SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of Event Reported: 10/07/96
MIDCOAST ENERGY RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Nevada 0-8898 76-0378638
(State or other Commission (I.R.S. Employer
jurisdiction of File Number Identification No.)
incorporation)
Suite 2950, 1100 Louisiana Street, Houston, Texas 77002
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 713/650-8900
MIDCOAST ENERGY RESOURCES, INC.
Item 2. Acquisition of Assets.
On October 7, 1996, Midcoast Holdings No. One. Inc. a wholly
owned subsidiary of Midcoast Energy Resources, Inc. ("the Company"),
acquired the Harmony gas processing plant and pipeline system
("Harmony System") from Koch Hydrocarbons Company, a division of
Koch Industries, Inc. for cash consideration of approximately
$3,640,000. The acquisition was made pursuant to the Agreement for
Sale and Purchase of Harmony Processing Plant and Related Gathering
System dated October 3, 1996.
The Harmony system gathers gas from producing fields located
in Jasper, Wayne, Greene and Clarke counties, Mississippi. It
consists of over 150 miles of high and low pressure gas gathering
pipeline with 4620 horsepower of field and inlet compression. The
processing plant in Clarke County is a refrigerated propane natural
gas liquid extraction plant with design capacity of over 20 MMCF/d.
The plant has sulphur extraction as well as full fractionation
facilities and markets propane, butanes, natural gasoline,
condensate and sulphur.
The acquisition was partially funded with proceeds from the
Company's sale of 1,000,000 shares of its common stock pursuant to
the Company's Registration Statement on Form SB-2 which was
declared effective on August 9, 1996. The remainder of the
purchase price was financed through the revolving line of credit of
a new $40 million credit facility which was entered into on August
22, 1996 with Bank One, Texas N.A.. Interest on the borrowings
will accrue, at the company's option, at the London Interbank
Offering Rate plus 2.5% or the Bank One, Texas N.A. Base Rate
(currently 8.25%) plus .5%.
Item 7. Financial Statements and Exhibits.
a) Financial Statements
Koch Hydrocarbons Company - Harmony Gas Processing Plant
Historical Summary of Revenue and Direct Operating
Expenses as of June 30, 1996 and for the year ended
December 31, 1995. *
Midcoast Energy Resources, Inc.
Pro forma balance sheet as of June 30, 1996. **
Pro forma statements of operations as of June 30,
1996 and for the year ended December 31, 1995. **
b) Exhibits
2.1 Agreement for Sale and Purchase of Harmony Gas
Processing Plant and Related Gathering System dated
October 3, 1996 by and between Koch Hydrocarbon
Company, Division of Koch Industries, Inc. and
Midcoast Holdings No. One, Inc.
* An Historical Summary of Revenue and Direct Operating
Expenses ("Historical Summary") will be prepared for the
purpose of complying with the financial statement
requirements of a business acquisition to be filed on
Form 8-K as promulgated by Regulation S-X Rule 3-05 and
Rule 1-02 (v) of the Securities Exchange Act of 1934.
The Historical Summary will be provided as an amendment
to this Form 8-K as soon as practicable but in any event
no later than 60 days from the date of this filing.
** To be filed by amendment within 60 days of this filing.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereto duly authorized.
MIDCOAST ENERGY RESOURCES, INC.
Date: October 21, 1996 By: /s/Richard A. Robert
Treasurer
Principal Financial Officer
Principal Accounting Officer
<PAGE>
AGREEMENT FOR SALE AND PURCHASE
OF
HARMONY PROCESSING PLANT
AND RELATED GATHERING SYSTEM
THIS AGREEMENT FOR SALE AND PURCHASE (this "Agreement") is
made and entered into this ___ day of October, 1996, by and between
KOCH HYDROCARBON COMPANY, Division of KOCH INDUSTRIES, INC., a
Kansas corporation ("Seller"), and MIDCOAST HOLDINGS NO. ONE, INC.,
a Delaware corporation ("Buyer").
WHEREAS, Seller owns a natural gas processing plant located in
Clarke County, Mississippi (the "Harmony Plant"), and a gathering
system and compression facilities behind that plant located in
Wayne, Jasper, Greene and Clarke Counties, Mississippi, as more
particularly described or depicted on the maps constituting
SCHEDULE 1.01(A) (the Harmony Plant, gathering system and
compression facilities and related equipment are hereinafter
sometimes collectively called the "Harmony System");
WHEREAS, pursuant to the terms of this Agreement, Seller
desires to sell and Buyer desires to purchase the following
(hereinafter sometimes collectively referred to as the "Harmony
System Assets"): the Harmony System, along with all appurtenances,
interests in realty, contracts, tools, office furniture and
equipment, operating supplies, gasoline or diesel fuel, spare parts
and all other assets owned by Seller, located at the Harmony Plant
Site, and pertaining to Seller's ownership, use, maintenance and
operation of the Harmony System, and the storing, transporting and
marketing on the Harmony System of the residue gas, natural gas
liquids and other plant products extracted from the gas processed,
excluding, however, those certain items hereinafter specifically
described;
ARTICLE I
SALE OF GAS GATHERING AND PROCESSING ASSETS
1.01 Sale of Assets. Subject to the terms and conditions of
this Agreement, Seller agrees to sell to Buyer, and Buyer agrees to
purchase from Seller, the Harmony System Assets, consisting of:
(a) the processing plant, gathering system and compression
facilities depicted on the maps attached hereto as SCHEDULE
1.01(a);
(b) the Harmony System equipment, including but not limited
to the compressor units, scrubbers, dehydration units, tanks,
traps, cathodic protection equipment, gas processing facilities and
other personal property listed on the attached SCHEDULE 1.01(b);
(c) all real property interests currently used by Seller in
connection with its natural gas processing and gathering business
in Wayne, Jasper and Clarke Counties, Mississippi, including those
fee interests, surface leases, easements, rights-of-way, surface
use agreements and other similar agreements listed on the attached
SCHEDULE 1.01(c) (the "Rights-of-Way");
(d) the vehicles and heavy motorized equipment, trailers and
like equipment listed on the attached SCHEDULE 1.01(d); and
(e) the gas purchase contracts, gas processing agreements ,
residue gas sales contracts, gas gathering agreements, and third
party contractor or supplier agreements, together with all
amendments thereto and ratifications thereof, listed on the
attached SCHEDULE 1.01 (e) (the"Contracts");
(f) any and all other facilities, equipment, tools, office
furniture and equipment, operating supplies, gasoline or diesel
fuel, spare parts, chemicals, and other tangible assets currently
located at the Harmony Plant or located at or attached or
appurtenant to the gathering lines and compression facilities
comprising the Harmony System, whether in use or non-use, and
whether specifically described or not described in the schedules
attached to this Agreement, except for those items, property
interests, vehicles, and facilities specifically listed on attached
SCHEDULE 1.01(f), which are excluded from the sale and purchase
contemplated hereby (the "Excluded Assets");
(g) all gas, natural gas liquids and other plant products in
the Harmony System other than those in storage awaiting marketing
which are owned by Seller on the Effective Date and attributable to
processing and treatment prior to the Effective Date; and
(h) all books, files, maps, records and reports pertaining to
the Harmony System, including, but not limited to, all pipeline and
plant construction and testing records, vessel and pipe certifi-cations
and weld x-rays, and reports and filings to and with the U.S. Department of
Transportation, the U.S. Environmental Protection Agency and the state
of Mississippi; provided, however, that Seller shall be entitled to retain
copies of any such books, files, maps, records and reports as Seller deems
necessary or desirable.
1.02 Conveyance of Realty. Except as included as a part of
the Excluded Assets, Seller shall convey to Buyer all fee interests
in realty, including all surface leases, rights-of-way, easements,
surface use agreements and other similar agreements comprising a
part of the Harmony System Assets by conveyance in substantially
the form attached hereto as Exhibit "A". There are no fee interest
properties.
1.03 Conveyance of Personal Property. Seller shall convey to
Buyer all personal property by an assignment and bill of sale
attached hereto as Exhibit "B".
1.04 Transfer of Permits and Authorizations. A list of all
permits, licenses, orders, certificates of occupancy, and other
governmental authorizations obtained by Seller pertaining or
relating to the Harmony System Assets is set forth as SCHEDULE 1.03
hereto (collectively, the "Permits"). Seller shall assign or
transfer the Permits to Buyer at Closing, to the extent legally
assignable or transferable.
ARTICLE II
PURCHASE PRICE AND CLOSING
2.01 Purchase Price. Subject to the terms and conditions of
this Agreement and in full payment for the Harmony System Assets,
Buyer shall pay Seller at Closing (as such term is defined
hereinafter), by wire transfer, the sum of three million four
hundred thousand and no/100 dollars ($3,400,000.00), as may be
adjusted pursuant to the provisions of this Agreement (the
"Purchase Price") as evidenced by the Preliminary Settlement
Statement described in Section 7.05(b) of this Agreement. In
addition, Buyer shall pay the cost of recording the assignments,
bills of sale, deeds and other instruments, and the cost of any
transfer tax, documentary stamps, mortgage tax, sales tax, use tax
or other similar tax due as a result of the sale and conveyance by
Seller to Buyer of the Harmony System Assets.
2.02 Adjustments to the Purchase Price. The Purchase Price
shall be adjusted at Closing.
(a) Upward Adjustments. The Purchase Price shall be adjusted
upward by the following:
(i) The amount of expenses, costs, taxes, and charges
incurred or paid by Seller that are attributable to
the ownership and operation of the Harmony System
Assets on or after the Effective Date through the
Closing, as follows:
(A) expenditures incurred in the normal course of
operation and maintenance of the Harmony
System Assets, including general and
administrative costs in the agreed amount of
$7,182, but excluding, however, the costs
incurrred in repairing the leak incident Lake
Como Gathering Line in late August and early
September and any costs incurred in
remediating the burn pit matter set forth on
Schedule 4.01(o);
(B) any capital expenditures incurred after the
date of this Agreement with the consent, in
writing, of Buyer; and
(C) any capital expenditures due to replacement
caused by an emergency, act of God, or other
circumstance requiring an expenditure to keep
the Harmony System or component therein in
operation; and
(ii) any other amount agreed upon by Seller and Buyer.
(b) Downward Adjustments. The Purchase Price shall be
adjusted downward by the following:
(i) the amount of all income, revenues and proceeds
received by Seller that are attributable to the
ownership and operation of the Harmony System
Assets on or after the Effective Date through the
Closing, as follows:
(A) income, revenues and proceeds from gas,
natural gas liquids and other plant products
saved and sold from processing and treatment
performed on or after the Effective Date;
(B) income, revenues and proceeds from other
sources and attributable to the ownership and
operation of the Assets for periods on or
after the Effective Date; and
(C) ad valorem, property and other taxes that are
allocated to the Seller pursuant to Section
2.03 of this Agreement;
(ii) the amount payable pursuant to Section 7.01 of this
Agreement for any casualty loss; and
(iii) any other amount agreed upon by Seller and Buyer.
2.03 Property Tax Proration. Real estate and personal
property taxes for the calendar year January 1, 1996, through
December 31, 1996, shall be prorated to the Effective Date (as
hereinafter defined) based upon the most recent property tax
assessments and most recent certified tax rates. Such tax
proration shall be settled at Closing by an adjustment to the
Purchase Price. Buyer will assume responsibility for the actual
payment to applicable government authorities of any unpaid property
taxes not yet due.
2.04 Effective Date. The purchase and sale of the Harmony
System Assets shall be effective as of August 1, 1996, at 7:00
A.M., local time where the Harmony System Assets are located
(herein called the "Effective Date").
ARTICLE III
ASSIGNMENT AND ASSUMPTION OF CONTRACTS
3.01 Gas Purchase and Processing Contracts. Seller agrees to
assign to Buyer, and Buyer agrees to assume, as of the Effective
Date, all rights and obligations of Seller arising under the
contracts as of and after the Effective Date, except those
obligations and the attendant liabilities arising on or after the
Effective Date by reason of any breaches or defaults by Seller
occurring prior to the Effective Date (the "Assumed Contract
Obligations"). Seller agrees to use reasonable commercial efforts
to obtain and secure any and all consents and approvals that may be
necessary to effect the assignment of any of the Contracts to
Buyer.
3.02 No Third-Party Beneficiary; No Waiver. The assumption
of the Assumed Contract Obligations by Buyer hereunder shall not be
deemed to create, confirm or give rise to any rights of any third
party, as third-party beneficiary or otherwise, or to waive any
defenses available to Seller or Buyer with respect to any such
liabilities; it being understood that such assumption is for the
purpose of allocated responsibility between Seller and Buyer.
Further, assumption of the Assumed Contract Obligations by Buyer
hereunder shall not be deemed a waiver of such breach of any
warranty, covenant, agreement, or undertaking of Seller hereunder
even though such breaches give rise to Assumed Contract Obliga-tions.
3.03 Performance Prior to Closing. Buyer shall assume
responsibility for operation of the Harmony System Assets as of the
Closing Date. Seller shall be entitled to receive payment for all
gas, natural gas liquids and other plant products saved and sold
prior to the Effective Date, provided that Seller shall make
payment for all such gas to the sellers of such gas, natural gas
liquids and other plant products pursuant to the Contracts. Buyer
agrees to assume all rights and obligations of Seller arising under
the Contracts as of and after the Effective Date, and agrees to
defend, indemnify and hold Seller harmless from any and all costs,
expenses and liabilities under such Contracts accruing on and after
the Effective Date, other than those costs, expenses and
liabilities arising by reason of any breaches or defaults by Seller
prior to the Effective Date. Seller shall defend, indemnify and
hold Buyer harmless from any and all costs, expenses and
liabilities under the Contracts accruing prior to the Effective
Date and those accruing or arising on or after the Effective Date
which result from any breaches or defaults by Seller prior to the
Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.01 Seller. Seller represents and warrants to Buyer as of
the date of this Agreement, and on and as of the Closing Date, as
follows:
(a) Organization and Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Kansas, and registered and in good standing as a
foreign corporation in Mississippi.
(b) Authority. Seller has the power and authority to enter
into and perform this Agreement and to carry out the transactions
contemplated herein. Seller has all the requisite legal authority
to own the Assets and to carry on its business as now conducted in
regard to the Assets. The execution and delivery of this Agreement
and the consummation by Seller of the transactions contemplated
herein have been duly and validly authorized by all necessary
action of the Board of Directors of Seller, and this Agreement
constitutes a valid and binding obligation of the Seller
enforceable in accordance with its terms. To the best knowledge of
the Seller, the making and performance of this Agreement by Seller
will not violate any provisions of any federal, state or local laws
of its respective articles of incorporation or by-laws and will not
result in the breach or violation of, constitute a default under,
or result in the creation of any lien, charge or encumbrance upon
any of the Assets, under any contractual agreement.
(c) Validity of Agreement. The Agreement is a legal, valid
and binding obligation of Seller enforceable against Seller in
accordance with the terms of this Agreement, except as enforcement
may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general. The
enforceability of Seller's obligations under this Agreement is
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Neither the execution of this Agreement nor the consummation of the
transactions contemplated herein will constitute a violation of, or
conflict with, or default under, any order, judgment, decree, or
any contract, commitment, agreement, understanding, arrangement or
restriction of any kind to which Seller is a party or by which
Seller is bound, other than as disclosed in the exhibits and
schedules to this Agreement or as may be otherwise provided for
herein.
(d) No Claims. Except as disclosed in SCHEDULE 4.01(d),
Seller represents and warrants to its knowledge that there are no
governmental or other legal actions, claims, suits, arbitrations or
other proceedings pending or threatened against Seller or the
Harmony System Assets, and it is not aware of any facts which might
result in such action, claim, suit, arbitration or other proceed-ing that
would prevent or interfere with the consummation of the
transactions contemplated by this Agreement or which might
reasonably be expected to have a material adverse effect on the
Harmony System Assets or on the operation or use thereof by either
Seller or Buyer. Seller has not received any written notices of
claims from any person purporting to act in an official capacity as
a representative of any federal, state or local governmental
agency, bureau, department or authority asserting a claim that
Seller is in violation of any applicable law, order or regulation
of a nature which governs the operations of the Assets and remains
uncured, and the enforcement of which in the event of a violation
would adversely affect the overall operation of the Harmony System
Assets, and is not aware of any facts which might result in any
such notice.
(e) Compliance with Applicable Laws. Seller is in material
compliance with all applicable laws, orders, rules, regulations,
judgments or decrees of all governmental bodies pertaining to the
ownership, use, maintenance and operation of the Harmony System
Assets.
(f) Indebtedness. The Harmony System Assets are not subject
to any instrument or agreement evidencing or related to
indebtedness for borrowed money, whether directly or indirectly; or
any agreement, other than those involving the processing or
purchase of gas.
(g) Contracts. Except as disclosed in the attached SCHEDULE
4.01(g), the Contracts are to Seller's knowledge in full force and
effect and are the valid and legally binding obligations of the
parties thereto and are enforceable in accordance with their
respective terms. Schedule 4.01(g) to this Agreement constitutes
a complete and correct list and description of all material
contracts affecting the Harmony System Assets, as operated in the
ordinary course of business, including all amendments,
modifications, revocations and notices, except those that would not
have a material adverse effect upon the rights, obligations or
liabilities of Seller or Buyer, as Seller's assignee, under said
contracts;
(h) Material Breach. Seller, to its knowledge, is not in
material breach or default with respect to any of its obligations
pursuant to any of the Contracts.
(i) Termination. To Seller's knowledge, no party to any of
the Contracts has given notice of any action to terminate, cancel,
rescind, or procure a judicial reformation of their contract or any
provision thereof.
(j) Exchange of Equipment. Since August 1, 1996, with
respect to each of the Assets,
(i) Seller has not exchanged any of the Assets for an
asset of lesser value; and
(ii) except as set forth in SCHEDULE 4.01(j), Seller has
not removed any idle equipment or inventory from
the Assets other than in the ordinary course of
business.
(k) No Consents Required. No consents are required from any
governmental bodies as part of an ordinary course transfer, no
preferential purchase rights, consents, approvals or other action
by, or filing with any person or governmental body is required in
connection with the execution, delivery and performance by Seller
of this Agreement other than those to reflect a change of ownership
and operatorship of the Harmony Plant, the Harmony System, and its
component parts, jointly or individually. All board of director
approvals for the execution of this Agreement and the consummation
of the transaction(s) set forth herein have been obtained.
(l) Conduct of Business. Except as set forth on the attached
SCHEDULE 4.01(l), since August 1, 1996, the Harmony System Assets
have not been operated other than in the ordinary course of
business in accordance with standard processing plant and gathering
practices.
(m) Title to Assets. The Harmony System Assets are free of
any liens, security interests or other like encumbrances, and
Seller warrants title to the Harmony System Assets to Buyer, its
successors and assigns, as to any and all claims by, through or
under Seller, but not otherwise;
(n) Taxes. All ad valorem and personal property taxes
assessed against the Harmony System Assets (including any penalties
or assessments for delinquencies in payment) and all other taxes of
any nature with respect to the Harmony System Assets which are due
and payable by Seller as of the Closing Date will be paid in full
by said Closing Date;
(o) Environmental. To the best of Seller's knowledge, and
except as disclosed to Buyer on the attached SCHEDULE 4.01(o),
Seller is not in violation of any federal, state or local law,
ordinance or regulation relating to the environment on, under or
about any real property or related facilities and equipment owned
or used in connection with any of the Harmony System Assets, and
knows of no Hazardous Waste or Hazardous Substances released,
discharged, or buried thereupon, or the existence of any
underground storage tanks, except as otherwise expressly stated in
SCHEDULE 4.01(o). For purposes of this Agreement, "Hazardous
Waste" and "Hazardous Substances" shall have the meaning presently
set forth in: (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Sections 9601 et seq.; (ii) Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 et seq.; and (iii) the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq.;
(p) No "Take or Pay". Seller is not subject to any
arrangement under which it or Buyer, as Seller's assignee, will be
obligated, by virtue of a prepayment arrangement, a "take-or-pay"
arrangement, a production payment, or any other arrangement, to
transport or deliver hydrocarbons at some future time without then
or thereafter receiving full payment therefor, or to make payment
at some future time for hydrocarbons or the transportation or
delivery of hydrocarbons previously purchased or transported;
(q) Financial Information. The summary financial information
set forth in the income statement attached hereto as SCHEDULE
4.01(q) is true and correct in all material respects.
(r) No Misleading Statement. To the best of Seller's
knowledge as such knowledge is encompassed by the officers of Koch
Hydrocarbon Company, Mike Freemen, Pat Martin, Sara Oschner, John
Earley, Steve Bienevides, Ray Cheatham, and Mike Schaeffer, none of
the statements, representations or warranties made by Seller in
this Agreement, or in any Exhibit or Schedule hereto, or in any
certificate or other document delivered with or pursuant to this
Agreement, contains any untrue statement of any material fact, or
omits to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under
which they were made, not misleading; provided, however, inasmuch
as SCHEDULE 4.01(g) is merely a summary of financial information,
which summary, while true and correct as to the information
presented, may not contain all information which Seller may deem,
in its opinion, desirable by reason of its "summary character".
ARTICLE V
REPRESENTATIONS AND WARRANTIES BY BUYER
Buyer hereby represents and warrants to Seller as follows:
5.01 Buyer. Buyer represents and warrants to Seller as of the
date of this Agreement, and on and as of the Closing Date, as
follows:
(a) Organization and Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware.
(b) Authority. Buyer has the power and authority to enter
into and perform this Agreement and to carry out the transactions
contemplated herein. Buyer has all the requisite legal authority
to own the Assets and to carry on its business as now conducted and
after it acquires the Assets. The execution and delivery of this
Agreement and the consummation by Buyer of the transactions
contemplated herein have been duly and validly authorized by all
necessary action of the Board of Directors of the Buyer, and this
Agreement constitutes a valid and binding obligation of Buyer
enforceable in accordance with its terms. To the best knowledge of
Buyer, the naming and performance of this Agreement by Buyer will
not violate any provisions of any federal, state or local laws or
the articles of incorporation or by-laws of Buyer.
(c) Validity of Agreement. The Agreement is a legal, valid
and binding obligation of Buyer enforceable against Buyer in
accordance with the terms of this Agreement, except as enforcement
may be limited by bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors' rights in general. The
enforceability of Buyers' obligations under this Agreement is
subject to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
Neither the execution of this Agreement nor the consummation of the
transactions contemplated herein will constitute a violation of, or
conflict with, or default under, any order, judgment, decree, or
any contract, commitment, agreement, understanding, arrangement or
restriction of any kind to which Buyer is a party or by which Buyer
is bound. Buyer represents and warrants to its knowledge that
there are no governmental or other legal actions, claims, suits or
proceedings pending or threatened, to which Buyer is or would be a
party, that would prevent or interfere with the consummation of the
transactions contemplated by this Agreement.
(d) No Consents Required. No consents, approvals or other
action by, or filing with any person or governmental body is
required in connection with the execution, delivery and performance
by Buyer of this Agreement other than those to reflect a change of
ownership and operatorship of the Harmony Plant, the Harmony
System, and its component parts, jointly or individually. All
board of director approvals for the execution of this Agreement and
the consummation of the transaction(s) set forth herein have been
obtained.
(e) Securities Representation. Buyer is an experienced and
knowledgeable investor and operator in the oil, gas and processing
business and is acquiring the Assets for Buyer's own account and
not with a view to, or for offer of resale in connection with, a
distribution thereof, within the meaning of the Securities Act of
1933.
ARTICLE VI
TITLE
6.01. Special Warranty of Title. SELLER WARRANTS AND FOREVER
DEFENDS TITLE TO THE ASSETS UNTO BUYER, AGAINST EVERY PERSON
WHOMSOEVER LAWFULLY CLAIMING THE SAME OR ANY PART THEREOF BY,
THROUGH AND UNDER SELLER, BUT NOT OTHERWISE. SELLER MAKES NO
OTHER WARRANTY OR REPRESENTATION OF ANY KIND, EXPRESSED OR
IMPLIED, RELATIVE TO THE ASSETS SOLD HEREUNDER OR THEIR FITNESS
FOR ANY PURPOSE OTHER THAN THOSE REPRESENTATIONS AND WARRANTIES
WHICH MAY BE EXPRESSLY STATED ELSEWHERE IN THIS AGREEMENT. ALL
ASSETS SOLD TO BUYER UNDER THIS AGREEMENT ARE SOLD AS IS, WHERE IS,
AND IN THEIR CURRENT CONDITION.
ARTICLE VII
COVENANTS
7.01 Casualty Loss. If, prior to the Closing, any portion of
the Harmony System Assets not material to the ongoing business
operation have been or are damaged or destroyed by fire, flood,
storm or other casualty or shall be taken by condemnation or under
the right of eminent domain (all of which are herein called
"Casualty Loss"), Buyer shall bear the risk of loss, provided,
however, Seller shall, at the Closing, pay by means of an
adjustment to the Purchase Price to Buyer all sums paid to Seller
by persons or governmental bodies by reason of the damage,
destruction or taking of such asset and shall assign, transfer and
set over unto Buyer all of the right, title and interest of Seller
in and to any unpaid proceeds or other payments from third parties
arising out of such destruction or taking, and all claims and
choses in action with respect to such destruction or taking;
further, provided, however, if any portion of such damaged,
destroyed or taken assets are material to the ongoing business
operation of the Harmony System and such assets are not repaired or
replaced and the business operation restored to its original state
by Seller prior to Closing, then Seller shall bear the risk of
loss, and Buyer shall have the right to terminate this Agreement
unless Buyer and Seller mutually agreed upon an appropriate
adjustment to the Purchase Price which reflects not only the cost
of repair or replacement of the damaged, destroyed or taken assets,
but also includes an amount for the economic losses incurred or
which will be incurred by Buyer to such business operation. Prior
to Closing, Seller shall not voluntarily compromise, settle or
adjust any amount payable by reason of any Casualty Loss which has
been assigned to Buyer pursuant to the foregoing provisions of this
Section 7.01.
7.02 Conduct of Business Prior to Closing.
(a) Prior to Closing, Seller shall:
(i) maintain and operate the Harmony System Assets in
the ordinary course of business in accordance with
standard processing plant and gathering practices
historically employed with respect to the Harmony
System Assets; and
(ii) continue the marketing of residue gas, natural gas
liquids and other plant products consistent with
past practice.
(b) Without the consent of Buyer (which shall be provided as
reasonably far in advance of the deadline for responses to third
persons as will provide Seller with reasonable time to respond, or
shall be deemed to be denied), prior to Closing Seller shall not:
(i) waive, compromise, or settle any right or claims in
excess of ten thousand dollars ($10,000) for which
Buyer will have liability hereunder;
(ii) incur obligations with respect to or undertake any
transactions relating to the Harmony System Assets
other than transactions (1) in the normal, usual
and customary manner, (2) of a nature and in an
amount consistent with prior practice, and (3) in
the ordinary course of business of owning and
operating such Assets;
(iii) enter into any new material agreements or
commitments with respect to the Harmony System
Assets other than those capital expenditures set
forth in Section 2.02(a)(i)(B) and (C) of this
Agreement;
(iv) modify any of the Contracts; or
(v) encumber, sell or otherwise dispose of any of the
Harmony System Assets, other than property which is
replaced at Seller's expense by equivalent property
or which is used, consumed or abandoned in the
normal operations of Seller's business.
7.03 Notice of Claims. Seller shall promptly notify Buyer,
if, between the date hereof and the Closing Date, Seller receives
actual notice of any claim, suit, action or other proceeding have
a potential adverse impact on the Harmony System Assets or their
operation in excess of ten thousand dollars ($10,000).
7.04 Compliance with Conditions Precedent. Each respective
party shall use its best efforts to cause the conditions precedent
set forth in Sections 8.02 and 8.03 of this Agreement which are
applicable to such party, to be fulfilled and satisfied as soon as
practicable, but in any event prior to Closing.
7.05 Preparation of Closing Documents.
(a) Forms of Assignment. Seller shall commence the
preparation of all forms of assignments, bills of sale, deeds, and other
conveyances and transfers pursuant to this Agreement, along with
all applicable schedules and exhibits to such forms of assignments,
bills of sale, deeds and other conveyances, and shall begin
delivering such draft forms to Buyer promptly so that Buyer can
review and approve such documents between the time of execution of
this Agreement and Closing.
(b) Preliminary Settlement Statement. Immediately prior to
Closing, Seller shall prepare a proposed preliminary settlement
statement ("Preliminary Settlement Statement") showing the
calculation of the Purchase Price, as adjusted ("Closing Amount").
7.06. Press Release. Prior to Closing and for a period of
thirty (30) days following Closing, neither party hereto shall make
any press release or other announcement in connection with this
Agreement without first consulting with the other party and
accommodating all reasonable requests of the other party regarding
(i) postponement or cancellation of such press release, or (ii) the
statements made in such press release or announcement. Following
such consultation and good faith attempt to make reasonable
accommodations, either party hereto may make any announcement or
press release that it believes is either required by applicable law
or the rules of any stock exchange, or is advisable in connection
with such party's obligation to provide public disclosure regarding
its activities. This provision shall not apply to any filing with
any governmental body or stock exchange required by law, rule or
regulation.
ARTICLE VIII
CLOSING
8.01 Time and Place. The Closing of the transaction
contemplated by this Agreement shall take place at the offices of
Seller in Houston, Texas, at 10:30 a.m. local time on or before
October 7, 1996 (the "Closing Date").
8.02 Conditions to Buyer's Obligations. The obligation of
Buyer to close is, at the option of Buyer, subject to each of the
conditions set forth below.
(a) The representations and warranties made by Seller in this
Agreement shall be true and accurate in all material respects on
and as of the Closing with the same effect as though such
representations and warranties have been given on and as of the Closing.
Seller shall also have performed or complied with, in all material
respects, all of its obligations under this Agreement which are to
be performed or complied with by it as of the Closing.
(b) Buyer shall have received all such conveyance documents,
certificates of title to vehicles, and other instruments as shall
be necessary to convey or transfer all of the Harmony System Assets
to Buyer, including but not limited to those conveyance documents
described in Section 1.02 of the Agreement.
(c) There shall not be on the Closing (i) any order, decree
or ruling by and court or governmental agency, (ii) any threat
thereof by any governmental agency, which is evidenced by a writing
by the threatening agency, or (iii) any lawsuit which might
prohibit, render illegal or otherwise preclude, postpone, or
prevent this transaction.
8.03 Conditions to Seller's Obligations. The obligation of
Seller to close is, at the option of Seller, subject to each of the
conditions set forth below.
(a) The representations and warranties made by Buyer in this
Agreement shall be true and accurate in all material respects on
and as of the Closing with the same effect as though such
representations and warranties had been given on and as of the Closing.
Buyer shall also have performed or complied in all material
respects with all of its obligations under this Agreement which are
to be performed or complied with by it prior to or on the Closing.
(b) Seller shall have received the payment of the Purchase
Price set forth in the Preliminary Settlement Statement, and Buyer
shall have wired full payment of the Purchase Price in immediately
available same day funds for credit to Seller's account in First
Chicago NBD, Account No. 5139058, ABA Routing No. 071000013.
ARTICLE IX
INDEMNIFICATION
9.01 Survival of Representations. The representations and
warranties of Seller and Buyer contained in this Agreement shall
survive the Closing for a two year period. During such time period
if no bona fide claim in writing, as set forth below, has been
brought by the party to whom such respective representations and
warranties have been made, then such party shall be forever barred
from bringing any claim or action for a breach thereof,
notwithstanding any longer period of limitation of actions which
may otherwise be available to such party by statute or law.
9.02 Indemnification by Seller. As provided immediately
below, Seller agrees for two (2) years to indemnify and defend and
hold harmless Buyer from and against all liabilities, losses,
claims, costs or damages whatsoever, arising out of or from, based
upon, or relating to:
(a) the inaccuracy of any representation or warranty herein
made by Seller in this Agreement;
(b) the non-performance of any covenant, agreement or obligation
to be performed by Seller pursuant to this Agreement; and
(c) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including without
limitation, reasonable legal fees and expenses incurred by Buyer,
incident to any of the foregoing or incurred by Buyer in
investigation or attempting to avoid the same or the oppose the
imposition thereof, or in enforcing this indemnity, but such legal
fees and expenses shall be reimbursed only to the extent Buyer is
successful in enforcing this indemnity.
The foregoing indemnification obligations of Seller shall only
apply if a claim for such indemnification is provided to Seller in
writing at the address set forth in Section 14.11 of this Agreement
setting forth in detail the particular facts and circumstances
which give rise to the claim; and further provided, that any such
claim be submitted within two (2) years of Closing. Under no
circumstance shall Seller be obligated to make payment or incur
liability under this indemnification provision until the cumulative
amount of all such liabilities, losses, claims, costs and damages
exceeds $200,000, nor shall Seller be required to pay a collective
amount in excess of $1,200,000 with respect to the foregoing
indemnification obligations.
9.03 Seller's Special Indemnity. Seller agrees to forever
protect, defend, indemnify and save harmless Buyer, and Buyer's
successors and assigns, from any and all claims, demands, suits,
proceedings, arbitrations, liabilities, attorneys fees, losses,
assessments, judgments, fines, penalties, costs and expenses
incurred by Buyer, or Buyer's successors and assigns, in connection
with, arising out of, or in any way related to (i) the incident
which occurred on or about September 10, 1994, in which the Lake
Como Gathering Line leaked, (ii) the incident which occurred on or
about August 2, 1996, in which the Lake Como Gathering Line again
leaked; (iii) the existing soil contamination in and around the
former burn pit site, and the groundwater contamination in and
under such site and surrounding premises of the Harmony Plant, all
of which has been documented by Seller with the Mississippi
Department of Environmental Quality ("MDEQ") in that report dated
October 1, 1996, as may be subsequently amended, and, in connection
therewith, Seller covenants and agrees to conduct all such further
assessment, monitoring and remediation thereof as may hereafter be
required by the MDEQ or any other state or federal agency asserting
jurisdiction; and (iv) work to be performed at the truck loading
station in order to file a plan that will be acceptable by the
Mississippi Department of Environmental Quality.
9.04 Indemnification by Buyer and Buyer's Parent Corporation.
As provided immediately below, Buyer and Midcoast Energy Resources,
Inc. ("MERI"), the parent corporation of Buyer, jointly and
severally, agree for two (2) years to indemnify and defend and hold
harmless Seller from and against all liabilities, losses, claims,
costs or damages whatsoever, arising out of or from, based upon, or
relating to:
(a) the inaccuracy of any representation or warranty made by
Buyer in this Agreement;
(b) the non-performance by Buyer of any covenant, agreement
or obligation to be performed by Buyer pursuant to this Agreement;
and
(c) the ownership, use, maintenance or operation of the
Harmony System Assets attributable to the period on and after the
Effective Date; and
(d) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including without
limitation, reasonable legal fees and expenses incurred by Seller,
directly related to any of the foregoing, or in enforcing this
indemnity, but such legal fees and expenses shall be reimbursed only
to the extent Seller is successful in enforcing this indemnity.
The foregoing indemnification obligations of Buyer and MERI shall
only apply if a claim for such indemnification is provided to Buyer
and MERI in writing at the address set forth in Section 15.11 of
this Agreement setting forth in detail the particular facts and
circumstances which give rise to the claim; and further provided,
that any such claim be submitted within two (2) years of Closing.
Under no circumstance shall Buyer or MERI be obligated to make
payment or incur liability under this indemnification provision
until the cumulative amount of all such liabilities, losses,
claims, costs and damages exceeds $200,000, nor shall Buyer or MERI
be required to pay a collective amount in excess of $1,200,000 with
respect to the foregoing indemnification obligations.
9.05 Conditions of Indemnification.
(a) Whenever any claim is made by with respect to which the
indemnifications contained in this Article IX relate, the indemnified
party (the "Indemnitee") shall notify the indemnifying party
(the "Indemnitor") in writing as soon as practical after the
Indemnitee becomes aware of such claim (such notice without
exception shall be given within thirty (30) days of the Indemnitee
becoming aware of any claim), but in no event more than thirty (30)
days thereafter (a "Notice of Claim") to the Indemnitor. The
Notice of Claim shall specify all facts known to the Indemnitee
giving rise to such indemnification claim and the amount or an
estimate of the amount of the liability arising therefrom.
(b) Each Notice of Claim will be deemed disapproved by the
Indemnitor, unless the Indemnitor gives the Indemnitee written
notice of approval within thirty (30) days of receipt of the Notice
of Claim. The parties shall undertake, in good faith, to resolve
any dispute with respect to the validity of any such claim which is
disapproved and resolve the obligation of the Indemnitor to
indemnify the Indemnitee. If the parties are unable to agree on
such resolution within thirty (30) days after either the Indemnitee
receives express notice of disapproval, or the lapse of the 30 day
period for Indemnitor to give written notice of approval or
disapproval, the respective rights of the parties as to the
validity of such claim and responsibility of the Indemnitor to
indemnify the Indemnitee shall be determined by arbitration, in
which case, each party shall select an arbitrator experienced in
arbitration and acknowledged by a state bar association or the
American Bar Association within thirty (30) days from the
expiration of the thirty (30) day period during which the parties
were to agree to a resolution. Such two arbitrators shall select
and agree among themselves upon a third arbitrator within fifteen
(15) days thereafter. Failure by one party to select an arbitrator
shall entitle the other party to petition the courts for such
appointment, with attorneys fees and costs for such petition to be
borne by the party who failed to make such timely appointment. The
arbitrators shall resolve the validity of such claim and the
obligation of the Indemnitor to indemnify the Indemnitee thereof
within sixty (60) days of their appointment. Any such decision
shall be binding upon the parties.
(c) If the facts giving rise to any such indemnification
shall involve any actual, threatened or possible claim or demand by
any person against the Indemnitee, the Indemnitor shall be entitled
to contest or defend such claim at its expense and through counsel
of its own choosing if it gives written notice of its intention to
assume the contest and defense of such claim to the Indemnitee
within thirty (30) days after receipt of the Notice of Claim. If
the Indemnitor shall exercise such option, it shall have control
over such contest and defense and over the payment, settlement or
compromise of such claim, and the Indemnitee agrees to cooperate
fully with the Indemnitor and its attorneys with respect to such
contest and defense. If the Indemnitor shall not exercise such
option, the Indemnitee may, but shall not be obligated to, assume
the contest and defense of such claim. Any payment or settlement
resulting from such contest, together with the total expenses
thereof, including but not limited to attorneys' fees, shall be
binding upon the Indemnitor and Indemnitee.
9.06 Covenant Not to Sue. In acknowledgement that Buyer is
acquiring the Harmony System on an "as-is", "where-is" basis, Buyer
agrees that it shall not bring a claim or action against Seller for
any matter relating to the condition of the Harmony System Assets,
including any environmental matter, nor shall it encourage or
facilitate a claim by a third party against Seller, except as may
be required to comply with a federal, state or local law or regulation or
except to enforce the indemnities and other obligations of Seller to Buyer
under Section 9.03 of this Agreement. Provided, however, nothing in
this Section 9.06 shall preclude Buyer from enforcing its rights
pursuant to Section 9.02 of this Agreement, including, but not limited
to, Buyer bringing a claim or action against Seller for any breach by
Seller of its representation and warranty under Section 4.01(o) of this
Agreement.
ARTICLE X
POST-CLOSING AGREEMENTS
10.01 Post-Closing Access. After Closing, Buyer and Seller
shall cooperate and afford each other access to the books and
records relating to the Assets prior to or after the Effective Date
as may be reasonably needed by a party to defend or respond to a
claim, lawsuit or other legal or administrative proceeding.
10.02 Final Settlement Statement; Subsequent Audits and
Settlements. With respect to final recapitulation and audits:
(a) Within ninety (90) days after the Closing, Seller shall
provide to Buyer, for Buyer's review, a proposed final settlement
statement (the "Final Settlement Statement") to account for all
adjustments to the Purchase Price pursuant to Section 2.02 of this
Agreement (the "Final Settlement"). Buyer shall have the right,
within thirty (30) days after receipt of the Final Settlement
Statement, to audit the Final Settlement Statement. If Buyer
disagrees with the Final Settlement Statement, Buyer and Seller
shall use best efforts to reach agreement within thirty (30) days
following Buyer's audit of the Final Settlement Statement.
(b) Should the parties be unable to resolve any disagree-ments, such
disagreement shall, at the earliest practicable date, be referred, by either
or both of the parties, to an accounting firm mutually agreeable to each
party (the "Accounting Firm"), along with all audit reports, work papers,
schedules and calculations related to the matter in dispute. Within thirty
(30) days after such submission, the Accounting Firm shall issue a
letter report determining the Final Settlement, which shall be
final and binding. Any fees and expenses incurred in resolving
disputes shall be borne equally by the parties.
(c) Payment of any amounts owed under the Final Settlement is
due thirty (30) days from the date Seller and Buyer agree on the
Final Settlement Statement, or ten (10) days from the determination
of the Final Settlement by the Accounting Firm, whichever is later.
10.03. Performance Bonds, Guaranties, Etc. With respect to
any surety bonds, performance bonds, guarantees or financial
assurances relating to the Harmony System Assets, on which Seller
or its affiliates are principals or guarantors, Buyer shall cause
such surety bonds, performance bonds, guarantees or financial
assurances to be replaced or otherwise released as promptly as
possible, but not later than sixty (60) days after the Closing.
Buyer shall reimburse Seller for any amounts paid by Seller with
respect to such surety bonds, performance bonds, guarantees or
financial assurances related to periods on and after the Closing
until replaced by Buyer's instruments.
10.04. Recording. Buyer shall be solely responsible for
promptly recording the assignments, deeds, and any other
instruments related to the conveyance of the Harmony System Assets,
and shall promptly furnish Seller with the recording information.
Buyer shall be responsible for all filings with state and federal
agencies for change of owner or operator, and shall promptly
provide Seller with the copies of all such filings when made and
confirmation thereof when received. All recording and filing fees
shall be paid by Buyer and where paid by Seller, reimbursed by
Buyer promptly after receipt of an invoice.
10.05 Contracts and Rights-of-Way Requiring Consents. If
Seller and Buyer should be unable to obtain any consent required
for the transfer of any Contract or Right-of-Way, the Contract or
Right-of-Way shall be held by Seller for the benefit of Buyer after
Closing for its term and Seller shall provide Buyer with the
economic benefits thereof until or unless such consent is received
or said Contract or Right-of-Way is terminated.
10.06 Change of Operator, Filings with State Agencies and
Changes of Signs. Buyer shall promptly file all necessary notices
with state and local governmental agencies needed to change the
designation of ownership and operatorship of the Harmony Plant and
the Harmony Plant Assets. Seller shall provide such assistance as
may be required to assist in completing such notices. Buyer shall
change all signs at the Harmony Plant and on the associated
gathering lines and meters within thirty (30) days of closing to
indicate that Buyer is now the owner of such Harmony Plant Assets.
10.07 Further Assurances. Each party hereto shall, from time
to time at the request of the other, and without further
consideration, execute and deliver such other instruments of sale,
transfer, conveyance, assignment, clarification and termination,
and take such other action as the party making the request may
require to effectuate the intentions of the parties, including
those required to sell, transfer, convey and assign to, and vest in
Buyer and to place Buyer in possession of the Harmony System
Assets, and to transfer, assign or convey the Excluded Assets to
Seller. Seller intends to convey the Harmony System Assets at
Closing; however, in the event it is determined after Closing that:
(i) any part of the Harmony System Assets was not in fact conveyed
to Buyer, and that the title to any part of the Harmony System
Assets is incorrectly in the name of Seller; or that (ii) any
Excluded Asset is conveyed to Buyer and that the title to such
Excluded Asset is incorrectly in the name of Buyer, then each party
hereto shall take all such action necessary to correctly convey any
part of the Harmony System Assets to Buyer, or any part of the
Excluded Assets to Seller.
ARTICLE XI
AS IS--WHERE IS SALE; DISCLAIMER
11.01 General.
IT IS EXPRESSLY UNDERSTOOD BY THE PARTIES HERETO THAT THE
HARMONY SYSTEM ASSETS ARE TO BE SOLD BY SELLER AND PURCHASED BY
BUYER AS IS, WHERE IS, WITHOUT WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, EITHER EXPRESS OR IMPLIED, AS SET
FORTH HEREIN, AND THAT BUYER ACKNOWLEDGES IT HAS HAD OR WILL
HAVE HAD A REASONABLE OPPORTUNITY TO INSPECT AND EXAMINE THE
CONDITION OF EACH AND EVERY ITEM THEREOF, INCLUDING THE
ENVIRONMENTAL CONDITION OF THE HARMONY SYSTEM ASSETS, PRIOR TO
CLOSING, AND BUYER IS AWARE OF AND ACCEPTS SUCH PHYSICAL
CONDITION AND ENVIRONMENTAL CONDITION. ALTHOUGH SELLER HAS MADE, AND
UNTIL CLOSING WILL MAKE, ALL OF ITS FILES AND RECORDS AVAILABLE TO BUYER,
EXCEPT AS SPECIFICALLY STATED IN THIS AGREEMENT, SELLER MAKES NO WARRANTY
OR REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AS TO
THE ACCURACY OR COMPLETENESS OF ANY ORAL OR WRITTEN STATEMENT,
DESCRIPTION, TITLE OPINION, DATA, REPORTS, RECORDS, PROJECTIONS,
INFORMATION OR MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED
OR MADE AVAILABLE TO BUYER IN CONNECTION WITH THIS AGREEMENT
INCLUDING, WITHOUT LIMITATION, ANY DESCRIPTION OF THE HARMONY
SYSTEM ASSETS OR ANY OTHER MATERIALS FURNISHED OR MADE AVAILABLE
TO BUYER BY SELLER OR BY SELLER'S AGENTS OR REPRESENTATIVES. IN
ENTERING INTO AND PERFORMING THIS AGREEMENT, BUYER HAS RELIED
AND WILL RELY SOLELY UPON ITS INDEPENDENT INVESTIGATION OF, AND
JUDGMENT WITH RESPECT TO, THE HARMONY SYSTEM ASSETS AND THEIR
VALUE.
ARTICLE XII
EMPLOYEE MATTERS
12.01 Employment of Personnel.
(a) As soon as requested by Buyer after execution of this
Agreement, Seller shall make available to Buyer for interviewing by
Buyer all employees Seller than has employed in connection with the
Harmony System, except those employees which Seller shall designate
as excluded per SCHEDULE 12.01(a) (those employees available for
interviewing hereinafter referred to as "Employees").
(b) At least 5 days prior to Closing, Buyer shall provide
Seller with a list of those Employees whom Buyer intends to offer
employment with Buyer after Closing.
(c) Seller shall terminate the relationship of Employees whom
Buyer offers employment and who accept such offer of employment as
of the Closing Date (collectively, the "Transferring Employees")
and (i) shall be responsible for the payment of all wages and other
remuneration due to Transferring Employees with respect to their
services as employees of Seller prior to Closing, (ii) provide for
health plan continuation coverage of the Transferring Employees in
accordance with the requirement of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and Section 601 through 609
of ERISA ("COBRA"), and (iii) be responsible for handling
relationships with and liabilities to the Transferring Employees
for causes, demands, suits, proceedings or the like arising prior
to Closing, provided that such indemnification will not apply to
claims, expenses, loss, and liabilities arising from Buyer's
employment related decisions.
ARTICLE XIII
TAXES
13.01 Tax Proceedings. Notwithstanding anything to the
contrary herein, Seller shall be responsible for all income and
processing taxes attributable to periods of ownership prior to the
Effective Date, and Buyer shall be responsible for all income and
processing taxes attributable to periods of ownership on and after
the Effective Date. In the event Buyer or any of Buyer's
affiliates receives notice of any examination, claim, adjustment or
other proceeding relating to the liability for taxes of or with
respect to Seller for any period prior to the Effective Date, Buyer
shall notify Seller in writing within ten (10) days of receiving
notice thereof. As to any such taxes for which Seller is or may be
liable, Seller shall at Seller's expense control or settle the
contest of such examination, claim, adjustment or other proceeding,
and shall indemnify Buyer against all losses in connection
therewith. The parties shall cooperate with each other and with
their respective affiliates in the negotiations and settlement of
any proceeding described in this Section 13.01.
13.02 Like-Kind Exchange. Notwithstanding anything contained
in this Agreement to the contrary, Seller and Buyer hereby
acknowledge and agree that:
(a) Seller desires to complete the sale of all or part of the
Assets to effect a qualified like-kind exchange for other property
("Exchange Property") in a transaction that qualifies as a deferred
exchange in accordance with section 1031 of the Internal Revenue
Code and regulations thereunder.
(b) At the direction of Seller at Closing, Buyer shall
deposit all or a part of the Purchase Price with a mutually-agreed
upon qualified escrow agent, who shall hold the same in accordance
with the terms of the Escrow Agreement entered into by Seller,
Buyer and the mutually agreed-upon escrow agent ("Escrow Agent").
The purpose of the escrow is to provide for the acquisition of
Exchange Property to complete a qualified deferred exchange.
(c) Buyer agrees to reasonably cooperate with Seller in
effecting a like-kind exchange, including the execution of
reasonable documents deemed necessary to qualify the transaction as
a deferred exchange. However, it is specifically agreed that Buyer
shall be an accommodating party only and shall not incur any
additional liability or expense as a result of such qualified
deferred exchange, and that it shall be the sole responsibility of
Seller to locate and identify the Exchange Property.
ARTICLE XIV
INSPECTION AND RECORDS
14.01 Inspection and Records. Prior to Closing, at any
reasonable time and from time to time, Seller shall permit the
representatives of Buyer to inspect the Harmony System and observe
the operating and maintenance personnel therein employed, and
further to observe any and all activities related to the
maintenance, operation, contracting and administration thereof.
Seller shall promptly after Closing furnish Buyer with the
Contracts and files pertaining to the Harmony System for the
purpose of achieving an efficient transfer of administration of the
system.
ARTICLE XV
MISCELLANEOUS PROVISIONS
15.01 Commission. Each of the parties hereto represents and
warrants that there are no claims for brokerage commission or
finders' fees in connection with the transaction contemplated by
this Agreement, and Seller and Buyer will respectively pay or
discharge, and will indemnify the other for, brokerage commissions
or finders' fees incurred by reason of any action taken by such
indemnifying party.
15.02 Further Assurances. From time to time, and without
further consideration each party will execute and deliver to the
other party such documents and take such actions as the other party
may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
15.03 Assignment. The terms, provisions and conditions of
this Agreement shall extend to, be binding upon and inure to the
benefit of the parties hereto, their respective successors, assigns
and legal representatives. No party will make an assignment
without the advance written consent of the other, which such
consent may be withheld, except for an assignment to a wholly owned
subsidiary or a wholly owned affiliate of a parent corporation,
provided that such assignor or parent corporation, as the case may
be, guarantees the performance of the obligations herein.
15.04 Entire Agreement; Amendments. This Agreement and the
exhibits and schedules attached hereto (which are hereby
incorporated into this Agreement by reference) contain the entire
understanding of the parties hereto with respect to its subject
matter. There are no restrictions, agreements, promises,
warranties, covenants or undertakings other than those expressly
set forth herein. This Agreement supersedes all prior agreements
and understandings between the parties hereto with respect to its
subject matter. This Agreement may be amended only by a written
instrument duly executed by the parties hereto. Any condition to
a party's obligations under this Agreement may be waived in writing
by such party. No waiver by any party hereto of any one or more
defaults by the other in performance of any of the provisions of
this Agreement shall operate or be construed as a waiver of any
future default or defaults, whether of a like or different
character.
15.05 Severability. Each portion of this Agreement is
intended to be severable. If any term or provision hereof is
illegal or invalid for any reason whatsoever, such illegality or
invalidity shall not affect the validity of the remainder of this
Agreement.
15.06 Actions. Seller and Buyer, singularly and plurally,
warrant and agree that each shall use its best efforts to take or
cause to be taken all such action as may be necessary to consummate
and make effective the transaction as set forth in this Agreement
and to assure that it will not be under any material corporate,
legal or contractual restriction that would prohibit or delay the
timely consummation of such transaction.
15.07 Termination. This Agreement may be terminated at any
time at or prior to the Closing:
(a) by mutual written consent of Seller and Buyer;
(b) by Seller on the Closing Date if the conditions set forth
in Section 8.03 of this Agreement have not been satisfied in all
material respects by Buyer and shall not have been waived by Seller
in writing;
(c) by Buyer on the Closing Date if the conditions set forth
in Section 8.02 of this Agreement have not been satisfied in all
material respects by Buyer and shall not have been waived by Buyer
in writing; and
(d) by Buyer if any portion of the Harmony System Assets
material to the ongoing business operation are damaged, destroyed
or taken prior to Closing and such assets are not repaired or
replaced and the business operation restored to its original state
by Seller prior to Closing, and Buyer and Seller are unable to
mutually agree upon an appropriate adjustment to the Purchase
Price, as set forth in Section 7.01 of this Agreement.
If the non-defaulting party elects to treat this Agreement as being
in full force and effect, the non-defaulting party shall have, in
addition to any other available remedy at law or equity, the right
to an action for specific performance and/or damages.
15.08 Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
15.09 Governing Law. This Agreement shall be governed by,
enforced in accordance with, and interpreted under, the laws of the
State of Texas.
15.10 Preparation of Agreement. This Agreement was prepared
jointly by the parties hereto and not by either to the exclusion of
the other.
15.11 Notices and Addresses. Any notice, request, instruc-tion,
waiver or other communication to be given hereunder by any
party hereto shall be in writing and shall be considered duly
delivered if personally delivered, facsimile, mailed, by certified
mail with postage prepared or sent by telegraph to the addresses or
facsimile of the parties hereto as follows:
Seller: Koch Hydrocarbon Company
P. O. Box 2256
Wichita, Kansas 67201
Attention: Legal Department
Facsimile: (316) 828-5803
Buyer: Midcoast Holdings No. One, Inc.
1100 Louisiana, Suite 2950
Houston, Texas 77002
Attention: Dan C. Tutcher, President
Facsimile: (713) 650-3232
MERI: Midcoast Energy Resources, Inc.
1100 Louisiana, Suite 2950
Houston, Texas 77002
Attention: Dan C. Tutcher, President
Facsimile: (713) 650-3232
or at such other address as either party hereto may designate by
written notice to the other.
15.12 Section and Subsection Headings. The article, section
and subsection headings contained in this Agreement are for the
purpose of convenience only and are not intended to define or limit
the contents thereof.
15.13 Confidentiality. Seller expressly agrees that all of
the terms and provisions of this Agreement and all copies of books,
files, maps, records and reports pertaining to the Harmony System
Assets that are retained by Seller pursuant to Section 1.01(h) of
this Agreement or any other provision of this Agreement shall be,
and shall be handled by Seller as, confidential information of
Buyer. Seller shall not disclose any such information to any third
party, including without limitation, any local, state or federal
governmental body or regulatory agency, unless required to do so by
applicable law. Prior to any such disclosure, Seller shall notify
Buyer, as far in advance of any such required disclosure as is
practicable, that Seller is required to disclose such information
and the basis for such required disclosure, and Seller shall
cooperate fully with Buyer to obtain confidential treatment for any
such disclosed information by the party to which such information
is disclosed.
IN WITNESS WHEREOF, the parties hereto have hereto set their
hands by their duly authorized officials as of the date set forth
above.
"BUYER"
MIDCOAST HOLDINGS NO. ONE, INC.
By:__________________________
Dan C. Tutcher,
President
"SELLER"
KOCH HYDROCARBON COMPANY
A Division of
KOCH INDUSTRIES, INC.
By:__________________________
Title:_______________________
"MERI"
*MIDCOAST ENERGY RESOURCES, INC.
By:__________________________
Dan C. Tutcher,
President
* Executed in order to acknowledge the indemnity obligation
of Midcoast Energy Resources, Inc. pursuant to section
9.05 of the Agreement, but for no other purpose.
mid1.koc
