EXHIBIT 10.U
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
This EXCHANGE AND REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is
entered into as of October 2, 2003 by and among GulfTerra Energy Company,
L.L.C., a Delaware limited liability company (the "COMPANY"), GulfTerra Energy
Partners, L.P., a Delaware limited partnership (the "PARTNERSHIP"), and Xxxxxxx
Xxxxx & Co., a New York limited partnership (the "INVESTOR").
RECITALS
WHEREAS, GulfTerra GP Holding Company, a Delaware corporation ("HOLDING
CO.") and the Investor are parties to that certain Purchase and Sale Agreement,
dated October 2, 2003 (the "LLC PURCHASE AGREEMENT"), whereby the Investor will
purchase from Holding Co. the Class A Membership Interests of the Company (as
issued and outstanding on the date of determination, the "CLASS A MEMBERSHIP
INTERESTS") from Holding Co.;
WHEREAS, Holding Co. is a wholly owned indirect subsidiary of El Paso
Corporation, a Delaware corporation ("EL PASO"), and El Paso has delivered
guaranteed certain obligations of Holding Co. under the LLC Purchase Agreement
pursuant to a Performance Guaranty, dated October 2, 2003 (the "GUARANTY"), in
favor of the Investor;
WHEREAS, the Partnership and the Investor are parties to that certain
Purchase and Sale Agreement, dated October 2, 2003 (the "UNIT PURCHASE
AGREEMENT," and with the LLC Purchase Agreement, the "PURCHASE AGREEMENTS"),
whereby the Investor will purchase from the Partnership 3,000,000 newly issued
Series A common units representing limited partner interests in the Partnership
("COMMON UNITS") from the Partnership;
WHEREAS, Holding Co. is and, upon closing of the transaction
contemplated by the LLC Purchase Agreement, Holding Co. and the Investor will be
parties to that certain First Amended and Restated Limited Liability Company
Agreement of the Company, dated October 2, 2003 (as amended, restated,
supplemented or otherwise modified from time to time, the "COMPANY LLC
AGREEMENT");
WHEREAS, the Partnership and the Company have agreed that upon each
such exchange, the Partnership will deliver the Class A Membership Interest
received in such Exchange to the Company for cancellation, and the Company will
cause the Incentive Distribution Rights (as defined herein) to be reduced as is
provided in that certain Incentive Distribution Reduction Agreement, dated
October 2, 2003, by and between the Company and the Partnership (the "REDUCTION
AGREEMENT," and with the Purchase Agreements, the Guaranty, the Company LLC
Agreement and this Agreement, the "TRANSACTION AGREEMENTS");
WHEREAS, this Agreement provides for the holder of the Class A
Membership Interest (the "HOLDER") to exchange such Class A Membership Interests
for Common Units, subject to the terms and provisions set forth herein, and the
Investor desires to limit the number of Common Units it or any subsequent holder
("HOLDER") receives at any one time pursuant to any such Exchange so as to not
result in its direct and/or indirect beneficial ownership of 10% of any
registered equity security covered by Section 16(a) of the Exchange Act (as
defined herein);
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows.
ARTICLE I
SECTION 1.1 DEFINITIONS. In addition to the terms defined elsewhere
herein, the following terms shall have the meanings set forth below:
"ACTION" means any action, appeal, petition, plea, charge, complaint,
claim, suit, demand, litigation, arbitration, mediation, hearing, inquiry,
investigation or similar event, occurrence, or proceeding.
"AFFILIATE" shall have the meaning assigned to such term in the Company
LLC Agreement.
"AVAILABLE CASH" has the meaning assigned to such term in the
Partnership Agreement.
"BASIS" means any past or current fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction about which the relevant Person has
knowledge that forms or could form the basis for any specified consequence.
"BREACH" means any breach, inaccuracy, failure to perform, failure to
comply, conflict with, default, violation, acceleration, termination,
cancellation, modification, or required notification.
"CHANGE OF CONTROL" means, with respect to a Person, the acquisition by
another Person of beneficial ownership, directly or indirectly, through a
purchase, merger or other acquisition transaction or series of transactions, of
50% or more of the Voting Stock of such Person; provided, however, that for
purposes of this Agreement, any Change of Control of El Paso shall not
constitute a Change of Control of the Company or the Class B Member and any
Change of Control of The Xxxxxxx Sachs Group, Inc. or Xxxxxxx Xxxxx & Co. shall
not constitute a Change of Control of the Class A Member and; provided, further,
that any acquisition by an Affiliate of such Person of beneficial ownership,
directly or indirectly, through a purchase, merger or other acquisition
transaction or series of transactions, of 50% or more of the Voting Stock of
such Person shall not constitute a Change in Control.
"CLASS A QUARTERLY DISTRIBUTION" means the product of the amount of the
distribution of Available Cash (as defined in the Partnership Agreement) by the
Partnership to the Company with respect to its general partner interest in the
Partnership and Incentive Distribution Rights times the Sharing Ratio (as
defined in the Partnership Agreement) attributable to the Class A Membership
Interest.
"CLASS B MEMBER" means Holding Co., or its successor, in its capacity
as the owner of the Class B Membership Interests of the Company (as issued and
outstanding on the date of determination).
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"CLASS B MEMBERSHIP INTEREST" means the Class B Membership Interests of
the Company issued and outstanding as of the date of determination.
"CLOSING DATE" shall have the meaning assigned to such term in the
Purchase Agreements.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON UNIT QUARTERLY DISTRIBUTION" means the quarterly distribution
of Available Cash (as defined in the Partnership Agreement) paid by the
Partnership to the holders of its Common Units pursuant to the terms of the
Partnership Agreement.
"COMPANY AVAILABLE CASH" shall have the meaning assigned to the term
"Available Cash" in the Company LLC Agreement.
"COMPETITOR" shall have the meaning assigned to such term in the
Company LLC Agreement.
"CONTRACT" means any contract, agreement, arrangement, commitment,
letter of intent, memorandum of understanding, heads of agreement, promise,
obligation, right, instrument, document, or other similar understanding, whether
written or oral.
"DILUTED BASIS" means, with respect to Limited Partnership Units as of
a date of determination, (i) the number of issued and outstanding Limited
Partnership Units and (ii) such additional number of Limited Partnership Units
as are subject to issuance upon the conversion, exchange or exercise of
non-participating, convertible or exchangeable equity, rights, options or
warrants, securities of the Partnership or convertible indebtedness of the
Partnership if, as of the date of such determination, the conversion, exchange
or exercise rights of such equity securities, warrants or indebtedness are
"in-the-money" and vested or otherwise then convertible into or exchangeable or
exercisable for Limited Partnership Units pursuant to the terms and provisions
of such securities.
"ENFORCEABLE" means, with respect to a Contract, that it is the legal,
valid, and binding obligation of the applicable Person enforceable against such
Person in accordance with its terms, except as such enforceability may be
subject to the effects of bankruptcy, insolvency, reorganization, moratorium, or
other Laws relating to or affecting the rights of creditors, and general
principles of equity.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any and successor federal statute, and the rules and regulations thereunder
of the Commission or any successor governmental authority, all as shall be in
effect at the time of determination.
"GOVERNMENTAL AUTHORITY" means any legislature, agency, bureau,
branch, department, division, commission, court, tribunal, magistrate, justice,
multi-national organization, quasi-governmental body, or other similar
recognized organization or body of any federal, state,
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county, municipal, local, or foreign government or other similar recognized
organization or body exercising similar powers or authority.
"HIGHEST INCENTIVE DISTRIBUTION SPLITS" shall have the meaning assigned
to such term in the Company LLC Agreement.
"INCENTIVE DISTRIBUTIONS" mean any amount of cash distributed to the
Company, in its capacity as general partner of the Partnership, pursuant to
terms and provisions of the Partnership Agreement which exceeds an amount equal
to 1.0% of the aggregate amount of cash then being distributed to all of the
partners.
"INCENTIVE DISTRIBUTION RIGHT" means the right of the Company pursuant
to the Partnership Agreement, as the holder the 1.0% general partner interest in
the Partnership, to receive Incentive Distributions.
"INITIAL EXCHANGE" has the meaning assigned to such term in Section
2.7.
"LAW" means any law (statutory, common, or otherwise), constitution,
treaty, convention, ordinance, equitable principle, code, rule, regulation,
executive order, or other similar authority enacted, adopted, promulgated, or
applied by any Governmental Authority, each as amended and now and hereinafter
in effect.
"LIMITED PARTNERSHIP UNITS" means Common Units and any other equity
securities of the Partnership that represent a participating interest in
quarterly distributions of Available Cash made by the Partnership to its limited
partners.
"ORDER" means any order, ruling, decision, verdict, decree, writ,
subpoena, mandate, precept, command, directive, consent, approval, award,
judgment, injunction, or other similar determination or finding by, before, or
under the supervision of any Governmental Authority, arbitrator, or mediator.
"PARTNERSHIP AGREEMENT" means the Second Amended and Restated Agreement
of the Limited Partnership of the Partnership, as amended, restated,
supplemented or otherwise modified from time to time.
"PERSON" means any individual or entity, including any corporation,
limited liability company, partnership, joint venture, association, joint stock
company, trust, unincorporated organization or Governmental Authority (or any
department, agency or political subdivision thereof).
"REGISTRABLE SECURITIES" means each Common Unit, each Exchange Unit to
be issued pursuant to Article II hereof and each Tag/Drag Unit to be issued
pursuant to the Company LLC Agreement until, in the case of any such security,
(A) the earliest of (i) its effective registration under the Securities Act and
resale in accordance with the Registration Statement covering it, (ii)
expiration of the applicable holding period under Rule 144(k) under the
Securities Act or (iii) its sale to the public pursuant to Rule 144 under the
Securities Act, and (B) as a result of the event or circumstance described in
any of the foregoing clauses (i) through (iii), any legends with
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respect to transfer restrictions are removed or removable in accordance with the
terms of such legend.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations thereunder of the
Commission or any successor governmental authority, all as shall be in effect at
the time of determination.
"THREATENED" means a demand or statement has been made (orally or in
writing) or a notice has been given (orally or in writing), or any other event
has occurred or any other circumstances exist that would lead a prudent Person
to conclude that an Action or other matter is likely to be asserted, commenced,
taken, or otherwise pursued in the future.
"UNDERWRITTEN OFFERING" means an offering in which Common Units are
sold to an underwriter for reoffering to the public.
"VOTING STOCK" shall have the meaning assigned to such term in the
Company LLC Agreement.
ARTICLE II
EXCHANGES
SECTION 2.1 EXCHANGE RIGHT. Subject to the provisions of this Article
II, the holder of the Class A Membership Interests (the "HOLDER") shall have the
right (the "EXCHANGE RIGHT") to make a one-time election, which once made shall
be irrevocable, to contribute all (but not less than all) of such Class A
Membership Interests to the Partnership in exchange (whether through one or more
exchanges, pursuant to this Agreement, each an "EXCHANGE") for a number of
Common Units (the "EXCHANGE UNITS") derived by dividing the most recent Class A
Quarterly Distribution prior to the date of the Initial Exchange by (ii) the
amount per unit distributed to each holder of a Common Unit in respect of the
most recent Common Unit Quarterly Distribution prior to the date of the Initial
Exchange (the "EXCHANGE FORMULA"); provided, however, that in no event shall the
sum of the number of Exchange Units that are to be issued pursuant to this
Agreement exceed 9.9% of the sum of the total number of Limited Partnership
Units (determined on a Diluted Basis) on the date of the Initial Exchange plus
the number of the Exchange Units to be issued in the Initial Exchange and any
subsequent Exchanges (the "HARD CAP").
SECTION 2.2 ADJUSTMENTS.
(a) If the amount of the most recent Class A Quarterly Distribution
prior to the date of the Initial Exchange was impacted to any material extent by
a non-recurring, extraordinary or other similar event, in calculating the
Exchange Formula, the parties shall use the most recent Class A Quarterly
Distribution not impacted to any material extent by a non-recurring,
extraordinary or similar event (the "PRIOR CLASS A DISTRIBUTION") in lieu of the
most recent Class A Quarterly Distribution.
(b) If during the time period commencing on the date of the most recent
Class A Quarterly Distribution (or in the case where Section 2.2(a) is deemed
applicable, the date of the Prior Class A Distribution) preceding the date of
the Initial Exchange and ending on the date of
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the Initial Exchange, the Partnership has issued limited partner interests or
increased or decreased (or declared an increase or decrease) in its regular
quarterly distribution of Available Cash to holders of its Common Units, in
calculating the Exchange Formula, the parties shall use a pro forma Class A
Quarterly Distribution amount that assumes that any and all such issuances or
increases or decreases occurred in such quarter; provided, however, no pro forma
adjustment shall be made for a distribution impacted to any material extent by a
non-recurring, extraordinary or similar event.
SECTION 2.3 EXERCISE; TOTAL NUMBER OF EXCHANGE UNITS.
(a) To exercise the Exchange Right, the Holder shall deliver a written
notice (an "EXCHANGE Notice") to each of the Company and the Partnership. Within
five business days after the later of the receipt by the Company or the
Partnership of such Exchange Notice, the parties shall mutually determine the
total number of Exchange Units to be issued to the Holder in exchange for the
Class A Membership Interests by application of the Exchange Formula (subject to
the Hard Cap) (the "TOTAL NUMBER OF EXCHANGE UNITS") and execute an
acknowledgement in the form attached hereto as Exhibit A (the "ACKNOWLEDGEMENT")
that sets forth the Total Number of Exchange Units; provided, however, that if
the Partnership or the Class B Member requires the Holder to exercise the
Exchange Right pursuant to Section 2.5(b) below, no Exchange Notice need be
submitted by the Holder and the parties shall instead mutually determine the
Total Number of Exchange Units and execute the Acknowledgement within five
business days after the receipt by the Holder of the written notice described in
such Section 2.5(b); and provided, further, that if the parties are unable to
agree upon the Total Number of Exchange Units (including the amount of any
adjustment that may be required under Section 2.2 above), the determination
shall be made in the manner provided in Section 2.3(b) below. After any
determination pursuant to this Section 2.3, the Total Number of Exchange Units,
as set forth in the Acknowledgement, shall thenceforth be fixed, subject to
adjustment only pursuant to the anti-dilution provisions set forth in Section
2.9.
(b) If the parties are unable to mutually agree on the Total Number of
Exchange Units within the periods provided for in Section 2.3(a), each of the
Holder, on the one hand, and the Company and the Partnership, on the other hand,
shall select a firm of independent accountants of nationally recognized standing
with which neither the Holder, on the one hand, or the Company and the
Partnership, on the other hand, has any material current business relationship
within five business days, which firms shall then mutually agree upon a third
firm of independent accountants of nationally recognized standing and refer the
matter to such third firm for resolution within five additional business days.
Such third firm shall determine the Total Number of Exchange Units within 15
business days of such referral. The aggregate fees and expense of such firms
shall be borne in the following manner: one-half by the Holder and one-fourth
each by the Company and the Partnership. The determination of the Total Number
of Exchange Units by such third firm shall be final, binding and conclusive on
the parties.
SECTION 2.4 SOFT CAP. Notwithstanding anything in this Article II to
the contrary, in no event shall the number of Exchange Units that are issued to
the Holder in any single Exchange exceed that number of Exchange Units that
would result in the Holder and/or any of its affiliates directly or indirectly
beneficially owning more than 9.9% of any class of equity security of the
Partnership which is registered pursuant to Section 12 of the Exchange Act
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(calculated pursuant to Section 16(a) of the Exchange Act) (the "SOFT CAP");
provided, however, that the parties hereto hereby expressly acknowledge and
agree that at all times during the term of this Agreement (a) the Holder shall
have the sole duty and responsibility to determine that the number of Exchange
Units issued in any Exchange does not exceed the Soft Cap and (b) neither the
Partnership nor the Company shall have any obligation to make any independent
calculation or otherwise confirm that the number of Exchange Units issued in any
such Exchange does not exceed the Soft Cap limitation.
SECTION 2.5 TIMING OF EXERCISE OF EXCHANGE RIGHT.
(a) The Holder may exercise the Exchange Right at any time after the
fifth (5th) anniversary of the Closing Date, subject to earlier exercise upon
the occurrence of the events described in Section 2.5(c) below.
(b) If (i) the Holder has not elected to exercise the Exchange Right
prior to the seventh (7th) anniversary of the Closing Date, at any time
thereafter, (ii) the Class B Member has exercised its "drag along" rights under
Section 3.11(b) of the Company LLC Agreement, or (iii) the Class A Member
transfers the Class A Membership Interest to a Competitor or upon a Change of
Control of the Class A Member that results in a Competitor beneficially owning
50% or more of the Voting Stock of the surviving entity, the Partnership (in the
case of clauses (i) and (iii)) or the Class B Member (in the case of clause
(ii)) may elect to require the Holder to exercise the Exchange Right by
delivering written notice to the Holder. The Exchange Formula applicable in the
case of an election by the Partnership or the Class B Member under this Section
2.5 shall be calculated in the same manner as specified in Section 2.1 above
(and in accordance with Sections 2.2, 2.10 and other applicable provisions of
this Article II); provided, however, that in the case of clause (ii), (x) the
Holder shall only be required to Exchange that portion of its Class A Membership
Interest in excess of that portion for which it did not elect to, or is not
permitted to, receive cash consideration pursuant to Section 3.11(b) of the
Company LLC Agreement, (y) the value of the Exchange Units to be issued to the
Holder shall not be less than the amount dictated by Section 3.11(b)(i) of the
Company LLC Agreement and (z) the Exchange made pursuant thereto shall not be
subject to the Soft Cap.
(c) Notwithstanding the limitations on the Holder's right to exercise
the Exchange Right in Section 2.5(a), the Holder may exercise the Exchange Right
(i) upon the public announcement of execution of definitive transaction
documents relating to (and in no event later than 10 days prior to the
consummation of such transaction) the (A) completion of a merger of the
Partnership with another entity or (B) completion of the sale or other
disposition by the Partnership or the Company of all or substantially all of its
assets, or (ii) at any time during the 10 days prior to the completion of a
direct or indirect Change of Control of Holding Co., (iii) at any time during
the 10 days prior to the completion of a liquidation of the Partnership, (iv) at
any time during the 10 days after the declaration by the Partnership of a
distribution of Cash from Interim Capital Transactions (as such term is defined
in the Partnership Agreement) or (v) at any time after the commencement of a
voluntary or an involuntary bankruptcy or similar proceeding against El Paso
Corporation or any of its material subsidiaries (including Holding Co. or the
Company), if at the time of such exercise there is then pending a proceeding
seeking payment pursuant to ERISA from the Company of any amounts due relating
to the termination of a benefit plan subject to ERISA or (vi) at the closing of
the sale or contribution by the Company of the
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Highest Incentive Distribution Splits, which sale or contribution is effected in
accordance with Section 3.12 of the Company LLC Agreement, if the Holder has
timely delivered to the Class B Member the notice of such Exchange Right in
accordance with Section 3.12 of the Company LLC Agreement; provided, however,
that the foregoing provisions of clauses (i) and (ii) shall not apply if such
merger, sale, disposition or Change of Control also triggers the "drag along"
rights of Holding Co. contained in Section 3.11(b) of the Company LLC Agreement;
and provided, further, that in the case of clause (v) that the Holder may only
Exchange that portion of its Class A Membership Interest such that, immediately
following such Exchange, the Holder retains not less than 1% of the total
Membership Interests (as defined in the Company LLC Agreement) in the Company
issued and outstanding at such time.
SECTION 2.6 EXCHANGE PROCEDURES.
(a) Within five business days after the execution of the
Acknowledgement, the Holder shall deliver written notice to each of the Company
and the Partnership which notice must include a determination, made in good
faith, that either (i) the total number of Exchange Units set forth in the
Acknowledgement can be issued to the Holder in compliance with the Soft Cap
limitation or (ii) a lesser number of Exchange Units must be issued to the
Holder in order to maintain compliance with the limitations of the Soft Cap (the
"CONFIRMATION NOTICE"). The Holder shall have sole responsibility and liability
for determining the number of Exchange Units so included in the Confirmation
Notice. The Company and the Partnership shall be entitled to rely, without
independent investigation, entirely upon the number of Exchange Units set forth
in the Confirmation Notice by the Holder as to the number of Exchange Units that
may be issued to the Holder in compliance with the Soft Cap limitation, and the
parties hereto hereby expressly acknowledge and agree that neither the
Partnership nor the Company shall have any obligation to make any independent
calculation or otherwise confirm that the number of Exchange Units issued
complies with the Soft Cap limitation. The Holder shall also deliver to the
Partnership, along with such Confirmation Notice, a certificate (a "CLASS A
CERTIFICATE") representing not less than the portion of the Class A Membership
Interest that is to be exchanged at that time. Within five business days after
receipt by the Partnership of a valid Confirmation Notice and Class A
Certificate conforming to the requirements of this Section 2.6, the Partnership
shall issue to the Holder such number of Exchange Units set forth in the
Confirmation Notice in fully certificated form. If such Class A Certificate
represents more than the percentage ownership interest in the Company to be
exchanged, a new Class A Certificate representing the percentage ownership
interest not so exchanged shall be reissued to the Holder.
(b) Notwithstanding the foregoing, if any Exchange is effected
hereunder following the record date established by the Partnership for its
Common Unit Quarterly Distribution for a particular calendar quarter but prior
to the record date to be established by the Company for its distribution of
Company Available Cash for such quarter, the Holder shall be entitled to
receive, upon the date of distribution by the Company, the Class A Quarterly
Distribution as if it were still an owner of such Class A Membership Interest on
the record date of the Company for its distribution of Company Available Cash
for such quarter. For the sake of clarity and to assure that no negative
inference is drawn from the language immediately above, in all other
circumstances, the Class A Member will be entitled to any distribution from the
Company and/or the Partnership if it is the owner of a membership interest of
the Company (including any unexchanged Class A Membership Interest) or
partnership interest of the Partnership,
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respectively, on the applicable record date established for such distribution
subject to the provisions of the Company LLC Agreement and the Partnership
Agreement. .
SECTION 2.7 ADDITIONAL EXCHANGES.
(a) If the effect of the application of the Soft Cap is to cause the
Partnership to issue less than the Total Number of Exchange Units to the Holder
in the initial Exchange pursuant to this Article II (the "INITIAL EXCHANGE"), on
the first business day of each fiscal quarter of the Partnership commencing
thereafter the Holder shall provide written notice (an "UPDATE NOTICE") to the
Company and Partnership which must include a determination, made in good faith,
whether the Holder may receive additional Exchange Units in compliance with the
limitations of the Soft Cap and, if so, the requested number of additional
Exchange Units to be issued to the Holder ("ADDITIONAL EXCHANGE UNITS") in
exchange for the contribution of a corresponding portion (calculated in
accordance with the Exchange Formula) of the Holder's remaining Class A
Membership Interests; provided, however, that the maximum number of Additional
Exchange Units that the Holder may request to be issued pursuant to any Update
Notice, and that the Partnership shall be obligated to issue in response
thereto, may not exceed the lesser of (i) the excess of the Total Number of
Exchange Units over the sum of all Exchange Units issued to the Holder prior to
the date of such Update Notice (including Exchange Units issued in the Initial
Exchange and all Additional Exchange Units issued in any subsequent Exchanges)
and (ii) the maximum number of Additional Exchange Units that may be issued to
the Holder in compliance with the limitation of the Soft Cap; provided, further,
the Company and the Partnership shall be entitled to rely, without independent
investigation, entirely upon the number of Additional Exchange Units set forth
by the Holder in the Update Notice as to the number of Exchange Units that may
be issued to the Holder in compliance with the limitation set forth in clause
(ii) above, and the parties hereto hereby expressly acknowledge and agree that
neither the Partnership nor the Company shall have any obligation to make any
independent calculation or otherwise confirm that such number of Additional
Exchange Units issued complies with the limitation set forth in clause (ii)
above.
(b) If the Partnership receives a valid Update Notice requesting the
issuance of Additional Exchange Units, the Holder shall also deliver to the
Partnership, along with such Update Notice, a Class A Certificate representing
not less than the portion of the Class A Membership Interest that is to be
exchanged for such Additional Exchange Units. Within five business days of
receipt of such Update Notice and Class A Certificate conforming to the
requirements of Sections 2.7(a) and 2.7(b), the Partnership shall issue to the
Holder such number of Additional Exchange Units requested in the Update Notice
in fully certificated form and, if such Class A Certificate represents more than
the percentage ownership interest in the Company to be exchanged, a new Class A
Certificate represented the percentage ownership interest not so exchanged shall
be reissued to the Holder.
SECTION 2.8 EXCHANGE PERIOD. If the Partnership issues less than the
Total Number of Exchange Units in the Initial Exchange, the period from the date
of such Initial Exchange through the date of the Exchange after which all of the
Total Number of Exchange Units will have been issued to the Holder shall be
known, for purposes of the Company LLC Agreement, LLC Purchase Agreement or
otherwise, as the "EXCHANGE PERIOD."
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SECTION 2.9 REFLECTION OF REDUCED SHARING RATIO. Promptly following
each Exchange pursuant to this Article II, (a) the Company's Register (as
defined in the Company LLC Agreement) shall be updated in compliance with the
procedures set forth therein to reflect the reduced Sharing Ratio (as defined in
the Company LLC Agreement) attributable to the Class A Membership Interests as a
result of such Exchange, such reduction to be effective as of the same date as
the date of the effectiveness of the amendment to the Partnership Agreement
referred to in Section 3.3 that corresponds to such Exchange.
SECTION 2.10 ANTI-DILUTION PROVISIONS. During the period that commences
upon the date of the initial election to exercise the Exchange Right and
continues for so long as less than the Total Number of Exchange Units have been
issued to the Holder pursuant to the terms of this Article II, the excess of the
Total Number of Exchange Units over the aggregate number of Exchange Units
issued in all prior Exchanges (such excess, the "UNISSUED EXCHANGE UNITS") shall
be subject to adjustment from time to time upon the happening of certain events
as follows:
(a) Reorganization, Merger or Consolidation. If the Partnership
reorganizes, merges, consolidates or otherwise combines with another Person in a
transaction whereby all of the holders of Common Units will receive securities,
property or assets of the Partnership or its successor payable with respect to
or in exchange for each Common Unit held, lawful and adequate provision shall be
made whereby the Holder shall have the right to receive (in lieu of the Unissued
Exchange Units), upon each subsequent Exchange following the consummation of
such transaction, the number of securities, property or assets of the
Partnership or its successor resulting from such reorganization, merger,
consolidation or other transaction as would have been issued or payable to the
Holder if the Holder had held a number of Common Units equal to (and in lieu of)
the total number of Unissued Exchange Units immediately prior to the
consummation of such transaction. The foregoing provisions of this Section
2.10(a) shall similarly apply to successive reorganizations, mergers,
consolidations or other applicable transactions and to the stock or securities
of any other Person that are at the time receivable upon exercise of the
Exchange Right.
(b) Reclassification, etc. If the Partnership, by reclassification of
securities or otherwise, changes the Common Units or any other securities as to
which the Exchange Right may apply hereunder into the same or a different number
of securities of any other class or classes, each subsequent Exchange in respect
of Unissued Exchange Units shall thereafter represent the right to acquire upon
each such Exchange such number and kind of securities as would have been
issuable, as the result of such change, with respect to or in exchange for a
number of Common Units equal to the total number of Unissued Exchange Units.
(c) Subdivision or Combination; Unit Dividends. If the Partnership
shall split, divide or combine its outstanding Common Units or declare and pay a
dividend on its outstanding Common Units which consists of additional Common
Units (including a split effected in the form of a dividend), then the total
number of Unissued Exchange Units shall be adjusted, as of the opening of
business on the effective date of such split, subdivision or combination or the
day after the day upon which such dividend or other distribution is paid to
unitholders, as the case may be, to a new total number of Unissued Exchange
Units determined by multiplying the total number of Unissued Exchange Units
immediately prior to such payment or other distribution by a fraction (i) the
numerator of which shall be the total number of outstanding Common Units
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immediately after such split, dividend, combination or distribution and (ii) the
denominator of which shall be the total number of outstanding Common Units
immediately prior to such split, dividend, combination or distribution.
(d) Other Distributions on Common Units. If the Partnership shall make
a distribution on its Common Units which consists of (i) limited partner
interests of the Partnership other than additional Common Units, evidences of
its indebtedness, or assets (including distributions of Cash from Interim
Capital Transactions or securities (other than Common Units), but excluding
distributions of Cash from Operations), then the Holder shall be entitled to
receive, upon each Exchange for Unissued Exchange Units, that portion of any
such distribution which the Holder would have been entitled to receive, had such
Exchange occurred immediately prior to the record date of such distribution;
provided, however, that if any such distribution consists of property which has
a limited life or expiration date (including but not limited to options,
warrants or similar instruments), the Holder shall be entitled to receive such
property on the date of such distribution. At the time of the record date
established for any such distribution, the Partnership shall allocate sufficient
reserves to ensure the timely and full performance of the provisions of this
Section 2.10(d).
(e) Self Tender. If (i) the Partnership shall engage in a tender offer
for more than 10% of the Common Units issued and outstanding at such time and
(ii) such tender offer is closed and payment is made for the Common Units
purchased therein for a purchase price per unit that is at least 5% greater than
the closing sales price per Common Unit on the trading day immediately preceding
the announcement of such tender offer (the "PRE-TENDER VALUE"), then the Holder
shall be entitled to receive, upon each Exchange for Unissued Exchange Units (in
addition to such Exchange Units), the excess of the purchase price per Common
Unit paid upon closing of the tender offer over the Pre-Tender Value per Common
Unit multiplied by the total number of Unissued Exchange Units which would have
been sold by the Holder if it tendered all of the Unissued Exchange Units to the
Partnership in such tender offer. Upon the closing of any such tender offer, the
Partnership shall allocate sufficient reserves to ensure the timely and full
performance of the provisions of this Section 2.10(e).
(f) No Other Adjustments. Other than specifically as set forth above in
this Section 2.10, no adjustment shall be made to the total number Unissued
Exchange Units as a result of or pursuant to the granting or issuance by the
Partnership of additional Common Units, or any security convertible thereinto or
exercisable or exchangeable therefore, including without limitation(i) the
issuance of Common Units or any other security of the Partnership or any
affiliate thereof (including securities convertible into or exchangeable for
Common Units) pursuant to an underwritten public offering or a private
placement, (ii) the issuance of Common Units or any other security of the
Partnership or any affiliate thereof (including securities convertible into or
exchangeable for Common Units) as consideration in an acquisition transaction,
(iii) the issuance of Common Units or any other security of the Partnership or
any affiliate thereof (including securities convertible into or exchangeable for
Common Units) in payment or satisfaction of any dividend upon or distribution to
any class of unit or equity security of the Partnership other than Common Units
and (iv) the issuance of options, restricted Common Units or "phantom" units
exercisable for or that upon vesting become Common Units, or the issuance of
Common Units upon the exercise or vesting or such options or rights, to
11
officers, employees or directors of, or consultants to, the Partnership, the
Company or any of their affiliates.
(g) No Multiple Adjustments. In the event of any one circumstance which
may give rise to an adjustment of the total number of Unissued Exchange Units
under one or more of Sections 2.10(a) through 2.10(e) above, the Partnership may
only apply the provisions of one of such paragraphs if necessary in order to
avoid unreasonable results given the circumstances, such determination to be
made in the Partnership's good faith and reasonable discretion; provided,
however, that a series of steps in a transaction or action shall not be
considered one circumstance for the purposes of this Section 2.10(g).
(h) Calculation of Adjustments. Upon each occurrence of an event
causing an adjustment pursuant to this Section 2.10, the Partnership will
promptly (i) calculate such adjustment and retain a record of such calculation
at its principal office and (ii) deliver to the Holder a certificate signed by
an appropriate officer on behalf of the Partnership, setting forth in reasonable
detail the event requiring the adjustment, the method of calculation of the
adjustment, and the number of Unissued Exchange Units and/or other securities,
property or assets after giving effect to such adjustment (an "ADJUSTMENT
CERTIFICATE"). If the Holder does not agree with such calculation, the Holder
shall give written notice (an "ADJUSTMENT DISPUTE NOTICE") to the Company and
the Partnership within ten business days of the receipt of such Adjustment
Certificate. If the parties are unable to mutually agree on the calculation of
such adjustment within five business days of receipt by the Company and the
Partnership of such Adjustment Dispute Notice, the parties shall each select a
firm of independent accountants of nationally recognized standing within five
business days, which firms shall then mutually agree upon a third firm of
independent accountants of nationally recognized standing and refer the matter
to such third firm for resolution within five additional business days. Such
third firm shall determine the amount of such adjustment to the Total Number of
Exchange Units within 15 business days of such referral. The aggregate fees and
expense of such firms shall be borne in the following manner: one-half by the
Holder and one-half by the Partnership. The determination by such firm of the
calculation of the adjustment described in the Adjustment Notice shall be final,
binding and conclusive on the parties.
SECTION 2.11 NONSEPARABILITY. The Exchange Right is not separable from
the Class A Membership Interest. If the Investor or any subsequent Holder of the
Class A Membership Interests transfers such interests (which transfer may only
be made in compliance with applicable provisions of the Company LLC Agreement),
the Exchange Right shall be transferred to such transferee who shall then
constitute the Holder hereunder.
SECTION 2.12 NYSE LISTING. Prior to the issuance of any Exchange Units
pursuant to this Article II, the Partnership shall cause such Exchange Units to
be approved for listing on the New York Stock Exchange or such other exchange or
quotation system on which the Common Units are then listed.
ARTICLE III
[RESERVED]
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ARTICLE IV
REGISTRATION RIGHTS
SECTION 4.1 SHELF REGISTRATION STATEMENT. Within 30 days after the
Closing Date (the "INITIAL SHELF FILING DEADLINE"), the Partnership shall file
with the Commission a "shelf" registration statement on Form S-3 pursuant to
Rule 415 under the Securities Act (the "INITIAL SHELF REGISTRATION STATEMENT")
providing for the resale of an aggregate of (i) the 3,000,000 Common Units
purchased by the Investor pursuant to the Unit Purchase Agreement plus (ii) such
number of Exchange Units that may be issued to the Holder pursuant to Article II
based on the number of Common Units outstanding on the Closing Date.
SECTION 4.2 ADDITIONAL COMMON UNITS. If the Initial Shelf Registration
Statement, even if supplemented or amended, does not have sufficient
availability to provide for the resale of (x) Exchange Units issued to the
Holder or (y) any Common Units issued to the Holder by the Partnership pursuant
to the provisions in the Company LLC Agreement relating to the exercise by the
Holder or the Class B Member, as the case may be, of their respective "tag
along" or "drag along" rights provided therein ("TAG/DRAG UNITS"), the Holder
may request that the Partnership file with the Commission one additional "shelf"
registration statement on Form S-3 pursuant to Rule 415 under the Securities Act
to accommodate any resale of Tag/Drag Units or Exchange Units in such amounts as
are requested at such time by the Holder in writing (a "SHELF NOTICE"). The
Partnership shall file such additional "shelf" registration statement (with the
Initial Shelf Registration Statement, a "SHELF REGISTRATION STATEMENT"), if any,
within 30 days after receipt by the Partnership of a written request from the
Holder (with the Initial Shelf Filing Deadline, a "SHELF FILING DEADLINE").
SECTION 4.3 EFFECTIVENESS.
(a) Subject to the provisions of this Article IV, the Partnership shall
use its best efforts to cause (i) the Initial Shelf Registration Statement to be
declared effective prior to the expiration of the Initial Lock-up Period (as
defined below) (the "INITIAL EFFECTIVENESS TARGET DATE") and (ii) any subsequent
Shelf Registration Statement to be declared effective no later than 90 days
after delivery to the Partnership by the Holder of a Shelf Notice (with the
Initial Effectiveness Deadline, the "EFFECTIVENESS TARGET DATE") and in either
case shall use best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended to the extent necessary to
assure that it is available for resale of the Common Units by the Holder and
that it conforms in all material respects with the requirements the Securities
Act, in each case during the entire period (the "EFFECTIVENESS PERIOD")
beginning on the date such Shelf Registration Statement shall first be declared
effective under the Securities Act and ending on the earlier to occur of (i) the
sale pursuant to a Shelf Registration Statement of all of the Registrable
Securities registered under such Shelf Registration Statement and (ii) the date
on which all of the Common Units registered under such Shelf Registration
Statement are no longer Registrable Securities.
(b) The "INITIAL LOCK-UP PERIOD" shall be earliest to occur of a (i)
the date that is the earlier of 90 days or the number of days agreed to by the
Partnership and the underwriters in the applicable underwriting agreement as a
lock-up period in connection with any primary offering of the Partnership that
closes prior to November 30, 2003, (ii) waiver by the underwriters of any such
offering of any lock-up related thereto, (iii) after the closing of any such
offering, the date
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of any sale of common units by the Partnership, the Company, El Paso Corporation
or its subsidiaries (other than pursuant to the exercise of existing options,
warrants or similar securities or agreements or as consideration in an
acquisition), or (iv) February 28, 2004.
SECTION 4.4 INFORMATION FURNISHED BY HOLDER. The Holder shall furnish
to the Partnership in writing, as soon as practicable after the Closing Date (in
the case of the Initial Shelf Registration Statement) or after requesting the
filing of an additional Shelf Registration Statement pursuant to Section 4.2,
the information specified in Items 507 and 508 of Regulation S-K under the
Securities Act and any other information reasonably requested by the Partnership
for inclusion in the applicable Shelf Registration Statement pursuant to the
Securities Act. Notwithstanding Sections 4.1 and 4.2, the Partnership shall not
be required to file any such Shelf Registration Statement until the Holder has
complied with the immediately preceding sentence. In addition, the Holder shall
promptly furnish to the Partnership (i) any additional information required to
be disclosed in such Shelf Registration Statement in order to make the
information previously furnished to the Partnership by the Holder not materially
misleading and (ii) any additional information as may be reasonably requested by
the Partnership for inclusion in any new prospectus or prospectus supplement or
post-effective amendment.
SECTION 4.5 REGISTRATION PROCEDURES.
(a) In connection with each Shelf Registration Statement, the
Partnership shall comply with all the provisions of Section 4.5(b) hereof and
shall, in accordance with Sections 4.1, 4.2, 4.3 and 4.4 hereof, prepare and
file with the Commission each Shelf Registration Statement relating to the
registration on Form S-3 under the Securities Act.
(b) In connection with each Shelf Registration Statement and any
related prospectus or prospectus supplement required by this Agreement to permit
the sale or resale of Common Units, the Partnership shall:
(i) Subject to any notice by the Partnership in accordance
with this Section 4.5(b) of the existence of any fact or event of the kind
described in Section 4.5(b)(iii)(D), use its best efforts to keep the Shelf
Registration Statement continuously effective during the Effectiveness Period;
upon the occurrence of any event that would cause the Shelf Registration
Statement or the related prospectus or prospectus supplement (A) to contain a
material misstatement or omission or (B) not be effective and usable for resale
of Registrable Securities during the Effectiveness Period, the Partnership shall
file promptly an appropriate amendment or supplement to or a document to be
incorporated by reference into the Shelf Registration Statement or a report
filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act, in the case of clause (A), correcting any such misstatement or
omission, and, in the case of either clause (A) or (B), use its best efforts to
cause any such amendment to be declared effective and the Shelf Registration
Statement and the related prospectus or prospectus supplement to become usable
for their intended purposes as soon as practicable thereafter. Notwithstanding
anything in this Agreement to the contrary, the Partnership may suspend the
effectiveness or use of and elect not to keep current the Shelf Registration
Statement by written notice to the Holder for a period not to exceed an
aggregate of 30 days in any 90-day period (each such period a "SUSPENSION
PERIOD") if:
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(x) an event occurs and is continuing as a result of which the
Shelf Registration Statement would, in the Partnership's reasonable
judgment, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and
(y) the Partnership reasonably determines that the disclosure
of such event at such time would or could reasonably be expected to
either (i) have a material adverse effect on the business or prospects
of the Partnership and its subsidiaries, taken as a whole, or (ii)
adversely affect a material financing, acquisition or other transaction
(existing or planned);
provided, that (A) in the event the disclosure relates to a previously
undisclosed proposed or pending material business transaction, the disclosure of
which would impede the Partnership's ability to consummate such transaction, the
Partnership may extend a Suspension Period from 30 days to 45 days and (B) the
Suspension Periods shall not exceed an aggregate of 90 days in any 365-day
period. The Holder, by its acceptance of a Registrable Security, agrees to hold
in confidence any communication by the Partnership relating to an event
described in Section 4.5(b)(i)(x) and (y) or Section 4.5(b)(iii)(D).
Notwithstanding the foregoing, the Holder may not use the Shelf Registration
Statement or related prospectus during the Initial Lock-up Period.
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary to keep the Shelf Registration Statement effective during the
Effectiveness Period; cause the related prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act, and to comply fully with the applicable
provisions of Rules 424 and 430A under the Securities Act in a timely manner;
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Shelf Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in the Shelf Registration
Statement or supplement to the prospectus.
(iii) Advise the underwriter(s), if any, and, in the case of
(A), (C) and (D) below, the Holder promptly and, if requested by such Persons,
to confirm such advice in writing:
(A) when the prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to the Shelf
Registration Statement or any post-effective amendment thereto, when
the same has become effective;
(B) of any request by the Commission for amendments to the
Shelf Registration Statement or amendments or supplements to the
prospectus or for additional information relating thereto;
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement under
the Securities Act or of the suspension by any state securities
commission of the qualification of the Registrable
15
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes; or
(D) of the existence (but not the nature) of any fact or the
happening of any event, during the Effectiveness Period, that makes any
statement of a material fact made in the Shelf Registration Statement,
the related prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Shelf Registration
Statement, the related prospectus or any amendment or supplement
thereto in order to make the statements therein not misleading.
If at any time the Commission shall issue any stop order suspending the
effectiveness of the Shelf Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Registrable Securities
under state securities or Blue Sky laws, the Partnership shall use its best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.
(iv) Furnish to counsel for the Holder and each of the
underwriter(s), if any, before filing with the Commission, a copy of the Shelf
Registration Statement and copies of any prospectus included therein or any
amendments or supplements to either of the Shelf Registration Statement or
prospectus (other than documents incorporated by reference after the initial
filing of the Shelf Registration Statement), which documents will be subject to
the review of such counsel and underwriter(s), if any, for a period of three
business days, and the Partnership will not file the Shelf Registration
Statement or prospectus or any amendment or supplement to the Shelf Registration
Statement or prospectus (other than documents incorporated by reference) to
which such counsel or the underwriter(s), if any, shall reasonably object within
three business days after the receipt thereof.
(v) Make available pursuant to a confidentiality and non-use
agreement at reasonable times for inspection by one or more representatives of
the Holder any underwriter, if any, participating in any distribution pursuant
to the Shelf Registration Statement, and any attorney or accountant retained by
the Holder or any of the underwriter(s), all financial and other records,
pertinent corporate documents and properties of the Partnership as shall be
reasonably necessary to enable them to exercise any applicable due diligence
responsibilities and to supply all information reasonably requested by any such
representative or representatives of the Holder, underwriter, attorney or
accountant in connection with the Shelf Registration Statement after the filing
thereof and before its effectiveness; provided, however, that the Holder shall
be responsible for ensuring that any such information shall be kept confidential
and not used for any purpose other than as contemplated hereby.
(vi) If requested by the Holder or the underwriter(s), if any,
incorporate in the Shelf Registration Statement or prospectus, pursuant to a
prospectus supplement or post-effective amendment if necessary, such
non-confidential information as the Holder and underwriter(s), if any, may
reasonably request to have included therein, including, without limitation: (1)
information relating to the "Plan of Distribution" of the Registrable
Securities, (2) information with respect to the number of Registrable Securities
being sold, (3) the purchase price being paid therefor and (4) any other terms
of the offering of the Registrable Securities to be sold in such
16
offering; and make all required filings of such prospectus supplement or
post-effective amendment as soon as reasonably practicable after the Partnership
is notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment.
(vii) Furnish to the Holder and each of the underwriter(s), if
any, without charge, at least one copy of the Shelf Registration Statement, as
first filed with the Commission, and of each amendment thereto (and any
documents incorporated by reference therein or exhibits thereto (or exhibits
incorporated in such exhibits by reference) as such Person may request in
writing).
(viii) Deliver to the Holder and each of the underwriter(s),
if any, without charge, as many copies of the prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such Persons
reasonably may request.
(ix) In the event of an Underwritten Offering, the Partnership
shall enter into a standard underwriting agreement with the underwriters and
shall:
(A) upon request, furnish to the Holder and each underwriter,
if any, in such substance and scope as they may reasonably request and
as are customarily made by the Partnership to underwriters in primary
underwritten offerings, upon the date of closing of any sale of
Registrable Securities in an Underwritten Offering:
(1) an officer's certificate, dated the date of such
closing, confirming, as of the date thereof, such matters as
such parties may reasonably request;
(2) opinions, each dated the date of such closing, of
counsel (inside and outside) to the Partnership covering such
matters as are customarily covered in legal opinions to
underwriters in connection with primary underwritten offerings
of securities by the Partnership; and
(3) customary comfort letters, dated the date of such
closing, from the Partnership's independent accountants (and
from any other accountants whose report is contained or
incorporated by reference in the Shelf Registration
Statement), in the customary form and covering matters of the
type customarily covered in comfort letters to underwriters in
connection with primary underwritten offerings of securities;
provided, that if the Partnership has used its best efforts to
obtain such letters, the Partnership shall not be responsible
if the accountants do not agree to deliver same;
(B) set forth in full in the underwriting agreement, if any,
indemnification provisions and procedures which provide rights no less
protective than those set forth in Section 4.10 hereof with respect to
all parties indemnified; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with clause
(A) above and with any
17
customary conditions contained in the underwriting agreement or other
agreement entered into by the Holder pursuant to this clause (ix).
(x) Before any public offering of Registrable Securities,
cooperate with the Holder, the underwriter(s), if any, and their respective
counsel in connection with the registration and qualification of the Registrable
Securities under the securities or Blue Sky laws of such jurisdictions as the
Holder or underwriter(s), if any, may reasonably request and do any and all
other acts or things necessary or reasonably advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by the Shelf
Registration Statement; provided, however, that the Partnership shall not be
required (A) to register or qualify as a foreign limited partnership or a dealer
of securities where it is not now so qualified or to take any action that would
subject it to the service of process in any jurisdiction where it is not now so
subject or (B) to subject itself to taxation in any such jurisdiction if it is
not now so subject.
(xi) Cooperate with the Holder and the underwriter(s), if any,
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends
(unless required by applicable securities laws); and enable such Registrable
Securities to be in such denominations and registered in such names as the
Holder or the underwriter(s), if any, may reasonably request within a reasonable
time before any sale of Registrable Securities made by such underwriter(s).
(xii) Use its best efforts to cause the Registrable Securities
covered by any Shelf Registration Statement to be registered with or approved by
such other U.S. governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the underwriter(s), if any, to
consummate the disposition of such Registrable Securities, subject to the
proviso in clause (x) above.
(xiii) Subject to Section 4.5(b)(i) hereof, if any fact or
event contemplated by Section 4.5(b)(iii)(D) hereof shall exist or have
occurred, use its best efforts to prepare a supplement or post-effective
amendment to the Shelf Registration Statement or related prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Registrable Securities,
the prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading.
(xiv) Provide CUSIP numbers for all Registrable Securities not
later than the effective date of the Shelf Registration Statement and provide
the transfer agent with certificates for the Common Units that are in a form
eligible for transfer in accordance with applicable requirements.
(xv) Cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by any
underwriter that is required to be retained in accordance with the rules and
regulations of the NASD.
(xvi) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and all reporting
requirements under the rules and regulations of the Exchange Act.
18
(c) The Holder agrees that, upon receipt of any notice from the
Partnership of the existence of any fact of the kind described in Section
4.5(b)(iii)(D) hereof, the Holder will, and will use its best efforts to cause
any underwriter(s) in an Underwritten Offering to, forthwith discontinue
disposition of Registrable Securities pursuant to the Shelf Registration
Statement until:
(xvii) the Holder has received copies of the supplemented or
amended prospectus contemplated by Section 4.5(b)(xiii) hereof; or
(xviii) the Holder is advised in writing by the Partnership
that the use of the prospectus may be resumed.
If so directed by the Partnership, the Holder will deliver to the Partnership
(at the Partnership's expense) all copies, other than permanent file copies then
in the Holder's possession, of the prospectus covering such Registrable
Securities that was current at the time of receipt of such notice of suspension.
SECTION 4.6 STOP TRANSFER INSTRUCTIONS. The Partnership may give such
stop transfer instructions to its transfer agent as it shall deem reasonably
necessary to prevent any sale of shares of Common Units under a Shelf
Registration Statement at any time when the Holder is not permitted to make such
a sale pursuant to this Article IV.
SECTION 4.7 NO PIGGYBACK OR OTHER REGISTRATION RIGHTS. Other than as
set forth in this Article IV, the Holder shall have no registration rights with
respect to Common Units beneficially owned by the Holder (including any
"piggyback" registration rights). In addition, the Partnership shall not be
required to include any Common Units acquired by the Holder for resale under a
Shelf Registration Statement other than the Common Units that constitute
Registrable Securities under this Agreement.
SECTION 4.8 REGISTRATION EXPENSES. The Partnership shall bear all
expenses incident to the filing of any Shelf Registration Statement, including
without limitation: (i) all registration and filing fees and expenses; (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all fees and disbursements of counsel for the
Partnership; (v) all application and filing fees in connection with listing or
quoting, as the case may be, the Common Units on each securities exchange or
automated quotation system on which the Common Units are then listed or quoted;
and (vi) all fees and disbursements of independent certified public accountants
of the Partnership (including the expenses of any special audit and comfort
letters required by or incident to such performance); provided, however, the
Holder shall bear the all the cost of (x) any discount or selling commission
incurred in connection with the sale of any of such Common Units and (y) any
fees and disbursements of counsel for the Holder or any other professional
advisors engaged by the Holder.
SECTION 4.9 RULE 144. The Partnership covenants that it will file at
times chosen by the Partnership any reports required to be filed by it under
Section 13 or 15(d) of the Exchange Act, all to the extent required from time to
time to enable the Holder to sell Registrable Securities without registration
under the Act within the limitation of the exemptions provided by Rule 144 under
the Act, as such Rule may be amended from time to time (or any similar rule or
19
regulation hereafter adopted by the Commission). Upon the reasonable request of
the Holder, the Partnership will deliver to the Holder a written statement as to
whether it has complied with such requirements. The Partnership further
covenants that, upon the request of the Holder, it will take any further actions
reasonably necessary to permit the Holder to transfer the Common Units under
Rule 144, including, without limitation, causing any restrictive legends to be
removed from any certificates representing Common Units in accordance with the
terms of such legends.
SECTION 4.10 INDEMNIFICATION.
(a) For purposes of this Section 4.10, the following terms shall have
the following meanings:
(i) "PRELIMINARY PROSPECTUS" means any preliminary prospectus
supplement to the base prospectus included in a Shelf Registration Statement,
together with such base prospectus, that describes the Common Units and the
offering thereof, filed with the Commission pursuant to Rule 424(a) of the rules
and regulations of the Commission under the Act and used prior to the filing of
the Prospectus.
(ii) "PROSPECTUS" means the final prospectus supplement, in
the form first filed pursuant to Rule 424(b) under the Act, together with the
base prospectus included in the Shelf Registration Statement; and any reference
herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein pursuant to Item
12 of Form S-3 under the Act, as of the date of such Preliminary Prospectus or
Prospectus, as the case may be; and any reference to any amendment or supplement
to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any documents filed after the date of such Preliminary Prospectus or
Prospectus, as the case may be, under the Exchange Act.
(iii) "REGISTRATION STATEMENT" means the various parts of the
Shelf Registration Statement, including all exhibits thereto and including (i)
the information contained in the form of final prospectus supplement to the base
prospectus included in the Shelf Registration Statement, filed with the
Commission after the date hereof pursuant to Rule 424(b) under the Act in
accordance with this Article IV and deemed by virtue of Rule 430A under the Act
to be part of the Shelf Registration Statement at the time it was declared
effective and (ii) the documents incorporated by reference in such final
prospectus supplement.
(b) Each of the Partnership and the Company, jointly and severally,
will indemnify and hold harmless the Holder against any losses, claims, damages
or liabilities, joint or several, to which the Holder may become subject, under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Holder for any legal or other expenses reasonably incurred by the Holder in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Partnership and the Company
shall not be
20
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus or any such amendment or supplement
in reliance upon and in conformity with written information furnished to the
Partnership by the Holder expressly for use therein.
(c) The Holder will indemnify and hold harmless the Partnership and the
Company against any losses, claims, damages or liabilities to which either the
Partnership, the Company or both may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus,
Registration Statement or Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Prospectus, Registration Statement
or Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Partnership by the Holder
expressly for use therein; and will reimburse the Partnership and the Company
for any legal or other expenses reasonably incurred by the Partnership and the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under Sections
4.10(b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
21
(e) If the indemnification provided for in this Section 4.10 is
unavailable to or insufficient to hold harmless an indemnified party under
Sections 4.10 (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Partnership and the Company on the one hand and the Holder
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Partnership and the
Company on the one hand or Holder on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Partnership, the Company and the Holder agree that it
would not be just and equitable if contributions pursuant to this Section
4.10(e) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 4.10(e). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this Section 4.10(e) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.10(e), the Holder shall not be
required to contribute any amount in excess of the amount by which the aggregate
consideration received by the Holder from the sale of any Registrable Securities
pursuant to the relevant Shelf Registration Statement exceeds the amount of any
damages which the Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(f) The obligations of the Partnership and the Company under this
Section 4.10 shall be in addition to any liability which the Partnership and the
Company may otherwise have and shall extend, upon the same terms and conditions,
to each person, if any, who controls any Holder within the meaning of the Act;
and the obligations of the Holder under this Section 4.10 shall be in addition
to any liability which the Holder may otherwise have and shall extend, upon the
same terms and conditions, to each officer and director of the Company and to
each person, if any, who controls the Partnership or the Company within the
meaning of the Securities Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 REPRESENTATIONS AND WARRANTIES OF THE PARTIES. Each party
to this Agreement hereby represents and warrants to each other party that the
statements in this Article V are true and correct as of the date of this
Agreement.
(a) Such party is an entity duly created, formed or organized, validly
existing, and in good standing under the Laws of the jurisdiction of its
creation, formation, or organization.
22
There is no pending or, to such party's knowledge, Threatened, Action (or Basis
therefor) for the dissolution, liquidation, insolvency, or rehabilitation of
such party.
(b) Such party has the entity power and authority to execute and
deliver this Agreement and to perform and consummate the transactions
contemplated herein. Such party has taken all actions necessary to authorize the
execution and delivery of this Agreement, the performance of such party's
obligations hereunder, and the consummation of the transactions contemplated
herein. This Agreement has been duly authorized, executed, and delivered by, and
is Enforceable against, such party.
(c) The execution and the delivery of this Agreement by such party and
the performance and consummation of the transactions contemplated herein by such
party will not (i) Breach any provision of its organizational documents, (ii)
Breach any Law to which such party is subject, (iii) Breach any Contract or
Order to which such party is a party or by which such party is bound or to which
any of such party's assets is subject, or (iv) require any approval, consent,
ratification, permission, waiver or authorization not already obtained, except
in the case of clauses (ii), (iii) and (iv) as would not have a material adverse
affect on the ability of such party to perform its obligations hereunder and
consummate the transactions contemplated herein.
SECTION 5.2 REPRESENTATION AND WARRANTY OF THE INVESTOR. The Investor
represents and warrants to the Company and the Partnership that in acquiring
Exchange Units, the Investor is not offering or selling, and shall not offer or
sell any Exchange Units, for the Partnership in connection with any distribution
of any of the Exchange Units, and the Investor does not have a participation and
shall not participate in any such undertaking or in any underwriting of such an
undertaking except in compliance with applicable federal and state securities
laws. The Investor acknowledges that it is able to fend for itself, can bear the
economic risk of its investment in the Exchange Units, and has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in the Exchange Units. The
Investor is an "accredited investor" as such term is defined in Regulation D
under the Securities Act. The Investor understands that none of the Exchange
Units shall have been registered pursuant to the Securities Act or any
applicable state securities laws, that the Exchange Units shall be characterized
as "restricted securities" under federal securities laws and that under such
laws and applicable regulations none of the Exchange Units can be sold or
otherwise disposed of without registration under the Securities Act or an
exemption therefrom.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 NOTICES. All notices and other communications provided for
or permitted under this Agreement shall be made in writing by hand delivery,
first class mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
23
if to Investor:
Xxxxxxx Xxxxx & Co.
0 Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000 0000
Attention: Raanan Agus
with a copy to:
Xxxxxxx Xxxxx & Co.
0 Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000 0000
Attention: General Counsel
and a copy to:
Xxxxxx & Xxxxxx L.L.P.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000 0000
Attention: Xxxx Xxxxxxxxxxx
if to the Company:
GulfTerra Energy Company, L.L.C.
c/o El Paso Corporation
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000 0000
Attention: Xxx Xxxx
with a copy to:
GulfTerra Energy Company, L.L.C.
c/o El Paso Corporation
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000 0000
Attention: Xxxx Xxxxxx
and a copy to:
24
Xxxxxxx Xxxxx LLP
000 Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000 0000
Attention: G. Xxxxxxx X'Xxxxx
if to the Partnership:
GulfTerra Energy Partners, L.P.
Four Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000 0000
Attention: Xxxx Xxxxxx
with a copy to:
GulfTerra Energy Partners, L.P.
Xxxx Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000 0000
Attention: Xxxx Xxxxx
and a copy to:
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
0000 Xxxxxxxx Xxxxx, Xxxxx Tower
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000 0000
Attention: J. Xxxxxxx Xxxxxxxx
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
says after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
SECTION 6.2 TERMINATION. This Agreement shall terminate upon the later
of (i) the conversion of all of the Class A Membership Interest to a Class B
Membership Interest, (ii) the retirement of all of such Class A Membership
Interest pursuant to the provisions of the Company LLC Agreement or (iii) such
time that of the Common Units, Exchange Units and Tag/Drag Units are no longer
Registrable Securities. Notwithstanding the foregoing, if any Registrable
Securities are sold pursuant to Article IV hereof, the provisions of Section
4.10 hereof shall not terminate and shall survive indefinitely.
25
SECTION 6.3 THIRD PARTY BENEFICIARY. Each of the parties specifically
intends that the Class B Member shall be entitled to assert its rights and
remedies hereunder as a third-party beneficiary hereto with respect to those
provisions of this Agreement affording a right, benefit or privilege to it
(including, without limitation, Section 2.5(b)).
SECTION 6.4 AMENDMENT. This Agreement may be amended or modified from
time to time only by written agreement of all the parties hereto. Each such
instrument shall be reduced to writing and shall be designated on its face an
"amendment" to this Agreement.
SECTION 6.5 SUCCESSORS AND ASSIGNS. All of the terms, agreements,
covenants, representations, warranties, and conditions of this Agreement are
binding upon, and inure to the benefit of and are enforceable by, the parties
hereto and their respective successors and assigns. Except as expressly provided
in the following sentence, no party may assign, transfer or otherwise alienate
either this Agreement or any of its rights, interest or obligations hereunder
without the prior written approval of the other parties. Notwithstanding the
immediately preceding sentence, the Holder can transfer Registrable Securities
to its Affiliates so long as such transfer is made in accordance with the
Securities Act and all of the Holder's obligations under this Agreement remain
with Holder; provided, in the event of such a transfer, the Holder may enforce
its rights under this Agreement on behalf of such Affiliate.
SECTION 6.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
SECTION 6.7 ARTICLES AND SECTIONS; HEADINGS. Unless otherwise provided,
all reference to Articles, Sections and paragraphs herein refer to Articles,
Sections and paragraphs of this Agreement. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
SECTION 6.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflict of law rules thereof.
SECTION 6.9 SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
SECTION 6.10 ENTIRE AGREEMENT. This Agreement, together with
Transaction Agreements to which the parties hereto are party, constitutes the
entire agreement and understanding of the parties hereto in respect of its
subject matter and supersedes all prior understandings, agreements, or
representations by or among such parties, written or oral, to the extent they
relate in any way to the subject matter hereof.
* * * * *
26
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY
GulfTerra Energy Company, L.L.C.
By: /s/ XXXXX X. XXXXX
---------------------------------
Xxxxx X. Xxxxx
President
PARTNERSHIP
GulfTerra Energy Partners, L.P.
By: GulfTerra Energy Company, L.L.C.,
its general partner
By: /s/ XXXXX X. XXXXX
---------------------------------
Xxxxx X. Xxxxx
President
INVESTOR
Xxxxxxx Xxxxx & Co.
By: /s/ RAANAN AGUS
---------------------------------
Name: Raanan Agus
-------------------------------
Title: Managing Director
------------------------------
27
EXHIBIT A
FORM OF ACKNOWLEDGEMENT
This Acknowledgment, dated as of , 200 , is executed by Holder, the
Company and the Partnership (each, as defined in the Exchange and Registration
Rights Agreement, dated October 2, 2003, among Xxxxxxx Xxxxx & Co., GulfTerra GP
Holding Company and Gulf GulfTerra Energy Company, L.L.C. (the "EXCHANGE
AGREEMENT"). Each of such parties hereby acknowledges and agrees that (i) the
Total Number of Exchange Units (as defined in the Exchange Agreement) for
purposes of the Exchange Agreement shall be the number set forth in the space
below and (ii) such Total Number of Exchange Units may only be adjusted or
modified pursuant to the provisions of the Exchange Agreement.
--------------------------------------
TOTAL NUMBER OF EXCHANGE UNITS
(as defined in the Exchange Agreement)
HOLDER
By:
--------------------------
Name:
Title:
COMPANY
By:
--------------------------
Name:
Title:
PARTNERSHIP
By:
--------------------------
Name:
Title:
A-1
