EXHIBIT 99.1
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into as of
this 12 day of January, 2001 by and among XXXXXXXX FIELD SERVICES GROUP, INC.
("Buyer"), BLACK MARLIN ENERGY COMPANY ("BMEC"), a Delaware corporation, MCNIC
OFFSHORE PIPELINE & PROCESSING COMPANY ("MCNIC"), a Michigan corporation, WBI
SOUTHERN, INC. ("WBI"), a Delaware corporation (BMEC, MCNIC, and WBI are
collectively referred to herein as the "Sellers", and individually as a
"Seller"). Sellers, on the one hand, and Buyer, on the other hand, are referred
to collectively herein as the "Parties" and individually as a "Party".
RECITALS
WHEREAS, BMEC owns 100% of the outstanding capital stock of Black Marlin
Pipeline Company ("BMPC"), a Texas corporation, MCNIC owns 100% of the
outstanding capital stock of MCNIC Black Marlin Offshore Company ("MCNIC
Offshore"), a Michigan corporation, and WBI owns 100% of the outstanding capital
stock of WBI Offshore Pipeline, Inc. ("WBI Offshore"), a Delaware corporation
(BMPC, MCNIC Offshore and WBI Offshore are collectively herein referred to as
the "Companies" and individually as a "Company");
WHEREAS, the Companies own certain natural gas transmission assets located
in the Gulf of Mexico offshore Texas and onshore in Galveston County, Texas, and
related onshore separation storage and dehydration facilities (collectively, the
"Assets"), more particularly described on Exhibit A;
WHEREAS, the undivided percentage ownership interest of each Company in
the Assets equal to their respective Pro Rata Shares (as hereinafter defined);
and
WHEREAS, the Sellers desire to sell to Buyer, and Buyer desires to acquire
from the Sellers, all of the outstanding capital stock of the Companies pursuant
to the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained the Parties hereto
hereby agree as follows:
ARTICLE 1
DEFINITIONS
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1.1 DEFINED TERMS. Capitalized terms not otherwise defined herein or in
the recitals to this Agreement used in this Agreement shall have the meanings
ascribed to them in this Section 1. 1.
"AFFILIATE" shall mean with respect to any Person, any Person which
directly or indirectly, controls, is controlled by, or is under a common control
with such Person. The term "control" (including the terms "controlled by" and
"under common control with") as used in the preceding sentence means the
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of a Person, whether through the ownership
of voting securities, by contract, or otherwise.
"BUYER INDEMNIFIED LIABILITIES" shall have the meaning given such term in
Section 8.1.
"BUYER MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect
on the assets, liabilities, financial condition, business, operations, affairs
or circumstances of Buyer.
"BUYER PARTIES" shall have the meaning given such term in Section 8.1.
"CLAIM" shall mean all demands, claims, actions, investigations, causes of
action, proceedings and arbitrations, whether or not ultimately determined to be
valid.
"CLAIM NOTICE" shall have the meaning given such term in Section 8.5(b).
"CLOSING" shall have the meaning given such term in Section 2.3.
"CLOSING DATE" shall have the meaning given such term in Section 2.3.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONFIDENTIALITY AGREEMENT" shall have the meaning given such term in
Section 5.1.
"CUSTOMARY POST-CLOSING CONSENTS" shall mean consents and approvals from
Governmental Authorities that are customarily obtained after closing in
connection with a sale of assets similar to the Assets.
"DISCLOSURE SCHEDULE" shall have the meaning given such term in the
introductory sentence of Article 3.
"EFFECTIVE TIME" shall be 12:00 a.m. on the Closing Date.
"ELECTION PERIOD" shall have the meaning given such term in Section
8.6(a).
"ENCUMBRANCE" shall mean any lien, pledge, condemnation proceeding, claim,
restriction, security interest, mortgage or similar encumbrance.
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"ENVIRONMENTAL LAWS" shall mean any and all federal, state and local laws,
statutes, regulations, rules, orders, ordinances or permits of any governmental
authority pertaining to health, the environment, wildlife or natural resources
in effect in any and all jurisdictions in which the Assets are located,
including, without limitation, the Clean Air Act, as amended, and the Federal
Water Pollution Control Act, as amended, the Rivers and Harbors Act of 1899, as
amended, the Safe Drinking Water Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource
Conservation and Recovery Act, as amended, the Hazardous and Solid Waste
Amendments Act of 1984, as amended, the Toxic Substances Control Act, as
amended, the Occupational Safety and Health Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Natural Gas Pipeline Safety Act of
1968, as amended and the Hazardous Liquid Pipeline Safety Act of 1979, as
amended.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"FERC" shall mean Federal Energy Regulatory Commission.
"GOVERNMENTAL AUTHORITY" shall mean the United States and any state,
county, city or other political subdivision, agency, court or instrumentality,
including the U. S. Army Corps of Engineers and the Port of Houston Authority.
"HIGH ISLAND A-5 PIPELINE" shall mean that certain 3.4 mile, 12-inch
pipeline originating from the High Island Block A-5 and connecting to the
Pipeline at High Island Block A-6.
"INCOME TAXES" shall mean federal income taxes as provided in IRC - 11,
alternative minimum tax as provided in IRC - 55, and any state taxes measured by
net income, and any interest and penalties thereon, including, without
limitation, the earned surplus tax component of the Texas Franchise Tax.
"INDEMNIFIED PARTY" shall have the meaning given such term in Section
8.5(a).
"INDEMNIFYING PARTY" shall have the meaning given such term in Section
8.5(a).
"IRC" shall mean the Internal Revenue Code of 1986, as amended.
"LAWS" shall mean any constitution, statute, code, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
applicable Governmental Authority.
"LOSS" shall mean all debts, liabilities, obligations, losses, damages,
costs and expenses (including, without limitation, interest including
prejudgment interest in any litigated matter), penalties, fines, court costs and
reasonable attorneys' fees and expenses, judgments, settlements and assessments.
"NGA" shall mean the Natural Gas Act of 1938, as amended.
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"PARTIES" shall have the meaning given in the introductory paragraph of
this Agreement.
"PERMITS" shall have the meaning given such term in Section 3.10.
"PERMITTED ENCUMBRANCE" shall mean any of the following: (i) any liens for
taxes and assessments not yet delinquent or, if delinquent, that are being
contested in good faith in the ordinary course of business; (ii) any obligations
or duties reserved to or vested in any municipality or other Governmental
Authority to regulate any of the Assets in any manner including all applicable
Laws; (iii) the terms and conditions of all leases, servitudes, contracts for
sale, purchase, exchange, refining or processing of hydrocarbons, operating
agreements, construction agreements, construction and operation agreements,
partnership agreements, processing agreements, conditioning agreements, treating
agreements, plant agreements, pipeline, gathering, exchange and transportation
agreements, disposal agreements, permits, licenses and other agreements set
forth in Attachments 1 and 2 to Exhibit A; (iv) Customary Post-Closing Consents;
(v) any required third party consents to assignment and similar agreements and
obligations with respect to which prior to Closing (A) waivers or consents have
been obtained from the appropriate person; (B) the applicable period of time for
asserting such rights has expired without any exercise of such rights, or (C)
arrangements reasonably satisfactory to Buyer have been made by the Parties to
allow Buyer to receive substantially the same economic benefits as if all such
waivers and consents had been obtained; (vi) easements, rights of way,
servitudes, permits, surface leases and other rights with respect to surface
obligations, pipelines, conditions, covenants or other restrictions, so long as
individually or in the aggregate they are not such as are reasonably likely to
have a material adverse effect on the use, ownership or operation of the Assets,
taken as a whole; and (vii) materialmen's, mechanics', repairmen's, and other
similar liens or charges arising in the ordinary course of business incidental
to construction, maintenance or operation of the Assets (A) if they have not
been filed pursuant to law, (B) if filed, they have not yet become due and
payable or (C) if their validity is being contested in good faith in the
ordinary course of business by appropriate action.
"PERSON" shall mean any natural person, firm, partnership, association,
corporation, limited liability company, trust, entity, public body or
government.
"PIPELINE" shall have the meaning given such term in Exhibit A.
"POST-CLOSING PERIODS" means any period that is not a Pre-Closing Period.
"PRE-CLOSING PERIODS" means any taxable year or period that ends on or
before the Effective Time and with respect to any taxable year or period
beginning before and ending after the Effective Time, the portion of such
taxable year or period ending on and including the Effective Time.
"PRO-RATA SHARE" of a Seller means (i) 50% for BMEC, (ii) 33 1/3 % for
MCNIC, and (iii) 16 2/3 % for WBI.
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"PURCHASE PRICE" shall have the meaning given such term in Section 2.2.
"RECORDS" shall have the meaning given such term in Section 5.6.
"SELLER MATERIAL ADVERSE EFFECT" shall mean any material and adverse
effect on the use, ownership or operation of the Assets, taken as a whole, or
the financial condition of the Companies, other than conditions affecting the
industry as a whole and other than the transactions contemplated by this
Agreement.
"SELLER PARTIES" shall have the meaning given such term in Section 8.2.
"SHARES" shall have the meaning given such term in Section 2. 1.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation more
than 50% of the outstanding voting securities of which, or any partnership,
joint venture or other entity more than 50% of the total equity interest of
which, is directly or indirectly owned by such Person.
"SUBSIDIARY COMPANY" shall mean with respect to a Seller, the Company that
is the Subsidiary of that Seller.
"TAX" or "TAXES" shall mean all taxes, however denominated, including any
interest penalties or other additions to tax that may become payable in respect
thereof, imposed by any federal, territorial, state, local or foreign government
or any agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income or profits
taxes (including, but not limited to, federal income taxes and state income
taxes), real property gains taxes, payroll and employee withholding taxes,
unemployment insurance taxes, social security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, and other
obligations of the same or of a similar nature.
"TAX RETURNS" shall mean all returns and reports of or with respect to any
Tax which are required to be filed with respect to the Companies.
"THIRD-PARTY CLAIM" shall mean a Claim asserted against an Indemnified
Party by a Person that is not a Party or an Affiliate of a Party that could give
rise to a right of indemnification under this Agreement.
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ARTICLE 2
PURCHASE AND SALE
2.1 THE TRANSACTION. Subject to and in accordance with the terms and
conditions of this Agreement, Buyer agrees to purchase from the Sellers, as
applicable, all of the outstanding capital stock of the Companies (the "Shares")
for the Purchase Price. Subject to and in accordance with the terms and
conditions of this Agreement, in exchange for their respective Pro-Rata Share of
the Purchase Price : (i) BMEC will sell to Buyer all of the outstanding capital
stock of BMPC, (ii) MCNIC will sell to Buyer all of the outstanding capital
stock of MCNIC Offshore, and (iii) WBI will sell to Buyer all of the outstanding
capital stock of WBI Offshore.
2.2 PURCHASE PRICE. Subject to the terms and conditions of this Agreement,
Buyer agrees to pay to Sellers at the Closing an aggregate amount of
$7,250,000.00 (the "Purchase Price"). The Purchase Price shall be (i) increased
by any capital expenditure incurred by any of the Sellers or the Companies that
relate to the Assets from and after 12:00 a.m., Houston, Texas time on the date
of this Agreement and that are incurred prior to the Effective Time without
creating any indebtedness or obligation on the part of any of the Companies
(other than borrowings from one or more of the Sellers, which are repaid at or
prior to the Effective Time); provided that any such individual non-emergency
capital expenditure in excess of $25,000 must have received written approval of
Buyer, which approval shall not be unreasonably withheld, in order for such
capital expenditure to be included in such adjustment, and (ii) decreased by
proceeds and revenues received by Sellers that are attributable to the operation
of the Assets after the Effective Time. The Purchase Price will be allocated
among the Sellers as set forth on Exhibit B. The Purchase Price shall be payable
by Buyer by wire transfer or delivery of other immediately available funds to
the accounts of BMEC (Account No. 0010041077(for the benefit of Blue Dolphin
Energy Company), at Bank One Texas NA, ABA Routing No.000000000) MCNIC (Account
No. 11737-83, at Bank One, ABA Routing No.000000000) and WBI (Account No.
163095535536, at US Bank Bismark ABA Routing No. 000000000), or to such other
bank and account designated in writing by Sellers to Buyer, in accordance with
the allocation set forth in Exhibit B.
2.3 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of BMEC, 000 Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxx 00000, commencing at 10:00 a.m., local time, as soon
as reasonably practicable after all conditions set forth in Article 7 have been
satisfied or waived by the appropriate party, or such other date as the Parties
shall agree in writing, and shall be effective as of the Effective Time (the
"Closing Date"). The Parties agree to use their best efforts to cause the
Closing to occur within 7 days of the date that all such conditions have been
satisfied or waived; and in any event Closing shall occur within 10 days that
such conditions are satisfied or waived.
2.4 DELIVERIES AT CLOSING. At the Closing (i) each Seller will deliver to
Buyer or its assigns stock certificates representing the Shares owned by such
Seller, endorsed in blank or accompanied by duly executed assignment documents;
and (ii) Buyer will deliver to Sellers the Purchase Price.
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2.5 REVENUES AND EXPENSES. (a) Each Seller shall be (i) subject to the
first sentence of Section 2.5(b), entitled to all revenues (and related accounts
receivable) attributable to the Subsidiary Company of that Seller and (ii)
responsible for the payment of all expenses (and related accounts payable),
including the payment of ad valorem taxes, attributable to the Assets owned by
its respective Subsidiary Company, in each case to the extent the foregoing
relate to the period of time prior to the Effective Time. Buyer shall be (i)
entitled to all revenues (and related accounts receivable) attributable to the
Companies, and (ii) subject to Article 8 hereof, responsible for the payment of
all expenses (and related accounts payable), including the payment of ad valorem
taxes, attributable to the Companies, in each case to the extent the foregoing
relate to the period of time occurring on and after the Effective Time.
(b) Within 45 days after Closing, the Sellers shall provide a written
notice to Buyer of all uncollected revenues (and related accounts receivable)
attributable to the Companies for the period prior to the Effective Time. To the
extent that Buyer receives any funds identified in such notice, Buyer shall
promptly deliver such funds to the Sellers. To the extent that the Sellers
receive any funds to which Buyer is entitled pursuant to Section 2.5(a), the
Sellers shall promptly deliver such funds to Buyer. If either Party pays any
expense (or related account payable) that is properly borne by the other Party
pursuant to Section 2.5(a), the Party responsible for such expense (or related
account payable) pursuant to Section 2.5(a) shall promptly reimburse the Party
who made such payment. The obligations of Buyer and the Sellers hereunder shall
be performed without any right of setoff.
2.6 HIGH ISLAND A-5 PIPELINE. In a separate transaction, Blue Dolphin
Pipeline Company (an affiliate of BMEC), MCNIC, and WBI will sell to Xxxxxxxx
Field Services - Gulf Coast Company, L.P., an affiliate of Buyer, their combined
100% ownership interest in the High Island A-5 Pipeline and appurtenant
facilities and all contracts, easements and rights of way, permits, licenses and
records (the "High Island A-5 Transaction"). The terms of such transaction shall
be governed by a separate purchase and sale agreement between those parties.
However, although the transactions are separate, the Parties acknowledge and
agree that the two (2) transactions are contingent upon one another and the
respective assignments and bills of sale shall be executed simultaneously.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Subject to the matters set forth in the disclosure schedule delivered by
the Sellers to Buyer on the date hereof and attached to this Agreement (the
"Disclosure Schedule"), BMEC severally with respect to itself and BMPC, MCNIC
severally with respect to itself and MCNIC Offshore, and WBI severally with
respect to itself and WBI Offshore, and each of BMEC, MCNIC and WBI jointly with
respect to representations concerning the Assets set forth in Sections 3.6, 3.7,
the second sentence of Section 3.15, 3.17, 3.19 and 3.20, represent and warrant
to Buyer as follows:
3.1 ORGANIZATION. The respective Seller is a corporation duly organized,
validly existing and in good standing under the laws of its respective state of
incorporation as set forth in the
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introductory paragraph to this Agreement. The Subsidiary Company of that Seller
is a corporation duly organized, validly existing and in good standing under the
laws of its respective state of incorporation.
3.2 QUALIFICATION. The respective Subsidiary Company is qualified to do
business as a foreign corporation in each state or jurisdiction in which such
qualification is required by Law. The Disclosure Schedule sets forth with
respect to the Subsidiary Company of the Seller a list of the jurisdictions in
which the Subsidiary Company has qualified to do business.
3.3 CAPITALIZATION; SUBSIDIARIES. The Disclosure Schedule sets forth for
the Subsidiary Company of that Seller the number of authorized shares of its
capital stock, the number of issued and outstanding shares of its capital stock,
and the owner thereof. The issued and outstanding capital stock of the
respective Subsidiary Company has been duly authorized, validly issued, fully
paid and is nonassessable. There are no preemptive rights with respect to the
issuance of the shares of capital stock of the respective Subsidiary Company.
There are no outstanding options, warrants, purchase rights, conversion rights,
exchange rights, or other contracts or commitments that could require the
respective Subsidiary Company to issue, sell or otherwise cause to become
outstanding any of such entity's capital stock. There are no voting trusts,
proxies, or other agreements or understandings with respect to the voting of the
capital stock, or restrictions upon the transfer of the capital stock, of the
respective Subsidiary Company, except as set forth on the Disclosure Schedule.
The respective Subsidiary Company has no Subsidiaries or any other ownership or
rights in any other entities or assets not included in the Assets.
3.4 AUTHORIZATIONS AND APPROVALS. The execution and delivery by the Seller
of this Agreement and the performance of its respective obligations hereunder
have been duly and validly authorized by all requisite corporate action. This
Agreement has been duly executed and delivered by the respective Seller, and
this Agreement constitutes the legal, valid and binding obligation of such
Seller enforceable against it in accordance with its terms except insofar as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity regardless of whether such principles are considered in a
proceeding at law or in equity. Except as disclosed in the Disclosure Schedule,
such Seller does not need to give any notice to, make any filing or register
with, or obtain any consent, approval, authorization, waiver, permit,
certificate or order of any third party or Governmental Authority to consummate
the transactions contemplated by this Agreement, except for those the absence of
which are not reasonably likely to have a Seller Material Adverse Effect,
including Customary Post-Closing Consents, and except for consents or waivers to
be obtained by the Sellers or the Companies prior to the Closing Date.
3.5 ABSENCE OF CONFLICTS. Neither the execution and delivery of this
Agreement by the respective Seller, nor the consummation of the transactions
contemplated hereby will (assuming receipt of all consents, approvals,
authorizations, waivers, permits, certificates and orders disclosed in the
Disclosure Schedule): (a) violate or breach the terms of, cause a default under,
conflict with,
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result in acceleration of, create in any party the right to accelerate,
terminate, modify or cancel or require any notice under (i) any applicable Law,
(ii) the charter or bylaws of the respective Seller or its Subsidiary Company or
(iii) any contract, agreement, lease, license or other arrangement to which the
respective Seller or its Subsidiary Company is a party or by which either of
them, or any of their properties, is bound; (b) result in the creation or
imposition of any Encumbrance (other than a Permitted Encumbrance) on the Shares
owned by the respective Seller or the undivided interest in the Assets owned by
the respective Subsidiary Company; (c) result in the cancellation, forfeiture,
revocation, suspension or adverse modification of any existing consent,
approval, authorization, license, permit, certificate or order of any
Governmental Authority having jurisdiction over the respective Seller or its
Subsidiary Company; or (d) with the passage of time or the giving of notice or
the taking of any action by any third party have any of the effects set forth in
clauses (a), (b) or (c) of this Section, except, where such violation, conflict,
breach, default, acceleration, termination, modification, cancellation, claim,
encumbrance, forfeiture, suspension, revocation or lien is not reasonably likely
to have a Seller Material Adverse Effect, including Customary Post-Closing
Consents, or materially impair the ability of the Sellers to consummate the
transactions contemplated by this Agreement.
3.6 CONTRACTS AND COMMITMENTS. Exhibit A and the Disclosure Schedule
includes a list of all material contracts and agreements (including, without
limitation, any transportation contract or agreement and other contracts or
agreements providing for receipt or payment, contingent or otherwise, of $50,000
or more annually, unless any such other contract or agreement is terminable with
notice of 90 days or less without a penalty) in either case relating to the
continued ownership and operation of the Companies or the Assets (the
"Contracts"), and each such Contract (other than inactive transportation
contracts or agreements) is in full force and effect, except where the failure
to be in full force and effect is not reasonably likely to have a Seller
Material Adverse Effect. The Companies have in all respects performed all
material obligations required to be performed by them to date under the
Contracts, and are not in default under any material obligation of any such
Contracts. To the knowledge of the Sellers, no other party to any Contract is in
default thereunder. The respective Company has not assigned to any other person
any of its rights under the Contracts. The respective Company has not waived any
of its material rights under the Contracts. Except as set forth on the
Disclosure Schedule, there are currently no gas or transportation imbalances
under any of the Contracts (other than the imbalances occurring in the ordinary
course of business that do not have a Seller Material Adverse Effect), and there
are currently no arrangements to sell, transport, or deliver hydrocarbons at
some future time without then or thereafter receiving full payment therefor, or
to make payment at some future time for hydrocarbons or the transportation or
the delivery of hydrocarbons previously purchased or transported.
3.7 ABSENCE OF CHANGES. Except as set forth in the Disclosure Schedule,
since December 31, 1999:
(i) there has not been any Seller Material Adverse Effect;
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(ii) to the knowledge of the Sellers, the Assets have been operated and
maintained in a prudent manner, in the ordinary course of the
business and consistent with past practices;
(iii) there has not been any material damage, destruction or loss to any
material portion of the Assets, whether covered by insurance or not;
and
(iv) there has been no actual, pending, or to the knowledge of the
Sellers, threatened change affecting the Assets with any customers,
licensors, suppliers, distributors or sales representatives, except
such as has not had, and is not reasonably expected to have, a
Seller Material Adverse Effect.
3.8 LITIGATION. Except as disclosed in the Disclosure Schedule, there are
no actions at law, suits in equity, investigations, proceedings or claims
pending, affecting or, to the knowledge of the Sellers, threatened against the
respective Subsidiary Company or the Assets before or by any federal, state,
foreign or local court, tribunal or governmental agency or authority.
3.9 COMPLIANCE WITH LAW. Except as disclosed in the Disclosure Schedule,
the respective Subsidiary Company is in compliance with all applicable Laws,
except where the failure to be in compliance is not reasonably likely to have a
Seller Material Adverse Effect; provided, however, notwithstanding the
foregoing, no representation or warranty in this Section 3.9 is made with
respect to compliance with Environmental Laws, which are covered exclusively by
the provisions set forth in Section 3.13.
3.10 PERMITS. Except as set forth in the Disclosure Schedule, the
respective Subsidiary Company owns or holds all franchises, licenses, permits,
consents, approvals and authorizations of all Governmental Authorities necessary
for the conduct of its business (collectively, the "Permits"), except for those
Permits which the failure to own or hold are not reasonably likely to have a
Seller Material Adverse Effect. Each Permit is in full force and effect, and the
Subsidiary Company is in compliance with all of its obligations with respect
thereto, except where the failure to be in full force and effect or to be in
compliance would not have a Seller Material Adverse Effect. To the knowledge of
the respective Seller, no event has occurred that permits, or upon the giving of
notice or the lapse of time or otherwise would permit, revocation or termination
of any Permit except such as in the aggregate would not have a Seller Material
Adverse Effect.
3.11 TITLE TO THE SHARES AND ASSETS. Each Seller has good and marketable
title to the Shares of the respective Subsidiary Company. The Companies have
good and defensible title to the Assets in the percentages shown on Exhibit B
free and clear of all Encumbrances claimed or claiming by, through or under the
respective Seller or its Subsidiary Company but not otherwise, other than the
Permitted Encumbrances.
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3.12 BROKERS FEES. Neither the Sellers nor the Companies has any liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
3.13 ENVIRONMENTAL MATTERS. Except as listed or described in the
Disclosure Schedule:
(a) To the knowledge of the Seller, the Subsidiary Company of that Seller:
(i) is and has been in compliance with and not in violation of any Environmental
Laws, and (ii) is not subject to any remedial obligations under such
Environmental Laws (and no condition exists on the Assets that could give rise
to any such remedial obligations), other than such violations or obligations
which are not reasonably likely to have a Seller Material Adverse Effect.
(b) To the knowledge of the Seller, such Subsidiary Company has in effect,
or applications pending for, all permits required by applicable Environmental
Laws for the operation and ownership of the Assets, except where the failure to
own or hold such permits are not reasonably likely to have a Seller Material
Adverse Effect, and, to the knowledge of the Seller, the respective Subsidiary
Company is not in violation of the terms and conditions of such permits, other
than such violations that are not reasonably likely to have a Seller Material
Adverse Effect.
(c) To the knowledge of the Seller, its Subsidiary Company: (i) is not
subject to any consent decree, compliance order or administrative order issued
pursuant to applicable Environmental Laws, and (ii) has not received written
notice under the citizen suit provision of any Environmental Law or written
request for information, notice of violation demand letter, administrative
inquiry, complaint or claim from any governmental agency pursuant to applicable
Environmental Laws, other than such of the foregoing that are not reasonably
likely to have a Seller Material Adverse Effect.
(d) To the knowledge of the Seller, no hazardous materials or substances
(as defined under Environmental Laws) have been released or disposed of by the
Seller or its Subsidiary Company in violation of Environmental Laws.
3.14 PUBLIC UTILITY HOLDING COMPANY ACT. The respective Seller is not
subject to, or is exempt from, regulation as a "holding company" or a
"subsidiary company" of a "holding company" or an affiliate of a "holding
company," or an "affiliate" of a "subsidiary company" of a "holding company," in
each case within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
3.15 CONDITION OF ASSETS. Except as set forth in the Disclosure Schedule,
the Assets constitute all of the assets and properties used by the respective
Subsidiary Company in connection with its business. Except as set forth in the
Disclosure Schedule, to the knowledge of the Sellers, jointly, the Assets (a)
are in serviceable and functional condition, (b) have been maintained by the
Companies to normal industry standards, (c) are suitable for the purposes used
by the Companies, and (d) are adequate for the normal operation of the business
of the Companies. Except as set forth
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in the Disclosure Schedule, there is no imminent repair or replacement pending
with respect to the Assets.
3.16 ABSENCE OF LIABILITIES. To the knowledge of the Seller, and except as
set forth on the Disclosure Schedule, there are no existing, contingent, or
threatened liabilities, obligations, liens, or claims (absolute, accrued,
contingent or otherwise) that relate to or have been or may be asserted against
the Subsidiary Company or the Assets other than Permitted Encumbrances or any
liabilities and obligations which will be paid in full by the respective
Subsidiary Company or Seller prior to the Effective Time.
3.17 CONFORMITY OF COPIES. The Sellers have made available for Buyer's
review accurate and complete copies of all Contracts and as-built drawings of
the Assets and the following information with respect to the Assets, which have
been prepared since January 1, 1997: MAOP reports, rectified output history,
test point readings, annual cathodic protection check reports, operation and
maintenance reports, average daily volume reports, pigging reports, and depth of
cover surveys.
3.18 EMPLOYEES. Since March 1, 1999, the Subsidiary Company of the Seller
has had no employees. The Subsidiary Company has no continuing obligations or
liabilities for any employee benefit plans or employee welfare plans (as defined
under ERISA) or collective bargaining agreements.
3.19 REPORTS. The Disclosure Schedule sets forth a list of all of the
environmental, accident, safety, and Governmental Authority inspections and
reports concerning the Companies and the Assets which have been performed since
March 1, 1999.
3.20 THROUGHPUT AND COSTS. The Disclosure Schedule sets forth with respect
to the period beginning on March 1, 1999 and ending on May 31, 2000: (a) the
monthly throughput, itemized by customer, of the Pipeline, and (b) the monthly
revenue of the Pipeline, (c) the monthly operating expenses of the Pipeline.
Such information is accurate and complete in all material respects.
Additionally, Sellers shall update such information between the date of this
Agreement and the Closing Date when reasonably requested by Buyer.
3.21 BUSINESS ACTIVITIES. Each Seller represents that its respective
Subsidiary Company does not now and has not in the past engaged in any business
activities other than those undertaken in connection with or incidental to the
ownership and operation of the Assets.
3.22 TAX MATTERS. To the knowledge of the Seller,
(a) the respective Subsidiary Company has filed all Tax Returns that
it was required to file (or in the case of consolidated income Tax
Returns have been filed by Seller or caused to be filed by Seller),
and has paid all Taxes shown thereon as owing;
23
(b) none of the Tax Returns of the Companies is currently being
audited or examined by any taxing authority; and
(c) the respective Subsidiary Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment of deficiency.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 CORPORATE ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
4.2 QUALIFICATION. Buyer is duly qualified to do business as a foreign
corporation and is in good standing in Texas.
4.3 AUTHORIZATIONS; APPROVALS. The execution and delivery by Buyer of this
Agreement and the performance of its obligations hereunder have been duly and
validly authorized by all requisite corporate action. This Agreement has been
duly executed and delivered by Buyer, and this Agreement constitutes the legal,
valid and binding obligation of Buyer enforceable against it in accordance with
its terms except insofar as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity regardless of whether such
principles are considered in a proceeding at law or in equity. Buyer is not
required to give any notice to, make any filing or register with, or obtain any
consent, approval, authorization, waiver, permit, certificate or order of any
Governmental Authority to consummate the transactions contemplated by this
Agreement except for those the absence of which are not reasonably likely to
have a Buyer Material Adverse Effect, including Customary Post-Closing Consents,
and except for consents or waivers to be obtained by Buyer prior to the Closing
Date.
4.4 ABSENCE OF CONFLICTS. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will, to
the knowledge of Buyer, violate or breach the terms of, cause a default under,
conflict with, result in acceleration of, create in any party the right to
accelerate, terminate, modify or cancel or require any notice under (a) any
applicable Law, (b) the charter or bylaws of Buyer, or (c) any material
contract, agreement, lease, license or other arrangement to which Buyer is a
party or by which it, or any of its properties, is bound, except
24
in each case for those the absence of which are not reasonably likely to have a
Buyer Material Adverse Effect, including Customary Post-Closing Consents.
4.5 BROKERS' FEES. Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
4.6 FINANCING. Buyer has sufficient cash, available lines of credit or
other sources of immediately available funds to enable it to make payment of the
Purchase Price at the Closing.
4.7 LITIGATION. There are no actions, suits, proceedings or governmental
investigations or inquiries pending, or to the knowledge of Buyer, threatened,
against Buyer or any of its properties, assets, operations or businesses that
might delay, prevent or hinder the consummation of the transactions contemplated
hereby.
ARTICLE 5
COVENANTS OF SELLER AND BUYER
5.1 ACCESS. Upon reasonable notice and at Buyer's sole risk, liability and
expense, and during normal business hours, the Sellers shall afford Buyer and
its representatives reasonable access, from the date hereof until the Closing
Date, to the Assets (including without limitation for the purpose of safety and
environmental inspections, assessments and nondestructive and noninvasive
testing of such Assets by a safety and/or an environmental engineering firm
designated by Buyer and reasonably satisfactory to the Sellers) and the
contracts, books, records and data of the Companies; provided, such access shall
be subject to the Sellers' obtaining all necessary consents and approvals from
third parties to such access and inspections. The Sellers shall promptly notify
Buyer in each case when such consents are required, and when they have been
obtained or withheld. Buyer's investigation shall be conducted in a manner that
does not unreasonably interfere with the normal operation of the Assets.
Notwithstanding the foregoing, Buyer shall not have access to personnel records
of the Sellers or the Companies (or any Affiliates thereof). Buyer agrees to
maintain the confidentiality of all such information pursuant to the terms of
that certain letter agreement regarding confidentiality dated July 24, 2000
between BMPC and Buyer (the "Confidentiality Agreement"). BUYER HEREBY AGREES TO
DEFEND, INDEMNIFY, RELEASE, PROTECT, SAVE AND HOLD HARMLESS THE SELLERS AND
THEIR AFFILIATES FROM AND AGAINST ANY AND ALL LOSSES (INCLUDING REASONABLE
ATTORNEYS' FEES AND COURT COSTS) ARISING OUT OF OR RELATING TO ANY CLAIMS
RELATING TO ANY PLANT OR FIELD VISIT, OR OTHER DUE DILIGENCE ACTIVITY, CONDUCTED
BY BUYER OR ANY OF ITS AGENTS, REPRESENTATIVES, EMPLOYEES, AFFILIATES,
SUCCESSORS, ASSIGNS, OFFICERS, REPRESENTATIVES OR DIRECTORS (FOR PURPOSES OF
THIS SECTION 5.1, A "BUYER PARTY") TO THE EXTENT SUCH LOSS IS SUFFERED BY ANY
BUYER PARTY, INCLUDING WITHOUT LIMITATION ANY LOSSES RESULTING, IN WHOLE OR IN
PART, FROM THE SOLE, CONCURRENT OR JOINT NEGLIGENCE OR STRICT LIABILITY OF THE
25
SELLERS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLERS.
5.2 CONDUCT OF BUSINESS PENDING THE CLOSING. The Sellers covenant and
agree, that from the date of this Agreement until the Closing Date, unless Buyer
shall otherwise agree or as otherwise contemplated by this Agreement:
(a) Sellers will, or will cause the Companies to, operate the Assets in
all material respects in the same manner as presently being operated, and will
refrain from entering into any transaction or contract relating directly to any
Assets other than in the ordinary course of business;
(b) The Sellers will, or will cause the Companies to, use commercially
reasonable efforts to perform its obligations under any contracts and agreements
to which it is a party or to which the Assets are subject, except for such
obligations as it in good faith may dispute and except for such failures to
perform as would not in the aggregate have a Seller Material Adverse Effect;
(c) Except as set forth on Schedule 5.2, the Sellers will not, and will
not permit the Companies to, directly or indirectly, enter into any transaction
with any of its Affiliates that will cause the Companies or the Assets to be
subject to any liabilities or obligations subsequent to the Effective Time.
(d) The Sellers will not permit the Companies to make any non-emergency
capital expenditure that would cost $25,000 or more without the prior written
approval of Buyer, which approval shall not be unreasonably withheld;
(e) The Companies will not create, incur, guarantee, or assume any
indebtedness:
(f) The Companies will not mortgage or pledge any of the Assets or create
or suffer to exist any encumbrance thereupon, other than Permitted Encumbrances;
(g) Except as set forth on Schedule 5.2, the Sellers will not, and will
not permit the Companies to, lease, transfer, or otherwise dispose of, directly
or indirectly, any of the Assets;
(h) The Sellers will not, and will not permit the Companies to, enter into
any new firm, long-term contract pursuant to which the Companies become
obligated to transport or deliver any products through or by means of the Assets
at a price less than the maximum applicable FERC tariff, or upon terms and
conditions which are substantially different from the terms and conditions
applicable to the transportation of products by the Companies pursuant to the
Contracts;
(i) Insurance will be maintained by the Sellers for the Companies and the
Assets in accordance with ordinary course established prior to the date of this
Agreement.
26
5.3 CONSENTS. Each of the Parties will use its commercially reasonable
efforts to obtain the authorizations, consents, orders and approvals of
Governmental Authorities and any other third parties that may be or become
necessary or advisable for the performance of its obligations pursuant to this
Agreement and the consummation of the transactions contemplated hereby and will
cooperate in all reasonable respects with each other in promptly seeking to
obtain such authorizations, consents, orders and approvals as may be necessary
or advisable for the performance of their respective obligations pursuant to
this Agreement.
5.4 COMMERCIALLY REASONABLE EFFORTS. Each of the Parties shall use
commercially reasonable efforts to obtain the satisfaction of all conditions of
Closing attributable to such Party in an expeditious manner.
5.5 USE OF NAME. On or before March 31, 2001, Buyer shall file all
necessary documents with the appropriate state governmental authorities so as to
terminate the existence of WBI Offshore and MCNIC Offshore, or to change the
corporate names of (i) WBI Offshore to a name not including "WBI" or any
derivation thereof and (ii) MCNIC Offshore to a name not including "MCNIC" or
any derivation thereof, and thereafter shall not directly or indirectly use the
names "WBI" or "MCNIC" or any derivation thereof, provided, however, that in the
event FERC action or inaction prohibits or prevents Buyer from taking any such
action, the time for performance by Buyer shall be extended accordingly.
Notwithstanding the foregoing, Buyer shall be permitted to continue to use the
name "Black Marlin Pipeline Company". As soon as practicable, but in any event
within 180 days after the Closing Date, Buyer shall remove the names of the
Sellers and their Affiliates, or any words or expressions similar thereto (other
than the name "Black Marlin") from the Assets.
5.6 DELIVERY AND RETENTION OF RECORDS. As soon as practicable, but in any
event within thirty (30) days after the Closing Date, Sellers will deliver or
cause to be delivered to Buyer all files, records, information and data relating
to the Companies that are in the possession or control of Sellers (the
"Records"). Buyer agrees to (a) hold the Records and not to destroy or dispose
of any thereof for the longer of (i) four years from the Closing Date, or (ii)
such longer time as may be required by law, including upon notice from Sellers
for any mandatory or consensual extension of a statutory limitations period
determined by the Internal Revenue Service for Tax Returns, provided that, if it
desires to destroy or dispose of such Records during such period, it will first
offer in writing at least 60 days prior to such destruction or disposition to
surrender them to the Sellers and if the Sellers do not accept such offer within
20 days after receipt of such offer, Buyer may take such action and (b)
following the Closing Date to afford Sellers and its accountants and counsel
during normal business hours, upon reasonable request, at any time, full access
to the Records and to Buyer's employees to the extent that such access may be
requested for any legitimate purpose at no cost to Sellers (other than for
reasonable out-of-pocket expenses), provided however, that such access will not
operate to cause the waiver of any attorney-client, work product or like
privilege; provided, further, that in the event of any litigation nothing herein
shall limit any Party's rights of discovery under applicable law.
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5.7 NEW COMMITMENTS. Subject to Section 5.2, the Sellers agree to keep
Buyer advised of, and to consult with Buyer regarding, any commercial
commitments to be entered into by the Companies related to the Assets prior to
Closing, providing that Sellers shall take all reasonable steps to prevent Buyer
from being required to participate in the Companies' regulatory proceedings or
related litigation until after the Closing Date. Buyer agrees that it will not
contact the Companies' customers on matters relating to the Companies without
the prior written consent of Sellers and in the event Sellers consent, Buyer
will allow a representative of the Companies or one of its Affiliates to be
present at any meeting.
5.8 AMENDMENTS OF SCHEDULES AND REMEDY.
(a) Sellers may, from time to time, prior to the Closing, by written
notice to Buyer, supplement or amend the Disclosure Schedule or other schedules
attached to this Agreement to correct any matter that would constitute a breach
of any representation, warranty of Sellers herein contained; PROVIDED HOWEVER,
except as provided in this Section 5.8, no such supplement or amendment will
affect the rights or obligations of the Parties (including without limitation
Buyer's rights and obligations under Section 7.2(a)) until after the Closing
Date. Notwithstanding any other provision hereof, if the Closing occurs, any
such supplement or amendment of any Schedule will be effective to cure and
correct for indemnification purposes (but only for such purposes) any breach of
any representation, warranty or covenant that would have existed by reason of
Sellers not having made such supplement or amendment.
(b) If Buyer terminates this Agreement solely as a result of Sellers's
amendment of the Disclosure Schedule or other schedules to reflect Material
Items (as defined below) and such Material Items were not made available to
Buyer before the date hereof, Buyer and Sellers agree that in lieu of any other
remedy Buyer may have against Sellers at law, equity or otherwise, Sellers shall
owe to Buyer money damages for Buyer's out-of-pocket costs related directly to
due diligence activities and negotiation of this Agreement in an amount up to
$100,000. As used in this Section 5.8, the term "Material Items" shall mean
matters occurring prior to the date of this Agreement, which would have an
adverse impact of $350,000 or greater individually or in the aggregate on the
Assets or the Companies. Buyer agrees that if it terminates this Agreement as a
result of an amendment to the Disclosure Schedule or other schedule that does
not constitute a Material Item, Buyer shall not have any recourse against
Sellers.
5.9 TRANSFER TAXES. Buyer shall be responsible for the payment of all
state and local transfer, sales, use or other similar taxes resulting from the
transactions contemplated by this Agreement, other than Income Taxes for
Pre-Closing Periods, and the Income Taxes arising from the elections made
pursuant to Section 10.1.
5.10 CASUALTY LOSS AND CONDEMNATION. In the event that there exist at and
as of the Closing any condemnation proceeding with respect to the Assets, the
Sellers shall assign to Buyer at and as of the Closing any rights it may have to
claims against any governmental entity, or third party with respect to such
condemnation proceeding. In the event that there exist at and as of the Closing
any
28
casualty loss with respect to the Assets, the Sellers shall process the claim,
if any, with its insurance carrier, and shall promptly turn over any proceeds
received from its insurance carrier with respect to such casualty loss.
5.11 DISTRIBUTION BY THE COMPANIES. On or before the Closing Date, each
Company shall dividend or distribute to the Seller that owns such Company any
cash, cash equivalents, and accounts receivable of the respective Subsidiary
Company as of the Effective Time, subject to Sellers's obligation to pay
expenses of the Companies pursuant to Section 2.5. The Companies shall not
distribute to the Sellers any other amounts or property prior or subsequent to
the Closing.
ARTICLE 6
INDEPENDENT INVESTIGATION AND DISCLAIMER
6.1 INDEPENDENT INVESTIGATION AND DISCLAIMER. Buyer acknowledges that: (a)
it has had, and pursuant to this Agreement will have prior to the Closing,
access to the Companies and the Assets and the officers and employees of the
Companies and Sellers, (b) in making the decision to enter into this Agreement
and consummate the transactions contemplated hereby, Buyer has relied solely on
the basis of its own independent investigation (including review of materials
provided to it by Sellers) and upon the expressed representations, warranties,
covenants and agreements set forth in this Agreement, and (c) it is familiar
with investments of the nature of the Shares and the Assets, understands that
this investment involves substantial risks, has adequately investigated the
Shares and the Assets and has substantial knowledge and experience in financial
and business matters such that it is capable of evaluating, and has evaluated,
the merits and risks inherent in purchasing the Shares and the Assets and is
able to bear the economic risks of such investment. Accordingly, except as set
forth in Article 3, Buyer acknowledges that Sellers have not made, AND SELLERS
HEREBY EXPRESSLY DISCLAIM AND NEGATE ANY REPRESENTATION OR WARRANTY, EXPRESSED,
IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE RELATING TO (i) THE CONDITION
OF THE ASSETS (INCLUDING WITHOUT LIMITATION, ANY IMPLIED OR EXPRESSED WARRANTY
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OF CONFORMITY TO MODELS
OR SAMPLES OF MATERIALS, OR ENVIRONMENTAL CONDITION), (ii) ANY INFRINGEMENT BY
THE COMPANIES OF ANY PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY, AND (iii)
ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO BUYER BY
OR ON BEHALF OF SELLERS (INCLUDING WITHOUT LIMITATION, IN RESPECT OF THE
EXISTENCE OR EXTENT OF OIL, GAS OR OTHER MINERAL RESERVES, THE RECOVERABILITY OF
OR THE COST OF RECOVERING ANY SUCH RESERVES OR THE LIKELIHOOD THAT SUCH
RESERVES, IF RECOVERED, WILL BE TRANSPORTED THROUGH THE PIPELINE; AND BUYER WILL
HAVE SOLE RESPONSIBILITY FOR ANY ACTION TAKEN BY BUYER, OR BY OTHERS RELYING ON
BUYER'S ADVICE BASED ON THE GEOLOGICAL MAPS, RECORDS, LOGS, PRODUCTION
29
OR RESERVE FORECASTS AND OTHER DATA, IF ANY, TRANSFERRED UNDER THIS AGREEMENT.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 CONDITIONS PRECEDENT TO OBLIGATION OF EACH PARTY. The respective
obligations of each Party to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(a) No order shall have been entered and remain in effect in any action or
proceeding before any federal, state, foreign or local court or governmental
agency or other federal, state, foreign or local regulatory or administrative
agency or commission that would prevent or make illegal the consummation of the
transactions contemplated by this Agreement and no action or proceeding that has
a reasonable likelihood of preventing or materially hindering the transactions
contemplated hereby shall have been instituted, which shall not have been
subsequently dismissed; and
(b) Any and all consents of third parties (other than Customary
Post-Closing Consents), necessary in connection with the transactions
contemplated hereby shall have been obtained or arrangements shall have been
made reasonably satisfactory to Buyer to allow Buyer to receive substantially
the same economic benefits as if all such consents had been obtained.
7.2 ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The
obligation of Buyer to consummate the transactions contemplated by this
Agreement are also subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(a) The representations and warranties contained in Article 3, to the
extent qualified as to materiality shall be accurate in all respects, and, to
the extent not so qualified, shall be accurate in all material respects, as of
the Closing Date as though such representations and warranties had been made at
and as of that time; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by Sellers on or before the Closing
Date shall have been duly complied with and performed in all material respects,
and a certificate to the foregoing effect dated the Closing Date and signed by
an authorized executive officer shall have been delivered by each Seller to
Buyer;
(b) The Assets shall not have been materially damaged requiring repair or
replacement costs exceeding $100,000, and Sellers shall not have received notice
of any condemnation of the Assets;
(c) No Seller Material Adverse Effect shall have occurred and be
continuing; and
(d) The Closing of the High Island A-5 Transaction shall have occurred.
30
7.3 ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS. The
obligation of Sellers to consummate the transactions contemplated by this
Agreement are also subject to the fulfillment at or prior to the Closing Date of
the condition that the representations and warranties of Buyer contained in
Article 4 shall be accurate in all material respect as of the Closing Date as
though such representations and warranties had been made at and as of that time;
all the terms, covenants and conditions of this Agreement to be complied with
and performed by Buyer on or before the Closing Date shall have been duly
complied with and performed in all material respects, and a certificate to the
foregoing effect dated the Closing Date and signed by an authorized executive
officer of Buyer shall have been delivered to Sellers.
ARTICLE 8
INDEMNIFICATION AND ASSUMPTION
8.1 BY SELLERS. SUBJECT TO THE TERMS AND CONDITIONS OF THIS ARTICLE 8,
EACH SELLER, SEVERALLY BUT NOT JOINTLY, HEREBY AGREES TO INDEMNIFY, DEFEND AND
HOLD HARMLESS BUYER, THE COMPANIES, AND THEIR RESPECTIVE AFFILIATES AND ITS AND
THEIR RESPECTIVE DIRECTORS, OFFICERS, SHAREHOLDERS AND EMPLOYEES (COLLECTIVELY,
THE "BUYER PARTIES"), FROM AND AGAINST THE FOLLOWING (COLLECTIVELY, THE "BUYER
INDEMNIFIED LIABILITIES"): ANY CLAIM INDIVIDUALLY CONSTITUTING A LOSS IN EXCESS
OF $10,000 ASSERTED AGAINST, IMPOSED UPON, OR INCURRED BY ANY BUYER PARTY,
DIRECTLY OR INDIRECTLY, BY REASON OF, ARISING OUT OF, OR RESULTING FROM (A) THE
INACCURACY OR BREACH OF ANY REPRESENTATION OR WARRANTY MADE BY SUCH SELLER IN
ARTICLE 3 OF THIS AGREEMENT; OR (B) THE BREACH OF ANY COVENANT OR AGREEMENT OF
SUCH SELLER CONTAINED IN THIS AGREEMENT; OR (C) THE OPERATIONS OF OR OWNERSHIP
OF THE ASSETS BY THE SUBSIDIARY COMPANY OF THAT SELLER PRIOR TO THE EFFECTIVE
TIME (INCLUDING EMPLOYEE OR ERISA RELATED CLAIMS), OR THE OWNERSHIP OF THE
RESPECTIVE SUBSIDIARY COMPANY BY THE SELLER, OTHER THAN ANY LITIGATION MATTERS
DISCLOSED IN THE DISCLOSURE SCHEDULE; OR (D) ANY TAXES OF THE SUBSIDIARY COMPANY
OF THAT SELLER RELATING TO PRE-CLOSING PERIODS, INCLUDING TAXES ARISING FROM ANY
DISTRIBUTIONS FROM THE SUBSIDIARY COMPANY TO THE SELLER, THE SECTION 338(H)(10)
ELECTION, OR THE LIABILITY OF ANY OTHER PERSON IMPOSED ON THE SUBSIDIARY COMPANY
UNDER TREASURY REGULATION SECTION 1.1502-6 WITH RESPECT TO THE CONSOLIDATED
GROUP OF THE SELLER, OR (E) ANY FINE OR PENALTY IMPOSED BY FERC RELATING TO
BMEC'S FAILURE TO SECURE FERC APPROVAL PRIOR TO TRANSFERRING OWNERSHIP IN THE
ASSETS TO WBI OFFSHORE AND MCNIC OFFSHORE; PROVIDED, NONE OF THE BUYER PARTIES
SHALL BE ENTITLED TO ASSERT RIGHTS OF INDEMNIFICATION BY SELLERS UNDER THIS
ARTICLE 8 FOR BUYER INDEMNIFIED LIABILITIES PURSUANT TO CLAUSES (A) OR (B)
UNLESS AND UNTIL THE AGGREGATE OF ALL SUCH BUYER INDEMNIFIED LIABILITIES EXCEEDS
$100,000 (IT BEING UNDERSTOOD THAT SUCH BUYER
31
INDEMNIFIED LIABILITIES SHALL ACCUMULATE UNTIL SUCH TIME OR TIMES AS THE
AGGREGATE OF ALL SUCH BUYER INDEMNIFIED LIABILITIES EXCEEDS $100,000, WHEREUPON
THE BUYER PARTIES SHALL BE ENTITLED TO INDEMNIFICATION BY SELLERS HEREUNDER TO
THE EXTENT OF SUCH EXCESS); PROVIDED, FURTHER, THAT SELLERS' MAXIMUM
INDEMNIFICATION OBLIGATIONS UNDER CLAUSES (A), (B) AND (C) OF THIS SECTION 8.1
("OBLIGATIONS") SHALL BE CAPPED AT AN AGGREGATE AMOUNT EQUAL TO 25% OF PURCHASE
PRICE (THE "CAP"), PROVIDED THAT THE CAP FOR EACH SELLER SHALL BE INCREASED TO
ITS PRO-RATA SHARE OF THE PURCHASE PRICE WITH RESPECT TO ANY OBLIGATIONS
DIRECTLY ARISING FROM THE KNOWING AND INTENTIONAL BREACH BY THAT SELLER OF A
REPRESENTATION OR WARRANTY. EACH SELLER SHALL BE RESPONSIBLE FOR THE BREACH OF
ANY JOINT REPRESENTATION, WARRANTY, OR COVENANT ONLY TO THE EXTENT OF ITS
PRO-RATA SHARE OF THE SAME.
8.2 BY BUYER. SUBJECT TO THE TERMS AND CONDITIONS OF THIS ARTICLE 8, BUYER
HEREBY AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS SELLERS AND THEIR
AFFILIATES AND THEIR RESPECTIVE DIRECTORS, OFFICERS, SHAREHOLDERS AND EMPLOYEES
(COLLECTIVELY, "SELLER PARTIES"), FROM AND AGAINST THE FOLLOWING (COLLECTIVELY,
THE "SELLER INDEMNIFIED LIABILITIES"): ANY CLAIM INDIVIDUALLY CONSTITUTING A
LOSS ASSERTED AGAINST, IMPOSED UPON OR INCURRED BY ANY OF THE SELLER PARTIES,
DIRECTLY OR INDIRECTLY, BY REASON OF, ARISING OUT OF OR RESULTING FROM (A) THE
INACCURACY OR BREACH OF ANY REPRESENTATION OR WARRANTY OF BUYER IN ARTICLE 4 OF
THIS AGREEMENT; OR (B) THE BREACH OF ANY COVENANT OR AGREEMENT OF BUYER
CONTAINED IN THIS AGREEMENT; OR (C) THE OPERATION AND OWNERSHIP OF THE ASSETS ON
OR AFTER THE EFFECTIVE TIME; OR (D) ANY TAXES OF THE COMPANIES RELATING TO
POST-CLOSING PERIODS.
8.3 EXPRESS NEGLIGENCE RULE. WITHOUT LIMITING OR ENLARGING THE SCOPE OF
THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS AGREEMENT, AN INDEMNIFIED
PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN ACCORDANCE WITH THE
TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM GIVING RISE TO SUCH
INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR COMPARATIVE
NEGLIGENCE, STRICT LIABILITY OR VIOLATION OF ANY LAW OF OR BY SUCH INDEMNIFIED
PARTY. THE PARTIES AGREE THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
8.4 EXCEPTIONS AND LIMITATIONS. (A) NOTWITHSTANDING ANYTHING TO THE
CONTRARY SET FORTH IN SECTION 8.1, BUYER INDEMNIFIED LIABILITIES SHALL NOT
INCLUDE ANY AND ALL CLAIMS TO THE EXTENT SAME ARE ATTRIBUTABLE TO A BREACH OF
ANY REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT OF BUYER UNDER THIS
AGREEMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN SECTION 8.2,
SELLER INDEMNIFIED LIABILITIES SHALL
32
NOT INCLUDE ANY AND ALL CLAIMS TO THE EXTENT SAME ARE ATTRIBUTABLE TO A BREACH
OF ANY REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT OF SELLERS UNDER THIS
AGREEMENT.
(B) NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS ARTICLE 8,
THE LIABILITY OF ANY OF THE SELLERS UNDER THIS AGREEMENT UNDER SECTION 8.1(A),
(B), OR (C) FOR MATTERS ARISING PRIOR TO XXXXX 0, 0000, XXXXX XX LIMITED TO
$1,000,000, IN THE AGGREGATE.
8.5 NOTICE OF CLAIM. (A) FOR PURPOSES OF THIS ARTICLE 8, THE TERM
"INDEMNIFYING PARTY" WHEN USED IN CONNECTION WITH A PARTICULAR CLAIM SHALL MEAN
THE PARTY HAVING AN OBLIGATION TO INDEMNIFY ANOTHER PARTY WITH RESPECT TO SUCH
CLAIM PURSUANT TO THIS ARTICLE 8, AND THE TERM "INDEMNIFIED PARTY" WHEN USED IN
CONNECTION WITH A PARTICULAR CLAIM SHALL MEAN THE PARTY HAVING THE RIGHT TO BE
INDEMNIFIED WITH RESPECT TO SUCH CLAIM BY ANOTHER PARTY PURSUANT TO THIS ARTICLE
8.
(B) PROMPTLY AFTER ANY INDEMNIFIED PARTY BECOMES AWARE OF FACTS GIVING
RISE TO A CLAIM BY IT FOR INDEMNIFICATION PURSUANT TO THIS ARTICLE 8, SUCH
INDEMNIFIED PARTY WILL PROVIDE NOTICE THEREOF IN WRITING TO THE INDEMNIFYING
PARTY ("CLAIM NOTICE") SPECIFYING THE NATURE AND SPECIFIC BASIS FOR SUCH CLAIM
AND A COPY OF ALL PAPERS SERVED WITH RESPECT TO SUCH CLAIM (IF ANY). FOR
PURPOSES OF THIS SECTION 8.5(B), RECEIPT BY A PARTY OF WRITTEN NOTICE OF ANY
DEMAND, ASSERTION, CLAIM, ACTION OR PROCEEDING (JUDICIAL, ADMINISTRATIVE OR
OTHERWISE) BY OR FROM ANY PERSON OR ENTITY OTHER THAN A PARTY TO THIS AGREEMENT
WHICH GIVES RISE TO A CLAIM ON BEHALF OF SUCH PARTY SHALL CONSTITUTE THE
DISCOVERY OF FACTS GIVING RISE TO A CLAIM BY IT AND SHALL REQUIRE PROMPT NOTICE
OF THE RECEIPT OF SUCH MATTER AS PROVIDED IN THE FIRST SENTENCE OF THIS SECTION
8.5(B). EACH CLAIM NOTICE SHALL SET FORTH A REASONABLE DESCRIPTION OF THE CLAIM
AS THE INDEMNIFIED PARTY SHALL THEN HAVE AND SHALL CONTAIN A STATEMENT TO THE
EFFECT THAT THE INDEMNIFIED PARTY GIVING THE NOTICE IS MAKING A CLAIM PURSUANT
TO, AND FORMAL DEMAND FOR INDEMNIFICATION, UNDER THIS ARTICLE 8. THE CLAIM
NOTICE MUST SET FORTH THE PARTICULAR PROVISION IN THIS ARTICLE 8 AND ANY RELATED
PROVISION IN THIS AGREEMENT PURSUANT TO WHICH SUCH INDEMNIFICATION CLAIM IS
MADE. FOR EXAMPLE, IF AN INDEMNIFIED PARTY ELECTS TO ASSERT AN INDEMNIFICATION
CLAIM FOR BREACH OF THE INDEMNIFYING PARTY'S REPRESENTATION, THE INDEMNIFIED
PARTY'S CLAIM NOTICE WOULD PROVIDE THAT THE CLAIM IS ASSERTED UNDER SECTION
8.1(A) OR 8.2(A), AS APPLICABLE, AND THAT THE REPRESENTATION ALLEGEDLY BREACHED
IS, FOR EXAMPLE, THE LITIGATION REPRESENTATION CONTAINED IN SECTION 3.8 OR 4.7,
AS APPLICABLE. NOTWITHSTANDING THE FOREGOING HOWEVER, THE FAILURE OF THE
INDEMNIFIED PARTY TO TIMELY
33
PROVIDE A CLAIM NOTICE SHALL NOT EXCUSE THE INDEMNIFYING PARTY FROM ITS
OBLIGATION TO PROVIDE INDEMNIFICATION HEREUNDER UNLESS SUCH FAILURE MATERIALLY
IMPAIRS THE ABILITY OF THE INDEMNIFYING PARTY TO MITIGATE OR DEFEND SUCH CLAIM.
8.6 THIRD-PARTY CLAIMS. (A) IF AN INDEMNIFIED PARTY SHALL HAVE ANY
THIRD-PARTY CLAIM ASSERTED AGAINST SUCH INDEMNIFIED PARTY, THE INDEMNIFIED PARTY
PROMPTLY SHALL TRANSMIT TO THE INDEMNIFYING PARTY A CLAIM NOTICE RELATING TO
SUCH THIRD PARTY CLAIM. PRIOR TO THE EXPIRATION OF THE 45-DAY PERIOD FOLLOWING
THE INDEMNIFYING PARTY'S RECEIPT OF SUCH NOTICE (THE "ELECTION PERIOD"), THE
INDEMNIFYING PARTY SHALL NOTIFY THE INDEMNIFIED PARTY (1) WHETHER THE
INDEMNIFYING PARTY DISPUTES ITS POTENTIAL LIABILITY TO THE INDEMNIFIED PARTY
UNDER THIS ARTICLE 8 WITH RESPECT TO SUCH THIRD-PARTY CLAIM AND (II) WHETHER THE
INDEMNIFYING PARTY ELECTS, AT THE SOLE COST AND EXPENSE OF SUCH INDEMNIFYING
PARTY, TO DEFEND THE INDEMNIFIED PARTY AGAINST SUCH THIRD-PARTY CLAIM.
(B) IF AN INDEMNIFYING PARTY NOTIFIES AN INDEMNIFIED PARTY WITHIN THE
ELECTION PERIOD THAT THE INDEMNIFYING PARTY DOES NOT DISPUTE ITS POTENTIAL
LIABILITY TO THE INDEMNIFIED PARTY UNDER THIS ARTICLE 8 AND THAT THE
INDEMNIFYING PARTY ELECTS TO ASSUME THE DEFENSE OF THE THIRD-PARTY CLAIM, THEN
THE INDEMNIFYING PARTY SHALL HAVE THE RIGHT TO DEFEND, AT ITS SOLE COST AND
EXPENSE, SUCH THIRD-PARTY CLAIM BY ALL APPROPRIATE PROCEEDINGS, WHICH
PROCEEDINGS SHALL BE PROSECUTED DILIGENTLY BY THE INDEMNIFYING PARTY TO A FINAL
CONCLUSION OR SETTLED AT THE DISCRETION OF THE INDEMNIFYING PARTY IN ACCORDANCE
WITH THIS SECTION 8.6(B). THE INDEMNIFYING PARTY SHALL HAVE FULL CONTROL OF SUCH
DEFENSE AND PROCEEDINGS, INCLUDING ANY COMPROMISE OR SETTLEMENT THEREOF. IF
REQUESTED BY THE INDEMNIFYING PARTY, THE INDEMNIFIED PARTY AGREES TO COOPERATE
FULLY WITH THE INDEMNIFYING PARTY AND ITS COUNSEL AT THE INDEMNIFYING PARTY'S
EXPENSE IN CONTESTING ANY THIRD-PARTY CLAIM THAT THE INDEMNIFYING PARTY ELECTS
TO CONTEST, INCLUDING, WITHOUT LIMITATION, THE MAKING OF ANY RELATED
COUNTERCLAIM AGAINST THE PERSON ASSERTING THE THIRD-PARTY CLAIM OR ANY
CROSS-COMPLAINT AGAINST ANY PERSON. THE INDEMNIFIED PARTY SHALL HAVE THE RIGHT
TO PARTICIPATE IN, BUT NOT CONTROL, ANY DEFENSE OR SETTLEMENT OF ANY THIRD-PARTY
CLAIM CONTROLLED BY THE INDEMNIFYING PARTY PURSUANT TO THIS SECTION 8.6(B) AND
SHALL BEAR ITS OWN COSTS AND EXPENSES WITH RESPECT TO ANY SUCH PARTICIPATION.
8.7 SUBROGATION. IN THE EVENT THAT ANY INDEMNIFIED PARTY HAS A RIGHT
AGAINST A THIRD PARTY WITH RESPECT TO ANY DAMAGES, LOSSES, COSTS OR EXPENSES
PAID TO SUCH INDEMNIFIED PARTY BY AN INDEMNIFYING PARTY,
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THEN SUCH INDEMNIFYING PARTY SHALL, TO THE EXTENT OF SUCH PAYMENT, BE SUBROGATED
TO THE RIGHT OF SUCH INDEMNIFIED PARTY.
8.8 EXCLUSIVE REMEDIES; SURVIVAL OF REPRESENTATIONS AND WARRANTIES,
LIMITATION OF CERTAIN LIABILITIES.
(A) BUYER AND SELLERS (I) AGREE THAT ONLY ACTUAL DAMAGES SHALL BE
RECOVERABLE UNDER THIS AGREEMENT AND (II) HEREBY WAIVE ANY RIGHT TO RECOVER
SPECIAL, PUNITIVE, CONSEQUENTIAL, INCIDENTAL OR EXEMPLARY DAMAGES EXCEPT TO THE
EXTENT ANY SUCH PARTY SUFFERS SUCH DAMAGES TO AN UNAFFILIATED THIRD-PARTY IN
CONNECTION WITH A THIRD-PARTY CLAIM, IN WHICH EVENT SUCH DAMAGES SHALL BE
RECOVERABLE PURSUANT TO THE TERMS OF THIS ARTICLE. NOTWITHSTANDING ANYTHING TO
THE CONTRARY IN THIS AGREEMENT, THE INDEMNIFICATION PROVISIONS OF THIS ARTICLE 8
SHALL BE THE EXCLUSIVE REMEDIES FOR ANY CLAIM BASED UPON THIS AGREEMENT OR THE
TRANSACTIONS DESCRIBED HEREIN FOLLOWING CLOSING. IN FURTHERANCE OF THE
FOREGOING, ALL OTHER REMEDIES AVAILABLE AT LAW OR IN EQUITY, IN TORT, CONTRACT
OR OTHERWISE ARE HEREBY WAIVED, RELEASED AND DISCHARGED BY SELLERS AND BUYER. NO
CLAIM OF ANY NATURE CAN BE BROUGHT BY ANY BUYER PARTY OR SELLER PARTY UNLESS
WRITTEN NOTICE OF SUCH CLAIM HAS BEEN GIVEN IN ACCORDANCE WITH ARTICLE 8 AS
FOLLOWS: (A) ON OR BEFORE THE SECOND ANNIVERSARY OF THE CLOSING DATE WITH
RESPECT TO ANY BUYER INDEMNIFIED LIABILITIES UNDER SECTION 8.1(A), (B) OR (C),
AND ANY SELLER INDEMNIFIED LIABILITIES UNDER 8.2(A), (B) OR (C); PROVIDED THAT
WITH RESPECT CLAIMS UNDER SECTION 8.1(A), (B), OR (C) FOR MATTERS ARISING PRIOR
TO MARCH 1, 1999 SUCH WRITTEN NOTICE MUST BE PROVIDED BEFORE MARCH 1, 2002, AND
(B) WITHIN THE APPLICABLE STATUTE OF LIMITATIONS, INCLUDING EXTENSIONS, WITH
RESPECT TO BUYER INDEMNIFIED LIABILITIES UNDER SECTION 8.1(D) AND SELLER
INDEMNIFIED LIABILITIES UNDER SECTION 8.2(D). WITH RESPECT TO BUYER INDEMNIFIED
LIABILITIES UNDER SECTION 8.1 (E) THERE SHALL BE NO TIME LIMITATION. INDEMNITY
OBLIGATIONS OF ANY INDEMNIFYING PARTY SHALL BE REDUCED BY ANY INSURANCE PROCEEDS
REALIZED BY ANY INDEMNIFIED PARTY, EXCEPT ANY PAYMENTS RECEIVED PURSUANT TO AN
INSURANCE PROGRAM UNDER WHICH THE INDEMNIFIED PARTY OR ANY OF ITS AFFILIATES
BEARS THE ULTIMATE COST OF SUCH CLAIM.
(B) NEITHER BUYER PARTIES NOR SELLER PARTIES MAY ASSERT ANY CLAIM UNDER
THIS ARTICLE 8 BASED ON FACTS CONSTITUTING A BREACH OF ANY OF THE
REPRESENTATIONS AND WARRANTIES HEREUNDER TO THE EXTENT SUCH PERSON HAD ACTUAL
KNOWLEDGE OF SUCH FACTS PRIOR TO THE CLOSING DATE, PROVIDED THAT A PARTY HERETO
WILL BE DEEMED TO HAVE KNOWLEDGE OF INFORMATION ALLEGEDLY DISCLOSED TO IT BY THE
OTHER PARTY ONLY IF SUCH ALLEGED DISCLOSURE WAS MADE IN WRITING.
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8.9 WAIVER OF TEXAS DTPA. IT IS THE INTENT OF THE PARTIES THAT BUYER'S
RIGHTS AND REMEDIES WITH RESPECT TO THIS TRANSACTION AND WITH RESPECT TO ALL
ACTS OR PRACTICES OF SELLERS, PAST, PRESENT OR FUTURE, IN CONNECTION WITH THIS
TRANSACTION SHALL BE GOVERNED BY LEGAL PRINCIPLES OTHER THAN THE TEXAS DECEPTIVE
TRADE PRACTICES - CONSUMER PROTECTION ACT, TEX. BUS. & COM. CODE XXX. " 17.41 ET
SEQ. (XXXXXX 1987 AND SUPP. 1994) (THE "DTPA"). AS SUCH, BUYER HEREBY WAIVES THE
APPLICABILITY OF THE DTPA TO THIS TRANSACTION AND ANY AND ALL DUTIES, RIGHTS OR
REMEDIES THAT MIGHT BE IMPOSED BY THE DTPA, WHETHER SUCH DUTIES, RIGHTS OR
REMEDIES ARE APPLIED DIRECTLY BY THE DTPA ITSELF OR INDIRECTLY IN CONNECTION
WITH OTHER STATUTES: PROVIDED, HOWEVER, BUYER DOES NOT WAIVE SECTION 17.555 OF
THE DTPA. BUYER ACKNOWLEDGES, REPRESENTS AND WARRANTS THAT IT IS PURCHASING THE
ASSETS COVERED BY THIS AGREEMENT FOR COMMERCIAL OR BUSINESS USE; THAT BUYER HAS
ASSETS OF FIVE MILLION DOLLARS ($5,000,000) OR MORE ACCORDING TO ITS MOST RECENT
FINANCIAL STATEMENT PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES; THAT BUYER HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS
MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS OF A TRANSACTION SUCH AS
THIS; AND THAT IT IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH
SELLERS. BUYER EXPRESSLY RECOGNIZES THAT THE PRICE FOR WHICH THE SELLERS HAVE
AGREED TO SELL THE ASSETS AND PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT HAS
BEEN PREDICATED UPON THE INAPPLICABILITY OF THE DTPA AND THIS WAIVER OF THE
DTPA. BUYER FURTHER RECOGNIZES THAT SELLERS, IN DETERMINING TO ENTER INTO THIS
AGREEMENT, HAVE EXPRESSLY RELIED ON THIS WAIVER AND THE INAPPLICABILITY OF THE
DTPA.
ARTICLE 9
TERMINATION
9.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby abandoned as follows:
(a) By the mutual written consent of Buyer and Sellers at any time prior
to the Closing;
(b) By Buyer or Sellers if a final, non-appealable order to restrain,
enjoin or otherwise prevent the consummation of the transactions contemplated
hereby shall have been entered; or
(c) by Buyer or Sellers if the Closing shall not have occurred on or
before March 31, 2001, so long as the terminating party is not in material
breach of any representation, warranty or covenant contained in this Agreement.
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9.2 EFFECT OF TERMINATION. In the event of any termination of this
Agreement pursuant to Section 9.1, (i) Sellers and Buyer shall have no
obligation or liability to each other except that the provisions of Section 5.1
and Section 5.8 shall survive any such termination, (ii) nothing herein and no
termination pursuant hereto will relieve any party from liability for any breach
of this Agreement prior to such termination or, with respect to those provisions
that survive such termination, prior to or following termination, and (iii)
Buyer's sole remedy for termination of this Agreement arising out of amendment
to the Disclosure Schedule and other schedules to reflect Material Items shall
be the remedy set forth in Section 5.8(b).
ARTICLE 10
TAX MATTERS
10.1 SECTION 338(H) (10) ELECTIONS. For purposes of this Article 10,
"Parent" means the parent entity of each Seller. Each Parent and Buyer shall
make a joint election under IRC Section 338(h)(10) and a similar election under
any applicable state income tax law (if any) for the respective Subsidiary
Company (the "Section 338(h)(10) Elections"). Not later than 60 days after the
Closing Date, Sellers shall prepare and deliver to Buyer an Internal Revenue
Service Form 8023 and any similar form under applicable state income tax law
(the "Forms") with respect to the Section 338(h)(10) Elections, together with
any completed schedules required to be attached thereto, which Forms shall have
been duly executed by an authorized person for Buyer. If any changes or
supplements are required to the Forms or the required schedules thereto, the
parties will promptly inform each other of same and Buyers and Sellers will
reasonably and promptly agree on such changes. Provided that the information on
the Forms and the required schedules thereto is, in the reasonable determination
of the Buyer, correct and complete in all material respects, within 15 days of
receipt thereof, Buyer shall cause the Forms to be duly executed by authorized
persons for Buyer, shall provide a copy of the executed Forms and schedules to
Sellers, shall duly and timely file the Forms as prescribed by Treasury
Regulation "1.338(h)(10)-l or the corresponding provisions of applicable state
income tax law. Sellers will pay the Income Taxes of the Companies attributable
to the making of the Section 338(h)(10) Elections. The allocation of Purchase
Price among the assets of the Companies shall be made in accordance with Code
Sections 338 and 1060 and any comparable provisions of state, local or foreign
law, as appropriate. Sellers shall, unless it would be unreasonable to do so,
accept Buyer's determination of such Purchase Price allocations and shall
report, act, file in all respects and for all purposes consistent with such
determination of Buyer.
10.2 PREPARATION OF TAX RETURNS; RESPONSIBILITY FOR TAXES.
(a) Sellers shall cause to be included in the consolidated federal income
Tax Returns (and the state income Tax Returns of any state that permits
consolidated, combined or unitary income Tax Returns, if any) of the Sellers for
all taxable periods ending on or before the Effective Time ("Complete Period"),
all items of income, gain, loss, deduction and credit and other tax items ("Tax
37
Items") of the Companies which are required to be included therein, shall cause
such Tax Returns to be timely filed with the appropriate taxing authorities, and
shall be responsible for the timely payment (and entitled to any refund) of all
Taxes due with respect to the periods covered by such Tax Returns for the
respective Seller. Sellers shall permit Buyer to review and comment on the
portion of all Tax Returns prepared by Sellers pursuant to this Section 10.2
pertaining to the Companies prior to the filing of such Tax Returns. Subject to,
and in accordance with, Section 5.11, at or prior to Closing Sellers may cause
the Companies to dividend cash reserved on its balance sheet for payment of
Taxes.
(b) With respect to any Tax Return covering a Complete Period that is
required to be filed after the Closing Date with respect to the Companies that
is not described in paragraph (a) above (other than one-day returns necessitated
by a stand-alone election under Section 338(g) or the corresponding provisions
of applicable state income tax law) including the federal Form 1065 for each
Subsidiary Company for the short-period ending on the Closing Date, the
respective Seller shall cause such Tax Return to be prepared, shall cause to be
included in such Tax Return all Tax Items required to be included therein, shall
cause such Tax Return to be filed timely with the appropriate taxing authority,
and shall be responsible for the timely payment (and entitled to any refund) of
all Taxes due with respect to the period covered by such Tax Return. Subject to,
and in accordance with, Section 5.11, at or prior to Closing Sellers may cause
the Companies to dividend cash reserved on its balance sheet for payment of
Taxes.
(c) With respect to any Tax Return covering a taxable period beginning on
or before the Closing Date and ending after the Closing Date that is required to
be filed after the Closing Date with respect to the Companies (including one-day
returns necessitated by a stand-alone election under IRC Section 338(g) or the
corresponding provisions of applicable state income law), Buyer shall cause such
Tax Return to be prepared, shall cause to be included in such Tax Return all Tax
Items required to be included therein, shall furnish a copy of such Tax Return
to Sellers, shall file timely such Tax Return with the appropriate taxing
authority, and shall be responsible for the timely payment (and entitled to any
refund) of all Taxes due with respect to the period covered by such Tax Return.
Buyer and Sellers shall determine (by an interim closing of the books as of the
Effective Time except for ad valorem Taxes which shall be prorated on a daily
basis) the portion of the Tax due with respect to the period covered by such Tax
Return which is attributable to the Pre-Closing Periods. Sellers shall pay Buyer
the amount of Tax so determined to be attributable to Sellers not later than
five days after the filing of such Tax Return.
(d) Notwithstanding anything to the contrary herein, any franchise Tax
paid or payable with respect to the Companies shall be allocated to the taxable
period during which the right to do business obtained by the payment of such
franchise Tax relates, regardless of whether such franchise Tax is measured by
income, operations, assets or capital relating to another taxable period. With
respect to any franchise Tax of the Companies so allocated to the taxable period
in which the Closing Date occurs: (i) Sellers shall determine by an annual
pro-ration based on the number of days in the calendar year before the Closing
Date the portion of the franchise Tax of the Companies due with respect to the
Pre-Closing Periods and the remaining portion of such taxable period, and (ii)
if the
38
amount of such franchise Tax paid or provided for as of the Closing Date exceeds
the amount so prorated to the portion of such taxable period ending on the
Closing Date, the Buyer shall pay to Sellers such excess amount. Notwithstanding
the foregoing, however, each Seller shall remain responsible for, and shall
indemnify Buyer and the Companies against, any incremental franchise tax
liability resulting from the Section 338(h)(10) Elections.
(e) Any Tax Return to be prepared pursuant to the provisions of this
Section 10.2 shall be prepared in a manner consistent with practices followed in
prior years with respect to similar Tax Returns, except for changes required by
changes in law or fact.
(f) Buyer shall not file an amended Tax Return for any period ending on or
prior to the Closing Date without the consent of Sellers.
(g) Any refunds of taxes paid in Pre-Closing Periods will be for the
account of Sellers and, upon receipt thereof, Buyer shall promptly pay such
amounts to Sellers.
10.3 ACCESS TO INFORMATION. (a) Sellers shall grant to Buyer (or its
designee) access at all reasonable times to all of the information, books and
records relating to the Companies within the possession of Sellers (including
work papers and correspondence with taxing authorities), and shall afford Buyer
(or its designee) the right (at Buyer's expense) to take extracts therefrom and
to make copies thereof, to the extent reasonably necessary to permit Buyer (or
its designees) to prepare Tax Returns and to conduct negotiations with taxing
authorities.
(b) Buyer shall grant or cause the Companies to grant to Sellers (or their
designees) access at all reasonable times to all of the information, books and
records relating to the Companies within the possession of Buyer or the
Companies (including work papers and correspondence with taxing authorities),
and shall afford Sellers (or their designees) the right (at Seller's expense) to
take extracts therefrom and to make copies thereof, to the extent reasonably
necessary to permit Sellers (or their designees) to prepare Tax Returns and to
conduct negotiations with taxing authorities.
10.4 TAX SHARING AGREEMENTS. Sellers shall, as of the Closing Date,
terminate all tax allocation agreements or tax sharing agreements with respect
to the Companies and shall ensure that such agreements are of no further force
or effect as to the Companies on and after the Closing Date and there shall be
no further liability of the Companies under any such agreement.
10.5 NON-FOREIGN PERSON AFFIDAVIT. Each Seller shall deliver to Buyer an
affidavit to the effect that the respective Seller is not a "foreign person"
within the meaning of IRC Sections 1445 or 7701 executed under penalty of
perjury and satisfying the requirements of the Treasury Regulations promulgated
pursuant to such Code sections.
10.6 ASSISTANCE AND COOPERATION. After the Closing Date, in the case of
any audit, examination or other proceeding ("Proceeding") with respect to Taxes
for which Sellers are or may be liable pursuant to this Agreement, Buyer shall
inform Sellers (within 15 days of the receipt of a
39
notice of such Proceeding), and shall afford Sellers, at Sellers' expense, the
opportunity to control the conduct of such Proceedings. Buyer shall execute or
cause to be executed powers of attorney or other documents necessary to enable
Sellers to take all actions desired by Sellers with respect to such Proceeding
to the extent such Proceeding may affect either the amount of Taxes for which
Sellers are liable pursuant to this Agreement. Sellers shall have the right to
control any such Proceedings, and, if there is reasonable authority therefor, to
initiate any claim for refund, file any amended return or take any other action
which they deem appropriate with respect to such Taxes. Notwithstanding the
foregoing, neither Sellers nor any Company shall enter into any closing
agreement (as defined in Section 7121 of the Code, or any comparable provisions
of state, county, local, or foreign law) which is binding on Buyer, Buyer's
affiliates, or a Company for any taxable period ending after the Closing Date
without the prior written consent of Buyer, which consent shall not be
unreasonably withheld. Further, neither Sellers nor any Company shall agree to
any settlement concerning Taxes for any taxable period ending on or before the
Closing Date, which settlement may result in an increase in Taxes of a Company
or of Buyer or Buyer's affiliates for any taxable period ending after the
Closing Date, without prior written consent of Buyer, which consent shall not be
unreasonably withheld. Any Proceeding with respect to Taxes for a period which
includes but does not end on the Closing Date shall be controlled jointly by
Sellers and Buyer.
ARTICLE 11
MISCELLANEOUS
11.1 EXPENSES. Sellers and Buyer shall bear and pay all of their own costs
and expenses incurred in connection with the transactions contemplated by this
Agreement.
11.2 WAIVER AND AMENDMENT. Any provision of this Agreement may be waived at
any time by the Party that is entitled to the benefits thereof. This Agreement
may not be amended or supplemented at any time, except by an instrument in
writing signed on behalf of each Party hereto. The waiver by any Party hereto of
any condition or of a breach of another provision of this Agreement shall not
operate or be construed as a waiver of any other condition or subsequent breach.
The waiver by any Party hereto of any of the conditions precedent to its
obligations under this Agreement shall not preclude it from seeking redress for
breach of this Agreement other than with respect to the condition so waived.
11.3 PUBLIC STATEMENT. Sellers and Buyer agree to consult with, and obtain
the approval of (which approval will not be unreasonably withheld), each other
prior to issuing any press release or otherwise making any public statement with
respect to the transactions contemplated hereby, and shall not issue any such
press release or make any such public statement prior to such consultation and
approval, except as may be required by law.
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11.4 ASSIGNMENT. This Agreement shall inure to the benefit of and will be
binding upon the Parties hereto and their respective legal representatives,
successors and permitted assigns.
11.5 NOTICES. All notices, requests, demands, claims and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given if (a) delivered in person
or by courier, (b) sent by telecopy or facsimile transmission, answer back
requested, or (c) mailed by registered or certified mail, postage prepaid,
return receipt requested, to the parties at the following addresses:
if to BMEC: Black Marlin Energy Company
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attention: President
if to MCNIC: 000 Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx
if to WBI: 0000 Xxxx Xxxxxxx Xxxxxx
Xxx 0000
Xxxxxxxx, Xxxxx Xxxxxx 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxx
if to Buyer: 0000 Xxxx Xxx Xxxx.
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxx XxXxx
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 11.5. Such notice shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when the
answer back is received, or (iii) if mailed, the date of delivery as shown by
the return receipt therefor.
11.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
41
EXCLUDING ANY CHOICE OF LAW RULES THAT MAY DIRECT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.
11.7 FURTHER ASSURANCES. In case at any time after the Closing Date any
further action is necessary to carry out the purposes of this Agreement
including, without limitation, the transfer of the Shares to Buyer and obtaining
all Customary Post-Closing Consents, Sellers and Buyer will take or cause to be
taken such further action (including the execution and delivery of such further
instruments and documents) as the other party reasonably may request all without
further consideration.
11.8 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall continue in full force and effect and shall
in no way be affected, impaired or invalidated unless such an interpretation
would materially alter the rights and privileges of any party hereto or
materially alter the terms of the transactions contemplated hereby.
11.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same agreement.
11.10 HEADINGS. The section headings herein are for convenience only and
shall not affect the construction hereof.
11.11 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement,
including the Exhibits hereto and the Disclosure Schedule, and any other
documents executed and delivered pursuant to this Agreement and the
Confidentiality Agreement constitute the entire agreements and supersede all
other prior agreements and understandings, both oral and written, between the
Parties, with respect to the subject matter hereof. Except as provided in
Article 8 hereof, neither this nor any document delivered in connection with
this Agreement, confers upon any person not a party hereto any rights or
remedies hereunder.
11.12 DISPUTE RESOLUTION. The Parties agree to submit any dispute arising out
of this Agreement to mediation in the city of Houston, Texas in accordance with
the CPR Center for Dispute Resolution Rules for Commercial Mediation, prior to
pursuing their remedies in a court of law.
42
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
SELLERS:
BLACK MARLIN ENERGY COMPANY
By:/S/ XXXXX XXXXX
Name: Xxxxx Xxxxx
Title: Vice President, Treasurer
MCNIC OFFSHORE PIPELINE & PROCESSING COMPANY
By:/S/ XXXXXX X. XXXXXXX
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
WBI SOUTHERN, INC.
By:/S/ XXXXXX XXXXXX
Name: Xxxxxx Xxxxxx
Title: Executive Vice President and General Manager
BUYER:
XXXXXXXX FIELD SERVICES GROUP, INC.
By:/S/ XXX XXXXX
Name: Xxx XxXxx
Title: Director Commercial Operation Gulf Coast
43
