1
EXHIBIT 10.2
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement"), effective as of
July 15, 1999 is by and between OCEAN ENERGY, INC., a Texas corporation
("Seller"), and SEMCO ENERGY, INC., a Michigan corporation ("Purchaser").
Capitalized terms used herein shall have the meanings ascribed to them in
Article XI, unless otherwise provided.
W I T N E S S E T H:
WHEREAS, Seller owns the APC Shares and the Distribution Assets;
WHEREAS, Seller owns the APC Debt;
WHEREAS, Purchaser desires to purchase, and Seller desires to sell, the
APC Shares, the Distribution Assets and the APC Debt, subject in all respects to
the provisions of this Agreement; and
WHEREAS, the closing of the transactions contemplated by this Agreement
is subject to obtaining certain governmental approvals, including the approval
of the RCA, which the parties desire to obtain.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
Sale and Purchase
Section 1.1. Sale and Purchase of APC Shares. Subject to all of the
terms and conditions of this Agreement, at the Closing, Seller shall sell,
transfer and deliver to Purchaser the APC Shares; and Purchaser shall purchase
and accept delivery from Seller of the APC Shares at the Closing.
Section 1.2. Sale and Purchase of Distribution Assets. Subject to all
of the terms and conditions of this Agreement, at the Closing, Seller shall
sell, transfer and deliver to Purchaser the Distribution Assets; and Purchaser
shall purchase and accept delivery from Seller of the Distribution Assets at the
Closing.
Section 1.3. Sale and Purchase of APC Debt. Subject to all of the terms
and conditions of this Agreement, at the Closing, Seller shall sell, transfer
and deliver to Purchaser the APC Debt; and Purchaser shall purchase and accept
delivery from Seller of the APC Debt at the Closing.
2
ARTICLE II
Purchase Price
Section 2.1. Stock Purchase Price. The purchase price for the APC
Shares shall be $70,000,000, as adjusted pursuant to Section 2.4 ("Stock
Purchase Price").
Section 2.2 Assets Purchase Price. The cash consideration to be paid
for the Distribution Assets shall be $161,500,000, as adjusted pursuant to
Section 2.4 ("Assets Purchase Price").
Section 2.3. APC Debt Purchase Price. The purchase price for the APC
Debt shall be equal to the principal amount thereof on the Closing Date, not to
exceed $58,700,000, together with accrued interest thereon (the "APC Debt
Purchase Price").
Section 2.4 Purchase Price Adjustment.
(a) Adjustment Mechanism. The Purchase Price is based on the
understanding that on the Closing Date, the working capital of the
Natural Gas Business shall be $2,000,000 (the "Target Working Capital
Amount"). For purposes of this Section 2.4, working capital shall be
determined in accordance with GAAP, applied on a basis consistent with
the manner in which the Base Financial Statements are prepared;
provided, however, that the current portion of any long-term debt shall
not be included in such calculation. If the working capital of the
Natural Gas Business is not at the Target Working Capital Amount, the
Purchase Price shall be adjusted as follows:
(i) On the date five days before the Closing Date,
Seller will provide Purchaser with an estimate of the working
capital of the Natural Gas Business as of the Closing Date,
and if such estimate is below or above the Target Working
Capital Amount, the Purchase Price payable on the Closing Date
shall be adjusted downward or upward, as the case may be, as
provided in Section 2.4(a)(iii), subject to the provisions
thereof.
(ii) If either party believes that an adjustment to
the Purchase Price is required in addition to the adjustment,
if any, provided in Section 2.4(a)(i), Purchaser will cause to
be prepared and delivered to Seller no later than 60 days
after the Closing Date an audited balance sheet of the Natural
Gas Business, as at the Closing Date, which balance sheet
shall present fairly, in conformity with GAAP, the assets and
liabilities of the Natural Gas Business as at the close of
business on the Closing Date and shall be prepared in a manner
consistent with the Base Financial Statements and shall set
forth the working capital. If such balance sheet shows that
the working capital of the Natural Gas Business is below or
above the Target Working Capital Amount, the Purchase Price
shall be adjusted downward or upward, as the case may be, as
provided in Section 2.4(a)(iii).
2
3
(iii) In the event that the working capital of the
Natural Gas Business determined pursuant to either the
estimate or the audited balance sheet prepared pursuant to
Section 2.4(a)(i) or (ii) above is less than or greater than
the Target Working Capital Amount, the Purchase Price shall be
adjusted downward or upward, as the case may be, by an amount
equal to such difference; provided, however, that in no event
shall the net effect of such adjustment be to increase the
Purchase Price by more than $2,000,000. The party required to
make a payment to the other party pursuant to this paragraph
shall make any such payment pursuant to clause (ii) within 30
business days after receipt of the applicable audited balance
sheet by Seller. Any adjustment shall adjust prorata the Stock
Purchase Price and the Asset Purchase Price.
(b) Dispute Procedures. During the 30-day period following
Seller's receipt of the audited balance sheet for the Natural Gas
Business, Seller and its independent auditors will be permitted to
review the working papers of the auditors relating to the audited
balance sheet. The audited balance sheet shall become final and binding
upon the parties on the thirtieth day following receipt thereof by
Seller unless Seller gives Purchaser written notice of its disagreement
prior to such date. Any notice of disagreement shall specify in
reasonable detail the nature of any disagreement so asserted and shall
be accompanied by a certificate of Seller's independent auditors that
they concur with each of the positions taken by Seller in the notice of
disagreement. If a notice of disagreement is received by Purchaser in a
timely manner, then the audited balance sheet (as revised in accordance
with clauses (i) or (ii) below) shall become final and binding upon the
parties on the earlier of (i) the date the parties hereto resolve in
writing any differences they have with respect to any matter specified
in the notice of disagreement or (ii) the date any disputed matters are
finally resolved in writing by the arbitrator referred to below. During
the 30-day period following the delivery of a notice of disagreement,
Seller and Purchaser shall seek in good faith to resolve in writing any
differences that they may have with respect to any matter specified in
the notice of disagreement. At the end of such 30-day period, Seller
and Purchaser shall submit to an arbitrator for review and resolution
any and all matters arising under this Section 2.4(b) which remain in
dispute. The arbitrator shall be a nationally recognized independent
public accounting firm as shall be agreed upon by the parties hereto in
writing. The arbitrator shall render a decision resolving the matters
submitted to the arbitrator within 30 days following submission
thereto. The cost of any arbitration (including the fees of the
arbitrator) pursuant to this Section 2.4 shall be borne 50% by
Purchaser and 50% by Seller. The fees and disbursements of Seller's
independent auditors incurred in connection with their review of the
audited balance sheet shall be borne by Seller, and the fees and
disbursements of Purchaser's independent auditors incurred in
connection with their preparation and review of the audited balance
sheet shall be borne by Purchaser.
Section 2.5. Letter of Credit. Concurrently with the execution of this
Agreement, Purchaser has delivered to Seller an irrevocable standby letter of
credit from Bank of America, in
3
4
an amount equal to $10,000,000, a copy of which is attached to this Agreement as
Exhibit B (the "Letter of Credit").
ARTICLE III
Representations and Warranties of Seller
Seller represents and warrants to Purchaser that, except as set forth
or disclosed in Seller's Disclosure Schedule:
Section 3.1. Corporate Status and Authority.
(a) Seller is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Texas. Seller has
all the requisite corporate power and corporate authority to execute
and deliver this Agreement and the other Operative Documents to which
it is a party and to perform its obligations hereunder and thereunder,
and the execution, delivery and performance of this Agreement and the
other Operative Documents to which Seller is a party have been duly
authorized by all necessary corporate action on the part of Seller.
Seller has all the requisite corporate power and corporate authority to
carry on the Distribution Business as it is now being conducted and to
own or lease and operate the Distribution Assets as and in the place
where the Distribution Business is now conducted or where the
Distribution Assets are now owned or leased and operated. Seller has
the corporate power to own the APC shares. Section 3.1(a) of Seller's
Disclosure Schedule lists all charter documents that, as of the date
hereof, constitute the Articles of Incorporation, as amended, of Seller
and APC, respectively. Prior to the date of this Agreement, Seller has
delivered to Purchaser true, correct and complete copies of the
Articles of Incorporation and Bylaws of Seller and APC.
(b) APC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Alaska. APC has all the
requisite corporate power and corporate authority to carry on its
business as it is now being conducted and to own or lease and operate
its properties as, and in the places where, such business is now
conducted and where such properties are now owned or leased and
operated. APC has the corporate power to own the APC Assets and to own,
lease and operate the Transmission Business as and in the place where
such business is now conducted and where such properties are now owned
or leased and operated. APC owns no equity security of any other entity
and, as a result, has no subsidiaries.
Section 3.2. Duly Executed. This Agreement has been duly executed and
delivered on behalf of Seller, and, when executed and delivered at the Closing
in accordance with this Agreement, each of the other Operative Documents to
which Seller is a party shall have been duly executed and delivered on behalf of
Seller. This Agreement does, and, when executed and delivered at the Closing in
accordance with this Agreement, each of the other Operative Documents to which
Seller is a party
4
5
shall, constitute a legal, valid and binding obligation of Seller enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights generally
and general principles of equity.
Section 3.3. Qualification. Seller and APC are duly qualified and in
good standing, as foreign corporations authorized to do business in all
jurisdictions (including, without limitation, with respect to Seller, the State
of Alaska) where failure to so qualify would materially adversely affect the
Natural Gas Business.
Section 3.4 Governmental Consent. Except for those consents or
approvals set forth in Section 3.4 of Seller's Disclosure Schedule (the
"Seller's Required Governmental Consents"), no consent, waiver, approval or
authorization of, or designation, declaration or filing with, any governmental
authority is or has been required on the part of Seller or APC in connection
with the execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby.
Section 3.5. Capitalization of APC; Title to APC Shares and APC Debt.
The authorized capital stock of APC consists of (i) 2,850,000 shares of common
stock, par value $1.00 per share, of which 1,900,000 shares are duly authorized,
validly issued and outstanding, fully paid and nonassessable, and 150,000 shares
of Preferred Stock, of which no shares are outstanding. All such outstanding
common stock, as well as all of the APC Debt, is owned by Seller. By delivery of
payment for the APC Shares and the APC Debt and by delivery of the certificates
representing the APC Shares and the instruments representing the APC Debt, in
each case, as provided for in this Agreement, Purchaser shall acquire good title
to the APC Shares and the APC Debt, free and clear of all liens, mortgages,
charges, security interests, encumbrances and other restrictions or limitations
of any kind whatsoever. There are no outstanding subscriptions, options,
warrants, conversion rights, outstanding convertible securities, preemptive
rights, preferential rights, or other rights (contractual or otherwise) or
agreements of any kind for the purchase or acquisition from (or the purchase,
sale or issuance by) Seller of any APC Debt or any shares of capital stock of
APC, or other equity or ownership interest in APC, and no outstanding
authorization therefor has been given.
Section 3.6. Title to Distribution Assets and APC Assets; Liens. Seller
has good and indefeasible title to the Distribution Assets and APC has good and
indefeasible title to the APC Assets, except, in each case, those that in the
aggregate are not material to the Natural Gas Business and those disposed of
since the date of the Base Financial Statements in the ordinary course of
business or otherwise disposed of in accordance with this Agreement. None of the
Distribution Assets nor any of the APC Assets are subject to any mortgage,
pledge, lien, security interest, charge or encumbrance except (i) liens created
by or pursuant to the Existing Loan Documents, all of which shall be released at
or prior to the Closing to the extent not in favor of the holders of
indebtedness to be acquired by Purchaser in accordance with the provisions of
this Agreement, (ii) liens securing any indebtedness referred to in clause
(d)(iv) of Section 3.9 hereof and covering only the assets and properties
securing such indebtedness at the time of its renewal, extension, rearrangement
or refunding as contemplated by such clause (d)(iv), all of which shall be
released at or prior to the
5
6
Closing to the extent not in favor of the holders of indebtedness to be acquired
by Purchaser in accordance with the provisions of this Agreement, (iii)
Permitted Encumbrances and (iv) other liens incidental to the conduct of the
Natural Gas Business or the ownership of the Distribution Assets or the APC
Assets that were not incurred in connection with the borrowing of money or the
obtaining of advances for credit and that do not in the aggregate materially
impair the value of the assets affected thereby or materially impair the use of
such assets in the operation of the Natural Gas Business. Seller enjoys peaceful
and undisturbed possession under all material real property leases included in
the Distribution Assets, and all such leases are valid and subsisting and in
full force and effect. APC enjoys peaceful and undisturbed possession under all
material leases of real property on which the facilities operated by it are
situated, and all such leases are valid and subsisting and in full force and
effect.
Section 3.7. No Breach, Etc. The execution, delivery and performance of
this Agreement and the Operative Document to which Seller is a party by Seller
and the consummation by Seller of the transactions contemplated hereby will not
result in (a) any conflict with or breach or violation of or default under the
Articles of Incorporation or by-laws of Seller or APC, or (b) subject to
obtaining those consents or approvals described in Sections 3.4 and Section 3.7
of Seller's Disclosure Schedule (the "Seller's Required Approvals", which term
shall not include any Seller's Required Governmental Consents), any material
conflict with or breach or violation of or default under or right to terminate,
cancel or accelerate under any Material Contract, or the creation of imposition
of any lien, charge, pledge or encumbrance on any of the Distribution Assets or
the APC Assets whatsoever, except for such conflicts, breaches, violations,
defaults, or rights of termination, cancellation or acceleration, liens ,
charges, pledges or encumbrances that individually or in the aggregate would not
result in a Material Adverse Effect on the Natural Gas Business. Seller has no
knowledge of any Material Permits that are currently required in connection with
its and APC's ownership and operation of the Natural Gas Business other than
those that either have been obtained or will be obtained in due course. The
Natural Gas Business is not being operated in violation of any of the provisions
of Seller's or APC's Material Permits or any applicable Legal Requirement except
for such violations, if any, which will not have, individually or in the
aggregate, a Material Adverse Effect on the Natural Gas Business.
Section 3.8. Financial Statements; Material Liabilities.
(a) Seller has heretofore delivered to Purchaser complete and
correct copies of (i) its annual report to shareholders for the fiscal
year ended December 31, 1998, (ii) its Annual Report on Form 10-K for
such fiscal year, as filed with the Securities and Exchange Commission,
(iii) audited combined financial statements of the Distribution
Division and APC for each of the three fiscal years ended December 31,
1998, accompanied by the report thereon of KPMG LLP, certified
accountants, and (iv) the unaudited combined financial statements of
the Distribution Division and APC as of March 31, 1999 ("Base Financial
Statements"). The audited and unaudited financial statements referred
to in clause (iii) above and the Base Financial Statements are referred
to herein as the "Natural Gas Business Financial Statements." All
Natural Gas Business Financial Statements were prepared in
6
7
accordance with generally accepted accounting principles applied on a
consistent basis, except for changes concurred in by said accountants
and disclosed in said financial statements, throughout the periods
specified, and present fairly in all material respects the financial
condition and the results of operations for the Natural Gas Business as
of the dates thereof and for the periods then ended (subject, in the
case of unaudited financial statements, to normal year-end audit
adjustments).
(b) On the date hereof Seller is not aware of any matter that
has or is reasonably likely to have a Material Adverse Effect on the
Natural Gas Business or (so far as Seller can now reasonably foresee)
has a substantial likelihood in the future of having a Material Adverse
Effect on the Natural Gas Business (taken as a whole) other than (i)
general economic conditions, (ii) the matters referred to or set forth
in the annual report to shareholders of Seller referenced in Section
3.8(a), the annual report on Form 10-K of Seller referenced in Section
3.8(a), the Natural Gas Business Financial Statements or in any
Material Contracts furnished to Purchaser by Seller and (iii) matters
and conditions not relating specifically to the Distribution Division
or APC that are generally known to the public or to those in the oil
and gas industry, the natural gas or electric utility industry in the
State of Alaska or the natural gas transmission and distribution
industry.
Section 3.9. Changes, etc. Since the date of the Base Financial
Statements:
(a) no Material Adverse Effect has occurred in respect of the
Natural Gas Business;
(b) except for those actions taken in compliance with this
Agreement, the Natural Gas Business has been conducted in substantially
the same manner in which it had been previously conducted;
(c) (i) the Distribution Assets, the APC Assets and related
real property have been and are being operated in all material respects
in compliance with Environmental Law and Seller has disclosed to
Purchaser all past or present conditions of the real property, and all
matters and issues in any way pertinent or related to the acquisition,
operation or management of the Distribution Assets or the APC Assets
which could, individually or in the aggregate, lead to imposition of a
Material Liability on APC or the Distribution Division. Seller has
received no notice or claim or information requests from any federal,
state or local governmental or regulatory authority with jurisdiction
over Seller (with respect to the Distribution Division), APC or the
Distribution Assets or the APC Assets or from any third party alleging
non-compliance with Environmental Law.
(ii) there are no present or past conditions arising from
or relating to the Distribution Assets or the APC Assets involving or
resulting from a past or present spill, discharge, leak, emission,
injection, escape, dumping, migration, seepage, or release of any kind
whatsoever (other than on-site or off-site) of any substance or
exposure of any type of
7
8
any workplace or to any medium, including, but not limited to, air,
land, surface waters or underground waters, or from any past or present
generation, transportation, treatment, storage or disposal of any
hazardous or toxic waste materials, raw materials, products or other
substances of any kind or from the storage, use or handling of any such
materials, products or substances that may lead to imposition of a
Material Liability on APC or the Distribution Division.
(d) no indebtedness for borrowed money has been incurred or
committed to be incurred by the Distribution Division or APC, except
such indebtedness that has been incurred (i) in the ordinary course of
business, (ii) pursuant to the Credit Agreement between APC and First
National Bank (the "First National Credit Agreement"), (iii) pursuant
to advances made by Seller to the Distribution Division or APC,
including pursuant to the Intercompany Line of Credit Agreement, or
(iv) in connection with any renewal, extension, rearrangement or
refunding of any indebtedness of the Distribution Division or APC
reflected on the Base Financial Statements or incurred after the date
thereof pursuant to the Credit Agreement referred to in subclause (ii)
above;
Section 3.10. Personal Property. To Seller's knowledge, all material
items of personal property and fixtures constituting a part of the Distribution
Assets and APC Assets that are used or useful in the normal operations of the
Distribution Business or the Transmission Business, as the case may be, have
been maintained in all material respects in a state of repair (normal wear and
tear excepted) that Seller believes to be adequate for the normal use of such
item in the ordinary conduct of the Distribution Division or the Transmission
Business, as the case may be, it being understood and agreed, however, that
Seller is making no representation herein with respect to any item of property
that the management of the Natural Gas Business has determined to be not
necessary or desirable for the continued efficient and profitable operation of
the Distribution Business or the Transmission Business, as the case may be.
Section 3.11. Regulatory Commission of Alaska.
(a) Section 3.11(a) of Seller's Disclosure Schedule lists all
currently effective certificates, permits and authorizations heretofore
issued by the RCA to APC or Seller in connection with the Natural Gas
Business.
(b) Section 3.11(b) of Seller's Disclosure Schedule reflects
all of the currently operative tariffs heretofore authorized and
approved by the RCA that are currently in effect and specifically
applicable to the Natural Gas Business and all of the currently pending
rate, certificate or other filings heretofore made by Seller or APC
before the RCA and the status of each such filing on the date hereof.
(c) All currently effective material filings heretofore made
by Seller or APC with the RCA were made in compliance with Legal
Requirements then applicable thereto and
8
9
the information contained therein was true and correct in all material
respects as of the respective dates of such filings.
Section 3.12. Material Contracts. Section 3.12 of Seller's Disclosure
Schedule contains a complete and correct list of all Material Contracts as of
the date hereof. There are no defaults by Seller, APC or the Distribution
Division under any contracts listed in such section that, individually or in the
aggregate, will materially and adversely impair the Natural Gas Business. To
Seller's knowledge, there are no defaults by any other party to any contracts
listed in such section that, individually or in the aggregate, will materially
and adversely impair the Natural Gas Business. Except for the First National
Credit Agreement, the Existing Loan Documents, the Intercompany Line of Credit
Agreement and as otherwise disclosed in Seller's Disclosure Schedule, no
Material Contract listed therein contains any restriction on the incurrence by
the Seller or APC of additional long-term debt.
Section 3.13. Gas Purchase Contracts and Responsibilities.
(a) Section 3.13(a) of Seller's Disclosure Schedule accurately
lists all currently effective material gas purchase contracts
heretofore entered into by Seller or APC with respect to the Natural
Gas Business pursuant to which either Seller or APC is obligated as a
purchaser of natural gas.
(b) As to each such gas purchase contract, neither Seller nor
APC (i) has, since January 1, 1998, made any payments (and no such
payments have become due to sellers of gas thereunder for gas not
taken) pursuant to any "take or pay" or similar arrangements; (ii) is
obligated to pay any material amount (net of any applicable offsets and
adjustments) for gas taken or not taken prior to the date of the Base
Financial Statements other than as reflected in the Base Financial
Statements; or (iii) has received gas that is to be paid for in the
future other than in the normal cycle of billing in the ordinary course
of business or as otherwise reflected in the Base Financial Statements,
in each case except to the extent that such matters would not have a
Material Adverse Effect.
(c) Section 3.13(c) of Seller's Disclosure Schedule accurately
lists all xxxxxx, swaps and other financial or physical commodity
positions of the Natural Gas Business on the date hereof and the net
open commodity position of the Natural Gas Business on such date.
Section 3.14. Litigation. Section 3.14 of Seller's Disclosure Schedule
lists all actions, suits, proceedings or governmental investigations pending or,
to the knowledge of Seller, threatened against Seller or APC which (i) could
reasonably be expected to have a Material Adverse Effect on the Natural Gas
Business or (ii) challenges or may challenge the validity of this Agreement or
any of the Operative Documents or seeks to enjoin or otherwise restrain the
transactions contemplated herein.
9
10
Section 3.15. Rights-of-Way. Seller and APC own or possess all
rights-of-way necessary for the conduct of the Distribution Business and the
Transmission Business, respectively, as now being conducted without any known
conflict with the rights of others, in each case except to the extent that the
failure to own or possess such rights-of-way would not have a Material Adverse
Effect on the Natural Gas Business.
Section 3.16. Gas Transportation and Sales Contracts. Section 3.16 of
Seller's Disclosure Schedule lists all Material Contracts pursuant to which
either the Distribution Division or APC (a) is legally obligated to transport
natural gas owned by a third party or (b) is legally obligated to undertake any
such transportation. There are no agreements or other legally binding
arrangements that constitute Material Contracts pursuant to which either Seller,
with respect to the Distribution Business, or APC is a seller of natural gas to
any third party other than pursuant to tariffs or similar arrangements approved
or authorized by the RCA.
Section 3.17. Employment Agreements and Benefits, Etc.
(a) Employment Agreements. Section 3.17(a) of Seller's
Disclosure Schedule lists all currently effective employment,
management, consulting or similar agreements and all currently
effective labor contracts and collective bargaining agreements
heretofore entered into by APC or Seller with respect to the Natural
Gas Business and neither Seller nor APC has any commitment or
obligation to establish or enter into any such agreement not disclosed
in Section 3.17(a) of Seller's Disclosure Schedule other than those, if
any, that do not constitute a Material Employment Contract.
(b) Officers and Directors. Section 3.17(b) of Seller's
Disclosure Schedule contains a complete and accurate list of each
officer of the Distribution Division and each director and officer of
APC on the date hereof.
(c) Employee Relations. Neither Seller nor APC is a party to
any collective bargaining agreements covering any of the Employees.
There is not occurring on the date hereof any slowdowns, pickets, work
stoppages or other similar disruptive labor activities on the part of
Seller's or APC's employees with respect to the Natural Gas Business.
To Seller's knowledge, no grievance, unfair labor practice charge or
any arbitration proceeding arising out of or under any collective
bargaining agreement relating to the Natural Gas Business exists or is
pending on the date hereof that would materially hinder the Natural Gas
Business from performing its operations in a manner consistent with
past practice or result in a material increase in the Natural Gas
Business's aggregate compensation expense.
(d) ERISA Plans.
(i) Except for (a) the ENSTAR Natural Gas Company
Retirement Plan for Operating Unit Employees and Clerical Unit
Employees (the "Operating Plan") and the ENSTAR Natural Gas
Company Retirement Plan For Salaried Employees,
10
11
but only as it covers non-union Natural Gas Business employees
(the "Salaried Plan") (collectively, the Operating Plan and
the Salaried Plan are herein referred to as the "Pension
Plans"), (b) the ENSTAR Natural Gas Company Thrift Investment
Plan (the "Thrift Plan"), (c) the ENSTAR Natural Gas Company
Profit by Service Plan for Classified Employees and the ENSTAR
Natural Gas Company Profit by Service Plan for Salaried
Employees (the "Profit Sharing Plans"), (d) the ENSTAR Natural
Gas Company Supplemental Executive Retirement Plan (the
"SERP"), and (e) the other employee benefit plans listed in
Section 3.17(d)(i) of Seller's Disclosure Schedule (the
employee benefit plans referred to in (a) through (e) hereof
are hereinafter collectively referred to as the "Plans"),
neither APC, Seller nor any affiliates thereof, currently
sponsors or maintains any employee benefit plan within the
meaning of Section 3(3) of ERISA or has at any time within the
six years prior to the Closing Date sponsored or maintained
any employee pension benefit plan within the meaning of
Section 3(2) of ERISA for the benefit of any employees of APC
or employees of Seller performing services in connection with
the Natural Gas Business ("Employees"). Specifically, neither
APC, Seller nor any entity under common control with Seller
within the meaning of Code ss. 414 currently contributes to or
has at any time within the six years prior to the Closing Date
contributed to any multiemployer plan within the meaning of
Section 3(37) of ERISA and Purchaser shall have no liability
for any such multiemployer plan.
(ii) APC and Seller have in all material respects
performed all material obligations required to be performed by
them or under or in connection with the Plans, and Seller has
no knowledge of any material default or violation (including
but not limited to fiduciary violations) by any other party to
the Plans.
(iii) Reports and disclosures relating to the Plans
required to be filed with or furnished to governmental
agencies, Plan participants or Plan beneficiaries prior to the
date hereof have been filed or furnished in accordance with
applicable law in a timely manner.
(iv) Each of the Thrift Plan, the Pension Plans and
the Profit Sharing Plans (a) satisfies in form the
requirements of Section 401 of the Code, except to the extent
amendments are not required by law to be made until a date
after the Closing Date, (b) has received a favorable
determination letter from the Internal Revenue Service
regarding such qualified status, and (c) has not, since
receipt of the most recent favorable determination letter been
amended or operated in a way that would, to the knowledge of
Seller, materially adversely affect such qualified status.
(v) There are no actions, suits or claims pending
(other than routine claims for benefits) or, to the knowledge
of Seller, threatened against any of the Plans or against the
assets of any of the Thrift Plan, Pension Plans or the Profit
Sharing Plans.
11
12
(vi) All contributions required to the be made
prior to the date hereof to the Thrift Plan, the Profit
Sharing Plans and the Pension Plans pursuant to their terms
and the provisions of ERISA, the Code or any other applicable
Legal Requirement have been timely made.
(vii) As to each Pension Plan, (a) there has been
no event or condition which presents the material risk of Plan
termination, (b) no accumulated funding deficiency, whether or
not waived, within the meaning of Section 302 of ERISA or
Section 412 of the Code has been incurred, (c) no reportable
event within the meaning of Section 4043 of ERISA (for which
the disclosure requirements of Regulation section 4043.1 et
seq., promulgated by the Pension Benefit Guaranty Corporation
("PBGC"), have not been waived) has occurred, (d) no notice of
intent to terminate the Plan has been given under Section 4041
of ERISA, (e) no proceeding has been instituted under Section
4042 of ERISA to terminate the Plan, (f) no material liability
to the PBGC has been incurred, and (g) the fair market value
of the assets of such Plan equals or exceeds the present value
of accumulated benefits under such Plan based upon the
actuarial assumptions used for purposes of the most recent
actuarial valuation.
(viii) The Base Financial Statements reflect
contribution liability accruals made in accordance with past
practices reflecting the estimated 1999 contribution liability
of APC and the Distribution Division to the Pension Plans, the
Thrift Plan and the Profit Sharing Plans as of March 31, 1999.
(ix) No act, omission or transaction has occurred
that would result in imposition on the APC, Seller or any
affiliates thereof of (A) breach of fiduciary duty liability
damages under Section 409 of ERISA, (B) a civil penalty
assessed pursuant to subsections (c), (i) or (l) of Section
502 of ERISA, or (C) a tax imposed pursuant to Chapter 43 of
Subtitle D of the Code.
(x) There is no action pending with respect to any
of the Plans before the Internal Revenue Service, the
Department of Labor or the Pension Benefit Guaranty
Corporation, or, to the knowledge of Seller, before any state
or local governmental agency.
(xi) Each Plan subject to the requirements of
Section 601 of ERISA has been operated in material compliance
therewith. Seller has not contributed to a nonconforming group
health plan (as defined in Code Section 5000(c)) and no person
under common control with Seller within the meaning of Section
414 of the Code has incurred a tax liability under Code
Section 5000(a) that is or could reasonably be expected to be
a liability of Seller.
12
13
(xii) Except for amounts with respect to which
Seller has sole responsibility to pay, no amounts payable
under any Plan or other agreement, contract, or arrangement
with respect to any Employees will fail to be deductible for
federal income tax purposes by virtue of Section 280G or
Section 162(m) of the Code.
(xiii) Complete and correct copies of the following
documents have been made available to Purchaser as of the date
of this Agreement: (i) all Plans and any related trust
agreements or insurance contracts, (ii) the most current
summary descriptions of each Plan subject to ERISA, (iii) the
three most recent Form 5500s and Schedules thereto for each
Plan subject to such reporting, (iv) the most recent
determination of the IRS with respect to the qualified status
of each Plan that is intended to qualify under Section 401(a)
of the Code, (v) the most recent accountings with respect to
Plan funded through a trust and (vi) the most recent actuarial
report of the qualified actuary of each Plan with respect to
which actuarial valuations are conducted.
(e) Other Employee Benefit Plans. Section 3.17(e) of Seller's
Disclosure Schedule lists, in addition to the Plans, all bonus,
profit-sharing, incentive compensation, stock option, pension,
retirement, deferred compensation and other plans, agreements, trusts,
funds and arrangements for the benefit of the Employees other than
those, if any, which do not constitute a Material Employment Contract.
Section 3.18. Insurance. Seller, in connection with the Distribution
Business, and APC have been continuously since January 1, 1995, insured in such
amounts and against such risks and losses as are customary for companies
conducting businesses similar to the Natural Gas Business during such time
period. Neither Seller, in connection with the Distribution Business, nor APC
has received any notice of cancellation or termination with respect to any
material insurance policy thereof.
Section 3.19. Patents, Trademarks, Etc. To Seller's knowledge, the
Natural Gas Business is conducted without conflict with or infringement of
asserted patent, trade names, trademark, copyright, trade secret, know-how or
other industrial property rights of others.
Section 3.20. APC Debt. The principal amount outstanding under the APC
Debt as of June 1, 1999, is $58,700,000. There is no default by the obligor
under the APC Debt with respect to payments of principal and interest required
to be made thereunder.
Section 3.21. Brokers. Except for Chase Securities, Inc., no broker or
finder has acted for or on behalf of Seller or any affiliate of Seller in
connection with this Agreement or the transactions contemplated by this
Agreement. No broker or finder is entitled to any brokerage or finder's fee, or
to any commission, based in any way on agreements, arrangements or
understandings made by or
13
14
on behalf of Seller or any affiliate of Seller for which Purchaser, APC or the
Distribution Division has or will have any liabilities or obligations
(contingent or otherwise).
Section 3.22 Year 2000 Compliance. The Natural Gas Business has adopted
a Year 2000 compliance program (the "Y2K Program"), a copy of which is attached
as Section 3.22 of Seller's Disclosure Schedule, and has filed the Y2K Program
with the RCA. APC and the Distribution Division are in compliance with the Y2K
Program in all material respects and have substantially performed the tasks
required to be performed thereby on or prior to any date as of which this
representation is made or deemed to have been made, in each case except to the
extent that such failure would not, or could not reasonably be expected to have,
a Material Adverse Effect on the Natural Gas Business.
ARTICLE IV
Representations and Warranties of Purchaser
Purchaser represents and warrants to Seller that, except as set forth
or disclosed in Purchaser's Disclosure Schedule:
Section 4.1. Corporate Status and Authority. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Michigan. Purchaser has all the requisite corporate power and corporate
authority to execute and deliver this Agreement and the other Operative
Documents to which it is a party and to perform its obligations hereunder and
thereunder, and the execution, delivery and performance of this Agreement and
the other Operative Documents to which Purchaser is a party have been duly
authorized by Purchaser's Board of Directors, which constitutes all necessary
corporate action required on the part of the Purchaser for such authorization.
Purchaser has heretofore delivered to Seller true and complete copies of its
Certificate or Articles of Incorporation and bylaws, in each case as amended.
Section 4.2. Power; Duly Executed. Subject to those matters set forth
in this Agreement, Purchaser has full right, power and authority to enter into
this Agreement and the other Operative Documents to which Purchaser is a party,
and Purchaser has full, right, power and authority to purchase and receive the
APC Shares and the Distribution Assets pursuant hereto. This Agreement has been
duly executed and delivered on behalf of Purchaser, and, when executed and
delivered at the Closing in accordance with this Agreement, each of the other
Operative Documents to which Purchaser is a party shall have been duly executed
and delivered on behalf of Purchaser. This Agreement does, and, when executed
and delivered at the Closing in accordance with this Agreement, each of the
other Operative Documents to which Purchaser is a party shall, constitute a
legal, valid and binding obligation of Purchaser enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors' rights generally and general
principles of equity.
14
15
Section 4.3. Qualification. Purchaser is duly qualified and in good
standing, as a foreign corporation authorized to do business in all
jurisdictions where the failure to so qualify would materially adversely affect
the business or properties of Purchaser. Prior to the Closing, Purchaser shall
become duly qualified and in good standing to do business in the State of
Alaska.
Section 4.4. Governmental Consent. Except for those consents or
approvals set forth in Section 4.4 of Purchaser's Disclosure Schedule (the
"Purchaser's Required Government Consents"), no consent, waiver, approval or
authorization of, or designation, declaration or filing with any governmental
authority is or has been required on the part of Purchaser in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
Section 4.5. Brokers. Except for Banc of America Securities LLC and
Charlevoix Energy Partners, no broker or finder has acted for or on behalf of
Purchaser or any affiliate of Purchaser in connection with this Agreement or the
transactions contemplated by this Agreement. No broker or finder is entitled to
any brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of Purchaser or
any affiliate of Purchaser for which Seller or any affiliate thereof has or will
have any liabilities or obligations (contingent or otherwise).
Section 4.6. Litigation. There are no actions, suits, proceedings or
governmental investigations pending or, to the knowledge of Purchaser,
threatened against Purchaser or any of the its subsidiaries which (a) will have
a Material Adverse Effect or can reasonably be expected to have a Material
Adverse Effect on the ability of Purchaser to consummate the transactions
contemplated in the Agreement, or (b) challenges or may challenge the validity
of this Agreement or any of the Operative Documents to be executed at Closing or
seeks to enjoin or otherwise restrain the transactions contemplated herein.
Section 4.7 No Breach, Etc. The execution, delivery and performance of
this Agreement and the Operative Documents to which Purchaser is a party by
Purchaser and the consummation by Purchaser of the transactions contemplated
hereby will not result in (a) any conflict with or breach or violation of or
default under the Certificate or Articles of Incorporation or by-laws of
Purchaser, or (b) subject to obtaining those consents or approvals described in
Sections 4.4 and 4.7 of the Purchaser's Disclosure Schedule (the "Purchaser's
Required Approvals", which term shall not include any Purchaser's Required
Governmental Consents), any material conflict with or breach or violation of or
default under or right to terminate, cancel or accelerate under any material
indenture, contract, agreement, license, lease or other instrument to which
Purchaser is a party or the creation of imposition of any lien, charge, pledge
or encumbrance on any of the material assets of the Purchaser. With respect to
the credit agreement related to the Purchaser's Required Approval described in
Section 4.7 of the Purchaser's Disclosure Schedule, such credit agreement is
subject to renewal no later than September 30, 1999, and upon such renewal the
credit agreement will be amended or otherwise modified so that no consent to the
transactions contemplated by this Agreement is required thereunder. Upon such
renewal the Purchaser's Disclosure Schedule shall
15
16
be deemed to be modified so that the requirement to obtain such consent is no
longer disclosed thereon.
Section 4.8. Financial Arrangements of Purchaser. Purchaser presently
has and will at all times have adequate sources of funds to provide at the
Closing, and at the Closing will have, sufficient funds in order to timely pay
the Purchase Price and any adjustments thereto.
Section 4.9. Financial Statements. Purchaser has heretofore delivered
to Seller complete and correct copies of (a) its annual report to shareholders
of its most recently ended fiscal year, (b) its Annual Report on Form 10-K for
the same fiscal year, as filed with the Securities and Exchange Commission, (c)
its proxy statement relating its most recent Annual Meeting of Shareholders and
(d) its quarterly reports on Form 10-Q for any fiscal quarters ended after the
fiscal year described in clause (a). The consolidated financial statements of
the Purchaser contained therein were prepared in accordance with generally
accepted accounting principles applied on a consistent basis, except for changes
concurred in by the Purchaser's accountants and disclosed in said financial
statements, throughout the periods specified, and present fairly in all material
respects the financial condition and results of operations of the businesses of
Purchaser as of the dates thereof and for the periods then ended (subject, in
the case of unaudited financial statements, to normal year-end audit
adjustments) and the absence of footnote disclosure.
Section 4.10. Purchase for Investment. Purchaser is acquiring the APC
Shares for its own account, for investment only, without a view to distribution,
as that phrase has meaning under the Securities Act of 1933, as amended (the
"Act") and rules and regulations of the Securities and Exchange Commission.
Purchaser understands that the effect of the representation and warranty made
herein is that the APC Shares must be held by it indefinitely unless
subsequently registered under the Act or unless an exemption from registration
is available at the time of any proposed sale or other transfer thereof.
Purchaser agrees to indemnify and hold harmless Seller against all liabilities,
costs and expenses, including reasonable attorneys' fees, and other Losses
incurred by Seller as a result of any sale, transfer or other disposition by
Purchaser of all or any part of the APC Shares in violation of the Act or
applicable state securities laws.
ARTICLE V
Covenants and Certain Actions of the Parties
Section 5.1. Obligations of Seller.
Section 5.1.1. Conduct of Business, Etc.
From the date of this Agreement and until the Closing ("Interim
Period"), except as is otherwise approved by Purchaser in writing (which
approval shall not be unreasonably withheld or delayed), Seller shall:
16
17
(a) except as permitted or contemplated by this Agreement,
carry on the Distribution Business in the ordinary course consistent
with past practice and, to the extent consistent with such business,
use all reasonable efforts to preserve intact the present business
organization and to preserve its relationship with customers, suppliers
and others having business dealings with the Distribution Division;
(b) except as permitted or contemplated by this Agreement,
cause APC to carry on the Transmission Business in the ordinary course
consistent with past practice and, to the extent consistent with such
business, use all reasonable efforts to preserve intact the present
business organization and to preserve its relationships with customers,
suppliers and others having business dealings with APC;
(c) maintain its corporate existence and, to the extent within
the control of Seller, maintain all qualifications of Seller that are
required for it to carry on the Distribution Business as set forth in
clause (a) above; and cause APC to maintain its corporate existence
and, to the extent within the control of Seller, cause APC to maintain
all qualifications of APC that are required for it to carry on the
Transmission Business as set forth in clause (b) above;
(d) not permit APC to amend its Articles of Incorporation or
bylaws;
(e) except as permitted or contemplated by this Agreement and
except for proposed transactions that are disclosed in Seller's
Disclosure Schedule, not enter into or amend or permit APC to enter
into or amend in any bonus, incentive compensation, deferred
compensation, profit sharing, retirement, pension, group insurance,
death benefit or other fringe benefit plan, trust agreement, or
arrangement affecting any Employees, or any compensation, severance or
consulting agreement with any such officer or employee other than in
the ordinary course of business or otherwise consistent with past
practice or as required by law or any presently existing collective
bargaining agreement;
(f) not permit APC or the Distribution Division, other than in
the ordinary course of business, to create, incur, assume, guarantee or
otherwise become liable with respect to any indebtedness for money
borrowed except (i) pursuant to the First National Credit Agreement,
(ii) pursuant to advances made by Seller to the Distribution Division
or APC, including under the Intercompany Line of Credit Agreement,
(iii) in compliance with the provisions of this Agreement, or (iv) in
connection with any renewal, extension, rearrangement or refunding of
any indebtedness of the Distribution Division or APC reflected in the
Base Financial Statements or incurred after the date thereof pursuant
to the First National Credit Agreement;
(g) except for proposed transactions described in Section
5.1.1(g) of Seller's Disclosure Schedule, refrain from disposing of any
material Distribution Assets or material APC Assets other than in the
ordinary course of business;
17
18
(h) except for any proposed transactions described in Section
5.1.1(h) of Seller's Disclosure Schedule, not permit APC to merge or
consolidate with any other corporation or acquire any stock,
securities, property or assets of any other Person; provided, however,
that the foregoing restriction shall not prohibit any acquisition of
property or assets to be used by the Natural Gas Business in the
ordinary course of business or for capital expenditures permitted by
Section 5.1.1(k);
(i) not permit APC to issue any shares of any class of its
capital stock, or enter into any contract, or grant any option, warrant
or right, calling for the issuance of any such shares, or create or
issue any securities convertible into any such shares or convertible
into securities in turn so convertible, or enter into any contract, or
grant any option, warrant or right, calling for the issuance of any
such convertible securities;
(j) advise and consult, and cause APC to advise and consult,
with Purchaser in advance of any material actions (including, without
limitation, rate filings) to be taken with respect to regulatory
matters or other contested matters;
(k) except as contemplated by the Natural Gas Business's
capital budget or as set forth in Section 5.1.1(k) of Seller's
Disclosure Schedule, not make or commit to make, or permit APC to make
or commit to make, any capital expenditures, capital additions or
capital improvements with respect to the Natural Gas Business in an
amount in excess of $1,000,000 with respect to all such capital
projects and except for repairs to the Natural Gas Business's property
required for safety and/or the continued operation of the Natural Gas
Business in accordance with past practice.
(l) use all reasonable efforts to obtain waivers of all
preferential rights to purchase all or any part of the Distribution
Assets and use all reasonable efforts to obtain, and cause APC to use
all reasonable efforts to obtain, any consent of third parties
necessary to complete the transactions contemplated by this Agreement;
(m) use all reasonable efforts to provide substantially in
accordance with past practices under that certain Agreement For
Services, dated January 1, 1993, as amended, between Seller, the
Distribution Division and APC, all material corporate general and
administrative services to APC and the Distribution Division of the
type previously provided by Seller and cooperate with Purchaser in the
transition of the performance of such services to Purchaser at the
Closing. Seller will, and will cause the Distribution Division and APC
to, terminate such Agreement For Services at Closing at no cost to the
Distribution Division or APC;
(n) not take undertake any hedging activity that is
inconsistent with net open commodity position, if any, described in
Section 3.13(c) of Seller's Disclosure Schedule; and
18
19
(o) enter into or amend any Material Contract or any other
contract listed on Section 3.12 of Seller's Disclosure Schedule, in
each case except to the extent related to any capital expenditure
permitted by Section 5.1.1(k).
Section 5.1.2. Access and Information. APC and Seller have given and,
during the Interim Period, Seller shall give, or shall cause to be given, to
Purchaser and its employees, agents and representatives full access, at all
reasonable times and at Purchaser's expense, to the properties, books, files,
records and officers of APC and of Seller, as such relate to the Natural Gas
Business, and will furnish or shall cause to be furnished, at Purchaser's
expense, all information and documents relating to the Natural Gas Business as
Purchaser may reasonably request, and permit Purchaser to contact and meet with
the employees of APC and Seller, as such are involved in the Natural Gas
Business, and others having business relations with such, at such place or
places and at such times as reasonably designated by Purchaser, provided that no
such investigation shall unreasonably interfere with the Natural Gas Business,
or relationships with employees or customers of Seller or APC. During the
Interim Period, Seller shall permit Purchaser to make copies of information
relating to the Natural Gas Business contained in the books, files and records
of Seller and APC. Purchaser will cause all information regarding Seller, the
Distribution Division, APC or the Natural Gas Business obtained or acquired by
Purchaser or Purchaser's representatives, employees, consultants, independent
contractors, attorneys and financing sources and other advisors (the "Purchaser
Parties") pursuant to this Agreement to be used and maintained by the Purchaser
Parties in accordance with the terms of the confidentiality agreement dated June
3, 1999, by and between Seller and Purchaser (the "Confidentiality Agreement").
Notwithstanding the foregoing provisions of this Section 5.1.2, Seller shall not
be required to disclose information to the extent that the disclosure thereof is
prohibited under confidentiality agreements currently in effect on the date
hereof.
(b) Purchaser hereby agrees to defend, indemnify, release, protect,
save and hold harmless the Seller Indemnitees from and against any and all
Losses (including injury or death of any person or damage to property) arising
out of or relating to Purchaser's access to the properties, books, files and
records of APC or the Natural Gas Business in connection with this Section
5.1.2, including without limitation any Losses resulting, in whole or in part,
from the actions of Purchaser's officers, employees, agents, representatives or
affiliates.
Section 5.1.3. Xxxx-Xxxxx-Xxxxxx.
(a) Seller will prepare and submit to the Federal Trade
Commission and the Department of Justice, in a timely manner, all
necessary filings for Seller in connection with the transactions
contemplated by this Agreement under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act or 1976 and the rules and regulations of the Federal
Trade Commission thereunder (collectively, the "Xxxx-Xxxxx-Xxxxxx
Act").
(b) In the event that a request for additional information is
made of Seller pursuant to the Xxxx-Xxxxx-Xxxxxx Act, Seller shall use
all reasonable efforts to comply with such request as soon as
practicable after receipt of such request.
19
20
Section 5.1.4 Limit on Indebtedness For Borrowed Money. At or prior to
the Closing, Seller shall take such action as shall be necessary such that, at
the Closing, (i) the aggregate indebtedness of the Natural Gas Business for
borrowed money or evidenced by leases required to be capitalized for financial
reporting purposes in accordance with GAAP does not exceed $58,700,000
(including the APC Debt), and (ii) the outstanding principal balance of the APC
Debt does not exceed $58,700,000.
Section 5.2. Obligations of Purchaser.
Section 5.2.1. Xxxx-Xxxxx-Xxxxxx.
(a) Purchaser will prepare and submit to the Federal Trade
Commission and the Department of Justice, in a timely manner, all
necessary filings for Purchaser in connection with the transactions
contemplated by this Agreement under the Xxxx-Xxxxx-Xxxxxx Act.
(b) In the event that a request for additional information is
made of Purchaser pursuant to the Xxxx-Xxxxx-Xxxxxx Act, Purchaser
shall use all reasonable efforts to comply with such request as soon as
practicable after receipt of such request.
Section 5.2.2. Employee Matters. On or before the Closing Date,
Purchaser will offer employment to each Employee as of the Closing Date who
meets Purchaser's normal employment criteria for similar classifications of
employees. Except as hereinafter provided, and subject to the provisions of any
presently existing collective bargaining agreement, Purchaser shall have full
discretion in determining the terms, conditions and benefits relating to such
employment, provided however, that the salaries and other employment benefits,
taken as a whole, and the positions of responsibility offered by Purchaser shall
be consistent in all material respects with the salary ranges and other
employment benefits, taken as a whole, and the levels of responsibility of such
Employees in effect on the Closing Date.
Section 5.2.3. Access to Information. After Closing, Purchaser will,
and will cause its counsel and independent public accountants to, afford to
representatives of Seller, including its counsel and accountants, reasonable
access to all books, records, files and documents related to the Distribution
Division, APC or the Natural Gas Business in order to permit Seller to prepare
and file its tax returns and to prepare for and participate in any investigation
with respect thereto, to prepare for and participate in any other investigation
and defend any litigation relating to or involving the Seller, Distribution
Division, APC or the Natural Gas Business for which Seller may be responsible,
to discharge its obligations under this Agreement and the other Operative
Documents to which it is a party and for other reasonable purposes and will
afford Seller reasonable assistance in connection therewith. Purchaser will
cause such records to be maintained for not less than seven years from the date
of Closing and will not dispose of such records without first offering in
writing to deliver them to Seller; provided, however, that in the event that
Purchaser transfers all or a portion of the Natural Gas Business to any third
party during such period, Purchaser may transfer to such third party all or a
portion of the books, records, files and documents related thereto, provided
such third party transferee expressly assumes in writing the obligations of
Purchaser under this Section 5.2.3.
20
21
Following the Closing Date, and to the extent reasonably necessary to permit
Seller or any of its Affiliates to defend (including, without limitation, any
related investigation, appeal or settlement) any lawsuit, mediation, enforcement
action, arbitration, administrative hearing or other adjudicative proceeding
relating to the Natural Gas Business, Purchaser agrees to afford Seller and its
Affiliates and their respective accountants and counsel, during normal business
hours, at no cost to Seller other than reasonable out-of-pocket expenses, (i)
reasonable access to all employees of Purchaser or any of its Affiliates and all
witnesses subject to the control or direction of Purchaser or any of its
Affiliates and (ii) reasonable access to all documents and records within the
custody or subject to the control of Purchaser or any of its Affiliates;
provided, however, that in the event of any litigation nothing herein shall
limit either party's rights of discovery under applicable law.
Section 5.3. Joint Obligations.
(a) Purchaser and Seller will, as soon as reasonably possible
following the execution of this Agreement, prepare and file with
appropriate governmental authorities such requests for approval as may
be necessary to obtain any Seller's Required Governmental Consents and
Seller's Required Approvals. Purchaser and Seller will diligently
pursue such authorizations and will cooperate with each other in
seeking such authorizations.
(b) Seller, APC and Purchaser mutually agree and covenant as
follows with respect to the disposition of the Plans:
(i) Effective as of Closing, Purchaser shall adopt,
or cause the appropriate affiliate of Purchaser to adopt,
those plans listed on Section 5.3(b)(i) of Seller's Disclosure
Schedule. Seller (or its insurer) will be liable for benefits
incurred by the Employees under such plans, as a result of
events occurring prior to Closing.
(ii) Effective as of Closing, Purchaser shall also
adopt, or cause the appropriate affiliate of Purchaser to
adopt, those plans listed on Section 5.3(b)(ii) of Seller's
Disclosure Schedule (together with the plans listed on Section
5.3(b)(i) of Seller's Disclosure Schedule, the "Scheduled
Plans") as a successor employer of the Employees who are
participants therein, without gap or interruption of coverage.
Further, effective as of the Closing Date, Purchaser shall
assume Seller's obligations under any presently existing
collective bargaining agreement affecting the Natural Gas
Business.
(iii) Subject to the provisions of any presently
existing collective bargaining agreement and subject to the
provisions of applicable law, Purchaser shall have the right
to amend or terminate any Scheduled Plan following the Closing
Date; provided, however, that the overall level of benefits
provided to the Employees of the Natural Gas Business shall be
comparable to the benefits provided to such Employees on the
date hereof for at least two years after the Closing Date.
With respect to any employee benefit plan that is not a
Scheduled Plan, Purchaser shall not
21
22
assume any obligations thereunder and Seller shall continue to
be liable therefor; provided, however, that Seller may amend
or terminate any such plan at any time.
(iv) Effective as of Closing, Purchaser shall cause
APC or the appropriate affiliate of Purchaser to assume the
Severance Agreement between Seller and Xxxxxxx X. Xxxxxx
("Xxxxxx"), a true and correct copy of which has been
furnished to Purchaser. Prior to Closing, Purchaser shall
enter into severance agreements with each of the other
officers of APC, which are identified on Section 5.3(b) of
Seller's Disclosure Schedule, providing benefits substantially
similar to the benefits provided to such persons under the
MSP. In the event Xxxxxx' or any other such officer's
employment is subject to an Involuntary Termination (as such
term is defined in the applicable severance agreement) within
six months following Closing, Seller shall reimburse Purchaser
for the cost of any severance benefits provided to such
officer in accordance with the applicable severance agreement.
Purchaser shall provide severance benefits to each of the
other Employees as of Closing (but not including Employees
subject to any collective bargaining agreement) in accordance
with the terms of the Resource Group Plan set forth in Section
5.3(b)(iv) of Purchaser's Disclosure Schedule. Purchaser will
continue to provide severance benefits to such Employees
substantially similar to those set forth in such Resource
Group Plan for a period of at least three years after the
Closing Date.
(v) APC, Seller and Purchaser shall cooperate in
exchanging information (including pertinent employment
records, benefit information, financial statements and other
data) or in taking actions respecting the interests of the
Employees in each of the plans described in this Section so as
to secure an orderly and effective transition of benefit
arrangements for the Employees. APC, the Seller and Purchaser
agree to use all reasonable efforts to accomplish the purposes
of this Section 5.3(b), subject to such changes as may be
required by any governmental agency of proper jurisdiction or
other regulatory authority.
(c) During the Interim Period, neither Purchaser nor Seller
shall make, nor permit any of its affiliates or representatives to
make, any news release or other public disclosure pertaining to this
Agreement or the transactions contemplated hereby without the prior
written approval of the other as to both form and content, which
approval shall not be unreasonably withheld. Notwithstanding the
foregoing, either party may make such news release or other public
disclosure which, in the opinion of such party's outside counsel, is
required to be made by such party pursuant to applicable securities
laws or securities exchange rules.
22
23
ARTICLE VI
Approvals, Reasonable Efforts
The parties recognize the importance of obtaining the Seller's Required
Governmental Consents, the Seller's Required Approvals, the Purchaser Required
Governmental Consents and the Purchaser's Required Approvals and, in this
regard, agree to give priority to seeking such approvals. The parties shall
apply for and diligently prosecute all applications for, and shall use all
reasonable efforts promptly to obtain, such approvals or forebearances from all
applicable federal, state and local authorities, and such other governmental
authorities as shall be necessary to permit the consummation of the transactions
contemplated this Agreement, and shall use all reasonable efforts to bring about
the satisfaction as soon as practicable of the transactions contemplated by this
Agreement. To this end, the parties agree to make available the personnel and
other resources of their respective organizations in order to accomplish actions
reasonably required by them to obtain all such approvals.
ARTICLE VII
Conditions Precedent
Section 7.1. Preamble. The respective obligations set forth herein of
Seller and Purchaser to consummate the transactions contemplated hereby shall be
subject to the fulfillment, on or before the Closing Date, in the case of
Seller, of the conditions set forth in Sections 7.2 and 7.3, and in the case of
Purchaser, of the conditions set forth in Sections 7.2 and 7.4. Any of the
following conditions may be waived in whole or in part by the party whose
obligation to perform at Closing is subject to such condition.
Section 7.2 Xxxx-Xxxxx-Xxxxxx Compliance. The applicable waiting period
under the Xxxx-Xxxxx Xxxxxx Act shall have expired or terminated.
Section 7.3. Conditions to Obligations of Seller.
Section 7.3.1. Representations and Warranties of Purchaser. The
representations and warranties of Purchaser contained in Article IV of this
Agreement shall be accurate in all respects (provided that, for purposes of this
Section 7.3.1 any representation or warranty contained in Article IV that is
qualified by a materiality standard or a Material Adverse Effect qualification
shall be read without regard to any such qualifications as if such
qualifications were not contained therein) as of the Closing Date, except for
such failures which, individually or in the aggregate, have not had and could
not reasonably be expected to have, a Material Adverse Effect on Seller.
Purchaser shall have duly performed and complied in all material respects with
all agreements contained herein required to be performed or complied with by it
at or before the Closing.
23
24
Section 7.3.2. Officer's Certificate. Purchaser shall have delivered to
Seller a certificate, dated the Closing Date and signed by its Chairman,
President or a Vice President, as to the fulfillment of the conditions set forth
in Section 7.3.1 hereof.
Section 7.3.3 Seller's Required Governmental Consents. All of Seller's
Required Governmental Consents shall have been obtained by Final Order.
Section 7.3.4 Seller's Required Approvals. All of Seller's Required
Approvals, the absence of which would have a Material Adverse Effect on Seller
or its businesses other than the Natural Gas Business after the Closing, and all
of Purchaser's Required Approvals, the absence of which would have a Material
Adverse Effect on Purchaser, in each case other than those consents and
approvals that are customarily obtained after the closing of a transaction of
the nature of the transaction contemplated by this Agreement, have been obtained
and are in full force and effect.
Section 7.3.5. Actions at Closing. Purchaser shall have taken the
respective actions to be taken by it at the Closing pursuant to Section 8.1
hereof.
Section 7.3.6. Absence of Proceedings. No action, suit or proceeding
instituted by any governmental authority shall be pending and no statute, rule
or regulation and no injunction, order, decree or judgment of any court or
governmental authority of competent jurisdiction shall be in effect that could
reasonably be expected to prohibit, restrain, enjoin or restrict the
consummation of the transactions contemplated by this Agreement.
Section 7.4. Conditions to Obligations of Purchaser.
Section 7.4.1. Representations and Warranties of Seller. The
representations and warranties of Seller contained in Article III and Section
10.1 of this Agreement shall be accurate in all respects (provided that, for
purposes of this Section 7.4.1 any representation or warranty contained in
Article III or Section 10.1 that is qualified by a materiality standard or a
Material Adverse Effect qualification shall be read without regard to any such
qualifications as if such qualifications were not contained therein) as of the
Closing Date, except for such failures which, individually or in the aggregate,
have not had and could not reasonably be expected to have, a Material Adverse
Effect on the Natural Gas Business. Seller shall have duly performed and
complied in all material respects with all agreements contained herein required
to be performed or complied with by it at or before the Closing.
Section 7.4.2. Officer's Certificate. Seller shall have delivered to
Purchaser a certificate, dated the Closing Date and signed by its Chairman,
President or Vice President, as to the fulfillment of the conditions set forth
in Section 7.4.1 hereof.
Section 7.4.3 Governmental Consents. All of Seller's Required
Governmental Consents and Purchaser's Required Governmental Consents shall have
been obtained by Final Order.
24
25
Section 7.4.4 Other Approvals. All of Seller's Required Approvals, the
absence of which would have a Material Adverse Effect on Purchaser and on the
Natural Gas Business after the Closing, and all of Purchaser's Required
Approvals, the absence of which would have a Material Adverse Effect on
Purchaser, in each case other than consents and approvals that are customarily
obtained after the closing of a transaction of this nature, have been obtained
and are in full force and effect.
Section 7.4.5. Actions at Closing. Seller shall have taken the actions
to be taken by Seller at the Closing pursuant to Section 8.1. hereof.
Section 7.4.6. Absence of Proceedings. No action, suit or proceeding
instituted by any governmental authority shall be pending and no statute, rule
or regulation and no injunction, order, decree or judgment of any court or
governmental authority of competent jurisdiction shall be in effect that could
reasonably be expected to prohibit, restrain, enjoin or restrict the
consummation of the transactions contemplated by this Agreement.
Section 7.4.7. Maintenance of Material Qualifications. Prior to
Closing, Seller shall have maintained all material qualifications of Seller that
are required for it to carry on the Distribution Business and shall have
maintained all material qualifications of APC that are required for it to carry
on the Transmission Business.
ARTICLE VIII
Closing
Section 8.1. Closing. The closing of the purchase and sale of the APC
and the Distribution Assets (the "Closing") will take place at the offices of
Xxxxxx & Xxxxxx L.L.P., 2300 First City Tower, 0000 Xxxxxx, Xxxxxxx, Xxxxx on
the first business day following five calendar days after all of the conditions
specified in Section 7.3 and 7.4 have been satisfied, unless another time, date
and place is agreed to in writing by the parties. The date of the Closing is
referred to in this Agreement as the "Closing Date." At the Closing the
following events shall occur, each event being deemed to have occurred
simultaneously with the other events:
(a) Seller will deliver to Purchaser the APC Shares and the
APC Debt, by delivering the certificates representing the APC Shares
and the instruments representing the APC Debt, in each case endorsed or
accompanied by stock or bond powers, as applicable (in form reasonably
satisfactory to counsel for Purchaser), in favor of Purchaser; and
(b) Purchaser will pay the Purchase Price, as adjusted, by
wire transferring such amount, in lawful money of the United States of
America in immediately available funds, to such account as Seller shall
have designated by notice to Purchaser; and
(c) Seller and Purchaser shall execute and deliver a General
Assignment and Xxxx of Sale ("General Assignment") substantially in the
form of Exhibit A attached hereto,
25
26
it being understood and agreed that the schedules attached to the
General Assignment as so executed and delivered shall be appropriately
modified and amended to reflect dispositions and acquisitions of
Distribution Assets after the date hereof;
(d) To the extent consistent with the other provisions of this
Agreement, Seller shall execute and deliver at Closing such other
conveyances, certificates of title and bills of sale reasonably
requested by Purchaser that are necessary in order to satisfy any
applicable Legal Requirement relating to the transfer of the
Distribution Assets to Purchaser or which are customarily given in
Alaska to accomplish transfers of assets of the type involved;
provided, however, that nothing in this clause (e) shall obligate
Seller to execute or deliver any document that affects, in a manner
adverse to Seller, Seller's liability to Purchaser as expressed herein
and in the General Assignment.
(e) Seller shall have delivered to Purchaser the original
Letter of Credit.
ARTICLE IX
Termination
Section 9.1. Termination. Subject to Section 9.2 hereof, this Agreement
and the transactions contemplated hereby may be terminated and abandoned:
(a) at any time prior to the Closing Date by mutual consent of
Purchaser and Seller; or
(b) by Purchaser or Seller at any time after December 31, 1999
(the "Termination Date") if the Closing shall not have occurred on or
prior to such date; provided, however, that either party may extend the
Termination Date for an additional three months from such originally
scheduled Termination Date if all the conditions to consummation of the
transactions contemplated hereby set forth in Article VII hereof have
either been satisfied or are then capable of being satisfied by such
date, other than the conditions set forth in Sections 7.3.3 and 7.4.3;
and provided further, that the right to terminate this Agreement under
this Section 9.1(b) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Closing to occur on or before the
Termination Date;
(c) by Purchaser or Seller at any time within 30 days
following the issuance of a ruling by the RCA to the effect that the
transactions contemplated by this Agreement to occur at Closing will
not be authorized to occur; or
(d) at any time on or before the Closing Date, by Purchaser if
Seller shall have failed to perform, satisfy and comply with, in any
material respect, on the date specified, any material term, condition
or provision herein required of Seller on or before the Closing Date;
26
27
(e) at any time on or before the Closing Date, by Seller if
Purchaser shall have failed to perform, satisfy and comply with, in any
material respect, on the date specified any material term, condition or
provision herein required of Purchaser on or before the Closing Date;
or
(f) by Purchaser at any time on or before the Closing Date,
upon the immediate payment by Purchaser to Seller of a termination fee
of $10 million, upon receipt of which by Seller (i) such termination
shall become effective and (ii) Seller shall promptly return the
original Letter of Credit to Purchaser.
The power of termination and abandonment of the transactions
contemplated by this Agreement pursuant to this Section 9.1 will be effective
only after written notice thereof, signed on behalf of the party for which it is
given by a duly authorized officer, shall have been given to the other party
hereto.
Section 9.2 Limitation on Right to Terminate; Effect of Termination.
(a) A party shall not be allowed to exercise any right of
termination pursuant to Section 9.1 if the event giving rise to the
termination right shall be due to the willful failure of such party
seeking to terminate this Agreement to perform or observe in any
material respect any of the covenants, or agreements hereof to be
performed or observed by such party.
(b) If this Agreement is terminated as permitted under Section
9.1 hereof, such termination shall be without liability of or to any
party to this Agreement, or any shareholder, director, officer,
employee, agent, servant, consultant or representative of such party;
provided, however, that if such termination shall result from the
willful failure of any party to fulfill a condition to the performance
of any other party or to perform a covenant of this Agreement or from a
material and willful breach by any party to this Agreement, then such
party shall (subject to the limitation set forth in the last sentence
of this Section 9.2(b)) be fully liable for any and all damages
sustained or incurred by the other party. If either party to this
Agreement resorts to legal proceedings to enforce this Agreement, the
prevailing party in such proceedings shall be entitled to recover all
costs incurred by such party including reasonable attorney's fees, in
addition to any other relief to which such party may be entitled;
provided, however, and notwithstanding anything to the contrary in this
Agreement, in no event shall either party be entitled to receive any
punitive, indirect or consequential damages.
(c) Notwithstanding anything in Section 9.2(b) to the
contrary, if Seller terminates this Agreement pursuant to Section
9.1(e) or as the result of any default or breach by Purchaser of
Purchaser's obligations hereunder, then Seller shall be entitled to
receive an amount equal to $10,000,000 as liquidated damages, and as
Seller's sole remedy in connection therewith, free of any claims by
Purchaser or any other Person with respect thereto (the parties hereby
acknowledging that the extent of damages to Seller occasioned by such
breach or default by Purchaser would be impossible or extremely
difficult
27
28
to ascertain and that the amount of such liquidated damages is a fair
and reasonable estimate of such damages under the circumstances).
(d) Upon the election by Seller to terminate this Agreement
pursuant to Section 9.1(e) hereof because of Purchaser being in default
or breach of its obligations under this Agreement (collectively, the
"Breach Event"), Seller shall give notice of the Breach Event and its
decision to terminate this Agreement to Purchaser. If Purchaser fails
to cure such Breach Event within one Business Day after such notice is
received by Purchaser, then Seller shall have the right to give notice
to Purchaser of the failure to cure the Breach Event and demand payment
from Purchaser of the $10 million liquidated damages. If Purchaser
fails to pay to Seller the $10 million liquidated damages, in cash or
by wire transfer to an account designated by Seller within one Business
Day after the notice demanding payment of the liquidated damages is
received by Purchaser, then Seller shall have the right to draw on the
Letter of Credit in the full amount of $10 million for the full payment
of the $10 million liquidated damages. If it is finally determined
(which determination is no longer subject to further review or appeal)
in accordance with the dispute resolution mechanisms permitted by this
Agreement that Seller was not entitled to receive liquidated damages,
then Seller shall, within 10 business days after such final
determination, remit such liquidated damages, together with interest at
the annual rate equal to the prime rate of Bank of America plus 2% from
the date of payment to Seller until the date of payment to Purchaser.
ARTICLE X
Taxes
Section 10.1 Seller Tax Representations and Warranties.
(a) Seller represents and warrants with respect to APC and the
Distribution Division that, except as set forth or disclosed in Section
10.1(a) of Seller's Disclosure Schedule (i) all Tax Returns required to
be filed have been filed or requests for extensions have been timely
filed, (ii) all such Tax Returns are true and correct in all material
respects, and (iii) all Taxes shown to be due on such Tax Returns have
been paid in full. Except as set forth in Section 10.1(a) of Seller's
Disclosure Schedule, no notice of deficiency or assessment has been
received from any taxing authority with respect to liabilities for
Taxes of APC or the Distribution Division which have not been fully
paid or finally settled, and any such deficiency shown in Section
10.1(a) of Seller's Disclosure Schedule is being contested in good
faith through appropriate proceedings. Except as set in Section 10.1(a)
of Seller's Disclosure Schedule, there are no outstanding agreements or
waivers extending the applicable statutory periods of limitation for
Taxes of APC or the Distribution Division for any period of time.
Except as set forth in Section 10.1(a) of Seller's Disclosure Schedule,
no audits or other administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns of APC or the
Distribution Division, and neither the
28
29
Seller nor APC has any knowledge of any threatened action, audit, or
administrative or court proceeding with respect to any Taxes or Tax
Returns of APC or the Distribution Division.
(b) Seller and APC are and will be members of an "affiliated
group" within the meaning of Section 1504 of the Code as of the Closing
Date.
(c) Except as set forth in Section 10.1(c) of Seller's
Disclosure Schedule, neither Seller nor APC is a party to any
allocation or sharing agreement regarding Taxes with any person.
(d) Seller is not a resident alien individual or foreign
corporation within the meaning of Section 897 of the Code and Purchaser
is not required to withhold Tax on the Purchase Price by reason of
Section 1445 of the Code or any other provision.
(e) Except as set forth in Section 10.1(e) of Seller's
Disclosure Schedule, there are no powers of attorney in effect relating
to Taxes of Seller or APC.
(f) Except as set forth in Section 10.1(f) of Seller's
Disclosure Schedule, there is no dispute or claim as to the Tax
liability of any other person as to which Seller or APC has an
indemnification obligation.
10.2 Tax Covenants and Indemnification
(a) Code Section 338(h)(10) Election; Purchase Price
Allocation. Upon consummation of the transactions contemplated by this
Agreement, Seller and Purchaser shall join in making a timely election
under Section 338(h)(10) of the Code (a "Section 338(h)(10) Election")
with respect to the purchase of the APC Shares and shall make similar
elections under state and local law to the fullest extent possible.
Purchaser will be responsible for preparing and filing all documents
and materials necessary in connection with making the Section
338(h)(10) Election and any similar elections under state and local
law. Not later than 120 days after the Closing Date, Purchaser shall
prepare and deliver to Seller a proposed allocation of the Purchase
Price for purposes of the Section 338(h)(10) Election. Purchaser and
Seller shall timely complete and file Form 8023 and any similar form
under applicable state law. If Purchaser and Seller cannot agree on
such allocation, Purchaser and Seller will select a nationally
recognized accounting firm or other recognized expert to appraise the
assets of APC. The cost of such appraisal will be divided between
Purchaser and Seller equally. Purchaser and Seller agree not to take
any position inconsistent with any such allocation for Tax reporting
purposes. Purchaser and Seller will file all Tax Returns in a manner
consistent with the Section 338(h)(10) Election and the valuation of
APC's assets determined as provided above.
(b) Transfer Taxes. Seller shall be liable for all sales, use,
documentary, recording, stamp, transfer or similar Taxes, assessments
or fees arising from the transaction contemplated by this Agreement;
provided, however, that if and to the extent that the
29
30
aggregate amount thereof exceed $150,000, then Purchaser shall pay 50%
of the amount of such excess, up to a maximum payment with respect
thereto by Purchaser of $50,000.
(c) Information. Seller and Purchaser will make available to
each other, and to any taxing authority, all information, records, or
documents relating to the liability or potential liability for
Pre-Closing Taxes that may be reasonably requested by a party and will
preserve such information, records or documents until the expiration of
any applicable statute of limitations or extensions thereof, provided
Seller and Purchaser shall reserve the confidentiality of any such
information, records or documents.
(d) Seller Indemnification. Seller shall be responsible for
and shall indemnify and hold harmless Purchaser, its subsidiaries and
APC from and against any and all Tax claims resulting from, arising out
of or relating to: (i) any and all Taxes imposed on or incurred by
Purchaser or APC as a result of a breach of the representations and
warranties made in Section 10.1 of this Article; (ii) any and all
Pre-Closing Taxes imposed on, incurred by or attributed to APC or the
Distribution Division, including any federal, state or local Taxes
incurred as a result of making the Section 338(h)(10) Election, except
to the extent any such Taxes are taken into account in determining the
adjustment to the Purchase Price pursuant to Section 2.4, and (iii) any
liability resulting from, arising out of or relating to, in the nature
of, or caused by any liability of APC for Taxes of any person other
than APC under Treas. Reg. ss. 1.1502-6 (or any similar provision of
state, local or foreign law).
(e) Purchaser Indemnification. Purchaser shall be responsible
for and shall indemnify and hold harmless Seller from and against any
and all Tax claims resulting from, arising out of or relating to any
and all Post-Closing Taxes imposed on or incurred by APC or the
Distribution Division.
(f) Procedures for Indemnification. The procedures for
indemnification pursuant to this Article 10 shall be conducted in a
manner consistent with Section 12.2 hereof.
(g) Proration of Tax Items. The Parties agree that for
purposes of allocating tax items of APC and the Distribution Division
between Seller and Purchaser for the Tax year that includes the Closing
Date, such tax items for such Tax year shall be apportioned between
Seller and Purchaser based upon the actual operations of APC and the
Distribution Division during the portion of such period ending on the
Closing Date and the portion of such period beginning on the day
following the Closing Date, and each portion of such period shall be
deemed to be a taxable period (whether or not it is in fact a taxable
period); provided, that ad valorem Taxes shall be prorated on a daily
basis.
(h) Filing Responsibility. Purchaser and APC shall be
responsible for filing all Tax Returns and paying all Taxes due with
respect to periods ending after the Closing Date. To the extent the law
permits or requires a short period return for the period or portion
thereof ending on or before the Closing Date, Seller shall be
responsible for filing such
30
31
returns and paying all Taxes due with respect to such period. Purchaser
will take such steps as are reasonably requested by Seller so that
Seller will have the authority necessary for Seller to be able to
execute and timely file the Tax Returns required to be filed by Seller.
(i) Tax Refunds and Tax Benefits. Any Tax refunds that are
received by Purchaser or APC, and any amounts credited against Tax to
which Purchaser or APC become entitled, that relate to Tax periods or
portions thereof ending on or before the Closing Date shall be for the
account of Seller, and Purchaser shall pay over to Seller any such
refund or the amount of any such credit within fifteen (15) days after
receipt or entitlement thereto. In addition, to the extent that a claim
for refund or a proceeding results in a payment or credit against any
Tax by a taxing authority to the Purchaser or APC of any amount accrued
as of the Closing Date, Purchaser shall pay such amount to Seller
within fifteen (15) days after receipt or entitlement thereto.
(j) Control of Tax Audits. Seller shall have the right, at its
own expense, to control any audit or examination by any taxing
authority ("Tax Audit"), initiate any claim for refund, contest,
resolve and defend against any assessment, notice of deficiency, or
other adjustment or proposed adjustment relating to any and all Taxes
for any taxable period ending on or before the Closing Date and
relating to APC or the Distribution Division. With respect to the items
described in the preceding sentence, Seller shall consult with
Purchaser with respect to the resolution of any such issue that would
adversely affect Purchaser, and with respect to Taxes other than income
Taxes will not settle any such issue, or file any amended return
relating to such issue, without the consent of Purchaser, which consent
shall not be unreasonably withheld. Seller will not enter into any
binding agreement with any Tax Authority with respect to Taxes (other
than income Taxes) for Tax periods ending or beginning after the
Closing Date. Purchaser shall have the right, at its own expense, to
control any other Tax Audit, initiate any other claim for refund, and
contest, resolve and defend against any other assessment, notice of
deficiency, or other adjustment or proposed adjustment relating to any
Taxes for any taxable period beginning before the Closing Date and
ending after the Closing Date, provided, that Purchaser shall consult
with Seller with respect to the resolution of any issue that would
adversely affect Seller, and, with respect to Taxes, other than income
Taxes, will not settle any such issue, or file any amended return
relating to any such issue, without the consent of Seller, which
consent shall not unreasonably be withheld. Where consent to a
settlement is withheld by the other party pursuant to this Section,
such other party may continue or initiate any further proceedings at
its own expense, provided that the liability of the first party, after
giving effect to this Agreement, shall not exceed the liability that
would have resulted from the settlement or amended return.
(k) Cooperation on Tax Matters.
(i) Purchaser, APC and Seller shall cooperate
fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant
to this Agreement and any audit, litigation or other
proceeding with respect
31
32
to Taxes. Such cooperation shall include the retention and
(upon the other party's request) the preservation of records
and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional
information and explanation of any material provided
hereunder. The Seller agrees (A) to retain all books and
records in its possession with respect to Tax matters
pertinent to APC and the Distribution Assets relating to any
taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent
notified by Purchaser or Seller, any extensions thereof) of
the respective taxable periods, and to abide by all record
retention requirements or agreements entered into with any
taxing authority, and (B) to give the other party reasonable
written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so
requests, Seller shall allow Purchaser to take possession of
such books and records.
(ii) Purchaser and Seller further agree, upon
request, to provide the other party with all information that
either party may be required to report pursuant to Section
6043 of the Code and all Treasury Regulations promulgated
thereunder with respect to the transactions contemplated by
this Agreement.
(l) Survival of Obligations. The obligations of the parties
set forth in this Article X shall be unconditional and absolute and
shall remain in effect until the expiration of the applicable
statute(s) of limitations.
ARTICLE XI
Definitions
As used herein, the following terms have the following meanings:
AAA: As defined in Section 13.11(b)(ii).
Act: As defined in Section 4.10.
Agreement: This Purchase and Sale Agreement, dated as of July 15, 1999,
between Seller and Purchaser, as the same may be amended or modified in writing
by the parties from time to time.
APC: Alaska Pipeline Company, an Alaska corporation.
APC Assets: All assets, properties and rights of APC.
APC Debt: The (i) debt of APC owned by Seller and described in the
Seller's Disclosure Schedule and (ii) indebtedness under the Intercompany Line
of Credit.
APC Debt Purchase Price: As defined in Section 2.3.
32
33
APC Shares: All the outstanding shares of capital stock of APC.
Assets Purchase Price: As defined in Section 2.2.
Xxxxxx: As defined in 5.3(b)(iv).
Base Financial Statements: As defined in Section 3.8.
Business Day: Any day except Saturday, Sunday and any other day on
which banking institutions located in the City of New York, New York are
required or authorized to close.
Board of Directors: Either of the respective boards of directors of
Seller and Purchaser or any duly authorized committee of that board.
Claim Notice: A written notice of claim given by a party seeking
indemnification pursuant to the terms of this Agreement that specifies in
reasonable detail the specific nature of the Losses and the estimated amount of
such Losses.
Closing: As defined in Section 8.1.
Closing Date: As defined in Section 8.1.
Code: The Internal Revenue Code of 1986, as amended.
Contracts: In the case of Seller, all agreements, contracts, notes and
other legally binding commitments to which Seller is a party and which relate to
the Distribution Division and, in the case of APC, all agreements, contracts,
notes and other legally binding commitments to which APC is a party.
Distribution Assets: The "Assets," as defined in the General
Assignment.
Distribution Business: The business carried on and conducted by the
Distribution Division.
Distribution Division: Seller's Alaskan natural gas distribution
division generally known as "ENSTAR Natural Gas Company."
Environmental Laws: 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 APC Assets and Distribution
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
33
34
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.
Employees: As defined in Section 3.17(d)(i).
ERISA: The Employee Retirement Income Security Act of 1974, as amended
from time to time.
Existing Loan Documents: The mortgages, indentures, security agreements
and other instruments listed in Seller's Disclosure Schedule, together with any
mortgages, indentures, security agreements or other instruments executed and
delivered by Seller or APC after the date hereof in connection with the renewal,
extension, rearrangement or refunding of the indebtedness evidenced or secured
by any of such listed mortgages, indentures, security agreements or other
instruments to the extent accomplished in compliance with this Agreement.
Final Order: An action by the relevant regulatory authority that has
not been reversed, stayed, enjoined, set aside, annulled or suspended, with
respect to which any waiting period prescribed by law before the transactions
contemplated hereby may be consummated has expired, and as to which all
conditions to the consummation of such transactions prescribed by law,
regulation or order have been satisfied.
First National Credit Agreement: As defined in Section 3.9(d).
General Assignment: As defined in Section 8.1(c).
Xxxx-Xxxxx-Xxxxxx Act: As defined in Section 5.1.3.
Indemnified Party: As defined in Section 12.2(e).
Indemnifying Party: As defined in Section 12.2(e).
Intercompany Line of Credit Agreement: The Revolving Credit Agreement
dated as of July 1, 1998, between the Distribution Division and Seller.
Interim Period: As defined in Section 5.1.1.
knowledge: When used in the phrases "to Seller's knowledge," "to the
knowledge of Seller" or similar phases with respect to Seller, means, and shall
be limited to, the actual knowledge of the executive officers of Seller or APC
or the senior employee of Seller or APC who are responsible for the area of
operation of the Natural Gas Business to which such person's knowledge relates.
34
35
Legal Requirements: Any and all applicable (i) federal, state, local
and foreign laws (statutory and administrative), ordinances and regulations,
(ii) judgments, orders, writs, injunctions, decrees and (iii) contracts with any
federal, state or foreign court, arbitrator or administrative or governmental
authority, bureau or agency relating to compliance with matters described in (i)
or (ii) above.
Losses: As defined in Section 12.2(a).
Material Adverse Effect: With respect to any Person, an occurrence or
condition that has a material adverse effect on the condition (financial or
otherwise) of operations, business, property or prospects of such Person, taken
as a whole, or materially hinders or impedes the consummation of the
transactions contemplated by this Agreement; provided, however, that an
occurrence or condition shall not constitute a Material Adverse Effect to the
extent that the Distribution Division or APC realizes the benefit of insurance
maintained by or for the benefit of the Natural Gas Business or is recoverable
by the Natural Gas Business through operation of current tariffed rates;
provided further that any action or threatened action from the RCA, either in
connection with its consideration of the approval of the transactions
contemplated by this Agreement or otherwise, shall not form the basis, directly
or indirectly, for a Material Adverse Effect with respect to the Distribution
Division, APC or the Natural Gas Business.
Material Contract: Any Contract which (a) calls for payments to or from
Seller or APC, on the one hand, and any third party, on the other hand, of an
amount in excess of $1,250,000 for any 12-month period commencing on or after
the date hereof and (b) is not terminable solely at the option of Seller or APC,
as the case may be, without penalty on no more than 90 days notice.
Material Employment Contract: Any employment, management, consulting or
similar agreements or any labor contracts or collective bargaining agreement
that (a) calls for payments from Seller or APC of an amount in excess of $50,000
for any 12-month period commencing on or after the date hereof and (b) is not
terminable solely at the option of Seller or APC, as the case may be, without
penalty on no more than 90 days notice.
Material Liability: In the case of any Person, any material liability
of such Person; provided however, such term shall not include any material
liability the cost or expense associated with which insurance proceeds have been
recovered by such Person or is recoverable by such Person through operation of
current tariffed rates.
Material Permits: All Permits relating to the Natural Gas Business
other than those the absence of which would not have a Material Adverse Effect.
MSP: As defined in Section 5.3(b)(i).
Natural Gas Business: The Distribution Business and the Transmission
Business, taken together.
35
36
Natural Gas Business Financial Statements: As defined in Section 3.8.
Notice Period: As defined in Section 12.2(e)
Operating Plan: As defined in Section 3.17(d)(i).
Operative Documents: This Agreement, the General Assignment, the Tax
Agreement and all other documents executed and delivered by Seller or Purchaser
at Closing.
Pension Plans: As defined in Section 3.17(d).
Permits: Any and all permits, authorizations, certificates, approvals,
registrations, legal status, variances, franchises, orders or other approvals
and licenses (i) under any Legal Requirement or (ii) granted by any federal,
state, local or foreign administrative authority, bureau or agency.
Permitted Encumbrances: As applied to Seller or APC:
(a) liens for taxes, assessments and governmental charges not
yet delinquent or, if delinquent, that are being contested in good
faith in the ordinary course of business and for which adequate
reserves have been established;
(b) carriers', warehousemen's, materialmen's, mechanics',
repairmen's, employees' or other similar liens or charges for
liquidated amounts arising in the ordinary course of business (i) if
securing amounts that have not yet become due and payable or payment is
being withheld as provided by law or (ii) if their validity is being
contested in good faith in the ordinary course of business by
appropriate action and for which adequate reserves have been
established;
(d) liens incurred or deposits made in the ordinary course of
business in connection with workmen's compensation, unemployment
insurance and other social security, or to secure the performance of
leases, tenders, statutory obligations, surety and appeal bonds,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations incurred in connection with the borrowing of
money or the obtaining of advances or credit);
(e) any judgment lien relating to a judgment for not more than
$50,000, unless the judgment it secures shall not, within 30 days after
the entry thereof, have been discharged or execution thereof stayed
pending appeal, or shall not have been discharged within 30 days after
the expiration of any such stay;
(f) leases granted in the ordinary course of business or
leases to which any property acquired in connection with the Natural
Gas Business in the ordinary course of business is subject;
36
37
(g) any encumbrances (other than to secure the payment of
money), easements, rights-of-way, permits, reservations, leases, rights
in respect of gravels, minerals, oil, gases or water or in respect of
grazing, logging, mining, canals, ditches, reservoirs or the like,
conditions, covenants, and restrictions, provided that such
encumbrances, easements, rights-of-way, permits, reservations, leases,
rights, conditions, covenants, and restrictions are such that they will
not either individually or in the aggregate, if exercised or availed
of, interfere materially with the use or operation of the property of
Seller or APC affected thereby for the purpose for which such property
is currently used;
(h) all Legal Requirements and rights reserved to or vested in
any municipality or public authority to control, regulate or use any
property of Seller or APC;
(i) other than any consents of any governmental authority, 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 Purchaser have been made by the parties to allow Purchaser to
receive substantially the same economic benefits as if all such waivers
and consents had been obtained;
(j) all rights to consent by, required notices to, filings
with, or other actions by any governmental authority in connection with
the transactions contemplated hereby;
(k) reservations and other matters relating to titles to
leases and leasehold interests in oil and gas properties and the lands
covered thereby, if such reservations and other matters do not, in the
aggregate, do not materially impair the use of such leases or leasehold
interests for the purposes for which they are held or the value of the
interest therein;
(l) any liens, mortgages or encumbrances given by the
Distribution Division and/or APC for the benefit of the other securing
indebtedness owing from one of the foregoing to the other; and
(m) any other liens, charges, encumbrances, contracts,
agreements, instruments, obligations, defects or irregularities of any
kind whatsoever (but not including liens to securing indebtedness for
borrowed money) affecting the APC Assets or the Distribution Assets
that individually or in the aggregate do not, in the aggregate,
materially impair the use of such assets for the purposes for which
they are held or the value of the interest therein.
Person: An individual, corporation, limited liability company,
partnership, joint venture, bank, trust, unincorporated organization and/or a
government or any department or agency thereof. Such term shall also include the
Distribution Division.
PBGC: As defined in Section 3.17(d)(vii).
37
38
Plans: As defined in Section 3.17(d)(i).
Post-Closing Taxes: Any taxable period beginning after the Closing
Date, and, for any taxable period beginning before the Closing Date and ending
after the Closing Date, Taxes relating to the portion of such taxable period
after but not including the Closing Date.
Pre-Closing Taxes: Any taxable period ending on or prior to the Closing
Date, and, for any taxable period beginning before the Closing Date and ending
after the Closing Date, Taxes relating to the portion of such taxable period up
to and including the Closing Date.
Profit Sharing Plans: As defined in Section 3.17(d)(i).
Purchase Price: The Stock Purchase Price, the Assets Purchase Price and
the APC Debt Purchase Price, taken together.
Purchaser: SEMCO ENERGY, Inc., a Michigan corporation.
Purchaser Indemnitees: Purchaser and its officers, directors,
employees, agents, representatives, affiliates, subsidiaries (including, from
and after the Closing, APC), successors and assigns.
Purchaser's Disclosure Schedule: The disclosure schedule of Purchaser
attached hereto; and the phrase disclosed in Purchaser's Disclosure Schedule
shall mean as set forth or referred to in Purchaser's Disclosure Schedule.
Purchaser's Required Approvals: As defined in Section 4.7.
Purchaser's Required Governmental Consents: As defined in Section 4.4.
RCA: The Regulatory Commission of Alaska, together with any predecessor
commission or agency (including, without limitation, the Alaska Public Utilities
Commission) or any successor commission or agency.
Salaried Plan: As defined in Section 3.17(d)(i).
Section 338(h)(10) Election: As defined in Section 10.2(a).
Seller: Ocean Energy, Inc., a Texas corporation.
Seller's Disclosure Schedule: The disclosure schedule of Seller
attached hereto; and the phrase "disclosed in Seller's Disclosure Schedule"
shall mean as set forth or referred to in Seller's Disclosure Schedule.
Seller's Required Approvals: As defined in Section 3.7.
38
39
Seller's Required Governmental Consents: As defined in Section 3.4.
Seller Indemnitees: Seller and its officers, directors, employees,
agents, representatives, affiliates, subsidiaries, successors and assigns.
SERP: As defined in Section 3.17(d)(i).
Stock Purchase Price: As defined in Section 2.1.
Tax Agreement: As defined in Section 8.1(e).
Taxes means all taxes, charges, fees, levies, penalties or other
assessments imposed by any federal, state or local foreign taxing authority,
including but not limited to, income, excise, real or personal property, sales,
transfer, franchise, payroll, withholding, social security, gross receipts,
license, stamp, occupation, employment or other taxes, including any interest,
penalties or additions attributable thereto.
Tax Return: Any return, report, information return, declaration, claim
for refund or other document (including any schedule or related or supporting
information) required to be supplied to any taxing authority with respect to
Taxes including amendments thereto.
Termination Date: As defined in Section 9.1(b).
Thrift Plan: As defined in Section 3.16(d)(i).
Transmission Business: The business carried on and conducted by APC.
ARTICLE XII
Assumption and Indemnification
12.1 Assumption. Subject to Section 5.1.4 and Seller's indemnification
obligation set forth in Section 12.2(b), at the Closing, Purchaser shall assume
all liabilities, duties and obligations of every kind whatsoever of Seller
relative to the ownership or operation of the Natural Gas Business, including,
without limitation, the obligation to pay all trade and other accounts payable
relative to the Natural Gas Business.
39
40
12.2 Indemnification .
(a) Subject to Section 12.2(c), and except for those matters
set forth in Article X which shall be governed by the terms of Article
X, Purchaser shall indemnify, defend and hold harmless the Seller
Indemnitees from and against any and all claims, liabilities, losses,
causes of actions, costs and expenses (including, without limitation,
involving theories of negligence or strict liability and including
court costs and attorneys' fees) ("Losses") asserted against, resulting
from, imposed upon or incurred by any of the Seller Indemnitees as a
result of, or arising out of, the breach of any of the representations,
warranties, covenants or agreements of Purchaser contained in this
Agreement, or as a result of, or arising out of, the ownership or
operation of the Natural Gas Business, the Distribution Assets or the
APC Assets, regardless in each case whether known or unknown, or
whether attributable to periods of time before or after the Closing
Date; provided, however, that Purchaser shall have no obligation to
indemnify any of the Seller Indemnitees with respect to any matter to
the extent Seller is indemnifying Purchaser for such matter pursuant to
Section 12.2(b).
(b) Subject to Section 12.2(d), and except for those matters
set forth in Article X which shall be governed by the terms of Article
X, Seller shall indemnify, defend and hold harmless the Purchaser
Indemnitees from and against all Losses asserted against, resulting
from, imposed upon or incurred by any of the Purchaser Indemnitees as a
result of, or arising out of (i) the breach of any of the
representations, warranties, covenants or agreements of Seller
contained in this Agreement, (ii) the litigation described under Item
Nos. 1 and 2 on Section 3.14 of Seller's Disclosure Schedule or (iii)
any oral or written representations or other actions by Seller, APC or
the Distribution Division prior to the Closing Date to any Employee not
subject to collective bargaining agreements, if and to the extent such
representations or actions are a significant cause of such Employee's
employment status being other than at-will; provided, however, that
with respect to the matters set forth in clause (iii) above, the amount
of Losses attributable to an Employee's not having at-will status shall
only be the amount by which Purchaser suffers Losses in excess of the
amount, if any, that Purchaser would otherwise be obligated to pay such
Employee upon termination under the terms of a severance agreement
referred to in Section 5.3(b)(iv) hereof or the Resource Group Plan
described in Section 5.3(b)(iv) hereof. Notwithstanding any provision
in this Agreement to the contrary, the indemnification for Losses
described in clauses (ii) and (iii) shall not be subject to the
threshold set forth in Section 12.2(d)(iv) hereof. Notwithstanding any
provision in this Agreement to the contrary, Seller's obligation to
indemnify Purchaser with respect to any litigation proceeding described
in clause (ii) above shall terminate upon a final, nonappealable
judgment is obtained with respect to such proceeding or such proceeding
is dismissed with prejudice, whichever is earlier. Notwithstanding any
provision in this Agreement to the contrary, Seller's obligation to
indemnify Purchaser with respect to the matters set forth in clause
(iii) above shall terminate on the third anniversary of the Closing
Date.
40
41
(c) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, IN NO EVENT SHALL PURCHASER BE LIABLE TO SELLER INDEMNITEES
FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE
OR SPECULATIVE DAMAGES; provided, however, that if a Seller Indemnitee
is held liable to a third party for any of such damages and Purchaser
is obligated to indemnify such Seller Indemnitee for the matter that
gave rise to such damages, then Purchaser shall be liable for, and
obligated to reimburse such Seller Indemnitee for, such damages.
(d) Notwithstanding anything to the contrary in this
Agreement, but subject to the last two sentences of Section 12.2(b),
the liability of Seller under this Agreement and any documents
delivered in connection herewith or contemplated hereby shall be
limited as follows:
(i) IN NO EVENT SHALL SELLER BE LIABLE TO PURCHASER
INDEMNITEES FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT,
CONSEQUENTIAL, REMOTE OR SPECULATIVE DAMAGES; provided,
however, that if a Purchaser Indemnitee is held liable to a
third party for any of such damages and Seller is obligated to
indemnify such Purchaser Indemnitee for the matter that gave
rise to such damages, then Seller shall be liable for, and
obligated to reimburse such Purchaser Indemnitee for, such
damages.
(ii) In no event shall any amounts be recovered
from Seller under Section 12.2(b) or otherwise for any matter
for which a Claim Notice is not delivered to Seller; (A) in
the case of indemnity for breach of a representation or
warranty, prior to the close of business on the date of
termination of such representation or warranty pursuant to
Section 12.2(d)(iii), (B) in the case of any covenant or
agreement of Seller, other than those covenants or agreements
set forth in Section 5.2.2 or 5.3(b)(i), prior to the close of
business on the 18-month anniversary of the Closing Date, and
(C) in the case of the covenants or agreements of Seller set
forth in Sections 5.2.2 or Section 5.3(b)(i), prior to the end
of any applicable statute of limitations; provided, however,
that such indemnities shall survive with respect only to the
specific matter that is the subject of any Claim Notice
delivered in good faith in compliance with the requirements of
this Section 12.2(d)(ii) until the earlier to occur of (A) the
date on which a final nonappealable resolution of the matter
described in such Claim Notice has been reached or (B) the
date on which the matter described in such Claim Notice has
otherwise reached final resolution.
(iii) The representations and warranties of Seller
(i) set forth in Section 3.10 shall survive the Closing for a
period of 180 days, and such representations and warranties of
Seller shall terminate at 5:00 p.m., local time in Alaska, on
the 180th day after the Closing Date, and (ii) the
representations and warranties of Seller set forth in Section
3.17 shall survive the Closing for the full period of any
applicable statute of limitation. Except as set forth in the
preceding
41
42
sentence, the representations, warranties, covenants and
agreements of Seller set forth in this Agreement shall survive
the Closing for a period of 18 months, and all
representations, warranties, covenants and agreements of
Seller under this Agreement shall terminate at 5:00 p.m.,
local time in Alaska, on the 18 month anniversary of the
Closing Date; provided, however, that any such representation,
warranty, covenant or agreement that is the subject of a
proper Claim Notice delivered in good faith shall survive with
respect only to the specific matter described in such Claim
Notice until the earlier to occur of (A) the date on which a
final nonappealable resolution of the matter described in such
Claim Notice has been reached or (B) the date on which the
matter described in such Claim Notice has otherwise reached
final resolution.
(iv) Notwithstanding anything to the contrary in
this Agreement, in no event shall Seller indemnify the
Purchaser Indemnitees, or be otherwise liable in any way
whatsoever to the Purchaser Indemnitees, for any Losses until
the Purchaser Indemnitees have suffered Losses in the
aggregate in excess of a deductible in an amount equal to
$3,000,000, after which point Seller will be obligated only to
indemnify the Purchaser Indemnitees from and against further
Losses in excess of such deductible.
(v) Notwithstanding anything to the contrary
herein, in no event shall Seller indemnify the Purchaser
Indemnitees, or be otherwise liable in any way whatsoever to
the Purchaser Indemnitees, for any Losses in excess of an
amount equal to the Purchase Price (before giving effect to
any adjustments provided for pursuant to this Agreement).
(vi) Seller may (but will not be required to), from
time to time prior to or at the Closing, by notice in
accordance with this Agreement, supplement or amend the
Seller's Disclosure Schedule, including without limitation one
or more supplements or amendments to correct any matter which
would constitute a breach of any representation, warranty or
covenant herein contained; provided, however, that subject to
the following sentence, no such supplement or amendment will
affect the rights or obligations of the parties to this
Agreement (including without limitation the right to assert a
breach of a representation or warranty as a failed closing
condition) 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 any breach of
any representation, warranty or covenant which would have
existed by reason of Seller not having made such supplement or
amendment.
(vii) Seller shall have no liability for any claim
(A) to the extent that such claim is covered by insurance
maintained by or for the benefit of Seller (including any such
insurance coverage applicable to the Natural Gas Business the
benefit of which the Distribution Division or APC will
realize) and Purchaser or APC actually receive the proceeds of
such insurance or (B) that, in the case of a claim against or
42
43
affecting the Distribution Division or APC, is recoverable by
the Distribution Division or APC (consistent with the prior
practices of the RCA) through the operation of current
tariffed rates.
(e) All claims for indemnification under Sections 12.2(a) or
12.2(b) shall be asserted and resolved pursuant to this Section
12.2(e). Any Person claiming indemnification hereunder is hereinafter
referred to as the "Indemnified Party" and any Person against whom such
claims are asserted hereunder is hereinafter referred to as the
"Indemnifying Party." In the event that any Losses are asserted against
or sought to be collected from an Indemnified Party by a third party,
said Indemnified Party shall with reasonable promptness provide to the
Indemnifying Party a Claim Notice. The Indemnifying Party shall not be
obligated to indemnify the Indemnified Party with respect to any such
Losses if the Indemnified Party fails to notify the Indemnifying Party
thereof in accordance with the provisions of this Agreement in
reasonably sufficient time so that the Indemnifying Party's ability to
defend against the Losses is not prejudiced. The Indemnifying Party
shall have 30 days from the personal delivery or receipt of the Claim
Notice (the "Notice Period") to notify the Indemnified Party (i)
whether or not it disputes the liability of the Indemnifying Party to
the Indemnified Party hereunder with respect to such Losses and/or (ii)
whether or not it desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such
Losses; provided, however, that any Indemnified Party is hereby
authorized prior to and during the Notice Period to file any motion,
answer or other pleading that it shall deem necessary or appropriate to
protect its interests or those of the Indemnifying Party (and of which
it shall have given notice and opportunity to comment to the
Indemnifying Party) and not prejudicial to the Indemnifying Party. In
the event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that it desires to defend the Indemnified
Party against such Losses, the Indemnifying Party shall have the right
to defend all appropriate proceedings, and with counsel of its own
choosing, which proceedings shall be promptly settled or prosecuted by
them to a final conclusion. If the Indemnified Party desires to
participate in, but not control, any such defense or settlement it may
do so at its sole cost and expense. If requested by the Indemnifying
Party, the Indemnified Party agrees to cooperate with the Indemnifying
Party and its counsel in contesting any Losses that the Indemnifying
Party elects to contest or, if appropriate and related to the claim in
question, in making any counterclaim against the Person asserting the
third party Losses, or any cross-complaint against any Person. No claim
may be settled or otherwise compromised without the prior written
consent of the Indemnifying Party.
(f) The rights, remedies and obligations of the Purchaser
Indemnitees and the Seller Indemnitees set forth in this Section 12.2
and Article X will be the exclusive rights, remedies and obligations of
such Persons after the Closing with respect to this Agreement, the
events giving rise to this Agreement and the transactions provided for
herein or contemplated hereby or thereby.
(g) WITHOUT LIMITING OR ENLARGING THE SCOPE OF THE
INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS AGREEMENT, AN
43
44
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,
VIOLATION OF ANY LAW OR OTHER LEGAL FAULT OF OR BY SUCH INDEMNIFIED
PARTY. THE PARTIES AGREE THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS
LEGEND.
12.3 Independent Investigation. Purchaser represents and acknowledges
that it is knowledgeable of with respect to the transmission and distribution of
natural gas and of the usual and customary practices of natural gas local
distribution companies such as the Natural Gas Business and that it has had
access to the Natural Gas Business, the officers and employees of Seller, the
Distribution Division and APC, and the books, records and files of Seller, the
Distribution Division and APC, relating to the Natural Gas Business and in
making the decision to enter into this Agreement and consummate the transactions
contemplated hereby, Purchaser has relied solely on the basis of its own
independent due diligence investigation of the Natural Gas Business and upon the
representations and warranties made in Article III. Accordingly, Purchaser
acknowledges that Seller has not made, and Seller hereby expressly disclaims and
negates any representation or warranty (other than those express representations
and warranties made in Article III), express, implied, at common law, by statute
or otherwise, relating to the Natural Gas Business.
12.4 Disclaimer Regarding Natural Gas Business. Except as otherwise
expressly provided in Article III above, Purchaser ACKNOWLEDGES THAT SELLER HAS
NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE CONDITION OF ANY REAL PROPERTY,
EQUIPMENT, INVENTORY, MACHINERY, FIXTURES AND PERSONAL PROPERTY CONSTITUTING
PART OF THE NATURAL GAS BUSINESS (INCLUDING, WITHOUT LIMITATION, (A) ANY IMPLIED
OR EXPRESS WARRANTY OF MERCHANTABILITY, (b) ANY IMPLIED OR EXPRESS WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, (c) ANY IMPLIED OR EXPRESS WARRANTY OF
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (d) ANY RIGHTS OF PURCHASER UNDER
APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE
PURCHASE PRICE, (e) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM VICES OR
DEFECTS, WHETHER KNOWN OR UNKNOWN, (f) ANY IMPLIED OR EXPRESS WARRANTY OF
FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT, (g) ANY AND ALL IMPLIED
WARRANTIES EXISTING UNDER APPLICABLE LAW NOW OR HEREAFTER IN EFFECT, AND (h) ANY
IMPLIED OR EXPRESS WARRANTY REGARDING ENVIRONMENTAL LAWS, THE RELEASE OF
MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF THE ENVIRONMENT OR HEALTH) IT
BEING THE EXPRESS INTENTION OF PURCHASER AND SELLER THAT (EXCEPT TO THE EXTENT
EXPRESSLY PROVIDED IN ARTICLE 3) THE DISTRIBUTION ASSETS AND THE APC ASSETS
SHALL BE CONVEYED (DIRECTLY OR INDIRECTLY, AS APPLICABLE) TO PURCHASER "AS IS,"
"WHERE IS" AND IN THEIR PRESENT CONDITION AND STATE OF
44
45
REPAIR AND PURCHASER REPRESENTS TO SELLER THAT PURCHASER HAS MADE OR CAUSED TO
BE MADE SUCH INSPECTIONS WITH RESPECT TO THE DISTRIBUTION ASSETS AND THE APC
ASSETS AS PURCHASER DEEMS APPROPRIATE AND PURCHASER WILL ACCEPT THE DISTRIBUTION
ASSETS AND THE APC ASSETS "AS IS," "WHERE IS" AND IN THEIR PRESENT CONDITION AND
STATE OF REPAIR.
ARTICLE XIII
Miscellaneous
Section 13.1. Modification; Waiver. This Agreement may be modified,
amended or supplemented in any manner and at any time only by a written
instrument executed by purchaser and Seller.
Section 13.2. Entire Agreement. This Agreement supersedes any and all
other agreements, oral or written, among the parties hereto in respect of the
subject matter of this Agreement.
Section 13.3. Expenses. Whether or not the transactions contemplated
herein shall be consummated, each party shall (except as otherwise specifically
provided herein) pay its own expenses incident to the preparation and
performance of this Agreement, including broker's fees and commissions; and each
party shall indemnify and hold harmless the other party with respect to
brokerage fees and commissions incurred by the indemnifying party in connection
with the transactions contemplated by this Agreement.
Section 13.4 Further Actions. Each party shall execute and deliver such
other certificates, agreements, conveyances, certificates of title, and other
documents and take such other actions as may reasonably be requested by the
other parties in order to consummate or implement the transactions contemplated
by this Agreement.
Section 13.5. Notices. Any and all notices or other communications
required or permitted under this Agreement shall be given in writing and
delivered in person or sent by United States certified or registered mail,
postage prepaid, return receipt requested, or by overnight express mail, or by
telex, facsimile or telecopy to the address of such party set forth below. Any
such notice shall be effective upon receipt or three days after placed in the
mail, whichever is earlier.
If to Purchaser:
SEMCO ENERGY, Inc.
000 Xxxxx Xxxxxx, X.X. Xxx 0000
Xxxx Xxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxxxx Xxxxxxx
Telecopy Number: (000) 000-0000
with copies to:
45
46
Xxxxxx X. Xxxxxxx
000 X. 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000-0000
Telecopy Number: (000) 000-0000
and
LeBouef, Lamb, Xxxxxx & XxxXxx, LLP
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Telecopy Number: (000) 000-0000
If to Seller:
Ocean Energy, Inc.
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx L.L.P.
2300 First City Tower
0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: J. Xxxx Xxxxx
Telecopy Number: (000) 000-0000
Any party may, by notice so delivered, change its address for notice purposes
hereunder.
Section 13.6. Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned, by
operation of law or otherwise, by any party hereto without the prior written
consent of the other party; provided, however, in the event of any such
assignment by a party by operation of law without the consent of the other party
as required above, such other party may consent to such assignment after it has
occurred and, in such event, this Agreement and all the provisions hereof shall
be binding upon the Person receiving such assignment by operation of law.
Section 13.7. No Third Party Beneficiaries. Nothing in this Agreement
shall provide any benefit to any third party or entitle any third party to any
claim, cause of action, remedy or right of any kind, it being the intent of the
parties that this Agreement shall not be construed as a third party
46
47
beneficiary contract; provided, however, that the indemnification provisions in
Section 12.2 shall inure to the benefit of the Purchaser Indemnitees and the
Seller Indemnitees as provided therein.
Section 13.8. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any adverse
manner to either Party. Upon such determination that any term or other
provisions is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
Section 13.9. Counterparts. This Agreement may be executed in multiple
counterparts, all of which shall constitute one and the same instrument.
Section 13.10. Construction. Any section headings in this Agreement are
for convenience of reference only, and shall be given no effect in the
construction or interpretation of this Agreement or any provisions thereof. No
provision of this Agreement will be interpreted in favor of, or against, any
party by reason of the extent to which any such party or its counsel
participated in the drafting thereof or by reason of the extent to which any
such provision is inconsistent with any prior draft hereof or thereof.
Section 13.11. Applicable Law; Alternative Dispute Resolution.
(a) This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Texas without giving
effect to any choice or conflict of law provision or rule (whether of
the State of Texas or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Texas.
(b) Any dispute arising under this Agreement or otherwise in
connection with or relating to the transactions contemplated hereby
shall be resolved pursuant to this Section 13.11(b):
(i) Any party has the right to request the other to
meet to discuss a dispute. The party requesting the meeting
will give at least 10 business days notice in writing of the
subject it wishes to discuss, provide a written statement of
the dispute, and designate an officer of the party with
complete power to resolve the dispute to attend the meeting.
Within three business days after receipt to such request, the
party receiving the request will provide a responsive written
statement and will designate an officer of the party who will
attend the meeting with complete power to resolve the dispute.
(ii) If the meeting fails to resolve the dispute by a
signed agreement among the officers, the dispute shall be
submitted for binding arbitration
47
48
administered by the AAA under its Commercial Arbitration Rules
before a single arbitrator, and judgment on the award rendered
by the arbitrator may be entered in any court having
jurisdiction thereof.
(iii) The parties agree to make discovery and
disclosure of all matters relevant to the dispute to the
extent and in the manner provided by the Federal Rules of
Civil Procedure. The arbitrator will rule on all requests for
discovery and disclosure and discovery shall be completed
within 90 days of the date of the first notice pursuant to
Section 13.11(b)(i). The arbitrator may consider any matter
relevant to the subject to the dispute and shall follow the
statutes and decisions of the substantive law of Texas
relevant to the subject. The arbitrator shall not have the
authority or power to alter, amend or modify any of the terms
and conditions of the agreement of the parties. The arbitrator
shall issue a final ruling within 180 days of the date of the
first notice pursuant to Section 13.11(b)(i).
(iv) The ruling of the arbitrator shall be in writing
and signed and shall be final and binding upon the parties.
The fees and expenses of counsel, witnesses and employees of
the parties and all other costs and expenses incurred
exclusively for the benefit of the party incurring the same
shall be borne by the party incurring such fees and expenses.
All other fees and expenses including, without limitation,
compensation for the judge, shall be divided equally between
the parties. All meetings and arbitrations held pursuant to
this Section 13.11 shall take place in the Borough of
Manhattan, New York, New York.
Section 13.12. Disclosure Schedules. With respect to the disclosure
schedules delivered pursuant to this Agreement, the disclosures made on any
section of a disclosure schedule with respect to any representation or warranty
shall be deemed to be made with respect to any other representation or warranty
requiring the same or similar disclosure only if the relevance of such
disclosure to other representations and warranties is evident from the face of
the applicable section of the such disclosure schedule. The inclusion of any
matter on any disclosure schedule will not be deemed an admission by any party
that such listed matter is material or that such listed matter has or would have
Material Adverse Effect or constitutes a Material Liability or Material
Contract, as the case may be.
Section 13.13. General Assignment. The parties acknowledge that
Schedule A to the General Assignment describing the real property included in
the Distribution Assets has not yet been prepared. Such schedule shall include
all of the real property located in the State of Alaska that is owned or used by
the Distribution Division in connection with the Distribution Business and such
schedule shall be prepared by Seller and shall be delivered to Purchaser prior
to the Closing. Upon such delivery, such schedule shall be deemed to be
incorporated into the General Assignment and this Agreement by this reference.
Until such schedule is prepared, the General Assignment shall be deemed to cover
all of the real property located in the State of Alaska that is owned or used by
the Distribution Division in connection with the Distribution Business.
48
49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
OCEAN ENERGY, INC.
By
--------------------------------------
Xxxxx X. Xxxxxxx
President and Chief Executive Officer
SEMCO ENERGY, INC.
By
--------------------------------------
Xxxxxxx X. Xxxxxxx
Chairman of the Board, President and
Chief Executive Officer
