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UNITED STATES
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) December 31, 1999
TRANSMONTAIGNE INC.
____________________________________
(Exact Name of Registrant as specified in its charter)
Delaware
_____________________________________
(State or other jurisdiction of incorporation)
Commission File Number 001-11763
IRS Employer No. 06-1052062
370 Seventeenth Street
Suite 2750
Denver, CO 80202
____________________________________
(Address, including zip code of principal executive offices)
303-626-8200
_____________________________________
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective as of December 31, 1999, TransMontaigne Inc. ("TransMontaigne"), sold
all of the issued and outstanding capital stock of its wholly-owned natural gas
gathering subsidiary, Bear Paw Energy Inc. ("BPEI") to BPE Acquisition LLC, a
special purpose entity formed by BPEI's management in association with Thomas J.
Edelman and Chase Capital Partners. The sale of BPEI is for cash consideration
of $107,500,000, plus reimbursement for all of the capital expenditures made by
TransMontaigne on BPEI's newly constructed Powder River coal seam gathering
system from July 1, 1999 to the closing date, approximately $24,000,000.
Subsequent to the closing date there will be post-closing adjustments determined
in accordance with the Agreement and Plan of Merger dated December 27, 1999, to
include net working capital. The amount of post-closing adjustments, including
net working capital, cannot be determined at this time, but is considered by
TransMontaigne's management not to be material relative to the entire
transaction proceeds.
The sale of BPEI results in the disposition of TransMontaigne's natural gas
business segment which, through the ownership and operation of natural gas
pipeline gathering systems, processing plants and related facilities, provides
services for the gathering, treating, processing, fractionating and reselling of
natural gas and natural gas liquids. TransMontaigne's natural gas gathering and
processing assets consist of 6 gathering and processing systems in four states,
Colorado, Montana, North Dakota and Wyoming, and the Canadian province of
Saskatchewan, with a combined throughput capacity of 115 million cubic feet per
day and over 2,900 miles of gathering pipelines.
The sales price was established in arms-length negotiation between the
managements of TransMontaigne and BPE Acquisition LLC. The Agreement and Plan of
Merger dated December 27, 1999 is included herein as Exhibit 2.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a. Not Applicable.
b. As of the date of this Form 8-K, it is impractical for TransMontaigne to
provide the pro forma financial information required pursuant to Article 11
of Regulation S-X. In accordance with Item 7.b. of Form 8-K, such pro forma
financial statements will be filed by Amendment to this Form 8-K on or
before March 20, 2000.
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c. Exhibits
Exhibit No. Description
---------- -----------
2.1 Agreement and Plan of Merger dated December 27,
1999, by and between Bear Paw Energy Inc.,
TransMontaigne Inc. and BPE Acquisition, LLC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
TransMontaigne has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: 18 January 2000 TRANSMONTAIGNE INC.
----------------
By:/s/ Donald H. Anderson
--------------------------
Donald H. Anderson
President
3
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
BEAR PAW ENERGY INC.,
"TARGET",
TRANSMONTAIGNE INC.,
"SHAREHOLDER"
AND
BPE ACQUISITION, LLC,
"ACQUIROR" AND "SURVIVING ENTITY"
DATED: DECEMBER 27, 1999
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Table of Contents
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1. Definitions....................................................................... 1
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2. The Merger and Consideration...................................................... 5
----------------------------
2.1 Consideration.................................................................. 5
2.1.1 Post-Closing Adjustments/Schedule........................................... 5
2.2 Merger......................................................................... 6
2.3 Shareholder and Member Approvals............................................... 6
2.3.1 Target Approval............................................................. 6
2.3.2 Acquiror Approval........................................................... 6
2.4 Closing........................................................................ 7
2.5 Consummation of the Transaction at the Closing................................. 7
2.6 Effect of Merger............................................................... 7
2.6.1 Surviving Entity............................................................ 7
2.6.2 Certificate of Formation.................................................... 7
2.6.3 Operating Agreement......................................................... 7
2.6.4 Directors and Officers of Target............................................ 8
2.6.5 The Merger.................................................................. 8
2.7 Effect on Capital Stock of Target.............................................. 8
2.8 Determination of Net Working Capital........................................... 8
2.8.1 Preparation of Effective Date Balance Sheet................................. 8
2.8.2 Review of Effective Date Balance Sheet...................................... 9
2.8.3 Determination by Arthur Andersen as to Matters in Notice of Disagreement.... 9
2.8.4 Post-Closing Adjustment..................................................... 9
2.9 Intentionally Left Blank...................................................... 10
2.10 Delayed Closing Date Interest................................................. 10
3. Conditions Precedent to Obligations.............................................. 10
-----------------------------------
3.1 Conditions Precedent to the Target's and Shareholder's Obligations............ 10
3.1.1 Representations and Warranties............................................. 10
3.1.2 Opinion.................................................................... 10
3.1.3 Absence of Prohibitions.................................................... 10
3.1.4 Absence of Restraining Action.............................................. 11
3.1.5 Expiration of HSR Act Waiting Period....................................... 11
3.1.6 Certificates of Good Standing.............................................. 11
3.1.7 Absence of Litigation...................................................... 11
3.1.8 Closing Documents.......................................................... 11
3.1.9 Consents and Releases...................................................... 11
3 .1.10 Facilities Operating Agreement............................................. 11
3.2 Conditions Precedent to the Acquiror's Obligations............................ 11
3.2.1 Representations and Warranties............................................. 11
3.2.2 Opinion.................................................................... 12
3.2.3 Absence of Prohibitions.................................................... 12
3.2.4 Absence of Restraining Action.............................................. 12
3.2.5 Expiration of HSR Waiting Period........................................... 12
3.2.6 Consents and Waivers....................................................... 12
3.2.7 Licenses, Permits and Authorizations....................................... 12
3.2.8 Certificates of Good Standing.............................................. 12
3.2.9 Certificates............................................................... 13
3.2.10 Member Approval............................................................ 13
3.2.11 Absence of Adverse Changes................................................. 13
3.2.12 Resignations............................................................... 13
3.2.13 Change in Financial Markets................................................ 13
3.2.14 Facilities Operating Agreement............................................. 13
3.3 Frustration of Closing Conditions............................................. 13
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4. Representations and Warranties................................................... 13
------------------------------
4.1 Representations and Warranties of Target and Shareholder...................... 13
4.1.1 Good Standing/Charter Documents............................................ 13
4.1.2 Binding Agreement.......................................................... 13
4.1.3 Capital Stock of Target.................................................... 14
4.1.4 Ownership of the Target Stock.............................................. 14
4.1.5 No Agreements.............................................................. 14
4.1.6 Financial Information...................................................... 14
4.1.7 No Change In Financial Condition........................................... 15
4.1.8 Tax Matters................................................................ 15
4.1.9 Accounts; Safe Deposit Boxes; Powers of Attorney........................... 16
4.1.10 Assets Other than Real Property Interests.................................. 16
4.1.11 Stock Transfer Records and Minute Books.................................... 16
4.1.12 Title to Real Property..................................................... 17
4.1.13 Easements, Rights-of-Way and Licenses...................................... 17
4.1.14 Insurance.................................................................. 18
4.1.15 Intellectual Property...................................................... 18
4.1.16 No Litigation.............................................................. 18
4.1.17 No Violation of Laws or Regulations........................................ 18
4.1.18 Consents and Approvals..................................................... 18
4.1.19 Labor Agreements........................................................... 19
4.1.20 Contracts.................................................................. 19
4.1.21 Employees.................................................................. 20
4.1.22 Licenses, Equipment........................................................ 20
4.1.23 Customer Accounts Receivable............................................... 20
4.1.24 Payables................................................................... 20
4.1.25 Permits.................................................................... 21
4.1.26 Employee Benefit Matters................................................... 21
(i) Employee Salaries and Benefits............................................. 21
(ii) Compliance with ERISA...................................................... 21
(iii) Funding.................................................................... 21
(iv) Determination Letters...................................................... 21
(v) Prohibited Transactions.................................................... 22
(vi) Pension Benefit Guaranty Corporation Liability............................. 22
(vii) Multi-Employer Plan........................................................ 22
(viii) Post Retirement Benefits................................................... 22
(ix) Communications............................................................. 22
(x) Severance.................................................................. 23
4.1.27 Directors and Officers..................................................... 23
4.1.28 No Subsidiaries............................................................ 23
4.1.29 Sale of Hydrocarbon Liquids................................................ 23
4.1.30 Suspense Accounts.......................................................... 23
4.1.31 Disclosure................................................................. 23
4.1.32 Year 2000 Compliance....................................................... 23
4.1.33 Related Transactions....................................................... 23
4.1.34 Environmental Matters...................................................... 24
4.1.35 Brokerage Commission....................................................... 25
4.1.36 Intercompany Debt.......................................................... 25
4.2 Representations and Warranties of Acquiror.................................... 25
4.2.1 Authority.................................................................. 25
4.2.2 No Conflicts; Consents..................................................... 25
4.2.3 Organization and Standing of Acquiror/Surviving Entity..................... 25
4.2.4 Actions and Proceedings, etc............................................... 26
4.2.5 Availability of Funds...................................................... 26
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4.2.6 Brokerage Agreements....................................................... 26
4.2.7 Disclosure................................................................. 26
5. Pre-Closing Covenants.................................................................... 26
---------------------
5.1 Pre-Closing Covenants of Shareholder and Target.................................. 26
5.1.1 Operation of Target's Business............................................. 26
(i) Organizational Documents................................................... 26
(ii) Corporate Name............................................................. 26
(iii) Compensation............................................................... 26
(iv) Distributions to Shareholder............................................... 27
(v) Management................................................................. 27
(vi) Reorganizations or Other Related Transactions.............................. 27
(vii) Disposition or Abandonment of Assets....................................... 27
(viii) Indebtedness............................................................... 27
(ix) Liens...................................................................... 27
(x) Increase of Indebtedness................................................... 27
(xi) Payables................................................................... 27
(xii) Maintenance of Assets...................................................... 27
(xiii) Insurance.................................................................. 27
(xiv) Contracts and Permits...................................................... 28
(xv) Goodwill................................................................... 28
(xvi) Issuance of Securities..................................................... 28
(xvii) Repayment of Indebtedness.................................................. 28
(xviii) Litigation................................................................. 28
(xix) Miscellaneous.............................................................. 28
(xx) Tax Claims/Elections....................................................... 28
5.1.2 Cooperation................................................................ 28
5.1.3 Commercially Reasonable Efforts............................................ 28
5.1.4 Access to Information Prior to the Closing................................. 28
5.1.5 Benefit Plans.............................................................. 29
5.1.6 Standstill Agreement; Disposition and Voting of Securities................. 29
5.1.7 Release.................................................................... 30
5.1.8 Relationships with Vendors and Customers................................... 30
5.1.9 Termination of Affiliate Transactions...................................... 30
5.1.10 Growth Capital Expenditures................................................ 30
5.1.11 Supplemental Exhibits...................................................... 31
5.2 Pre-Closing Covenants of Acquiror................................................ 31
5.2.1 Confidentiality............................................................ 31
5.2.2 Commercially Reasonable Efforts............................................ 31
5.2.3 Non-Solicitation of Shareholder Employees.................................. 31
5.3 Mutual Pre-Closing Covenants..................................................... 32
5.3.1 Publicity.................................................................. 32
5.3.2 Commercially Reasonable Efforts............................................ 32
5.3.3 Antitrust Notification..................................................... 32
6. Post-Closing Covenants................................................................... 32
----------------------
6.1 Mutual Covenants................................................................. 32
6.1.1 Cooperation................................................................ 32
6.1.2 Intentionally Left Blank................................................... 33
6.1.3 Intentionally Left Blank................................................... 33
6.1.4 Intentionally Left Blank................................................... 33
6.1.5 Records.................................................................... 33
6.1.6 Shareholder Guaranties..................................................... 34
6.1.7 Tax Treatment.............................................................. 34
6.2 Post-Closing Covenants of Shareholder and Target................................. 34
6.2.1 Cooperation of Shareholder and Current Directors of Target................. 35
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6.2.2 Disposition of Confidential Information.................................... 35
6.2.3 Other Transitional Matters................................................. 35
6.2.4 Sublease of Office Space................................................... 35
6.2.5 Switchboard/Receptionist Services.......................................... 36
6.2.6 Product Marketing.......................................................... 36
6.2.7 Environmental Consulting Services.......................................... 36
6.2.8 Personal Property/Software................................................. 36
6.2.9 Computer Network Support................................................... 36
6.2.10 Stock Option Vesting....................................................... 36
6.2.11 Tax Loans.................................................................. 36
6.2.12 Use of Name................................................................ 36
6.2.13 Filing for Tax Liquidation................................................. 37
6.2.14 Canadian Tax Form 2062..................................................... 37
6.2.15 Target Will Not Incur Tax Liability After Effective Date................... 37
6.3 Post-Closing Covenants of Acquiror............................................ 37
6.3.1 Settlement of Tax Claims................................................... 37
6.3.2 New Tax Licenses........................................................... 37
6.3.3 Property Tax Returns....................................................... 37
6.3.4 Forms 1099................................................................. 37
6.3.5 Canadian Goods and Services Tax Return..................................... 38
6.3.6 Unclaimed Property Reports................................................. 38
6.3.7 Payroll Reimbursement Obligation........................................... 38
6.3.8 Establishment of Qualified Retirement Savings Plan......................... 38
6.3.9 Surviving Entity/Good Standing............................................. 38
6.4 Environmental Matters......................................................... 38
6.4.1 Environmental Liabilities.................................................. 38
6.4.2 Environmental Survey Expenses.............................................. 39
7. Closing.................................................................................. 39
-------
7.1 Delivery of Closing Documents to Acquiror..................................... 39
7.2 Delivery of Documents to the Target and Shareholder........................... 40
8. Employee and Related Matters............................................................. 40
----------------------------
8.1 Employment.................................................................... 41
8.2 Employee Benefit Plans Post-Closing........................................... 41
8.3 Accrued Vacation; Nonqualified Pension Plans.................................. 41
8.4 COBRA......................................................................... 41
8.5 Workers Compensation.......................................................... 42
8.6 Retirement Savings Plans...................................................... 42
8.7 Continuing Employee Payroll and Benefits...................................... 42
8.8 Employee Benefits............................................................. 42
8.9 Pre-Existing Conditions/Deductibles........................................... 42
8.10 No Change in Employment Status................................................ 43
9. Termination.............................................................................. 43
-----------
9.1 Events of Termination......................................................... 43
9.1.1 Mutual Consent............................................................. 43
9.1.2 Prior to Closing Date...................................................... 43
9.1.3 Delay...................................................................... 43
9.1.4 Content of Exhibits........................................................ 43
9.1.5 Consequences of Termination................................................ 43
10. General Matters.......................................................................... 44
---------------
10.1 Notices....................................................................... 44
10.2 Successors and Assigns........................................................ 45
10.3 Arbitration................................................................... 45
10.4 No Oral Modifications......................................................... 45
10.5 Waiver........................................................................ 45
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10.6 Governing Law................................................................. 45
10.7 Severability.................................................................. 45
10.8 Headings and Captions for Convenience......................................... 45
10.9 Counterparts.................................................................. 46
11. Indemnification.......................................................................... 46
---------------
11.1 Tax Indemnification........................................................... 46
11.1.1 Shareholder Indemnification of Acquiror and Surviving Entity............... 46
11.1.2 Acquiror and Surviving Entity Indemnification of Shareholder............... 46
11.1.3 Reimbursement.............................................................. 46
11.2 Other Indemnification by Shareholder.......................................... 47
11.3 Other Indemnification by Acquiror............................................. 47
11.4 Losses Net of Insurance, etc.................................................. 48
11.5 Intentionally Left Blank...................................................... 48
11.6 Procedures Relating to Indemnification (Other than under Section 11.1)........ 49
11.7 Other Claims.................................................................. 50
11.8 Procedures Relating to Indemnification of Tax Claims.......................... 50
11.9 Mitigation.................................................................... 51
11.10 No Contribution from the Target or Surviving Entity........................... 51
12. Tax Matters.............................................................................. 51
-----------
13. Survival of Representations and Warranties............................................... 53
------------------------------------------
14. Miscellaneous............................................................................ 53
-------------
14.1 Expenses...................................................................... 53
14.2 No Benefit to Others.......................................................... 54
14.3 Press Releases................................................................ 54
14.4 Exhibits...................................................................... 54
14.5 Entire Agreement.............................................................. 54
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AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made this 27/th/ day
---------
of December, 1999, by and among Bear Paw Energy Inc., a Colorado corporation
(the "Target"), TransMontaigne Inc., a Delaware corporation and the sole
------
shareholder of the Target (the "Shareholder") and BPE Acquisition, LLC, a
-----------
Delaware limited liability company (the "Acquiror" and, after the Effective
--------
Time, the "Surviving Entity").
----------------
RECITALS
A. WHEREAS, Target is engaged in the ownership and operation of natural
gas gathering, processing and pipeline facilities in the states of Colorado,
Kansas, Montana, North Dakota, Texas and Wyoming, as well as in the province of
Saskatchewan, Canada;
B. WHEREAS, Shareholder owns 100% of the issued and outstanding capital
stock of Target;
C. WHEREAS, Acquiror desires to acquire Target's business by merging
Target with and into Acquiror in accordance with the terms and conditions of
this Agreement in a transaction designed and intended to meet the requirements
of Section 18-209 of the Delaware Limited Liability Company Act, Del. Code Title
6, (S) 18-209 (the "Delaware Limited Liability Company Act");
--------------------------------------
D. WHEREAS, the merger of Target into Acquiror will be treated for
Federal income tax purposes as a purchase of the assets of Target and an
assumption of its liabilities by Acquiror, followed by the liquidation of Target
into Shareholder; and
E. WHEREAS, as a result of the transaction Acquiror, following the Merger
of Target with and into Acquiror, will be the Surviving Entity.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Definitions. The definitions set forth below shall apply to the
-----------
meaning of the terms as used throughout this Agreement. All other capitalized
terms shall have the meaning as defined in other sections of this Agreement.
1.1 "Acquiror" shall mean BPE Acquisition, LLC.
--------
1.2 "Affiliate" shall mean with reference to a particular Person (i)
---------
any Person, directly or indirectly, owning, controlling or holding with power to
vote 10% or more of the outstanding voting securities of such particular Person;
(ii) any Person 10% or more of whose outstanding voting securities are directly
or indirectly owned, controlled or held with power to vote by such particular
Person; or (iii) any Person, directly or indirectly, controlled by, controlling
or under common control with such particular Person.
1.3 "Agreement" shall mean this Agreement and Plan of Merger.
---------
1
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1.4 "Assumed Liabilities" shall mean any and all Liabilities or
-------------------
obligations of Target or Surviving Entity of any nature (whether accrued,
absolute, contingent, known or unknown, unasserted or otherwise) (i) arising out
of the conduct of the businesses and operations of Target or Surviving Entity at
any time after the Closing, specifically including (i) the Environmental
Liabilities, (ii) any obligations to be performed after the Closing under the
terms of any contract, agreement, lease, license, commitment, instrument or
binding arrangement of Target or Surviving Entity, (iii) any liabilities or
obligations reflected in the calculation of Net Working Capital as contemplated
by Section 2.8, and (iv) intercompany debt between Target and its Canadian
-----------
subsidiary, Bear Paw Processing (Canada) Ltd., but shall specifically exclude
Retained Liabilities and Intercompany Debt.
1.5 "Bear Paw Energy, LLC" shall be the name of the Surviving Entity
--------------------
as set forth in Section 2.5.
-----------
1.6 "Closing" shall mean the consummation of the transactions
-------
contemplated by this Agreement.
1.7 "Closing Date" shall mean the date on which the Closing occurs
------------
pursuant to Section 2.4 hereof.
-----------
1.8 "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
1.9 "Colorado Business Act" shall mean the Colorado Business
---------------------
Corporation Act, Colo. Rev. Stat. (S)(S) 7-101-101 to 7-117-105.
1.10 "Colorado Corporations and Association Acts" shall mean the
------------------------------------------
Colorado Corporations and Associations Act, Colo. Rev. Stat. (S)(S) 7-90-101 to
7-90-312.
1.11 "DLLCA" shall mean the Delaware Limited Liability Company Act.
-----
1.12 "Effective Date" shall mean December 31, 1999.
--------------
1.13 Intentionally Left Blank.
1.14 Intentionally Left Blank.
1.15 "Effective Time" shall mean the time when the Certificate of
--------------
Merger is filed as provided in Section 2.5 hereof and the Merger of Target with
-----------
and into the Acquiror becomes effective under applicable law.
1.16 "Environmental Laws" shall mean all applicable federal, state,
------------------
provincial and local environmental, health and safety laws, statutes,
ordinances, rules and regulations of any governmental or quasi-governmental
authority of the United States and Canada as in effect as of the Effective Date
relating to (i) emissions, (ii) discharges, releases or seepages to air, soil,
surface water or ground water, (iii) solid or liquid waste disposal, (iv) the
use, storage, generation, handling, transport, discharge, release or disposal of
toxic or hazardous substances or waste, including petroleum, or (vi) other
environmental, health or safety matters, including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986; the
Resource Conservation and Recovery Act of 1976; the Federal Water Pollution
Control Act of 1970, as amended; the Safe Drinking Water Act of 1974; the Toxic
Substances Control Act of 1976; the Emergency Planning and Community Right to
Know Act of
2
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1986, as amended; the Clean Air Act, as amended; the Federal Water Pollution
Control Act, as amended; the Oil Pollution Act of 1990, as amended; the Rivers
and Harbors Act of 1899; the Hazardous and Solid Waste Amendments Act of 1984,
as amended; and the Hazardous Materials Transportation Act.
1.17 "Final Effective Date Balance Sheet" is defined in Section 2.8.2.
---------------------------------- -------------
1.18 "Governmental Entity" shall mean any federal, state, local or
-------------------
foreign government or any court of competent jurisdiction, administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign.
1.19 "Growth Capital Expenditures" shall mean all capital expenditures
---------------------------
made by Target or Shareholder for the benefit of Target on and after July 1,
1999 up to and including the Effective Time as initially reflected on Exhibit
-------
1.19(A) (the "Estimated Growth Capital Expenditure Schedule"), attached hereto,
- ------- ---------------------------------------------
which schedule reflects all Growth Capital Expenditures made in connection
therewith as of November 30, 1999 (the "Pre-December 1, 1999 Growth Capital
-----------------------------------
Expenditures") and which Schedule shall be updated at Closing to accurately
- ------------
reflect any and all additional Growth Capital Expenditures made during the
period of December 1, 1999 through and including the Effective Time (the "Post
----
November 30, 1999 Growth Capital Expenditures"), as well as all expenditures
- ---------------------------------------------
made as of said date with respect to both the Pre-December 1, 1999 Growth
Capital Expenditures and the Post-November 30, 1999 Growth Capital Expenditures,
such updated Schedule being defined as the "Closing Growth Capital Expenditure
----------------------------------
Schedule". Notwithstanding anything hereinabove to the contrary, Growth Capital
- --------
Expenditures shall not include (i) those capital expenditures committed to and
incurred by Target or Shareholder prior to July 1, 1999, as reflected on Exhibit
-------
1.19(B) attached hereto (the "Pre-July 1, 1999 Growth Capital Expenditure
- ------- -------------------------------------------
Schedule"), or (ii) those operating and maintenance capital expenditures
- --------
incurred and accrued by Target or Shareholder as of the Effective Date as
initially reflected on Exhibit 1.19(C) (the "Estimated Operating and Maintenance
--------------- -----------------------------------
Capital Expenditure Schedule") attached hereto, which Schedule reflects all
- ----------------------------
operating and maintenance capital expenditures incurred and accrued by Target or
Shareholder as of November 30, 1999 (the "Pre-December 1, 1999 O&M
------------------------
Expenditures") and which Schedule shall be updated at Closing to accurately
- ------------
reflect any and all additional operating and maintenance capital expenditures
incurred and accrued by Target or Shareholder during the period of December 1,
1999 through and including the Effective Date (the "Post-November 30, 1999 O&M
--------------------------
Expenditures"), such updated Schedule being defined as the "Effective Date O&M
- ------------ ------------------
Expenditure Schedule".
- --------------------
1.20 "HSR Act" shall mean the Hart-Scott-Rodino Anti-trust
-------
Improvements Act of 1976, as amended.
1.21 "Intercompany Debt" shall mean all accounts payable or other
-----------------
Liabilities of the Target that are payable by the Target to the Shareholder as
shown on the Balance Sheet attached as Exhibit 4.1.6 and any such Intercompany
-------------
Debt arising after the date of the Balance Sheet.
1.22 "Liabilities" means any liability or obligation whether known or
-----------
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, and whether due or to become due, including the
liabilities of Target under (S)461(h) of the Code.
1.23 "Losses" means any and all losses, claims, shortages, damages,
------
liabilities, expenses (including reasonable attorneys' and accountants' and
other professionals' fees), assessments, Tax deficiencies and Taxes incurred in
connection with the receipt of indemnification payments
3
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(including interest or penalties thereon) arising from or in connection with any
such matter that is the subject of indemnification under Section 11.
----------
1.24 "Member" shall mean an equity interest owner of the Acquiror.
------
1.25 Intentionally Left Blank.
1.26 "Merger" shall have the same meaning as set forth in Section 2.2
------ -----------
hereof.
1.27 "Net Working Capital" is defined in Section 2.8.1.
------------------- -------------
1.28 "Permitted Liens" shall mean (i) mechanics', carriers',
---------------
workmen's, repairmen's or other like liens arising or incurred in the ordinary
course of business, liens arising under original purchase price conditional
sales contracts and equipment leases with third parties entered into in the
ordinary course of business and liens for Taxes which are not due and payable or
which may thereafter be paid without penalty or are being contested in good
faith in appropriate proceedings, (ii) mortgages, liens, security interests and
encumbrances which secure debt that has been disclosed to Acquiror in writing
prior to the date hereof and (iii) other imperfections of title or encumbrances,
if any, which do not, individually or in the aggregate, materially impair the
continued use and operation of the real property to which they relate in the
business.
1.29 "Person" shall mean an individual, partnership, corporation,
------
trust, limited liability Company, unincorporated organization, association or
joint venture or a government, or an agency, political subdivision or
instrumentality thereof.
1.30 Intentionally Left Blank.
1.31 "Retained Liabilities" shall mean (i) any and all Liabilities or
--------------------
obligations of Target of any nature (whether accrued, absolute, contingent,
known or unknown, unasserted or otherwise) arising out of the conduct of the
businesses and operations of Target at any time prior to the Closing, (ii) any
obligation or Liability assumed by Shareholder pursuant to Section 5.1.9 and
-------------
(iii) any obligation or Liability of Target to be performed prior to the Closing
under the terms of any contract, agreement, lease, license, commitment,
instrument or binding arrangement of Target which has not been performed as of
the Closing, but shall specifically exclude (i) any liabilities or obligations
(A) relating to the Environmental Liabilities, (B) reflected in the calculation
of Net Working Capital as contemplated by Section 2.8, (ii) any obligations to
-----------
be performed after the Closing under the terms of any contract, agreement,
lease, license, commitment, instrument or binding arrangement of Target or
Surviving Entity, and (iii) the Assumed Liabilities.
1.32 "Securities Act" shall mean the Securities Act of 1933, as
--------------
amended, and the rules and regulations thereunder.
1.33 "Shareholder" shall mean TransMontaigne Inc.
-----------
1.34 Intentionally Left Blank.
1.35 "Surviving Entity" shall have the same meaning as set forth in
----------------
Section 2.2 of this Agreement.
- -----------
1.36 "Target" shall mean Bear Paw Energy Inc.
------
4
<PAGE>
1.37 "Target Stock" shall mean all of the authorized, issued and
------------
outstanding capital stock of Target.
1.38 "Taxes" means, with respect to any Person, (i) all income taxes
-----
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income) and all gross
receipts, sales, use, ad valorem, transfer, franchise, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property or
alternative or add-on minimum taxes, customs duties and other taxes, fees,
assessments or charges of any kind whatsoever, together with all interest and
penalties, additions to tax and other additional amounts imposed by any taxing
authority (domestic or foreign) on such Person (if any) and (ii) any liability
for the payment of any amount of the type described in clause (i) above as a
result of (x) being a "transferee" (within the meaning of Section 6901 of the
Code or any other applicable Law) of another Person, (y) being a member of an
affiliated, combined or consolidated group or (z) a contractual arrangement or
otherwise.
1.39 "Tax Return" means any return, declaration, report, claim for
----------
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.40 "TM Credit Agreement" means the Third Amended and Restated Credit
-------------------
Agreement dated as of June 29, 1999, as amended by Amendment No. 1 dated as of
June 29, 1999 and Amendment No. 2 dated as of September 30, 1999, by and between
the Shareholder and BankBoston, N.A.
1.41 "Year 2000 Compliance" shall mean that (a) no value for current
--------------------
date will cause any interruption in operation; (b) date-based functionality will
behave consistently for dates prior to, during and after Year 2000; (c) in all
interfaces and data storage, the first two digits in the year of any date are
specified either explicitly or by unambiguous algorithms; (d) year 2000 will be
recognized as a leap year; and (e) the year "00" will be read and correctly
interpreted as the year "2000."
All other capitalized terms shall have the meanings as specified elsewhere
in this Agreement.
2. The Merger and Consideration
----------------------------
2.1 Consideration. On the terms and subject to the conditions of
this Agreement, Target shall merge with and into Acquiror, and Acquiror as
consideration therefor shall pay to Shareholder an amount equal to the sum of
(A) $110,000,000, plus (B) the amount of Growth Capital Expenditures set forth
on the Closing Growth Capital Expenditures Schedule, minus (C) $2,500,000, which
amount represents consideration for Acquiror's assumption of all Environmental
Liabilities of Target (the sum of items A, B and C being referred to herein as
the "Closing Date Amount"), plus (D) the Underpayment Amount, if any (as
-------------------
determined in accordance with Section 2.8), minus (E) the Overpayment Amount, if
-----------
any (as determined in accordance with Section 2.8) (collectively, the "Merger
----------- ------
Consideration"). The Merger Consideration shall be delivered in accordance with
- -------------
the terms and provisions of Sections 2.4 and 2.8.
------------ ---
2.1.1 Post-Closing Adjustments/Schedule. The parties
acknowledge and agree to account for items paid or received by Shareholder
relating to operation of the business of Target in the ordinary course between
the Effective Date and the Effective Time so as to give the parties the economic
effect as if the Effective Time occurred on the Effective Date, including but
not limited to payments made or received by Shareholder for the account of
Target and in January 2000 for Liabilities
5
<PAGE>
or receivables of Target accrued as of the Effective Date and cash items
incurred by Target between the Effective Date and the Effective Time, together
with such other adjustments as set forth in this Agreement. Shareholder and
Surviving Entity shall jointly prepare a schedule reflecting all Post-Closing
Adjustments (the "Post-Closing Adjustment Schedule") and shall deliver the
--------------------------------
Post-Closing Adjustment Schedule to Arthur Andersen, LLP ("Arthur Andersen")
within sixty (60) days following the Closing Date. During the thirty (30) day
period following its receipt, Arthur Andersen shall audit and review the Post-
Closing Adjustment Schedule, and issue a report to the Shareholder and Surviving
Entity of its findings. Such report shall become final and binding upon the
parties on the thirtieth (30/th/) day following receipt thereof unless a written
notice of disagreement is served by either party upon the other and Arthur
Andersen within said time period. In such event, the same resolution procedures
shall be followed as provided in Sections 2.8.2 and 2.8.3 with respect to the
-------------- -----
Effective Date Balance Sheet and shall be paid in a manner similar to that set
forth in Section 2.8.4.
-------------
2.2 Merger. At the Effective Time and subject to and upon the terms
and conditions of this Agreement and in accordance with Section 18-209 of the
DLLCA and Section 7-90-203 of the Colorado Corporations and Associations Act,
Target shall be merged with and into the Acquiror (the "Merger") and as a result
------
of such Merger the separate corporate existence of the Target shall cease and
the Acquiror shall continue as the Surviving Entity. The Acquiror, as the
surviving entity after the Merger, is hereafter sometimes referred to as the
"Surviving Entity".
----------------
The Merger will have the effect set forth in Section 18-209 of
the DLLCA and Section 7-90-204 of the Colorado Corporations and Associations
Act. The Surviving Entity may, at any time after the Effective Time, take any
action, including executing and delivering any certificates, instruments and
documents as shall be determined by the board of managers of the Surviving
Entity to be necessary and appropriate, in the name and on behalf of either the
Acquiror or Target in order to carry out and effectuate the transactions
contemplated by this Agreement.
2.3 Shareholder and Member Approvals. Subsequent to the date of this
Agreement and prior to the Effective Time, the Target and Acquiror shall obtain,
in accordance with applicable law, the requisite shareholder approval as
required under the Target's Articles of Incorporation and Bylaws and the
Acquiror's Certificate of Formation and Operating Agreement as follows:
2.3.1 Target Approval. Within ten (10) days following the date
of execution of this Agreement, Target shall obtain the requisite written
consent of its Board of Directors and the Shareholder of this Agreement and the
Merger, all in accordance with the Colorado Business Corporations Act and its
Articles of Incorporation and Bylaws. The Board of Directors of Target shall
approve the Merger and shall recommend approval of the Merger to the board of
directors of the Shareholder. The directors of the Target who are also directors
of the Shareholder shall also vote, as directors of the Shareholder, to approve
the Merger by the Shareholder. The Board of Directors of Target shall duly call,
give notice of, convene and hold a special meeting of its shareholders to
consider and vote upon the approval and adoption of this Agreement.
2.3.2 Acquiror Approval. Within ten (10) days following the date
of execution of this Agreement, Acquiror, acting through its board of managers,
shall duly call, give notice of, convene and hold a special meeting of its
Members to consider and vote upon the approval and adoption of this Agreement
and the Merger contemplated hereby, or shall seek the requisite written consent
of its Members, all in accordance with Delaware law and its Certificate of
Formation and Operating Agreement. The board of managers of Acquiror shall
recommend approval and adoption of
6
<PAGE>
this Agreement by Acquiror's Members. The director of Target who is also a
Member of Acquiror shall vote to approve the Merger by the Acquiror.
2.4 Closing. The Closing shall be held at the offices of Shareholder,
370 17/th/ Street, Denver, Colorado, at 10:00 a.m. (local time) on the business
day following the date on which all conditions to the Closing set forth in
Section 3 (other than conditions which by their terms are to be satisfied at the
- ---------
Closing) shall have been satisfied. The date on which the Closing shall occur
is hereinafter referred to as the "Closing Date". At the Closing, (A) Acquiror
------------
shall deliver to Shareholder, by wire transfer to a bank account, designated in
writing by Shareholder at least two business days prior to the Closing Date,
immediately available funds in an amount equal to the Closing Date Amount as set
forth in Section 2.1 above, and (B) Shareholder shall deliver or cause to be
-----------
delivered to Acquiror a certificate representing the Target Stock, duly endorsed
in blank or accompanied by stock powers duly endorsed in blank in proper form
for transfer, with appropriate transfer stamps, if any, affixed. Such Closing
may be accomplished by facsimile transmission of Closing documents and facsimile
signatures, provided that the original of such signed documents are transmitted
to the party or parties entitled to receive such documents within three (3)
business days following the Closing Date.
2.5 Consummation of the Transaction at the Closing. Shareholder,
Target and Acquiror will each carry out the procedures specified under the
applicable provisions of Colorado and Delaware law as shall be necessary and
appropriate to assure the effectiveness of the Merger. The Merger shall be
consummated by filing the Certificate of Merger with the Secretary of State of
Delaware and a Statement of Merger with the Secretary of State of Colorado in
such form as required by, and executed in accordance with Section 18-209 of the
DLLCA and Section 7-90-203 of the Colorado Corporations and Associations Act to
the extent required, and substantially in the form of the Certificate of Merger
and Statement of Merger attached hereto as Exhibit 2.5. Such Certificate of
-----------
Merger shall provide for an amendment to the Acquiror's Certificate of Formation
to change its name to "Bear Paw Energy, LLC."
--------------------
2.6 Effect of Merger. At the Effective Time:
2.6.1 Surviving Entity. Target shall be merged with and into the
Acquiror, with the Acquiror as the Surviving Entity, and the separate existence
of Target shall cease. As a result of the Merger, the Shareholder, which held a
stock certificate representing the Target Stock prior to the Merger, shall cease
to have any rights with respect to such stock and all rights, privileges,
powers, franchises and interests of the Target and all of its properties,
whether real, personal or mixed, all debts due on whatever account, other than
the right to receive the Merger Consideration, and every other interest of the
Target, whether tangible or intangible, shall be deemed to vest in the Surviving
Entity without further act or deed, and all claims, demands, property and every
other interest shall be, as of the Effective Time, the property of the Surviving
Entity to the same extent as previously owned or held by the Target.
2.6.2 Certificate of Formation. Except as contemplated by
Section 2.5, the Certificate of Formation of the Acquiror in effect at and as of
- -----------
the Effective Time shall remain the Certificate of Formation of the Surviving
Entity until thereafter amended as provided by law.
2.6.3 Operating Agreement. The Operating Agreement of the
Acquiror in effect immediately prior to the Effective Time shall be the
Operating Agreement of the Surviving Entity until thereafter amended as provided
by law and provisions of such Operating Agreement.
7
<PAGE>
2.6.4 Directors and Officers of Target. Immediately prior to the
Effective Time of the Merger, the directors and officers of the Target, as
constituted immediately prior to the Effective Time, shall tender their
resignations to the Acquiror as requested by Acquiror in the form set forth in
Exhibit 2.6.4. The membership of the board of managers and the individuals or
- -------------
entities that will serve as managers of the Surviving Entity shall be elected by
the Members in accordance with the Surviving Entity's Operating Agreement and
such persons or entities as so appointed shall continue to hold office until
their successors have been duly nominated, elected or appointed as provided
under the Surviving Entity's Operating Agreement as may subsequently be amended
in accordance with the provisions thereof.
2.6.5 The Merger. From and after the Effective Time, the Merger
shall have all the effects provided for a merger under the DLLCA and the
Colorado Corporations and Associations Acts.
2.7 Effect on Capital Stock of Target. At the Effective Time, as a
result of the Merger and without any action on the part of Acquiror, the Target
Stock issued and outstanding immediately prior to the Effective Time, all of
which are held by the Shareholder, shall be delivered by Shareholder for
surrender to the Acquiror on the Closing Date and at the Effective Time
converted into the right to receive all the considerations payable under this
Agreement. The certificate representing the Target Stock shall be cancelled at
the Effective Time and after the Effective Time, Shareholder shall cease to have
any rights with respect to the Target Stock, except the right to receive the
consideration identified in Section 2.1 upon the surrender of the certificate
-----------
therefor in accordance with this Section 2.7. Upon the filing of the
-----------
Certificate of Merger with the Secretary of State of Delaware and the Statement
of Merger with the Secretary of State of Colorado, as a consequence of the
Merger and without any other action on the part of the parties to this
Agreement, the Target Stock shall be cancelled and retired by the Surviving
Entity in exchange for the consideration as provided in Section 2.1 hereof and
-----------
shall automatically be cancelled and retired and no payment by the Acquiror
shall be made with respect to any such other capital stock, if any, of the
Target.
2.8 Determination of Net Working Capital.
2.8.1 Preparation of Effective Date Balance Sheet. Within sixty
(60) days following the Closing Date, the Shareholder and Surviving Entity shall
jointly prepare a balance sheet of the Target that shall be as of the close of
business on the Effective Date (the "Effective Date Balance Sheet") and a
----------------------------
statement setting forth the Net Working Capital of the Target as of the close of
business on the Effective Date. The Effective Date Balance Sheet and the
statement of Net Working Capital shall be prepared (i) using the same accounting
practices, procedures and methods regularly and historically employed by the
Target for reporting to the Shareholder and (ii) in accordance with the
procedures used in preparing and set forth on Exhibit 2.8.1, which reflects the
-------------
Net Working Capital of Target as of September 30, 1999 and (iii) in accordance
with generally accepted accounting principles ("GAAP") as historically applied
----
by the Target. For purposes hereof, the term "Net Working Capital" shall mean
-------------------
the difference in amount between the Current Assets of the Target acquired by
Acquiror and the Current Liabilities of the Target assumed by Acquiror as of the
close of business on the Effective Date, excluding current income tax
asset/liabilities. The term "Current Assets" shall mean all assets that will be
--------------
collected in one year or less including cash, accounts receivable and
inventories. The term "Current Liabilities" shall mean obligations that will
-------------------
become due within one year including accounts payable, short term debts incurred
in the ordinary course of business (other than Intercompany Debt and Growth
Capital Expenditures), and accruals for wages, salaries, rentals and Taxes
(excluding Income Taxes).
8
<PAGE>
2.8.2 Review of Effective Date Balance Sheet. Within sixty (60)
days after the Closing Date, the parties shall deliver the Effective Date
Balance Sheet and statement of Net Working Capital to Arthur Andersen. Arthur
Andersen, within sixty (60) days of receipt thereof and at the Surviving
Entity's expense, shall audit the Effective Date Balance Sheet and the statement
of Net Working Capital to verify that the same have been prepared in accordance
with Section 2.8.1 and prepare and issue a report of its findings concerning the
-------------
same. During the thirty (30) day period following receipt of Arthur Andersen's
audit report, Shareholder and Surviving Entity and their respective independent
auditors shall be permitted to review the work papers of Arthur Andersen
relating to such Effective Date Balance Sheet and the statement of Net Working
Capital. The Effective Date Balance Sheet and statement of Net Working Capital
shall become final and binding upon the parties on the thirtieth (30/th/) day
following delivery of Arthur Andersen's report to the parties, unless, prior
thereto, either party gives written notice of its disagreement ("Notice of
---------
Disagreement") to the other and to Arthur Andersen. Within said time period,
- ------------
any Notice of Disagreement shall (A) specify in reasonable detail the nature of
any disagreement so asserted and (B) include only disagreements based on
mathematical errors or based on Net Working Capital not being calculated in
accordance with Section 2.8.1. If a Notice of Disagreement is received by the
-------------
receiving party in a timely manner, then the Final Effective Date Balance Sheet
(as revised in accordance with clause (I) or (II) below) shall become final and
binding upon Shareholder and Surviving Entity on the earlier of (I) the date
Shareholder and Surviving Entity resolve in writing any differences they have
with respect to the matters specified in the Notice of Disagreement or (II) the
date any disputed matters are finally resolved in writing by Arthur Andersen as
provided in Section 2.8.3 below. The Final Effective Date Balance Sheet, upon
-------------
becoming final and binding in accordance with this Section 2.8.2, and as the
-------------
same may be revised in accordance with clauses (I) or (II) of the preceding
sentence, is hereinafter referred to as the "Final Effective Date Balance
----------------------------
Sheet".
- -----
2.8.3 Determination by Arthur Andersen as to Matters in Notice
of Disagreement. During the thirty (30) day period following the delivery of a
Notice of Disagreement, Shareholder and Surviving Entity shall seek in good
faith to resolve in writing any differences which they may have with respect to
the matters specified in the Notice of Disagreement. At the end of such thirty
(30) day period, Shareholder and Surviving Entity shall submit to Arthur
Andersen for review and resolution any and all matters which remain in dispute
and which were properly included in the Notice of Disagreement. Shareholder and
Surviving Entity shall use reasonable efforts to cause Arthur Andersen to render
a decision resolving the matters submitted to the it within thirty (30) days
following submission of the disputed matters. The decision of Arthur Andersen
shall be final and binding upon the parties. Arthur Andersen's cost for the
resolution of disputes arising under any such Notice of Disagreement shall be
borne by the Surviving Entity and Shareholder in inverse proportion as they may
prevail on matters resolved by Arthur Andersen, which proportionate allocations
shall also be determined by Arthur Andersen at the time its determination is
rendered on the merits of the matters submitted. The fees and disbursements of
Shareholder's independent auditors incurred in connection with their review of
the Effective Date Balance Sheet and statement of Net Working Capital and
certification of any Notice of Disagreement shall be borne by Shareholder, and
the fees and disbursements of the Surviving Entity's independent auditors
incurred in connection with their review of the Effective Date Balance Sheet and
statement of Net Working Capital and any Notice of Disagreement shall be borne
by the Surviving Entity.
2.8.4 Post-Closing Adjustment.
(a) If the Final Effective Date Balance Sheet shows that
the Net Working Capital as of the Effective Date is a positive amount (such
amount being referred to as the "Underpayment Amount"), then, within five (5)
-------------------
business days following the date such balance sheet
9
<PAGE>
becomes the Final Effective Date Balance Sheet, the Merger Consideration shall
be increased by the amount of the Underpayment Amount and the Surviving Entity
shall make payment to the Shareholder by wire transfer in immediately available
funds in the amount of the Underpayment Amount.
(b) If the Final Effective Date Balance Sheet shows that
the Net Working Capital as of the Effective Date is a negative amount (such
amount being referred to herein as the "Overpayment Amount"), then, within five
------------------
(5) business days following the date such balance sheet becomes the Final
Effective Date Balance Sheet, the Merger Consideration shall be decreased by the
amount of the Overpayment Amount and the Shareholder shall make payment to the
Surviving Entity by wire transfer in immediately available funds in the amount
of the Overpayment Amount.
(c) The parties agree that any amounts payable by one
party to the other pursuant to paragraphs (a) or (b) above, if any and as
applicable, may be increased or decreased, as the case may be, by any respective
amounts payable or receivable from one party to the other pursuant to Section
-------
2.1.1.
- -----
2.9 Intentionally Left Blank.
2.10 Delayed Closing Date Interest. In the event the Closing shall
not have occurred on or before January 14, 2000 due to (i) the failure of
Acquiror to fulfill the conditions precedent to Shareholder's obligation to
close and/or (ii) the waiting period under the HSR Act shall not have expired or
been terminated and such delay in the HSR Act waiting period has not been
materially caused by Shareholder, Acquiror agrees to pay to Shareholder interest
on the Closing Date Amount at the rate of Thirteen Thousand Dollars ($13,000.00)
per day for each day the Closing is delayed, for the period from and including
January 15, 2000 until January 31, 2000, up to a maximum of Two Hundred Twenty-
One Thousand Dollars ($221,000.00), which sum shall be reflected on the Post-
Closing Adjustment Schedule referenced herein.
3. Conditions Precedent to Obligations
-----------------------------------
3.1 Conditions Precedent to the Target's and Shareholder's
Obligations. The obligations of Target and Shareholder to be performed under
this Agreement on or before the Closing Date are subject to each and all of the
following conditions, any one or more of which may, however, be waived in whole
or in part by Target or Shareholder.
3.1.1 Representations and Warranties. The representations and
warranties of Acquiror made in this Agreement qualified as to materiality shall
be true and correct, and those not so qualified shall be true and correct in all
material respects, as of the date hereof and as of the time of the Closing as
though made as of such time. Acquiror shall have performed or complied in all
material respects with all obligations and covenants required by this Agreement
to be performed or complied with by Acquiror by the time of the Closing.
Acquiror shall have delivered to Shareholder a certificate dated the Closing
Date and signed by an authorized member of Acquiror confirming the foregoing.
3.1.2 Opinion. Shareholder shall have received customary
opinions dated the Closing Date of Clanahan, Tanner, Downing and Knowlton, P.C.,
counsel to Acquiror.
3.1.3 Absence of Prohibitions. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or permanent
injunction or other order enacted, entered, promulgated, enforced or issued by
any Governmental Entity or other legal restraint or prohibition
10
<PAGE>
preventing the Merger shall be in effect.
3.1.4 Absence of Restraining Action. There shall not be pending
or threatened by any Governmental Entity any suit, action or proceeding (or by
any other person any suit, action or proceeding which has a reasonable
likelihood of success), challenging or seeking to restrain or prohibit the
Merger or any of the other transactions contemplated by this Agreement or
seeking to obtain from Shareholder or any of its subsidiaries in connection with
the Merger any damages that are material in relation to Shareholder and its
subsidiaries taken as a whole; provided, however, that this condition shall be
-------- -------
deemed to be waived by Shareholder as to any suit, action or proceeding (except
for any suit, action or proceeding by any Governmental Entity) if Acquiror
provides to Shareholder indemnification in form and substance reasonably
satisfactory to Shareholder and its counsel with respect to any such suit,
action or proceeding.
3.1.5 Expiration of HSR Act Waiting Period. The waiting period
under the HSR Act, if applicable to the transaction, shall have expired or been
terminated and there shall be no further action required with respect to the HSR
Act.
3.1.6 Certificates of Good Standing. Shareholder shall have
received customary closing certificates pertaining to Acquiror, including a
certificate of good standing from the Secretary of State of the State of
Delaware dated as of a date reasonably prior to the Closing Date.
3.1.7 Absence of Litigation. The Acquiror shall have disclosed
to Target and Shareholder in Exhibit 4.1.16 all suits, actions or other
--------------
proceedings pending before any court or governmental agency, or threatened
against or affecting the Acquiror and Shareholder shall be satisfied that no
such suit, action or other proceeding, if adversely determined, would have a
material adverse effect on the value of the business, assets, or properties of
the Acquiror.
3.1.8 Closing Documents. Target and Shareholder shall have
received the certificates and other Closing documents required to be received
under this Section or Section 7.2 hereof on or prior to the Closing Date.
-----------
3.1.9 Consents and Releases. Shareholder shall have obtained
the consents and releases referenced in Sections 7.12 and 7.13.
------------- ----
3.1.10 Facilities Operating Agreement. Shareholder and Acquiror
shall enter into a facilities operating agreement prior to the Effective Date
containing terms and conditions mutually acceptable to the parties.
3.2 Conditions Precedent to the Acquiror's Obligations. The
obligations of the Acquiror to be performed under this Agreement on or before
the Closing Date are subject to each and all of the following conditions, any
one or more of which may, however, be waived in whole or in part by the
Acquiror:
3.2.1 Representations and Warranties. The representations and
warranties of Shareholder made in this Agreement qualified as to materiality
shall be true and correct, and those not so qualified shall be true and correct
in all material respects, as of the date hereof and as of the time of the
Closing as though made as of such time. Shareholder shall have performed or
complied in all material respects with all obligations and covenants required
by this Agreement to be performed or complied with by Shareholder by the time
of the Closing. Shareholder shall have delivered to Acquiror a certificate
11
<PAGE>
dated the Closing Date and signed by an authorized officer of Shareholder
confirming the foregoing.
3.2.2 Opinion. Acquiror shall have received customary opinion
dated the Closing Date of Erik B. Carlson, Esq., counsel to Shareholder.
3.2.3 Absence of Prohibitions. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or permanent
injunction or other order enacted, entered, promulgated, enforced or issued by
Governmental Entity or other legal restraint or prohibition preventing the
Merger shall be in effect.
3.2.4 Absence of Restraining Action. There shall not be pending
or threatened by any Governmental Entity any suit, action or proceeding (or by
any other person any suit, action or proceeding which has a reasonable
likelihood of success), (A) challenging or seeking to restrain or prohibit the
Merger or any of the other transactions contemplated by this Agreement or
seeking to obtain from Acquiror or its members in connection with the Merger any
damages that are material in relation to Acquiror and its members taken as a
whole, (B) seeking to prohibit or limit the ownership or operation by Acquiror,
Target or any of their respective members of subsidiaries of any material
portion of the business or assets of Acquiror, Target or any of their respective
subsidiaries or members, or to compel Acquiror, Target or any of their
respective subsidiaries or members to dispose of or hold separate any material
portion of the business or assets of Acquiror, Target or any of their respective
members or subsidiaries, in each case as a result of the Merger or any of the
other transactions contemplated by this Agreement, or (C) seeking to prohibit
Acquiror or any of its members from effectively controlling Target in any
material respect; provided, however, that this condition shall be deemed to be
-------- -------
waived by Acquiror as to any suit, action or proceeding that seeks solely
monetary damages (except for any suit, action or proceeding by any Governmental
Entity) if Shareholder provides to Acquiror indemnification in form and
substance reasonably satisfactory to Acquiror and its counsel with respect to
such suit, action or proceeding.
3.2.5 Expiration of HSR Waiting Period. The waiting period
under the HSR Act shall have expired or been terminated and there shall be no
further action required with regard to the HSR Act.
3.2.6 Consents and Waivers. Shareholder shall have obtained all
third party and Governmental Entities consents or waivers that are necessary for
the conduct of the business of Target or to consummate the transactions
contemplated by this Agreement identified in Exhibit 4.1.18, all such consents
--------------
and waivers being in form and substance reasonably satisfactory to Acquiror.
3.2.7 Licenses, Permits and Authorizations. All licenses,
permits and authorizations issued or granted to Target by Governmental Entities
that are necessary for the conduct of the business of Target set forth in
Exhibits 4.1.22 and 4.1.25 shall be in place and not be subject to expiration,
- --------------- ------
revocation or adverse change due to the Closing or shall have been obtained by
Acquiror.
3.2.8 Certificates of Good Standing. Acquiror shall have
received customary closing certificates pertaining to Target, including a
certificate of good standing from the Secretary of State of the State of
Colorado and comparable certificates from the Secretaries of State of each State
in which Target is qualified to do business as a foreign corporation, each dated
as of a date reasonably prior to the Closing Date.
<PAGE>
3.2.9 Certificates. The Acquiror shall have received such
certificates and other Closing documents as are required by this Section 3.2.9
-------------
and Section 7.1 hereof on or prior to the Closing Date.
-----------
3.2.10 Member Approval. The Members of Acquiror shall have
approved the Merger and the other transactions contemplated by this Agreement in
accordance with the DLLCA.
3.2.11 Absence of Adverse Changes. Target shall not suffer
any material adverse change in its financial condition, business, property or
assets since the date of the most recent audited financial statements of the
Target.
3.2.12 Resignations. Acquiror shall have received the
resignation dated as of the Closing Date of each director of the Target and the
officers of the Target as Acquiror requests to resign prior to the Closing in
the form set forth in Exhibit 2.6.4.
-------------
3.2.13 Change in Financial Markets. There shall not have
occurred a material disruption or a material adverse change in financial,
banking or capital market conditions that could materially impair the financing
of debt or equity of the Acquiror.
3.2.14 Facilities Operating Agreement. Shareholder and
Acquiror shall enter into a facilities operating agreement prior to the
Effective Date containing terms and conditions mutually acceptable to the
parties.
3.3 Frustration of Closing Conditions. Neither Acquiror nor
Shareholder may rely on the failure of any condition set forth in Section 3.1 or
-----------
3.2, respectively, to be satisfied if such failure was caused by such party's
- ---
failure to act in good faith or to use its commercially reasonable efforts to
cause the Closing to occur.
4. Representations and Warranties.
-------------------------------
4.1 Representations and Warranties of Target and Shareholder. The
Target and the Shareholder, jointly and severally, represent and warrant to
Acquiror as of the date hereof, as of the Effective Date and as of the Closing
Date, as follows:
4.1.1 Good Standing/Charter Documents. The Target is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado, with full corporate power and authority to own,
operate and lease its properties and to carry on its business as now being
conducted. The Target is qualified to do business and is in good standing in
all jurisdictions where its properties, assets or activities and operations so
require, which states are listed in Exhibit 4.1.1 attached hereto. True and
-------------
correct copies of the Target's Articles of Incorporation and all amendments
thereto, and the Target's Bylaws and all amendments thereof are set forth in
Exhibit 4.1.1 attached hereto.
- -------------
4.1.2 Binding Agreement. Each of the Shareholder and Target
has all respective power and authority (corporate or otherwise) to execute,
deliver and perform its respective obligations under this Agreement and to
consummate the Merger contemplated herein. This Agreement has been executed and
delivered by the Target and Shareholder, constitutes the valid and binding
obligations of the Target and the Shareholder and is enforceable in accordance
with their terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium, general principles
13
<PAGE>
of equity, or similar laws affecting the rights of creditors generally and will
not conflict with, cause a breach, violate or be in contravention of or result
in a default under the respective Articles of Incorporation, Bylaws or any other
organizational or governing instrument of the Target or the Shareholder, or of
any Contract, Lease, indenture, promissory notes, agreement, mortgage or other
instrument to which the Target or Shareholder is a party or by which any of its
assets or property is bound or affected or to the best of Target and
Shareholder's knowledge any law, rule, License, regulation, judgment, decree or
order of any court, agency or other authority to which has jurisdiction over the
business, properties, assets and activities of Target or Shareholder. All
corporate action necessary for the approval or ratification of this Agreement
has been taken or, in the case of submission of this Agreement for approval by
Target's Board of Directors and Shareholder, will have been taken on or before
the Closing.
4.1.3 Capital Stock of Target. The authorized capital stock
of the Target consists of one million (1,000,000) shares of common stock, par
value of ten cents (.10c) per share, of which, as of the date hereof, ten
thousand (10,000) shares, constituting the Target Stock, are duly authorized,
validly issued and outstanding, fully paid and non-assessable. Shareholder is
the record and beneficial owner of the Target Stock. Except for the Target
Stock, there are no shares of capital stock or other equity securities of Target
outstanding. The Target Stock has not been issued in violation of, and the
Target Stock is not subject to, any purchase option, call, right of first
refusal, preemptive, subscription or similar rights under any provision of
applicable law, the Articles of Incorporation or By-laws of Target, any
contract, agreement or instrument to which Target is subject, bound or a party
or otherwise. There are no outstanding warrants, options, rights, "phantom"
stock rights, agreements, convertible or exchangeable securities or other
commitments (other than this Agreement) (i) pursuant to which Shareholder or
Target is or may become obligated to issue, sell, purchase, return or redeem any
shares of capital stock or other securities of Target or (ii) that give any
person the right to receive any benefits or rights similar to any rights enjoyed
by or accruing to the holders of shares of capital stock of Target.
4.1.4 Ownership of the Target Stock. Except as disclosed in
Exhibit 4.1.4, Shareholder has good and valid title to the Target Stock, free
- -------------
and clear of any liens, claims, encumbrances, security interests, options,
charges and restrictions of any kind. Other than this
Agreement, the Target Stock is not subject to any voting trust agreement or
other contract, agreement, arrangement, commitment or understanding, including
any such agreement, arrangement, commitment or understanding restricting or
otherwise relating to the voting, dividend rights or disposition of the Target
Stock.
4.1.5 No Agreements. Except as set forth in Exhibit 4.1.5,
-------------
there are no agreements with any person with respect to (i) the sale, lease,
exchange or other disposition of any of the Target's properties or assets,
except in the ordinary course of its business; or (ii) the sale, pledge,
hypothecation, transfer, assignment or other disposition of the ownership,
direct or indirect, of any of the Target Stock, the operation of which may in
the future result in a change in control of the Target.
4.1.6 Financial Information. The unaudited trial balance
report of the Target dated September 30, 1999 attached hereto as Exhibit 4.1.6
-------------
(the "Balance Sheet") has been prepared based upon the accounting practices,
-------------
procedures and methods regularly and historically employed by the Target for
reporting to the Shareholder and in accordance with GAAP, as historically
applied by the Target, is in accordance with the books and records of the Target
(which books and records are complete and correct in all material respects) and
fairly presents the financial position and results of operations of the Target
in all material respects as of such date and for the period indicated. As of the
date of the
14
<PAGE>
Balance Sheet, the Target had no Liabilities other than those set forth on the
Balance Sheet. Since the date of the Balance Sheet, Target has not incurred or
become subject to any Liability other than Liabilities incurred in the ordinary
course of business.
4.1.7 No Change In Financial Condition. Except as set forth
in Exhibit 4.1.7 attached hereto, since September 30, 1999, there has not been,
-------------
and neither the Shareholder nor the Target knows of (i) any event, condition or
state of facts that has resulted or may reasonably be expected to result in any
material adverse change in the financial condition, business, sales, income,
properties, assets or liabilities of the Target; or (ii) any material adverse
change with respect to any contracts to which the Target is a party or any
event, circumstance, fact or other occurrence which may result in any material
adverse change to the financial condition, business, sales, income, properties
or assets of the Target; or (iii) any damage, destruction or loss to the
properties, assets or business of the Target, whether or not covered by
insurance, as the result of any fire, explosion, accident, casualty, labor
disturbance or interruption, requisition or taking of property by any
governmental body or agency, flood, embargo, or act of God or the public enemy,
or cessation, interruption or diminution of operations, which has materially and
adversely affected or impaired or which may be reasonably expected to materially
or adversely affect or impair the conduct of the Target's operations or
business; or (iv) any labor trouble or, to the best of Shareholder's or the
Target's knowledge, any event or condition of any character which has materially
and adversely affected or which may be reasonably expected to materially and
adversely affect or impair the conduct of the Target's operations or business;
or (v) any declaration, setting aside or payment of any dividend, or any other
distribution (whether in cash, stock or other property), in respect of the
Target Stock; or (vi) any redemption, purchase or other acquisition by the
Target of any of the Target Stock; or (vii) any significant loss of customers of
the Target or any delivery of a notice of non-renewal or any other failure to
renew contracts between Target and any of its significant customers.
4.1.8 Tax Matters.
(i) Except as set forth in Exhibit 4.1.8, (A) Target and
-------------
any affiliated group, within the meaning of Section 1504 of the Code, of which
Target is or has been a member, have filed or caused to be filed in a timely and
proper manner all material Tax Returns, reports and forms required to be filed
by the Code or by applicable state, local or foreign Tax laws, (B) all Taxes
required to be paid, including all Taxes due on or prior to the Effective Date
have been paid in full or will be paid in full as of the Closing Date and (C) no
material Tax liens have been filed, and no material claims are being asserted in
writing, with respect to any Taxes payable by Target or any member of any such
affiliated group.
The federal consolidated income Tax Returns in which
Target has joined have not been audited by the Internal Revenue Service.
(ii) Except as set forth in Exhibit 4.1.8, (A)
neither Shareholder nor any of its affiliates has made with respect to Target,
or any property held by Target, any consent under Section 341 of the Code, (B)
no property of Target is "tax exempt use property" within the meaning of Section
168(h) of the Code, and (C) Target is not a party to any lease made pursuant to
Section 168(f)(8) of the Internal Revenue Code of 1954.
(iii)Except as set forth in Exhibit 4.1.8, there
-------------
are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any material Tax returns required to be filed with
respect to Target and neither Target nor any affiliated group, within the
meaning of Section 1504 of the Code, of which Target is or has been a member,
has requested any
15
<PAGE>
extension of time within which to file any material Tax return, which return has
not yet been filed.
(iv) Shareholder is not a "foreign person" within the
meaning of Section 1445 of the Code.
(v) All monies required to be withheld by the Target
from employees for income taxes, social security and unemployment insurance
taxes have, as of the date hereof, been collected or withheld, and as of the
Closing Date shall have been collected and withheld, and either paid to the
appropriate governmental agencies or set aside in cash for such purpose. The
Target has not entered into, nor has been asked to enter into, any agreement for
the extension of time or the assessment of any Tax or Tax delinquency, nor has
the Target received any outstanding or unresolved notices from the Internal
Revenue Service or any taxing body of any proposed examination or of any
proposed deficiency or assessment or of any Tax returns of Tax liabilities due
and payable.
(vi) Target has no liability in respect of any Tax
sharing agreement with any Person, and all Tax sharing agreements to which
Target has been bound have been terminated.
(vii)No claim has been made within the last three
years by any taxing authority in a jurisdiction in which Target does not file
Tax Returns that Target is or may be subject to taxation by that jurisdiction.
4.1.9 Accounts; Safe Deposit Boxes; Powers of Attorney.
Shareholder has made available to Acquiror (i) a true and correct list of all
bank and savings accounts, certificates of deposit and safe deposit boxes of
Target and those persons authorized to sign thereon, (ii) true and correct
copies of all corporate borrowing, depository and transfer resolutions and those
persons entitled to act thereunder and (iii) a true and correct list of all
powers of attorney granted by Target in force as of the date hereof and those
persons authorized to act thereunder.
4.1.10 Assets Other than Real Property Interests. Target has
good and valid title to all assets related to its business, except those assets
sold or otherwise disposed of for fair value since September 30, 1999 in the
ordinary course of business consistent with past practice and not in violation
of this Agreement, in each case free and clear of all mortgages, liens, security
interests or encumbrances of any kind except (i) such as will be set forth in
Exhibit 4.1.10, and (ii) Permitted Liens.
- --------------
All the material tangible personal property of Target has been
maintained in all respects in accordance with the past practice of Target and
generally accepted industry practice. Each item of material tangible personal
property of Target is in all respects in good operating condition and repair,
ordinary wear and tear excepted. All material leased personal property of
Target is in all respects in the condition required of such property by the
terms of the lease applicable thereto during the term of the lease and upon the
expiration thereof.
This Section 4.1.10 does not relate to real property or interests
--------------
in real property, such items being the subject of Section 4.1.12.
--------------
4.1.11 Stock Transfer Records and Minute Books. Copies of
the stock transfer records and corporate minute books of the Target and its
subsidiaries will be furnished to the Acquiror at least ten (10) days prior to
the Closing Date and will be complete and correct in all respects, except for
those minutes and resolutions to be prepared with respect to Target's Canadian
subsidiary in respect of certain 1999 tax return filings which will be prepared
and filed in conjunction with
16
<PAGE>
Shareholder's preparation and filing of such tax returns. The minute books will
accurately reflect all meetings, consents and other actions of the shareholders
and board of directors of the Target since the ownership of the Target by
Shareholder and will also include such other documents as may be in the
possession of Target relating to the period prior to Shareholder's ownership of
the Target.
4.1.12 Title to Real Property. Exhibit 4.1.12 sets forth a
--------------
complete list of all real property and interests in real property owned in fee
by Target that are used, held for use or intended to be used primarily in, or
necessary for the conduct of, the current business (individually, an "Owned
-----
Property"). Exhibit 4.1.12 sets forth a complete list of all real property and
- -------- --------------
interests in real property leased by Target that are used, held for use or
intended to be used primarily in, or necessary for the conduct of, the current
business of Target (individually, a "Leased Property"). Target has (i) good and
---------------
insurable fee title to all Owned Property and (ii) good and valid title to the
leasehold estates in all Leased Property (an Owned Property or Leased Property
being sometimes referred to herein, individually, as a "Company Property" and,
----------------
collectively, as "Company Properties"), in each case free and clear of all
------------------
mortgages, liens, security interests, encumbrances, leases, assignments,
subleases, easements, covenants, rights-of-way and other similar restrictions of
any nature whatsoever, except (A) such as will be set forth in Exhibit 4.1.12,
--------------
(B) leases, subleases and similar agreements that will be set forth in Exhibit
-------
4.1.12, (C) Permitted Liens, (D) easements, covenants, rights-of-way,
- ------
conditions, restrictions, reservations, licenses and other similar restrictions
of record, (E) (I) any conditions that may be shown by a current, accurate
survey or physical inspection of any Target Property made prior to Closing and
(II) all immaterial encroachments, overlaps, boundary line disputes and
shortages in area and (F) (I) all land use (including environmental and
wetlands) zoning, building and other similar restrictions, (II) mortgages,
liens, security interests, encumbrances, easements, covenants, rights-of-way and
other similar restrictions that have been placed by any owner, developer,
landlord, sublandlord or other third party on property over which Target has
easement rights or on any Leased Property and subordination or similar
agreements relating thereto, and (III) unrecorded easements, covenants, rights-
of-way, conditions, restrictions, reservations, licenses and other similar
restrictions, none of which items set forth in clauses (I), (II) and (III),
individually or in the aggregate, materially impair the continued use and
operation of the property to which they relate in the business of Target as
presently conducted. The current use by Target of the natural gas gathering and
processing facilities (each, a "Facility" and collectively, the "Facilities"),
-------- ----------
offices and other facilities located on Target Property does not violate any
local zoning or similar land use or government regulations in any manner that
materially affects, or could reasonably be expected to materially affect, the
use or operation of any Facility.
4.1.13 Easements, Rights-of-Way and Licenses. Exhibit 4.1.13
--------------
attached hereto sets forth, as of the date hereof and which shall set forth as
of the Closing Date, an accurate and complete list of all easements and rights-
of-way across real property or leases, license agreements and other rights to
and for personal property to which the Target is a party (whether as purchaser,
lessor, lessee, licenser or licensee) (collectively, the "Leases, Rights-of-Way
---------------------
and Licenses"). The Target, as purchaser, lessee or licensee, has entered into
- ------------
all such Leases, Rights-of-Way and Licenses which are necessary for the conduct
of the business and operation as now conducted. The Target has provided Acquiror
access to accurate and complete copies of all such Leases, Rights-of-Way and
Licenses. Each such Lease, Right-of-Way and License is in full force and effect.
Each such Lease, Right-of-Way and License constitutes the legal, valid and
binding obligation of the Target and the other party or parties thereto,
enforceable against the Target or such other party or parties thereto as the
case may be in accordance with its respective terms of each such Lease,
Right-of-Way and License except as may be limited by bankruptcy, insolvency,
reorganization, readjustment of debt, moratorium, general principles of equity
or other laws of general application related to or affecting the enforcement of
creditor's rights generally. Neither the Target nor the Shareholder has received
notice or have any reason to know, of any
17
<PAGE>
claimed default under any such Leases, Rights-of-Way and Licenses except as set
forth in Exhibit 4.1.13. The Target has a valid and enforceable right to lay,
--------------
operate and maintain all of the pipeline currently operated by Target, other
than as specifically set forth on Exhibit 4.1.13.
--------------
4.1.14 Insurance. Shareholder or Target maintain policies of
fire and casualty, liability and other forms of insurance in such amounts, with
such deductibles and against such risks and losses as are reasonable for the
business and assets of Target. All such policies are in full force and effect,
all premiums due and payable thereon have been paid (other than retroactive or
retrospective premium adjustments that are not yet, but may be, required to be
paid with respect to any period ending prior to the Closing Date under
comprehensive general liability and workmen's compensation insurance policies),
and no notice of cancellation or termination has been received with respect to
any such policy which has not been replaced on substantially similar terms prior
to the date of such cancellation. To the knowledge of Shareholder, the
activities and operations of Target have been conducted in a manner so as to
conform in all material respects to all applicable provisions of such insurance
policies.
4.1.15 Intellectual Property. Exhibit 4.1.15 sets forth a true
--------------
and complete list of all patents, trademarks (registered or unregistered), trade
names, service marks and registered copyrights and registrations and
applications therefor, domestic or foreign, owned by or registered in the name
of Target or in or with respect to which Target has any rights that are used,
held for use or intended to be used primarily in, or necessary for the conduct
of, the current business, except for (A) such rights the loss of which,
individually or in the aggregate, would not have a material adverse effect and
(B) rights in off-the-shelf computer software. Target owns or holds licenses
under all such patents, trademarks, trade names, service marks and copyrights as
are necessary for the conduct of its business as currently conducted and neither
Shareholder nor Target is currently in receipt of any notice of infringement or
notice of conflict with the asserted rights of other persons in any patents,
trademarks, trade names, service marks or copyrights owned or held by other
persons.
4.1.16 No Litigation. Except as set forth in Exhibit 4.1.16
--------------
attached hereto, there are no existing or pending or, to the best of the
knowledge of the Target and the Shareholder, threatened suits, actions, claims,
or litigation, administrative, arbitration or other proceedings or governmental
investigations or inquiries to which the Target or Shareholder is a party to
which any of the properties or assets of Target is subject.
4.1.17 No Violation of Laws or Regulations. To the best
knowledge of Shareholder and Target, the Target has materially complied with,
and is not in any material respect in default under or in violation of, any
laws, ordinances, requirements, regulations or orders applicable to its
businesses and properties, nor is the Target in violation of or in default of
any order, writ, injunction, judgment or decree of any court, arbitrator, or
federal, state or local department official, commission, authority, board,
bureau, agency or other instrumentality issued or pending against the Target
which would adversely affect the Target's or the Shareholder's ability to
execute, deliver and perform their obligations under this Agreement or to
consummate the transactions contemplated hereby or which challenges or seeks to
prevent, enjoin, alter or delay any such transactions. Except as set forth in
Exhibit 4.1.17, neither the Shareholder nor the Target has received notice, or
- --------------
otherwise have any reason to know, of any claimed default or violation or
investigation related thereto with respect to any of the foregoing.
4.1.18 Consents and Approvals. All consents necessary or
required to be obtained by the Target and the Shareholder for the consummation
of the transactions contemplated hereby are set forth in Exhibit 4.1.18 attached
--------------
hereto. The Target or Shareholder will have obtained, on or before the Closing
Date, all such consents, approvals and authorizations of all designations,
18
<PAGE>
declarations and notices required to be obtained or given, as the case may be,
pursuant to the Articles of Incorporation or the Bylaws of the Target, the TM
Credit Agreement or under or in accordance with any Lease, Rights-of-Way,
License, Permit, Contract, agreement, indenture or other instrument to which the
Target is a party or by which the Target or any of its properties or assets are
bound in connection with the execution, delivery and performance of this
Agreement and the consummation of each transaction referred to in this
Agreement. Subject to obtaining the approvals set forth in Exhibit 4.1.18,
--------------
attached hereto, neither the execution, delivery or performance of this
Agreement nor the conclusion of any transaction contemplated by this Agreement
will result in any violation of, be in conflict with or constitute a default
under any term or provision of the Articles of Incorporation or the Bylaws of
the Target, the TM Credit Agreement or any Lease, Right-of-Way, License, Permit,
Contract, indenture or other agreement or instrument or the rules and
regulations of any regulatory body having jurisdiction over Target and/or its
properties.
4.1.19 Labor Agreements. There are (i) no collective
bargaining agreements between the Target and any labor union or other
representative of employees, including local agreements, amendments,
supplements, letters and memoranda of understanding of all kinds and (ii) no
employment or consulting contracts to which the Target is a party which are not
terminable at will without penalty.
4.1.20 Contracts. Exhibit 4.1.20 attached hereto sets forth,
--------------
as of the date hereof and as of the Closing Date, accurate and complete lists of
the following:
(i) except for the Leases and Licenses, all
agreements, contracts, arrangements, commitments, understandings or obligations,
oral or written, of the Target which are to be performed in whole or in part on
or after the date hereof and which require or may require the payment by the
Target in an amount, or under which the Target is required or may be required to
provide goods or services of a value, greater than twenty-five thousand dollars
($25,000) during any period of twelve (12) consecutive months;
(ii) any agreement to which the Target is a party or by
which its properties or assets are bound that limits the freedom of Target to
compete in any line of business or with any person; and
(iii)all other agreements, contracts, arrangements,
commitments, understandings or obligations, oral or written (other than oral
contracts of employment), between the Target on the one part and the Shareholder
or any other officer or director of the Target on the other part, or in which
any of such persons or entities has any financial interest, direct or indirect
(including without limitation any agreements affecting the Target's properties
or assets and agreements to make loans).
The Target or the Shareholder have furnished to the
extent reasonably requested by Acquiror or have made available for inspection by
Acquiror a copy of each agreement, contract, arrangement, commitment or
obligation set forth on Exhibit 4.1.20, attached hereto. Collectively the
--------------
contracts, agreements, arrangements, commitments or obligations set forth in
this Section and listed in Exhibit 4.1.20, attached hereto, are referred to
--------------
throughout this Agreement as the "Contracts." Except as set forth in Exhibit
--------- -------
4.1.20, each such Contract is in full force and effect and constitutes a valid
- ------
and binding obligation of the Target which the Target has performed all material
obligations under each Contract required to be performed by it as of the date
hereof and as of the Closing Date and Target is not (without or without the
lapse of time or the giving of notice, or both) in breach or in default in any
material respect thereunder and, to the knowledge of Target, no other party
19
<PAGE>
to any of the Contracts (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder.
4.1.21 Employees. Except as set forth on Exhibit 4.1.21, the
--------------
Target is not a party to any agreement, contract, arrangement, plan, commitment
or understanding which has resulted or would result, upon the consummation of
the transactions contemplated under this Agreement or otherwise, separately or
in the aggregate, in the payment of any "excess parachute payment" within the
meaning of Code Section 280G nor is the Target obligated to pay any severance
arrangements with any current or former employees of the Target or any of its
subsidiaries. Attached hereto as Exhibit 4.1.21 is a true and complete list of
--------------
all persons employed and/or compensated by the Target. There are no employees
of the Target who have employment contracts or employee benefit rights which
cannot be terminated upon reasonable notice, except to the extent employment
benefit rights must be continued as required by state and federal law.
4.1.22 Licenses, Equipment.
(i) All licenses and authorizations with respect to the
facilities owned, operated or leased by the Target, such facilities being
identified at Exhibit 4.1.22, attached hereto, and/or to the conduct of the
--------------
Target's business are listed at Exhibit 4.1.22 attached hereto. Except as set
--------------
forth in Exhibit 4.1.22 to the best knowledge of Shareholder or Target, the
--------------
Target has complied in all material respects with all terms and conditions
thereof and the same are not now and will not be at the Closing subject to
suspension, modification, revocation or nonrenewal as a result of this Agreement
or the consummation of the transactions contemplated hereby. There are no
outstanding citations or notices of a violation or, to the best knowledge of the
Target and Shareholder, investigations ongoing, by any federal or state
government agency, commission or other authority with respect to the facilities
owned, operated or leased by the Target.
(ii) The Target owns or leases all of the equipment
necessary or useful in the operation of the facilities in accordance with the
licenses granted in connection therewith and in accordance with the Target's
obligations under any agreements now in effect (the "Equipment"). All of the
---------
Equipment is in good repair and operable condition, ordinary wear and tear
excepted, and has been, and will be, prior to Closing, operated in material
compliance with the authorizations governing the operation of the facilities and
applicable rules and regulations of the federal and state regulatory agency,
commission or other authority having jurisdiction over such facilities.
4.1.23 Customer Accounts Receivable. All customer accounts
receivable of Target, in effect as of the date hereof or which are subsequently
created through the Closing Date, have arisen from bona fide transactions in the
ordinary course of business. To Shareholder's knowledge, all such customer
accounts receivable are good and collectible at the aggregate recorded amounts
thereof, net of any applicable reserves for doubtful accounts. Target has good
and marketable title to all of its accounts receivable, free and clear of all
liens, except as set forth in Exhibit 4.1.23.
--------------
4.1.24 Payables. The accounts payable of the Target are true
and correct and Target is not in default thereunder as of the date hereof and as
of the Closing Date. The Target shall not incur any additional accounts payable
between the date hereof and the Closing Date other than in the ordinary course
of business without Acquiror's express, written consent, which consent shall not
be unreasonably withheld.
20
<PAGE>
4.1.25 Permits. The Target has obtained all permits, licenses
and any other approvals or authorizations (collectively "Permits") necessary for
-------
the ownership, operation, or leasing of the facilities. All such Permits are
presently valid and in full force and effect, the Target is not in default
under, no condition exists that with notice or lapse of time would constitute a
default under, and no revocation, cancellation, or withdrawal thereof has been
effected or to the best of the knowledge of the Target and the Shareholder,
threatened. Except as set forth in Exhibit 4.1.25, the execution, delivery and
--------------
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in the termination of, or modifications of,
any such Permits.
4.1.26 Employee Benefit Matters.
(i) Employee Salaries and Benefits. Exhibit 4.1.26(i)
-----------------
consists of a true and complete list of all of the salaries of all employees of
the Target and a true and complete list of all "employee pension benefit plans"
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (sometimes referred to herein as "Retirement Savings
----- ------------------
Plan"), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA),
- ----
bonus, stock option, stock purchase, deferred compensation plans or arrangements
and other employee fringe benefit plans maintained, or contributed to, by
Shareholder or Target for the benefit of any employees of Target (all the
foregoing being herein referred to as "Benefit Plans"). Shareholder will make
-------------
available to Acquiror true, complete and correct copies of (A) each Benefit Plan
(or, in the case of any unwritten Benefit Plans, descriptions thereof), (B) the
most recent annual report on Form 5500 filed with the Internal Revenue Service
with respect to each Benefit Plan (if any such report was required), (C) the
most recent summary plan description for each Benefit Plan for which such a
summary plan description is required and (D) each trust agreement and group
annuity contract relating to any Benefit Plan. None of the Benefit Plans is
sponsored or maintained by Target (except to the extent Target is a
participating employer in the Benefit Plans), and neither Acquiror nor Target
shall have any liability or obligation under any Benefit Plan from and after the
Closing except as specifically provided in Section 8 hereof.
---------
(ii) Compliance with ERISA. Except as set forth in
Exhibit 4.1.26(ii), (A) each Benefit Plan has been administered in all material
- ------------------
respects in accordance with its terms, (B) Target and all the Benefit Plans are
in compliance in all material respects with the applicable provisions of ERISA
and the Code, and (C) there are no lawsuits, actions, termination proceedings or
other proceedings pending, or, to the knowledge of Shareholder, threatened
against or involving any Benefit Plan and, to the knowledge of Shareholder,
there are no investigations by any Governmental Entity or other claims (except
claims for benefits payable in the normal operation of the Benefit Plans)
pending or threatened against or involving any Benefit Plan or asserting any
rights to benefits under any Benefit Plan.
(iii) Funding. Except as set forth in Exhibit
-------
4.1.26(iii), (A) all contributions to, and payments from, the Benefit Plans that
- -----------
may have been required to be made in accordance with the Benefit Plans and, when
applicable, Section 302 of ERISA or Section 412 of the Code, have been timely
made, (B) there has been no application for or waiver of the minimum funding
standards imposed by Section 412 of the Code with respect to any Pension Plan,
(C) no Pension Plan has an "accumulated funding deficiency" within the meaning
of Section 412(a) of the Code as of the most recent plan year and (D) there are
no liens in respect of any Pension Plan to which Target could be subject
pursuant to Section 412(n) of the Code or Sections 302(f) or 4068(a) of ERISA.
(iv) Determination Letters. Except as set forth in
Exhibit 4.1.26(iv), all Pension Plans that are intended to be tax-qualified have
- ------------------
been the subject of determination
21
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letters from the Internal Revenue Service to the effect that such Pension Plans
are qualified and exempt from Federal income taxes under Sections 401(a) and
501(a), respectively, of the Code, and no such determination letter has been
revoked nor, to the knowledge of Shareholder, has revocation been threatened. No
amendment to any such Pension Plan has been adopted since the date of its most
recent determination letter that, to the knowledge of Shareholder, is likely to
adversely affect its qualification.
(v) Prohibited Transactions. To the best of the
knowledge of Shareholder and Target, "prohibited transaction" (as defined in
Section 4975 of the Code or Section 406 of ERISA) has not occurred that involves
the assets of any Benefit Plan and that could subject Target or any of its
employees to a material tax or penalty on prohibited transactions imposed by
Section 4975 of ERISA or the sanctions imposed under Title I of ERISA. Except as
will be set forth in Exhibit 4.1.26(v), none of the Pension Plans has been
-----------------
terminated nor have there been any "reportable events" (as defined in Section
4043 of ERISA and the regulations thereunder) with respect thereto for which the
30-day notice requirement under Section 4043(a) of ERISA has not been waived by
the Pension Benefit Guaranty Corporation other than as a result of the
transactions contemplated by this Agreement. Neither Shareholder nor, to
Shareholder's knowledge, any trustee, administrator or other fiduciary of any
Benefit Plan nor any agent of any of the foregoing has engaged in any
transaction or acted or failed to act in a manner that could subject Target to
any liability for breach of fiduciary duty under ERISA or any other applicable
law which, individually or in the aggregate, would have a material adverse
effect.
(vi) Pension Benefit Guaranty Corporation
Liability. With respect to any Pension Plan subject to Title IV of ERISA
(including for the purposes of this Section 4.1.26 any Pension Plan maintained
--------------
or contributed to by Shareholder or any other person under common control with
Shareholder), Shareholder has not incurred any liability to such Pension Plan or
to the Pension Benefit Guaranty Corporation that has not been satisfied, other
than for the payment of contributions or premiums, all of which have been paid
when due.
(vii) Multi-Employer Plan. Except as set forth in
Exhibit 4.1.26(vii), at no time within the three years preceding the Closing
- -------------------
Date has Shareholder or Target been required to contribute to any "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA) for the benefit of any
employees of Target or incurred any withdrawal liability, within the meaning of
Section 4201 of ERISA, with respect to any such multiemployer plan, which
liability has not been fully paid as of the date hereof, or announced an
intention to withdraw, but not yet completed such withdrawal, from any such
multiemployer plan.
(viii) Post Retirement Benefits. No plan, program or
arrangement maintained by the Target or by Shareholder on behalf of Target
provides for post-retirement medical benefits, post-retirement death benefits or
other post-retirement welfare benefits, except to the extent of the continuation
coverage rules as provided under the provisions of (S)4980B of the Code and
(S)(S)601 through 608 of ERISA.
(ix) Communications. To the best knowledge of Target
and Shareholder, all communications with respect to each Benefit Plan by any
person having the requisite authority to make such communications reflect and
always have reflected in all material respects the plan documents and operations
of each such Benefit Plan. There have been no written statements or
communications, and to the best knowledge of the Target and the Shareholder, no
oral statements or communications made to any employee or former employee of the
Target in any form by any person so authorized by Shareholder or Target
(including, without limitation, any officer, director or any other employee of
the Target having the requisite power to do so) which provide for or could be
construed as
22
<PAGE>
contract or promise by the Target to provide for any pension, welfare or
other insurance type benefits to any such employee or former employee, whether
before or after retirement, other than benefits under the Benefit Plans listed
in Exhibit 4.1.26(i) attached hereto.
-----------------
(x) Severance. The Target has no severance arrangements
with any current or former employee of the Target.
4.1.27 Directors and Officers. Exhibit 4.1.27 attached hereto
--------------
is a correct and complete list as of the date hereof showing the names of each
of the Officers and Directors of the Target, each of whom has been duly elected
or appointed.
4.1.28 No Subsidiaries. Except as set forth in Exhibit 4.1.28,
--------------
the Target does not have any subsidiaries and does not own shares of common
stock or capital stock in any other corporation or a participating interest or
other interest in any limited liability company, partnership, joint venture,
strategic alliance or any other entity, association or business arrangement.
4.1.29 Sale of Hydrocarbon Liquids. Except as set forth in
Exhibit 4.1.29, no hydrocarbon liquids extracted at the Target's gas processing
- --------------
and gathering facilities are subject to a sales contract (other than a contract
or division order terminable upon no more than 30 days notice), and no person
has any call upon, option to purchase or similar rights with respect to
hydrocarbon liquids extracted from the Target's gas processing and gathering
facilities. The Target is receiving proceeds from the sale of liquid
hydrocarbons in a timely manner, and the proceeds payable to Target are not
being held in suspense by any purchaser or operator and are not subject to
refund.
4.1.30 Suspense Accounts. Suspense accounts for proceeds
payable to third parties that are maintained by Target are adequate for the
purposes for which they were created, and will contain sufficient monies at the
Closing Date to satisfy obligations to such third parties for the payment of
their proceeds of production as of the Closing Date.
4.1.31 Disclosure. No representation or warranty of
Shareholder or Target contained in this Agreement, and no statement contained in
any document, certificate or Schedule furnished or to be furnished by or on
behalf of Shareholder or Target to Acquiror or any of its representatives
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading or necessary in order to fully
and fairly provide the information required to be provided in any such document,
certificate or Schedule.
4.1.32 Year 2000 Compliance. Target has not and will not
suffer a material adverse effect attributable to a lack of Year 2000 Compliance
in any system, process or equipment owned or operated by the Target.
4.1.33 Related Transactions. Except as set forth on Exhibit
-------
4.1.33, and except for compensation to bona-fide employees of the Target for
- ------
services rendered in the ordinary course of business, no current or former
Affiliate of the Target or any "associate" (as defined in the rules promulgated
under the Securities Exchange Act of 1934, as amended) thereof, is now, or has
been during the last three fiscal years, (A) party to any transaction or
Contract with the Target (including, but not limited to, any contract, agreement
or other arrangement providing for the furnishing of services by, or rental of
real or personal property from, or otherwise requiring payments to, any such
Affiliate or
23
<PAGE>
associate), or (B) the direct or indirect owner of an interest in any Person
which is a present or potential competitor, supplier or customer of the Target
(other than nonaffiliated holdings in publicly held companies). As of the
Closing Date, the Target shall not be a guarantor or otherwise liable for any
actual or potential Liability of its Affiliates, except the intercompany payable
from Bear Paw Processing Company (Canada) Ltd. to Target. The Target does not
(x) own or operate any vehicles, boats, aircraft, apartments or other
residential or recreational properties or facilities for executive,
administrative or sales purposes or (y) own any social club memberships, whether
or not for the benefit of the Target and/or its executives.
4.1.34 Environmental Matters.
(i) Target is in compliance in all material respects
with all Environmental Laws.
(ii) Without limiting the generality of the foregoing,
Target holds and is in compliance in all material respects with all permits,
licenses and other authorizations that may be required pursuant to Environmental
Laws for the operation of its facilities and systems and the operation of its
business as currently conducted. A list of all such permits, licenses and other
authorizations is set forth on the "Environmental Schedule" attached hereto as
----------------------
Exhibit 4.1.34(ii).
- ------------------
(iii)To the best of their knowledge, except as set
forth on Exhibit 4.1.34(iii), (A) neither Shareholder nor Target has received
-------------------
any written communication within the past three years that has not been
satisfactorily resolved from a Governmental Entity or other person that alleges
that Target is not in compliance with or is subject to liability under any
Environmental Laws or that any investigation or cleanup of hazardous substances
is requested or demanded under any Environmental Law, (B) no real property
currently or formerly owned or operated by Target is contaminated with, or is
subject to any release of, any hazardous substance which contamination or
release requires investigation or remediation under Environmental Law and which
investigation or remediation, individually or in the aggregate, would be
reasonably likely to result in material Liability to Target, (C) Target is not
the subject of any written claim or notice regarding potential responsibility
for hazardous substance off-site disposal pursuant any Environmental Law, and
(D) Shareholder and/or Target has delivered or made available to Acquiror copies
of all environmental reports, studies, assessments, sampling data and other
material environmental information in their possession relating to Target and
its current or former properties or operations.
(iv) Except as set forth on Exhibit 4.1.34(iv), none of the
----------
following exists at any property or facility owned or operated by the Target: 1)
regulated underground storage tanks 2) asbestos-containing material in any form
or condition; 3) materials or equipment containing polychlorinated biphenyls; or
4) landfills, surface impoundments, or disposal areas.
(v) Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any obligations
for site investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any "transaction-triggered" or
"responsible property transfer" provisions of Environmental Laws.
(vi) Target has not, either expressly or by operation of law,
assumed or undertaken any liability, including without limitation any obligation
for corrective or remedial action, of any other person relating to Environmental
Laws.
24
<PAGE>
4.1.35 Brokerage Commission. Neither the Shareholder nor Target
has, directly or indirectly, entered into any agreement with any person that
would obligate Target or Acquiror to pay any compensation, brokerage fee or
"finder's fee" in connection with the transactions contemplated by this
Agreement.
4.1.36 Intercompany Debt. At the Closing Date, the Intercompany
Debt between Shareholder and Target is a Retained Liability to be paid in full
from the Closing Date Amount.
4.2 Representations and Warranties of Acquiror. Acquiror represents
and warrants to the Target and the Shareholder as of the date hereof, as of the
Effective Date, and as of the Closing Date as follows:
4.2.1 Authority. Acquiror has all requisite power and authority
to enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. All corporate acts and other
proceedings required to be taken by Acquiror to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and properly taken. This
Agreement has been duly executed and delivered by Acquiror and constitutes a
legal, valid and binding obligation of Acquiror, enforceable against Acquiror in
accordance with its terms. A true and correct copy of Acquiror's Certificate of
Formation and all amendments thereto and restatements thereof, certified by the
Delaware Secretary of State and all amendments thereof and restatements thereto,
are set forth in Exhibit 4.2.1 attached hereto.
-------------
4.2.2 No Conflicts; Consents. The execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated
hereby and compliance with the terms hereof shall not, conflict with, or result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or to
increased, additional, accelerated or guaranteed rights or entitlements of any
person under, or result in the creation of any lien, claim, encumbrance,
security interest, option, charge or restriction of any kind upon any of the
properties or assets of Acquiror under any provision of (i) the Certificate of
Formation, Operating Agreement or any other organizational or governing
instrument of Acquiror, (ii) any material note, bond, mortgage, indenture, deed
of trust, license, lease, contract, commitment, agreement or arrangement to
which Acquiror is a party or by which any of its properties or assets are bound,
or (iii) any judgment, order, or decree, or material statute, law, ordinance,
rule or regulation applicable to Acquiror its properties or assets, other than,
in the case of clauses (ii) and (iii) above, any such items that, individually
or in the aggregate, would not have a material adverse effect on the business,
assets, condition (financial or otherwise), results of operations or prospects
of Acquiror or on the ability of Acquiror to consummate the transactions
contemplated hereby ("Material Adverse Effect"). No material consent, approval,
-----------------------
license, permit, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made by or
with respect to Acquiror in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, other than compliance with and filings under the HSR Act.
4.2.3 Organization and Standing of Acquiror/Surviving Entity.
Acquiror is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware. Acquiror has full
corporate power and authority and possesses all governmental franchises,
licenses, permits, authorizations and approvals necessary to enable it to own,
lease or otherwise hold its properties and assets and to carry on its business
as presently conducted. Acquiror is duly qualified and in good standing to do
business as a foreign corporation in each jurisdiction in which
25
<PAGE>
the conduct or nature of its business or the ownership, leasing or holding of
its properties makes such qualification necessary, except such jurisdictions
where the failure to be so qualified or in good standing, individually or in the
aggregate, would not have a Material Adverse Effect.
4.2.4 Actions and Proceedings, etc. There are no (i)
outstanding judgments, orders, injunctions or decrees of any Governmental Entity
or arbitration tribunal against Acquiror or any of its affiliates, (ii)
lawsuits, actions or proceedings pending or, to the knowledge of Acquiror,
threatened against Acquiror or any of its affiliates, or (iii) investigations by
any Governmental Entity which are, to the knowledge of Acquiror, pending or
threatened against Acquiror or any of its affiliates, and which, in the case of
each of clauses (i), (ii) and (iii), could have a material adverse effect on the
ability of Acquiror to consummate the transactions contemplated hereby.
4.2.5 Availability of Funds. Subject to the terms and
conditions of this Agreement, as of the Closing Date, Acquiror will have
sufficient cash available or will have borrowing facilities or firm commitments
which together are sufficient to enable it to consummate the transactions
contemplated by this Agreement.
4.2.6 Brokerage Agreements. Acquiror has not, directly or
indirectly, entered into any agreement with any person that would obligate
Shareholder to pay any compensation, brokerage fee or "finder's fee" in
connection with the transactions contemplated by this Agreement.
4.2.7 Disclosure. No representation or warranty of Acquiror
contained in this Agreement contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein not misleading.
5. Pre-Closing Covenants
---------------------
5.1 Pre-Closing Covenants of Shareholder and Target.
5.1.1 Operation of Target's Business. The Shareholder and the
Target (for purposes of this Section 5, all references to the "Target" shall
---------
include each of the Target's subsidiaries, if any) hereby agree that from and
after the date hereof to the Closing Date, except as otherwise contemplated by
this Agreement, the Target shall conduct its business solely in the ordinary
course consistent with past practice and the Target shall, and the Shareholder
shall cause the Target to:
(i) Organizational Documents. Not amend the Articles
of Incorporation or Bylaws of Target, except as may be necessary to carry out
this Agreement or as required by law;
(ii) Corporate Name. Not change the corporate name of
Target or permit the use thereof by any other corporation, person or entity;
(iii) Compensation. Not pay or agree to pay any
employee, officer, or director of Target, without the consent of Acquiror,
compensation which is in excess of the current compensation level of each
employee, officer or director, except for standard periodic increases to non-
management employees consistent with past practice in terms of timing and
amount;
26
<PAGE>
(iv) Distributions to Shareholder. Not declare, make,
pay or otherwise authorize any distributions to the Shareholder including,
without limitation, dividends or the purchase, redemption or other acquisition
of the Target's Stock.
(v) Management. Not make any changes in management of
Target without the prior written consent of Acquiror;
(vi) Reorganizations or Other Related Transactions. Not
merge or consolidate Target with any other corporation, nor shall Target
acquire, agree to acquire or be acquired by any corporation, association,
partnership, joint venture or other entity without the prior written consent of
Acquiror;
(vii) Disposition or Abandonment of Assets. Not sell,
transfer or otherwise dispose of any of the properties or assets of Target,
equipment or other facilities without the prior written consent of Acquiror;
(viii) Indebtedness. Not create, incur, assume or
guarantee any indebtedness for the use or benefit of Target except for trade
indebtedness incurred in the ordinary course of business of Target, unless the
Target first advises Acquiror and Acquiror consents thereto, which consents
shall not be unreasonably withheld.
(ix) Liens. Not create or suffer to exist any liens on
any of the properties or assets, equipment or other facilities of Target, except
for Permitted Liens and those in existence on the date hereof;
(x) Increase of Indebtedness. Not increase the amount
of any indebtedness outstanding under any loan agreement, mortgage or borrowing
arrangement in existence on the date hereof for the use or benefit of Target,
unless the Target first advises Acquiror and receives its consent thereto except
for additional borrowings required to fund the working capital needs of the
Target in the ordinary course of business under any line of credit loan to the
extent permitted thereunder by the documentation relating thereto in effect as
of the date hereof and then only to the extent that the Target has first
notified Acquiror of any such borrowings under the line of credit subsequent to
the date hereof and Acquiror approves such borrowings, such approval not to be
unreasonably withheld;
(xi) Payables. Pay when due, in accordance with past
practices, all of accounts payables and trade obligations of Target;
(xii) Maintenance of Assets. Maintain the facilities,
assets and properties of Target, including without limitation the equipment, in
good operating repair, order and condition, reasonable wear and tear excepted,
and notify Acquiror promptly upon any loss of, damage to or destruction of any
of its facilities, properties or assets;
(xiii) Insurance. Keep and maintain in full force and
effect through the close of business on the Closing Date all insurance coverage
of the types and in the amounts currently maintained, or suitable replacements
therefor attached hereto and apply the proceeds received under any insurance
policy as a result of any loss of, damage to, or destruction of any of
facilities, properties or assets, including the equipment of Target, to the
repair or replacement of such facilities, properties or assets, including the
equipment;
27
<PAGE>
(xiv) Contracts and Permits. Maintain in full force and
effect all material Leases, Rights-of-Way, Licenses, Contracts and Permits
necessary for or related to the operation of the business of Target in all
respects and in all places as its business is now conducted;
(xv) Goodwill. Use commercially reasonable efforts to
preserve the business organization of Target intact, to keep available the
services of Target's present employees and to preserve the goodwill of the
customers and others having business relations with Target;
(xvi) Issuance of Securities. Not issue any additional
capital stock, options, warrants, or other rights to purchase capital stock or
securities convertible into or exchangeable for capital stock of the Target; not
declare, set aside or pay any dividend or make any other distributions (whether
in cash, stock or other property) in respect of any of the Target's shares of
capital stock;
(xvii) Repayment of Indebtedness. Except as approved by
Acquiror after first being notified of any such event, not make any direct or
indirect repurchase, repayment or retirement of any principal of, or interest
on, any indebtedness of Target other than regularly scheduled payments of
principal and interest as provided in the promissory note evidencing any of the
Target's indebtedness;
(xviii) Litigation. Promptly advise Acquiror in writing
of the commencement of, or of any known threat to commence, any suit, claim,
action, arbitration, legal or administrative proceedings, governmental
investigation or tax audit against the Target;
(xix) Miscellaneous. Not enter into any agreement or
otherwise agree to take any action in violation of the negative covenants set
forth in this Section 5.1.1;
-------------
(xx) Tax Claims/Elections. Not settle any Tax claims
except those for which notice has been received or an audit has been commenced
as set forth in Exhibit 4.1.8 relating to Target, or make any Tax election with
-------------
respect to Target which is not consistent with past practice without the consent
of the Acquiror, which consent shall not be unreasonably withheld;
5.1.2 Cooperation. Target and Shareholder will cooperate with
Acquiror in seeking authorizations or consents to the transfer of control to the
Surviving Entity, and each party will bear its expenses incurred in requesting
such authorizations or consents required to be obtained under the provisions of
this Agreement by such party. Target and Shareholder will cooperate with
Acquiror in responding promptly to any inquiries or objections related to such
requests for authorizations or consents; and
5.1.3 Commercially Reasonable Efforts. Subject to the other
provisions of this Agreement, the Shareholder and the Target will use their
commercially reasonable efforts to cause the conditions listed in Section 3.2
-----------
hereof to be satisfied on or before the Closing Date.
5.1.4 Access to Information Prior to the Closing. The Target
and Shareholder shall reasonably cooperate with Acquiror, and the Target shall
provide, and the Shareholder shall cause the Target to provide, to Acquiror and
its accountants, counsel and other representatives (collectively "Advisors")
--------
during normal business hours, (i) reasonable access to the books, records,
equipment, leases, title opinions and other information concerning the
properties and other real estate owned or leased by the Target or in which the
Target has an interest, and all other Contracts, Leases, Rights-of-Way, Licenses
and Permits relating to the assets and operations of the Target's business and
28
<PAGE>
properties and all work papers relating to the Target of the Target's
independent accountants and (ii) reasonable opportunity to discuss the Target's
business affairs and assets with its officers, employees, agents and independent
accountants and furnish to Acquiror and its advisors copies of such documents,
records and information with respect to the affairs of the Target as Acquiror
may reasonably request; provided, however, that such access does not
unreasonably disrupt the normal operations of Shareholder or the Target.
5.1.5 Benefit Plans. Between the date hereof and the Closing
Date the Target will not establish or implement a new Benefit Plan of any kind
whatsoever that will take effect prior to the Closing Date.
5.1.6 Standstill Agreement; Disposition and Voting of
Securities.
(i) During the period from the date hereof until the
Closing Date (the "Exclusive Period"), the Target and the Shareholder shall deal
----------------
exclusively with the Acquiror regarding the acquisition of or investment in the
Target or any subsidiary, whether by way of merger, purchase of capital stock,
purchase of assets or otherwise (a "Potential Transaction") and, without the
---------------------
prior written consent of the Acquiror, neither the Target nor the Shareholder
shall, directly or indirectly, (i) solicit, initiate discussions with or engage
in negotiations with any Person (whether such negotiations are initiated by the
Target, the Shareholder or otherwise), other than the Acquiror and its
Affiliates or a party designated by the Acquiror, relating to a Potential
Transaction, (ii) provide information or documentation with respect to the
Target or any subsidiary to any Person, other than the Acquiror and its
Affiliates or a party designated by the Acquiror, relating to a Potential
Transaction or (iii) enter into an agreement with any Person, other than the
Acquiror or any Affiliate thereof, providing for any Potential Transaction. If
the Target or the Shareholder receives an unsolicited inquiry, offer or proposal
relating to any of the above, the Target or such Shareholder shall immediately
notify the Acquiror thereof. The Target and the Shareholder represent to the
Acquiror that they are not bound to negotiate a Potential Transaction with any
other Person and that their execution of this Agreement does not violate any
agreement to which any of them is bound or to which any of the assets of the
Target or any subsidiary is subject.
(ii) From and after the date hereof, the Shareholder
shall, as to itself, and the Target (with respect to the securities of each
subsidiary) shall:
(a) without the prior written consent of the
Acquiror, refrain from transferring, selling or assigning to any Person, or
agreeing in any manner to transfer, sell or assign to any Person, or pledge,
encumber, deposit in a voting trust or grant a proxy with respect to, any
securities of the Target or any subsidiary presently or hereafter owned or
controlled by him, her or it; and
(b) vote the shares of capital stock of the
Target and any subsidiary presently or hereafter owned or controlled by such
Shareholder or the Target (or any other security which has voting rights)
against any merger (other than the Merger), consolidation, sale of assets,
reorganization, recapitalization, liquidation or winding up of the Target or any
subsidiary at every meeting of shareholders of the Target or any subsidiary
called therefor and at every adjournment thereof (or withhold consent in writing
to any such action proposed to be taken by written consent in lieu of a
meeting).
(iii) The parties recognize and acknowledge that a
breach by the Target, any subsidiary or the Shareholder of this Section 5.1.6
-------------
will cause irreparable and material loss
29
<PAGE>
and damage to the Acquiror as to which they will not have an adequate remedy at
law or in damages. Accordingly, each party acknowledges and agrees that the
issuance of an injunction or other equitable remedy is an appropriate remedy for
any such breach.
5.1.7 Release.
(i) Anything contained herein to the contrary
notwithstanding, by the execution and delivery of this Agreement, in
consideration of the mutual covenants and agreements contained herein,
including, without limitation, the consideration set forth in Section 2.1, the
-----------
Shareholder hereby irrevocably releases and forever discharges the Target (for
the benefit of the Surviving Entity and its members, subsidiaries, Affiliates,
divisions and predecessors and their respective past and present directors,
officers, employees and agents, and each of their respective successors, heirs,
assigns, executors and administrators (collectively, the "Released Persons") of
----------------
and from all manner of action and actions, cause and causes of action, suits,
rights, debts, dues, sums of money, accounts, bonds, bills, covenants,
contracts, controversies, omissions, promises, variances, trespasses, damages,
liabilities, judgments, executions, claims and demands whatsoever, in law or in
equity which against the Released Persons such Shareholder ever had, now has or
which it hereafter can, shall or may have, whether known or unknown, suspected
or unsuspected, matured or unmatured, fixed or contingent, for, upon or by
reason of any matter or cause arising at any time on or prior to the Effective
Time unless occasioned by fraud or willful misconduct or gross negligence.
(ii) The Shareholder specifically represents and
warrants to the Released Persons that he, she or it has not assigned any such
claim set forth in paragraph (i) above, and agrees to indemnify and hold
harmless the Released Persons from and against any and all losses or damages
arising from or in any way related to (A) any such assignment, and (B) any
action by any third party arising from or in any way related to the relationship
among such Shareholder and the Released Persons, which is the subject of this
Section 5.1.7.
- -------------
5.1.8 Relationships with Vendors and Customers. From and after
the date hereof, neither the Target, any subsidiary nor the Shareholder shall
take or fail to take any action which would reasonably be expected to, directly
or indirectly, have a material adverse effect on the Target or its Subsidiaries
or the business or operations of the Surviving Entity after the Closing, or on
the business relationship between the Target or the Surviving Entity, as
applicable, and any vendor, supplier or customer thereof.
5.1.9 Termination of Affiliate Transactions. The Shareholder
agrees that, effective as of the Effective Time and without any further action
by the Target, the Surviving Entity or any Member thereof, shall be released
from and Shareholder shall assume any and all Liabilities to the Shareholder or
its Affiliates including Intercompany Debt, which shall be paid in full at
Closing in accordance with Section 4.1.36, and except as set forth on Exhibit
-------------- -------
4.1.33.
- ------
5.1.10 Growth Capital Expenditures. Shareholder and the Target
have committed to and have incurred those Growth Capital Expenditures reflected
on Exhibit 1.19(A). Further, Target and Shareholder agree that for the period
from and after November 30, 1999 up to and including the Effective Time, Target
and/or Shareholder for the benefit of Target shall commit to and incur the
Growth Capital Expenditures to be reflected on the Closing Growth Capital
Expenditure Schedule; provided, however, that from and after the date of
execution of this Agreement up to and including the Effective Time, neither
Target nor Shareholder for the benefit of Target shall commit to or
30
<PAGE>
incur any Growth Capital Expenditure without the prior consent of Acquiror,
which consent shall not be unreasonably withheld.
5.1.11 Supplemental Exhibits. Shareholder and Target shall have
the continuing obligation until the Closing promptly to supplement or amend the
exhibits hereto with respect to any matter hereafter arising or discovered
which, if existing or known as of the date of execution of this Agreement, would
have been required to be set forth or described in such exhibits; provided,
however, that any such addition or supplement by Shareholder to the exhibits
hereto shall in no way diminish or compromise Acquiror's right to object thereto
pursuant to Section 9.1.5 or Section 11 of this Agreement.
------------- ----------
5.2 Pre-Closing Covenants of Acquiror.
5.2.1 Confidentiality. Acquiror and its respective members,
managers and employees, bankers, consultants and agents shall retain in
confidence and shall cause their Advisors to retain in confidence, all
information obtained by them pursuant to the investigations made by Acquiror or
its Advisors in connection with the Merger (the "Target Confidential
-------------------
Information"). The Shareholder, the Target, their respective officers, directors
- -----------
and employees shall retain in confidence, all information obtained by them in
connection with any investigation undertaken by such persons as a result of
Acquiror providing such persons reasonable access to information of the Acquiror
as provided in this Agreement (the "Acquiror Confidential Information", together
---------------------------------
with the Target Confidential Information, the "Confidential Information"). The
------------------------
parties agree that Confidential Information shall not include information which
(i) was or becomes generally available to the public other than as a result of a
disclosure by Target, Shareholder, the Acquiror or any of their officers,
directors, members, managers or employees or any of their Advisors, (ii) was or
becomes available to Target, Shareholder, Acquiror, any of their officers,
directors or employees or their Advisors on a non-confidential basis from a
source other than Target, Shareholder, Acquiror or their Advisors, provided that
such source is not bound by a confidentiality agreement or (iii) was, or in the
future is, developed independently by Target, Shareholder, Acquiror or their
Advisors without reference to the information furnished by Target, the
Shareholder or Acquiror or their Advisors, as the case may be. The parties
understand and agree that all of the Confidential Information supplied to
Target, Shareholder or Acquiror or their Advisors is provided on the
understanding that such Confidential Information shall remain the property of
Target, Shareholder or Acquiror, as the case may be, and that all copies and
originals of any Confidential Information furnished pursuant to this Agreement
from one party to another will be returned to the party furnishing such
Confidential Information promptly upon its request after termination of this
Agreement as provided under Section 8 hereof. Pending the Closing of the
---------
transactions contemplated hereby or if this Agreement is terminated as provided
in Section 8 hereof, a party receiving the Confidential Information of another
---------
party shall not use such information to its economic or financial advantage or
benefit.
5.2.2 Commercially Reasonable Efforts. Subject to the other
conditions of this Agreement, Acquiror will use its commercially reasonable
efforts to cause the conditions listed in Section 3.1 hereof to be satisfied on
-----------
or before the Closing Date.
5.2.3 Non-Solicitation of Shareholder Employees. Except for
those employees of Shareholder listed on Exhibit 5.2.3, neither Acquiror,
-------------
Target or the Surviving Entity shall solicit, hire or employ any persons
employed by Shareholder from November 10, 1999 and for a period of two (2) years
thereafter without obtaining the prior written consent of Shareholder, which may
be withheld in its sole and absolute discretion. The parties agree that this
restriction shall not apply to (i) any solicitation directed at the public in
general by the surviving entity in publications available to the
31
<PAGE>
public in general, (ii) the employment of employees of Shareholder by Acquiror,
Target or Surviving Entity not involving an initial solicitation by such
parties, including a solicitation which is effected in the manners described in
clauses (i) or (iii) of this Section, (iii) the solicitation of employees of
Shareholder by an executive search firm acting on behalf of Acquiror, Target or
Surviving Entity where none of Acquiror, Target or Surviving Entity instructed
or encouraged such solicitation, or (iv) employment by any of Acquiror, Target
or Surviving Entity of any employees of Shareholder who have terminated
employment with Shareholder prior to commencement of employment discussions
between the said parties and such employee.
5.3 Mutual Pre-Closing Covenants.
5.3.1 Publicity. Shareholder and Acquiror agree that, from the
date hereof through the Closing Date, no public release or announcement
concerning the transactions contemplated hereby shall be issued by either party
without the prior consent of the other party (which consent shall not be
unreasonably withheld), except as such release or announcement may be required
by law or the rules or regulations of any United States or foreign securities
exchange, in which case the party required to make the release or announcement
shall allow the other party reasonable time to comment on such release or
announcement in advance of such issuance; provided, however, that each of
-------- -------
Acquiror and Shareholder may make internal announcements to its employees that
are consistent with the parties' prior public disclosures regarding the
transactions contemplated hereby after reasonable prior notice to and
consultation with the other party.
5.3.2 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each party shall use its commercially reasonable
efforts to cause the Closing to occur.
5.3.3 Antitrust Notification. Each of Shareholder and Acquiror
shall as promptly as practicable, but in no event later than one business day
following the execution and delivery of this Agreement, file with the United
States Federal Trade Commission (the "FTC") and the United States Department of
---
Justice (the "DOJ") the notification and report form, if any, required for the
---
transactions contemplated hereby and any supplemental information requested in
connection therewith pursuant to the HSR Act. Any such notification and report
form and supplemental information shall be in substantial compliance with the
requirements of the HSR Act. Each of Acquiror and Shareholder shall furnish to
the other such necessary information and reasonable assistance as the other may
request in connection with its preparation of any filing or submission which is
necessary under the HSR Act. Shareholder and Acquiror shall keep each other
apprised of the status of any communications with, and any inquiries or requests
for additional information from, the FTC and the DOJ and shall comply promptly
with any such inquiry or request. Each of Shareholder and Acquiror shall use its
commercially reasonable efforts to obtain any clearance required under the HSR
Act for the purchase and sale of the Shares. Filing fees related to the HSR Act
filing shall be paid by the Acquiror.
6. Post-Closing Covenants. The Shareholder, Target and Acquiror agree as
----------------------
follows with respect to the period following the Closing.
6.1 Mutual Covenants.
6.1.1 Cooperation. Without limiting Section 12, Acquiror and
----------
Shareholder shall cooperate with each other, and shall cause their respective
affiliates, officers, employees, agents, auditors and representatives to
cooperate with each other after the Closing to ensure the orderly transition of
Target from Shareholder to Acquiror and to minimize any disruption to the
respective businesses of
32
<PAGE>
Shareholder, Acquiror and Target that might result from the transactions
contemplated hereby. After the Closing, upon reasonable written notice, Acquiror
and Shareholder shall furnish or cause to be furnished to each other and their
employees, counsel, auditors and representatives access, during normal business
hours, to such information and assistance relating to Target as is reasonably
necessary for financial reporting and accounting matters, the preparation and
filing of any Tax Returns, reports or forms or the defense of any Tax claim or
assessment. Each party shall reimburse the other for reasonable out-of-pocket
costs and expenses incurred in assisting the other pursuant to this Section
-------
6.1.1. Neither party shall be required by this Section 6.1.1 to take any action
- ----- -------------
that would unreasonably interfere with the conduct of its business or
unreasonably disrupt its normal operations.
6.1.2 Intentionally Left Blank.
6.1.3 Intentionally Left Blank.
6.1.4 Intentionally Left Blank.
6.1.5 Records. (i) On the Closing Date, Shareholder shall
deliver or cause to be delivered to Acquiror all original material agreements,
documents, books, records and files, including records and files stored on
computer disks or tapes or any other storage medium (collectively, "Records"),
-------
if any, in the possession of Shareholder relating to Target to the extent not
then in the possession of Target, subject to the following exceptions:
(A) Acquiror recognizes that certain Records may contain
incidental information relating to Target or may relate primarily to
subsidiaries or divisions of Shareholder or Target other than Target, and that
Shareholder may retain such Records and shall provide copies of the relevant
portions thereof to Acquiror;
(B) Subject to clause (ii) below, Shareholder may retain
any and all Tax returns, reports or forms and other Tax Records relating to
Target in its possession; and
(C) Shareholder shall retain the original Minutes Books
of Target and its Subsidiaries for a period of thirty (30) days after Closing to
prepare appropriate resolutions relating to the matters occurring prior to or at
the Closing Date.
(ii) Shareholder and Acquiror shall provide to each
other, and Acquiror shall cause Target to provide to Shareholder, at any
reasonable time and from time to time, at the business location at which the
Records are maintained, after the Closing Date, full access to such Tax Records
of Target as Shareholder or Acquiror, as the case may be, may from time to time
reasonably request and shall furnish, and request the independent accountants
and legal counsel of Shareholder, Acquiror or Target to furnish to Shareholder
or Acquiror, as the case may be, such additional Tax and other information and
documents in the possession of such persons (excluding privileged materials) as
Shareholder or Acquiror may from time to time reasonably request; provided,
--------
however, that Shareholder shall not be required to furnish access to Records (or
- -------
portions of any Records) or furnish, or request its independent accountants or
legal counsel to furnish, any information or documents (or any portions thereof)
that are not related to the Business. In particular, but without limitation,
(A) to the extent in its possession, Shareholder shall provide to Acquiror, to
the extent requested by Acquiror, access to all separate Tax Returns (and
related workpapers) of Target and such portions of the consolidated, combined or
unitary returns of affiliated groups of which Target was a member (and related
workpapers), in each case to the extent such returns or such portions relate
exclusively to the Business (including redacted
33
<PAGE>
versions of such returns or portions thereof to the extent that relate
exclusively to the Business) and (B) to the extent in the possession of Acquiror
or Target, Acquiror shall provide to Shareholder, or cause Target to provide to
Shareholder, to the extent requested by Shareholder, true and complete copies of
all Tax Returns, workpapers and other Records relating to Federal, state and
local sales, use and excise Taxes.
6.1.6 Shareholder Guaranties. Acquiror recognizes that
Shareholder, directly or through financial institutions, insurance companies or
third parties, has provided guaranties or have otherwise agreed to be liable
for, liabilities (including contingent liabilities) arising from the business of
Target (the "Shareholder Guaranties"), which Shareholder Guaranties are set
----------------------
forth on Exhibit 6.1.6, attached hereto. Acquiror recognizes that Shareholder
-------------
prefers to terminate the Shareholder Guaranties as of the Closing Date but
further recognizes that the removal or replacement of Shareholder as a guarantor
on or before the Closing Date is impractical. Acquiror will use its commercially
reasonable efforts to substitute, where required, the obligation of Acquiror,
directly or through financial institutions, insurance companies or other third
parties, for the Shareholder Guaranties on or before the Closing Date but in any
event within a reasonable time following the Closing Date. Shareholder agrees
not to terminate the Shareholder Guaranties; provided that Acquiror shall
--------
indemnify, or shall cause Surviving Entity to indemnify, Shareholder for all
liabilities on Shareholder Guaranties that arise after the Closing Date in a
manner reasonably satisfactory to Shareholder; and provided further that
-------- -------
Acquiror shall continue to use, or shall cause Surviving Entity to use, its
commercially reasonable efforts to complete the actions required to be taken by
Acquiror referenced above. Notwithstanding anything hereinabove to the contrary,
Shareholder's obligation hereunder shall terminate six (6) months after the
Effective Time (the "Shareholder Guaranty Termination Date"); provided, however,
-------------------------------------
that in the event Acquiror or Surviving Entity, despite its use of commercially
reasonable efforts, is unable to substitute the obligation of Acquiror or
Surviving Entity with respect to any Shareholder Guaranty and provides
Shareholder written notice thereof at least thirty (30) days prior to the
Shareholder Guaranty Termination Date, Shareholder agrees to discuss in good
faith with Surviving Entity possible alternative mutually acceptable remedies
prior to terminating the relevant Shareholder Guaranty, but, in the absence of
agreement regarding a mutually acceptable alternative, shall not be required to
maintain such Shareholder Guaranty in effect after the Shareholder Guaranty
Termination Date.
6.1.7 Tax Treatment. Acquiror, Target and Shareholder shall
treat the Merger transaction contemplated under this Agreement for all Tax
purposes, including on their Tax Returns, as a sale of assets by Target to
Acquiror, followed by a liquidation of Target into Shareholder occurring as of
the Closing Date. Acquiror and Shareholder are each separately responsible for
the allocation statement ("Allocation Statement") with respect to the assets
--------------------
acquired from Target, pursuant to Section 1060 of the Code and any other
applicable Tax laws. Acquiror and Shareholder will attempt to reach agreement as
to an Allocation Statement allocating the Merger Consideration to the various
assets transferred for Tax purposes in connection with the Merger. However, to
the extent that Acquiror and Shareholder are unable to reach agreement as to the
allocation of any particular item or items, each party shall prepare that
portion of its Allocation Statement, allocating the portion of the Merger
Consideration to each such item upon which they disagree in the manner as each
shall determine in its sole discretion without regard as to the manner in which
the other party allocates such item on its Allocation Statement. Shareholder and
Acquiror agree that the fair market value of the issued and outstanding shares
of the capital stock of each of Bear Paw Processing (Canada) Ltd. and Republic
Natural Gas Company is $1.00.
6.2 Post-Closing Covenants of Shareholder and Target.
34
<PAGE>
6.2.1 Cooperation of Shareholder and Current Directors of
Target. The Shareholder and the current directors of the Target will reasonably
cooperate upon and after the Closing Date in effecting the Merger and the
orderly transfer of the assets and properties, as well as the control of the
Target to Acquiror by using their commercially reasonable efforts to cause any
federal, state or local governmental body, and every agency and department and
instrumentality thereof, to have contracts between such government, agency,
department and instrumentality and the Target, to the extent required under any
existing Contracts between the Target and such governmental body, as a result of
the change of control of the Target, to be approved and transferred into the
name of the Target under the control of the Acquiror following the Closing. To
the extent that any other contract between the Target and any other third
parties require approval as a result of the Merger, the Shareholder and the
current officers and directors of the Target will reasonably cooperate in
effecting any such approval such that the Contracts will remain intact and
enforceable in accordance with the terms thereof. To the extent required to
effect any such approval and transfer of control, the Shareholder and the
current officers and directors of the Target will execute any appropriate and
reasonable documents or instruments required to accomplish such result.
6.2.2 Disposition of Confidential Information. The Shareholder
and the current officers and directors of the Target will treat and hold as such
all of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
the Acquiror or destroy, at the request and option of Acquiror, all tangible
correspondence, documents, instruments, memorandums and all other writings (and
all copies thereof) which embody the Confidential Information which are in such
persons' possession. If the Shareholder or current officers or directors of the
Target are requested or required (by oral question or request for information or
document in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, the
Shareholder and the current officers or directors of the Target will notify
Acquiror promptly of any such request or requirement to enable Acquiror to seek
an appropriate remedy to enjoin the disclosure of such Confidential Information
or waive compliance with the provisions of this Section. The foregoing provision
shall not apply to any Confidential Information that is generally available to
the public immediately prior to the time of disclosure.
6.2.3 Other Transitional Matters. The Shareholder and the
current officers and directors of the Target will not take any action which is
primarily designed or intended to have the effect of discouraging any lessor,
licenser, customer, supplier, or other business associate of the Target or any
of its Subsidiaries from maintaining the same business relationships with the
Target and its Subsidiaries after the Closing as it maintained with the Target
and its Subsidiaries prior to the Closing. The Shareholder and the current
officers and directors of the Target will refer any and all lessor, licensor,
customer and supplier inquiries relating to the business of the Target and any
of its Subsidiaries to Acquiror from and after the Closing Date.
6.2.4 Sublease of Office Space. Shareholder, subject to the
prior rights which Brookfield Management Services ("Landlord") may have under
--------
the master lease, agrees to enter into a Sublease Agreement with Surviving
Entity substantially in the form of the Sublease Agreement attached hereto as
Exhibit 6.2.4, pursuant to which Shareholder shall sublease to Surviving Entity
- -------------
the space identified on the attached floor plan of the 27th floor at Republic
Plaza, 370 17th Street, Denver, Colorado, plus associated storage space, at the
rate of $22.00 per square foot for a term identical to that of the master lease
between Shareholder and Landlord. In addition, Shareholder shall commit to
sublease to Surviving Entity two additional offices, as marked on the attached
floor plan, at the rate of $22.00 per
35
<PAGE>
square foot, inclusive of related storage space upon the terms and conditions
set forth in the Sublease Agreement.
6.2.5 Switchboard/Receptionist Services. For a period of up to
two months from and after the Effective Date, Shareholder will provide
receptionist and switchboard services for Surviving Entity.
6.2.6 Product Marketing. (i) Subject to Acquiror's ability to
employ the individuals referenced in item (ii) below, Shareholder will assign
the TransMontaigne Product Services Inc. product marketing agreement for the six
month remaining term to Acquiror as of the Effective Date.
(ii) Acquiror will extend, or cause Surviving Entity to
extend, offers to Shareholder/TransMontaigne Product Services Inc. employees,
Chip Duval, Ronnie Ellerbee and Ed Stoudt as of the Effective Date. If such
employees and Acquiror are not able to agree on employment terms, Acquiror shall
have the obligation to continue with the remaining term of the TransMontaigne
Product Services Inc. product marketing agreement. Shareholder and Acquiror
shall be responsible for the severance of their respective employees, if any,
should any be terminated.
6.2.7 Environmental Consulting Services. Subsequent to the
Effective Date, Shareholder agrees to enter into a mutually agreeable
Environmental Consulting Services Agreement with Surviving Entity substantially
in the form of the Environmental Consulting Services Agreement attached hereto
as Exhibit 6.2.7 pursuant to which Shareholder shall provide internal
-------------
environmental services to Surviving Entity for a period of up to six months.
6.2.8 Personal Property/Software. All computer hardware,
together with all software and software licenses listed on Exhibit 6.2.8,
-------------
attached hereto will become the property of Surviving Entity at no additional
cost. Any additional licensing fees to complete the separation of accounting and
information services will be borne by Shareholder. Surviving Entity will assume
any ongoing license or update fees on all transferred software licenses.
6.2.9 Computer Network Support. For a period of two months
after Closing, Shareholder will provide support personnel and cooperate with
Surviving Entity to separate Surviving Entity's network from Shareholder's and
set up a new working network for Surviving Entity which would provide email and
network functions substantially similar to those which are currently provided by
Shareholder to Target. Shareholder will cooperate with Surviving Entity's long
distance service provider to assign appropriate T-1 connections currently used
by Surviving Entity to facilitate its network with remote offices.
6.2.10 Stock Option Vesting. Shareholder will accelerate the
vesting of all stock options in shares of Shareholder granted by Shareholder to
the Continuing Employees (defined in Section 8.1 below) prior to December 31,
-----------
1999. Such options, if unexercised on or before ninety (90) days from the
Effective Date, shall expire.
6.2.11 Tax Loans. The remaining balance due to Shareholder from
the President and Executive Vice President of Target with respect to tax loans
made by Shareholder to such officers' shall be forgiven as of the Closing Date;
provided, however, that such "loan forgiveness" shall be treated as compensation
to each such officer for tax reporting purposes.
6.2.12 Use of Name. The Shareholder shall not allege or assert
that the name "Bear Paw" or any variant thereof (the "Names") has not become
-----
distinctive and unique and the
36
<PAGE>
Shareholder shall not allege or assert that the Names have not obtained
secondary meaning, identifying the Names or any variant thereof as the source of
goods associated with such Name. The Shareholder recognizes and acknowledges
that it is proscribed by operation of law from, and undertake in this Agreement
as a matter of contract to refrain from, (A) owning any interest, directly or
indirectly, in, or becoming associated with or otherwise lending any aid or
support to, any Person (other than the Surviving Entity or any Affiliate
thereof) using the Names or (B) performing any service or offering any goods
identified with the Names in a manner that is likely to cause confusion in the
minds of ordinary purchasers, except on behalf of the Surviving Entity or any
Affiliate thereof. In connection therewith, it is agreed that the undertaking
under this Section 6.2.12 is of a special and unique nature, the loss of which
--------------
cannot be adequately compensated for in damages by an action at law, and that
the breach or threatened breach of the provisions of this Section 6.2.12 would
--------------
cause the Surviving Entity and its Affiliates irreparable harm. In the event of
any such breach, the Surviving Entity shall be entitled, as a matter of right,
to injunctive and other equitable relief without waiving any other rights which
they may have to damages or otherwise.
6.2.13 Filing for Tax Liquidation. Shareholder shall prepare and
timely file appropriate documentation reflecting the tax liquidation of Target
into Shareholder under Section 332 of the Code.
6.2.14 Canadian Tax Form 2062. Shareholder shall prepare and
timely file with the Canadian tax authorities Form 2062 Certificate of
Compliance relating to the disposition of the capital stock of Bear Paw
Processing Company (Canada) Ltd.
6.2.15 Target Will Not Incur Tax Liability After Effective Date.
The Target will not incur any liability for Taxes from and after the Effective
Date other than Taxes incurred in the ordinary course of business and consistent
with past practice except for Income Taxes relating to the transfer of assets as
a result of the Merger.
6.3 Post-Closing Covenants of Acquiror.
6.3.1 Settlement of Tax Claims. Acquiror shall not, and shall
cause Surviving Entity not to settle any Tax Claims relating to Target with
respect to the periods prior to the Effective Time without the consent of
Shareholder in accordance with Section 11.8.
------------
6.3.2 New Tax Licenses. Acquiror shall, or shall cause Surviving
Entity to, apply for new sales and use tax licenses, production tax and excise
tax licenses and all other tax licenses formerly held by Target and consents and
agrees not to continue to use after the Closing Date any of Target's tax
licenses or tax identification numbers (excluding those related to Target's
Subsidiaries).
6.3.3 Property Tax Returns. Acquiror shall, or shall cause
Surviving Entity to, at its own cost, prepare and file all property tax returns
and pay all property taxes due with respect to Target and its Subsidiaries for
the period from and after the Effective Date.
6.3.4 Forms 1099. Acquiror shall, or shall cause Surviving
Entity to, at its own cost, prepare and distribute in a timely manner any and
all required Forms 1099, including but not limited to Forms 1099-MISC, 1099-S
and Form 1096 relating to Target's calendar year 1999 activity and provide
Shareholder copies of all such filings. In connection therewith, Acquiror shall,
or shall cause Surviving Entity to, at its own expense, assume responsibility
for all correspondence with the IRS relating to Forms 1099, 1099-MISC and 1099-
S, including without limitation "B Notices (Taxpayer ID
37
<PAGE>
Number)" or "C Notices (back up withholding)" whether relating to pre-Effective
Date or post-Effective Date activity of Target.
6.3.5 Canadian Goods and Services Tax Return. Acquiror shall, or
shall cause Surviving Entity to, at its own cost, prepare and file all Canadian
Goods and Services tax returns applicable to the business activities of Target
and its Subsidiaries from and after the Effective Time.
6.3.6 Unclaimed Property Reports. Acquiror shall, or shall cause
Surviving Entity to, at its own cost, prepare and file all required state
unclaimed property reports with respect to the business of Target and its
Subsidiaries for the periods both before and after the Effective Date.
6.3.7 Payroll Reimbursement Obligation. Acquiror shall, or shall
cause Surviving Entity to, reimburse Shareholder for the payroll and payroll
burden expenses incurred by Shareholder as pursuant to the provisions of Section
8.7 hereinbelow.
6.3.8 Establishment of Qualified Retirement Savings Plan.
Acquiror shall, or shall cause Surviving Entity, as soon as practicable after
the Closing Date, to establish a retirement savings plan for the Continuing
Employees (the "Qualified Plan") which Qualified Plan will be qualified to
--------------
receive, as a plan-to-plan transfer from the Shareholder's Retirement Savings
Plan, the account balances of all Continuing Employees. Such Qualified Plan
shall also permit employee loans. As soon as practicable after Acquiror has
established the Qualified Plan, Shareholder shall direct the trustee of the
Shareholder's Retirement Savings Plan to transfer to the trustee or funding
agent of the Acquiror's Qualified Plan an amount, in cash, equal to the value of
the account balances of the Affected Employees, together with the liabilities
associated with such assets, including any outstanding loans under the
Retirement Savings Plan. After the date of the transfer of assets and
liabilities, Shareholder and Shareholder's Retirement Savings Plan shall retain
no further liability with respect to such transferred assets and liabilities.
6.3.9 Surviving Entity/Good Standing. Immediately following
Closing, Acquiror shall take such action and make such filings, with the
appropriate Governmental Entities, or cause the same to be done, such that as of
said time Surviving Entity (i) shall be a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (ii) shall have full power and authority and possess all governmental
franchises, licenses, permits, authorizations and approvals necessary to enable
it to own, lease or otherwise hold its properties and assets and to carry on the
business of Target as presently conducted, and (iii) shall be duly qualified and
in good standing to do business as a foreign entity in each jurisdiction in
which the conduct or nature of its business, or the ownership, leasing or
holding of its properties makes such qualification necessary.
6.4 Environmental Matters.
6.4.1 Environmental Liabilities. Effective upon the Closing,
Acquiror agrees to assume all environmental liabilities including fines and/or
penalties associated therewith of the Target and its Subsidiaries both known and
unknown, past, present and future related to or resulting from the non-
compliance of Target or its Subsidiaries with any Environmental Laws, including
fines and/or penalties associated therewith (collectively, the "Environmental
-------------
Liabilities"), and agrees to release, indemnify and defend Shareholder of and
- -----------
from any and all claims, actions, causes of action, damages, penalties, fines
and expenses, including reasonable attorney's fees related thereto.
38
<PAGE>
6.4.2 Environmental Survey Expenses. In conjunction with
Acquiror's assumption of the Environmental Liabilities, Target, on behalf of
Acquiror, retained the environmental consulting services of third party
consultants to conduct an environmental survey to update the existing Phase I
and Phase II environmental surveys previously provided by Shareholder and Target
to Acquiror with respect to the Koch Oil Company facilities and the Lignite
facilities acquired by Target. Acquiror and Shareholder have agreed that
expenses incurred by Target and/or Acquiror and paid by Shareholder on behalf of
Acquiror and/or Target with respect to such surveys (the "Survey Expenses")
---------------
shall not exceed $50,000.00 (the "Survey Expense Limit"). Further, Shareholder
--------------------
and Acquiror agree that Survey Expenses incurred by Acquiror and/or Target in
excess of the Survey Expense Limit shall be paid by Acquiror. At Closing,
Acquiror shall reimburse Shareholder for the Survey Expenses; provided, however,
that should the Merger provided for in this Agreement not be consummated (unless
due to the failure of Acquiror to fulfill the conditions precedent to
Shareholder's obligation to close set forth in Section 3.1), the Survey Expenses
-----------
shall be solely for the account of Shareholder.
7. Closing.
--------
7.1 Delivery of Closing Documents to Acquiror. At the Closing, the
following documents, agreements, and instruments shall be duly delivered by the
Target and the Shareholder to the Acquiror:
7.1.1 A Certificate representing the shares of Target Stock
which shall be duly executed in blank or with a duly executed stock power
attached thereto, endorsed in blank;
7.1.2 The resignations of the Officers and Directors of the
Target substantially in the form of Exhibit 2.6.4;
-------------
7.1.3 The records relating to Target and its business.
7.1.4 The opinion of Erik B. Carlson, counsel to Target in the
form of Exhibit 7.1.4 attached hereto, such opinion letter to be in the form and
-------------
substance satisfactory to Acquiror;
7.1.5 A certificate of good standing from the State of Colorado
certified by the appropriate official of such state, dated as of the date not
more than five (5) days prior to the Closing Date evidencing that the Target is
duly qualified and in good standing in its state of incorporation;
7.1.6 All consents and approvals referred to in Section 3.2.9
-------------
hereof;
7.1.7 The Target's closing certificate in the form of Exhibit
-------
7.1.7 attached hereto;
- -----
7.1.8 Certificate of Merger and Statement of Merger as
contemplated by Section 2.5 hereof;
-----------
7.1.9 With respect to any indebtedness of the Target, other than
trade payables, documentation (including without limitation, duly executed UCC-3
termination statements or duly executed and recordable releases of deeds of
trust or mortgages) satisfactory in form and substance to Acquiror as requested
by Acquiror to release all or a portion of such Encumbrances to the extent of
such loan repayment, if any, in favor of any of the holders of any such
indebtedness on the property and assets of the Target;
39
<PAGE>
7.1.10 The Sublease substantially in the form of the Sublease
attached hereto as Exhibit 6.2.4;
-------------
7.1.11 The Environmental Consulting Agreement for certain
environmental and safety services provided by Shareholder to Surviving Entity
after the Effective Time substantially in the form of the Environmental
Consulting Agreement attached hereto as Exhibit 6.2.7;
--------------
7.1.12 A signed consent and release from BankBoston, N.A. under
the TM Credit Agreement releasing Target and Acquiror from obligations as a
Guarantor under the TM Credit Agreement and release of the Bank's lien upon the
certificate representing the Target Stock;
7.1.13 A signed release from The Prudential Insurance Company of
America and U.S. Private Placement Fund under the Master Shelf Agreement
releasing Target and the Surviving Entity from all obligations thereunder;
7.1.14 The Closing Growth Capital Expenditures Schedule;
7.1.15 Such other documents or instruments of further assurance
or conveyance as shall be deemed reasonably necessary and appropriate by the
Acquiror; and
7.1.16 A certificate from a duly authorized officer of Target
stating that Target is not a foreign person which fulfills the requirements of
Treasury Regulations Section 1.1445-2(b)(2).
7.2 Delivery of Documents to the Target and Shareholder. At the
Closing, the following documents, agreements and instruments shall be duly
delivered by the Acquiror to the Target and Shareholder:
7.2.1 A Certificate of good standing from the Delaware Secretary
of State, dated not more than five (5) days prior to the Closing Date evidencing
that Acquiror is duly qualified and in good standing in the State of Delaware;
7.2.2 Acquiror's closing certificate in the form of Exhibit
-------
7.2.2 attached hereto;
- -----
7.2.3 The opinion of Clanahan Tanner Downing and Knowlton, P.C.,
Acquiror's counsel, in the form of Exhibit 7.2.3 attached hereto; and
-------------
7.2.4 Certificate of Merger and Statement of Merger as
contemplated by Section 2.5 hereof; and
-----------
7.2.5 Such other documents and instruments of further assurance
and conveyance as shall be deemed necessary and appropriate to the Closing of
the transactions contemplated hereby.
8. Employee and Related Matters.
----------------------------
40
<PAGE>
8.1 Employment. Acquiror shall, or shall cause Surviving Entity to,
continue the employment as of the Closing of each active employee of Target,
including those listed on Exhibits 4.1.21 and 5.2.3 hired by Surviving Entity
-------------------------
("Continuing Employees") in the same or a comparable position and at an initial
--------------------
rate of base salary or wages at least equal to such employee's rate of base
salary or wages in effect as of the date hereof as set forth on Exhibit
-------
4.1.26(i). Any employee of Target who, on the Effective Time, is on medical,
- ---------
short-term disability or other authorized leave of absence from Target shall be
considered one of the "Continuing Employees" for purposes hereof and shall be
permitted to return to employment with Surviving Entity in accordance with the
terms of the leave of absence policy of Surviving Entity. To the extent
required by law, Acquiror shall, or shall cause Surviving Entity to, reemploy
any employee of Target who, as of the Effective Time, is on long-term disability
(an "Inactive Employee") provided such Inactive Employee becomes able to return
-----------------
to active employment. Prior to such reemployment by Surviving Entity, all
liabilities and obligations relating to Inactive Employees shall remain the
responsibility of Shareholder.
8.2 Employee Benefit Plans Post-Closing. Except as otherwise
specifically set forth herein, Shareholder shall retain all liabilities and
obligations under the Benefit Plans with respect to Continuing Employees and
former employees of Target ("Former Employees") and their eligible dependents
----------------
and beneficiaries (including in respect of claims filed under Benefit Plans that
are employee welfare benefit plans after the Closing relating to expenses
incurred prior to the Closing). Following the Effective Time, Acquiror shall or
shall cause Surviving Entity to, provide the Continuing Employees with employee
benefit plans, programs and arrangements substantially comparable to those
currently afforded such employees by Shareholder. Each employee benefit plan,
program, policy or arrangement provided by Acquiror or Surviving Entity to
Continuing Employees following the Closing shall give full credit, to the extent
credited under a comparable Benefit Plan, for each participant's period of
service (as recognized by Target as of the Closing) prior to the Effective Time
for purposes of determining eligibility and vesting of benefits (but not for
benefit accrual purposes); provided, however, that prior years of service shall
be utilized only to determine enrollment eligibility but shall not be utilized
for vesting purposes with respect to Surviving Entity's Qualified Plan to be
adopted after the Effective Time. Each employee welfare benefit plan provided
by Acquiror or Surviving Entity to the Continuing Employees from and after the
Effective Time shall (i) give full credit for deductibles and out-of-pocket
expenses under the Benefit Plans with respect to the current plan year toward
any deductibles for the remainder of the plan year during which the Closing
occurs, and (ii) shall waive any pre-existing condition limitation for any such
Continuing Employee immediately prior to the Effective Time.
8.3 Accrued Vacation; Nonqualified Pension Plans. For calendar year
2000, all vacation entitlement for Continuing Employees shall be determined in
accordance with the Shareholder's vacation policy as extended to Target, and any
Continuing Employee with accrued but unused vacation, personal or sick day
entitlement as of the Effective Time must (subject to applicable laws) schedule
and take such vacation prior to December 31, 2000 in accordance with Surviving
Entity's vacation policy. Subject to applicable laws, all accrued but unused
vacation as well as unused personal and sick days not taken prior to December
31, 2000 shall be forfeited and no Continuing Employee shall receive any
compensation therefor. Shareholder shall reasonably permit Continuing Employees
to use their accrued but unused vacation, personal and sick days prior to the
Closing Date. Commencing January 1, 2001, the Continuing Employees shall
accrue and be entitled to vacation pursuant to Surviving Entity's vacation
policy, as in effect from time to time, giving credit for their years of service
with the Target.
8.4 COBRA. Shareholder shall be solely responsible for compliance
with the health care continuation requirements of Section 4980B of the Code and
Part 6 of Title I of ERISA (hereinafter referred to as "COBRA") with respect to
-----
all Former Employees who incurred a Qualifying Event (within
41
<PAGE>
the meaning of Section 4980B(f)(3) of the Code and Section 603 of ERISA) prior
to February 1, 2000. Shareholder shall be solely responsible for compliance with
COBRA with respect to all Former Employees who had elected COBRA continuation
coverage prior to the Closing, including such Former Employees who, or whose
beneficiaries, incur a subsequent Qualifying Event after February 1, 2000.
Acquiror shall be solely responsible for compliance with COBRA with respect to
all Continuing Employees who participate in Acquiror's or Surviving Entity's
employee welfare benefit plans after the Closing, and who, or whose
beneficiaries, experience a Qualifying Event from and after February 1, 2000.
8.5 Workers Compensation. Shareholder shall discharge all
liabilities for claims for workers compensation benefits for Continuing
Employees arising out of occurrences prior to the Closing Date. Acquiror shall
discharge all liabilities for claims for workers compensation benefits for
Continuing Employees arising out of occurrences on or after the Closing Date.
8.6 Retirement Savings Plans. Shareholder shall, effective as of
January 23, 2000, fully vest the account balance or accrued benefits (as
applicable) of, and terminate the participation of, each Continuing Employee in
Shareholder's Retirement Savings Plan in which such individual is then
participating.
8.7 Continuing Employee Payroll and Benefits. Notwithstanding
anything hereunder to the contrary, Shareholder, at the request of and to
accommodate Acquiror, agrees to retain the Continuing Employees on Acquiror's
payroll for the pay period ending January 23, 2000 and pay the salaries of said
Continuing Employees based upon their current rate of pay as of the Effective
Time. In addition, the Continuing Employees shall be permitted to continue to
participate in Shareholder's Retirement Savings Plan through January 23, 2000
and shall be covered under Shareholder's health, dental, life and long-term
disability plan through January 31, 2000. In consideration of the foregoing,
Acquiror shall, or shall cause Surviving Entity to, reimburse Shareholder for
all payroll expenses (including taxes related to the tax loan forgiveness
provided in Section 6.2.11), including payroll burden, which includes, without
--------------
limitation, expenses related to health, life and long-term disability insurance;
employer and employee withholding; Retirement Savings Plan employer match, and
any Flex Spending Account reimbursements processed in excess of amounts
contributed by the affected employee. Shareholder shall prepare and deliver an
invoice to Acquiror and Surviving Entity covering such reimbursable expense,
which Acquiror or Surviving Entity shall pay in full within ten (10) days of
receipt thereof. Late payments shall accrue interest from the due date until
the payment date at the rate of four percent (4%) over the prime rate of
BankBoston, N.A., as amended from time to time.
8.8 Employee Benefits. Following the consummation of the Merger,
Acquiror shall continue to provide to individuals who are employed by the Target
as of the Effective Time and who, if any, remain employed with Acquiror or any
subsidiary of Acquiror ("Affected Employees"), for so long as such Affected
------------------
Employees remain employed by Acquiror or any subsidiary of Acquiror, employee
benefits (other than incentive compensation) pursuant to employee benefit plans,
programs, policies or arrangements maintained by Acquiror or any subsidiary of
Acquiror providing coverage and benefits which, in the aggregate, are comparable
to those provided to employees of Acquiror in positions comparable to positions
held by Affected Employees with Acquiror or its subsidiaries from time to time
after the Effective Time.
8.9 Pre-Existing Conditions/Deductibles. Acquiror will, or will
cause the Surviving Entity to, (i) waive all limitations as to preexisting
conditions, exclusions and waiting periods with respect to participation and
coverage requirements applicable to the Affected Employees under any
42
<PAGE>
welfare benefit plans that such employees may be eligible to participate in
after February 1, 2000, other than limitations or waiting periods that are
already in effect with respect to such employees and that have not been
satisfied as of February 1, 2000 under any welfare plan maintained for the
Affected Employees immediately prior to February 1, 2000, and (ii) provide each
Affected Employee with credit for any co-payments and deductibles paid prior to
February 1, 2000 in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that such employees are eligible to
participate in after February 1, 2000.
8.10 No Change in Employment Status. Notwithstanding anything
contained herein to the contrary, nothing contained in this Section 8 or
---------
elsewhere in this Agreement shall be construed as requiring Acquiror or
Surviving Entity to continue employment following the Closing of any Continuing
Employee or other employee or otherwise be construed as modifying such
employee's "at will" status.
9. Termination
-----------
9.1 Events of Termination. Anything contained elsewhere in this
Agreement to the contrary notwithstanding, prior to the Closing Date, this
Agreement may be terminated by written notice of termination sent by one party
to the other in accordance with the following:
9.1.1 Mutual Consent. Any time by mutual consent of the
Acquiror, Target and Shareholder;
9.1.2 Prior to Closing Date. By the Target, Shareholder on the
one hand or Acquiror on the other hand if the other party shall have (i)
materially misrepresented or be in material breach of any of their respective
representations, warranties or covenants contained in Section 4 or Section 5
--------- ---------
hereof, as applicable, or (ii) breached any covenant, undertaking or restriction
contained herein, and such misstatement or breach has not been cured by the
earlier of (a) thirty (30) days after the giving of notice of such party of such
misstatement or breach or (b) the Closing Date.
9.1.3 Delay. By either party by written notice to the other
party if the Closing shall not have occurred on or prior to January 31, 2000;
provided, however, that the right to terminate this Agreement under this Section
-------
9.1.3 shall not be available to any party whose failure to fulfill or perform
- -----
any obligation under this Agreement has been a substantial cause of, or has
substantially resulted in, the failure of the Closing to occur on or before such
date.
9.1.4 Content of Exhibits. By the party ("Receiving Party")
---------------
receiving exhibits, schedules or attachments or amendments thereto from the
other party to this Agreement which disclose information which such Receiving
Party reasonably determines to materially adversely affect the economic,
financial or business considerations previously determined by the Receiving
Party in entering into this Agreement setting forth its objection to such
exhibit, schedule, attachment or amendment and to which such Receiving Party
gives ten (10) days written notice to the party furnishing such exhibits,
schedules, attachments or amendments and Surviving Party shall not have
corrected or cured such objections within the referenced ten (10) day period.
9.1.5 Consequences of Termination. In the event of a termination
and abandonment hereof pursuant to the provisions of this Section 9, this
---------
Agreement shall become void and have no effect, without any liability on any of
the parties or their directors, officers, stockholder, members or managers in
respect of this Agreement, except that (a) the agreements contained in this
Section 9.1.5, in Section 6.2.2, in Section 10.2 in Section 10.7 and Section
- ------------- ------------- ------------ ------------ -------
13.1 shall survive the
- ----
43
<PAGE>
termination hereof and (b) no such termination shall relieve any party of any
liability or damages resulting from a breach by that party of its
representations, warranties, covenants, agreements or other obligations under
this Agreement prior to such termination. In addition, if this Agreement is
terminated as provided under Section 9.1.2 or Section 9.1.4 hereof, the party
------------- -------------
making the misrepresentation or breaching this Agreement shall be obligated to
pay the other party's costs and expenses reasonably incurred in connection with
the preparation of this Agreement, including reasonable attorney's fees.
Otherwise, if the transactions contemplated hereunder cannot be consummated for
reasons beyond the control of the parties hereto, provided they have used their
commercially reasonable efforts to acquire the approvals and consents hereunder,
or this Agreement is terminated under the provisions of Sections 9.1.1 or 9.1.3
-------------- -----
hereof, then each party hereto will pay its own expenses, including without
limitation its attorneys' fees and costs.
10. General Matters.
---------------
10.1 Notices. Any notices under this Agreement shall be in writing,
signed by the party giving the same and transmitted by registered or certified
United States Mail or by a generally accepted national courier service providing
confirmation of delivery, and addressed to the party to receive the notice at
the address set forth below or such other address as any party may specify by
notice to the other party, and shall be deemed properly given and received when
actually given and received:
If to Acquiror: BPE Acquisition, LLC
770 Park Avenue
New York, New York 10021
Attn: Thomas J. Edelman
and
BPE Acquisition, LLC
c/o 370 Seventeenth Street, Suite 2750
Denver, Colorado 80202
Attn: Robert J. Clark
With a copy to: Michael J. Wozniak, Esq.
Clanahan, Tanner, Downing & Knowlton, P.C.
730 17/th/ Street, Suite 500
Denver, Colorado 80202
O'Sullivan, Graev & Karabell, LLP
30 Rockefeller Plaza - 41/st/ Floor
New York, New York 10112
Attn: Ilan S. Nissan, Esq.
If to the Target
and Shareholder: TransMontaigne Inc.
370 Seventeenth Street, Suite 2750
Denver, Colorado 80202
Attn: Donald H. Anderson
With a copy to: TransMontaigne Inc.
44
<PAGE>
370 Seventeenth Street, Suite 2750
Denver, Colorado 80202
Attn: Erik B. Carlson, Esq.
10.2 Successors and Assigns. This Agreement is personal to the parties
hereto and may not be assigned or transferred to another party without the prior
written consent of all of the parties hereto; provided, however, that the
-------- -------
Acquiror or Surviving Entity, as the case may be, may pledge, assign or grant a
security interest in any or all of its respective rights and interests hereunder
to any lender or lenders providing financing for the Merger contemplated hereby,
which for the purposes hereof shall include Chase Capital Partners and Chase
Bank acting as the syndication agent for debt financing by Chase Bank, First
Union, Bank of Nova Scotia and U.S. Bancorp. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
10.3 Arbitration. Any dispute arising pursuant to or in any way
related to this Agreement or the transactions contemplated hereby shall be
settled by arbitration at a mutually agreed upon location in Denver, Colorado;
provided, however, that nothing in this Section shall restrict the right of
either party to apply to a court of competent jurisdiction for emergency relief
pending final determination of a claim by arbitration in accordance with this
Section. All arbitration shall be conducted in accordance with the rules and
regulations of the American Arbitration Association, in force at the time of any
such dispute, by a panel of three (3) single arbitrators selected in accordance
with the procedures of the American Arbitration Association. Each party shall
pay its own expenses associated with such arbitration, including 50% of the
expenses of the arbitrator, provided that the prevailing party after entry of a
final, non-appealable order in any arbitration shall be entitled to
reimbursement of reasonable attorney's fees and expenses relating to such
arbitration. The award of the arbitrator, based upon written findings of fact
and conclusions of law, shall be binding upon the parties; and judgment in
accordance with that decision may be entered in any court having jurisdiction
thereof.
10.4 No Oral Modifications. No amendments or modifications to this
Agreement shall be made or deemed to have been made unless in writing executed
and delivered by the party to be bound thereby. Any provision of this Agreement
may be waived, amended, supplemented or modified only by agreement in writing of
the parties hereto.
10.5 Waiver. The failure of any party to this Agreement to insist upon
strict performance of any of the terms of this Agreement will not constitute a
waiver of any of its rights under this Agreement or its right Subsequently to
assert, rely upon, or enforce any provision of this Agreement.
10.6 Governing Law. This Agreement shall be interpreted, governed by
and enforced according to the laws of the State of Delaware without regard to
principles of conflicts of law.
10.7 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement will not in any way be affected or
impaired thereby.
10.8 Headings and Captions for Convenience. The headings and captions
contained in this Agreement are for convenience only and shall not be considered
in interpreting the provisions hereof.
45
<PAGE>
10.9 Counterparts. This agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, all of
which together shall constitute one and the same instrument.
11. Indemnification.
---------------
11.1 Tax Indemnification.
11.1.1 Shareholder Indemnification of Acquiror and Surviving
Entity. Shareholder shall indemnify Acquiror and Surviving Entity and each of
their respective officers, directors, employees, stockholders, members, agents
and representatives and hold them harmless from and against any Losses resulting
from or in connection with (i) any and all liability for Taxes of Target for all
periods prior to the Effective Date (except insofar as adjustments have been
made for such Taxes in the calculation of Closing Net Working Capital), (ii) any
and all liability for Income Taxes of Target with respect to the sale of assets
and liquidation of the Target related to the Merger, (iii) any and all liability
(as a result of Treasury Regulation (S) 1.1502-6(a) or otherwise) for Taxes of
Shareholder or any other entity (other than Target) which is or has been
affiliated with Shareholder or Target, (iv) any and all liability attributable
to a breach by Shareholder of its obligations under this Agreement, including,
without limitation, a breach of any representation or warranty in Section 4.1.8,
-------------
and (v) any and all liability for reasonably necessary legal fees and expenses
incurred by Acquiror in enforcing its rights under clause (i), (ii), (iii) or
(iv) above.
11.1.2 Acquiror and Surviving Entity Indemnification of
Shareholder. Acquiror shall, and shall cause Surviving Entity to, indemnify
Shareholder and its affiliates and each of their respective officers, directors,
employees, stockholders, agents and representatives and hold them harmless and
against any Losses resulting from or in connection with (i) any and all
liability for Taxes of Surviving Entity for any taxable period beginning on or
after the Effective Date excepting any and all liability for Income Taxes of
Target with respect to the sale of assets and liquidation of the Target related
to the Merger, (ii) any and all liability for Taxes attributable to a breach by
Acquiror of its obligations under this Agreement and (iii) any and all liability
for reasonably necessary legal fees and expenses incurred by Shareholder in
enforcing its rights under clause (i) or (ii) above.
11.1.3 Reimbursement. Shareholder's indemnity obligation in
respect of Taxes other than Income Taxes (as defined below) for all tax periods
prior to the Effective Date shall initially be effected by its payment to
Acquiror of the excess (the "Shareholder Reimbursement Amount") of (i) such
--------------------------------
Taxes for each such tax period over (ii) the amount of such Taxes paid by
Shareholder or any of its Affiliates (other than Target) at any time plus the
amount of such Taxes paid by Target on or prior to the Effective Date with
respect to such tax period (in the form of estimated Tax payments or otherwise),
in each case excluding amounts reflected in the calculation of Net Working
Capital. Shareholder shall initially pay the Shareholder Reimbursement Amount
to Acquiror within thirty (30) days after the return, report or form with
respect to the final liability for such Taxes is required to be filed (or, if
later, is actually filed). If the amount described in clause (i) above exceeds
the amount described in clause (ii) above, Acquiror shall pay to Shareholder the
amount of such excess within thirty (30) days after the return, report or form
with respect to the final liability for such Taxes is required to be filed.
Acquiror's indemnity obligation in respect of Income Taxes for any and all tax
periods after the Effective Date shall initially be effected by its payment to
Shareholder of the excess (the "Acquiror Reimbursement Amount") of (x) such
-----------------------------
Taxes for the period after the Effective Date over (y) such Taxes previously
paid by Acquiror or Surviving Entity after the Effective Date (in the form of
estimated tax payments or otherwise), in each case excluding amounts reflected
in the calculation of Net Working
46
<PAGE>
Capital. Acquiror shall initially pay such Acquiror Reimbursement Amount to
Shareholder within thirty (30) days after the return, report or form with
respect to the final liability for such Taxes is required to be filed (or, if
later, is actually filed). If the amount described in clause (y) above exceeds
the amount described in clause (x) above, Shareholder shall pay to Acquiror the
amount of such excess within thirty (30) days after the return, report or form
with respect to the final liability for such Taxes is required to be filed. The
payments to be made pursuant to this Section 11.1.3 by Shareholder or Acquiror
--------------
with respect to a Tax for which either of them has an obligation to indemnify
the other shall be appropriately adjusted to reflect the outcome of any contest
with respect to any such Tax period pursuant to Sections 11.1.1 or 11.1.2. For
-------------------------
purposes of this Agreement, "Income Tax" or "Income Taxes" shall mean all Taxes
--------- ------------
in whole or in part based on or measured by net or gross income, gains or
profits, and any Taxes (including franchise Taxes) imposed in lieu thereof or
similar thereto.
11.2 Other Indemnification by Shareholder. Shareholder shall indemnify
Acquiror and the Surviving Entity and each of their respective officers,
directors, employees, members, stockholders, agents and representatives against
and hold them harmless from any Losses suffered or incurred by any such
indemnified party (other than any relating to Taxes, for which indemnification
provisions are set forth in Section 11.1) to the extent arising from, relating
------------
to or otherwise in respect of (i) any breach of any representation or warranty
of Shareholder or Target which survives the Closing contained in this Agreement
or in any certificate delivered pursuant hereto (it being agreed and
acknowledged by the parties that for purposes of Acquiror's right to
indemnification pursuant to this Section 11.2 the representations and
------------
warranties of Shareholder or Target contained herein shall not be deemed
qualified by any references herein to materiality or knowledge generally or to
whether or not any such breach results or may result in a material adverse
effect), (ii) any breach of any covenant of Shareholder or Target contained in
this Agreement and (iii) all Retained Liabilities; provided, however, that
-------- -------
Shareholder shall not have any liability under clause (i) above unless the
aggregate of all losses, liabilities, costs and expenses relating thereto for
which Shareholder would, but for this proviso, be liable exceeds on a cumulative
basis an amount equal to $3,000,000 in which case Shareholder shall be liable
for the full amount thereof (except with respect to representation and
warranties set forth in Sections 4.1.1, 4.1.2, 4.1.3, 4.1.4, 4.1.35 and 4.1.36);
------------------------------------------------------
provided, however, that Shareholder shall not have any liability under clause
- -------- -------
(i) above for any individual items where the loss, liability, cost or expense
relating thereto is less than $10,000 and such items shall not be aggregated for
purposes of the first proviso to this Section 11.2; and provided further,
------------ ----------------
however, that Shareholder's liability under clause (i) above shall in no event
- -------
exceed $45,000,000 (except with respect to representations and warranties set
forth in Sections 4.1.1, 4.1.2, 4.1.3, 4.1.4, 4.1.35 and 4.1.36 and except that
------------------------------------------------------
this proviso shall not apply to any willful breach of any covenant by
Shareholder). In no event shall Shareholder be obligated to indemnify Acquiror
or any other person with respect to any matter to the extent that (A)
Shareholder has already provided indemnity for such matter pursuant to this
Agreement, (B) such matter (excluding third-party claims) was reflected in the
calculation of Net Working Capital pursuant to Sections 2.8.1 and 2.8.2, or (C)
------------------------
such matter constitutes an Environmental Liability.
11.3 Other Indemnification by Acquiror. Acquiror and Surviving Entity
shall indemnify Shareholder, its affiliates and each of their respective
officers, directors, employees, stockholders, agents and representatives against
and hold them harmless from any Losses suffered or incurred by any such
indemnified party (other than any relating to Taxes, for which indemnification
provisions are set forth in Section 11.1) to the extent arising from (i) any
------------
breach of any representation or warranty of Acquiror which survives the Closing
contained in this Agreement or in any certificate delivered pursuant hereto (it
being agreed and acknowledged by the parties that for purposes of Shareholder's
right to indemnification pursuant to this Section 11.3 the representations and
------------
warranties of Acquiror contained herein shall not be deemed qualified by any
references herein to materiality
47
<PAGE>
generally), (ii) any breach of any covenant of Acquiror or Surviving Entity
contained in this Agreement, and (iii) all Assumed Liabilities, provided,
however, that Acquiror shall not have any liability under clause (i) above,
unless the aggregate of all losses, liabilities, costs and expenses relating
thereto for which Acquiror would, but for this proviso, be liable exceeds on a
cumulative basis an amount equal to $3,000,000 (in which case Acquiror shall be
liable for the full amount thereof, (except with respect to representations and
warranties set forth in Sections 4.2.1, 4.2.2, 4.2.3 and 4.2.6); provided,
-------------------------------------- --------
however, that Acquiror shall not have any liability under clause (i) above for
- -------
any individual items where the loss, liability, cost or expense relating thereto
is less than $10,000 and such items shall not be aggregated for purposes of the
first proviso to this Section 11.3; and provided further, however, that
------------ ---------------- -------
Acquiror's liability under clause (i) above shall in no event exceed $45,000,000
(except with respect to representations and warranties set forth in Sections
--------
4.2.1, 4.2.2, 4.2.3 and 4.2.6 and except that this proviso shall not apply to
- -----------------------------
any willful breach of any covenant by Acquiror). In no event shall Acquiror be
obligated to indemnify Shareholder or any other person with respect to any
matter to the extent that (A) Acquiror has already provided indemnity for such
matter pursuant to this Agreement, or (B) such matter (excluding third-party
claims) was reflected in the calculation of Net Working Capital pursuant to
Sections 2.8.1 and 2.8.2.
- ------------------------
11.4 Losses Net of Insurance, etc. The amount of any loss, liability,
claim, damage, expense or Tax for which indemnification is provided under this
Section 11 shall be net of any amounts recovered or recoverable by the
- ----------
indemnified party under insurance policies with respect to such Losses and shall
be (i) increased to take account of any net Tax cost actually incurred by the
indemnified party arising from the receipt of indemnity payments hereunder
(grossed up for such increase) and (ii) reduced to take account of any net Tax
savings actually realized by the indemnified party arising from the incurrence
or payment of any such Losses or events giving rise thereto during the Tax year
or any previous Tax year in which the indemnity payment is made. In computing
the amount of any such Tax cost or Tax savings, the indemnified party shall be
deemed to recognize all other items of income, gain, loss, deduction or credit
before recognizing any item arising from the receipt of any indemnity payment
hereunder or the incurrence or payment of any indemnified Losses. Any
indemnification payment hereunder shall initially be made without regard to this
paragraph and shall be increased or reduced to reflect any such net Tax cost
(including gross-up) or net Tax benefit only after the indemnified party has
actually realized such cost or benefit. For purposes of this Agreement, an
indemnified party shall be deemed to have "actually realized" a net Tax cost or
a net Tax benefit to the extent that, and at such time as, the amount of Taxes
payable by such indemnified party is increased above or reduced below, as the
case may be, the amount of Taxes that such indemnified party would be required
to pay but for the receipt of the indemnity payment or the incurrence or payment
of such Loss, as the case may be. The amount of any increase or reduction
hereunder shall be adjusted to reflect any final determination (which shall
include the execution of Form 870-AD or any successor form) with respect to the
indemnified party's liability for Taxes and payments between Shareholder and
Acquiror to reflect such adjustment shall be made if necessary. Any indemnity
payment under this Agreement shall be treated as an adjustment to the Merger
Consideration for Tax purposes, unless a final determination (which shall
include the execution of Form 870-AD or any successor form) with respect to the
indemnified party or any of its affiliates causes any such payment not to be
treated as an adjustment to the Merger Consideration for United States Federal
income Tax purposes. Notwithstanding the foregoing, an indemnifying party shall
not be liable for any payment pursuant to a final determination described in the
preceding sentence to which it has not consented, it being a condition to the
withholding of such consent, however, that such indemnifying party agree to bear
the cost of any further contest (for which a settlement or other final
disposition otherwise has been proposed) it shall request.
11.5 Intentionally Left Blank.
48
<PAGE>
11.6 Procedures Relating to Indemnification (Other than under Section
-------
11.1). In order for a party (the "indemnified party") to be entitled to any
- ---- -----------------
indemnification provided for under this Agreement (other than in relation to
Taxes, which matters are governed by Section 11.1) in respect of, arising out of
------------
or involving a claim or demand made by any person against the indemnified party
(a "Third Party Claim"), such indemnified party must notify the indemnifying
-----------------
party in writing, and in reasonable detail, of the Third Party Claim within 10
business days after receipt by such indemnified party of written notice of the
Third Party Claim; provided, however, that failure to give such notification
-------- -------
shall not affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure (except that the indemnifying party shall not be liable for any expenses
incurred during the period in which the indemnified party failed to give such
notice). Thereafter, the indemnified party shall deliver to the indemnifying
party, within five business days after the indemnified party's receipt thereof,
copies of all notices and documents (including court papers) received by the
indemnified party relating to the Third Party Claim.
If a Third Party Claim is made against an indemnified party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges its obligation to indemnify the indemnified
party therefor, to assume the defense thereof with counsel selected by the
indemnifying party; provided that such counsel is not reasonably objected to by
--------
the indemnified party. Should the indemnifying party so elect to assume the
defense of a Third Party Claim, the indemnifying party shall not be liable to
the indemnified party for legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the indemnifying
party assumes such defense, the indemnified party shall have the right to
participate in the defense thereof and to employ counsel (not reasonably
objected to by the indemnifying party), at its own expense, separate from the
counsel employed by the indemnifying party, it being understood that the
indemnifying party shall control such defense. The indemnifying party shall be
liable for the fees and expenses of counsel employed by the indemnified party
for any period during which the indemnifying party has failed to assume the
defense thereof (other than during the period prior to the time the indemnified
party shall have given notice of the Third Party Claim as provided above).
If the indemnifying party so elects to assume the defense of any Third
Party Claim, all of the indemnified parties shall cooperate with the
indemnifying party in the defense or prosecution thereof. Such cooperation
shall include the retention and (upon the indemnifying party's request) the
provision to the indemnifying party of records and information which are
reasonably relevant to such Third Party Claim, and making employees available on
a mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Whether or not the indemnifying party shall
have assumed the defense of a Third Party Claim, the indemnified party shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the indemnifying party's prior written consent (which
consent shall not be unreasonably withheld). If the indemnifying party shall
have assumed the defense of a Third Party Claim, the indemnified party shall
agree to any settlement, compromise or discharge of a Third Party Claim which
the indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the indemnifying party completely in
connection with such Third Party Claim and which would not otherwise adversely
affect the indemnified party.
Notwithstanding the foregoing, the indemnifying party shall not be
entitled to assume the defense of any Third Party Claim (and shall be liable for
the fees and expenses of counsel incurred by the indemnified party in defending
such Third Party Claim) if the Third Party Claim seeks an order, injunction or
other equitable relief or relief for other than money damages against the
indemnified party which the indemnified party reasonably determines, after
conferring with its outside counsel, cannot be
49
<PAGE>
separated from any related claim for money damages. If such equitable relief or
other relief portion of the Third Party Claim can be so separated from that for
money damages, the indemnifying party shall be entitled to assume the defense of
the portion relating to money damages. The indemnification required by Sections
--------
11.2 and 11.3 shall be made by periodic payments of the amount thereof during
- ---- ----
the course of the investigation, remediation or defense, as and when bills are
received or the Loss is incurred. All claims under Sections 11.2 or 11.3 other
------------- ----
than Third Party Claims shall be governed by Section 11.7. All Tax Claims (as
------------
defined in Section 11.8) shall be governed by Section 11.8.
------------ ------------
11.7 Other Claims. In the event any indemnified party should have a
claim against any indemnifying party under Sections 11.2 or 11.3 that does not
------------- ----
involve a Third Party Claim being asserted against or sought to be collected
from such indemnified party, the indemnified party shall deliver notice of such
claim with reasonable promptness to the indemnifying party. The failure by any
indemnified party so to notify the indemnifying party shall not relieve the
indemnifying party from any liability which it may have to such indemnified
party under Section 11.2 or 11.3, except to the extent that the indemnifying
------------ ----
party demonstrates that it has been materially prejudiced by such failure. If
the indemnifying party does not notify the indemnified party within twenty (20)
calendar days following its receipt of such notice that the indemnifying party
disputes its liability to the indemnified party under Sections 11.2 or 11.3,
------------- ----
such claim specified by the indemnified party in such notice shall be
conclusively deemed a liability of the indemnifying party under Section 11.2 or
------------
11.3 and the indemnifying party shall pay the amount of such liability to the
- ----
indemnified party on demand or, in the case of any notice in which the amount of
the claim (or any portion thereof) is estimated, on such later date when the
amount of such claim (or such portion thereof) becomes finally determined. If
the indemnifying party has timely disputed its liability with respect to such
claim, as provided above, the indemnifying party and the indemnified party shall
proceed in good faith to negotiate a resolution of such dispute and, if not
resolved through negotiations, such dispute shall be resolved by arbitration as
provided in this Agreement.
11.8 Procedures Relating to Indemnification of Tax Claims. Acquiror
or Shareholder, as the case may be, shall promptly notify the other in writing
of the commencement of any claim, audit, examination, or other proposed change
or adjustment of which it or any of its affiliates has been informed in writing
by any taxing authority which may affect the liability of the other party under
this Section 11.1 (each, a "Tax Claim"). Such notice shall describe the
------------ ---------
asserted Tax Claim in reasonable detail and shall include copies of any notices
and other documents received from any taxing authority in respect of any such
asserted Tax Claim. If notice of a Tax Claim is not given by a party to the
other party within a sufficient period of time to allow the other party to
effectively contest such Tax Claim, or in reasonable detail to apprise the other
party of the nature of the Tax Claim or if an indemnified party otherwise fails
to follow the requirements of this Section 11.8, the amount of any indemnity
------------
payment pursuant to Section 11.1 shall be reduced, to the extent that the other
------------
party is harmed or its position is actually prejudiced as a result thereof.
With respect to any Tax Claim relating to Target for any period prior
to the Effective Time, at Shareholder's election (to be made not later than 10
business days following Shareholder's receipt of a notification from Acquiror
that (i) Surviving Entity has received from a taxing authority a first offer of
settlement or (ii) Surviving Entity proposes to make a first offer of settlement
to a taxing authority), except as set forth herein, Shareholder shall have the
sole right to represent Shareholder's or Target's interest(s) in any Tax audit
or administrative or court proceeding and to employ counsel of its choice, and,
without limiting the foregoing, may in its sole discretion pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with any
taxing authority with respect thereto (collectively, "Tax Proceedings"), and
---------------
may, in its sole discretion, either pay the Tax claimed and sue for a refund
where applicable law permits such refund suits or contest the Tax Claim in any
50
<PAGE>
permissible manner; provided however, that Acquiror shall have the sole right to
-------- -------
represent the Surviving Entity's interest in any Tax Proceedings related to all
Taxes for the period after the Effective Date, including, but not limited to,
any period after the Effective Date and before the Effective Time, and
Shareholder's right to control any Tax Proceedings relating to Taxes for the
period after the Effective Date and before the Effective Time shall be limited
to those issues and matters affecting Income Taxes relating to the Target for
such periods. Acquiror shall cooperate fully with Shareholder (including, but
not limited to, by granting to Shareholder a power of attorney reasonably
necessary to represent Target in any such audit or proceeding and by causing
Target, at Shareholder's reasonable request, to take such requested actions in
the defense against or compromise of any claim in any Tax audit or proceeding
which Shareholder controls pursuant hereto), timely make available to
Shareholder all data and other information reasonably requested by Shareholder
in connection with such Tax Proceedings and make employees available on a
mutually convenient basis to provide additional information or explanation of
any material provided hereunder or to testify at Tax Proceedings relating to
such Tax Claim.
Subject to the foregoing, Shareholder shall have sole control of all
Tax Proceedings undertaken in connection with any Tax Claim relating to the
Taxes of the Target for the period prior to the Effective Time, and Acquiror and
Surviving Entity shall have sole control of all Tax Proceedings undertaken in
connection with any Tax Claim relating to the Taxes of the Surviving Entity
after the Effective Time; provided, however, that neither the Shareholder nor
-------- -------
any of its respective officers, directors, employees, stockholders, agents or
representatives will settle or otherwise compromise any Tax Claim which includes
a position not consistent with prior Tax practice of the Target and which may
have an adverse effect upon the Acquiror's Taxes without the prior written
consent of Surviving Entity, which shall not be unreasonably withheld or
delayed. In no case shall Acquiror, Surviving Entity or any of their respective
officers, directors, employees, stockholders, agents or representatives settle
or otherwise compromise any Tax Claim relating to any period prior to the
Effective Date without the prior written consent of Shareholder, which shall not
be unreasonably withheld or delayed.
11.9 Mitigation. Acquiror and Shareholder shall cooperate with each
other with respect to resolving any claim or liability with respect to which one
party is obligated to indemnify the other party hereunder, including by making
commercially reasonably efforts to mitigate or resolve any such claim or
liability; provided that such party shall not be required to make such efforts
--------
(other than in respect of Tax matters) if they would be detrimental in any
material respect to such party. In the event that Acquiror or Shareholder shall
fail to make such commercially reasonably efforts to mitigate or resolve any
claim or liability, then (unless the proviso to the foregoing covenant shall be
applicable) notwithstanding anything else to the contrary contained herein, the
other party shall not be required to indemnify any person for any loss,
liability, claim, damage or expense that could reasonably be expected to have
been avoided if Acquiror or Shareholder, as the case may be, had made such
efforts.
11.10 No Contribution from the Target or Surviving Entity. The
obligations of the Shareholder to indemnify the Acquiror, the Surviving Entity
and their respective officers, directors, employees, members, stockholders,
agents and representatives pursuant to the terms of this Agreement are primary
obligations of the Shareholder, subject to the limitations set forth herein.
The Shareholder hereby waives any rights to seek or obtain indemnification or
contribution from the Target or the Surviving Entity for Losses as a result of
any breach by the Target of any representation, warranty or covenant contained
in this Agreement.
12. Tax Matters.
-----------
12.1 In the case of Taxes other than Income Taxes, for any taxable
period of Target
51
<PAGE>
after the Effective Date, Acquiror shall prepare and timely file with the
appropriate authorities all Tax Returns required to be filed and shall timely
pay all Taxes due with respect to such Tax Returns; provided that Shareholder
--------
shall reimburse Acquiror (in accordance with the procedures set forth in Section
-------
11.1.1) for any amount owed by Shareholder pursuant to Section 11.1 with respect
- ------ ----
to the taxable periods covered by such Tax Returns if the Merger is not
consummated. In the case of Income Taxes, for any taxable period of Target that
includes (but does not end on) the Closing Date, Shareholder shall prepare and
timely file with the appropriate authorities (or provide to Acquiror for
signature and filing) all Tax Returns required to be filed and shall timely pay
(or remit to Acquiror for payment) the amount of all Taxes due with respect to
such Tax Returns; provided that Acquiror shall reimburse Shareholder (in
--------
accordance with the procedures set forth in Section 11.1.3) for any amount owed
--------------
by Acquiror pursuant to Section 11.1.2 with respect to the taxable period
--------------
covered by such Tax Returns. For any taxable period of Target that ends on or
before the Closing Date, Shareholder shall prepare and timely file with the
appropriate authorities all Tax Returns related to Income Tax required to be
filed, and shall timely pay all Income Taxes due with respect to such Tax
Returns related to Income Tax. Acquiror and Shareholder agree to cause Target to
file all Tax Returns related to Income Tax for the period including the Closing
Date on the basis that the relevant taxable period ended as of the close of
business on the Closing Date, unless the relevant taxing authority will not
accept a Tax Return related to Income Tax filed on that basis. With respect to
Tax Returns related to Income Tax to be made by Shareholder pursuant to the
terms hereof, Acquiror shall cause Surviving Entity to prepare and provide to
Shareholder packages of tax information materials, including, but not limited
to, federal and state income tax information (the "Tax Packages"), which shall
------------
be completed in accordance with past practice unless other instructions shall
have been provided by Shareholder, together with relevant work papers, for
purposes of preparing all Tax Returns related to Income Tax for the relevant
period, together with all other relevant materials and information reasonably
requested by Shareholder for these purposes. Acquiror shall cause the Tax
Packages and related work papers for such taxable period of Target to be
delivered to Shareholder no later than the sooner of thirty (30) days from
receipt of written request therefor by Shareholder or forty-five (45) days prior
to the due date for filing any such Tax Return related to Income Tax.
12.2 Shareholder, Target and Acquiror shall reasonably cooperate, and
shall cause their respective affiliates, officers, employees, agents, auditors
and representatives reasonably to cooperate, in preparing and filing all Tax
Returns relating to Taxes, including maintaining and making available to each
other all records necessary in connection with Taxes and in resolving all
disputes and audits with respect to all taxable periods relating to Taxes.
Acquiror and Shareholder recognize that Shareholder and its affiliates will need
access, from time to time, after the Closing Date, to certain accounting and Tax
records and information held by Surviving Entity to the extent such records and
information pertain to events occurring on or prior to the Effective Date;
therefore, Acquiror agrees, and agrees to cause Surviving Entity , (i) to
properly retain and maintain all potentially relevant records until such time as
Shareholder agrees in writing that such retention and maintenance is no longer
necessary, and (ii) to allow Shareholder and its agents and representatives (and
agents or representatives of any of its affiliates), at times and dates mutually
acceptable to the parties, to inspect, review and make copies of such records as
Shareholder may deem necessary or appropriate from time to time, such activities
to be conducted during normal business hours and at Shareholder's expense.
12.3 Any refunds or credits of Taxes of Target for any taxable period
ending on or before the Effective Time, other than any amount reflected in the
calculation of Net Working Capital, shall be for the account of Shareholder, and
shall be remitted to Shareholder as set forth herein. Any refunds or credits of
Taxes of Target received by Shareholder for any taxable period beginning after
the Effective Date shall be for the account of the Acquiror. Acquiror shall, if
Shareholder so requests and at Shareholder's expense, cause Surviving Entity to
file for and obtain any refunds or credits to which
52
<PAGE>
Shareholder is entitled under this Section 12.3. Acquiror shall permit
------------
Shareholder to control the prosecution of any such refund claim and, where
deemed appropriate by Shareholder, shall cause Surviving Entity to authorize by
appropriate powers of attorney such persons as Shareholder shall designate to
represent Target with respect to such refund claim. Acquiror shall cause
Surviving Entity to forward to Shareholder any such refund within 10 days after
the refund is received (or reimburse Shareholder for any such credit within 10
days after the credit is allowed or applied against other Tax liability).
Notwithstanding the foregoing, the control of the prosecution of a claim for
refund of Taxes paid pursuant to a deficiency assessed subsequent to the
Effective Date as a result of an audit shall be governed by the provisions of
Section 11.8.
- ------------
12.4 Shareholder shall be responsible for filing any amended
consolidated, combined or unitary Tax Returns related to Income Tax for taxable
years ending on or prior to the Effective Time which are required as a result of
examination adjustments made by the Internal Revenue Service or by the
applicable state, local or foreign taxing authorities for such taxable years as
finally determined. For those jurisdictions in which separate Tax Returns
related to Income Tax are filed by Target, any required amended Tax Returns
related to Income Tax resulting from such examination adjustments, as finally
determined, shall be prepared by Shareholder and furnished to Surviving Entity
for approval (which approval shall not be unreasonably withheld), signature and
filing at least 30 days prior to the due date for filing such Tax Returns
related to Income Tax. Unless Acquiror shall have first secured Shareholder's
consent in writing, Acquiror shall not (i) file any amended Tax Return related
to Income Tax related to Target with respect to any tax period prior to the
Effective Time, or (ii) carryback any loss or other Tax related to Income Tax
attribute to a tax period prior to the Effective Time.
12.5 All transfer, documentary, sales, use, registration and other
such Taxes (including all applicable real estate transfer or gains Taxes) and
related fees (including any penalties, interest and additions to Tax) incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by Acquiror. Acquiror shall timely prepare and file all Tax Returns as
may be required to comply with the provisions of such Tax laws.
13. Survival of Representations and Warranties.
------------------------------------------
Subject to the further provisions of this Section 13, the
----------
representations and warranties of the Target and the Shareholder contained in
Section 4.1 and the representations and warranties of the Acquiror contained in
- -----------
Section 4.2 shall survive the Closing Date until the date that is thirty-six
- -----------
(36) months following the Closing Date; provided, however, that (i) the
-------- -------
representations and warranties of the Shareholder contained in Sections 4.1.1,
---------------
4.1.2, 4.1.3, 4.1.4, 4.1.5, 4.1.33 and 4.1.35 and the representations and
- ---------------------------------- ------
warranties of the Acquiror contained in Sections 4.2.1, 4.2.2, 4.2.3 and 4.2.6
---------------------------- -----
shall survive the Closing Date without any time limit and (ii) the
representations and warranties set forth in Sections 4.1.8 and 4.1.16, shall
-------------- ------
survive the Closing Date until the date that is ninety (90) days after the
expiration of the statute of limitations, if any, applicable to the matters set
forth therein. The covenants and other agreements of the parties contained in
this Agreement shall survive the Closing Date until they are otherwise
terminated, whether by their terms or as a matter of applicable law. For
convenience of reference, the date upon which any representation, warranty,
covenant or other agreement contained herein shall terminate, if any, is
referred to herein as the "Survival Date".
-------------
14. Miscellaneous
-------------
14.1 Expenses. Except as otherwise provided herein, each of the
Target and the Shareholder, on one hand, and the Acquiror, on the other hand,
shall bear their own expenses in
53
<PAGE>
connection with the preparation for and consummation of the Merger and the other
transactions contemplated hereby (the "Transaction Expenses"); provided,
-------------------- --------
however, that in the event the Merger is consummated, all Transaction Expenses
- -------
incurred by the Target (whether incurred on behalf of the Target, the
subsidiaries and/or the Shareholder) shall be borne by the Shareholder, which
expenses shall include all prepayment penalties relating to indebtedness or
capital leases paid off at Closing and any payments required to obtain any third
party consents or waivers (or, to the extent not determinable at the Closing,
the Shareholder shall pay such expenses after the Closing), and such expenses
shall not in any event be the responsibility of the Target, the Surviving
Entity, the Acquiror or any Affiliate of the Acquiror. This provision shall not
apply to the Tax referenced in Section 12.5 or the Extraordinary Event Tax
referenced in Section 11.1 hereof.
14.2 No Benefit to Others. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto and their respective heirs, successors, assigns, and such
representations, warranties, covenants and agreements shall not be construed as
conferring, and are not intended to confer, any rights on any other persons.
14.3 Press Releases. Shareholder and Acquiror agree that neither
party shall make any public announcement regarding this Agreement without first
conferring with the other. If the parties are unable to agree as to the text or
time of release of any such announcement, no announcement shall be made unless
the party proposing the announcement is advised by counsel that the announcement
is legally required to be made, in which case the other party shall be
immediately advised of the text and time of release of the announcement.
14.4 Exhibits. The Exhibits referred to herein are incorporated into
this Agreement by reference. Such Exhibits may be amended or modified by a
party provided that the other party ("Receiving Party") has been furnished with
---------------
a copy of the amendment or modification to such Exhibit; provided, however, that
if any such amendment shall materially adversely affect the economics, financial
or business considerations of the transactions contemplated under this Agreement
as reasonably determined by the Receiving Party, such Receiving Party may
terminate this Agreement in accordance with Section 9.1.4.
-------------
14.5 Entire Agreement. This Agreement, together with Exhibits
hereto, represents the entire agreement between the parties hereto with respect
to the subject matter hereof and all prior agreements, understandings or
negotiations shall be deemed merged herein. No representations, warranties,
promises or agreements, express or implied, shall exist between the parties,
except as stated herein.
SIGNATURES ON FOLLOWING PAGE:
REMAINDER OF PAGE LEFT BLANK INTENTIONALLY
54
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
TRANSMONTAIGNE INC.
a Delaware Corporation
By: /s/ DONALD H. ANDERSON
----------------------
Donald H. Anderson
Title: Vice Chairman
Date: 12/27/99
BEAR PAW ENERGY INC.
a Colorado Corporation
By: /s/ ROBERT J. CLARK
-------------------
Robert J. Clark
Title: President
Date: 12/27/99
BPE ACQUISITION, LLC
a Delaware Limited Liability Company
By: /s/ THOMAS J. EDELMAN
---------------------
Thomas J. Edelman
Title: Chairman
Date: 12/27/99
55
