1
EXHIBIT 10.5
ASSET PURCHASE AGREEMENT
DATED AS OF MARCH 13, 1996
BY AND AMONG
TRANSWESTERN GATHERING COMPANY
AS SELLER
AND
CONTINENTAL NATURAL GAS, INC.
AS BUYER
2
TABLE OF CONTENTS
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2 Xxxxxxx Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.3 Adjustments to the Purchase Price . . . . . . . . . . . . . . . . . . .
2.4 Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.5 Post-Closing Adjustments to the Purchase Price . . . . . . . . . . . .
2.6 Allocated Values . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 3
CLOSING; ADJUSTMENTS TO PURCHASE PRICE
3.1 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . .
3.2 Deliveries by Seller at Closing . . . . . . . . . . . . . . . . . . . .
3.3 Deliveries by Buyer at Closing . . . . . . . . . . . . . . . . . . . .
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 Organization and Good Standing of Seller . . . . . . . . . . . . . . .
4.2 Condition of the Assets; Preferential Rights to Purchase
4.3 Authorization of Agreement; No Violation; No Consents . . . . . . . . .
4.4 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . .
4.5 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.6 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.7 Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.8 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . .
4.9 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . .
4.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . .
5.2 Authorization of Agreement; No Violation; No Consents . . . . . . . . .
5.3 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . .
5.4 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.6 Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.7 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
i
3
ARTICLE 6
COVENANTS
6.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.2 Operation of the Assets Prior to the Effective Time . . . . . . . . . .
6.3 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.4 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.5 Payment of Pre-Effective Time Operating Expenses . . . . . . . . . . .
6.6 Commission Filings . . . . . . . . . . . . . . . . . . . . . . . . . .
6.7 Risk of Loss of the Assets; Casualty Loss . . . . . . . . . . . . . . .
6.8 Allocation of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
6.9 Records: Access and Retention . . . . . . . . . . . . . . . . . . . . .
6.10 Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.11 Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . .
6.12 Supplements to Schedules . . . . . . . . . . . . . . . . . . . . . . .
6.13 Seller's Property Located on Easements After Closing . . . . . . . . .
6.14 Operational Due Diligence
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF SELLER
7.1 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.3 Pending Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.4 Casualty Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.5 Seller's Acquisition of Assets . . . . . . . . . . . . . . . . . . . .
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF BUYER
8.1 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.3 Pending Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.4 Casualty Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 9
TITLE MATTERS
9.1 Title Examination Period . . . . . . . . . . . . . . . . . . . . . . .
9.2 Definition of Title Defects . . . . . . . . . . . . . . . . . . . . . .
9.3 Remedies for Title Defects . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 10
ENVIRONMENTAL MATTERS
10.1 Pre-Closing Environmental Audit . . . . . . . . . . . . . . . . . . . .
10.2 Post-Closing Environmental Investigation . . . . . . . . . . . . . . .
10.3 Corrective Action . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.4 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ii
4
ARTICLE 11
TERMINATION
11.1 Termination At or Prior to Closing . . . . . . . . . . . . . . . . . .
11.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 12
INDEMNIFICATION
12.1 Assumption of Liabilities Relating to the Assets . . . . . . . . . . .
12.2 Indemnification By Buyer . . . . . . . . . . . . . . . . . . . . . . .
12.3 Indemnification By Seller . . . . . . . . . . . . . . . . . . . . . . .
12.4 Limitation on Damages; Survival of Representations . . . . . . . . . .
12.5 Notice of Asserted Liability; Opportunity to Defend . . . . . . . . . .
ARTICLE 13
MISCELLANEOUS
13.1 Applicable Law; Alternative Dispute Resolution . . . . . . . . . . . .
13.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.3 Independent Investigation . . . . . . . . . . . . . . . . . . . . . . .
13.4 Disclaimer Regarding Assets . . . . . . . . . . . . . . . . . . . . . .
13.5 Waiver of Trade Practices Acts . . . . . . . . . . . . . . . . . . . .
13.6 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . .
13.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.8 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . .
13.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.10 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.12 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.13 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.15 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . .
13.16 Payment of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.17 Certain Interpretive Matters . . . . . . . . . . . . . . . . . . . . .
iii
5
ASSET PURCHASE AGREEMENT
BETWEEN
TRANSWESTERN GATHERING COMPANY
AND
CONTINENTAL NATURAL GAS, INC.
SCHEDULES
SCHEDULE NO. TITLE
------------ -----
1.1 Description of Assets
4.2 Rights to Purchase
4.4 Governmental Consents
4.7 Pending Legal, Administrative or Arbitration
Proceedings
4.9 Environmental
6.3(b) Capital Expenditures
9.2 Permitted Encumbrance
6
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, dated as of March _____, 1996, is by and between
TRANSWESTERN GATHERING COMPANY, a Delaware corporation ("Seller"), as Seller,
and CONTINENTAL NATURAL GAS, INC., a Delaware corporation ("Buyer"), as Buyer.
WHEREAS, SELLER owns certain natural gas gathering pipelines and related
facilities located in the Anadarko producing area that it acquired from
Transwestern Pipeline Company ("TW") ("TW Assets") and Seller has obtained a
Declaratory Order from the Federal Energy Regulatory Commission ("Commission")
finding the TW Assets are gas gathering facilities not subject to the
jurisdiction of the Commission under the Natural Gas Act (the "Act");
WHEREAS, Buyer desires to acquire from Seller, and Seller desires to
sell to Buyer, certain of the natural gas gathering pipelines and related
assets that are located in the Anadarko producing area of Texas and Oklahoma,
generally consisting of the Catsby\Ivanhoe, Xxxxxxx, Kiowa Creek, Xxxx Rock and
Wolf Creek gathering systems; and
WHEREAS, Seller desires to sell the aforementioned gathering assets to
Buyer, upon the terms and subject to the conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale. Subject to the terms and conditions hereof, at
the Closing (defined in Section 3.1 below), Seller will sell, assign, transfer
and deliver to Buyer, and Buyer will purchase and acquire from Seller, the
assets described on Schedule 1.1 attached hereto under the heading "Seller's
Assets" (Seller's Assets are sometimes herein referred to as the "Assets").
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price. Buyer agrees to pay an aggregate purchase price
to Seller of SEVEN MILLION EIGHT HUNDRED FOUR THOUSAND AND NO/100 DOLLARS
($7,804,000.00) (the "Purchase Price"), as adjusted at Closing pursuant to
Section 2.3 of this Agreement (the "Adjusted Purchase Price") less the Xxxxxxx
Money (as defined
7
in Section 2.2) by means of a completed Federal Funds wire transfer of
immediately available funds to an account designated by Seller.
2.2 Xxxxxxx Money. No xxxxxxx money will be deposited by Buyer.
2.3 Adjustments to the Purchase Price.
(a) The Purchase Price shall be increased by the following
amounts:
(i) all capital expenditures (other than expenditures for
Environmental Compliance Deficiencies set forth on the Environmental
Statement (each as hereinafter defined)) reasonably paid or incurred by
Seller or its affiliates that are attributable to the Assets and
attributable to the period of time from and after 12:00 a.m., Houston,
Texas time on the date of this Agreement to the Effective Time (as
hereinafter defined); provided that any individual non-emergency capital
expenditure in excess of $30,000 that is not listed on Schedule 6.1(b)
must have received the prior written approval of Buyer, which approval
shall not be unreasonably withheld, in order for such capital
expenditure to be included in such adjustment;
(ii) the market value of liquid hydrocarbons, if any, in tanks
or storage included in the Assets as of the Effective Time which can be
measured or reasonably estimated;
(iii) the amount, if any, expended by Seller as the cost to cure
any Title Defect (as hereinafter defined) up to the amount of the
deductible provided for in Section 9.3(b), for which Buyer is
responsible; and
(iv) any other amount provided for in this Agreement or agreed
upon in writing by Buyer and Seller.
(b) The Purchase Price shall be decreased by the following amounts:
(i) any amount agreed upon in writing by Buyer and Seller;
(ii) any amount agreed upon in writing by Buyer and Seller
pursuant to Section 10.1(b)(i) as the remaining cost of any incomplete
or remaining corrective projects; and
-2-
8
(iii) any other amount provided for in this Agreement or agreed
upon in writing by Buyer and Seller.
(c) The adjustments described in Sections 2.3(a) and (b) are
hereinafter referred to as the "Purchase Price Adjustments".
2.4 Statement. Not later than three (3) business days prior to the
Closing Date, Seller shall prepare and deliver to Buyer a statement (the
"Statement") of the estimated Purchase Price Adjustments and the estimated
Adjusted Purchase Price ("Estimated Adjusted Purchase Price"). At Closing,
Buyer shall pay the Estimated Adjusted Purchase Price (less the Xxxxxxx Money
Fund).
2.5 Post-Closing Adjustments to the Purchase Price.
(a) On or before one hundred twenty (120) days after the Closing
Date, Seller shall prepare and deliver to Buyer a revised Statement setting
forth the actual Purchase Price Adjustments. To the extent reasonably required
by Seller, Buyer shall assist in the preparation of the revised Statement.
Seller shall provide Buyer such data and information as Buyer may reasonably
request supporting the amounts reflected on the revised Statement in order to
permit Buyer to perform or cause to be performed an audit. The revised
Statement shall become final and binding upon the parties on the sixtieth
(60th) day following receipt thereof by Buyer (the "Final Settlement Date")
unless Buyer gives written notice of its disagreement ("Notice of
Disagreement") to Seller prior to such date. Any Notice of Disagreement shall
specify in detail the dollar amount, nature and basis of any disagreement so
asserted. If a Notice of Disagreement is received by Seller in a timely manner,
then the Statement (as revised in accordance with clause (i) or (ii) below)
shall become final and binding on the parties on, and the Final Settlement Date
shall be, the earlier of (i) the date Seller and Buyer agree in writing with
respect to all matters specified in the Notice of Disagreement or (ii) the date
on which the Final Statement (as hereinafter defined) is issued by the
Arbitrator (as hereinafter defined).
(b) During the sixty (60) days following the date of receipt by
Seller of the Notice of Disagreement, Seller and Buyer shall attempt to resolve
in writing any differences that they may have with respect to all matters
specified in the Notice of Disagreement. If, at the end of such sixty (60) day
period (or earlier by mutual agreement to arbitrate), Buyer and Seller have not
reached agreement on such matters, the matters that remain in dispute may be
submitted to an arbitrator (the "Arbitrator") by either party for review and
resolution. The Arbitrator shall be KPMG Peat Marwick (Houston office), or if
such firm is unable or
-3-
9
unwilling to act, such other nationally recognized independent public
accounting firm as shall be agreed upon by Buyer and Seller in writing. Each
party shall, not later than seven (7) business days prior to the hearing date
set by the Arbitrator, submit a brief with dollar figures for settlement of the
disputes as to the amount of the Adjusted Purchase Price (together with a
proposed Statement that reflects such figures). The figures submitted need not
be the figures offered during prior negotiations. The hearing will be scheduled
seven (7) business days following submission of the settlement figures, or as
soon thereafter as is acceptable to the Arbitrator, and shall be conducted on a
confidential basis without continuance or adjournment. The Arbitrator shall
render a decision resolving the matters in dispute (which decision shall
include a written statement of findings and conclusions) within three (3)
business days after the conclusion of the hearing, unless the parties reach
agreement prior thereto and withdraw the dispute from arbitration. The
Arbitrator shall provide to the parties explanations in writing of the reasons
for its decisions regarding the Adjusted Purchase Price and shall issue the
Final Statement reflecting such decisions. The decision of the Arbitrator shall
be final and binding on the parties. The cost of any arbitration (including the
fees and expenses of the Arbitrator) pursuant to this Section 2.5 shall be
borne equally by Buyer, on the one hand, and Seller, on the other hand. The
fees and disbursements of Seller's independent auditors incurred in connection
with the procedures performed with respect to the Statement shall be borne by
the Seller and the fees and disbursements of Buyer's independent auditors
incurred in connection with their preparation of the Notice of Disagreement
shall be borne by Buyer. As used in this Agreement the term "Final Statement"
shall mean the revised Statement described in Section 2.5(a), as prepared by
Seller and as may be subsequently adjusted to reflect any subsequent written
agreement between the parties with respect thereto, or if submitted to the
Arbitrator, the Statement issued by the Arbitrator.
(c) If the amount of the Adjusted Purchase Price as set forth on the
Final Statement exceeds the amount of the Estimated Adjusted Purchase Price
paid at Closing, then Buyer shall pay to Seller, within five (5) business days
after the Final Settlement Date, the amount by which the Adjusted Purchase
Price as set forth on the Final Statement exceeds the amount of the Estimated
Adjusted Purchase Price paid at Closing. If the amount of the Adjusted Purchase
Price as set forth on the Final Statement is less than the amount of the
Estimated Adjusted Purchase Price paid at Closing, then Seller shall pay to
Buyer, within five (5) business days after the Final Settlement Date, the
amount by which the Adjusted Purchase Prices as set forth on the Final
Statement is less than the amount of the Estimated Adjusted Purchase Price paid
at
-4-
10
Closing. Any post-Closing payment made pursuant to this Section 2.5(c) shall be
made by means of a Federal Funds wire transfer of immediately available funds
to a bank account designated by the party receiving the funds.
2.6 Allocated Values. The parties agree to allocate the Purchase
Price among the Assets for all purposes (including financial accounting and tax
purposes) on or before the Closing Date (the "Allocated Values"). Seller and
Buyer each agree that they will not take any position inconsistent with such
allocation in preparing all tax returns and tax reports to governmental
authorities ("Tax Returns") or otherwise. The parties will timely furnish each
other their tax identification numbers, non-foreign affidavits and other
reasonably requested tax compliance information.
ARTICLE 3
CLOSING; ADJUSTMENTS TO PURCHASE PRICE
3.1 Time and Place of Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at 10:00 a.m.
in the offices of Seller at 0000 Xxxxx Xxxxxx, Xxxxxxx, Xxxxx 00000, on March
29, 1996 (the "Closing Date"), and shall be effective March 31, 1996 as of
11:59 p.m. (Houston time) (the "Effective Time").
3.2 Deliveries by Seller at Closing. At Closing, Seller shall execute
and deliver, or cause to be executed and delivered, to Buyer:
(a) special warranty deeds conveying to Buyer all fee lands included
in the Assets ("Deeds"), in substantially the form attached hereto as Exhibit
A;
(b) assignments and partial assignments, as appropriate, in
recordable form assigning to Buyer all interests in real property included in
the Assets (other than fee property), including any obligations contained in
easements to install and maintain farm taps and/or sell gas from the Assets
through such farm tap facilities ("Assignments" and "Partial Assignments", in
substantially the form attached hereto as Exhibit B-1 and B-2;
(c) a conveyance, assignment and xxxx of sale assigning to Buyer all
personal property (tangible and intangible) included in the Assets
("Conveyance"), in substantially the form attached hereto as Exhibit C;
-5-
11
(d) TW's standard form of Operational Balancing Agreement, which is
attached hereto as Exhibit D (the "TW OBA"), unless the currently effective TW
OBA between TW and Buyer is amended to accommodate new delivery points;
(e) certificates of title for vehicles included in the Assets where
necessary to transfer title, duly endorsed in blank;
(f) the assumption agreement regarding certain system operational
obligations and rate discounts, in substantially the form attached hereto as
Exhibit E (the "Assumption Agreement");
(g) the gathering agreement between TW and Buyer providing
transportation for certain gas that will be purchased or received by TW after
the Closing Date, in the form, provided for in TW's FERC Order in Docket No.
CP95-70 with the term amended to coincide with any TW gas purchase obligations,
attached hereto as Exhibit F (the "Default Gathering Agreement"). In the event
TW and Buyer agree to the assignment of the TW gas purchase obligations to
Buyer, the Default Gathering Agreement shall not be applicable to this
Agreement;
(h) the cathodic protection agreement between TW and Buyer, in
substantially the form attached hereto as Exhibit G (the "Cathodic Protection
Agreement");
(i) right of way and easement agreements granting to Buyer a right of
way for pipeline facilities that cross fee lands retained by Seller or its
affiliates, in substantially the forms attached hereto as Exhibit H (the "Right
of Way Agreement'); and
(j) any other agreements, documents, certificates or other
instruments reasonably necessary to consummate the transactions contemplated by
this Agreement.
3.3 Deliveries by Buyer at Closing. At Closing, Buyer shall deliver
to Seller the Estimated Adjusted Purchase Price as contemplated by Section 2.4,
and Buyer shall execute and deliver or cause to be executed and delivered the
following:
(a) easement agreements, in substantially the form attached hereto as
Exhibit I, granting to Seller (and its affiliates, as the case may be)
easements (at no cost to Seller or its affiliates) across any fee property or
lease included in the Assets in order that Seller and its affiliates can
operate and maintain their respective facilities located on such property that
are excluded form the Assets;
-6-
12
(b) the TW OBA;
(c) the Gathering Agreement;
(d) the Cathodic Protection Agreement;
(e) Deeds, Assignments, Partial Assignments and Conveyances; and
(f) any other agreements, documents, certificates or other
instruments reasonably necessary to consummate the transactions contemplated by
this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants severally as to itself and not
jointly to Buyer as of the date hereof and as of the Closing Date that:
4.1 Organization and Good Standing of Seller. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power, right and authority to own and
lease the properties and assets it currently owns and leases and to carry on
its business as such business is currently being conducted.
4.2 Condition of the Assets; Preferential Rights to Purchase.
(a) Taken as a whole, the tangible assets and properties that are
part of the Assets are generally in good operating condition and repair,
subject to normal wear and maintenance, and except for assets taken out of
service are generally usable in the regular and ordinary course of business.
(b) Except as listed on Schedule 4.2, there are no preferential
rights to purchase any portion of the Assets.
4.3 Authorization of Agreement; No Violation; No Consents. This
Agreement has been duly executed and delivered by Seller. Seller has the full
corporate power and authority to enter into this Agreement, to make the
representation, warranties, covenants and agreements made herein and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all
-7-
13
requisite corporate action on the part of Seller and its affiliates. Neither
the execution and delivery of this Agreement by Seller nor the consummation by
Seller of the transactions contemplated hereby (a) will conflict with, result
in a breach, default or violation of, or require consent of any third party
under (i) the terms, provisions or conditions of the Certificate of
Incorporation or Bylaws of Seller or such affiliates or (ii) to the knowledge
of Seller, any judgment, decree, order, governmental permit, certificate,
license, law, statute, rule or regulation to which either Seller or any such
affiliate is a party or is subject, or to which any of the Assets are subject,
except for (A) consents and approvals from governmental authorities that are
customarily obtained after closing in connection with the transactions
contemplated hereby the (the "Customary Post-Closing Consents") and (B) any
conflict, breach, default, violation, or consent that would not have,
individually or in the aggregate, a Material Adverse Effect, or (b) will result
in the creation of any lien, charge or other encumbrance on any of the Assets.
For purposes of this Agreement, occurrences or conditions shall have a
"Material Adverse Effect" if they individually or collectively have a material
adverse effect on the use, ownership or operation of the Assets, taking into
account the nature and valuation of the Assets, or materially hinder or impede
the consummation of the transactions contemplated by this Agreement. For
purposes of this Agreement, the terms "knowledge", "known" or any similar term,
as applied to Seller, shall mean the actual knowledge of the executive officers
and key operational and management personnel of Seller or other authorized
agents of Seller (to the extent employees or agents of an affiliate of Seller)
who prepared or provided information to Buyer in connection with Buyer's
assessment and analysis of this transaction.
4.4 Governmental Consents. To the knowledge of Seller and except as
set forth on Schedule 4.4, no consent, action, approval or authorization of, or
registration, declaration or filing with, any domestic or foreign court,
government, governmental agency, authority, entity or instrumentality
("Governmental Entity") is required to authorize, or is otherwise required in
connection with, the execution and delivery of this Agreement by Seller or
Seller's performance of the terms of this Agreement or the validity or
enforceability hereof against Seller, except for (a) Customary Post-Closing
Consents, (b) the matters discussed in Section 6.6 of this Agreement.
4.5 Enforceability. This Agreement constitutes the legal, valid and
binding obligation of Seller enforceable against Seller in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws
-8-
14
affecting creditors' rights generally and general principles of equity.
4.6 Brokers. No broker or finder who acted on behalf of Seller or any
affiliate of Seller 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 Seller or any affiliate of Seller for which the Buyer has or
will have any liabilities or obligations (contingent or otherwise).
4.7 Suits. Except as set forth on Schedule 4.7, there is no legal,
administrative or arbitration proceeding pending or, to the knowledge of
Seller, threatened relating to the Assets or to which either Seller or one of
its affiliates is or would be a party in connection with the ownership or
operation of the Assets, or that would prohibit or delay in any material
respect the consummation of the transactions contemplated hereby.
4.8 Compliance With Laws. To the knowledge of Seller, Seller is in
material compliance with each statute, law, ordinance, rule or regulation
("Law") of any Governmental Entity applicable to it and related to the Assets,
or by which the Assets are bound, except for any violation that would not have
a Material Adverse Effect. To the knowledge of Seller, Seller possess all
governmental licenses, permits, and certificates necessary for the current
operation of the Assets, except to the extent that the failure to possess such
governmental licenses, permits, and certificates would not have a Material
Adverse Effect. Nothing in this Section 4.8 shall be deemed or construed to
constitute a representation or warranty with respect to Environmental Laws
because such matters are covered solely by Article 10 and Section 4.9.
4.9 Environmental Matters. Except as set forth on Schedule 4.9, (a)
to the knowledge of Seller and with the possible exception of those matters
raised in the Environmental Statement (as hereinafter defined) from Buyer to
Seller provided for in Section 10.1 (which matters Seller does not admit
constitute violations of Environmental Laws), no violation of Environmental
laws (as defined below) exists with respect to any of the Assets, which
violation of Environmental Laws would have a Material Adverse Effect, and (b)
Seller has all applicable and required environmental permits and has filed all
notices required under applicable Environmental Laws. For purposes of this
Agreement, the term "Environmental Laws" shall mean, as to any given Asset, all
laws, statutes, ordinances, rules and regulations of any Governmental Authority
(as hereinafter defined) pertaining to protection of the environment or human
health in effect as of the date hereof. For purposes of this Agreement, the
term "Governmental Authority" shall mean, as to any
-9-
15
given Asset, the United States and the state, county, city and political
subdivisions in which such Asset is located and the exercises jurisdiction over
such Asset, and any agency, department, board or other instrumentality thereof
that exercises jurisdiction over such Assets.
4.10 Tax Matters. No ad valorem taxes assessed against the Assets are
delinquent. Seller or the previous affiliate owners of the Assets have properly
completed and filed or caused to be filed in a timely manner material reports
or returns required to be filed with respect to such ad valorem taxes relating
to the Assets with any applicable taxing authority or, if not so timely filed,
all appropriate penalties with respect to same have been assessed and paid or
duly contested in good faith and reserved against.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof and as of
the Closing Date that:
5.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Oklahoma with full corporate power, right and authority to own and lease the
properties and assets it currently owns and leases and to carry on its business
as such business is currently being conducted.
5.2 Authorization of Agreement; No Violation; No Consents. This
Agreement has been duly executed and delivered by Buyer. Buyer has the full
corporate power and authority to enter into this Agreement, to make the
representations, warranties, covenants and agreements made herein and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all requisite
corporate action on the part of Buyer. Neither the execution and delivery of
this Agreement by Buyer nor the consummation by Buyer of the transactions
contemplated hereby will conflict with, result in a breach, default or
violation of, or require the consent of a third party under (a) the terms,
provisions or conditions of the Certificate of Incorporation or Bylaws of Buyer
or (b) to the knowledge of Buyer, any judgment, decree or order or any
governmental permit, certificate, material agreement, license, law, statute,
rule or regulation or any judgment, decree order to which Buyer is a party or
is subject, or to which the business, assets or operations of Buyer are
subject, except for (i) Customary Post-Closing Consents and (ii) any
-10-
16
conflict, breach, default or violation that would not have, individually or in
the aggregate, a Material Adverse Effect. For purposes of this Agreement, the
terms "knowledge", "known" or any similar term, as applied to Buyer shall mean
the actual knowledge of the executive officers and key operational and
management personnel of Buyer or other authorized agents of Buyer (to the
extent employees or agents of an affiliate of Buyer) who reviewed information
or otherwise performed due diligence in connection with Buyer's assessment and
analysis of this transaction.
5.3 Governmental Consents. To the knowledge of Buyer, no consent,
action, approval or authorization of, or registration, declaration, or filing
with, any Governmental Entity is required to authorize, or is otherwise
required in connection with, the execution and delivery of this Agreement by
Buyer or Buyer's performance of the terms of this Agreement or the validity or
enforceability hereof against Buyer, except for Customary Post-Closing
Consents.
5.4 Enforceability. This Agreement constitutes the legal, valid and
binding obligation of Buyer enforceable against Buyer in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting creditor's rights generally and general
principles of equity.
5.5 Brokers. No broker or finder has acted for or on behalf of Buyer
or any affiliate of Buyer 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 Buyer or any
affiliate of Buyer for which Seller has or will have any liabilities or
obligations (contingent or otherwise).
5.6 Suits. There is no injunction or restraining order or legal,
administrative or arbitration proceeding pending against Buyer which restrains
or prohibits the consummation of the transactions contemplated by this
Agreement.
5.7 Financing. Buyer has currently available (including funds that
can be drawn under existing lines of credit) all funds necessary to pay the
Purchase Price and any other amounts contemplated by this Agreement. Buyer's
ability to consummate the transactions contemplated hereby is not contingent on
its ability to complete any financing prior to or upon the Closing.
-11-
17
ARTICLE 6
COVENANTS
6.1 General. Buyer and Seller each will use their reasonable efforts
in good faith to take all actions and to do all things necessary or advisable
in order to consummate and make effective the purchase and sale of the Assets
contemplated by this Agreement including satisfaction of the closing
conditions.
6.2 Operation of the Assets Prior to the Effective Time.
(a) Subject to the provisions of applicable agreements Seller shall
continue to maintain, operate and administer the Assets, or shall cause the
Assets to be maintained, operated and administered, in a good and workmanlike
manner consistent with past practices and in substantial compliance with all
applicable laws and regulations; provided, however, prior to the Closing Date
Seller may, at its election, cause liquid hydrocarbons in any tanks or storage
included in the Assets to be drained.
(b) Between the date of this Agreement and the Closing Date, Seller
shall, except for emergency action taken in the face of risk to life, property
or the environment (such determination to be made in Seller's reasonable
judgment) submit to Buyer for prior written approval (which approval shall not
be unreasonably withheld), all requests for capital expenditures relating to
the Assets that involve individual commitments of more than Thirty Thousand
Dollars ($30,000) and which, consistent with generally accepted accounting
principles and the Commission's regulations relating to natural gas pipeline
accounting, are classified as capital expenditures. The capital expenditures
for the Assets shown in Schedule 6.2(b) are hereby approved by Buyer. Buyer
will respond to Seller in writing within three (3) days after receiving from
Seller a request for approval of a capital expenditure. If Buyer fails to
deliver a written response to Seller within such three (3) days, Buyer will be
deemed to have approved such expenditure. Schedule 1.1 shall be deeded amended
to reflect any assets acquired or constructed by Seller in compliance with this
Section 6.2(b).
(c) Without the prior written approval of Buyer, (except with respect
to Default Gathering Contracts (as hereinafter defined)), as to which no prior
approval is necessary Seller will not enter into, amend, or terminate any
agreements to be assigned to Buyer as part of the Assets, other than (i)
execution of any natural gas gathering agreements, wellhead connect agreements
or other similar agreements with producers whose xxxxx become connected to the
Assets or other shippers between the date of this Agreement and the Closing
Date provided such agreements do not contain terms and
-12-
18
conditions less favorable than the Default Gathering Contracts (hereinafter
defined) and (ii) the termination of evergreen or month-to-month arrangements.
Seller will take all commercially reasonable steps to keep in force and perform
any agreements to be assigned to Buyer as part of the Assets.
6.3 Permits. Seller and Buyer agree to keep in force and effect and
to cooperate with each other (and Seller agrees to cause the current owners of
the Assets and their employees to cooperate and assist) to make application for
assignment of existing realty and environmental permits (effective with the
conveyance of the Assets to Buyer) or the issuance of new permits relating to
the Assets subsequent to the conveyance of the Assets to Buyer.
6.4 Access. Seller will permit Buyer's officers, employees, agents
and advisors to have reasonable access to the Assets and the employees
operating the Assets (so long as such access occurs during normal business
hours and does not unreasonably interfere with the operation of the Assets) for
the following: (a) to inspect the Assets (including any Environmental Audit (as
hereinafter defined) conducted pursuant to Article 10); (b) to observe the
operation of the Assets and the performance of duties by the employees
operating the Assets prior to the Closing; and (c) related purposes consistent
with this Agreement. Buyer agrees to maintain the confidentiality of all such
information pursuant to the terms of that certain Confidentiality Agreement
signed January 11,1996, between Enron Liquids Services Corp. ("ELSC"), as agent
for Seller, and Buyer (the "Confidentiality Agreement"). In connection with
Buyer's right to reasonable access to the Assets BUYER HEREBY AGREES TO DEFEND,
INDEMNIFY, RELEASE, PROTECT, SAVE AND HOLD HARMLESS THE SELLER INDEMNITEES (AS
HEREINAFTER DEFINED) FROM AND AGAINST ANY AND ALL LOSSES (AS HEREINAFTER
DEFINED) ARISING OUT OF OR RELATING TO ANY PLANT OR FIELD VISIT, OR OTHER DUE
DILIGENCE ACTIVITY, CONDUCTED BY BUYER OR ANY AFFILIATE, SUCCESSOR, ASSIGN,
OFFICER, REPRESENTATIVE, DIRECTOR, CONTROLLING PERSON AND AGENT (EACH A "BUYER
PARTY"), INCLUDING WITHOUT LIMITATION ANY LOSSES RESULTING, IN WHOLE OR IN
PART, FROM THE CONCURRENT OR JOINT NEGLIGENCE OR STRICT LIABILITY OF ANY SELLER
INDEMNITEE. NOTWITHSTANDING THE FOREGOING, BUYER SHALL NOT BE OBLIGATED TO
INDEMNIFY ANY SELLER INDEMNITEE FOR LOSSES (WITH THE EXPRESS EXCEPTION OF
LOSSES SUFFERED BY ANY BUYER PARTY) THAT WERE GROSS THE RESULT OF ANY SELLER
INDEMNITEE'S STRICT LIABILITY OR THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
ONE OR MORE SELLER INDEMNITEES. THE PARTIES AGREE THAT THIS PARAGRAPH
CONSTITUTES A CONSPICUOUS LEGEND.
6.5 Payment of Pre-Effective Time Operating Expenses. Seller agrees
that all operating expenses actually incurred by Seller or
-13-
19
its affiliates in connection with the operation of the Assets prior to the
Effective Time shall be for the account of, and paid by, Seller or its
affiliates in the ordinary course of business and Buyer shall not be
responsible for the payment thereof other than sales and other transfer taxes
and fees described in Section 6.8(a), which taxes and fees shall be paid by
Buyer.
6.6 Commission Filings. (a) TW filed, with the Commission in Docket
Nos. CP95-70, for authorization to abandon by sale certain gas gathering
facilities, including the Assets, to Seller ("Abandonment Application"). An
Order authorizing the abandonment was issued to TW on July 27, 1995. Buyer
agrees to comply with the conditions set forth in such Order, including but not
limited to, the default gathering contracts applicable to the Assets. A copy of
the Order has been provided to Buyer. In addition, Seller has filed for and
received a Commission Order on its Petition for Declaratory Order, pursuant to
which the Commission determined, among other things, that the gathering
facilities acquired from TW, and which are part of the Assets, are not subject
to the jurisdiction of the Commission under the Act. A copy of such Order has
been provided to Buyer.
(b) Buyer agrees to comply with all Commission requirements regarding
the use and terms and conditions to be contained in the "Default" Gathering
Contract(s) with customers on the gathering facilities constituting a part of
the Assets.
6.7 Risk of Loss of the Assets; Casualty Loss. The risk of loss to
the Assets shall remain on the current owner of the Assets until the Effective
Time, and Buyer will receive the Assets, taken as a whole, in generally good
operating condition and repair, ordinary wear and tear excepted. In the event
any of the Assets shall be damaged by fire or other casualty prior to the
Closing Date, the parties will negotiate in good faith reasonable compensation
reflecting the reasonable costs of repair to the extent such repair,
replacement or reconstruction has not occurred at or prior to the Closing.
6.8 Allocation of Taxes.
(a) Buyer shall be liable for all sales, use, documentary, recording,
stamp, transfer or similar taxes, assessments or fees arising from the transfer
of the Assets to Buyer.
(b) All ad valorem, property and similar taxes for the then current
year relating to the Assets shall be prorated as of the Effective Time. If the
Closing shall occur before the actual taxes for the then current year are
known, the apportionment of taxes
-14-
20
shall be upon the basis of taxes for the Assets for the immediately preceding
year, provided that, if the taxes for the current year are thereafter
determined to be more or less than the taxes for the preceding year (after any
appeal of the assessed valuation thereof is concluded), Seller and Buyer shall
promptly adjust the proration of such taxes in accordance with such
determination, and Seller or Buyer, as the case may be, shall pay to the other
any amount required as a result of such adjustment. All special taxes or
assessments prior to the end of the calendar year of Closing shall be prorated
as of the Closing Date.
(c) Except as set forth in Section 6.8(a) and subject to Section
6.8(b), Seller shall be responsible for all taxes (including fines, interest
and penalties related thereto and except for fines, interest or penalties
resulting from the fault or negligence of Seller in its operation of the Assets
for which Seller shall be liable for pursuant to the provisions of Section 12.3
in the twelve (12) months following the Closing Date) imposed on or with
respect to the Assets that are attributable to any whole or partial taxable
period ending on or before the Effective Time. Buyer shall be responsible for
all taxes (including fines, interest and penalties related thereto) imposed on
or with respect to the Assets that are attributable to any whole or partial
taxable period ending after the Effective Time.
(d) Seller will be entitled to any refunds or credits of taxes paid
with respect to the Assets to the extent attributable to a pre-Effective Time
tax period. Buyer will be entitled to any refunds or credits of taxes paid with
respect to the Assets to the extent attributable to a post-Effective Time tax
period.
6.9 Records; Access and Retention.
(a) As soon as reasonably possible after the completion of the
accounting cycle (but not later than sixty (60) days thereafter) for the period
up to but excluding the Closing Date, Seller will deliver to Buyer copies of
files or, where the files relate exclusively to the Assets, the original files
included in the books, records and files associated with the Assets (the
"Records"), including without limitation gas accounting files, contract
administration files, property record files, maps, engineering reports,
operating reports and data, and maintenance records dealing with the
construction, operation and maintenance of the Assets. After Closing, Buyer
shall give Seller and its authorized representatives such access, during normal
business hours, to the Records, as may be reasonably required by Seller,
provided that such access does not unreasonably interfere with the
-15-
21
ongoing operations of Buyer. Seller shall be entitled to keep or obtain
extracts and copies of such Records.
(b) For a period of seven (7) years after the Closing Date, Buyer
shall preserve and retain all such Records (except for meter charts which shall
be preserved and retained for three (3) years after the Closing); provided,
however, that in the event that Buyer transfers all or a portion of the Assets
to any third party during such period, Buyer may transfer to such third party
all or a portion of the Records related thereto, provided such third party
transferee expressly assumes in writing the obligations of Buyer under this
Section 6.9 and Buyer first offers to Seller the opportunity, at Seller's
expense, to copy the Records to be transferred.
6.10 Names. As soon as reasonably possible after Closing, but in no
event later than ninety (90) days after Closing, Buyer shall remove the names
of Seller and its affiliates, including "ENRON" and all variations thereof,
from all of the Assets and make the requisite filings with, and provide the
requisite notices to, the appropriate federal, state or local agencies to place
the title or other indicia of ownership, including operation of the Assets, in
a name other than any name of Seller or any of its affiliates, or any
variations thereof.
6.11 Employment Matters. (a) All individuals employed by Seller or one
of its affiliates who are currently assigned to perform work on the Assets
affected by this Agreement are designated by Seller on the Employee Schedule
(as hereinafter defined) as "Field Employees". Buyer agrees to cause a member
of the controlled group under IRC Section 1563(c)(2)(A) of which Buyer is a
member (the "Buyer Controlled Group") to make offers of employment as of thirty
(30) days after the Effective Time to such number of Field Employees that will
result in either (a) such offers of employment will have been made by Closing
to all Field Employees, or (b) as of Closing at least two (2) Field Employees
will become employed by a member of the Buyer Controlled Group. Seller shall
deliver the Employee Schedule for "Field Employees" on a confidential basis to
the Manager, Human Resources of Buyer no more than seven (7) business days
after this Agreement is executed showing the name, job position, work location,
and years of past service credit for all Field Employees. In addition, Seller
will provide Buyer on a confidential basis relevant written information in
Seller's possession regarding each individual's work qualifications, training
history, and prior jobs held while employed by any affiliate of Seller. All
employment offers (i) shall be made sufficiently in advance of thirty (30) days
after the Closing Date, and (ii) shall be at a base salary and benefits
-16-
22
compensation package comparable to that of Buyer's employees performing similar
jobs.
(b) Employees listed on the Employee Schedule who accept offers of
employment and who are employed by a member of the Buyer Controlled Group are
referred to as "Acquired Employees", or individually as an "Acquired Employee".
Upon commencement of employment by an Acquired Employee with a member of the
Buyer Controlled Group, Acquired Employee's participation in all employee
benefit plans (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (the "Plans") sponsored by
Seller or any of its affiliates, or in which they are participating employers,
shall cease, and all liability associated with such Plans, including but not
limited to funding, claims for benefits, fines, penalties and taxes, shall
remain the liability of the Seller and its affiliates. Buyer will, or will
cause its affiliates to, take all action necessary to cause all such Acquired
Employees to be covered under the employee benefit plans of Buyer or its
affiliates and fringe benefit arrangements, in each case effective as of the
Closing Date, on the same basis as those provided to Buyer's affiliates'
employees in comparable positions.
(c) If a member of the Buyer Controlled Group (an "Offering
Employer") makes any such offers of employment to Acquired Employees requiring
a change of work location such that the Acquired Employee must travel at least
50 miles (as determined under Internal Revenue Code Section 217 and the
regulations issued pursuant thereto) further to the new principal place of work
than the work location as shown on the Employee Schedule for Field Employees,
such Offering Employer will extend the same relocation assistance to such
Acquired Employee as are available to employees of the Offering Employer.
(d) Seller represents to Buyer that Seller shall pay the Field
Employees which are not Acquired Employees or are not relocated by Seller to
another of Seller's work locations a severance pay ("Severed Employees"). If
Buyer employs any of the Severed Employees within six (6) months of Closing,
Buyer shall reimburse Seller a prorated amount of the severance pay Seller paid
to the Severed Employees.
6.12 Supplements to Schedules. From time to time prior to the Closing
with the consent of Buyer (which consent shall not be unreasonably withheld),
Seller will promptly supplement or amend the Schedules attached hereto with
respect to any Assets or additional assets which, if existing or occurring at
the date of
-17-
23
this Agreement, would have been required to be set forth or described in such
Schedule.
6.13 Seller's Property Located on Easements After Closing. Following
the Closing Seller (or its affiliates) will have facilities located on the real
property, easements and leases acquired by Buyer pursuant to this Agreement.
Except as provided in this Section 6.13, Buyer agrees that in no event shall
Buyer have the right to require Seller or its affiliates to remove, relocate,
lower or otherwise alter in any respect any of their respective facilities that
are located on any such fee property, easement or lease. During the Title
Examination Period, Buyer and Seller agree to negotiate in good faith to
attempt to mutually agree upon the extent to which block valves, quality
measurement and metering facilities and custody transfer points on the Assets
and on the interconnecting facilities of Seller or its affiliates not included
in the Assets as to handling of both gas and liquid hydrocarbons need to be
modified, moved, altered or installed and the location of any such facilities
and custody transfer points. The costs of any such modifications, alterations
and additions will be borne equally by the parties, and to the extent
reasonably feasible such modifications, alterations and additions will be
completed by Closing or promptly thereafter. During the Title Examination
Period, Buyer and Seller will also negotiate in good faith to attempt to
mutually agree upon arrangements for the sharing of certain facilities (and
costs related to the operation thereof) that will be owned by one party after
the Closing, but were used in connection with both the Assets and Seller and
its affiliates retained facilities prior to the Closing, such as cathodic
protection equipment, radio towers, and pigging equipment.
6.14 Operational Due Diligence. From and after March 13, 1996 until
5:00 P.M. local time in Houston, Texas on March 26, 1996 (the "Operational Due
Diligence Period"), Buyer shall have access to the Assets for the purpose of
inspecting the Assets for the presence of defects other than title and
environmental which are addressed in Articles 9 and 10. Buyer shall have the
right during the Operational Due Diligence Period to review among other things,
the following related to the Assets: accounting documents (including current
discount information), operational data (including current and historical gas
flow data), maintenance records, gas contract files, equipment rental or
capital lease agreements, maintenance contracts, gas processing affidavits or
contracts, and operating permits. In the event that Buyer determines that the
Assets are materially defective or that Seller has made misrepresentations
regarding the Assets, which in either case result in a Material Adverse Effect
on the Assets, then Buyer shall have the option to
-18-
24
terminate this Agreement by written notice to Seller by 12 noon CST on March
27, 1996.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions contemplated by
this Agreement are subject, at the option of Seller, to the following
conditions:
7.1 Representations. The representations and warranties of Buyer
herein contained shall be made again at Closing and shall be true and correct
in all material respects on the Closing Date.
7.2 Performance. Buyer shall have performed all material obligations,
covenants and agreements contained in this Agreement to be performed or
complied with by it at or prior to the Closing.
7.3 Pending Matters. No suit, action or other proceeding shall be
pending that could reasonably be expected to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by this Agreement.
7.4 Casualty Loss. The Assets shall not have been materially damaged,
lost, or destroyed where the cost to repair or replace such Assets to the
condition prior to such damage, loss, or destruction exceeds an amount equal to
seven and one-half percent (7.5%) of the Purchase Price.
7.5 Seller's Acquisition of Assets. TW shall have received from the
Commission orders on rehearing regarding the Abandonment Applications which
preserve the accounting and tax treatment of the transaction as currently
contemplated by Seller and its affiliates and such orders shall not contain any
condition or provision that is unacceptable to TW, in its sole discretion,
regardless of whether TW subsequently accepts such order if the Commission is
unwilling to remove or satisfactorily modify such unacceptable provision or
condition on rehearing or otherwise.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
this Agreement are subject, at the option of Buyer, to the following
conditions:
-19-
25
8.1 Representations. The representations and warranties of Seller
herein contained shall be made again at Closing and shall be true and correct
in all material respects on the Closing Date.
8.2 Performance. Seller shall have performed all material
obligations, covenants and agreements contained in this Agreement to be
performed or complied with by it at or prior to the Closing.
8.3 Pending Matters. No suit, action or other proceeding shall be
pending that could reasonably be expected to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by this Agreement.
8.4 Casualty Loss. The Assets shall not have been materially damaged,
lost, or destroyed where the cost to repair or replace such Assets to the
condition prior to such damage, loss, or destruction exceeds an amount equal to
seven and one-half percent (7.5%) of the Purchase Price.
ARTICLE 9
TITLE MATTERS
9.1 Title Examination Period. From and after March 13, 1996 until
5:00 p.m., local time in Houston, Texas, on March 26, 1996 (the "Title
Examination Period"), Buyer may notify Seller in writing of any alleged Title
Defects affecting any of the Assets and discovered by Buyer or any affiliate or
agent of Buyer, setting forth in such notice a detailed description of each
Title Defect and the estimated cost to cure each Title Defect. Any matters that
may otherwise constitute Title Defects relating to the Assets but that are not
specifically raised in writing by Buyer prior to the expiration of the Title
Examination Period shall be deemed to have been waived. Upon receipt of such
notice from Buyer, Seller shall have the right, but not the obligation, to
attempt to cure such Title Defects prior to Closing and after the Closing, to
the extent that Seller elect pursuant to Section 9.3(a) to indemnify Buyer for
Losses (as hereinafter defined) arising out of any Title Defects.
Notwithstanding the preceding sentence, prior to the Closing Seller will seek
diligently consents and approvals for transfers of easements, rights of way,
and realty leases on privately owned lands where they are required. To the
extent that such consent require payments to the affected landowners, if any,
the resulting costs will be governed by the provisions of Section 9.3. Buyer
shall not have the right to attempt to cure such Title Defects to the extent
that Seller has elected to indemnify Buyer for Losses arising out of such
defects, unless in the reasonable opinion of Buyer's counsel Buyer would likely
be liable to a third party for punitive or similar damages as a result of such
Title Defect.
-20-
26
9.2 Definition of Title Defects.
(a) Any unobtained consent to assignment, lien, charge, obligation,
encumbrance, defect or irregularity of title or any other circumstance or
condition that causes Seller's title to the Assets in any of the realty of
major facilities that are part of the Assets to be less than Defensible Title
(as hereinafter defined) and for which notice is given by Buyer to Seller
pursuant to Section 9.1, shall be a title defect (a "Title Defect").
(b) For purposes of this Agreement, the term "Defensible Title" to
the major facilities shall mean, subject to and except for the Permitted
Encumbrances (as hereinafter defined), Seller's title to the assets in the
major facilities is free and clear of all liens, encumbrances and defects of
any kind whatsoever.
(c) For purposes of this Agreement the term "Permitted Encumbrances"
shall mean any of the following:
(i) any liens for taxes and assessments not yet due or, if
due, that are being contested in good faith in the ordinary course of
business;
(ii) any obligations or duties reserved to or vested in any
municipality or other Governmental Authority to contract or regulate any
Asset in any manner, all applicable Laws and all applicable rules and
orders of any Governmental Authority;
(iii) the terms and conditions of all leases and servitudes, and
the agreements listed on Schedule 1.1;
(iv) Customary Post-Closing Consents;
(v) any required third party consents to assignment and
similar agreements and obligations arising in connection with the
transfer of the Assets to Seller or this sale of the Assets to Buyer
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) lawful arrangements have been made by the parties to allow
Buyer to receive substantially the same economic benefits as if all such
waivers and consents had been obtained;
(vi) existing easements, rights of way, servitudes, permits,
licenses, surface leases and other rights with respect to surface
obligations, pipelines, grazing, canals, ditches, reservoirs, or the
like, conditions, covenants or
-21-
27
other restrictions, and easements of streets, alleys, highways,
pipelines, telephone lines, power lines, railways and other easements
and rights of way on, over or in respect of any of the Assets, so long
as individually or in the aggregate they do not have a Material Adverse
Effect;
(vii) materialmen's, mechanics', repairmen's, employees',
contractors', operators', tax and other similar liens or charges arising
in the ordinary course of business incidental to construction,
maintenance or operation of any of the Assets (A) if they have not been
filed pursuant to law, (B) if filed, they have not yet become due and
payable or payment is being withheld as provided by law or (C) if their
validity is being contested in good faith in the ordinary course of
business by appropriate action;
(viii) any Title Defect of which Seller has provided a remedy
pursuant to Section 9.3 (including, without limitations, an adjustment
to the Purchase Price or indemnification) and any Title Defect that has
been waived by Buyer or deemed to be waived by Buyer pursuant to this
Agreement; and
(ix) the matters described on Schedule 9.2 attached hereto.
9.3 Remedies for Title Defects. (a) Subject to Section 9.3(b), in the
event that any Title Defect is not waived by Buyer or cured on or before
Closing, Seller shall, in its sole election, elect to:
(i) reduce the Purchase Price by an amount agreed upon in
writing by Buyer and Seller as being the cost to cure such Title Defect,
taking into consideration the portion of the Assets subject to such
Title Defect and the legal effect of such Title Defect on the Assets
affected thereby; or
(ii) indemnify Buyer, subject to the maximum amount of Seller's
liability set forth in Section 12.4(b), against all liability, loss,
cost and expense resulting from such Title Defect pursuant to Section
12.3(d).
In the event that Seller elects to proceed under Section 9.3(a)(k) and Buyer
and Seller have failed to agree on or before the third business day prior to
the then scheduled Closing Date on the proportionate reduction of the Purchase
Price (which agreement Buyer and Seller shall use good faith efforts to reach),
Seller shall then elect to proceed with respect to such Title Defect under
-22-
28
Section 9.3(a)(ii). Seller may elect to proceed under Section 9.3(a)(i) with
respect to certain Title Defects and under Section 9.3(a)(ii) with respect to
the Title Defects.
(b) Notwithstanding anything in Article 9 to the contrary, in no
event shall Seller be obligated pursuant to Section 9.3(a) to decrease the
Purchase Price or indemnify Buyer pursuant to Section 12.3(d) for Title Defects
unless the cost to cure all such Title Defects in the aggregate, exceeds a
deductible in an amount of Fifty Thousand Dollars ($50,000.00), after which
point Buyer shall be entitled to adjustments to the Purchase Price or
indemnification only with respect to curative costs in excess of such
deductible. Without the prior written consent of Buyer, Seller shall not incur
costs to cure any Title Defects that would be attributable to Buyer's
deductible amount.
ARTICLE 10
ENVIRONMENTAL MATTERS
10.1 Pre-Closing Environmental Audit. (a) From and after March 13,
1996, Buyer may, at its option, cause Buyer's personnel and a reputable
consulting or engineering firm reasonably acceptable to Seller ("Environmental
Auditor") to conduct (i) a Phase I and Phase II environmental audit of Seller
and its affiliates, records, (ii) interviews with employees operating the
Assets, and (iii) an inspection of the Assets and prepare a written report of
their findings (the "Environmental Audit") by 5:00 p.m., local time in Houston,
Texas, on March 26, 1996 (the "Environmental Examination Period"). In the event
Buyer elects to conduct a Phase II environmental audit (i.e. Buyer seeks to
conduct any sampling or intrusive investigation of the surface or the
subsurface of the Assets) Buyer and Seller shall agree upon the scope and
nature of such a Phase II audit not later than March 28, 1996. The agreed upon
Phase II investigation shall be set forth in writing which shall be sufficient
to define the scope, nature, location and duration of such an investigation.
During the Environmental Examination Period, Buyer may submit to Seller in
writing a statement (the "Environmental Statement") describing which, if any,
of the Environmental Compliance Deficiencies (defined below) and proposed
corrective actions (with corresponding cost estimates as provided in the
Environmental Audit) Buyer is requesting Seller to undertake. If Buyer delivers
an Environmental Statement, then Seller agrees (without admitting that any
compliance deficiencies contained in any report prepared by an Environmental
Auditor or Environmental Statement are in fact violations of Environmental
Laws) to pay for, undertake or indemnify Buyer for corrective projects or
deficiencies specified in the Environmental Statement provided hereunder, which
are Environmental Compliance
-23-
29
Deficiencies, subject to the limitations on liability set forth in Section
12.4(b) below.
(b) If there are any corrective projects specified in the
Environmental Statement, which are Environmental Compliance Deficiencies, that
are not completed by or on behalf of Seller prior to the Closing, Seller shall,
at its sole election, either:
(i) reduce the Purchase Price by an amount agreed upon in
writing by Buyer and Seller as the remaining costs of any incomplete or
remaining corrective projects, subject to the maximum amount of Seller
liability set forth in Section 12.4(b);
(ii) perform or cause to be performed, in accordance with
Section 10.3 and subject to the maximum amount of Seller's liability set
forth in Section 12.4(b), such operations as may be necessary to cure
any Environmental Compliance Deficiencies; or
(iii) indemnify Buyer against Losses resulting from any such
Environmental Compliance Deficiencies pursuant to Article 12.3(e),
subject to the limitations on Seller's liability set forth in this
Section 12.4(b); provided, however, if in the reasonable opinion of
environmental counsel to Seller or Buyer there is an affirmative duty to
correct such Environmental Compliance Deficiencies, Seller shall not be
entitled to elect this Section 10.1(b)(iii). In the event that Seller
elects to proceed under this clause (iii) for any Environmental
Compliance Deficiency, Buyer shall be deemed to have furnished a Claim
Notice with respect to such Environmental Compliance Deficiency in
accordance with Article 12.
(c) As used in this Agreement, the term "Environmental Compliance
Deficiencies" shall mean those matters specifically set forth in the
Environmental Statement or in the Environmental Defect Notice described in
Section 10.2 below that indicate that on the date of the Environmental
Statement the Assets are in violation or in noncompliance with Environmental
Laws or, in the case of an Environmental Defect Notice, that on the Closing
Date the Assets were in violation or in noncompliance with Environmental Laws.
(d) Buyer shall be responsible for all of its environmental due
diligence costs and expenses whether incurred before or after the Closing,
including those costs associated with the evaluation of the Assets and the
preparation of Environmental Audits, Environmental Statements and Environmental
Defect Notices. Such due diligence costs shall not include any remedial or
corrective
-24-
30
action costs incurred by Seller pursuant to this Article 10. Buyer shall not
have any right to claim that such costs are Losses (hereinafter defined) for
which Seller is obligated to indemnify Buyer pursuant to Section 12.3 below.
Any report prepared by an Environemental Auditor describing Environmental
Compliance Deficiencies as to which Buyer requests Seller to take corrective
action or reimburse Buyer for the cost of corrective action shall be addressed
to Buyer and Seller.
10.2 Post-Closing Environmental Investigation. (a) During the three
(3) years following the Closing Date, Buyer may notify Seller in writing of any
Environmental Compliance Deficiencies affecting the Assets that were discovered
by Buyer or an Environmental Auditor after the Closing, but that relate to
periods prior to the Closing. Such notice shall be in writing and shall set
forth a reasonably detailed description of each alleged Environmental
Compliance Deficiency and proposed corrective actions (with corresponding cost
estimated) (the "Environmental Defect Notice"). Seller will notify Buyer in
writing promptly after it determines that Buyer will be responsible, in whole
or in part, for corrective action undertaken pursuant to this Section 10.2.
(b) If the amounts previously paid by Seller to correct Environmental
Compliance Deficiencies pursuant to this Article 10 (including pre-Closing
corrective action and reduction of the Purchase Price) have not exceeded the
amounts of Seller's maximum liability set forth in Section 12.4(b) and Buyer
delivers an Environmental Defect Notice, Seller agrees, at its sole election,
to either (without admitting that any compliance deficiencies contained in any
report prepared by an Environmental Auditor or Environmental Defect Notice(s)
are in fact violations of Environmental Laws):
(i) perform or cause to be performed, in accordance with
Section 10.3 and subject to the maximum amount of Seller's liability set
forth in Section 12.4(b), such operations as may be necessary to cure
any Environmental Compliance Deficiencies; or
(ii) indemnify Buyer against Losses resulting from any
Environmental Complaince Deficiencies pursuant to Section 12.3(e),
subject to the limitations on Seller's liability set forth in Section
12.4(b); provided, however, if in the reasonable opinion of
environmental counsel to Seller or Buyer there is an affirmative duty to
correct such Environmental Compliance Deficiencies, Seller shall not be
entitled to elect this Section 10.2(b)(ii). In the event Seller elects
to proceed under this clause (ii) for any Environmental
-25-
31
Compliance Deficiency, Buyer shall be deemed to have furnished a Claim
Notice with respect to such Environmental Compliance Deficiency in
accordance with Article 12.
10.3 Corrective Action. The parties agree that in the event Seller
elects to undertake corrective action of any Environmental Compliance
Deficiencies, the corrective action shall be conducted as follows:
(a) Seller shall notify Buyer of its election to conduct the
corrective action.
(b) Seller shall provide Buyer with a copy of all materials
that may be submitted to or received from agencies with jurisdictional
authority over the corrective action, including but not limited to notices,
plans, approvals and analytical results. In the event no plan or proposal is
submitted to the jurisdictional agency, then Seller shall provide Buyer with a
written plan to conduct the corrective action. The foregoing documentation
shall be sufficient to describe the scope, nature and anticipated duration of
the corrective action. Buyer agrees not to interfere with or oppose (before any
jurisdictional authority) in any manner any of Seller's corrective action
activities except and unless Seller fails to conduct such corrective actions in
accordance with the terms and condition of this Agreement or as may be required
by applicable laws, rules or regulations, or the requirements of governmental
authorities.
(c) Seller shall conduct the corrective action in a good and
workmanlike manner consistent with industry standards and in accordance with
any proposal or plans submitted to regulatory agencies and the Buyer. Seller's
plans and corrective actions shall be carried out in ways that avoid or
minimize to the greatest extent feasible any interference with Buyer's ongoing
gathering operations.
(d) Seller shall provide Buyer written notice of all major
operations to be conducted on the Assets associated with the corrective action
at least fifteen (15) days prior to such operations in order that Buyer may
witness and observe such operations. Such operations will include, but not be
limited to, any sampling conducted on the Assets. Buyer shall have the right to
split any samples taken by Seller as well as the right to take independent
samples and submit such samples to an independent laboratory. Seller shall have
the right to split any samples taken by Buyer and submit such samples for
analysis. Buyer agrees to bear its own costs in regard to witnessing,
inspecting or auditing the corrective action activities of the Seller. Such
costs
-26-
32
include, but are not limited to, sampling costs, laboratory costs, personnel
costs, and any third party costs.
(e) Seller shall notify Buyer in writing of the completion of
the corrective action. Such notice shall include a statement of actual
expenditures and where appropriate, supporting analytical information and
report(s) sufficient to verify that the Environmental Compliance Deficiency no
longer exists.
(f) Seller shall invoice Buyer for Buyer's share, if any, of
any costs and expenses incurred as a result of the corrective action, and Buyer
shall pay such invoice within thirty (30) days of receipt. Seller agrees that
Buyer shall have the right to audit such records as may be reasonably necessary
to verify the expenditures associated with the corrective action.
(g) In the event Seller elects to proceed with a corrective
action, Buyer agrees to fully cooperate with the Seller to facilitate the
corrective action. Such cooperation shall include providing information to
Seller and access to the Assets during reasonable hours. Buyer also agrees to
provide access to the Assets to Seller's personnel and agents and
jurisdictional agency representatives.
(h) If the cost of the corrective action at any time causes
Seller's maximum liability to have been incurred, Seller shall immediately so
inform Buyer in writing, and Buyer may immediately or at any time thereafter
assume performance of the corrective action to completion. Seller shall not
have the right to continue corrective actions at Buyer's sole cost without
Buyer's written consent.
10.4 Release. Any matters that may otherwise constitute Environmental
Compliance Deficiencies that are not raised by Buyer prior to the third
anniversary of the Closing Date shall be deemed to have been waived. Upon
completion by or on behalf of Seller of any corrective project specified in the
Environmental Statement or the Environmental Defect Notice, or upon payment by
Seller to Buyer of Seller's share of the cost to complete any such corrective
project, Buyer shall be deemed to have released Seller from any further
liability for such Environmental Compliance Deficiency.
ARTICLE 11
TERMINATION
11.1 Termination At or Prior to Closing. The occurrence of any of the
following events prior to the Closing notwithstanding
-27-
33
the reasonable efforts of the party asserting a termination to avoid the event
and to fulfill the conditions to Closing in its control shall be a Termination
Event:
(a) Seller and Buyer may elect to terminate this Agreement at
any time on or prior to the Closing Date by mutual written consent of the
parties;
(b) either Seller or Buyer may elect to terminate this
Agreement if the Closing shall not have occurred on or before May 2, 1996;
provided, however, that neither Seller nor Buyer can so terminate this
Agreement if such party is at such time in material breach of any provision of
this Agreement;
(c) either Seller or Buyer may elect to terminate this
Agreement if any Governmental Entity shall have issued a final non-appealable
order, judgment or decree or taken any other action challenging, delaying
beyond May 2, 1996, restraining, enjoining, prohibiting or invalidating the
consummation of any of the transactions contemplated herein;
(d) Seller may elect to terminate this Agreement by March 27,
1996 if the aggregate amount of (i) all Title Defects in excess of the 2.5% of
Purchase Price deductible asserted pursuant to Article 9 of this Agreement plus
(ii) all Environmental Compliance Deficiencies asserted pursuant to Article 10
of this Agreement, exceeds an amount equal to 7.5% of Purchase Price;
(e) Buyer may elect to terminate this Agreement by March 27,
1996 if (i) the aggregate amount of Title Defects asserted pursuant to Article
9 of this Agreement up to the amount of the Title Defect Deductible plus (ii)
all Environmental Compliance Deficiencies asserted pursuant to Article 10 of
this Agreement, exceeds an amount equal to 7.5% of Purchase Price; or
(f) if Buyer has requested permission to conduct a Phase II
environmental investigation pursuant to Section 10.1(a) and Seller has not
agreed with Buyer prior to March 18, 1996 on such investigation as required by
Section 10.1(a), then on or before the Closing Date either Seller or Buyer may
elect to terminate the transactions contemplated by this Agreement;
(g) Buyer may terminate this Agreement pursuant to Section
6.14 provided, however, if the terminating party's estimate of costs to cure
Title defects or Environmental Deficiencies, as the case may be, exceeds the
non-terminating party's estimate by more than 10% then neither Seller nor Buyer
shall be entitled to elect to terminate this Agreement pursuant to clauses (d)
or (e),
-28-
34
respectively, unless and until an independent expert engaged by the parties
issues an opinion on the estimated costs of such curative projects ("Estimated
Curative Costs"), which Estimated Curative Costs shall be determinative of a
party's right to terminate this Agreement pursuant to clause (d) or (e) above.
11.2 Effect of Termination. In the event that Closing does not occur
as a result of either party exercising its right to terminate pursuant to
Section 11.1, then neither party shall have any further rights or obligations
under this Agreement, except that (a) nothing herein shall relieve either party
from any liability for any willful breach hereof and (b) Buyer's
indemnification and related obligations under Section 6.4 shall survive any
such termination.
ARTICLE 12
INDEMNIFICATION
12.1 Assumption of Liabilities Relating to the Assets. As of the
Effective Time and subject to Seller's indemnification obligation set forth in
Section 12.3, Buyer shall assume the Assumed Obligations. "Assumed Obligations"
shall mean all liabilities, duties, and obligations of every kind whatsoever
relative to (a) ownership, operation, occupancy, condition or use of the Assets
on and after the Effective Time, and (b) matters arising out of any matter or
circumstance relating to Environmental Laws, the release of materials into the
environment or protection of the environment, whether known or unknown, whether
attributable to period of time before or after the Effective Time.
12.2 Indemnification By Buyer. Subject to Section 12.4(a), Buyer shall
indemnify, release, defend, and hold harmless Seller, its officers, directors,
employees, agents, representatives, affiliates, subsidiaries, successors and
assigns (collectively, the "Seller Indemnitees") from and against any and all
claims, liabilities, losses, causes of actions, costs and expenses (including,
without limitation, 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: (a) the breach of any of the
representations, warranties, covenants or agreements of Buyer contained in this
Agreement, or (b) the Assumed Obligations, or (c) any liability for taxes
(including interest, penalties or fines related thereto) the responsibility for
payment of which was assumed by Buyer pursuant to Section 6.7 above; provided,
however, that Buyer shall not assume and shall have obligation to indemnify any
of the Seller Indemnitees with respect to any matter for which Seller are
indemnifying Buyer pursuant to Sections 12.3.
-29-
35
12.3 Indemnification By Seller. Subject to Section 12.4(b), Seller
shall indemnify, defend and hold harmless Buyer, its officers, directors,
employees, agents, representatives, affiliates, subsidiaries, successors and
assigns (collectively, the "Buyer Indemnitees") from and against all Losses
asserted against, resulting from, imposed upon or incurred by any of the Buyer
Indemnitees as a result of, or arising out of, (a) the breach of any of the
representations, warranties, covenants or agreements of Seller contained in
this Agreement, (b) the ownership, operation, occupancy, use or condition of
the Assets prior to the Effective Time, other than matters relating to
Environmental Laws (which are covered by clause (e) below), (c) claims made by
employees or former employees of Seller or any affiliates of Seller with regard
to compensation and benefits under any benefit plan or any other employee
benefit program in which such employee participated while employed by Seller or
an affiliate of Seller prior to the Effective Time, (d) Title Defects related
to the Seller Assets as to which Seller elected pursuant to Section 9.3 above
to indemnify Buyer against all liability, loss, cost and expense, subject to
satisfaction of the deductible provided for in Section 9.3(b), (e)
Environmental Compliance Deficiencies related to the Seller Assets as to which
Seller elected pursuant to Section 10.1(b)(ii) above to indemnify Buyer against
Losses and Environmental Compliance Deficiencies related to the Seller Assets
raised by Buyer within three (3) years after the Closing pursuant to Section
10.2(b) above, subject, in each case, to the limitations on liability set forth
in Article 10, and (f) any liability for taxes related to the Seller's Assets
(including interest, penalties or fines related thereto) for the period prior
to the Effective Time other than those assumed by Buyer pursuant to Section 6.9
above.
12.4 Limitation on Damages; Survival of Representations. (a)
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, IN NO EVENT SHALL
BUYER BE LIABLE TO THE SELLER'S INDEMNITEES FOR ANY EXEMPLARY, PUNITIVE, REMOTE
OR SPECULATIVE DAMAGES; PROVIDED, HOWEVER, THAT IF ANY SELLER INDEMNITEE IS
HELD LIABLE TO A THIRD PARTY FOR ANY SUCH DAMAGES AND BUYER IS OBLIGATED TO
INDEMNIFY SUCH SELLER INDEMNITEE FOR THE MATTER THAT GAVE RISE TO SUCH DAMAGES,
THE BUYER SHALL BE LIABLE FOR, AND OBLIGATED TO REIMBURSE SUCH SELLER
INDEMNITEE FOR SUCH DAMAGES. The representations and warranties of Buyer set
forth in ARTICLE 5 shall survive the Closing for a period of three (3) years
and such representations and warranties of Buyer shall terminate at 5:00 p.m.,
local time in Houston, Texas, on the third anniversary of the Closing Date;
provided, however, that any such representation or warranty that is the subject
of a written notice of claim specifying in reasonable detail the specific
nature of the Losses and the estimated amount of such Losses ("Claim Notice")
delivered in good faith shall
-30-
36
survive with respect only to the specific matter described in such claim notice
until the earlier to occur of (i) the date on which a final non-appealable
resolution of the matter described in such claim notice until the earlier to
occur of (i) the date on which a final non-appealable resolution of the matter
described in such Claim Notice has been reached or (ii) the date on which the
matter described in such Claim Notice has otherwise reached final resolution.
(b) Notwithstanding anything to the contrary in this Agreement, 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 THE BUYER
INDEMNITEES FOR ANY EXEMPLARY, PUNITIVE, REMOTE OR SPECULATIVE DAMAGES;
PROVIDED, HOWEVER, THAT IF ANY BUYER INDEMNITEE IS HELD LIABLE TO A
THIRD PARTY FOR ANY SUCH DAMAGES AND EITHER SELLER IS OBLIGATED TO
INDEMNIFY SUCH BUYER INDEMNITEE FOR THE MATTER THAT GAVE RISE TO SUCH
DAMAGES, SUCH SELLER SHALL BE LIABLE FOR, AND OBLIGATED TO REIMBURSE
SUCH BUYER INDEMNITEE FOR, SUCH DAMAGES.
(ii) The representations and warranties of Seller set forth in
ARTICLE 4 (except for Section 4.9, which shall terminate at Closing)
shall survive the Closing for a period of three (3) years and such
representations and warranties shall terminate at 5:00 p.m., local time
in Houston, Texas, on the third anniversary of the Closing Date;
provided, however, that any such representation and warranty that is the
subject of a 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 non-appealable
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) Notwithstanding anything to the contrary in this
Agreement, in no event shall Seller indemnify the Buyer Indemnitees, or
be otherwise liable in any way whatsoever to the Buyer Indemnitees, (A)
for any aggregated individual Losses as to which a claim has been made
pursuant to Article 10) not in excess of $3,000 or (B) for any Losses
(other than Losses as to which a claim has been made pursuant to ARTICLE
10) until the Buyer Indemnitees have suffered Losses (other than Losses
excluded pursuant to clause (A))in the aggregate in excess of a
deductible in an amount equal to Ten Thousand
-31-
37
Dollars ($10,000.00) for non-environmental matters and Fifty Thousand
Dollars ($50,000.00) for environmental matters after which point Seller
will be obligated only to indemnify the Buyer Indemnitees from and
against further Losses in excess of such deductible (and only to the
extent of any such excess).
(iv) Notwithstanding anything to the contrary herein, in no
event shall Seller indemnify the Buyer Indemnitees, or be otherwise
liable in any way whatsoever to the Buyer Indemnitees, for any Losses
under this Agreement in excess of an amount equal to One Million Five
Hundred Thousand Dollars ($1,500,000.00) provided, however, that for
purposes of this Section 12.4(b)(iv) the term Losses shall include (A)
any amount agreed upon by Buyer and Seller pursuant to Article 9 as the
value of any Title Defect and (B) any amounts paid by Seller for
environmental liabilities or corrective actions pursuant to Article 10.
(v) No amount shall be recovered from Seller for the breach or
inaccuracy of any of Seller's representations, warranties, covenants or
agreements, or for any other matter, to the extent that Buyer had actual
knowledge of such breach, inaccuracy or other matter at or prior to the
Closing, nor shall Buyer be entitled to post-Closing rescission with
respect to any such matter.
(vi) Seller shall have no liability for Losses pursuant to this
Article unless a Claim Notice has been delivered to Seller as required
by Section 12.5 within three (3) years after the Effective Time.
12.5 Notice of Asserted Liability, Opportunity to Defend. All claims
for indemnification under Sections 12.2 and 12.3 shall be asserted and resolved
pursuant to this Section 12.5. Any person claiming indemnification hereunder is
hereinafter referred to as the "Indemnified Party" and any person against whom
such claims are asserted hereunder 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
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 thirty (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
-32-
38
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 desire 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.
12.6 Exclusive Remedy. As between the Buyer Indemnitees and the
Seller's Indemnitees the rights and obligations set forth in this Article 12
will be the exclusive rights and obligations with respect to this Agreement,
the events giving rise to this Agreement, and the transactions provided for
herein or contemplated hereby or thereby. It being understood and agreed
between Seller and Buyer that all other rights and obligations between Seller
and their affiliates on the one hand and the Buyer and its affiliates on the
other hand shall be governed by this Agreement.
12.7 NEGLIGENCE AND STRICT LIABILITY WAIVER. WITHOUT LIMITING OR
ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, AN INDEMNIFIED PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER
IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM
GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE,
CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR VIOLATION OF ANY LAW
OF OR BY SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS PARAGRAPH
CONSTITUTES A CONSPICUOUS LEGEND.
-33-
39
ARTICLE 13
MISCELLANEOUS
13.1 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) Except as expressly provided in Section 2.5, any dispute arising
under this Agreement shall be resolved pursuant to this Section 13.1:
(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
ten (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 company with complete power to resolve the dispute to
attend the meeting. Within three (3) business days after receipt of such
request, the party receiving the request will provide a responsive
written statement and will designate an officer of the company 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 non-
appealable, binding determination through arbitration. The parties agree
that an officer with authority to resolve the dispute for each entity
shall attend the arbitration. The Arbitrator chosen rom the arbitrators
available through Judicial Arbitration & Mediation Services, In.
("JAMS") shall be the Arbitrator unless the parties agree on a
substitute arbitrator. Unless otherwise agreed by the parties, the
Arbitrator shall be a person with at least eight (8) years of
professional experience in the natural gas industry or the judiciary and
who is not, and within the previous five (5) years has not been, an
employee or independent contractor of either Seller or Buyer (or any
affiliate thereof), and does not have a direct or indirect interest in
either Seller or Buyer (of any affiliate thereof) or the subject matter
of the arbitration.
(iii) the parties agree to make discovery and disclosure of all
matters relevant to the dispute to the
-34-
40
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 ninety (90) days of
the date of the first notice pursuant to Section 13.1(b)(i). The
Arbitrator shall follow the statutes and decisions of the substantive
law of Texas relevant to the subject. The Arbitrator's powers shall be
limited to enforcement of this Agreement as to the issues raised by the
parties, and shall not include tort claims or the power to award
punitive damages. 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 one hundred eighty (180) days of the date of the first notice
pursuant to Section 13.1(b)(i).
(iv) The ruling of the Arbitrator shall be in writing and
signed, shall contain a statement of findings and conclusions 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
Arbitrator shall be divided equally between the parties. All meetings
and arbitration hearings held pursuant to this Section 13.1 shall take
place in Houston, Texas. Judgment on the arbitration award or decision
may be entered in any court having jurisdiction.
13.2 Expenses and Attorney Fees. Each party shall be solely
responsible for all expenses, including due diligence expenses, incurred by it
in connection with this transaction, and neither party shall be entitled to any
reimbursement for such expenses from the other party hereto. Without limiting
the generality of the foregoing, Buyer will be solely responsible for all
recording fees and taxes relating to the conveyances to be delivered pursuant
hereto. Notwithstanding the foregoing, if any action is brought to enforce or
for breach of the provisions of this Agreement, the prevailing party shall be
entitled to recover its reasonable costs and expenses (including reasonable
attorney fees).
13.3 Independent Investigation. Buyer represents and acknowledges that
it is knowledgeable of the business of operating pipelines and that it has had
access to the Assets, the officers and employees of Seller and its affiliates,
and the Records of Seller and its affiliates relating to the Assets and in
making the decision to enter into this Agreement and consummate the
-35-
41
transactions contemplated hereby, Buyer has relied solely on the basis of its
own independent due diligence investigation of the Assets (which will be
completed by March 26, 1996 at 5:00 P.M.) and upon the representations and
warranties of Seller made in Article 4 and on the covenants of Seller in this
Agreement.
13.4 Disclaimer Regarding Assets. Except as otherwise expressly
provided in this AGREEMENT, BUYER 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 PART OF THE ASSETS
(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, AND (d) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM
FROM PATENT OR TRADEMARK INFRINGEMENT) IT BEING THE EXPRESS INTENTION OF BUYER
AND SELLER THAT (EXCEPT TO THE EXTENT EXPRESSLY PROVIDED IN THIS AGREEMENT) THE
ASSETS SHALL BE ACCEPTED BY BUYER AS IS AND IN THEIR PRESENT CONDITION AND
STATE OF REPAIR; AND BUYER REPRESENTS TO SELLER THAT BY MARCH 26, 1996 AT 5:00
P.M. BUYER WILL HAVE MADE OR CAUSED TO BE MADE SUCH INSPECTIONS WITH RESPECT TO
THE ASSETS AS BUYER DEEMS APPROPRIATE AND THEREAFTER BUYER WILL ACCEPT THE
ASSETS AS IS, IN THEIR PRESENT CONDITION AND STATE OF REPAIR. THE PARTIES AGREE
THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
13.5 Waiver of Trade Practices Acts.
(a) It is the intention of the parties that Buyer's rights and
remedies with respect to this transaction and with respect to all acts or
practices of Seller, past, present or future, in connection with this
transaction shall be governed by legal principles other than the Texas
Deceptive Trade Practices-Consumer Protection Act, Tex. Bus. & Com. Code Xxx.
Section 17.41 et seq. (the "DTPA"). AS SUCH, BUYER HEREBY WAIVES THE
APPLICABILITY OF THE DTPA TO THIS TRANSACTION AND ANY AND ALL DUTIES, RIGHTS OR
REMEDIES THAT MIGHT BE IMPOSED BY THE DTPA, WHETHER SUCH DUTIES, RIGHTS AND
REMEDIES ARE APPLIED DIRECTLY BY THE DTPA ITSELF OR INDIRECTLY IN CONNECTION
WITH OTHER STATUTES; PROVIDED, HOWEVER, BUYER DOES NOT WAIVE Section 17.555 OF
THE DTPA. BUYER ACKNOWLEDGES, REPRESENTS AND WARRANTS THAT IT IS PURCHASING THE
GOODS AND/OR SERVICES COVERED BY THIS AGREEMENT FOR COMMERCIAL OR BUSINESS USE;
THAT IT HAS ASSETS OF $5 MILLION OR MORE ACCORDING TO ITS MOST RECENT FINANCIAL
STATEMENT PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES,
THAT IT HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT
ENABLE IT TO EVALUATE THE MERITS AND RISKS OF A TRANSACTION SUCH AS THIS; AND
THAT IT IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH SELLER.
-36-
42
(b) TO THE MAXIMUM EXTENT PERMITTED BY LAW, BUYER HEREBY WAIVES ALL
PROVISIONS OF CONSUMER PROTECTION ACTS, DECEPTIVE TRADE PRACTICE ACTS AND OTHER
ACTS SIMILAR TO THE DTPA IN ALL JURISDICTIONS IN WHICH ANY OF THE ASSETS ARE
LOCATED (SUCH ACTS, TOGETHER WITH THE DTPA, ARE HEREINAFTER COLLECTIVELY
REFERRED TO AS THE "TRADE PRACTICES ACTS").
(c) BUYER EXPRESSLY RECOGNIZES THAT THE PRICE FOR WHICH SELLER HAS
AGREED TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT HAS BEEN PREDICATED UPON
THE INAPPLICABILITY OF THE TRADE PRACTICES ACTS AND THIS WAIVER OF THE TRADE
PRACTICES ACTS. BUYER FURTHER RECOGNIZES THAT SELLER, IN DETERMINING TO PROCEED
WITH THE ENTERING INTO OF THIS AGREEMENT, HAS EXPRESSLY RELIED ON THIS WAIVER
AND THE INAPPLICABILITY OF THE TRADE PRACTICES ACTS.
13.6 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 beneficiary
contract; provided, however, that the indemnification provisions in Article 12
shall inure to the benefit of the Buyer Indemnitees and the Seller Indemnitees
as provided therein.
13.7 Waiver. Except as expressly provided in this Agreement, neither
the failure nor any delay on the part of any party hereto in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, or of any
other right, power or remedy; nor shall any single or partial exercise of any
right, power or remedy preclude any further or other exercise thereof, or the
exercise of any other right, power or remedy. Except as expressly provided
herein, no waiver of any of the provisions of this Agreement shall be valid
unless it is in writing and signed by the party against whom it is sought to be
enforced.
13.8 Entire Agreement; Amendment. This Agreement, the Schedules and
Exhibits hereto, each of which is deemed to be a part hereof, and any
agreements, instruments or documents executed and delivered by the parties
pursuant to this Agreement, constitute the entire agreement and understanding
between the parties, and all previous undertakings, negotiations and agreements
between the parties regarding the subject matter hereof are merged herein;
provided however, that this Agreement does not supersede the confidentiality
Agreement, which shall not terminate (except in accordance with its terms)
unless and until the Closing occurs, and following the Closing, only to the
extent it relates to the Assets. This Agreement may not be modified orally, but
only by an agreement in writing signed by Buyer and Seller.
-37-
43
13.9 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 part set forth below. Any such notice shall
be effective upon receipt or three (3) days after placed in the mail, whichever
is earlier.
If to Buyer: Continental Natural Gas, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx, XX 00000
By Mail or Hand Delivery: Continental Natural Gas, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
P.O. Box 21470
Xxxxx, XX 00000
Attention:
Telephone Number: 000-000-0000
Telecopy Number: 918-560-4900
with a copy to
Attention:
Telecopy Number:
Telephone Number:
If to Seller:
By Mail:
Transwestern Gathering Company
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Vice President and Secretary
With a copy to: Vice President and General Counsel
By Hand Delivery:
Transwestern Gathering Company
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Vice President and Secretary
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
With a copy to: Vice President and General Counsel
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
-38-
44
Any party may, by notice so delivered, change its address for notice purposes
hereunder.
13.10 No Assignment. This Agreement shall not be assigned or
transferred in any way whatsoever by either party hereto except with prior
written consent of the other party hereto, which consent such party shall be
under no obligation to grant, and any assignment or attempted assignment
without such consent shall have no force or effect with respect to the non-
assigning party. Subject to the preceding sentence, this Agreement shall be
binding on and inure to the benefit of the parties hereto and their permitted
successors and assigns.
13.11 Severability. If any provision of this Agreement is invalid,
illegal or unenforceable, the balance of this Agreement shall remain in full
force and effect and this Agreement shall be construed in all respects as if
such invalid, illegal or unenforceable provision were omitted. If any provision
is inapplicable to any person or circumstance, it shall, nevertheless, remain
applicable to all other persons and circumstances.
13.12 Publicity. Seller and Buyer shall consult with each other with
regard to all publicity and other releases concerning this Agreement and the
transactions contemplated hereby and, except as required by applicable law or
the applicable rules or regulations of any Governmental Entity or stock
exchange, no party shall issue any such publicity or other release without the
prior written consent of the other party, which shall n to be unreasonably
withheld.
13.13 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.
13.14 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, and which together
shall constitute but one and the same instrument.
13.15 Further Assurances. After the Closing Date, each party hereto at
the reasonable request of the other and without additional consideration, shall
execute and deliver, or shall cause to be executed and delivered, from time to
time, such further certificates, agreements or instruments of conveyance and
transfer,
-39-
45
assumption, release and acquittance and shall take such other action as the
other party hereto may reasonably request, to convey and deliver the Assets to
Buyer, to assure to Seller the assumption of the liabilities and obligations
intended to be assumed by Buyer hereunder and to otherwise consummate or
implement the transactions contemplated by this Agreement.
13.16 Payment of Funds. The amount of all revenues received by Seller
(or any affiliates thereof) relating to the ownership or operation of the
Assets on or after the Effective Time shall be remitted to Buyer in immediately
available funds on a timely basis. The amount of all revenues received by Buyer
(or any affiliates thereof) relating to the ownership or operation of the
Assets prior to the Effective Time shall be remitted to Seller in immediately
available funds on a timely basis. Without in any way limiting either party's
obligation to remit such amounts on a timely basis, if any such amounts
received by a party (or any affiliate thereof) are in excess of $25,000 in the
aggregate and have not been remitted to the other party within thirty (30) days
of receipt by the receiving party (or any affiliate thereof), such amounts
shall bear interest from the date of such receipt until the date upon which the
other party receives remittance of such amount in full and in immediately
available funds at an annual rate of 6%.
13.17 Certain Interpretive Matters. The inclusion of any matter on any
Schedules will not be deemed an admission by either party that such listed
matter has or would have a Material Adverse Effect.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first written above.
SELLER:
TRANSWESTERN GATHERING COMPANY
By:
------------------------------------------
Name:
Title:
-40-
46
Buyer:
CONTINENTAL NATURAL GAS, INC.
By:
------------------------------------------
Name:
Title:
-41-
