereof and (b) any court or any governmental or administrative department,
commission, board, bureau, agency or arbitration tribunal of the United States of America or of any
state or political subdivision thereof.
“GP Interest” shall have the meaning given such term in the second recital to this
Agreement.
“
GulfTerra Acquisition Agreement” shall mean that certain Quitclaim Conveyance and
Xxxx of Sale dated June 1, 0000 xxxxxxx XxxxXxxxx Xxxxx Pipeline, L.P. and TexStar FS, including
all exhibits and schedules thereto and that certain Quitclaim Conveyance and Xxxx of Sale dated
March 1, 0000 xxxxxxx XxxxXxxxx Xxxxx Pipeline, L.P. and
Texas Gas Gathering, including all
exhibits and schedules thereto.
“Hazardous Materials” shall mean: (a) any chemicals, materials or substances defined
or included in the definition of “hazardous substances,” “hazardous materials,” “toxic substances,”
“solid wastes,” “pollutants,” “contaminants,” or words of similar import intended to define, list
or classify substances by reason of deleterious properties under any Environmental Law, (b) any
radioactive materials, asbestos, and polychlorinated biphenyls, (c) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any Governmental Authority, or
(d) oil, waste oil, petroleum, waste petroleum, natural gas, natural gas liquids or liquefied
natural gas.
“
HM Capital” means HM Capital Partners, LLC, a
Texas limited liability company.
11
“HMCO” means Xxxxx, Muse & Co. Partners, L.P., a Texas limited partnership.
“HMTF US Operating” shall mean HMTF US Operating, L.P., a Delaware limited
partnership.
“HSR Act” shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the Regulations thereunder.
“HSR Approval” shall mean (a) the receipt of any Authorization required, or (b) the
expiration of any applicable waiting period, under the HSR Act.
“Hydrocarbon Contracts” means (a) all Hydrocarbon Purchase Contracts, (b) all
Hydrocarbon Sales Contracts, (c) all other Hydrocarbon gathering, treating or processing
agreements, joint operating agreements, water disposal agreements, and compressor agreements to
which any TexStar Company is a party or that is binding on any TexStar Company and (d) all other
Contracts materially affecting oil and gas operations on, or which impose any material monetary
liability or obligation or other material liability or obligation, monetary or otherwise, on any of
the TexStar Companies.
“Hydrocarbon Purchase Contract” means any sales, purchase, exchange or marketing
Contract that is currently in effect and under which any TexStar Company is a buyer of Hydrocarbons
for resale in whole or in part (other than purchase agreements entered into in the ordinary course
of business with a term of three months or less, terminable by the TexStar Company which is a party
thereto without penalty on 30 days’ notice or less, which provide for a price not greater than the
market value price that would be paid pursuant to an arm’s-length contract for the same term with
an unaffiliated third-party seller, and which do not obligate the purchaser to take any specified
quantity of Hydrocarbons or to pay for any deficiencies in quantities of Hydrocarbons not taken).
“Hydrocarbon Sales Contract” means any sales, purchase, exchange or marketing Contract
that is currently in effect and under which any TexStar Company is a seller of Hydrocarbons (other
than “spot” sales agreements entered into in the ordinary course of business with a term of three
months or less, and which provide for a price not less than the price that would be received
pursuant to an arm’s-length contract for the same term with an unaffiliated third party purchaser).
“Hydrocarbons” shall mean crude oil, condensate, natural gas, casinghead gas and other
liquid or gaseous hydrocarbons.
“Incentive Distribution Rights” shall mean Incentive Distribution Rights issued by the
Partnership to the General Partner in the form of a non-voting limited partner interest as more
specifically defined and provided for in the Partnership Agreement.
“
Indebtedness” shall mean, without duplication, (i) any obligations of any TexStar
Company for borrowed money (including all obligations for principal, interest, premiums, penalties,
fees, expenses and breakage costs), (ii) any obligations of any TexStar Company evidenced by any
note, bond, debenture or other debt security, (iii) any obligations of any TexStar Company for or
on account of capitalized leases, (iv) any obligations of a Person other
12
than a TexStar Company secured by a Lien against any TexStar Company’s Assets, (v) any
obligations of any TexStar Company for the reimbursement of letters of credit, bankers’ acceptance
or similar credit transactions, (vi) any obligations of any TexStar Company under any currency,
commodity or interest rate swap, hedge or similar protection device, (vii) any obligations of the
types described in clauses (i) through (vii) above of any Person other than any TexStar Company,
the payment of which is guaranteed, directly or indirectly, by any TexStar Company.
“Indemnified Party” or “Indemnitee” shall have the meaning given such term in
Section 9.5(a).
“Indemnifying Party” or “Indemnitor” shall have the meaning given such term in
Section 9.5(a).
“Intellectual Property” shall have the meaning given such term in Section
3.13.
“Interests” shall have the meaning given such term in the fourth recital to this
Agreement.
“Interim Financial Statements” shall have the meaning given such term in Section
3.17(a)(ii).
“IRS” shall mean the United States Internal Revenue Service.
“Xxxxx Acquisition Agreement” shall mean that certain Stock and Asset Purchase
Agreement dated July 30, 2004 by and among HMTF Gas Partners, L.P., BlackBrush Holdings, Inc., TGG
Corp. (predecessor to TexStar), BlackBrush Drilling, Inc., and BlackBrush Energy, Inc., as
purchasers, and Xxxxx Oil & Gas, Inc. (predecessor to BlackBrush O&G) (“Xxxxx”),
Diamondback Drilling, Inc., Mesquite Partners Limited Partnership, and each of the stockholders of
Xxxxx a party thereto, as sellers, including all exhibits and schedules thereto.
“Laws” shall mean all laws, statutes and ordinances of the United States, any state of
the United States and any political subdivision thereof, including all decisions of any
Governmental Authority having the effect of law in each such jurisdiction.
“Xxxxx Contracts” shall mean each of (i) the Gas Gathering and Treating Agreement,
dated June 1, 2002, between Xxxxx Xxxxx Properties, Inc. and Enbridge Pipelines (Texas Gathering),
L.P., and (ii) the Gas Purchase Agreement, dated June 1, 2002, between Xxxxx Xxxxx Properties, Inc.
and TexStar FS, L.P. (as successor to Enbridge Pipelines (Texas Gathering), L.P.), as amended.
“
Xxxxx Litigation” means the litigation and the facts, circumstances, acts and
omissions underlying, concerning or relating to the same that is the subject of Cause No.
05-11-00123-CVL,
Xxxxx Xxxxx Properties, Inc. v. Enbridge Pipelines (Texas Gathering) L.P. and
TexStar FS, L.P., in the 81
st Judicial District Court of LaSalle County, Texas and any
other or subsequent allegations, complaints, writs, claims or causes of action made or brought by
or on behalf of Xxxxx Xxxxx Properties or their Affiliates against any of the TexStar Companies or
Seller based on or arising out of (i) the facts stated in
Article IV of the Plaintiff’s
First Amended
13
Original Petition For Declaratory Judgment filed with respect to the foregoing, (ii) the
matters described in the letter dated February 27, 2006, from Xxxxxxx X. Xxxx to Enbridge Energy
Company regarding the Gas Gathering and Treatment Agreement referred to therein, and (iii) the
Xxxxx Contracts, in each case with respect to which Seller may be or is alleged to have any
responsibility, obligation or liability.
“Liability” shall mean any direct or indirect liability, Indebtedness, obligation,
commitment, expense, claim, deficiency, guaranty or endorsement of or by any Person of any type,
whether known or unknown, and whether accrued, absolute, contingent, matured or unmatured.
“Lien” shall mean any lien, mortgage, pledge, adverse or other claim, charge, security
interest, production payment, restriction, burden, encumbrance, right of purchase, rights of a
vendor under any title retention or conditional sale agreement, or lease or other arrangement
substantially equivalent thereto or other encumbrance, option or defect in title.
“LLC Interests” shall have the meaning give such term in the first recital to this
Agreement.
“Loss” or “Losses” shall mean any and all damages, payments, penalties,
assessments, disbursements, costs and expenses, including interest, awards, judgments, settlements,
fines, costs of remediation, fees, costs of defense and reasonable attorneys’ fees, costs of
accountants, expert witnesses and other professional advisors and costs of investigation and
preparation of any kind or nature whatsoever.
“LP Interest” shall have the meaning given such term in the first recital to this
Agreement.
“Management Services Agreement” means the Management Services Agreement dated July 30,
2004, between BlackBrush O&G and TexStar (as successors by conversion to TGG Corp., a Delaware
corporation).
“Manager” shall mean each manager of each TexStar Company which is manager managed,
including each person so identified in Section 1.1(a) of the TexStar Disclosure Schedule,
in each case in that person’s capacity as such.
“Managing General Partner” shall mean Regency GP LLC, a Delaware limited liability
company and the general partner of the General Partner.
“Market” shall have the meaning given such term in Section 3.26(a).
“Material Adverse Effect” shall mean:
(i) with respect to TexStar, any result, occurrence, change, fact, event, circumstance or
effect of any of the foregoing (whether or not (A) foreseeable as of the date of this Agreement or
(B) covered by insurance) that, individually or in the aggregate with any such other result,
occurrence, change, fact, event, circumstance or effects (whether or not such result, occurrence,
condition, change, fact, event, circumstance or effect has, during the period or at any
14
time in question, manifested itself in the historical statements of the TexStar Companies),
has had, has, or could reasonably be expected to have a material adverse effect on (x) the
near-term or long-term condition (financial or otherwise), business, prospects, properties or
results of operations of the TexStar Companies, taken as a whole, (y) the ability of the TexStar
Companies to own and operate their assets and conduct their business in the ordinary course as
presently operated and conducted or (z) the ability of Seller to perform its obligations under or
consummate the transactions contemplated by the Transaction Documents to which it is a party;
provided, however, that a Material Adverse Effect shall not be deemed to occur
pursuant to clause (i)(x) solely as a result of (1) the effect of any change that is generally
applicable to the industry and markets in which the TexStar Companies operate or (2) the effect of
any change that is generally applicable to the United States economy or securities markets,
provided that the changes and effects in the case of clauses (1) or (2) of this sentence do not
disproportionately affect the TexStar Companies; or
(ii) with respect to the Partnership, any result, occurrence, change, fact, event,
circumstance or effect of any of the foregoing (whether or not (A) foreseeable as of the date of
this Agreement or (B) covered by insurance) that, individually or in the aggregate with any such
other result, occurrence, change, fact, event, circumstance or effects (whether or not such result,
occurrence, condition, change, fact, event, circumstance or effect has, during the period or at any
time in question, manifested itself in the historical statements of the Partnership and its
subsidiaries), has had, has, or could reasonably be expected to have a material adverse effect on
(x) the near-term or long-term condition (financial or otherwise), business, prospects, properties
or results of operations of the Partnership and its subsidiaries, taken as a whole, (y) the ability
of the Partnership and its subsidiaries to own and operate their assets and conduct their business
in the ordinary course as presently operated and conducted or (z) the ability of the Partnership or
Buyer to perform its obligations under or consummate the transactions contemplated by this
Agreement; provided, however, that a Material Adverse Effect shall not be deemed to
occur pursuant to clause (ii)(x) solely as a result of (1) the effect of any change that is
generally applicable to the industry and markets in which the Partnership and its subsidiaries
operate or (2) the effect of any change that is generally applicable to the United States economy
or securities markets, provided that the changes and effects in the case of clauses (1) or (2) of
this sentence do not disproportionately affect the Partnership and its subsidiaries.
“Material Contract” shall mean each of the following to the extent such Contract is
currently executory:
(a) each of the Hydrocarbon Contracts;
(b) each Contract to which any TexStar Company is a party, other than any of the Gas
Contracts, that is reasonably expected to require payments of Cash to or by the TexStar Companies,
or the incurrence of Liabilities by the TexStar Companies during the period of twelve months
following the date of this Agreement in an amount of more than $500,000;
(c) the Acquisition Agreements;
15
(d) each Contract of any TexStar Company restricting or otherwise affecting the ability of
such TexStar Company to conduct or compete in any line of business in any jurisdiction;
(e) each Contract between any TexStar Company, on the one hand, and any of the Directors,
Officers, Managers or other employees of any TexStar Company or any of the directors, officers,
managers or other employees of Seller or any of its Affiliates;
(f) each Contract between any TexStar Company, on the one hand, and any financial advisor or
consultants to Seller or any TexStar Company, on the other hand, under which there are remaining
indemnity or other obligations of any party thereto after the Closing, including the Financial
Advisory Agreement, the Monitoring and Oversight Agreement and any other financial advisory,
oversight or similar agreement with HMCO or any of its Affiliates;
(g) each lease for capital equipment that provides for ongoing payments by any TexStar Company
in excess of $100,000 annually;
(h) any indenture, mortgage, promissory note, loan or other similar Contract for Indebtedness;
and
(i) each other existing Contract of any TexStar Company, not otherwise covered by clauses (a)
through (h) that otherwise is material to the TexStar Companies or the loss of which could
reasonably be expected to have a Material Adverse Effect on TexStar.
“Measurement Date” shall mean July 31, 2006 (if the Closing Date is on or after August
1, 2006 but on or before August 5, 2006) or August 31, 2006, (if the Closing Date is on or after
September 1, 2006 but on or before September 5, 2006), or such other dates to which the parties
agree in writing.
“MSA Termination Agreement” means the MSA Termination Agreement entered into
simultaneously with the execution and delivery of this Agreement by and among the parties to the
Management Services Agreement providing for the termination of the Management Services Agreement as
of the Closing Date.
“Monitoring and Oversight Agreement” shall mean the Amended and Restated Monitoring
and Oversight Agreement dated effective December 1, 2005 between the TexStar Companies and HMTF US
Operating.
“Mutual Releases” shall mean Mutual Releases in the form attached hereto as
Exhibit A-1 or A-2 that are either (i) executed concurrently with the execution and
delivery of this Agreement, but to be effective and reaffirmed as of the Closing, by Seller, each
Officer, each Manager, each officer and director of Seller, and each director of any TexStar
Company, on one hand, and the Partnership, Buyer and the TexStar Companies, on the other hand, or
(ii) delivered at the Closing pursuant to Section 5.6(b).
“Nasdaq” shall mean The Nasdaq National Market.
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“Net Working Capital” shall mean the amount by which Current Assets exceed Current
Liabilities as of 11:59 p.m. Dallas, Texas time, on the Measurement Date.
“NGA” shall have the mean the Natural Gas Act of 1938, as amended.
“NGPA” shall mean the Natural Gas Policy Act of 1978.
“Notification” shall mean any notice to or filing with any Person or Governmental
Authority required under the terms of any Contract to which any TexStar Company or Seller is a
party, by the terms of any Authorization held by or applicable to any TexStar Company or Seller or
by Law that is necessary for Seller to execute, deliver and perform its obligations under this
Agreement and the Transaction Documents to which it is or shall be a party or is otherwise required
in connection with the consummation by any TexStar Company of the transactions contemplated hereby
or thereby.
“Officer” shall mean each of Xxx Xxxxxxxxxx, Xxxxxx Xxxxxxx, Xxxxx Xxxxxx, P. Xxxxx
Xxxxxx, Xxxxxxx X. Xxxxx, Xxxx Xxxxxxxxxx, Xxxxxx X. Xxxxxxx, Xxxx Xxxxx, Xxxxx O’Dell, Xxx X. Xxxx
and Xxxxxxx X. XxXxxxxx, in his or her capacity as an officer of any of the TexStar Companies, any
successor to any of them serving in such capacity prior to the Closing Date and any other officer
of any TexStar Company.
“Officers of the Managing General Partner” shall mean each of Xxxxx X. Xxxx, Xxxxxxx
X. Xxxxxxxx, Xxxxxxx X. Xxxxx, Xxxxxxx X. Xxxx III, Xxxxxx X. Xxxxxxx, Xxxxxxxx X. Xxxxxxx, Xxxxxxx
X. Xxxxx, Xx. and Xxxxx Xxxxx.
“Order” shall mean all applicable writs, judgments, injunctions, decrees and other
official acts of or by any Governmental Authority.
“Organizational Documents” shall mean with respect to any particular entity: (a) if a
corporation, its articles or certificate of incorporation and its bylaws; (b) if a limited
partnership, its limited partnership agreement and its articles or certificate of limited
partnership; (c) if a limited liability company, its articles of organization or certificate of
formation and its limited liability company agreement or operating agreement; (d) all related
equityholders’ agreements, voting agreements, voting trust agreements, joint venture agreements or
registration rights agreements; and (e) any amendment or supplement to any of the foregoing.
“Xxxxxxx” shall mean Xxxxxxx Pipeline Company, Inc., a Texas corporation and indirect
wholly-owned subsidiary of TexStar.
“Xxxxxxx Joint Venture” shall mean a joint venture organized and existing under the
laws of Texas between PGCL and Fasken Acquisitions 01-I, Ltd., a Texas limited partnership.
“Parties” or “Party” shall have the meaning given such term in the opening
paragraph of this Agreement.
“Partnership” shall have the meaning given such term in the opening paragraph of this
Agreement.
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“Partnership Agreement” shall mean the Amended and Restated Agreement of Limited
Partnership of the Partnership dated as of February 3, 2006.
“Partnership Agreement Amendment” shall mean the Amendment No. 1 to the Partnership
Agreement in substantially the form attached hereto as Exhibit B.
“Partnership Consulting Agreements” means the Consulting Agreements executed
concurrently with or prior to the execution and delivery of this Agreement, but effective as of the
Closing, by each of P. Xxxxx Xxxxxx and Xxxxxxx Xxxxx, on the one hand, and Partnership on the
other.
“Partnership Interests” shall have the meaning given such term in the third recital to
this Agreement.
“Partnership SEC Documents” shall mean the Partnership’s prospectuses filed under
Section 10 of the Securities Act since December 31, 2005 and its reports filed under Section 13(a)
of the Exchange Act since December 31, 2005, including its Prospectus January 30, 2006, (the
“Prospectus”) comprising a part of the Partnership’s Registration Statement on Form S-1
(Registration No. 333-128332) (the “Registration Statement”), its Annual Report on Form
10-K as filed with the Securities and Exchange Commission on March 30, 2006, its Quarterly Report
on Form 10-Q for the quarter ended March 31, 2006 (the “Form 10-Q”) as filed with the
Securities and Exchange Commission on May 15, 2006, its Current Reports on Form 8-K filed on
February 1, 2006, February 9, 2006, April 11, 2006, April 27, 2006 and May 15, 2006 and all other
reports filed by the Partnership with the Securities and Exchange Commission prior to Closing.
“Payoff Letters” shall mean the Payoff letters, in form and substance reasonably
satisfactory to Seller and Buyer, (a) from each Person to whom Change of Control Amounts or
Severance Obligations are owed, (i) setting forth the aggregate amount required to be paid to
satisfy fully such obligation(s) and payment instructions for such payee and (ii) providing for the
release and termination of all Liens, recourse and other obligations associated with the Change of
Control Amounts or Severance Obligations that are the subject of such Payoff Letter upon receipt of
the amount specified in such Payoff Letter to be paid on or after the Closing Date, (b) from each
Person to whom Expenses in excess of $2,000 are owed, setting forth the aggregate amount required
to be paid to fully satisfy such obligation(s) and wire transfer instructions for such payee
(provided, however, that the aggregate amount of Expenses for which Payoff Letters
shall not be obtained shall not exceed $20,000 in the aggregate) and (c) from each Person to whom
FAA Fees or Termination Fees are owed, setting forth the aggregate amount required to be paid to
fully satisfy such obligation(s) and wire transfer instructions for such payee.
“Permitted Distribution Date” shall have the meaning ascribed to it in Section
5.12(d).
“Permitted Encumbrances” shall mean the following:
(a) terms, conditions, restrictions, exceptions, reservations, limitations, and other matters
contained in any document creating or transferring any Real Property Interests, or
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in any Authorizations or Contract (including those arising under the Credit Agreement) that,
singularly or in the aggregate, do not materially adversely affect the value of the Real Property
Interest to which such matters relate or materially interfere with the ownership, use or operation
of such Real Property Interests and which are of a nature that would be reasonably acceptable to a
prudent pipeline or plant operator and, in any event, do not prevent or prohibit the use of such
Real Property Interests by the TexStar Companies as currently used or as otherwise necessary for
the conduct of their respective businesses as presently conducted and as presently proposed to be
conducted by any TexStar Company;
(b) the matters excluded from coverage under Schedules B and C to the policies
of Title Insurance listed in Section 3.11 of the TexStar Disclosure Schedule and the
matters identified as permitted encumbrances (or words of similar import) in the Acquisition
Agreements;
(c) Liens for Taxes and assessments that are not yet due and payable (or that are being
contested in good faith by appropriate Proceedings and for which adequate reserves have been made
in the Financial Statements);
(d) mechanic’s, materialmen’s, repairmen’s and other statutory Liens arising in the ordinary
course of business and securing obligations incurred prior to the Closing Date that are not
delinquent, that will be paid and discharged in the ordinary course of business and for which
adequate reserves have been made in the Financial Statements;
(e) utility easements, restrictive covenants, defects and other irregularities in title, that,
singularly or in the aggregate, do not materially adversely affect the value of the assets to which
such matters relate or materially interfere with the ownership, use or operation of such assets and
which are of a nature that would be reasonably acceptable to a prudent pipeline or plant operator
and, in any event, do not prevent or prohibit the use of such assets by the TexStar Companies as
currently used or as otherwise necessary for the conduct of their respective business as presently
conducted and as presently proposed to be conducted by any TexStar Company;
(f) required Third Person consents to assignment, preferential purchase rights and other
similar agreements with respect to which consents or waivers are obtained from the appropriate
Person prior to Closing for the transactions contemplated hereby, or as to which the appropriate
time for asserting such rights has expired as of the Closing without an exercise of such right, or
the effects of which, singularly or in the aggregate, could not reasonably be expected to interfere
materially with the ownership, use or operation of the assets to which such matters relate and
which are of a nature that would be reasonably acceptable to a prudent pipeline or plant operator
and, in any event, do not prevent or prohibit the use of such assets by the TexStar Companies as
currently used or as otherwise necessary for the conduct of their respective business as presently
conducted by any TexStar Company;
(g) any Post-Closing Notification;
(h) Liens created by Buyer or its successors or assigns;
(i) Liens in favor of the lenders granted under the Credit Agreement; and
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(j) the Liens listed in Section 1.1(b) of the TexStar Disclosure Schedule.
“Permitted Indemnification/Contribution” shall have the meaning given such term in
Section 10.17.
“Person” shall mean any natural person, corporation, company, partnership (general or
limited), limited liability company, trust, joint venture, joint stock company, unincorporated
organization, Governmental Authority or other entity or association.
“PGCL” shall mean Xxxxxxx Gas Company, Ltd., a Texas limited partnership and indirect
wholly-owned subsidiary of TexStar.
“Pipeline Assets” shall mean the pipelines, equipment, other tangible personal
property, Easements and other similar assets and rights used by any TexStar Company in connection
with its natural gas pipeline, gathering, compression, treating and processing operations as
presently conducted.
“Plains Acquisition Agreement” shall mean that certain Asset Purchase and Sale
Agreement dated January 19, 2005 by and between Plains Pipeline, L.P. and Frio NewLine, including
all exhibits and schedules thereto.
“Plan” shall have the meaning given such term in Section 3.16(b).
“Post-Closing Notification” shall mean any Notification to or with any Person or
Governmental Authority that is customarily effected following the closing of a transaction similar
to the transaction contemplated hereby, including those listed in Section 1.1(c) of the TexStar
Disclosure Schedule, but shall not include any Notification that constitutes a Required
Consent.
“PPM Acquisition Agreement” shall mean that certain Agreement of Sale and Purchase
dated July 7, 2005 by and among PPM Live Oak Energy, LLC and Person-Panna Xxxxx, LLC, as sellers,
and BlackBrush Oil & Gas, L.P., and TexStar FS, as buyers, including all exhibits and schedules
thereto.
“PPM Facilities Property Liabilities” shall mean any liabilities or obligations (i)
imposed by or arising under or with respect to Article XIV of the PPM Acquisition Agreement, (ii)
in any way relating to the Facilities Property (as defined in the PPM Acquisition Agreement).
“Proceeding” shall mean any action, suit, claim, investigation, review or other
judicial or administrative proceeding, at law or in equity, before or by any Governmental Authority
or arbitration proceeding.
“Proposed Closing Statement” shall have the meaning given such term in Section
2.3(b).
“
Real Property Interests” shall mean all interests in real property used or held for
use by any TexStar Company, including fee properties, rights-of-way, Easements, surface use
agreements, licenses and leases that are used or held for use in connection with the ownership,
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operation or maintenance of the assets owned by or leased by any TexStar Company, and all
fixtures, pipelines, gathering facilities, buildings and improvements located thereon or
appertaining thereto that are owned or held by leasehold interest by any TexStar Company.
“Records” shall mean all Contract, land, title, engineering, environmental,
regulatory, operating, accounting, business, marketing, and other data, files, documents,
instruments, notes, papers, ledgers, journals, reports, abstracts, surveys, title opinions, maps,
drawings, books, records and studies that relate to the ownership, operation or maintenance of the
assets owned by any TexStar Company.
“Registration Rights Agreement” shall mean the Registration Rights Agreement in
substantially the form attached hereto as Exhibit C.
“Registration Rights Parties” shall mean each of Flatrock Production Company, LLC, P.
Xxxxx Xxxxxx, Xxxxxxx X. Xxxxx, Xxx X. Xxxx, Xxxx X. Xxxxx, Xxxxxx X. Xxxxxxx, Xxxx X. Xxxxxxxxxx,
Xxxxxxx X. XxXxxxxx, Xxxx X. Xxxxxxxx, Xxxxx X. O’Dell and The Estate of Xxxxxx X. Xxxxxxxx.
“Regulation” shall mean any rule or regulation of any Governmental Authority having
the effect of Law or of any rule or regulation of any self-regulatory organization.
“Regulation S-X” shall have the meaning given such term in Section 5.9(d).
“Required Notifications” shall have the meaning given such term in Section
3.7(a).
“Required Third-Party Consent” shall have the meaning given such term in Section
3.7(a).
“Restricted Cash” shall mean, as of 11:59 p.m. on the Measurement Date, the amount of
Cash of the TexStar Companies that would be deemed to be “restricted” in accordance with GAAP as
consistently applied by TexStar in the preparation of the Audited Financial Statements;
provided, however, that the amount so determined shall (whether or not in
compliance with GAAP) include the following: (i) amounts held in escrow, (ii) restricted balances,
(iii) the proceeds of any casualty loss with respect to any asset (to the extent any such asset has
not been repaired or replaced or the liability for the repair or replacement of such asset has not
been paid or accrued as a current liability) and (iv) proceeds of indemnification settlements to
the extent that the indemnified losses have not been paid or accrued as current liabilities.
“Review Period” shall have the meaning given such term in Section 2.3(c).
“Sample Balance Sheet” shall mean the sample calculation of Current Assets and Current
Liabilities and sample calculation of Net Working Capital as of 11:59 p.m. on the Sample Balance
Sheet Date as set forth on Schedule A attached hereto.
“Sample Balance Sheet Date” shall mean April 30, 2006.
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“San Antonio Lease” shall mean the Office Lease Agreement, dated December 2, 2004, by
and between BlackBrush Energy, Inc., a Delaware corporation, and Concord Park Commons, Ltd., a
Texas limited partnership.
“Schedules” shall mean the schedules referenced in this Agreement and attached hereto.
“SEC” shall mean the U.S. Securities and Exchange Commission.
“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“Seller Affiliate” shall have the meaning given such term in Section 10.15(b).
“Seller Indemnitees” shall have the meaning given such term in Section 9.2.
“Seller Title Representations” shall mean the representations and warranties in
Section 3.2.
“Seller’s Knowledge” or any similar term, shall mean the actual knowledge, after due
inquiry, of each of Xxx Xxxxxxxxxx, Xxxxx Xxxxxx, Xxxxxx Xxxxxxx, P. Xxxxx Xxxxxx, Xxxxxxx X.
Xxxxx, Xxx X. Xxxx, Xxxx Xxxxxxxxxx, Xxxx X. Xxxxx, Xxxxx X’Dell, Xxxxxxx X. XxXxxxxx, Xxxxxx X.
Xxxxxxx.
“Severance Obligations” shall mean any payment or other obligation of any TexStar
Company or Seller to any Director, Officer, Manager or other employee, or any independent
contractor or agent, of any TexStar Company, pursuant to any Contract with such Person existing as
of or prior to the Closing that would arise from the termination (including termination with or
without cause and voluntary termination) of the position, office, employment or engagement of such
Person upon or at any time after Closing, or that exists as of the Closing as a result of any such
termination prior to Closing, including any severance, bonus, accrued vacation or tax
indemnification obligations or other similar payments and the TexStar Companies’ portion of any
Medicaid, Social Security or unemployment Taxes in respect of such payments, but excluding salary
through the date of any such termination.
“Severance Adjustment Amount” shall mean amounts payable with respect to Severance
Obligations that exist as a result of a termination of employment or engagement as a consultant or
other service provider prior to or at Closing to the extent not paid prior to 11:59 p.m. on the
Measurement Date.
“Straddle Period” shall mean any Taxable period beginning on or before and ending
after the Closing Date.
“Subordinated Units” shall mean units representing limited partner interest of the
Partnership designated as Subordinated Units and having the rights, obligations and such other
terms as set forth in the Partnership Agreement.
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“Subsidiary” means, with respect to any Person, any corporation or other organization,
whether incorporated or unincorporated, of which (a) such Person or any other Subsidiary of such
Person is a general partner, managing member or sole or controlling member or (b) at least a
majority of the Equity Interest or other interests having by their terms ordinary voting power to
elect a majority of the board of directors, managers or others performing similar functions with
respect to such corporation, partnership, limited partnership, limited liability company or other
organization is, directly or indirectly, owned or controlled by such Person or by any one or more
of its Subsidiaries, or by such Person and any one or more of its Subsidiaries.
“Survival Date” shall have the meaning given such term in Section 9.1(a)(iii).
“Tax” or “Taxes” shall mean any tax, assessment, duty, fee, levy or similar
charge assessed by any Governmental Authority, including any income tax, ad valorem tax, excise
tax, sales tax, use tax, franchise tax, real or personal property tax, transfer tax, gross receipts
tax or employment tax, together with and including, any and all interest, fines, penalties,
assessments, and additions to Tax resulting from, relating to, or incurred in connection with any
of those and any amount asserted as such by any Governmental Authority in or any contest or dispute
thereof and including any obligations to indemnify or otherwise assume or succeed to the Tax
liability of any Person.
“Tax Return” shall mean any declaration, report, statement, form, return or other
document or information required to be supplied to a taxing authority in connection with Taxes
including any schedule or attachment thereto, and including any amendment thereof.
“Xxxxxx Litigation” means the litigation and the facts, circumstances, acts and
omissions underlying, concerning or relating to the same that is the subject of Cause No.
06-06-0034-CVL in the 218th Judicial District in La Salle County, Texas, and any other or
subsequent allegations, complaints, writs, claims or causes of action made or brought by or on
behalf of Xxxxxx X. Xxxxxx, Xxxxxx Welding Service or any other Person against any of the TexStar
Companies concerning the natural gas pipelines and/or the compressor station refurbished by Xx.
Xxxxxx or with respect to which any of the TexStar Companies may be or are alleged to have any
responsibility, obligation or liability and any other subsequent allegations, complaints, claims or
causes of action made or brought by any other third party arising from or relating to the events
forming the basis of such litigation.
“Xxxxxx Reserve” means the contingency reserve account in the amount of $1,553,619.27
established in TexStar’s books of account and existing as of the date of this Agreement with
respect to the Xxxxxx Litigation.
“Termination Agreements” means the FAA/MO Termination Agreement and the MSA
Termination Agreement.
“Termination Fees” shall mean the fees payable by any TexStar Company to an Affiliate
of Seller for termination of the Financial Advisory Agreement, Monitoring and Oversight Agreement
and Management Services Agreement pursuant to the Termination Agreements, which fees shall be paid
by Buyer pursuant to Section 2.2(b)(iii).
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“Texana Pipeline Company” shall mean a joint venture organized and existing under the
laws of Texas between TexStar FS and MarkWest Pinnacle, L.P.
“Texas Gas Gathering” shall mean Texas Gas Gathering, LLC, a Texas limited liability
company and indirect wholly-owned subsidiary of TexStar.
“TexStar” shall have the meaning given such term in the first recital of this
Agreement.
“TexStar Acquisition” shall mean TexStar Acquisition, L.P., a Delaware limited
partnership and indirect wholly-owned subsidiary of TexStar.
“TexStar Acquisition GP” shall mean TexStar Acquisition GP, LLC, a Delaware limited
liability company and indirect wholly-owned subsidiary of TexStar.
“TexStar Company” shall mean any of TexStar GP, TexStar or any TexStar Subsidiary,
individually, and “TexStar Companies” shall mean TexStar GP, TexStar and the TexStar
Subsidiaries, collectively.
“TexStar Disclosure Schedules” shall mean the disclosure schedules delivered by Seller
to Buyer concurrently with the execution and delivery of this Agreement.
“TexStar EasTex I” shall mean TexStar EasTex ProTreat I, L.P, a Delaware limited
partnership and indirect wholly-owned subsidiary of TexStar.
“TexStar EasTex II” shall mean TexStar EasTex ProTreat II, L.P., a Delaware limited
partnership and indirect wholly-owned subsidiary of TexStar.
“TexStar Employees” shall have the meaning ascribed to such term in Section
5.15(a).
“TexStar FCC Licenses” shall have the meaning given to such term in Section
3.26.
“TexStar FS” shall mean TexStar FS, L.P., a Delaware limited partnership and indirect
wholly-owned subsidiary of TexStar formerly named TGG, L.P.
“TexStar FS GP” shall mean TexStar FS GP, LLC, a Delaware limited liability company
and indirect wholly-owned subsidiary of TexStar.
“TexStar GP” shall have the meaning given such term in the first recital to this
Agreement.
“TexStar GU” shall mean TexStar Gas Utility, L.P., a Delaware limited partnership and
indirect wholly-owned subsidiary of TexStar.
“TexStar Guarantor” shall mean TexStar Guarantor, L.P., a Delaware limited partnership
and wholly-owned subsidiary of TexStar.
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“TexStar Guarantor GP” shall mean TexStar Guarantor GP, LLC, a Delaware limited
liability company and wholly-owned subsidiary of TexStar.
“TexStar GU GP” shall mean TexStar GU GP, LLC, a Delaware limited liability company
and indirect wholly-owned subsidiary of TexStar.
“TexStar NewLine” shall mean TexStar EasTex NewLine, L.P., a Delaware limited
partnership and indirect wholly-owned subsidiary of TexStar.
“TexStar Operating” shall mean TexStar Operating, L.P., a Delaware limited partnership
and indirect wholly-owned subsidiary of TexStar.
“TexStar Operating GP” shall mean TexStar Operating GP, LLC, a Delaware limited
liability company and indirect wholly-owned subsidiary of TexStar.
“TexStar Subsidiaries” shall mean TexStar EasTex I, TexStar EasTex II, TexStar
NewLine, TexStar Guarantor GP, TexStar Guarantor, TexStar Operating GP, TexStar Operating, Xxxxxxx,
PGCL, TexStar GU, TexStar GU GP, TexStar FS GP, TexStar FS, TexStar Acquisition GP, TexStar
Acquisition, FN GP, Frio NewLine and Texas Gas Gathering.
“TexStar Title Representations” shall mean the representations and warranties in
Section 3.3(c) and Section 3.3(e).
“Third-Party Consent” shall mean any consent, waiver, permission, authorization or
approval of, or exemption by, any Third Person (other than a Governmental Authority).
“Third-Party Debt” shall mean, other than Indebtedness under the Credit Agreement, all
outstanding Indebtedness for borrowed money of any TexStar Company from any Person other than
another TexStar Company.
“Third Person” shall mean (i) any Person other than a Party or its Affiliates and (ii)
any Governmental Authority.
“Xxxxxx Acquisition Agreement” shall mean that certain Asset Purchase and Sale
Agreement dated October 20, 2005, by and among Enbridge Pipelines (Texas Intrastate) L.P. and
Enbridge Pipelines (Texas Gathering) L.P., as sellers, Enbridge Employee Services, Inc., and
TexStar FS, as buyer, as amended by the First Amendment to Purchase and Sale Agreement dated
October 20, 2005 including all exhibits and schedules thereto.
“Title Defect” shall mean any Lien or defect in title associated with a TexStar
Company’s title to the Assets, other than a Permitted Encumbrance and other than any Lien or defect
in title permitted under the Como Acquisition Agreement to the extent the transaction contemplated
thereby has been consummated, that (a) causes any TexStar Company’s title in any Asset not to
constitute good and marketable title or (b) adversely affects in any material respect the ability
of any TexStar Company to own, operate or maintain the Assets in the ordinary course of business
consistent with past practice.
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“Transaction Documents” shall mean this Agreement, the Mutual Releases, the
Partnership Agreement Amendment, the Registration Rights Agreement, the Assignment of Membership
Interests, the Assignment of Partnership Interests, the Gas Gathering Agreement, the Termination
Agreements, the Transaction Services Agreement, and any other Contract among the Parties that is
expressly agreed by the Parties to constitute a Transaction Document for purposes of this
Agreement.
“Transaction Units” shall mean an aggregate of 5,173,189 Class B Common Units to be
issued by the Partnership to Seller at the consummation of the transactions contemplated hereby in
discharge of a portion of the Aggregate Consideration.
“Transferred Employee” shall have the meaning ascribed to such term in Section
5.15(b).
“Transition Services Agreement” shall have the meaning given such term in Section
5.17.
“Triumph Acquisition Agreement” shall mean that certain Purchase and Sale Agreement
dated February 23, 2005 between Triumph Petroleum Company, LLC, BlackBrush Oil & Gas, Inc, and TGG,
L.P., a predecessor to TexStar, including all exhibits and schedules thereto.
“Valence” means, collectively, Valence Midstream, Ltd., a Texas limited partnership,
and EEC Midstream, Ltd., a Texas limited partnership.
“Voting Debt” shall mean bonds, debentures, notes or other indebtedness having the
right to vote (or convertible into securities having the right to vote) on any matters on which
holders of the Common Units may vote.
“Working Capital Deficit” shall mean the amount, if any, by which the Net Working
Capital as reflected on the Final Closing Statement is less than the applicable Base Working
Capital.
“Working Capital Surplus” shall mean the amount, if any, by which Net Working Capital
as reflected on the Final Closing Statement exceeds the Base Working Capital.
“Worksite Employees” shall have the meaning given such term in Section
3.16(a).
1.2 Other Definitional Provisions. As used in this Agreement, unless expressly stated
otherwise or the context requires otherwise, (a) all references to an “Article,” “Section,” or
“subsection” shall be to an Article, Section, or subsection of this Agreement, (b) the words “this
Agreement,” “hereof,” “hereunder,” “herein,” “hereby,” or words of similar import shall refer to
this Agreement as a whole and not to a particular Article, Section, subsection, clause or other
subdivision hereof, (c) the words used herein shall include the masculine, feminine and neuter
gender, and the singular and the plural, (d) the word “including” shall mean “including, without
limitation” and (e) the word “day” or “days” shall mean a calendar day or days, unless denoted as a
Business Day.
26
1.3 Headings. The headings of the Articles and Sections of this Agreement and of the
Schedules and Exhibits are included for convenience only and shall not be deemed to constitute part
of this Agreement or to affect the construction or interpretation hereof or thereof.
1.4 Other Terms. Other terms may be defined elsewhere in the text of this Agreement and
shall have the meaning indicated throughout this Agreement.
ARTICLE II
THE TRANSACTION
2.1 The Transaction. Subject to and upon the terms and conditions of this Agreement, at
the Closing, Seller shall contribute, transfer, convey, assign and deliver to Buyer, and Buyer
shall acquire and accept from Seller, all the Interests free and clear of all Liens. At the
Closing Seller shall deliver to Buyer assignments duly executed by Seller transferring and
assigning the Interests to Buyer in accordance with the terms of this Agreement.
2.2 Consideration.
(a) The aggregate consideration to be paid by Buyer for the Interests shall consist of (i)
Transaction Units and (ii) the Cash Amount (together, the “Aggregate Consideration”). The
“Cash Amount” of the Aggregate Consideration shall be $150,000,000 (one hundred fifty million and
no/100 dollars) less the Credit Agreement Balance plus or minus the algebraic sum of the following
adjustments: Positive adjustments consisting of the sum of (A) Capital Expenditures, if any, and
(B) the Working Capital Surplus, if any, and a negative adjustment consisting of (C) the Working
Capital Deficit, if any. The Aggregate Consideration shall be payable in the manner described in
Section 2.2(b) and Section 2.3.
(b) At the Closing, Buyer shall:
(i) pay to Seller, by wire transfer of immediately available funds to the account designated
in writing by Seller to Buyer at least two Business Days prior to Closing, an amount in Cash equal
to the Estimated Cash Amount (the “Closing Amount”);
(ii) issue to Seller the Transaction Units, which securities shall be issued on original issue
and evidenced by a certificate or certificates duly executed and delivered by or on behalf of the
Partnership; and
(iii) to the extent unpaid, pay to the payees of any Expenses, Termination Fees, FAA Fees,
Change of Control Amounts and Severance Adjustment Amounts, by wire transfer of immediately
available funds to the account(s) designated by such Persons in
the applicable Payoff Letters, the amounts specified in the Payoff Letters less, to the extent
applicable, any Medicaid, Social Security, income tax, unemployment tax and other amounts required
to be withheld; provided, however, that any payment of Severance Adjustment Amounts
and Change of Control Amounts shall be subject to receipt by TexStar of the releases, if any,
required, and the expiration, without revocation of such releases, of all time periods during which
such release could be revoked, under any Employee Benefit Plan or other Contract or instrument
pursuant to which such Severance Adjustment Amounts or Change of Control Amounts are payable.
27
(c) Promptly after the Closing, Buyer shall pay to each holder of any Third-Party Debt, by
wire transfer of immediately available funds to the account(s) designated by such Persons in the
applicable Debt Payoff Letters, the amounts specified in the Debt Payoff Letters.
(d) Buyer agrees that it shall not pay the Credit Agreement Balance until after the Closing.
2.3 Adjustments.
(a) Preparation of Estimated Closing Statement. Seller shall prepare in good faith and
deliver to Buyer, at least four Business Days prior to the Closing Date and at the sole expense of
Seller, a statement as of the Closing Date (the “Estimated Closing Statement”), setting
forth a detailed determination of the Estimated Cash Amount. The “Estimated Cash Amount”
shall be $150,000,000 minus the Credit Agreement Balance plus (A) the sum of (1) estimated amount
of the Capital Expenditures, if any, and (2) the estimated amount of Working Capital Surplus, if
any, minus (B) the estimated amount of Working Capital Deficit. The Debt Payoff Amount and the
Expenses, Severance Adjustment Amount, Change of Control Amount, the amount of FAA Fees and the
amount of Termination Fees to be used in the calculation of estimated Working Capital Deficit or
estimated Working Capital Surplus shall be based on amounts set forth in the Debt Payoff Letter or
the Payoff Letters, or, to the extent a Debt Payoff Letter or a Payoff Letter has not been provided
for a Third-Party Debt, Change of Control Amount, Severance Adjustment Amount, Expense, FAA Fees or
Termination Fees, an estimate of such amounts, and in each case, shall be subject to final
determination in the preparation of the Final Closing Statement. Each estimation shall be made as
of 11:59 p.m. on the Measurement Date. If Buyer has any questions or disagreements regarding the
Estimated Closing Statement, Buyer shall contact Seller at least two Business Days prior to the
Closing Date, and in such case Seller and Buyer shall in good faith attempt to resolve any
disagreements. If Buyer and Seller agree on changes to the Estimated Cash Amount based on such
discussions, then the Estimated Cash Amount shall be paid at Closing based on such changes. If
Buyer and Seller do not agree on changes to the Estimated Cash Amount, then the Estimated Cash
Amount shall be paid at the Closing based on the amounts set forth in the Estimated Closing
Statement. In either such case, appropriate adjustments to the Purchase Price shall be made after
the Closing pursuant to Sections 2.3(b), (c), and (d).
(b) Preparation of Closing Statement . As soon as reasonably practicable after the Closing Date (and, in any event, within 90 days
after the Closing Date), Buyer shall prepare and deliver to Seller, at the sole expense of Buyer, a
closing statement as of 11:59 p.m. on the Measurement Date (the “Proposed Closing
Statement”), setting forth the proposed final calculation of (i) Capital Expenditures, (ii) Net
Working Capital, and (iii) using the Credit Agreement Balance, the Cash Amount of the Aggregate
Consideration. If Buyer does not deliver the Proposed Closing Statement when required, Seller may
prepare and deliver it to Buyer, and, in such case, Buyer shall have Seller’s objection rights
under this Section 2.3. Buyer shall provide Seller access to the Records in accordance
with Section 5.4 in order to confirm Buyer’s calculations or to prepare the Proposed
Closing Statement, as the case may be.
(c) Examination of Proposed Closing Statement. Seller shall review the Proposed Closing
Statement to confirm the accuracy of the Proposed Closing Statement and
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Buyer’s calculations. If
Seller fails to give Buyer written notice of any disputed amounts within 30 days after Seller
receives the Proposed Closing Statement (the “Review Period”), then the Proposed Closing
Statement shall become the Final Closing Statement for purposes hereof. If Seller gives Buyer
written notice of any disputed items within the Review Period, Buyer and Seller shall attempt in
good faith to agree on any adjustments that should be made to the Proposed Closing Statement. If
Buyer and Seller fail to resolve any disputed amounts within 60 days after Seller receives the
Proposed Closing Statement, Buyer and Seller will engage the Audit Firm to resolve any such
disputed matters in accordance with the terms of this Agreement, and, in connection with such
engagement Buyer, TexStar and Seller shall execute any engagement, indemnity and other agreements
as the Audit Firm may require as a condition to such engagement. The Audit Firm’s engagement shall
be limited to the resolution of disputed amounts set forth in the Proposed Closing Statement that
have been identified by Seller, and no other matter relating to the Final Closing Statement shall
be subject to determination by the Audit Firm except to the extent affected by resolution of the
disputed amounts. The Parties shall cooperate diligently with any reasonable request of the Audit
Firm in an effort to resolve any disputed matter as soon as reasonably possible after the Audit
Firm is engaged. If possible, the decision of the Audit Firm shall be made within 30 days after
being engaged and shall be final and binding on the Parties. The Proposed Closing Statement shall
be revised, if necessary, to reflect the final determination of (i) Capital Expenditures, (ii) Net
Working Capital, and (iii) the Cash Amount of the Aggregate Consideration (the final form of the
Proposed Closing Statement, including any revisions that are made thereto pursuant to this
Section 2.3(c), is referred to herein as the “Final Closing Statement”).
(d) Adjustments.
(i) If the Cash Amount of the Aggregate Consideration as reflected on the Final Closing
Statement is less than the Closing Amount (the amount of such shortfall, if any, being hereinafter
referred to as the “Aggregate Consideration Deficit”), Seller shall pay Buyer an amount in
Cash equal to the Aggregate Consideration Deficit. The Aggregate Consideration Deficit, if any,
shall be paid by Seller to Buyer within five Business Days after the final determination of the
Final Closing Statement.
(ii) If the Aggregate Consideration as reflected on the Final Closing Statement is greater
than the Closing Amount (the amount of such excess being hereinafter referred to as the
“Aggregate Consideration Surplus”), Buyer shall pay Seller an amount in Cash equal to the
Aggregate Consideration Surplus. The Aggregate Consideration Surplus, if any, shall be paid by
Buyer to Seller within five Business Days after the final determination of the Final Closing
Statement.
(e) No Duplicative Effect. The provisions of this Section 2.3 and of any other
Transaction Document shall apply in such a manner so as not to give the components and calculations
duplicative effect to any item of adjustment and, except as otherwise expressly provided in this
Agreement or as described in the Sample Balance Sheet, the Parties covenant and agree that no
amount shall be (or is intended to be) included, in whole or in part (either as an increase or
reduction) more than once in the calculation of (including any component of) Capital Expenditures,
or Net Working Capital, in each case, if any, or the Cash Amount of the Aggregate Consideration, or
any other calculated amount pursuant to this Agreement if the effect of such
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additional inclusion
(either as an increase or reduction) would be to cause such amount to be overstated or understated
for purposes of such calculation. The Parties acknowledge and agree that, if there is a conflict
between a determination, calculation or methodology set forth in the Sample Balance Sheet or the
definitions contained in this Agreement, as applicable, on the one hand, and those provided by
GAAP, on the other hand, (i) the determination, calculation or methodology set forth in the Sample
Balance Sheet or the definitions contained in this Agreement, as applicable, shall control to the
extent that the matter is included in the Sample Balance Sheet or the definitions contained in this
Agreement, as applicable, as a line item or specific adjustment and (ii) the determination,
calculation or methodology prescribed by GAAP shall control to the extent the matter is not so
addressed in the Sample Balance Sheet or the definitions contained in this Agreement, as
applicable, or requires reclassification as an asset or liability to be included in a line item or
specific adjustment.
(f) Fees and Expenses of the Audit Firm. If the Parties submit any disputed amounts to the
Audit Firm for resolution as provided in Section 2.3(c) above, the fees and expenses of the
Audit Firm (the “Audit Fees”) will be paid by and apportioned between Buyer and the Seller
based on the aggregate dollar amount of the amount in dispute and the relative recovery as
determined by the Audit Firm of Seller and Buyer, respectively. The Seller and Buyer shall
promptly, and in any event within five Business Days after the final determination of the Final
Closing Statement, pay to the Audit Firm the amount of Audit Fees payable by Seller and Buyer
pursuant to the preceding sentence.
(g) Seller Holdback. As security to Buyer for the performance of Seller’s obligations
under Sections 2.3(d) and under Section 2.3(f), Seller shall, until the amount of
any Aggregate Consideration Deficit and Audit Fees for which Seller is responsible under
Section 2.3(d) and Section 2.3(f) has been paid or, if none, then the date of
delivery of the Final Closing Statement, (A) maintain Seller’s limited
partnership existence and (B) not transfer, assign, pledge or otherwise dispose of any interest in
any Transaction Units issued to Seller pursuant to Section 2.2(b).
2.4 Como Acquisition.
(a) In calculating the Cash Amount of the Aggregate Consideration, the Como Bank Debt
(including any proceeds thereof) shall not be taken into account or otherwise affect such
calculations or the Aggregate Consideration under Section 2.2 or the Estimated Cash Amount
under Section 2.3.
(b) If the Como Acquisition shall not have closed as of 11:59 p.m. on the Measurement Date,
but the closing of the Como Acquisition shall have occurred as of the Closing Date, then Como
Expenses shall not be included as a Current Liability.
(c) If the Como Acquisition closes after the Closing and on or prior to October 31, 2006, then
upon the closing of the Como Acquisition, Buyer will reimburse Seller for all Como Expenses
included as a Current Liability for purposes of Section 2.2 and Section 2.3.
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(d) If the Como Closing has not occurred by October 31, 2006, then Seller shall, within five
Business Days following written request by Buyer, (i) refund to Buyer the Como Adjustment Amount,
without interest, and (ii) reimburse Buyer for the full amount of all Como Expenses paid or
incurred by any TexStar Company and that were not incurred as a Current Liability, without
interest. Seller shall, until the earlier of the occurrence of the Como Closing and November 15,
2006 (i) maintain liquidity in an amount no less than the Como Adjustment Amount and an amount
equal to the Como Expenses in excess of the amount of Como Expenses included in Current Liabilities
for purposes of Sections 2.2 and 2.3; and (ii) maintain Seller’s limited
partnership existence.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the limitations set forth in Article IX, Seller represents and warrants to
Buyer as follows (such representations and warranties being deemed to be made as of the date hereof
and on a continuous basis until the Closing):
3.1 Organization, Good Standing and Authority of Seller.
(a) Seller is a limited partnership duly formed, validly existing and in good standing under
the Laws of the State of Delaware and has all requisite limited partnership power and authority to
carry on its business as it is now being conducted and to own, operate and lease the assets it now
owns, operates or holds under lease. Seller is duly qualified to transact business and is in good
standing in Delaware. All the outstanding partnership interests of Seller have been duly
authorized and validly issued and were not issued in violation of any preemptive rights
or other preferential rights of subscription or purchase of any Person. Seller is duly
qualified to do business in all the jurisdictions in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such qualification necessary, except
jurisdictions in which the failure to be so qualified would not have a Material Adverse Effect on
TexStar.
(b) Seller has the full right, power and authority to enter into this Agreement and the
Transaction Documents to which it shall be a party and to transfer, convey and sell to Buyer at the
Closing the Interests. The execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is or is intended to be a Party have been duly authorized by all
requisite partnership action on the part of the Seller. This Agreement and the other Transaction
Documents to which it is or shall be a Party have been duly executed and delivered by Seller, and
(assuming due authorization, execution and delivery hereof by the other parties hereto and thereto)
such Transaction Documents constitute or will, if not yet executed, at Closing constitute, legal,
valid and binding obligations of Seller, enforceable against Seller in accordance with their terms;
subject as to enforceability, to bankruptcy, insolvency, reorganization, moratorium and other laws
of general applicability relating to or affecting creditors’ rights and to general principles of
equity (regardless of whether such enforceability is considered in a proceeding in equity or at
law).
3.2 Title to Interests. Seller has good and valid record and beneficial title to the
Interests, free and clear of any and all Liens. TexStar GP has good and valid record and beneficial
title to the GP Interests, free and clear of any and all Liens. The Partnership Interests
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constitute all of the outstanding Equity Interests in TexStar, and the LLC Interests constitute all
of the outstanding Equity Interests in TexStar GP. Upon the Closing, Buyer will acquire good title
to all of the issued and outstanding Interests, free and clear of any Liens, other than any Liens
created by Buyer. No partnership interest, membership interests or other Equity Interests of
TexStar are reserved for issuance. There are not, and on the Closing Date there will not be,
outstanding or in existence any other Equity Interests (a) of TexStar except for the Partnership
Interests and (b) of TexStar GP except for the LLC Interests, and neither TexStar or TexStar GP has
any outstanding Equity Interest Equivalents and is not obligated, under any Contract or otherwise,
to issue any Equity Interests or Equity Interest Equivalents other than as described in the
foregoing clauses (a) and (b).
(a) TexStar is a limited partnership duly formed, validly existing and in good standing under
the Laws of the State of Delaware and has all requisite limited partnership power and authority to
carry on its business as it is now being conducted and to own, operate and lease the assets it now
owns, operates or holds under lease. TexStar is duly qualified to transact business and is in good
standing in Delaware. All the outstanding partnership interests of TexStar have been duly
authorized and validly issued and were not issued in violation of any preemptive rights or other
preferential rights of subscription or purchase of any Person. TexStar is duly qualified to do
business in all the jurisdictions in which the business it is conducting, or
the operation, ownership or leasing of its properties, makes such qualification necessary,
except jurisdictions in which the failure to be so qualified would not have a Material Adverse
Effect on TexStar.
(b) TexStar GP is a limited liability company duly formed, validly existing and in good
standing under the Laws of the State of Delaware and has all requisite limited liability company
power and authority to carry on its business as it is now being conducted and to own, operate and
lease the assets it now owns, operates or holds under lease. TexStar GP is duly qualified to
transact business and is in good standing in Delaware and Texas. All the outstanding limited
liability company interests of TexStar GP have been duly authorized and validly issued and were not
issued in violation of any preemptive rights or other preferential rights of subscription or
purchase of any Person. TexStar GP is duly qualified to do business in all the jurisdictions in
which the business it is conducting, or the operation, ownership or leasing of its properties,
makes such qualification necessary, except jurisdictions in which the failure to be so qualified
would not have a Material Adverse Effect on TexStar.
(c) TexStar, directly or indirectly through another TexStar Subsidiary, owns, of record and
beneficially, all of the outstanding Equity Interests of each TexStar Subsidiary free and clear of
all Liens except for Liens in favor of Lenders granted under the Credit Agreement. The TexStar
Subsidiaries, Texana Pipeline Company and Xxxxxxx Joint Venture are the only corporations, limited
partnerships, limited liability companies and other Persons in which TexStar owns, directly or
indirectly, an Equity Interest. Section 3.3(c) of the TexStar Disclosure Schedule sets
forth all of (i) the outstanding Equity Interests of each TexStar Subsidiary and the record and
beneficial owners thereof and (ii) the outstanding Equity Interests of Texana Pipeline Company and
Xxxxxxx Joint Venture owned by TexStar Subsidiaries and the record and beneficial owners of such
Equity Interests. TexStar, directly or indirectly through another
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TexStar Subsidiary, owns, of
record and beneficially, the Equity Interests in Texana Pipeline Company and Xxxxxxx Joint Venture
set forth in Section 3.3(c) of the TexStar Disclosure Schedule free and clear of all Liens
except for Liens in favor of Lenders granted under the Credit Agreement. None of the TexStar
Subsidiaries has any outstanding Equity Interests Equivalents and is not obligated, under any
Contract or otherwise, to issue any Equity Interests or Equity Interest Equivalents.
(d) Each TexStar Subsidiary is duly organized or incorporated, validly existing and in good
standing under the Laws of its respective jurisdiction of organization or incorporation, is duly
qualified to do business as a foreign limited liability company, limited partnership or corporation
in good standing to conduct business in each jurisdiction set forth opposite such TexStar
Subsidiary’s name on Section 3.3(d) of the TexStar Disclosure Schedule, which are all the
jurisdictions in which the business it is conducting, or the operation, ownership or leasing of its
properties, makes such qualification necessary, except jurisdictions in which the failure to be so
qualified would not have a Material Adverse Effect on TexStar. Each TexStar Subsidiary has the
requisite power and authority (as a corporation, limited partnership or limited liability company)
to carry on its respective business as it is now being conducted and to own, operate and lease the
assets it now owns, operates or holds under lease.
(e) All the outstanding shares of capital stock, partnership interests, membership interests
and other Equity Interests of each TexStar Subsidiary (i) have been duly
authorized and validly issued (and, with respect to Xxxxxxx, are fully paid and
non-assessable), (ii) were not issued in violation of any preemptive rights or other preferential
rights of subscription or purchase of any Person and (iii) are owned of record and beneficially by
TexStar or another TexStar Subsidiary, free and clear of all Liens.
(f) Seller has heretofore made available to Buyer true and complete copies of the
Organizational Documents of each of TexStar, TexStar GP and the TexStar Subsidiaries. Section
3.3(f) of the TexStar Disclosure Schedule sets forth a true and complete list of the TexStar
Subsidiaries together with, for each such entity, (i) a specification of the nature of its legal
organization, (ii) the jurisdiction of its organization and (iii) its authorized, issued and
outstanding Equity Interest and record and beneficial owner thereof.
3.4 [reserved].
3.5
No Conflicts. Assuming the effectuation of all filings and registrations with,
the termination or expiration of any applicable waiting periods imposed by and the receipt of all
Authorizations and Orders of Governmental Authorities indicated as required in
Section 3.5 of
the TexStar Disclosure Schedule, neither the execution and delivery by Seller of this
Agreement, any other Transaction Documents to which Seller is or shall be a party or any instrument
required hereby or thereby to be executed and delivered by it at Closing nor the performance by
Seller of its obligations hereunder or thereunder will conflict with, violate or breach the terms
of, cause a default (with or without notice or lapse of time or both) or give rise to right of
termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or
result in the creation of any Lien on any of the Assets of any TexStar Company under (i) assuming
the consents, approvals, authorizations or permits and filings or notifications referred to in
Section 3.7 are duly and timely obtained or made, to Seller’s Knowledge, any Law,
33
Regulation or Order applicable to any Seller or TexStar Company, (ii) the Organizational Documents
of Seller or any TexStar Company or (iii) any Contract to which any Seller or any TexStar Company
is a party or by which it or any of its properties or assets is bound, other than, in the case of
clause (i) or (iii), any such conflict, violation, breach, default, right, loss of benefit, or
creation of Lien that, individually or in the aggregate, has not had and could not reasonably be
expected to result in a Material Adverse Effect on TexStar.
3.6
Regulation and Authorizations. No TexStar Company has engaged in any activities
that would subject any TexStar Company, its activities, or its facilities to the NGA jurisdiction
of the FERC. All of the facilities of TexStar used to transport natural gas are intrastate
pipelines or “gathering” facilities and, as such, are not subject to regulation by any Governmental
Authority under the NGA or the NGPA. The representations made by Seller and the TexStar Companies
concerning the jurisdictional status of their facilities and operations to natural gas purchasers
and interstate or intrastate pipelines in order to effect sales or to facilitate transportation
transactions (whether for any TexStar Company or any Third Person) were when made and are true and
correct in all material respects, and the TexStar Companies have complied in all material respects
with the
terms and conditions of such sales, transportation or interconnect or similar arrangements
(including “on behalf of” certificates).
(a) Except for (i) Post-Closing Notifications, (ii) any Notifications set forth in Section
3.7(a)(ii) of the TexStar Disclosure Schedule (the “Required Notifications”), (iii) any
Third-Party Consent set forth in Section 3.7(a)(iii) of the TexStar Disclosure Schedule (a
“Required Third-Party Consent”), and (iv) any Authorizations set forth in Section
3.7(a)(iii) of the TexStar Disclosure Schedule, to Seller’s Knowledge, no Authorization,
Notification or Third-Party Consent is necessary for Seller to execute, deliver and perform this
Agreement and the other Transaction Documents to which it is or it shall be a party other than such
Authorizations, Notifications or Third-Party Consents that if not obtained or given, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on TexStar.
(b) Each TexStar Company possesses all material Authorizations, including all certificates of
public convenience and necessity and rate authorizations required by the Governmental Authority of
each state with jurisdiction over such matters, as are, to Seller’s Knowledge, necessary to carry
on its businesses as currently conducted. Such Authorizations are in full force and effect and, to
Seller’s Knowledge, have not been violated in any material respect and no suspension, revocation or
cancellation thereof has been threatened. To Seller’s Knowledge, no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time) could reasonably
be expected to constitute or result in a material violation by any of the TexStar Companies of, or
a material failure on the part of any member thereof to comply with the terms of, any such
Authorization. Neither Seller nor any of the TexStar Companies has received from any Governmental
Authority written notification that any such Authorizations (i) are not in full force and effect,
(ii) have been violated in any material respect or (iii) are subject to any suspension, revocation,
modification or cancellation. There is no Proceeding pending or, to Seller’s Knowledge, threatened
regarding suspension, revocation, modification or cancellation of any of such Authorizations.
34
(a) TexStar and the TexStar Subsidiaries, individually or together, own, all of the assets
reflected in the Consolidated Balance Sheet (other than any assets reflected in the Consolidated
Balance Sheet that have been sold or otherwise disposed of since the date of the Consolidated
Balance Sheet without breaching Section 5.1(b)) and all other assets (including Real
Property Interests) owned by them or held by them under valid leaseholds (the “Assets”)
free and clear of all Title Defects, other than the Pipeline Assets, as to which they have such
title or interest as is sufficient to enable them to conduct their business as currently conducted
without material interference. Neither Seller nor any TexStar Company has received any written
notice of any claim asserting the existence of a Title Defect in connection with any material
Assets. To
Seller’s Knowledge, there are no assessments against the Assets for public improvements. As
of the date of this Agreement, there has been no actual or, to Seller’s Knowledge, threatened
taking (whether permanent, temporary, whole or partial) of any part of the Assets by reason of
condemnation or, to Seller’s Knowledge, the threat of condemnation.
(b) The Assets constitute all of the assets, rights and properties, tangible or intangible,
real or personal, that are used or, to Seller’s Knowledge, necessary for use in connection with the
operation of the business of the TexStar Companies consistent with past practice and as currently
operated. The personal property owned or leased by the TexStar Companies is, to Seller’s
Knowledge, sufficient to enable them to conduct their business as currently conducted. There are
no preferential or similar rights to purchase any material Asset or material portion of the Assets.
(c) None of the Title Defects set forth in Section 3.8 of the TexStar Disclosure
Schedule has had or will have an adverse effect on the ability of the TexStar Companies to
conduct their business as currently conducted without material interference.
(d) Neither Seller nor any TexStar Company has received any notice of default or termination
or, to Seller’s Knowledge, is in default, under the terms of any leases, easements or rights of way
with respect to the Real Property Interests, that might result in a material impairment or loss of
title to the Real Property Interests or the value thereof or that has or would hinder or impede the
operations of the assets of any TexStar Company or adversely affect the ability of the TexStar
Companies to own and operate their assets from and after the Closing in the ordinary course of
business as conducted by the TexStar Companies prior to Closing.
(e) The assets of the TexStar Companies that are tangible assets are, in all material
respects, in good operating and working order, repair and condition, subject to ordinary wear and
tear.
(a) All Taxes payable by or imposed against any TexStar Company have been timely and fully
paid other than Taxes not yet due and payable. Each TexStar Company has duly complied with all
withholding Tax and Tax deposit requirements imposed on them and their respective assets.
35
(b) All Tax Returns that are required to have been filed for, by, on behalf of or with respect
to each TexStar Company have been duly and timely filed with the appropriate Governmental Authority
(other than tax returns for which timely extensions have been filed) and all such Tax Returns are
correct and complete in all material respects.
(c) (i) No TexStar Company is under audit or examination by any Governmental Authority with
respect to Taxes, (ii) there are no Claims or Proceedings now pending or, to Seller’s Knowledge,
threatened against any TexStar Company with respect to any Tax or any matters under discussion with
any Governmental Authority relating to any Tax, (iii)
there are no Claims for any additional Tax and no assessment, deficiency or adjustment has
been asserted by any Governmental Authority against any TexStar Company that has not been finally
resolved and satisfied, and (iv) no claim has ever been made by a Governmental Authority in a
jurisdiction where the TexStar Companies do not file Tax Returns that it is or may be subject to
taxation in that jurisdiction. There are no outstanding Contracts or waivers extending the
statutory period of limitation applicable to (A) the filing of any Tax Return by or with respect
to, or (B) any claim for, or the period for the collection or assessment of, Taxes due from or with
respect to, any TexStar Company for any taxable period.
(d) No TexStar Company has agreed to make any material adjustment pursuant to Section 481(a)
of the Code (or any similar provision of foreign, state or local law or any predecessor provision)
by reason of any change in any accounting method, and there is no application pending with any
Governmental Authority requesting permission for any changes in any accounting method of any
TexStar Company.
(e) No TexStar Company will be required to include in any period ending after the Closing Date
any income that accrued in a prior period but was not recognized in any prior period as a result of
the installment method of accounting, the completed contract method of accounting, the long-term
contract method of accounting or the cash method of accounting.
(f) None of the TexStar Companies (i) has been a member of an affiliated, consolidated,
combined, unitary or similar group filing a consolidated federal income Tax Return, or (ii) has any
liability for the Taxes of any Person (other than another TexStar Company).
(g) No TexStar Company is a party to, is bound by, or has any obligation under, any Tax
sharing agreement, Tax allocation agreement or similar Contract.
(h) No TexStar Company has executed or entered into with the IRS, or any other Governmental
Authority, a closing agreement pursuant to Section 7121 of the Code or any similar provision of
state, local, foreign or other income tax law, which will require any increase in taxable income or
alternative minimum taxable income, or any reduction in Tax deductions or Tax credits for, any
TexStar Company for any taxable period ending after the Closing Date.
(i) No TexStar Company has made any payments, is obligated to make any payments, or is a party
to any agreement that could obligate it to make any payments that would not be deductible under
Section 280G of the Code.
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(j) From and at all times since July 28, 2005, TexStar has been classified as a disregarded
entity for U.S. federal income tax purposes under Treasury Regulation § 301.7701-3 and all Tax
Returns have been prepared consistently therewith. All of the TexStar Subsidiaries, other than
Xxxxxxx (which is classified as a corporation) and PGCL (which is classified as a partnership) from
and at all times since their inception, have been classified as disregarded entities for U.S.
federal income tax purposes under Treasury Regulation § 301.7701-3 and all Tax Returns have been
prepared consistently therewith.
(a) Except as set forth in Section 3.10(a) of the TexStar Disclosure Schedule, each
TexStar Company is in compliance in all material respects with all applicable Laws and Regulations
and no TexStar Company has received specific written notice from any Governmental Authority that it
is not in compliance in any material respects with any applicable Law. Notwithstanding anything
herein to the contrary, the provisions of this Section 3.10 shall not relate to or cover
Environmental Laws.
(b) Subject to Section 3.6 and except as set forth in Section 3.10(b) of the
TexStar Disclosure Schedule, no provision of any Law, Regulation or Order applicable to any
TexStar Company (i) would preclude any TexStar Company from charging and collecting, without the
necessity for approvals of any Governmental Authority and without refund obligation, market based
rates for gathering, transporting, treating, processing, compressing, purchasing, or selling
Hydrocarbons; (ii) would preclude any TexStar Company from constructing additions to, modifications
of or interconnections with Third Persons with respect to, its gathering, transportation, treating,
processing or compression facilities; or (iii) has required or could reasonably be expected to
require any TexStar Company to make refunds of amounts collected for sales or services.
(c) None of the TexStar Companies is engaged in any natural gas or other futures or options
trading or is a party to any price swaps, xxxxxx, futures or similar instruments.
3.11
Insurance.
Section 3.11 of the TexStar Disclosure Schedule sets forth a list,
including the name of the insurer, the risks insured, and related limits of the insurance policies
currently maintained by the TexStar Companies. All such policies are in full force and effect.
There is no material claim outstanding under any such insurance policy and to Seller’s Knowledge,
no event has occurred, and no circumstance or condition exists, that has given rise to or serves as
the basis for or (with or without notice or lapse of time) could reasonably be expected to give
rise to or serve as the basis for any such claim under any such policy. No TexStar Company has
received any written notice from any insurer or reinsurer of any reservation of rights with respect
to pending or paid claims. No TexStar Company is a party to any Contract, and the insurance
policies listed on
Section 3.11 of the TexStar Disclosure do not contain any provision,
that would affect the rights of any TexStar Company under such insurance policies upon or as a
result of the consummation of the transactions contemplated by this Agreement.
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(a) Section 3.12(a)(i) of the TexStar Disclosure Schedule contains a description of
all Material Contracts. A true, correct and complete copy of each Material Contract has been made
available to Buyer. Except for the Acquisition Agreements, no TexStar Company has entered into any
material acquisition, partnership, joint venture, teaming or other similar Contract since July 30,
2004. None of the TexStar Companies has received from any other party to a Material Contract any
written notice of any material breach or material violation
by any TexStar Company of any Material Contract or termination or intention to terminate such
Material Contract. Except as set forth in Section 3.12(a)(ii) of the TexStar Disclosure
Schedule, no event has occurred which (with notice or lapse of time, or both) would constitute
a default or an event of default by any TexStar Company under the terms of any Material Contract or
give any other party to a Material Contract the right to terminate or modify the terms of such
Material Contract. The TexStar Companies have performed all of their material obligations under
the Material Contracts. Each of the Material Contracts is enforceable and in full force and effect
and constitutes a legal, valid and binding obligation of the TexStar Company that is a party
thereto and, to Seller’s Knowledge, each other party thereto, and, to Seller’s Knowledge, no other
party to any Material Contract is in material breach of the terms, provisions or conditions of such
Material Contract.
(b) A copy of each Contract entered into between any TexStar Company and any of the parties to
any Acquisition Agreement after the date of the closing under the applicable Acquisition Agreement,
and any Contract currently being negotiated and proposed to be entered into among such parties,
including without limitation any such Contract regarding the resolution of responsibility or
liability for the remediation or other clean-up of any Pre-existing Environmental Matters or any
claim for indemnification by any party, is listed on Schedule 3.12(b) of the TexStar Disclosure
Schedule and true and correct copies of each such Contract (or the current version of each such
Contract currently being negotiated), has been made available to Buyer.
(c) No TexStar Company has received any claim for indemnification from any party (other than a
TexStar Company) under any Acquisition Agreement, and Section 3.12(c) of the TexStar Disclosure
Schedule sets forth a list of (i) all claims for indemnification made by any TexStar Company
under any Acquisition Agreement and (ii) all unresolved pending claims for indemnification made by
any TexStar Company under the Acquisition Agreement.
3.13
Intellectual Property. There are no material trademarks, trade names, patents,
service marks, brand names, computer programs, databases, industrial designs, copyrights or other
intangible property (“
Intellectual Property”), that are, to Seller’s Knowledge, necessary
for the operation, or continued operation, of the business of any TexStar Company, or for the
ownership and operation, or continued ownership and operation, of any assets of any TexStar
Company, for which the TexStar Companies do not hold valid and continuing authority in connection
with the use thereof. No TexStar Company has received any written notice of infringement,
misappropriation or conflict with respect to Intellectual Property from any Person with respect to
the operation of the Assets owned by any TexStar Company.
3.14
Broker’s or Finder’s Fees. Except as set forth in
Section 3.14 of the TexStar
Disclosure Schedule, no investment banker, broker, finder or other Person is entitled to any
38
brokerage or finder’s fee or similar commission in respect of the transactions contemplated by this
Agreement or any Transaction Document
based in any way on agreements, arrangements or understandings made by or on behalf of any TexStar
Company.
(a) None of the TexStar Companies has agreed to recognize any labor union or other collective
bargaining representative and, to Seller’s Knowledge, no labor union or other collective bargaining
representative claims to or is seeking to represent any employees of the TexStar Companies. To
Seller’s Knowledge, no union organizational campaign or representation petition is currently
pending with respect to any employees of any TexStar Company.
(b) No TexStar Company is a party to or bound by any collective bargaining agreement,
applicable to any employees of the TexStar Companies. No collective bargaining agreements relating
to any employees of the TexStar Companies are being negotiated.
(c) There is no labor strike or labor dispute, slow down, lockout or stoppage actually pending
or, to Seller’s Knowledge, threatened against or affecting the TexStar Companies, and none of the
TexStar Companies has experienced any labor strikes or material labor disputes, slowdowns, lockouts
or stoppages. None of the TexStar Companies is engaged, nor has engaged, in any unfair labor
practices, and has not had any, unfair labor practice charges or complaints before any Governmental
Authority pending or, to Seller’s Knowledge, threatened against any TexStar Company. None of the
TexStar Companies has any grievances, arbitrations, or other proceedings arising or asserted to
arise out of or under any employment or similar Contract or individual Contract, pending or, to
Seller’s Knowledge, threatened, against any of them.
(d) None of the TexStar Companies is a party to any Contract (other than this Agreement) that
is, in any way, inconsistent with such employees’ future status with Buyer or any TexStar Company
as employees-at-will who may be terminated at any time without cause or notice, except as otherwise
provided by applicable Law.
(e) None of the TexStar Companies is a party to any employment Contract or any consulting or
similar Contract for the provision of services to, any TexStar Company.
(a) TexStar has entered into the Management Services Agreement pursuant to which employees of
BlackBrush O&G provide personnel management services to TexStar and the other the TexStar Companies
(the “Worksite Employees”).
(b) Section 3.16(b) of the TexStar Disclosure Schedule sets forth a complete and
accurate list of each of the following (whether oral or in writing) that is or has been sponsored,
maintained or contributed to since January 1, 2000 by any TexStar Company or any
trade or business, whether or not incorporated, that together with any TexStar Company would
be considered affiliated with TexStar under Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA (an “ERISA Affiliate”) for the benefit of any person who, as of the
39
Closing, is a current or former Worksite Employee or employee or subcontractor of TexStar: (i)
each “employee benefit plan,” as such term is defined in Section 3(3) of ERISA (each, a
“Plan”); and (ii) each equity compensation, bonus, incentive award, severance, deferred
compensation, executive compensation, supplemental income, retiree benefit, fringe benefit (whether
or not taxable), employee loan, vacation, or change of control plan, policy or agreement, each
employment and consulting agreement, each personnel policy and each other employee benefit plan,
contract, program or practice which is not described in Section 3.16(b)(i) (each, a
“Benefit Program” or “Benefit Agreement,” as applicable) (such Plans and Benefit
Programs or Benefit Agreements are sometimes collectively referred to in this Agreement as the
“Employee Benefit Plans”).
(c) Neither any TexStar Company nor any ERISA Affiliate contributes to or has an obligation to
contribute to, nor has at any time since January 1, 2000, contributed to or had an obligation to
contribute to, a multiemployer plan within the meaning of Section 3(37) of ERISA or any other plan
subject to Title IV of ERISA; each TexStar Company and each ERISA Affiliate has performed all
obligations, whether arising by operation of law or by contract, including ERISA and the Code,
required to be performed by it in connection with the Employee Benefit Plans and the Management
Services Agreement, such that there have been no material defaults or violations by any other party
to the Employee Benefit Plans or the Management Services Agreement; each of the Plans intended to
be qualified under Section 401(a) of the Code has received a favorable determination letter from
the IRS regarding such qualified status (or the period for applying for a determination letter
remains open) or is entitled to rely on an opinion or notification letter from the IRS and has not
been amended, operated or administered in a way which could reasonably be determined to adversely
affect such qualified status; there are no actions, suits or claims pending (other than routine
claims for benefits) or, to Seller’s Knowledge, contemplated or threatened against, or with respect
to, any of the Employee Benefit Plans or their assets; the TexStar Companies and the ERISA
Affiliates have no liabilities or other obligations, whether actual or contingent, under any
Employee Benefit Plan for post-employment welfare benefits (other than continuation coverage under
the requirements of Section 4980B of the Code and Sections 601-609 of ERISA, other coverage
mandated by law or deferred compensation benefits); and each Employee Benefit Plan, related trust
agreements and, to the extent applicable, the IRS Forms 5500’s is for the three most recently
completed plan years for each Plan have been provided to Buyer.
(d) Neither the execution or delivery of this Agreement or the Transaction Documents nor the
consummation of the transactions contemplated hereby or thereby will result in any payment becoming
due to any employee or group of employees of any TexStar Company under any Employee Benefit Plan.
(a) TexStar has delivered to Buyer the following:
(i) the audited consolidated balance sheets (the “Consolidated Balance Sheet”) and
related audited consolidated income statements, statements of cash flows and statements of changes
in partners’ equity of TexStar and its Subsidiaries for the five months
40
ended December 31, 2004 and
the year ended December 31, 2005, together with the notes thereto and the related audit reports of
PricewaterhouseCoopers thereon (such financial statements for the five months ended December 31,
2004 and the year ended December 31, 2005 being the “Audited Financial Statements”); and
(ii) the unaudited consolidated balance sheet and related unaudited consolidated income
statements, statements of cash flows and statements of changes in partners’ equity of TexStar and
its Subsidiaries (for the four-month period ended April 30, 2006) together with the notes thereto
(the “Interim Financial Statements”) and together with the comparable unaudited financial
statements of TexStar and its Subsidiaries for the five-month period ended May 31, 2005. The
Audited Financial Statements and the Interim Financial Statements are hereinafter referred to,
collectively, as the “Financial Statements.”
(b) The Financial Statements have been prepared in accordance with the books and records of
TexStar and the TexStar Subsidiaries in all material respects. Each of the balance sheets included
in the Financial Statements (including any related notes and schedules) fairly presents in all
material respects the consolidated financial position of TexStar and the TexStar Subsidiaries, as
of the date thereof, and each of the consolidated income statements, statements of cash flows and
statements of changes in partners’ equity included in the Financial Statements (including any
related notes and schedules) fairly presents in all material respects the consolidated results of
operations, cash flows and changes in member interests, as the case may be, of TexStar and the
TexStar Subsidiaries for the periods set forth therein, in each case in accordance with GAAP,
subject, in the case of the Interim Financial Statements, to normal year-end adjustments and the
absence of notes or other textual disclosures required under GAAP that are not, indirectly or in
the aggregate, material. TexStar has informed the Partnership and Buyer that: (i) imbalances and
line losses or line gains may occur from time to time, causing the sums or gas volumes payable or
receivable under the Contracts of the TexStar Companies to increase or decrease after the date of
invoice (collectively, “Future Adjustments”), (ii) it is common industry practice to
discover Future Adjustments through meter readings, calculations, integrations and adjustments
performed substantially after a particular gas purchase, sale, transportation, gathering,
processing or treating transaction has been completed, invoiced for and settled by payment, (iii)
when a Future Adjustment is discovered, it is common in gas industry contracts to require the
parties to correct the Future Adjustment by making adjusted deliveries or payments as required to
settle all accounts based on the actual volumes delivered, transported, gathered, processed,
treated or received, and (iv) the Financial Statements were prepared based on the TexStar
Companies’ invoiced volumes and have not been adjusted for, and no amounts have been reserved for,
Future Adjustments that may be required under any TexStar Company’s Contracts; provided,
however, all Future Adjustments that were known or estimable as of the dates of the
Financial Statements are reflected in such Financial Statements; and provided,
further, nothing contained in this sentence shall limit or otherwise affect the rights of
the
Partnership and Buyer to rely (without qualification or limitation by this sentence) on the
representations and warranties otherwise set forth in this Section 3.17 or shall limit or
otherwise affect any rights or remedies of any Buyer Indemnitee under Article IX.
(c) Except as set forth in Section 3.17(c) of the TexStar Disclosure Schedule, there
are no Liabilities of TexStar or any TexStar Subsidiaries that are not reflected or reserved
against in the Interim Financial Statements, other than Liabilities that are (i) current
liabilities
41
incurred in the ordinary course of business and consistent with past practices of the
TexStar Companies since April 30, 2006, (ii) not required to be presented in unaudited interim
financial statements prepared in conformity with GAAP and that are not, individually or in the
aggregate, material to the TexStar Companies, taken as a whole, (iii) Liabilities under this
Agreement or (iv) Liabilities for Expenses.
(d) Each of the TexStar Companies maintains books and records reflecting in all material
respects its assets and liabilities and that in reasonable detail accurately and fairly reflect in
all material respects the transactions and dispositions of the assets of the TexStar Companies, and
maintains proper and adequate internal accounting controls that provide reasonable assurance that
(A) transactions are executed with management’s authorization; (B) transactions are recorded as
necessary to permit preparation of the consolidated financial statements of the TexStar Companies
and to maintain accountability for the consolidated assets; (C) access to the TexStar Companies’
assets is permitted only in accordance with management’s authorization; (D) the reporting of the
TexStar Companies’ assets is compared with existing assets at regular intervals; and (E) accounts,
notes and other receivables and inventory are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a current and timely basis.
(e) Seller’s accountants have not advised the Seller of any material deficiencies in Seller’s
disclosure controls and procedures, which controls and procedures are designed to require
disclosure of information of the type that would be required to be disclosed in reports filed under
the Exchange Act if TexStar FS had a class of securities registered under Section 12 of the
Exchange Act.
(f) Seller has made available to Buyer and the Partnership a summary of (A) any significant
deficiencies in the design or operation of internal controls which could, to Seller’s Knowledge,
materially adversely affect the TexStar Companies’ ability to record, process, summarize and report
financial data, (B) any material weaknesses in the TexStar Companies’ internal controls, (C) any
fraud, whether or not material, that involves management or other employees who have a significant
role in the TexStar Companies’ internal controls and (D) any change in the internal controls or
disclosure controls and procedures of the TexStar Companies effected since January 1, 2006.
(a) To Seller’s Knowledge, no TexStar Company is in violation of any Environmental Law that
could reasonably expected to have a Material Adverse Effect on
TexStar. No Governmental Authority or other Third Person has alleged that any TexStar Company
is in violation of any Environmental Law that could reasonably be expected to have a Material
Adverse Effect on TexStar, except for such allegations of violation that have been resolved to the
satisfaction of the party making such allegation.
(b) None of the Real Property Interests, none of any other properties used by any TexStar
Company, and none of the properties to which Hazardous Materials generated by any TexStar Company
or as a result of the operations of any TexStar Company may have migrated or been transported is
(i) listed on the CERCLA National Priorities List or any other
42
similar list of sites of
environmental concern maintained by any Governmental Authority or (ii) is the subject of any
remediation, removal, cleanup, investigation, response action, claim, judgment, or enforcement
action regarding any actual or alleged presence or release of Hazardous Materials.
(c) No TexStar Company has released (or, as to each of Xxxxxxx Joint Venture, Texas Gas
Gathering and Texana Pipeline Company, such TexStar Company has not, since the date any other
TexStar Company first acquired an Equity Interest in such TexStar Company, released), and to
Seller’s Knowledge there have not been any releases of, Hazardous Materials on, under, from, or
into any of the Real Property Interests or any other property formerly owned, operated, or used by
any TexStar Company during or before the time of such TexStar Company’s ownership, operation, or
use of such properties that could be reasonably expected to have a Material Adverse Effect on
TexStar.
(d) To Seller’s Knowledge, each TexStar Company currently holds all material permits,
licenses, and approvals required under any Environmental Law for its ownership, operation, or use
of the Real Property Interests and the conduct of its operations. There are no outstanding or
unresolved notices of violation or notices of noncompliance with respect to such permits, licenses,
and approvals.
(e) There are no civil, criminal, or administrative actions, suits, demands, claims, hearings,
proceedings, or notices pending or, to Seller’s Knowledge, threatened against any TexStar Company
under any Environmental Law, including without limitations those related to allegations of economic
loss, personal injury, illness, or damage to real or personal property or the environment.
(f) Except as set forth in Section 3.18(f) of the TexStar Disclosure Schedule, no
TexStar Company is a party or, to Seller’s Knowledge, a successor in interest to any Contract under
which any TexStar Company has assumed or agreed to be responsible for any current or contingent
Liabilities with respect to any Hazardous Materials or any matters arising under Environmental
Laws.
(g) To Seller’s Knowledge, there are no actual or contingent Environmental Costs or
Liabilities that any TexStar Company may sustain in connection with any remediation, clean-up,
modification, monitoring, repairs, work, construction, alterations or installations required as a
result of any existing condition, fact or circumstance, including any Environmental Costs or
Liabilities relating to capital improvements, physical upgrading or maintenance and
repairs required by, or otherwise required to correct any TexStar Company’s noncompliance
with, any Environmental Law.
(a) Except as set forth in Section 3.19(a) of the TexStar Disclosure Schedule, there
are no Proceedings pending or, to Seller’s Knowledge, threatened against any TexStar Company or the
Assets of any TexStar Company, including any Proceeding that questions the validity or
enforceability of this Agreement or any other Transaction Document to be executed
43
and delivered by
the TexStar Companies in connection with the transactions contemplated hereby.
(b) Except as set forth in Section 3.19(b) of the TexStar Disclosure Schedule, to
Seller’s Knowledge, there are no facts or circumstances existing that could reasonably give rise to
(i) any litigation, arbitration, investigation or proceeding that, if resolved in a manner adverse
to the TexStar Companies, could reasonably be expected to give rise to a material Liability or have
a Material Adverse Effect on TexStar or (ii) any litigation, arbitration, investigation or
proceeding under the Xxxxx Contracts.
(c) No TexStar Company is subject to any outstanding Order (other than routine oil and gas
field regulatory orders) or any executory compliance or settlement agreement, conciliation
agreement, memorandum of understanding, or letter of commitment with a Third Party, including any
such Order, agreement or arrangement relating to claims of unfair labor practices, employment
discrimination or other claims with respect to employment and labor practices and policies.
Notwithstanding anything herein to the contrary, the provisions of this Section 3.19
shall not relate to or cover Environmental Laws.
3.20
Bankruptcy. There are no bankruptcy, reorganization or receivership proceedings
pending, planned or being contemplated by any TexStar Company or with respect to any of their
respective Assets, or, to Seller’s Knowledge, being threatened against TexStar or any of the
TexStar Subsidiaries.
3.21
Absence of Certain Changes. Except as reflected in the Interim Financial Statements,
since January 1, 2006, (a) neither TexStar nor any TexStar Subsidiary has acted or failed to act in
a manner that would have been prohibited by
Section 5.1 if the terms of such Section had
been in effect as of and after such date and (b) there has not occurred, and neither TexStar nor
any TexStar Subsidiary has incurred or suffered, any result, occurrence, change, fact, event,
circumstance or effect of any of the foregoing that has had or could reasonably be expected to
have, a Material Adverse Effect on TexStar.
3.22
Pipeline Matters.
Section 3.22 of the TexStar Disclosure Schedule sets forth summary historical throughput
data and information (but only to the extent TexStar possesses such throughput data and
information) for the periods January 1, 2006 through April 30, 2006 relating to the Assets,
including volumes of Hydrocarbons transported through the Pipeline Assets for the periods
indicated. Such throughput data and information are accurate and complete in all material respects
with respect to such periods. Subsequent to such periods, there have been no material adverse
changes in the volumes of Hydrocarbons transported through the Pipeline Assets. Except as set
forth in
Section 3.22 of the TexStar Disclosure Schedule as of the date hereof, no fact or
circumstance exists that would result in a material decrease in such volumes excluding, however,
changes that may result from (a) market conditions, (b) matters that affect the energy industry in
general or in the area in which the Assets are located, or (c) non-performance by a party under the
Gas Contracts other than a TexStar Company.
44
3.23
Affiliate Relationships. Except as set forth in
Section 3.23 of the TexStar
Disclosure Schedule, there are no Contracts or other arrangements involving any TexStar Company
in which any member, manager, officer, director, or Affiliate of TexStar or the TexStar
Subsidiaries has a financial interest.
(a) The Transaction Units are being acquired by Seller for investment purposes only, for
Seller’s own account and not as nominee or agent for any other person or entity, and not with a
view to, or for resale in connection with, any distribution thereof within the meaning of the
Securities Act. Seller is not a party to or bound by, and does not intend to or have any plans to
enter into, any Contract with any person to sell, transfer or pledge any part of the Transaction
Units, except for bona fide pledges or sales or transfers made in compliance with all applicable
securities laws, each of which current or intended Contracts is set forth in Section 3.24(a) of
the TexStar Disclosure Schedule.
(b) Seller has such expertise, knowledge and sophistication in financial and business matters
generally that it is capable of evaluating, and has evaluated, the merits and economic risks of its
investment in the Partnership and the suitability of the Transaction Units as an investment.
(c) In connection with the acquisition of the Transaction Units hereunder, Seller has had the
opportunity to examine all aspects of the Partnership, its operations, and its financial condition
that Seller has deemed relevant, and has had access to all information with respect to the
Partnership and its business in order to make an evaluation thereof. In connection with the
acquisition of the Transaction Units hereunder, Seller has had the opportunity to ask such
questions of and receive answers from directors, officers, employees and representatives of the
Partnership concerning the Partnership and to obtain such additional information about the
Partnership as Seller deems necessary for an evaluation thereof. The investment decision of Seller
to acquire the Transaction Units has been based solely upon the evaluation made by Seller of the
Partnership. In evaluating the suitability of an investment in the Partnership, Seller has not
been furnished and has not relied upon any representations or other information (whether oral
or written) other than as contained in the representations and warranties of the Partnership and
Buyer in this Agreement and information in the instruments referred to in Section 3.24(d).
(d) Seller acknowledges that it has received, sufficiently in advance of this Agreement as
Seller deems necessary to evaluate an investment in the Transaction Units, a copy of each of the
Partnership SEC Documents, and has been informed that copies of Exhibits to each of the Partnership
SEC Documents will be made available to Seller upon such Seller’s written request.
(e) Seller is an “Accredited Investor” as defined in Rule 501 of Regulation D under the
Securities Act.
(f) Seller acknowledges that the Transaction Units have not been offered or sold by means of
any form of general solicitation or general advertising or by means of publicly disseminated
advertisements or sales literature.
45
(a) Seller acknowledges that no registration statement relating to the Transaction Units has
been filed under the Securities Act or any state securities law and that, consequently, the
Transaction Units are “restricted securities” within the meaning of Rule 144 under the Securities
Act, may not be sold, pledged, hypothecated or otherwise transferred (and, therefore, must be held
by Sellers) unless the Shares subsequently are registered under the Securities Act and such state
laws or unless an exemption from such registration requirements is available.
(b) Neither Seller nor anyone acting on Seller’s behalf has offered or sold or will offer or
sell any of the Transaction Units by means of any form of general solicitation or general
advertising or has taken or will take any action that would constitute a distribution of the
Transaction Units under the Securities Act, would render the disposition of the Transaction Units a
violation of Section 5 of the Securities Act or any state or other applicable securities law, or
would require registration or qualification pursuant thereto.
(a) Section 3.26 of the TexStar Disclosure Schedule sets forth a true and complete
list of all FCC Licenses held by each TexStar Company (the “TexStar FCC Licenses”). For
each TexStar FCC License, Section 3.26 of the TexStar Disclosure Schedule sets forth (A)
name of the licensee, (B) the FCC call sign, (C) the authorized channel(s), (D) the geographic area
of authorization (the “Market”) and (E) the date of original issuance or, if applicable,
last renewal. Except for Permitted Encumbrances, all TexStar FCC Licenses are owned by the
applicable TexStar Company free and clear of all Liens.
(b) The grant, renewal or assignment of the TexStar FCC Licenses to the existing licensee
thereof was approved by the FCC by Final Order and the TexStar FCC Licenses are validly issued and
in full force and effect. There is no Proceeding pending before the FCC or, to Seller’s Knowledge,
threatened, with respect to any TexStar FCC License.
(c) No application with respect to any TexStar FCC License is currently pending with the FCC.
(d) No TexStar Company is a party to or bound by any Contract with respect to spectrum
capacity under any TexStar FCC License or to accept any interference with respect to any TexStar
FCC License.
(e) Prior to the date hereof, Seller has made available or provided to Buyer true and complete
copies of each TexStar FCC License.
(f) There is no TexStar FCC License that is currently subject to a condition or situation that
could reasonably be expected to place the applicable FCC License at material risk of revocation,
cancellation or forfeiture within 180 days after the Closing Date.
46
The Partnership and Buyer jointly and severally represent and warrant to Seller as follows
(such representations and warranties being deemed to be made as of the date hereof and on a
continuous basis until the Closing), in each case except as to matters disclosed in the Partnership
SEC Documents:
4.1 Organization, Standing and Power. Each of the Partnership and Buyer and its
Significant Subsidiaries (as defined herein) is a corporation, limited liability company or limited
partnership duly organized or formed, validly existing and in good standing under the laws of its
jurisdiction of incorporation, organization or formation, has all requisite power and authority to
own, lease and operate its properties and to carry on its business as now being conducted, and is
duly qualified and licensed, as may be required, and in good standing to do business in each
jurisdiction in which the business it is conducting, or the operation, ownership or leasing of its
properties, makes such qualification and licensing necessary, other than in such jurisdictions
where the failure so to be qualified and licensed could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the Partnership. The Partnership
has heretofore made available to Seller complete and correct copies of its Organizational
Documents, each as amended to date, and complete and correct copies of the Organizational Documents
of Buyer. “Significant Subsidiary” means any subsidiary of the Partnership that would
constitute a Significant Subsidiary of the Partnership within the meaning of Rule 1.02 of
Regulation S-X of the SEC.
4.2 Capital Structure. As of the date hereof, the authorized Equity Interest of the
Partnership is as set forth in the Partnership Agreement. At the close of business on July 11,
2006: (a) 19,521,396 Common
Units were issued and outstanding; (b) 19,103,896 Subordinated Units were issued and outstanding;
(c) General Partner held 2% of the total partnership interest in the Partnership; (d) 751,800
Common Units were subject to issuance under outstanding options or awards under the Partnership
Long-Term Incentive Plan (“Unit Plan”); (e) 1,696,284 Common Units were reserved for
issuance pursuant to awards that may be granted (other than currently outstanding awards) pursuant
to the Unit Plan; (f) no Voting Debt was issued and outstanding; and (g) all Incentive Distribution
Rights were held by the General Partner. Except as set forth in this Section 4.2, and
except for changes since July 11, 2006 resulting from the grant or exercise of options granted
prior to the date hereof pursuant to, or from issuances or purchases under, Unit Plan, there are
outstanding: (i) no Equity Interests or Equity Interest Equivalents, Voting Debt or other voting
securities of the Partnership; (ii) no securities of the Partnership or any subsidiary of the
Partnership convertible into or exchangeable for shares of Equity Interests or Equity Interest
Equivalents, Voting Debt or other voting securities of the Partnership or any subsidiary of the
Partnership; and (iii) no options, warrants, calls, rights (including preemptive rights),
commitments or agreements to which the Partnership or any subsidiary of the Partnership is a party
or by which it is bound in any case obligating the Partnership or any subsidiary of the Partnership
to issue, deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered, sold,
purchased, redeemed or acquired, additional shares of Equity Interests or Equity Interest
Equivalents or any Voting Debt or other voting securities of the Partnership or of any subsidiary
of the Partnership or obligating the Partnership
47
or any subsidiary of the Partnership to grant,
extend or enter into any such option, warrant, call, right, commitment or agreement.
4.3 Authority; No Violations, Consents and Approvals.
(a) Other than approval by the General Partner, which approval has been obtained, no vote of
holders of any Equity Interest of the Partnership is necessary to approve this Agreement, the
Partnership Agreement Amendment, the other Transaction Documents to which the Partnership or Buyer
is or will be a party, or the performance by the Partnership and Buyer of their respective
obligations hereunder or thereunder. The Partnership and Buyer have all requisite limited
partnership power and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary partnership action on
the part of each of the Partnership and Buyer. This Agreement has been duly executed and delivered
by each of the Partnership and Buyer and, assuming this Agreement constitutes the valid and binding
obligation of Seller, constitutes a valid and binding obligation of each of the Partnership and
Buyer enforceable in accordance with its terms, subject as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium and other laws of general applicability relating to or
affecting creditors’ rights and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The Partnership, as the owner
of all of the outstanding Equity Interest in the general partner of Buyer, has caused the general
partner of Buyer to approve this Agreement and the transactions contemplated hereby in its capacity
as the general partner of Buyer.
(b) The execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby and compliance with the provisions
hereof will not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any material obligation or to the loss of a material benefit under, or give rise to
a right of purchase under, result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Partnership or any of its Subsidiaries
under, or otherwise result in a material detriment to the Partnership or any of its Subsidiaries
under, any provision of (i) the Organizational Documents of the Partnership (each as amended to
date) or any provision of the comparable charter or organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license or other Contract applicable to the
Partnership or any of its Subsidiaries, (iii) any joint venture or other ownership arrangement or
(iv) assuming the consents, approvals, authorizations or permits and filings or notifications
referred to in Section 3.7 are duly and timely obtained or made, any Law, Regulation or
Order applicable to the Partnership or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clause (ii) or (iii), any such conflicts,
violations, defaults, rights, liens, security interests, charges, encumbrances or detriments that,
individually or in the aggregate, could not reasonably be expected to result in a Material Adverse
Effect on the Partnership.
(c) No Notification to, and no Authorization from, any Governmental Authority is required by
or with respect to the Partnership or any of its Subsidiaries in connection with the execution and
delivery by the Partnership and Buyer of this Agreement and the other
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Transaction Documents to
which they are or will be a party or the performance by the Partnership and Buyer of their
respective obligations hereunder or thereunder, except for: (i) such filings and/or notices as may
be required under the Securities Act or the Exchange Act; (ii) filings with the Nasdaq; (iii) such
filings and approvals as may be required by any applicable state securities, “blue sky” or takeover
laws or environmental laws; (iv) any Post-Closing Notifications; and (v) any such Notification or
Authorization that the failure to obtain or make could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the Partnership.
4.4 SEC Documents. The Partnership has made available to Seller a true and complete copy
of each of the Partnership SEC Documents and exhibits to each of the Partnership SEC Documents.
The Partnership SEC Documents constitute each registration statement, prospectus, (other than
preliminary prospectuses), and other material reports and schedules filed by the Partnership with
the SEC since December 31, 2005, and include all the documents (other than preliminary material)
that the Partnership was required to file with the SEC since December 31, 2005. As of their
respective dates, the Partnership SEC Documents complied as to form in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Partnership SEC Documents, and none of the
Partnership SEC Documents contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. The financial statements of the
Partnership included in the Partnership SEC Documents were prepared from the books and records of
the Partnership and its subsidiaries, complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Rule
10.01 of Regulation S-X of the SEC) and fairly present in accordance with applicable requirements
of GAAP (subject, in the case of the unaudited statements, to normal, recurring adjustments, none
of which is material) the consolidated financial position of the Partnership and its consolidated
subsidiaries as of their respective dates and the consolidated results of operations and the
consolidated cash flows of the Partnership and its consolidated Subsidiaries for the periods
presented therein. Notwithstanding the foregoing statements, the Partnership and the Buyer shall
have no liability with respect to any current report on Form 8-K of the Partnership that has been
“furnished” rather than “filed” with the SEC.
4.5 Absence of Certain Changes or Events. Except as disclosed in, or reflected in the
financial statements included in, the Partnership SEC Documents, since December 31, 2005, the
Partnership has conducted its business only in the ordinary course of business, and there has not
been: (a) any material damage, destruction or other casualty loss (whether or not covered by
insurance) affecting the business or assets owned or operated by the Partnership and its
subsidiaries; or (b) any other transaction, commitment, dispute or other event or condition
(financial or otherwise) of any character (whether or not in the ordinary course of business) that,
individually or in the aggregate, has resulted in or could reasonably be expected to result in a
Material Adverse Effect on the Partnership.
49
4.6 Litigation. Except as disclosed in the Partnership SEC Documents, there is no suit,
action or proceeding pending, or, to Buyer’s Knowledge, threatened against or affecting the
Partnership or any subsidiary of the Partnership (“Partnership Litigation”), and, to the
Buyer’s Knowledge, there are no facts that are likely to give rise to any Partnership Litigation,
that, individually or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect on the Partnership, nor is there any judgment, decree, injunction, rule or order of
any Governmental Authority or arbitrator outstanding against the Partnership or any Subsidiary of
the Partnership that could reasonably be expected to result in a Material Adverse Effect on the
Partnership.
4.7 Taxes. From and at all times since its formation, the Partnership has qualified as a
partnership for U.S. federal income tax purposes under Section 7704(c) of the Code, and all Tax
Returns have been prepared consistently therewith.
4.8 Broker’s or Finder’s Fees. No investment banker, broker, finder or other Person is
entitled to any brokerage or finder’s fee or similar commission in respect of the transactions
contemplated by this Agreement or any Transaction Document based in any way on agreements,
arrangements or understandings made by or on behalf of Buyer or any of its Affiliates that is, or
following the Closing would be, an obligation of TexStar, Seller or any of their respective
Affiliates.
4.9 Investment Intent. Buyer is acquiring the Interests for its own account for investment and not with a view to, or
for sale in connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; and Buyer has no present or contemplated agreement, undertaking,
arrangement, obligation, indebtedness or commitment providing for the disposition thereof.
4.10 Financing. Buyer has received and furnished to Seller an accurate and complete copy
of the Commitment. The debt proceeds to be provided pursuant to the Commitment (assuming the
satisfaction of the conditions thereto) are sufficient to enable Buyer to perform its obligations
to consummate the transactions contemplated by this Agreement. As of the date hereof, to the
Partnership’s Knowledge, there is no fact or circumstance that could reasonably be expected to
cause the conditions to provide financing set forth in the Commitment to not be satisfied;
provided, however, that (i) the Partnership and Buyer make no representation or
warranty as to the materiality or past or future effect on the TexStar Companies of any matter
disclosed in the TexStar Disclosure Schedule or otherwise made available or provided to the
Partnership, Buyer or their advisors in the Buyer’s due diligence of the TexStar Companies,
including whether any such fact or circumstance has had or could reasonably be expected to have a
Material Adverse Effect on TexStar and (ii) this sentence and any representations or warranties
made in this Section 4.10 shall terminate as of the Closing and shall not affect any rights
or remedies of any Buyer Indemnitee under Article IX.
5.1 Conduct of Business.
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(a) Seller covenants and agrees that until the earlier of the Closing or the termination of
this Agreement, except as otherwise set forth in Section 5.1(a) of the TexStar Disclosure
Schedule or unless Buyer otherwise consents in writing (which consent shall not unreasonably
withheld, conditioned or delayed), Seller shall cause the TexStar Companies to:
(i) operate in the usual and ordinary course of business consistent with past practice;
(ii) preserve substantially intact their business organizations, and use commercially
reasonable efforts to maintain their rights, privileges and immunities, to retain the services of
the key employees (subject to work force requirements) of the TexStar Companies and to maintain
their relationships with their customers and suppliers;
(iii) use commercially reasonable efforts consistent with past practice to maintain and to
keep their properties and assets in good repair and condition, ordinary wear and tear excepted; if
there is any casualty loss or damage to any properties or assets of any TexStar Company prior to
Closing, TexStar shall consult with Buyer regarding the replacement or repair of such property or
asset;
(iv) use commercially reasonable efforts to keep in full force and effect insurance applicable
to their assets and operations comparable in amount and scope of coverage to that currently
maintained; and
(v) (A) keep and maintain accurate books, Records and accounts; (B) pay or accrue all Taxes,
assessments and other governmental charges imposed upon any of their Assets or with respect to
their franchises, business, or income when due and before any penalty or interest accrues thereon,
except for any Taxes the validity of which is being contested in good faith by appropriate legal
proceedings and for which adequate reserves have been set aside; (C) accrue and pay when due and
payable all wages and other compensation incurred with respect to all employees of and consultants
to the TexStar Companies, including all payments required under the Management Services Agreement;
and (D) comply in all material respects with the requirements of all applicable Laws, Regulations
and Orders, obtain or take all Governmental Actions necessary in the operation of its business, and
comply and enforce (in all material respects) the provisions of all Material Contracts.
(b) Except pursuant to the terms of this Agreement, as otherwise set forth in Section
5.1(b) of the TexStar Disclosure Schedule or unless Buyer otherwise agrees in writing from and
after the execution of this Agreement and until the earlier of the Closing or the termination of
this Agreement, Seller shall not sell, transfer or otherwise dispose of, or grant any Lien with
respect to, the Interests or any other Equity Interests of any TexStar Company and shall not permit
any TexStar Company to take any of the following actions (and shall take all action necessary
(including exercising its rights with respect to the Interests) to prevent any TexStar Company from
taking any action prohibited by this Section 5.1(b)):
(i) (A) to redeem, purchase or acquire, or offer to purchase or acquire, any of the
outstanding Equity Interests of any TexStar Company, (B) to effect any reorganization or
recapitalization, (C) to split, combine or reclassify any of the Equity Interests of any TexStar
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Company, or (D) to declare, set aside or pay any dividend or other distribution, other than wholly
in Cash, in respect of its Equity Interests;
(ii) (A) to offer, sell, transfer, issue, dispose of or grant, or authorize the offering,
sale, transfer, issuance, grant or disposition of, the Partnership Interests or any of its Equity
Interests or (B) to grant, or authorize the grant of, any Lien of any TexStar Company with respect
to the Partnership Interests or any of its Equity Interests;
(iii) to acquire, directly or indirectly, (A) whether by merger or consolidation, by
purchasing an Equity Interest or otherwise, any business or division of any Person or (B) any
material assets or properties other than the acquisition of assets from suppliers or vendors in the
ordinary course of business and consistent with past practice other than, in either case, for an
Approved Acquisition;
(iv) to sell, lease, exchange or otherwise dispose of, any of their respective assets, except
for dispositions of Hydrocarbon inventories or leases of their properties, in each case in the
ordinary course of business consistent with past practice or to grant any Lien with respect to any
of their respective assets, other than in connection with an Approved Acquisition;
(v) to adopt any amendments to their respective Organizational Documents;
(vi) (A) to make any change in their methods of accounting in effect on the date hereof,
except as may be required to comply with changes in GAAP, (B) to make or revoke any Tax election or
change (or make a request to change) its Tax accounting methods, policies, or procedures, (C) to
settle or compromise any Proceeding relating to Taxes, except, in each case, as may be required by
Law; or (D) to revalue any asset except as required by GAAP consistently applied on a basis
consistent with past practice and the preparation of the Interim Financial Statements;
(vii) to incur any Indebtedness, except for draws against the working capital facility
provided by the Credit Agreement and funding of the Como Bank Debt;
(viii) to incur, or commit to incur any liability or obligation to make capital expenditures
in excess of $150,000 individually or $500,000 in the aggregate, except for capital expenditures
that (A) have been approved by TexStar’s management prior to the date hereof and are set forth in
Schedule B, or (B) have been approved by Buyer;
(ix) to adopt a plan of complete or partial liquidation or resolutions providing for or
authorizing a liquidation, dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization;
(x) to amend, modify, cancel, waive or assign any rights or obligations under or otherwise
change in any respect any Material Contract other than in the ordinary course of business;
provided Seller shall (1) cause TexStar EasTex I and TexStar EasTex II to consult with
Buyer prior to taking any such action under the Como Acquisition Agreement without
52
regard to
whether such action may be in the ordinary course of business and (2) not amend, and not permit any
TexStar Company to amend, the Financial Advisory Agreement.
(xi) to enter into or assume any Contract with any Person (including an Affiliate), other than
Contracts entered into in the ordinary course of business with a Third Person consistent with past
practice and Contracts entered into in connection with an Approved Acquisition;
(xii) (A) increase any TexStar Employee’s compensation (including salary, bonuses, benefits
and other forms of current and deferred compensation), (B) to enter into, (1) any employee benefit,
pension or other plan (whether or not subject to ERISA), (2) any other equity based, incentive or
deferred compensation plan or arrangement or other fringe benefit plan, (3) any consulting,
employment, severance, bonus, termination or similar Contract with any Person or (4) any amendment
or extension of any such plan or Contract; (C) except for payments made pursuant to any existing
Plans, to grant, pay, or otherwise become liable for or obligated to pay, any Severance Obligation,
Change of Control Obligation, bonus or increase in compensation or benefits to, or forgive any
Indebtedness of, any employee or consultant of any TexStar Company; or (D) to make any loan to, or
enter into any other transaction with, any of its directors, officers or employees;
(xiii) to engage in any practice or take any action that would cause or result in, or permit
by inaction, any of the representations and warranties contained in Article III to become
untrue;
(xiv) (A) fail to maintain in full force and effect all TexStar FCC Licenses, and timely
comply with FCC Rules with respect to the TexStar FCC Licenses, (B) enter into any agreement on or
with respect to spectrum capacity under any TexStar FCC License without the prior consultation with
and the prior approval of Buyer, and (C) enter into any agreements to accept interference as
prescribed by the FCC Rules in connection with any TexStar FCC License without the prior
consultation with and the prior approval of Buyer; and
(xv) to agree in writing or otherwise to do any of the foregoing.
(c) The parties agree that if Buyer agrees in writing to any of the preceding Sections
5.1(a) and (b), each applicable section of TexStar Disclosure Schedules shall be
automatically updated for all purposes under this Agreement to include such action to which Buyer
agreed.
5.2 Access, Information and Access Indemnity.
(a) Until the earlier of the Closing or the termination of this Agreement, on Business Days
and during the business hours of 8:00 a.m. to 5:00 p.m. (local time), TexStar will continue to make
available to Buyer and Buyer’s authorized representatives for examination as Buyer may reasonably
request, all Records and agreements in the possession or control of Seller or any TexStar Company
relating to the assets and operations of any TexStar Company; provided, however,
such material shall not include (i) any information described in Section 5.2(a) of the TexStar
Disclosure Schedule subject to Third Person confidentiality agreements for which a consent or
waiver cannot be secured by TexStar after reasonable efforts,
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or (ii) subject to prompt disclosure
to Buyer of the general nature thereof, information which, if disclosed, would violate an
attorney-client privilege or would constitute a waiver of rights as to attorney work product or
attorney-client privileged communications; and provided, further that, Buyer shall
not unreasonably interfere with the day-to-day operations of the business of any TexStar Company.
(b) Subject to Section 5.2(a) above, TexStar shall permit Buyer and Buyer’s authorized
representatives to consult with TexStar’s employees on Business Days and during the business hours
of 8:00 a.m. to 5:00 p.m. (local time) provided that the prior notice is given to an Officer and
such Officer is permitted to be present, and to conduct, at Buyer’s sole risk and expense,
inspections and inventories of the assets owned by any TexStar Company over which any TexStar
Company has control. TexStar shall also coordinate, in advance, with Buyer to allow site visits
and inspections at the field sites on Saturdays unless operational conditions would reasonably
prohibit such access. Neither Buyer nor any of its representatives shall contact any customer of
any TexStar Company without the prior written consent of TexStar, which consent shall not be
unreasonably withheld.
(c) BUYER SHALL PROTECT, DEFEND, INDEMNIFY AND HOLD THE TEXSTAR INDEMNITEES HARMLESS FROM AND
AGAINST ANY AND ALL CLAIMS AND LOSSES CAUSED DIRECTLY OR INDIRECTLY BY THE ACTS OR OMISSIONS OF
BUYER, BUYER’S AFFILIATES OR ANY PERSON ACTING ON BUYER’S OR ITS AFFILIATE’S BEHALF IN CONNECTION
WITH ANY DUE DILIGENCE CONDUCTED PURSUANT TO OR IN CONNECTION WITH THIS AGREEMENT, INCLUDING ANY
SITE VISITS AND ENVIRONMENTAL SAMPLING; PROVIDED, HOWEVER, THAT THIS PROVISION
SHALL NOT APPLY TO ANY ENVIRONMENTAL CLAIM OR LIABILITY OF ANY TEXSTAR COMPANY DISCOVERED BY BUYER
THROUGH DUE DILIGENCE. Buyer shall comply fully with all rules, regulations, policies and
instructions issued by any TexStar Company or any Third Person operator and provided to Buyer
regarding Buyer’s actions while upon, entering or leaving any property, including any insurance
requirements that any TexStar Company may impose on contractors authorized to perform work on any
property owned or operated by any TexStar Company. Buyer shall not unreasonably interfere with the
day-to-day operations of the business of any TexStar Company.
5.3 Regulatory Filings. Seller shall (a) file promptly following the date of this
Agreement with the DOJ and the FTC the notification report form required by the HSR Act for the
transactions contemplated hereunder, requesting early termination of the waiting period thereunder,
(b) respond promptly to inquiries from the FTC or the DOJ in connection with such filing and (c)
comply in all material respects with the requirements of the HSR Act. Buyer shall (x) file
promptly following the date of this Agreement with the DOJ and the FTC the notification report form
required by the HSR Act for the transactions contemplated hereunder, requesting early termination
of the waiting period thereunder, (y) respond promptly to inquiries from the FTC or the DOJ and (z)
comply in all material respects with the requirements of the HSR Act. Subject to regulatory
constraints, Seller and Buyer shall cooperate with each other and promptly furnish all information
to the other Party that is necessary in connection with the Parties’ compliance with the HSR Act
and to obtain HSR Approval. Seller and Buyer shall coordinate their initial filing of the
notification and report form so that such filings are made on the same
54
day. Seller and Buyer shall
each keep the other Party fully advised with respect to any requests from or communications with
the DOJ or the FTC and shall consult with the other Party with respect to all filings and responses
thereto. The filing fees with respect to any filing under the HSR Act shall be paid at the time of
filing 50% by Buyer and 50% by Seller.
5.4 Preservation and Access to Records; and Further Assurances.
(a) For a period of at least seven years after the Closing Date (or at the request of any
Party, until 60 days after the expiration of any applicable statute of limitations), the Party in
possession of the originals of the Records will retain such Records at its sole cost and expense
and will make such Records (including reasonable access during regular office hours to personnel
familiar therewith) available to any other Party upon reasonable notice for inspection or copying,
or both, at the expense of the requesting Party, at the headquarters of the Party in
possession (or at such other location in the United States as the Party in possession may
reasonably designate in writing to the requesting Party) at reasonable times during regular office
hours. If Buyer, at any time, directly or indirectly, transfers the Records to a Third Person,
then Buyer will obligate the transferee to maintain the Records as herein required and will retain
access to the Records for the benefit of itself and the other Parties.
(b) From time to time, and without further consideration, each Party will execute and deliver
to any other Party such documents and take such actions as any other Party may reasonably request
in order more effectively to implement and carry into effect the transactions contemplated by this
Agreement and the other Transaction Documents.
5.5 Termination of Agreements. TexStar shall terminate the Financial Advisory Agreement,
the Monitoring and Oversight Agreement and the Management Services Agreement by executing and
delivering the Termination Agreements, prior to the Closing Date, without further Liability or
obligations of any TexStar Company thereunder other than Termination Fees described in Section
5.5 of the TexStar Disclosure Schedule.
5.6 Payoff Letters; Mutual Releases.
(a) Within five Business Days prior to the Closing Date, TexStar shall use its commercially
reasonable efforts to cause each payee of Third-Party Debt, Expenses, Change of Control Amounts and
Severance Obligations, as the case may be, to deliver a Debt Payoff Letter or a Payoff Letter to
TexStar, copies of which shall be promptly delivered to Buyer.
(b) TexStar shall use its commercially reasonable efforts to (i) cause each Mutual Release
delivered prior to the Closing to be reaffirmed at the Closing by Seller, each Officer, each
Manager, each officer and director of Seller, each director of any TexStar Company who has
delivered a Mutual Release prior to the Closing, and (ii) obtain and deliver to Buyer at the
Closing an executed Mutual Release from each Officer, each Manager, each officer and director of
Seller, and each director of any TexStar Company who has not delivered a Mutual Release prior to
the Closing.
5.7 Cooperation and Reasonable Efforts. The Parties agree to cooperate with each other and
to use commercially reasonable efforts to cause all of the conditions precedent to Closing to be
satisfied as promptly as practicable. Seller shall use commercially reasonable
55
efforts to obtain
prior to Closing each Authorization and each Required Third-Party Consent and to deliver each
Required Notification that is required to be obtained prior to the Closing of the transactions
contemplated by this Agreement, and in addition, Seller shall otherwise cooperate with Buyer, upon
Buyer’s request, to obtain the consent of any Third Person that may be required under any Law,
Regulation or Order or any Contract to which any TexStar Company is a party and that requires
consent as a result of the transactions contemplated by this Agreement.
5.8 Tax Matters.
(a) From and after the Closing, if any Taxing authority informs the Partnership, Buyer or any
TexStar Company of a claim, assessment, dispute or other Proceeding concerning an amount of Taxes
for which Seller is or may be liable, Buyer shall promptly inform Seller, and, for any period prior
to the Final Distribution Date, Seller shall have the right to control any resulting Proceedings
and to determine whether and when to settle any such claim, assessment, dispute or other Proceeding
to the extent such Proceedings affect the amount of Taxes for which Seller is or may be liable;
provided that Seller shall take no action without the prior written consent of Buyer, which
consent shall not be unreasonably withheld or delayed, that increases or could reasonably be
expected to increase the amount of Taxes payable by any TexStar Company for any period with respect
to which Seller is not obligated to indemnify Buyer pursuant to Article IX. Buyer shall
also use commercially reasonable efforts to cooperate with Seller, at Buyer’s expense, in
connection with any such claim, assessment, dispute or other Proceeding and provide access to the
Records in accordance with Section 5.4.
(b) Seller shall cause to be prepared and duly filed all Tax Returns required to be filed by
or with respect to the TexStar Companies for all Taxable years and periods ending on or before the
Closing Date. If requested by Buyer, PGCL or Xxxxxxx Joint Venture shall make a timely, valid
election under Section 754 of the Code with respect to the taxable period that includes the
contribution under this Agreement. Not later than 30 days prior to the due date of each such Tax
Return (including extensions thereof), Seller shall deliver to Buyer a copy of such Tax Return for
Buyer’s review and comment which comments shall not be unreasonably withheld. Seller shall provide
a copy of all such Tax Returns to Buyer promptly after filing. Buyer shall cause to be prepared
and duly filed all Tax Returns required to be filed by or with respect to the TexStar Companies for
all Straddle Periods. Not later than 30 days prior to the due date of each such Tax Return
(including extensions thereof), Buyer shall deliver to Seller a copy of such Tax Return for
Seller’s review and comment which comments shall not be unreasonably withheld. Buyer shall provide
a copy of all such Tax Returns to Seller promptly after filing.
(c) In the case of Taxes that are payable with respect to any Straddle Period, the portion of
any such Tax that is attributable to the portion of the period ending on the Closing Date shall be:
(i) in the case of Taxes that are either (A) based upon or related to income or receipts, or
(B) imposed in connection with any sale or other transfer or assignment of property (real or
personal, tangible or intangible), deemed equal to the amount that would be payable if the Taxable
years of each of TexStar Company (and each partnership in which any TexStar Company owns an
interest) ended with (and included) the Closing Date; and
56
(ii) in the case of Taxes that are imposed on a periodic basis with respect to the assets of
the TexStar Companies deemed to be the amount of such Taxes for the entire period (or, in the case
of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately
preceding period), multiplied by a fraction the numerator of which is the number of calendar days
in the portion of the period ending on the Closing Date and the denominator of which is the number
of calendar days in the entire period.
(d) From and after the date hereof, (i) Seller shall not, and shall not permit any of its
Affiliates to, amend any Tax Return previously filed which includes information relating to any
TexStar Company, without prior written consent of Buyer, which consent shall not be unreasonably
withheld or delayed, and (ii) Buyer shall not, and shall not permit any of its Affiliates to, amend
any Tax Return with respect to the Straddle Periods, without prior written consent of Seller, which
consent shall not be unreasonably withheld or delayed.
(e) Buyer and Seller shall cooperate fully, and shall cause each TexStar Company to cooperate
fully, as and to the extent reasonably requested by the other party, in connection with the filing
of Tax Returns pursuant to this Section 5.8 and any audit or Proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other Party’s request) the
provision of records and information that are reasonably relevant to any such audit or Proceeding
and making employees available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Partnership, Buyer and Seller further agree,
upon request, to use commercially reasonable efforts to obtain any certificate or other document
from any Governmental Authority or any other person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed on Seller, the Partnership or on Buyer, or any TexStar
Company (including with respect to the transactions contemplated hereby). The Partnership, Buyer
and Seller further agree, upon request, to provide the other Party with all information regarding
any TexStar Company that either Party may be required to report to any Governmental Authority.
(f) Any refund of Taxes of any TexStar Company (including any interest with respect thereto)
for any Taxable period ending on or prior to the Closing Date or for the portion of any Straddle
Period ending on the Closing Date (determined in accordance with the provisions of Section
5.8(c)) that is not attributable to the carryback of Losses from Taxable periods beginning
after the Closing Date or the portion of any Straddle Period beginning after the Closing Date
(determined in accordance with Section 5.8(c)) shall be the property of Seller, shall be
paid over promptly to Seller and if received by the Buyer or any TexStar Company after the Closing
Date shall be payable promptly to Seller.
(g) The Parties agree that any Tax of any TexStar Company that is imposed on any transaction
involving any TexStar Company (other than transactions in the ordinary course of business) that
occurs on the Closing Date but after Buyer’s purchase of the Interests shall be the responsibility
of the Buyer.
(h) All payments of Change of Control Amounts, Severance Obligations and other Expenses made
by a TexStar Company on or before the Closing Date shall be allocated entirely to the Taxable
period that ends on the Closing Date or the portion of any Straddle Period ending on the Closing
Date (determined in accordance with the provisions of Section 5.8(c)).
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5.9 Financing; Financial Statements; Controls and Procedures.
(a) Buyer shall use its commercially reasonable efforts to obtain the financing under the
Commitment required to effect the transactions contemplated by this Agreement. If
any portion of the funds to be provided under the Commitment becomes unavailable, regardless
of the reason therefor, Buyer shall, upon learning thereof, promptly so advise Seller and shall use
its commercially reasonable efforts to obtain alternative financing from other sources. Buyer
shall not change, amend, modify, supplement or terminate the Commitment without Seller’s prior
written consent.
(b) Prior to the Closing, Seller shall cooperate, and shall cause TexStar to cooperate, with
Buyer, Buyer’s financing sources, and Buyer’s auditors and attorneys in connection with the
financing of the purchase of the Interests by Buyer.
(c) Buyer shall advise each lender from whom Buyer is seeking financing of Buyer’s and
Partnership’s confidentiality obligations under the Confidentiality Agreement and shall cause such
lender to execute an agreement in commercially reasonable form and content agreeing to abide by the
confidentiality obligations set forth therein.
(d) Seller agrees, at Buyer’s sole cost and expense (including costs associated with Seller’s
internal accounting staff), (i) to revise the Audited Financial Statements so that such financial
statements will comply with Regulation S-X promulgated by the SEC (“Regulation S-X”)
(provided Seller shall be entitled to rely on Buyer and Buyer’s auditors in determining compliance
with Regulation S-X) and to use commercially reasonable efforts to obtain the reissuance of the
audit reports with respect thereto by PriceWaterhouseCoopers not later than 60 days after the
Closing, Seller’s independent registered public accounting firm (such statements and related
opinions being hereinafter referred to as the “Full Audited Financial Statements”) and (ii)
to prepare unaudited consolidated balance sheets and related unaudited consolidated income
statements, statements of cash flows and statements of changes in partners’ equity for TexStar and
its Subsidiaries for the quarters ended March 31, June 30 and September 30, 2005 and March 31, and
June 30, 2006, together with the notes thereto, in form and substance compliant with Regulation S-X
(provided Seller shall be entitled to rely on Buyer and Buyer’s auditors in determining compliance
with Regulation S-X) (such statements being hereinafter referred to as the “Full Unaudited
Financial Statements”). Seller shall use commercially reasonable efforts to complete the
preparation of the Full Audited Financial Statements and the Full Unaudited Financial Statements so
that they can be delivered to the Partnership not later than 60 days after Closing. Seller shall
also use commercially reasonable efforts to obtain the consent of PriceWaterhouseCoopers that the
Full Audited Financial Statements may be relied upon by the Partnership and its underwriters or
initial purchasers (a) to prepare and file reports under the Exchange Act, and (b) in connection
with any financing or public or Rule 144A offering of securities by the Partnership or its
Affiliates. Notwithstanding whether the Closing occurs or not, Buyer shall make all of the
payments for the costs and expenses hereunder promptly upon the written request of Seller.
(e) From and after the date hereof until the Closing, the Seller shall cause the TexStar
Companies (i) to deliver to the Buyer any unaudited financial statements of the TexStar Companies
prepared for any period subsequent to May 31, 2006 and (ii) at Buyer’s sole cost and expense
(including costs associated with Seller’s internal accounting staff), to initiate and diligently
pursue the preparation of unaudited financial statements of TexStar and its Subsidiaries for the
six-month periods ended June 30, 2005 and 2006 in form and substance compliant with Regulation S-X.
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expense (including costs associated with Seller’s internal accounting staff), to initiate
and diligently pursue the preparation of unaudited financial statements of TexStar and its
Subsidiaries for the six-month periods ended June 30, 2005 and 2006 in form and substance compliant
with Regulation S-X.
(f) All financial statements prepared and delivered pursuant to subsections (d) and
(e) of this Section 5.9 shall be prepared in accordance with the books and records
of TexStar and its Subsidiaries. Seller shall use its commercially reasonable efforts to assist
Buyer and Buyer’s auditors in preparing (i) balance sheets included in such financial statements
(including any related notes and schedules) that fairly present in all material respects the
consolidated financial position of TexStar and the TexStar Subsidiaries, as of the date thereof,
and (ii) consolidated income statements, statements of cash flows and statements of changes in
partners’ equity included in such financial statements (including any related notes and schedules)
that fairly present in all material respects the consolidated results of operations, cash flows and
changes in member interests, as the case may be, of TexStar and the TexStar Subsidiaries for the
periods set forth therein, in each case in accordance with GAAP, subject, in the case of interim
financial statements, to normal year-end adjustments and the absence of notes or other textual
disclosures required under GAAP that are not, indirectly or in the aggregate, material;
provided, however, that Buyer acknowledges and agrees that this Section
5.9(f) shall not be deemed to be a representation or warranty of any kind by Seller with
respect to such financial statements.
(g) From and after the date hereof and continuing after the Closing, at Buyer’s sole cost and
expense (including costs associated with Seller’s internal accounting staff), Seller will
cooperate, and Seller will cause its affiliates (including Blackbrush O&G) to cooperate, with
TexStar in producing such financial information relating to any TexStar Company as may be
reasonably necessary in order to permit TexStar to prepare such financial statements of TexStar and
its Subsidiaries as may be required (A) to be included by the Partnership in reports filed by it
under the Exchange Act or (B) in connection with the financing or public or Rule 144A offering of
securities by the Partnership or any of its affiliates. The provisions of this paragraph shall
survive the Closing.
(h) From the date of this Agreement until the Closing, Seller shall promptly disclose to Buyer
and the Partnership in summary form the existence, to Seller’s Knowledge, of any of the following
(A) any significant deficiencies in the design or operation of internal controls of the TexStar
Companies which could adversely affect the TexStar Companies’ ability to record, process, summarize
and report financial data, (B) any material weaknesses in the TexStar Companies’ internal controls,
(C) any fraud, whether or not material, that involves management or other employees who have a
significant role in the TexStar Companies’ internal controls and (D) any change in the internal
controls or disclosure controls and procedures of the TexStar Companies effected since January 1,
2006.
5.10 Transfer Taxes. All sales, transfer, use, gross receipts, registration, and similar
Taxes (including real estate transfer Taxes), if any, that are payable by any Party hereto or any
of the TexStar Subsidiaries arising out of or in connection with the consummation of the
transactions contemplated hereby shall be borne by Buyer.
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5.11 Tax Treatment; Aggregate Consideration Allocation. The Parties intend that the
transactions contemplated by Article II constitute a transfer described in Section 721 of
the Code and that the Cash Amount constitutes, to the maximum extent possible, reimbursement to
Seller for certain capital expenditures made during the two-year period preceding Closing within
the meaning of Treasury Regulation Section 1.707-4(d). Within sixty (60) calendar days after the
Closing Date, Buyer shall deliver to Seller a tax allocation of the Aggregate Consideration and the
assumed liabilities among the assets of the TexStar Companies. If Seller does not deliver to Buyer
a written objection to such allocation within thirty (30) calendar days after delivery thereof to
Seller, then such allocation shall govern. If Seller delivers a written objection to Buyer to such
allocation within thirty (30) calendar days after delivery of the allocation to Seller, then Seller
and Buyer shall negotiate in good faith in an attempt to reach agreement upon such allocation. If
the allocation is not agreed upon during the thirty (30) calendar day period after Seller’s written
objection is delivered to Buyer or within a mutually agreed-to extended time period, Seller and
Buyer agree that the allocation shall be based upon an asset valuation supplied by an independent
accounting firm of recognized national standing to be mutually agreed upon by Buyer and Seller.
Seller, the Partnership and Buyer shall act in accordance with such allocation in the filing of all
income Tax Returns (including for purposes of Section 704 of the Code), except as otherwise
required by a determination, as defined in Section 1313 of the Code. The cost of such appraisal
shall be shared equally by Buyer and Seller. The Parties agree that the difference between the
fair market value and the adjusted tax basis of any Section 704(c) property (within the meaning of
Treasury Regulation Section 1.704-3(a)(3)) acquired by the Partnership pursuant to this Agreement
will be taken into account under the “remedial method” as described in Treasury Regulation Section
1.704-3(d).
5.12 Transaction Units.
(a) Seller agrees that the Transaction Units shall not be offered for sale, sold, assigned,
pledged, hypothecated, transferred, exchanged or otherwise disposed of (a “transfer”)
unless the offer and sale is registered under the Securities Act and applicable state securities
laws or an exemption from such registration is available and complied with, and that if any such
transfer or offer thereof, is proposed to be effected pursuant to any such exemption, then the
Holder must, prior to such transfer, furnish to the Partnership and the transfer agent such
certifications, legal opinions or other information as they may reasonably require to confirm that
such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act or any state or foreign securities law.
(b) Seller acknowledges the following:
(i) The following legend may be placed on the certificates representing the Transaction Units:
THE UNITS (THE “UNITS”) EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER AGREES THAT IT WILL NOT DISTRIBUTE, OFFER, RESELL, PLEDGE OR
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OTHERWISE TRANSFER (INDIVIDUALLY AND COLLECTIVELY, A “TRANSFER”) THE UNITS
EVIDENCED HEREBY, EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT SUCH AS THE EXEMPTION SET FORTH IN RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE). IF THE PROPOSED TRANSFER IS TO BE MADE OTHER THAN PURSUANT TO
CLAUSE (A) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE ISSUER AND
THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT OR ANY STATE OR FOREIGN SECURITIES LAW.
TRANSFER OF THE UNITS EVIDENCED HEREBY IS RESTRICTED BY THE
CONTRIBUTION AGREEMENT,
DATED JULY 12, 2006, AMONG
REGENCY ENERGY PARTNERS LP, REGENCY GAS SERVICES LP AND
HMTF GAS PARTNERS II, L.P. THE UNITS EVIDENCED HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH SUCH RESTRICTIONS.
The legend set forth in the first paragraph above may be removed if and when the Transaction Units
represented by such certificate are disposed of pursuant to an effective registration statement
under the Securities Act, the opinion of counsel referred to above has been provided to the
Partnership, or, in the opinion of counsel to the Partnership, the same are no longer required
under the applicable requirements of such securities laws. The legend set forth in the second
paragraph above shall be removed upon the conversion of the Class B Common Units into the Common
Units in accordance with the Partnership Agreement. The unit certificates shall also bear any
additional legends required by applicable federal, state or foreign securities laws, which legends
may be removed when, in the opinion of counsel to the Partnership, the same are no longer required
under the applicable requirements of such securities laws.
(ii) Stop transfer instructions have been or will be placed with respect to the Transaction
Units so as to restrict the distribution, resale, pledge, hypothecation or other transfer thereof
in accordance with this Agreement.
(iii) The legend and stop transfer instructions described in subparagraphs (i) and (ii) above
will be replaced with respect to any new certificate issued upon presentment by the undersigned of
a certificate for transfer.
(c) Seller is aware that the Partnership has relied on the representations and warranties of
Seller set forth in Section 3.24 and Section 3.25 and on the covenants of Seller
set
forth in Section 3.25 and this Section 5.12 in determining that an exemption
from registration under the Securities Act, applicable state securities laws and the rules
promulgated thereunder is available for the issuance of the Transaction Units by the Partnership to
Seller, and that, but for
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such representations, no issuance of the Transaction Units would be made
by the Partnership to Seller pursuant to this Agreement.
(d) Seller covenants and agrees that it will not distribute any of the Transaction Units to
its partners prior to the date that the Transaction Units may be converted into Common Units of the
Partnership (the “Permitted Distribution Date”). Thereafter, the Seller may distribute any
or all the Transaction Units to its partners, or otherwise.
5.13 Director and Officer Indemnification.
(a) Without limiting any additional rights that any D&O Indemnified Person (as defined below)
may have pursuant to any employment agreement, indemnification agreement or otherwise, from and
after the Closing, the Partnership shall indemnify, defend and hold harmless each person who is
now, or has been at any time prior to the date of this Agreement or who becomes prior to the
Closing Date, a director or officer of any TexStar Company or who acts as a fiduciary under any
Employee Benefit Plan (the “
D&O Indemnified Persons”) against all losses, claims, damages,
costs, expenses (including attorneys’ and other professionals’ fee and expenses), liabilities or
judgments or amounts that are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of or in connection with any threatened or actual
claim, action, suit, proceeding or investigation based in whole or in part on or arising in whole
or in part out of the fact that such person is or was a director, officer, employee or agent of
such TexStar Company or a fiduciary under any Employee Benefit Plan or is or was serving at the
request of the Company or any of its Subsidiaries as a director, officer, employee or agent of
another corporation, partnership, limited liability company, joint venture, employee benefit plan,
trust or other enterprise or by reason of anything done or not done by such Person in any such
capacity whether pertaining to any act or omission occurring or existing prior to, at or after the
Closing Date and whether asserted or claimed prior to, at or after the Closing Date (“
D&O
Indemnified Liabilities”), including all D&O Indemnified Liabilities based in whole or in part
on, or arising in whole or in part out of, or pertaining to, this Agreement or the transactions
contemplated hereby, in each case to the fullest extent permitted under applicable law (and the
Partnership shall pay expenses in advance of the final disposition of any such claim, action, suit,
proceeding or investigation to each D&O Indemnified Person to the fullest extent permitted under
applicable law if such D&O Indemnified Person provides an undertaking to repay such expenses if
such person is determined to not be entitled to indemnification). Without limiting the foregoing,
if any such claim, action, suit, proceeding or investigation is brought against any D&O Indemnified
Persons (whether arising before or after the Closing Date), (i) the D&O Indemnified Persons may
retain the TexStar Company’s regularly engaged independent legal counsel or other counsel
satisfactory to them, and the Partnership shall pay all reasonable fees and expenses of such
counsel for the D&O Indemnified Persons as promptly as statements therefor are received and (ii)
the Partnership shall use its commercially reasonable efforts to assist in the vigorous defense of
any such matter, provided that the Partnership shall not be liable for any settlement effected
without its prior written
consent (which consent shall not be unreasonably withheld). Any D&O Indemnified Person
wishing to claim indemnification under this
Section 5.13, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Partnership (but the failure so to
notify shall not relieve the Partnership from any liability that it may have under this
Section
5.13 except to the extent such failure materially prejudices the Partnership’s position with
respect to such
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claims) and shall deliver to the Partnership any undertaking required by applicable
law, but without any requirement for the posting of a bond or any other terms or conditions other
than those expressly set forth herein.
(b) For a period of six years following the Closing Date, no TexStar Company shall amend,
repeal or otherwise modify its Organizational Documents in any manner that would affect adversely
the rights thereunder of individuals who at and at any time prior to the Closing Date were entitled
to indemnification thereunder (unless such amendment, repeal or modification is required by
applicable law). The Partnership shall cause each TexStar Company to honor any indemnification
agreements between such TexStar Company and any of its directors, officers or employees.
(c) The Partnership shall indemnify any D&O Indemnified Person against all reasonable costs
and expenses (including attorneys’ fees and expenses) relating to the enforcement of such D&O
Indemnified Person’s rights under this Section 5.13 or under any Organizational Document or
Contract regardless of whether such D&O Indemnified Person is ultimately determined to be entitled
to indemnification hereunder or thereunder, such amounts to be payable in advance upon request as
provided in Section 5.13(a) (including the undertaking required therein).
5.14 Control of the Xxxxxx Litigation.
(a) The Seller shall be entitled, through its designated counsel and at its sole cost and
expense, to control the defense, settlement and resolution of the Xxxxxx Litigation on behalf of
the TexStar Companies. The Seller shall have the right to require the TexStar Companies to settle,
compromise or otherwise resolve the Xxxxxx Litigation thereof so long as (i) the Seller provides
reasonable advance notice to the Partnership of such proposed settlement, including the terms
thereof and (ii) such settlement, compromise or other resolution of such claim includes as an
unconditional term thereof the giving by each claimant or plaintiff in the Xxxxxx Litigation to
each TexStar Company a release from all liability in respect to such action, which release in any
such settlement agreement or agreed judgment shall be in form and substance satisfactory to the
Partnership.
(b) The Partnership shall have the right, but not the obligation, through counsel to
participate in the defense, settlement and resolution of the Xxxxxx Litigation. Additionally, the
Partnership shall extend reasonable cooperation to the Seller in connection with the defense,
settlement and resolution of the Xxxxxx Litigation and, in connection therewith, shall furnish such
records, information and testimony and attend such conferences, proceedings, hearings, trials or
appeals as may be reasonably requested by the Seller. The Partnership shall be
entitled to reimbursement from Seller for its costs and expenses incurred in connection with
its participation and cooperation in the Xxxxxx Litigation pursuant to this Section
5.14(b).
(c) Notwithstanding the foregoing, the Partnership may assume control of the Xxxxxx Litigation
from the Seller, at the sole cost and expense of Seller, if any claims for equitable relief are
made against the TexStar Companies or any additional claims arise as part of the Xxxxxx Litigation
that would reasonably be expected to affect adversely the Partnership’s ownership, operation or
maintenance of the assets of the TexStar Companies. In such event,
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Seller shall have the right, but
not the obligation, at its sole cost and expense, through counsel to participate in the defense,
settlement and resolution of the Xxxxxx Litigation and shall extend reasonable cooperation to the
Partnership, at the Seller’s sole cost and expense, in connection with the defense, settlement and
resolution of the Xxxxxx Litigation.
(d) Costs and expenses with respect to the Xxxxxx Litigation to which the Partnership is
entitled to reimbursement from the Seller pursuant to this Section 5.14 shall first be
charged by the Partnership against the Xxxxxx Reserve. If the Partnership’s costs and expenses
exceed the reserve, then the Partnership shall be entitled to reimbursement from Seller monthly
within 10 days after submission of invoices to the Seller for costs and expenses to which the
Partnership is entitled to reimbursement under this Section 5.14. As defendants in the
litigation, the TexStar Companies will pay any Losses incurred in connection with the Final
Resolution of the Xxxxxx Litigation up to the amount of the Xxxxxx Reserve (after charging costs
and expenses against the reserve). To the extent that the Xxxxxx Litigation is Finally Resolved
with resulting Losses to the TexStar Companies in an amount that is less than the remainder of
Xxxxxx Reserve (after charging costs and expenses against such reserve), the Partnership shall
promptly (and in no event less than 10 days after such Final Resolution) pay to the Seller an
amount equal to the sum of the remainder of the Xxxxxx Reserve minus the amount for which the
Xxxxxx Litigation was Finally Resolved.
(e) Seller shall be entitled to all recoveries from Xxxxxx as a result of counterclaims by the
TexStar Companies against Xxxxxx.
5.15 Employees.
(a) Section 5.15(a) of the TexStar Disclosure Schedule lists all employees of the
TexStar Companies (the “TexStar Employees”), their current annual salary or hourly rate, as
applicable, and employee benefits (the “Current Salary/Benefits”). After the Closing, Buyer
shall continue, or shall cause the TexStar Companies or another Affiliate of Buyer to continue,
the employment of the TexStar Employees with Buyer, the TexStar Companies, another Affiliate of
Buyer, on terms no less favorable than the terms of employment (including, subject to the following
proviso, their Current Salary/Benefits but excluding any equity plan participation) through the
first anniversary of the Closing Date; provided, however, that after December 31,
2006, the Partnership and the TexStar Companies may change the Current Salary/Benefits of the
TexStar Employees such that the TexStar Employees are entitled to annual salary and employee
benefits (including bonus plan participation) that are provided to similarly situated employees of
the Partnership; and provided further, however, that the Partnership and the
TexStar Companies
may terminate any TexStar Employee for cause without further obligation to such TexStar
Employee unless required by the terms of the Current Salary/Benefits.
(b) Buyer or an Affiliate of Buyer may offer, and Seller shall cause BlackBrush O&G to allow
Buyer or an Affiliate of Buyer to offer, employment to the employees of BlackBrush O&G listed on
Section 5.15(b) of the TexStar Disclosure Schedule (the “Blackbrush Employees”)
upon such terms as Buyer in its sole discretion shall deem appropriate. Any such employment offers
shall be contingent upon and effective as of the Closing, and shall be under the terms that Buyer,
in its sole discretion, determines. Nothing herein shall obligate Buyer to offer employment to any
particular BlackBrush Employee or to offer any specific terms
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of employment to any BlackBrush
Employee. Seller shall cooperate, and shall cause BlackBrush O&G to cooperate, with Buyer in
arranging interviews with the Blackbrush Employees for potential employment with Buyer. Effective
as of the Closing, Seller shall cause BlackBrush O&G to terminate the employment of each BlackBrush
Employee who accepts Buyer’s offer of employment (each, a “Transferred Employee”). Seller
shall waive, and shall cause BlackBrush O&G to waive, enforcement of any and all noncompete,
confidential information and restrictive covenants or agreements applicable to the Transferred
Employees, so that the Transferred Employees will not be in violation of any such obligations to
Seller or BlackBrush O&G when the Transferred Employees are employed by Buyer or an Affiliate of
Buyer.
5.16 Gas Gathering Agreement. Subject to Buyer and Seller’s mutual agreement to the form
of the Gas Gathering Corollary Agreements, prior to Closing TexStar shall execute and deliver, and
Seller shall cause BlackBrush O&G and BlackBrush Oil and Gas II, L.P., a Delaware limited
partnership, to execute and deliver, the Gas Gathering Agreement and the Gas Gathering Corollary
Agreements, and copies shall be provided to Buyer.
5.17 Transition Services Agreement; Sublease. At the Closing, Seller shall cause
BlackBrush O&G to execute and deliver (i) a transition services agreement (the “Transition
Services Agreement”) pursuant to which BlackBrush O&G shall agree to provide administrative
services to Buyer and the TexStar Companies with respect to the TexStar Companies and their assets
and operations on terms mutually agreeable to Seller and Buyer, and (ii) a sublease, mutually
agreeable to Buyer and Seller, providing for the sublease by the TexStar Companies of a portion of
the office space currently occupied by BlackBrush O&G and the TexStar Companies in San Antonio,
Texas pursuant to the San Antonio Lease. Buyer and Seller agree to negotiate on good faith to
reach agreement on the terms of the agreements and sublease called for in this Section
5.17. Seller shall use and shall cause BlackBrush O&G to use commercially reasonable efforts to
obtain the consent of the landlord under the San Antonio Lease to sublease the San Antonio office
space to the TexStar Companies as called for in this Section 5.17.
5.18 Notice of Breaches of Representations and Warranties. Following the execution of this
Agreement and prior to Closing, Buyer and Partnership shall promptly (and in any event prior to the
earlier of three (3) Business Days following discovery or
the Closing Date) notify Seller of any matter of which any Officer of the Managing General Partner
has actual knowledge that, to the actual knowledge of such officer, constitutes a breach of any
representation or warranty of Seller contained in Article III; provided,
however, any such notification will not affect the rights or obligations of the
Partnership, Buyer or Seller under this Agreement and the failure to provide such notification will
not affect any rights of any Buyer Indemnitee or any obligations of Seller under this Agreement.
5.19 Financing Rebate. If any amounts are paid, or become payable, to Seller pursuant to
the side letter dated June 16, 2006, between UBS Loan Finance LLC, UBS Securities LLC, TexStar
Guarantor and TexStar Operating (the “Side Letter”), then (i) until such amounts are paid
Seller shall exercise its rights under the Side Letter to collect such payment and (ii) upon
payment of such amounts to Seller, Seller shall promptly deliver all amounts paid to Seller
pursuant to the Side Letter to Buyer and, until such payment to Buyer, shall hold such amounts in
trust for the benefit of Buyer. Seller shall not, and prior to Closing shall not permit TexStar
65
Guarantor or TexStar Operating to, amend, or waive or assign any rights under, the Side Letter
without Buyer’s prior written consent.
5.20 FCC Filings.
(a) Not later than five Business Days following the date of this Agreement (or, with respect
to the FCC Licenses to be acquired pursuant to the Como Acquisition Agreement, if any, as soon as
practicable after such applications can be filed), Buyer and Seller shall file or cause to be filed
with the FCC all appropriate applications with respect to the transfer of control to Buyer of the
TexStar FCC Licenses (the “FCC Transfer Applications”). The FCC Transfer Applications and
any supplemental information furnished in connection therewith shall be in substantial compliance
with the FCC Rules or be responsive to a request of the FCC.
(b) Buyer and Seller shall furnish to each other such necessary information and reasonable
assistance as the other may reasonably request in connection with the preparation, filing and
prosecution of the FCC Transfer Applications. Buyer and Seller shall bear their own expenses in
connection with the preparation, filing and prosecution of the FCC Transfer Applications. Buyer
and Seller shall each use their commercially reasonable efforts to prosecute the FCC Transfer
Applications and shall furnish to the FCC any documents, materials, or other information reasonably
requested by the FCC.
6.1 Seller’s Conditions. The obligation of Seller to close the transaction contemplated by
this Agreement is subject to the satisfaction of the following conditions, any of which (other than
the condition in Section 6.1(f)) may be waived by Seller in its sole discretion:
(a) The representations and warranties of Buyer contained in Article IV of this
Agreement shall be true and correct in all material respects (provided, however,
that any such representation or warranty of Buyer contained in Article IV that is qualified
by a materiality standard or a Material Adverse Effect on the Partnership qualification shall not
be further qualified by materiality for purposes of this Section 6.1(a)) on and as of the
Closing Date as if made on and as of such date, except (i) as affected by transactions specifically
permitted by this Agreement, and (ii) to the extent that any such representation or warranty is
made as of a specified date, in which case such representation or warranty shall have been true and
correct in all material respects as of such specified date;
(b) Buyer shall have performed in all material respects the obligations, covenants and
agreements of Buyer contained herein and in the Transaction Documents to which it is a party and
required before Closing;
(c) No temporary restraining order, preliminary or permanent injunction or other Order issued
by any court of competent jurisdiction that restrains, enjoins or otherwise prohibits the
consummation of the transactions contemplated by this Agreement shall be effective as of the
Closing;
66
(d) Buyer shall have delivered the items required to be delivered by Buyer pursuant to
Section 7.2(b);
(e) There shall have been no event or other occurrence that, individually or in the aggregate,
has had or reasonably could be expected to have a Material Adverse Effect on Partnership; and
(f) The HSR Approval shall have been obtained and each Required Notification shall have been
delivered.
6.2 Buyer’s Conditions. The obligation of Buyer to close the transactions contemplated by
this Agreement is subject to the satisfaction of the following conditions, any of which (other than
the condition in Section 6.2(i)) may be waived in its sole discretion:
(a) The Seller Title Representations and TexStar Title Representations shall be true and
correct on and as of the Closing Date as if made on the Closing Date and all other representations
and warranties contained in Article III shall be true and correct in all material respects
on and as of the Closing Date as if made on and as of such date, except as affected by transactions
contemplated or permitted by this Agreement and except to the extent that any such representation
or warranty is made as of a specified date, in which case such representation or warranty shall
have been true and correct in all material respects as of such specified date;
(b) All representations and warranties of Seller in Article III, other than the Seller
Title Representations and TexStar Title Representations, shall be true and correct in all material
respects (provided, however, that any such other representation or warranty of
Seller contained in Article III that is qualified by a materiality standard or a Material
Adverse Effect qualification shall not be further qualified by materiality for purposes of this
Section 6.2(b)) on
and as of the Closing Date as if made on and as of such date, except (i) as affected by
transactions specifically permitted by this Agreement and (ii) to the extent any such
representation or warranty is made as of a specified date, in which case such representation or
warranty shall have been true or correct in all material respects as of such specified date;
(c) Seller shall have performed, in all material respects, its obligations, covenants and
agreements contained herein and in the Transaction Documents and required to be performed before
Closing;
(d) No temporary restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction that restrains, enjoins or otherwise prohibits the
consummation of the transactions contemplated by this Agreement shall be effective as of the
Closing;
(e) There shall have been no event or other occurrence that, individually or in the aggregate,
has had or reasonably could be expected to have a Material Adverse Effect on TexStar;
(f) Buyer shall have available to it debt financing in the full amount of the Commitment on
terms and conditions substantially consistent with the terms and conditions of the Commitment;
67
(g) Seller shall have delivered the items required to be delivered by Seller pursuant to
Section 7.2;
(h) Each of the FAA Termination Agreement, the MO Termination Agreement and the MSA
Termination Agreement shall remain in full force and effect without any amendment thereto or waiver
of any right thereunder;
(i) The HSR Approval, each Required Third-Party Consent and each Authorization shall have been
obtained and each Required Notification shall have been delivered;
(j) The approval by the FCC of the FCC Transfer Applications shall have been obtained with
respect to each TexStar FCC License and shall have become a Final Order; and
(k) TexStar and BlackBrush O&G shall have executed and delivered the Gas Gathering Agreement
and, in a form mutually acceptable to Buyer and Seller, the Gas Gathering Corollary Agreements, and
copies shall have been provided to Buyer.
7.1 Time and Place of Closing. The consummation of the transactions contemplated hereby
(the “Closing”) shall take place at 10:00 a.m. local time on August 1, 2006 (or on or
before August 5, 2006), to be effective as of
August 1, 2006, (and in any such case with a Measurement Date of July 31, 2006), or if such Closing
shall not take place by August 5 2006, on September 1, 2006 (or on or before September 5, 2006), to
be effective as of September 1, 2006 (and with a Measurement Date of August 31, 2006) in the
offices of Xxxxxx & Xxxxxx, L.L.P, Xxxxxxxx Xxxx Center, 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx,
Xxxxx 00000 or such other time and place as the Parties agree to in writing (the “Closing
Date”). Subject to the provisions of Article VIII hereof, failure to consummate the
Closing on the date and at the place determined pursuant to this Section 7.1 will not
result in the termination of this Agreement and will not relieve any Party of any obligation under
this Agreement.
7.2 Deliveries at Closing. At the Closing,
(a) Seller will:
(i) deliver to Buyer an executed Assignment of Membership Interest in the form attached hereto
as Exhibit D (the “Assignment of Membership Interests”) assigning the GP Interest
to Buyer in accordance with Section 2.1;
(ii) deliver to Buyer an Assignment of Partnership Interest in the form attached hereto as
Exhibit E (the “Assignment of Partnership Interests”) executed by Seller and
TexStar GP (in its capacity as general partner of TexStar);
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(iii) execute and deliver, or cause to be executed and delivered, to Buyer a certificate of
Seller’s officers, certifying the satisfaction of the conditions specified in Sections
6.2(a), 6.2(b), and 6.2(c);
(iv) deliver to Buyer a certificate of the Secretary of State of the State of Delaware as to
the legal existence and good standing (including tax) of Seller and each TexStar Company in
Delaware;
(v) deliver to Buyer the original minute books of each TexStar Company;
(vi) execute and deliver to the Partnership a counterpart to the Transition Services
Agreement;
(vii) cause the Directors, Officers and Managers of each TexStar Company to execute and
deliver to Buyer the written resignation of each such Person in his or her capacity as such,
effective concurrently with the Closing on the Closing Date;
(viii) deliver to Buyer a certificate of non-foreign status of Seller which meets the
requirements of Treasury Regulation Section 1.1445-2(b)(2); and
(ix) deliver to the Partnership executed counterparts to the Registration Rights Agreement
from the Registration Rights Parties.
(b) Buyer will:
(i) execute and deliver to Seller an executed counterpart of the Assignment of Membership
Interest;
(ii) execute and deliver to Seller an executed counterpart of the Assignment of Partnership
Interest;
(iii) execute and deliver to Seller a certificate of Buyer’s officers certifying the
satisfaction of the conditions specified in Sections 6.1(a) and 6.1(b);
(iv) deliver to Seller a certificate of the Secretary of State of the State of Delaware as to
the legal existence and good standing (including tax) of Buyer in Delaware;
(v) execute and deliver to the Seller a counterpart to the Transition Services Agreement; and
(vi) make by wire transfer those Cash payments specified in Sections 2.2(b)(i),
2.2(b)(iii) and 2.2(c).
(c) The Partnership will:
(i) issue and deliver to Seller, in the name of Seller, the certificates representing the
Transaction Units deliverable to Seller pursuant to Section 2.2(b)(i);
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(ii) deliver to Seller a certificate of the Secretary of State of the State of Delaware as to
the legal existence and good standing (including tax) of the Partnership in Delaware;
(iii) execute and deliver to Seller a counterpart of the Partnership Agreement Amendment; and
(iv) execute and deliver to the Registration Rights Parties (upon receipt of counterparts from
such parties) a counterpart to the Registration Rights Agreement.
8.1 Termination at or Prior to Closing. This Agreement may be terminated prior to Closing
and the transactions contemplated hereby abandoned as follows:
(a) Seller and the Partnership may elect to terminate this Agreement at any time prior to the
Closing by mutual written consent;
(b) Seller on one hand, or the Partnership, on the other hand, by written notice may terminate
this Agreement if the Closing shall not have occurred on or before September 5, 2006;
provided, however, that, if HSR Approval shall not have been obtained on or prior
to such
date, the Partnership or TexStar shall have the right, in its sole discretion, to extend such
date to October 5, 2006 (with the Closing to be effective as of October 1, 2006 (and with a
Measurement Date of September 30, 2006));
(c) Seller by written notice to the Partnership may terminate this Agreement at any time prior
to the Closing if the Partnership or Buyer shall have breached any representations, warranties or
covenants of the Partnership or Buyer herein contained in such a manner such that the conditions to
Closing contained in Section 6.1(a) and 6.1(b) would not be satisfied;
provided, however, if such breach may be cured by the Partnership through the use
of its commercially reasonable efforts and for so long as the Partnership continues to use such
efforts, Seller may not terminate this Agreement under this Section 8.1(c) until after the
applicable deadline set forth in Section 8.1(b);
(d) The Partnership by written notice to Seller may terminate this Agreement at any time prior
to the Closing if Seller shall have breached any representations, warranties or covenants of Seller
herein contained in such a manner such that the conditions to Closing contained in Section
6.2(a), 6.2(b) and 6.2(c) would not be satisfied; provided,
however, if such breach may be cured by Seller through the use of its commercially
reasonable efforts and for so long as Seller continues to use such efforts, Buyer may not terminate
this Agreement under this Section 8.1(d) until after the applicable deadline set forth in
Section 8.1(b);
(e) The Partnership by written notice may terminate this Agreement upon the occurrence of an
event or other occurrence that, individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect on TexStar; or
70
(f) The Seller by written notice may terminate this Agreement upon the occurrence of an event
or other occurrence that, individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect on Partnership.
Notwithstanding anything in the foregoing to the contrary, a Party that is in material breach
of any provision of this Agreement shall not be entitled to terminate this Agreement except, in the
case of a material breach by Seller, with the consent of the Partnership, or in the case of a
material breach by the Partnership or Buyer, with the consent of Seller.
8.2 Effect of Termination. If Closing does not occur as a result of a Party exercising its
right to terminate pursuant to Section 8.1, then no Party shall have any further rights or
obligations under this Agreement, except that (i) nothing herein shall relieve a Party from any
liability for any breach of this Agreement, and (ii) the provisions of Section 5.2(c), this
Section 8.2, Section 9.7 and Section 10.1 and the Confidentiality Agreement
shall survive any termination of this Agreement. Notwithstanding the foregoing, if Closing does
not occur due to an election by a Party to terminate this Agreement under Section 8.1(c) or
8.1(d) as a result of a breach of representations or warranties by the other Party (i)
which occurs as a result of a change or occurrence between the date of this Agreement and the
Closing Date or (ii) the existence of which is first known to any Person listed within the
definition of Buyer’s Knowledge or Seller’s Knowledge, respectively, after the date of this
Agreement, then provided the Party that has breached its
representations and warranties has complied with its obligations under this Agreement to attempt to
cure such breach so as to cause the applicable conditions to Closing to have been satisfied, such
Party shall have no liability to the other under this Agreement arising from such breach other than
the right to recover actual out-of-pocket fees and expenses incurred by the non-breaching party,
including fees and expenses of legal counsel and financial advisers, in connection with the
evaluation of the transactions contemplated by this Agreement, the negotiation of this Agreement
and the other Transaction Documents and the preparation for the Closing of the transactions
contemplated by this Agreement.
9.1 Survival.
(a) Representations and Warranties. Regardless of any investigation at any time made by or
on behalf of any Party hereto or of any information any Party may have in respect thereof, each of
the representations and warranties made in this Agreement or any other Transaction Document shall
survive the Closing only as follows:
(i) each of the Seller Title Representations and the TexStar Title Representations shall
terminate 30 days after the expiration of all statutes of limitations applicable to any claim of
breach of such representations and warranties; and
(ii) the Seller’s representations and warranties in Section 3.9, to the extent made in
connection with Taxes that are imposed on or measured by a Person’s overall net income and
franchise taxes imposed (in lieu of net income taxes) on such Person by any
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Governmental Authority,
shall terminate 30 days after the expiration of all statutes of limitations applicable to any claim
of breach of such representations and warranties.
(iii) each of the other representations and warranties set forth in Article III and
Article IV shall terminate on the six month anniversary date of the Closing Date (the
“Survival Date”).
(b) Survival of Covenants. The covenants and agreements of the Parties hereto contained in
this Agreement, to the extent that, by their terms, they are to be performed prior to or on the
Closing Date, shall terminate 60 days following the Closing Date or, to the extent they are to be
performed after the Closing, shall terminate 60 days following the date on which such covenants or
agreements are to be performed, or if no such date is specified, 60 days following the expiration
of all applicable statutes of limitations applicable to any Claim with respect to such covenant or
agreement.
(c) Pending Claims. Notwithstanding the foregoing, if a Claim Notice is provided in accordance with Article
IX before the termination of the applicable representation, warranty, covenant or agreement
pursuant to Section 9.1(a) or Section 9.1(b), then (notwithstanding such
termination) the representation, warranty, covenant or agreement giving rise to such claim will
survive until, but only for the purpose of, the resolution of such claim by final, nonappealable
judgment or settlement. The preceding sentence shall not be construed as authorizing a Claim
Notice prior to the Closing Date, and no Claim Notice may be given until following the Closing
Date.
9.2 Indemnification by Buyer. Effective upon the Closing and subject to the provisions of
Sections 9.2 and 9.4 and the other Sections of this Article IX, the
Partnership and Buyer shall defend, indemnify and hold harmless Seller, its Affiliates and all of
their respective managers, partners, directors, officers, and owners (collectively, the “Seller
Indemnitees”) from and against any and all Losses asserted against, resulting from, imposed
upon or incurred by any of the Seller Indemnitees as a result of or arising out of (a) any breach
by the Partnership or Buyer of its representations, warranties, covenants or agreements contained
in this Agreement, (b) the Xxxxx Litigation, and (c) other than with respect to any Losses arising
as a result of a breach by Seller of any representation, warranty, covenant or agreement contained
in this Agreement, the ownership, management, or operation of any TexStar Company from and after
the Closing Date.
9.3 Indemnification by Seller.
(a) Effective upon the Closing and subject to the provisions of Sections 9.1 and
9.4 and the other Sections of this Article IX, Seller shall defend, indemnify and
hold harmless Buyer, its Affiliates and all of their respective managers, partners, directors,
officers, and owners (collectively, the “Buyer Indemnitees”) from and against any and all
Losses (up to but not exceeding the Aggregate Consideration) asserted against, resulting from,
imposed upon or incurred by any of the Buyer Indemnitees as a result of or arising out of any
breach by Seller of any Seller Title Representation or TexStar Title Representation.
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(b) Effective upon the Closing and subject to the provisions of Sections 9.1 and
9.4 and the other Sections of this Article IX, Seller shall defend, indemnify and
hold harmless the Buyer Indemnitees from and against any and all Losses asserted against, resulting
from, imposed upon or incurred by any of the Buyer Indemnitees as a result of or arising out of:
(i) any breach by Seller of its representations or warranties contained in this Agreement
other than the Seller Title Representations and the TexStar Title Representations (for which
indemnity is provided pursuant to Section 9.3(a));
(ii) any failure by Seller to comply with any covenant or agreement contained in this
Agreement, whether or not any such failure was discovered or known before or after Closing;
(iii) any Third-Party Debt, Expenses, Change of Control Amounts and Severance Adjustment
Amounts that do not result in a reduction in the Aggregate Consideration pursuant to Section
2.3;
(iv) any Buyer Indemnified Taxes;
(v) the failure of Seller to pay to Buyer any amount owed pursuant to Section 2.4;
(vi) the Xxxxxx Litigation to the extent Finally Resolved for an amount in excess of the
Xxxxxx Reserve, including costs and expenses to which the Partnership is entitled to reimbursement
pursuant to Section 5.14(d) to the extent not reimbursed pursuant thereto;
(vii) any Aggregate Consideration Deficit;
(viii) Seller’s failure to obtain the reaffirmation of a Mutual Release at the Closing; and
(ix) if TexStar assigns its rights under Article XIV of the PPM Acquisition Agreement as
described in Section 5.1(b) of the TexStar Disclosure Schedule, any PPM Facilities Property
Liabilities.
9.4 Certain Limitations. The Buyer Indemnitees and Seller Indemnitees rights to
indemnification under this Article IX shall be limited as follows:
(a) No Claim Notice for indemnification may be provided with respect to any Claim for breach
of a representation, warranty, covenant or other agreement in this Agreement beyond the survival
period specified in Section 9.1.
(b) The recovery of Losses by any Buyer Indemnitee pursuant to clause (i) or (ii) of
Section 9.3(b), together with all Losses recovered by other Buyer Indemnitees under such
provision, shall be limited to an aggregate of $15,000,000.
(c) The recovery of Losses by any Seller Indemnitee pursuant to Section 9.2, together
with all Losses recovered by other Seller Indemnitees under such provision, shall be
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limited to an
aggregate of $15,000,000, provided, however, that the foregoing limitation shall
not apply to any claim for indemnification or rights of Seller under Sections 2.3(d),
2.4(c) or 5.13.
(d) No Buyer Indemnitee or Seller Indemnitee shall be entitled to recover Losses pursuant to
Section 9.3(b)(i) and (ii) or Section 9.2, respectively, unless:
(i) the Buyer Indemnitees, collectively, or the Seller Indemnitees, collectively, shall have
suffered or incurred aggregate Losses otherwise recoverable under this Article IX in an
amount in excess of the Deductible, and then recovery shall be permitted only to the extent of such
excess; and
(ii) after the Deductible has been met, the Buyer Indemnitees, collectively, or the Seller
Indemnitees, collectively, shall have suffered or incurred Losses with respect to the individual
Claim or series of related Claims that arise out of substantially the same facts and circumstances
for which recovery is sought in excess of $125,000, in which case the full amount of such Losses
shall be recoverable, subject to the limitations imposed by the other provisions of this
Section 9.4.
Notwithstanding the foregoing, any claim for indemnification (and the Losses recoverable therefrom)
that may be brought under both Section 9.3(b)(i), on the one hand, and any other subsection
of Section 9.3, on the other hand, shall not be subject to any limitation specified in this
Section 9.4(d).
(e) Notwithstanding anything to the contrary in this Agreement:
(i) For purposes of determining whether a representation or warranty contained herein, other
than those set forth in Sections 3.17, 3.21, 4.4 and 4.5, has been
breached for purposes of this Article IX and determining the amount of Losses suffered
thereby by any Buyer Indemnitee or Seller Indemnitee, as the case may be, each representation and
warranty set forth in this Agreement (other than as aforesaid), and any qualification with respect
to any such representation or warranty set forth in the TexStar Disclosure Schedule in the case of
representations or warranties by the Seller, shall be read without regard or giving effect to any
“material,” “materiality,” “Material Adverse Effect,” and “substantial” qualifications that may be
contained in any such representation or warranty; provided, however, that the
defined term “Material Contract” and all “material,” “materiality,” “Material Adverse Effect,” and
“substantial” qualifications that are contained in any defined term shall be given effect;
(ii) No investigation or knowledge of any Party, whenever undertaken or however obtained,
shall limit such Party’s right to indemnification hereunder in any manner; and
(iii) The provisions of this Article IX shall apply in such a manner as not to give
duplicative effect to any item of adjustment and if there has been an adjustment to the Aggregate
Consideration for any Loss, there shall not be any charge against the Deductible and no Indemnitee
may claim a breach of any representation or warranty with respect to any Loss that gave rise to
such adjustment in the Aggregate Consideration pursuant to Section 2.3 to the extent of the
amount of such Loss given effect in such adjustment to the Aggregate Consideration.
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(f) The amount of Losses required to be paid pursuant to this Article IX shall be
reduced to the extent of any tax benefits actually realized, or insurance proceeds directly or
indirectly received by the Indemnified Party.
9.5 Notice of Asserted Liability; Opportunity to Defend.
(a) All claims for indemnification hereunder shall be asserted and handled pursuant to this
Section 9.5. Any Person claiming indemnification hereunder is referred to
herein as the “Indemnified Party” or “Indemnitee” and any Person against whom
such claims are asserted hereunder is referred to herein as the “Indemnifying Party” or
“Indemnitor.”
(b) If any Claim is asserted against or any Loss is sought to be collected from an
Indemnifying Party, the Indemnified Party shall with reasonable promptness (and in any event prior
to the expiration of the relevant survival period set forth in Section 9.1(a)) provide to
the Indemnifying Party a Claim Notice. The failure to notify the Indemnifying Party shall not
relieve it of any liability that it may have to any Indemnified Party with respect to such Claim or
Loss except to the extent the Indemnifying Party shall have been prejudiced by such failure or to
the extent the Claim Notice was provided after the expiration of the relevant survival period set
forth in Section 9.1.
(c) The Indemnifying Party shall have 30 days from receipt of the Claim Notice (the
“Notice Period”) to notify the Indemnified Party in writing (i) whether or not the
Indemnifying Party disputes the liability to the Indemnified Party hereunder with respect to the
Claim or Loss, (ii) in any case in which Losses are asserted against or sought to be collected from
an Indemnifying Party by an Indemnified Party, whether or not the Indemnifying Party desires at its
own sole cost and expense to attempt to remedy such Losses or (iii) in any case in which Claims are
asserted against or sought to be collected from an Indemnified Party by a Third Person (“Third
Person Claim”), whether or not the Indemnifying Party desires at its own sole cost and expense
to defend the Indemnified Party against such Third Person Claim.
(d) Except as otherwise provided in Section 5.8(a), if the Indemnifying Party notifies
the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party
against a Third Person Claim, the Indemnifying Party shall have the right to defend all appropriate
Proceedings with counsel of its own choosing (but reasonably satisfactory to the Indemnified Party)
and such Proceedings shall be diligently prosecuted by it to settlement or a final conclusion. If
the Indemnified Party desires to participate in any such defense or settlement, other than at the
request of the Indemnifying Party, it may do so at its sole cost and expense. If the Indemnified
Party joins in defending in any such Third Person Claim, the Indemnifying Party shall have full
authority to determine all action to be taken with respect thereto. If the Indemnifying Party
elects not to defend the Indemnified Party against a Third Person Claim or does not provide an
answer within the Notice Period, the Indemnified Party shall be entitled to assume the defense of
all appropriate Proceedings related thereto with counsel of its choosing and the Indemnifying Party
shall be responsible for paying for counsel for the Indemnified Party in the event that they are
otherwise entitled to indemnification with respect to such matter. If a Proceeding is asserted
against both the Indemnifying Party and the Indemnified Party and there are one or more defenses
available to the Indemnified Party that are not available to the Indemnifying Party or there is a
conflict of interest that renders it inappropriate for the
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same counsel to represent both the
Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be responsible for
paying for separate counsel for the Indemnified Party; provided, however, that, if
there is more than one Indemnified Party, the Indemnifying Party shall not be responsible for
paying for more than one separate firm of attorneys (in addition to local counsel) to represent the
Indemnified Parties, regardless of the number of Indemnified Parties. No compromise or settlement
of any Proceeding may be effected by the Indemnifying Party without the Indemnified Party’s written
consent unless the sole relief provided is monetary damages that are paid in full by the
Indemnifying Party and such settlement includes the granting
by each claimant or plaintiff to each Indemnified Party of an unconditional release from all
liability in respect of such Third Person Claim and the related Proceeding.
(e) If requested by the Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel, at the cost and expense of the Indemnifying Party, in
contesting any Third Person Claim, in making any counterclaim against the Third Person asserting
the Third Person Claim or in making any cross-complaint against any Person. Notwithstanding
anything to the contrary contained in this Agreement, no Third Person Claim may be settled or
otherwise compromised without the prior written consent of the Indemnifying Party.
(f) The costs and expenses of a Buyer Indemnitee or Seller Indemnitee, including the fees,
costs and expenses of its separate counsel, experts (including expert witnesses), consultants and
any other representatives engaged by it, incurred in connection with the defense and settlement or
final resolution of any Third Person Claim as to which such Buyer Indemnitee or Seller Indemnitee,
as the case may be, has the right to control shall be treated as “Losses” for all purposes
hereunder.
9.6 Exclusive Remedy. AS BETWEEN THE BUYER INDEMNITEES AND THE SELLER, ON ONE HAND, AND
THE SELLER INDEMNITEES AND THE PARTNERSHIP OR BUYER, ON THE OTHER, AFTER CLOSING, OTHER THAN WITH
RESPECT TO CLAIMS FOR FRAUD, (A) THE PROVISIONS SET FORTH IN THIS ARTICLE IX SHALL BE THE
SOLE AND EXCLUSIVE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES WITH RESPECT TO THIS AGREEMENT,
THE EVENTS GIVING RISE THERETO, AND THE TRANSACTIONS PROVIDED FOR HEREIN OR CONTEMPLATED HEREBY AND
(B) NO PARTY OR ANY OF ITS SUCCESSORS OR ASSIGNS SHALL HAVE ANY RIGHTS AGAINST ANY OTHER PARTY OR
ITS AFFILIATES OTHER THAN AS IS EXPRESSLY PROVIDED IN THIS ARTICLE IX.
9.7 Limitation on Damages. SUBJECT TO SECTION 9.6 NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS AGREEMENT, IN NO EVENT SHALL ANY PARTY BE LIABLE AFTER THE CLOSING TO ANY OTHER
PARTY, OR TO ANY INDEMNITEE, UNDER THIS AGREEMENT FOR ANY EXEMPLARY, PUNITIVE, REMOTE, SPECULATIVE,
CONSEQUENTIAL OR SPECIAL DAMAGES, AND NO CLAIM SHALL BE MADE OR AWARDED AGAINST ANY PARTY, FOR ANY
SUCH DAMAGES; PROVIDED, HOWEVER, THIS SECTION 9.7 SHALL NOT LIMIT THE RIGHT
OF BUYER TO RECOVER ANY LOSS TO THE
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EXTENT ACTUALLY SUFFERED, INCURRED OR PAID BY BUYER TO ANY
THIRD PARTY OR WITH RESPECT TO ANY THIRD PARTY OBLIGATION.
9.8 Bold and/or Capitalized Letters. THE PARTIES ACKNOWLEDGE THAT THE BOLD AND CAPITALIZED
LETTERS IN THIS AGREEMENT CONSTITUTE CONSPICUOUS LEGENDS.
9.9 Independent Investigation. The Partnership and Buyer are knowledgeable in the business
of gathering, treating, processing, transporting and marketing natural gas and natural gas liquids.
In making the decision to enter into this Agreement and to consummate the transactions
contemplated hereby, the Partnership and Buyer have relied solely on their own independent due
diligence investigations and inspection of the Assets of the TexStar Companies, and the
representations, warranties, covenants and undertakings of Seller in this Agreement.
9.10 Disclaimer. WITHOUT DIMINISHING THE REPRESENTATIONS AND WARRANTIES MADE BY SELLER IN
ARTICLE III, BUYER ACKNOWLEDGES THAT: (A) THE ASSETS OWNED BY THE TEXSTAR COMPANIES HAVE
BEEN USED FOR NATURAL GAS, NATURAL GAS LIQUIDS, CONDENSATE OR REFINED PRODUCT OPERATIONS AND
PHYSICAL CHANGES IN SUCH ASSETS AND IN THE LANDS BURDENED THEREBY MAY HAVE OCCURRED AS A RESULT OF
SUCH USES AND (B) SUCH ASSETS INCLUDE BURIED PIPELINES AND OTHER EQUIPMENT, THE LOCATIONS OF WHICH
MAY NOT BE READILY APPARENT BY A PHYSICAL INSPECTION OF SUCH ASSETS OR THE LANDS BURDENED THEREBY.
EXCEPT AS EXPRESSLY SET OUT IN THIS AGREEMENT, SELLER MAKES NO REPRESENTATION, COVENANT OR
WARRANTY, EXPRESS, IMPLIED OR STATUTORY, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA OR RECORDS
DELIVERED TO BUYER WITH RESPECT TO (A) THE ASSETS, INCLUDING ANY DESCRIPTION OF THE ASSETS, PRICING
ASSUMPTIONS, QUALITY OR QUANTITY OF THE INTERESTS, FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT OR
(B) FUTURE VOLUMES OF HYDROCARBONS OR OTHER PRODUCTS GATHERED, TRANSPORTED, TREATED, STORED OR
PROCESSED THROUGH OR AT THE ASSETS. WITH RESPECT TO ANY PROJECTION OR FORECAST DELIVERED TO THE
PARTNERSHIP OR BUYER BY OR ON BEHALF OF SELLER OR ANY OF ITS AFFILIATES, BUYER ACKNOWLEDGES THAT
(I) THERE ARE UNCERTAINTIES INHERENT IN ATTEMPTING TO MAKE SUCH PROJECTIONS AND FORECASTS, (II)
BUYER IS FAMILIAR WITH SUCH UNCERTAINTIES, AND (III) BUYER IS TAKING FULL RESPONSIBILITY FOR MAKING
ITS OWN EVALUATION OF THE ADEQUACY AND ACCURACY OF ALL SUCH PROJECTIONS AND FORECASTS FURNISHED.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Expenses. Each Party will bear its own respective costs and expenses (including legal
fees and expenses) incurred in connection with the negotiation of this Agreement and the
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transactions contemplated hereby (and the Partnership and Buyer acknowledge that TexStar shall pay
the costs and
expenses of Seller, the Officers, the Directors, the Managers and officers and directors of Seller
and the TexStar Companies).
10.2 Assignment. No Party may assign this Agreement or any of its rights or obligations
arising hereunder without the prior written consent of the other Parties; provided,
however, that without the consent of Seller, Buyer may, without relieving Buyer from its
liabilities or obligations hereunder, (a) assign this Agreement, and its rights and obligations
hereunder, to an Affiliate of Buyer or to an entity formed, controlled and primarily owned by
Buyer, (b) collaterally assign this Agreement to any entity providing financing to Buyer or (c)
both.
10.3 Entire Agreement, Amendments and Waiver. This Agreement (together with any Exhibits
and schedules hereto) and all certificates, documents, instruments and writings that are delivered
pursuant hereto contain the entire understanding of the Parties with respect to the transactions
contemplated hereby and supersede all prior agreements, arrangements and understandings relating to
the subject matter hereof other than the Confidentiality Agreement which is hereby ratified by
Buyer, as if Buyer were a party thereto, and shall hereafter bind the Partnership and Buyer, as
well as the parties thereto. This Agreement may be amended, superseded or canceled only by a
written instrument duly executed by Seller, the Partnership and Buyer, specifically stating that it
amends, supersedes or cancels this Agreement. Any of the terms of this Agreement and any condition
to a Party’s obligations hereunder may be waived only in writing by that Party specifically stating
that it waives a term or condition hereof. No waiver by a Party of any one or more conditions or
defaults by the other in performance of any of the provisions of this Agreement shall operate or be
construed as a waiver of any future conditions or defaults, whether of a like or different
character, nor shall the waiver constitute a continuing waiver unless otherwise expressly provided.
10.4 Severability. Each portion of this Agreement is intended to be severable. If any
term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or
invalidity shall not affect the validity of the remainder of this Agreement.
10.5 Counterparts. This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
10.6 Governing Law and Dispute Resolution.
(a) Governing Law. This Agreement shall be governed by, enforced in accordance with,
and interpreted under, the Laws of the State of Texas, without reference to applicable principles
of conflicts of Laws.
(b) Consent to Jurisdiction. The Parties hereby irrevocably submit to the
jurisdiction of the courts of the State of Texas and the federal courts of the United States of
America located in Dallas, Texas, and appropriate courts of appeal therefrom, over any dispute
arising out of or relating to this Agreement or any of the transactions contemplated hereby, and
each Party hereby irrevocably agrees that all claims in respect of such dispute or proceeding may
78
be heard and determined in such courts. The Parties hereby irrevocably waive, to the fullest
extent permitted by Law, any objection that they may now or hereafter have to the laying of venue
of any dispute arising out of or relating to this Agreement or any of the transactions contemplated
hereby brought in such court or any defense of inconvenient forum for the maintenance of such
dispute. Each Party agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by Law. This consent to
jurisdiction is being given solely for purposes of this Agreement and is not intended to confer,
and shall not confer, consent to jurisdiction with respect to any other dispute in which a Party to
this Agreement may become involved.
(c) Recovery of Costs and Attorneys’ Fees. If there are any Proceedings arising out
of or relating to this Agreement or the transactions contemplated hereby after the entry of a final
written non-appealable order and if one Party has predominantly prevailed in the dispute, that
Party shall be entitled to recover from the other Party all court costs, fees and expenses relating
to such Proceeding, including reasonable attorneys’ fees.
(d) Settlement Proceedings. All aspects of any settlement proceedings, including
discovery, testimony and other evidence, negotiations and communications pursuant to this
Section 10.6, briefs and the award shall be held confidential by each Party, and shall be
treated as compromise and settlement negotiations for the purposes of the federal and state rules
of evidence.
10.7 Notices and Addresses. Any notice, request, instruction, waiver or other
communication to be given hereunder by any Party shall be in writing and shall be considered duly
delivered if personally delivered, mailed by certified mail with the postage prepaid (return
receipt requested), sent by messenger or overnight delivery service, or sent by facsimile to the
addresses of the Parties as follows:
THE PARTNERSHIP or BUYER:
Regency Energy Partners LP
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Chief Legal Officer
With a copy to (which shall not constitute notice):
Xxxxxx & Xxxxxx LLP
3700 Xxxxxxxx Xxxx Center
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
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SELLER:
HMTF Gas Partners II, L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxxx
With a copy to (which shall not constitute notice):
Xxxxxx & Xxxx, LLP
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 214-939-5849
Attention: Xxxxxxx X. Xxxxx
TEXSTAR:
TexStar Field Services, L.P.
000 X. Xxxxxxxx Xxxx., Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Telephone: 000- 000-0000
Facsimile: 210-495-0075
Attention: General Counsel
Prior to the Closing, with a copy to (which shall not constitute notice):
Xxxxxx & Xxxx, LLP
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 214-939-5849
Attention: Xxxxxxx X. Xxxxx
After the Closing, with a copy to (which shall not constitute notice):
Xxxxxx & Xxxxxx LLP
3700 Xxxxxxxx Xxxx Center
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
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Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
or at such other address as a Party may designate by written notice to the other Parties in the
manner provided in this Section 10.7. Notice by mail shall be deemed to have been given
and received on the third day after posting. Notice by messenger, overnight delivery service,
facsimile transmission or personal delivery shall be deemed given on the date of actual delivery.
10.8 Press Releases. Except as may otherwise be required by securities Laws and public
announcements or disclosures that are, in the reasonable opinion of the Party proposing to make the
announcement or disclosure, legally required to be made, there shall be prior to Closing no press
release or public communication concerning the transactions contemplated by this Agreement by any
Party except with the prior written consent of the Party not originating such press release or
communication, which consent shall not be unreasonably withheld or delayed. Prior to Closing the
Partnership and Seller will consult in advance on the necessity for, and the timing and content of,
any communications to be made to the public and, subject to legal constraints, to the form and
content of any application or report to be made to any Governmental Authority that relates to the
transactions contemplated by this Agreement.
10.9 Offset. Nothing contained herein shall impair or constitute a waiver of any right of
offset or setoff for any Party.
10.10 No Partnership; Third Party Beneficiaries. Nothing in this Agreement shall be deemed to create a joint venture, partnership, tax
partnership, or agency relationship between the Parties. Nothing in this Agreement shall provide
any benefit to any Third Person or entitle any Third Person to any claim, cause of action, remedy
or right of any kind, it being the intent of the Parties that this Agreement shall not be construed
as a third-party beneficiary contract; provided, however, that the indemnification
provisions of Article IX shall inure to the benefit of the Buyer Indemnitees and the Seller
Indemnitees as provided therein and the provisions of Section 5.13 are intended to benefit
the Director/Officer Indemnitees and their heirs and representatives.
10.11 Negotiated Transaction. The Parties, each represented by legal counsel, have each
participated in the negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation should arise, this Agreement shall be construed as if drafted by all
Parties and no presumption or burden of proof shall arise favoring or burdening any Party hereto by
virtue of the authorship of any of the provisions of this Agreement.
10.12 Disclosure Schedule. The information in the TexStar Disclosure Schedule constitutes
(a) exceptions or qualifications to particular representations, warranties, covenants and
obligations of Seller as set forth in this Agreement or (b) descriptions or lists of assets and
liabilities and other items referred to in this Agreement. The TexStar Disclosure Schedule shall
not be construed as indicating that any disclosed information is required to be disclosed, and no
disclosure shall be construed as an admission that such information is material to, or required to
be disclosed by, the Seller. Capitalized terms used in the TexStar Disclosure Schedule that are
not defined therein are defined in this Agreement shall have the meaning given to them in this
Agreement. The statements in the TexStar Disclosure Schedule relate only to the provisions in
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the
Section of this Agreement to which they expressly relate and not to any other provision in this
Agreement, unless its applicability to another Section of this Agreement is readily apparent.
10.13 Time of the Essence. With regard to all dates and time periods set forth or referred
to in this Agreement, time is of the essence.
10.14 Specific Performance.
The Parties recognize that, if Seller should refuse to perform under the provisions of this
Agreement, monetary damages alone will not be adequate. The Partnership and Buyer shall therefore
be entitled, in addition to any other remedies that may be available, including money damages, to
obtain specific performance of the terms of this Agreement. In the event of any action to enforce
this Agreement specifically, Seller hereby waives the defense that there is an adequate remedy at
law. The parties recognize, however, that, if Buyer and Partnership should refuse to perform under
the provisions of this Agreement monetary damages will be adequate. The Seller shall therefore be
entitled as its sole remedy in lieu of specific performance to recover
damages with respect to the failure of Partnership and Buyer to comply with their obligations
arising under this Agreement.
10.15 Affiliate Liability.
(a) Each of the following is herein referred to as a “Buyer Affiliate”: (i) any
direct or indirect holder of the Common Units, Subordinated Units, General Partner Units or other
Equity Interests in the Partnership (whether limited or general partners, members, stockholders or
otherwise), and (ii) any director, officer, manager, employee, representative or agent of (A) the
Partnership or Buyer or any Subsidiary of either of them or (B) any Person who directly or
indirectly controls the Partnership. Except to the extent that a Buyer Affiliate is an express
signatory thereto or an express assignee of the Partnership or Buyer, no Buyer Affiliate shall have
any liability or obligation to Seller of any nature whatsoever in connection with or under this
Agreement, any of the Transaction Documents or the transactions contemplated herein or therein, and
Seller on behalf of itself and each TexStar Company and Seller Affiliate hereby waives and releases
all claims of any such liability and obligation. Notwithstanding the foregoing, Seller shall not
be deemed an Affiliate of the Partnership.
(b) Each of the following is herein referred to as a “Seller Affiliate”: (i) any
direct or indirect holder of Equity Interests in Seller (whether limited or general partners,
members, stockholders or otherwise), and (ii) any partner, member, shareholder, director, officer,
manager, employee, representative or agent of (A) Seller or any TexStar Company or any Subsidiary
of either of them or (B) any Person who directly or indirectly controls Seller. Except (x) to the
extent that a Seller Affiliate is an express signatory thereto or an express assignee of Seller and
(y) any Seller Affiliate to which any assets (including Cash and Transaction Units) shall be
distributed in violation of Section 5.12(d), no Seller Affiliate shall have any liability
or obligation to the Partnership, Buyer or Buyer Indemnitee of any nature whatsoever in connection
with or under this Agreement, any of the Transaction Documents or the transactions contemplated
herein or therein, and the Partnership and Buyer on behalf of themselves and the Buyer Affiliates
hereby waive and release all claims of any such liability and obligation.
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10.16 No Waiver of Claims for Fraud. The liability of any Party under Article IX
shall be in addition to, and not exclusive of, any other liability that such Party may have at law
or equity based on such Party’s fraudulent acts or omissions. None of the provisions set forth in
this Agreement shall be deemed a waiver by any Party of any right or remedy which such Party may
have at law or equity based on any other Party’s fraudulent acts or omissions, nor shall any such
provisions limit, or be deemed to limit, (a) the amounts of recovery sought or awarded in any such
claim for fraud, (b) the time period during which a claim for fraud may be brought, or (c) the
recourse which any such Party may seek against another Party with respect to a claim for fraud;
provided, however, that with respect to such rights and remedies at law or equity,
the Parties further acknowledge and agree that none of the provisions of this Section 10.16
shall be deemed a waiver of any defenses which may be available in respect of actions or claims for
fraud, including defenses of statutes of limitations or limitations of damages.
10.17 No Recovery. Seller shall not be entitled to indemnification or contribution from
any TexStar Company for any Losses that it is obligated to pay pursuant to any Claim brought by a
Buyer Indemnitee. The foregoing does not apply to (a) Claims made against the Partnership or Buyer
for a breach of any of the representations, warranties, covenants and agreements of the Partnership
or Buyer set forth in this Agreement or (b) a claim for indemnification by a Director/Officer
Indemnitee under the Organizational Documents of any TexStar Company with respect to any Third
Person Claim related to or arising out of or based upon such Director/Officer Indemnitee’s
activities as such prior to the Closing except to the extent any such Third Person Claim relates to
or arises out of any activities that constitute a breach of any representation or warranty
contained in Article III, a breach of any covenant under this Agreement to be performed
prior to Closing by Seller or any other matter giving rise to a right to any Buyer Indemnitee to
indemnification under Article IX (collectively, a “Permitted
Indemnification/Contribution”). If any right of indemnification or contribution from any
TexStar Company under the Organizational Documents of such TexStar Company relating to a Claim
(other than a claim for Permitted Indemnification/Contribution) is ultimately determined to be
unwaivable, Seller shall indemnify the Buyer or the applicable TexStar Company to the full extent
of such recovery. Except as set forth in this Section 10.17, Seller hereby waives and
releases any and all rights that it may have to assert claims of indemnification or contribution
against any TexStar Company under this Agreement, any other Transaction Document, any other
Contract or any provision of its Organizational Documents for any Losses that the Seller is
obligated to pay pursuant to any Claim brought by a Buyer Indemnitee (other than a claim for
Permitted Indemnification/Contribution).
[SIGNATURE PAGES FOLLOW]
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THE PARTIES HAVE signed this Agreement as of the date first set forth above.
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BUYER: |
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REGENCY GAS SERVICES LP |
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By: Regency OLP GP LLC, its general partner |
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By: |
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Xxxxxxx X. Xxxxxxxx |
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Vice President |
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THE PARTNERSHIP: |
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REGENCY ENERGY PARTNERS LP |
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By: Regency GP LP, its general partner |
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By: Regency GP LLC, its general partner |
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By: |
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Xxxxxxx X. Xxxxxxxx |
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Executive Vice President and Chief Operating Officer |
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SELLER: |
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HMTF GAS PARTNERS II, L.P. |
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By: HMTF XX XX, L.L.C., its general partner |
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By: |
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Xxxxx Xxxxxx |
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Vice President |
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S-1
Exhibit A-1
Mutual Release
(Individual)
[See Attached]
X-0-0
Xxxxxxx X-0
Mutual Release
(Entity)
[See Attached]
A-2-1
Exhibit B
Partnership Agreement Amendment
[See Attached]
B-1
Exhibit C
Registration Rights Agreement
[See Attached]
C-1
Exhibit D
Assignment of Membership Interests
[See Attached]
D-1
Exhibit E
Assignment of Partnership Interests
[See Attached]
E-1
Exhibit F
Gas Gathering Agreement
[See Attached]
F-1
TexStar Disclosure Schedule
[See Attached]
TexStar Disclosure Schedule - 1
Schedule A
Sample Balance Sheet
[See Attached]
Schedule A - 1
Schedule B
Capital Expenditures
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Project Description |
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Estimated Capital |
Build sweet rich pipe from Battlecat area back to Enterprise System to achieve processing upgrade on
Escondido, Alamo, and Virtex sweet rich gas |
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$ |
8,400,000 |
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Build pipe from PJV system back to Enterprise System to achieve processing upgrade on PJV volumes |
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$ |
6,200,000 |
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Eustace turnaround – 2nd half |
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$ |
2,000,000 |
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Xxxxxx — Refurbish (new plant controls, etc) |
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$ |
2,500,000 |
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Xxxxxx — Acid Gas Injection |
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$ |
4,500,000 |
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Xxxxxx — Replace boilers |
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$ |
1,000,000 |
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Build line to Delta Sligo xxxxx |
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$ |
2,700,000 |
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Compression additions at Catarina |
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$ |
1,350,000 |
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Connect Mainline to Tilden; convert 8” to sour service |
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$ |
500,000 |
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Complete work at Eagle Pass plant |
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$ |
1,100,000 |
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Bruni/Xxxxxx/Texana — add compression, complete line repair and tie-in to Crosstex |
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$ |
1,750,000 |
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Panna Xxxxx — purchase & relocate compressor |
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$ |
1,000,000 |
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Panna Xxxxx – add intermediate pressure line, line rework |
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$ |
500,000 |
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Grand total |
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$ |
33,500,000 |
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Schedule B - 1