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EXHIBIT 10.17
AGREEMENT AND PLAN OF MERGER
AMONG
CMS ENERGY CORPORATION
CMS MERGING CORPORATION
TERRA ENERGY LTD.
XXXXXX X. XXXXXX
XXXXX X. XXXXXX
XX. XXXXXX XXXXX AND XXXXX X. XXXXX
XX. XXXXX XXXXXX AND XXXX X. XXXXXX
THE REVOCABLE LIVING TRUST OF XX. XXXXXXX X. XXXXXXXX
UNDER AGREEMENT DATED MAY 1, 1990
XXXXXX X. XXXXX
AND
XXXXX XXXXXXXXXX
_______________________________________________
Dated as of August 29, 1995
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TABLE OF CONTENTS
ARTICLE I
THE MERGER....................... 2
Section 1.1. The Merger................................... 2
Section 1.2. Filing Certificate of Merger and
Effectiveness.............................. 2
Section 1.3. Effects of the Merger........................ 3
Section 1.4. Articles of Incorporation, By-Laws,
Directors and Officers..................... 3
Section 1.5. Further Assurances........................... 3
ARTICLE II
CONVERSION OF SHARES................... 3
Section 2.1. Conversion of Securities..................... 3
Section 2.2. Aggregate Consideration; Terra
Consolidated Net Working Capital;
Terra Debt................................. 5
Section 2.3. Exchange of Xxxxxx Shares by Xxxxxx.......... 6
Section 2.4. Payment of Cash and Delivery
of Certificates............................ 7
Section 2.5. Dividends and Distributions.................. 8
Section 2.6. Fractional Shares............................ 8
Section 2.7. Changes in CMS Common Stock.................. 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS AND THE OPTIONHOLDERS........ 9
Section 3.1. Organization of Terra........................ 9
Section 3.2. Subsidiaries and Investments................. 9
Section 3.3. Capitalization............................... 11
Section 3.4. Authority.................................... 13
Section 3.5. Financial Statements......................... 15
Section 3.6. Operations Since Balance Sheet Date.......... 15
Section 3.7. No Undisclosed Liabilities................... 17
Section 3.8. Taxes........................................ 18
Section 3.9. Condition of Tangible Assets................. 22
Section 3.10. Title to Property; Property Schedules........ 22
Section 3.11. Availability and Ownership of Assets......... 23
Section 3.12. Personal Property Leases..................... 23
Section 3.13. Accounts Receivable.......................... 23
Section 3.14. Intellectual Property........................ 24
Section 3.15. Owned Real Property.......................... 26
Section 3.16. Leased Real Property......................... 26
Section 3.17. Litigation................................... 27
Section 3.18. No Guaranties; Extensions of Credit.......... 27
Section 3.19. Compliance with Laws......................... 27
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Section 3.20. Permits...................................... 27
Section 3.21. Insurance.................................... 28
Section 3.22. Employee Benefit Plans....................... 29
Section 3.23. Employees and Agents and Related
Agreements................................. 31
Section 3.24. Employee Relations and Labor Matters......... 31
Section 3.25. Absence of Certain Business Practices........ 32
Section 3.26. Territorial Restrictions..................... 32
Section 3.27. Transactions with Certain Persons............ 32
Section 3.28. No Finder.................................... 33
Section 3.29. Environmental Matters........................ 33
Section 3.30. Contracts.................................... 35
Section 3.31. Additional Drilling Obligations.............. 38
Section 3.32. Gas Imbalances; Production Rights
and Obligations............................ 38
Section 3.33. Xxxxx........................................ 38
Section 3.34. CMS Energy Common Shares;
Terra Common Stock......................... 39
Section 3.35. Disclosure................................... 39
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CMS ENERGY...... 40
Section 4.1. Organization of CMS Energy................... 40
Section 4.2. Authority.................................... 40
Section 4.3. Shares of CMS Common Stock................... 41
Section 4.4. Capitalization............................... 42
Section 4.5. Operations Since June 30, 1995............... 42
Section 4.6. Compliance with Laws......................... 43
Section 4.7. SEC Documents................................ 43
Section 4.8. No Finder.................................... 43
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SUB......... 43
Section 5.1. Organization and Standing.................... 44
Section 5.2. Capital Structure............................ 44
Section 5.3. Authority.................................... 44
ARTICLE VI
ACTIONS PRIOR TO THE EFFECTIVE DATE........... 44
Section 6.1. Issuance of CMS Common Shares................ 44
Section 6.2. Action by Stockholders of Terra.............. 45
Section 6.3. Subsequent Financial Statements.............. 45
Section 6.4. Investigation of Terra....................... 45
Section 6.5. Lawsuits, Proceedings, Etc................... 46
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Section 6.6. Conduct of Business by Terra
Pending the Merger......................... 46
Section 6.7. Mutual Cooperation;
Reasonable Best Efforts.................... 49
Section 6.8. No Public Announcement....................... 50
Section 6.9. No Solicitation.............................. 50
Section 6.10. Antitrust Law Compliance..................... 50
Section 6.11. Termination of Xxxxxx Proxies................ 51
Section 6.12. Exercise of Options.......................... 51
Section 6.13. New Office Building.......................... 51
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS........... 52
Section 7.1. Tax-Free Nature; Tax Consequences............ 52
Section 7.2. Taxes........................................ 54
Section 7.3. Resale of CMS Common Shares.................. 59
Section 7.4. Access to Data............................... 59
Section 7.5. Terra Employees.............................. 59
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS
OF CMS ENERGY AND SUB................ 60
Section 8.1. No Misrepresentation or Breach
of Covenants and Warranties................ 60
Section 8.2. No Material Adverse Effect................... 61
Section 8.3. Opinions of Counsel for Terra, the
Stockholders and the Optionholders......... 61
Section 8.4. No Injunctions or Restraints................. 61
Section 8.5. Necessary Governmental Approvals............. 61
Section 8.6. Necessary Consents........................... 61
Section 8.7. Effectiveness of Registration Statement...... 62
Section 8.8. Listing of CMS Common Shares................. 62
Section 8.9. Stockholder Action........................... 62
Section 8.10. Dissenting Stockholders...................... 62
Section 8.11. Due Diligence................................ 62
Section 8.12. Resignations of Terra Directors
and Officers............................... 62
Section 8.13. Options to Acquire Terra Common Stock........ 63
Section 8.14. CMS NOMECO Lenders' Consent.................. 63
Section 8.15. Payments for Purchased Assets................ 63
Section 8.16. Guarantee.................................... 63
Section 8.17. Consulting Agreement......................... 63
Section 8.18. Employment Agreements........................ 63
Section 8.19. 1995 Antrim Program.......................... 63
Section 8.20. Minimum Aggregate Consideration.............. 63
Section 8.21. Insurance.................................... 63
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Section 8.22. Gas Delivery................................. 64
Section 8.23. Covenant Not to Compete...................... 64
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS
OF TERRA AND THE STOCKHOLDERS............. 64
Section 9.1. No Misrepresentation or Breach
of Covenants and Warranties................ 64
Section 9.2. No Material Adverse Effect................... 65
Section 9.3. No Injunctions or Restraints................. 65
Section 9.4. Opinions of Counsel for CMS Energy
and Sub and Counsel for the Stockholders... 65
Section 9.5. Necessary Governmental Approvals............. 65
Section 9.6. Effectiveness of Registration Statement...... 65
Section 9.7. Listing of CMS Common Shares................. 66
Section 9.8. Stockholder Action........................... 66
Section 9.9. Necessary Consents........................... 66
Section 9.10. Minimum Aggregate Consideration.............. 66
Section 9.11. Covenant Not to Compete...................... 66
ARTICLE X
INDEMNIFICATION; SURVIVAL............... 66
Section 10.1. Indemnification by the Stockholders
and Optionholders.......................... 66
Section 10.2. Indemnification by CMS Energy
and the Surviving Corporation.............. 68
Section 10.3. Notice of Claims............................. 68
Section 10.4. Third Party Claims........................... 69
Section 10.5. Exclusive Remedy............................. 70
Section 10.6. Survival of Obligations...................... 70
Section 10.7. Update of the Representations
and Warranties............................. 70
Section 10.8. Adjustment to Consideration.................. 72
ARTICLE XI
TERMINATION....................... 72
Section 11.1. Termination.................................. 72
Section 11.2. Effect of Termination........................ 72
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ARTICLE XII
OTHER PROVISIONS.................... 73
Section 12.1. Confidential Nature of Information........... 73
Section 12.2. Fees and Expenses............................ 73
Section 12.3. Notices...................................... 73
Section 12.4. Definitions.................................. 74
Section 12.5. Partial Invalidity........................... 80
Section 12.6. Successors and Assigns....................... 81
Section 12.7. Execution in Counterparts.................... 81
Section 12.8. Titles and Headings.......................... 81
Section 12.9. Schedules and Exhibits....................... 81
Section 12.10. Entire Agreement; Amendments and
Waivers; Assignment........................ 81
Section 12.11. Independent Investigation and
Scope of Representations................... 82
Section 12.12. Governing Law; Arbitration................... 82
Section 12.13. No Third-Party Beneficiaries................. 83
Section 12.14. Interpretation............................... 83
EXHIBITS
Exhibit A Certificate of Merger
Exhibit B Purchased Assets transfer documents
Exhibit C Section 8.1 Certificates
Exhibit D Form of Opinions of Mika, Meyers, Xxxxxxx & Xxxxx, P.L.C.
Exhibit E Form of Opinion on behalf of Non-Management Stockholders
Exhibit F Guarantee of Net Receipts relating to
Gas Purchase Agreements and Gas Sale Agreements
Exhibit G Consulting Agreement with Newco
Exhibit H Employment Agreement of Tester
Exhibit I Employment Agreement of Xxxxxxxxxx
Exhibit J Covenant Not to Compete
Exhibit K Section 9.1 Certificates
Exhibit L Form of Opinion of Xxxxxx Sturdy, Esq.
Exhibit M Form of Opinion re: tax matters
SCHEDULES
Schedule 3.2 Subsidiaries, Capital Stock, State of Organization and
Jurisdiction; Partnerships
Schedule 3.3(a) Owners of Terra Common Stock and Options
Schedule 3.3(b) Other Restrictions on Terra Common Stock
Schedule 3.3(c) Liens on Shares of Capital Stock
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Schedule 3.3(d) Liens on Partnerships, Joint Ventures and Other Interests
Schedule 3.4(a) Agreements Requiring Consents
Schedule 3.5 Adjustments to Balance Sheet and Statement of Income as of
December 31, 1994
Schedule 3.6(a) Material Adverse Changes Since December 31, 1994
Schedule 3.6(b) Actions Not in the Ordinary Course of Business Since
December 31, 1994
Schedule 3.7 Undisclosed Liabilities since December 31, 1994
Schedule 3.8(a) Tax Matters
Schedule 3.9 Condition of Assets
Schedule 3.10(a) Title to Property
Schedule 3.10(b) Liens on Material Assets
Schedule 3.10(c) Costs and Expenses
Schedule 3.12 Personal Property Leases
Schedule 3.14 Intellectual Property
Schedule 3.15 Owned Real Property
Schedule 3.16 Leased Real Property
Schedule 3.17 Litigation; Disputes
Schedule 3.18 Guaranties
Schedule 3.19 Compliance with Laws
Schedule 3.21 Insurance
Schedule 3.22 Employee Plans
Schedule 3.23(a) Employment/Consulting Agreements/Non-Compete Agreements Not
Terminable on 30 Days Notice, Deferred Compensation
Schedule 3.23(b) Consultants
Schedule 3.24(b) Collective Bargaining Agreements
Schedule 3.26 Third Party Restrictions on Conduct of Business
Schedule 3.27 Transactions with Affiliates, Stockholders, Officers or
Directors
Schedule 3.29 Environmental Matters
Schedule 3.30 Terra Agreements
Schedule 3.31 Additional Drilling Obligations
Schedule 3.32 Gas Imbalances; Take or Pay Obligations
Schedule 12.4(e) Knowledge of Terra
Schedule 12.4(i) Property Schedules
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SCHEDULE OF DEFINED TERMS
TERM DEFINITION SECTION
---- ------------------
AAA 12.12(b)
Acquisition Expenses 12.2
Acquisition Proposal 6.9
Affiliate 12.4(a)
After-Tax Basis 7.2(e)
Aggregate Consideration 2.2(a)
Agreement Preamble
Applicable Environmental Laws 3.29(c)
Associate 12.4(b)
Average Price 2.1(c)
Balance Sheet 3.5
Balance Sheet Date 3.5
BCA 1.1
Xxxxx Preamble
CERCLA 3.29(a)
CERCLIS 3.29(a)
Certificates 2.4
CMS Common Shares 2.1(c), 2.7
CMS Common Stock First Recital
CMS Energy Preamble
CMS Energy SEC Documents 4.7
CMS NOMECO 8.14
Code Sixth Recital
Company Group 3.8(a)
Confidentiality Agreement 12.10
Constituent Corporations Preamble
Conversion Number 2.1(c)
Covenant Not to Compete 8.23
Daily Prices 2.1(c)
Dispute 12.12(b)
Effective Date 1.2
Effective Time 1.2
Enterprises 8.14
ERISA 3.22(a)
ERISA Affiliate 3.22(a)
Exchange Act 4.7
Exchange Closing 2.3
Exchange Closing Time 2.3
Expense 10.1
GAAP 3.5
Good and Defensible Title 12.4(c)
Xxxxxx Notes 2.2
Guardian 3.30(d)
Hazardous Substance 3.29(c)
HSR Act 3.4(a)
Indemnified Tax Items 7.2(c)
Interests 12.4(d)
Xxxxx Preamble
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Knowledge of Terra 12.4(e)
Xxxxxx Preamble
Xxxxxx Proxies 6.11
Xxxxxx Shares 2.3
Leased Real Property 3.16
Leases 3.30(a)
Liens 3.10(b)
Loss 10.1
Xxxxxx Preamble
Management Stockholders Preamble
Material Adverse Change or Effect 12.4(f)
Merger Fifth Recital
Non-Wholly Owned Subsidiaries 3.2(b)
Newco 6.6(b)
New Office 6.13
1995 Antrim Program 8.19
Non-Management Stockholders Preamble
NORM 3.7
NPL 3.29(a)
NYSE 2.1(c)
Operating Agreements 3.2(a)
Optionholders Preamble
Options 3.3(a)
Owned Real Property 3.15
Participants 3.22(a)
Partnership Agreements 3.2(b)
Partnerships 3.2(b)
Permits 3.20
Permitted Encumbrances 12.4(g)
Permitted Transferee 3.3(b)
Person 12.4(h)
Plan 3.22(a)
PPC 3.7
Property 3.29(b)
Property Schedules 12.4(i)
Prospectus 6.1
Proved Developed Interests 12.4(d)(i)
Proved Undeveloped Interests 12.4(d)(ii)
Purchased Assets 6.6(b)
Registration Statement 6.1
Release 3.29(c)
Remedial Action 3.29(c)
Scherock Preamble
SEC 4.2
Securities Act 4.2
Xxxxxxxxxx Preamble
Statement of Income 3.5
Stockholders Preamble
Sub Preamble
Subsidiaries 3.2(a)
Surviving Corporation 1.1
Tax Indemnitees 7.2(a)
Tax Partnership 3.8(e)
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Tax Return 3.8(d)
Tax Sharing Arrangement 3.8(d)
Taxes 3.8(d)
Terra Preamble
Terra Agreements 3.30(b)
Terra Business Fourth Recital
Terra Common Stock Third Recital
Terra Consolidated Net
Working Capital 2.2(b)
Terra Debt 2.2(c)
Tester Preamble
Title Defect 12.4(j)
Title IV Plan 3.22(b)
Unaudited Balance Sheet 3.5
Unaudited Balance Sheet Date 3.5
Unaudited Statement of Income 3.5
Unproved Interests 12.4(d)(iii)
Xxxxx 3.33(b)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 29, 1995 (this
"Agreement"), among CMS Energy Corporation, a Michigan corporation ("CMS
Energy"), CMS Merging Corporation, a Michigan corporation and a wholly-owned
Subsidiary of CMS Energy ("Sub"), Terra Energy Ltd., a Michigan corporation
("Terra" and, together with Sub, the "Constituent Corporations"), Xxxxxx X.
Xxxxxx ("Xxxxxx"), Xxxxx X. Xxxxxx ("Tester" and, together with Xxxxxx and each
Optionholder (as hereinafter defined) from and after acquisition by such
Optionholder of any shares of Terra Common Stock (as hereinafter defined), each
individually a "Management Stockholder" and collectively the "Management
Stockholders"), Xx. Xxxxxx Xxxxx and Xxxxx X. Xxxxx (collectively, "Xxxxx"),
Xx. Xxxxx Xxxxxx and Xxxx X. Xxxxxx (collectively, "Xxxxxx"), The Revocable
Living Trust of Xx. Xxxxxxx X. Xxxxxxxx under Agreement dated May 1, 1990,
acting by and through its sole trustee, Xx. Xxxxxxx X. Xxxxxxxx ("Scherock"
and, together with Xxxxx and Xxxxxx, each individually a "Non-Management
Stockholder" and collectively the "Non-Management Stockholders" and, together
with Lagina, Tester, Xxxxx, Xxxxxx and each Optionholder from and after
acquisition by such Optionholder of any shares of Terra Common Stock, each
individually a "Stockholder" and collectively the "Stockholders"), Xxxxxx X.
Xxxxx ("Xxxxx") and Xxxxx Xxxxxxxxxx ("Xxxxxxxxxx", and, together with Xxxxx,
each individually an "Optionholder" and collectively the "Optionholders").
Unless otherwise indicated, capitalized terms used herein are used as defined
in Section 12.4 hereof.
W I T N E S S E T H :
WHEREAS, CMS Energy is a Michigan corporation having an authorized capital
of (i) 250,000,000 shares of common stock, $.01 par value (the "CMS Common
Stock"), of which, as of June 30, 1995, 88,174,182 shares were issued and
outstanding, (ii) 10,000,000 shares of preferred stock, $.01 par value, none of
which, on the date hereof, is issued and outstanding, and (iii) 60,000,000
shares of Class G common stock, no par value, of which, as of August 15, 1995,
7,520,000 shares were issued and outstanding;
WHEREAS, Sub is a Michigan corporation having an authorized capital of
60,000 shares of common stock, no par value, of which, on the date hereof, 10
shares are issued and outstanding;
WHEREAS, Terra is a Michigan corporation having an authorized capital of
20,000,000 shares of common stock, no par value (the "Terra Common Stock"), of
which, on the date hereof, 9,519,500 shares are issued and outstanding;
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WHEREAS, Terra, itself and through its Subsidiaries, is in the business of
natural gas and oil exploration, development and production and activities
related thereto (hereinafter generally referred to as the "Terra Business");
WHEREAS, the respective Boards of Directors of CMS Energy and the
Constituent Corporations have approved the merger (the "Merger") of Sub into
Terra pursuant to the terms and conditions of this Agreement and the related
transactions contemplated by this Agreement, the Board of Directors of Terra
has directed that this Agreement be submitted to its stockholders for adoption,
and CMS Energy as the sole stockholder of Sub has adopted this Agreement;
WHEREAS, the parties hereto intend the Merger to constitute a reorganization
described in section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code");
WHEREAS, CMS Energy, Sub, Terra, the Stockholders and the Optionholders
desire to make certain representations, warranties and agreements in connection
with the Merger and the related transactions contemplated by this Agreement and
also to prescribe various conditions to the Merger and such transactions;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions
contained herein, and in accordance with the provisions of this Agreement and
the Michigan Business Corporation Act (the "BCA"), at the Effective Time (as
hereinafter defined), Sub shall be merged with and into Terra pursuant to the
Certificate of Merger in substantially the form of Exhibit A hereto or in such
other form as the parties may agree to accomplish the Merger. As the
corporation surviving in the Merger (the "Surviving Corporation"), Terra shall
continue unaffected and unimpaired by the Merger to exist under and be governed
by the laws of the State of Michigan. Upon the effectiveness of the Merger,
the separate existence of Sub shall cease except to the extent provided by law
in the case of a corporation after its merger into another corporation.
SECTION 1.2. FILING CERTIFICATE OF MERGER AND EFFECTIVENESS. Upon the
satisfaction or waiver of the conditions to the obligations of each of the
parties contained herein, the Certificate of Merger, executed in accordance
with the laws of the State of Michigan, shall be filed in the office of the
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Corporation and Securities Bureau, Department of Commerce, of the State of
Michigan. The Merger shall become effective upon such filing as provided in
the BCA. The date and the time on such date of effectiveness of the Merger are
herein called, respectively, the "Effective Date" and the "Effective Time."
SECTION 1.3. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 724 of the BCA.
SECTION 1.4. ARTICLES OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS.
The Articles of Incorporation and By-Laws of Terra, in each case as they may be
amended, as in effect immediately prior to the Effective Time, shall continue
in full force and effect as the Articles of Incorporation and By-Laws of the
Surviving Corporation. The initial directors of the Surviving Corporation
shall consist of the directors of Sub immediately prior to the Effective Time,
who shall serve until their respective successors are duly elected and
qualified. The initial officers of the Surviving Corporation shall consist of
the officers of Sub immediately prior to the Effective Time, who shall serve
until their respective successors are duly elected and qualified.
SECTION 1.5. FURTHER ASSURANCES. From time to time after the Effective
Time, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of Terra or
otherwise, such deeds and other instruments and to take or cause to be taken
such further or other action as shall be necessary or desirable in order to
vest or perfect in or to confirm, of record or otherwise, in the Surviving
Corporation title to, and possession of, all of the property, rights,
privileges, powers, immunities and franchises of Terra (subject, however, to
the provisions of Section 6.6(b) hereof) and otherwise carry out the purposes
of this Agreement.
ARTICLE II
CONVERSION OF SHARES
SECTION 2.1. CONVERSION OF SECURITIES. As of the Effective Time, by virtue
of the Merger and without any action on the part of any stockholder of Terra or
Sub:
(a) Each share of common stock of Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and become one fully paid
and nonassessable share of common stock, no par value, of the Surviving
Corporation.
(b) All shares of Terra Common Stock that immediately prior to the
Effective Time are held in the treasury of Terra or by any wholly-owned
Subsidiary of
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Terra or by CMS Energy (including the Xxxxxx Shares, as hereinafter defined)
shall be canceled and no capital stock of CMS Energy or other consideration
shall be delivered in exchange therefor.
(c) Subject to the provisions of Sections 2.6 and 2.7 hereof, each share of
Terra Common Stock issued and outstanding immediately prior to the Effective
Time (exclusive of shares of Terra Common Stock referred to in Section
2.1(b)) shall be converted into the number (the "Conversion Number") of
shares of CMS Common Stock (such shares of CMS Common Stock, together with
shares of CMS Common Stock issuable pursuant to Section 2.3 hereof and the
Covenant Not to Compete, are collectively referred to herein as "CMS Common
Shares"), rounded to the nearest millionth of a share, equal to the quotient
of (i) the quotient of (A) $46,474,772 and (B) the aggregate number of shares
of Terra Common Stock issued and outstanding immediately prior to the
Effective Time (exclusive of shares of Terra Common Stock referred to in
Section 2.1(b)) which the parties understand shall be 11,065,422 shares of
Terra Common Stock; and (ii) the average of the per share Daily Prices (as
hereinafter defined) on the New York Stock Exchange, Inc. (the "NYSE") of CMS
Common Stock (the "Average Price") as reported in the New York Stock Exchange
Composite Transactions (on the Transaction Reporting System operated by the
Consolidated Tape Association) during the ten (10) consecutive trading days
ending on the fifth trading day prior to the Effective Time of the Merger;
provided, however, that in the event the foregoing would result in an Average
Price greater than $24.625, then the Average Price shall be deemed to be
$24.625; and provided, further, that in the event the foregoing would result
in an Average Price less than $20.625, then the Average Price shall be deemed
to be $20.625.
All such shares of Terra Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and each holder
of a Certificate (as hereinafter defined) theretofore representing any such
shares shall cease to have any rights with respect thereto, except the right
to receive, upon surrender of such Certificate in accordance with Section
2.4, shares of CMS Common Stock and cash in lieu of fractional shares as
contemplated by Section 2.6. As used herein, the term Daily Price shall mean
the last sale price, or the closing bid price if no sale occurred, on the day
in question.
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(d) Each Option outstanding immediately prior to the Effective Time and not
theretofore exercised or canceled shall no longer be outstanding and shall
automatically be canceled.
SECTION 2.2. AGGREGATE CONSIDERATION; TERRA CONSOLIDATED NET WORKING
CAPITAL; TERRA DEBT. (a) Aggregate Consideration shall mean the difference
between (A) the sum of (I) $59,274,000, (II) an amount equal to Terra
Consolidated Net Working Capital (as hereinafter defined), which is estimated
to be $9,183,000 and (III) an amount equal to the revenue received by Terra or
its Subsidiaries for its account attributable to the Purchased Assets (as
hereinafter defined) between January 1, 1995 through the Effective Date, which
amount is estimated to be $250,000; and (B) the sum of (I) Terra Debt, (II) an
amount equal to the royalty and Tax obligations of Terra or its affiliates
incurred on or after January 1, 1995 relating to the income from the Purchased
Assets, which amount is estimated to be $100,000, (III) all costs and expenses
in excess of $100,000 borne or incurred by Terra or its affiliates after
December 31, 1994 (including, without limitation, fees and disbursements of its
counsel or counsel for the Stockholders or Optionholders, accountants and other
financial, legal, accounting or other advisers, but excluding the cost of the
audit of Terra's 1994 consolidated financial statements) in connection with the
negotiation, execution, delivery or performance of this Agreement and each of
the other documents and agreements executed in connection with or contemplated
by this Agreement or the consummation of the transactions contemplated hereby,
which amount is estimated to be $200,000, (IV) the amount, if any, by which the
bonuses paid pursuant to Section 6.6(a)(xiii)(D) hereof exceed the aggregate
amount received by Terra upon exercise of the Options (as hereinafter defined)
prior to the Effective Time as contemplated by Section 6.12 hereof, (V) an
amount equal to the costs and expenses (net of any Tax benefit not taken into
account in calculating the amount referred to in clause (B)(II) above), and any
capital costs, paid by Terra or its Subsidiaries (including amounts paid on
mortgages on Purchased Assets) in connection with acquisition or operation of
the Purchased Assets between January 1, 1995 through the Effective Date, which
are estimated to be $475,000, (VI) fifty percent (50%) of the deferred income
tax account of Terra and its Subsidiaries as shown on the Balance Sheet, which
was $878,000, (VII) the amount paid by Terra or its Subsidiaries for the
bonuses referred to in Section 6.6(a)(xiii)(B) and (C);
(b) Terra Consolidated Net Working Capital shall mean the consolidated net
working capital of Terra as of December 31, 1994 determined in accordance with
GAAP (as hereinafter defined) except that (i) current maturities of long-term
debt relating to periods after January 1, 1995 that arise from gas compressor
financing transactions, which was $736,129, shall be added back, (ii) the
current portion of the Xxxxxx Foods Notes (the "Xxxxxx
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Notes"), which current portion is equal to $147,946 shall be deleted as an
asset, (iii) the current portion of the liability to Xxxxx relating to his 10%
interest in the Xxxxxx Notes shall be deleted as a liability, (iv) any amounts
representing principal or interest payable to Terra on promissory notes or
other indebtedness secured by workover rigs shall not be included in
calculating Terra Consolidated Net Working Capital, (v) any amounts
representing payments or receivables for overhead costs to be incurred in 1995
or thereafter shall be deleted as an asset except to the extent that there is
included a corresponding amount as a liability for prepaid revenues and (vi)
any amounts representing payments or receivables for drilling costs to be
incurred in 1995 or thereafter shall be deleted as an asset except to the
extent that there is included a corresponding amount as a liability for such
costs.
(c) Terra Debt shall mean the actual outstanding principal and all accrued
but unpaid interest payable by Terra or any of its Subsidiaries under any
long-term debt (excluding the current portion to the extent included in Terra
Consolidated Net Working Capital) as of December 31, 1994, excluding, however,
(i) the non-current portion of debt arising from gas compressor financing
transactions as of December 31, 1994, which was $1,452,845, (ii) project
finance debt of Terra incurred on or prior to December 31, 1994 of up to $5
million relating to the construction of the Vienna CO2 plant, but only to the
extent that MCN has a firm commitment to purchase such plant upon its
completion in consideration, among other things, of the discharge of such
indebtedness, which was zero, (iii) the non-current portion of debt of Terra to
Xxxxx relating to Xxxxx'x 10% interest in the Xxxxxx Notes, (iv) capitalized
auto lease debt of Terra and (v) debt of Terra or any of its Subsidiaries to be
assumed by the purchasers of the Purchased Assets pursuant to the documents
referred to in Section 6.6(b).
SECTION 2.3 EXCHANGE OF XXXXXX SHARES BY XXXXXX. (a) Subject to the terms
and conditions set forth in this Agreement, Xxxxxx agrees to exchange, assign,
transfer and deliver to CMS Energy, on the Effective Date and at a time which
is immediately prior to the time which is immediately prior to the Effective
Time (the "Exchange Closing Time"), and CMS Energy agrees to acquire from
Xxxxxx at such time, an aggregate of one million (1,000,000) shares of Terra
Common Stock (the "Xxxxxx Shares") currently owned by Xxxxxx.
(b) In consideration of the exchange by Xxxxxx of the Xxxxxx Shares and
subject to the satisfaction or waiver of the closing conditions described in
Article VIII below, CMS Energy shall assign, transfer and deliver to Xxxxxx, in
exchange for and upon delivery of the Xxxxxx Shares, the number of shares of
CMS Common Stock, rounded to the nearest thousandth of a share, determined by
dividing (i) $10,632,168 by (ii) the Average Price, provided that CMS Energy
shall satisfy such obligation by
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delivering cash in lieu of fractional shares or interests pursuant to Section
2.6, by check or wire transfer of immediately available funds to the account or
accounts designated by Xxxxxx in a notice to CMS Energy, and one or more
certificates representing the aggregate number of whole CMS Common Shares into
which the Xxxxxx Shares shall have been exchanged pursuant to this Section 2.3.
(c) At the Exchange Closing (as hereinafter defined), subject to the
satisfaction or waiver of the closing conditions described in Article IX below,
Xxxxxx will deliver to CMS Energy the certificates representing the Xxxxxx
Shares, duly endorsed in blank, or accompanied by duly authorized and executed
stock powers, such transfer representing full transfer of all of Lagina's
right, title and interest in the Xxxxxx Shares, free and clear of any
encumbrances, Liens, or intervening interests of any Person.
(d) Subject to the terms and conditions hereof, the consummation of the
transactions contemplated by this Section 2.3 (the "Exchange Closing") shall
take place at the Exchange Closing Time on the Effective Date.
SECTION 2.4. PAYMENT OF CASH AND DELIVERY OF CERTIFICATES. (a) At or
after the Effective Time, each holder, except for any holder referred to in
Section 2.1(b), of a certificate or certificates representing issued and
outstanding shares of record of Terra Common Stock immediately prior to the
Effective Time (collectively, the "Certificates") may surrender such
Certificate or Certificates to CMS Energy, and CMS Energy shall deliver or
cause to be delivered, in exchange therefor, (i) cash in lieu of fractional
shares or interests pursuant to Section 2.6, by check or wire transfer of
immediately available funds to the account or accounts designated by such
holder in a notice to CMS Energy, and (ii) one or more certificates
representing the aggregate number of whole CMS Common Shares into which the
Terra Common Stock represented by the Certificate or Certificates so
surrendered shall have been converted pursuant to Section 2.1.
(b) Any certificates representing CMS Common Shares or cash in lieu of
fractional shares deliverable pursuant to Section 2.1(c) shall be deliverable
upon the surrender to CMS Energy of a Certificate or Certificates representing
issued and outstanding shares of record of Terra Common Stock immediately prior
to the Effective Time. Until so surrendered, each outstanding certificate
representing issued and outstanding shares of record of Terra Common Stock
immediately prior to the Effective Time shall not be transferable on the books
of the Surviving Corporation or CMS Energy, but shall be deemed for all
corporate purposes, subject to Section 2.5, to evidence the right to receive
such cash and ownership of the number of whole CMS Common Shares, as the case
may be, into which the shares of Terra Common
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Stock which immediately prior to the Effective Time were represented thereby
shall have been converted pursuant to Section 2.1. At the close of business on
the business day next preceding the Effective Date, the stock transfer books of
Terra shall be closed and, except with respect to the exercise of the Options
and the exchange of the Xxxxxx Shares as contemplated by Section 2.3 hereof, no
transfer of Terra Common Stock shall thereafter be made or consummated.
SECTION 2.5. DIVIDENDS AND DISTRIBUTIONS. Any dividend or other
distribution paid in respect of CMS Common Stock to holders of record on or
after the Effective Date and otherwise payable to the holder of an outstanding
Certificate which, immediately prior to the Effective Time, represented issued
and outstanding shares of Terra Common Stock until the surrender of such
Certificate and the issuance of a certificate or certificates for CMS Common
Shares in respect thereof, shall be retained by CMS Energy pending such
surrender, and no such dividend or other distribution payable in respect of CMS
Common Stock shall be paid to the holder of such Certificate representing Terra
Common Stock until such Certificate shall have been so surrendered to CMS
Energy and a certificate or certificates for CMS Common Shares shall have been
so issued. Upon surrender of each such Certificate and issuance in exchange
therefor of CMS Common Shares, there shall be paid by CMS Energy to or at the
direction of the holder of the certificate for such CMS Common Shares the
amount of all dividends and distributions which became payable to holders of
record on or after the Effective Date in respect of the number of whole CMS
Common Shares represented by the certificate or certificates so issued. In no
event shall any holder of any Certificate which, immediately prior to the
Effective Time, represented issued and outstanding shares of Terra Common Stock
be entitled to receive interest on any of the funds to be received in the
Merger, or the consideration to be paid pursuant to the Covenant Not to Compete
or on any such dividend or other distribution.
SECTION 2.6. FRACTIONAL SHARES. No certificates for fractions of shares of
CMS Common Stock and no scrip or other certificates evidencing fractional
interests in such shares shall be issued pursuant to Section 2.1, 2.3 or the
Covenant Not to Compete. If the exchange or conversion of a person's aggregate
holdings of Terra Common Stock or other right to obtain CMS Common Shares at
any time results in a fractional share of CMS Common Stock or interest therein,
such person shall, in lieu thereof, be paid in cash in an amount equal to the
value of such fractional share or interest based on the Average Price of CMS
Common Stock. Any person otherwise entitled to a fractional share or interest
shall not be entitled by reason thereof to any voting, dividend or other rights
as a stockholder of CMS Energy.
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SECTION 2.7. CHANGES IN CMS COMMON STOCK. In the event that, during the
period of ten (10) trading days which is used to determine the Average Price,
or subsequent to such period but prior to the Effective Time, there has
occurred the record date of any reclassification, stock split, stock dividend
or similar change in respect of the CMS Common Stock, then appropriate
adjustment shall be made in the number of shares of CMS Common Stock and/or
kind of securities issued as CMS Common Shares in order to provide holders of
Terra Common Stock or of any other right to obtain CMS Common Shares pursuant
to the transactions contemplated by this Agreement with the same number of
shares of CMS Common Stock and/or securities that they would have received
after such reclassification, stock split, stock dividend or similar change if
the Effective Time had occurred immediately prior to the record date of such
reclassification, stock split, stock dividend or similar change (and all
references herein to the "CMS Common Shares" shall refer to such adjusted
number and/or kind of securities).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
AND THE OPTIONHOLDERS
As an inducement to CMS Energy and Sub to enter into this Agreement and to
consummate the transactions contemplated hereby, the Management Stockholders
and Optionholders jointly and severally (except as otherwise provided below)
represent and warrant to CMS Energy and Sub and agree, and the Non-Management
Stockholders severally and not jointly represent and warrant to CMS Energy and
Sub and agree solely with respect to Section 3.3(b) (first sentence), Section
3.4(b) and Section 3.34 as follows:
SECTION 3.1. ORGANIZATION OF TERRA. Terra is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Michigan. Terra is duly qualified to transact business as a foreign
corporation and is in good standing in each of the jurisdictions in which the
ownership or leasing of the properties used in its business or the conduct of
its business requires such qualification, other than in such jurisdictions
where the failure to be so qualified and in good standing would not have a
Material Adverse Effect. Terra has full corporate power and authority
necessary to own or lease and operate its properties and to carry on its
business as now conducted. Terra has delivered to CMS Energy complete and
correct copies of the articles of incorporation and by-laws of Terra, in each
case as amended and in effect on the date hereof.
SECTION 3.2. SUBSIDIARIES AND INVESTMENTS. (a) Terra owns beneficially
and of record, or indirectly, all of the issued and outstanding shares of
capital stock of each of the
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corporations listed under the heading "Subsidiaries" on Schedule 3.2 (each such
corporation, together with any partnership or limited liability company
(whether or not a Tax Partnership, but excluding any entity created by any
Operating Agreement, as hereinafter defined) of which Terra or any such
corporation is a general or managing partner or member or of which Terra or any
such corporation owns at least 50% of the partnership or membership interest,
each of which is identified in Schedule 3.2, but excluding Cronus Development
Corp., being herein collectively referred to as "Subsidiaries"). Except as
disclosed on Schedule 3.2, and excluding oil and gas joint operating agreements
or other agreements providing for the joint acquisition, exploration,
development or production of oil and gas properties and all amendments thereto
to which Terra or any Subsidiary is a party (the "Operating Agreements"), Terra
does not, directly or indirectly, (i) own, of record or beneficially, any
outstanding securities or other interest in any corporation, limited liability
company, partnership, joint venture or other entity (other than investments in
publicly traded securities, cash equivalents and short-term investment grade
debt) or (ii) control any corporation, limited liability company, partnership,
joint venture or other entity.
(b) Except as disclosed on Schedule 3.2, each of the Subsidiaries is duly
organized, validly existing and, in the case of corporate Subsidiaries, in good
standing, under the laws of its jurisdiction of organization, and each has full
corporate, partnership or limited liability company power and authority, as the
case may be, necessary to own or lease and operate its properties as now
conducted. Each of the Subsidiaries is duly qualified to transact business as
a foreign corporation, foreign partnership or foreign limited liability
company, as the case may be, and is in good standing in each of the
jurisdictions in which conduct of its business requires such qualification,
other than in such jurisdictions where the failure to be so qualified and in
good standing would not have a Material Adverse Effect. Schedule 3.2 contains
a list of each jurisdiction in which each Subsidiary is duly qualified to
transact business. Schedule 3.2 sets forth the authorized, and issued and
outstanding shares of, capital stock of each corporate Subsidiary and a
complete and accurate list of each corporation in which Terra directly or
indirectly owns at least 20% but less than 100% of the issued and outstanding
shares of capital stock (the "Non-Wholly Owned Subsidiaries") and a complete
and accurate list of each partnership or limited liability company (whether or
not a Tax Partnership, but excluding any entity created by any Operating
Agreement) of which Terra or any Subsidiary is or at any time has been a
managing, general or limited partner or a member or has served in a similar
capacity (the "Partnerships"), together with the state and date of organization
of each Partnership, the name and address of each general or limited partner or
member of each Partnership as they appear in the records of Terra or such
subsidiary, and the percentage interest of Terra or any of its
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Subsidiaries in each Partnership. Terra has delivered to CMS Energy true and
complete copies of each partnership agreement, limited liability company
agreement, regulations or similar governing instrument and all amendments
thereto pursuant to which each Partnership was organized (the "Partnership
Agreements").
(c) The assets of Cronus Development Corporation, the common stock of which
constitutes a Purchased Asset under Section 6.6(b), consist solely of
properties known as the "Crystal Prospect" leasehold; "Crystal Prospect"
Teselsky & Xxxxxx surface and minerals (T10N-R5W,SEC.3); "Xxxxxx Prospect"
leasehold; "Southern Michigan White Bear" leasehold interests; "Xxxxxx Maidens"
leasehold; "Pontisso" minerals (T30N-R1W, SEC. 15); "Xxxxxx 11" surface and
minerals 3.748 acres in Sec. 18; Hutches State Kalkaska well; Pontisso # 2-10 &
#4-10 xxxxx; and oil and gas leases in Benzie and Manistee Counties; and
additional assets which do not exceed $10,000 in value in the aggregate.
SECTION 3.3. CAPITALIZATION. (a) The authorized capital of Terra consists
of 20,000,000 shares of common stock, no par value, of which 9,519,500 shares
are duly and validly issued and outstanding and, except for 2,545,922 shares
issuable upon exercise of certain Options (as hereinafter defined) granted by
Terra, none of which is reserved for any purpose. All of the outstanding
shares of Terra Common Stock are duly authorized, validly issued, fully paid
and nonassessable. The record owners of the Terra Common Stock as of the date
hereof are listed in Schedule 3.3(a) and a list of the record owners of the
Terra Common Stock as of the Effective Time will be provided to CMS Energy on
the Effective Date. The record owners of options, warrants or similar rights
to purchase shares of Terra Common Stock from Terra or from the holders of any
Terra Common Stock (collectively, the "Options") are listed in Schedule 3.3(a)
hereto. Complete and correct copies of the material agreements relating to the
Options have been delivered to CMS Energy. Except for the Options, there are
no options, warrants or other rights to acquire, or agreements or commitments
of Terra to issue, sell, purchase or redeem, or of the holders of any Terra
Common Stock to sell or purchase, shares of capital stock or any other equity
interest of Terra, whether on conversion of other securities or otherwise.
None of the issued and outstanding shares of Terra Common Stock has been issued
in violation of, or is subject to, any preemptive or subscription rights.
Except as set forth in Schedule 3.3(a), there are no stockholder agreements,
voting trust agreements or any other similar contracts, agreements,
arrangements, commitments, plans or understandings restricting or otherwise
relating to voting, dividend, ownership or transfer rights with respect to any
shares of capital stock of Terra.
(b) Each Stockholder severally represents and warrants as to himself that
(i) he is the beneficial owner of the shares of Terra Common Stock listed in
Schedule 3.3(a) opposite his name
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or he has transferred such shares to a Permitted Transferee or Permitted
Transferees (as hereinafter defined) or, in the case of Xxxxxx, that the Xxxxxx
Shares are subject to Section 2.3 hereof and (ii) all such shares are owned
free from all liens, claims, encumbrances or other restrictions of any kind,
other than liens, claims, encumbrances or other restrictions listed on Schedule
3.3(b), securities law restrictions applicable to restricted stock and
restrictions created by this Agreement. Each Optionholder severally represents
and warrants as to himself that (i) he is the beneficial owner of Options to
purchase shares of Terra Common Stock listed in Schedule 3.3(a) opposite his
name, (ii) all such Options are owned free from all liens, claims, encumbrances
or other restrictions of any kind, other than liens, claims, encumbrances or
other restrictions listed on Schedule 3.3(b), securities law restrictions
applicable to restricted securities and restrictions created by this Agreement,
and (iii) that such Options will be exercised prior to the Effective Time and,
as of the Effective Time, no shares of Terra Common Stock will be issuable
pursuant thereto. Permitted Transferee shall mean any executor of the estate
of any Stockholder or any person acquiring the CMS Common Shares of such
Stockholder solely pursuant to the laws of descent.
(c) All outstanding shares of capital stock of each corporate Subsidiary
are duly authorized, validly issued, fully paid and nonassessable. Terra or
another wholly-owned Subsidiary is the record and beneficial owner of all of
the issued and outstanding shares of capital stock of each such Subsidiary and,
to the knowledge of Terra, is the record and beneficial owner of the shares of
capital stock of each Non-Wholly Owned Subsidiary as indicated on Schedule 3.2.
All such shares of capital stock are so owned free from all liens, claims,
encumbrances or other restrictions of any kind, other than liens, claims,
encumbrances or other restrictions listed on Schedule 3.3(c). Except as set
forth on Schedule 3.3(c), there are no options, warrants or other rights to
acquire, or agreements or commitments to issue, sell, purchase or redeem,
shares of capital stock of any corporate Subsidiary, whether on conversion of
other securities or otherwise. None of the issued and outstanding shares of
common stock of any corporate Subsidiary has been issued in violation of, or is
subject to, any preemptive or subscription rights. There are no voting trust
agreements or any other similar contracts, agreements, arrangements,
commitments, plans or understandings restricting or otherwise relating to
voting, dividend, ownership or transfer rights with respect to any shares of
common stock of any corporate Subsidiary.
(d) All outstanding partnership or membership interests in each Partnership
Subsidiary (including any limited liability company Subsidiary) are duly
authorized and validly issued. Terra or another Subsidiary is the record and
beneficial owner of such partnership or membership interests of each such
Partnership Subsidiary to the extent set forth in Schedule 3.2.
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All such partnership or membership interests are so owned free from all liens,
claims, encumbrances or other restrictions of any kind, other than liens,
claims, encumbrances or other restrictions listed on Schedule 3.3(d) and other
than as set forth in the relevant Partnership Agreements. There are no
options, warrants or other rights to acquire, or agreements or commitments to
issue, sell, purchase or redeem, any partnership or membership interests in any
Partnership Subsidiary, other than as set forth in the relevant Partnership
Agreements.
SECTION 3.4. AUTHORITY. (a) Terra has full corporate power and authority
to enter into this Agreement and, subject to adoption of this Agreement by the
stockholders of Terra (which adoption shall be effected promptly after the date
hereof), to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by Terra and the
consummation by Terra of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Terra, subject to
such adoption of this Agreement by the stockholders of Terra. This Agreement
has been duly executed and delivered by Terra and is, and each other agreement
or instrument of Terra contemplated hereby when executed and delivered by or on
behalf of Terra will be, the legal, valid and binding agreement of Terra,
enforceable against Terra in accordance with its respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
Each Management Stockholder and Optionholder severally represents and
warrants as to himself and as to Terra that neither the execution or delivery
of this Agreement by Terra or such Stockholder or Optionholder, nor
consummation of the transactions contemplated hereby or compliance with or
fulfillment of the terms and provisions hereof by Terra or such Stockholder or
Optionholder, will (a) conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of default or an
event creating rights of acceleration, termination or cancellation or a loss of
rights, or result in the creation or imposition of any encumbrance upon any of
the material assets of Terra or any Subsidiary, under the articles of
incorporation or the by-laws or partnership agreement, limited liability
company agreement, regulations or similar governing instrument of Terra or any
Subsidiary, any instrument, agreement (including any partnership agreement),
mortgage, indenture, deed of trust, permit, concession, grant, franchise,
license, judgment, order, award, decree or other restriction to which Terra or
any Subsidiary is a party or any of its respective properties is subject or by
which it is bound or any statute, other law or regulatory provision affecting
it,
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except for such conflicts, breaches, defaults, events, creations and
impositions that are set forth on Schedule 3.4(a) or (b) require the approval,
consent or authorization of, or the making of any declaration, filing or
registration with, any third party or any foreign, federal, state or local
court, governmental authority or regulatory body, by or on behalf of Terra or
any Subsidiary, except for the applicable requirements of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 0000 (xxx "XXX Xxx"), the filing of a Certificate
of Merger with the Corporation and Securities Bureau, Department of Commerce,
of the State of Michigan and appropriate documents with the relevant
authorities of other jurisdictions in which Terra is qualified to do business,
adoption of this Agreement by the stockholders of Terra and as set forth in
Schedule 3.4(a).
(b) Each Stockholder and Optionholder severally represents and warrants as
to himself that he has full power and authority to enter into this Agreement.
Scherock severally represents and warrants as to itself that (i) it is a trust
duly formed and validly existing under the laws of the State of Michigan and
Xx. Xxxxxxx X. Xxxxxxxx serves as sole trustee thereof, (ii) such trustee has
the power and authority under the agreement dated May 1, 1990 creating the
trust and the laws of the State of Michigan to execute and deliver this
Agreement, to consummate the transactions contemplated hereby and to cause the
trust to perform its obligations hereunder and (iii) Scherock has, and will
continue to have and maintain, sufficient assets to perform its obligations as
set forth in this Agreement. Each Stockholder and Optionholder severally
represents and warrants as to himself, and the Management Stockholders and
Optionholders represent and warrant as to Terra, that neither the execution or
delivery of this Agreement by Terra or such Stockholder or Optionholder, nor
consummation of the transactions contemplated hereby or compliance with or
fulfillment of the terms and provisions hereof by Terra or such Stockholder or
Optionholder, will conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, or result in the creation or imposition of any encumbrance upon
any of the material assets of Terra or any Subsidiary under, any instrument,
agreement, mortgage, indenture, deed of trust, permit, concession, grant,
franchise, license, judgment, order, award, decree or other restriction to
which such Stockholder or Optionholder is a party or by which such Stockholder
or Optionholder is bound. Each Stockholder and Optionholder severally
represents and warrants as to himself that this Agreement has been duly
executed and delivered by such person and is, and each other agreement or
instrument of such Stockholder or Optionholder contemplated hereby when
executed and delivered by or on behalf of such person will be, the legal, valid
and binding agreement of such Stockholder or Optionholder, as the case may be,
enforceable against such Stockholder or Optionholder in accordance with its
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respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforceability of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law).
SECTION 3.5. FINANCIAL STATEMENTS. Terra has previously provided CMS
Energy with: (i) the draft dated August 14, 1995 of the consolidated balance
sheet (the "Balance Sheet") of Terra as of December 31, 1994 (the "Balance
Sheet Date") and the related draft dated August 14, 1995 of the consolidated
statements of income (the "Statement of Income"), stockholders' equity and cash
flows for the year then ended, together with the notes and any schedules to
such financial statements, as in the process of being audited by Xxxxxx
Xxxxxxxx L.L.P., independent public accountants, and (ii) the consolidated
unaudited balance sheet (the "Unaudited Balance Sheet") of Terra as of June 30,
1995 (the "Unaudited Balance Sheet Date") and the related unaudited
consolidated statement of income (the "Unaudited Statement of Income") for the
six months then ended. Except as set forth on Schedule 3.5 or disclosed in the
notes or any schedules to the consolidated financial statements referred to in
clause (i) of the preceding sentence, and disregarding the matters referred to
in the proviso contained in Section 3.7, to the knowledge of Terra, the
consolidated balance sheets and statements of income, stockholders' equity and
cash flows referred to in such clause (i) have been prepared in conformity with
generally accepted accounting principles ("GAAP") consistently applied and
fairly present in all material respects the consolidated financial position of
Terra and its consolidated subsidiaries at the dates of such balance sheets and
the consolidated results of its operations and consolidated cash flows for the
respective periods indicated.
SECTION 3.6. OPERATIONS SINCE BALANCE SHEET DATE. (a) Except as set forth
in Schedule 3.6(a), since the Balance Sheet Date, there has been: (i) except
for changes relating to the oil and gas industry in general and not
specifically relating to Terra, its Subsidiaries, or the Stockholders, no
Material Adverse Change in Terra and its Subsidiaries taken as a whole, and
(ii) no damage, destruction, loss or claim with respect to, whether or not
covered by insurance, or condemnation or other taking of, assets having a
Material Adverse Effect on Terra and its Subsidiaries taken as a whole;
provided, however, that no representation or warranty is made with respect to
the items described in the proviso contained in Section 3.7.
(b) Except as set forth in Schedule 3.6(b), as contemplated hereby or with
the prior written consent of CMS Energy after the date hereof, since the
Balance Sheet Date, Terra has conducted its business only in the ordinary
course and in general conformity with past practice. Without limiting the
generality of the foregoing, except as set forth in
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Schedule 3.6(b), as contemplated by any provision of this Agreement or with the
prior written consent of CMS Energy after the date hereof, since the Balance
Sheet Date, neither Terra nor any of its Subsidiaries has: (i) issued,
delivered or agreed (actually or contingently) to issue or deliver any of its
capital stock, except with respect to the exercise of the Options, or granted
any option, warrant or right to purchase any of its capital stock or other
equity interest, or security convertible into its capital stock or other equity
interest, or, other than in the ordinary course of business consistent with
past practice, any of its bonds, notes or other securities, or borrowed or
agreed to borrow any funds; (ii) paid any obligation or liability (absolute or
contingent) other than current liabilities reflected on the balance sheets
referred to in Section 3.5 and current liabilities incurred since the Balance
Sheet Date in the ordinary course of business consistent with past practice;
(iii) declared or made, or agreed to declare or make, any payment of dividends
or distributions to stockholders or purchased or redeemed, or agreed to
purchase or redeem, any of its capital stock or other equity interest, (iv)
mortgaged, pledged or encumbered any assets other than in the ordinary course
of business consistent with past practice; (v) except for (A) assets sold,
leased or transferred in the ordinary course of business consistent with past
practice and (B) the sale of the Purchased Assets as contemplated by Section
6.6(b) hereof, sold, leased or transferred or agreed to sell, lease or transfer
any material assets or rights; (vi) to the knowledge of Terra, except in the
ordinary course of business consistent with past practice, canceled or agreed
to cancel any material debts or claims, waived or agreed to waive any rights of
material value, or allowed to lapse or failed to keep in force any material
franchise, permit or other material right; (vii) to the knowledge of Terra,
except in the ordinary course of business consistent with past practice, made
or permitted any material amendment or termination of any material contract,
agreement or license; (viii) undertaken or committed to capital expenditures
exceeding $100,000 for any single project or related series of projects, except
for the 1995 Antrim Program and the New Office; (ix) made any increase in the
compensation paid or to become payable to, or paid any bonus or incentive
compensation to, any of its directors, officers or employees except for
increases in base compensation in the normal course of business consistent with
past practice, increases required to be made pursuant to the terms of any
written employment or other agreement or employee benefit plan entered into
prior to the Balance Sheet Date, any bonus or incentive compensation the
payment of which has been approved in writing by CMS Energy or which is
included in calculating Terra Consolidated Net Working Capital, and any bonus
or incentive compensation which is referred to in Section 6.6(a)(xiii); (x)
amended its articles of incorporation or by-laws; (xi) to the knowledge of
Terra, undergone any material adverse change in its relationship with any
material supplier, purchaser, distributor, lessor, governmental body,
co-venturer under any Operating Agreement or
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consultant; (xii) made charitable donations in excess of $20,000 in the
aggregate; (xiii) incurred any liability or obligation (whether absolute,
accrued, contingent or otherwise and whether direct or as guarantor or
otherwise with respect to obligations of others) material to the business or
assets of Terra and its Subsidiaries, taken as a whole, except in the ordinary
course of business consistent with past practice and except as contemplated
hereunder and disregarding matters referred to in the proviso contained in
Section 3.7; (xiv) instituted, settled or agreed to settle any litigation,
action, or proceeding before any court or governmental body relating to the
business or assets of Terra or any of its Subsidiaries and involving an amount
in excess of $10,000 or materially affecting Terra or its Subsidiaries; (xv)
entered into, or amended in any material respect, any employment, collective
bargaining, deferred compensation, retention, change of control, termination or
other material agreement or arrangement for the benefit of employees (whether
or not legally binding) or entered into, adopted or amended in any material
respect any Plan (as hereinafter defined); (xvi) suffered any strike or other
employment related problem which would have a Material Adverse Effect on Terra
and its Subsidiaries taken as a whole; (xvii) suffered the loss of any key
employees, consultants or agents which would have a Material Adverse Effect on
Terra and its Subsidiaries taken as a whole or, to the knowledge of Terra, had
any material adverse change in its relations with its employees, consultants or
agents; (xviii) received any notice of termination of any material contract or
lease or other material agreement; (xix) transferred or expressly granted any
rights under, or entered into any settlement regarding the breach or
infringement of, any material United States or foreign license, patent,
copyright, trademark, trade name, invention or other material intellectual
property or modified in any material respect any existing rights with respect
thereto; (xx) changed its accounting reference period; (xxi) entered into any
transaction of the type described in Section 3.30 except as permitted
hereunder; or (xxii) entered into or become committed to enter into any other
material transaction except in the ordinary course of business consistent with
past practice.
SECTION 3.7. NO UNDISCLOSED LIABILITIES. Neither Terra nor any of its
Subsidiaries is subject to any material liability which is required in
accordance with GAAP to be shown on the Balance Sheet but which is not so
shown, and, to the knowledge of Terra, neither Terra nor any of its
Subsidiaries is subject to any material liability, absolute or contingent,
which is not shown on the Balance Sheet or which is in excess of amounts shown
or reserved for in the Balance Sheet, other than, in each case, (i) as referred
to in the notes to the Balance Sheet or in the discussion of the accounting
methodologies contained therein, (ii) as disclosed in Schedule 3.7 and (iii)
liabilities incurred after the Balance Sheet Date in the ordinary course of its
business consistent with past practice; provided, however, that no
representation or warranty is made with respect
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to liabilities or obligations in connection with (A) naturally occurring
radioactive material ("NORM"), (B) charges for post-production costs ("PPC")
made and to be made to the owners of royalties, overriding royalties and other
interests which do not bear all or a portion of production costs, (C) plugging
and abandonment of Xxxxx, (D) the amount of fees and disbursements charged and
to be charged to Terra by its accountants relating to the audit of Terra's
consolidated financial statements for the year ended December 31, 1994, or (E)
those items referred to in Sections 3.22 or 3.29.
SECTION 3.8. TAXES. (a) Except as set forth on Schedule 3.8(a): (i) each
of Terra and its Subsidiaries (as hereinafter defined) has filed on or before
the date hereof (or will timely file) all Tax Returns (as hereinafter defined)
that are required to be filed on or before the date hereof or the Effective
Date; (ii) all such Tax Returns for taxable years or periods ending on or
before December 31, 1994 are (or will be) complete and accurate in all material
respects and disclose all Taxes (as hereinafter defined) required to be paid by
Terra and its Subsidiaries for the periods covered thereby except for Taxes for
which adequate reserves have been established by Terra or its Subsidiaries and
such reserves are reflected in the computation of Terra Consolidated Net
Working Capital and all Taxes shown to be due on such Tax Returns have been
timely paid or are reflected in the computation of Terra Consolidated Net
Working Capital; (iii) none of Terra or any Subsidiary has waived or been
requested to waive any statute of limitations in respect of Taxes; (iv) the Tax
Returns referred to in clause (i) for taxable years or periods ending on or
before December 31, 1991 have been examined by the Internal Revenue Service or
the appropriate state, local or foreign taxing authority, or the period for
assessment of Taxes in respect of which such Tax Returns were required to be
filed has expired; (v) there is no action, suit, investigation, audit, claim or
assessment pending or, to the knowledge of Terra, proposed or threatened with
respect to Taxes of Terra or any Subsidiary for taxable years or periods ending
on or before December 31, 1994 and, to the knowledge of Terra, no basis exists
therefor for which adequate reserves have not been established and such
reserves are reflected in the computation of Terra Consolidated Net Working
Capital; (vi) all deficiencies asserted or assessments made as a result of any
examination of the Tax Returns referred to in clause (i) for taxable years or
periods ending on or before December 31, 1994 have been paid in full or are
reflected in the computation of Terra Consolidated Net Working Capital; (vii)
all Tax Sharing Arrangements (as hereinafter defined) will terminate prior to
the Effective Date and neither Terra nor any Subsidiary will have any liability
thereunder on or after the Effective Date; (viii) there are no Tax indemnity
agreements to which Terra or any Subsidiary is a party or is bound; (ix) there
are no liens for Taxes upon the assets of Terra or any Subsidiary except liens
relating to current Taxes not yet due or which are reflected in the computation
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of Terra Consolidated Net Working Capital; (x) all Taxes which Terra or any
Subsidiary is required by law to withhold or to collect for payment (including
with respect to the exercise of the Options, collection of withholding from the
Optionholders due with respect thereto as contemplated by Section 6.12, and
with respect to the bonuses referred to in Section 6.6(a)(xiii), collection of
withholding due with respect thereto) have been duly withheld and collected,
and have been paid or accrued; (xi) none of Terra or any of its Subsidiaries
has been a member of any consolidated group other than the Company Group of
which it is a member on the date hereof; (xii) to the knowledge of Terra, the
accruals for deferred Taxes reflected in the Balance Sheet are adequate to
cover any deferred tax liability of Terra and its Subsidiaries determined in
accordance with GAAP through the date thereof; (xiii) there are no Tax rulings,
requests for private letter rulings or requests for technical advice, in each
case initiated by Terra or any Subsidiary, or requests for a change in method
of accounting or closing agreements relating to Terra or any Subsidiary, which
in each case could affect the liability of Terra or any Subsidiary for Taxes
for any period after December 31, 1994; (xiv) none of Terra or any Subsidiary
has filed a consent under Section 341(f) of the Code or any comparable
provision of state statutes; (xv) since January 1, 1991, none of Terra or any
Subsidiary has taken any action not in accordance with past practice that would
have the effect of deferring any Tax liability for Terra or any Subsidiary from
any taxable period ending on or before December 31, 1994 to any taxable period
ending after December 31, 1994; (xvi) no income or gain of Terra or any
Subsidiary has been deferred pursuant to Treasury Regulation Section Section
1.1502-13 or -14, or Temporary Treasury Regulation Section Section 1.1502-13T
or -14T; (xvii) no power of attorney has been granted with respect to any
matter relating to Taxes of Terra or any Subsidiary which is currently in
force; (xviii) none of the property of Terra or any Subsidiary is required to
be treated as owned by another person pursuant to Section 168(f)(8) of the Code
(as in effect prior to its amendment by the Tax Equity and Fiscal
Responsibility Act of 1982) or is "tax exempt use property" within the meaning
of Section 168(h) of the Code or is subject to a so-called TRAC lease under
Section 7701(h) of the Code or any predecessor provision; (xix) Terra and each
Subsidiary is the owner for income tax purposes of all property which it has
leased to any other person; (xx) neither Terra nor any Subsidiary has
participated in or cooperated with an international boycott, within the meaning
of Section 999 of the Code, and all filing requirements imposed by Section 999
of the Code with respect to Terra and its Subsidiaries have been and will be
complied with; (xxi) neither Terra nor any Subsidiary has disposed of property
in a transaction being accounted for under the installment method pursuant to
Section 453 or 453A of the Code; (xxii) neither Terra nor any Subsidiary has
any corporate acquisition indebtedness, as described in Section 279(b) of the
Code; (xxiii) no taxes with respect to any period ending on or before December
31, 1994 were paid by Terra or any Subsidiary (or charged to Terra or any
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Subsidiary through any intercompany account or payment) after December 31, 1994
which were not included in the provision for income taxes on the Statement of
Income; (xxiv) to the knowledge of Terra, all of the production from intervals
in production or completed for production as of the date of this Agreement and
sold prior to January 1, 2003 from the Xxxxx designated as "Section 29 Xxxxx"
in the Property Schedules will, absent a change in applicable law occurring
after the Effective Date, constitute "qualified fuels" within the meaning of
Section 29(c) of the Code and, absent a change in applicable law occurring
after the Effective Date, none of such production will be "gas produced from a
tight formation" within the meaning of Section 29(c)(2)(B) of the Code; (xxv)
except as may be limited as a result of the Merger and the other transactions
contemplated by this Agreement, the alternative minimum tax credit described in
Note 11 to the consolidated financial statements of Terra and subsidiaries for
the year ended December 31, 1994 will be available, subject to applicable
limits relating to the amount of "regular" Tax that can be offset by an
alternative minimum tax credit, to reduce the "regular" federal income tax of
Terra and its Subsidiaries for periods beginning January 1, 1995; and (xxvi) no
portion of the Interests (A) has been contributed to and is currently owned by
a Tax Partnership, (B) is subject to any form of agreement (whether formal or
informal, written or oral) deemed by any state or federal Tax statute, rule or
regulation to be or to have created a Tax Partnership; or (C) otherwise
constitutes "partnership property" (as that term is used throughout Subchapter
K of Chapter 1 of Subtitle A of the Code) of a Tax Partnership.
(b) No disposition by Terra or any of the Stockholders pursuant to this
Agreement is subject to withholding under Section 1445 of the Code and no stock
transfer taxes, real estate transfer taxes, or other similar taxes will be
imposed in respect of the Merger.
(c) As a result of the Merger and the transactions contemplated by this
Agreement, none of Terra, any Subsidiary or the Surviving Corporation will be
obligated (limited, in the case of the Surviving Corporation, to obligations to
which the Surviving Corporation becomes subject as a result of any agreement or
arrangement entered into by Terra or any Subsidiary prior to the Merger) to
make a payment to an individual that would be an "excess parachute payment" to
a "disqualified individual" as those terms are defined in Section 280G of the
Code, without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
(d) For purposes of this Section 3.8 and Section 7.2, notwithstanding any
other provision hereof, the following definitions shall apply:
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(i) "Company Group" shall mean any "affiliated group" (as defined in
Section 1504(a) of the Code without regard to the limitations contained in
Section 1504(b) of the Code) that, at any time on or before the Effective
Date, includes or has included Terra, any of its Subsidiaries or any
predecessor of or successor to Terra or any of its Subsidiaries (or another
such predecessor or successor), or any other group of corporations which, at
any time on or before the Effective Date, files or has filed Tax Returns on a
combined, consolidated or unitary basis with Terra or any of its Subsidiaries
or any predecessor of or successor to Terra or any of its Subsidiaries (or
another such predecessor or successor).
(ii) "material" shall mean, with respect to Taxes, that the failure
on a timely basis to pay all such Taxes would result in an aggregate Tax
liability of not less than $25,000.
(iii) "Subsidiary" shall have the meaning ascribed thereto in Section
3.2(a).
(iv) "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
shall mean (i) any federal, state, local or foreign net income, gross income,
gross receipts, windfall profits, severance, property, production, sales, use,
value added, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem, transfer, excise, stamp, or
environmental tax, or any other tax, custom, duty, governmental fee or import
or export duty or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any governmental authority, and (ii) liability of Terra or any of
its Subsidiaries for the payment of amounts with respect to payments of a
type described in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group, or as a result of any obligation of
Terra or any of its Subsidiaries under any Tax Sharing Arrangement or Tax
indemnity arrangement.
(v) "Tax Partnership" shall mean any entity, organization, agreement
or group deemed to be a partnership within the meaning of Section 761 of the
Code or any similar state or federal statute, rule or regulation and that is
not excluded from the application of the partnership provisions of Subchapter
K of Chapter 1 of Subtitle A of the Code and of all similar provisions of
state tax statutes or regulations by reason of elections made, pursuant to
Section 761(a)
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of the Code and all such similar state or federal statutes, rules and
regulations.
(vi) "Tax Return" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
(vii) "Tax Sharing Arrangement" shall mean any written or unwritten
agreement or arrangement for the allocation or payment of Tax liabilities or
payment for Tax benefits with respect to a consolidated, combined or unitary
Tax Return, which Tax Return includes Terra or any of its Subsidiaries.
SECTION 3.9. CONDITION OF TANGIBLE ASSETS. Except as otherwise disclosed
in Schedule 3.9, to the knowledge of Terra, each tangible Interest or asset
owned or leased by Terra or any of its Subsidiaries and having a book or fair
market value in excess of $25,000 is in good operating condition (subject to
reasonable wear and tear and immaterial impairments of value and damage) and
generally suitable for the uses for which intended.
SECTION 3.10. TITLE TO PROPERTY; PROPERTY SCHEDULES. (a) Since June 1,
1995, except as set forth in Schedule 3.10(a) neither Terra nor any Subsidiary
has made or suffered to be made any conveyance, encumbrance or burden on
production with respect to the Proved Developed Interests, Proved Undeveloped
Interests and Unproved Interests except for those not included in the working
interests, net revenue interests or overriding royalty interests shown on the
Property Schedules, nor knowingly acted or knowingly failed to act in such
manner as to give rise to any Title Defect or other adverse claim against the
Proved Developed Interests, Proved Undeveloped Interests or Interests relating
to oil and gas gathering, transportation, processing and treating activities
or, except in the ordinary course of business consistent with past practice,
Unproved Interests. Except as set forth in this Section 3.10(a), no
representation is made as to title to the Proved Developed Interests, the
Proved Undeveloped Interests or the Unproved Interests or Interests relating to
oil and gas gathering, transportation, processing or treating activities.
(b) Each of Terra and its Subsidiaries has good and, with respect to real
property, indefeasible title to all other Interests (excluding Proved Developed
Interest, Proved Undeveloped Interests and Unproved Interests or Interests
relating to oil and gas gathering, transportation, processing and treating
activities) and assets reflected on the Balance Sheet as being owned by it and
all such other Interests and assets thereafter acquired by it (except to the
extent that such assets have thereafter been disposed of in the ordinary course
of
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business consistent with past practice), subject to no liens, mortgages,
pledges, security interests, encumbrances, claims or charges of any kind
(collectively, "Liens") except (i) as noted in Schedule 3.10(b), (ii) for Liens
for taxes not yet delinquent or the validity of which is being contested in
good faith, (iii) any Liens arising by operation of law securing obligations
not yet overdue, (iv) Liens that do not materially interfere with the present
use or value of the applicable asset and (v) Permitted Encumbrances.
(c) To the knowledge of Terra, except as set forth in Schedule 3.10(c),
Terra and its Subsidiaries are currently bearing or, in the case of Interests
not operated by Terra or its Subsidiaries, paying the operators of such
Interests, as Terra's share of costs and expenses, no more than the working
interests set forth on the Property Schedules, unless there has been a
corresponding and proportionate increase in the net revenue interests. Terra
and its Subsidiaries have made all such payments in a timely manner so that
neither Terra nor its Subsidiaries is in default, or currently required to pay
interest, under the terms of any agreements relating to such payments.
SECTION 3.11. AVAILABILITY AND OWNERSHIP OF ASSETS. The Interests and
assets shown on the Balance Sheet, taken as a whole, include all the material
properties and assets owned or used or held by Terra or its Subsidiaries during
the twelve months covered by the Balance Sheet and required, in accordance with
GAAP, to be reflected on the Balance Sheet (except properties and assets sold,
cash disposed of, accounts receivable collected, prepaid expenses realized,
contracts fully performed, and properties or assets which had become worn out,
obsolete or surplus, in each case in the ordinary course of business or as
contemplated by this Agreement). There are no material Interests, assets or
properties used in the Terra Business owned by any person other than Terra or
its Subsidiaries which are leased or licensed pursuant to a lease or license
that will terminate as a result of the consummation of the Merger and the other
transactions contemplated hereby.
SECTION 3.12. PERSONAL PROPERTY LEASES. Schedule 3.12 identifies each
lease or other agreement or right, whether written or oral, under which Terra
or any of its Subsidiaries is lessee of, or holds or operates, any machinery,
equipment, vehicle or other tangible personal property owned by a third person
having scheduled rental payments in excess of $10,000 per year.
SECTION 3.13. ACCOUNTS RECEIVABLE. To the knowledge of Terra, all
outstanding accounts receivable of Terra and its Subsidiaries have arisen from
bona fide transactions, except to the extent that a reserve in respect thereof
shall have been established on the Balance Sheet or the Unaudited Balance
Sheet.
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To the knowledge of Terra, (i) the accounts receivable reflected in the Balance
Sheet, taken as a whole, are good and collectible in all material respects in
the ordinary course of business at the aggregate recorded amounts thereof, net
of any applicable allowances for doubtful accounts reflected therein; and (ii)
the accounts receivable to be reflected in the books and records of Terra and
its Subsidiaries as of the Effective Date, taken as a whole, will be good and
collectible in all material respects in the ordinary course of business at the
aggregate recorded amounts thereof, net of any applicable allowances for
doubtful accounts reflected thereon, which allowances will be determined on a
basis consistent with the basis used in determining the allowances for doubtful
accounts reflected in the Balance Sheet. The reserve established on the
Balance Sheet for doubtful accounts has been deducted in calculating Terra
Consolidated Net Working Capital, and the reserve to be reflected in the books
and records of Terra and its Subsidiaries as of the Effective Date will not be
a greater percentage of accounts receivable reflected therein than is the
percentage of the reserve established on the Balance Sheet for doubtful
accounts of accounts receivable reflected thereon.
SECTION 3.14. INTELLECTUAL PROPERTY. (a) Schedule 3.14 contains a list of:
(i) all material United States and foreign patents and patent
applications, all material United States, state and foreign trademarks,
service marks, trade names and copyrights for which registrations have been
issued or applied for, and all other material United States, state and
foreign trademarks, service marks, trade names and copyrights, owned by
Terra or any of its Subsidiaries or in which Terra or any of its Subsidiaries
holds any material right, license or interest, showing in each case the
product, device, process, service, business or publication covered thereby,
the registered or other owner, expiration date and, in the case of any such
right, license or interest, a brief description thereof;
(ii) all material agreements, commitments, contracts, understandings,
licenses and assignments relating or pertaining to any asset, property or
right described in the preceding clause to which Terra or any of its
Subsidiaries is a party, showing in each case the parties thereto and, in the
case of oral agreements, commitments, contracts, understandings, licenses and
assignments, the material terms thereof;
(iii) all material licenses or agreements pertaining to mailing lists,
know-how, trade secrets, inventions or uses of ideas to which Terra or any of
its Subsidiaries is a party, showing in each case the parties thereto and, in
the case of oral licenses or
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agreements, a brief description of the material terms thereof; and
(iv) all registered assumed or fictitious names under which Terra or any of
its Subsidiaries is conducting its business as of the date hereof.
(b) All patents listed in Schedule 3.14 as being owned by Terra or any of
its Subsidiaries are valid and in full force, all patents listed in Schedule
3.14 as being used by Terra or any of its Subsidiaries are, to the knowledge of
Terra, valid and in full force and all patent applications of Terra or any of
its Subsidiaries listed therein are in good standing, all without material
challenge of any kind except as otherwise disclosed in Schedule 3.14, and,
except as otherwise disclosed in Schedule 3.14, Terra or a Subsidiary owns the
entire right, title and interest in and to such patents and patent applications
so listed as being owned by Terra or any of its Subsidiaries without
limitation, burden or encumbrance of any kind, except for such limitations,
burdens and encumbrances that would not have a Material Adverse Effect on Terra
and its Subsidiaries taken as a whole. All of the registrations for trade
names, trademarks, service marks and copyrights listed in Schedule 3.14 as
being owned by Terra or any of its Subsidiaries are valid and in full force,
all of the registrations for trade names, trademarks, service marks and
copyrights listed in Schedule 3.14 as being used by Terra or any of its
Subsidiaries are, to the knowledge of Terra, valid and in full force and all
applications by Terra or any of its Subsidiaries for such registrations are
pending and in good standing, all without material challenge of any kind except
as otherwise disclosed in Schedule 3.14, and, except as otherwise disclosed in
Schedule 3.14, Terra or its Subsidiaries owns the entire right, title and
interest in and to all such trade names, trademarks, service marks and
copyrights so listed as being owned by Terra or any of its Subsidiaries as well
as the registrations and applications for registration therefor without
qualification, limitation, burden or encumbrance of any kind, except for such
qualifications, limitations, burdens and encumbrances that would not have a
Material Adverse Effect on Terra and its Subsidiaries taken as a whole.
Correct and complete copies of all the patents and patent applications,
registered trademarks, trade names, service marks and copyrights, registrations
or applications therefor and licenses listed in Schedule 3.14 have heretofore
been delivered by Terra to CMS Energy.
(c) To the knowledge of Terra, no infringement of any patent, patent right,
trademark, service xxxx, trade name, or copyright or registration thereof has
occurred or results in any way from the operations or business of Terra or its
Subsidiaries, except for such infringements that would not have a Material
Adverse Effect on Terra and its Subsidiaries taken as whole.
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SECTION 3.15. OWNED REAL PROPERTY. Schedule 3.15 contains a brief
description of each parcel of real property, excluding Proved Developed
Interests, Proved Undeveloped Interests and Unproved Interests and easements,
rights of way and other Interests relating to oil and gas gathering,
transportation, processing and treating activities, owned by Terra or any of
its Subsidiaries (the "Owned Real Property") and of each option held by Terra
or any of its Subsidiaries to acquire any such real property. Complete and
correct copies of any title opinions, surveys and appraisals in the possession
of Terra or any of its Subsidiaries or any policies of title insurance
currently in force and in the possession of Terra or any of its Subsidiaries
with respect to each such parcel have heretofore been made available by Terra
to CMS Energy.
SECTION 3.16. LEASED REAL PROPERTY. Schedule 3.16 sets forth a list of
each lease or similar agreement under which (i) Terra or any of its
Subsidiaries is lessee of, or holds or operates, any real property or interest
therein owned by any third person, excluding Proved Developed Interests, Proved
Undeveloped Interests and Unproved Interests and easements, rights of way and
other Interests relating to oil and gas gathering, transportation, processing
and treating activities, (ii) to the knowledge of Terra, Terra or any of its
Subsidiaries has been lessee of, or has held or operated, any real property
owned by any third person, excluding Proved Developed Interests, Proved
Undeveloped Interests and Unproved Interests and easements, rights of way and
other Interests relating to oil and gas gathering, transportation, processing
and treating activities, and is as of the date hereof, or will be as of the
Effective Date, subject to any actual or contingent liability (other than any
liability in respect of a matter referred to in Section 3.29) in respect
thereof (the real property described in clauses (i) and (ii) above being
collectively referred to herein as the "Leased Real Property") or (iii) Terra
or any of its Subsidiaries is lessor of any of the Owned Real Property. Except
as set forth in Schedule 3.16, Terra or a Subsidiary has the right to quiet
enjoyment of all the Leased Real Property described in clause (i) of the
immediately preceding sentence for the full term of each such lease or similar
agreement (and any renewal option) relating thereto, and the leasehold or other
interest of Terra or such Subsidiary in such real property is not subject or
subordinate to any encumbrance, except for any failure to have such right or
the existence of any such encumbrance that would not have a Material Adverse
Effect on Terra and its Subsidiaries taken as whole. Complete and correct
copies of any title opinions, surveys and appraisals in the possession of Terra
or any of its Subsidiaries or any policies of title insurance currently in
force and in the possession of Terra or any of its Subsidiaries with respect to
each such parcel of leased property have heretofore been made available by
Terra to CMS Energy.
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SECTION 3.17. LITIGATION. Except as set forth in Schedule 3.17, there are
no claims, actions, suits or proceedings to which Terra or any of its
Subsidiaries is a party or any of their respective properties is subject or by
which any of them is bound, pending or, to the knowledge of Terra, threatened
before or by any court or governmental agency, which in the case of threatened
claims, actions, suits or proceedings, would, if adversely determined, have a
Material Adverse Effect on Terra and its Subsidiaries taken as a whole, or
prevent or hinder the consummation of the transactions contemplated hereby.
Notwithstanding anything contained in this Section 3.17 to the contrary, no
representation or warranty is made with respect to threatened claims, actions,
suits or proceedings relating to the items set forth in clauses (A) through (C)
of the proviso contained in Section 3.7.
SECTION 3.18. NO GUARANTIES; EXTENSIONS OF CREDIT. Except as set forth in
Schedule 3.18, except for customary indemnification and guaranty provisions
contained in any Operating Agreement and except for extensions of credit made
in the ordinary course of business, no material obligations or liabilities of
Terra or any of its Subsidiaries are guaranteed by or subject to a similar
contingent obligation of any other person, nor has Terra or any of its
Subsidiaries guaranteed or become subject to a similar contingent obligation in
respect of the obligations or liabilities of, or extended credit to any other
person.
SECTION 3.19. COMPLIANCE WITH LAWS. To the knowledge of Terra, except as
disclosed in Schedule 3.19, Terra and its Subsidiaries are in compliance with
the provisions of all applicable existing laws and regulations (but excluding
environmental laws and regulations, which are the subject of Section 3.29, and
also excluding laws and regulations pertaining to employee benefits matters,
which are the subject of Section 3.22) of all federal, state, local and foreign
governments, except to the extent that the failure to comply therewith would
not have a Material Adverse Effect on Terra and its Subsidiaries taken as
whole. Except as disclosed in Schedule 3.19, to the knowledge of Terra, there
are no proposed orders, judgments, decrees, governmental takings, condemnations
or other proceedings, in each case binding upon the business, operations or
properties of Terra or any of its Subsidiaries and which would have a Material
Adverse Effect on Terra and its Subsidiaries taken as a whole. Notwithstanding
anything contained in this Section 3.19 to the contrary, no representation or
warranty is made with respect to the items set forth in clauses (A) through (C)
of the proviso contained in Section 3.7.
SECTION 3.20. PERMITS. To the knowledge of Terra, each of Terra and its
Subsidiaries possesses all material federal, state, local and foreign
governmental and regulatory franchises, rights, privileges, permits, grants,
concessions,
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licenses, certificates, variances, authorizations, approvals, and other
material authorizations (including any amendments to any thereof) necessary to
own or lease and operate its Interests and other material properties and to
conduct its business as now conducted (collectively, the "Permits"), excluding
environmental Permits, which are the subject of Section 3.29.
To the knowledge of Terra, all Permits are in full force and effect and will
continue in full force and effect immediately following the consummation of the
Merger without the breach of any terms or conditions thereof or the forfeiture
or impairment of any rights thereunder and no consent, approval or act of, or
the making of any filing with, any governmental body, regulatory commission or
other party will be required to be obtained or made by Terra or any of its
Subsidiaries in respect of any Permit as a result of the consummation of the
Merger and the other transactions contemplated hereby. To the knowledge of
Terra, neither Terra nor any of its Subsidiaries is in default in any material
respect under the terms of any such Permit nor has received notice of any
material default thereunder which has not been resolved.
SECTION 3.21. INSURANCE. To the knowledge of Terra, Schedule 3.21 contains
a list and brief description (including type of coverage, limits, deductibles,
carriers and effective and termination dates) of all policies of fire and
casualty, liability (general, product and other liability), well control,
workers' compensation and other forms of insurance and bonds maintained by
Terra or any of its Subsidiaries since December 31, 1992 up to and including
the Effective Date, and except as disclosed in Schedule 3.21, each of Terra and
its Subsidiaries is a named insured or is otherwise covered under each such
policy, and each such policy is in full force and effect and will not in any
way be affected by or terminate or lapse by reason of the transactions
contemplated by this Agreement.
Terra has made available to CMS Energy complete and correct copies of all
policies listed on Schedule 3.21, together with all riders and amendments
thereto, and, to the knowledge of Terra, no insurer under such policies has a
basis to void such policies on grounds of non-disclosure on the part of the
policyholder or the insured thereunder.
To the knowledge of Terra, (i) Schedule 3.21 hereto includes a list of each
claim and each notice of claim submitted under any such policy since December
31, 1992; (ii) except for any such claims or notices of claim, the full policy
limits (subject to deductibles provided therein) are available and unimpaired
under each such policy; and (iii) each of Terra and its Subsidiaries and
affiliates has complied with each such policy in all material respects and has
not failed to give any notice or present any claim thereunder in a due and
timely manner.
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SECTION 3.22. EMPLOYEE BENEFIT PLANS. (a) Schedule 3.22) sets forth a
list of, and, except as set forth in Schedule 3.22, Terra has delivered to CMS
Energy copies of, any pension, profit sharing, retirement, disability, health,
welfare or other "employee benefit plan", as that term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), bonus, stock option or other equity based, incentive, severance,
termination, retention or other material employee benefit or compensation plan,
policy, arrangement or agreement, whether written or unwritten, (i) under which
any employee or former employee of Terra or any of its Subsidiaries or the
beneficiary or dependent of any such employee or former employee (collectively,
the "Participants") is eligible to participate or derive a benefit and (ii)
that is established, maintained or contributed to by Terra or any of its
Subsidiaries or any trade or business, whether or not incorporated, which would
be treated as a single employer together with Terra and its Subsidiaries under
Section 414 of the Code, as of any date of determination (each, an "ERISA
Affiliate") or to which Terra or any of its Subsidiaries or any ERISA Affiliate
is obligated to contribute (collectively, the "Plans"). Neither Terra nor, to
the knowledge of Terra, any such Plan nor any trust created thereunder has
engaged in a transaction prohibited by Section 406 of ERISA or Section 4975 of
the Code that would result in any material liability to Terra or any of its
Subsidiaries. Except as disclosed in Schedule 3.22, current determination
letters have been received from the Internal Revenue Service with respect to
each Plan which is intended to qualify under Section 401(a) of the Code to the
effect that such Plan and the attendant trust are qualified and tax-exempt
within the meaning of Sections 401 and 501 of the Code, respectively, and, to
the knowledge of Terra, nothing has occurred either before or after the date of
such letters that would result in disqualification of such Plans or the loss of
such tax-exempt status and a material liability to Terra or any of its
Subsidiaries as a result thereof. Each of the Plans has been operated and
administered in material compliance with ERISA, the Code and all other
applicable laws, regulations and rules, except where any such noncompliance
would not result in a material liability to Terra or any of its Subsidiaries.
There are no material pending or, to the knowledge of Terra, threatened, claims
by or on behalf of any Plan, by or on behalf of any Participant or otherwise
involving any Plan (other than routine claims for benefits). Each Plan which
is subject to the minimum funding standards of Section 412 of the Code or
Section 302 of ERISA satisfies such standards, and no such Plan has incurred an
"accumulated funding deficiency," whether or not waived, within the meaning of
such Sections of the Code or ERISA. All contributions required to have been
made by Terra or any of its Subsidiaries and each ERISA Affiliate to each Plan
under the terms of any such Plan or pursuant to applicable law or any
applicable collective bargaining agreement have been made within the time
prescribed by any such Plan, law or agreement, as the case may be.
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(b) Except as set forth in Schedule 3.22, neither Terra or any of its
Subsidiaries nor any ERISA Affiliate would be liable for any material amount
pursuant to Title IV of ERISA if any employee pension benefit plan (within the
meaning of section 3(2) of ERISA) subject to such Title (a "Title IV Plan")
were to terminate. Except as disclosed on Schedule 3.22 hereto, as of the last
day of the 1994 plan year of each Plan which is a Title IV Plan, the "projected
benefit obligations" (within the meaning of the Financial Accounting Standards
Board Statement No. 87) under each such Plan did not exceed the fair market
value of the assets of each such Plan, determined on the basis of actuarial
assumptions each of which is reasonable. Neither Terra or any of its
Subsidiaries nor any ERISA Affiliate has engaged in a transaction which could
cause Terra or any such Subsidiary or such ERISA Affiliate to be subject to
liability under section 4069 or 4212 of ERISA. Neither Terra nor any of its
Subsidiaries nor any ERISA Affiliate has incurred any material liability under
or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and
several liability provisions of the Code or ERISA relating to employee benefit
plans for failure to comply with such provisions with respect to the Plans and
no event or condition has occurred or exists which could result in any material
liability following the Effective Date to CMS Energy under or pursuant to Title
I or IV of ERISA or such penalty, excise tax or liability provisions of the
Code or ERISA for failure to comply with such provisions with respect to the
Plans.
(c) No Plan is a "multiemployer plan" or a "multiple employer plan" within
the meaning of ERISA or the Code.
(d) No Participant is or may become entitled to post-employment welfare
benefits of any kind by reason of employment with Terra or any of its
Subsidiaries, including, without limitation, death or medical benefits (whether
or not insured), other than coverage mandated by section 4980B of the Code or
Part 6 of Title I of ERISA. The consummation of the transactions contemplated
by this Agreement will not result in an increase in the amount of compensation
or benefits or accelerate the vesting or timing of payment of any compensation
or benefits payable under any Plan to or in respect of any participant.
(e) Terra has delivered, or made available, to CMS Energy with respect to
each Plan subject to ERISA, correct and complete copies, where applicable, of
(i) all Plan documents and amendments thereto, trust agreements and amendments
thereto and insurance and annuity contracts and policies, (ii) the current
summary plan description, (iii) the Annual Reports (Form 5500 series) and
accompanying schedules, as filed, for the most recently completed three plan
years for which such reports have been filed, (iv) the financial statements for
the most recently completed three plan years for which such statements have
been prepared, (v) the actuarial reports for the most recently begun three plan
years for which such reports exist, (vi) the most
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recent determination letter issued by the Internal Revenue Service and the
application submitted with respect to such letter, (vii) PBGC Form 1 for the
most recently begun plan year and (viii) all correspondence with the Internal
Revenue Service, Department of Labor and Pension Benefit Guaranty Corporation
concerning any controversy. Each report described in clause (v) of the
preceding sentence accurately describes the funded status of the Plan to which
it relates and subsequent to the date of such report there has been no adverse
change in the funding status or financial condition of such Plan.
SECTION 3.23. EMPLOYEES AND AGENTS AND RELATED AGREEMENTS. (a) Except as
set forth in Schedules 3.23(a) or 3.30, neither Terra nor any of its
Subsidiaries is a party to or bound by any material oral or written employment
agreement, consulting agreement (other than employment or consulting agreements
under which the obligations of Terra or such Subsidiary are terminable by Terra
or such Subsidiaries without premium or penalty (other than statutory severance
or termination benefits) on notice of 30 days or less), deferred compensation
agreement, confidentiality agreement or covenant not to compete with any
officer, director, stockholder, employee, agent or attorney-in-fact of Terra or
any of its Subsidiaries. Terra has delivered to CMS Energy complete and
correct copies of each such agreement or instrument.
(b) Schedule 3.23(b) contains a list of all independent contractors
performing services for Terra or any of its Subsidiaries whose compensation
from Terra and all such Subsidiaries in 1994 was in excess of $250,000.
SECTION 3.24. EMPLOYEE RELATIONS AND LABOR MATTERS. (a) To the knowledge
of Terra, Terra and its Subsidiaries have complied in all material respects
with all applicable laws, rules and regulations which relate to wages, hours,
discrimination in employment and collective bargaining and are not liable for
any material arrearages of wages or any material taxes or penalties for failure
to comply with any of the foregoing. Terra believes that the relations of
Terra and its Subsidiaries with their employees are good.
(b) Except as set forth in Schedule 3.24(b) hereto, neither Terra nor any
of its Subsidiaries is a party to any collective bargaining agreement and Terra
and its Subsidiaries have complied in all material respects with all such
collective bargaining agreements. Neither Terra nor any of its Subsidiaries is
a party to or, to the knowledge of Terra, is threatened with, any dispute or
controversy with a union or with respect to unionization or collective
bargaining involving its employees. To the knowledge of Terra, neither Terra
nor any of its Subsidiaries is materially affected by any dispute or
controversy with a union or with respect to unionization or collective
bargaining involving any of its suppliers or customers. Schedule
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3.24(b) hereto sets forth a list of any union organizing or election activities
involving any non-union employees of Terra or any of its Subsidiaries known to
Terra which have occurred since December 31, 1991 or, to the knowledge of
Terra, are threatened as of the date hereof.
SECTION 3.25. ABSENCE OF CERTAIN BUSINESS PRACTICES. (a) None of Terra or
any of its Subsidiaries, any officer, employee or agent of Terra or any of its
Subsidiaries or any other person acting on its behalf, has, directly or
indirectly, given or agreed to give any gift or similar benefit (other than
with respect to bona fide payments for which adequate consideration has been
given) to any customer, supplier, governmental employee or other person who is
or may be in a position to help or hinder the business of Terra or any of its
Subsidiaries (or assist Terra or any of its Subsidiaries in connection with any
actual or proposed transaction) (a) which might subject Terra or any of its
Subsidiaries to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (b) which, if not continued in the future, would have
a Material Adverse Effect on Terra or any of its Subsidiaries or which would
subject Terra or any of its Subsidiaries to suit or penalty in any private or
governmental litigation or proceeding, (c) for any of the purposes described in
section 162(c) of the Code, or (d) for establishment or maintenance of any
concealed fund or concealed bank account.
(b) Terra and each of its Subsidiaries is in compliance with all applicable
provisions of the Foreign Corrupt Practices Act of 1976, as amended.
SECTION 3.26. TERRITORIAL RESTRICTIONS. Except as set forth on Schedule
3.26 and except for written agreements or understandings not listed on Schedule
3.26 unless they contain provisions which would have a Material Adverse Effect
on Terra, neither Terra nor any of its Subsidiaries is restricted in any
material respect by any written agreement or understanding (including area of
mutual interest or similar agreements or provisions, but excluding
confidentiality agreements or provisions) with third parties from carrying on
its business in any geographical area.
SECTION 3.27. TRANSACTIONS WITH CERTAIN PERSONS. Except as set forth in
Schedule 3.27 hereto, except for the transactions contemplated by this
Agreement, and except for transactions relating to the participation of an
officer of Terra in oil or gas projects on properties where the transactions
are documented in writing and the interests of such officers pursuant to those
transactions are not included within Terra's net revenue interests, working
interests or overriding royalty interests shown in the Property Schedules,
since January 1, 1992 neither Terra nor any of its Subsidiaries has purchased,
leased or otherwise acquired any material property or obtained any material
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services from, or sold, leased or otherwise disposed of any material property
or furnished any material services to (except with respect to remuneration for
services rendered as a director, officer or employee of Terra or any of its
Subsidiaries), in the ordinary course of business or otherwise, (i) any
Stockholder, (ii) any affiliate of Terra or any of its Subsidiaries, (iii) any
person who is an officer or director of Terra or any of its Subsidiaries or
(iv) any associate of any person referred to in clause (i), (ii) or (iii)
above. Except as set forth in Schedule 3.27 hereto and except for the
transactions contemplated by this Agreement, neither Terra nor any of its
Subsidiaries owes any amount in excess of $10,000 to, or has any contract with
or commitment to, any Stockholder, director, officer or employee of Terra or
any of its Subsidiaries (other than for compensation for current services not
yet due and payable and reimbursement of expenses arising in the ordinary
course of business) and none of such persons owes any amount in excess of
$10,000 to Terra or any of its Subsidiaries.
SECTION 3.28. NO FINDER. Neither Terra nor any of its Subsidiaries nor any
party acting on the behalf of any of them has paid or become obligated to pay
any fee or commission to any broker, finder or intermediary for or on account
of the transactions contemplated by this Agreement.
SECTION 3.29. ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule
3.29, to the knowledge of Terra, each of Terra and its Subsidiaries and each
operator of Proved Developed Interests or Proved Undeveloped Interests not
operated by Terra or its Subsidiaries, with respect to such Interests:
(i) is in material compliance with all Applicable Environmental Laws,
including those with respect to the use, handling, transportation, discharge,
release and/or disposal of any Hazardous Substance;
(ii) is not the subject of any investigation, judicial or administrative
proceeding, or settlement concerning (A) a Release (as hereinafter defined)
or threatened Release of any Hazardous Substance or (B) the violation of any
Applicable Environmental Laws;
(iii) is not under a duty to file any notice under any Applicable
Environmental Laws reporting the violation of any Applicable Environmental
Laws or the Release or threatened Release of any Hazardous Substance;
(iv) has no contingent liability in connection with any Release or
threatened Release of any Hazardous Substance nor has any present Property or
past Property been listed or proposed for listing on the National Priorities
List ("NPL") pursuant to the federal
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Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section Section 9601 et seq., ("CERCLA") or on the Comprehensive
Environmental Response Compensation Liability Information System List
("CERCLIS") or any similar state or foreign list of sites requiring Remedial
Action;
(v) has generated, treated, stored, recycled, transported or disposed of
any Hazardous Substances in accordance with Applicable Environmental Laws;
(vi) has installed underground storage tanks or surface impoundments on its
Property only in connection with the exploration for, or production, treating
or transportation of, oil, gas or other hydrocarbons and in accordance with
Applicable Environmental Laws;
(vii) is operating all Xxxxx, pipelines, storage tanks and other storage
vessels operated by it in material compliance with all secondary containment,
spill prevention and financial assurance requirements of Applicable
Environmental Laws; and
(viii) has no outstanding Lien filed on its assets in favor of any
governmental agency in connection with any Applicable Environmental Laws.
(b) To the knowledge of Terra, each of Terra and its Subsidiaries possesses
all material federal, state, local and foreign rights, privileges, permits and
other material authorizations (including any amendments to any thereof) under
Applicable Environmental Laws necessary to own or lease and operate its
Interests and other material properties and to conduct its business as now
conducted.
(c) For purposes of this Section 3.29, the following definitions shall
apply:
(i) "Applicable Environmental Laws" shall mean any environmental, health,
safety statutes, laws, rules, regulations, ordinances and codes, including,
without limitation, those imposing liability or standards of care with
respect to the handling, transport, treatment or disposal of Hazardous
Substances, and any governmental agency orders, guidelines, directives and
instructions, whether United States federal or state or any foreign
government or political subdivision thereof, applicable to the relevant
operation;
(ii) "Hazardous Substance" means any hazardous or toxic waste, hazardous
substance or any constituent thereof, pollutant, contaminant, including
petroleum
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and its various fractions, natural gas, drilling mud or production wastes,
and equipment and Property affected thereby, as defined or regulated under
any Applicable Environmental Laws.
(iii) "material" means any fines, penalties, natural resource damages,
costs or expenses arising under Applicable Environmental Laws that would
result in an aggregate liability to Terra and its Subsidiaries of not less
than $25,000 per year;
(iv) "Property" means any real or personal property, plant, building,
facility, structure, well, pipeline, storage tank, equipment or unit, or
other asset owned, leased or operated by Terra or any of its Subsidiaries or
in which Terra or any of its Subsidiaries has a net revenue interest or
working interest (including any surface water thereon or adjacent thereto,
and soil or groundwater thereunder whether now or previously or any time);
and
(v) "Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal; leaching or migration
into the indoor or outdoor environment or into or out of any Property,
including the movement of Hazardous Substances through or in the air, soil,
surface water, groundwater or Property.
(vi) "Remedial Action" shall mean any action required to (A) clean up,
remove, treat or in any other way address Hazardous Substances in the indoor
or outdoor environment; (B) prevent the Release or threat of Release or
minimize the further Release of any Hazardous Substance; or (C) perform
pre-remedial studies and investigations and post remedial care.
(d) Notwithstanding anything contained in this Section 3.29 to the
contrary, no representation or warranty is made with respect to the items set
forth in clauses (A) through (C) of the proviso contained in Section 3.7.
SECTION 3.30. CONTRACTS. (a) Except as contemplated hereby or as set
forth in Schedule 3.30, any other Schedule under this Article III or, in the
case of documents or instruments referred to in clause (ii) below, as are
contained in the records and files of Terra or its Subsidiaries located at
Terra's offices in Traverse City, Michigan and made fully available for
inspection by CMS Energy, neither Terra nor any of its Subsidiaries is a party
to or is bound by any written or material oral contract, agreement, commitment
or instrument or amendment to any of the foregoing (excluding any of the
foregoing which has been fully performed by all parties):
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(i) for the purchase, sale or lease (except if the scheduled lease payments
are less than $10,000 per year) of real property;
(ii) relating to oil and gas leases, licenses, permits and similar
arrangements (collectively, the "Leases"), Operating Agreements, farm-out
and farm-in agreements, service contracts and similar agreements, option
agreements, pooling and unitization agreements, production marketing
agreements, gas balancing agreements, gas purchase and sales contracts,
production sales contracts, processing agreements, permits, licenses and
orders, easements, rights of way, pipeline agreements, exploration
agreements, participation agreements, oil sales contracts, and all agreements
or amendments relating to the same, or assignments of rights or obligations
under any such agreements, all relating to the exploration for or the
development, production, treating, processing, transportation or marketing of
hydrocarbons;
(iii) which provides for, or relates to, the guarantee by Terra or any of
its Subsidiaries of any obligation of any customers, suppliers, officers,
directors, employees or affiliates of Terra or such Subsidiaries;
(iv) which provides for, or relates to, the incurrence by Terra or any of
its Subsidiaries of debt for borrowed money in excess of $10,000;
(v) which provides for, or relates to, any non-competition or
confidentiality arrangement with any person, including any current or former
director, officer or employee of Terra or any of its Subsidiaries;
(vi) for capital expenditures in excess of $25,000 for any single project
or related series of projects;
(vii) any partnership, joint venture or other similar arrangements or
agreements involving a sharing of profits or losses;
(viii) which (other than contracts, agreements, commitments and instruments
of the nature described in clauses (i) through (vii) above) involve payments
or receipts by Terra or any of its Subsidiaries of more than $10,000; and
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(ix) for any purpose (whether or not made in the ordinary course of the
business or otherwise not required to be listed or described in Schedule
3.30) which is material to the business of Terra and its Subsidiaries taken
as a whole.
(b) To the knowledge of Terra, except as set forth in Schedule 3.30, (i)
Terra and its Subsidiaries have fulfilled and performed their obligations in
all material respects under each of the leases, contracts and other agreements
listed in Schedule 3.30 or referred to in clause (ii) of Section 3.30(a)
(collectively, together with other leases, contracts and other agreements
listed in other Schedules under this Article III, the "Terra Agreements") and
are not, and are not alleged to be, in breach or default in any material
respect under, nor is there or is there alleged to be any basis for termination
of, any of the Terra Agreements, and (ii) no event has occurred and no
condition or state of facts exists which, with the passage of time or the
giving of notice or both, would constitute such a default or breach by Terra or
any of its Subsidiaries; provided, however, that no representation or warranty
is made with respect to the items set forth in clauses (A) through (C) of the
proviso to Section 3.7. Copies of each of the Terra Agreements have been made
available to CMS Energy by Terra.
Except as disclosed on Schedule 3.30, the Terra Agreements (i) have been
duly authorized, executed and delivered by Terra or the Subsidiaries of Terra
that are a party thereto, and (ii) are in full force and effect and constitute
legal, valid, binding and enforceable obligations of Terra or such Subsidiaries
and will continue in full force and effect following the consummation of the
Merger without the breach of any terms or conditions thereof or the forfeiture
or impairment of any rights thereunder and without the consent, approval or act
of, or the making of any filing with, any other person or party.
(c) Except as set forth in Schedule 3.30, to the knowledge of Terra, each
operator of Proved Developed Interests or Proved Undeveloped Interests not
operated by Terra or its Subsidiaries fulfilled and performed its respective
obligations in all material respects under each of the leases, contracts and
other agreements relating to such Interests and is not in breach or default in
any material respect under nor is there alleged to be any basis for termination
of any of such agreements, and no event has occurred and no condition or state
of facts exists which, with the passage of time or the giving of notice or
both, would constitute such a default or breach by any such operator; provided,
however, that no representation or warranty is made with respect to the items
set forth in clauses (A) through (C) of the proviso contained in Section 3.7.
(d) Terra has disclosed to its principal co-venturers, Guardian Energy
Management Corp. ("Guardian"), MCN Investment
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Corporation, Destec Fuel Resources, Inc., Chevron U.S.A. Production Company, a
division of Chevron U.S.A. Inc. and Enogex Exploration Corporation, or their
applicable respective affiliates, (i) Terra's ownership of an interest in
certain persons performing services for the projects for which Terra serves as
operator and in which any such co-venturers have respective interests, and (ii)
payment, reimbursement or revenue sharing arrangements that are in place with
respect to the charges assessed against such co-venturers with respect to such
services.
SECTION 3.31. ADDITIONAL DRILLING OBLIGATIONS. Except as disclosed on
Schedule 3.31, except for the 1995 Antrim Program and except for implied
covenants under Leases, as to which no violation has heretofore been asserted,
no Terra Agreements applicable to the Proved Developed Interests contain
provisions to the effect that the drilling of additional xxxxx or other
material development operations is a condition to earning, maintaining or
continuing to hold all or any portion of such Interests, and no Terra
Agreements applicable to Proved Developed Interests, the Proved Undeveloped
Interests or the Unproved Interests contain provisions that unconditionally
require the drilling of additional xxxxx or other material development
operations.
SECTION 3.32. GAS IMBALANCES; PRODUCTION RIGHTS AND OBLIGATIONS. (a)
Except as disclosed on Schedule 3.32, there are no gas imbalances pertaining to
the production and marketing of gas as between Terra or any of its Subsidiaries
and any third party.
(b) Except as disclosed on Schedule 3.32, neither Terra nor any of its
Subsidiaries has received any advance, "take-or-pay," or other similar payments
under production sales contracts that entitle the purchasers to "make-up" or
otherwise receive deliveries of hydrocarbons produced from the Interests
without paying at such time the full contract price therefor that were not made
up prior to January 1, 1995. Except as disclosed on Schedule 3.32, each of
Terra and its Subsidiaries has paid to each royalty and overriding royalty
owner (or such other party in interest as may be entitled to share therein)
such owner's or party's full share of any royalty or other payments with
respect to advance, "take-or-pay" or similar payments (including, but not
limited to, payments relating to any "buy-down" or "buy-out" of any such
contract or arrangement), and no such owner has proposed, demanded or
threatened to demand that it is entitled to any further payments.
SECTION 3.33. XXXXX (a) The historical production figures for oil, gas
and water, and revenue and cost and expense figures, relating to the Interests
and provided by Terra to CMS Energy are, to the knowledge of Terra, accurate
and complete in all material respects.
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(b) To the knowledge of Terra, all oil xxxxx and gas xxxxx and all fresh
water xxxxx, injection xxxxx, salt water disposal xxxxx and other xxxxx of
every nature and kind, and xxxxx-in-progress to the extent applicable, whether
producing or non-producing, located on any of the Leases or which constitute
part of the Interests, whether or not operated by Terra (collectively, the
"Xxxxx"), have been drilled, completed and operated substantially within the
limits permitted by applicable local, state, federal or foreign laws, rules or
regulations (excluding Applicable Environmental Laws). To the knowledge of
Terra, no Well is subject to material penalties or production restrictions
because of any overproduction or any other violation of applicable laws, rules,
regulations, permits or judgments, orders or decrees of any court or
governmental body or agency which would have a material adverse effect on the
operation of any Xxxxx.
(c) To the knowledge of Terra, Terra has, with respect to the Interests,
complied in all material respects with the Natural Gas Policy Act of 1978, as
amended, and the rules and regulations thereunder.
SECTION 3.34. CMS ENERGY COMMON SHARES; TERRA COMMON STOCK. (a) Each
Stockholder severally represents and warrants that such Stockholder has
received (i) the Prospectus of CMS Energy dated June 30, 1995 relating to the
CMS Common Shares on July 25, 1995, which is at least twenty (20) Business Days
prior to the Effective Date; (ii) the CMS Energy SEC Documents (as hereinafter
defined), with the exception of the Form 10-Q of CMS Energy for the second
quarter of 1995, on July 25, 1995, (iii) the Form 10-Q of CMS Energy for the
second quarter of 1995 on or about August 14, 1995; and (iv) such further
information as such Stockholder reasonably requests concerning CMS Energy and
its business, results of operations and financial condition.
(b) Each Non-Management Stockholder severally represents and warrants that
such Non-Management Stockholder has received (i) the financial statements
referred to in Section 3.5 (including, without limitation, the Balance Sheet,
the Statement of Income, the Unaudited Balance Sheet and the Unaudited
Statement of Income) relating to Terra and its consolidated subsidiaries and
(ii) such further information as such Non- Management Stockholder reasonably
requests concerning Terra, the Terra Business, its properties, results of
operations, financial condition and prospects.
SECTION 3.35. DISCLOSURE. To the knowledge of Terra, none of the
representations and warranties contained herein, the information contained in
the Schedules referred to in this Article III or the other information or
documents referred to in this Article III as having been furnished or to be
furnished or made available to CMS Energy or any of its representatives by
Terra, the Stockholders or their representatives pursuant to the
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terms of this Agreement is false or misleading in any material respect or omits
to state a fact necessary to make the statements herein or therein not
misleading in any material respect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CMS ENERGY
As an inducement to Terra, the Stockholders and the Optionholders to enter
into this Agreement and to consummate the transactions contemplated hereby, CMS
Energy hereby warrants and represents to Terra, the Stockholders and the
Optionholders and agrees as follows:
SECTION 4.1. ORGANIZATION OF CMS ENERGY. CMS Energy is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Michigan. CMS Energy is duly qualified to transact business as a foreign
corporation and is in good standing in each of the jurisdictions in which the
ownership or leasing of the properties used in its business or the conduct of
its business requires such qualification, other than in such jurisdictions
where the failure to be so qualified and in good standing would not have a
material adverse effect on the financial condition or results of operation of
CMS Energy and its consolidated subsidiaries taken as a whole, and no other
jurisdiction has demanded, requested or otherwise indicated that CMS Energy is
required so to qualify. CMS Energy has full corporate power and authority to
own or lease and operate its properties and to carry on its business as now
conducted.
SECTION 4.2. AUTHORITY. CMS Energy has full corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by CMS
Energy and the consummation by CMS Energy of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of CMS Energy, subject to the adoption of this Agreement by CMS Energy as the
sole stockholder of Sub. This Agreement is, and each other agreement or
instrument of CMS Energy contemplated hereby when executed and delivered by CMS
Energy will be, the legal, valid and binding obligation of CMS Energy
enforceable against CMS Energy in accordance with its respective terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
Neither the execution and delivery of this Agreement by CMS Energy nor
consummation of the transactions contemplated hereby or compliance with or
fulfillment of the terms and provisions hereof by CMS Energy will (a) result in
a breach of
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the terms, conditions or provisions of, or constitute a default, an event of
default or an event creating rights of acceleration, termination or
cancellation or a loss of rights, or result in the creation or imposition of
any encumbrance upon any of the material assets of CMS Energy, under (i) the
articles of incorporation or the by-laws of CMS Energy, (ii) any material
instrument, agreement, mortgage, indenture, deed of trust, permit, concession,
grant, franchise, license, judgment, order, award, decree or other restriction
to which CMS Energy is a party or any of its material properties is subject or
by which it is bound or (iii) any material statute, other law or regulatory
provision affecting CMS Energy other than, in the case of clauses (ii) or
(iii), any such breaches, defaults, rights or encumbrances that, individually
or in the aggregate, would not have a material adverse effect on the financial
condition or results of operation of CMS Energy and its consolidated
subsidiaries taken as a whole, materially impair the ability of CMS Energy to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby, or (b) require the approval, consent or
authorization of, or the making of any declaration, filing or registration
with, any third party or any foreign, federal, state or local court,
governmental authority or regulatory body, by or on behalf of CMS Energy or
Sub, except for the filing of a Form S-4 Registration Statement with the
Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "Securities Act") and the declaration of effectiveness
thereof by the SEC, and for the applicable requirements of the HSR Act, the
filing of a Certificate of Merger in the office of the Corporation and
Securities Bureau, Department of Commerce, of the State of Michigan, and
appropriate documents with the relevant authorities of other jurisdictions in
which Terra is qualified to do business, such filings and consents as may be
required under any environmental, health or safety law or regulation pertaining
to any notification, disclosure or required approval triggered by the Merger or
the transactions contemplated by this Agreement, such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under the corporation, takeover or blue sky laws of various states,
and such other consents, orders, authorizations, registrations, declarations
and filings the failure of which to be obtained or made would not, individually
or in the aggregate, have a material adverse effect on the financial condition
or results of operation of CMS Energy and its consolidated subsidiaries taken
as a whole, materially impair the ability of CMS Energy to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
SECTION 4.3. SHARES OF CMS COMMON STOCK. The CMS Common Shares to be
delivered to the Stockholders pursuant to this Agreement will, when issued and
delivered in accordance with the terms hereof, be duly and validly issued and
outstanding, fully paid and nonassessable shares of CMS Common Stock free and
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clear of all Liens other than those arising by or through any Stockholder, and
the issuance of all shares of CMS Common Stock issuable in connection with the
consummation of the transactions contemplated hereby has been duly registered
with the SEC on a Form S-4 Registration Statement under the Securities Act
(reg. no. 033-60007) of CMS Energy which was declared effective by the SEC on
June 30, 1995, and prior to the Effective Time all CMS Common Shares issuable
in connection with the consummation of the transactions contemplated hereby
shall have been listed, or approved for listing upon notice of issuance, on the
NYSE. No stop order suspending the effectiveness of such Registration
Statement has been issued by the SEC.
SECTION 4.4. CAPITALIZATION. The authorized capital of CMS Energy consists
of (i) 250,000,000 shares of common stock, $.01 par value, of which, as of June
30, 1995, 88,174,182 shares were issued and outstanding, 2,829,900 shares were
held by CMS Energy, 5,222,648 shares were held by subsidiaries of CMS Energy
and 3,188,210 shares were reserved for issuance under certain CMS Energy
compensation plans, (ii) 10,000,000 shares of preferred stock, $.01 par value,
none of which is issued and outstanding or reserved for any purpose, and (iii)
60,000,000 shares of Class G common stock, no par value, of which, as of August
15, 1995, 7,526,924 shares were issued and outstanding. All of the outstanding
shares of CMS Common Stock are duly authorized, validly issued, fully paid and
nonassessable. Except for options granted and CMS Common Stock issuable
pursuant to certain CMS Energy compensation plans, and as contemplated hereby,
there are no options, warrants or other rights to acquire from CMS Energy or
agreements or commitments by CMS Energy to issue or sell shares of its capital
stock, whether on conversion of other securities or otherwise. None of the
issued and outstanding shares of CMS Common Stock has been issued in violation
of, or is subject to, any preemptive or subscription rights. There are no
stockholder agreements, voting trust agreements or any other similar contracts,
agreements, arrangements, commitments, plans or understandings to which CMS
Energy is a party restricting or otherwise relating to voting, dividend,
ownership or transfer rights with respect to any shares of capital stock of CMS
Energy.
SECTION 4.5. OPERATIONS SINCE JUNE 30, 1995. Except as set forth in the
CMS Energy SEC Documents, since June 30, 1995, there has been: (i) no material
adverse change in the financial condition or results of operation of CMS Energy
and its consolidated subsidiaries taken as a whole; and (ii) no damage,
destruction, loss or claim with respect to, whether or not covered by
insurance, or condemnation or other taking of, assets having a material adverse
effect on the financial condition or results of operation of CMS Energy and its
consolidated subsidiaries taken as a whole.
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SECTION 4.6. COMPLIANCE WITH LAWS. CMS Energy is in compliance with the
provisions of all applicable laws and regulations of the federal, state, local
and foreign governments, except to the extent that the failure to comply
therewith would not have a material adverse effect on the financial condition
or results of operation of CMS Energy and its consolidated subsidiaries taken
as a whole. Except as set forth in the CMS Energy SEC Documents, to the
knowledge of CMS Energy, there are no proposed orders, judgments, decrees,
governmental takings, condemnations or other proceedings, in each case binding
upon the business, operations or properties of CMS Energy or any subsidiary
thereof, which would have a material adverse effect on the financial condition
or results of operation of CMS Energy and its consolidated subsidiaries taken
as a whole.
SECTION 4.7. SEC DOCUMENTS. CMS Energy has previously delivered to Terra
and the Stockholders complete and correct copies of all reports (including
annual reports on Form 10-K, current reports on Form 8-K, quarterly reports on
Form 10-Q and proxy statements) filed by it with the SEC pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act") since December
31, 1994 (the "CMS Energy SEC Documents"). To the knowledge of CMS Energy,
none of the information supplied by CMS Energy and included in the Registration
Statement or the Prospectus (as hereinafter defined), as it may be amended or
supplemented, or the documents filed under the Exchange Act which are
incorporated by reference therein, as of their respective effective, issue or
filing dates, does or will, as the case may be, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Registration
Statement and Prospectus comply as to form in all material respects with the
applicable provisions of the Securities Act and the rules and regulations
promulgated thereunder.
SECTION 4.8. NO FINDER. Neither CMS Energy nor any party acting on its
behalf has paid or become obligated to pay any fee or any commission to any
broker, finder or intermediary for or on account of the transactions
contemplated herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SUB
As an inducement to Terra, the Stockholders and the Optionholders to enter
into this Agreement and to consummate the transactions contemplated hereby, CMS
Energy and Sub hereby jointly and severally warrant and represent to Terra, the
Stockholders and the Optionholders and agree as follows:
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SECTION 5.1. ORGANIZATION AND STANDING. Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Michigan. Sub was organized solely for the purpose of engaging in the
transactions contemplated by this Agreement and has not engaged in any business
since it was incorporated which is not in connection with this Agreement and
has no material assets or liabilities (other than the rights and obligations
referred to in this Agreement).
SECTION 5.2. CAPITAL STRUCTURE. The authorized capital stock of Sub
consists of 60,000 shares of common stock, no par value, of which 10 shares are
validly issued and outstanding, fully paid and nonassessable and are owned by
CMS Energy free and clear of all liens, claims and encumbrances.
SECTION 5.3. AUTHORITY. Sub has full corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement, the performance by Sub
of its obligations hereunder and the consummation of the transactions
contemplated hereby have been duly authorized by its Board of Directors and by
CMS Energy as its sole stockholder, and, except for the corporate filings
required by state law, no other corporate proceedings on the part of Sub are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Sub and this
Agreement is, and each other agreement or instrument of Sub contemplated hereby
when executed and delivered by Sub will be, the legal, valid and binding
agreement of Sub enforceable against Sub in accordance with its respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
ARTICLE VI
ACTIONS PRIOR TO THE EFFECTIVE DATE
CMS Energy, Sub and Terra (and the Stockholders with respect to their
individual obligations set forth in Sections 6.2, 6.7, 6.8, and 6.11 and the
Optionholders with respect to their individual obligations set forth in
Sections 6.2, 6.7, 6.8 and 6.12) covenant and agree to take the following
respective actions between the date hereof and the Effective Date:
SECTION 6.1. ISSUANCE OF CMS COMMON SHARES. (a) CMS Energy has filed a
registration statement on Form S-4 with the SEC containing a prospectus (the
"Prospectus") covering the issuance and sale of the CMS Common Shares to be
delivered
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hereunder. CMS Energy will use all reasonable efforts to cause such
registration statement (the "Registration Statement") to be effective at least
twenty (20) Business Days prior to the Effective Date. CMS Energy shall
deliver to the NYSE pursuant to Rule 153 under the Securities Act copies of the
Prospectus included in the Registration Statement, as the same may be amended
or supplemented from time to time.
(b) CMS Energy shall use all reasonable efforts to list the CMS Common
Shares to be issued hereunder on the NYSE.
SECTION 6.2. ACTION BY STOCKHOLDERS OF TERRA. Terra shall duly call, give
notice of, convene and hold a meeting of its stockholders for the purpose of
approving the Merger and adopting this Agreement. Terra will, through its
Board of Directors, recommend to its stockholders the adoption of this
Agreement. In lieu of such meeting, the stockholders of Terra may take the
actions described in the preceding sentence by unanimous written consent in
accordance with the BCA. Each of the Stockholders and the Optionholders agrees
to take all necessary action to cause this Agreement to be so adopted.
SECTION 6.3. SUBSEQUENT FINANCIAL STATEMENTS. Prior to the Effective Date,
Terra shall deliver to CMS Energy, not later than sixty (60) days after the end
of each monthly period beginning after June 30, 1995 and in the form
customarily prepared by Terra, the unaudited internal consolidated financial
statements of Terra, including an income statement, for the monthly period then
ended and for the period from the beginning of the fiscal year to the end of
such monthly period.
SECTION 6.4. INVESTIGATION OF TERRA. Terra shall afford to the officers,
employees and authorized representatives of CMS Energy (including, without
limitation, independent public accountants, attorneys, environmental
consultants and financial advisors of CMS Energy), reasonable access during
normal business hours to the offices, properties, employees and business and
financial records (including, without limitation, computer files, retrieval
programs and similar documentation) of Terra to the extent CMS Energy shall
deem necessary or desirable, and shall furnish to CMS Energy or its authorized
representatives such additional information concerning the operations,
properties and businesses of Terra as may be reasonably requested in writing,
to enable CMS Energy or its authorized representatives to verify the accuracy
of the representations and warranties contained in this Agreement, to verify
the accuracy of the financial statements referred to in Section 3.5 and to
determine whether the conditions set forth in Article VIII have been satisfied.
CMS Energy agrees that such investigations shall be conducted in such manner as
not to interfere unreasonably with the operation of the business of Terra.
Without limiting the foregoing, Terra shall permit CMS Energy, or its
representatives, (i) to conduct a site inspection of any of the Interests, the
Owned Real Property or
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the Leased Real Property, to witness and to conduct well tests, and to conduct
an environmental audit of any such properties with respect to any
environmental, health or safety issues deemed material by CMS Energy, (ii)
access to all title information in the possession of Terra or its Subsidiaries,
its agents or attorneys, relating to the Interests, and Terra shall use its
best efforts to obtain any other such title information from third parties that
is reasonably requested by CMS Energy, and (iii) access to all production and
operating information in the possession of Terra or its Subsidiaries, its
agents or attorneys, relating to the Interests, and Terra shall use its best
efforts to obtain any other production and operation information from third
parties that is reasonably requested by CMS Energy.
SECTION 6.5. LAWSUITS, PROCEEDINGS, ETC. Each of CMS Energy and Terra
shall notify the other promptly of any lawsuit, proceeding, claim or
investigation that may be threatened, brought, asserted or commenced against
any party hereto involving in any way the transactions contemplated by this
Agreement or that would have been listed in Schedule 3.17 or the CMS Energy SEC
Documents if such lawsuit, proceeding, claim or investigation had arisen prior
to the date hereof.
SECTION 6.6. CONDUCT OF BUSINESS BY TERRA PENDING THE MERGER. (a) During
the period from January 1, 1995 through the Effective Time, except as set forth
in any Schedules to this Agreement or as expressly contemplated by this
Agreement, Terra has carried on, and will carry on, its business in, and has
not entered into, and will not enter into, any material transaction other than
in, the ordinary course of business consistent with past practice and, to the
extent consistent therewith, has used and will use its reasonable efforts to
preserve intact its current business organization, to keep available the
services of its current officers and employees and to preserve its
relationships with material customers, material suppliers and others having
material business dealings with it (except with the written consent of CMS
Energy and except as set forth in any Schedules to this Agreement or as
contemplated by this Agreement). Without limiting the generality of the
foregoing, and except as set forth in any Schedules to this Agreement or as
expressly contemplated by this Agreement, Terra and its Subsidiaries has not
since January 1, 1995 and shall not, without the prior written consent of CMS
Energy, which, as to matters relating to clauses (vii), (viii) or (xii) of this
Section 6.6(a), CMS Energy agrees not to unreasonably withhold or delay:
(i) (A) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to the Stockholders in their
capacity as such, (B) split, combine or reclassify any of its capital stock
or issue, sell or authorize the issuance of any other securities in
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respect of, in lieu of or in substitution for shares of its capital stock, or
(C) purchase, redeem or otherwise acquire any shares of capital stock of
Terra or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock or other securities (including, without
limitation, any rights, warrants or options to acquire any securities),
except for issuances of its common stock upon exercise of the Options to
acquire an aggregate of up to 2,545,922 shares of Terra Common Stock held by
certain Optionholders;
(iii) amend its articles of incorporation or by-laws;
(iv) acquire or agree to acquire, by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or in any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof;
(v) sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of, any of its assets, except for (A) sales of produced
hydrocarbons in the ordinary course of business, (B) the sale, lease or other
disposition of other assets in the ordinary course of business consistent
with past practice, provided that no such sale, lease or disposition has
caused or will cause the representations and warranties contained in Section
3.6(a) hereof to be untrue or incorrect in any material respect; (C)
dispositions of assets as contemplated by clause (xiii) of this Section
6.6(a), or (D) the sale of the Purchased Assets as contemplated by Section
6.6(b);
(vi) incur any indebtedness for borrowed money or guarantee any such
indebtedness material to the business or assets of Terra and its
Subsidiaries, taken as a whole, except in the ordinary course of business
consistent with past practice and except as contemplated hereunder or issue
or sell any debt securities or guarantee any debt securities of others, or
make any loans, advances or capital contributions to, or investments in, any
other person, except the incurrence and/or guarantee of indebtedness to fund
working capital;
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(vii) with respect to its operations other than the 1995 Antrim Program and
construction of the New Office, make or incur any new capital expenditure or
capital expenditures for any single project or related series of projects
which are in excess of $100,000 and, with respect to the New Office
(exclusive of furnishings and equipment), make any capital or major
expenditures or investments, or incur any obligations for capital or major
expenditures or enter into any leases for personal or real property, in
excess of $2 million.
(viii) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than such payment, discharge or satisfaction in the ordinary course of
business consistent with past practice;
(ix) alter through merger, liquidation, reorganization, restructuring or in
any other fashion its corporate structure;
(x) enter into or adopt, or amend, any existing, bonus, incentive, deferred
compensation, insurance, medical, hospital, disability or severance plan,
agreement or arrangement or enter into or amend any Plan or material
employment, consulting or management agreement, other than any such amendment
to a Plan that is made to maintain the qualified status of such Plan or its
continued compliance with applicable law and except as contemplated
hereunder;
(xi) make any change in accounting practices or policies applied in the
preparation of the financial statements referred to in Section 3.5 except as
required by GAAP;
(xii) except in the ordinary course of business consistent with past
practice, knowingly make any material modifications to any material
agreements, understandings, obligations, commitments, indebtedness or other
material obligations or enter into any agreement, understanding, obligation
or commitment, or incur any indebtedness or obligation, of the type that
would have been required to be listed on Schedule 3.30 or that would
otherwise would have been included in the Terra Agreements if in existence on
the date hereof; provided that no such modifications, agreements or
incurrences of indebtedness shall in any event cause the representations and
warranties contained in Section 3.6(a) hereof to be untrue or incorrect in
any material respect;
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(xiii) pay or commit to pay any bonus to any director, officer or employee
of Terra other than (A) payment to the respective employees entitled thereto
of the bonuses contemplated by Section 7.5(b) hereof, (B) payment to
employees (other than the Management Stockholders) of bonuses not to exceed
$1.0 million in the aggregate; (C) payment of employee bonuses to the
Management Stockholders not to exceed $2.4 million in the aggregate; and (D)
payment to Xxxxx and Xxxxxxxxxx of bonuses not to exceed $881,260 and
$302,636, respectively; or
(xiv) enter into any other transaction materially affecting the business of
Terra, other than in the ordinary course of business consistent with past
practice or as expressly contemplated by this Agreement; provided that to the
extent that this clause (xiv) constitutes a representation or warranty, no
representation or warranty is made with respect to the items set forth in
clauses (A) through (C) of the proviso contained in Section 3.7 or with
respect to the matters referred to in Sections 3.22 and Section 3.29 (except
to the extent specifically set forth therein).
(b) Notwithstanding any other provision of this Agreement, prior to the
Effective Time, Terra shall sell to one or more limited liability companies to
be formed by Lagina, Boeve, Tester and/or Xxxxxxxxxx ("Newco"), Xxxxxx or
Xxxxx, as designated, to be effected immediately prior to the Effective Time,
certain assets, together with all associated liabilities and obligations
relating thereto (the "Purchased Assets"), of Terra, all as designated in, and
such sales to be effected pursuant to, respective asset purchase agreements
with each of Newco, Xxxxxx and Xxxxx and related transfer instruments and other
required documentation substantially in the form of Exhibit B hereto, and Terra
may take any action reasonably necessary or appropriate pursuant thereto to
effect such sales.
(c) Terra shall promptly advise CMS Energy orally and in writing of any
change or event having a Material Adverse Effect on Terra and its Subsidiaries
taken as a whole.
SECTION 6.7. MUTUAL COOPERATION; REASONABLE BEST EFFORTS. The respective
parties hereto shall cooperate with each other, and shall use their respective
reasonable best efforts, to cause the fulfillment, to the extent within their
reasonable control, of the conditions to each party's obligations hereunder
which are within such reasonable control and to obtain as promptly as possible,
to the extent within their reasonable control, all consents, authorizations,
orders or approvals from each and every third party, whether private or
governmental, required in connection with the transactions contemplated by this
Agreement; provided, however, that the foregoing shall not
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require CMS Energy or Terra to make any divestiture or consent to any
divestiture in order to obtain any waiver, consent or approval.
SECTION 6.8. NO PUBLIC ANNOUNCEMENT. None of the parties hereto shall,
without the approval of CMS Energy and Terra (which may not be unreasonably
withheld), make any press release or other public announcement concerning the
transactions contemplated by this Agreement, except as and to the extent that
such party shall be so obligated by law, in which case each of CMS Energy and
Terra shall be advised and they shall use their reasonable best efforts to
cause a mutually agreeable release or announcement to be issued; provided that
nothing herein shall be deemed to interfere with the filing by CMS Energy of a
Form S-4 with the SEC.
SECTION 6.9. NO SOLICITATION. Terra shall not, nor shall it authorize or
permit any officer, director or employee of it or its Subsidiaries or
affiliates or any investment banker, attorney or other adviser or
representative of Terra or any of its Subsidiaries or affiliates to, (i)
solicit, initiate, or encourage the submission of, any Acquisition Proposal (as
hereinafter defined), (ii) enter into any agreement with respect to any
Acquisition Proposal or (iii) except to the extent required by law as advised
by counsel in writing, participate in any discussions or negotiations
regarding, or furnish to any person any information for the purpose of
facilitating the making of, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal. Terra promptly shall advise CMS
Energy of any Acquisition Proposal and any inquiries with respect to any
Acquisition Proposal, in each case occurring on or after May 27, 1995. For
purposes of this Agreement, "Acquisition Proposal" means any proposal for a
merger or other business combination involving Terra or any of its Subsidiaries
or affiliates or any proposal or offer to acquire in any manner, directly or
indirectly, an equity interest in Terra or any of its Subsidiaries or
affiliates, any voting securities of Terra or any of its Subsidiaries or
affiliates or a substantial portion of the assets of Terra and its Subsidiaries
taken as a whole.
SECTION 6.10. ANTITRUST LAW COMPLIANCE. CMS Energy and Terra shall file
and Terra shall cause to be filed with the Federal Trade Commission and the
United States Department of Justice the notification and other information
required to be filed with respect to the transactions contemplated hereby under
the HSR Act and the rules and regulations promulgated thereunder. CMS Energy
warrants that all such filings by it shall be, and Terra warrants that all such
filings by it shall be, accurate as of the date filed and in accordance with
the requirements of the HSR Act and all such rules and regulations. CMS Energy
and Terra agree to make available, or cause to be made available, to the
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other parties such information as may reasonably be requested relative to the
businesses, assets and property of CMS Energy and Terra, as the case may be, as
may be required to file any additional information requested by such agencies
under the HSR Act and such rules and regulations.
SECTION 6.11. TERMINATION OF XXXXXX PROXIES. Xxxxxx, Xxxxx and Xxxxxxxxxx
shall cause all rights of Xxxxxx to receive voting proxies (the "Xxxxxx
Proxies") as to shares of Terra Common Stock to be acquired by the
Optionholders under the terms of the Options to be terminated, effective at or
prior to the Effective Time, and each of Xxxxxx, Xxxxx and Xxxxxxxxxx agree
that the Xxxxxx Proxies are hereby terminated effective as of the Effective
Time.
SECTION 6.12. EXERCISE OF OPTIONS. Each of Terra, Tester and the
Optionholders agrees that, prior to the Effective Time, the Options to acquire
an aggregate of up to 2,545,922 shares of Terra Common Stock from Terra
currently held by certain Optionholders shall be exercised in accordance with
their terms and the options to acquire an additional 359,379 currently
outstanding shares of Terra Common Stock by Xxxxx from Tester shall be
exercised, and each such Optionholder shall, to the extent such Options are
subject to Section 83 of the Code and the regulations thereunder, pay to Terra
an amount equal to the income tax and employment tax withholding relating
thereto assuming a fair market value of each share of Terra Common Stock
received upon exercise equal to the fair market value of the consideration to
be received therefor in the Merger, such amount to be payable by each such
Optionholder in cash; and as of the Effective Time, no shares of Terra Common
Stock shall be issuable by Terra pursuant to or shall otherwise be subject to
the Options.
SECTION 6.13. NEW OFFICE BUILDING. Terra shall proceed with construction
of a new office building on the six acre parcel on which such office building
("New Office") is proposed to be constructed in accordance with current plans
and budgets; provided that Terra shall immediately and from time to time
thereafter confer with CMS Energy regarding the plans, budgets and construction
process and any revisions thereto shall be subject to the written consent of
CMS Energy; and provided further that Terra will not make any commitment
relating to construction costs in excess of $2 million (exclusive of
furnishings and equipment) in the aggregate, and will not make any commitment
with respect to the $350,000 budgeted for furnishings and equipment, in each
case without the prior written approval of CMS Energy, which approval will not
be unreasonably withheld or delayed.
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ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 7.1. TAX-FREE NATURE; TAX CONSEQUENCES. (a) The Stockholders and
CMS Energy intend the Merger to constitute a reorganization described in
Section 368(a)(2)(E) of the Code and shall use their best efforts to cooperate
in achieving such a tax-free reorganization. Notwithstanding the preceding
sentence, the parties to this Agreement will rely solely on their own advisors
in determining the tax consequences of the transactions contemplated by this
Agreement and each party is not relying, and will not rely, on any
representations or assurances of any other party regarding such consequences
other than the representations and covenants set forth in writing in this
Agreement or any other agreement or certificate delivered in connection
herewith. In the event that the Merger does not qualify as such a tax-free
reorganization, the validity of the Merger and the transactions contemplated
thereby shall nevertheless be binding and final upon the parties to this
Agreement. Neither the Stockholders nor CMS Energy will take any tax reporting
positions or make any tax elections inconsistent with the characterization of
the Merger as a reorganization described in Section 368(a)(2)(E) of the Code
except as may be required upon examination (or the result of a prior
determination) by the Internal Revenue Service or any other Tax authority.
(b) Each Stockholder agrees that he will not sell or transfer more than one
percent (1%) of the aggregate outstanding CMS Common Stock within any ninety
(90) day period. The Stockholders agree that the aggregate sales and transfers
by all Stockholders of CMS Common Stock (i) shall not exceed 25% of the
aggregate number of shares of CMS Common Stock issued in the Merger in any
ninety (90) day period and (ii) shall not exceed 20,000 shares of CMS Common
Stock on any given trading day during the first ninety (90) day period after
the Effective Date; provided that transfers by any Stockholder to a spouse in
transactions not effected in the public markets shall be excluded from such
restrictions so long as such spouse agrees to be bound by the restrictions
contained in this Section 7.1(b).
(c) CMS Energy hereby warrants and represents to and covenants with Terra
and the Stockholders that:
(i) neither CMS Energy nor the Surviving Corporation has any plan or
intention to take any action following the Merger that could result in the
Surviving Corporation's failing to hold at least 90 percent of the fair
market value of Terra's net assets and at least 70 percent of the fair market
value of Terra's gross assets and at least 90 percent of the fair market
value of Sub's net assets and at least 70
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percent of the fair market value of Sub's gross assets held immediately prior
to the Merger (determined before taking into account the payment of bonuses
referred to in Section 6.6(a)(xiii), and any amounts used by Terra or Sub to
pay Merger expenses and assuming that the amount received with respect to the
Purchased Assets was not less than the fair market value thereof). For
purposes of the preceding sentence, the Merger expenses incurred by Terra or
Sub shall be deemed not to exceed $500,000, and the loan by the Surviving
Corporation of up to $5,000,000 to CMS NOMECO on commercially reasonable
terms shall not be deemed to be a transfer or distribution;
(ii) the Surviving Corporation has no plan or intention to issue additional
shares of its stock that would result in CMS Energy's losing control of the
Surviving Corporation within the meaning of Section 368(c) of the Code;
(iii) CMS Energy has no plan or intention to reacquire any of the CMS
Common Stock issued in the Merger;
(iv) CMS Energy has no plan or intention to liquidate the Surviving
Corporation, to merge the Surviving Corporation with or into another
corporation, to sell or otherwise dispose of the stock of the Surviving
Corporation (except for a transfer of stock of the Surviving Corporation by
CMS Energy to CMS Enterprises (which is a corporation controlled by CMS
Energy within the meaning of Section 368(a)(2)(C) of the Code and Treas. Reg.
Section 1.368-2(j)(4)) in exchange for the stock and debt obligations of
Enterprises, which is to be followed by a transfer of the stock of the
Surviving Corporation by Enterprises to CMS NOMECO (which is a corporation
controlled by Enterprises within the meaning of Section 368(c) of the Code)
in exchange for the stock and debt obligation of CMS NOMECO);
(v) Sub will have no liabilities assumed by the Surviving Corporation and
will not transfer to the Surviving Corporation any assets subject to
liabilities in the Merger;
(vi) following the Merger, the Surviving Corporation will continue Terra's
historic business or use a significant portion of Terra's historic business
assets in a business;
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(vii) CMS Energy and Sub will pay their respective expenses, if any,
incurred in connection with the Merger;
(viii) there is no intercorporate indebtedness between CMS Energy and Terra
or between Sub and Terra that will be settled at a discount following the
Merger;
(ix) CMS Energy is not an investment company as defined in Sections
368(a)(2)(F)(iii) and (iv) of the Code;
(x) the total cash consideration that will be paid in the Merger in lieu of
issuing fractional shares of CMS Common Stock will not exceed one percent of
the total fair market value of the CMS Common Stock (as of the Effective
Time) to be issued in the Merger;
(xi) prior to acquisitions contemplated by this Agreement, CMS Energy did
not own during the past five years any shares of the stock of Terra; and
(xii) prior to the Merger, CMS Energy will be in control of Sub within the
meaning of Section 368(c) of the Code.
SECTION 7.2. TAXES.
(a) Liability for Taxes.
(i) Except as shown as a liability or reserve on the Balance Sheet, the
Management Stockholders shall be liable for and indemnify CMS Energy, the
Surviving Corporation and their subsidiaries (collectively, the "Tax
Indemnitees") for all Taxes imposed on any Tax Indemnitee (or for which a Tax
Indemnitee may otherwise be liable) arising from the assets or activities of
Terra and its Subsidiaries for any taxable year or period of Terra or its
Subsidiaries that ends on or before the Balance Sheet Date and, with respect
to any taxable year or period beginning before and ending after the Balance
Sheet Date, the portion of such taxable year ending on and including the
Balance Sheet Date.
(ii) The Tax Indemnitees shall be liable for and indemnify the Management
Stockholders for the Taxes of Terra and its Subsidiaries for any taxable year
or period that begins after the Balance Sheet Date and, with respect to any
taxable year or period beginning before and ending after the Balance Sheet
Date, the
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portion of such taxable year or period beginning after the Balance Sheet
Date. Notwithstanding the preceding sentence, the Management Stockholders
shall be liable for and indemnify the Tax Indemnitees for 63% of any Taxes
imposed on any Tax Indemnitee (or for which a Tax Indemnitee may otherwise be
liable) arising from the disallowance of a deduction for the payments
described in Section 6.6(a)(xiii)(B), (C) or (D) or Section 7.5(b). For
purposes of the preceding sentence, no effect shall be given to the use of
credits allowable pursuant to Sections 29 or 53 of the Code.
(iii) For purposes of paragraphs (a)(i) and (a)(ii), whenever it is
necessary to determine the liability for Taxes of Terra and its Subsidiaries
for a portion of a taxable year or period that begins before and ends after
the Balance Sheet Date, the determination of the Taxes of Terra and its
Subsidiaries for the portion of the year or period ending on, and the portion
of the year or period beginning after, the Balance Sheet Date shall be
determined by assuming that Terra and its Subsidiaries had a taxable year or
period which ended at the close of the Balance Sheet Date, except that
exemptions, allowances or deductions that are calculated on an annual basis,
such as the deduction for depreciation, shall be apportioned on a daily
basis.
(iv) The Management Stockholders shall be liable for all transfer, sales,
use or similar Taxes arising from the transactions contemplated by Section
6.6(b).
(v) Within twenty (20) days after the execution of this Agreement, the
Stockholders shall deliver or cause to be delivered to CMS Energy or its
designee true and complete copies of: (A) all income Tax Returns of Terra
and its Subsidiaries requested by CMS Energy or its Subsidiaries; (B) any
other Tax Returns of Terra and its Subsidiaries requested by CMS Energy or
its Subsidiaries, as may be relevant to Terra and its Subsidiaries and their
assets and operations; and (C) any work papers or other supporting data
requested by CMS Energy or its subsidiaries relating to "income taxes
payable" or similar line item reflected in the Statement of Income or Balance
Sheet relating to Tax Returns made available pursuant to (A) or (B), or
relating to Tax Returns referred to in (A) or (B) not yet filed, to the
extent copies of such Tax Returns, work papers or other data are in existence
and in the possession of Terra at the time of such request.
(vi) Surviving Corporation and Subsidiaries shall be entitled to retain any
refund or credit of Taxes
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(and interest thereon) attributable to a carryback of losses, credits or
other similar items from a taxable year or period that ends after the Balance
Sheet Date to a taxable year or period that ends on or before the Balance
Sheet Date.
(b) Tax Returns. Terra shall file when due (after taking into account all
extensions properly obtained) all Tax Returns that are required to be filed by
or with respect to Terra and its Subsidiaries on or before the Effective Date
and shall remit or cause to be remitted any Taxes shown to be due on such Tax
Returns, and the Surviving Corporation shall file when due (after taking into
account all extensions properly obtained) all Tax Returns that are required to
be filed by Terra and its Subsidiaries after the Effective Date and shall remit
or cause to be remitted any Taxes due in respect of such Tax Returns. All Tax
Returns which Terra is required to file in accordance with this paragraph (b)
shall be prepared and filed in a manner consistent with past practice and, on
such Tax Returns, no position shall be taken or method adopted that is
inconsistent with positions taken or methods used in preparing and filing
similar Tax Returns in prior periods except for changes required by law or
changes in facts.
(c) Contest Provisions. CMS Energy or one of its subsidiaries shall
notify the Stockholders in writing upon receipt by any Tax Indemnitee of notice
of any pending or threatened federal, state, local or foreign Tax audit or
assessment (including any revenue agent report or notice of proposed
adjustment) which may materially affect the Tax liabilities of Terra or its
Subsidiaries for which the Stockholders would be required to indemnify the Tax
Indemnitees pursuant to Section 10.1 or this Section 7.2, provided, that
failure to comply with this provision shall not affect the Tax Indemnitees'
right to indemnification hereunder except to the extent that such omission
results in a failure of actual knowledge of the Stockholders and the
Stockholders are damaged as a result of such failure of actual knowledge.
The Stockholders shall have the sole right to represent the interests of
Terra and its Subsidiaries in any Tax audit or administrative or court
proceeding relating to taxable periods ending on or before the Balance Sheet
Date, and to employ counsel of their choice at their expense, provided that the
Tax Indemnitees (and their tax counsel) may, at their own expense, be present
at and participate in any such audit or proceeding. Notwithstanding the
foregoing, the Stockholders shall not be entitled to settle, either
administratively or after the commencement of litigation, any claim for Taxes
which would adversely affect the liability for Taxes of the Tax Indemnitees for
any period after the Balance Sheet Date to any extent (including, but not
limited to, the imposition of income Tax deficiencies, the reduction of asset
basis or cost adjustments,
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the lengthening of any amortization or depreciation periods, the denial of
amortization, depreciation or depletion deductions, or the reduction of loss or
credit carryforwards) without the prior written consent of the Tax Indemnitees.
Such consent shall not be necessary to the extent that the Stockholders have
indemnified the Tax Indemnitees in a manner reasonably acceptable to the Tax
Indemnitees against the effects of any such settlement.
Except to the extent that CMS Energy reasonably concludes that the presence
of a representative of Management Stockholders will interfere with the contest
of matters unrelated to the matters which are subject to indemnification by the
Management Stockholders under this Section 7.2 ("Indemnified Tax Items"), a
representative of the Management Stockholders (and their tax counsel) may, at
their own expense, be present at and participate in any audit or proceeding
relating to Indemnified Tax Items. CMS Energy shall not settle any dispute
with respect to Indemnified Tax Items without the consent of the Management
Stockholders, except that CMS may settle any such dispute without the consent
of the Management Stockholders if it agrees to relieve the Management
Stockholders of their indemnification obligation hereunder with respect to such
transaction.
(d) Assistance and Cooperation. After the Effective Date, each of the
Stockholders and the Tax Indemnitees shall:
(i) agree to timely sign and deliver such certificates or forms as may be
necessary or appropriate to establish an exemption from (or otherwise
reduce), or make a report with respect to, Taxes described in paragraph
(a)(iv) of this Section 7.2;
(ii) assist (and cause their respective affiliates to assist) the other
parties in preparing any Tax Returns which such other parties are responsible
for preparing and filing in accordance with paragraph (b) of this Section
7.2;
(iii) cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Tax Returns of Terra and its Subsidiaries;
(iv) make available to the other parties and to any taxing authority as
reasonably requested all information, records, and documents relating to
Taxes of Terra and its Subsidiaries;
(v) provide timely notice to the other parties in writing of any pending
or threatened Tax audits or assessments of Terra and its Subsidiaries for
taxable periods for which the other may have a liability under this Section
7.2; and
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(vi) furnish the other with copies of all correspondence received from any
taxing authority in connection with any Tax audit or information request with
respect to any such taxable period.
(e) Adjustment to Purchase Price. Any payment by the Stockholders under
this Section 7.2 shall be considered an adjustment to the consideration paid in
connection with the Merger and to the extent that it cannot be so characterized
for Tax purposes, shall be made on an After-Tax Basis. (For purposes of this
Agreement, the term After-Tax Basis means, with respect to any amount which is
to be paid hereunder on an "After-Tax Basis," an amount which, after
subtraction of the amount of all federal, state, local and foreign Taxes
payable by the recipient thereof as a result of the receipt or accrual of such
payment, and after taking into account (i) the increase in federal, state,
local and foreign Taxes (including estimated Taxes) payable by such recipient
for all affected taxable years as a result of the event or occurrence giving
rise to such payment, and (ii) the reduction in federal, state, local and
foreign Taxes (including estimated Taxes) payable by the recipient for all
applicable taxable years, including the present value (using the applicable
Federal rate as the discount rate) of all reasonably anticipated future tax
reduction for taxable years ending on or after the end of the taxable year in
which such payment is made, shall be sufficient as of the date of payment to
compensate the recipient for such event or occurrence giving rise to such
payment.
(f) Survival of Obligations; No Duplication of Indemnities.
Notwithstanding Article X, the obligations of the Stockholders and the Tax
Indemnitees set forth in this Section 7.2 shall be unconditional and absolute
and shall remain in effect until 30 days after the expiration of the applicable
statute of limitations, except that if the Internal Revenue Service shall not,
prior to the third anniversary of the Effective Date, have proposed (including
in a revenue agent report or notice of proposed assessment) to disallow any
portion of the bonus described in Section 6.6(a)(xiii)(B) or (C) (including
through a reduction in a net operating loss carryover or carryback), the
indemnity provided in the second sentence of Section 7.2(a)(ii) shall terminate
on said third anniversary. To the extent that the provisions of this Section
7.2 conflict with the provisions of Article X, the provisions of this Section
7.2 shall control and no double payment shall be made with respect to any
breach or alleged breach of any representation or warranty contained in or
pertaining to the matters which are the subject of Section 3.8, it being
understood that if there is a breach or alleged breach of any representation or
warranty contained in or pertaining to the matters which were not taken into
account in determining the Aggregate Consideration and such breach or alleged
breach does not give rise to an indemnification obligation under Section 7.2,
such breach or alleged breach shall give rise to an indemnification obligation
under Article X.
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(g) Tax Reporting of Certain Payments. Each of the Management Stockholders
agrees to report the bonus paid pursuant to Section 6.6(a)(xiii)(C) as ordinary
income for federal, state and local income tax purposes in the year paid. Each
of the Optionholders agrees to report the excess of the fair market value of
the Terra Common Stock acquired upon the exercise of his Option (determined as
provided in Section 6.12) over the amount, if any, paid upon such exercise as
ordinary income for federal, state and local income tax purposes in the year of
such exercise.
SECTION 7.3. RESALE OF CMS COMMON SHARES. Each Shareholder who is an
affiliate of Terra within the meaning of Rule 145 under the Securities Act
agrees that any resale of CMS Common Shares to be received hereunder shall be
made in compliance with Rule 145(d) under the Securities Act.
SECTION 7.4. ACCESS TO DATA. For a period of one year after the Effective
Date, Terra shall allow Xxxxxx and/or Xxxxx, or a company controlled by them,
access to and the right to copy (at their expense), Terra data as follows:
(i) Niagaran base maps;
(ii) Dundee base maps;
(iii) Michigan State production data;
(iv) seismic data over leaseholds located west of a north-south line
demarcated by the west boundary line of Kalkaska County, Michigan; and
(v) plat maps, pipeline maps, and lease ownership and data maps.
SECTION 7.5. TERRA EMPLOYEES. (a) CMS Energy agrees with respect to each
employee of Terra as of the Effective Date other than Messrs. Lagina, Boeve,
Tester and Xxxxxxxxxx that from and after the Effective Date either (i) CMS
Energy shall cause Terra to continue to employ such employee for at least one
year after the Effective Date at a level of compensation and benefits
(considered in the aggregate for each such employee) not materially less
favorable to the employee than Terra was obligated to provide such employee as
of January 1, 1995 or (ii) in the event that the employment of any such
employee is terminated by Terra within one year after the Effective Date for
any reason other than death, disability or cause, CMS Energy shall cause Terra
to pay such employee severance pay equal to the difference between (A) one
year's base salary for such employee as of January 1, 1995 and (B) the actual
amount of base salary paid to such employee for the period commencing on the
Effective Date and ending on the effective date of such employee's termination.
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(b) CMS Energy agrees that it will cause and permit Terra to pay as a bonus
to employees of Terra as of both the Effective Date and the date which is
thirty (30) days after the Effective Date an aggregate amount of $803,000, such
amount to be paid on or prior to December 31, 1995 and allocated to such
employees as Terra and Newco shall mutually determine; provided, that CMS
Energy and Terra shall have the right to make the payment of any such bonus to
any or all such employees conditional upon such employees executing a release
of any interest such employees might otherwise have or have had in the
properties and associated rights known as the Terra employee override pool.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF CMS ENERGY AND SUB
The obligations of CMS Energy and Sub under this Agreement to cause the
Merger and the other transactions contemplated to be consummated at the
Effective Time to be consummated, and the obligation of CMS Energy to complete
the transactions contemplated by the Exchange Closing, shall, at the option of
CMS Energy, be subject to the satisfaction, on or prior to the Effective Date,
of the following conditions:
SECTION 8.1. NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES.
There shall have been no material breach by Terra, any Stockholder or any
Optionholder in the performance of their respective covenants and agreements
herein to be performed at or prior to the Effective Time; subject to Section
10.7, none of the representations and warranties of Terra, any Stockholder or
any Optionholder that is qualified as to materiality shall be untrue or
incorrect in any respect on the Effective Date and on the Effective Date such
representations and warranties shall be true and correct as though made on the
Effective Date except for changes therein specifically permitted by this
Agreement or resulting from any transaction expressly consented to in writing
by CMS Energy, permitted by Section 6.6 or entered into in connection with the
consummation of the Merger and the other transactions contemplated hereby;
subject to Section 10.7, none of the representations or warranties that is not
so qualified shall be untrue or incorrect in any material respect on the
Effective Date and on the Effective Date such representations and warranties
shall be true and correct in all material respects as though made on the
Effective Date except for changes therein specifically permitted by this
Agreement or resulting from any transaction expressly consented to in writing
by CMS Energy, permitted by Section 6.6 or entered into in connection with the
consummation of the Merger and the other transactions contemplated hereby; and
there shall have been delivered to CMS Energy and Sub a certificate or
certificates to the foregoing effect in substantially the form of Exhibit C
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hereto, dated the Effective Date, signed on behalf of Terra by its Chairman and
its President and signed by each of the Stockholders and the Optionholders
(limited in the case of the respective Management and Non-Management
Stockholders and Optionholders to the respective covenants and agreements, and
representation and warranties, of such persons contained herein).
SECTION 8.2. NO MATERIAL ADVERSE EFFECT. Between the date hereof and the
Effective Date, there shall have been no Material Adverse Effect on Terra and
its Subsidiaries, taken as a whole; and there shall have been delivered to CMS
Energy and Sub a certificate or certificates to such effect, dated the
Effective Date, signed on behalf of Terra and its Subsidiaries by its President
and its Chief Financial Officer and signed by each of the Management
Stockholders.
SECTION 8.3. OPINIONS OF COUNSEL FOR TERRA, THE STOCKHOLDERS AND THE
OPTIONHOLDERS. CMS Energy and Sub shall have received from (i) Mika, Meyers,
Xxxxxxx & Xxxxx, P.L.C., counsel for Terra and the Management Stockholders and
the Optionholders, opinions, dated the Effective Date, in form and substance
reasonably satisfactory to CMS Energy, substantially to the effect set forth in
Exhibits D-1 and D-2, respectively, and (ii) Law, Xxxxxxxx & Xxxxxxxxxx, P.C.,
counsel to the Non-Management Stockholders, an opinion, dated the Effective
Date, in form and substance reasonably satisfactory to CMS Energy,
substantially to the effect set forth in Exhibit E.
SECTION 8.4. NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or any other material transaction contemplated by
this Agreement shall be in effect; provided, however, that each of the parties
shall have used its reasonable best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any injunction
or other order that may be entered.
SECTION 8.5. NECESSARY GOVERNMENTAL APPROVALS. The parties shall have
received all governmental and regulatory approvals and actions reasonably
necessary to consummate the transactions contemplated hereby, which are either
required to be obtained prior to the Effective Date by applicable law or
regulation (including, without limitation, the expiration or early termination
of the applicable waiting period under the HSR Act) or are necessary to prevent
a Material Adverse Effect on Terra and its Subsidiaries taken as a whole.
SECTION 8.6. NECESSARY CONSENTS. Terra shall have received consents, in
form and substance reasonably satisfactory to CMS Energy, to the transactions
contemplated hereby from the other parties to all material contracts, leases,
agreements and
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permits to which Terra or any of its Subsidiaries is a party or by which any of
them are affected and which require such consent prior to the Merger and are
necessary to prevent a Material Adverse Effect with respect to Terra and its
Subsidiaries taken as a whole.
SECTION 8.7. EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement, including the Prospectus, shall be effective under the Securities
Act, no stop order suspending the effectiveness of the Registration Statement
shall have been entered by the SEC and no material or fundamental change shall
have occurred which requires disclosure thereof to be included in an amendment
to the Registration Statement or a supplement to the Prospectus included in the
Registration Statement, or to be incorporated by reference therein from a
filing under the Exchange Act, prior to any further use of such Registration
Statement and Prospectus under the Securities Act and the rules and regulations
thereunder; and further, a sufficient time period shall have lapsed following
the delivery of the Prospectus to the Stockholders as is necessary to comply
with the requirements of Form S-4.
SECTION 8.8. LISTING OF CMS COMMON SHARES. The CMS Common Shares to be
issued hereunder shall have been approved for listing upon notice of issuance
by the NYSE.
SECTION 8.9. STOCKHOLDER ACTION. This Agreement shall have been
unanimously adopted by all holders of Terra Common Stock. The payments of the
bonuses described in Section 6.6(a)(xiii) to the Management Stockholders and
the payments described in the Covenant Not to Compete shall have been approved
in a separate vote or written consent of all such holders who do not receive
such payments.
SECTION 8.10. DISSENTING STOCKHOLDERS. No stockholder of Terra shall have
delivered a written demand for appraisal of its Terra Common Stock pursuant to
Section 762 of the BCA; and there shall have been delivered to CMS Energy and
Sub a certificate or certificates to such effect, dated the Effective Date,
signed on behalf of Terra by its Chairman and its President.
SECTION 8.11. DUE DILIGENCE. CMS Energy shall have conducted a legal,
business and financial due diligence review of Terra and its Subsidiaries the
results of which shall have been reasonably satisfactory to CMS Energy.
SECTION 8.12. RESIGNATIONS OF TERRA DIRECTORS AND OFFICERS. CMS Energy
shall have received the resignation of each of the directors and officers of
Terra and the directors and officers of each of its Subsidiaries which are
serving at the request or for the convenience of Terra.
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SECTION 8.13. OPTIONS TO ACQUIRE TERRA COMMON STOCK. All outstanding
Options shall have been exercised, including, without limitation, the exercise
of Options to acquire an aggregate of 2,545,922 shares of Terra Common Stock
from Terra currently held by certain Optionholders in accordance with their
terms.
SECTION 8.14. CMS NOMECO LENDERS' CONSENT. The lenders to CMS NOMECO Oil &
Gas Co., a Michigan corporation ("CMS NOMECO") and a wholly-owned subsidiary
of CMS Enterprises Company, a Michigan corporation ("Enterprises") and a
subsidiary of CMS Energy, under the financing arrangements of CMS NOMECO, shall
have consented to the Merger and the transfer to CMS NOMECO of the capital
stock of the Surviving Corporation and shall have waived any breach under such
arrangement as a result of the indebtedness, guarantees or similar obligations
of the Surviving Corporation, in each case on terms and conditions satisfactory
to CMS Energy.
SECTION 8.15. PAYMENTS FOR PURCHASED ASSETS. Terra shall have received
payments for the Purchased Assets as contemplated by Section 6.6(b).
SECTION 8.16. GUARANTEE. Each of Lagina, Boeve, Tester and Xxxxxxxxxx
shall have executed a guarantee in favor of Terra substantially in the form of
Exhibit F in the amount of $3,600,000 relating to net revenue to be received by
Terra from and after January 1, 1995 for gas sales under its gas sale
agreements after taking into account its purchases of gas under its gas
purchase agreements.
SECTION 8.17. CONSULTING AGREEMENT. Terra and Newco shall have entered
into a consulting agreement substantially in the form of Exhibit G.
SECTION 8.18. EMPLOYMENT AGREEMENTS. Terra and each of Tester and
Xxxxxxxxxx shall have entered into employment agreements substantially in the
respective forms of Exhibits H and I.
SECTION 8.19. 1995 ANTRIM PROGRAM. Terra shall have obtained written
commitments from co-venturers for the funding, drilling and operation by Terra
of the xxxxx included in the 1995 Antrim Program consisting of at least 282
xxxxx and related pipelines and other facilities (the "1995 Antrim Program").
SECTION 8.20. MINIMUM AGGREGATE CONSIDERATION. The amount calculated
pursuant to clause (A) less clause (B) of Section 2.2(a) shall be at least
$59,000,000.
SECTION 8.21. INSURANCE. Terra and its Subsidiaries shall have maintained
policies of fire and casualty, liability (general, product and other
liability), well control, workers'
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compensation and other forms of insurance and bonds in such amounts and against
such risks and losses as are usually insured against in the same general areas
by companies engaged in the same or a similar business.
SECTION 8.22. GAS DELIVERY. Terra shall have reached an agreement with
Michigan Consolidated Gas Company to the effect that any gas delivered into the
Gaylord-Alpena pipeline system shall be redelivered to the Xxxxxxx interconnect
at an aggregate cost not to exceed 12 cents per Mcf.
SECTION 8.23. COVENANT NOT TO COMPETE. Each of the Management Stockholders
shall have entered into the Covenant Not to Compete with CMS Energy
substantially in the form of Exhibit J (the "Covenant Not to Compete").
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS
OF TERRA AND THE STOCKHOLDERS
The obligations of Terra, the Stockholders and the Optionholders under this
Agreement to cause the Merger and the other transactions contemplated to be
consummated at the Effective Time, and the obligation of Xxxxxx to complete the
transactions contemplated by the Exchange Closing, shall, at the option of
Terra, the Stockholders, and the Optionholders, be subject to the satisfaction,
on or prior to the Effective Date, of the following conditions:
SECTION 9.1. NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES.
There shall have been no material breach by CMS Energy or Sub in the
performance of any of their respective covenants and agreements herein to be
performed at or prior to the Effective Time; subject to Section 10.7, none of
the representations and warranties of CMS Energy or Sub that is qualified as to
materiality shall be untrue or incorrect in any respect on the Effective Date
and on the Effective Date such representations and warranties shall be true and
correct as though made on the Effective Date except for changes therein
specifically permitted by this Agreement or resulting from any transactions
expressly consented to in writing by Terra, permitted by Section 6.6 or entered
into in connection with the consummation of the Merger and the other
transactions contemplated hereby; subject to Section 10.7, none of the
representations or warranties that are not so qualified shall be untrue or
incorrect in any material respect on the Effective Date and on the Effective
Date such representations and warranties shall be true and correct in all
material respects as though made on the Effective Date except for changes
therein specifically permitted by this Agreement or resulting from any
transactions expressly consented to in writing by Terra, permitted by Sections
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6.6 or entered into in connection with the consummation of the Merger and the
other transactions contemplated hereby; and there shall have been delivered to
Terra and the Stockholders a certificate or certificates to the foregoing
effect substantially in the form of Exhibit K hereto, dated the Effective Date,
signed on behalf of CMS Energy and Sub by their respective Presidents or Vice
Presidents.
SECTION 9.2. NO MATERIAL ADVERSE EFFECT. Between the date hereof and the
Effective Date, there shall have been no Material Adverse Effect on CMS Energy
and its Subsidiaries taken as a whole; and there shall have been delivered to
Terra and the Stockholders a certificate or certificates to such effect, dated
the Effective Date, signed on behalf of CMS Energy by its President or a Vice
President.
SECTION 9.3. NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or any other material transaction contemplated by
this Agreement shall be in effect; provided, however, that each of the parties
shall have used its reasonable best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any injunction
or other order that may be entered.
SECTION 9.4. OPINIONS OF COUNSEL FOR CMS ENERGY AND SUB AND COUNSEL FOR THE
STOCKHOLDERS. Terra and the Stockholders shall have received from Xxxxxx
Sturdy, Esq., Assistant General Counsel for CMS Energy and Sub, an opinion,
dated the Effective Date, in form and substance satisfactory to Terra, the
Stockholders, substantially to the effect set forth in Exhibit L, and the
Stockholders shall have received from Xxxxxx Xxxxxxx, special tax counsel for
Terra, an opinion, dated the Effective Date, as to certain tax matters,
substantially to the effect set forth in Exhibit M.
SECTION 9.5. NECESSARY GOVERNMENTAL APPROVALS. The parties shall have
received all governmental and regulatory approvals and actions reasonably
necessary to consummate the transactions contemplated hereby, which are either
required to be obtained prior to the Effective Date by applicable law or
regulation (including, without limitation, the expiration or early termination
of the applicable waiting period under the HSR Act) or are necessary to prevent
a Material Adverse Effect on CMS Energy and its Subsidiaries taken as a whole.
SECTION 9.6. EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement, including the Prospectus, shall be effective under the Securities
Act, no stop order suspending the effectiveness of the Registration Statement
shall have been entered by the SEC and no material or fundamental change shall
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have occurred which requires disclosure thereof to be included in an amendment
to such Registration Statement or a supplement to the Prospectus included in
such Registration Statement, or to be incorporated by reference therein from a
filing under the Exchange Act, prior to any further use of such Registration
Statement and Prospectus under the Securities Act and the rules and regulations
thereunder.
SECTION 9.7. LISTING OF CMS COMMON SHARES. The CMS Common Shares to be
issued hereunder shall have been approved for listing upon notice of issuance
by the NYSE.
SECTION 9.8. STOCKHOLDER ACTION. This Agreement shall have been
unanimously adopted by all holders of Terra Common Stock. The payments of the
bonuses described in Section 6.6(a)(xiii) and the payments described in the
Covenant Not to Compete shall have been approved in a separate vote or written
consent of all such holders who do not receive such payments. By the execution
hereof, all such holders agree to give their timely consent and agree to
execute such consents and other documents necessary to evidence such approvals.
SECTION 9.9. NECESSARY CONSENTS. Terra shall have received consents, in
form and substance reasonably satisfactory to Terra, to the transactions
contemplated hereby from the other parties to all material contracts, leases,
agreements and permits to which Terra or any of its Subsidiaries is a party or
by which any of them are affected and which require such consent prior to the
Merger and are necessary to prevent a Material Adverse Effect with respect to
Terra and its Subsidiaries taken as whole.
SECTION 9.10. MINIMUM AGGREGATE CONSIDERATION. The amount calculated
pursuant to clause (A) less clause (B) of Section 2.2(a) shall be at least
$59,000,000.
SECTION 9.11. COVENANT NOT TO COMPETE. CMS Energy shall have entered into
the Covenant Not to Compete with each of the Management Stockholders
substantially in the form of Exhibit J.
ARTICLE X
INDEMNIFICATION; SURVIVAL
SECTION 10.1. INDEMNIFICATION BY THE STOCKHOLDERS AND OPTIONHOLDERS. From
and after the Effective Time, each of the Stockholders and Optionholders shall
jointly and severally indemnify and hold harmless CMS Energy, the Surviving
Corporation and their subsidiaries, affiliates and successors from and against
any and all (a) liabilities, losses, costs or damages ("Loss") and (b)
reasonable attorneys', consultants' and accountants' fees and expenses, court
costs and all other reason-
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able out-of-pocket expenses ("Expense") incurred by CMS Energy, the
Surviving Corporation and their subsidiaries, affiliates and successors in
connection with or arising from (i) any breach or failure to perform by any
Stockholder or Optionholder of any of his respective agreements, covenants or
obligations in this Agreement or any agreement entered into in connection with
the transactions contemplated hereby, (ii) any breach or failure to perform by
Terra of any of its agreements, covenants or obligations in this Agreement or
any agreement entered into in connection with the transactions contemplated
hereby, in each case to be performed or complied with prior to or at the
Effective Time, and (iii) any breach of any warranty or the inaccuracy of any
representation of Terra or any Stockholder or Optionholder contained in this
Agreement, as updated in accordance with Section 10.7 hereof, or in any
certificate delivered by or on behalf of Terra or any Stockholder or
Optionholder pursuant hereto; provided, however, that no Stockholder or
Optionholder shall have any obligation to indemnify and hold harmless any
indemnified party with respect to any Loss or Expense arising from any breach
of a warranty, or inaccuracy of a representation, of any other Stockholder
contained in Section 3.3(b) or 3.4(b) or 3.34 or of any other Optionholder
contained in Section 3.3(b) or 3.4(b); and provided, further, however, that no
Non-Management Stockholder shall have any obligation to indemnify and hold
harmless any indemnified party except with respect to (A) any Loss or Expense
arising from any breach or failure to perform by such Non-Management
Stockholder of any of his respective agreements, covenants or obligations in
this Agreement or any agreement entered into in connection with the
transactions contemplated hereby, or (B) any breach of a warranty, or
inaccuracy of a representation, of such Non-Management Stockholder contained in
Section 3.3(b) (first sentence), 3.4(b) or 3.34; and provided, further,
however, that, it is understood that if there is a breach or alleged breach of
any representation or warranty contained in or pertaining to the matters which
were not taken into account in determining the Aggregate Consideration and such
breach or alleged breach does not give rise to an indemnification obligation
under Section 7.2, such breach or alleged breach shall give rise to an
indemnification obligation under this Article X; and provided, further,
however, that the Stockholders shall be required to indemnify and hold harmless
CMS Energy and the Surviving Corporation under this Section 10.1 with respect
to the breach or inaccuracy of any representations or warranties as hereinabove
provided only to the extent that the aggregate amount of Loss and Expense
referred to above in this Section 10.1 relating thereto exceeds $300,000,
except for any Loss or Expense incurred in connection with or arising from any
breach or inaccuracy of the representations and warranties contained in Section
3.3 and 3.4, as to which no such limitation shall apply; and provided further,
that the obligation of the Stockholders to indemnify and hold harmless CMS
Energy and the Surviving Corporation pursuant to this Section 10.1 shall be
limited to the aggregate payment by
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such Stockholders of an amount equal to $30,000,000, except for any Loss or
Expense incurred in connection with or arising from any breach or inaccuracy of
the representations and warranties contained in Sections 3.3 and 3.4, as to
which such limitation shall be the Aggregate Consideration.
SECTION 10.2. INDEMNIFICATION BY CMS ENERGY AND THE SURVIVING CORPORATION.
From and after the Effective Time, CMS Energy and the Surviving Corporation
shall jointly and severally indemnify and hold harmless the Stockholders and
Optionholders and their affiliates and successors from and against any and all
Loss and Expense incurred by the Stockholders or Optionholders and their
affiliates and successors in connection with or arising from (a) any breach or
failure to perform by CMS Energy or the Surviving Corporation of any of their
respective agreements, covenants or obligations in this Agreement or any
agreement entered into in connection with the transactions contemplated hereby
or thereby, and (b) any breach of any warranty or the inaccuracy of any
representation of CMS Energy or Sub contained in this Agreement, as updated in
accordance with Section 10.7 hereof, or in any certificate delivered by or on
behalf of CMS Energy or Sub pursuant hereto or thereto, provided, however, that
the obligation of CMS Energy and the Surviving Corporation to indemnify and
hold harmless pursuant to this Section 10.2 shall be limited to the aggregate
payment by CMS Energy and/or the Surviving Corporation of an amount equal to
$30,000,000, except for any Loss or Expense in connection with or arising from
any breach or inaccuracy of the representations and warranties contained in
Sections 4.1, 4.2, 4.3 and 4.4, as to which such limitation shall be the
Aggregate Consideration.
SECTION 10.3. NOTICE OF CLAIMS. If CMS Energy (with respect to Section
10.1) or a Stockholder or Optionholder (with respect to Section 10.2) believes
that any of the persons entitled to indemnification under this Article X has
suffered or incurred any Loss or incurred any Expense, CMS Energy or the
Stockholder or Optionholder, as the case may be, shall so notify the others
promptly in writing describing such Loss or Expense, the amount thereof, if
known, and the method of computation of such Loss or Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement or any certificate delivered pursuant hereto in respect of which such
Loss or Expense shall have occurred; provided, however, that the omission by
such indemnified party to give notice as provided herein shall relieve the
indemnifying party of its indemnification obligation under this Article X only
if such omission results in a failure of actual notice to the indemnifying
party and then only to the extent that such indemnifying party is materially
damaged as a result of such failure to give notice. If any action at law or
suit in equity is instituted by or against a third party with respect to which
any of the persons entitled to indemnification under this Article X intends to
claim any liability or expense as Loss or Expense
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under this Article X, any such person shall promptly notify the indemnifying
party of such action or suit as specified in this Section 10.3 and Section
10.4. Any party entitled to indemnification hereunder shall use reasonable
efforts to minimize any Loss or Expense for which indemnification is sought
hereunder.
SECTION 10.4. THIRD PARTY CLAIMS. In the event of any claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceeding by a third party, the indemnified persons shall give such
notice thereof to the indemnifying party not later than twenty (20) days prior
to the time any response to the asserted claim is required, if possible, and in
any event within fifteen (15) days following the date such indemnified person
has actual knowledge thereof; provided, however, that the omission by such
indemnified party to give notice as provided herein shall relieve the
indemnifying party of its indemnification obligation under this Article X only
if such omission results in a failure of actual notice to the indemnifying
party and then only to the extent that such indemnifying party is materially
damaged as a result of such failure to give notice. In the event of any such
claim for indemnification resulting from or in connection with a claim or legal
proceeding by a third party, the indemnifying party may, at its sole cost and
expense, assume the defense thereof; provided, however, that counsel for the
indemnifying party, who shall conduct the defense of such claim or legal
proceeding, shall be reasonably satisfactory to the indemnified party; and
provided, further, that if the defendants in any such actions include both the
indemnified persons and the indemnifying party and the indemnified persons
shall have reasonably concluded that there may be legal defenses or rights
available to them which have not been waived and are in actual or potential
conflict with those available to the indemnifying party, the indemnified
persons shall have the right to select one law firm reasonably acceptable to
the indemnifying party to act as separate counsel, on behalf of such
indemnified persons, at the expense of the indemnifying party. Subject to the
second proviso of the immediately preceding sentence, if an indemnifying party
assumes the defense of any such claim or legal proceeding, such indemnifying
party shall not consent to entry of any judgment, or enter into any settlement,
that (a) is not subject to full indemnification hereunder, (b) provides for
injunctive or other non-monetary relief affecting the indemnified persons or
(c) does not include as an unconditional term thereof the giving by each
claimant or plaintiff to such indemnified persons of a release from all
liability with respect to such claim or legal proceeding, without the prior
written consent of the indemnified persons (which consent, in the case of
clauses (b) and (c), shall not be unreasonably withheld); provided, however,
that subject to the second proviso of the immediately preceding sentence, the
indemnified persons may, at their own expense, participate in any such
proceeding with the counsel of their choice without any right of
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control thereof. So long as the indemnifying party is in good faith defending
such claim or proceeding, the indemnified persons shall not compromise or
settle such claim or proceeding without the prior written consent of the
indemnifying party, which consent shall not be unreasonably withheld. If the
indemnifying party does not assume the defense of any such claim or litigation
in accordance with the terms hereof, the indemnified persons may defend against
such claim or litigation in such manner as they may deem appropriate,
including, without limitation, settling such claim or litigation (after giving
prior written notice of the same to the indemnifying party and obtaining the
prior written consent of the indemnifying party, which consent shall not be
unreasonably withheld) on such terms as the indemnified persons may deem
appropriate, and the indemnifying party will promptly indemnify the indemnified
persons in accordance with the provisions of this Section 10.4.
SECTION 10.5. EXCLUSIVE REMEDY. In the event the Merger is consummated,
any claim against either the Stockholders or Optionholders or CMS Energy or the
Surviving Corporation for any breach of this Agreement or in connection with
any of the transactions contemplated hereby (other than a claim for breach of
Section 7.2 or of any agreements or instruments entered into in connection
herewith) shall, to the extent permitted by law, be made solely pursuant to
this Article X.
SECTION 10.6. SURVIVAL OF OBLIGATIONS. All representations, warranties,
covenants and obligations contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement; provided,
however, that the representations and warranties in Articles III and IV shall
terminate on the third anniversary of the Effective Date except for the
representations and warranties contained in Sections 3.3 and 3.4, which shall
survive without termination, and the representations contained in Sections 3.8,
3.22 and 7.1(c), which shall survive until expiration of the applicable statute
of limitations; and provided, further, that if any claim under this Article X
for Loss or Expense in respect of any representations and warranties is
asserted in writing with reasonable specificity prior to the expiration of the
applicable period set forth above, the obligations of the indemnifying party
with respect to such claim shall not be affected by the expiration of such
period.
SECTION 10.7. UPDATE OF THE REPRESENTATIONS AND WARRANTIES. (a) Not later
than five days prior to the Effective Date, Terra, any Stockholder or any
Optionholder may deliver a written notice to CMS Energy setting forth any and
all facts, conditions, occurrences, changes and other matters, in each case,
occurring after the date hereof, that has caused or may cause the
representations and warranties of the Stockholders and/or the Optionholders
contained herein (including the Schedules hereto) not to be true and correct in
all respects (in the case of any
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representation or warranty containing any materiality qualification) or in all
material respects (in the case of any representation or warranty without any
materiality qualification). In the event that any of such facts, conditions,
occurrences, changes and other matters shall have caused or will cause, on or
prior to the Effective Date, any such representation or warranty not to be true
and correct in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material respects (in the
case of any representation or warranty without any materiality qualification)
on the Effective Date with the same effect as though made on the Effective
Date, CMS Energy may elect to terminate this Agreement pursuant to Section
11.1(d) based on such facts, conditions, occurrences, changes or other matters.
If CMS Energy shall nevertheless proceed to consummate the Merger, such facts,
conditions, occurrences, changes and other matters so disclosed as to each such
representation or warranty of the Stockholders and/or the Optionholders
contained herein (including the Schedules) shall be deemed to constitute an
exception to such representation or warranty reflecting the facts, conditions,
occurrences, changes and other matters so disclosed with the same effect as if
such exception had been made in such representation or warranty as of the date
hereof in this Agreement to the extent, but only to the extent, of such
disclosure.
(b) Not later than five days prior to the Effective Date, CMS Energy may
deliver a written notice to Terra, the Stockholders and the Optionholders
setting forth any and all facts, conditions, occurrences, changes and other
matters, in each case, occurring after the date hereof, that has caused or may
cause the representations and warranties of CMS Energy contained herein
(including the Schedules hereto) not to be true and correct in all respects (in
the case of any representation or warranty containing any materiality
qualification) or in all material respects (in the case of any representation
or warranty without any materiality qualification). In the event that any of
such facts, conditions, occurrences, changes and other matters shall have
caused or will cause, on or prior to the Effective Date, any such
representation or warranty not to be true and correct in all respects (in the
case of any representation or warranty containing any materiality
qualification) or in all material respects (in the case of any representation
or warranty without any materiality qualification) on the Effective Date with
the same effect as though made on the Effective Date, Terra may elect to
terminate this Agreement pursuant to Section 11.1(e) based on such facts,
conditions, occurrences, changes or other matters. If Terra shall nevertheless
proceed to consummate the Merger, such facts, conditions, occurrences, changes
or other matters so disclosed as to each such representation or warranty of CMS
Energy contained herein (including the Schedules) shall be deemed to constitute
an exception to such representation or warranty reflecting the facts,
conditions, occurrences, changes and other matters so disclosed with the same
effect as if such
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exception had been made in such representation or warranty as of the date
hereof in this Agreement to the extent, but only to the extent, of such
disclosure.
SECTION 10.8. ADJUSTMENT TO CONSIDERATION. All indemnity payments
made pursuant to this Article X shall be considered as adjustments to the
consideration paid in connection with the Merger and to the extent that it
cannot be so characterized for Tax purposes, shall be made on an After-Tax
Basis.
ARTICLE XI
TERMINATION
SECTION 11.1. TERMINATION. Anything contained in this Agreement to
the contrary notwithstanding, this Agreement may be terminated at any time
prior to the Effective Time:
(a) by the mutual consent of CMS Energy and Terra;
(b) by CMS Energy upon any material breach by Terra or any Stockholder
or any Optionholder of any of the covenants contained in Article VI or VII or
Section 12.1;
(c) by Terra upon any material breach by CMS Energy or Sub of any of
the covenants contained in Article VI or VII or Section 12.1;
(d) by CMS Energy if any of the conditions specified in Article VIII
has not been met in all material respects or waived by CMS Energy at such time
as such condition can no longer be satisfied;
(e) by Terra if any of the conditions specified in Article IX has not
been met in all material respects or waived by Terra and the Stockholders, as
applicable, at such time as such condition can no longer be satisfied; or
(f) by CMS Energy or Terra if the Merger shall not have been
consummated on or before September 30, 1995.
SECTION 11.2. EFFECT OF TERMINATION. In the event that this Agreement
shall be terminated pursuant to Section 11.1, all further obligations of the
parties under this Agreement (other than Sections 12.1, 12.2 and 12.10) shall
terminate without further liability of any party to the others; provided,
however, that nothing herein shall relieve any party from
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liability for its breach of this Agreement during its effectiveness, provided
that anything contained in this Agreement to the contrary notwithstanding, in
the event of such termination after the Exchange Closing Time, Xxxxxx shall be
deemed to have continuously held the Xxxxxx Shares and any action taken
pursuant to Section 2.3 hereof or in connection with the Exchange Closing shall
be deemed null and void, ab initio, and shall be reversed effective as of the
Exchange Closing Time.
ARTICLE XII
OTHER PROVISIONS
SECTION 12.1. CONFIDENTIAL NATURE OF INFORMATION. Each party agrees that
it will treat in strict confidence all documents, materials and other
information which it obtains regarding the other parties during the course of
the negotiations leading to the consummation of the transactions provided for
herein and the preparation of this Agreement; and if for any reason whatsoever
the transactions contemplated by this Agreement shall not be consummated, each
party shall return to each other party all copies of non-public documents and
materials which have been furnished or acquired in connection therewith and
shall not use or disseminate such documents, materials or other information for
any purpose whatsoever.
SECTION 12.2. FEES AND EXPENSES. Except as otherwise provided in this
Section 12.2, each of the parties hereto shall bear its own costs and expenses
(including, without limitation, fees and disbursements of its counsel,
accountants and other financial, legal, accounting or other advisors), incurred
by it or its affiliates in connection with the preparation, negotiation,
execution, delivery and performance of this Agreement and each of the other
documents and instruments executed in connection with or contemplated by this
Agreement, and the consummation of the transactions contemplated hereby and
thereby (collectively "Acquisition Expenses"); provided, however, that
Acquisition Expenses incurred or paid by Terra in excess of $100,000 shall be
included in Section 2.2(a)(B)(III).
SECTION 12.3. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally or by overnight mail, or four days after being mailed (by registered
mail, return receipt requested) to a party at the following address (or to such
other address as such party may have specified by notice given to the other
parties pursuant to this provision):
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If to CMS Energy to:
CMS Energy Corporation
Fairlane Plaza South, Suite 1100
000 Xxxx Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
with a copy to:
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
and
CMS NOMECO Oil & Gas Co.
Xxx Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx III
If to Sub to:
CMS Merging Corporation
c/o CMS Energy Corporation
Fairlane Plaza South, Suite 1100
000 Xxxx Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
with a copy to:
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
If to Terra to:
Terra Energy Ltd.
0000 Xxxxx Xxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: President
with a copy to:
Mika, Meyers, Xxxxxxx & Xxxxx, P.L.C.
Suite 700
000 Xxxxxx Xxxxxx, X.X.
Xxxxx Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
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If to the Management Stockholders to the
Stockholders' Representative as follows:
Xxxxxx X. Xxxxxx
c/o Terra Energy Ltd.
0000 Xxxxx Xxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
with a copy to:
Mika, Meyers, Xxxxxxx & Xxxxx, P.L.C.
Suite 700
000 Xxxxxx Xxxxxx, X.X.
Xxxxx Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
If to the Optionholders to the
Stockholders' Representative as follows:
Xxxxxx X. Xxxxxx
c/o Terra Energy Ltd.
0000 Xxxxx Xxxxxxxx Xxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
with a copy to:
Mika, Meyers, Xxxxxxx & Xxxxx, P.L.C.
Suite 700
000 Xxxxxx Xxxxxx, X.X.
Xxxxx Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
If to the Non-Management Stockholders to:
Xx. Xxxxxxx X. Xxxxxxxx
0000 X. Xxxxxxx Xxxx
Xx. Xxxxxxxx, Xxxxxxxx 00000
with a copy to:
Law, Xxxxxxxx & Xxxxxxxxxx
000 Xxxxxxxxxxx Xxxxx
000 Xxxxxx Xxxxxx, X.X.
Xxxxx Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
SECTION 12.4. DEFINITIONS. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
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(b) an "associate" of any person means (i) a corporation or organization of
which such person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of a class of equity securities, (ii)
any trust or other estate in which such person has substantial beneficial
interest or as to which such person serves as trustee or in a similar
capacity and (iii) any relative or spouse of such person, or any relative of
such spouse, who has the same home as such person or who is a director or
officer of the person or any of its parents or subsidiaries.
(c) "Good and Defensible Title" shall mean that title, free and clear of
all liens, encumbrances, burdens and claims, which entitles Terra or any
Subsidiary, as the case may be, (i) with respect to Interests constituting
pipelines, gathering lines, and treating and processing facilities, to the
interest in all capital assets and revenues, subject to associated costs and
expenses, not less than the undivided interests as held on June 1, 1995, and
(ii) with respect to Proved Developed Interests, Proved Undeveloped Interests
and Unproved Interests, to receive, during the remaining life of the Leases
or other mineral rights or interests constituting an Interest, not less than
the undivided interests set forth in the Property Schedules as net revenue
interests, both before and after payout, and overriding royalty interests in
all hydrocarbons produced, saved and marketed from such Leases or other
mineral rights and all Xxxxx located thereon through the plugging,
abandonment and salvage of such Xxxxx, without suspense or any indemnity
other than normal division order warranty of title, and which obligates Terra
or any Subsidiary, as the case may be, to bear a portion of the costs and
expenses relating to the maintenance and development of, and operations
relating to, the Leases or such other mineral rights or interests and all
Xxxxx located thereon through the plugging, abandonment and salvage of such
Xxxxx not greater than the working interests for such Leases or such other
mineral rights or interests, both before and after payout, set forth in the
Property Schedules, except in each case (A) to the extent that the Property
Schedules indicate that such net revenue interest, overriding royalty
interest and/or working interest is subject to change; (B) for penalty
provisions and contribution requirements customarily provided for in
operating and other similar agreements; (C) for increases in the working
interest where there has been a corresponding and proportionate increase in
the net revenue interest and (D) for Permitted Encumbrances.
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(d) "Interests" shall mean and include all of the following:
(i) Proved Developed Oil and Gas Interests. The interests and rights
of Terra and its Subsidiaries in and to oil and gas Leases, overriding
royalty interests, mineral interests, and other interests of Terra and its
Subsidiaries in producing oil and gas reserves that are expected to be
recovered through existing Xxxxx which are producing oil or gas or which are
capable of production (whether or not in actual production) with existing
equipment and operating methods, including, without limitation, the
interests and rights of Terra and its Subsidiaries in and to the Leases,
units, Xxxxx, and other properties described as proved developed in the
Property Schedules (collectively, the "Proved Developed Interests");
(ii) Proved Undeveloped Oil and Gas Interests. The interests and
rights of Terra and its Subsidiaries in and to oil and gas Leases,
overriding royalty interests, mineral interests, and other interests of
Terra and its Subsidiaries in oil and gas reserves that are considered to be
proven in accordance with commonly accepted petroleum engineering standards
and are expected to be recovered from Xxxxx that have not been drilled,
completed or equipped to a point that would permit production of commercial
quantities of oil and gas, including, without limitation, the interests and
rights of Terra and its Subsidiaries in and to the Leases, units, Xxxxx, and
other properties described as proved undeveloped in the Property Schedules
(collectively, the "Proved Undeveloped Interests");
(iii) Unproved Oil and Gas Interests. The interests and rights of
Terra and its Subsidiaries in and to oil and gas Leases, overriding royalty
interests, mineral interests, and other interests of Terra and its
Subsidiaries in oil and gas properties that are neither Proved Developed
Interests or Proved Undeveloped Interests, including, without limitation,
the interests and rights of Terra and its Subsidiaries in and to the
properties described as unproved in the
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Property Schedules (collectively, the "Unproved Interests");
(iv) Personal Property and Equipment. All of the personal property,
equipment, inventory and supplies of Terra and its Subsidiaries of
whatsoever kind or nature, wheresoever situated;
(v) Agreements. All of the interests of Terra and its Subsidiaries in
the entire estates and other rights created by all equipment, real estate
and other leases, licenses, permits, employment contracts, pipeline
easements or rights of way, and other Terra Agreements, together with all of
the property and rights incident thereto;
(vi) Geological and Geophysical Data. All right, title or interest of
Terra and its Subsidiaries in or to any seismic, geological and geophysical
data, of whatsoever kind or nature, wheresoever situated, together with all
interpretive analyses; and
(vii) Remaining Assets. All other assets and properties now or as of the
Effective Time owned by Terra or any of its Subsidiaries, whether real or
personal, tangible or intangible, wheresoever situated.
(e) the "knowledge of Terra" or "the best knowledge of Terra" or "known to
Terra" or "knowingly" means the knowledge of any of the Management
Stockholders or the Optionholders or of any of the persons listed in Schedule
12.4(e), which Schedule includes all persons other than the Management
Stockholders and the Optionholders who are directors of Terra or the chief
executive officers of Terra or any of its Subsidiaries or officers of Terra.
(f) "Material Adverse Change or Effect" means any change or effect (or any
development that, insofar as can reasonably be foreseen, would result in any
change or effect) that is materially adverse to the business, properties,
operations, assets, condition (financial or otherwise) or results of
operations of the applicable person or persons;
(g) "Permitted Encumbrances" shall mean (i) landowners' royalties,
overriding royalties, production payments, net profits interests, and other
similar burdens on production in amounts that do not operate to
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reduce the net revenue interest of any Interest, either before or after
payout, to less than the net revenue interest, either before or after payout,
set forth on the Property Schedules for such Interest or to increase the
working interest of any Interest, either before or after payout, to greater
than the working interest set forth on the Property Schedules for such
Interest, either before or after payout; (ii) division orders that do not
operate to reduce the net revenue interest of any Interest, either before or
after payout, to less than the net revenue interest, either before or after
payout, set forth in the Property Schedules for such Interest and that do not
increase the working interest of any Interest, either before or after payout,
to greater than the working interest, either before or after payout, set
forth in the Property Schedules for such Interest without a corresponding and
proportionate increase in the net revenue interest; (iii) operating
agreements containing terms and conditions customary in the industry for the
area in which the affected Interest is located and that do not operate to
reduce the net revenue interest of any Interest, either before or after
payout, to less than the net revenue interest, either before or after payout,
set forth in the Property Schedules for such Interest and that do not
increase the working interest of any Interest, either before or after payout,
to greater than the working interest, either before or after payout, set
forth in the Property Schedules for such Interest without a corresponding and
proportionate increase in the net revenue interest; (iv) unitization,
pooling, communitization and spacing agreements and orders that contain terms
and conditions customary in the industry for the area in which the affected
Interest is located and that do not operate to reduce the net revenue
interest, either before or after payout, of any Interest to less than the net
revenue interest, either before or after payout, set forth in the Property
Schedules for such Interest and that do not increase the working interest,
either before or after payout, of any Interest to greater than the working
interest, either before or after payout, for such Interest set forth in the
Property Schedules for such Interest without a corresponding and
proportionate increase in the net revenue interest; (v) farmout and farmin
agreements that contain terms and conditions that are customary in the
industry for the area in which the affected Interest is located and that have
been taken into consideration in setting forth the net revenue interest and
working interest, both before and after payout, set forth in the Property
Schedules; (vi) mechanic's, materialmen's, warehousemen's and carrier's liens
and other similar liens arising by operation of
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law or statute in the ordinary course of the Terra Business for
obligations that are not delinquent or that will be paid or discharged in
the ordinary course of the Terra Business; (vii) liens arising under joint
operating agreements for obligations that are not delinquent or that will be
paid or discharged in the ordinary course of business; (viii) liens for
taxes, assessments and similar governmental charges incurred or payable by
Terra or its Subsidiaries that are not delinquent or, if delinquent, that
are being contested in good faith by Terra and for which adequate reserves
have been established by Terra and reflected on the Statement of Income
and/or the Balance Sheet (and taken into account in determining Terra
Consolidated Net Working Capital); (ix) liens and encumbrances securing
Terra Debt; (x) liens and encumbrances that shall be released at or prior to
the Effective Time at no cost to Terra; (xi) easements, servitudes,
rights-of-way and other similar rights relating to the Leases that do not
materially interfere with the use of the Leases; (xii) rights reserved to or
vested in any municipality or to governmental, statutory or public authority
to control or regulate any of the Interest in any manner, and all applicable
laws, rules and orders of governmental authorities; and (xiii) any defect
(but not a deficiency) in title or related lien, encumbrance, encroachment
or burden of a type expected to be encountered, and which is customarily
acceptable to prudent oil and gas operators, in the area in which the
Interest is located.
(h) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization or other entity.
(i) "Property Schedules" shall mean the Schedules of Proved Developed
Interests, Proved Undeveloped Interests and Unproved Interests attached
hereto as Schedule 12.4(i).
(j) "Title Defect" shall mean any defect or deficiency in title, lien,
encumbrance, encroachment, burden, circumstance, that renders title to any
Interest identified in the Property Schedules or any portion thereof, or any
Interest relating to oil and gas gathering and transportation activities,
less than or deficient from Good and Defensible Title.
SECTION 12.5. PARTIAL INVALIDITY. In case any one or more of the
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be
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construed as if such invalid, illegal or unenforceable provision or provisions
had never been contained herein unless the deletion of such provision or
provisions would result in such a material change as to cause completion of the
transactions contemplated hereby to be unreasonable.
SECTION 12.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective permitted
successors or assigns.
SECTION 12.7. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be considered an original
counterpart, and shall become a binding agreement when CMS Energy, Sub, Terra,
the Stockholders and the Optionholders shall have each executed one
counterpart.
SECTION 12.8. TITLES AND HEADINGS. Titles and headings to Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 12.9. SCHEDULES AND EXHIBITS. The Schedules and Exhibits referred
to in this Agreement shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim herein.
SECTION 12.10. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS; ASSIGNMENT. This
Agreement, including the Schedules and Exhibits, contains the entire
understanding of the parties hereto with regard to the subject matter contained
herein except that the confidentiality agreement, dated March 29, 1995 (the
"Confidentiality Agreement"), between Terra and CMS NOMECO shall remain in full
force in effect pursuant to the terms thereof after the execution of this
Agreement; provided, however, that the Confidentiality Agreement shall
terminate as of the Effective Time. The parties hereto, by mutual agreement in
writing, may amend, modify and supplement this Agreement. The failure of any
party hereto to enforce at any time any provision of this Agreement shall not
be construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of such party
thereafter to enforce each and every such provision. No waiver of any breach
of this Agreement shall be held to constitute a waiver of any other or
subsequent breach. Except as expressly provided herein, the rights and
obligations of the parties under this Agreement may not be assigned or
transferred by any party hereto without the prior written consent of the other
parties hereto.
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SECTION 12.11. INDEPENDENT INVESTIGATION AND SCOPE OF REPRESENTATIONS. CMS
Energy acknowledges and confirms that (i) in making the decision to enter into
this Agreement and to consummate the transactions contemplated hereby, it has
relied on the representations, warranties, covenants and agreements of Terra,
the Stockholders and the Optionholders set forth in the Agreement (including
the exhibits and schedules) and on no other representations, warranties,
covenants and agreements, and (ii) it has made its own independent
investigation, analysis and evaluation of Terra's properties (including CMS
Energy's own estimate and appraisal of the extent and value of Terra's
hydrocarbon reserves, pipelines and contracts), business, financial condition,
operations and prospects. Except to the extent expressly set forth in this
Agreement, including Section 3.35, no party makes any representation or
warranty whatsoever. Without limiting the generality of the foregoing, except
as set forth in Article III, NO REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS
OR IMPLIED, ARE MADE WITH RESPECT TO THE MERCHANTABILITY, USEFULNESS OR
SUITABILITY FOR ANY PURPOSE OF ANY PERSONAL PROPERTY OF Terra OR ITS
SUBSIDIARIES, INCLUDING, WITHOUT LIMITATION (a) ANY IMPLIED OR EXPRESS WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, (b) ANY RIGHTS OF CMS
ENERGY UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION AND (c)
ANY CLAIM FOR DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN, WITH
RESPECT TO SUCH PERSONAL PROPERTY, IT BEING UNDERSTOOD THAT, EXCEPT AS
AFORESAID, SUCH PERSONAL PROPERTY SHALL EXIST IN ITS PRESENT CONDITION AND
STATE OF REPAIR, "AS IS" AND "WHERE IS," WITH ALL FAULTS.
SECTION 12.12. GOVERNING LAW; ARBITRATION. (a) This Agreement, and the
application or interpretation thereof, shall be governed by its terms and by
the internal laws of the State of Michigan, without regard to principles of
conflicts of laws as applied in the State of Michigan or any other jurisdiction
which, if applied, would result in the application of any laws other than the
internal laws of the State of Michigan.
(b) Any action, dispute, claim or controversy arising under, out of, in
connection with, or relating to, this Agreement, or any amendment hereof, or
the breach hereof (a "Dispute"), shall be determined and settled by binding
arbitration in Lansing, Michigan, by a person or persons mutually agreed upon,
or in the event of a disagreement as to the selection of the arbitrator or
arbitrators, in accordance with the rules of the American Arbitration
Association ("AAA"). Any award rendered therein shall specify the findings of
fact of the arbitrator or arbitrators and the reasons for such award, with the
reference to and reliance on relevant law. Any such award shall be final and
binding on each and all of the parties thereto and their personal
representatives, and judgment may be entered thereon in any court having
jurisdiction thereof. Any party may, by summary proceedings, bring an action
in court to compel arbitration of any Dispute. Any arbitration hereunder shall
be
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administered by the AAA in accordance with the terms of this Section 12.12, the
Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable,
the Federal Arbitration Act. To the maximum extent practicable, an arbitration
proceeding hereunder shall be concluded by December 31, 1995. Each party
agrees to keep all Disputes and arbitration proceedings strictly confidential
except for disclosure of information required by applicable law.
SECTION 12.13. NO THIRD-PARTY BENEFICIARIES. Except for Section 7.2 and
Article X, nothing in this Agreement, expressed or implied, is intended or
shall be construed to confer upon any person other than the parties hereto and
successors and assigns permitted by Section 12.6 any right, remedy or claim
under or by reason of this Agreement (but excluding for the purpose of this
provision the Exhibits and Schedules).
SECTION 12.14. INTERPRETATION. Except as expressly stated otherwise, any
reference herein to "he," "she" or "it", or comparable terms, with respect to
any person or entity shall mean and include references to any or all of the
same as applicable whether or not so stated and regardless of gender, and any
reference herein to "this Agreement," "herein," "hereof," "hereby,"
"hereunder," or comparable terms shall mean and include references to this
Agreement and the Schedules and Exhibits to this Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto or by their duly authorized officers, all as of the date
first above written.
CMS ENERGY CORPORATION,
a Michigan corporation
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
CMS MERGING CORPORATION,
a Michigan corporation
By: /s/ Xxxxxxx X. Xxxxxxxx III
Name: Xxxxxxx X. Xxxxxxxx III
Title: Vice President and
General Counsel
TERRA ENERGY LTD.,
a Michigan corporation
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chairman and Chief
Executive Officer
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
/s/ Xx. Xxxxxx Xxxxx
Xx. Xxxxxx Xxxxx
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/s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
/s/ Xx. Xxxxx Xxxxxx
Xx. Xxxxx Xxxxxx
/s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx
The Revocable Living Trust of
Xx. Xxxxxxx X. Xxxxxxxx Under
Agreement dated May 1, 1990
By: /s/ Xx. Xxxxxxx Xxxxxxxx
Xx. Xxxxxxx Xxxxxxxx, Trustee
/s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
/s/ Xxxxx Xxxxxxxxxx
Xxxxx Xxxxxxxxxx
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