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 report (date of earliest event reported): November 20, 1998
DUKE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 1-4928 56-0205520
(State of other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
422 South Church Street
Charlotte, North Carolina 28202-1904
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 704-594-6200
Item 5. Other Events.
Duke Energy Corporation (the "registrant"), through its wholly owned
subsidiary Duke Energy Field Services, Inc. ("DEFS"), entered into a Merger and
Purchase Agreement among Union Pacific Resources Company, Union Pacific Fuels,
Inc., DEFS and DEFS Merger Sub Corp. dated as of November 20, 1998, pursuant to
which DEFS will purchase the natural gas gathering, processing, fractionation
and natural gas liquids (NGL) pipeline business of Union Pacific Resources
(known as UPFuels) as well as UPR's natural gas and NGL marketing activities for
$1.35 billion. The purchase is contingent upon receipt of clearances under the
Hart-Scott-Rodino Act. Closing is anticipated at the end of the first quarter of
1999.
A copy of the registrant's press release announcing the Merger and Purchase
Agreement is filed herewith as Exhibit 2 and is incorporated by reference
herein. The Merger and Purchase Agreement is filed herewith as Exhibit 10 and is
incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
The following exhibits are filed herewith:
2. Press Release of registrant dated November 22, 1998.
10. Merger and Purchase Agreement among Union Pacific Resources
Company, Union Pacific Fuels, Inc., Duke Energy Field Services,
Inc. and DEFS Merger Sub Corp., dated as of November 20, 1998.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DUKE ENERGY CORPORATION
(registrant)
By: ________________________
Richard J. Osborne
Executive Vice President
and Chief Financial Officer
Dated: December 1, 1998
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Exhibit Index
Exhibit Description
- ------- -----------
2 Press Release of registrant dated November 22, 1998
10 Merger and Purchase Agreement among Union Pacific
Resources Company, Union Pacific Fuels, Inc., Duke Energy
Field Services, Inc. and DEFS Merger Sub Corp., dated as
of November 20, 1998.
November 22, 1998
CONTACT: Media Relations
John P. Barnett
713/627-4072
DUKE ENERGY BUYS GATHERING, PROCESSING AND MARKETING
BUSINESS OF UNION PACIFIC RESOURCES
DENVER - Duke Energy Field Services Inc. has reached an agreement to purchase
the natural gas gathering, processing, fractionation and natural gas liquids
(NGL) pipeline business of Union Pacific Resources (known as UPFuels) as well as
UPR's natural gas and NGL marketing activities for $1.35 billion.
These assets, combined with Duke Energy's current assets, will make Duke Energy
the nation's largest producer of NGLs with production in excess of 200,000
barrels per day. This purchase also will make Duke Energy one of the largest
gatherers of natural gas and one of the largest marketers of natural gas and
NGLs in the United States.
This acquisition increases to 60 from 41 the number of processing facilities in
which Duke Energy owns all or a partial interest. It also increases to 47 from
30 the number of processing plants that Duke Energy operates. This acquisition
adds 2.3 billion cubic feet per day (Bcf/d) of processing capacity to the
existing 4.6 Bcf/d of capacity for a total of 6.9 Bcf/d of capacity. It also
expands Duke Energy's fractionation capacity by 118,000 barrels per day (Bbl/d)
for a combined total of 200,000 Bbl/d. Additionally, it adds 7,200 miles of
pipeline to Duke Energy's existing 19,800 miles of pipe for a total of 27,000
miles of pipeline.
"The purchase of these assets advances Duke Energy's strategy of growing its
non-jurisdictional earnings and positions Duke Energy Field Services as a major,
top-tier participant in the consolidating midstream gas industry," said Jim
Mogg, president and chief executive officer of Duke Energy Field Services.
"These are quality assets that both complement our existing assets as well as
expand our asset base into new geographic areas with anticipated growth."
(more)
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- 2 -
Under the agreement, much of UPR's U.S. production will be gathered and
processed by Duke Energy for a minimum of 10 years. UPR also will dedicate for
five years most of its natural gas and NGL production to Duke Energy for
marketing.
"These assets will give us a much greater market presence in areas that we
believe will see significant growth, such as Texas, Louisiana and the Rocky
Mountains," said Rick Priory, chairman, president and chief executive officer of
Duke Energy Corporation. "These assets are strategically located in parts of the
country where Duke Energy will focus on developing regional energy centers. We
believe growth opportunities in natural gas processing and gathering will offer
better returns for our shareholders over time."
The purchase is contingent on receiving approval under the Hart-Scott-Rodino
Act. The transaction is expected to close at the end of the first quarter of
1999.
Duke Energy Field Services also has recently announced several other expansions:
the purchase of several natural gas gathering systems and processing plants from
ONEOK Inc.; plans to build a natural gas processing plant with ONEOK in southern
Oklahoma; and the purchase of the Roberts Ranch natural gas processing plant in
Midland County located in West Texas.
Duke Energy Field Services Inc., with about 250 employees in its Denver
headquarters, is one of the nation's largest gatherers and processors of natural
gas and one of the largest marketers of natural gas liquids. The company also
provides intrastate natural gas transportation and storage, and financial
services for producers.
Duke Energy (NYSE:DUK) is a global energy company with more than $24 billion in
assets. Duke Energy companies provide electric service to approximately 2
million customers; operate pipelines that deliver 12 percent of the natural gas
consumed in the United States; and are leading marketers of electricity, natural
gas and natural gas liquids. Globally the companies develop, own and operate
energy facilities and provide engineering, management, operating and
environmental services. Contact Duke Energy on the World Wide Web at
http://www.duke-energy.com.
# # #
Note to Editors: There is a map of the Duke Energy Field Services assets
available on the Internet.
MERGER AND PURCHASE AGREEMENT
dated as of November 20, 1998
among
UNION PACIFIC RESOURCES COMPANY,
UNION PACIFIC FUELS, INC.,
DUKE ENERGY FIELD SERVICES, INC.
and
DEFS MERGER SUB CORP.
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TABLE OF CONTENTS
Page
ARTICLE 1
Definitions............................................................1
SECTION 1.01. Definitions.............................................1
ARTICLE 2
Merger; Purchase and Sale.............................................12
SECTION 2.01. Merger.................................................12
SECTION 2.02. Purchase and Sale; Assumption of Liabilities...........13
SECTION 2.03. Closing................................................13
SECTION 2.04. Purchase Price Calculations............................14
SECTION 2.05. Adjustment of Gas Storage Inventory....................15
SECTION 2.06. Assignment of Certain Rights...........................15
SECTION 2.07. Adjustment for Transaction Consummation................16
ARTICLE 3
Representations and Warranties of Seller..............................16
A. Representations and Warranties Relating to the Company..........16
SECTION 3.01. Corporate Existence and Power of the Company...........16
SECTION 3.02. Governmental Authorization.............................16
SECTION 3.03. Non-contravention......................................17
SECTION 3.04. Capitalization.........................................17
SECTION 3.05. Financial Statements...................................18
SECTION 3.06. Absence of Certain Changes.............................18
SECTION 3.07. Litigation.............................................20
SECTION 3.08. Material Contracts.....................................20
SECTION 3.09. Insurance..............................................20
SECTION 3.10. Compliance with Laws; No Defaults......................21
SECTION 3.11. Environmental Matters..................................21
SECTION 3.12. Employee Benefit Plans.................................22
SECTION 3.13. Taxes..................................................23
SECTION 3.14. Assets Sufficient......................................24
SECTION 3.15. Leased Equipment.......................................24
SECTION 3.16. Process Safety Management..............................24
SECTION 3.17. Royalties..............................................24
SECTION 3.18. Limitation of Representations and Warranties...........24
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B. Representations and Warranties Relating to Seller...............25
SECTION 3.19. Existence of Seller; Authorization.....................25
SECTION 3.20. Valid and Binding Agreement............................25
SECTION 3.21. Non-contravention......................................25
SECTION 3.22. Ownership..............................................25
SECTION 3.23. Finders' Fees..........................................25
ARTICLE 4
Representations and Warranties of Buyer...............................26
SECTION 4.01. Organization, Existence and Authority..................26
SECTION 4.02. Corporate Authorization................................26
SECTION 4.03. Valid and Binding Agreement............................26
SECTION 4.04. Governmental Authorization.............................26
SECTION 4.05. Non-contravention......................................26
SECTION 4.06. Finders' Fees..........................................27
SECTION 4.07. Financing..............................................27
SECTION 4.08. Purchase for Investment................................27
SECTION 4.09. Litigation. ...........................................27
SECTION 4.10. Due Diligence..........................................27
ARTICLE 5
Covenants of Seller...................................................27
SECTION 5.01. Conduct of the Company.................................27
SECTION 5.02. Access to Information..................................29
SECTION 5.03. Termination of Benefit Arrangements and Employee Plans.30
SECTION 5.04. Restructuring Activities...............................30
SECTION 5.05. Software...............................................30
ARTICLE 6
Covenants of Buyer....................................................30
SECTION 6.01. Access.................................................30
SECTION 6.02. Employment; Benefit Plans..............................30
SECTION 6.03. Indemnification and Insurance..........................32
SECTION 6.04. Dispositions of Certain Company Property...............32
SECTION 6.05. Use of Names; Removal..................................33
SECTION 6.06. Guarantees.............................................34
SECTION 6.07. Non-Solicitation of Key Employees......................34
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ARTICLE 7
Covenants of Buyer and Seller.........................................34
SECTION 7.01. Confidentiality........................................34
SECTION 7.02. Reasonable Commercial Efforts..........................34
SECTION 7.03. Certain Filings........................................35
SECTION 7.04. Public Announcements...................................35
SECTION 7.05. Process Safety Management..............................35
SECTION 7.06. Asbestos and NORM......................................36
SECTION 7.07. Year 2000 Compliance...................................36
SECTION 7.08. Litigation Matters.....................................37
SECTION 7.09. Transition Services....................................38
SECTION 7.10. Amendment of Schedules.................................38
ARTICLE 8
Environmental Matters.................................................39
SECTION 8.01. Environmental Review and Audit. .......................39
SECTION 8.02. Environmental Defects..................................39
SECTION 8.03. Waiver by Buyer........................................41
SECTION 8.04. Termination............................................41
SECTION 8.05. Environmental Arbitrator...............................41
ARTICLE 9
Title Matters.........................................................42
SECTION 9.01. Disclaimer of Warranties...............................42
SECTION 9.02. Buyer's Title Review...................................42
SECTION 9.03. Determination of Title Defects.........................47
SECTION 9.04. No Duplication.........................................47
SECTION 9.05. Deferred Claims and Disputes...........................48
ARTICLE 10
Conditions to Closing.................................................48
SECTION 10.01. Conditions to Obligations of Buyer and Seller.........48
SECTION 10.02. Conditions to Obligation of Buyer and Merger Sub......49
SECTION 10.03. Conditions to Obligation of Seller and the Company....50
ARTICLE 11
Taxes; Covenants......................................................51
SECTION 11.01. Code Section 338(h)(10) Election; Purchase Price
Allocation..........................................51
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SECTION 11.02. Code Section 754 Election; Purchase Price Allocation..52
SECTION 11.03. Transfer Taxes........................................52
SECTION 11.04. Information...........................................52
SECTION 11.05. Tax Attributes........................................53
SECTION 11.06. Indemnification.......................................53
SECTION 11.07. Procedures for Indemnification........................55
SECTION 11.08. Proration of Taxable Income and Loss..................55
SECTION 11.09. Filing Responsibility.................................55
SECTION 11.10. Tax Refunds and Tax Benefits..........................55
SECTION 11.11. Control of Tax Audits.................................55
ARTICLE 12
Survival; Indemnification.............................................57
SECTION 12.01. Survival..............................................57
SECTION 12.02. Indemnification.......................................57
SECTION 12.03. Procedures; Limitations...............................58
SECTION 12.04. Exclusive Remedy......................................59
ARTICLE 13
Termination...........................................................59
SECTION 13.01. Grounds for Termination...............................59
SECTION 13.02. Effect of Termination.................................60
ARTICLE 14
Miscellaneous.........................................................61
SECTION 14.01. Notices...............................................61
SECTION 14.02. Amendments; No Waivers................................62
SECTION 14.03. Expenses..............................................62
SECTION 14.04. Successors and Assigns................................62
SECTION 14.05. Governing Law.........................................62
SECTION 14.06. Counterparts; Effectiveness...........................62
SECTION 14.07. Entire Agreement......................................62
SECTION 14.08. Captions..............................................63
SECTION 14.09. Jurisdiction; Waiver of Jury Trial....................63
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Exhibits & Schedules
Exhibit A Property Schedule
Exhibit B Restructuring Activities
Exhibit C Knowledge Group
Exhibit D Arbitration Procedures
Exhibit E Form of Deed, Bill of Sale and Assignment
Exhibit F Form of Release
Exhibit G Form of Bill of Sale
Exhibit H Form of SWAP Agreement
Exhibit I Form of Option Agreement
Schedule 1.01(1) Excluded Businesses and Assets
Schedule 1.01(2) Marketing Contracts
Schedule 1.01(3) Non-Operated Assets
Schedule 1.01(4) Purchased Assets
Schedule 3.02 Seller's Required Consents
Schedule 3.03 Non-contravention
Schedule 3.04(c) Capitalization
Schedule 3.06 Absence of Certain Changes
Schedule 3.07 Litigation
Schedule 3.08 Material Contracts Exceptions
Schedule 3.09 Insurance Matters
Schedule 3.10 Compliance with Laws; No Defaults
Schedule 3.11 Environmental Matters
Schedule 3.12(a) Employee Plans
Schedule 3.12(e) Benefit Arrangements
Schedule 3.12(g) Collective Bargaining Agreement Employees
Schedule 3.13 Tax Matters
Schedule 3.13(f) Tax Matters Partners
Schedule 3.15 Equipment Leases
Schedule 3.16 PSM Matters
Schedule 4.04 Buyer's Required Consents
Schedule 5.01 Conduct of Business
Schedule 5.01(a)(ix) Risk Management Positions
Schedule 5.03 Certain Benefit Plans
Schedule 5.05 Identified Software
Schedule 6.02(a) Excluded Covered Employees
Schedule 6.02(b)(i) Severance Plan
Schedule 6.02(b)(ii) Vacation Plans
Schedule 6.02(b)(iii) Stay Bonuses
Schedule 6.02(b)(iv) Retention Bonuses
Schedule 6.02(b)(v) Sign On Bonuses
Schedule 6.06 Guarantees
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Schedule 6.07 Identified Employees
Schedule 7.08(a) Retained Litigation
Schedule 7.08(d) Assumed Litigation
Schedule 9.02(b) Purchase Price Allocation
Schedule 11.05 Depreciation Schedule
Schedule 11.06(b) Identified Partnerships
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<PAGE>
MERGER AND PURCHASE AGREEMENT
AGREEMENT dated as of November 20, 1998 among Union Pacific Resources
Company, a Delaware corporation ("Seller"), Union Pacific Fuels, Inc., a
Delaware corporation and a wholly-owned subsidiary of Seller (the "Company"),
Duke Energy Field Services, Inc., a Colorado corporation ("Buyer"), and DEFS
Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of Buyer
("Merger Sub").
The parties hereto agree as follows:
ARTICLE 1
Definitions
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person.
"Arbitration Procedures" means the arbitration procedures set forth in
Exhibit D attached to and made a part of this Agreement.
"Assets" means the assets of the Company and the Subsidiaries and the
Purchased Assets.
"Assumed Liabilities" means those liabilities and obligations of Seller
and its Affiliates (other than the Company and its Subsidiaries) to the extent
the same arose out of the ownership or operation of the Purchased Assets, and
which (i) are not liabilities or obligations retained by Seller or any Affiliate
of Seller (other than the Company or any of its Subsidiaries) pursuant to the
terms of this Agreement, or (ii) are not obligations for which Seller has agreed
to indemnify any Buyer Indemnified Party pursuant to Section 12.02(a) during
such period of indemnification.
"Base Purchase Price" means the sum of the Base Merger Price (as defined
in the definition of Merger Price) and the Base Purchased Assets Purchase Price
(as defined in the definition of Purchased Assets Purchase Price).
"Benefit Arrangement" means any employment, severance or similar contract,
arrangement or policy or any other contract, plan, policy or arrangement
(whether or not written) providing for compensation, bonus, profit-sharing,
stock option or other stock related rights or other forms of incentive or
deferred compensation, vacation benefits, insurance coverage (including any
self-insured arrangements), health or medical benefits, disability benefits,
workers' compensation, supplemental unemployment benefits, severance benefits
and post-employment or retirement benefits (including compensation, pension,
health, medical or life insurance benefits) that (i) is not an Employee Plan,
(ii) is entered into, maintained, administered or contributed to, by
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the Company or the Subsidiaries or any of their respective ERISA Affiliates and
(iii) covers any Covered Employee.
"Business" means the gas gathering, processing, marketing, and pipeline
businesses and assets of Seller, all of which (other than the Purchased Assets),
pursuant to the Restructuring Activities, have been or will be prior to the
Closing contributed to the Company and its Subsidiaries, but specifically
excluding those businesses and assets of Seller and its Affiliates identified on
Schedule 1.01(1) hereto.
"Change of Control" with respect to a Person means:
(a) any person or "group" (as determined in accordance with Rule 13d-5
of the Securities and Exchange Commission under the Securities
Exchange Act of 1934 or under any successor rule or regulation,
being herein referred to at the "Regulation") shall have acquired
"beneficial ownership" (as determined in accordance with such
Regulation) of such Person's securities (i) representing 25% or more
of the combined voting power of such Person's then outstanding
securities or (ii) having voting power sufficient to elect a
majority of the board of directors or other similar governing body
of such Person;
(b) any statutory merger, consolidation or share exchange (other than a
merger, consolidation or share exchange with an Affiliate of such
Person) in which either (i) such Person is not the surviving
corporation or (ii) such Person will be the surviving corporation
and any outstanding shares of its common stock will be converted
into shares of any other company (other than an Affiliate of such
Person); or
(c) such Person's stockholders (i) approve any plan or proposal for the
disposition or other transfer of all or substantially all of the
assets of such Person, whether by means of a merger, reorganization,
liquidation or dissolution or otherwise, or (ii) dispose of, or
become obligated to dispose of, 25% or more of the outstanding
capital stock of such Person by tender offer or otherwise.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $1.00 per share, of the
Company.
"Defensible Title" means (a) with respect to the real property interests
included in a Gas Plant Interest or Pipeline System Interest (whether the
interests of the Company and its Affiliates are equal to or less than 100%),
other than the Rights-of-Way associated with such Gas Plant or Pipeline System,
title to such real property interests, whether held by the Company or one of its
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Affiliates or by a third Person for the benefit of the Company or one of its
Affiliates as a beneficial owner of such real property interests, that: (i)
entitles the Company or such Affiliate to not less than the revenue interest set
forth in the Property Schedule for such Gas Plant Interest or Pipeline System
Interest, as the case may be; (ii) obligates the Company or one of its
Affiliates to bear the costs and expenses relating to maintenance, feed stock,
shrinkage and operation of the related Gas Plant or Pipeline System, as the case
may be, in an amount not greater than the interest set forth in the Property
Schedule for such Gas Plant Interest or Pipeline System Interest, as the case
may be; and (iii) except for Permitted Encumbrances, is free of all Liens and
(b) with respect to the Rights-of-Way included in a Gas Plant Interest or
Pipeline System Interest, title to such Rights-of-Way, whether held by the
Company, an Affiliate of the Company or by a third Person for the benefit of the
Company or one of its Affiliates as a beneficial owner of such Gas Plant
Interest or Pipeline System Interest, that, except for Permitted Encumbrances,
is free of all Liens.
"Employee Plan" means any "employee benefit plan," as defined in Section
3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is
maintained, administered or contributed to by the Company or the Subsidiaries or
any of their respective ERISA Affiliates and (iii) covers any Covered Employee.
"Environmental Condition" means (i) the existence of a Hazardous Substance
in the soil or groundwater for which there is an obligation under applicable
Environmental Law to engage in any removal or remediation or concerning which a
governmental regulatory authority with jurisdiction over such matter has
required remedial action under applicable Environmental Laws (for purpose of
this Agreement, Hazardous Substance contamination at multiple sites at a given
Gas Plant or Pipeline System involving the same contaminant(s) from similar
causes shall be deemed to be a single Environmental Condition) or (ii) a
violation of Environmental Law other than the existence of a Hazardous Substance
as addressed in the preceding clause (i).
"Environmental Defect" means an Environmental Condition with respect to
the Assets or the Business which is not set forth in Schedule 3.11; provided
that, if the reasonably anticipated Remediation Amount with respect to such
Environmental Condition is not in excess of $75,000, such Environmental
Condition shall not constitute an Environmental Defect.
"Environmental Laws" means all federal, state, and local laws,
regulations, ordinances, rules and orders existing and in effect on the date
hereof relating to the control of any pollutant or protection of the
environment, including, without limitation, laws, regulations, ordinances, rules
and orders relating to the emission, discharge, disposal, treatment, recycling,
reclamation, permitting, manufacture, processing, distribution, generation,
storage, transportation, release or threatened release of, or exposure of
persons or property to, Hazardous Substances; provided, however, such term does
not include laws, regulations, ordinances, rules and orders relating to the
transportation, handling and distribution of products that include Hazardous
Substances as constituents. Environmental Laws includes, without limitation, the
Clean Air Act, as amended, the Clean Water Act, as amended, the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, the
Resources Conservation and Recovery Act, as amended, the
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Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, and the Oil Pollution Act of 1990, as amended.
"Environmental Liabilities" means all liabilities for which the Company or
any of its Subsidiaries or, in the case of any Purchased Asset, the Purchased
Asset Seller shall have any liability following the completion for the
Restructuring Activities, which (i) arise under or relate to violations of
Environmental Laws or arise in connection with or related to any matter
disclosed or required to be disclosed in Schedule 3.11 and (ii) are attributable
to actions occurring or conditions existing on or prior to the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, and the rules and regulations
promulgated thereunder.
"ERISA Affiliate" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"Examination Period" means the period commencing on the date of this
Agreement and ending at 5:00 p.m., Central Standard Time, on the date which is
ninety days after the date of this Agreement.
"Gas Plant" means each plant for the processing, separation or treatment
of natural gas or casinghead gas that is described in the Property Schedule,
including (i) any pipelines for gathering such gas described in the Property
Schedule, (ii) any compressors used in connection with the gathering by the
gatherer of such gas described in the Property Schedule and (iii) all fee
interests, surface lease interests, easements and rights-of-way used in
connection with such plant, compressors and pipelines (collectively, the
"Rights-of-Way" included in such Gas Plant).
"Gas Plant Interest" means, as to a particular Gas Plant or gathering
system included in a Gas Plant, the undivided interest in such Gas Plant or
gathering system as specified on the Property Schedule.
"Gas Storage Inventory" means, (i) the dollar value of all physical gas of
the Company and the Subsidiaries in storage (excluding pipeline imbalances and
linefill) at Closing determined using the best available withdrawal schedule and
applicable gas market prices plus (ii) the mark-to-market value at Closing of
the financial hedges of the Company and the Subsidiaries related to such stored
physical gas.
"Governmental Authority" means (i) the United States of America, (ii) any
state, county, municipality or other governmental subdivision within the United
States of America, and (iii) any court or any governmental department,
commission, board, bureau, agency or other instrumentality of the United States
of America or of any state, county, municipality or other governmental
subdivision within the United States of America.
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"Hazardous Substances" means any toxic or otherwise hazardous substance,
which is regulated under Environmental Laws, including, to the extent regulated,
petroleum and its constituents and petroleum products.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Law" means any applicable statute, law, ordinance, regulation, rule,
ruling, order, restriction, requirement, writ, injunction, decree or other
official act of or by any Governmental Authority.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, encumbrance or other adverse claim of any kind in
respect of such asset. For the purposes of this Agreement, a Person shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Managed Partnerships" means those Partnerships for which Seller or one of
its Affiliates is the tax matters partner.
"Marketing Contracts" means those agreements between Seller (or one of its
Affiliates) and the Company or a Subsidiary listed on Schedule 1.01(2) hereto.
"Material Adverse Effect" means a material adverse effect on the condition
(financial or otherwise), business, assets or results of operations of the
Company and the Subsidiaries, or prior to the completion of the Restructuring
Activities, the Business, taken as a whole, having a present value in excess of
$10,000,000; provided that in determining whether there has been a Material
Adverse Effect, the following matters will not be considered: (i) any changes in
the pricing of products sold or purchased by the Company, its Subsidiaries, or
the Business, (ii) any changes in drilling plans or programs by producers of gas
gathered, processed or transported by the Company, its Subsidiaries or the
Business, (iii) any changes in the financial condition of a customer or supplier
of the Company its Subsidiaries or the Business or (iv) any changes in the
national securities markets.
"Merger Price" means $1,082,823,000 (the "Base Merger Price"), plus (i)
Estimated Gas Storage Inventory, plus (ii) the cost incurred subsequent to the
date hereof and prior to the Closing of any capital expenditures (allocable to
the Assets other than the Purchased Assets) mutually agreed by Buyer and Seller
pursuant to Section 5.01(b), minus (iii) any adjustment related to Environmental
Conditions (allocable to the Assets other than the Purchased Assets) effected
prior to the Closing Date as contemplated by Section 8.02(c), minus (iv) any
reductions on account of Title Defects with respect to any Asset other than any
Purchased Asset pursuant to Section 9.02(e)(1)(ii), and minus (v) any reduction
pursuant to Section 2.07(a).
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"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
"Non-Operated Assets" means the assets identified on Schedule 1.01(3).
"Partnership" means any entity which is taxed for federal income tax
purposes as a partnership in which the Company or any of its Subsidiaries has an
interest immediately after the Closing.
"Permitted Encumbrances" means any of the following matters:
(1) all agreements, instruments, documents, liens, encumbrances, and
other matters which are described in any schedule or exhibit hereto;
(2) any (i) undetermined or inchoate liens or charges constituting
or securing the payment of expenses which were incurred incidental to
maintenance or operation of any of the Gas Plant Interests or Pipeline
System Interests or for the purpose of gathering or processing natural gas
or other hydrocarbons and (ii) materialman's, mechanics', repairman's,
employees', contractors', operators' or other similar liens, security
interests or charges for liquidated amounts arising in the ordinary course
of business incidental to construction, maintenance or operation of any of
the Gas Plant Interests or Pipeline System Interests or the gathering or
processing of natural gas or other hydrocarbons, that are not delinquent
and that will be paid in the ordinary course of business or, if
delinquent, that are being contested in good faith and, to the extent
required in accordance with generally accepted accounting principles, for
which adequate reserves have been established;
(3) any liens for Taxes not yet delinquent or, if delinquent, that
are being contested in good faith in the ordinary course of business and,
to the extent required in accordance with generally accepted accounting
principles, for which adequate reserves have been established;
(4) any liens or security interests created by Law or reserved in
leases for rental or for compliance with the terms of any of the Gas Plant
Interests or Pipeline System Interests;
(5) all Preference Rights and Transfer Requirements;
(6) consents to assignment from Governmental Authorities that may be
required in connection with the assignment of any of the Gas Plant
Interests or Pipeline System Interests or any interest therein;
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(7) any easements, rights-of-way, servitudes, permits, licenses,
leases and other rights with respect to operations to the extent such
matters do not interfere in any material respect with the Company's or its
applicable Affiliate's operation of the portion of the Gas Plant Interest
or Pipeline System Interest burdened thereby;
(8) all agreements and obligations relating to imbalances with
respect to the transportation or processing of natural gas or other
hydrocarbons;
(9) all liens, charges, plat restrictions, or other encumbrances,
contracts, agreements, instruments, obligations, defects, irregularities
and other matters affecting any of the Gas Plant Interests or Pipeline
System Interests which individually or in the aggregate are not such as to
interfere materially with the operation, value or use of such Gas Plant
Interest or Pipeline System Interest;
(10) any encumbrance, title defect or other matter (whether or not
constituting a Title Defect) waived or deemed waived by Buyer pursuant to
Article 9;
(11) all rights reserved to or vested in any Governmental Authority
to control or regulate any of the Gas Plant Interests or Pipeline System
Interests and all applicable laws, rules, regulations and orders of such
authorities and compliance therewith;
(12) the terms and conditions of all applicable tariff schedules,
contracts and agreements relating to or affecting any of the Gas Plant
Interests or the Pipeline System Interests, or the operation thereof,
including, without limitation, construction and operating agreements,
partnerships or other joint venture agreements, gas and natural gas
liquids purchase and sales contracts, processing agreements,
transportation and gathering agreements, fractionation agreements, and
right-of-way agreements; and
(13) any agreement, contract, lease, instrument, encumbrance,
permit, amendment, extension or other matter entered into by the Company
or one of the Affiliates in accordance with Section 5.01.
"Person" means an individual, corporation, partnership, association, trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
"Pipeline System" means each pipeline system for the transportation of
natural gas, residue gas and natural gas liquids described in the Property
Schedule, including (i) any compressors and pump stations related thereto
described in the Property Schedule and (ii) all fee
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interests, surface lease interests, easements and rights-of-way used in
connection with such pipeline system (collectively also referred to as the
"Rights-of-Way" included in such Pipeline System).
"Pipeline System Interest" means, as to a particular Pipeline System, the
undivided interest in such Pipeline System as specified on the Property
Schedule.
"Pre-Closing Taxes" means Taxes relating to any taxable period ending on
or prior to the Closing Date, and, for any taxable period beginning before the
Closing Date and ending after the Closing Date, Taxes relating to the portion of
such taxable period up to and including the Closing Date.
"Preference Right" means any right or agreement that enables any Person to
purchase or acquire any Gas Plant Interest or Pipeline System Interest or
portion thereof as a result of or in connection with the sale, assignment,
encumbrance or other transfer of such Gas Plant Interest or Pipeline System
Interest or portion thereof.
"Property Schedule" means Exhibit A attached hereto and made a part of
this Agreement.
"Purchased Assets" means those assets of Seller and its Affiliates
identified on Schedule 1.01(4) hereto.
"Purchased Assets Purchase Price" means $267,177,000 (the "Base Purchased
Assets Purchase Price"), plus (i) the cost incurred subsequent to the date
hereof and prior to the Closing of any capital expenditures (allocable to the
Purchased Assets) mutually agreed by Buyer and Seller pursuant to Section
5.01(b), minus (ii) any adjustment related to Environmental Conditions
(allocable to the Purchased Assets) effected prior to the Closing Date as
contemplated by Section 8.02(c), and minus (iii) any reductions on account of
Title Defects with respect to any Purchased Asset pursuant to Section
9.02(e)(1)(ii).
"Purchase Price" means, collectively, the Merger Price and the Purchased
Assets Purchase Price.
"Regulated Activity" means any generation, treatment, storage, recycling,
transportation or disposal of any Hazardous Substance.
"Release" means any discharge, emission or release, including a Release as
defined in the Comprehensive Environmental Response, Compensation, and Liability
Act, as amended, at 42 U.S.C. ss. 9601(22).
"Remedial Action" means any corrective, removal, response, construction,
monitoring, closure, disposal or other remedial action.
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"Remediation" means, with respect to an Environmental Condition, the
implementation and completion of any Remedial Actions to industrial site
standards required under Environmental Laws to monitor, correct or remove such
Environmental Condition, or to satisfy remedial action requirements of a
governmental regulatory authority with jurisdiction over the Remedial Action for
the Environmental Condition; provided, however, that if, as of the Closing Date,
it is reasonably foreseeable based on the law then in effect that the remedial
action requirements of a governmental regulatory authority with jurisdiction
over the Remedial Action at a site will be more stringent than industrial site
standards determined as of the Closing Date, the Remediation shall require
Remedial Action to such more stringent standards.
"Remediation Amount" means, with respect to an Environmental Condition,
the out-of-pocket, third-party cost of the most cost effective Remediation of
such Environmental Condition.
"Restructuring Activities" means the corporate restructuring activities of
Seller, the Company and the Subsidiaries and their respective Affiliates, which
are described on Exhibit B hereto.
"Rights-of-Way" are defined in the definitions of Gas Plant and Pipeline
System set forth in this Section 1.01.
"Section 338(h)(10) Election" shall have the meaning set forth in Section
11.01 of this Agreement.
"Seller's knowledge" or "to the knowledge of Seller" means the actual
knowledge of those officers and employees of Seller, the Company or any
Subsidiary of the Company identified on Exhibit C hereto.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by the Company.
"Taxes" (and, with correlative meaning, "Tax") means any taxes, duties,
assessments, fees, levies, or similar governmental charges, together with any
interest, penalties, and additions to tax, imposed by any taxing authority,
wherever located (i.e. whether federal, state, local, municipal, or foreign)
("Taxing Authority"), including, without limitation, all net income, gross
income, gross receipts, net receipts, sales, use, transfer, franchise,
privilege, profits, social security, disability, withholding, payroll,
unemployment, employment, excise, severance, property, windfall profits, value
added, ad valorem, or occupational imposition.
"Taxing Authority" is defined in the definition of Taxes set forth in this
Section 1.01.
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"Tax Claims" shall mean any claims, actions, causes of action,
liabilities, losses, damages, deficiencies, judgments, settlements, costs and
expenses whatsoever (including reasonable out of pocket expenses and reasonable
attorney's fees), whether or not resulting from third party claims, relating to
Taxes,
"Tax Return" shall mean any return, declaration, report, claim for refund,
information return, statement, or other similar document relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereto.
"Third Party Claims" shall mean any damages, penalties, fines, costs and
expenses (including without limitation the cost of acquiring a Right-of-Way or a
substitute therefor, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any action, suit or proceeding),
to the extent the same arise out of or result from any claim, demand or cause of
action (or threatened cause of action) which (a) is at any time made, asserted
or threatened against Buyer by a Person which is not Buyer or a Related Person
and (b) has not been solicited or intentionally provoked by Buyer or a Related
Person; provided that, "Third Party Claims" shall not include any consequential,
indirect, exemplary or punitive damages (it being agreed that damages for any
loss of profit, business interruption loss, or loss of business reputation or
opportunities shall be considered "consequential damages" for purposes of this
Agreement) incurred or suffered by Buyer (or a Related Person). The term
"Related Person" shall mean any Affiliate of Buyer, any successor or assign of
Buyer or any of its Affiliates, and any director, officer, employee, agent or
representative of Buyer, any of its Affiliates, or any of its or their
successors or assigns.
"Title Deductible Amount" means, as at a particular time, an amount equal
to $10,000,000 minus the aggregate amount of the reductions thereto made prior
to such time pursuant to Section 9.02(e).
"Title IV Plan" means an Employee Plan, other than any Multiemployer Plan,
subject to Title IV or ERISA.
"Transfer" means any sale, contract to sell, assignment, lease,
conveyance, alienation, transfer or other disposition, whether direct, indirect,
voluntary, involuntary, by operation of law or otherwise, including without
limitation any Change of Control with respect to the Company or any of the
Subsidiaries.
"Transfer Requirement" means any consent, approval, authorization or
permit of, or filing with or notification to, any Person which must be obtained,
made or complied with for or in connection with any sale, assignment, transfer
or encumbrance of any Gas Plant Interest or Pipeline System Interest.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
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TERM SECTION
Assumed Litigation 7.08(d)
Audit 8.01(a)
Buyer Indemnified Party 12.02(a)
Buyer's Consultant 8.01(a)
Buyer's Required Consents 4.04
Certificate of Merger 2.01(c)
Closing 2.03
Company Employees 6.02(a)
Company Securities 3.04(b)
Covered Employees 6.02(a)
Damages 12.02(a)
Deferred Matters Date 8.02(d)
Deferred Title Matters 9.05(a)
Deferred Title Matters Date 9.05(a)
DGCL 2.01
East Texas P & S Agreement 2.07
Effective Time 2.03(c)
Environmental Arbitrator 8.05
Environmental Defect Amount 8.02(c)
Environmental Defect Deductible 8.02(c)
Environmental Dispute 8.02(d)
Environmental Notice 8.02(a)
Estimated Gas Storage Inventory 2.04(a)
Final Gas Storage Inventory 2.05(a)
Guarantees 6.06
Gas Storage Inventory Statement 2.04(a)(1)
Identified Employee 6.07
Inventory Referee 2.03(a)(3)
Indemnified Party 12.03
Indemnifying Party 12.03
Letter Agreement 5.02
LIBOR 2.05(b)
Material Contracts 3.08
Merger 2.01(a)
Merger Sub Stock 4.01
NCU's 7.07
NOL 11.05(b)
NORM 7.06
Process Safety Management 3.16
Prohibited Names and Marks 6.05
Purchased Assets Buyer 2.02(a)
Purchased Asset Seller 2.02(a)
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TERM SECTION
Retained Employees 6.02(a)
Rights Against Third Parties 2.06
Retained Litigation 7.08(a)
Section 338(h)(10) Election 11.01
Seller Indemnified Party 12.02(b)
Seller's Required Approvals 3.03
Seller's Required Consents 3.02
September 1998 Balance Sheet 3.05
Shares 3.04(a)
Step-up 11.06(b)(1)
Subsidiary Securities 3.04(c)
Surviving Corporation 2.01(b)
Tax Audit 11.11
Title Arbitrator 9.05(b)
Title Cure Deadline 9.02(c)
Title Defect 9.03
Title Defect Amount 9.02(d)
Title Defect Property 9.02(c)
Year 2000 Efforts 7.07
Year 2000 Problems 7.07
1997 Year End Balance Sheet 3.05
ARTICLE 2
Merger; Purchase and Sale
SECTION 2.01. Merger. Subject to the terms and conditions hereof and in
accordance with Delaware General Corporation Law (the "DGCL"), at the Effective
Time (as hereinafter defined),
(a) Merger Sub, which was formed solely for purposes of effecting the
Merger, shall be merged with and into the Company (the "Merger") and the
separate existence of Merger Sub shall cease;
(b) the Company, as the surviving corporation (also referred to herein as
the "Surviving Corporation"), shall: (i) be a wholly-owned subsidiary of Buyer,
(ii) continue its corporate existence under the laws of the State of Delaware,
(iii) change its present name to a name that does not include as a part thereof
any of the names "Union Pacific", "Union Pacific Resources", "UPR" or "UP" and
any variations and derivations thereof, and (iv) succeed to all rights, assets,
liabilities and obligations of Merger Sub and the Company in accordance with the
DGCL;
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(c) the Certificate of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, as amended pursuant to a certificate of
merger filed with respect to the Merger (the "Certificate of Merger"), shall
continue as the Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with the provisions therein and as provided by
the applicable provisions of the DGCL;
(d) the By-laws of Merger Sub, as in effect immediately prior to the
Effective Time, shall continue as the By-laws of the Surviving Corporation until
thereafter amended in accordance with their terms and the Certificate of
Incorporation of the Surviving Corporation and as provided by the DGCL;
(e) Any Shares which are held in the Company's treasury immediately prior
to the Effective Time shall be canceled;
(f) Each share of Merger Sub Stock which is outstanding immediately prior
to the Effective Time shall be converted at the Effective Time into one share of
Common Stock of the Surviving Corporation; and
(g) Each Share which is outstanding immediately prior to the Effective
Time will be converted into, and become a right to receive, at the Effective
Time, the amount determined by dividing the Merger Price by the number of Shares
outstanding immediately before the Effective Time.
SECTION 2.02. Purchase and Sale; Assumption of Liabilities. (a) Upon the
terms and subject to the conditions of this Agreement, at the Closing Seller
agrees to sell or to cause one of its Affiliates to sell (the Person so selling
any Purchased Assets being referred to herein as a "Purchased Asset Seller" and
all such Persons as the "Purchased Asset Sellers") to Buyer or one of its
Affiliates (the Person so buying the Purchased Assets being referred to herein
as the "Purchased Assets Buyer"), and Buyer agrees to purchase from the
Purchased Asset Sellers or to cause the Purchased Assets Buyer to purchase the
Purchased Assets.
(b) On and subject to the terms and conditions of this Agreement, Buyer
hereby agrees to assume and become responsible for all of the Assumed
Liabilities at Closing.
SECTION 2.03. Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Seller, 777
Main Street, Fort Worth, Texas on the first day of the month following the day
that is no more than 10 business days following satisfaction of the conditions
set forth in Article 10, or at such other time or place as Buyer and Seller may
agree. At the Closing:
(a) Buyer shall deliver to Seller an amount equal to the Purchase Price
in immediately available funds by wire transfer to an account of Seller, which
account has been designated by Seller, by notice to Buyer, not later than two
business days prior to the Closing Date. The
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Purchase Price shall be subject to adjustment following the Closing as provided
in Section 2.04 and Articles 8 and 9.
(b) The Purchased Asset Sellers shall deliver to the Purchased Assets
Buyer a Deed, Bill of Sale and Assignment relating to the Purchased Assets
substantially in the form of Exhibit E hereto.
(c) The parties hereto shall cause the Merger to be consummated by filing
the Certificate of Merger with the Secretary of State of the State of Delaware
in such form as required by, and executed in accordance with the relevant
provisions of, Delaware Law (the date and time of such filing being referred to
herein as the "Effective Time").
(d) Buyer and Seller shall execute and deliver an option agreement
substantially in the form of Exhibit I hereto.
SECTION 2.04. Purchase Price Calculations. (a) No later than two days
prior to the Closing Date, Buyer and Seller will agree in good faith on the
Merger Price to be paid by Buyer at the Closing, which amount will reflect
Seller's reasonable estimate of Gas Storage Inventory ("Estimated Gas Storage
Inventory"). If Buyer and Seller agree in writing that the Estimated Gas Storage
Inventory is final and binding on all parties, then there will be no adjustment
of Gas Storage Inventory after the Closing and Sections 2.04(a)(1)-(3) and 2.05
will have no force or effect. If Buyer and Seller do not so agree:
(1) As promptly as practicable, but no later than 30 days after the
Closing Date, Buyer will cause to be prepared and delivered to Seller a
statement setting forth the Buyer's calculation of Gas Storage Inventory as of
the close of business on the day immediately preceding the Closing Date ("Gas
Storage Inventory Statement") .
(2) If Seller disagrees with Buyer's calculation of Gas Storage Inventory
delivered pursuant to Section 2.04(a)(1), Seller may, within 15 days after
delivery of the Gas Storage Inventory Statement, deliver a notice to Buyer
disagreeing with the calculation of Gas Storage Inventory contained therein and
setting forth Seller's calculation of such amount. Any such notice of
disagreement shall specify those items or amounts as to which Seller disagrees,
and Seller shall be deemed to have agreed with all other items and amounts
contained in the Gas Storage Inventory Statement and the calculation of Gas
Storage Inventory delivered pursuant to Section 2.04(a)(1).
(3) If a notice of disagreement shall be delivered pursuant to Section
2.04(a)(2), Seller and Buyer shall, during the 30 days following such delivery,
use their best efforts to reach agreement on the disputed items or amounts in
order to determine, as may be required, the amount of Gas Storage Inventory. If,
during such period, Seller and Buyer are unable to reach such agreement, they
shall promptly thereafter cause Ernst & Young LLP (the "Inventory Referee"),
promptly to review this Agreement and the disputed items or amounts in the Gas
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Storage Inventory Statement as to which Seller has disagreed. Such Inventory
Referee shall deliver to Seller and Buyer, as promptly as practicable, a report
setting forth such calculation. Such report shall be, subject to the provisions
set forth in Section 2.05, final and binding upon Seller and Buyer. The cost of
such review and report shall be borne equally by Seller and Buyer.
(b) Buyer and Seller acknowledge that all matters relating to Preference
Rights shall be handled in accordance with the understanding of the parties.
SECTION 2.05. Adjustment of Gas Storage Inventory. (a) If Final Gas
Storage Inventory exceeds Estimated Gas Storage Inventory by more than $50,000,
Buyer shall pay to Seller, in the manner, and with interest, as provided in
Section 2.05(b), the amount of such excess. If Final Gas Storage Inventory is
less than Estimated Gas Storage Inventory by more than $50,000, Seller shall pay
to Buyer, in the manner and with interest as provided in Section 2.05(b), the
amount of such difference. For purposes of this Section 2.05, "Final Gas Storage
Inventory" means Gas Storage Inventory (i) as set forth in the Gas Storage
Inventory Statement, if no notice of disagreement with respect thereto is duly
delivered pursuant to Section 2.04(a)(2); or (ii) if such a notice of
disagreement is delivered, (A) as agreed by Seller and Buyer pursuant to Section
2.04(a)(3) or (B) in the absence of such agreement, as shown in the calculation
of the Inventory Referee delivered pursuant to Section 2.04(a)(3); provided
that, in no event shall Final Gas Storage Inventory be less than the calculation
of Gas Storage Inventory as set forth in the Gas Storage Inventory Statement or
more than the calculation of Gas Storage Inventory delivered pursuant to Section
2.04(a)(2).
(b) Any payment pursuant to Section 2.05(a) shall be made at a mutually
convenient time and place within 10 days after Final Gas Storage Inventory has
been determined as aforesaid by delivery by Buyer or Seller, as the case may be,
of a certified or official bank check payable in immediately available funds to
Seller (or Buyer) or by causing such payments to be credited to such account as
may be designated by Seller (or Buyer). The amount of any payment to be made
pursuant to this Section shall bear interest from and including the Closing Date
to, but excluding, the date of payment at a rate per annum equal to the three
months London Interbank Offered Rate of interest published in the Money Rates
section of The Wall Street Journal on the Closing Date ("LIBOR"). Such interest
shall be payable at the same time as the payment to which it relates and shall
be calculated daily on the basis of a year of 365 days and the actual number of
days elapsed.
SECTION 2.06. Assignment of Certain Rights. Seller and certain Affiliates
of Seller (other than the Company and its Subsidiaries) may be the beneficiary
of certain agreements with third parties (other than any Affiliate of Seller)
relating to the Assets and the Business, including without limitation,
representations and warranties under or pursuant to agreements pursuant to which
Assets were acquired from any third parties (other than any Affiliate of
Seller), confidentiality agreements with third parties (other than any Affiliate
of Seller) in respect of the Assets and the Business (collectively, the "Rights
Against Third Parties"). At the Closing, to the extent transferable, Seller
shall, and to the extent that any Rights Against Third Parties are
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held by Affiliates of Seller (other than the Company and its Subsidiaries) and
are not transferred to Buyer pursuant to the Deed, Bill of Sale and Assignment
covering the Purchased Assets, Seller shall cause such Affiliates to, assign all
of Seller's and such Affiliates' right, title and interest in and to such Rights
Against Third Parties to Buyer with full rights of substitution and subrogation,
without representations and warranties of any kind whatsoever.
SECTION 2.07. Adjustment for Transaction Consummation. (a) Reference is
hereby made to that certain Purchase and Sales Agreement dated as of June 18,
1998 (the "East Texas P & S Agreement"), by and among Seller, Union Pacific
Intrastate Pipeline Company and Panola Pipe Line, Inc., as "Buyers," and HMB
Corporation, Hugh M. Briggs Family Trust, et al, as "Sellers," relating to the
acquisition by such Buyers of such Sellers' interests in the East Texas Plant,
Carthage Hub, Panola Pipeline and San Jacinto Pipeline. The parties agree that
if, for any reason, the transaction evidenced by the East Texas P & S Agreement
is not consummated on or before the Closing Date, the Merger Price shall be
reduced by $32,976,550.
(b) If the transaction evidenced by the East Texas P & S Agreement (or any
extension thereof or amendment thereto) is consummated prior to the third
anniversary of the Closing Date, Buyer shall pay to Seller an amount equal to
the reduction to the Merger Price effected pursuant to Section 2.07(a) above
together with interest thereon from the Closing Date to the date of payment at
LIBOR.
ARTICLE 3
Representations and Warranties of Seller
A. Representations and Warranties Relating to the Company. Subject to
Section 3.18, 9.01 and Section 12.01, Seller hereby represents and warrants to
Buyer as of the date hereof that:
SECTION 3.01. Corporate Existence and Power of the Company. The Company
and each Subsidiary is a corporation (or partnership or limited liability
company, in the case of non-corporate Subsidiaries) duly incorporated (or
otherwise organized or formed, in the case of non-corporate Subsidiaries),
validly existing and in good standing under the laws of the state of its
incorporation (or organization or formation, in the case of non-corporate
Subsidiaries), and has all corporate (or partnership or company, in the case of
non-corporate Subsidiaries) powers required to carry on its business as now
conducted. The Company and each Subsidiary is duly qualified to do business in
each jurisdiction where such qualification is necessary to the business of the
Company or such Subsidiary. Seller has heretofore delivered to Buyer true and
complete copies of the charter and bylaws of the Company and each of its
Subsidiaries as currently in effect.
SECTION 3.02. Governmental Authorization. Except for those actions,
filings, consents or approval described on Schedule 3.02 ("Seller's Required
Consent") and except for
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such governmental or tribal consents or approvals customarily obtained after
Closing, the execution, delivery and performance of this Agreement by Seller and
the Company and the performance of the obligations of the Purchased Asset
Sellers contemplated herein require no action by or in respect of, or filing
with, any governmental body, agency, official or authority other than compliance
with any applicable requirements of the HSR Act.
SECTION 3.03. Non-contravention. Except as disclosed in Schedule 3.03, the
execution, delivery and performance of this Agreement by Seller and the Company,
or in the case of the Purchased Asset Sellers, the sale of the Purchased Assets
to the Purchased Assets Buyer, do not and will not (i) contravene or conflict
with the charter or bylaws of the Company or its corporate Subsidiaries or the
comparable organizational documents with respect to non-corporate Subsidiaries,
(ii) assuming compliance with the matters referred to in Section 3.02,
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Purchased Asset Sellers, the Company or its Subsidiaries,
(iii) require any consent, approval or other action by any Person (other than
any governmental body, agency, official or authority and Preference Rights)
("Seller's Required Approvals") or constitute a default under or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of any Purchased Asset Seller, the Company or its Subsidiaries or to
a loss of any benefit to which any Purchased Asset Seller, the Company or its
Subsidiaries is entitled under any provision of any material agreement,
contract, indenture, lease or other instrument binding upon any Purchased Asset
Seller, the Company or its Subsidiaries or any license, franchise, permit or
other similar authorization held by any Purchased Asset Seller, the Company or
its Subsidiaries or (iv) result in the creation or imposition of any Lien on the
Purchased Assets or any asset of the Company or the Subsidiaries, except in any
such case set forth in clause (iii) above as would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.04. Capitalization. (a) The authorized capital stock of the
Company consists of 1,000 shares of Common Stock (the "Shares"). At the Closing,
no capital stock of the Company other than the Shares will be outstanding. The
Shares have been duly authorized and validly issued and are fully paid and
non-assessable.
(b) Except for the Shares, at the Closing there will be outstanding no (i)
shares of capital stock or other voting securities of the Company, (ii)
securities of the Company convertible into or exchangeable for shares of capital
stock or voting securities of the Company or (iii) options or other rights to
acquire from the Company, and there is no obligation of the Company to issue,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities (the items in clauses (i),
(ii) and (iii) being referred to collectively as the "Company Securities").
(c) Schedule 3.04(c) sets forth a list of all of the Subsidiaries of the
Company upon completion of the Restructuring Activities. Except as set forth on
Schedule 3.04(c), all of the outstanding capital stock of, or other voting
securities or ownership interests in, each Subsidiary,
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have been duly authorized and validly issued and are fully paid and
non-assessable, and are owned by the Company, directly or indirectly, free and
clear of any Lien and free of any other limitation or restriction (other than
those created by this Agreement and restrictions on sales of stock under
applicable securities laws), including any restriction on the right to vote,
sell or otherwise dispose of such capital stock or other voting securities or
ownership interests. There are no outstanding (i) securities of the Company or
any Subsidiary convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any Subsidiary or (ii) options
or other rights to acquire from the Company or any Subsidiary, or other
obligation of the Company or any Subsidiary to issue, any capital stock or other
voting securities or ownership interests in, or any securities convertible into
or exchangeable for any capital stock or other voting securities or ownership
interests in, any Subsidiary (the items in clauses (i) and (ii) being referred
to collectively as the "Subsidiary Securities"). There are no outstanding
obligations of the Company or any Subsidiary to repurchase, redeem or otherwise
acquire any outstanding Company Securities or Subsidiary Securities.
SECTION 3.05. Financial Statements. The audited combined statement of
financial position of certain gathering and processing assets owned by Seller
(together with its wholly owned subsidiaries) as of December 31, 1997 (the "1997
Year End Balance Sheet") and the related audited combined statements of income
and cash flows for the year then ended previously delivered to Buyer fairly
present, in conformity with generally accepted accounting principles applied on
a consistent basis (except as may be indicated in the notes thereto), the
financial position for the period then ended of the Business. The unaudited
combined statement of financial position of the Business as of September 30,
1998 (the "September 1998 Balance Sheet") and the related unaudited combined
statements of income and cash flows for the nine months ended September 30, 1998
previously delivered to Buyer fairly present, in conformity with generally
accepted accounting principles applied on a consistent basis, the financial
position for the period then ended (subject to normal year-end adjustments and
the omission of footnotes) of the Business. Except as reflected therein or
specifically required by the terms of this Agreement, the September 1998 Balance
Sheet has been prepared in a manner consistent with the 1997 Year End Balance
Sheet.
SECTION 3.06. Absence of Certain Changes. Except to the extent permitted
or required by Section 5.01 herein or as otherwise contemplated by this
Agreement or disclosed in Schedule 3.06 hereto, since September 30, 1998, the
business of the Company and its Subsidiaries, and prior to the completion of the
Restructuring Activities, the Business, have been conducted in the ordinary
course consistent with past practices and there has not been:
(i) any events, occurrences, developing or states or circumstances
or facts which individually or in the aggregate, have had or are
reasonably likely to have, a Material Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the
Company or the Subsidiaries,
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or any repurchase, redemption or other acquisition by the Company or the
Subsidiaries of any outstanding shares of capital stock or other
securities of, or other ownership interest in, the Company or the
Subsidiaries;
(iii) any amendment of any term of any outstanding security of the
Company or the Subsidiaries;
(iv) any incurrence, assumption or guarantee by the Company or the
Subsidiaries of any indebtedness for borrowed money other than guarantees
by the Company of the obligations of a wholly-owned Subsidiary in the
ordinary course of business; or, except as would not, in the aggregate,
have a Material Adverse Effect, the incurrence of any liabilities or
obligations (whether absolute, accrued, contingent or otherwise and
including, without limitation, margin loans) of a nature required by
generally accepted accounting principles to be reflected in the combined
statement of financial position of the Business, other than those
liabilities, obligations or contingencies which are accrued or reserved
against 1997 Year End Balance Sheet or are reflected in the September 1998
Balance Sheet or which were incurred after September 30, 1998 in the
ordinary course of business consistent with past practice;
(v) any transaction or commitment made, or any contract or agreement
entered into, by the Company or the Subsidiaries that is material to the
Company, the Subsidiaries and their businesses taken as a whole, other
than transactions and commitments in the ordinary course of business
consistent with past practices and those contemplated by this Agreement;
(vi) any commitments by the Company or the Subsidiaries to make
material capital or other expenditures other than expenditures in the
ordinary course of business consistent with past practices, but in any
event not exceeding $250,000 per commitment;
(vii) any change in any method of accounting or accounting practice
by the Company or the Subsidiaries;
(viii)any labor or employment dispute, other than routine individual
grievances, or any lockouts, strikes, slowdowns, work stoppages or threats
thereof by or with respect to any Covered Employee;
(ix) any settlement of any claim, proceeding or litigation (other
than with respect to the Retained Litigation) that resulted or is expected
to result in a payment by the Company or the Subsidiaries of more than
$250,000;
(x) any material change in any Employee Plan or Benefit Arrangement
or the entering into of any employment agreement in any such case that is
binding upon the Company or any of its Subsidiaries that is not terminable
at will; or
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(xi) any material change in the nature of the business conducted by
the Company and the Subsidiaries (including conducting a retail business).
Notwithstanding the foregoing, to the extent that the representations and
warranties contained in this Section 3.06 relate to the Non-Operated Assets,
such representations and warranties are made solely to the knowledge of Seller.
SECTION 3.07. Litigation. (a) Except as disclosed in Schedules 3.07,
7.08(a) or 7.08(d), there are no actions, suits, proceedings or arbitrations
against the Company or any of the Subsidiaries or, in the case of a Purchased
Asset, any Purchased Asset Seller, pending or, to the knowledge of Seller,
threatened, before any arbitrator, court or other Governmental Authority, which,
individually or in the aggregate, if decided adversely to the Company or such
Subsidiary or, in the case of a Purchased Asset, any Purchased Asset Seller,
could reasonably be expected to have a Material Adverse Effect or impair the
ability of the parties hereto to consummate the transactions contemplated by
this Agreement.
(b) Except as disclosed in Schedules 3.07, 7.08(a) or 7.08(d), none of the
Purchased Asset Sellers, the Company nor any Subsidiary is contemplating any
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law. None
of the Purchased Asset Sellers, the Company nor any Subsidiary is aware of any
threatened involuntary bankruptcy proceeding that might be brought against it by
a third party.
SECTION 3.08. Material Contracts. Except as disclosed on Schedule 3.08,
all agreements, contracts or commitments to which the Company or the
Subsidiaries are parties or which are included in the Purchased Assets or to
which any of the Assets are subject (other than agreements, contracts or
commitments relating to or evidencing title to any of the Assets) which involve
gathering, processing, pipeline transportation, the sale or purchase of natural
gas or natural gas liquids, or Gas Plant or Pipeline System operation or
ownership and which either has a duration of one year or less and involve the
payment or receipt of more than $500,000 or have a duration of longer than one
year and involve the payment or receipt of more than $250,000 per year
("Material Contracts") are valid and binding and in full force and effect as to
a Purchased Asset Seller, the Company or one or more of the Subsidiaries, as the
case may be, on the date of this Agreement. Except as disclosed on Schedule
3.08, none of the Purchased Asset Sellers, the Company, the Subsidiaries, as the
case may be, nor, to the Seller's knowledge, any other parties, have violated
any provision of, or committed or failed to perform any act which with notice,
lapse of time or both would constitute a default under the provisions of, any
Material Contract. Notwithstanding the foregoing, to the extent that the
representations and warranties contained in this Section 3.08 relate to the
Non-Operated Assets, such representations and warranties are made solely to the
knowledge of Seller.
SECTION 3.09. Insurance. Except as disclosed on Schedule 3.09, there is
no material claim by Seller or one of its Affiliates pending under any of the
insurance policies and fidelity
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bonds maintained by Seller (or one of its Affiliates) covering the Assets as to
which coverage has been denied or disputed by the underwriters of such policies
or bonds. All premiums due and payable under all material insurance policies and
fidelity bonds maintained by Seller (or one of its Affiliates) covering the
Assets have been paid and Seller and its Affiliates have otherwise complied
fully with the terms and conditions of all such policies and bonds. Except as
disclosed on Schedule 3.09, to the knowledge of Seller , there has not been any
threatened termination of any such policies or bonds as a result of the
transactions contemplated hereby and as of the date of this Agreement, neither
Seller nor any of its Affiliates has received any written notice of termination
as to any such policies or bonds. Neither Seller nor any of its Affiliates will
maintain any insurance policy or fidelity bond with respect to the Assets
following the Closing.
SECTION 3.10. Compliance with Laws; No Defaults. Except as disclosed on
Schedule 3.10 hereto:
(a) None of the Purchased Asset Sellers, with respect to the Purchased
Assets, or the Company or the Subsidiaries is in violation of any applicable
provisions of any laws, statutes, ordinances or regulations except for
violations that have not had and would not reasonably be expected to have,
individually or when aggregated with the failure(s), if any, referenced in
Section 3.16, a Material Adverse Effect. The Purchased Asset Sellers and the
Company and the Subsidiaries have, or will have at Closing, all permits,
licenses, certificates and similar governmental authorizations required in the
case of the Purchased Asset Seller, to own and operate the Purchased Assets, and
in the case of the Company and the Subsidiaries, to conduct their respective
businesses in accordance with past practice except for such permits, licenses,
certificates and authorizations the absence of which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(b) None of the Company or the Subsidiaries is in default under, and no
condition exists that with notice or lapse of time or both would constitute a
default under and, with respect to the Purchased Assets, none of the Purchased
Asset Sellers is in default under, and no condition exists that with notice or
lapse of time or both would constitute a default under, (i) any mortgage, loan
agreement, indenture or evidence of indebtedness for borrowed money to which the
Company or the Subsidiaries is a party or by which the Company or the
Subsidiaries or any material amount of their assets is bound or (ii) any
judgment, order or injunction of any court, arbitrator or governmental body,
agency, official or authority, which defaults or potential defaults individually
or in the aggregate would reasonably be expected to have a Material Adverse
Effect.
(c) This Section 3.10 does not relate to environmental matters (for which
Section 3.11 is applicable) or matters relating to Process Safety Management
(for which Section 3.16 is applicable).
SECTION 3.11. Environmental Matters. (a) Except as would not reasonably
be expected to have a Material Adverse Effect or as disclosed on Schedule 3.11,
as of the date hereof, no written notice, notification, demand, request for
information, citation, summons or
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complaint has been received or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending,
or to Seller's knowledge, threatened by any governmental entity or other Person
with respect to any (A) alleged violation by the Company or the Subsidiaries,
or, with respect to a Purchased Asset, such Affiliate of Seller that owns such
Purchased Asset, of any Environmental Law or liability thereunder, (B) alleged
failure by the Company or the Subsidiaries, or, with respect to a Purchased
Asset, such Affiliate of Seller that owns such Purchased Asset, to have any
permit, certificate, license, approval, registration or authorization required
under any Environmental Law in connection with the conduct of their businesses,
or (C) Release of Hazardous Substances by the Company or the Subsidiaries, or,
with respect to a Purchased Asset, such Affiliate of Seller that owns such
Purchased Asset.
(b) Except as disclosed on Schedule 3.11, to Seller's knowledge, as of the
date hereof, there are no Environmental Liabilities that have had, or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 3.12. Employee Benefit Plans. (a) Schedule 3.12(a) identifies
each Employee Plan. Seller has furnished or made available to Buyer copies of
the Employee Plans (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof.
(b) No Employee Plan is a Multiemployer Plan.
(c) None of Seller, the Company or any Subsidiary or any of their
respective ERISA Affiliates has incurred, or reasonably expects to incur prior
to the Closing Date, any liability under Title IV of ERISA arising in connection
with the termination of, or complete or partial withdrawal from, any plan
covered or previously covered by Title IV of ERISA that would become a liability
of the Buyer or any of its ERISA Affiliates after the Closing Date.
(d) Each Employee Plan has been maintained in substantial compliance with
its terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code.
(e) Schedule 3.12(e) identifies each Benefit Arrangement. Seller has
furnished to Buyer copies or descriptions of each such Benefit Arrangement.
(f) Except as set forth in Schedule 3.12(e), there is no contract,
agreement, plan or arrangement covering any employee or former employee of the
Company or the Subsidiaries that, individually or collectively, could give rise
to a "parachute" payment (as defined in Section 280G of the Code).
(g) Except as set forth on Schedule 3.12(g), none of the Covered Employees
are covered by a collective bargaining agreement.
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SECTION 3.13. Taxes. Except as disclosed in Schedule 3.13:
(a) (i) The Company, its Subsidiaries and the Managed Partnerships have
filed or caused to be filed all Tax Returns, (ii) all such returns, reports and
forms are true and correct in all material respects, (iii) all Taxes shown to be
due on such returns, reports and forms have been paid in full or will be paid in
full by the due date thereof and (iv) no tax liens have been filed and no claims
are being asserted, in writing or otherwise with respect to any Taxes, except
for liens for Taxes not yet due.
(b) There are no audits or examinations in progress by any Taxing
Authority with respect to the Company, its Subsidiaries or the Managed
Partnerships. None of the Company, its Subsidiaries or the Managed Partnerships
has received any written notice from any Taxing Authority of additional Taxes
owed, adjustments being considered or audits to be commenced. There are no
agreements or understandings between the Company, its Subsidiaries or the
Managed Partnerships and any Taxing Authority, whether oral or written, with
respect to the payment of any Taxes.
(c) There are no outstanding agreements or waivers extending the statutory
period of limitation applicable to any items of Tax of the Company, its
Subsidiaries or the Managed Partnerships.
(d) Seller, Company and its Subsidiaries are and will be members of an
"affiliated group" within the meaning of Section 1504 of the Code as of the
Closing Date.
(e) None of the Company or its Subsidiaries is a party to any allocation
or sharing agreement regarding Taxes with any person.
(f) Schedule 3.13(f) sets forth the Tax Matters Partner of each
Partnership.
(g) Each Partnership is and has been since its date of inception properly
treated as a partnership, and not as an association taxable as a corporation,
pursuant to Section 7701 (a)(2) of the Code and any corresponding provision of
state and local law and will be treated as a partnership for Tax purposes at all
times from the date hereof through the Closing Date.
(h) There are no agreements now, and there have been no agreements in the
past, providing for allocation of income, losses or distributions of cash of any
of the Partnerships other than as set forth in the current or former Partnership
agreements of the Partnerships.
(i) Seller is not a resident alien individual or foreign corporation
within the meaning of Section 897 of the Code and Buyer is not required to
withhold Tax on the Purchase Price by reason of Section 1445 of the Code or any
other provision.
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(j) With respect to any property or related operations owned jointly with
another party, the Seller or its Affiliates have jointly made a timely and
effective election pursuant to Section 761(a) of the Code and Treasury
Regulation Section 1.761-2(b) to be excluded from all subchapter K of the Code,
and such election has not been modified, revoked or otherwise altered, and
remains in effect. Such property or related operations are properly excluded
from all subchapter K of the Code prior to and including the Closing Date.
Neither Seller nor any of its Affiliates has taken or has been notified that it
has taken any action inconsistent with such election
SECTION 3.14. Assets Sufficient. Immediately after the completion of the
Restructuring Activities, the Assets shall include all assets, rights and
interests owned by Seller or its Affiliates prior to completion of the
Restructuring Activities which were used by Seller or its Affiliates in the
conduct of the Business.
SECTION 3.15. Leased Equipment. Schedule 3.15 identifies (i) each lease of
gas plant, pipeline or compressor used in the Business (other than those
relating to any Non-Operated Assets) having a remaining term greater than 30
days and an annual lease payment in excess of $50,000; (ii) the amount of the
annual lease payments in respect of each such lease and (iii) the remaining term
of each such lease.
SECTION 3.16. Process Safety Management. In conducting the Business,
Seller and its Affiliates have initiated and, to the extent required by
Occupational Safety and Health Administration's Process Safety Management of
Highly Hazardous Chemicals Standard (i.e., 29 CFR 1910.119) (collectively
"Process Safety Management") to be completed prior to the date hereof,
completed, each item identified on Schedule 3.16 in respect of Process Safety
Management, except where any failure or failures to do so would not reasonably
be expected to have, individually or when aggregated with the violation(s), if
any, of the laws, statutes, ordinances or regulations referenced in the first
sentence of Section 3.10(a), a Material Adverse Effect. Notwithstanding the
foregoing, to the extent that the representation and warranty contained in this
Section 3.16 relate to the Non-Operated Assets, such representation and warranty
are made solely to the knowledge of Seller.
SECTION 3.17. Royalties. Neither the Company nor its Subsidiaries, nor
with respect to the Purchased Assets, any Affiliate of Seller, are obligated to
make oil and gas royalty payments as a part of the Business.
SECTION 3.18. Limitation of Representations and Warranties. BUYER
ACKNOWLEDGES THAT IF THE CLOSING IS CONSUMMATED, THE BUSINESS, ASSETS AND
LIABILITIES OF THE COMPANY AND ITS SUBSIDIARIES AND THE PURCHASED ASSETS ARE
BEING SOLD TO BUYER ON AN "AS IS, WHERE IS" BASIS, WITHOUT ANY WARRANTIES OR
REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER, EXCEPT AS
SPECIFICALLY SET FORTH IN THIS AGREEMENT. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, SELLER MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO ANY
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PROJECTIONS, ESTIMATES OR BUDGETS DELIVERED TO OR MADE AVAILABLE TO BUYER OF
FUTURE FINANCIAL OR OIL AND GAS RESERVES, FUTURE REVENUES, FUTURE RESULTS OF
OPERATIONS (OR ANY COMPONENT THEREOF), FUTURE CASH FLOWS OR FUTURE FINANCIAL
CONDITION (OR ANY COMPONENT THEREOF) OF THE COMPANY, ITS SUBSIDIARIES AND THE
PURCHASED ASSETS OR THE FUTURE BUSINESS AND OPERATIONS OF THE COMPANY, ITS
SUBSIDIARIES AND THE PURCHASED ASSETS.
B. Representations and Warranties Relating to Seller. Seller hereby makes
the following representations and warranties to Buyer as of the date hereof:
SECTION 3.19. Existence of Seller; Authorization. Seller is a corporation
duly organized and validly existing under the laws of the State of Delaware. The
execution, delivery and performance by Seller of this Agreement and the
consummation by Seller of the transactions contemplated hereby are within
Seller's corporate powers and have been duly authorized by all necessary
corporate action.
SECTION 3.20. Valid and Binding Agreement. This Agreement constitutes a
valid and binding agreement of Seller, enforceable against Seller in accordance
with its terms, except as (i) the enforceability hereof and thereof may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
SECTION 3.21. Non-contravention. The execution, delivery and performance
by Seller of this Agreement do not and will not (i) in the case of Seller,
contravene or conflict with its charter or bylaws or (ii) assuming compliance
with the matters referred to in Section 3.02, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to Seller.
SECTION 3.22. Ownership. Seller is and will be at the Closing the record
and beneficial owner of the Shares, free and clear of any Lien and free of any
other limitation or restriction (including any restriction on the right to vote,
sell or otherwise dispose of such Shares)(other than those created by this
Agreement and restrictions on sales of stock under applicable securities laws),
and will transfer and deliver to Buyer at the Closing good and valid title to
such Shares free and clear of any such Lien and free of any such limitation or
restriction.
SECTION 3.23. Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of Seller or the Company or the Subsidiaries who might be entitled to any
fee or commission from Buyer, the Company or any Subsidiary or any of their
respective Affiliates (other than Seller) in connection with the transactions
contemplated by this Agreement.
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ARTICLE 4
Representations and Warranties of Buyer
Subject to Section 12.01, Buyer hereby represents and warrants to Seller
as of the date hereof that:
SECTION 4.01. Organization, Existence and Authority. Buyer is a
corporation duly incorporated, validly existing and in good standing under the
laws of Colorado and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. Merger Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
Merger Sub has authorized capital stock consisting of 1,000 shares of common
stock, without par value per share ("Merger Sub Stock"), of which 1,000 shares
are outstanding.
SECTION 4.02. Corporate Authorization. The execution, delivery and
performance by Buyer and Merger Sub of this Agreement and the consummation by
Buyer and Merger Sub of the transactions contemplated hereby are within the
corporate powers of Buyer and Merger Sub and have been duly authorized by all
necessary corporate action on the part of Buyer and Merger Sub.
SECTION 4.03. Valid and Binding Agreement. This Agreement constitutes a
valid and binding agreement of Buyer and Merger Sub, enforceable against each of
them in accordance with its terms, except as (i) the enforceability hereof and
thereof may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
SECTION 4.04. Governmental Authorization. Except for those actions,
filings, consents or approval described on Schedule 4.04 ("Buyer's Required
Consents") and except for such governmental or tribal consents or approvals
customarily obtained after Closing, the execution, delivery and performance of
this Agreement by Buyer and Merger Sub require no action by or in respect of, or
filing with, any governmental body, agency, official or authority other than
compliance with any applicable requirements of the HSR Act.
SECTION 4.05. Non-contravention. The execution, delivery and performance
by Buyer and Merger Sub of this Agreement do not and will not (i) contravene or
conflict with the certificate of incorporation or bylaws of either Buyer or
Merger Sub or (ii) assuming compliance with the matters referred to in Section
4.04, contravene or conflict with any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to Buyer or
Merger Sub.
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SECTION 4.06. Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of Buyer or its Affiliates who might be entitled to any fee or commission
from Seller or any of its Affiliates in connection with the transactions
contemplated by this Agreement.
SECTION 4.07. Financing. Buyer has sufficient funds available to pay the
Purchase Price.
SECTION 4.08. Purchase for Investment. Buyer is acquiring the Company and
its Subsidiaries and the Purchased Assets for investment for its own account and
not with a view to, or for sale in connection with, any distribution of
securities thereof.
SECTION 4.09. Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of Buyer threatened against or affecting, Buyer or
Merger Sub before any court or arbitrator or any Governmental Agency which in
any manner challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
SECTION 4.10. Due Diligence. (a) Buyer is an informed and sophisticated
purchaser and is experienced in the evaluation and acquisition of companies such
as the Company and the Subsidiaries and of assets such as the Purchased Assets.
In making the decision to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer has relied solely on its own independent
investigation of the Company and the Subsidiaries and the Purchased Assets as of
this date and upon the representations and warranties and covenants in this
Agreement (as limited by Sections 3.18, 9.01, 12.01 and 12.04).
(b) Buyer acknowledges that Seller has made no representation or warranty
as to the prospects, financial or otherwise, of the Company or the Subsidiaries,
except as specifically provided in this Agreement, and that the Company and the
Subsidiaries and the Purchased Assets are to be sold pursuant to this Agreement
in an "AS IS" and "WHERE IS" condition. Buyer agrees to accept the Company and
the Subsidiaries and the Purchased Assets as they exist on the Closing Date
based upon its own inspection, examination and determination with respect
thereto as to all matters and without reliance upon any express or implied
representations or warranties of any nature made by or on behalf of or imputed
to Seller except as expressly set forth in this Agreement.
ARTICLE 5
Covenants of Seller
SECTION 5.01. Conduct of the Company. (a) Except for the Restructuring
Activities or as set forth on Schedule 5.01, from the date hereof until the
Closing Date, Seller shall cause the Company and the Subsidiaries to conduct
their business and, with respect to the Purchased
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Assets, shall cause the respective Purchased Asset Sellers to conduct their
business, in the ordinary course consistent with past practice and to use their
reasonable commercial efforts to preserve intact their business organizations
and relationships with third parties. Without limiting the generality of the
foregoing, from the date hereof until the Closing Date, other than with respect
to the Restructuring Activities, without the consent of Buyer, Seller will not
permit the Company or any Subsidiary or, with respect to any Purchased Asset,
such Affiliate of Seller that owns such Asset, to, and, with respect to clause
(x) below, shall not and shall not permit any of its Affiliates to:
(i) adopt or propose any change in its charter or bylaws (or
comparable organizational documents in the case of non-corporate
Subsidiaries);
(ii) fail to operate the Assets in accordance with good industry
practices and the Seller's existing operation and maintenance policies and
programs;
(iii) merge or consolidate with any other Person or acquire a
material amount of assets of any other Person except pursuant to existing
contracts or commitments;
(iv) declare or pay any dividends in respect of any Company
Securities;
(v) sell, lease, license or otherwise dispose of any assets or
property of the Company or any of its Subsidiaries, or any of the
Purchased Assets except (A) the sale of inventory in the ordinary course
of business consistent with past practice, (B) pursuant to those existing
contracts or commitments described on Schedule 5.01, or (C) the sale of
worn out, obsolete equipment or equipment not necessary in the ordinary
operations of the Business in the ordinary course of business consistent
with past practice; provided, however, that such sales described in clause
(C) above shall not exceed $250,000 in the aggregate without Buyer's prior
written consent;
(vi) enter into any Material Contract other than in the ordinary
course of business consistent with past practice;
(vii) take any action that could reasonably be expected to cause the
representations and warranties contained in Article 3 to be untrue, except
as otherwise may be required by law;
(viii) agree or commit to do any of the foregoing;
(ix) transact, establish or otherwise commit to any gas purchase,
gas sale, futures or derivative trade, hedge or other risk management
position which changes the net open position summarized on Schedule
5.01(a)(ix) hereto. Without limiting the foregoing, any consummated new or
renewed transactions that have a term extending beyond the Closing Date
shall take into consideration gross margin, operating expenses
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and credit exposure, consistent with the current business practices of
Seller and in no instances shall result in business with gross margin less
than operating/servicing costs. Also without limiting the foregoing, the
prior written approval of Buyer shall be required for any gas purchase,
gas sale, futures or derivative trade, hedge or other risk management
position which exceeds 7,300,000 MMBtu; or
(x) allocate any liability or obligation to the Company, any of its
Subsidiaries or to the Assumed Liabilities which is not consistent with
the allocation method used when allocating similar kinds of liabilities
and obligations in preparing the September 1998 Balance Sheet.
Notwithstanding the foregoing, to the extent that the obligations of Seller
contained in this Section 5.01 relate to the Non-Operated Assets, Seller shall
only be required in respect of such obligations to use reasonable commercial
efforts, it being acknowledged by the parties that Seller or its Affiliates may
not have control over the actions of the operators of such Non-Operated Assets.
(b) During the period from the date hereof until the Closing Date, Seller
shall and shall cause its Subsidiaries to, make capital expenditures in and in
respect of the Business consistent with Seller's 1998 and 1999 capital
expenditure budgets for the Business, copies of which have been provided to
Buyer. The Seller may notify Buyer of any capital expenditures that Seller is
considering making after the date hereof and which Seller is not obligated to
make pursuant to the first sentence of this Section 5.01(b), and request that
such capital expenditure, if made, be included as an adjustment to the Purchase
Price. Buyer will respond to Seller's request in a reasonable period of time. If
Buyer elects not to have such capital expenditure included as an adjustment to
the Purchase Price, Seller will have no obligation to make such capital
expenditure.
SECTION 5.02. Access to Information. From the date hereof until the
Closing Date, Seller will (i) give, and will cause the Company or the
Subsidiaries and, with respect to any Purchased Asset, the Purchased Asset
Seller, to give Buyer, its counsel, financial advisors, auditors and other
authorized representatives full access to the offices, properties, books and
records of the Company or the Subsidiaries and to the books and records of
Seller relating to the Company, the Subsidiaries or the Purchased Assets, (ii)
furnish, and will cause the Company or the Subsidiaries to furnish, to Buyer,
its counsel, financial advisors, auditors and other authorized representatives
such financial and operating data and other information in Seller's possession
which relates to the Company, the Subsidiaries or the Purchased Assets as such
Persons may reasonably request, and (iii) instruct the employees and counsel of
Seller or its Affiliates to cooperate with Buyer in its investigation of the
Company, the Subsidiaries or the Purchased Assets. Notwithstanding the
foregoing, Seller shall not be required to take any such actions to the extent
doing so would violate any legal constraints or obligations or would result in
the waiver of any attorney client privilege. All such access and information
obtained by Buyer and its authorized representatives shall be subject to the
terms and conditions of the letter agreement dated as of June 25, 1998 (the
"Letter Agreement") between Buyer and the Company.
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SECTION 5.03. Termination of Benefit Arrangements and Employee Plans. On
or prior to the Closing, and except for those Benefit Arrangements and Employee
Plan liabilities described on Schedule 5.03 which shall be assumed by or remain
an obligation of the Company following the Closing, Seller shall terminate or
amend, if necessary, all of its Benefit Arrangements and Employee Plans in such
a manner so that none of Buyer, the Company or any Subsidiary of the Company
shall have any liability or obligation with respect to any such Benefits
Arrangement or Employee Plan following the Closing.
SECTION 5.04. Restructuring Activities. Prior to Closing, Seller shall
implement the Restructuring Activities as described on Exhibit B hereto.
SECTION 5.05. Software. Seller will and will cause its Affiliates to,
before and, if necessary, after the Closing, pay all fees or take other actions
as may be necessary to assign the software programs identified on Schedule 5.05
hereto to the Company.
ARTICLE 6
Covenants of Buyer
SECTION 6.01. Access. On and after the Closing Date, Buyer will and will
cause the Company and the Subsidiaries and any of its other Affiliates to afford
to Seller and their agents reasonable access to the properties, books, records,
employees and auditors of the Company and its Subsidiaries or relating to the
Purchased Assets to the extent necessary to permit Seller to determine any
matter relating to their rights and obligations hereunder or to any period
ending on or before the Closing Date. Notwithstanding the foregoing, Buyer shall
not be required to take any such actions to the extent that doing so would
violate any legal constraints or obligations. Seller will hold, and will use its
reasonable commercial efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Company or any Subsidiary or the Purchased Assets provided to it pursuant to
this Section. Any reasonable direct costs for retrieval or reproduction of
records will be reimbursed by Seller.
SECTION 6.02. Employment; Benefit Plans. (a) Within 30 days after the date
of this Agreement, Seller shall provide Buyer with a list of (i) all employees
of the Company and its Subsidiaries and (ii) all employees of Seller or any of
its ERISA Affiliates (other than the Company and its Subsidiaries) who work in
the Business (collectively with respect to all such employees covered by clauses
(i) and (ii) above, the "Covered Employees"; and with respect to those employees
covered by clause (i) above, "Company Employees"), which list shall specify the
job description, if available, job title and compensation payable to each such
employee. Following the date of this Agreement and prior to the Closing, Buyer
shall be permitted to interview the Covered Employees who are not listed on
Schedule 6.02(a) hereto only for
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purposes of interviewing for employment and discussing with such Covered
Employees the terms and conditions under which Buyer would be willing to employ
such Covered Employees or have their employment with the Company or its
Subsidiaries continue following the Closing. At least 10 days prior to the
Closing, Buyer shall provide Seller with a list of the Covered Employees who are
to be offered employment with Buyer (or one of its Affiliates) or continued
employment with the Company or its Subsidiaries after the Closing and the terms
and conditions (including compensation and benefits) of such new or continued
employment. Seller shall, at or prior to Closing, cause the termination or
transfer of all Company Employees who were not designated by Buyer as being
offered continued employment or who did not accept prior to Closing any such
offer of continued employment so that such employees are not, on the Closing
Date, employees of the Company or any of its Subsidiaries, and Seller shall be
solely liable for any and all severance or similar benefits payable to any
Covered Employee who is terminated pursuant to this transaction prior to the
Closing or who does not elect prior to the Closing to continue his or her
employment with the Company or its Subsidiaries following the Closing on the
terms and conditions offered by Buyer. Following the Closing, all Covered
Employees who begin employment with Buyer (or one of its Affiliates) or continue
their employment with the Company or its Subsidiaries ("Retained Employees"),
shall, subject to Section 6.02(b), be employed on the terms and conditions
designated by Buyer in its initial offer to such employees as such terms and
conditions may be amended or modified from time to time.
(b) Notwithstanding the foregoing, Buyer agrees that Buyer shall provide
the following benefits to all Retained Employees:
(i) In the event that Buyer terminates a Retained Employee within
the first year after Closing under circumstances that would have entitled
the Retained Employee to a severance benefit under the severance plan
identified in Schedule 6.02(b)(i), Buyer will provide a severance payment
to such terminated Retained Employee which is at least equal to that which
would have been paid to such employee under the severance plan identified
in Schedule 6.02(b)(i); provided however, that Buyer shall not provide an
"Enhanced Severance Allowance" (as such term is defined in the plan
identified in Schedule 6.02(b)(i)) benefit unless such terminated Retained
Employee has executed a general release of claims against Seller and its
Affiliates and Buyer and its Affiliates in substantially the form attached
hereto as Exhibit F and such terminated Retained Employee has not effected
a valid revocation of such release;
(ii) Retained Employees will be credited by Buyer with all earned
but unused vacation time to which they would have been entitled under the
plan listed in Schedule 6.02(b)(ii) during the year in which Closing
occurs and thereafter, any service under such listed plans will be
included for purposes of determining a Retained Employee's vacation
benefit under any vacation benefit plan maintained by Buyer;
(iii) Buyer will provide a stay bonus to each Retained Employee
identified in Schedule 6.02(b)(iii) in the amount specified therein, if
the Retained Employee remains
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employed with Buyer until the earliest of (x) involuntary termination
other than for cause, (y) the 120th day following Closing or (z) May 1,
1999;
(iv) Buyer will provide a retention bonus to each Retained Employee
identified in Schedule 6.02(b)(iv) in the amount specified therein, if the
Retained Employee remains employed with Buyer until the earliest of (x)
involuntary termination other than for cause, (y) the 120th day following
Closing or (z) April 1, 1999;
(v) Buyer will provide a sign on bonus to each Retained Employee
identified in Schedule 6.02(b)(v) in the amount specified therein, if the
Retained Employee remains employed with Buyer on the date set forth on
Schedule 6.02(b)(v); and
(vi) Retained Employees will be immediately eligible to participate
in Buyer's employee benefit plans for similarly situated employees of
Buyer and its subsidiaries, including, without limitation, any and all
pension benefit, medical, dental, life insurance, severance plan
established after the date of this Agreement and short and long-term
disability benefit plans, with, to the maximum extent permitted by law,
full credit for all service with Seller or its Affiliates for benefit
vesting (but not benefit accrual) purposes; provided, however, that
employees who are eligible for the benefits described in Sections
6.02(b)(i), (iii), (iv) and (v) shall not be entitled to participate in
any severance benefit or similar plan of Buyer until such time as such
employee is no longer entitled to any such benefits from Seller (or its
Affiliates).
SECTION 6.03. Indemnification and Insurance. (a) Buyer agrees that all
rights to indemnification and exculpation existing in favor of directors,
officers, employees, fiduciaries and agents of the Company or the Subsidiaries
who continue as such following the Closing, as provided in their respective
charters or bylaws (or comparable organizational documents in the case of
non-corporate Subsidiaries) in effect as of the date hereof with respect to the
matters occurring prior to the Closing shall survive the Closing and shall
continue in full force and effect for a period of not less than the applicable
statute of limitations.
(b) Buyer shall provide each individual who served as a director or
officer of the Company or any of the Subsidiaries at anytime prior to the
Closing Date and who continues as such after the Closing with liability
insurance for a period of three years after the Closing Date no less favorable
in coverage and amount than is provided to similarly situated directors or
officers of Buyer.
SECTION 6.04. Dispositions of Certain Company Property. Except with
respect to the Marketing Contracts which will be governed by the terms thereof,
Buyer shall not and shall cause the Company and the Subsidiaries not to effect
or permit a Transfer of any portion of or interest having a value in excess of
$5,000,000 in any Gas Plant or Pipeline System used in the Business to perform
its obligations under any gas processing agreement or gas gathering agreement to
which Seller or an Affiliate of Seller is then a party, including without
limitation the
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Buyer's, the Company's or any Subsidiary's interest in such gas processing
agreement or gas gathering agreement to any Person unless such Person shall have
executed and delivered to Seller an agreement in form satisfactory to Seller
under which such Person shall have agreed to comply with the terms of this
Section 6.04 with respect to any further Transfer of such portion of or interest
in the Assets and either:
(a) such Person's long term senior unsecured debt is either rated at least
BBB by Standard and Poor's Rating Group and at least Baa2 by Moody's Investors
Service, Inc. if such Person is publicly held; or if such Person is not publicly
held, Standard and Poor's Rating Group or Moody's Investors Service, Inc.
confirms that such Person's long term senior unsecured debt is of at least
comparable quality; or
(b) such Person has a book net worth (as shown in such Person's most
recent audited financial statement) of at least $300,000,000; or
(c) such Person is an Affiliate of Buyer so long as Buyer guarantees the
performance by such Affiliate any affected gas processing agreement or gas
gathering agreement to which Seller or an Affiliate of Seller is then a party;
or
(d) Seller shall have given its prior written consent to such Transfer,
which consent shall not be unreasonably withheld taking into account (i) the
financial capabilities of such Person taking into account the nature of the
Assets, (ii) the reputation and character of such Person, and (iii) the ability
of such Person to perform its obligations to Seller and its Affiliates in a
manner similar to Buyer.
SECTION 6.05. Use of Names; Removal. Buyer acknowledges that following the
Closing, neither it nor the Company and the Subsidiaries nor any of its other
Affiliates will be entitled to use the names "Union Pacific", "Union Pacific
Resources", "UPR" or "UP" and any variations and derivations thereof, including
any logo, trademark or design containing such name (the "Prohibited Names and
Marks"). Accordingly, promptly following the Closing, Buyer shall (i) cause each
of the Company and the Subsidiaries and the Purchased Assets Buyer (as
appropriate) to change its legal name to remove therefrom the name "Union
Pacific", "Union Pacific Resources", "UPR" or "UP" or any variations and
derivations thereof and (ii) cause the destruction, disposal and/or replacement
of stationery, business cards and similar assets of Company and the Subsidiaries
so to avoid the use of the Prohibited Names and Marks. In addition, as soon as
reasonably practicable, but in any event within six months following the
Closing, Buyer shall cause to be removed the Prohibited Names and Marks from all
of the assets of the Company and the Subsidiaries and the Purchased Assets, and
will not thereafter make any use whatsoever of such names, marks, and logos.
Buyer shall indemnify Seller for any Damages as a result of the failure by Buyer
to cause the removal of such names or marks after the Closing or any other
violation of this Section 6.05.
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SECTION 6.06. Guarantees. Schedule 6.06 identifies each financial or
performance guarantee by Seller, any of its Affiliates (other than the Company
or any of the Subsidiaries) or any other party of any obligations of the Company
or any of the Subsidiaries or in respect of the Purchased Assets (the
"Guarantees"). Beginning on the date that is 90 days after the Closing Date,
Seller and its Affiliates shall be entitled to terminate any such Guarantees.
Buyer agrees to indemnify, defend and hold harmless Seller (and its Affiliates),
and their respective directors, officers, employees, agents and representatives,
from and against any and all losses, costs, damages, obligations, claims,
liabilities, expenses and causes of action relating to, resulting from, or
arising out of, any Guarantee to the extent any such losses, costs, damages,
obligations, claims, liabilities, expenses and causes of action relate to,
result from, or arise out of the Assets, the Business or the Company or any of
its Subsidiaries.
SECTION 6.07. Non-Solicitation of Key Employees. Schedule 6.07 identifies
certain key employees of Seller and its Affiliates (each an "Identified
Employee"). Until the second anniversary of the Closing, Buyer shall not and
shall cause its Affiliates not to, directly or indirectly, hire, solicit or
recruit any Identified Employee, or attempt to persuade any Identified Employee
to terminate his or her employment with Seller (or any of its Affiliates). Buyer
acknowledges that (i) the foregoing covenant is reasonable and necessary to
protect the legitimate business interests of Seller (and its Affiliates), (ii)
any violation of this Section 6.07 will result in irreparable injury that
damages at law would not be reasonable or adequate compensation, and (iii)
Seller shall be entitled to have the foregoing covenant enforced by Seller (and
its Affiliates) by, without limitation, injunctions and restraining orders.
ARTICLE 7
Covenants of Buyer and Seller
SECTION 7.01. Confidentiality. Notwithstanding anything herein to the
contrary, Seller and Buyer agree that prior to the Closing Date and after any
termination of this Agreement, that certain Letter Agreement shall remain in
full force and effect in accordance with its terms.
SECTION 7.02. Reasonable Commercial Efforts. Subject to the terms and
conditions of this Agreement, Buyer and Seller will use reasonable commercial
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. Seller and Buyer
agree, prior to and after the Closing, to, and to cause the Company or the
Subsidiaries to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be necessary
or desirable in order to consummate expeditiously the transactions contemplated
by this Agreement. The Parties acknowledge that the Restructuring Activities
involve the transfer of a large number of assets, the reorganization and
movement of a number of companies and the division of assets among Seller, the
Company and its Subsidiaries and the other Affiliates of Seller. The Parties
agree to take any necessary actions before or after
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the Closing, including without limitation the transfer, conveyance, retransfer
or reconveyance of assets to accomplish, no more or no less, the Restructuring
Activities. To the extent that any assets of the Business which would be
Purchased Assets or assets of the Company or any of its Subsidiaries following
the completion of Restructuring Activities are retained by Seller or any of its
Affiliates after the Closing solely because the transfer of such asset requires
the consent of any third party which has not been obtained, (i) to the maximum
extent permitted by law, the Seller or such Affiliate shall hold such asset for
the benefit of Buyer, and take such reasonable actions with respect thereto as
directed by Buyer, the Company and its Subsidiaries, and (ii) at the request of
Buyer, Seller shall, and shall cause such Affiliate to, continue, following the
Closing, to use reasonable commercial efforts, to obtain, at the sole cost and
expense of Buyer, any required consents to such transfer, and, upon obtaining
such consents shall promptly transfer all of its right, title and interest in
and to such assets to Buyer or the Affiliate of Buyer designated by Buyer.
SECTION 7.03. Certain Filings. Seller and Buyer shall cooperate with one
another (i) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any Material Contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (ii) in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.
Seller and Buyer agree to file as promptly as practicable any information and
documents required to be filed under the HSR Act and to request early
termination in connection such filings.
SECTION 7.04. Public Announcements. Until the eleventh day following
either the Closing or the termination of this Agreement, neither Seller nor
Buyer (or their respective Affiliates) will issue any press release with respect
to this Agreement or the transactions contemplated hereby unless it has obtained
the prior written consent of the other party hereto, which consent shall not be
unreasonably withheld; provided, however, that either party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing party will use its best efforts to advise the other party
hereto prior to making such disclosure).
SECTION 7.05. Process Safety Management. Buyer recognizes and acknowledges
that compliance with the Occupational Safety and Health Administration's Process
Safety Management with respect to the Assets is an ongoing process. Buyer agrees
to assume any and all compliance obligations (including the identification,
evaluation and remediation of covered processes) associated with Process Safety
Management as of the Closing Date and shall not be entitled to claim the fact
that Process Safety Management is not complete or that additional cost will be
required to complete Process Safety Management compliance as a Title Defect,
Environmental Condition, or, without in any way limiting its ability to seek
indemnification under Article 12 for a breach of the representations and
warranties contained in Section 3.16 hereof, breach of Seller's representations
and warranties or breach of any of Seller's other obligations under this
Agreement. Buyer (on behalf of itself, its officers, agents, employees,
Affiliates,
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successors and assigns) irrevocably waives such claims. In conducting the duties
and obligations contained in this Section 7.05, Buyer shall comply with all
applicable laws.
SECTION 7.06. Asbestos and NORM. Buyer acknowledges that the Assets may
currently or have in the past contained asbestos or naturally occurring
radioactive materials ("NORM") and that special procedures may be required for
the assessment, remediation, removal, transportation or disposal of such
asbestos and NORM. Notwithstanding anything contained in this Agreement to the
contrary, Buyer agrees to accept full responsibility for and shall pay all costs
and expenses associated with the assessment, remediation, removal,
transportation and disposal of the asbestos or NORM associated with the Assets,
and Buyer shall not be entitled to claim the fact that the assessment,
remediation, removal, transportation or disposal of the asbestos or NORM is not
complete or that additional cost will be required to complete the assessment,
remediation, removal, transportation or disposal of the asbestos or NORM as a
Title Defect, Environmental Condition, breach of Seller's representations and
warranties or breach of any of Seller's other obligations under this Agreement,
and Buyer (on behalf of itself, its officers, agents, employees, Affiliates,
successors and assigns) irrevocably waives such claims. In conducting the duties
and obligations contained in this Section 7.06, Buyer shall comply with all
applicable laws.
SECTION 7.07. Year 2000 Compliance. Buyer recognizes and acknowledges that
certain of the Assets (including, but not limited to, information systems and
technology, commercial and noncommercial hardware and software, firmware,
mechanical or electrical products, embedded systems, or any other
electro-mechanical or processor-based system, whether as part of a desktop
system, office system, building system, plant system, field system or otherwise)
and the products and services provided by vendors, suppliers and other third
parties may be subject to Year 2000 Problems and that efforts to alleviate, or
avoid adverse consequences of, Year 2000 Problems ("Year 2000 Efforts") are an
ongoing process. Buyer agrees to assume any and all Year 2000 Efforts as of the
Closing Date and shall not be entitled to claim as a Title Defect, Environmental
Condition, breach of Seller's representations and warranties or breach of any of
Seller's other obligations under this Agreement (i) the fact that Year 2000
Efforts are not adequate, appropriate, reasonable or complete, (ii) that
additional cost will be required to complete Year 2000 Efforts, or (iii) the
existence of Year 2000 Problems. Buyer (on behalf of itself, its officers,
agents, employees, Affiliates, insurers, successors and assigns) irrevocably
waives such claims.
"Year 2000 Problems" includes, without limitation, (i) failures to
correctly recognize, store and process (including, without limitation,
calculating, comparing, valuing, recording, presenting, validating and
sequencing) date and date-related data without error, malfunction, operation
problem or usage problem before, during and after the twentieth and twenty-first
centuries; (ii) failures to correctly treat the Year 2000 as a leap year; (iii)
any error, malfunction, operation problem or usage problem in connection with
the date 9/9/99; (iv) clock overflow problems associated with the Global
Positioning System, including, without limitation, the antennae and receivers
processors associated therewith; and (v) any error, malfunction, operation
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problem or usage problem in processing and reporting any data denominated in the
Euro, including, without limitation, receiving, recognizing, using and
processing both national currency units ("NCU's") and Euro units (and permit or
performing conversions from NCU's to Euro units and vice-versa) before, during
and after January 1, 1999.
SECTION 7.08. Litigation Matters. (a) Prior to or at Closing, the Company
and the Subsidiaries will assign, provide and deliver to Seller (or its nominee)
(i) the benefit of all rights, titles and interests of the Company (or any
Subsidiary) in and to the litigation matters described on Schedule 7.08(a),
together with and including any and all causes of action, defenses,
counterclaims, cross-claims and other claims, rights or remedies which have been
brought or asserted or that could have been brought or asserted by or against
the Company (or any Subsidiary) in connection with such matters (the "Retained
Litigation") and (ii) the benefit of and access to all petitions, pleadings,
exhibits, evidence, court filings and orders, briefs, legal research, attorney
or legal assistant work product, books, files, records and other data and
information in whatever form or medium (or legible copies thereof which are
admissible in evidence in the Retained Litigation) of the Company (or any
Subsidiary) which relate to the Retained Litigation or the rights, titles and
interests assigned under clause (i) above.
(b) Following the Closing, Buyer shall and shall cause the Company and the
Subsidiaries to (i) take all actions reasonably requested by Seller or its
nominee in connection with the defense, appeal, retrial, assertion, recovery or
other pursuit of or under the Retained Litigation and the aforesaid rights,
titles and interests beneficially assigned by the Company or any of the
Subsidiaries to Seller or its nominee, (ii) expressly consent to and waive any
conflict regarding the representation of Seller (or its nominee) in connection
with the Retained Litigation by any lawyer or law firm which has represented or
continues to represent the Company (or any Subsidiary) in connection with the
Retained Litigation and (iii) otherwise cooperate fully with and assist Seller
(or its nominee) in connection with all actions and matters undertaken by Seller
(or its nominee) relating to the Retained Litigation, including without
limitation by providing access to records and employees of Buyer and the Company
and the Subsidiaries.
(c) Following the Closing, Seller shall indemnify Buyer and the Company
and the Subsidiaries against any Damages arising out of or relating to the
Retained Litigation; provided however, that Buyer may elect, at its own cost and
expense, to participate in, but not control, a defense or settlement in
connection with the Retained Litigation.
(d) Prior to or at Closing, Seller shall, and shall cause its Affiliates
to, assign, provide and deliver to Company (or its nominee) (i) the benefit of
all rights, titles and interests of Seller (and its Affiliates) in and to the
litigation matters described on Schedule 7.08(d), together with and including
any and all causes of action, defenses, counterclaims, cross-claims and other
claims, rights or remedies which have been brought or asserted or that could
have been brought or asserted by or against Seller (or its Affiliates) in
connection with such matters (the "Assumed Litigation") and (ii) the benefit of
and access to all petitions, pleadings, exhibits, evidence, court filings and
orders, briefs, legal research, attorney or legal assistant work product, books,
files,
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records and other data and information in whatever form or medium (or legible
copies thereof which are admissible in evidence in the Assumed Litigation) of
Seller (or any of its Affiliates) which relate to the Assumed Litigation or the
rights, titles and interests assigned under clause (i) above.
(e) Following the Closing, Seller shall, and shall cause its Affiliates
to, (i) take all actions reasonably requested by the Company or its nominee in
connection with the defense, appeal, retrial, assertion, recovery or other
pursuit of or under the Assumed Litigation and the aforesaid rights, titles and
interests beneficially assigned by Seller (or any of its Affiliates) to the
Company or its nominee, (ii) expressly consent to and waive any conflict
regarding the representation of the Company (or its nominee) in connection with
the Assumed Litigation by any lawyer or law firm which has represented or
continues to represent Seller (or any of its Affiliates) in connection with the
Assumed Litigation and (iii) otherwise cooperate fully with and assist the
Company (or its nominee) in connection with all actions and matters undertaken
by the Company (or its nominee) relating to the Assumed Litigation, including
without limitation by providing access to records and employees of Seller and
its Affiliates.
(f) Following the Closing, Buyer shall indemnify Seller (and its
Affiliates) against any Damages arising out of or relating to the Assumed
Litigation; provided however, that Seller may elect, at its own cost and
expense, to participate in, but not control, a defense or settlement in
connection with the Assumed Litigation.
(g) The Company and its Subsidiaries, Seller and Buyer believe and
acknowledge that many of the claims in the Retained Litigation and Assumed
Litigation are based on a misunderstanding of the facts by the plaintiffs,
represent attempts to change the law rather than to apply existing law, are
overreaching or overstated, or are completely frivolous or without merit.
Nevertheless, because of the substantial costs of defending these cases, and in
order to ensure their economic expectations, Buyer requires that it be
indemnified for the Retained Litigation and Seller requires that it be
indemnified for the Assumed Litigation in order to go forward with the
transactions contemplated by this Agreement.
SECTION 7.09. Transition Services. Prior to the Closing, Buyer and Seller
will agree upon the transition services, if any, to be provided by Seller (or
one or more of its Affiliates) to Buyer (or one or more of its Affiliates) after
the Closing, subject to entering into a mutually acceptable transition services
agreement.
SECTION 7.10. Amendment of Schedules. As of the Closing Date, all
Schedules hereto shall be deemed amended and supplemented to include reference
to any matter (a) relating to the Company, the Subsidiaries of the Company or
the Assets which arises or occurs after the date hereof and does not result from
a breach by Seller of its covenants contained in Section 5.01 and which would
not result in the representations contained in Section 3.06 not being true and
correct at the Closing; or (b) which results in an adjustment to the Purchase
Price pursuant to Sections 2.04, 5.01(b), 8.02(c) or 8.02(d).
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ARTICLE 8
Environmental Matters
SECTION 8.01. Environmental Review and Audit. (a) Subject to the
restrictions contained in this Agreement and obtaining any required consent of
any third Person, Buyer may, at its option, cause an environmental audit,
including Phase I and Phase II environmental assessments, ("Audit") of the
Assets to be conducted by one or more of SEACOR, CH2M Hill and Harding Lawson
Associates (collectively referred to herein as "Buyer's Consultant"). Subject to
obtaining any required consent of any third Person, Seller shall permit Buyer
and Buyer's Consultant reasonable access to the Assets for the purpose of
allowing Buyer and Buyer's Consultant to conduct the Audit at Buyer's sole risk,
cost and expense. Prior to conducting the Audit, Buyer shall furnish Seller with
a proposed scope of the work for the Audit including a description of the
activities to be conducted. Buyer shall not commence any of such proposed
activities unless and until such activities have been approved in writing by
Seller, which approval shall not be unreasonably withheld. Seller shall have the
right to be present during any inspection of the Assets and shall have the
right, at its option and expense, to split samples with Buyer. Buyer shall
provide Seller's counsel with copies of any audit report prepared and analytical
test results received by Buyer or Buyer's Consultant promptly following Buyer's
or Buyer's Consultant's preparation or receipt of same. In addition, Buyer will
inform Seller promptly if it discovers an Environmental Defect during the course
of its due diligence.
(b) After completing any Audit activities on the Assets, Buyer shall, at
its sole cost and expense, restore the Assets to their condition prior to the
Audit activities, unless Seller requests otherwise. Buyer shall maintain and
shall cause its officers, employees, representatives, consultants (including
Buyer's Consultant) and advisors to maintain all information obtained by Buyer
and Buyer's Consultant pursuant to any Audit as strictly confidential and shall
not disclose same to any third Person without the prior written consent of
Seller, which consent shall not be unreasonably withheld or delayed. Buyer does
hereby indemnify and hold harmless Seller from and against any and all Damages
arising from Buyer's and Buyer's Consultant's environmental inspection of the
Assets, excluding, however, those Damages arising from any Environmental Defects
ascertained thereby.
SECTION 8.02. Environmental Defects.
(a) Buyer's Assertions of Environmental Defects. Prior to the expiration
of the Examination Period, Buyer may notify Seller in writing of any matters
which, in Buyer's Consultant's reasonable opinion, constitute Environmental
Defects. Buyer's written notice (the "Environmental Notice") must include (i) a
specific description of each Asset (or portion thereof) that is affected by the
alleged Environmental Defect, (ii) a description of the alleged Environmental
Defect and the facts and circumstances giving rise thereto, including all
evidence compiled by Buyer which relates to or is associated with the existence
of such alleged
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Environmental Defect, and (iii) a calculation of the Remediation Amount
(itemized in reasonable detail) that Buyer's Consultant asserts is attributable
to such alleged Environmental Defect. Buyer's Consultant's calculation of the
Remediation Amount must describe the Remediation proposed for the Environmental
Condition that gives rise to the asserted Environmental Defect, and identify all
assumptions used by the Buyer's Consultant in calculating the Remediation
Amount, including the standards the Buyer's Consultant asserts must be met to
comply with Environmental Laws.
(b) Seller's Election. If Buyer timely notifies Seller in writing of an
Environmental Defect as required by Section 8.02(a), Seller, at its option,
shall elect, on or before twenty-eight days after the expiration of the
Examination Period, one of the following options with respect to such
Environmental Defect:
(i) to reduce the Purchase Price by the Remediation Amount set forth
in the Environmental Notice with respect to such Environmental Defect
(taking into account any application of the Environmental Defect
Deductible which Seller elects to make with respect thereto);
(ii) to dispute the accuracy of the Remediation Amount set forth in
the Environmental Notice with respect to such Environmental Defect; or
(iii) to dispute that Buyer has identified an Environmental Defect.
(c) Reduction in Purchase Price. If Seller elects the option set forth in
Section 8.02(b)(i), then the Purchase Price shall be adjusted downward by the
amount (the "Environmental Defect Amount"), if any, by which the Remediation
Amount with respect to such Environmental Defect exceeds that part, if any, of
an amount equal to $40,000,000 (the "Environmental Defect Deductible").
Notwithstanding the foregoing, if any such Remediation Amount is reimbursable
pursuant to any existing (i) insurance policy in favor of the Company or the
Subsidiaries or (ii) contractual indemnification obligation in favor of the
Company or the Subsidiaries, prior to the calculation of the Remediation Amount,
such Remediation Amount shall be reduced by the amount that can reasonably be
expected to be collected from the insurer or the indemnifying party, as the case
may be, on account thereof. Any downward Purchase Price adjustment made by
Seller pursuant to this Section 8.02(c), shall be appropriately allocated by
Seller between the Merger Price and the Purchase Assets Purchase Price depending
on the identity of the Asset(s) affected by the Environmental Defect(s) with
respect to which Seller has elected the option set forth in Section 8.02(b)(i).
(d) Environmental Disputes. If Seller elects the option set forth in
Sections 8.02(b)(ii) or (iii) above with respect to an alleged Environmental
Defect, any such dispute (an "Environmental Dispute") shall be settled pursuant
to this Section 8.02(d) and, except as provided in Section 8.04, shall not
prevent or delay Closing. At Closing, the Purchase Price shall not be adjusted
on account of, and no effect shall be given to, such Environmental
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Dispute. On or prior to the sixtieth (60th) consecutive calendar day following
the Closing Date (the "Deferred Matters Date"), Seller and Buyer shall attempt
in good faith to reach agreement on and to resolve by written agreement all the
Environmental Disputes. Any Environmental Dispute which is not so resolved on or
before the Deferred Matters Date may be submitted by either party to the
Environmental Arbitrator (defined below) for final and binding arbitration in
accordance with the Arbitration Procedures. Within 15 days following Seller's
receipt of the written decision of the Environmental Arbitrator (i) that an
alleged Environmental Defect which is the subject of an Environmental Dispute
exists and/or (ii) concerning the appropriate Remediation Amount applicable to
an Environmental Defect which is the subject of an Environmental Dispute (which
amount shall not exceed the amount set forth with respect to such Environmental
Defect in the Environmental Notice), Seller shall be obligated to pay to Buyer
an amount equal to the amount by which the Purchase Price would have been
reduced at Closing on account of such Environmental Defect if same had not been
the subject of an Environmental Dispute and if no other Environmental Disputes
had existed at Closing. Any amounts owing by Seller to Buyer pursuant to this
Section 8.02(d) shall be promptly paid by Seller to Buyer, together with
interest thereon from and including the Closing Date to, but excluding, the date
of payment at LIBOR.
SECTION 8.03. Waiver by Buyer. Buyer and Seller agree that (i) any and all
matters that might otherwise constitute Environmental Defects but that are not
specifically raised in writing by Buyer prior to the expiration of the
Examination Period shall be deemed to have been waived by Buyer and (ii) the
foregoing provisions constitute the sole remedies of Buyer with respect to any
Environmental Defects.
SECTION 8.04. Termination.
(a) Seller may terminate this Agreement if the sum of the Remediation
Amounts set forth in the Environmental Notice with respect to each of the
alleged Environmental Defects described therein exceeds an amount equal to 10%
of the Base Purchase Price.
(b) Buyer may terminate this Agreement if the sum of the Remediation
Amounts set forth in the Environmental Notice with respect to each of the
alleged Environmental Defects described therein exceeds an amount equal to 10%
of the Base Purchase Price.
SECTION 8.05. Environmental Arbitrator. Buyer and Seller shall confer and
attempt to agree upon the Person who will serve as the Environmental Arbitrator
hereunder. If Buyer and Seller are unable to agree upon such Person within
thirty days following the date of this Agreement, then the Environmental
Arbitrator shall be selected pursuant to the provisions of Section 6 of the
Arbitration Procedures that relate to the selection of a replacement arbitrator.
The Person selected pursuant to this Section 8.05 shall be the "Environmental
Arbitrator" hereunder.
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ARTICLE 9
Title Matters
SECTION 9.01. Disclaimer of Warranties. Seller makes no warranty or
representation, express, implied, statutory or otherwise, with respect to the
Assets, including without limitation the Gas Plant Interests or Pipeline System
Interests, and Buyer hereby acknowledges and agrees that Buyer's sole remedy for
any defect of title, including any Title Defect with respect to the Assets,
including without limitation the Gas Plant Interests or Pipeline System
Interests, shall be pursuant to the procedures set forth in this Article 9.
Furthermore, Seller makes no warranty or representation, express, implied,
statutory or otherwise, with respect to the accuracy, completeness or
reliability of the books, records, documents and other information now,
heretofore or hereafter made available to Buyer in connection with the Assets
(including, without limitation, any description of a Gas Plant Interest or the
Pipeline System Interest, pricing assumptions, volume forecasts, potential for
natural gas gathering, transportation or processing or any other matters
contained in or related to any other material furnished to Buyer by Seller or by
Seller's agents or representatives).
SECTION 9.02. Buyer's Title Review.
(a) Buyer's Assertion of Title Defects. On or before the expiration of the
Examination Period, Buyer shall notify Seller in writing of any matters which,
in Buyer's reasonable opinion, constitute Title Defects and which Buyer intends
to assert as a Title Defect with respect to any portion of a Gas Plant Interest
or a Pipeline System Interest pursuant to this Article 9; provided, however,
that Buyer agrees to give Seller written notice of each Title Defect as soon as
is reasonably practical following Buyer's discovery of such Title Defect. For
all purposes of this Agreement, Buyer shall be deemed to have waived any Title
Defect which Buyer fails to assert as a Title Defect by written notice given to
Seller on or before the expiration of the Examination Period or in writing
pursuant to the proviso contained in Section 10.03(vi) of this Agreement. To be
effective, Buyer's written notice of a Title Defect must include (i) a brief
description of the matter constituting the asserted Title Defect, (ii) the
claimed Title Defect Amount attributable thereto, and (iii) supporting documents
reasonably necessary for Seller (as well as any title attorney or examiner hired
by Seller) to verify the existence of such asserted Title Defect and the Title
Defect Amount attributable thereto.
(b) Purchase Price Allocations. A portion of the Purchase Price has been
allocated to the various Gas Plants Interests and Pipeline System Interests in
the manner and in accordance with the respective values set forth in Schedule
9.02(b). If any adjustment is made to the Purchase Price pursuant to Section
9.02(e), a corresponding adjustment shall be made to the portion of the Purchase
Price allocated to the affected Gas Plant Interest or Pipeline System Interest
in Schedule 9.02(b).
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(c) Seller's Opportunity to Cure. Seller shall have until the twenty-third
day following the expiration of the Examination Period (the "Title Cure
Deadline"), at its cost and expense, if it so elects but without obligation, to
cure all or a portion of any such asserted Title Defects. On or before three
days prior to Closing, Buyer shall advise Seller in writing of which Title
Defects asserted by Buyer are agreed by Buyer to be cured based upon Seller's
title curative efforts. Any asserted Title Defects which are waived by Buyer or
cured by Seller within such time shall be deemed "Permitted Encumbrances"
hereunder. If Seller within such time fails to cure any Title Defect of which
Buyer has given timely written notice as required above and Buyer has not and
does not waive same on or before the Title Cure Deadline, the Gas Plant Interest
or Pipeline System Interest affected by such uncured and unwaived Title Defect
shall be a "Title Defect Property". Nothing in this Section 9.02(c) shall limit
Seller's right to cure a Title Defect after the Title Cure Deadline as provided
in this Article 9 or to dispute the existence of a Title Defect or any Title
Defect Amount asserted by Buyer.
(d) Title Defect Amount. "Title Defect Amount" shall mean, with respect to
a Title Defect Property, the amount by which the value of such Title Defect
Property is impaired as a result of the existence of one or more Title Defects,
which amount shall be determined as follows and subject to the following
conditions:
(1) If the Title Defect results from the Company or its applicable
Affiliate having a lesser Gas Plant Interest or Pipeline System Interest
in such Title Defect Property than the Gas Plant Interest or Pipeline
System Interest specified therefor in the Property Schedule, the Title
Defect Amount shall be equal to the product obtained by multiplying the
amount of the Purchase Price allocated in Schedule 9.02(b) to the Title
Defect Property by a fraction, the numerator of which is the reduction in
the Gas Plant Interest or Pipeline System Interest and the denominator of
which is the Gas Plant Interest or Pipeline System Interest specified for
such Title Defect Property in the Property Schedule.
(2) If the Title Defect results from the existence of a lien, the
Title Defect Amount shall be an amount sufficient to discharge such lien.
(3) If the Title Defect results from the failure of the Company or
its applicable Affiliate to have title to a Right-of-Way, the Title Defect
Amount shall be based on the estimated cost to eliminate the Title Defect.
This estimated cost will be based on the cost of acquiring the property
right to use the existing rights in question, unless credible evidence
indicates that this remedy is not reasonably likely to succeed. Right of
condemnation will be taken into consideration in this regard. The cost of
acquiring property rights will be based on prevailing (1998) costs of such
rights in the applicable geographic area, but will take into account the
specific nature and location of the property involved.
(4) If a Title Defect is not effective or does not affect a Title
Defect Property throughout the entire useful life of operation of such
Title Defect
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Property, such fact shall be taken into account in determining the Title
Defect Amount.
(5) The Title Defect Amount with respect to a Title Defect Property
shall be determined without duplication of any costs or losses included in
another Title Defect Amount hereunder. For example, but without
limitation, if a lien affects more than one Title Defect Property or the
curative work with respect to one Title Defect results (or is reasonably
expected to result) in the curing of any other Title Defect affecting the
same or another Title Defect Property, the amount necessary to discharge
such lien or the cost and expense of such curative work shall only be
included in the Title Defect Amount for one Title Defect Property and only
once in such Title Defect Amount.
(6) The Title Defect Amount attributable to a Title Defect Property
or any portion thereof shall not exceed the amount of the Purchase Price
allocated to the Title Defect Property in Schedule 9.02(b). For example,
but without limitation, if the Company or its applicable Affiliate does
not own 50 percent of the Gas Plant Interest or Pipeline System Interest
specified in the Property Schedule for a Title Defect Property and such
unowned 50 percent interest is also burdened by a lien, the Title Defect
Amount for such Title Defect Property shall not exceed the portion of the
Purchase Price allocable to such 50 percent Gas Plant Interest or Pipeline
System Interest notwithstanding that it may be affected by multiple Title
Defects.
(e) Title Defect Remedies. Subject to Section 9.04, the sole and exclusive
remedies to which Buyer shall be entitled with respect to the existence of any
Title Defect are set forth in this Section 9.02(e).
(1) With respect to each Title Defect asserted by Buyer pursuant
to and in accordance with the requirements of this Article 9
which have not theretofore been cured by Seller on or before
the Title Cure Deadline, on or before two days prior to the
Closing, Seller shall have the option to settle one or more of
such Title Defects by electing one or more of the following
remedies with respect to each of the Title Defects it elects
to settle:
(i) reducing the Title Deductible Amount by the Title Defect
Amount with respect to the affected Title Defect
Property; provided that, the Title Deductible Amount may
not be reduced below zero; and/or
(ii) reducing the Purchase Price by the amount by which the
Title Defect Amount with respect to the affected Title
Defect Property
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exceeds the amount of any reduction in the Title
Deductible Amount which Seller elects with respect to
such Title Defect pursuant to clause (i) above. Any
reduction of the Purchase Price as a result of Seller's
election pursuant to this Section 9.02(e), shall be
appropriately allocated by Seller between the Merger
Price and the Purchase Assets Purchase Price depending
on the identity of Asset(s) affected by the Title
Defect(s) which Seller has elected to so settle.
(2) With respect to each Title Defect asserted by Buyer pursuant
to and in accordance with the requirements of this Article 9
which has not been cured by Seller on or before the Title Cure
Deadline and which has not been settled by Seller pursuant to
Section 9.02(e)(l), from and after the Closing Date Seller
shall, subject to Sections 9.02(e)(3), 9.02(e)(4) and 9.05,
indemnify Buyer for a period ending on the third anniversary
of the Closing Date from and against all Third Party Claims
(not to exceed in the aggregate the Title Defect Amount
attributable to the affected Title Defect Property) to the
extent resulting from or attributable to such Title Defect.
(3) With respect to each Title Defect asserted by Buyer pursuant
to and in accordance with the requirements of this Article 9
which is accepted by Seller after the Closing but on or before
the Deferred Title Matters Date in accordance with Section
9.05(a), Seller shall settle each such Title Defect by
electing one or more of the following remedies with respect
thereto:
(i) reducing the Title Deductible Amount by the Title Defect
Amount with respect to the affected Title Defect
Property; provided that, the Title Deductible Amount may
not be reduced below zero;
(ii) refunding to Buyer the amount by which the Title Defect
Amount with respect to the affected Title Defect
Property exceeds the amount of any reduction in the
Title Deductible Amount which Seller elects with respect
to such Title Defect pursuant to clause (i) above,
together with interest thereon from the Closing Date to
the date of payment at LIBOR; and/or
(iii) continuing to indemnify Buyer during the period expiring
on the third anniversary of the Closing Date from and
against all Third Party Claims (not to exceed in the
aggregate the Title Defect Amount attributable to the
affected Title Defect Property) to the extent resulting
from or attributable to such Title Defect; provided,
however, that the remedy set forth in this clause (iii)
shall not be
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available to Seller for Title Defects resulting from
matters described in Section 9.02(d)(1) and (2).
With respect to any Title Defect for which Seller elects the
remedy set forth in clause (i) or (ii) above, the
indemnification granted by Seller to Buyer pursuant to Section
9.02(e)(2) shall automatically terminate. Upon the request of
Seller, Buyer shall promptly provide Seller with written
confirmation of such termination.
(4) With respect to each Title Defect asserted by Buyer pursuant
to and in accordance with the requirements of this Article 9
which is resolved in accordance with Section 9.05(b), Seller
shall settle each such Title Defect by electing one or more of
the following remedies with respect thereto:
(i) reducing the Title Deductible Amount by the Title Defect
Amount with respect to the affected Title Defect
Property; provided that, the Title Deductible Amount may
not be reduced below zero;
(ii) refunding to Buyer the amount by which the Title Defect
Amount with respect to the affected Title Defect
Property exceeds the amount of any reduction in the
Title Deductible Amount which Seller elects with respect
to such Title Defect pursuant to clause (i) above,
together with interest thereon from the Closing Date to
the date of payment at LIBOR; and/or
(iii) continuing to indemnify Buyer during the period expiring
on the third anniversary of the Closing Date from and
against all Third Party Claims (not to exceed in the
aggregate the Title Defect Amount attributable to the
affected Title Defect Property as such Title Defect
Amount is determined by the Title Arbitrator if same was
the subject of arbitration) to the extent resulting from
or attributable to such Title Defect; provided, however,
that the remedy set forth in this clause (iii) shall not
be available to Seller for Title Defects resulting from
matters described in Section 9.02(d)(1)and (2).
With respect to any Title Defect for which Seller elects the
remedy set forth in clause (i) or (ii) above, the
indemnification granted by Seller to Buyer pursuant to Section
9.02(e)(2) shall automatically terminate. Upon the request of
Seller, Buyer shall promptly provide Seller with written
confirmation of such termination.
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Seller shall have the continuing right to attempt to cure any Title Defect for
which Seller has provided Buyer indemnification pursuant to this Section
9.02(e). Upon any such cure, the indemnification with respect to the Title
Defect which has been cured shall automatically terminate. Upon the request of
Seller, Buyer shall promptly provide Seller with written confirmation of such
termination. With respect to any Title Defect which is remedied by
indemnification pursuant to this Section 9.02(e), the procedure for and limits
of such indemnification shall be as provided in Sections 12.03(a) and 12.03(c).
SECTION 9.03. Determination of Title Defects. A portion of a Gas Plant
Interest or Pipeline System Interest shall be deemed to have a "Title Defect" if
the Company or its applicable Affiliate does not have Defensible Title thereto.
Notwithstanding any other provision in this Agreement to the contrary, the
following matters shall not be asserted as, and shall not constitute Title
Defects: (i) any title defect which does not result in a diminution in present
value of the Assets of more than $25,000; (ii) defects in the early chain of the
title consisting of the mere failure to recite marital status in a document or
omissions of successions of heirship proceedings, unless Buyer provides
affirmative evidence that such failure or omission results in another party's
superior claim of title to the relevant Gas Plant Interest, Pipeline System
Interest or portion thereof, (iii) defects arising out of lack of survey, (iv)
defects arising out of lack of corporate authorization, unless Buyer provides
affirmative evidence that such corporate action was not authorized and results
in another party's superior claim of title to the relevant Gas Plant Interest,
Pipeline System Interest or portion thereof, and (v) defects that have been
cured by possession under the applicable statutes of limitations or statutes for
prescription.
SECTION 9.04. No Duplication. Notwithstanding anything herein provided
to the contrary:
(a) If a Title Defect results from any matter which constitutes a breach
of any representation or warranty of Seller set forth in Article 3, then Buyer
may only assert Damages in respect of such Title Defect pursuant to this Article
9.
(b) Subject to the immediately following sentence, if a Title Defect
results from any matter which constitutes a breach of any representation or
warranty of Seller set forth in Article 3, only Damages which are other than in
respect of such Title Defect may be asserted by Buyer pursuant to other Articles
of this Agreement to the extent permitted thereby.
Notwithstanding anything in this Agreement to the contrary, but without limiting
any right Buyer may have to assert a Title Defect under this Article 9 with
respect to any Rights-of-Way, the failure of the Company or any Affiliate to
have title to a fee interest, surface lease interest, easement or right-of-way
included in a Gas Plant or Pipeline System (or the use of any such land without
such title) shall not give rise to or constitute a breach of any warranty or
representation by Seller in Article 3 or elsewhere in this Agreement on account
of trespass or a claim of trespass.
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SECTION 9.05. Deferred Claims and Disputes.
(a) On or prior to the 45th consecutive calendar day following the Closing
Date (the "Deferred Title Matters Date"), Seller and Buyer shall attempt in good
faith to reach agreement on the Title Defects and associated Title Defect
Amounts which were not settled by Seller pursuant to Section 9.02(e)(1) (the
"Deferred Title Matters") and, ultimately, to resolve by written agreement any
disputes regarding the Deferred Title Matters. Any Deferred Title Matters which
are resolved by Seller and Buyer on or before the Deferred Title Matters Date
shall be settled by Seller in the manner provided in Section 9.02(e)(3).
(b) Any Deferred Title Matters which are not so resolved on or before the
Deferred Title Matters Date may be submitted by either party to John S. Lowe,
Esq. (the "Title Arbitrator") for final and binding arbitration in accordance
with the Arbitration Procedures; provided, however, that the Seller may elect at
any time to resolve all disputes relating to any Deferred Title Matters by
agreeing to the existence of the Title Defect and Title Defect Amount asserted
by Buyer which gives rise to such Deferred Title Matters. The Title Arbitrator
shall not be entitled to adjust upward any Title Defect Amount asserted by
Buyer. After all Deferred Title Matters not resolved by the parties on or before
the Deferred Title Matters Date have been determined by written agreement of the
parties or the final and binding written decision of the Title Arbitrator
pursuant to this Section 9.05(b), the remedies provided in Section 9.02(e)(4)
shall apply. If the parties so agree or the Title Arbitrator so determines that
a Title Defect asserted by Buyer does not exist, the indemnification provided by
Seller to Buyer pursuant to Section 9.02(e)(2) shall automatically terminate.
Upon the request of Seller, Buyer shall promptly provide Seller with written
confirmation of such termination.
ARTICLE 10
Conditions to Closing
SECTION 10.01. Conditions to Obligations of Buyer and Seller. The
obligations of the parties hereto to consummate the Closing are subject to the
satisfaction of the following conditions:
(i) The waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act and any other material
waiting periods under applicable foreign laws (if any) shall have expired
or been terminated, and no action by the Department of Justice or Federal
Trade Commission or any foreign Governmental Entity challenging or seeking
to enjoin the consummation of the transactions contemplated hereby shall
have been instituted and be pending.
(ii) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal or regulatory
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restraint or prohibition shall have been issued and be in effect
restraining or prohibiting the consummation of the transactions
contemplated hereby nor shall any action have been taken or any statute,
rule, regulation or order have been enacted, entered or enforced or be
deemed applicable to the transactions contemplated hereby which makes the
consummation of the transactions contemplated hereby illegal or prevents
or prohibits consummation of the transactions contemplated hereby.
(iii) All Seller's Required Consents and Buyer's Required Consents
shall have been obtained and be in full force and effect.
SECTION 10.02. Conditions to Obligation of Buyer and Merger Sub. (a) The
obligations of Buyer and Merger Sub to consummate the Closing is subject to the
satisfaction or waiver of each of the following conditions:
(i) (A) The representations and warranties contained in Sections
3.01 through 3.10, 3.12 through 3.17 and 3.19 through 3.23 of this
Agreement and in the certificate (referenced in clause (B) below)
delivered by Seller or the Company pursuant hereto shall be true and
correct in all material respects at and as of the Closing Date, as if made
at and as of such date and (B) Buyer shall have received a certificate to
the foregoing effect from the Executive Vice President of Seller.
(ii) (A) Seller shall have performed in all material respects all of
its obligations hereunder required to be performed by it on or prior to
the Closing Date and (B) Buyer shall have received a certificate to the
foregoing effect from the Executive Vice President of Seller.
(iii) Buyer shall have received opinions of Morgan, Lewis & Bockius
LLP, counsel to Seller, and Joseph A. LaSala, Jr., Vice President and
General Counsel of Seller, dated the Closing Date, in form and substance
reasonably satisfactory to Buyer. In rendering such opinion such counsel
may rely upon certificates of public officers and, as to matters of fact,
upon certificates of officers of Seller or the Company copies of which
certificates shall be contemporaneously delivered to Buyer.
(iv) The Marketing Contracts shall have been executed and delivered
by the parties thereto.
(v) Buyer shall have received certification signed by Seller to the
effect that Seller is not a "foreign person" as defined in Section 1445 of
the Code.
(vi) The Restructuring Activities shall have been completed.
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(vii) In respect of the Purchased Assets, Seller (or one or more of
its Affiliates) shall have executed and delivered the Deed, Bill of Sale
and Assignment to Buyer or to the Purchased Assets Buyer designated by
Buyer substantially in the form of Exhibit E hereto.
(viii) Seller and the corporate parent of Seller shall have executed
and delivered the Bill of Sale to Fuels Acquisition Company substantially
in the form of Exhibit G hereto.
(ix) Seller, through its wholly-owned subsidiary, UPR Energy
Services, Inc., shall have entered into an International Swaps and
Derivatives Association Agreement and replacement "Price Risk Management
Contract" covering such transactions referenced in UPR Energy Services'
letter regarding Changes of Control of Union Pacific Fuels, Inc.: Impact
on Price Risk management Contract and Associated Transactions, with Duke
Energy Trading and Marketing, L.L.C., in substantially the form attached
hereto as Exhibit H.
(b) For purposes of this Section 10.02, the conditions set forth in
Sections 10.02(a)(i) and 10.02(a)(ii) will be deemed satisfied unless the
failure or failures of the representations and warranties contained in Sections
3.01 through 3.17 and 3.19 through 3.23 of this Agreement and in the certificate
(referenced in clause (B) of Section 10.02(a)(i)) delivered by Seller or the
Company pursuant hereto to be true and correct at and as of the Closing Date, as
if made at and as of such date, together with any failure or failures by Seller
to perform all of its obligations required to be performed by it hereunder on or
prior to the Closing Date will, or are reasonably likely to, result in an
adverse effect on the condition (financial or otherwise), business, assets or
results of operations of the Company and the Subsidiaries, or prior to the
completion of the Restructuring Activities, the Business, taken as a whole,
having a present value in excess of $50,000,000.
SECTION 10.03. Conditions to Obligation of Seller and the Company. The
obligation of Seller and the Company to consummate the Closing is subject to the
satisfaction or waiver of each of the following conditions:
(i) (A) The representations and warranties of Buyer contained in
this Agreement and in the certificate (referenced in clause (B) below)
delivered by Buyer pursuant hereto shall be true and correct in all
material respects at and as of the Closing Date, as if made at and as of
such date and (B) Seller shall have received a certificate to the
foregoing effect from the President of Buyer.
(ii) (A) Buyer shall have performed in all material respects all of
its obligations hereunder required to be performed by it on or prior to
the Closing Date and (B) Seller shall have received a certificate to the
foregoing effect from the President of Buyer.
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(iii) Seller shall have received an opinion of LeBoeuf, Lamb, Greene
& MacRae L.L.P., counsel to Buyer, dated the Closing Date, in form and
substance reasonably satisfactory to Seller. In rendering such opinion,
such counsel may rely upon certificates of public officers and, as to
matters of fact, upon certificates of officers of Buyer, copies of which
certificates shall be contemporaneously delivered to Seller.
(iv) Seller shall have received the Purchase Price.
(v) Seller shall have received all documents it may reasonably
request relating to the existence of Buyer and the authority of Buyer for
this Agreement, all in form and substance reasonably satisfactory to
Seller.
(vi) The aggregate asserted Title Defect Amounts with respect to all
asserted Title Defects that have not been cured or waived as of the
Closing Date shall not exceed $50,000,000; provided, however, if Seller
desires to terminate this Agreement on account of this condition not being
satisfied, Buyer may elect to waive in writing sufficient Title Defects so
that the Title Defect Amounts with respect to the remaining non-waived
Title Defects do not exceed $50,000,000.
(vii) Seller shall have received a certificate from Buyer stating
that to Buyer's knowledge, there are no facts, circumstances or
occurrences that would cause the conditions set forth in Sections
10.02(a)(i) and 10.02(a)(ii) (when read in connection with Section
10.02(b)) not to be satisfied; provided, however, if Seller desires to
terminate this Agreement on account of this condition not being satisfied,
Buyer may elect to waive in writing in whole or in part any failures of
the representations and warranties of Seller contained in Sections 3.01
through 3.17 and 3.19 through 3.23 of this Agreement and/or any failures
by Seller to perform any covenant or agreement in this Agreement so that
any such failures that are not so waived would not, by themselves, cause
the conditions set forth in Sections 10.02(a)(i) and 10.02(a)(ii) (when
read in connection with Section 10.02(b)) not to be satisfied.
ARTICLE 11
Taxes; Covenants
SECTION 11.01. Code Section 338(h)(10) Election; Purchase Price
Allocation. Upon Consummation of the transactions contemplated by this
Agreement, Seller and Buyer shall join in making a timely election under Section
338(h)(10) of the Code (a "Section 338(h)(10) Election") with respect to the
Merger and shall make similar elections under state and local law to the fullest
extent possible. Buyer will be responsible for preparing and filing all
documents and materials necessary in connection with making the Section
338(h)(10) Election and any similar elections under state and local law. Not
later than 120 days after the Closing Date, Buyer shall
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prepare and deliver to Seller a proposed allocation of the Purchase Price for
purposes of the Section 338(h)(10) Election and any Code Section 754 election
made by Buyer as contemplated by Section 11.02 below. Buyer and Seller shall
timely complete and file Form 8023 and any similar form under applicable state
law. If Buyer and Seller cannot agree on such allocation, Buyer and Seller will
select a nationally recognized accounting firm or other recognized expert to
appraise the Assets. The cost of such appraisal will be divided between Buyer
and Seller equally. Buyer and Seller agree not to take any position inconsistent
with any such allocation for Tax reporting purposes. Seller and Buyer will file
all tax returns in a manner consistent with the Section 338(h)(10) Election and
the valuation of the Assets determined as provided above, provided however, that
Buyer and Seller agree that no Section 338(h)(10) Election (or any similar
election under state or local law) will be made with respect to Highlands Gas
Corporation and its subsidiaries (together, "Highlands").
SECTION 11.02. Code Section 754 Election; Purchase Price Allocation.
Seller shall consent to and cooperate with Buyer in making a Code Section 754
election for all Partnerships and, if requested by Buyer, Seller or its
Affiliate shall also sign such election, with respect to such Partnership's tax
year which includes the Closing Date to adjust the basis of such Partnership's
assets under section 743 of the Code. Not later than 120 days after the Closing
Date, Buyer shall prepare and deliver to Seller a proposed allocation of the
Purchase Price for purposes of the Section 338(h)(10) Election and any Code
Section 754 election made by Buyer as contemplated by this Section 11.02. Buyer
and Seller shall timely complete and file the statement required by Treasury
Regulation 1.743-1 and IRS Form 8594 consistent with such allocation, shall
provide a copy of such form to the other party hereto and shall file a copy of
such form with its federal income tax return for the period that includes the
Closing Date. If Buyer and Seller cannot agree on such allocation with respect
to a Partnership, Buyer and Seller will select a nationally recognized
accounting firm or other recognized expert, which is reasonably acceptable to
both parties, to appraise the assets of the Partnership at issue. The cost of
such appraisal will be divided between Buyer and Seller equally. Buyer and
Seller agree not to take any position inconsistent with any such allocation for
Tax reporting purposes.
SECTION 11.03. Transfer Taxes. Seller shall pay all sales, use, transfer,
real property transfer, recording, gains, stock transfer and other similar taxes
and fees, if any, arising out of or in connection with the transactions effected
pursuant to this Agreement.
SECTION 11.04. Information. Seller and Buyer will make available to each
other, and to any Taxing Authority, all information, records, or documents
relating to the liability or potential liability for Pre-Closing Taxes that may
be reasonably requested by a party and will preserve such information, records
or documents until the expiration of any applicable statute of limitations or
extensions thereof, provided Seller and Buyer shall reserve the confidentiality
of any such information, records or documents.
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SECTION 11.05. Tax Attributes. Seller hereby represents and warrants to
Buyer that:
(a) Highlands basis in its assets for federal income tax purposes will be
at least $47,000,000 as of the Closing Date. Schedule 11.05 provides a schedule
of the approximate amount of annual tax depreciation that can be taken in the
future with respect to Highlands.
(b) Highlands is subject to limitations under Section 382 of the Code on
its use of net operating losses ("NOL") for federal income tax purposes and the
annual limitation on the use of its of its NOL pursuant to Section 382 of the
Code is not less than $3,5000,000.
(c) Highlands has not qualified or attempted to qualify for treatment
pursuant to Section 382(l)(5) of the Code within twenty-one months prior to the
date hereof.
(d) Highlands NOL carry forward for federal income tax purposes will not
be less than $30,000,000 as of the Closing Date.
(e) Seller acquired Highlands on August 19, 1997. To the best of Seller's
knowledge, Highlands had no ownership changes as defined under Section 382 of
the Code prior to Seller's purchase and after the first loss year of Highlands.
SECTION 11.06. Indemnification. (a) Seller shall be responsible for and
shall indemnify and hold harmless Buyer, the Company and its Subsidiaries from
and against any and all Tax Claims, resulting from, arising out of or relating
to: (i) any and all Pre-Closing Taxes imposed on or incurred by Buyer, Company
or its Subsidiaries relating to any of Company or its Subsidiaries, including
any federal, state or local Taxes incurred as a result of making the Section
338(h)(10) Election, and (ii) an amount equal to any entity level Pre-Closing
Taxes incurred by or imposed on any of the Partnerships, provided however, that
any such amount shall be limited to the ownership percentage of such Partnership
acquired by Buyer as a result of the Transactions contemplated in this
Agreement.
(b) Seller shall indemnify Buyer for the present value to Buyer of the
benefits of a Section 754 Election for any Partnership listed on Schedule
11.06(b) for which an effective Section 754 Election is not made, provided Buyer
records for federal income tax purposes an investment in the capital of such
Partnership. Seller shall make the indemnification payment to Buyer within two
weeks of the due date (including extensions) of such Partnership return on which
such Section 754 Election must be made. The indemnification amount shall be
calculated by taking the following steps:
(1) Calculate the difference (the "Step-up") between (i) the actual
value allocated to such Partnership up to the amount set forth on
Schedule 11.06(b) plus any Partnership liabilities deemed assumed
pursuant to Section 752 of the Code, and (ii) Seller's adjusted
basis of partnership property (which is the sum of its interest
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as a partner in partnership capital and surplus plus its share of
partnership liabilities) as agreed upon by Buyer and Seller .
(2) Calculate the anticipated yearly benefit of the Step-up by
depreciating the Step-up pursuant to the rules of the Code, assuming
that all of the Step-up is either 15 year intangible property within
the meaning of Section 197 of the Code or 15 year property within
the meaning of Section 168 of the Code, based on the principal asset
of such Partnership.
(3) Multiply each yearly amount arrived at in step 2 by 37%.
(4) Calculate the present value as of the Closing Date of each of the
yearly amounts arrived at in step 3 using an annual discount rate of
9%.
(5) Multiply the Step-up by 37% and multiply such result by 75%.
(6) Calculate the present value as of the Closing Date of the amount
arrived at in step 5, assuming it were realized in 2019 and assuming
an annual discount rate of 9%.
(7) Subtract the amount arrived at in step 6 from the sum of the annual
amounts arrived at in step 4. This total will be the amount of any
indemnity payment due to Buyer pursuant to this Section 11.06(b).
(8) To the amount calculated in step 7 that applies only to the
Partnership's tax year ending on 12/31/99 shall be added an interest
factor at LIBOR from the Closing Date to the date the indemnity
payment is made.
If Buyer records all or any portion of the investment as other than in the
capital of a Partnership, and such treatment is disallowed by any Taxing
Authority, then an indemnification payment shall be made. Payment will be made
within 30 days of final determination of such disallowance with interest from
the Closing Date to the date of payment at LIBOR.
(c) Seller shall indemnify and hold harmless Buyer from any loss, tax,
damage, liability, cost, or expense incurred by Buyer arising out of any
misrepresentation or breach of warranty made by Seller contained in Section
11.05.
(d) In addition to Sections 11.06(a), (b) and (c), Seller shall indemnify
and hold harmless Buyer, and the Company and its Subsidiaries from any and all
Taxes of Seller's affiliated group (as defined in Code Section 1504), other than
Taxes attributable to the Company or its Subsidiaries, imposed under Treasury
Regulation Section 1.1502-6 or any similar law, rule or regulation administered
by any Taxing Authority.
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(e) Any indemnification payment made pursuant to this Section 11.06 shall
be treated as an adjustment to the Purchase Price for federal, state and local
Tax purposes.
SECTION 11.07. Procedures for Indemnification. The procedures for
indemnification pursuant to this Section 11 shall be conducted in a manner
consistent with Sections 12.02 and 12.03 hereof.
SECTION 11.08. Proration of Taxable Income and Loss. The Parties agree
that for purposes of allocating taxable income or loss of the Company and its
Subsidiaries between Seller and Buyer for the Tax year that includes the Closing
Date, such income or loss for such Tax year shall be apportioned between Seller
and Buyer based upon the actual operations of the Company and its Subsidiaries
during the portion of such period ending on the Closing Date and the portion of
such periods beginning on the day following the Closing Date, each portion of
such period shall be deemed to be a taxable period (whether or not it is in fact
a taxable period).
SECTION 11.09. Filing Responsibility. Buyer, Company and its Subsidiaries
shall be responsible for filing all Tax Returns and paying all Taxes due with
respect to periods ending after the Closing Date. To the extent the law permits
or requires a short period return for the period or portion thereof ending on or
before the Closing Date, Seller shall be responsible for filing such returns and
paying all Taxes due with respect to such period. Seller shall be responsible
for filing Tax Returns and paying all Taxes due with respect to periods ending
on or before the Closing Date. Buyer will take such steps as are reasonably
requested by Seller so that Seller will have the authority necessary for Seller
to be able to execute and timely file the Tax Returns required to be filed by
Seller.
SECTION 11.10. Tax Refunds and Tax Benefits. Any Tax refunds that are
received by Buyer or the Company and its Subsidiaries, and any amounts credited
against Tax to which Buyer or the Company and its Subsidiaries become entitled,
that related to Tax periods or portions thereof ending on or before the Closing
Date shall be for the account of Seller, and Buyer shall pay over to Seller any
such refund or the amount of any such credit within fifteen (15) days after
receipt or entitled thereto. In addition, to the extent that a claim for refund
or a proceeding results in a payment or credit against Tax by a taxing authority
to the Buyer or the Company and its Subsidiaries of any amount accrued as of the
Closing Date, the Buyer shall pay such amount to Seller within fifteen (15) days
after receipt or entitled thereto.
SECTION 11.11. Control of Tax Audits. Seller shall have the right, at its
own expense, to control any audit or examination by any Taxing Authority ("Tax
Audit"), initiate any claim for refund, contest, resolve and defend against any
assessment, notice of deficiency, or other adjustment or proposed adjustment
relating to any and all Taxes for any taxable period ending on or before the
Closing Date. With respect to the items described in the preceding sentence,
Seller shall consult with Buyer with respect to the resolution of any such issue
that would affect Buyer, and not settle any such issue, or file any amended
return relating to such issue, without the consent of Buyer, which consent shall
not be unreasonably be withheld. Where consent to a
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settlement is withheld by the other party pursuant to this Section, such party
may continue or initiate any further proceedings at its own expense, provided
that the liability of the first party, after giving effect to this Agreement,
shall not exceed the liability that would have resulted from the settlement or
amended returns. Seller will not enter into any binding agreement with any Tax
Authority for Tax periods beginning after the Closing Date. Buyer shall have the
right, at its own expense, to control any other Tax Audit, initiate any other
claim for refund, and contest, resolve and defend against any other assessment,
notice of deficiency, or other adjustment or proposed adjustment relating to any
Taxes for any taxable period beginning before the Closing Date and ending after
the Closing Date, provided that, Buyer shall consult with Seller with respect to
the resolution of any issue that would affect Seller, and not settle any such
issue, or file any amended return relating to any such issue, without the
consent of Seller, which consent shall not unreasonably be withheld. Where
consent to a settlement is withheld by the other party pursuant to this Section,
such other party may continue or initiate any further proceedings at it own
expense, provided that the liability of the first party, after giving effect to
this Agreement, shall not exceed the liability that would have resulted from the
settlement or amended return.
SECTION 11.12. Cooperation on Tax Matters. (a) Buyer, the Company and its
Subsidiaries and Seller shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns
pursuant to this Agreement and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Company and
its Subsidiaries and Seller agree (A) to retain all books and records with
respect to Tax matters pertinent to the Company and its Subsidiaries relating to
any taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by Buyer or Seller, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
the Company and its Subsidiaries or Seller, as the case may be, shall allow the
other party to take possession of such books and records.
(b) Buyer and Seller further agree, upon request, to use their best
efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(c) Buyer and Seller further agree, upon request, to provide the other
party with all information that either party may be required to report pursuant
ss.6043 of the Code and all Treasury Department Regulations promulgated
thereunder.
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SECTION 11.13. Extensions. Within 15 days of the Closing Date, Seller
will, or will cause one of its Affiliates to, provide Buyer with a list of all
Tax Returns of the Company, its Subsidiaries or any Managed Partnership for
which an extension of time within which to file such Tax Return has been
requested, for which no Tax Return has yet been filed.
SECTION 11.14. Survival Obligations. The obligations of the parties set
forth in this Article 11 and Section 3.13 shall be unconditional and absolute
and shall remain in effect until the expiration of the applicable statute(s) of
limitations.
ARTICLE 12
Survival; Indemnification
SECTION 12.01. Survival. The agreements, representations and warranties of
the parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing, but except as otherwise provided in this Agreement, claims for breach
of such agreements, representations and warranties must be made in writing prior
to the first anniversary of the Closing Date. Notwithstanding the foregoing,
claims for breach of the agreements or representations and warranties contained
in Sections 2.01(b), 2.04(a)(1)-(3), 2.05, 3.13, 3.18, 5.02, 5.03, 5.04, Article
6, Sections 7.01, 7.02, 7.04, 7.05, 7.06, 7.07, 7.08, 8.01(b), 8.02(d), 8.03,
Article 9, Article 11, this Article 12 and Article 14 shall survive for the full
period of any applicable statute of limitations.
SECTION 12.02. Indemnification. (a) Except as otherwise provided in
Article 11 and Section 12.03, Seller hereby assumes and indemnifies Buyer and
its officers, directors, employees, stockholders, successors and affiliates
(each a "Buyer Indemnified Party") against and agrees to hold each Buyer
Indemnified Party harmless from any and all damage, loss, taxes, liability,
cost, obligation, claim and expense (including without limitation reasonable
expenses of investigation and reasonable attorneys' fees and expenses in
connection with any action, suit or proceeding) ("Damages"), INCLUDING WITHOUT
LIMITATION, ANY DAMAGES BASED ON NEGLIGENCE, GROSS NEGLIGENCE OR STRICT
LIABILITY OF THE BUYER INDEMNIFIED PARTY OR ANY OTHER THEORY OF LIABILITY
WHETHER IN LAW (WHETHER COMMON OR STATUTORY) OR EQUITY, incurred or suffered by
such Buyer Indemnified Party arising out of (i) any misrepresentation or breach
of warranty made by Seller pursuant to Sections 3.01 through 3.12, 3.14 through
3.17 and 3.19 through 3.23 of this Agreement; provided that claims under this
clause (i) must be made in writing prior to the first anniversary of the Closing
Date; (ii) the failure by Seller to perform any covenant or agreement in this
Agreement; (iii) the operation or ownership of the Crawar Gathering System
identified on Schedule 1.01(1) hereto by Union Pacific Highlands Gathering and
Processing Company; or (iv) the Company's crude oil, crude oil pipeline,
refining and storage businesses prior to the Closing Date and any businesses of
Northern Canadian Resources, Inc. or Norcen Marketing, Inc. not included in the
Business. Notwithstanding the foregoing, Seller shall not be liable under this
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Article 12 for any Damages caused by or resulting from (A) any breach of any
representation or warranty if Buyer had actual knowledge on or before the
Closing Date of such breach and failed to disclose to Seller in writing of the
existence of and Buyer's good faith estimate of reasonably anticipated Damages
relating to such breach, or (B) any misrepresentation or breach of warranty made
by Seller or the failure by Seller to perform any covenant or agreement in this
Agreement if Buyer has waived the same in writing pursuant to the proviso
contained in Section 10.03(vii) of this Agreement. Any qualifications to
Seller's knowledge in respect of the Non-Operated Assets set forth in the
representations and warranties of Seller in Sections 3.06, 3.08 and 3.16 shall
be disregarded for purposes of determining whether Seller has an indemnification
obligation to Buyer arising under this Article 12.
(b) Except as otherwise provided in Section 12.03, Buyer hereby assumes
and indemnifies Seller (and its Affiliates) and their respective officers,
directors, employees, stockholders, successors and affiliates (each a "Seller
Indemnified Party") against and agrees to hold each Seller Indemnified Party
harmless from any and all Damages, INCLUDING WITHOUT LIMITATION, ANY DAMAGES
BASED ON NEGLIGENCE, GROSS NEGLIGENCE OR STRICT LIABILITY OF THE SELLER
INDEMNIFIED PARTY OR ANY OTHER THEORY OF LIABILITY WHETHER IN LAW (WHETHER
COMMON OR STATUTORY) OR EQUITY, incurred or suffered by such Seller Indemnified
Party relating to, resulting from, or arising out of (i) any misrepresentation
or breach of warranty made by Buyer pursuant to Sections 4.01 through 4.10 of
this Agreement; provided that claims under this clause (i) must be made in
writing prior to the first anniversary of the Closing Date, (ii) the failure by
Buyer to perform any covenant or agreement in this Agreement, (iii) the Assumed
Liabilities, or (iv) except to the extent that Seller is obligated to indemnify
any Buyer Indemnified Party under Section 12.02(a), the Assets, liabilities,
business or operations of the Company and the Subsidiaries (other than the
Retained Litigation) and the Purchased Assets, whether arising before or after
the Closing.
(c) The indemnification rights and obligations provided in this Section
12.02 shall not cover claims relating to Taxes or breaches of the
representations and warranties contained in Section 3.13, all of which shall be
exclusively covered by Article 11.
SECTION 12.03. Procedures; Limitations (a) The party seeking
indemnification under Section 12.02 or Section 9.02(e) (the "Indemnified Party")
agrees to give prompt notice to the party against whom indemnity is sought (the
"Indemnifying Party") of the assertion of any claim, or the commencement of any
suit, action or proceeding in respect of which indemnity may be sought under
such Section. The Indemnifying Party may, and at the request of the Indemnified
Party shall, participate in and control the defense of any such suit, action or
proceeding at its own expense. The Indemnifying Party shall not be liable under
Section 12.02 or Section 9.02(e) for any settlement effected without its consent
of any claim, litigation or proceeding in respect of which indemnity may be
sought hereunder.
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(b) Except with respect to any breach of Seller's covenants contained in
Section 5.03 or Seller's indemnification obligations set forth in clauses (iii)
and (iv) of Section 12.02(a), which shall not be subject to such limitations, no
party shall seek indemnification under Section 12.02 unless (i) the Damages in
respect of each individual claim for which indemnification is sought exceeds
$75,000, and (ii) the aggregate Damages for all claims for which indemnification
is sought exceeds $5,000,000, and then only with respect to aggregate Damages in
excess of $5,000,000.
(c) Notwithstanding anything contained to the contrary in any other
provision of this Agreement, Seller and Buyer agree that, except for the
liquidated damages specifically provided for in Section 13.02(b), the recovery
(either directly or indirectly) by any Indemnified Party of any damages suffered
or incurred by it as a result of any breach by Buyer or Seller, as the case may
be, of its representations, warranties, covenants or agreements under this
Agreement shall be limited to the actual damages suffered or incurred by the
Indemnified Party as a result of the breach by the breaching party of its
representations, warranties, covenants or agreements hereunder and in no event
shall the breaching party be liable to any Indemnified Party for any indirect,
consequential, exemplary or punitive damages suffered or incurred by the
Indemnified Party as a result of the breach by the breaching party of its
representations, warranties, covenants or agreements hereunder.
SECTION 12.04. Exclusive Remedy. Except as specifically set forth in this
Agreement, Buyer and Seller hereby waive any rights or claims they may have
against the other parties hereto, whether in law or in equity, relating in any
way to the Company, the Subsidiaries, the Purchased Assets or to the
transactions contemplated by this Agreement. The rights and claims waived by
Buyer and Seller under this Section 12.04 include, but are not limited to,
claims for breach of contract, breach of warranty, contribution and negligent
misrepresentation.
ARTICLE 13
Termination
SECTION 13.01. Grounds for Termination. This Agreement may be terminated
at any time prior to the Closing:
(i) by mutual written agreement of Seller and Buyer;
(ii) by either Seller or Buyer if the Closing shall not have been
consummated on or before the day that is 180 days after the date hereof,
unless the reason that the Closing has not occurred shall be (A) the
failure of the party seeking to terminate this Agreement to fulfill its
obligations hereunder or (B) the failure of any condition to the
terminating party's obligations to consummate the Closing to be satisfied
as a result of such party's failure to fulfill its obligations hereunder;
or
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(iii) by Seller or Buyer if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any court or governmental body having competent jurisdiction.
The party desiring to terminate this Agreement shall give notice of such
termination to the other party.
SECTION 13.02. Effect of Termination. (a) Except as provided in paragraph
(b) of this Section 12.02, termination shall be without liability of any party
(or any stockholder, director, officer, employee, partner, affiliate, agent,
consultant or representative of such party) to any other party to this
Agreement. The provisions of Sections 7.01, 7.04, 8.01 and 14.03 shall survive
any termination hereof pursuant to Section 13.01.
(b) If this Agreement is terminated by Buyer based on (i) a failure of
Seller to deliver the certificate required by Section 10.02(i) without exception
(or based on the failure of Seller to perform the obligations for which such
certificate serves as confirmation), when all conditions under Sections 10.01
and 10.03 have been satisfied, (ii) the failure of Seller to consummate the
transactions contemplated by this Agreement on the Closing Date when all
conditions under Sections 10.01 and 10.03 have been satisfied, or (iii) the
willful breach by Seller in contravention of the commitments and obligations of
Seller under this Agreement, or by Seller based on (x) a failure of Buyer to
deliver the certificate required by Section 10.3(i) without exception (or based
on the failure of Buyer to perform the obligations for which such certificates
serve as confirmation), when all conditions under Sections 10.01 and 10.02 have
been satisfied, (y) the failure to consummate the transactions contemplated by
this Agreement on the Closing Date when all conditions under Sections 10.01 and
10.02 have been satisfied, or (z) the willful breach by Buyer in contravention
of the commitments and obligations of Buyer under this Agreement, then the
terminating party shall be entitled to receive from the other party an amount
equal to $100 million as liquidated damages. Such liquidated damages shall be
payable in cash by wire transfer or delivery of other immediately available
funds within three days of the occurrence of the event giving rise to such
party's obligation to pay such liquidated damages. It is expressly stipulated by
the parties that the actual amount of damages resulting from such a termination
would be difficult if not impossible to determine accurately because of the
unique nature of this Agreement, the transactions contemplated hereby, the
uncertainties of applicable commodity markets and differences of opinion with
respect to such matters, and that the liquidated damages provided for herein are
a reasonable estimate by the parties of such damages and, except in the case of
fraud, shall constitute full satisfaction of all claims by either of the parties
hereto against the other in the event of such termination.
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ARTICLE 14
Miscellaneous
SECTION 14.01. Notices. All notices, requests and other communications
to either party hereunder shall be in writing (including telex, telecopy or
similar writing) and shall be given,
if to Buyer, to:
Duke Energy Field Services, Inc.
370 17th Street, Ninth Floor
Denver, Colorado 80202
Attn: Michael J. Bradley, Executive Vice President
Telecopy: 303-893-2613
with a copy to:
Duke Energy Field Services, Inc.
370 17th Street, Ninth Floor
Denver, Colorado 80202
Attn: William Mathews, Vice President and General Counsel
Telecopy: 303-893-8902
if to Seller, to:
Union Pacific Resources Company
777 Main Street
Fort Worth, Texas 76102
Attn: V. Richard Eales, Executive Vice President
Telecopy: 817-810-9032
and
Union Pacific Resources Company
777 Main Street
Fort Worth, Texas 76102
Attn: Joseph A. LaSala, Jr., Vice President and General Counsel
Telecopy: 817-321-7026
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with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178-0060
Attn: Howard L. Shecter, Esq.
Telecopy: 212-309-7044
SECTION 14.02. Amendments; No Waivers. (a) Any provisions of this
Agreement may be amended or waived prior to the Closing Date if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by Buyer and Seller or in the case of a waiver, by the party against whom the
waiver is to be effective.
(b) No failure to delay by either party in exercising any right, power or
privilege hereunder shall operate as a wavier thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 14.03. Expenses. All costs and expenses incurred in connection
with the execution, delivery and performance of this Agreement shall be paid by
the party incurring such cost or expense.
SECTION 14.04. Successors and Assigns. This Agreement and the rights of
the parties hereunder may not be assigned and shall be binding upon and inure to
the benefit of the parties hereto and their respective successors.
SECTION 14.05. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS. Notwithstanding the
foregoing, the Merger shall be effected pursuant to the DGCL.
SECTION 14.06. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other party hereto.
SECTION 14.07. Entire Agreement. This Agreement, the Letter Agreement
and that certain Agreement among the parties hereto, dated as of the date
hereof, constitute the entire
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agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter of this
Agreement. Neither this Agreement nor any provision hereof is intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder.
SECTION 14.08. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 14.09. Jurisdiction; Waiver of Jury Trial. (a) SELLER AND BUYER
HEREBY AGREE THAT ANY CLAIM, ACTION OR PROCEEDING BY ANY PARTY SEEKING ANY
RELIEF WHATSOEVER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BROUGHT ONLY IN STATE OR FEDERAL COURT
SITTING IN TARRANT COUNTY, TEXAS. IF SUCH TEXAS COURTS ARE UNAVAILABLE,
PROCEEDINGS MUST BE BROUGHT IN EITHER THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK,
COUNTY OF NEW YORK.
(b) SELLER AND BUYER HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 14.10. No Third Party Beneficiaries. The rights and obligations
under this Agreement are intended to benefit only the parties hereto and their
respective successors and permitted assigns and no third party shall be a
beneficiary hereof or have any rights hereunder, except for Buyer Indemnified
Parties and Seller Indemnified Parties.
[intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
or have caused this Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
UNION PACIFIC RESOURCES COMPANY
By: /s/ V. RICHARD EALES
-------------------------------
Name: V. Richard Eales
Title: Executive Vice President
UNION PACIFIC FUELS, INC.
By: /s/ V. RICHARD EALES
-------------------------------
Name: V. Richard Eales
Title: Executive Vice President
DUKE ENERGY FIELD SERVICES, INC.
By: /s/ J.W. Mogg
-------------------------------
Name: J.W. Mogg
Title: President
DEFS MERGER SUB CORP.
By: /s/ J.W. Mogg
--------------------------------
Name: J.W. Mogg
Title: President
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