EXECUTION COPY
STOCK PURCHASE AGREEMENT
dated as of May 8, 2000
By and Between
AGL RESOURCES INC.,
as Buyer
and
CONSOLIDATED NATURAL GAS COMPANY,
as Seller,
VIRGINIA NATURAL GAS, INC., and
DOMINION RESOURCES, INC.
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iv
TABLE OF CONTENTS
PAGE
ARTICLE 1 CERTAIN DEFINITIONS.....................................1
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ARTICLE 2 PURCHASE AND SALE OF VNG STOCK..........................9
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Section 2.1 Purchase and Sale of Stock..........................9
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND DRI........14
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Section 3.1 Organization and Corporate Power.................. 14
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Section 3.2 Authorization; Validity............................14
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Section 3.3 Organization, Qualification and Corporate Power of VNG..15
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Section 3.4 No Conflict........................................16
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Section 3.5 Capital Stock..................................... 16
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Section 3.6 Financial Statements...............................17
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Section 3.7 Compliance with Law; Proceedings...................17
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Section 3.8 Tax Matters........................................19
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Section 3.9 Material Contracts.................................21
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Section 3.10 Consents and Approvals..................................22
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Section 3.11 Brokers.................................................22
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Section 3.12 Labor Matters...........................................22
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Section 3.13 ERISA...................................................23
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Section 3.14 Events Subsequent to December 31, 1999................. 25
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Section 3.15 Title to Properties.....................................27
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Section 3.16 Insurance...............................................28
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Section 3.17 Transactions with Certain Persons.......................28
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Section 3.18 Compliance With Environmental Laws......................28
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Section 3.19 Intellectual Property...................................29
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Section 3.20 Disclosure..............................................30
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER.................30
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Section 4.1 Organization and Corporate Power...................31
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Section 4.2 Authorization of Agreement; Validity...............31
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Section 4.3 No Conflict........................................31
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Section 4.4 Consents and Approvals.............................31
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Section 4.5 Brokers............................................32
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Section 4.6 Availability of Funds..............................32
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Section 4.7 Investment.........................................32
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Section 4.8 Litigation.........................................32
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ARTICLE 5 ACCESS; ADDITIONAL AGREEMENTS..........................33
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Section 5.1 Access to Information; Continuing Disclosure.......33
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Section 5.2 Regulatory Approvals...............................34
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Section 5.3 Further Assurances.................................35
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Section 5.4 Certain Tax Matters................................36
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Section 5.5 Conduct of Business of VNG.........................40
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Section 5.6 Notice of Changes..................................42
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Section 5.7 Director and Officer Indemnification and Insurance.43
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Section 5.8 Employee Matters...................................44
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Section 5.9 WARN Act...........................................56
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Section 5.10 Satisfaction of Debt....................................56
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Section 5.11 Related Agreements......................................56
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ARTICLE 6 CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS............58
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Section 6.1 No Injunction......................................58
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Section 6.2 Representations and Warranties.....................58
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Section 6.3 Performance........................................59
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Section 6.4 Approvals and Filings..............................59
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Section 6.5 No Material Adverse Change.........................60
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ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER......60
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Section 7.1 No Injunction......................................60
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Section 7.2 Representations and Warranties.....................61
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Section 7.3 Performance........................................61
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Section 7.4 Approvals and Filings..............................61
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ARTICLE 8 CLOSING 62
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Section 8.1 Time and Place.....................................62
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Section 8.2 Deliveries. At the Closing:.......................62
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ARTICLE 9 TERMINATION AND ABANDONMENT.........................................63
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Section 9.1 Methods of Termination.............................63
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Section 9.2 Procedure Upon Termination and Consequences........65
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ARTICLE 10 INDEMNIFICATION........................................66
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Section 10.1 Remedies................................................66
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Section 10.2 Indemnity Claims........................................67
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Section 10.3 Notice of Claim.........................................69
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Section 10.4 Defense.................................................69
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Section 10.5 Limitations.............................................70
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ARTICLE 11 MISCELLANEOUS......................................................71
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Section 11.1 Amendment and Modification................................
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Section 11.2 Waiver of Compliance....................................71
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Section 11.3 Notices.................................................71
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Section 11.4 Binding Nature; Assignment..............................73
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Section 11.5 Entire Agreement..........................................
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Section 11.6 Expenses................................................74
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Section 11.7 Press Releases and Announcements; Disclosure............74
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Section 11.8 Acknowledgment..........................................74
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Section 11.9 Disclaimer Regarding Assets.............................75
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Section 11.10Governing Law...........................................75
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Section 11.11Counterparts............................................76
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Section 11.12Interpretation..........................................76
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EXHIBITS
Exhibit 5.11.1 .........- Form of Transition Services Agreement
Exhibit 5.11.2 .........- Form of Software License Agreement
SCHEDULES
Schedule 1A .........- Knowledge
Schedule 2.1.2 .........- Working Capital Methodologies
Schedule 3.3 .........- Equity Interests
Schedule 3.4 .........- Conflicts
Schedule 3.7 .........- Compliance with Law; Litigation
Schedule 3.8 .........- Tax Matters
Schedule 3.9 .........- Material Contracts
Schedule 3.10 .........- Seller Consents and Approvals
Schedule 3.13 .........- ERISA; Employee Plans
Schedule 3.14 .........- Events Subsequent to December 31, 1999
Schedule 3.15 .........- Permitted Liens
Schedule 3.16 .........- Insurance
Schedule 3.17 .........- Transactions with Certain Persons
Schedule 3.18.1 -........ Compliance with Environmental Laws
Schedule 3.18.2 -........ MGP Sites
Schedule 3.19 .........- Intellectual Property
Schedule 4.4 .........- Buyer Consents and Approvals
Schedule 4.8 .........- Buyer Litigation
Schedule 5.8.1 .........- Associated Seller Employees
Schedule 5.8.4 - List of Employee Benefit Plans for
which VNG/Buyer has Responsibility Following Closing
Schedule 6.4 .........- Required Seller Consents and Approvals
Schedule 7.4 .........- Required Buyer Consents and Approvals
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79
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of May 8, 2000 (this
"Agreement") is made by and among AGL Resources Inc., a Georgia corporation
("Buyer"), Consolidated Natural Gas Company, a Delaware corporation ("Seller"),
Virginia Natural Gas, Inc., a Virginia corporation ("VNG") (with VNG being a
party to this Agreement solely for the purposes of Sections 2.1.4, 5.3, 5.4,
5.5, and 6.3), and Dominion Resources, Inc., a Virginia corporation ("DRI")
(with DRI being a party to this Agreement solely for the purposes of Sections
2.1.4, 3.1.2, 3.2.2, 5.4, 5.11.3, and Article 10).
RECITALS
A. Seller owns all of the issued and outstanding shares of VNG Stock
(as defined herein).
B. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, subject to the terms and conditions of this Agreement, all of the issued
and outstanding shares of VNG Stock owned by Seller.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE 1
CERTAIN DEFINITIONS
For the purposes of this Agreement, the following words and phrases
shall have the following meanings: "Adverse Consequences" means all
actions, suits, proceedings, hearings, investigations, charges,
complaints, claims,
demands, injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities, obligations,
Taxes, liens, losses, expenses, and fees including court costs and reasonable
attorneys' fees and expenses.
"Advisors" has the meaning set forth in Section 11.8.2.
"Affiliate" means any Person in control or under control of, or under
common control with, another Person. For purposes of the foregoing, "control",
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through ownership of voting securities or by contract or
otherwise.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Agreement to Hold Separate" means the Federal Trade Commission's Order
of November 4, 1999 in FTC File No. 991-0244 and Docket No. C-3901.
"Allocation" has the meaning set forth in Section 2.1.4.
"Applicable Law" has the meaning set forth in Section 2.1.4.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which commercial banking institutions in Norfolk, Virginia are authorized or
obligated by law or executive order to be closed.
"Buyer" has the meaning set forth in the first paragraph of this
Agreement. "Buyer's Auditors" means Deloitte & Touche LLP. "Claim" has
the meaning set forth in Section 5.7.1. "Closing" has the meaning set
forth in Section 8.1. "Closing Date" has the meaning set forth in
Section 8.1.
"Code" means the Internal Revenue Code of 1986, as amended. All
citations to the Code or to the regulations promulgated thereunder shall include
any amendments or any substitute or successor provisions thereto.
"Collective Bargaining Agreement" has the meaning set forth in Section
3.12. "Common Parent" means either DRI or Seller, or both, as the case
may be.
"Common Stock" means the common stock, no par value, of VNG.
"Confidentiality Agreement" has the meaning set forth in Section 5.1.
"Contract" means a contract, note, bond, mortgage, indenture,
instrument or other obligation. "Determination Date" has the meaning
set forth in Section 5.4.8. "DOJ" has the meaning set forth in Section
5.2.1.
"DRI" has the meaning set forth in the introductory paragraph.
"Employee Plan" means all of the employee benefit plans, policies,
programs and arrangements (including, without limitation, (i) all deferred
compensation, retirement, early retirement, savings and other pension plans,
policies, programs and arrangements, whether or not qualified under the Code
(ii) all health, severance, insurance, disability and other employee welfare
plans, policies, programs and arrangements; and (iii) all employment, incentive,
stock option, stock appreciation, stock purchase, vacation and other similar
plans, programs, policies and arrangements), whether or not subject to ERISA and
whether covering one person or more than one person, that are maintained by VNG
or any ERISA Affiliate with respect to VNG Employees, directors or independent
contractors or to which VNG or any ERISA Affiliate contributes on behalf of VNG
Employees, directors or independent contractors.
"Environmental Condition" means any condition relating to or
originating from a Release of a Hazardous Substance at any of the Manufactured
Gas Facilities (regardless of whether such condition is on or off the
Manufactured Gas Facilities) by Seller, VNG or any of their Affiliates or any
other Person.
"Environmental Laws" means all applicable Federal, state and local laws
and regulations, including common law, relating to pollution or protection of
the environment or natural resources, including laws relating to Releases or
threatened Releases of Hazardous Substances (including, without limitation,
Releases to ambient air, surface water, groundwater land and surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport, disposal or handling
of Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any other Person that, together with VNG, is
required to be treated as a single employer under Section 414 of the Code or
Section 4001(a)(14) of ERISA.
"Estimated Purchase Price" has the meaning set forth in Section 2.1.2.
"Final Allocation" has the meaning set forth in Section 2.1.4. "Final
Working Capital Schedule" has the meaning set forth in Section 2.1.3.
"Financial Statements" has the meaning set forth in Section 3.6. "FTC"
has the meaning set forth in Section 5.2.
"Hazardous Substance" shall mean any substance, material, product,
derivative, compound, mixture, mineral, chemical, waste, medical waste or gas
(excluding natural gas), defined or included within the definition of a
"hazardous substance," "hazardous waste," "hazardous material," "toxic
chemical," "toxic substance," "hazardous chemical," "extremely hazardous
substance," "pollutant," "contaminant," or any other words of similar meaning
within the context used under any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Intellectual Property" has the meaning set forth in Section 3.19.
"Joint Use Pipeline" means that portion of the natural gas pipeline
facilities whose construction, ownership and operation by VNG was authorized by
the Virginia State Corporation Commission in Case Nos. PUE860065, PUE900038,
PUE910071, PUE950001 and PUE950002 that begins at an intersection with the
interstate natural gas transmission facilities of CNG Transmission Company at a
point on the boundary line of Fauquier and Prince William Counties, Virginia and
runs south and east through Fauquier, Stafford, Spotsylvania, Caroline, Henrico
and Hanover Counties, Virginia and terminates at an intersection in southern
Hanover County, Virginia with the natural gas pipeline facilities of Virginia
Electric and Power Company and the gas distribution facilities of VNG, the
location of which Joint Use Pipeline is shown more particularly on certificates
of public convenience and necessity Nos. GT-63, GT-66, GT-62, GT-59A, GT-61A and
GT-60.
"Knowledge" or words to such effect mean, with respect to any Person,
the actual knowledge of such Person (or, in the case of any Person that is not
an individual, the actual knowledge without independent investigation of the
executive officers of such Person listed on Schedule 1A). In all instances in
this Agreement, the term "Seller's Knowledge" or "to the Knowledge of Seller"
shall be deemed to include the Knowledge of VNG.
"Liens" means liens, charges, restrictions, claims or encumbrances of
any nature. "Loss" has the meaning set forth in Section 10.1.
"Manufactured Gas Facilities" means (a) the former Manufactured Gas
Plant ("MGP") site located in the City of Norfolk, VA at the intersection of
Virginia Beach Blvd. and Monticello Avenue; (b) the former MGP site located in
the City of Newport News that is currently under an entrance ramp of Interstate
Highway Route 664; (c) the MGP waste storage site in the City of Chesapeake, VA
adjacent to VNG's propane-air peak-shaving plant site; (d) the former MGP waste
storage site located in the City of Suffolk, VA at the intersection of Hill
Street and Central Avenue; and (e) any other facility at which VNG or its
predecessors owned or operated a manufactured gas facility or manufactured gas
waste storage site.
"Material" or "materially" means, when used with respect to VNG,
material to VNG, taken as a whole, and when used with respect to Buyer, material
to Buyer, taken as a whole.
"Material Adverse Effect" means an effect, whether resulting from
events, actions, inactions, or circumstances, which when taken individually or
in combination with other like events, actions, inactions, or circumstances, is
materially adverse to the business, assets, condition (financial or otherwise)
or results of operations of VNG, taken as a whole.
"Material Contracts" means each Contract to which VNG is a party or by
which it or any of its property may be bound and which, in each case, is
material to VNG taken as a whole.
"Material Encumbrances" means, with respect to a material asset, any
liens, charges, restrictions, claims or encumbrances of any nature, materially
adverse to VNG's use of that asset.
"Multiemployer Plan" means a multiemployer plan, as defined in Sections
3(37) and 4001(a)(3) of ERISA. "PBGC" has the meaning set forth in
Section 3.13.4. "Permitted Liens" has the meaning set forth in Section
3.15.
"Person" means and includes an individual, a partnership, a joint
venture, a corporation, a union, a limited liability company, a trust, an
unincorporated organization, a government or any department or agency thereof,
or any other separate legal entity recognized pursuant to law.
"Preliminary Working Capital Schedule" has the meaning set forth in
Section 2.1.3. "Purchase Price" has the meaning set forth in Section
2.1.2. "Reasonable efforts" means commercially reasonable efforts.
"Related Company Employees" has the meaning set forth in Section 5.8.1.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment (including the abandonment or discarding of barrels, containers
or other closed receptacles containing any Hazardous Substance), but not
including any such action which results in exposure to persons solely within a
workplace with respect to a claim which such persons may assert against the
employer of such persons or emissions from the engine exhaust of a motor
vehicle, rolling stock, aircraft, vessel or pipeline pumping station engine.
"Section 338(h)(10) Elections" has the meaning set forth in Section
5.4.8. "Seller" has the meaning set forth in the first paragraph of
this Agreement. "Seller's Auditors" means PricewaterhouseCoopers, LLP.
"Subsidiary" of a Person means (i) any corporation, association or
other business entity of which 50% or more of the total voting power of shares
or other voting securities outstanding thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and (ii) any partnership
or limited liability company a general partner or managing member of which is
such Person or one or more of the other Subsidiaries of such Person (or any
combination thereof).
"Supplemental Agreement" has the meaning set forth in Section 10.1.1.
"Taxes" mean all federal, state, local, foreign and other net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, lease, service, service use, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, windfall profits, fuel,
gas import, customs, duties or other taxes, fees, assessments or charges of any
kind whatsoever imposed by any governmental entity, together with any interest
and any penalties, additions to tax or additional amounts with respect thereto,
and the term "Tax" means any one of the foregoing Taxes.
"Tax Return" means any return, declaration, report, statement or other
document required to be filed in respect of Taxes. "Title IV Plan" has
the meaning set forth in Section 3.13.4. "U.S. GAAP" means accounting
principles generally accepted in the United States as of a given date.
"VNG" has the meaning set forth in the introductory paragraph.
"VNG Employees" means (i) all current employees of VNG or Related
Company Employees; (ii) all employees of VNG or Related Company Employees who
are absent from work on account of vacation, disability, layoff, leave of
absence or for any other reason on the Closing, whether or not they return to
active employment after the Closing, whose last day of active employment was
with VNG or as a Related Company Employee; and (iii) all persons who retired or
whose employment with VNG terminated for any reason before the Closing.
"VNG Stock" means all of the issued and outstanding shares of capital
stock of VNG. "WARN Act" has the meaning set forth in Section 5.9.
"Working Capital" has the meaning set forth in Section 2.1.2.
ARTICLE 2
PURCHASE AND SALE OF VNG STOCK
Section 2.1 Purchase and Sale of Stock.
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2.1.1 Transfer of VNG Stock. Upon the terms and subject to the conditions set
forth below, at the Closing Seller shall sell, convey, transfer, assign, and
deliver to Buyer, and Buyer shall purchase from Seller, all of the VNG Stock.
2.1.2 Purchase Price. The consideration to be paid for the VNG Stock (the
"Purchase Price") shall be $ 550,000,000 plus the amount by which the book value
of the Working Capital of VNG on the Closing Date exceeds $21,888,000, or minus
the amount by which the book value of such Working Capital is less than
$21,888,000. The term "Working Capital" as used herein shall mean current assets
less current liabilities determined in accordance with U.S. GAAP; provided,
however, that for the purposes of this definition, current liabilities as of any
date shall not include any payables to any Affiliates of VNG including amounts
borrowed as of such date by VNG from the "System Money Pool" described in Note
13 to the 1999 audited VNG financial statements, and current assets shall not
include receivables from any Affiliates of VNG. The computation of Working
Capital as of December 31, 1999 is set forth on Schedule 2.1.2. At the Closing,
Buyer will pay Seller an amount (the "Estimated Purchase Price") determined by
Seller's Auditors on the basis hereinabove set forth using the unaudited balance
sheet of VNG for the end of the month immediately preceding the Closing, subject
to such adjustments to reflect known variances in Working Capital as may be
mutually agreeable to the parties. The Estimated Purchase Price shall be paid by
wire transfer of immediately available funds to an account designated by Seller.
2.1.3 Adjustment to the Estimated Purchase Price.
(a) As promptly as practical, but in no event more than 60 days after the
Closing, Buyer shall cause Buyer's Auditors to prepare and deliver to Seller a
draft of a schedule of the Working Capital of VNG (in the format consistent with
Schedule 2.1.2) as of the commencement of business on the Closing Date (the
"Preliminary Working Capital Schedule"), which shall reflect the value of the
Working Capital as of such date, together with a draft of their report stating,
without qualification, that the Preliminary Working Capital Schedule has been
prepared in conformity with U.S. GAAP.
(b) Seller's Auditors may, if Seller so elects, review the manner in which
Buyer's Auditors plan to prepare the Preliminary Working Capital Schedule,
including, but not limited to, the nature and extent of the procedures to be
applied in preparing the schedule. Seller and Seller's Auditors shall be
entitled to observe the taking of the physical inventory, if any. (c) During the
15 days following the receipt by Seller of the draft of the Preliminary Working
Capital Schedule and the report of Buyer's Auditors with respect thereto,
Seller's Auditors shall be permitted to review the working papers of Buyer's
Auditors relating to the draft of the Preliminary Working Capital Schedule and
shall have such access to Buyer's personnel as may be reasonably necessary to
permit them to review in detail the manner in which the draft was prepared.
Buyer and Buyer's Auditors shall cooperate with Seller and Seller's Auditors in
facilitating such review. Seller's Auditors shall give any comments or
objections they have with respect to the draft of the Preliminary Working
Capital Schedule to Buyer and Buyer's Auditors. Such comments or objections,
insofar as they relate to the valuation of any assets or liabilities, shall be
resolved by Buyer, and Buyer's Auditors shall prepare a final schedule of
Working Capital (the "Final Working Capital Schedule") which shall reflect such
resolution, and deliver it to Seller pursuant to the provisions of the next
paragraph.
(d) Within seven days after the expiration of such 15 day period, Buyer shall
deliver to Seller the Final Working Capital Schedule accompanied by a definitive
report of Buyer's Auditors with respect thereto. Within three Business Days
after receipt of such schedule and report, Seller's Auditors shall deliver a
letter to Seller and Buyer stating whether they concur with such report and
their exceptions thereto, if any, together with the reasons therefor. If
Seller's Auditors fail to deliver to Seller and Buyer a letter within such
period, Seller shall be deemed to have accepted the Final Working Capital
Schedule. If the objections raised in a timely submitted letter from Seller's
Auditors cannot be resolved between Buyer's Auditors and Seller's Auditors
within five Business Days after delivery of such letter by Seller's Auditors,
the question or questions in dispute shall then be promptly submitted to any
"big five" accounting firm (other than Seller's Auditors and Buyer's Auditors),
or if such accounting firm cannot or refuses to serve in such capacity, a
mutually acceptable firm of independent public accountants of recognized
standing, the decision of which as to such question or questions in dispute
shall be final and binding upon Seller and Buyer. The accounting firm shall be
instructed to resolve the question or questions in dispute within 20 days of
submission.
(e) If the Final Working Capital Schedule, after the resolution of all disputes,
indicates that the amount of Working Capital of VNG used to determine the
Estimated Purchase Price was less than the amount of Working Capital of VNG
reflected in the Final Working Capital Schedule, Buyer shall promptly pay to
Seller, in immediately available funds the amount of the difference. If the
Final Working Capital Schedule, after the resolution of all disputes, indicates
that the amount of Working Capital of VNG used to determine the Estimated
Purchase Price exceeded the amount of Working Capital of VNG reflected in the
Final Working Capital Schedule, Seller shall promptly pay to Buyer, in
immediately available funds the amount of such excess.
(f) The fees of Buyer's Auditors incurred in connection with the preparation of
the Preliminary and Final Working Capital Schedules shall be borne by Buyer, and
the fees of Seller's Auditors incurred in connection with their review of the
work done in connection with the preparation of such schedules shall be borne by
Seller. The fees of any independent accounting firm appointed pursuant to
Section 2.3(d) shall be borne equally by Seller and Buyer.
2.1.4 Allocation of Purchase Price. In the event that a Section 338(h)(10)
Election is made pursuant to Section 5.4.8, Buyer and Seller agree that the
Purchase Price and the liabilities of VNG (plus other relevant items) will be
allocated to the assets of VNG for federal income tax purposes in accordance
with the Final Allocation. Buyer shall deliver to Seller at Closing a
preliminary allocation of the Purchase Price and liabilities (plus other
relevant items) among the assets of VNG, and, as soon as possible following the
Closing (but in any event within 90 days following the completion of the
adjustments to the Purchase Price contemplated by Section 2.1.3), Buyer shall
prepare and deliver to Seller a final allocation of the Purchase Price and
liabilities (plus other relevant items), reflecting all adjustments to the
Purchase Price contemplated by Section 2.1.3, among the assets of VNG (the
"Allocation"). The Allocation shall be consistent with Section 1060 of the Code
and the Treasury Regulations thereunder. Seller hereby agrees to accept Buyer's
Allocation unless Seller determines that such Allocation was not prepared in
accordance with Section 1060 of the Code and the regulations thereunder
("Applicable Law"). If Seller so determines, Seller shall within 20 days
thereafter propose any changes necessary to cause the Allocation to be prepared
in accordance with Applicable Law. Within 10 days following delivery of such
proposed changes, Buyer shall provide Seller with a statement of any objections
to such proposed changes, together with a reasonably detailed explanation of the
reasons therefor. If Buyer and Seller are unable to resolve any disputed
objections within 10 days thereafter, such objections shall be referred to a
"Big 5" accounting firm mutually agreeable to them (other than Seller's Auditors
and Buyer's Auditors) or if such accounting firm cannot or refuses to serve in
such capacity, a mutually acceptable firm of independent public accountants of
recognized standing, whose review shall be limited to whether Buyer's Allocation
of such disputed items regarding the Allocation was prepared in accordance with
Applicable Law. Such accounting firm shall be instructed to deliver to Seller
and Buyer a written determination of the proper allocation of such disputed
items within 20 days. Such determination shall be conclusive and binding upon
the parties hereto for all purposes, and the Allocation shall be so adjusted
(the Allocation, including the adjustment, if any, to be referred to as the
"Final Allocation"). Seller and Buyer shall share fees and disbursements of the
accounting firm attributable to the Allocation equally. Each of Seller and Buyer
agrees to timely file Internal Revenue Service Form 8594, and all federal,
state, local and foreign Tax Returns (including amended returns and claims for
refund) in a manner consistent with the Final Allocation. Each of Buyer and
Seller agrees to promptly provide the other with any additional information and
reasonable assistance required to complete Form 8594, or compute Taxes arising
in connection with (or otherwise affected by) the transactions contemplated
hereunder. Each of Seller and Buyer shall timely notify the other, and each
shall timely provide the other with reasonable assistance in the event of an
examination, audit or other proceeding regarding the Final Allocation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND DRI
Seller hereby represents and warrants to Buyer and, with respect to
Sections 3.1.2 and 3.2.2 only, DRI hereby represents and warrants to Buyer, as
follows: Section 3.1 Organization and Corporate Power.
3.1.1 Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full corporate power
and authority to own the VNG Stock, to execute, deliver and perform this
Agreement, and to perform all of the transactions contemplated hereby.
3.1.2 DRI is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Virginia and has full corporate power and
authority to execute, deliver and perform this Agreement, and to perform all of
the transactions contemplated hereby to be performed by it.
Section 3.2 Authorization; Validity.
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3.2.1 The execution, delivery and performance by Seller of this Agreement and
the transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of Seller. This Agreement has been duly executed
and delivered by Seller and constitutes the valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereinafter in effect relating to
creditors' rights generally, and general equitable principles (whether
considered in a proceeding in equity or at law).
3.2.2 The execution, delivery and performance by DRI of this Agreement and the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of DRI. This Agreement has been duly executed and
delivered by DRI and constitutes the valid and binding obligation of DRI,
enforceable against DRI in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereinafter in effect relating to creditors' rights
generally, and general equitable principles (whether considered in a proceeding
in equity or at law). Section 3.3 Organization, Qualification and Corporate
Power of VNG. VNG is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia, and is duly licensed or
qualified to transact business as a foreign corporation in each jurisdiction in
which the nature of the business transacted by it or the character of the
properties owned or leased by it requires such licensing or qualification. VNG
has full corporate power and authority to own, lease or otherwise hold its
properties and assets and to carry on its business as now conducted. Except as
set forth on Schedule 3.3, VNG does not own any equity interest in any other
entity, excluding de minimis interests received as a result of bankruptcy
proceedings. Section 3.4 No Conflict. The execution, delivery and performance by
Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby will not (i) violate, conflict with or result in a breach of
any provisions of the certificate or articles of incorporation, by-laws or
articles of organization of Seller or VNG, (ii) violate any material law or
regulation applicable to Seller or VNG, or any order of any court or
governmental agency or authority having jurisdiction over Seller or VNG, (iii)
except as set forth in Schedule 3.4, violate or conflict with, or constitute
(with due notice or lapse of time or both) a default under, any Material
Contract or (iv) result in the creation or imposition of any Material
Encumbrance. Section 3.5 Capital Stock.
3.5.1 Seller owns of record and beneficially good and valid title to all of the
authorized, issued and outstanding capital stock of VNG, consisting of 5,273
shares of Common Stock. There are (i) no authorized or outstanding
subscriptions, warrants, options, convertible securities or other similar
securities or rights (contingent or otherwise) to purchase or otherwise acquire
from VNG or Seller any equity interests of or in VNG, (ii) no commitments on the
part of VNG or Seller to issue shares, subscriptions, warrants, options,
convertible securities, partnership interests or other similar securities or
rights with respect to the equity securities of VNG, and (iii) no equity
securities of VNG reserved for issuance for any such purpose. Neither Seller nor
VNG has any obligation (contingent or other) to purchase, redeem or otherwise
acquire or sell any equity securities of VNG. Except for this Agreement, there
is no lien, restriction, claim, charge, option, voting trust or agreement,
stockholders agreement, pledge agreement, buy-sell agreement, right of first
refusal, preemptive right, proxy, or encumbrance on or relating to any equity
securities of VNG. None of the shares of VNG Stock have been issued in violation
of the preemptive rights of any Person or of any applicable securities law.
3.5.2 All shares of VNG Stock have been and at the Closing will be duly
authorized, validly issued, fully paid and nonassessable. Upon the conveyance
and transfer of the VNG Stock to Buyer, Buyer shall receive good and valid title
thereto, free and clear of all liens, claims, equities, charges, options, rights
of first refusal, encumbrances, or other restrictions and with no defects of
title. Section 3.6 Financial Statements. Seller has delivered to Buyer an
audited balance sheet of VNG at December 31, 1998 and 1999 and related audited
statements of income and cash flows of VNG for the years then ended (such
statements, together with the related notes thereto, collectively, the
"Financial Statements"). The Financial Statements have been prepared in
accordance with U.S. GAAP consistently applied, and fairly present in all
material respects the financial condition of VNG as of the dates thereof and the
results of operations for the periods covered thereby. VNG has no liability or
obligation (whether accrued, absolute, contingent or otherwise) which,
individually or in the aggregate, is material to VNG, other than (i) liabilities
reflected (but only to the extent so reflected) or reserved (but only to the
extent so reserved) against in the Financial Statements, (ii) liabilities or
obligations that have arisen since December 31, 1999 in the ordinary course of
business, none of which, individually or in the aggregate, would, or would
reasonably be expected to, have a Material Adverse Effect or (iii) liabilities
or obligations disclosed in Schedule 3.6. Section 3.7 Compliance with Law;
Proceedings.
3.7.1 Except as set forth on Schedule 3.7, VNG is in compliance with all laws,
rules, regulations, licenses, permits and orders applicable to it and its
business (other than labor laws, which are addressed in Section 3.12, and
Environmental Laws, which are addressed in Section 3.18), except for such
non-compliance as would not, or would not reasonably be expected to, have a
Material Adverse Effect. Except as set forth on Schedule 3.7, VNG has all
permits, licenses, franchises and other governmental authorizations
(collectively, "Permits") necessary to own, lease or otherwise hold its
properties and assets and to conduct its business as currently conducted, except
where the failure to obtain the same would not, or would not reasonably be
expected to, have a Material Adverse Effect. Except as set forth on Schedule
3.7, and except as would not have, or would not reasonably be expected to have,
a Material Adverse Effect, (i) each Permit is in full force and effect in
accordance with its terms, (ii) there is no outstanding written notice, nor to
Seller's Knowledge, any other notice of revocation, cancellation or termination
of any Permit, and (iii) there are no proceedings pending or, to Seller's
Knowledge, threatened that seek the revocation, cancellation or termination of
any Permit. 3.7.2 Except as set forth on Schedule 3.7, (i) each franchise is in
full force and effect in accordance with its terms, (ii) there is no outstanding
written notice, nor to Seller's Knowledge, any other notice, of revocation,
cancellation or termination of any franchise, (iii) there are no liabilities of
VNG under any existing or expired franchise which have not been fully satisfied,
and (iv) there are no proceedings pending or, to Seller's Knowledge, threatened
that seek the revocation, cancellation or termination of any franchise.
3.7.3 There are no (i) actions, suits, claims or proceedings (including, but not
limited to, any arbitration proceedings) pending or, to Seller's Knowledge,
threatened, or (ii) investigations which, to Seller's Knowledge, are pending or
threatened, against VNG, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign which would, or would reasonably
be expected to, have a Material Adverse Effect or which seek specifically to
prevent, restrict or delay the consummation of the transactions contemplated
hereby or the fulfillment of the conditions of this Agreement. VNG is not in
default with respect to any order, writ, injunction or decree known to or served
upon VNG of any court or of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, except for defaults which would not, or would not reasonably be
expected to, have a Material Adverse Effect.
3.7.4 Except as set forth on Schedule 3.7, there are no rate proceedings filed,
pending or on appeal with or from the Virginia State Corporation Commission or
any other governmental authority having rate setting or approval authority over
VNG. Section 3.8 Tax Matters.
3.8.1 There have been properly completed and filed on a timely basis and in
substantially correct form all Tax Returns required to be filed by VNG on or
prior to the date hereof. As of the time of filing, the foregoing Tax Returns
were true, correct, and complete in all material respects. Except as set forth
in Schedule 3.8, VNG is not currently the beneficiary of any extension of time
within which to file any Tax Return.
3.8.2 With respect to all amounts in respect of Taxes imposed on VNG for any
taxable periods or portions of periods ending on or before the Closing Date, (i)
all applicable Tax laws have been complied with, except for such non-compliance
as would not, or would not reasonably be expected to, have a Material Adverse
Effect, and (ii) all material amounts required to be paid to taxing authorities
or others on or before the date hereof have been paid, except such Taxes, if
any, as set forth in Schedule 3.8 that are being contested in good faith.
3.8.3 Schedule 3.8 lists all federal, state, local, and foreign Tax Returns
filed with respect to VNG for taxable periods ended on or after December 31,
1997, indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Seller has delivered to
Buyer true, correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by VNG (or portions of such Tax Returns, reports and statements that relate
to VNG) since December 31, 1997. Except as set forth in Schedule 3.8, no
material adjustments to the Tax liability of VNG have been proposed (and are
currently pending) by any taxing authority in connection with any such Tax
Return. All deficiencies asserted or assessments made as a result of any
examinations have been fully paid, or are fully reflected as a liability in the
financial statements of VNG, or are being contested in good faith and are
described in Schedule 3.8. 3.8.4 There are no liens for Taxes (other than for
current Taxes not yet due and payable) on any of the assets of VNG. 3.8.5 The
unpaid Taxes of VNG (i) did not, as of the most recent fiscal month end, exceed
the reserve for Tax liability (other than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the most recent balance sheet (other than in any notes thereto)
and (ii) will not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of VNG
in filing its Tax Returns. 3.8.6 VNG has not filed a consent under Code ss.
341(f) concerning collapsible corporations. VNG has not made any payments, is
not obligated to make any payments, nor is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code ss. 280G. VNG has not been a United States real property
holding corporation within the meaning of Code ss. 897(c)(2) during the
applicable period specified in Code ss. 897(c)(1)(A)(ii). VNG has disclosed on
its federal income Tax Returns all positions taken therein that could give rise
to a substantial understatement of federal income Tax within the meaning of Code
ss. 6662. VNG (i) has not been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was Common Parent) or (ii) has no material liability for the Taxes of any
Person (other than VNG) as a transferee or successor, or by contract.
Section 3.9 Material Contracts. The Contracts listed in Schedule 3.9 include all
of the Material Contracts; provided, however, that no Contract shall be deemed a
Material Contract solely by reason of the fact that it is listed on Schedule
3.9. Seller has provided to Buyer true, correct and complete copies of all
contracts listed on Schedule 3.9. Except as otherwise set forth in Schedule 3.9,
(i) each Material Contract is valid, binding and in full force and effect, and
is enforceable by VNG in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereinafter in effect relating to creditors' rights
generally, and general equitable principles (whether considered in a proceeding
in equity or at law), (ii) VNG has performed the material obligations required
to be performed by it to date under each Material Contract, and (iii) to the
Knowledge of Seller, there has not occurred any material default by any other
party under any Material Contract nor any event that with or without the giving
of notice or lapse or time, or both, would constitute a material default under
any Material Contract.
Section 3.10 Consents and Approvals. Except as set forth in Schedule 3.10, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality or any other
Person is or will be necessary for the valid execution, delivery and performance
by Seller of this Agreement or the consummation of the transactions contemplated
hereby, other than filings required pursuant to the HSR Act.
Section 3.11 Brokers. Neither Seller nor any Subsidiary or Affiliate thereof has
any contract, arrangement or understanding with any investment banking firm,
broker or finder with respect to the transactions contemplated by this
Agreement, except for Merrill Lynch, whose fees shall be borne by Seller.
Section 3.12 Labor Matters. Seller has delivered to Buyer a true and correct
copy of the collective bargaining agreement dated May 16, 1997 between VNG and
the Virginia Natural Gas Employees of Local 50 of the International Brotherhood
of Electrical Workers (together with any amendments thereto, the "Collective
Bargaining Agreement"). The Collective Bargaining Agreement constitutes the only
collective bargaining agreement to which VNG is a party or is subject. VNG (i)
is in compliance with all applicable laws regarding employment and employment
practices, terms and conditions of employment, and wages and hours, (ii) has not
received written notice of any unfair labor practice complaint against it
pending before the National Labor Relations Board; (iii) has no arbitration
proceeding pending against it that arises out of or under any collective
bargaining agreement which relates to the business or operations of VNG, and
(iv) is not currently experiencing, and has received no current threat of, any
work stoppage, in each case of (i) through (iv), except as would not, or would
not reasonably be expected to, have a Material Adverse Effect. Section 3.13
ERISA.
3.13.1 Schedule 3.13 lists all Employee Plans. Neither VNG nor any of its ERISA
Affiliates has made any commitment to establish any new Employee Plan or to
modify any Employee Plan, nor has any intention to do so been communicated to
any VNG Employee. Seller has provided Buyer with true, correct and complete
copies of all plan documents and other documents relating to the Employee Plans.
Since such documents have been supplied, no amendments to any Employee Plan have
been adopted, and no such amendments will be adopted or made prior to the
Closing except to the extent Buyer consents to such amendment or modification.
3.13.2 All Employee Plans subject to ERISA and the Code comply with ERISA and
the Code in all material respects. 3.13.3 Except as set forth in Schedule 3.13,
all Employee Plans intended to be qualified under Section 401 of the Code have
received favorable determination letters with respect to such qualified status
from the Internal Revenue Service. The determination letter for each such
Employee Plan remains in effect, and, to the Knowledge of Seller, any amendment
made or event relating to such an Employee Plan subsequent to the date of such
determination letter has not adversely affected the qualified status of the
Employee Plan. No issue concerning qualification of any Employee Plan is pending
before or threatened by the Internal Revenue Service. 3.13.4 Except as set forth
on Schedule 3.13, no Employee Plan that is subject to Title IV of ERISA (a
"Title IV Plan") has incurred an accumulated funding deficiency, whether or not
waived, within the meaning of Section 412 of the Code or Section 302 of ERISA,
and no condition exists which would be expected to result in an accumulated
funding deficiency as of the last day of the current plan year of any Title IV
Plan. The Pension Benefit Guaranty Corporation ("PBGC") has not instituted
proceedings to terminate any Title IV Plan, and no other event or condition has
occurred which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any such Title IV
Plan. Neither VNG nor any ERISA Affiliate has withdrawn from a Title IV Plan
during a plan year in which it was a "substantial employer" (within the meaning
of Section 4001(a)(2) of ERISA), or filed a notice of intent to terminate any
Title IV Plan or adopted any amendment to treat any such plan as terminated. No
notice of a reportable event (within the meaning of ERISA Section 4043(b)) has
been filed with the PBGC by the plan administrator of any Title IV Plan, nor has
any reportable event occurred for which such a notice is required to be filed
with the PBGC. All required premium payments to the PBGC for each Title IV Plan
has been paid when due.
3.13.5 No Employee Plan is a Multiemployer Plan.
3.13.6 None of the Employee Plans has engaged in or been a party to a
transaction that is prohibited under Section 4975 of the Code or Section 406 of
ERISA and which is not exempt under Section 4975 of the Code or Section 408 of
ERISA, respectively. 3.13.7 Except for individuals listed in Schedule 5.8.1, no
VNG Employee shall accrue or receive additional benefits, service or accelerated
rights to payment of benefits under any Employee Plan or become entitled to
severance, termination allowance or similar payments as a result of the
transactions contemplated by this Agreement.
3.13.8 Other than claims for benefits in the ordinary course, there is no claim
pending, or, to Seller's Knowledge, threatened, with respect to any Employee
Plan or any fiduciary (as defined under ERISA) under any Employee Plan. 3.13.9
VNG and its ERISA Affiliates have made full and timely payment of all amounts
required to be contributed under the terms of each Employee Plan.
3.13.10 The voluntary employee benefit association (VEBA) sponsored by VNG has
been funded in accordance with any applicable regulatory requirements set forth
by the Virginia State Corporation Commission. 3.13.11 Schedule 3.13 sets forth
the pay scale for all existing VNG Employees, and lists the number of VNG
Employees in the positions denoted on Schedule 3.13.
Section 3.14 Events Subsequent to December 31, 1999. Except as set forth in
Schedule 3.14 or as specifically and expressly identified and provided for by
this Agreement to occur prior to the Closing Date (or consented to or approved
by Buyer in writing prior to the Closing Date), since December 31, 1999, VNG has
not:
(i) incurred any indebtedness for borrowed money (not including accounts payable
and trade payables incurred in the ordinary course of business) other than in
the ordinary course consistent with past practice, indebtedness to Affiliates
which will be repaid prior to Closing, and indebtedness incurred in accordance
with the express terms of any Material Contract; (ii) acquired or disposed of,
in either case in any manner, any material assets or properties, other than
acquisitions and dispositions in the ordinary course of business, dispositions
of obsolete or surplus assets, acquisitions and dispositions in connection with
the normal repair and/or replacement of assets or properties, or property losses
covered by insurance, or acquisitions or dispositions in accordance with the
express terms of any Material Contract; (iii) amended its Certificate of
Incorporation, By-laws or governing documents; (iv) failed to pay and discharge
on a timely basis consistent with past practices any material liabilities which
constitute current liabilities under U.S. GAAP consistently applied, except for
liabilities not yet due or liabilities which are subject to good faith contest
for which appropriate reserves have been established; (v) cancelled any material
indebtedness owed to VNG or waived any rights of substantial value to VNG; (vi)
declared or paid any dividend or distribution in respect of the VNG Stock; (vii)
granted any general increase in the compensation or benefits of any VNG
Employees other than normal merit or promotional increases in the normal course
of business or as required pursuant to existing contracts (including collective
bargaining agreements); (viii) suffered any damage or destruction materially and
adversely affecting the assets or business of VNG taken as a whole; (ix) made
any change in any material method, practice, or principle of financial or tax
accounting; (x) entered into any agreement or commitment to take any of the
actions described in Sections 3.14 (i) to 3.14 (ix); or (xi) from December 31,
1999 to the date of this Agreement, suffered a Material Adverse Effect. Section
3.15 Title to Properties. VNG has good and valid title to the material
properties and assets reflected on the December 31, 1999 balance sheet included
in the Financial Statements or thereafter acquired (other than material
properties and assets disposed of in the ordinary course of business since such
date and dispositions that would not result in a breach of the representations
set forth in Section 3.14), free and clear of any Material Encumbrances, except
for: (i) Liens and encumbrances set forth in Schedule 3.15; (ii) Liens for
current taxes not yet due and payable or being contested in good faith through
appropriate proceedings, Liens which do not materially adversely affect the use
or value for the purpose of VNG's business of the property they encumber, Liens
to lenders incurred on deposits made in the ordinary course of business in
connection with maintaining bank accounts, Liens in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, governmental permits, licenses and approvals, performance and
return-of-money bonds and other similar obligations, and (iii) materialmen's,
warehousemen's and mechanics Liens and other Liens arising by operation of law
in the ordinary course of business for sums not yet due. The Liens described in
the foregoing clauses (i), (ii) and (iii) are collectively referred to as
"Permitted Liens". VNG currently owns, leases or otherwise has a right to use
all of the property necessary for the conduct of its business as currently
conducted except for such property the absence of which would not, or would not
reasonably be expected to, have a Material Adverse Effect. Section 3.16
Insurance. Schedule 3.16 lists the insurance policies maintained by or on behalf
of VNG. Seller has delivered to Buyer true, correct and complete copies of all
such insurance policies. Except as set forth in Schedule 3.16, VNG holds, or is
beneficiary of, valid policies of insurance of such types and in such amounts as
is customary for companies similarly situated. Such policies are in full force
and effect, and VNG has received no written notice of any pending or threatened
termination of such policies. Section 3.17 Transactions with Certain Persons.
Except for liabilities and obligations arising out of their employment
relationship with VNG and its Affiliates, and except as set forth in Schedules
3.9 or 3.13, VNG has no outstanding liabilities or obligations owing to or from
any officer, director, employee or stockholder of VNG (other than Seller or its
Affiliates, which liabilities will be satisfied as of the Closing) nor any
member of any such person's immediate family. Section 3.18 Compliance With
Environmental Laws. 3.18.1 Except as set forth in Schedule 3.18.1, (i) VNG is in
material compliance with applicable Environmental Laws, (ii) VNG has no material
liability under applicable Environmental Laws, and (iii) Hazardous Substances
have not been Released by Seller, VNG or their Affiliates at any properties
owned and/or operated currently or formerly by Seller, VNG or their Affiliates,
which would, or would reasonably be expected to, result in a material Loss.
Except as set forth in Schedule 3.18.1, (A) no written notice of any material
violation of Environmental Laws relating to the operations or properties of VNG
has been received by, and is pending against VNG, and (B) there are no writs,
injunctions, decrees, orders or judgments outstanding, or any actions, suits,
claims, proceedings or investigations pending or, to the Knowledge of Seller or
VNG, threatened, relating to material non-compliance by VNG with or liability of
VNG under the applicable Environmental Laws. Except for documents, environmental
studies and assessments related to the Manufactured Gas Facilities, Seller has
provided to Buyer true, correct and complete copies of (1) all material
documents related to the items listed on Schedule 3.18.1 within the possession
or control of Seller, VNG, or their Affiliates and (2) summaries of all
environmental studies and assessments of VNG and its properties prepared since
1995 within the possession or control of Seller, VNG or their Affiliates. 3.18.2
Except as set forth on Schedule 3.18.2 and as described in items (a) through (d)
of the definition of Manufactured Gas Facilities, neither VNG nor its
predecessors have owned or operated any facility or property which was used as a
manufactured gas plant. All manufactured gas plants of VNG and its predecessors
and sites to which Hazardous Substances or other wastes from such manufactured
gas plants are known to have been sent by Seller, VNG or their Affiliates for
storage, treatment or disposal are listed in Schedule 3.18.2. Section 3.19
Intellectual Property. Schedule 3.19 is a complete list of all material patents,
patent applications, trademarks, service marks, tradenames, copyrights, material
proprietary software, inventions and other proprietary items owned or used by
VNG in the conduct of its business (such intellectual property owned by VNG, the
"VNG Intellectual Property", and collectively with all intellectual property
used by VNG, the "Intellectual Property"). Except as set forth on Schedule 3.19,
VNG owns, possesses or has the right to exploit, free of any obligation to make
any material payment (whether of a royalty, license fee, compensation or
otherwise), the Intellectual Property, all of which are the only Intellectual
Property which are necessary to the conduct of VNG's business, other than such
Intellectual Property the absence of which would not have a Material Adverse
Effect. To the Knowledge of the Seller, VNG's ownership, possession or other use
or exploitation of any of the Intellectual Property does not conflict with the
rights of any Person. VNG has used its reasonable efforts to protect the VNG
Intellectual Property. To the Knowledge of Seller, other than as set forth on
Schedule 3.19, (i) no Person other than VNG owns or has any other right in or
to, or has claimed any ownership or other right in or to, any VNG Intellectual
Property which is material to VNG's business as currently conducted and (ii) no
Person is infringing upon any VNG Intellectual Property material to VNG's
business as currently conducted. Section 3.20 Disclosure. Neither this Agreement
(including the Schedules) nor any documents, certificates or other items
delivered to Buyer by or on behalf of Seller or VNG in accordance with this
Agreement contain any untrue statement of a material fact or omit a material
fact necessary to make each statement contained herein or therein not
misleading. ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
Section 4.1 Organization and Corporate Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Georgia.
Buyer has full corporate power and authority to execute, deliver and perform
this Agreement. Section 4.2 Authorization of Agreement; Validity. The execution,
delivery and performance by Buyer of this Agreement have been duly authorized by
all requisite corporate action on the part of Buyer. This Agreement has been
duly executed and delivered by Buyer and constitutes the valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and general equitable principles
(whether considered in a proceeding in equity or at law). Section 4.3 No
Conflict. The execution, delivery and performance by Buyer of this Agreement and
the consummation of the transactions contemplated hereby will not (i) violate
the certificate of incorporation, by-laws, articles of organization, partnership
agreement, formation agreement or other similar organizational documents of
Buyer, (ii) violate any material law or regulation applicable to Buyer, or any
order of any court or governmental agency or authority having jurisdiction over
Buyer, or (iii) violate or conflict with, or constitute (with due notice or
lapse of time or both) a default or result in acceleration under, any material
note, bond, mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation by which Buyer or any of its assets is bound.
Section 4.4 Consents and Approvals. Except as set forth in Schedule 4.4, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality or any other
Person is or will be necessary for the valid execution, delivery and performance
by Buyer of this Agreement and the consummation of the transactions contemplated
hereby, other than filings required pursuant to the HSR Act.
Section 4.5 Brokers. Neither Buyer nor any Subsidiary or Affiliate of Buyer has
any contract, arrangement or understanding with any investment banking firm,
broker, finder or similar agent with respect to the transactions contemplated by
this Agreement, except for Morgan Stanley Dean Witter, whose fees shall be borne
by Buyer.
Section 4.6 Availability of Funds. At the Closing, Buyer will have sufficient
funds to pay the Purchase Price and to consummate the transactions contemplated
hereby. Section 4.7 Investment. Buyer is acquiring the VNG Stock for investment
and not with a view to its sale or distribution other than in a sale or
distribution which is registered under applicable securities laws or is exempt
from such registration. Section 4.8 Litigation. Except as set forth in Schedule
4.8, there are no actions, suits, claims, investigations or proceedings (legal,
administrative or arbitrative) pending or, to the Knowledge of Buyer, threatened
against Buyer, whether at law or in equity and whether civil or criminal in
nature, before any federal, state, municipal, foreign country's or other court,
arbitrator, governmental department, commission, agency or instrumentality, nor
are there any judgments, decrees or orders of any such court, arbitrator,
governmental department, commission, agency or instrumentality outstanding
against Buyer, which have or if, adversely determined, would, or would
reasonably be expected to, have a material adverse effect on Buyer's assets or
its business, taken as a whole, or which seek specifically to prevent, restrict
or delay the consummation of the transactions contemplated hereby or the
fulfillment of any of the conditions of this Agreement.
ARTICLE 5
ACCESS; ADDITIONAL AGREEMENTS
Section 5.1 Access to Information; Continuing Disclosure.
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5.1.1 Seller agrees that from the date hereof until the Closing Date, and
subject to the terms of the Confidentiality Agreement, upon reasonable notice
from Buyer, Seller shall cause VNG to provide to Buyer reasonable access, at
reasonable times during normal business hours, to the employees, properties,
books and records of VNG and shall promptly furnish to Buyer, or cause VNG to
furnish to Buyer, information as Buyer may reasonably request; provided, that
such access shall be afforded to Buyer only in such manner so as not to
unreasonably disturb or interfere with the normal operations of VNG. Seller and
VNG shall not be required to take any action that would constitute a waiver of
the attorney-client privilege. Seller and VNG need not supply to Buyer any
information that Seller or VNG are under a legal obligation not to supply, but
shall inform Buyer of such legal obligation. At regular intervals prior to the
Closing Date, or at such other times as Buyer or its representatives shall
reasonably request, Seller shall consult with Buyer regarding the conduct of the
business of VNG. All information furnished by or on behalf of Seller or VNG
hereunder shall be subject to the terms of the Confidentiality Agreement dated
February 2, 2000 between Seller and Buyer (the "Confidentiality Agreement").
5.1.2 Seller agrees that after the Closing Date, and subject to the terms of a
commercially reasonable confidentiality agreement, upon reasonable notice from
Buyer, Seller shall provide to Buyer and VNG reasonable access, at reasonable
times during normal business hours, to documents, environmental studies and
assessments related to the Manufactured Gas Facilities within the possession or
control of Seller or its Affiliates; provided, that such access shall be
afforded to Buyer and VNG only in such manner so as not to unreasonably disturb
or interfere with the normal operations of Seller and in the event that (i)
Buyer or VNG receives an inquiry from a governmental authority or otherwise
needs access in order to comply with applicable law, (ii) a third party asserts
a claim against Buyer or VNG relating in any way to the Manufactured Gas
Facilities, or (iii) Buyer or VNG provides written notice to Seller specifying
any other reason for which Buyer or VNG requests access, in which event access
will be provided upon Seller's consent (not to be unreasonably withheld). Seller
shall not be required to take any action that would constitute a waiver of the
attorney-client privilege. Seller need not supply to Buyer and VNG any
information that Seller is under a legal obligation not to supply, but shall
inform Buyer and VNG of such legal obligation. All information furnished by or
on behalf of Seller or VNG hereunder shall be subject to the terms of a
commercially reasonable confidentiality agreement.
Section 5.2 Regulatory Approvals.
--------------------
5.2.1 Buyer and Seller will as promptly as practical, but in no event later than
30 days following the execution and delivery of this Agreement, each file with
the United States Federal Trade Commission (the "FTC") and the United States
Department of Justice (the "DOJ") the Notification and Report Form under the HSR
Act, if any, required in connection with the transactions contemplated hereby
and as promptly as practicable supply any additional information, if any,
requested in connection herewith pursuant to the HSR Act. Any such Notification
and Report Form and additional information, if any, submitted to the FTC or the
DOJ shall be in substantial compliance with the requirements of the HSR Act.
Each of Buyer and Seller shall furnish to the other such information and
assistance as the other may reasonably request in connection with its
preparation of any filing or submission which is necessary under the HSR Act.
Each of Buyer and Seller shall keep the other apprised in a prompt manner of the
status and substance of any communications with, and inquiries or requests for
additional information from, the FTC and the DOJ and shall comply promptly with
any such inquiry or request. Each of Buyer and Seller will use its reasonable
efforts to obtain the termination or expiration of any applicable waiting period
required under the HSR Act for the consummation of the transactions contemplated
hereby. The cost of all filing fees under the HSR Act shall be borne by Buyer.
5.2.2 Each of Buyer and Seller shall as promptly as practical, but in no event
later than forty-five days following the execution and delivery of this
Agreement, submit to the appropriate agency/ies or third party/ies all
declarations, filings and registrations required of it and listed on Schedules
3.10 and 4.4. With respect to any such filings, Buyer and Seller shall cooperate
to share and develop information necessary for such filing(s) and drafts of such
filing(s) within 20 days following execution and delivery of this Agreement and
shall give each other reasonable opportunity to comment on and to revise such
draft filing(s) before such filing(s) are made.
Section 5.3 Further Assurances. From time to time from the date hereof until the
Closing Date, as and when requested by any party hereto, the requested party
shall use reasonable efforts to execute and deliver, or cause to be executed and
delivered, all such documents and instruments and shall take, or cause to be
taken, all such further or other actions as reasonably necessary to consummate
the transactions contemplated by this Agreement, including, without limitation,
such actions as are reasonably necessary in connection with obtaining any third
party consent identified on Schedules 3.10 or 4.4 or any regulatory filings as
any party may undertake in connection herewith; provided, however, neither party
shall be required to incur any material economic burden or instigate litigation
in order to obtain any such third party consent. After the date hereof and prior
to Closing, if requested by Buyer, each of Buyer, Seller and VNG agree
cooperatively to commence and diligently pursue efforts to reinstate the expired
Permits listed in Schedule 3.7; provided, however, neither Seller nor VNG shall
be obligated to agree to incur any economic burden or ongoing obligations (other
than those contained in the expired Permits) in order to obtain such
reinstatement. Section 5.4 Certain Tax Matters.
5.4.1 Any tax sharing agreement between Seller, or any Affiliate of Seller, and
VNG will be terminated as of the Closing Date and will have no further effect
for any taxable year (whether the current year, a future year, or a past year).
5.4.2 Seller and DRI agree to jointly and severally indemnify Buyer from and
against the entirety of any Adverse Consequences Buyer may suffer resulting
from, arising out of, relating to, in the nature of, or caused by any liability
of VNG for Taxes of any Person other than VNG for any periods prior to the
Closing Date (a) under Reg. ss. 1.1502-6 (or any similar provision of state,
local or foreign law), (b) as a transferee or successor, (c) by contract, or (d)
otherwise.
5.4.3 Common Parent will include the income of VNG (including any deferred
income triggered into income by Reg. ss. 1.1502-13) on Common Parent's
consolidated federal income Tax Returns for all periods through the Closing Date
and shall pay any income Taxes attributable to such income. VNG will furnish Tax
information to Common Parent for inclusion in the Common Parent's federal
consolidated income Tax Return for the period which includes the Closing Date in
accordance with VNG's past custom and practice. Seller will allow Buyer an
opportunity to review and comment upon such Tax Returns (including any amended
returns) to the extent that they relate to VNG. Except as may be required by
law, Seller will take no position on such returns that relate to VNG that would
adversely affect VNG after the Closing Date, except that Seller may take
positions consistent with past practices. The income of VNG will be apportioned
to the period up to and including the Closing Date and the period after the
Closing Date by closing the books of VNG as of the end of the Closing Date.
5.4.4 Common Parent will give notice to VNG of any audit and allow VNG and its
counsel to participate at its own expense in any audits of Common Parent's
consolidated federal income Tax Returns to the extent that such returns relate
to VNG. Common Parent will not settle any such audit in a manner which would
adversely affect VNG after the Closing Date without the prior written consent of
Buyer, which consent shall not unreasonably be withheld.
5.4.5 (i) To the extent permitted by law, Buyer shall cause VNG to carry forward
any net operating losses, net capital losses, tax credits, or other tax
attributes attributable to periods after the Closing. To the extent that
applicable law requires VNG to carry back any such Tax attribute to a period
before the Closing, Common Parent shall cooperate with Buyer in the filing of
any Tax Returns necessary to effect such carryback and shall promptly upon
receipt pay to Buyer any Tax refund resulting from such carryback. Buyer agrees
to indemnify Seller for any Taxes resulting from the disallowance of such
postacquisition Tax attribute on audit or otherwise. Seller may elect to
reimburse Buyer for any refund that would have resulted from any carryback in
lieu of amending any Tax Return or filing any refund claims provided in this
Section 5.4.5.
(ii).....Except as provided in subsection (i) of this Section
5.4.5, Common Parent shall be entitled to all overpayments in respect of (A) any
Tax Return filed by or for VNG or any group of corporations that includes VNG
for periods ending on or before the Closing Date and (B) any Tax Return filed on
a consolidated, combined or unitary basis for a group that includes VNG for a
period that begins on or before the Closing Date and that ends after the Closing
Date. VNG shall be entitled to all refunds in respect of any Tax Return filed by
it on a separate company basis for a period that begins on or before the Closing
Date and that ends after the Closing Date, except that Common Parent shall be
entitled to any excess of (1) estimated tax or other payments made on or before
the Closing Date with respect to any such Tax Return over (2) the tax liability
that would have been due for the portion of the period covered by such Tax
Return up to and including the Closing Date, determined as if the books of VNG
were closed as of the end of the Closing Date.
5.4.6 Common Parent will not elect to retain any net operating loss carryovers
or capital loss carryovers of VNG under Reg. ss. 1.1502-20(g). 5.4.7 All stamp,
documentary, recording, transfer and sales and use taxes incurred in connection
with this Agreement and the transactions contemplated hereby shall be borne by
Buyer, and Buyer at its own expense shall file, to the extent required by
applicable law, all necessary Tax Returns and other documentation with respect
to all such transfer or sales and use taxes. If required by applicable law,
Seller shall join the execution of any such Tax Returns or other documentation.
5.4.8 At DRI's option, as the common parent of the consolidated group which
includes VNG, DRI will join with Buyer in making an election under Section
338(h)(l0) of the Code (and any corresponding elections under state, local, or
foreign tax law) (collectively a "Section 338(h)(10) Election") with respect to
the purchase and sale of the VNG Stock hereunder. At the earliest time deemed by
DRI, in its sole discretion, to be practicable, but not later than the earliest
of (i) June 1, 2001, (ii) the end of the fifth calendar month following the
month in which the Closing shall occur, or (iii) the date on which DRI receives
an unfavorable response from the Securities and Exchange Commission or the
Internal Revenue Service which DRI determines in its sole discretion renders
pursuit of its desired tax treatment futile (such date, being the "Determination
Date"), DRI shall advise Buyer whether DRI will join Buyer in such request. DRI
shall cooperate with Buyer with regard to the preparation of Internal Revenue
Service Form 8023 in order that such Form 8023 can be filed in a timely manner,
provided that such cooperation by DRI prior to DRI's assent to joining Buyer in
making the Section 338(h)(10) Election shall not be construed as such assent. If
DRI elects to join Buyer in making the Section 338(h)(10) Election, DRI will pay
any Tax attributable to the making of the Section 338(h)(10) Election and will
indemnify Buyer and VNG against any Adverse Consequences arising out of any
failure to pay such Tax, and will pay any federal, state, local, or foreign Tax
(and indemnify Buyer and VNG against any Adverse Consequences arising out of any
failure to pay such Tax) attributable to an election under state, local or
foreign law similar to the election available under Section 338(h) of the Code
(or which results from the making of an election under Section 338(h) of the
Code) with respect to the purchase and sale of the VNG Stock hereunder. In the
event DRI shall not agree to join Buyer in making the Section 338(h)(10)
Election on or before the Determination Date, Seller shall pay to Buyer, as an
adjustment to the Purchase Price, the sum of $50,000,000 plus interest thereon
from the Closing Date until the date such payment is made, at an annual rate
equal to the 30-day LIBOR Rate plus 250 basis points. Seller shall pay the sum
not later than 35 days after the Determination Date.
Section 5.5 Conduct of Business of VNG. From the date hereof until the Closing,
Seller will cause VNG to, and VNG covenants that it will, conduct its business
only in the ordinary course and in a manner consistent with past practices, and
use its best efforts to preserve its relationships with licensors, suppliers,
dealers, customers and others having business relationships with VNG. From the
date hereof until the Closing without written consent of Buyer (such consent not
to be unreasonably withheld or delayed), Seller will not permit VNG to, and VNG
will not:
(i) sell or dispose of any of its material assets or properties, other than
sales and dispositions in the ordinary course of business, sales or dispositions
of obsolete or surplus assets, sales and dispositions in connection with the
normal repair and/or replacement of assets or properties, or property losses
covered by insurance, or sales or dispositions in accordance with the express
terms of any Material Contract; (ii) mortgage, pledge or otherwise encumber any
of its assets; (iii) amend in any material respect, terminate or assign any
Contract listed in Schedule 3.9; (iv) incur any obligation or liability for
borrowed money other than in the ordinary course of business, indebtedness to
Affiliates which will be repaid prior to Closing, or indebtedness incurred in
accordance with the express terms of a Material Contract; (v) make any
individual capital expenditure of more than $100,000, or aggregate capital
expenditures of more than $1,000,000, other than in the ordinary course of
business, or to repair any damaged property or pursuant to VNG's existing
capital expenditure program; (vi) merge or consolidate with, or acquire any or
all of the capital stock or assets of any other Person; (vii) assume, guarantee,
endorse or otherwise become responsible for the obligations of any other Person,
or make loans or advances to any other Person, except in the ordinary course of
business or pursuant to the Appliance Purchase and Computer Purchase Program;
(viii) grant any individual or general increase in the compensation of any VNG
Employees other than normal merit or promotional increases in the normal course
of business or as required by an existing agreement; create any new Employee
Plan to be sponsored by VNG; extend, modify or change in any material respect
(except as may be required by applicable law) any Employee Plan sponsored by VNG
or terminate any existing Employee Plan sponsored by VNG; (ix) enter into any
Material Contract other than Material Contracts to be fully performed by
December 31, 2000, Material Contracts terminable on not more than 90 days
notice, or Material Contracts implementing another provision of this Section
5.5; (x) alter in any material way the manner in which it has regularly and
customarily maintained its books of account and records; (xi) split, combine or
otherwise change its capital stock, or redeem any of its capital stock; (xii)
issue or sell any shares of its capital stock or any securities or obligations
convertible into or exchangeable for, or giving any Person any right to acquire,
any shares of its capital stock; (xiii) declare or pay any dividend or
distribution in respect of VNG Stock; (xiv) amend its Articles of Incorporation
or Bylaws; (xv) hire any new employees for positions at or above the "manager"
level unless to replace an employee vacancy (including the replacement of Edward
R. Hallisey); (xvi) waive or release any material right or claim, other than
pursuant to a settlement without ongoing obligations applicable to VNG or Buyer
with respect to (A) item 1 disclosed in Schedule 3.7 or (B) the item disclosed
in Schedule 3.8; or (xvii) enter into an agreement to do any of the things
described in clauses (i) through (xvi) above. Section 5.6 Notice of Changes.
Between the date of this Agreement and the Closing, each party will promptly
advise the other in writing with respect to any matter arising after execution
of this Agreement of which that party obtains knowledge and which, if existing
or occurring at the date of this Agreement and not set forth in this Agreement,
including any of the Schedules, would have constituted a breach of a
representation or warranty of such party contained herein. Subject to the
condition set forth in Section 6.2, Seller, by written notice to Buyer, may
unilaterally amend the Schedules to this Agreement prior to the Closing Date
either (i) to add items resulting solely from events beyond the reasonable
control of Seller or VNG and occurring between the date of this Agreement and
the Closing Date (it being understood that any amendment pursuant to this clause
(i) shall be treated as if it did not appear in such Schedule for purposes of
Section 6.2 or Section 9.1(iv)), or (ii) to reflect Buyer's hiring decisions
pursuant to Section 5.8.1. Section 5.7 Director and Officer Indemnification and
Insurance. 5.7.1 Buyer shall cause VNG to keep in effect provisions in its
articles of incorporation and bylaws with respect to indemnification and
director and officer exculpation from liability identical to such provisions
contained in the articles of incorporation and bylaws of VNG on the date hereof,
which provisions shall not be amended, repealed, or otherwise modified for a
period of six years from the Closing Date in any manner that would adversely
affect the rights thereunder of individuals who at any time prior to the Closing
Date were directors or officers of VNG in respect of actions or omissions at or
prior to the Closing Date (excluding the transactions contemplated by this
Agreement), except as required by applicable law or except to make changes
permitted by law that would not materially diminish such directors' and
officers' right of indemnification. 5.7.2 For a period of six years after the
Closing Date, provided VNG is able to obtain coverage under existing policies
pursuant to Section 5.11.3 and such insurance is available at commercially
reasonable rates, Buyer shall cause to be maintained in effect the officers' and
directors' liability insurance maintained by VNG immediately prior to the
Closing (provided that Buyer may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions that are not
materially less advantageous than such existing insurance) with respect to
Claims arising from facts or events that occurred prior to the Closing Date.
5.7.3 This Section 5.7 shall survive the Closing, is intended to benefit the
officers and directors of VNG as described in subsections 5.7.1 and 5.7.2, and
each of their respective heirs and personal representatives (each of which shall
be entitled to enforce this Section 5.7 against Buyer as a third-party
beneficiary of this Agreement), and shall be binding on all successors and
assigns of Buyer. Section 5.8 Employee Matters. 5.8.1 Certain Employees. (a)
Related Company Employees. Schedule 5.8.1 lists those employees (including
employees who are absent from work on account of vacation, disability, layoff,
leave of absence or for any other reason on the Closing) of one or more
Affiliates of VNG (including Seller) whom Seller deems to be principally
associated with the assets or operations of VNG. At least 30 days prior to
Closing, Buyer shall notify Seller of those employees listed on Schedule 5.8.1
to whom Buyer elects to offer employment with VNG. If Buyer fails to so notify
Seller, Buyer shall be deemed to have elected not to offer employment to any
employee listed on Schedule 5.8.1. Neither VNG nor Buyer shall be liable for the
benefits or payments described in Section 3.13.7 with respect to such
individuals listed in Schedule 5.8.1. Those employees to whom Buyer notifies
Seller that it elects to offer employment are referred to as the "Related
Company Employees." Buyer agrees to offer employment, effective as of Closing,
to the Related Company Employees at salaries that are initially equal to those
salaries in effect for such Related Company Employees immediately prior to the
Closing. Neither Buyer nor VNG shall have any liability for employee benefits or
severance, change in control, retention or other payments due to any individual
listed on Schedule 5.8.1 who does not become a Related Company Employee. (b)
Union Employees. VNG shall recognize the Local 50 of the International
Brotherhood of Electrical Workers as the bargaining representative for VNG
Employees currently represented, acknowledging the continuation of the
applicable Collective Bargaining Agreement through its term and the continuation
of the employment of all union employees as of the Closing Date. 5.8.2 Employee
Benefits. Buyer agrees to provide non-union VNG Employees from the Closing Date
until the later of December 31, 2001 or one year from the date of Closing,
benefits that are substantially comparable in the aggregate to the benefits
available to non-union VNG Employees. For purposes of this Section 5.8.2,
"benefits" shall mean any broad-based Employee Plans as of May 8, 2000
(excluding non-qualified or deferred compensation plans as well as the employee
stock ownership plan) that are governed by ERISA other than any benefits
conferred by or promised under an agreement with an individual. Notwithstanding
the foregoing, Buyer agrees to provide non-union VNG Employees who have retired
prior to the Closing Date, benefits that are equivalent to those benefits that
would have been available to those employees had they remained covered under the
System Retiree Medical Insurance Plan of Consolidated Natural Gas and its
Participating Subsidiaries for Employees Who Are Not Represented by a Recognized
Union (the "CNG Retiree Medical Plan") (or under a successor plan) for a period
of 5 years from the Closing Date; provided, to the extent the benefits under the
CNG Retiree Medical Plan or its successor plan are reduced, Buyer's plan may
similarly be reduced, but Buyer is not required to increase benefits above the
level available under the CNG Retiree Medical Plan as in effect on May 8, 2000.
Following the Closing, Buyer shall, and shall cause VNG to (i) waive all
pre-existing conditions, exclusions, actively-at-work provisions, waiting
periods and any other similar conditions or requirements with respect to
participation and coverage of non-union VNG Employees and their covered
dependents under any group health plan in which VNG Employees may be eligible to
participate after the Closing Date; (ii) provide each non-union VNG Employee
with credit for payments made by such non-union VNG Employee or his covered
dependents prior to the Closing Date for purposes of satisfying any applicable
deductible, coinsurance or out-of-pocket requirements under any health insurance
plan in which non-union VNG Employees or covered dependents may be eligible to
participate after the Closing Date; and (iii) provide credit to non-union VNG
Employees for purposes of determining eligibility to participate, vesting and
benefit accrual under any employee benefit plan, program or arrangement in which
non-union VNG Employees may be eligible to participate after the Closing Date,
for service prior to the Closing Date with VNG, its Affiliates and predecessors
(but only to the extent recognized by VNG and its Affiliates for such purposes
immediately preceding the Closing); provided, that the foregoing shall not apply
to the extent it would result in duplication of benefits. As of the Closing
Date, VNG shall cease to be a participating employer in any and all Employee
Plans, except the Employee Plans that are solely sponsored by VNG prior to the
Closing Date. 5.8.3 Section 401(k) Plan. (i) As soon as practicable following
the Closing, Buyer shall establish a defined contribution plan and trust (or
amend an existing defined contribution plan) for non-union VNG Employees, which
shall be qualified under Sections 401 and 501 of the Internal Revenue Code and
which shall provide for salary reduction contributions pursuant to Section
401(k) of the Code ("Buyer's 401(k) Plan"). (ii) Buyer's 401(k) Plan shall
provide that each non-union VNG Employee be given credit for the VNG Employee's
service with VNG, its Affiliates and its predecessor companies for purposes of
determining the non-union VNG Employee's eligibility to participate, eligibility
for benefits and vesting under Buyer's 401(k) Plan. Buyer shall ensure that all
"section 411(d)(6) protected benefits" (as defined in Treasury Regulation
1.411(d) (4)) provided by the System Thrift Plan of Consolidated Natural Gas
Company and Its Participating Subsidiaries for Employees Who Are Not Represented
By A Recognized Union (the "Seller's 401(k) Plan") are preserved in Buyer's
401(k) Plan. VNG Employees will not accrue additional benefits after the Closing
under defined contribution plans maintained by Seller or any of its Affiliates.
(iii) VNG shall cease to participate in Seller's 401(k) Plan as of the Closing
Date. Assets of Seller's 401(k) Plan equal to the account balances of non-union
VNG Employees under Seller's 401(k) Plan (whether or not vested) will be
transferred to Buyer's 401(k) Plan as soon as practicable after the Closing. Any
outstanding plan loans to non-union VNG Employees shall be transferred with the
underlying accounts. Assets shall be transferred in cash unless otherwise
determined by the Buyer. (iv) The account balances of non-union VNG Employees in
Seller's 401(k) Plan will be valued as of the date on which the transfer is
made. The account balances of VNG Employees in Seller's 401(k) Plan shall share
in the earnings, appreciation and depreciation of Seller's 401(k) Plan for the
period between the Closing and the date on which the transfer is made. Any
benefits that are payable to non-union VNG Employees from Seller's 401(k) Plan
after the Closing and before the assets are transferred shall be paid from
Seller's 401(k) Plan in the ordinary course. The amount to be transferred to
Buyer's 401(k) Plan shall be reduced by the amount of such payments. The account
balances to be credited for non-union VNG Employees under Buyer's 401(k) Plan
shall not be less than the account balances of non-union VNG Employees under
Seller's 401(k) Plan as of the date on which the transfer is made. (v) Effective
on the date of the transfer of Seller's 401(k) Plan assets, (i) Buyer and
Buyer's 401(k) Plan shall assume all liabilities in connection with the account
balances of non-union VNG Employees under Seller's 401(k) Plan, and (ii) Seller,
its Affiliates and Seller's 40-1(k) Plan shall have no further liability with
respect to the account balances of non-union VNG Employees. Seller and its
Affiliates shall have no liability with respect to Buyer's 401(k) Plan. (vi)
Buyer shall request that the Internal Revenue Service issue a favorable
determination letter with respect to the qualification under Sections 401 and
501 of the Internal Revenue Code of Buyer's 401(k) Plan and its related trust.
Buyer shall make such changes to Buyer's 401(k) Plan as may be required by the
Internal Revenue Service in order for the Internal Revenue Service to issue a
favorable determination letter. Buyer shall provide Seller with a copy of the
determination letter received from the Internal Revenue Service with respect to
Buyer's 401(k) Plan as soon as the determination letter is received. 5.8.4
Employee Plans. The Employee Plans for which VNG shall have responsibility
following the Closing are set forth on Schedule 5.8.4. 5.8.5 Retirement Plan
Transfer. (i) As soon as practicable after the Closing, Buyer shall establish a
defined benefit pension plan and trust (or amend an existing defined benefit
plan) for the non-union VNG Employees, which shall be qualified under Sections
401 and 501 of the Internal Revenue Code ("Buyer's Retirement Plan"). (ii)
Buyer's Retirement Plan shall provide that each non-union VNG Employee be given
credit for the VNG Employee's service with VNG, its Affiliates and its
predecessor companies, for purpose of determining the VNG Employee's eligibility
to participate, eligibility for benefits, vesting and accrual of benefits. VNG
Employees will not accrue additional benefits after the Closing under pension
plans maintained by Seller or any of its Affiliates. (iii) VNG shall cease to
participate in the System Pension Plan of Consolidated Natural Gas Company and
Its Participating Subsidiaries for Employees Who Are Not Represented By A
Recognized Union (the "Seller's Retirement Plan") as of the Closing Date. Assets
of the Seller's Retirement Plan equal to the accrued benefit values (as
described below) of the non-union VNG Employees will be transferred to Buyer's
Retirement Plan as soon as practicable after the accrued benefit values have
been determined pursuant to this Section 5.8.5. Buyer shall ensure that all
"section 411(d)(6) protected benefits" (as defined in Treasury Regulation
1.411(d)-4) provided by the Seller's Retirement Plan are preserved with respect
to transferred benefits in Buyer's Retirement Plan. The term "accrued benefit
values" means the present value of the accrued benefits of VNG Employees as of
the Closing under the Seller's Retirement Plan, computed as if Seller's
Retirement Plan had terminated on the Closing Date and based on benefits accrued
before the Closing. Accrued benefit values shall be calculated as if all
affected participants ceased accruing any additional benefits under Seller's
Retirement Plan immediately prior to Closing, and for purposes of calculating
accrued benefit values, the 1983 Group Annuity Mortality Table and the then
applicable PBGC interest rates (including the immediate and deferred rates)
shall be used to value benefits upon plan termination, and otherwise actuarial
assumptions stated in the last plan actuarial valuation shall be used. (iv) The
calculations referred to in Section 5.8.5(iii) will be made by Seller's actuary
as soon as practicable following the Closing (but not later than 120 days),
subject to review by Buyer's actuary within 60 days following receipt from
Seller's actuary of a copy of its valuation together with all other information
reasonably necessary for Buyer's actuary to complete its review. In the event of
significant, reasonable comment from Buyer's actuary (other than a comment
relating to the assumptions described in 5.8.5(ii)) that cannot be resolved
between the Buyer's Actuary and Seller's Actuary within ten Business Days, the
question or questions in dispute shall then be promptly submitted to any
independent actuary of recognized standing to be selected by agreement of Seller
and Buyer and whose evaluations shall be binding and final. The fees of any such
independent actuary shall be borne equally by Seller and Buyer. The assets shall
be transferred in cash. (v) Seller will adjust the amount to be transferred from
the Seller's Retirement Plan to Buyer's Retirement Plan, as calculated pursuant
to Section 5.8.5(iii), by a pro rata share of the Seller Retirement Plan
earnings, appreciation and depreciation for the period between the Closing and
the date on which the assets are actually transferred. (vi) Any benefits that
are payable to non-union VNG Employees from the Seller's Retirement Plan after
the Closing and before the plan assets are transferred shall be paid from the
Seller's Retirement Plan in the ordinary course to the extent permitted by law.
The amount to be transferred to Buyer's Retirement Plan shall be reduced by the
payments made. (vii) The accrued benefits to be credited under Buyer's
Retirement Plan with respect to the non-union VNG Employees shall not be less
than the accrued benefits of the non-union VNG Employees under the Seller's
Retirement Plan as of the Closing. Buyer shall ensure that Buyer's Retirement
Plan provides non-union VNG Employees with the benefits accrued prior to Closing
under the Seller's Retirement Plan in accordance with the terms of the Seller's
Retirement Plan and applicable law. Effective on the date of transfer of the
Seller's Retirement Plan assets, (i) Buyer and Buyer's Retirement Plan shall
assume all liabilities in connection with the accrued benefits of non-union VNG
Employees under the Seller's Retirement Plan, and (ii) Seller, its Affiliates
and the Seller's Retirement Plan shall have no further liability with respect to
the accrued benefits of non-union VNG Employees. Seller and its Affiliates shall
have no liability whatsoever with respect to Buyer's Retirement Plan. (viii) The
parties agree that the transfers described in this Section 5.8.5 shall be made
in accordance with Section 414(l) of the Internal Revenue Code. Buyer and Seller
shall make any appropriate filings required under the Internal Revenue Code or
ERISA in connection with the transfers described in this Section 5.8.5 as soon
as practicable after the Closing. Seller shall be responsible for delivery to
VNG Employees of any notice required under Code Section 204(h) in connection
with the transactions contemplated by this Agreement. (ix) Buyer will request
that the Internal Revenue Service issue a favorable determination letter with
respect to the qualification under Sections 401 and 501 of the Internal Revenue
Code of Buyer's Retirement Plan (and the related trust). Buyer will file with
the Internal Revenue Service application for a determination letter for Buyer's
Retirement Plan. Buyer will make such changes to the plan as may be required by
the Internal Revenue Service in order for the Internal Revenue Service to issue
a favorable determination letter. Buyer will provide Seller with a copy of the
determination letter received from the Internal Revenue Service with respect to
Buyer's Retirement Plan within a reasonable time after the determination letter
is received. (x) Seller will request that the Internal Revenue Service issue a
favorable determination letter with respect to the qualification under Sections
401 and 501 of the Internal Revenue Code of the Seller's Retirement Plan (and
the related trust). If necessary, Seller will file with the Internal Revenue
Service an application for determination letter for the Seller's Retirement
Plan. Seller will make such changes to the plan as may be required by the
Internal Revenue Service in order for the Internal Revenue Service to issue a
favorable determination letter. Seller will provide Buyer with a copy of the
favorable determination letter received from the Internal Revenue Service with
respect to the Seller's Retirement Plan within a reasonable time after the
determination letter is received. 5.8.6 VNG Retirement Plan Funding. The VNG
Retirement Plan shall be fully funded as of the Closing Date, so that any such
plan will have assets at least equal to the "accrued benefit values" of the VNG
Employees under such plan. For this purpose, the term "accrued benefit values"
means the present value of the accrued benefits of VNG Employees as of the
Closing under the plan, computed as if the plan had terminated on the Closing
Date and based on benefits accrued before the Closing. Accrued benefit values
shall be calculated as if all affected participants ceased accruing any
additional benefits under the plan immediately prior to Closing and for purposes
of calculating accrued benefit values, the 1983 Group Annuity Mortality Table
and then applicable PBGC interest rates (including the immediate and deferred
rates) shall be used to value annuities upon plan termination, and otherwise
actuarial assumptions stated in the last plan actuarial valuation shall be used.
Seller shall fully fund such plan prior to the Closing Date. All transfers of
assets or additional funding of plans shall be made in cash. 5.8.7 Transfer from
CNG VEBA. VNG shall cease to participate in the Consolidated Natural Gas
Voluntary Employees Beneficiary Association (the "Seller's VEBA") as of the
Closing Date. As soon as practicable after Closing, the assets and liabilities
of or associated with the VNG Non-Union/Management subaccount of the CNG VEBA
shall be transferred to Buyer's VEBA. The assets shall be transferred in cash.
5.8.8 COBRA. Buyer shall be responsible for providing group health coverage
under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") for each
non-union VNG Employee and each qualified beneficiary with respect to a
non-union VNG Employee who is entitled to COBRA coverage under an Employee Plan
of Seller as a result of a " qualifying event" (as defined under COBRA) that
occurs on or after the Closing Date. Pursuant to the Buyer's assumption of the
group health plan maintained by VNG for union employees, Buyer shall retain
liability for COBRA coverage for each union VNG employee and each qualified
beneficiary with respect to a union VNG Employee that experienced a "qualifying
event" prior to, on or after the Closing Date. 5.8.9 Flexible Spending Account
Transfer. As of the Closing, Buyer shall allow all non-union VNG Employees to
participate in Buyer's plan (or establish such plan) under Section 125 of the
Internal Revenue Code ("Buyer's Section 125 Plan"). The non-union VNG Employees
who elected to participate in Seller's Section 125 Plan for the calendar year of
Closing shall be eligible to participate in Buyer's Section 125 Plan for that
part of the calendar year of Closing remaining after the Closing. Buyer shall
maintain Buyer's Section 125 Plan as a continuation of Seller's Section 125 Plan
for the calendar year of Closing, so that the aggregate benefits that non-union
VNG Employees receive under Seller's Section 125 Plan and Buyer's Section 125
Plan for the calendar year of Closing is not less than the benefits the
non-union VNG Employees would have received had they remained employed by Seller
through the calendar year of Closing. (i) If the aggregate amount contributed by
non-union VNG Employees for the calendar year of Closing to non-union VNG
Employees' spending accounts under Seller's Section 125 Plan exceeds the
aggregate claims paid by Seller for the calendar year of Closing with respect to
the non-union VNG Employees' spending accounts, Seller will pay Buyer an amount
in cash equal to such excess, to the extent that the aggregate amount
contributed by non-union VNG Employees for the calendar year of Closing to their
spending accounts under Buyer's Section 125 Plan is less than the aggregate
claims paid by Buyer for the calendar year of Closing with respect to the
non-union VNG Employees' spending accounts. (ii) If the aggregate amount
contributed by non-union VNG Employees for the calendar year of Closing to the
respective non-union VNG Employees' spending accounts under Seller's Section 125
Plan is less than the aggregate claims paid by Seller for the calendar year of
closing with respect to the non-union VNG Employees' spending accounts, Buyer
will pay Seller an amount in cash equal to such deficit, to the extent that the
aggregate amount contributed by non-union VNG Employees for the calendar year of
Closing to the non-union VNG Employees' spending accounts under Buyer's Section
125 Plan exceeds the aggregate claims paid by Buyer for the calendar year of
Closing with respect to the non-union VNG Employees' spending accounts. (iii)
The foregoing payments shall be made as soon as practicable after all claims
have been paid for the calendar year of Closing. 5.8.10 Administration. Buyer
and Seller shall each make their appropriate employees available to the other at
such reasonable times as may be necessary for the proper administration by the
other of any and all matters relating to employee benefits affecting VNG
Employees. 5.8.11 Non-solicitation of Employees. Seller covenants that it will
refrain, and will use its best efforts to cause Affiliates of Seller to refrain,
from soliciting any of the existing employees of VNG or the employees listed on
Schedule 5.8.1 for employment with Seller or its Affiliates from the date of
this Agreement through the period ending twenty-four (24) months after the
Closing Date; provided, however, that Seller may solicit employees terminated by
VNG and Schedule 5.8.1 Associated Seller Employees who do not become Related
Company Employees.. Section 5.9 WARN Act. If a plant closing or a mass layoff
occurs or is deemed to occur with respect to VNG or any of its facilities at any
time on or after the Closing, Buyer shall be solely responsible for providing
all notices required under the Worker Adjustment and Retraining Notification
Act, 29 U.S.C. ss.2109 et seq. or the regulations promulgated thereunder (the
"WARN Act") and for taking all remedial measures, including, without limitation,
the payment of all amounts, penalties, liabilities, costs and expenses if such
notices are not provided. Section 5.10 Satisfaction of Debt. At or immediately
prior to Closing, Seller shall take, or cause VNG to take, such actions as are
necessary to (i) satisfy or extinguish all intercompany debt obligations between
VNG, as borrower, and any of Seller or its Affiliates, as lender, (ii) terminate
as to VNG the Supplemental Agreement, and (iii) satisfy or extinguish all
intercompany payables and receivables between VNG and any of Seller or its
Affiliates. Section 5.11 Related Agreements. 5.11.1 The parties recognize that
Seller provides a significant level of support services to VNG in the areas of
corporate services, information technology and business support services that
may need to continue following Closing. If the parties deem necessary, at
Closing the parties shall enter into a transition services agreement in
substantially the form attached as Exhibit 5.11.1 pursuant to which Seller or
its Affiliates shall provide for a period of up to one year on a fully-loaded
cost basis certain transition services, including, but not limited to: (i)
operation of VNG's Customer Service System ("CSS") on Seller's computer hardware
platforms; (ii) access to Oracle enterprise financial software through Seller's
computer hardware and network communications facilities; (iii) access to
Strategic Asset Management System ("SAMS") software through Seller's computer
hardware and network communications facilities; (iv) access to Peoplesoft and
Automated Time and Attendance software through Seller's computer hardware and
network communications facilities; (v) gas supply, gas control and measurement,
purchasing and telecommunications services; (vi) natural gas pipeline aerial
surveillance services; (vii) operation of VNG's Customer Payment Processing
system; and (viii) operation of VNG's remittance processing. 5.11.2 At Closing
the parties shall enter into a software license agreement in substantially the
form of Exhibit 5.11.2 for the use by VNG of the proprietary software of Seller
described on Schedule 3.19. 5.11.3 DRI and Seller shall use reasonable efforts
to assist Buyer and VNG, at Buyer's request, to obtain for VNG, separately, and
in its own name, the rights and coverage under the insurance policies maintained
by Seller or DRI for the benefit of VNG, including the right to purchase "tail"
coverage under those policies. In addition, in the event that such rights and
coverage cannot be separately obtained by VNG, Seller and DRI shall, if
requested by Buyer and if such coverages can be obtained by Seller or DRI on
behalf of VNG, maintain such policies on behalf of VNG or purchase on behalf of
VNG "tail" coverage under those policies. VNG shall reimburse Seller or DRI, as
the case may be, for any premiums and other costs paid to obtain such coverage.
ARTICLE 6
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligations of Buyer under this Agreement shall be subject to the
satisfaction (or waiver in writing by Buyer), at or before the Closing, of each
of the following conditions, and Seller shall use reasonable efforts to cause
each of such conditions to be satisfied as promptly as practicable.
Section 6.1 No Injunction. No Federal or state governmental agency or authority
or political subdivision thereof or Federal or state court of competent
jurisdiction shall have issued any injunction or other order (whether temporary,
preliminary or permanent) which prohibits or restrains (or seeks to prohibit or
restrain) the consummation of the transactions contemplated hereby, nor shall
any other suit, action or other proceeding be pending before any court in which
the consummation of the transactions contemplated hereby are sought to be
restrained or enjoined; provided, that the parties shall use their reasonable
efforts to litigate against, and obtain the lifting of, any such injunction,
order or proceeding.
Section 6.2 Representations and Warranties. The representations and warranties
of Seller and DRI contained in Article 3 shall be true and correct in all
material respects (except where such representation or warranty is by its terms
qualified by materiality or Material Adverse Effect, in which case such
representation or warranty must be true and correct in all respects) as of the
date hereof and as of the Closing Date (except where such representation or
warranty is expressly made only as of another specific date, in which case such
representation or warranty must be true and correct only as of such specific
date) as though such representations and warranties were made at and as of the
Closing Date, and Buyer shall have received at the Closing a certificate, dated
the Closing Date, signed on behalf of Seller and DRI by executive officers of
Seller and DRI to such effect. Section 6.3 Performance. Seller and VNG shall
have performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it at
or prior to the Closing; and Buyer shall have received at the Closing a
certificate of Seller and VNG dated the Closing Date and signed on behalf of
Seller and VNG by executive officers of Seller and VNG to such effect.
Section 6.4 Approvals and Filings. All consents, authorizations and approvals
from, and all declarations, filings and registrations with, governmental
agencies or third parties that are listed on Schedule 6.4 shall have been
obtained or made, free of any term, condition, restriction, imposed liability or
other provision that would, or would reasonably be expected to, have a Material
Adverse Effect or a material adverse effect on Buyer or its Affiliates, and
shall be final and unappealable, except where the failure to obtain or make the
same is a result of Buyer's breach of its obligations hereunder. All waiting
periods under the HSR Act shall have expired or been properly terminated.
Section 6.5 No Material Adverse Change. Since the date of this Agreement, there
shall not have occurred a material adverse change in the business, assets,
condition (financial or otherwise), or results of operations of VNG, taken as a
whole, excluding, in any case, (i) any changes, circumstances or effects
resulting from or relating to changes or developments in the economy, financial
markets, commodity markets, laws, regulations or rules in the applicable gas
markets (including, without limitation, changes in laws or regulations affecting
owners or providers of gas production, transmission or distribution as a group,
and not VNG or its Affiliates exclusively) or in the political climate generally
or in any specific region and (ii) any changes in conditions or developments
generally applicable to the industries in which VNG is involved.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement shall be subject to the
satisfaction (or waiver in writing by Seller) on or before the Closing of each
of the following conditions, and Buyer shall use reasonable efforts to cause
each of such conditions to be satisfied as promptly as practicable:
Section 7.1 No Injunction. No Federal or state governmental agency or authority
or political subdivision thereof or Federal or state court of competent
jurisdiction shall have issued any injunction or other order (whether temporary,
preliminary or permanent) which prohibits or restrains (or seeks to prohibit or
restrain) the consummation of the transactions contemplated hereby, nor shall
any other suit, action or other proceeding be pending before any court in which
the consummation of the transactions contemplated hereby are sought to be
restrained or enjoined; provided, that the parties shall use their reasonable
efforts to litigate against, and obtain the lifting of, any such injunction,
order or proceeding.
Section 7.2 Representations and Warranties. The representations and warranties
of Buyer contained in Article 4 shall be true and correct in all material
respects (except where such representation or warranty is by its terms qualified
by materiality or Material Adverse Effect, in which case such representation or
warranty must be true and correct in all respects) as of the date hereof and as
of the Closing Date (except where such representation or warranty is expressly
made only as of another specific date, in which case such representation or
warranty must be true and correct only as of such specific date) as though such
representations and warranties were made at and as of the Closing Date, and
Seller shall have received at the Closing a certificate, dated the Closing Date,
signed on behalf of Buyer by an executive officer of Buyer to such effect.
Section 7.3 Performance. Buyer shall have performed and complied with, in all
material respects, all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing; and Seller shall
have received at the Closing a certificate, dated the Closing Date, signed on
behalf of Buyer by an executive officer of Buyer to such effect. Section 7.4
Approvals and Filings. All consents, authorizations and approvals from, and all
declarations, filings and registrations with, governmental agencies or third
parties that are listed on Schedule 6.4 shall have been obtained or made, free
of any term, condition, restriction, imposed liability or other provision that
would, or would reasonably be expected to, have a material adverse effect on
Seller, and shall be final and unappealable, except where the failure to obtain
or make the same is a result of Seller's breach of its obligations hereunder.
All waiting periods under the HSR Act shall have expired or been properly
terminated.
ARTICLE 8
CLOSING
Section 8.1 Time and Place. Subject to Article 9, the closing of the sale by
Seller and the purchase by Buyer of the VNG Stock (the "Closing") shall take
place at the offices of McGuire, Woods, Battle & Boothe LLP, One James Center,
901 East Cary Street, Richmond, Virginia 23219 on the fifteenth Business Day
after the date on which all of the conditions contained in Articles 6 and 7 are
satisfied or waived (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions); provided that, notwithstanding the foregoing, the Closing may take
place at such other place, at such other time, or on such other date as the
parties hereto may mutually agree (the date on which the Closing occurs being
herein referred to as the "Closing Date").
Section 8.2 Deliveries. At the Closing:
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8.2.1 Stock Certificates. Seller shall deliver to Buyer certificate(s)
evidencing all of the shares of VNG Stock owned by Seller, duly endorsed in
blank for transfer or accompanied by stock power duly executed in blank. 8.2.2
Certificates. Buyer and Seller shall deliver to each other the certificates and
other items described in Articles 5, 6 and 7.
8.2.3 Resignations. Seller shall deliver, or cause to be delivered, to Buyer the
resignations of all officers and directors of VNG. 8.2.4 Opinion of Seller's and
DRI's Counsel. Buyer shall receive from counsel to Seller and DRI an opinion,
dated the Closing Date, in form and substance reasonably satisfactory to Buyer
and its counsel.
8.2.5 Opinion of Buyer's Counsel. Seller shall receive from counsel to Buyer an
opinion, dated the Closing Date, in form and substance reasonably satisfactory
to Seller and its counsel. 8.2.6 Additional Documents. Each party shall execute
and deliver to the other parties all documents which the other reasonably
determines are necessary to consummate the transactions contemplated hereby or
to demonstrate or evidence compliance with the terms or the accuracy of any
representation and warranty set forth herein.
ARTICLE 9
TERMINATION AND ABANDONMENT
Section 9.1 Methods of Termination. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time prior to the
Closing Date: (i) by mutual consent of Seller and Buyer; or (ii) by Buyer at any
time after December 31, 2000 if any of the conditions provided for in Article 6
of this Agreement shall remain unsatisfied and not have been waived in writing
by Buyer prior to such date; provided, that if any condition in Article 6 has
not been so satisfied or waived and diligent efforts are being undertaken to
satisfy such condition, including, but not limited to, efforts to cure any
breach of any representation or warranty, and the Virginia State Corporation
Commission extends the time limit for the sale of VNG by Seller, then the
references to December 31, 2000 in this Section 9.1(ii) shall be extended for up
to the shorter of (A) 90 days or (B) the period of the Virginia State
Corporation Commission extension, so long as such diligent efforts continue; or
(iii) by Seller at any time after December 31, 2000 if any of the conditions
provided for in Article 7 of this Agreement shall remain unsatisfied or not have
been waived in writing by Seller prior to such date; provided, that if any
condition in Article 7 has not been so satisfied or waived and diligent efforts
are being undertaken to satisfy such condition, including, but not limited to,
efforts to cure any breach of any representation or warranty, and the Virginia
State Corporation Commission extends the time limit for the sale of VNG by
Seller, then the references to December 31, 2000 in this Section 9.1(iii) shall
be extended for up to the shorter of (A) 90 days or (B) the period of the
Virginia State Corporation Commission extension, so long as such diligent
efforts continue; (iv) by Buyer, upon not less than 30 days prior written
notice, if there has been a violation or breach by Seller of its agreements,
representations or warranties contained in this Agreement, or if Seller notifies
Buyer of a matter pursuant to Section 5.6, and such violation, breach or
disclosed matter would, individually or in conjunction with past violations,
breaches or disclosed matters, have a Material Adverse Effect which is not
susceptible to cure (or if so susceptible is not the subject of diligent efforts
on the part of the breaching party to cure within the cure periods provided in
Section 9.1(ii)). Any written notice provided by Buyer pursuant to this
subsection shall reference this subsection and specify in reasonable detail the
claimed violation and breach which Buyer claims as a basis for the exercise of
its rights under this subsection; or (v) by Seller upon not less than 30 days
prior written notice, if there has been a material violation or breach by Buyer
of its agreements, representations or warranties contained in this Agreement, or
if Buyer notifies Seller of a matter pursuant to Section 5.6, and such
violation, breach or disclosed matter would materially and adversely impair the
ability of Buyer to consummate the transactions contemplated by this Agreement
and such violation, breach or disclosed matter is not susceptible to cure (or if
so susceptible, is not the subject of diligent efforts on the part of the
breaching party to cure within the cure periods provided in Section 9.1(iii)).
Any written notice provided by Seller pursuant to this subsection shall
reference this subsection and specify in reasonable detail the claimed violation
and breach which Seller claims as a basis for the exercise of its rights under
this subsection.
Section 9.2 Procedure Upon Termination and Consequences. Buyer or Seller may
terminate this Agreement when permitted pursuant to Section 9.1 by delivering
written notice of such termination, and such termination shall be effective upon
delivery of such notice in accordance with Section 11.3. If this Agreement is
terminated as provided herein, (i) each party will redeliver all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether obtained before or after the execution hereof, to
the parties furnishing the same; and (ii) no party hereto shall have any
liability or further obligation to any other party to this Agreement except with
respect to the Confidentiality Agreement, which shall survive the termination of
this Agreement, including with respect to information that is subject to the
Confidentiality Agreement pursuant to Section 5.1, and except for such legal and
equitable rights and remedies which any party may have by reason of any breach
or violation of this Agreement by any other party prior to such termination.
ARTICLE 10
INDEMNIFICATION
Section 10.1 Remedies.
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10.1.1 Indemnification by Seller and DRI. Except as otherwise limited by this
Article 10, Seller and DRI (collectively for purposes of this Article 10, the
"Seller Indemnifying Parties") shall, jointly and severally, indemnify and
reimburse Buyer and VNG for any and all claims, losses, liabilities, damages,
costs (including court costs and investigative and remedial costs) and expenses
(including reasonable attorneys' and accountants' fees) (hereinafter "Loss" or
"Losses") incurred by Buyer, VNG, or any successors or assigns thereto, and
their respective officers, directors, employees, consultants and agents (the
"Buyer Protected Parties"), as a result of, or with respect to, (i) (A) any
breach or inaccuracy of any representation or warranty of Seller or DRI set
forth in this Agreement or in any certificate or other document delivered
pursuant hereto or in connection herewith (which representations and warranties
in the case of the certificate delivered pursuant to Section 6.2 hereof, shall
be without regard to the materiality qualification contained in such
certificate), whether such breach or inaccuracy exists or is made on the date of
this Agreement or as of the Closing Date or (B) any matter described in items
(1) and (2) of Schedule 3.18.1; (ii) any breach of or noncompliance by Seller,
DRI or VNG with any covenant or agreement of Seller, DRI or VNG contained in
this Agreement, and (iii) any Environmental Condition (including, without
limitation, any Loss arising out of any contribution or indemnity obligation
under the Supplemental Agreement among DRI, VNG and Seller dated January 23,
1990 (the "Supplemental Agreement"), a true, correct and complete copy of which
has been provided to Buyer). For the purpose of this Article 10, consequential
damages or any damages to the extent attributable to a failure by the
indemnified party to use reasonable efforts to mitigate damages shall not
constitute Losses and shall not otherwise be recoverable.
10.1.2 Indemnification by Buyer. Except as otherwise limited by this Article 10,
Buyer shall indemnify and reimburse Seller for any and all Losses incurred by
Seller or any successors or assigns thereto, and their respective officers,
directors, employees, consultants and agents (the "Seller Protected Parties"),
as a result of, or with respect to, (i) any breach or inaccuracy of any
representation or warranty of Buyer set forth in this Agreement or in any
certificate or other document delivered pursuant hereto or in connection
herewith (which representations and warranties in the case of the certificate
delivered pursuant to Section 7.2 hereof, shall be without regard to the
materiality qualification contained in such certificate), whether such breach or
inaccuracy exists or is made on the date of this Agreement or as of the Closing
Date and (ii) any breach of or noncompliance by Buyer with any covenant or
agreement of Buyer contained in this Agreement.
Section 10.2 Indemnity Claims.
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10.2.1 Survival. The representations and warranties of the parties contained
herein or in any certificate or other document delivered pursuant hereto or in
connection herewith shall not be extinguished by the Closing but shall survive
the Closing, subject to the limitations set forth in Section 10.2.2 hereof with
respect to the time periods within which claims for indemnity must be asserted,
and the covenants and agreements of the parties contained herein shall survive
without limitation as to time except as provided by applicable statutes of
limitation or as may be otherwise specified herein. No investigation or other
examination of VNG by Buyer, its designee or representatives, or of Buyer by
Seller, its designee or representatives, shall affect the term of survival of
any representation or warranty contained herein or in any certificate or other
document delivered pursuant hereto or in connection herewith, or the term of the
right of the Buyer Protected Parties or the Seller Protected Parties
(collectively, the "Protected Parties") to seek indemnification hereunder.
10.2.2 Time to Assert Claims. All claims for indemnification hereunder shall be
asserted no later than twelve (12) months after the Closing Date, except as
follows (i) claims with respect to (A) Losses arising out of or related in any
way to any breach of or inaccuracy in the representations and warranties
contained in Sections 3.1, 3.2, 3.5, 3.7.2, 4.1 and 4.2, and (B) Losses arising
out of or related in any way to the matters described in Sections 10.1.1(i)(B),
(ii) and (iii) and 10.1.2(ii) may be made without limitation, except as limited
by law; and (ii) claims with respect to Losses arising out of or related in any
way to any breach of or inaccuracy in the representations and warranties
contained in Section 3.8 and in Section 3.13 as it relates to ERISA compliance
hereof, may be made until, and shall be made no later than, thirty (30) days
after the expiration of the applicable statute of limitations relative to the
liability relating to such representation or warranty; and (iii) claims with
respect to Losses arising out of or related in any way to any breach of or
inaccuracy in the representations contained in Section 3.18 hereof, may be made
until, and shall be made no later than twenty-four(24) months after the Closing
Date;
(the matters cited in clauses (i), (ii) and (iii) above being
hereinafter collectively referred to as the "Surviving Matters"). Section 10.3
Notice of Claim. The Protected Party shall notify the Seller Indemnifying
Parties or Buyer, as the case may be (the "Indemnifying Party"), in writing, of
any claim for indemnification, specifying in reasonable detail the nature of the
Loss, and, if known, the amount, or an estimate of the amount, of the liability
arising therefrom. The Protected Party shall provide to the Indemnifying Party
as promptly as practicable thereafter such information and documentation as may
be reasonably requested by the Indemnifying Party to support and verify the
claim asserted, so long as such disclosure would not violate the attorney-client
privilege of the Protected Party.
Section 10.4 Defense. If the facts pertaining to a Loss arise out of the claim
of any third party, or if there is any claim against a third party (other than a
Protected Party) available by virtue of the circumstances of the Loss, the
Indemnifying Party may assume the defense or the prosecution thereof by prompt
written notice to the affected Protected Party, including the employment of
counsel or accountants, at its cost and expense. Such notice shall expressly
acknowledge the affected Protected Party's right to indemnification under
Article 10 of this Agreement. The affected Protected Party shall have the right
to employ counsel separate from counsel employed by the Indemnifying Party in
any such action and to participate therein, but the fees and expenses of such
counsel employed by the affected Protected Party shall be at such Protected
Party's expense. In the event the Indemnifying Party has elected to assume the
defense or prosecution of a claim as provided herein, the Indemnifying Party
shall not be liable for any settlement of any such claim effected without its
prior written consent, which shall not be unreasonably withheld; provided that
if the Indemnifying Party does not assume the defense or prosecution of a claim
as provided above within thirty (30) days after notice thereof from any
Protected Party as provided above, the affected Protected Party may settle such
claim without the consent of the Indemnifying Party. The Indemnifying Party
shall not agree to a settlement of any claim which provides for any relief other
than the payment of monetary damages or which could have a material precedential
impact or effect on the business or financial condition of any Protected Party
without the affected Protected Party's prior written consent. Whether or not the
Indemnifying Party chooses to so defend or prosecute such claim, all the parties
hereto shall cooperate in the defense or prosecution thereof and shall furnish
such records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals, as may be reasonably requested in
connection therewith.
Section 10.5 Limitations. Buyer shall not be liable pursuant to Section
10.1.2(i) and neither DRI nor Seller shall be liable pursuant to Section
10.1.1(i)(A), until the Losses incurred thereunder shall exceed $1,000,000, in
which event the indemnifying party shall only be liable for the Losses in excess
of $1,000,000. The Seller Indemnifying Parties' aggregate indemnification
obligations under this Article 10 shall not exceed twenty percent (20%) of the
Purchase Price. Buyer's aggregate indemnification obligations under this Article
10 shall not exceed twenty percent (20%) of the Purchase Price; provided,
however, the "cap" on liability shall not apply to indemnification obligations
(i) under Section 10.1.1(i)(B), (ii) under Section 10.1.1(i)(A) or Section
10.1.2(i) relating to the representations in Sections 3.1, 3.2, 3.5, 4.1, and
4.2, (iii) under Section 10.1.1(ii) with respect to covenants and agreements of
Seller, DRI or VNG set forth in Sections 5.4, 5.8, 5.10 and Article 2, (iv)
under Section 10.1.2(ii) with respect to covenants and agreements of Buyer set
forth in Sections 5.4, 5.8 and Article 2, and (v) under Section 10.1.1(iii).
ARTICLE 11
MISCELLANEOUS
Section 11.1 Amendment and Modification. This Agreement may be amended, modified
and supplemented only by written agreement of Buyer and Seller. Section 11.2
Waiver of Compliance. Any failure of Buyer, Seller or DRI to comply with an
obligation, covenant, agreement or condition contained herein may be expressly
waived in writing by Seller, in the event of any such failure by Buyer, or by
Buyer, in the event of any such failure by Seller or DRI, but such waiver or
failure to insist upon strict compliance shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
Section 11.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and may be given by any of the following methods: (a) personal
delivery, (b) facsimile transmission, (c) registered or certified mail, postage
prepaid, return receipt requested, or (d) next day air courier service. Notices
shall be sent to the appropriate party at its address or facsimile number given
below (or at such other address or facsimile number for such party as shall be
specified by notice given hereunder).
If to Seller, to:
Consolidated Natural Gas Company
c/o Dominion Resources, Inc.
120 Tredegar Street
Richmond, VA 23219
Attn: James F. Stutts, Vice President and General Counsel
Fax No.: (804) 819-2233
If to DRI, to:
Dominion Resources, Inc.
120 Tredegar Street
Richmond, VA 23219
Attn: James F. Stutts, Vice President and General Counsel
Fax No.: (804) 819-2233
with copies to:
Virginia Natural Gas, Inc.
5100 East Virginia Beach Blvd.
Norfolk, VA 23502-3488
Attn: Donald A. Fickenscher, Chief Counsel
Fax No.: (757) 466-5562
or to such other Person or address as Seller shall designate in writing.
If to Buyer to:
AGL Resources Inc.
817 West Peachtree Street, N.W.
Atlanta, GA 30308
Attn: Paul R. Shlanta, Senior Vice President and Counsel
Fax No.: (404) 584-3419
with a copy to:
Long Aldridge & Norman LLP
303 Peachtree Street, Suite 5300
Atlanta, GA 30308
Attn: David M. Ivey
Fax No. (404) 527-4198
or to such other Person or address as Buyer shall designate in writing.
All such notices, requests, demands, waivers and communications shall
be deemed effective upon (i) actual receipt thereof by the addressee, (ii)
actual delivery thereof to the appropriate address or (iii) in the case of a
facsimile transmission, transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above by first
class mail or by an air courier service, postage prepaid. However, such mailing
shall in no way alter the time at which the facsimile notice is deemed received.
Section 11.4 Binding Nature; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without prior written consent of the other party. Notwithstanding the
foregoing, all rights, obligations, and duties of Buyer may be assigned by Buyer
to any Affiliate of Buyer, provided that Buyer remains liable for its
obligations hereunder. Except as set forth in Section 5.7, nothing contained
herein, express or implied, is intended to confer on any Person other than the
parties hereto or their successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
Section 11.5 Entire Agreement. This Agreement, including the Schedules, Exhibits
and the Confidentiality Agreement, embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. This Agreement and the Confidentiality Agreement supersede all prior
agreements and understandings among the parties with respect to such subject
matter and supersede any letters, memoranda or other documents or
communications, whether oral, written or electronic, submitted or made by (i)
Buyer or its agents or representatives to Seller, VNG, DRI, Merrill Lynch & Co.
or any of their respective agents or representatives, or (ii) Seller, VNG, DRI,
Merrill Lynch & Co. or their respective agents or representatives to Buyer or
any of its agents or representatives, in connection with the bidding process
which occurred prior to the execution of this Agreement or otherwise in
connection with the negotiation and execution of this Agreement. No
communications by or on behalf of Seller, including responses to any questions
or inquiries, whether orally, in writing or electronically, and no information
provided in any data room or any copies of any information from any data room
provided to Buyer or any other information shall be deemed to constitute a
representation, warranty or an agreement of Seller or be part of this Agreement.
Section 11.6 Expenses. Except as otherwise expressly provided herein, each party
to this Agreement will pay its own expenses in connection with the negotiation
of this Agreement, the performance of its obligations hereunder, and the
consummation of the transactions contemplated herein.
Section 11.7 Press Releases and Announcements; Disclosure. No press release or
other public announcement or disclosure related to this Agreement or the
transactions contemplated herein (including but not limited to the terms and
conditions of this Agreement) shall be issued or made without the prior approval
of Buyer and Seller. The foregoing shall not prohibit any disclosure required by
law, provided such disclosure is made pursuant to the Confidentiality Agreement
and, to the extent legally permissible, the disclosing party consults with the
other parties in advance of such disclosure.
Section 11.8 Acknowledgment.
--------------
11.8.1 Except as otherwise expressly provided herein, in the Schedules and in
the certificate to be delivered pursuant to Section 6.2, Buyer acknowledges that
neither Seller, VNG nor any other Person has made any representation or
warranty, expressed or implied, as to the accuracy or completeness of any
information regarding Seller or VNG not included in this Agreement, the
Schedules and the certificate to be delivered pursuant to Section 6.2. Without
limiting the generality of the foregoing, no representation or warranty is made
with respect to any information in the Information Memorandum dated February
2000 or any supplement or amendment thereto provided in connection with the
solicitation of proposals to enter into the transactions contemplated by this
Agreement, such information having been provided for the convenience of Buyer in
order to assist Buyer in framing its due diligence efforts. 11.8.2 Buyer further
acknowledges that Buyer, either alone or together with any Persons Buyer has
retained to advise it with respect to the transactions contemplated hereby
("Advisors"), has knowledge and experience in transactions of this type and in
the business of VNG, and is therefore capable of evaluating the risks and merits
of acquiring the VNG Stock. Section 11.9 Disclaimer Regarding Assets. Except as
otherwise expressly provided herein, in the Schedules and in the certificate to
be delivered pursuant to Section 6.2, Seller expressly disclaims any
representations or warranties of any kind or nature, express or implied, as to
the condition, value or quality of the assets or operations of VNG or the
prospects (financial and otherwise), risks and other incidents of VNG and Seller
specifically disclaims any representation or warranty of merchantability, usage,
suitability or fitness for any particular purpose with respect to such assets,
or any part thereof, or as to the workmanship thereof, or the absence of any
defects therein, whether latent or patent.
Section 11.10 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Virginia without giving effect
to the choice of law principles thereof. Each party consents to personal
jurisdiction in any action brought in any court, federal or state, within the
Commonwealth of Virginia having subject matter jurisdiction arising under this
Agreement, and each of the parties hereto agrees that any action instituted by
either of them against the other with respect to this Agreement will be
instituted exclusively in a court, federal or state, within the Commonwealth of
Virginia. Section 11.11 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page of this Agreement by facsimile transmission
shall be effective as delivery of a manually executed counterpart of this
Agreement. Section 11.12 Interpretation. The article and section headings
contained in this Agreement are inserted for convenience only and shall not
constitute a part hereof.
[SIGNATURES APPEAR ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
CONSOLIDATED NATURAL GAS COMPANY
By:__/s/ Thomas N. Chewning________
Name:
Title:
DOMINION RESOURCES, INC.
By:__/s/ Thomas N. Chewning _______
Name:
Title:
VIRGINIA NATURAL GAS, INC.
By:___/s/ William A. Fox___________
Name:
Title:
AGL RESOURCES INC.
By: ___/s/ Walter M. Higgins_______
Name:
Title:
<PAGE>
Exhibit 5.11.1
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement (the "Agreement") dated as of
___________, 2000, is made between VIRGINIA NATURAL GAS, INC., a Virginia
corporation ("VNG"), and CONSOLIDATED NATURAL GAS COMPANY, a Delaware
corporation ("CNG").
RECITALS
A. VNG, CNG, Dominion Resources Inc., a Virginia corporation, and
AGL Resources, Inc., a Georgia corporation ("AGL"), have entered into a Stock
Purchase Agreement dated as of May 5, 2000 (the "Purchase Agreement"), providing
for the sale by CNG to AGL, of all of the stock in VNG on the terms and
conditions specified therein.
B. As a condition to the respective obligations of the parties to the
Purchase Agreement to consummate the transactions contemplated therein, the
Purchase Agreement requires the execution and delivery of this Agreement
pursuant to which CNG agrees to provide VNG certain transition services upon the
terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
1. Definitions.
------------
Terms used herein and not otherwise defined herein shall have
the meanings ascribed to them in the Purchase Agreement. In addition, the
following terms, as used herein, have the following meanings:
"Cost" means for any Transition Service rendered hereunder,
(a) the cost assigned to such Transition Service on Schedule A attached hereto,
or (b) if no cost is so assigned on Schedule A, then the allocable portions of
the wages, employee benefits, incentives and other payments to CNG employees,
including occupancy costs related to such CNG employees, and the allocable
portions of any direct variable costs and fixed operating costs (including,
without limitation, fees, taxes, charges, depreciation, overheads, service fees,
and expenses) incurred by CNG in supplying such Transition Service, all
determined in a manner consistent with CNG's cost accounting practices.
"Effective Date" means the Closing Date.
"Transition Services" means those services more particularly
described on Schedule A attached hereto.
2. Term of Agreement.
------------------
This Agreement shall be effective beginning on the Effective
Date and shall continue for a period of up to one year following the Effective
Date (the period during which this Agreement remains effective being referred to
herein as the "Term"). This Agreement shall be terminable: (a) by either party
immediately upon written notice to the other party if the other party shall file
or have filed against it any petition under the bankruptcy laws of the United
States; or (b) according to the terms set forth in Paragraph 4. In addition,
this Agreement shall be terminable with respect to any particular Transition
Service upon two weeks' notice by VNG to CNG. Notwithstanding anything to the
contrary set forth herein, so long as either party hereto has any executory
obligations incurred during the Term, this Agreement shall remain in effect to
govern such obligations.
3. Transition Services.
During the Term of this Agreement, CNG or its Affiliates shall
provide Transition Services to VNG according to the terms set forth hereunder
and on Schedule A attached hereto. The quality and level of such Transition
Services shall be substantially the same as such services provided by CNG to VNG
prior to the date hereof; provided, however, the quality or level of such
services shall at a minimum be commercially reasonable. VNG shall pay CNG an
amount equal to the sum of (a) the Cost of each Transition Service listed on
Schedule A and (b) all reasonable travel expenses incurred by CNG's employees
and contractors in connection with providing each Transition Service to VNG
hereunder. CNG will invoice VNG for those Transition Services provided by CNG
and listed on Schedule A attached hereto, and such invoice shall be payable in
cash within 15 days after VNG receives such invoice. Each such invoice shall:
(i) identify the applicable Transition Service to which the invoice relates,
(ii) provide summary details of the fees and expenses payable for each
Transition Service invoiced, and (iii) specify the total amount payable by VNG
to CNG.
4. Termination for Cause.
Either party may terminate this Agreement immediately by
written notice to the other party if the other party breaches a material
provision of this Agreement and the breach continues for more than five (5)
business days after delivery of notice of such breach. Notwithstanding the
foregoing, however, if the breaching party is making a good faith effort to cure
such breach it shall be provided an additional reasonable amount of time to do
so (not to exceed thirty (30) days) without triggering immediate termination.
5. Effect of Termination or Expiration.
If this Agreement shall terminate as set forth in Paragraph 2
or Paragraph 4, it shall terminate in its entirety, and no further obligation
shall exist on the part of either party under this Agreement, except that VNG
shall be obligated to pay all outstanding amounts due under this Agreement.
Notwithstanding anything else contained in this Agreement, termination or
expiration of this Agreement shall not act as a waiver by either party of any
breach of this Agreement by the other party hereto through the date of such
termination or expiration of this Agreement.
6. Force Majeure.
--------------
(a) CNG may suspend or reduce, in whole or in part, the supply of any or
all of the Transition Services or the performance of any of its
obligations hereunder to the extent CNG is impeded in its ability to
provide such Transition Service as a result of a Force Majeure Event.
Notwithstanding the foregoing, CNG agrees to use commercially
reasonable efforts to comply with the terms and conditions of this
Agreement to the extent that it is able to do so. For purposes of this
Agreement, the term "Force Majeure Event" includes, but is not
limited to: (i) fire, explosion, storm damage, flood, or other
casualty; (ii)labor troubles including strikes, lockouts or slowdowns;
(iii) government intervention (not including fines for violations
of permits), government regulation or statute; (iv) war, sabotage,
riot, or other civil disturbance; or (v) other cause or conditions
beyond CNG's reasonable control. CNG shall take reasonable steps to
mitigate any damages accruing to VNG as a result of CNG's inability
to comply with the terms and conditions of this Agreement as a result
of a Force Majeure Event and to perform its obligations as promptly as
reasonably practicable after the elimination of the Force Majeure
Event.
(b) During any period in which any Transition Services are reduced or
suspended pursuant to Section 6(a), VNG shall not be obligated to pay
for any Costs with respect to the reduced, suspended or terminated
portion of such Transition Services.
(c) CNG covenants that it will maintain its present or comparable
replacement disaster recovery program and in the event that a Force
Majeure Event occurs which is included in the current CNG disaster
plan, CNG will make the benefits of its disaster recovery program
available to VNG in accordance with the other terms of this Agreement.
7. Limitation of Liability.
(a) Neither CNG, nor its Affiliates, employees or agents shall be liable to
VNG for, and VNG releases and discharges CNG, its Affiliates, employees
and agents from, any and all claims, liabilities, actions, suits,
judgments, losses, injuries, damages (including, without limitation,
incidental or consequential damages), costs and expenses arising out of
or connected with any act or omission, of CNG, its Affiliates,
employees or agents, with respect to the Transition Services, or any
failure to provide the Transition Services to VNG, other than a refusal
by CNG in breach of this Agreement, or gross negligence or willful
misconduct of CNG, its Affiliates, employees or agents.
(b) VNG shall not use the Transition Services for any purpose other than in
connection with the operation of its internal business. VNG will
indemnify CNG against any loss, damage or expense incurred by CNG as a
result of VNG's willful, improper use or employment of any of the
Transition Services in contravention of the provisions of this
Agreement.
8. Warranties.
-----------
CNG warrants that it will make commercially reasonable efforts
to provide for the maintenance of all software in a normal operating state.
Except as provided in the foregoing sentence, the parties expressly agree that
no warranty shall be implied under this Agreement, whether warranties of
utility, fitness for any particular purpose, merchantability, or any other type
and, further, that no warranties of any sort are made herein.
9. Cooperation.
------------
If, after the date hereof, the parties determine that
additional services and functions need to be provided by CNG to VNG during the
Term of this Agreement, each of CNG and VNG agrees to use commercially
reasonable efforts to:
(a) cause CNG to provide to VNG such services or functions, as applicable,
and
(b) agree on fair pricing for such services or functions.
10. Notices.
--------
All notices and other communications required or permitted
hereunder shall be in writing (including telex, telefax or similar writing) and
shall be given:
If to CNG to:
Consolidated Natural Gas Company
c/o Dominion Resources, Inc.
120 Tredegar Street
Richmond, VA 23219
Attention: James F. Stutts, Vice President & General Counsel
Facsimile: (804) 819-2233
with a copy to:
McGuire, Woods, Battle & Boothe LLP
One James Center
901 East Cary Street
Richmond, VA 23219-4030
Attention: Michael J. Schewel, Esq.
Facsimile: (804) 775-1061
If to VNG to:
Virginia Natural Gas, Inc.
c/o AGL Resources, Inc.
817 West Peachtree Street, N.W.
Atlanta, GA 30308
Attention: Paul R. Shlanta, Senior Vice President and Counsel
Facsimile: (404) 584-3419
with a copy to:
Long Aldridge & Norman LLP
303 Peachtree Street, Suite 5300
Atlanta, GA 30308
Attention: David M. Ivey
Facsimile: (404) 527-4198
or to such other person or to such other address or telefax number as the party
to whom such notice is to be given may have furnished the other parties in
writing by like notice. If mailed, any such communication shall be deemed to
have been given on the third business day following the day on which the
communication is posted by registered or certified mail (return receipt
requested). If given by any other means it shall be deemed to have been given
when received.
11. Interpretation.
The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
12. Miscellaneous.
This Agreement (a) together with the Purchase Agreement and
the Related Agreements, constitutes the entire agreement and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof; (b) is an independent
agreement, the rights and obligations of the parties to which shall not be
affected by any provision of, or remedy arising under or with respect to, the
Purchase Agreement or any other agreement between the parties, except to the
extent expressly provided in any such agreement; (c) is not intended to and
shall not confer upon any other person or business entity, other than the
parties hereto or any permitted assignees, any rights or remedies with respect
to the subject matter hereof; (d) shall not be assigned by operation of law or
otherwise by either party without the express written prior approval of the
other party, which approval shall not be unreasonably withheld, except that CNG
may assign all or any portion of its rights hereunder or obligations to one or
more Affiliates; (e) shall be governed by and construed in accordance with the
laws of the Commonwealth of Virginia without regard to its conflicts of law or
choice of law rules; and (f) is not intended to and shall not be deemed to
create an employment relationship between VNG and the employees, agents, or
both, of CNG or any Affiliate or Subsidiary of CNG who perform Transition
Services pursuant to the terms and conditions of this Agreement.
<PAGE>
13. Counterparts.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF the parties have caused this Agreement to be
executed by their duly authorized officers.
CONSOLIDATED NATURAL GAS COMPANY
By:___________________________
Name:
Title:
VIRGINIA NATURAL GAS, INC.
By:___________________________
Name:
Title:
<PAGE>
SCHEDULE A
See Attached
<PAGE>
TRANSITION AND SUPPORT SERVICES SCHEDULE
<TABLE>
<CAPTION>
Service Type Application/System FTEs Required Total Monthly Cost
<S> <C> <C> <C>
Resident Staff Services:
Supervision 1.00 $ 11,760
Staff Support CSS 3.00 $ 18,480
System 1.00 $ 7,560
AS/400 Support 2.00 $ 15,960
Total Resident Staff Services 7.00 $ 53,760
Dominion Services Support:
SCADA 0.25 $ 1,250
PeopleSoft Support 0.50 $ 29,035
Oracle Financials 1.50 $ 66,008
Sams Support 0.50 $ 9,310
Telecom Support 2.00 $ 12,263
Network Services 1.00 $ 10,208
Data Center 3.50 $ 81,775
System Admin 1.00 $ 8,165
Internet/Intranet 0.50 $ 4,166
Wang Contract 4.00 $ 54,500
Total Dominion Services Support 14.75 $276,680
Total Transition/Support Services 21.75 $330,440
</TABLE>
<PAGE>
Exhibit 5.11.2
EDI SOFTWARE LICENSE AGREEMENT
THIS EDI SOFTWARE LICENSE AGREEMENT (this "Agreement") is made and
entered into this _____ day of _______________, _____, by and between
Consolidated Natural Gas Company, a corporation duly organized and existing
under the laws of the State of Delaware and having its principal office at 625
Liberty Avenue, Pittsburgh, Pennsylvania 15222-3199, United States of America
(hereinafter "Licensor"), and Virginia Natural Gas, Inc., a corporation duly
organized and existing under the laws of the Commonwealth of Virginia and having
its principal office at 5100 E. Virginia Beach Blvd., Norfolk, Virginia
23502-3488 (hereinafter "Licensee").
Recitals of the Parties
WHEREAS, Licensor is the developer and owner of a proprietary
electronic data interchange software program known as EDI (hereinafter, the "EDI
Software");
WHEREAS, Licensee is desirous of obtaining a license to use the EDI
Software in its business; and
WHEREAS, Licensor is willing to grant such a license to Licensee on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
Definitions
In addition to terms elsewhere defined in this Agreement, the following
terms shall have the meanings set forth in this Article I for purposes of this
Agreement:
1.1. "Licensee Equipment." The Local Area Network (LAN) central
processing units (CPUs), including all terminals, and other components thereof,
situated at Licensee Premises and more fully described at Schedule A attached
hereto, on which the EDI Software is installed, operated, and maintained.
1.2. "Licensee Personnel." All persons engaged from time to time
as officers, employees, agents, or independent contractors of Licensee.
1.3. "Licensee Premises." Those premises occupied by Licensee at
5100 E. Virginia Beach Blvd., Norfolk, Virginia.
1.4. "LAN." A limited-distance distributed processing network
that comprises the Licensee Equipment and supporting communication facilities
interconnected by a transmission medium in order to facilitate the interexchange
of data.
ARTICLE II
Grant of License to Licensee
2.1. Scope of License. Licensor hereby grants to Licensee a perpetual,
royalty-free, nonexclusive license to install, execute, and use the EDI Software
on Licensee Equipment at Licensee Premises, to make copies required for such
use, including copies for archival and backup purposes, to create derivative
works thereof, and to sublicense the EDI Software and any derivative works
thereof to subsidiaries of Licensee, all in accordance with terms and conditions
hereof. If Licensee is owned by a parent corporation that operates a centralized
information systems office, the definitions of "Licensee Equipment" and
"Licensee Premises" shall be understood to include such centralized information
systems equipment and office, respectively, but the only permitted uses of the
software on any Licensee Equipment or on any Licensee Premises shall be for
Licensee's benefit. Nothing herein shall be interpreted to permit use of the EDI
Software for the benefit of any person or entity other than Licensee or its
permitted sublicensees.
2.2. Sublicenses. Licensee agrees that any sublicense granted hereunder
shall contain provisions with respect to use and protection of trade secrets at
least as restrictive as those contained in Article IV hereof. Licensee shall not
grant its sublicensees the right to further sublicense the EDI Software or any
derivative works.
ARTICLE III
Limited Warranties; Limitations on Liability
3.1 Limited Warranty. Licensor warrants that it is owner of the EDI
Software, that it has the right to convey the licenses set forth in Section 2.1
hereof, and that to the best of its knowledge, the Licensee's use of the EDI
Software in accordance with the terms of this Agreement shall not infringe any
third-party rights in copyrights or trade secrets in the United States. Other
than the warranties specifically set forth in the foregoing sentence (the
"Limited Warranties"), Licensor is providing the EDI Software licensed hereunder
on an "as is" basis. Excluding the Limited Warranties, Licensor disclaims all
warranties relating to the EDI Software licensed hereunder, including all
implied warranties of merchantability and fitness for a particular purpose.
3.2. Limitation on Liability. In no event shall Licensor be liable for
any indirect, exemplary, incidental, or consequential damages arising out of or
otherwise relating to the use or performance of the EDI Software or any
components thereof, however caused, even if Licensor has been advised of the
possibility or likelihood of such damages.
ARTICLE IV
Licensee's Use and Protection of Trade Secrets
4.1 Acknowledgment of Proprietary Materials; Limitations on Use.
Licensee acknowledges that the EDI Software, including any derivative works
thereof, and all associated intellectual property rights, are the property of
Licensor and that Licensor holds the copyright interests therein, the EDI
Software being treated as an unpublished work. Licensee further acknowledges
that the EDI Software, including any derivative works, is treated by Licensor as
secret and proprietary information of Licensor of substantial value, and
Licensee shall treat such information so received in confidence and shall not
use, copy, disclose, nor permit any Licensee Personnel to use, copy, or disclose
the same for any purpose that is not specifically authorized under this
Agreement; provided, however, that such covenant shall not be interpreted to
prohibit Licensee from retaining reputable expert third-party entities to
maintain the EDI Software and from disclosing to such entities such information
as is necessary to allow them to maintain the EDI Software, so long as such
maintenance entities shall undertake in writing to observe all applicable
restrictions set forth in this Article IV with respect to such information as
may be so furnished to them by Licensee.
4.2. Secure Handling. Licensee shall require that the EDI Software, to
the extent not installed on the Licensee Equipment, be kept on the Licensee
Premises in separate, secured drawers or cabinets, which shall be maintained in
a manner so as to reasonably preclude unauthorized persons from having access
thereto. Licensee shall permit such drawers or cabinets to be open to access
only as necessary for Licensee's use thereof for the operation or maintenance of
the EDI Software. Licensee shall identify each copy of EDI Software with a
unique number and shall maintain a written log indicating the exact physical
location of each such copy.
4.3. Proprietary Legends. Licensee shall not remove any copyright
notice or other proprietary or restrictive notice or legend contained or
included in any material provided by Licensor, and Licensee shall reproduce and
copy all such information on all copies made hereunder, including such copies as
may be necessary for archival or backup purposes.
4.4. Obligations of Parties Having Access. Licensee shall limit use of
and access to the EDI Software to such Licensee Personnel as are directly
involved in the operation or maintenance of the EDI Software by Licensee.
Licensee shall use its best efforts to (1) disclose such materials only to
Licensee Personnel whom Licensee has no reason to believe are untrustworthy or
may violate the provisions of this Article IV or the provisions of any Licensor
Restrictive Disclosure Agreement executed as referred to in this Article IV, and
(2) prevent all Licensee Personnel from having access to any such information
that is not required in the performance of their duties for Licensee; provided,
however, that Licensee shall be permitted to convey the same to maintenance
entities in accordance with Section 4.1 hereof.
4.5. Assistance of Licensee. At the request and expense of Licensor,
Licensee shall use reasonable efforts to assist Licensor in identifying any use,
copying, or disclosure of any portion of the EDI Software by any present or
former Licensee Personnel in any manner that is contrary to the provisions of
this Agreement, so long as Licensor shall have provided Licensee with
information reasonably justifying the conclusion of Licensor that such contrary
usage may have occurred.
4.6. Rights to Injunctive Relief. Recognizing and acknowledging that
any use or disclosure of the EDI Software by Licensee or Licensee Personnel in a
manner inconsistent with the provisions of this Agreement may cause Licensor
irreparable damage for which other remedies may be inadequate, Licensee agrees
that Licensor shall have the right to petition for injunctive or other equitable
relief from a court of competent jurisdiction as may be necessary and
appropriate to prevent any unauthorized use or disclosure by Licensee or
Licensee Personnel of any such information and that, in connection therewith,
Licensee shall not oppose such injunction on the grounds that an adequate remedy
is available at law.
4.7. Limitations on Confidentiality. The restrictions set forth in this Article
IV respecting confidentiality of the EDI Software shall not apply to any portion
of the EDI Software that (1) is in or becomes part of the public domain or (2)
is required to be disclosed by Licensee pursuant to any order or directive of a
court or governmental agency of competent jurisdiction, in the event that
Licensee has furnished Licensor notice of such directive or order prior to
disclosure.
4.8. Licensor's Support Obligations. In the event the EDI Software is not
already installed on Licensee's premises, Licensor shall provide reasonable
assistance and cooperation to Licensee in connection with the installation of
the EDI Software on Licensee's premises. In the event that Licensor updates the
EDI Software within one year after the date hereof and Licensee does not desire
to receive the updated versions of the EDI Software, Licensor shall insure that
Licensee is provided access to and assistance for a period of one year after the
date hereof from Licensor's employees, who are skilled in and competent to
provide support in the version of the EDI Software licensed to Licensee
hereunder. If such employees are unable to provide a fix or otherwise adequately
respond to Licensee's support needs hereunder, Licensor shall provide Licensee
with the source code pursuant to a source code license agreement, if Licensor
has the right to provide such source code, for a period not exceeding one year
after the date hereof, so that Licensee can itself support the EDI Software.
4.9. Survival of Terms. The provisions of this Article IV shall survive
termination of this Agreement for any reason.
ARTICLE V
Licensor Indemnification for Intellectual Property Rights Infringement
5.1. Scope of Indemnification. Licensor agrees to defend, indemnify and
hold harmless Licensee from and against any claim, suit, demand, or action
alleging that the EDI Software or any component thereof infringes a U.S.
copyright, trade secret, or any other proprietary right of any third party, and
Licensor shall indemnify Licensee against all costs, expenses, and damages
arising from any such claim, suit, demand, or action; provided, however, that
(1) Licensee shall have given Licensor prompt written notice of such claim,
suit, demand, or action; (2) Licensee shall reasonably cooperate with Licensor
in the defense and settlement thereof; and (3) Licensor shall have control of
the defense of such claim, suit, demand, or action and the settlement or
compromise thereof.
5.2. Licensee Remedy Upon Injunction of EDI Software Use. If a
temporary or a final injunction is obtained against Licensee's use of the EDI
Software or any portion thereof by reason of an infringement of a U.S.
copyright, trade secret, or other proprietary right, Licensor will, at its
option and expense, either:
(a) Procure for Licensee the right to continue using the EDI
Software or
(b) Replace or modify for Licensee the EDI Software or such
infringing portion thereof so that it no longer infringes such
copyright, trade secret, or other proprietary right, so long
as the utility or performance of the EDI Software is not
adversely affected by such replacement or modification and the
EDI Software continues to materially conform with the EDI
Software Specifications.
5.3. Exclusion of Liability. Licensor shall have no liability to
Licensee for any infringement action or claim that is based upon or arises out
of the use of the EDI Software or any component thereof in combination with any
other system, equipment, or software in the event that, but for such use, the
claim of infringement would not lie.
5.4. Exclusivity and Survival. This Article V sets forth the exclusive
remedy of Licensee against Licensor with respect to any action or claim for an
alleged patent, copyright, or other proprietary right infringement by the EDI
Software or any component thereof, and this Article V shall survive any
termination of this Agreement.
ARTICLE VI
Termination
6.1. Termination for Cause. Either party may terminate this
Agreement forthwith at any time upon the giving of written
notice:
(a) In the event that the other party fails to discharge any
obligation or remedy any default under this Agreement for a
period continuing more than 45 days after the aggrieved party
shall have given said other party written notice specifying
such failure or default and that such failure or default
continues to exist as of the date upon which the aggrieved
party gives such notice so terminating this Agreement; or
(b) In the event that the other party makes an assignment for the
benefit of creditors, or commences or has commenced against it
any proceeding in bankruptcy, insolvency, or reorganization
pursuant to bankruptcy laws or laws of debtor's moratorium.
6.2. Cure. A failure or delay in performance by either party
under this Agreement shall not constitute basis for
termination of the Agreement under this Article VI if such
performance is effectively commenced or completed prior to the
giving of notice of termination.
6.3. Termination of Licenses. Upon termination of this Agreement for
any reason, all licenses granted hereunder shall terminate and Licensee shall
immediately cease use of the EDI Software. Licensee shall, immediately upon such
termination, return to Licensor all copies of the EDI Software. Licensee shall
certify to Licensor that it has retained no copies of such EDI Software.
ARTICLE VII
Miscellaneous
7.1. Notices.
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All notices, demands and requests under this Agreement shall be in
writing and delivered by hand, by private courier or by telecopy, to the
following addresses (or to such other address as a party may designate by notice
hereunder):
IF TO LICENSOR:
Consolidated Natural Gas Company
625 Liberty Avenue
Pittsburgh, PA 15222-3199
Attn: __________________
Facsimile: _______________
IF TO LICENSEE:
Virginia Natural Gas, Inc.
5100 E. Virginia Beach Blvd.
Norfolk, Virginia 23502-3488
Attn: __________________
Facsimile: _______________
7.2. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the Commonwealth of Virginia, without resort to
the conflicts of laws rules thereof.
7.3. No Assignment. Neither party may assign this Agreement
without the written consent of the other.
7.4. No Waiver. The failure of either party to insist upon strict
performance of any of the terms or provisions of this Agreement, or the exercise
of any option, right to remedy contained herein, shall not be construed as a
waiver of any future application of such term, provision, option, right or
remedy, and such term, provision, option, right or remedy shall continue and
remain in full force and effect.
7.5. Entire Agreement. The terms and provisions of this Agreement
constitute the entire agreement between the parties with respect to use and
reproduction of the Work and supersede all previous communications,
negotiations, proposals, representations, conditions or agreements, whether
written or oral, relating thereto. This Agreement may not be modified or amended
except in a writing signed by a duly authorized officer or representative of
each party.
7.6. Counterparts. This Agreement may be executed in any number of
counterparts, each full set of which shall be deemed an
original, with the same effect as if the signatures were upon
the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first written above.
CONSOLIDATED NATURAL GAS
COMPANY
By: _____________________________
Title: _____________________________
VIRGINIA NATURAL GAS, INC.
By: _____________________________
Title: _____________________________
<PAGE>
SCHEDULE A
[Schedule A - List of all Licensee Equipment, i.e., CPUs, etc. to be covered
by Agreement.]
