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 MARCH 1, 1999
(Date of earliest event reported)
BLUE DOLPHIN ENERGY COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 0-15905 73-1268729
(State or other jurisdiction of Commission File Number: (I.R.S. Employer
incorporation or organization) Identification No.)
801 TRAVIS, SUITE 2100, HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip Code)
(713) 227-7660
(Registrant's telephone number, including area code)
1
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 1, 1999, a wholly owned subsidiary of Blue Dolphin Energy Company
("Company") acquired Black Marlin Pipeline Company from Enron Pipeline Company
("Enron"), for $5,404,270 cash. Black Marlin Pipeline Company is the owner of
the 75 mile Black Marlin Pipeline System originating in High Island Block 136 in
the Gulf of Mexico off the Texas Gulf Coast extending across Galveston Bay to
onshore facilities at Texas City, Texas.
This acquisition was funded by selling a one-sixth (1/6) undivided interest in
the Company's Blue Dolphin Pipeline System and the Black Marlin Pipeline System
to WBI Southern, Inc. for $3,713,000 and selling a one-third (1/3) undivided
interest in the Black Marlin Pipeline System to MCNIC Pipeline Processing
Company ("MCNIC") for $1,801,423. MCNIC owns a one-third (1/3) undivided
interest in the Blue Dolphin Pipeline System.
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS.
(A) FINANCIAL STATEMENTS
As of the date of filing of this report on Form 8-K, it is impracticable for the
Registrant to provide the financial statements required by this Item 7(a). In
accordance with item 7(a)(4) of Form 8-K, such financial statements shall be
filed by amendment to this Form 8-K no later than 60 days after March 16, 1999.
(B) PRO FORMA FINANCIAL INFORMATION
As of the date of filing of this report on Form 8-K, it is impracticable for the
Registrant to provide the pro forma financial statements required by this Item
7(a). In accordance with item 7(a)(4) of Form 8-K, such financial statements
shall be filed by amendment to this Form 8-K no later than 60 days after March
16, 1999.
(C) EXHIBITS
10.29 Press Release March 1, 1999
10.30 Asset Purchase Agreement between WBI Southern, Inc. and Blue Dolphin
Pipeline Company, Buccaneer Pipe Line CO. and Mission Energy, Inc.
10.31 Purchase and Sale Agreement between Enron Pipeline Company and Black
Marlin Energy Company and Blue Dolphin Energy Company
10.32 Asset Purchase Agreement between WBI Southern, Inc. and Black Marlin
Pipeline Company and Black Marlin Energy Company
10.33 Asset Purchase Agreement between MCNIC Offshore Pipeline & Processing
Company and Black Marlin Pipeline Company and Black Marlin Energy Company
2
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLUE DOLPHIN ENERGY COMPANY
Date: March 9, 1999 By: /s/ G. BRIAN LLOYD
G. Brian Lloyd
Vice President, Treasurer
3
EXHIBIT 10.29
NEWS RELEASE
FOR IMMEDIATE RELEASE March 1, 1999
HOUSTON, TEXAS - BLUE DOLPHIN ENERGY COMPANY (NASDAQ SYMBOL: BDCO)
BLUE DOLPHIN ENERGY ACQUIRES BLACK MARLIN PIPELINE
The Company effective today completed its previously announced acquisition of a
significant pipeline system, the 75 mile offshore Black Marlin Pipeline. The
acquisition was made jointly with MCNIC Pipeline & Processing Company ("MCNIC")
(1/3), a business unit of MCN Energy Group Inc. (NYSE: MCN), and WBI Holdings,
Inc. ("WBI") (1/6), the natural gas transmission unit of MDU Resources Group,
Inc. (NYSE: MDU). The seller was Enron Pipeline Company.
The Black Marlin system is a major natural gas and condensate gathering line
with related shore facilities servicing the High Island Area, offshore Texas,
with transportation capacity of 160 Mmcf/d and 1500 Bpd of condensate. Present
throughput is approximately 60 Mmcf/d and 300 Bpd of condensate. The line begins
in High Island Block 136 and extends across Galveston Bay to Texas City where it
connects to multiple markets.
Concurrent with the acquisition, Blue Dolphin sold a 1/6 interest in the Blue
Dolphin Pipeline system and related shore facilities to WBI. In total, the
transactions involve approximately 150 miles of natural gas pipeline gathering
systems located in the State and Federal Waters of the upper Texas Gulf Coast.
MCNIC holds a 1/3 interest in the Blue Dolphin system. Blue Dolphin will own a
50% interest and operate both systems.
"These transactions are a major step in our overall business plan to expand our
operations on the shelf," stated William D. Fisher, senior vice president of
Blue Dolphin. "The acquisition of Black Marlin will more than double the size of
our growing gathering and transportation business unit." Fisher noted "We are
excited about our new alliance with WBI Holdings and our continued business
relationship with MCNIC."
BLUE DOLPHIN ENERGY COMPANY is engaged in the gathering and transportation
of natural gas and condensate, exploration and acquisition of oil and gas
properties, and development of an offshore terminal and storage facility to
handle crude oil and refined products. Questions should be directed to G. Brian
Lloyd, Vice President, Treasurer, at the Company's offices in Houston, Texas,
(713) 227-7660. For further information see our home page at
http://www.blue-dolphin.com.
EXHIBIT 10.30
ASSET PURCHASE AGREEMENT
by and among
BLUE DOLPHIN PIPE LINE COMPANY,
BUCCANEER PIPE LINE CO. AND MISSION ENERGY, INC.,
as the Blue Dolphin Companies
and
WBI SOUTHERN, INC.,
as Buyer
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Dated as of February 25, 1999
TABLE OF CONTENTS
ARTICLE I SALE AND PURCHASE OF ASSETS -2-
1.01 AGREEMENT TO PURCHASE AND SELL -2-
1.02 PURCHASE PRICE -2-
1.03 CONDITIONAL CONSIDERATION -3-
1.04 CUSTOMER CONTRACTS -4-
1.05 EFFECTIVE TIME -4-
1.06 OTHER AGREEMENTS -4-
ARTICLE II CLOSING -4-
ARTICLE III ACTIONS TAKEN AT THE CLOSING -5-
3.01 ACTIONS TAKEN BY THE BLUE DOLPHIN COMPANIES -5-
3.02 ACTIONS TAKEN BY BUYER -6-
ARTICLE IV REPRESENTATIONS BY AND WARRANTIES OF THE BLUE DOLPHIN
COMPANIES -6-
4.01 THE BLUE DOLPHIN COMPANIES -6-
(a) ORGANIZATION AND POWERS -6-
(b) AGREEMENTS AND CONSENTS -6-
(c) LITIGATION; ORDERS -7-
(d) VALIDITY AND ENFORCEABILITY -7-
(e) CONDITION OF ASSETS -7-
(f) OWNERSHIP OF ASSETS -7-
(g) GOVERNMENTAL LICENSES AND PERMITS -7-
(h) CONTRACTS -8-
(i) COMPLIANCE WITH LAWS -8-
(j) ENVIRONMENTAL MATTERS -8-
(k) NO BROKERS -9-
(l) CONFORMITY OF COPIES -9-
(m) NO CHANGES -9-
(n) ACCURACY AS OF THE EFFECTIVE TIME -9-
(o) NOT A RETAILER -9-
(p) EMPLOYEES -9-
(q) CORPORATE STRUCTURE -9-
(r) FORECASTS AND PROJECTIONS -9-
(s) DISCLOSURE OF OTHER MATTERS -10-
4.02 NO OTHER WARRANTIES -10-
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER -10-
5.01 BY BUYER -10-
(a) ORGANIZATION AND POWERS -10-
(b) AGREEMENTS AND CONSENTS -10-
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(c) LITIGATION; ORDERS -11-
(d) VALIDITY AND ENFORCEABILITY -11-
(e) NO BROKERS -11-
(f) NO DISTRIBUTION -11-
(g) CORPORATE STRUCTURE -12-
(h) ACCURACY AS OF THE EFFECTIVE TIME -12-
ARTICLE VI ADDITIONAL COVENANTS -12-
6.01 PUBLIC ANNOUNCEMENTS -12-
6.02 TAX MATTERS -12-
6.03 FURTHER ASSURANCES -13-
6.04 CASUALTY LOSS AND CONDEMNATION -13-
6.05 CONDUCT AND PRESERVATION OF BUSINESS -13-
6.06 RESTRICTIONS ON CERTAIN ACTIONS -13-
6.07 THIRD PARTY CONSENTS -14-
6.08 AMENDMENT OF SCHEDULES -14-
ARTICLE VII ASSUMPTION AND INDEMNIFICATION -15-
7.01 ASSUMPTION OF LIABILITIES RELATING TO THE PURCHASED INTERESTS -15-
7.02 INDEMNIFICATION BY THE BLUE DOLPHIN COMPANY -15-
7.03 INDEMNIFICATION BY BUYER -15-
7.04 NOTICE OF ASSERTED LIABILITY -16-
7.05 OPPORTUNITY TO DEFEND -16-
7.06 NEGLIGENCE AND STRICT LIABILITY WAIVER -16-
7.07 EXCLUSIVE REMEDY -16-
ARTICLE VIII MISCELLANEOUS -17-
8.01 SURVIVAL -17-
8.02 DUE DILIGENCE REVIEW -17-
8.03 COUNTERPARTS -17-
8.04 GOVERNING LAW -17-
8.05 ENTIRE AGREEMENT -17-
8.06 EXPENSES -17-
8.07 NOTICES -17-
8.08 SUCCESSORS AND ASSIGNS -18-
8.09 HEADINGS -18-
8.10 SEVERABILITY -19-
8.11 NO THIRD PARTY BENEFICIARIES -19-
8.12 CROSS-REFERENCES -19-
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ASSET PURCHASE AGREEMENT
This Agreement is made and entered into as of the 25th day of February,
1999, by and among Blue Dolphin Pipe Line Company, a Delaware corporation
("BDPL"), Buccaneer Pipe Line Co., a Texas corporation ("BPC"), Mission Energy,
Inc., a Delaware corporation doing business in Texas under the name "MEI Mission
Energy, Inc." ("MEI") (BDPL, BPC, and MEI are sometimes collectively referred to
herein as the "Blue Dolphin Companies" or singularly as a "Blue Dolphin
Company"), and WBI Southern, Inc., a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, BDPL is engaged in the business (the "Blue Dolphin Pipeline
Business") of providing services relating to the transportation of natural gas
and liquids through the Blue Dolphin Pipeline (as hereinafter defined);
WHEREAS, MEI is engaged in the business (the "Shore Facilities Business")
of providing services relating to the dehydration of natural gas and the
separation and storage of liquids on and at the Land and the Shore Facilities
(as hereinafter defined);
WHEREAS, BPC is engaged in the business (the "Buccaneer Pipeline
Business") of providing services relating to the transportation of liquids
through the Buccaneer Pipeline (as hereinafter defined);
WHEREAS, Buyer desires to purchase an undivided 1/6 of 8/8ths interest in
the assets comprising the Blue Dolphin Pipeline Business, the Shore Facilities
Business, and the Buccaneer Pipeline Business (collectively, the "Businesses"),
and the Blue Dolphin Companies desire to sell to Buyer an undivided 1/6 of 8/8th
interests in said assets on the terms and subject to the conditions set forth
herein;
WHEREAS, the Blue Dolphin Companies have previously sold an undivided 1/3
of 8/8ths interest in the Businesses to MCNIC Offshore Pipeline & Processing
Company, a Michigan corporation ("MCNIC"), and, in connection therewith, have
each entered into an Operating Agreement with MCNIC dated August 31, 1995
(collectively, the "Operating Agreements");
WHEREAS, Black Marlin Energy Company, a Delaware corporation affiliated
with the Blue Dolphin Companies ("BMEC"), has entered into that certain Purchase
and Sale Agreement (the "Black Marlin Agreement") with Enron Pipeline Company
("Enron") and Blue Dolphin Energy Company, a Delaware corporation ("Blue
Dolphin"), pursuant to which BMEC has agreed to purchase, and Enron has agreed
to sell, all of the outstanding stock of Black Marlin Pipeline Company, a Texas
corporation ("BMPC") (the "Black Marlin Purchase"), which purchase transaction
is anticipated to close on or about March 1, 1999 (the "Black Marlin Closing");
and
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WHEREAS, WBI is acquiring an undivided 1/6 of 8/8ths interest (the "Black
Marlin Interest") in the operating assets of BMPC on the date hereof.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and the benefits to be derived herefrom, the parties hereby agree as
follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.01 AGREEMENT TO PURCHASE AND SELL. Subject to the terms and the
conditions set forth in this Agreement, as of the Effective Time (as defined in
Section 1.05):
(a) BDPL will sell to Buyer, and Buyer will purchase from BDPL, an
undivided 1/6 of 8/8ths interest in and to that certain pipeline system owned by
BDPL located both onshore in Brazoria County, Texas, and offshore of the coast
of Texas, which is referred to and described in Exhibit 1.01(a), including an
undivided 1/6 of 8/8ths interest in and to all pipelines and related equipment
and fixtures and any easements, right-of-ways, and permits necessary to conduct
the Blue Dolphin Pipeline Business (the "Blue Dolphin Pipeline").
(b) BPC will sell to Buyer, and Buyer will purchase from BPC, an undivided
1/6 of 8/8ths interest in and to that certain pipeline system owned by BPC
located onshore in Brazoria County, Texas, which is referred to and described in
Exhibit 1.01(b), including an undivided 1/6 of 8/8ths interest in all pipelines
and related equipment and fixtures and any easements, right-of-ways, and permits
necessary to conduct the Buccaneer Pipeline Business (the "Buccaneer Pipeline");
(c) MEI will sell to Buyer, and Buyer will purchase from MEI, an undivided
1/6 of 8/8ths interest in and to all of:
(i) those certain tracts or parcels of real estate
described in Exhibit 1.01(c)(i) (the "Land");
(ii) the onshore separation, vapor recovery, and
dehydration facilities, related equipment and fixtures owned
by MEI which are located on the Land on the date of this
Agreement (the "Shore Facilities"); and
(d) BDPL will sell to Buyer, and Buyer will purchase from BDPL, an
undivided 1/6 of 8/8ths interest in all of the pipeline described on Exhibit
1.01(d) including all related equipment and fixtures and any easements,
right-of-ways, and permits (the "Omega Pipeline").
The assets comprising the Businesses and the Omega Pipeline which are
subject to the sale and assignment of an undivided 1/6 of 8/8ths interest
pursuant to this Section are sometimes referred to herein collectively as the
"Assets". The undivided 1/6 of 8/8ths interest in the Assets to be acquired by
Buyer pursuant to this Section are sometimes referred to herein collectively as
the "Purchased Interests" or singularly as a "Purchased Interest".
<PAGE>
1.02 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Purchased Interests shall be (i) U.S. $2,795,788 (the "Cash Payment"),
(ii) the assumption by Buyer of the Assumed Obligations (as defined in Section
7.01), and (iii) the Conditional Consideration (as defined in Section 1.03). The
Purchase Price shall be allocated to Class III assets as defined in Temporary
Treasury Regulation ss. 1.1060-1T(d)(2)(ii) and among the Purchased Interests in
the manner set forth in Section 6.02(d). The Purchase Price shall be equitably
adjusted in the event Buyer reasonably determines within 90 days of Closing that
there is a defect in the title of the Assets.
1.03 CONDITIONAL CONSIDERATION.
(a) Seller may receive up to a maximum of an additional Five Hundred
Thousand Dollars ($500,000) of Conditional Consideration during the four (4)
year period following the Effective Time provided the Pre-Tax Cash Flow
allocated and distributed to Buyer exceeds certain target levels.
(i) Pre-Tax Cash Flow means Buyer's share of
Distributable Proceeds (as defined in the applicable Operating
Agreements) from the Purchased Interests and the Black Marlin
Interests distributed to it pursuant to the applicable
Operating Agreement with respect to the revenues realized
during the period in question. Capital expenditures shall be
deducted from Pre-Tax Cash Flow, provided, however, that if
capital expenditures are made in anticipation of the
generation of incremental revenue, then the annual economic
depreciation amount computed under generally accepted
accounting principles plus a 15% pre-tax return on the capital
expenditures will instead be deducted from Pre-Tax Cash Flow.
(ii) Conditional Consideration shall be paid on an
annual basis equal to one hundred percent (100%) of the
excess, if any, of the Pre-Tax Cash Flow for each twelve month
period following March 1, 1999 above the Adjusted Pre-Tax Cash
Flow Annual Target set forth in the following schedule:
YEAR 1 YEAR 2 YEAR 3 YEAR 4
------ ------ ------ ------
- -------------------------------------------------------------------------------
Annual Pre-Tax Cash Flow Target $ 410,000 $ 406,000 $ 401,000 $ 395,000
- -------------------------------------------------------------------------------
Cumulative Shortfall from Prior
Years ---------
- -------------------------------------------------------------------------------
Adjusted Pre-Tax Cash Flow Annual
Target $ 410,000
- -------------------------------------------------------------------------------
Actual Pre-Tax Cash Flow
- -------------------------------------------------------------------------------
Net Shortfall (Payment to Seller)
- -------------------------------------------------------------------------------
(b) Buyer shall deliver or make available to Seller not later than April 1
of each year, a statement of the Pre-Tax Cash Flow for the twelve month period
ending the last day of February of each year (terminating on February 28, 2003)
and a determination of the Conditional Consideration, if any, to be paid to
Seller. Seller shall have twenty (20) calendar days after the information
specified in the preceding sentence is delivered or made available to them to
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examine such information and to present any objections that the Seller may have
to such information, such objections shall be set forth in writing and in
reasonable detail. Thereafter, Seller and Buyer shall promptly meet to discuss
any of the objections raised by the Seller, and shall mutually use good faith
efforts to resolve such objections. If the Seller does not deliver any written
objection to Buyer within such twenty (20) calendar day period, the Seller shall
be deemed to have accepted the determination of the Conditional Consideration
and waived any objection thereto. Any objections by Seller pursuant to this
provision that are not resolved within fifteen (15) calendar days after delivery
of such written objections by the Seller, may be referred to a Arbitrating
Accountant. The decision of the Arbitrating Accountant shall be binding and
conclusive upon both Buyer and Seller. All fees and expenses of the Arbitrating
Accountant will be paid one half by Buyer and one half by Seller. For purposes
of this section, the Arbitrating Accountant will be mutually selected by Buyer
and Seller from a nationally recognized firm of independent public accountants
with offices in Houston, Texas, or if no such selection is made, by the American
Arbitration Association at the request of either party.
1.04 CUSTOMER CONTRACTS. The sale and purchase of the Purchased Interests
shall include an assignment of undivided 1/6 of 8/8ths interest in and to all of
the agreements described on Schedule 1.04 (the "Customer Contracts") pursuant to
which certain persons have entered into agreements with one or more of the Blue
Dolphin Companies with respect to (a) the transportation, separation,
dehydration, or storage of natural gas, crude oil, and/or condensate through,
by, and/or on certain of the Assets, or (b) the vapor recovery processes
performed by MEI.
1.05 EFFECTIVE TIME. The transfer of the ownership of the Purchased
Interests shall be effective as of 9:00 a.m., Central Standard Time, on the day
of the Black Marlin Closing (the "Effective Time"). All sums owing on account of
the ownership, operation, or use of the Purchased Interests prior to the
Effective Time shall be for the account of and charged to the appropriate Blue
Dolphin Company, and all sums owing on account of the ownership, operation, or
use of the Purchased Interests on or after the Effective Time shall be charged
to and for the account of Buyer. The respective Blue Dolphin Company shall be
entitled to any and all revenues, refunds, sums or amounts attributable to the
ownership, operation, or use of the Purchased Interests prior to the Effective
Time. Buyer shall be entitled to any and all revenues, refunds, sums or amounts
attributable to the ownership, operation, or use of the Purchased Interests on
and after the Effective Time. Nothing set forth in this Section 1.05 shall be
construed, however, to supersede any agreements made pursuant to the Operating
Agreements with respect to the operation of the Assets subsequent to the
Effective Time, which shall be controlling for all such purposes. For purposes
of this Section 1.05, (a) revenues shall be treated as realized with respect to
the storage of crude oil, condensate, and natural gas liquids prior to the
Effective Time to the extent such liquids were in storage in or on the Assets at
the Effective Time and (b) such liquids shall be deemed delivered from storage
on a "FIFO" basis.
1.06 OTHER AGREEMENTS. At the Closing, Buyer is entering into the (i)
Operating Agreements, and (ii) a purchase rights and participation agreement
identical in form and content to Exhibit 1.06 (the "Purchase Rights Agreement").
ARTICLE II
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CLOSING
The closing of the transactions contemplated by this Agreement ("Closing")
is taking place simultaneously with the execution of this Agreement. The Closing
will only be effective on, and is contingent upon, the Black Marlin Closing. If
the Black Marlin Closing has not occurred by March 31, 1999, the Closing under
this Agreement and the Closing Agreements (as defined in Section 4.01(b)) shall
be null and void. The Closing pursuant to this Agreement may be revoked by Buyer
prior to the Effective Time if the Purchased Interests are materially damaged,
lost or destroyed prior to the Effective Time if such damage, loss or
destruction is not adequately compensated by insurance.
ARTICLE III
ACTIONS TAKEN AT THE CLOSING
3.01 ACTIONS TAKEN BY THE BLUE DOLPHIN COMPANIES. The Blue Dolphin
Companies have executed and delivered on the date hereof the following:
(a) an Assignment and Bill of Sale (the "Assignment") and any other
instruments reasonably necessary to transfer an undivided 1/6 of 8/8ths interest
in all of the Blue Dolphin Pipeline, the Buccaneer Pipeline and the Shore
Facilities to Buyer, free and clear of all Liens, other than Permitted
Encumbrances;
(b) a Special Warranty Deed (the "Deed"), and any other instruments
reasonably necessary to transfer an undivided 1/6 of 8/8ths interest in all of
the Land to Buyer free and clear of all Liens, other than Permitted
Encumbrances;
(c) the Operating Agreements;
(d) the Purchase Rights Agreement; and
(e) an affidavit or other certification that such Blue Dolphin Company is
not a "foreign person" within the meaning of Section 1445 (or similar
provisions) of the Internal Revenue Code of 1986, as amended (i.e., such Blue
Dolphin Company is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate as those terms are defined in such
code and the regulations promulgated thereunder).
As used in this Agreement: (a) the term "Liens" shall mean any lien, pledge,
claim, charge, security interest or other encumbrance, and (b) the term
"Permitted Encumbrances" shall mean: (i) Liens for taxes not yet due and payable
or which are being contested in good faith and disclosed in Schedule 3.01; (ii)
materialmen's, mechanics', workers', repairmen's, or other similar Liens arising
in the ordinary course of the operation of the Assets for amounts not due and
payable or which are being contested in good faith and disclosed on Schedule
3.01; (iii) all rights to, consents by, required notices to, filings with, or
other actions by governmental entities if the same are customarily obtained
subsequent to sale or conveyance; (iv) rights reserved to or vested in any
local, state, and federal governmental bodies, authorities, or agencies to
control or regulate any of the real property occupied by the Assets in any
manner, and all laws, rules, regulations,
<PAGE>
ordinances, and orders of any such bodies, authorities, or agencies; (v) Liens
to be released at or before the Effective Time; (vi) any other Liens that do
not, individually or in the aggregate, have a material adverse effect on the
ownership, operation, or value of the Purchased Interests; (vii) the
encumbrances and restrictions with respect to the Land described in Exhibit "B"
to the Deed and (viii) the Applicable Operating Agreements (as defined in
Section 4.01(h)).
3.02 ACTIONS TAKEN BY BUYER. Immediately upon the Black Marlin Closing,
Buyer shall deliver or cause to be delivered the Cash Payment by wire transfer
of immediately available funds to the bank accounts designated by each Blue
Dolphin Company. The Buyer has executed and delivered on the date hereof
following:
(a) the Assignment;
(b) the Operating Agreements; and
(c) the Purchase Rights Agreement.
ARTICLE IV
REPRESENTATIONS BY AND WARRANTIES OF THE BLUE DOLPHIN
COMPANIES
4.01 THE BLUE DOLPHIN COMPANIES. Each Blue Dolphin Company, jointly and
severally, represents and warrants to Buyer as set forth below:
(a) ORGANIZATION AND POWERS. BDPL and MEI are corporations duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and are duly qualified to do business in, and are in good standing under the
laws of the State of Texas. BPC is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Texas. The Blue
Dolphin Company has all corporate power and authority necessary to conduct its
business as presently conducted, and to own, lease, or operate all properties
now owned, leased, or operated by the Blue Dolphin Company.
(b) AGREEMENTS AND CONSENTS. Neither the execution, delivery, nor
performance of this Agreement, the Operating Agreements, the Assignment, the
Deed, the Purchase Rights Agreement or any other documents or instruments
executed and delivered at the Closing (the "Closing Agreements") by the Blue
Dolphin Company will (i) conflict with or result in any breach of any provisions
of the articles of incorporation, certificate of incorporation, or bylaws of
that Blue Dolphin Company; (ii) to the knowledge of that Blue Dolphin Company,
require the consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except as set forth
in Schedule 4.01(b) or Section 6.07, or any regulatory approvals or routine
governmental consents normally acquired after consummation of transactions such
as transactions of the nature contemplated by this Agreement, (iii) except as
set forth in Schedule 4.01(b), violate, effect acceleration of or result in the
termination, cancellation, or modification of any material agreement, indenture,
instrument, lease, contract, or other undertaking to which that Blue Dolphin
Company is a party or is bound, except as provided in Section 6.07 or for such
defaults (or rights of termination, cancellation, or acceleration) as to which
requisite waivers or consents have been obtained or will be obtained prior to
the Effective
<PAGE>
Time; (iv) violate any order, writ, injunction, or decree to which the Blue
Dolphin Company is bound or may be bound, (v) to the knowledge of the Blue
Dolphin Company, violate any statute, rule, or regulation to which that Blue
Dolphin Company is bound or may be bound; or (vi) result in the imposition or
creation of any Lien upon any of the Assets other than a Permitted Encumbrance.
(c) LITIGATION; ORDERS. There is no action, suit, investigation, inquiry,
or proceeding ("Litigation") pending, or to the knowledge of the Blue Dolphin
Company threatened, to which such Blue Dolphin Company is or would be a party
and which relates to the Assets. As of the date hereof there is no Litigation,
judgment or outstanding order, writ, injunction, decree, stipulation, or award
(whether rendered by a court or administrative agency, or by arbitration) to
which that Blue Dolphin Company is bound that would prohibit or delay in any
material respect the consummation of the transactions contemplated hereby or in
the Closing Agreements or that could otherwise be reasonably expected to
materially adversely affect the Purchased Interests.
(d) VALIDITY AND ENFORCEABILITY. The Blue Dolphin Company has the
corporate power and authority to execute and deliver this Agreement and the
Closing Agreements. The execution and delivery by the Blue Dolphin Company of
this Agreement and the Closing Agreements and the consummation by the Blue
Dolphin Company of the transactions and performance of the terms and conditions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on behalf of that Blue Dolphin Company. This
Agreement has been, and at the Closing the Closing Agreements will be, duly and
validly executed and delivered by the Blue Dolphin Company and, assuming this
Agreement and the Closing Agreements constitute valid and binding obligations of
Buyer, this Agreement constitutes, and at the Closing this Agreement and the
Closing Agreements will constitute, valid and binding obligations of the Blue
Dolphin Company, enforceable in accordance with their respective terms (except
as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, bank moratorium, fraudulent conveyance, or similar laws
affecting creditors' rights generally, general principles of equity, and laws
restricting the availability of equitable remedies).
(e) CONDITION OF ASSETS. Except as set forth on Schedule 4.01(e), the
Assets constitute all of the assets and properties used in connection with the
Businesses. To the knowledge of the Blue Dolphin Company, the Assets owned by
the Blue Dolphin Company are in serviceable and functional condition, subject
only to (i) normal maintenance requirements and normal wear and tear reasonably
expected in the ordinary course of business based on the age and nature of such
Assets or (ii) any other matters which do not have a material adverse effect on
the Purchased Interests, and are suitable for the purposes used and are adequate
for the normal operation of the respective Business.
(f) OWNERSHIP OF ASSETS. The Blue Dolphin Company is the owner of and has
title to the Purchased Interests which are to be assigned by that Blue Dolphin
Company pursuant to Section 1.01, free and clear of all Liens other than
Permitted Encumbrances.
(g) GOVERNMENTAL LICENSES AND PERMITS. To the knowledge of the Blue
Dolphin Company, (i) the Blue Dolphin Company possesses all governmental
licenses, franchises, permits, certificates, orders, approvals, authorizations,
exemptions, registrations, and similar documents or instruments (the "Permits")
necessary for the ownership, operation, and maintenance of the Assets as
currently operated (all of which are listed on Schedule 4.01(g)), and
<PAGE>
(ii) the Assets are in compliance with the Permits and all orders, judgments and
decrees applicable to the ownership, use, maintenance, and operation of the
Assets.
(h) CONTRACTS. Schedule 1.04 sets forth all of the Customer Contracts. The
contracts and agreements listed on Schedule 4.01(h) (the "Applicable Operating
Agreements") constitute all of the material contracts and agreements (other than
the Customer Contracts) relating to the continued ownership, operation, and
maintenance of the Assets by the Blue Dolphin Company and, except as set forth
on Schedule 4.01(h), each of the Customer Contracts and the Applicable Operating
Agreements is in full force and effect and there is no breach or default by the
Blue Dolphin Company under any such contract or agreement (or the occurrence of
any event which, after the giving of notice or the passage of time or otherwise,
will result in a breach or default) that could reasonably be expected to have a
material adverse effect on the ownership, operation, or maintenance of the
Purchased Interests. To the knowledge of the Blue Dolphin Company, no other
party to any of such contracts or agreements is in breach of or in default under
such contracts and agreements, nor has any assertion been made by the Blue
Dolphin Company of any such breach or default. Except as disclosed on Schedule
4.01(h) and Section 6.08, each of such contracts and agreements are freely and
fully assignable to Buyer without penalty or other adverse consequence.
(i) COMPLIANCE WITH LAWS. To the knowledge of the Blue Dolphin Company,
the Blue Dolphin Company is operating the Assets in compliance with all laws,
rules and regulations of federal, state, or local entities (other than
Environmental Laws (as defined below)) which have jurisdiction over the Blue
Dolphin Company or the ownership, operation, and maintenance of the Assets. The
Blue Dolphin Company is not charged and has not been charged with or, to the
knowledge of the Blue Dolphin Company, threatened with or under investigation
with respect to, any violation of any applicable law relating to any aspect of
the ownership or operation of the Assets or the operation of the respective
Business.
(j) ENVIRONMENTAL MATTERS. Except as set forth on Schedule 4.01(j), to the
knowledge of the Blue Dolphin Company, the Assets have been operated by the Blue
Dolphin Company in compliance with all applicable Environmental Laws (as defined
below), other than violations which individually or in the aggregate do not and
will not have a material adverse effect on the operation and ownership of the
Assets or the results of operations and the condition (financial or otherwise)
or prospects of the respective Business. There is at the date hereof no pending
Litigation or, to the knowledge of that Blue Dolphin Company, any threatened
Litigation, relating to any violation of any Environmental Laws with respect to
the Assets; and to the Blue Dolphin Company's knowledge, all material notices,
permits, or similar authorization, if any, required to be obtained or filed in
connection with the ownership and operation of the Assets, including, without
limitation, the treatment, storage, disposal, or release of a hazardous
substance or solid waste into the environment, have been duly obtained or filed.
As used in this Agreement "Environmental Laws" means any and all laws, statutes,
ordinances, rules, regulations, orders, judicial, or arbitrated decisions, or
determinations of any governmental authority or court pertaining to the
environment currently in effect in Brazoria or Galveston County, Texas and
offshore of the Texas Gulf Coast, including, without limitation, the Clean Air
Act, as amended, the Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA"), the Federal Water Pollution Control Act,
as amended, the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended
<PAGE>
("RCRA"), the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act, as amended,
comparable state and local laws, and other safety, health, and environmental
conservation or protection laws. The term "release" has the meaning specified in
the CERCLA, and the term "disposal" (or "disposed") has the meaning specified in
the RCRA.
(k) NO BROKERS. Neither the Blue Dolphin Company nor any of its affiliates
has employed any investment banker, broker, or finder in connection with the
transactions contemplated by this Agreement, nor has any of them taken any
action which would give rise to any valid claim against Buyer or any of its
affiliates, officers, directors, or employees for a brokerage commission,
finder's fee, or other like payment in connection with the transaction evidenced
hereby.
(l) CONFORMITY OF COPIES. The Blue Dolphin Companies have made available
to Buyer accurate and complete copies of all Customer Contracts and Applicable
Operating Agreements.
(m) NO CHANGES. Except as disclosed on Schedule 4.01(m), since December
31, 1998 (i) there has not been any material adverse change in, or any event or
condition that might reasonably be expected to result in any material adverse
change in, the business, assets, results of operations, or condition of the
Businesses or the ownership or operation of the Assets or any material portion
thereof; (ii) the Businesses have been conducted only in the ordinary course
consistent with past practice; (iii) the Blue Dolphin Company has not, in
respect of the Business conducted by that Blue Dolphin Company, incurred any
material liability, engaged in any material transaction, or entered into any
material agreement outside the ordinary course of business consistent with past
practice; (iv) the Blue Dolphin Company has not suffered any material loss,
damage, destruction, or other casualty to any of the Assets (whether or not
covered by insurance); and (v) the Blue Dolphin Company has not, in respect of
the Business conducted by that Blue Dolphin Company, taken any of the actions
set forth in Section 6.07 except as permitted thereunder.
(n) ACCURACY AS OF THE EFFECTIVE TIME. The representations and warranties
made in this Article IV will be true and correct on and as of the Effective Time
with the same force and effect as if such representations and warranties had
been made on and as of the Effective Time, except that any such representations
and warranties which expressly relate only to an earlier date shall be true and
correct on the Effective Time as of such earlier date.
(o) NOT A RETAILER. MEI is not engaged in the business of selling tangible
personal property at retail, does not hold a sales and use tax permit issued by
the state of Texas, and has not made any retail sale of tangible personal
property during the twelve month period ending on the Effective Time.
(p) EMPLOYEES. None of the Blue Dolphin Companies employ any individuals.
(q) CORPORATE STRUCTURE. Each Blue Dolphin Company is wholly owned by Blue
Dolphin Energy Company, a Delaware corporation.
<PAGE>
(r) FORECASTS AND PROJECTIONS. To the knowledge of the Blue Dolphin
Companies, the forecasts of future production from the reserves of parties to
the Customer Contracts previously provided to MCNIC by the Blue Dolphin
Companies were prepared based upon reasonable assumptions.
(s) DISCLOSURE OF OTHER MATTERS. To the knowledge of the Blue Dolphin
Company, no representation or warranty made by the Blue Dolphin Company in this
Agreement, and no statement of the Blue Dolphin Company contained in any Closing
Agreement, contains or will contain, at the time of delivery, any untrue
statement of a material fact or omits or will omit, at the time of delivery, to
state any material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading. To the knowledge of the Blue Dolphin Company, it is not aware of any
information which could not have been discovered pursuant to a reasonable and
diligent investigation of the files and records maintained by the Blue Dolphin
Company which would materially and adversely affect the operation or ownership
of the Assets. The Blue Dolphin Company has made available to Buyer accurate and
complete copies of all agreements, documents, and other writings referred to or
listed in this Article or any Schedule hereto.
(t) PUBLIC UTILITY HOLDING COMPANY ACT COMPLIANCE. None of the Blue
Dolphin Companies is a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
4.02 NO OTHER WARRANTIES. Except as and to the extent set forth in this
Article IV, the Blue Dolphin Company (i) has not made any representations or
warranties to Buyer whatsoever, and (ii) hereby disclaims all liability and
responsibility for any other representation, warranty, statement, or information
made or communicated (orally or in writing) to Buyer by any person, including
without limitation a Blue Dolphin Company or any of their representatives.
Specifically, Buyer acknowledges that none of the Blue Dolphin Companies nor any
of their affiliates have made any representation or warranty other than that
which is set forth in Section 4.01(e) relating to the condition, fitness, or
suitability of any of the tangible assets included in the Purchased Interests,
and acknowledges that it will acquire such tangible assets, except for the
representations set forth in Section 4.01(e), "AS IS" and "WHERE IS" without any
representation or warranty from any of the Blue Dolphin Companies or any of
their affiliates relating to their condition, merchantability or fitness for a
specific purpose.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.01 BY BUYER. Buyer represents and warrants to each of the Blue Dolphin
Companies as set forth below:
(a) ORGANIZATION AND POWERS. Buyer (i) is a corporation duly organized,
validly existing, and in good standing under the laws of the state of Delaware,
(ii) is duly qualified to do business in, and is in good standing under the laws
of, the state of Texas, and (iii) has all corporate power and authority
necessary to conduct its business as it is presently conducted.
<PAGE>
(b) AGREEMENTS AND CONSENTS. Neither the execution, delivery, nor
performance of this Agreement or the Closing Agreements by Buyer will (i)
conflict with or result in any breach of any provisions of the certificate of
incorporation or bylaws of Buyer; (ii) to Buyer's knowledge, require the consent
or approval, authorization, or permit of, or filing with or notification to, any
governmental or regulatory authority, except any regulatory approvals or routine
governmental consents normally acquired after consummation of transactions such
as transactions of the nature contemplated by this Agreement, (iii) violate,
effect acceleration of, or result in termination, cancellation, or modification
of any material agreement, indenture, instrument, lease, contract, or other
undertaking to which Buyer is a party or by which it is bound, except for such
defaults (or rights of termination, cancellation, or acceleration) as to which
requisite waivers or consents have been obtained or will be obtained prior to
the Effective Time; or (iv) violate any order, writ, or injunction to which
Buyer is bound or may be bound, or (v) to the knowledge of Buyer, violate any
decree, statute, rule, or regulation to which Buyer is bound or may be bound.
(c) LITIGATION; ORDERS. There is no Litigation, judgment or outstanding
order, writ, injunction, decree, stipulation, or award (whether rendered by a
court or administrative agency, or by arbitration) pending, or to the knowledge
of Buyer threatened, to which Buyer is or would be a party or to which Buyer is
bound that would have an adverse effect on the ability of Buyer to consummate
the transactions contemplated hereby or in the Closing Agreements or that would
prevent or delay in any material respect the consummation of the transactions
contemplated hereby or in the Closing Agreements or could otherwise be
reasonably expected to materially adversely affect the Purchased Interests.
(d) VALIDITY AND ENFORCEABILITY. Buyer has the corporate power and
authority to execute and deliver this Agreement and the Closing Agreements. The
execution and delivery by Buyer of this Agreement and the Closing Agreements and
the consummation by Buyer of the transactions and performance of the terms and
conditions contemplated hereby and thereby have been duly and validly authorized
by all necessary corporate action on behalf of Buyer. This Agreement has been,
and at the Closing the Closing Agreements will be, duly and validly executed and
delivered by Buyer and, assuming this Agreement and the Closing Agreements
constitute a valid and binding obligation of the Blue Dolphin Companies, the
Agreements constitute, and at the Closing the Closing Agreements will
constitute, valid and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms (except as the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, bank moratorium,
fraudulent conveyance, or similar laws affecting creditors' rights generally,
general principles of equity, and laws restricting the availability of equitable
remedies).
(e) NO BROKERS. Neither Buyer nor any of its affiliates has employed any
investment banker, broker, or finder in connection with the transactions
contemplated by this Agreement, nor has any of them taken any action which would
give rise to any valid claim against any Blue Dolphin Company or any of their
affiliates, officers, directors, or employees for a brokerage commission,
finder's fee, or other like payment in connection with the transaction evidenced
hereby.
<PAGE>
(f) NO DISTRIBUTION. Buyer is an experienced and knowledgeable investor in
the natural gas and liquids pipeline business. Prior to entering into this
Agreement, Buyer was advised by its counsel and such other persons it has deemed
appropriate concerning this Agreement. Buyer is acquiring the Purchased
Interests for its own account and for investment, and not in connection with a
distribution thereof in violation of the Securities Act of 1933, as amended, and
the rules and regulations as promulgated thereunder or any applicable state blue
sky laws.
(g) CORPORATE STRUCTURE. Buyer is wholly owned by WBI Holdings, Inc., a
Delaware corporation.
(h) ACCURACY AS OF THE EFFECTIVE TIME. The representations and warranties
made in this Article V will be true and correct on and as of the Effective Time
with the same force and effect as if such representations and warranties had
been made on and as of the Effective Time, except that any such representations
and warranties which expressly relate only to an earlier date shall be true and
correct on the Effective Time as of such earlier date.
ARTICLE VI
ADDITIONAL COVENANTS
6.01 PUBLIC ANNOUNCEMENTS. Without the prior written approval of the other
parties hereto, which approval shall not be unreasonably withheld, no party
hereto will issue, or permit any agent or affiliate to issue, any press releases
or otherwise make or cause any agent or affiliate to make, any public statements
with respect to this Agreement or the transactions contemplated hereby except
where such release or statement is deemed in good faith by the releasing party
to be required by applicable law or any national securities exchange. Any party
or parties issuing such a release or statement will use its or their reasonable
efforts to provide a copy to the other parties prior to the issuance of such
release or statement.
6.02 TAX MATTERS.
(a) The term "Taxes" shall mean all income, gross receipts, profits,
franchise, sales, use, occupation, property (including in lieu-of-taxes), ad
valorem, capital, wealth, environmental, employment, severance, production,
excise, stamp, transfer, workers' compensation, social security, withholding or
similar taxes, motor vehicle registration fees, customs or import duties and all
other taxes or other governmental fees or charges imposed by any country or
political subdivision thereof, together with any interest, additions or
penalties with respect thereto.
(b) Buyer shall pay all transfer taxes, including without limitation,
sales, use, excise (including excise taxes on petroleum, products of petroleum,
petrochemicals, chemicals, and other taxable substances), stamp, documentary,
filing, recording, permit, license, authorization, and other similar Taxes,
filing fees and similar charges ("Transfer Taxes"), incurred or imposed in
connection with or as a result of the transactions effected pursuant to this
Agreement regardless of upon whom such Transfer Tax is levied or imposed by law.
Buyer shall prepare and file all returns and reports for such Transfer Taxes.
Should any of the Blue Dolphin Companies be required by law to pay such Transfer
Tax, Buyer shall notify the appropriate Blue
<PAGE>
Dolphin Company of such amount and the due dates thereof and remit the amount of
such Transfer Tax and pre-prepared filings associated therewith to the Blue
Dolphin Company for remittance at least ten days before such Transfer Tax is
due.
(c) The Blue Dolphin Companies shall be liable for all Taxes (other than
Transfer Taxes described in Section 6.02(b)) incurred in connection with the
sale of the Purchased Interests and all taxes with respect to the ownership and
operation of the Purchased Interests for taxable periods ending on or before the
Effective Time. Buyer shall be liable for its pro rata share of all Taxes (other
than (subject to its obligations under the Operating Agreements) employment,
workers' compensation, social security, withholding, or similar taxes relating
to employees) imposed with respect to the ownership and operation of the Assets
for periods beginning after the Effective Time. With respect to any taxable
period which includes the Effective Time (i) property and other ad valorem Taxes
accruing with respect to the Purchased Interests shall be apportioned between
the respective Blue Dolphin Company, on the one hand, and Buyer, on the other
hand, based on the daily proration of such Taxes, and (ii) any other Taxes
accruing during such period shall be equitably apportioned among the parties.
(d) The Blue Dolphin Companies and Buyer agree that the Purchase Price
shall be allocated among the Purchased Interests in the manner set forth in
Schedule 6.02(d). Each party agrees to complete IRS Form 8594 consistently with
the agreed allocation and to furnish the other party with a draft copy of such
form within a reasonable period before the filing due date of such form. Neither
the Blue Dolphin Companies nor Buyer shall file any return with a tax authority
that is inconsistent with such allocation.
6.03 FURTHER ASSURANCES. After the Closing, the Blue Dolphin Companies and
Buyer shall, and shall cause their affiliates to, execute, acknowledge, and
deliver all such further conveyances, notices, assumptions, releases, and
acquittances, and such other instruments, and shall take such further actions,
as may be necessary or appropriate more fully to assure to Buyer, and its
successors or assigns, all of the properties, rights, titles, interests,
estates, remedies, powers, and privileges intended to be conveyed to Buyer
pursuant to this Agreement and to assure fully to the Blue Dolphin Companies,
their affiliates and successors and assigns, the assumption of the liabilities
and obligations intended to be assumed by Buyer pursuant to this Agreement.
6.04 CASUALTY LOSS AND CONDEMNATION. In the event that there exist at and
as of the Effective Time any casualty loss or condemnation proceeding with
respect to the Purchased Interests, the Blue Dolphin Companies shall assign to
Buyer at and as of the Effective Time any rights it may have to claims against
any insurance carrier, governmental entity, or third party with respect to such
casualty loss or condemnation proceeding.
6.05 CONDUCT AND PRESERVATION OF BUSINESS. Except as expressly provided in
this Agreement, during the period from the date hereof until the Effective Time,
each Blue Dolphin Company (i) shall conduct the Business now conducted by that
Blue Dolphin Company only in the ordinary course consistent with past practice
and in compliance with all applicable laws; (ii) shall use its reasonable best
efforts to preserve, maintain, and protect the Assets; and (iii) shall use its
reasonable best efforts to preserve intact the business organization of such
Business, to keep available the services of the employees of the Business, and
to maintain existing
<PAGE>
relationships with licensors, licensees, suppliers, contractors, distributors,
customers, and others having business relationships with the Business.
6.06 RESTRICTIONS ON CERTAIN ACTIONS. Without limiting the generality of
Section 6.05, and except as otherwise expressly provided in this Agreement,
prior to the Effective Time, each Blue Dolphin Company shall not, without the
prior written consent of Buyer:
(a) make any material change in the ongoing operations of the
Assets or the Business;
(b) except in the ordinary course of the Business consistent with
past practice, create, incur, guarantee, or assume any indebtedness for
borrowed money in respect of the Business;
(c) mortgage or pledge any of the Assets or create or suffer to
exist any encumbrance thereupon, other than the Permitted Encumbrances;
(d) sell, lease, transfer, or otherwise dispose of, directly or
indirectly, any of the Assets, other than inventories of finished goods
sold in the ordinary course of the Business consistent with past practice;
(e) make any capital expenditure or expenditures relating to any of
the Businesses which, individually, is in excess of $10,000 or, in the
aggregate, are in excess of $10,000;
(f) permit any current insurance or reinsurance policies covering
the Assets to be cancelled or terminated or any of the coverages
thereunder to lapse if such policy covers Assets or insures risks,
contingencies, or liabilities of the Businesses, unless simultaneously
with such cancellation, termination, or lapse, replacement policies
providing coverage equal to or greater than the coverage cancelled,
terminated, or lapsed are in full force and effect and written copies
thereof have been provided to Buyer;
(g) take any action which would make any of the representations or
warranties of a Blue Dolphin Company contained in this Agreement untrue or
inaccurate as of any time from the date of this Agreement to the Effective
Time or would result in any of the conditions set forth in this Agreement
not being satisfied; or
(h) authorize or agree in writing or otherwise to take any of the
actions described in this Section.
6.07 THIRD PARTY CONSENTS. The Blue Dolphin Companies and Buyer shall use
their respective reasonable best efforts to obtain all consents, approvals,
orders, authorizations, and waivers of, and to effect all declarations, filings,
and registrations with, all third parties (including governmental entities) that
are necessary or required to enable the Blue Dolphin Companies to transfer the
Purchased Interests to Buyer as contemplated by this Agreement and to otherwise
consummate the transactions contemplated hereby. All costs and expenses of
obtaining or effecting any and all of the consents, approvals, orders,
authorizations, waivers, declarations,
<PAGE>
filings, and registrations referred to in this Section shall be borne by the
Seller, provided, however, that the foregoing shall not affect the obligation of
Buyer to pay recording costs and such expenses as required to comply with
regulatory requirements imposed by the Federal Energy Regulatory Commission and
the Minerals Managements Service with respect to this transaction.
6.08 AMENDMENT OF SCHEDULES. Each Blue Dolphin Company agrees that, with
respect to the representations and warranties of such Blue Dolphin Company
contained in this Agreement, such Blue Dolphin Company shall have the continuing
obligation until the Effective Time to supplement or amend promptly the
Schedules with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in the Schedules. For all purposes of this Agreement, the
Schedules shall be deemed to include only that information contained therein on
the date of this Agreement and shall be deemed to exclude all information
contained in any supplement or amendment thereto; provided, however, that if the
Closing shall occur, then all matters disclosed pursuant to any such supplement
or amendment at or prior to the Closing shall be waived and no party shall be
entitled to make a claim thereon pursuant to the terms of this Agreement.
ARTICLE VII
ASSUMPTION AND INDEMNIFICATION
7.01 ASSUMPTION OF LIABILITIES RELATING TO THE PURCHASED INTERESTS. As of
the Effective Time, Buyer shall assume and agree to pay, perform, and discharge
or cause to be paid, performed, and discharged all duties, obligations, and
liabilities ("Obligations") arising out of, in connection with, or otherwise in
respect of the ownership or operation of the Purchased Interests, whether
primary or secondary, fixed or contingent, arising after the Effective Time,
including a pro rata portion of the duties, obligations, and liabilities of the
Blue Dolphin Companies under the Customer Contracts and the Applicable Operating
Agreements (collectively, the "Assumed Obligations"); provided, however, that
Buyer does not assume any Obligations of the Blue Dolphin Companies associated
with or arising out of matters as to which a Blue Dolphin Company is obligated
to indemnify Buyer pursuant to Section 7.02.
7.02 INDEMNIFICATION BY THE BLUE DOLPHIN COMPANY. Each Blue Dolphin
Company shall jointly and severally indemnify, defend, and hold harmless Buyer
(and its directors, officers, employees, affiliates, successors, and assigns)
from and against any Obligations based upon, arising out of or otherwise in
respect of (a) any inaccuracy in or breach of any representation, warranty, or
covenant of any Blue Dolphin Company contained in this Agreement; (b) any
Obligations arising out of, in connection with, or otherwise in respect to the
ownership of the Purchased Interests arising before the Effective Time, and (c)
any liability for Taxes the responsibility for the payment of which is retained
by that Blue Dolphin Company pursuant to Section 6.02(c); provided, however,
that the Blue Dolphin Companies shall have no liability under this Section 7.02
with respect to matters described in clause (a) above for Obligations until the
aggregate amount of such Obligations shall exceed the sum of $100,000 and, in
any event only with respect to the amount in excess thereof, subject at all
times, to the provisions of this Article VIII. Notwithstanding anything to the
contrary herein contained, the maximum aggregate
<PAGE>
amount of the obligations of the Blue Dolphin Companies to indemnify Buyer
pursuant to this Section 7.02 shall be the Purchase Price.
7.03 INDEMNIFICATION BY BUYER. Buyer shall indemnify, defend, and hold
harmless each of the Blue Dolphin Companies (and their respective directors,
officers, employees, affiliates, successors, and assigns) from and against any
Obligations based upon, arising out of or otherwise in respect of (a) any
inaccuracy in or breach of any representation, warranty, or covenant of Buyer
contained in this Agreement; (b) any liability for Taxes the responsibility for
the payment of which is assumed by Buyer pursuant to Section 6.04(b) and (c)
hereof; and (c) the Assumed Obligations.
7.04 NOTICE OF ASSERTED LIABILITY. Promptly after receipt by any party
hereto (the "Indemnitee") of notice of any demand, claim, or circumstance which,
with the lapse of time, would give rise to a claim or the commencement (or
threatened commencement), or any action, proceeding, or investigation (an
"Asserted Liability") that may result in an Obligation, the Indemnitee shall
give notice thereof (the "Claims Notice") to the other party hereto (the
"Indemnifying Party"). The Claims Notice shall describe the Asserted Liability
in reasonable detail, and shall indicate the amount (estimated, if necessary) of
the Obligation that has been or may be suffered by the Indemnitee.
Notwithstanding the foregoing, no party shall have any liability for claims
arising pursuant to Section 7.02(a) or 7.03(a) unless a Claims Notice has been
delivered within the appropriate time period indicated in Section 8.01.
7.05 OPPORTUNITY TO DEFEND. The Indemnifying Party may elect to compromise
or defend, at its own expense and by its own counsel, any Asserted Liability and
if it does so the Indemnifying Party shall have the right to make all judgments
and decisions in respect of the handling of the defense of such Asserted
Liability and the settlement or compromise of the Asserted Liability, subject to
the provisions of this Section 7.05. If the Indemnifying Party elects to defend
such Asserted Liability, it shall within 30 days of the Claims Notice (or
sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate, as
requested by and at the expense of the Indemnifying Party, in the compromise of,
or defense against, such Asserted Liability. If the Indemnifying Party elects
not to defend the Asserted Liability, fails to notify the Indemnitee of its
election as herein provided or contests its obligation to indemnify under this
Agreement, the Indemnitee may pay, compromise, or defend such Asserted
Liability. Notwithstanding the foregoing, neither the Indemnifying Party nor the
Indemnitee may settle or compromise any claim subject to indemnification over
the objection of the other, provided, however, that consent to settlement or
compromise shall not be unreasonably withheld. In any event, the Indemnitee and
the Indemnifying Party may participate, at their own expense, in the defense of
such Asserted Liability. If the Indemnifying Party chooses to defend any claim,
the Indemnitee shall make available to the Indemnifying Party any books,
records, or other documents within its control that are necessary or appropriate
for such defense.
7.06 NEGLIGENCE AND STRICT LIABILITY WAIVER. The indemnification provided
for in this Article VIII shall be applicable regardless of whether Obligations
in question arose solely or in part from the active, passive, or concurrent
negligence of any Indemnitee (or under any theory of strict liability) prior to
the Effective Time or after the Effective Time, as the case may be.
<PAGE>
7.07 EXCLUSIVE REMEDY. After the Closing, and to the extent permitted by
applicable law, the rights and remedies expressly set forth in this Agreement
and in the Closing Agreements shall be the exclusive rights and remedies of the
parties hereto with respect to losses or claims relating to the transactions
consummated pursuant to this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.01 SURVIVAL. The representations and warranties made by the Blue Dolphin
Companies and Buyer pursuant to this Agreement shall expire eighteen (18) months
after the Effective Time and shall thereafter be of no force and effect except
such representations and warranties shall be considered as continuing until
three (3) years after the Effective Time with respect to any intentional and
willful misrepresentations set forth herein, after which time no claim or suit
may be brought with respect to the same and provided, however, that the
representations and warranties with respect to the Omega Pipeline shall expire
at the Closing.
8.02 DUE DILIGENCE REVIEW. Buyer acknowledges that it has assumed the
responsibility for conducting its own due diligence review with respect to the
Assets and the transactions contemplated hereby. Buyer acknowledges that it has
been provided full access to such information as it has requested from the Blue
Dolphin Companies with respect to the Assets and the books, records, facilities,
leases, equipment, consultants, and personnel of the Blue Dolphin Companies and
all other matters and things sought to be examined by Buyer in connection with
its due diligence investigation, and that it has conducted its due diligence
review to its satisfaction, except it has not been given an opportunity to
review any title information. Buyer acknowledges that it has conducted its own
independent evaluation of any forecast or projection provided to it by any of
the Blue Dolphin Companies or their representatives, and specifically has
independently evaluated the future throughput, revenue, and expenses of the
Purchased Interests.
8.03 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
8.04 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without reference to the
conflicts of law principles thereof.
8.05 ENTIRE AGREEMENT. The Agreements and the Schedules and Exhibits
hereto supersede all prior agreements between the parties (written or oral) and,
is intended as a complete and exclusive statement of the terms of the agreement
between the parties. This Agreement may be amended only by a written instrument
duly executed by the parties.
8.06 EXPENSES. Except as expressly set forth in this Agreement, whether
the transactions contemplated hereby are or are not consummated, all legal and
other costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses.
<PAGE>
8.07 NOTICES. All notices hereunder shall be sufficiently given (and
deemed made) for all purposes hereunder if in writing and (a) delivered
personally, (b) sent by documented overnight delivery service, (c) to the extent
receipt is confirmed, sent by telecopy, telefax, or other electronic
transmission service to the appropriate address or number as set forth below, or
(d) sent by United States mail, postage prepaid with return receipt requested.
Notices to any of the Blue Dolphin Companies shall be transmitted or addressed
to:
(Name of Blue Dolphin Company)
801 Travis, Suite 2100
Houston, Texas 77002
Attention: President
Telecopier No.: (713) 227-7626
with a copy to:
Doherty, Doherty & Adams, L.L.P.
1717 St. James Place, Suite 520
Houston, Texas 77056
Attention: Mr. Casey W. Doherty
Telecopier No.: (713) 572-1001
or at such other addresses or telefax numbers and to the attention of such other
person as the Blue Dolphin Company may designate by written notice to each of
the other parties.
Notices to Buyer shall be transmitted or addressed to:
200 North 3rd Street, Suite 300
Bismarck, North Dakota 58501
Attention: Darwin Subart
Telecopier No.: 701/221-1297
with a copy to:
200 North 3rd Street, Suite 300
Bismarck, North Dakota 58501
Attention: John K. Castleberry
Telecopier No.: 701/221-1297
or at such other addresses or telefax numbers and to the attention of such other
person as Buyer may designate by written notice to each of the other parties.
8.08 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that no party hereto may assign its rights or
delegate its obligations under this Agreement without the express prior written
consent of each other party hereto.
<PAGE>
8.09 HEADINGS. The section and article headings contained in this
Agreement are inserted for convenience of reference only and will not affect the
meaning or interpretation of this Agreement.
8.10 SEVERABILITY. If any term or provision of this Agreement is invalid,
illegal, or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any material adverse manner
to any party. Upon such determination that any term or other provision is
invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
8.11 NO THIRD PARTY BENEFICIARIES. Except as provided in Article VIII,
nothing in this Agreement shall entitle any person other than the Blue Dolphin
Companies and Buyer or their respective successors and assigns permitted hereby
to any claim, cause of action, remedy, or right of any kind.
8.12 CROSS-REFERENCES. References in this Agreement to Articles, Sections,
Exhibits, or Schedules shall be deemed to be references to Articles, Sections,
Exhibits, and Schedules of this Agreement unless the context specifically and
expressly requires otherwise.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of
the parties as of the date first above written.
WBI SOUTHERN, INC. BLUE DOLPHIN PIPE LINE COMPANY,
a Delaware corporation a Delaware corporation
By:_________________________ By:__________________________________
John K. Castleberry, William Fisher,
President and Chief Executive Officer Senior Vice President
BUCCANEER PIPE LINE CO.,
a Texas corporation
By:__________________________________
William Fisher,
Senior Vice President
MISSION ENERGY, INC.,
<PAGE>
a Delaware corporation
By:_________________________________
William Fisher,
Senior Vice President
EXHIBIT 10.31
PURCHASE AND SALE AGREEMENT
BY AND AMONG
ENRON PIPELINE COMPANY
AS SELLER
and
BLACK MARLIN ENERGY COMPANY
AS BUYER
and
BLUE DOLPHIN ENERGY COMPANY
AS PARENT
September 28, 1998
<PAGE>
TABLE OF CONTENTS
RECITALS...............................................................1
ARTICLE 1 DEFINITIONS................................................1
1.1 DEFINED TERMS....................................................1
ARTICLE 2 PURCHASE AND SALE..........................................5
2.1 THE TRANSACTION..................................................5
2.2 PURCHASE PRICE...................................................5
2.3 CLOSING..........................................................6
2.4 DELIVERIES AT CLOSING............................................6
2.5 REVENUES AND EXPENSES............................................6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER...................7
3.1 ORGANIZATION.....................................................7
3.2 QUALIFICATION....................................................7
3.3 CAPITALIZATION, SUBSIDIARIES.....................................7
3.4 AUTHORIZATIONS AND APPROVALS.....................................7
3.5 ABSENCE OF CONFLICTS.............................................8
3.6 CONTRACTS AND COMMITMENTS........................................8
3.7 ABSENCE OF CHANGES...............................................8
3.8 LITIGATION.......................................................9
3.9 COMPLIANCE WITH LAW..............................................9
3.10 PERMITS........................................................9
3.11 TITLE TO THE SHARES AND ASSETS.................................9
3.12 BROKERS' FEES..................................................9
3.13 ENVIRONMENTAL MATTERS..........................................9
3.14 PUBLIC UTILITY HOLDING COMPANY ACT............................10
3.15 CONDITION OF ASSETS...........................................10
3.16 ABSENCE OF LIABILITIES........................................10
3.17 CONFORMITY OF COPIES..........................................11
3.18 EMPLOYEES.....................................................11
3.19 REPORTS.......................................................11
3.20 THROUGHPUT AND COSTS..........................................11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER...................11
4.1 CORPORATE ORGANIZATION..........................................11
4.2 QUALIFICATION...................................................11
4.3 AUTHORIZATIONS; APPROVALS......................................11
4.4 ABSENCE OF CONFLICTS............................................12
4.5 BROKERS' FEES...................................................12
4.6 FINANCING.......................................................12
4.7 LITIGATION......................................................12
ARTICLE 5 COVENANTS OF SELLER AND BUYER.............................12
5.1 ACCESS..........................................................12
5.2 CONDUCT OF BUSINESS PENDING THE CLOSING.........................13
5.3 CONSENTS........................................................14
5.4 COMMERCIALLY REASONABLE EFFORTS.................................14
5.5 USE OF NAME.....................................................14
5.6 DELIVERY AND RETENTION OF RECORDS...............................14
5.7 COMMERCIAL EFFORTS..............................................14
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5.8 AMENDMENTS OF SCHEDULES AND REMEDY..............................15
5.9 FERC MATTERS....................................................15
5.10 RELOCATION OF PIPELINE........................................15
5.11 PIPELINE COVER................................................17
5.12 DISPOSITION OF SECTION 311 PIPELINE...........................17
5.13 PURCHASE OPTION...............................................17
5.14 TRANSFER TAXES................................................17
5.15 PERIODIC MEETINGS.............................................18
5.16 CASUALTY LOSS AND CONDEMNATION................................18
5.17 DISTRIBUTION BY BLACK MARLIN..................................18
ARTICLE 6 INDEPENDENT INVESTIGATION AND DISCLAIMER..................18
6.1 INDEPENDENT INVESTIGATION AND DISCLAIMER........................18
ARTICLE 7 CONDITIONS TO CLOSING.....................................19
7.1 CONDITIONS PRECEDENT TO OBLIGATION OF EACH PARTY................19
7.2 ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.........19
7.3 ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER........20
ARTICLE 8 INDEMNIFICATION AND ASSUMPTION............................20
8.1 BY SELLER.......................................................20
8.2 BY BUYER........................................................21
8.3 EXPRESS NEGLIGENCE RULE.........................................21
8.4 EXCEPTIONS TO INDEMNITIES.......................................22
8.5 NOTICE OF CLAIM.................................................22
8.6 THIRD-PARTY CLAIMS..............................................23
8.7 SUBROGATION.....................................................24
8.8 EXCLUSIVE REMEDIES; SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
LIMITATION OF CERTAIN LIABILITIES...................................24
8.9 WAIVER OF TEXAS DTPA............................................25
ARTICLE 9 TERMINATION...............................................25
9.1 TERMINATION.....................................................25
9.2 EFFECT OF TERMINATION...........................................26
ARTICLE 10 TAX MATTERS..............................................26
10.1 SECTION 338(H)(10) ELECTIONS..................................26
10.2 PREPARATION OF TAX RETURNS; RESPONSIBILITY FOR TAXES..........27
10.3 ACCESS TO INFORMATION.........................................28
10.4 TAX SHARING AGREEMENTS........................................28
10.5 NON-FOREIGN PERSON AFFIDAVIT..................................29
10.6 ASSISTANCE AND COOPERATION....................................29
ARTICLE 11 MISCELLANEOUS............................................29
11.1 EXPENSES......................................................29
11.2 WAIVER AND AMENDMENT..........................................29
11.3 PUBLIC STATEMENT..............................................29
11.4 ASSIGNMENT....................................................29
11.5 NOTICES.......................................................30
11.6 GOVERNING LAW.................................................31
11.7 FURTHER ASSURANCES............................................31
11.8 SEVERABILITY..................................................31
11.9 COUNTERPARTS..................................................31
11.10 HEADINGS......................................................31
ii
<PAGE>
11.11 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES................31
iii
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into as of
this 28th day of September, 1998 by and among ENRON PIPELINE COMPANY, a Delaware
corporation ("Seller"), and BLACK MARLIN ENERGY COMPANY, a Delaware corporation
("Buyer"), and BLUE DOLPHIN ENERGY COMPANY, a Delaware corporation ("Parent").
Seller, on the one hand, and Buyer and Parent, on the other hand, are referred
to collectively herein as the "Parties" and individually as a "Party."
RECITALS
WHEREAS, Seller owns 100% of the outstanding capital stock of Black Marlin
Pipeline Company, a Texas corporation ("Black Marlin");
WHEREAS, Black Marlin owns certain natural gas transmission assets located
in the Gulf of Mexico offshore Texas and onshore in Galveston County, Texas and
related onshore separation storage and dehydration facilities more particularly
described on Exhibit A attached hereto;
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to acquire
from Seller, all of the outstanding capital stock of Black Marlin pursuant to
the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained the Parties hereto
hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINED TERMS. Capitalized terms not otherwise defined herein or in
the recitals to this Agreement used in this Agreement shall have the meanings
ascribed to them in this Section 1.1.
"ADJUSTED PURCHASE PRICE" shall have the meaning given such term in
Section 2.2.
"AFFILIATE" shall mean with respect to any Person, any Person which
directly or indirectly, controls, is controlled by, or is under a common control
with such Person. The term "control" (including the terms "controlled by" and
"under common control with") as used in the preceding sentence means the
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of a Person, whether through the ownership
of voting securities, by contract, or otherwise.
"ASSETS" shall mean the assets and properties described in Exhibit "A"
hereto, and for purposes of Article 3, the term Assets shall also include the
High Island Lateral.
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<PAGE>
"BOLIVAR SPOIL SITE ENCROACHMENT" shall mean the planned construction by
the Army Corps of Engineers of a spoil disposal site and levee system over and
in close proximity to the Pipeline in Galveston Bay.
"BUYER INDEMNIFIED LIABILITIES" shall have the meaning given such term in
Section 8.1.
"BUYER MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect
on the assets, liabilities, financial condition, business, operations, affairs
or circumstances of Buyer.
"BUYER PARTIES" shall have the meaning given such term in Section 8.1.
"CLAIM" shall mean all demands, claims, actions, investigations, causes of
action, proceedings and arbitrations, whether or not ultimately determined to be
valid.
"CLAIM NOTICE" shall have the meaning given such term in Section 8.5(b).
"CLOSING" shall have the meaning given such term in Section 2.3.
"CLOSING DATE" shall have the meaning given such term in Section 2.3.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONFIDENTIALITY AGREEMENT" shall have the meaning given such term in
Section 5.1.
"CUSTOMARY POST-CLOSING CONSENTS" shall mean consents and approvals from
Governmental Authorities that are customarily obtained after closing in
connection with a sale of assets similar to the Assets.
"DECERTIFICATION" means the receipt by Buyer of written confirmation from
the FERC that the Assets and the High Island Lateral, if applicable, are no
longer subject to rate or tariff regulation under the NGA by the FERC.
"DISCLOSURE SCHEDULE" shall have the meaning given such term in the first
sentence of Article 3.
"EFFECTIVE TIME" shall be 12:00 a.m. on the Closing Date.
"ELECTION PERIOD" shall have the meaning given such term in Section
8.6(a).
"ENCUMBRANCE" shall mean any lien, pledge, condemnation proceeding, claim,
restriction, security interest, mortgage or similar encumbrance.
"ENVIRONMENTAL LAWS" shall mean any and all federal, state and local laws,
statutes, regulations, rules, orders, ordinances or permits of any governmental
authority pertaining to health, the environment, wildlife or natural resources
in effect in any and all jurisdictions in which the Assets are located,
including, without limitation, the Clean Air Act, as amended,
2
<PAGE>
and the Federal Water Pollution Control Act, as amended, the Rivers and Harbors
Act of 1899, as amended, the Safe Drinking Water Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as amended,
the Resource Conservation and Recovery Act, as amended, The Hazardous and Solid
Waste Amendments Act of 1984, as amended, the Toxic Substances Control Act, as
amended, the Occupational Safety and Health Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Natural Gas Pipeline Safety Act of
1968, as amended and the Hazardous Liquid Pipeline Safety Act of 1979, as
amended.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"FERC" shall mean Federal Energy Regulatory Commission.
"GOVERNMENTAL AUTHORITY" shall mean the United States and any state,
county, city or other political subdivision, agency, court or instrumentality,
including the U. S. Army Corps of Engineers and the Port of Houston Authority.
"HIGH ISLAND LATERAL" shall mean the 6.9 mile, 8 inch O.D. lateral line
originating in High Island Block 199, which is connected to the Pipeline at High
Island Block 171, for which permission and approval for the abandonment by sale
to Black Marlin is pending FERC approval in Northern Natural Gas Company's
Docket No. CP98-714-000 filed on August 7, 1998.
"INCOME TAXES" shall mean federal income taxes as provided in IRC ss.11,
alternative minimum tax as provided in IRC ss.55, and any state taxes measured
by net income, and any interest and penalties thereon, including, without
limitation, the earned surplus tax component of the Texas Franchise Tax.
"INDEMNIFIED PARTY" shall have the meaning given such term in Section
8.5(a).
"INDEMNIFYING PARTY" shall have the meaning given such term in Section
8.5(a).
"IRC" shall mean the Internal Revenue Code of 1986, as amended.
"LAWS" shall mean any constitution, statute, code, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
applicable Governmental Authority.
"LOSS" shall mean all debts, liabilities, obligations, losses, damages,
costs and expenses (including, without limitation, interest including
prejudgment interest in any litigated matter), penalties, fines, court costs and
reasonable attorneys' fees and expenses, judgments, settlements and assessments.
"NGA" shall mean the Natural Gas Act of 1938, as amended.
"PARTIES" shall have the meaning given in the introductory paragraph of
this Agreement.
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"PERMITS" shall have the meaning given such term in Section 3.10.
"PERMITTED ENCUMBRANCE" shall mean any of the following: (i) any liens for
taxes and assessments not yet delinquent or, if delinquent, that are being
contested in good faith in the ordinary course of business; (ii) any obligations
or duties reserved to or vested in any municipality or other Governmental
Authority to regulate any of the Assets in any manner including all applicable
Laws; (iii) the terms and conditions of all leases, servitudes, contracts for
sale, purchase, exchange, refining or processing of hydrocarbons, operating
agreements, construction agreements, construction and operation agreements,
partnership agreements, processing agreements, conditioning agreements, treating
agreements, plant agreements, pipeline, gathering, exchange and transportation
agreements, disposal agreements, permits, licenses and other agreements set
forth in Exhibit A and the Disclosure Schedule; (iv) Customary Post-Closing
Consents; (v) any required third party consents to assignment and similar
agreements and obligations with respect to which prior to Closing (A) waivers or
consents have been obtained from the appropriate person; (B) the applicable
period of time for asserting such rights has expired without any exercise of
such rights, or (C) arrangements reasonably satisfactory to Buyer have been made
by the Parties to allow Buyer to receive substantially the same economic
benefits as if all such waivers and consents had been obtained; (vi) easements,
rights of way, servitudes, permits, surface leases and other rights with respect
to surface obligations, pipelines, conditions, covenants or other restrictions,
so long as individually or in the aggregate they are not such as are reasonably
likely to have a material adverse effect on the use, ownership or operation of
the Assets, taken as a whole; (vii) materialmen's, mechanics', repairmen's, and
other similar liens or charges arising in the ordinary course of business
incidental to construction, maintenance or operation of the Assets (A) if they
have not been filed pursuant to law, (B) if filed, they have not yet become due
and payable or (C) if their validity is being contested in good faith in the
ordinary course of business by appropriate action; and (viii) any other liens,
charges, encumbrances, contracts, agreements, instruments, obligations, defects
or irregularities of any kind whatsoever affecting the Assets that individually
or in the aggregate are not such as are reasonably likely to have a material
adverse effect on the use, ownership or operation of the Assets, taken as a
whole.
"PERSON" shall mean any natural person, firm, partnership, association,
corporation, limited liability company, trust, entity, public body or
government.
"PIPELINE" shall have the meaning given such term in Exhibit "A."
"PIPELINE LOWERING" shall have the meaning given such term in Section
5.10.
"PIPELINE COVERING" shall have the meaning given such term in Section
5.11.
"PURCHASE PRICE" shall have the meaning given such term in Section 2.2.
"RECORDS" shall have the meaning given such term in Section 5.6.
"SELLER MATERIAL ADVERSE EFFECT" shall mean any material and adverse
effect on the use, ownership or operation of the Assets and the High Island
Lateral, taken as a whole, or
4
<PAGE>
the financial condition of Black Marlin, other than conditions affecting the
industry as a whole and other than the transactions contemplated by this
Agreement, including the transfer of the Section 311 Pipeline.
"SELLER PARTIES" shall have the meaning given such term in Section 8.2.
"SERVICE AGREEMENT" shall have the meaning given such term in Section 5.6.
"SHARES" shall have the meaning given such term in Section 2.1.
"TAX" or "TAXES" shall mean all taxes, however denominated, including any
interest, penalties or other additions to tax that may become payable in respect
thereof, imposed by any federal, territorial, state, local or foreign government
or any agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income or profits
taxes (including, but not limited to, federal income taxes and state income
taxes), real property gains taxes, payroll and employee withholding taxes,
unemployment insurance taxes, social security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, and other
obligations of the same or of a similar nature.
"TAX RETURNS" shall mean all returns and reports of or with respect to any
Tax which are required to be filed with respect to Black Marlin.
"THIRD-PARTY CLAIM" shall mean a Claim asserted against an Indemnified
Party by a Person that is not a party to this Agreement or an Affiliate of a
party to this Agreement that could give rise to a right of indemnification under
this Agreement.
ARTICLE 2
PURCHASE AND SALE
2.1 THE TRANSACTION. Subject to and in accordance with the terms and
conditions of this Agreement, Buyer agrees to purchase from Seller all of the
outstanding capital stock of Black Marlin (the "Shares") for the Purchase Price,
as adjusted in the manner described in Section 2.2. Subject to and in accordance
with the terms and conditions of this Agreement, Seller agrees to sell to Buyer
the Shares for the Purchase Price, as adjusted in the manner described in
Section 2.2.
2.2 PURCHASE PRICE. Subject to the terms and conditions of this Agreement,
Buyer agrees to pay to Seller at the Closing $7,000,000 (the "Purchase Price"),
as adjusted in the manner described in this Section 2.2. The Purchase Price
shall be (i) increased by all capital expenditures incurred by Seller or Black
Marlin that relate to the Assets (other than capital expenditures incurred
pursuant to Section 5.10 and Section 5.11 below) from and after 12:00 a.m.,
Houston, Texas time on the date of this Agreement and that are incurred prior to
Closing without creating any indebtedness or obligation on the part of Black
Marlin (other than borrowings from Seller, which are repaid at or prior to
Closing); provided that
5
<PAGE>
any such individual non-emergency capital expenditure in excess of $25,000 must
have received the written approval of Buyer, which approval shall not be
unreasonably withheld, in order for such capital expenditure to be included in
such adjustment, and (ii) decreased by $5,567 for each complete calendar day
that the Closing Date is subsequent to May 1, 1998. The Purchase Price as
adjusted pursuant to this Section is herein after referred to as the "Adjusted
Purchase Price." The Adjusted Purchase Price shall be payable by Buyer by wire
transfer or delivery of other immediately available funds to the account of
Seller, Account No. 4066-8275, at CitiBank, N.A., ABA Routing No. 021 000089 (or
to such other bank and account designated in writing by Seller to Buyer).
2.3 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Seller, 1400 Smith
Street, Houston, Texas 77002 commencing at 10:00 a.m., local time, on the last
business day of the month in which all conditions set forth in Article 7 have
been satisfied or waived by the appropriate party, or such other date as the
Parties shall agree in writing, and shall be effective as of the Effective Time
(the "Closing Date").
2.4 DELIVERIES AT CLOSING. At the Closing (i) Seller will deliver to Buyer
the agreements referred to in Section 7.2(b); (ii) Seller will deliver to Buyer
or its assigns a stock certificate(s) representing all of the Shares endorsed in
blank or accompanied by duly executed assignment documents; and (iii) Buyer will
deliver to Seller the Adjusted Purchase Price.
2.5 REVENUES AND EXPENSES. (a) Seller shall be (i) subject to the first
sentence of Section 2.5(b), entitled to all revenues (and related accounts
receivable) attributable to Black Marlin and (ii) subject to Section 2.2(i),
responsible for the payment of all expenses (and related accounts payable),
including the payment of ad valorem taxes, attributable to Black Marlin, in each
case to the extent the foregoing relate to the period of time prior to the
Effective Time. Buyer shall be (i) entitled to all revenues (and related
accounts receivable) attributable to Black Marlin, and (ii) subject to Article 8
hereof, responsible for the payment of all expenses (and related accounts
payable), including the payment of ad valorem taxes, attributable to Black
Marlin, in each case to the extent the foregoing relate to the period of time
occurring on and after the Closing Date.
(b) Within 45 days after Closing, Seller shall provide a written notice to
Buyer of all uncollected revenues (and related accounts receivable) attributable
to Black Marlin for the period prior to the Effective Time. To the extent that
Buyer receives any funds identified in such notice, Buyer shall promptly deliver
such funds to Seller. Buyer shall have no obligation to deliver any funds to
Seller not identified in such notice. To the extent that Seller receives any
funds to which Buyer is entitled pursuant to Section 2.5(a), Seller shall
promptly deliver such funds to Buyer. If either Party pays any expense (or
related account payable) that is properly borne by the other Party pursuant to
Section 2.5(a), the Party responsible for such expense (or related account
payable) pursuant to Section 2.5(a) shall promptly reimburse the Party who made
such payment. The obligations of Buyer and Seller hereunder shall be performed
without any right of setoff.
ARTICLE 3
6
<PAGE>
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows, subject to the
matters set forth in the disclosure schedule delivered by Seller to Buyer on the
date hereof (the "Disclosure Schedule"):
3.1 ORGANIZATION. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Black Marlin is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas.
3.2 QUALIFICATION. Black Marlin is duly qualified to do business as a
foreign corporation and is in good standing in Oklahoma, and is not required to
be qualified to do business as a foreign corporation in any other state or
jurisdiction.
3.3 CAPITALIZATION, SUBSIDIARIES. The Disclosure Schedule sets forth for
Black Marlin, the number of authorized shares of its capital stock, the number
of issued and outstanding shares of its capital stock and the owner thereof. The
issued and outstanding capital stock of Black Marlin has been duly authorized,
validly issued, fully paid and is nonassessable. There are no preemptive rights
with respect to the issuance of the shares of capital stock of Black Marlin.
There are no outstanding options, warrants, purchase rights, conversion rights,
exchange rights, or other contracts or commitments that could require Black
Marlin to issue, sell or otherwise cause to become outstanding any of such
entity's capital stock. There are no voting trusts, proxies, or other agreements
or understandings with respect to the voting of the capital stock, or
restrictions upon the transfer of the capital stock, of Black Marlin except as
set forth on the Disclosure Schedule. Black Marlin has no Subsidiaries. For
purposes hereof, the term "Subsidiary" means, with respect to any Person, any
corporation more than 50% of the outstanding voting securities of which, or any
partnership, joint venture or other entity more than 50% of the total equity
interest of which, is directly or indirectly owned by such Person.
3.4 AUTHORIZATIONS AND APPROVALS. The execution and delivery by Seller of
this Agreement and the performance of its obligations hereunder have been duly
and validly authorized by all requisite corporate action. This Agreement has
been duly executed and delivered by Seller, and this Agreement constitutes the
legal, valid and binding obligation of Seller enforceable against it in
accordance with its terms except insofar as the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity regardless of
whether such principles are considered in a proceeding at law or in equity.
Except as disclosed in the Disclosure Schedule, Seller does not need to give any
notice to, make any filing or register with, or obtain any consent, approval,
authorization, waiver, permit, certificate or order of any Governmental
Authority to consummate the transactions contemplated by this Agreement, except
for those the absence of which are not reasonably likely to have a Seller
Material Adverse Effect, including Customary Post-Closing Consents, and except
for consents or waivers to be obtained by Seller or Black Marlin prior to the
Closing Date.
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3.5 ABSENCE OF CONFLICTS. Neither the execution and delivery of this
Agreement by Seller, nor the consummation of the transactions contemplated
hereby will (assuming receipt of all consents, approvals, authorizations,
waivers, permits, certificates and orders disclosed in the Disclosure Schedule):
(a) violate or breach the terms of, cause a default under, conflict with, result
in acceleration of, create in any party the right to accelerate, terminate,
modify or cancel or require any notice under (i) any applicable Law, (ii) the
charter or bylaws of Seller or Black Marlin or (iii) any contract, agreement,
lease, license or other arrangement to which Seller or Black Marlin is a party
or by which either of them, or any of their properties, is bound; (b) result in
the creation or imposition of any Encumbrance (other than a Permitted
Encumbrance) on the Shares or any of the Assets; (c) result in the cancellation,
forfeiture, revocation, suspension or adverse modification of any existing
consent, approval, authorization, license, permit, certificate or order of any
Governmental Authority having jurisdiction over Seller or Black Marlin; or (d)
with the passage of time or the giving of notice or the taking of any action of
any third party have any of the effects set forth in clauses (a), (b) or (c) of
this Section, except, in the case of clauses (a) through (d), where such
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, claim, encumbrance, forfeiture, suspension, revocation or lien is
not reasonably likely to have a Seller Material Adverse Effect, including
Customary Post-Closing Consents, or materially impair the ability of Seller to
consummate the transactions contemplated by this Agreement.
3.6 CONTRACTS AND COMMITMENTS. Exhibit A and the Disclosure Schedule
includes a list of all material contracts and agreements (including, without
limitation, any transportation contract or agreement and other contracts or
agreements providing for receipt or payment, contingent or otherwise, of $25,000
or more annually (unless any such other contract or agreement is terminable with
notice of 90 days or less without a penalty) in either case relating to the
continued ownership and operation of Black Marlin or the Assets (the
"Contracts"), and each such Contract (other than inactive transportation
contracts or agreements) is in full force and effect, except where the failure
to be in full force and effect is not reasonably likely to have a Seller
Material Adverse Effect. Black Marlin (or Northern Natural Gas Company with
respect to Contracts related to the High Island Lateral) has in all respects
performed all material obligations required to be performed by it to date under
the Contracts, and is not in default under any material obligation of any such
Contracts. To the knowledge of Seller, no other party to any Contract is in
default thereunder. Black Marlin (or Northern Natural Gas Company with respect
to Contracts related to the High Island Lateral) has not assigned to any other
person any of its rights under the Contracts. Black Marlin (or Northern Natural
Gas Company with respect to Contracts related to the High Island Lateral) has
not waived any of its rights of material value under the Contracts. Except as
set forth on the Disclosure Schedule, there are currently no gas imbalances
under any of the Contracts, and there are currently no arrangements to sell,
transport, or deliver hydrocarbons at some future time without then or
thereafter receiving full payment therefor, or to make payment at some future
time for hydrocarbons or the transportation or the delivery of hydrocarbons
previously purchased or transported.
3.7 ABSENCE OF CHANGES. Except as set forth in the Disclosure Schedule,
since January 1, 1998:
(i) there has not been any Seller Material Adverse Effect;
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(ii) to Seller's knowledge, the Assets have been operated and maintained
in a prudent manner and in the ordinary course of the business;
(iii) there has not been any material damage, destruction or loss to any
material portion of the Assets, whether covered by insurance or not;
and
(iv) there has been no actual, pending, or to the knowledge of Seller,
threatened change affecting the Assets with any customers,
licensors, suppliers, distributors or sales representatives, except
such as has not had, and is not reasonably expected to have, a
Seller Material Adverse Effect.
3.8 LITIGATION. Except as disclosed in the Disclosure Schedule, there are
no actions at law, suits in equity, investigations, proceedings or claims
pending, affecting or, to the knowledge of Seller, threatened against Black
Marlin or the Assets before or by any federal, state, foreign or local court,
tribunal or governmental agency or authority, except such as in the aggregate
are not reasonably likely to have a Seller Material Adverse Effect.
3.9 COMPLIANCE WITH LAW. Except as disclosed in the Disclosure Schedule,
Black Marlin is in compliance with all applicable Laws, except where the failure
to be in compliance is not reasonably likely to have a Seller Material Adverse
Effect; provided, however, notwithstanding the foregoing, no representation or
warranty in this Section 3.9 is made with respect to compliance with
Environmental Laws, which are covered exclusively by the provisions set forth in
Section 3.13.
3.10 PERMITS. Except as set forth in the Disclosure Schedule, Black Marlin
(or Northern Natural Gas Company with respect to the High Island Lateral) owns
or holds all franchises, licenses, permits, consents, approvals and
authorizations of all Governmental Authorities necessary for the conduct of its
business (collectively, the "Permits"), except for those Permits which the
failure to own or hold are not reasonably likely to have a Seller Material
Adverse Effect. Each Permit is in full force and effect, and Black Marlin (or
Northern Natural Gas Company with respect to the High Island Lateral) is in
compliance with all of its obligations with respect thereto, except where the
failure to be in full force and effect or to be in compliance would not have a
Seller Material Adverse Effect. To the knowledge of Seller, no event has
occurred that permits, or upon the giving of notice or the lapse of time or
otherwise would permit, revocation or termination of any Permit except such as
in the aggregate would not have a Seller Material Adverse Effect.
3.11 TITLE TO THE SHARES AND ASSETS. Seller owns the Shares free and clear
of all Encumbrances. Except as set forth on the Disclosure Schedule, Black
Marlin owns the Assets free and clear of all Encumbrances other than the
Permitted Encumbrances.
3.12 BROKERS' FEES. Neither Seller nor Black Marlin has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
3.13 ENVIRONMENTAL MATTERS. Except as listed or described in the
Disclosure Schedule or as described in Sections 5.10 and 5.11 below:
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(a) To the knowledge of Seller, Black Marlin and Northern Natural Gas
Company with respect to the High Island Lateral are: (i) not in violation of any
Environmental Laws, and (ii) not subject to any remedial obligations under such
Environmental Laws, other than such violations or obligations which are not
reasonably likely to have a Seller Material Adverse Effect.
(b) To the knowledge of Seller, each of Black Marlin and Northern Natural
Gas Company with respect to the High Island Lateral has in effect, or
applications pending for, all permits required by applicable Environmental Laws
for the operation and ownership of the Assets, except where the failure to own
or hold such permits are not reasonably likely to have a Seller Material
Adverse Effect, and, to the knowledge of Seller, neither Black Marlin nor
Northern Natural Gas Company is in violation of the terms and conditions of
such permits, other than such violations that are not reasonably likely to have
a Seller Material Adverse Effect.
(c) To the knowledge of Seller, neither Black Marlin nor Northern Natural
Gas Company with respect to the High Island Lateral: (i) is subject to any
consent decree, compliance order or administrative order issued pursuant to
applicable Environmental Laws, and (ii) has received written notice under the
citizen suit provision of any Environmental Law or written request for
information, notice of violation, demand letter, administrative inquiry,
complaint or claim from any governmental agency pursuant to applicable
Environmental Laws, other than such of the foregoing that are not reasonably
likely to have a Seller Material Adverse Effect.
3.14 PUBLIC UTILITY HOLDING COMPANY ACT. Seller is not subject to, or is
exempt from, regulation as a "holding company" or a "subsidiary company" of a
"holding company" or an affiliate of a "holding company," or an "affiliate" of a
"subsidiary company" of a "holding company," in each case within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
3.15 CONDITION OF ASSETS. Except as set forth in the Disclosure Schedule,
the Assets (other than the High Island Lateral) constitute all of the assets and
properties used by Black Marlin in connection with its Gulf Coast business.
Except as set forth on the Disclosure Schedule, to the knowledge of the Seller,
the Assets (a) are in serviceable and functional condition, (b) have been
maintained to normal industry standards with cathodic protection, (c) (other
than the High Island Lateral) are suitable for the purposes used by Black
Marlin, and (d) (other than the High Island Lateral) are adequate for the normal
operation of the business of Black Marlin. Except as set forth on the Disclosure
Schedule, there is no imminent repair or replacement pending with respect to the
Assets, other than the Pipeline Lowering, Pipeline Covering and possibly, the
Bolivar Spoil Site Encroachment.
3.16 ABSENCE OF LIABILITIES. To the knowledge of Seller and except as set
forth on the Disclosure Schedule, there are no existing, contingent, or
threatened liabilities, obligations, liens, or claims (absolute, accrued,
contingent or otherwise) that relate to or have been or may be asserted against
Black Marlin other than liabilities and obligations which will be paid in full
by Black Marlin or the Seller prior to the Effective Time and liabilities and
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obligations related to the Pipeline Lowering and possible liabilities and
obligations related to the Bolivar Spoil Site Encroachment.
3.17 CONFORMITY OF COPIES. The Seller has made available for Buyer's
review accurate and complete copies of all Contracts and as-built drawings of
the Assets and the following information with respect to the Assets, which have
been prepared since January 1, 1997, MAOP reports, rectified output history,
test point readings, annual cathodic protection check reports, operation and
maintenance reports, average daily volume reports, pigging reports, and depth of
cover surveys.
3.18 EMPLOYEES. Since January 1, 1990, Black Marlin has had no employees.
Black Marlin has no continuing obligations or liabilities for any employee
benefit plans or employee welfare plans (as defined under ERISA) or collective
bargaining agreements.
3.19 REPORTS. The Disclosure Schedule sets forth a list of all of the
environmental, accident, safety, and Governmental Authority inspections and
reports concerning Black Marlin which have been performed since January 1, 1997.
3.20 THROUGHPUT AND COSTS. The Disclosure Schedule sets forth with respect
to the period beginning on January 1, 1997 and ending on June 30, 1998: (a) the
monthly throughput, itemized by customer, of the Pipeline, and (b) the monthly
revenue of the Pipeline, (c) the monthly operating expenses of the Pipeline.
Such information is accurate and complete in all respects.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer and Parent, jointly and severally, represent and warrant to Seller
as follows:
4.1 CORPORATE ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
4.2 QUALIFICATION. Buyer is duly qualified to do business as a foreign
corporation and is in good standing in Texas.
4.3 AUTHORIZATIONS; APPROVALS. The execution and delivery by Buyer of this
Agreement and the performance of its obligations hereunder have been duly and
validly authorized by all requisite corporate action. This Agreement has been
duly executed and delivered by Buyer, and this Agreement constitutes the legal,
valid and binding obligation of Buyer enforceable against it in accordance with
its terms except insofar as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity regardless of whether such
principles are considered in a proceeding at law or in equity. Buyer is not
required to give any notice to, make any filing or register with, or obtain any
consent, approval, authorization, waiver, permit, certificate or order of any
Governmental Authority to consummate the transactions
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contemplated by this Agreement except for those the absence of which are not
reasonably likely to have a Buyer Material Adverse Effect, including Customary
Post-Closing Consents, and except for consents or waivers to be obtained by
Buyer prior to the Closing Date.
4.4 ABSENCE OF CONFLICTS. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will, to
the knowledge of Buyer, violate or breach the terms of, cause a default under,
conflict with, result in acceleration of, create in any party the right to
accelerate, terminate, modify or cancel or require any notice under (a) any
applicable Law, (b) the charter or bylaws of Buyer, or (c) any material contact,
agreement, lease, license or other arrangement to which Buyer is a party or by
which it, or any of its properties, is bound, except in each case for those the
absence of which are not reasonably likely to have a Buyer Material Adverse
Effect, including Customary Post-Closing Consents.
4.5 BROKERS' FEES. Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
4.6 FINANCING. Buyer has sufficient cash, available lines of credit or
other sources of immediately available funds to enable it to make payment of the
Adjusted Purchase Price at the Closing.
4.7 LITIGATION. There are no actions, suits, proceedings or governmental
investigations or inquiries pending, or to the knowledge of Buyer, threatened,
against Buyer or any of its properties, assets, operations or businesses that
might delay, prevent or hinder the consummation of the transactions contemplated
hereby.
ARTICLE 5
COVENANTS OF SELLER AND BUYER
5.1 ACCESS. Upon reasonable notice and at Buyer's sole risk, liability and
expense, and during normal business hours, Seller shall afford Buyer, MCNIC, and
their respective representatives reasonable access, from the date hereof until
the Closing Date, to the Assets and the High Island Lateral (including without
limitation for the purpose of safety and environmental inspections, assessments
and nondestructive and noninvasive testing of such Assets by a safety and/or an
environmental engineering firm designated by Buyer and reasonably satisfactory
to Seller) and the contracts, books, records and data of Black Marlin; provided,
such access shall be subject to Seller's obtaining all necessary consents and
approvals from third parties. Seller shall promptly notify Buyer in each case
when such consents are required, and when they have been obtained or withheld.
Buyer's investigation shall be conducted in a manner that does not unreasonably
interfere with Black Marlin's normal operations. Notwithstanding the foregoing,
Buyer shall not have access to personnel records of Black Marlin (or any
Affiliates thereof). Buyer agrees to maintain the confidentiality of all such
information pursuant to the terms of that certain letter agreement regarding
confidentiality dated August 26, 1997 between Blue Dolphin Energy Company and
Black Marlin, as amended from time to time (the "Confidentiality Agreement").
BUYER
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AND PARENT HEREBY, JOINTLY AND SEVERALLY, AGREE TO DEFEND, INDEMNIFY, RELEASE,
PROTECT, SAVE AND HOLD HARMLESS THE SELLER AND ITS AFFILIATES FROM AND AGAINST
ANY AND ALL LOSSES ARISING OUT OF OR RELATING TO ANY CLAIMS RELATING TO ANY
PLANT OR FIELD VISIT, OR OTHER DUE DILIGENCE ACTIVITY, CONDUCTED BY BUYER OR ANY
OF ITS AGENTS, REPRESENTATIVES, AFFILIATE, SUCCESSOR, ASSIGN, OFFICER,
REPRESENTATIVE OR DIRECTOR, INCLUDING WITHOUT LIMITATION ANY LOSSES RESULTING,
IN WHOLE OR IN PART, FROM THE SOLE, CONCURRENT OR JOINT NEGLIGENCE OR STRICT
LIABILITY OF SELLER OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SELLER.
5.2 CONDUCT OF BUSINESS PENDING THE CLOSING. Seller covenants and agrees,
that from the date of this Agreement until the Closing Date, unless Buyer shall
otherwise agree or as otherwise contemplated by this Agreement:
(a) Seller will, or will cause Black Marlin to, operate the Assets in all
material respects in the same manner as presently being operated, and will
refrain from entering into any transaction or contract relating directly to any
Assets other than in the ordinary course of business;
(b) Seller will, or will cause Black Marlin to, use commercially
reasonable efforts to perform its obligations under any contracts and agreements
to which it is a party or to which the Assets are subject, except for such
obligations as it in good faith may dispute and except for such failures to
perform as would not in the aggregate have a Seller Material Adverse Effect;
(c) Except as set forth on Schedule 5.2, Seller will not, and will not
permit Black Marlin to, directly or indirectly, enter into any transaction with
any of its Affiliates affecting the Assets, other than in the ordinary course of
business;
(d) Seller will not permit Black Marlin to make any non-emergency capital
expenditure that would cost $25,000 or more without the prior written approval
of Buyer, which approval shall not be unreasonably withheld;
(e) Black Marlin will not create, incur, guarantee, or assume any
indebtedness;
(f) Black Marlin will not mortgage or pledge any of the Assets or create
or suffer to exist any encumbrance thereupon, other than Permitted Encumbrances;
(g) Except as set forth on Schedule 5.2, Seller will not, and will not
permit Black Marlin to, lease, transfer, or otherwise dispose of, directly or
indirectly, any of the Assets;
(h) Seller will not, and will not permit Black Marlin to, enter into any
new firm, long-term contract pursuant to which Black Marlin becomes obligated to
transport or deliver any products through or by means of the Assets at a price
less than the maximum applicable FERC tariff, or upon terms and conditions which
are substantially different from the terms and conditions applicable to the
transportation of products by Black Marlin pursuant to the Contracts;
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(i) Insurance will be maintained for Black Marlin and the Assets through
Enron Corp.'s insurance program.
5.3 CONSENTS. Each of the Parties, severally and not jointly, will use its
commercially reasonable efforts to obtain the authorizations, consents, orders
and approvals of Governmental Authorities (including the FERC approvals referred
to in Section 5.9) and any other third parties that may be or become necessary
or advisable for the performance of its obligations pursuant to this Agreement
and the consummation of the transactions contemplated hereby and will cooperate
in all reasonable respects with each other in promptly seeking to obtain such
authorizations, consents, orders and approvals as may be necessary or advisable
for the performance of their respective obligations pursuant to this Agreement.
5.4 COMMERCIALLY REASONABLE EFFORTS. Each of the Parties, severally and
not jointly, shall use commercially reasonable efforts to obtain the
satisfaction of all conditions of Closing attributable to such Party in an
expeditious manner.
5.5 USE OF NAME. As soon as practicable, but in any event within 60 days
after the Closing Date, Buyer shall remove the names of Seller, its Affiliates,
Enron or any words or expressions similar thereto (other than the name "Black
Marlin") from the Assets.
5.6 DELIVERY AND RETENTION OF RECORDS. As soon as practicable, but in any
event within thirty (30) days after the Closing Date, Seller will deliver or
cause to be delivered to Buyer all files, records, information and data relating
to Black Marlin that are in the possession or control of Seller (the "Records")
except such files as may be necessary for Seller to perform its obligations
under the Services Agreement to be executed at Closing in substantially the form
of Exhibit B attached hereto (the "Services Agreement"). Within sixty (60) days
after expiration or termination of the Services Agreement, Seller will deliver
all such retained Records to Buyer. Buyer agrees to (a) hold the Records and not
to destroy or dispose of any thereof for the longer of (i) six years from the
Closing Date, or (ii) such longer time as may be required by law, including upon
notice from Seller for any mandatory or consensual extension of a statutory
limitations period determined by the Internal Revenue Service for Tax Returns,
provided that, if it desires to destroy or dispose of such Records during such
period, it will first offer in writing at least 60 days prior to such
destruction or disposition to surrender them to the Seller and if Seller does
not accept such offer within 20 days after receipt of such offer, Buyer may take
such action and (b) following the Closing Date to afford Seller and its
accountants and counsel during normal business hours, upon reasonable request,
at any time, full access to the Records and to Buyer's employees to the extent
that such access may be requested for any legitimate purpose at no cost to
Seller (other than for reasonable out-of-pocket expenses), provided however,
that such access will not operate to cause the waiver of any attorney-client,
work product or like privilege; provided, further, that in the event of any
litigation nothing herein shall limit either party's rights of discovery under
applicable law.
5.7 COMMERCIAL EFFORTS. Subject to Section 5.2, Seller agrees to use
reasonable efforts to keep Buyer advised of, and to consult with Buyer
regarding, any commercial commitments to be entered into by Black Marlin related
to the Assets prior to Closing,
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providing that Seller shall take all reasonable steps to prevent Buyer from
being required to participate in Black Marlin's regulatory proceedings or
related litigation until after the Closing Date. Buyer agrees that it will not
contact Black Marlin's customers (or the customers of the High Island Lateral)
on matters relating to Black Marlin or the High Island Lateral without the prior
written consent of Seller and in the event Seller consents, Buyer will allow a
representative of Black Marlin or one of its affiliates to be present at any
meeting.
5.8 AMENDMENTS OF SCHEDULES AND REMEDY.
(a) Seller may, from time to time, prior to the Closing, by written notice
to Buyer, supplement or amend the Disclosure Schedule or other schedules
attached to this Agreement to correct any matter that would constitute a breach
of any representation, warranty of Seller herein contained; PROVIDED HOWEVER,
except as provided in this Section 5.8, no such supplement or amendment will
affect the rights or obligations of the parties to this Agreement (including
without limitation Buyer's rights and obligations under Section 7.2(a) hereof)
until after the Closing Date. Notwithstanding any other provision hereof, if the
Closing occurs, any such supplement or amendment of any Schedule will be
effective to cure and correct for indemnification purposes (but only for such
purposes) any breach of any representation, warranty or covenant that would have
existed by reason of Seller not having made such supplement or amendment.
(b) If Buyer terminates this Agreement solely as a result of Seller's
amendment of the Disclosure Schedule or other schedules to reflect Material
Items (as defined below) and such Material Items were not made available to
Buyer before the date hereof, Buyer and Seller agree that in lieu of any other
remedy Buyer may have against Seller at law, equity or otherwise, Seller shall
owe to Buyer money damages for Buyer's out-of-pocket costs related directly to
due diligence activities and negotiation of this Agreement in an amount up to
$100,000. As used in this Section 5.8, the term "Material Items" shall mean
matters occurring prior to the date of this Agreement, which would have an
adverse impact of $500,000 or greater in the aggregate on the Assets or Black
Marlin. Buyer agrees that if it terminates this Agreement as a result of an
amendment to the Disclosure Schedule or other schedule that does not constitute
a Material Item, Buyer shall not have any recourse against Seller.
5.9 FERC MATTERS. Black Marlin filed a rate case at the FERC in Docket No.
RP98-274-000 (the "Rate Case") proposing to place rates into effect no later
than August 1, 1998. Buyer will have the right to, within ten (10) business
days of receipt of any settlement proposal related to the Rate Case, approve
such settlement before such is filed with the FERC to resolve the Rate Case;
provided, however, if Buyer rejects, or does not approve, any such settlement
proposal within such ten (10) business day period, then Seller shall have the
right to terminate this Agreement pursuant to Section 9.1(f). In the event FERC
rejects or materially alters any settlement approved by Buyer, or all or part
of the Rate Case is litigated, Buyer shall have the right to terminate this
Agreement pursuant to Section 9.1(g) if resolution of the Rate Case is not
reasonably satisfactory to Buyer.
5.10 RELOCATION OF PIPELINE. (a) Seller shall be financially responsible
for any removal, relocation, and replacement, if applicable, of the Pipeline to
a depth which will
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accommodate the lowering of the Houston Ship Channel to a depth of 45 feet, Mean
Low Tide, and a bottom width of 530 feet, whether before or after the Closing
Date (the "Pipeline Lowering"). Seller shall cause the Pipeline Lowering to be
complete by January 1, 2000, or such earlier or later date as the U. S. Army
Corps of Engineers and the Port of Houston Authority shall require or allow.
(b) Subject to the following sentence, the Seller shall control the manner
of the performance of the work relating to the Pipeline Lowering performed prior
to and after the Closing Date (the "Work"), subject to the following obligations
and limitations: (i) the Work shall be conducted in a proper and workmanlike
manner in accordance with industry standards and applicable rules and
regulations of Governmental Authorities, (ii) the Pipeline, after the completion
of Work, shall be of the same or superior quality and condition as prior to the
performance of the Work (including pressure requirements), and (iii) Seller
shall use commercially reasonable efforts to minimize disruption of Pipeline
operations after the Closing Date. The Seller shall (x) obtain the approval of
the Buyer of the plans, specifications and contracts relating to the Work, which
consent shall not be unreasonably withheld, and (y) hold semimonthly meetings
with operational personnel of the Buyer to review the status and scope of the
Work. The Buyer shall have the right to inspect the Work from time to time as
performed. The Seller shall require any contractor hired to perform work on the
Pipeline Lowering to post bonds and provide indemnities. In connection
therewith, Seller shall consult with Buyer upon the amount of any such bonds,
indemnities and prepayments prior to execution of any agreement between the
contractor and Black Marlin or Seller, as the case may be. The Seller shall pay
for the Work in the time and manner reasonably required by the U. S. Army Corps
of Engineers, including payments directly to contractors and other vendors. If
necessary, Seller will cooperate with Black Marlin to provide any guaranties of
Black Marlin's payment obligations under contracts entered into by Black Marlin
for Work.
(c) Seller shall use reasonable efforts prior to the Closing to allow
Buyer to have a representative at any meeting with the U. S. Army Corps of
Engineers relating to the Pipeline Lowering. Prior to the Closing, Seller will
consult with Buyer on any issues raised by the U. S. Army Corps of Engineers
that may affect the Pipeline; provided, however, neither Seller nor Black Marlin
shall be obligated to advocate any position taken by Buyer if such position
would conflict with the position taken by Seller, Black Marlin, or any of their
respective affiliates.
(d) Any amounts recovered by Black Marlin after the Closing to recoup the
cost of the Pipeline Lowering, other than from tariffs or fees paid by its
customers, shall be for the account of, and shall be distributed to, Seller. At
the request of Seller, Buyer shall cause Black Marlin to assign to Seller any
rights it may have against any Persons for reimbursement of the cost of the
Pipeline Lowering (other than against customers for reimbursement out of tariffs
or fees). The Buyer and Seller shall name each other as additional insureds
under their respective liability insurance policies to the extent of the
indemnity obligations in this Agreement, with waiver of subrogation, with
respect to the Pipeline Lowering.
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5.11 PIPELINE COVER. To the extent that cover over the Pipeline on Bolivar
Peninsula does not meet applicable legal requirements, Seller will cause such
cover to be repaired to a minimum depth of thirty (30) inches prior to Closing
at no cost to Buyer or Black Marlin (the "Pipeline Covering"). Any amounts
recovered by Black Marlin to recoup the cost of the Pipeline Covering, other
than from tariffs or fees paid by its customers, shall be for the account of,
and shall be distributed to, Seller. At the request of Seller, Buyer shall cause
Black Marlin to assign to Seller any rights it may have against any Persons for
reimbursement of the cost of the Pipeline Covering (other than against customers
for reimbursement out of tariffs or fees).
5.12 DISPOSITION OF SECTION 311 PIPELINE. On or before the Closing Date,
Seller shall cause Black Marlin to dispose of that certain 39-mile, 30-inch
natural gas pipeline located near the Texas-Oklahoma border and any related
assets (the "Section 311 Pipeline"), provided that Black Marlin shall not incur
any continuing indemnity or other obligations with respect to such disposition.
5.13 PURCHASE OPTION. The Buyer shall notify the Seller of the
Decertification within 30 days of its occurrence. Within the earlier of the
third anniversary of the notice of Decertification from the Buyer or the fifth
anniversary of the Closing Date, Enron Corp. or any of its Affiliates shall have
the option to elect in writing to purchase a minimum of a 25%, and a maximum of
a 33 1/3%, undivided interest in the Assets and, if applicable, the High Island
Lateral, in exchange for a proportionate amount of the Purchase Price, plus a
proportionate share of any capital improvements or additions made to the Assets
and, if applicable, the High Island Lateral subsequent to the Effective Time,
free and clear of any Liens, other than Permitted Encumbrances. Such acquisition
would be on terms and conditions substantially similar to those contained in
this Agreement, to the extent applicable. The parties shall cooperate with each
other to close the acquisition of the undivided interest as promptly as
practicable and such acquisition shall be effective as of the date of closing.
Enron Corp. or one of its Affiliates, as the case may be, shall execute such
documents as are reasonably required by Buyer with respect to such acquisition
of the undivided interest, including documents which provide that (a) Black
Marlin shall be the sole operator of the Assets and, if applicable, the High
Island Lateral, (b) the costs, expenses and revenues relating to the operation
of the Assets shall be proportionately shared by the owners of the Assets and,
if applicable, the High Island Lateral, (c) the interest in the Assets and, if
possible, the High Island Lateral acquired by Enron Corp. or one of its
Affiliates shall be subject to a right of first refusal held by Black Marlin in
the event (and to the extent) such entity desires to transfer all or a portion
of its undivided interest in the Assets and, if applicable, the High Island
Lateral to an unaffiliated third party, and (d) information disclosed to Enron
Corp. or one of its Affiliates, relating to the Assets shall be confidential.
Seller and its Affiliates shall keep confidential and not disclose the existence
or terms of this option.
5.14 TRANSFER TAXES. Buyer shall be responsible for the payment of all
state and local transfer, sales, use or other similar taxes resulting from the
transactions contemplated by this Agreement, other than Income Taxes for
Pre-Closing Periods (as defined in Section 10.2 below), and the Income Taxes
arising from the elections made pursuant to Section 10.1.
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5.15 PERIODIC MEETINGS. Marketing and operational personnel of the Seller
and the Buyer shall conduct semimonthly meetings to discuss the ongoing
marketing and operation of the Assets prior to Closing.
5.16 CASUALTY LOSS AND CONDEMNATION. In the event that there exist at and
as of the Closing any condemnation proceeding with respect to the Assets, the
Seller shall assign to Buyer at and as of the Closing any rights it may have to
claims against any governmental entity, or third party with respect to such
condemnation proceeding. In the event that there exist at and as of the Closing
any casualty loss with respect to the Assets, the Seller shall process the
claim, if any, with its insurance carrier, and shall promptly turn over any
proceeds received from its insurance carrier with respect to such casualty loss.
5.17 DISTRIBUTION BY BLACK MARLIN. On or before the Closing Date, Black
Marlin shall dividend or distribute to the Seller any cash, cash equivalents,
and accounts receivable of Black Marlin as of the Effective Time, subject to
Seller's obligation to pay expenses of Black Marlin pursuant to Section 2.5
above. Black Marlin shall not distribute to the Seller any other amounts or
property prior or subsequent to the Closing.
ARTICLE 6
INDEPENDENT INVESTIGATION AND DISCLAIMER
6.1 INDEPENDENT INVESTIGATION AND DISCLAIMER. Buyer acknowledges that: (a)
it has had, and pursuant to this Agreement will have prior to the Closing,
access to Black Marlin, the Assets and the High Island Lateral and the officers
and employees of Black Marlin and Seller, (b) in making the decision to enter
into this Agreement and consummate the transactions contemplated hereby, Buyer
has relied solely on the basis of its own independent investigation (including
review of materials provided to it by Seller) and upon the expressed
representations, warranties, covenants and agreements set forth in this
Agreement, and (c) it is familiar with investments of the nature of the Shares,
the Assets and the High Island Lateral, understands that this investment
involves substantial risks, has adequately investigated the Shares, the Assets
and the High Island Lateral and has substantial knowledge and experience in
financial and business matters such that it is capable of evaluating, and has
evaluated, the merits and risks inherent in purchasing the Shares, the Assets
and the High Island Lateral, and is able to bear the economic risks of such
investment. Accordingly, except as set forth in Article 3, Buyer acknowledges
that Seller has not made, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES ANY
REPRESENTATION OR WARRANTY, EXPRESSED, IMPLIED, AT COMMON LAW, BY STATUE, OR
OTHERWISE RELATING TO (i) THE CONDITION OF THE ASSETS AND THE HIGH ISLAND
LATERAL (INCLUDING WITHOUT LIMITATION, ANY IMPLIED OR EXPRESSED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OF CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS, OR ENVIRONMENTAL CONDITION), (ii) ANY INFRINGEMENT BY
BLACK MARLIN OF ANY PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY, AND (iii)
ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO BUYER BY
OR ON BEHALF OF SELLER (INCLUDING WITHOUT LIMITATION, IN RESPECT OF THE
EXISTENCE OR EXTENT OF OIL,
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GAS OR OTHER MINERAL RESERVES, THE RECOVERABILITY OF OR THE COST OF RECOVERING
ANY SUCH RESERVES AND THE ABILITY OF BUYER TO BECOME OPERATOR OF THE ASSETS AND
THE HIGH ISLAND LATERAL UNDER ANY OPERATING OR SIMILAR AGREEMENT); AND BUYER
WILL HAVE SOLE RESPONSIBILITY FOR ANY ACTION TAKEN BY BUYER, OR BY OTHERS
RELYING ON BUYER'S ADVICE BASED ON THE GEOLOGICAL MAPS, RECORDS, LOGS,
PRODUCTION OR RESERVE FORECASTS AND OTHER DATA, IF ANY, TRANSFERRED UNDER THIS
AGREEMENT.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 CONDITIONS PRECEDENT TO OBLIGATION OF EACH PARTY. The respective
obligations of each Party to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(a) No order shall have been entered and remain in effect in any action or
proceeding before any federal, state, foreign or local court or governmental
agency or other federal, state, foreign or local regulatory or administrative
agency or commission that would prevent or make illegal the consummation of the
transactions contemplated by this Agreement and no action or proceeding that has
a reasonable likelihood of preventing or materially hindering the transactions
contemplated hereby shall have been instituted, which shall not have been
subsequently dismissed; and
(b) Any and all consents of third parties (other than Customary
Post-Closing Consents), necessary in connection with the transactions
contemplated hereby shall have been obtained or arrangements shall have been
made reasonably satisfactory to Buyer to allow Buyer to receive substantially
the same economic benefits as if all such consents had been obtained.
7.2 ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The
obligation of Buyer to consummate the transactions contemplated by this
Agreement are also subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(a) The representations and warranties contained in Article 3, to the
extent qualified as to materiality shall be accurate in all respects, and, to
the extent not so qualified, shall be accurate in all material respects, as of
the Closing Date as though such representations and warranties had been made at
and as of that time; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by Seller on or before the Closing
Date shall have been duly complied with and performed in all material respects,
and a certificate to the foregoing effect dated the Closing Date and signed by
an authorized executive officer of Seller shall have been delivered to Buyer;
(b) The Transition Services Agreement, in substantially the form attached
hereto as Exhibit B, shall have been executed by the parties thereto;
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(c) The Rate Case shall have been resolved on terms reasonably
satisfactory to Buyer; provided, however, Buyer agrees that filing with FERC of
an uncontested Settlement that was previously approved by Buyer pursuant to
Section 5.9 shall constitute resolution on terms reasonably satisfactory to
Buyer;
(d) The Assets shall not have been materially damaged and there shall have
been no condemnation of the Assets; and
(e) No Seller Material Adverse Effect shall have occurred and be
continuing.
7.3 ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The
obligation of Seller to consummate the transactions contemplated by this
Agreement are also subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(a) The representations and warranties of Buyer contained in Article 4
shall be accurate in all material respects as of the Closing Date as though such
representations and warranties had been made at and as of that time; all the
terms, covenants and conditions of this Agreement to be complied with and
performed by Buyer on or before the Closing Date shall have been duly complied
with and performed in all material respects, and a certificate to the foregoing
effect dated the Closing Date and signed by an authorized executive officer of
Buyer shall have been delivered to Seller.
ARTICLE 8
INDEMNIFICATION AND ASSUMPTION
8.1 BY SELLER. SUBJECT TO THE TERMS AND CONDITIONS OF THIS ARTICLE 8,
SELLER HEREBY AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS BUYER, BLACK MARLIN,
MCNIC, AND THEIR RESPECTIVE AFFILIATES AND ITS AND THEIR RESPECTIVE DIRECTORS,
OFFICERS, SHAREHOLDERS AND EMPLOYEES (COLLECTIVELY, THE "BUYER PARTIES"), FROM
AND AGAINST THE FOLLOWING (COLLECTIVELY, THE "BUYER INDEMNIFIED LIABILITIES"):
ANY CLAIM INDIVIDUALLY CONSTITUTING A LOSS IN EXCESS OF $10,000 ASSERTED
AGAINST, IMPOSED UPON, OR INCURRED BY ANY BUYER PARTY, DIRECTLY OR INDIRECTLY,
BY REASON OF, ARISING OUT OF, OR RESULTING FROM (A) THE INACCURACY OR BREACH OF
ANY REPRESENTATION OR WARRANTY MADE BY SELLER IN ARTICLE 3 OF THIS AGREEMENT; OR
(B) THE BREACH OF ANY COVENANT OR AGREEMENT OF SELLER CONTAINED IN THIS
AGREEMENT; OR (C) THE OPERATIONS OF BLACK MARLIN OR THE ASSETS PRIOR TO THE
EFFECTIVE TIME (INCLUDING EMPLOYEE OR ERISA RELATED CLAIMS; OR (D) CLAIMS
RELATED TO THE SECTION 311 PIPELINE; OR (E) REFUND OBLIGATIONS IMPOSED BY FERC
IN THE RATE CASE AND CREDITING OF INTERRUPTIBLE REVENUE); OR (F) OPERATION OF
THE HIGH ISLAND LATERAL PRIOR TO THE LATER OF THE EFFECTIVE TIME OR THE DATE
SUCH ASSET IS CONVEYED TO BLACK MARLIN; OR (G) THE PIPELINE
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LOWERING OR THE PIPELINE COVERING; OR (H) ANY LITIGATION DISCLOSED BY THE SELLER
PURSUANT TO THE DISCLOSURE SCHEDULE; OR (I) ANY TAXES OF BLACK MARLIN RELATING
TO PRE-CLOSING PERIODS, INCLUDING TAXES ARISING FROM THE DISPOSITION OF THE
SECTION 311 PIPELINE, ANY DISTRIBUTIONS FROM BLACK MARLIN TO THE SELLER, THE
SECTION 338(H)(10) ELECTIONS, OR THE LIABILITY OF ANY OTHER PERSON IMPOSED ON
BLACK MARLIN UNDER TREASURY REGULATION SECTION 1.1502-6 WITH RESPECT TO THE
CONSOLIDATED GROUP OF THE PARENT; PROVIDED, NONE OF THE BUYER PARTIES SHALL BE
ENTITLED TO ASSERT RIGHTS OF INDEMNIFICATION BY SELLER UNDER THIS ARTICLE 8 FOR
BUYER INDEMNIFIED LIABILITIES PURSUANT TO CLAUSES (A) OR (B) UNLESS AND UNTIL
THE AGGREGATE OF ALL SUCH BUYER INDEMNIFIED LIABILITIES EXCEEDS $100,000 (IT
BEING UNDERSTOOD THAT SUCH BUYER INDEMNIFIED LIABILITIES SHALL ACCUMULATE UNTIL
SUCH TIME OR TIMES AS THE AGGREGATE OF ALL SUCH BUYER INDEMNIFIED LIABILITIES
EXCEEDS $100,000, WHEREUPON THE BUYER PARTIES SHALL BE ENTITLED TO
INDEMNIFICATION BY SELLER HEREUNDER TO THE EXTENT OF SUCH EXCESS); PROVIDED,
FURTHER, SELLER'S MAXIMUM INDEMNIFICATION OBLIGATION UNDER CLAUSES (A), (B), (C)
AND (F) OF THIS SECTION 8.1 SHALL BE CAPPED AT AN AGGREGATE AMOUNT EQUAL TO $1
MILLION.
8.2 BY BUYER. SUBJECT TO THE TERMS AND CONDITIONS OF THIS ARTICLE 8, BUYER
AND PARENT HEREBY, JOINTLY AND SEVERALLY, AGREE TO INDEMNIFY, DEFEND AND HOLD
HARMLESS SELLER AND ITS AFFILIATES AND THEIR RESPECTIVE DIRECTORS, OFFICERS,
SHAREHOLDERS AND EMPLOYEES (COLLECTIVELY, "SELLER PARTIES"), FROM AND AGAINST
THE FOLLOWING (COLLECTIVELY, THE "SELLER INDEMNIFIED LIABILITIES"): ANY CLAIM
INDIVIDUALLY CONSTITUTING A LOSS ASSERTED AGAINST, IMPOSED UPON OR INCURRED BY
ANY SELLER PARTY, DIRECTLY OR INDIRECTLY, BY REASON OF, ARISING OUT OF OR
RESULTING FROM (A) THE INACCURACY OR BREACH OF ANY REPRESENTATION OR WARRANTY OF
BUYER IN ARTICLE 4 OF THIS AGREEMENT; OR (B) THE BREACH OF ANY COVENANT OR
AGREEMENT OF BUYER CONTAINED IN THIS AGREEMENT; OR (C) THE OPERATION AND
OWNERSHIP OF THE ASSETS ON OR AFTER THE EFFECTIVE TIME; OR (D) THE OPERATION OF
THE HIGH ISLAND LATERAL AFTER THE LATER OF THE EFFECTIVE TIME OR THE DATE SUCH
ASSET IS CONVEYED TO BLACK MARLIN; OR (E) ANY TAXES OF BLACK MARLIN RELATING TO
POST-CLOSING PERIODS.
8.3 EXPRESS NEGLIGENCE RULE. WITHOUT LIMITING OR ENLARGING THE SCOPE OF
THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS AGREEMENT, AN INDEMNIFIED
PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN ACCORDANCE WITH THE
TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM GIVING RISE TO SUCH
INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR COMPARATIVE
NEGLIGENCE, STRICT
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LIABILITY OR VIOLATION OF ANY LAW OF OR BY SUCH INDEMNIFIED PARTY. THE PARTIES
AGREE THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
8.4 EXCEPTIONS TO INDEMNITIES. NOTWITHSTANDING ANYTHING TO THE CONTRARY
SET FORTH IN SECTION 8.1, BUYER INDEMNIFIED LIABILITIES SHALL NOT INCLUDE ANY
AND ALL CLAIMS TO THE EXTENT SAME ARE ATTRIBUTABLE TO A BREACH OF ANY
REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT OF BUYER UNDER THIS AGREEMENT.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN SECTION 8.2, SELLER
INDEMNIFIED LIABILITIES SHALL NOT INCLUDE ANY AND ALL CLAIMS TO THE EXTENT SAME
ARE ATTRIBUTABLE TO A BREACH OF ANY REPRESENTATION, WARRANTY, COVENANT OR
AGREEMENT OF SELLER UNDER THIS AGREEMENT.
8.5 NOTICE OF CLAIM. (A) FOR PURPOSES OF THIS ARTICLE 8, THE TERM
"INDEMNIFYING PARTY" WHEN USED IN CONNECTION WITH A PARTICULAR CLAIM SHALL MEAN
THE PARTY HAVING AN OBLIGATION TO INDEMNIFY ANOTHER PARTY WITH RESPECT TO SUCH
CLAIM PURSUANT TO THIS ARTICLE 8, AND THE TERM "INDEMNIFIED PARTY" WHEN USED IN
CONNECTION WITH A PARTICULAR CLAIM SHALL MEAN THE PARTY HAVING THE RIGHT TO BE
INDEMNIFIED WITH RESPECT TO SUCH CLAIM BY ANOTHER PARTY PURSUANT TO THIS ARTICLE
8.
(B) PROMPTLY AFTER ANY INDEMNIFIED PARTY BECOMES AWARE OF FACTS GIVING
RISE TO A CLAIM BY IT FOR INDEMNIFICATION PURSUANT TO THIS ARTICLE 8, SUCH
INDEMNIFIED PARTY WILL PROVIDE NOTICE THEREOF IN WRITING TO THE INDEMNIFYING
PARTY (A "CLAIM NOTICE") SPECIFYING THE NATURE AND SPECIFIC BASIS FOR SUCH CLAIM
AND A COPY OF ALL PAPERS SERVED WITH RESPECT TO SUCH CLAIM (IF ANY). FOR
PURPOSES OF THIS SECTION 8.5(B), RECEIPT BY A PARTY OF WRITTEN NOTICE OF ANY
DEMAND, ASSERTION, CLAIM, ACTION OR PROCEEDING (JUDICIAL, ADMINISTRATIVE OR
OTHERWISE) BY OR FROM ANY PERSON OR ENTITY OTHER THAN A PARTY TO THIS AGREEMENT
WHICH GIVES RISE TO A CLAIM ON BEHALF OF SUCH PARTY SHALL CONSTITUTE THE
DISCOVERY OF FACTS GIVING RISE TO A CLAIM BY IT AND SHALL REQUIRE PROMPT NOTICE
OF THE RECEIPT OF SUCH MATTER AS PROVIDED IN THE FIRST SENTENCE OF THIS SECTION
8.5(B). EACH CLAIM NOTICE SHALL SET FORTH A REASONABLE DESCRIPTION OF THE CLAIM
AS THE INDEMNIFIED PARTY SHALL THEN HAVE AND SHALL CONTAIN A STATEMENT TO THE
EFFECT THAT THE INDEMNIFIED PARTY GIVING THE NOTICE IS MAKING A CLAIM PURSUANT
TO, AND FORMAL DEMAND FOR INDEMNIFICATION, UNDER THIS ARTICLE 8. THE CLAIM
NOTICE MUST SET FORTH THE PARTICULAR PROVISION IN THIS ARTICLE 8 AND ANY RELATED
PROVISION IN THIS AGREEMENT PURSUANT TO WHICH SUCH INDEMNIFICATION CLAIM IS
MADE. FOR EXAMPLE, IF AN INDEMNIFIED PARTY ELECTS TO ASSERT AN INDEMNIFICATION
CLAIM FOR BREACH OF THE INDEMNIFYING PARTY'S BREACH
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OF REPRESENTATION, THE INDEMNIFIED PARTY'S CLAIM NOTICE WOULD PROVIDE THAT THE
CLAIM IS ASSERTED UNDER SECTION 8.1(A) OR 8.2(A)(I), AS APPLICABLE, AND THAT THE
REPRESENTATION ALLEGEDLY BREACHED IS, FOR EXAMPLE, THE LITIGATION REPRESENTATION
CONTAINED IN SECTION 3.8 OR 4.8, AS APPLICABLE. NOTWITHSTANDING THE FOREGOING
HOWEVER, THE FAILURE OF THE INDEMNIFIED PARTY TO TIMELY PROVIDE A CLAIM NOTICE
SHALL NOT EXCUSE THE INDEMNIFYING PARTY FROM ITS OBLIGATION TO PROVIDE
INDEMNIFICATION HEREUNDER UNLESS SUCH FAILURE MATERIALLY IMPAIRS THE ABILITY OF
THE INDEMNIFYING PARTY TO MITIGATE OR DEFEND SUCH CLAIM.
8.6 THIRD-PARTY CLAIMS. (A) IF AN INDEMNIFIED PARTY SHALL HAVE ANY
THIRD-PARTY CLAIM ASSERTED AGAINST SUCH INDEMNIFIED PARTY, THE INDEMNIFIED PARTY
PROMPTLY SHALL TRANSMIT TO THE INDEMNIFYING PARTY A CLAIM NOTICE RELATING TO
SUCH THIRD-PARTY CLAIM. PRIOR TO THE EXPIRATION OF THE 45-DAY PERIOD FOLLOWING
THE INDEMNIFYING PARTY'S RECEIPT OF SUCH NOTICE (THE "ELECTION PERIOD"), THE
INDEMNIFYING PARTY SHALL NOTIFY THE INDEMNIFIED PARTY (I) WHETHER THE
INDEMNIFYING PARTY DISPUTES ITS POTENTIAL LIABILITY TO THE INDEMNIFIED PARTY
UNDER THIS ARTICLE 8 WITH RESPECT TO SUCH THIRD-PARTY CLAIM AND (II) WHETHER THE
INDEMNIFYING PARTY ELECTS, AT THE SOLE COST AND EXPENSE OF SUCH INDEMNIFYING
PARTY, TO DEFEND THE INDEMNIFIED PARTY AGAINST SUCH THIRD-PARTY CLAIM.
(B) IF AN INDEMNIFYING PARTY NOTIFIES AN INDEMNIFIED PARTY WITHIN THE
ELECTION PERIOD THAT THE INDEMNIFYING PARTY DOES NOT DISPUTE ITS POTENTIAL
LIABILITY TO THE INDEMNIFIED PARTY UNDER THIS ARTICLE 8 AND THAT THE
INDEMNIFYING PARTY ELECTS TO ASSUME THE DEFENSE OF THE THIRD-PARTY CLAIM, THEN
THE INDEMNIFYING PARTY SHALL HAVE THE RIGHT TO DEFEND, AT ITS SOLE COST AND
EXPENSE, SUCH THIRD-PARTY CLAIM BY ALL APPROPRIATE PROCEEDINGS, WHICH
PROCEEDINGS SHALL BE PROSECUTED DILIGENTLY BY THE INDEMNIFYING PARTY TO A FINAL
CONCLUSION OR SETTLED AT THE DISCRETION OF THE INDEMNIFYING PARTY IN ACCORDANCE
WITH THIS SECTION 8.6(B). THE INDEMNIFYING PARTY SHALL HAVE FULL CONTROL OF SUCH
DEFENSE AND PROCEEDINGS, INCLUDING ANY COMPROMISE OR SETTLEMENT THEREOF. IF
REQUESTED BY THE INDEMNIFYING PARTY, THE INDEMNIFIED PARTY AGREES TO COOPERATE
FULLY WITH THE INDEMNIFYING PARTY AND ITS COUNSEL AT THE INDEMNIFYING PARTY'S
EXPENSE IN CONTESTING ANY THIRD-PARTY CLAIM THAT THE INDEMNIFYING PARTY ELECTS
TO CONTEST, INCLUDING, WITHOUT LIMITATION, THE MAKING OF ANY RELATED
COUNTERCLAIM AGAINST THE PERSON ASSERTING THE THIRD-PARTY CLAIM OR ANY
CROSS-COMPLAINT AGAINST ANY PERSON. THE INDEMNIFIED PARTY SHALL HAVE THE RIGHT
TO PARTICIPATE IN, BUT NOT CONTROL, ANY DEFENSE
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OR SETTLEMENT OF ANY THIRD-PARTY CLAIM CONTROLLED BY THE INDEMNIFYING PARTY
PURSUANT TO THIS SECTION 8.6(B) AND SHALL BEAR ITS OWN COSTS AND EXPENSES WITH
RESPECT TO ANY SUCH PARTICIPATION.
8.7 SUBROGATION. IN THE EVENT THAT ANY INDEMNIFIED PARTY HAS A RIGHT
AGAINST A THIRD PARTY WITH RESPECT TO ANY DAMAGES, LOSSES, COSTS OR EXPENSES
PAID TO SUCH INDEMNIFIED PARTY BY AN INDEMNIFYING PARTY, THEN SUCH INDEMNIFYING
PARTY SHALL, TO THE EXTENT OF SUCH PAYMENT, BE SUBROGATED TO THE RIGHT OF SUCH
INDEMNIFIED PARTY.
8.8 EXCLUSIVE REMEDIES; SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
LIMITATION OF CERTAIN LIABILITIES.
(A) BUYER, SELLER AND PARENT (I) AGREE THAT ONLY ACTUAL DAMAGES SHALL BE
RECOVERABLE UNDER THIS AGREEMENT AND (II) HEREBY WAIVE ANY RIGHT TO RECOVER
SPECIAL, PUNITIVE, CONSEQUENTIAL, INCIDENTAL OR EXEMPLARY DAMAGES EXCEPT TO THE
EXTENT ANY SUCH PARTY SUFFERS SUCH DAMAGES TO AN UNAFFILIATED THIRD-PARTY IN
CONNECTION WITH A THIRD-PARTY CLAIM, IN WHICH EVENT SUCH DAMAGES SHALL BE
RECOVERABLE. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, THE
INDEMNIFICATION PROVISIONS OF THIS ARTICLE 8 SHALL BE THE EXCLUSIVE REMEDIES FOR
ANY CLAIM BASED UPON THIS AGREEMENT OR THE TRANSACTIONS DESCRIBED HEREIN
FOLLOWING CLOSING. IN FURTHERANCE OF THE FOREGOING, ALL OTHER REMEDIES AVAILABLE
AT LAW OR IN EQUITY, IN TORT, CONTRACT OR OTHERWISE ARE HEREBY WAIVED, RELEASED
AND DISCHARGED BY SELLER, BUYER AND PARENT. NO CLAIM OF ANY NATURE CAN BE
BROUGHT BY ANY BUYER PARTY OR SELLER PARTY UNLESS WRITTEN NOTICE OF SUCH CLAIM
HAS BEEN GIVEN IN ACCORDANCE WITH ARTICLE 8 AS FOLLOWS: (A) ON OR BEFORE THE
THIRD ANNIVERSARY OF THE CLOSING DATE WITH RESPECT TO ANY BUYER INDEMNIFIED
LIABILITIES UNDER SECTION 8.1(A), (B), (C), (D), OR (E) AND ANY SELLER
INDEMNIFIED LIABILITIES UNDER 8.2(A), (B), (C), OR (D); AND (B) WITHIN THE
APPLICABLE STATUTE OF LIMITATIONS WITH RESPECT TO BUYER INDEMNIFIED LIABILITIES
UNDER 8.1(I) AND SELLER INDEMNIFIED LIABILITIES UNDER 8.2(E). INDEMNITY
OBLIGATIONS OF ANY INDEMNIFYING PARTY SHALL BE REDUCED BY ANY INSURANCE PROCEEDS
REALIZED BY ANY INDEMNIFIED PARTY, EXCEPT ANY PAYMENTS RECEIVED PURSUANT TO AN
INSURANCE PROGRAM UNDER WHICH THE INDEMNIFIED PARTY OR ANY OF ITS AFFILIATES
BEARS THE ULTIMATE COST OF SUCH CLAIM.
(B) NEITHER BUYER PARTIES NOR SELLER PARTIES MAY ASSERT ANY CLAIM UNDER
THIS ARTICLE 8 BASED ON FACTS CONSTITUTING A BREACH OF ANY OF THE
REPRESENTATIONS AND WARRANTIES
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HEREUNDER TO THE EXTENT SUCH PERSON HAD ACTUAL KNOWLEDGE OF SUCH FACTS PRIOR TO
THE CLOSING DATE.
8.9 WAIVER OF TEXAS DTPA. IT IS THE INTENT OF THE PARTIES THAT BUYER'S
RIGHTS AND REMEDIES WITH RESPECT TO THIS TRANSACTION AND WITH RESPECT TO ALL
ACTS OR PRACTICES OF SELLER, PAST, PRESENT OR FUTURE, IN CONNECTION WITH THIS
TRANSACTION SHALL BE GOVERNED BY LEGAL PRINCIPLES OTHER THAN THE TEXAS DECEPTIVE
TRADE PRACTICES - CONSUMER PROTECTION ACT, TEX. BUS. & COM. CODE ANN. SS. 17.41
ET SEQ. (VERNON 1987 AND SUPP. 1994) (THE "DTPA"). AS SUCH, BUYER HEREBY WAIVES
THE APPLICABILITY OF THE DTPA TO THIS TRANSACTION AND ANY AND ALL DUTIES, RIGHTS
OR REMEDIES THAT MIGHT BE IMPOSED BY THE DTPA, WHETHER SUCH DUTIES, RIGHTS OR
REMEDIES ARE APPLIED DIRECTLY BY THE DTPA ITSELF OR INDIRECTLY IN CONNECTION
WITH OTHER STATUTES: PROVIDED, HOWEVER, BUYER DOES NOT WAIVE SECTION 17.555 OF
THE DTPA. BUYER ACKNOWLEDGES, REPRESENTS AND WARRANTS THAT IT IS PURCHASING THE
ASSETS COVERED BY THIS AGREEMENT FOR COMMERCIAL OR BUSINESS USE; THAT BUYER HAS
ASSETS OF FIVE MILLION DOLLARS ($5,000,000) OR MORE ACCORDING TO ITS MOST RECENT
FINANCIAL STATEMENT PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES; THAT BUYER HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS
MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS OF A TRANSACTION SUCH AS
THIS; AND THAT IT IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH
SELLER. BUYER EXPRESSLY RECOGNIZES THAT THE PRICE FOR WHICH THE SELLER HAS
AGREED TO SELL THE ASSETS AND PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT HAS
BEEN PREDICATED UPON THE INAPPLICABILITY OF THE DTPA AND THIS WAIVER OF THE
DTPA. BUYER FURTHER RECOGNIZES THAT SELLER, IN DETERMINING TO PROCEED WITH THE
ENTERING INTO OF THIS AGREEMENT, HAS EXPRESSLY RELIED ON THIS WAIVER AND THE
INAPPLICABILITY OF THE DTPA.
ARTICLE 9
TERMINATION
9.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby abandoned as follows:
(a) By the mutual written consent of Buyer and Seller at any time prior to
the Closing;
(b) By Buyer or Seller if a final, non-appealable order to restrain,
enjoin or otherwise prevent the consummation of the transactions contemplated
hereby shall have been entered;
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(c) By Seller at any time prior to the Closing if the Closing shall not
have occurred on or before March 31, 1999 by reason of a failure of any
condition precedent under Section 7.1 or 7.3 unless the failure results
primarily from the breach by Seller of any representation, warranty or covenant
contained in this Agreement;
(d) By Buyer at any time prior to the Closing if the Closing shall not
have occurred on or before March 31, 1999 by reason of a failure of any
condition precedent under Section 7.1 or 7.2 unless the failure results
primarily from the breach by Buyer of any representation, warranty or covenant
contained in this Agreement;
(e) by Buyer or Seller if the Closing shall not have occurred on or before
March 31, 1999, so long as the terminating party is not in material breach of
any representation, warranty or covenant contained in this Agreement;
(f) by Seller if Buyer doesn't approve of any Rate Case settlement
proposal within ten (10) business days after notice of a settlement proposal is
submitted to Buyer; and
(g) by Buyer, if final resolution of the Rate Case is not reasonably
satisfactory to Buyer.
(h) by Buyer or Seller within ten (10) business days of Seller's written
notice to Buyer detailing the results of Seller's investigation of and Seller's,
or its Affiliates', determined course of action regarding the Bolivar Spoil Site
Encroachment, or by Buyer if such written notice is not received prior to the
Closing.
9.2 EFFECT OF TERMINATION. In the event of any termination of this
Agreement pursuant to Section 9.1, (i) Seller and Buyer shall have no obligation
or liability to each other except that the provisions of Section 5.1 and Section
5.8 shall survive any such termination, (ii) nothing herein and no termination
pursuant hereto will relieve any party from liability for any breach of this
Agreement prior to such termination or, with respect to those provisions that
survive such termination, prior to or following termination, and (iii) Buyer's
sole remedy for termination of this Agreement arising out of amendment to the
Disclosure Schedule and other schedules to reflect Material Items shall be the
remedy set forth in Section 5.8(b).
ARTICLE 10
TAX MATTERS
10.1 SECTION 338(H)(10) ELECTIONS. For purposes of this Article 10,
"Parent" means Enron Corp., the parent of the Seller. Parent and Buyer shall
make a joint election under Section 338(h)(10) of the Code and a similar
election under any applicable state income tax law for Black Marlin, if any (the
"Section 338(h)(10) Elections"). Not later than 180 days after the Closing Date,
Seller shall prepare and deliver to Buyer an Internal Revenue Service Form
8023-A and any similar form under applicable state income tax law (the "Forms")
with respect to the Section 338(h)(10) Elections, together with any completed
schedules required to be attached thereto, which Forms shall have been duly
executed by an authorized person for Parent. Within 15 days of receipt thereof,
Buyer shall cause the Forms to be duly
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executed by an authorized person for Buyer, shall provide a copy of the executed
Forms and schedules to Seller, shall duly and timely file the Forms as
prescribed by Treasury Regulation ss.1.338(h)(10)-1 or the corresponding
provisions of applicable state income taX law. Seller will pay the Income Taxes
of Black Marlin attributable to the making of the Section 338(h)(10) Elections.
The allocation of Adjusted Purchase Price among the assets of Black Marlin shall
be made in accordance with Code Sections 338 and 1060 and any comparable
provisions of state, local or foreign law, as appropriate. Seller shall, unless
it would be unreasonable to do so, accept Buyer's determination of such Adjusted
Purchase Price allocations and shall report, act, file in all respects and for
all purposes consistent with such determination of Buyer.
10.2 PREPARATION OF TAX RETURNS; RESPONSIBILITY FOR TAXES. (a) Seller
shall cause to be included in the consolidated federal income Tax Returns (and
the state income Tax Returns of any state that permits consolidated, combined or
unitary income Tax Returns, if any) of the Seller for all taxable periods ending
on or before the Closing Date ("Pre-Closing Period(s)"), all items of income,
gain, loss, deduction and credit and other tax items ("Tax Items") of Black
Marlin which are required to be included therein, shall cause such Tax Returns
to be timely filed with the appropriate taxing authorities, and shall be
responsible for the timely payment (and entitled to any refund) of all Taxes due
with respect to the periods covered by such Tax Returns. Subject to, and in
accordance with, Section 5.17, at or prior to Closing Seller may cause Black
Marlin to dividend cash reserved on its balance sheet for payment of Taxes
related to Pre-Closing Periods.
(b) With respect to any Tax Return covering a Pre-Closing Period that is
required to be filed after the Closing Date with respect to Black Marlin that is
not described in paragraph (a) above (other than one-day returns necessitated by
a stand-alone election under Section 338(g) or the corresponding provisions of
applicable state income tax law), Seller shall cause such Tax Return to be
prepared, shall cause to be included in such Tax Return all Tax Items required
to be included therein, shall cause such Tax Return to be filed timely with the
appropriate taxing authority, and shall be responsible for the timely payment
(and entitled to any refund) of all Taxes due with respect to the period covered
by such Tax Return. Subject to, and in accordance with, Section 5.17, at or
prior to Closing Seller may cause Black Marlin to dividend cash reserved on its
balance sheet for payment of Taxes related to Pre-Closing Periods.
(c) With respect to any Tax Return covering a taxable period beginning on
or before the Closing Date and ending after the Closing Date that is required to
be filed after the Closing Date with respect to Black Marlin (including one-day
returns necessitated by a stand-alone election under Section 338(g) or the
corresponding provisions of applicable state income law), Buyer shall cause such
Tax Return to be prepared, shall cause to be included in such Tax Return all Tax
Items required to be included therein, shall furnish a copy of such Tax Return
to Seller, shall file timely such Tax Return with the appropriate taxing
authority, and shall be responsible for the timely payment (and entitled to any
refund) of all Taxes due with respect to the period covered by such Tax Return.
Seller shall determine (by an interim closing of the books as of the Closing
Date except for ad valorem Taxes which shall be prorated on a daily basis) the
portion of the Tax due with respect to the period covered by such Tax Return
which is attributable to the Pre-Closing Period. Seller shall pay the amount
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of Tax so determined to be attributable to the Pre-Closing Period not later than
five days after the filing of such Tax Return.
(d) Notwithstanding anything to the contrary herein, any franchise Tax
paid or payable with respect to Black Marlin shall be allocated to the taxable
period during which the right to do business obtained by the payment of such
franchise Tax relates, regardless of whether such franchise Tax is measured by
income, operations, assets or capital relating to another taxable period. With
respect to any franchise Tax of Black Marlin so allocated to the taxable period
in which the Closing Date occurs: (i) Seller shall determine (by an interim
closing of the books as of the Closing Date) the portion of the franchise Tax of
Black Marlin due with respect to the portion of such taxable period ending on
the Closing Date and the remaining portion of such taxable period, and (ii) if
the amount of such franchise Tax paid or provided for as of the Closing Date
exceeds the amount so prorated to the portion of such taxable period ending on
the Closing Date, the Buyer shall pay to Seller such excess amount.
Notwithstanding the foregoing, however, Seller shall remain responsible for, and
shall indemnify Buyer and Black Marlin against, any incremental franchise tax
liability resulting from the Section 338(h)(10) Elections.
(e) Any Tax Return to be prepared pursuant to the provisions of this
Section 10.2 shall be prepared in a manner consistent with practices followed in
prior years with respect to similar Tax Returns, except for changes required by
changes in law or fact.
(f) Buyer shall not file an amended tax return for any period ending on or
prior to the Closing Date without the consent of Seller.
(g) Any refunds of taxes paid in Pre-Closing periods will be for the
account of Seller and, upon receipt thereof, Buyer shall promptly pay such
amounts to Seller.
10.3 ACCESS TO INFORMATION. (a) Seller shall grant to Buyer (or its
designee) access at all reasonable times to all of the information, books and
records relating to Black Marlin within the possession of Seller (including work
papers and correspondence with taxing authorities), and shall afford Buyer (or
its designee) the right (at Buyer's expense) to take extracts therefrom and to
make copies thereof, to the extent reasonably necessary to permit Buyer (or its
designees) to prepare Tax Returns and to conduct negotiations with taxing
authorities.
(b) Buyer shall grant or cause Black Marlin to grant to Seller (or its
designee) access at all reasonable times to all of the information, books and
records relating to Black Marlin within the possession of Buyer or Black Marlin
(including work papers and correspondence with taxing authorities), and shall
afford Seller (or its designee) the right (at Seller's expense) to take extracts
therefrom and to make copies thereof, to the extent reasonably necessary to
permit Seller (or its designee) to prepare Tax Returns and to conduct
negotiations with taxing authorities.
10.4 TAX SHARING AGREEMENTS. Seller shall, as of the Closing Date,
terminate all tax allocation agreements or tax sharing agreements with respect
to Black Marlin and shall ensure that such agreements are of no further force or
effect as to Black Marlin on and after
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the Closing Date and there shall be no further liability of Black Marlin under
any such agreement.
10.5 NON-FOREIGN PERSON AFFIDAVIT. Seller shall have delivered to Buyer an
affidavit to the effect that Seller is not a "foreign person" within the meaning
of Sections 1445 or 7701 of the Code executed under penalty of perjury and
satisfying the requirements of the Treasury Regulations promulgated pursuant to
such Code sections.
10.6 ASSISTANCE AND COOPERATION. After the Closing Date, in the case of
any audit, examination or other proceeding ("Proceeding") with respect to Taxes
for which Seller are or may be liable pursuant to this Agreement, Buyer shall
inform Seller (within 10 days of the receipt of a notice of such Proceeding),
and shall afford Seller, at Seller's expense, the opportunity to control the
conduct of such Proceedings. Buyer shall execute or cause to be executed powers
of attorney or other documents necessary to enable Seller to take all actions
desired by Seller with respect to such Proceeding to the extent such Proceeding
may affect either the amount of Taxes for which Seller is liable pursuant to
this Agreement. Seller shall have the right to control any such Proceedings,
and, if there is substantial authority therefor, to initiate any claim for
refund, file any amended return or take any other action which they deem
appropriate with respect to such Taxes. Any Proceeding with respect to Taxes for
a period which includes but does not end on the Closing Date shall be controlled
jointly by Seller and Buyer.
ARTICLE 11
MISCELLANEOUS
11.1 EXPENSES. Seller and Buyer shall bear and pay all costs and expenses
incurred by it in connection with the transactions contemplated by this
Agreement.
11.2 WAIVER AND AMENDMENT. Any provision of this Agreement may be waived
at any time by the Party that is entitled to the benefits thereof. This
Agreement may not be amended or supplemented at any time, except by an
instrument in writing signed on behalf of each Party hereto. The waiver by any
Party hereto of any condition or of a breach of another provision of this
Agreement shall not operate or be construed as a waiver of any other condition
or subsequent breach. The waiver by any Party hereto of any of the conditions
precedent to its obligations under this Agreement shall not preclude it from
seeking redress for breach of this Agreement other than with respect to the
condition so waived.
11.3 PUBLIC STATEMENT. Seller and Buyer agree to consult with, and obtain
the approval of (which approval will not be unreasonably withheld), each other
prior to issuing any press release or otherwise making any public statement with
respect to the transactions contemplated hereby, and shall not issue any such
press release or make any such public statement prior to such consultation and
approval, except as may be required by law.
11.4 ASSIGNMENT. This Agreement shall inure to the benefit of and will be
binding upon the Parties hereto and their respective legal representatives,
successors and permitted assigns. This Agreement shall not be assignable by the
Parties hereto without the prior
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written consent of the other Parties hereto; provided that Buyer may assign its
rights under this Agreement to one or more of its Affiliates, MCNIC Pipeline &
Processing Company ("MCNIC"), or an Affiliate of MCNIC upon five (5) business
days notice prior to Closing, provided that such assignee assumes a
proportionate share of the obligations of the Buyer hereunder and is capable of
making the representations and warranties set forth in Article 4; and provided,
further, no such assignment or assumption of obligations shall relieve Buyer of
any obligations under this Agreement.
11.5 NOTICES. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (a) delivered
in person or by courier, (b) sent by telecopy or facsimile transmission, answer
back requested, or (c) mailed by registered or certified mail, postage prepaid,
return receipt requested, to the parties at the following addresses:
if to Seller: Enron Pipeline Company
1400 Smith Street
Houston, Texas 77002
Fax: 713/853-2534
Attention: Corporate Secretary
if to Buyer: Eleven Greenway Plaza, Suite 1606
Houston, Texas 77046
Attention: William Fisher
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 11.5. Such notice shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, when the
answer back is received, or (iii) if mailed, the date of delivery as shown by
the return receipt therefor.
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11.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CHOICE OF LAW
RULES THAT MAY DIRECT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. THE
PARTIES HERETO AGREE TO SUBMIT TO ARBITRATION IN THE CITY OF HOUSTON, TEXAS ANY
DISPUTE ARISING OUT OF THIS AGREEMENT UNDER THE COMMERCIAL ARBITRATION RULES OF
THE AMERICAN ARBITRATION ASSOCIATION. THE PARTIES AGREE THAT ANY SUCH DISPUTE
SHALL BE SUBMITTED TO THREE ARBITRATORS SELECTED FROM THE PANEL OF ARBITRATORS
OF THE AMERICAN ARBITRATION ASSOCIATION. THE PARTIES FURTHER AGREE THAT THEY
WILL FAITHFULLY OBSERVE THIS AGREEMENT AND THE RULES, AND THAT THEY WILL ABIDE
BY AND PERFORM ANY AWARD RENDERED BY THE ARBITRATORS AND THAT A JUDGMENT OF A
COURT HAVING JURISDICTION MAY BE ENTERED UPON THE AWARD.
11.7 FURTHER ASSURANCES. In case at any time after the Closing Date any
further action is necessary to carry out the purposes of this Agreement
including, without limitation, the transfer of the Assets to Buyer and obtaining
all Customary Post Closing Consents, Seller and Buyer will take or cause to be
taken such further action (including the execution and delivery of such further
instruments and documents) as the other party reasonably may request all without
further consideration.
11.8 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall continue in full force and effect and shall
in no way be affected, impaired or invalidated unless such an interpretation
would materially alter the rights and privileges of any party hereto or
materially alter the terms of the transactions contemplated hereby.
11.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same agreement.
11.10 HEADINGS. The section headings herein are for convenience only and
shall not affect the construction hereof.
11.11 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement,
including the Exhibits hereto and the Disclosure Schedule, and any other
documents executed and delivered pursuant to this Agreement and the
Confidentiality Agreement constitute the entire agreements and supersede all
other prior agreements and understandings, both oral and written, between the
Parties, with respect to the subject matter hereof. Except as provided in
Section 5.13 and Article 8 hereof, neither this nor any document delivered in
connection with this Agreement, confers upon any person not a party hereto any
rights or remedies hereunder.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
SELLER:
ENRON PIPELINE COMPANY
By: /s/ RODERICK J. HAYSLETT
Title: SR VP FINANCE AND ACCOUNTING
BUYER:
BLACK MARLIN ENERGY COMPANY
By: /s/ WILLIAM D. FISHER
Title: SR. V.P. BUSINESS DEVELOPMENT
PARENT:
BLUE DOLPHIN ENERGY COMPANY
By: /s/ WILLIAM D. FISHER
Title: SR. V.P. BUSINESS DEVELOPMENT
32
EXHIBIT 10.32
ASSET PURCHASE AGREEMENT
This Agreement is made and entered into on the 25th day of February, 1999,
by and among Black Marlin Pipeline Company, a Texas corporation ("Seller"),
Black Marlin Energy Company, a Delaware corporation ("BMEC") and WBI Southern,
Inc., a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, the Seller owns certain natural gas pipeline assets located in
the Gulf of Mexico offshore Texas and onshore in Galveston County, Texas and
related onshore separation storage and dehydration facilities more particularly
described on Exhibit A;
WHEREAS, BMEC has entered into that certain Purchase and Sale Agreement
with Enron Pipeline Company ("Enron") and Blue Dolphin Energy Company dated
September 28, 1998 (the "Enron Agreement"), pursuant to which BMEC has agreed to
purchase, and Enron has agreed to sell, all of the outstanding stock of Seller
(the "Black Marlin Purchase");
WHEREAS, effective upon the closing of the Black Marlin Purchase (the
"Black Marlin Closing"), BMEC desires for the Seller to sell to Buyer, and Buyer
desires to acquire from Seller, an undivided 1/6 of 8/8ths interest in the
operating assets of Seller; and
WHEREAS, effective upon the Black Marlin Closing, BMEC desires for
Coenergy Offshore Pipeline & Processing Company, a Michigan corporation
("COPP"), to purchase an undivided 1/3 of 8/8ths interest in the operating
assets of Seller.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and the benefits to be derived herefrom, the parties hereby agree as
follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.01 AGREEMENT TO PURCHASE AND SELL. Subject to the terms and the
conditions set forth in this Agreement, as of the Effective Time (as defined in
Section 1.03) Seller will sell to Buyer, and Buyer will purchase from Seller, an
undivided 1/6 of 8/8ths interest in and to:
(a) the Assets, as defined in the Enron Agreement, as amended; and
(b) the High Island Lateral, as defined in the Enron Agreement.
The undivided 1/6 in 8/8ths interest to be acquired by Buyer pursuant to
this Section are sometimes referred to herein collectively as the "Purchased
Interests" or singularly as a "Purchased Interest".
<PAGE>
1.02 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Purchased Interests shall be U.S. $916,212 together with the assumption
by Buyer of the Assumed Obligations (as defined in Section 5.01). The Purchase
Price shall be allocated to Class III assets as defined in Temporary Treasury
Regulation ss. 1.1060-1T(d)(2)(ii) and among the Purchased
Interests in the manner set forth in Schedule 1.02.
1.03 EFFECTIVE TIME. The transfer of the ownership of the Purchased
Interests shall be effective as of 9:00 a.m., Central Daylight Time (the
"Effective Time") on the date of the Black Marlin Closing. All sums owing on
account of the ownership, operation, or use of the Purchased Interests prior to
the Effective Time shall be for the account of and charged to the Seller, and
all sums owing on account of the ownership, operation, or use of the Purchased
Interests on or after the Effective Time shall be charged to and for the account
of Buyer. The Seller shall be entitled to any and all revenues, refunds, sums or
amounts attributable to the ownership, operation, or use of the Purchased
Interests prior to the Effective Time. Buyer shall be entitled to any and all
revenues, refunds, sums or amounts attributable to the ownership, operation, or
use of the Purchased Interests on and after the Effective Time. Nothing set
forth in this Section 1.03 shall be construed, however, to supersede any
agreements made pursuant to the Operating Agreement (as hereafter defined) with
respect to the operation of the Assets subsequent to the Effective Time, which
shall be controlling for all such purposes.
1.04 OTHER AGREEMENTS. Seller, Buyer and COPP are entering into on the
date hereof (i) an operating agreement in the form attached hereto as Exhibit
1.04(i) (the "Operating Agreement"), and (ii) a Purchase Rights and
Participation Agreement in the form attached hereto as Exhibit 1.04(ii) (the
"Purchase Rights Agreement").
ARTICLE II
CLOSING
2.01 THE CLOSING. The closing of the transactions contemplated by this
Agreement ("Closing") is occurring simultaneously with the execution of this
Agreement. The Buyer and the Seller have entered into and delivered on the date
hereof the instruments and agreements necessary to effect the transaction
contemplated pursuant to Article I, including but not limited to the Operating
Agreement and the Purchase Rights Agreement (the "Closing Documents").
2.02 EFFECT OF CLOSING. The Closing will only be effective on, and is
contingent upon, the Black Marlin Closing. If the Black Marlin Closing has not
occurred by March 31, 1999, the Closing shall be null and void. The individual
who has executed this Agreement and the Closing Documents on behalf of Seller
has done so in anticipation of being elected as an officer of the Seller
effective as of the Black Marlin Closing. Regardless of the foregoing, however,
Buyer agrees not to revoke its execution of any of the Closing Documents.
2.03 FUNDING. Immediately upon the Black Marlin Closing, Buyer will wire
transfer the Purchase Price in the manner designated by Seller.
<PAGE>
ARTICLE III
ADDITIONAL COVENANTS
3.01 TAX MATTERS.
(a) Buyer shall pay all transfer taxes, including without limitation,
sales, use, excise (including excise taxes on petroleum, products of petroleum,
petrochemicals, chemicals, and other taxable substances), stamp, documentary,
filing, recording, permit, license, authorization, and other similar taxes,
filing fees and similar charges ("Transfer Taxes"), incurred or imposed in
connection with or as a result of the transactions effected pursuant to this
Agreement regardless of upon whom such Transfer Tax is levied or imposed by law.
Buyer shall prepare and file all returns and reports for such Transfer Taxes.
Should any of the Seller be required by law to pay such Transfer Tax, Buyer
shall notify the appropriate Seller of such amount and the due dates thereof and
remit the amount of such Transfer Tax and pre-prepared filings associated
therewith to the Seller for remittance at least ten days before such Transfer
Tax is due.
(b) The Seller and Buyer agree that the Purchase Price shall be allocated
among the Purchased Interests in the manner set forth in Schedule 3.01. Each
party agrees to complete IRS Form 8594 consistently with the agreed allocation
and to furnish the other party with a draft copy of such form within a
reasonable period before the filing due date of such form. Neither the Seller
nor Buyer shall file any return with a tax authority that is inconsistent with
such allocation.
3.02 THIRD PARTY CONSENTS. After the Black Marlin Closing, the Seller and
Buyer shall use their respective reasonable best efforts to obtain all consents,
approvals, orders, authorizations, and waivers of, and to effect all
declarations, filings, and registrations with, all third parties (including
governmental entities) that are necessary or required to enable the Seller to
transfer the Purchased Interests to Buyer as contemplated by this Agreement and
to otherwise consummate the transactions contemplated hereby. All costs and
expenses of obtaining or effecting any and all of the consents, approvals,
orders, authorizations, waivers, declarations, filings, and registrations
referred to in this Section shall be borne by the Seller, provided, however,
that the foregoing shall not affect the obligation of Buyer to pay recording
costs and such expenses as required to comply with regulatory requirements
imposed by the Federal Energy Regulatory Commission and the Minerals Managements
Service with respect to this transaction.
3.03 RIGHTS UNDER THE ENRON AGREEMENT. BMEC hereby assigns to Buyer,
effective as of the Black Marlin Closing, an undivided 1/6 or 8/8ths interest in
all of the rights of BMEC under the Enron Agreement, including but not limited
to the right of BMEC to receive indemnification from Enron with respect to
certain matters (the "Enron Indemnification Rights") and Buyer hereby assumes,
as of the Closing a proportionate amount of the obligations of BMEC under the
Agreement, including but not limited to the obligation to resell up to a 33 1/3%
undivided interest in the Purchased Interests to Enron pursuant to Section 5.13
of the Enron Agreement.
<PAGE>
ARTICLE IV
ASSUMPTION AND INDEMNIFICATION
As of the Effective Time, Buyer shall assume and agree to pay, perform,
and discharge or cause to be paid, performed, and discharged all duties,
obligations, and liabilities ("Obligations") arising out of, in connection with,
or otherwise in respect of the ownership or operation of the Purchased
Interests, whether primary or secondary, fixed or contingent, including but not
limited to a pro rata portion of the duties, obligations, and liabilities of the
Seller under the contracts and agreements referenced in schedules and exhibits
to the Enron Agreement, subject to the Enron Indemnification Rights.
ARTICLE V
MISCELLANEOUS
5.01 DUE DILIGENCE REVIEW. Buyer acknowledges that it has assumed the
responsibility for conducting its own due diligence review with respect to the
Assets and High Island Lateral and the transactions contemplated hereby. Buyer
acknowledges that it has been provided full access to such information as it has
requested with respect to the assets of Seller and the books, records,
facilities, leases, equipment, consultants, and personnel of the Seller and all
other matters and things sought to be examined by Buyer in connection with its
due diligence investigation, and that it has conducted its due diligence review
to its satisfaction. Buyer acknowledges that it has conducted its own
independent evaluation of any forecast or projection provided to it by any of
the Seller or their representatives, and specifically has independently
evaluated the future throughput, revenue, and expenses of the Purchased
Interests.
5.02 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
5.03 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without reference to the
conflicts of law principles thereof.
5.04 ENTIRE AGREEMENT. The Agreements and the Schedules and Exhibits
hereto supersede all prior agreements between the parties (written or oral) and,
except as aforesaid, is intended as a complete and exclusive statement of the
terms of the agreement between the parties. This Agreement may be amended only
by a written instrument duly executed by the parties.
5.05 EXPENSES. Except as expressly set forth in this Agreement, whether
the transactions contemplated hereby are or are not consummated, all legal and
other costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses.
<PAGE>
5.06 NOTICES. All notices hereunder shall be sufficiently given (and
deemed made) for all purposes hereunder if in writing and (a) delivered
personally, (b) sent by documented overnight delivery service, (c) to the extent
receipt is confirmed, sent by telecopy, telefax, or other electronic
transmission service to the appropriate address or number as set forth below, or
(d) sent by United States mail, postage prepaid with return receipt requested.
Notices to the Seller shall be transmitted or addressed to:
801 Travis, Suite 2100
Houston, Texas 77002
Attention: President
Telecopier No.: (713) 227-7626
with a copy to:
Doherty, Doherty & Adams, L.L.P.
1717 St. James Place, Suite 520
Houston, Texas 77056
Attention: Mr. Casey W. Doherty
Telecopier No.: (713) 572-1001
or at such other addresses or telefax numbers and to the attention of such other
person as the Seller may designate by written notice to each of the other
parties.
Notices to Buyer shall be transmitted or addressed to:
200 North 3rd Street, Suite 300
Bismarck, North Dakota 58501
Attention: Darwin L. Subart
Telecopier No.: 701/221-1297
with a copy to:
200 North 3rd Street, Suite 300
Bismarck, North Dakota 58501
Attention: Darwin L. Subart
or at such other addresses or telefax numbers and to the attention of such other
person as Buyer may designate by written notice to each of the other parties.
5.07 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that no party hereto may assign its rights or
delegate its obligations under this Agreement without the express prior written
consent of each other party hereto.
5.08 HEADINGS. The section and article headings contained in this
Agreement are inserted for convenience of reference only and will not affect the
meaning or interpretation of this Agreement.
<PAGE>
5.09 SEVERABILITY. If any term or provision of this Agreement is invalid,
illegal, or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any material adverse manner
to any party. Upon such determination that any term or other provision is
invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
5.10 CROSS-REFERENCES. References in this Agreement to Articles, Sections,
Exhibits, or Schedules shall be deemed to be references to Articles, Sections,
Exhibits, and Schedules of this Agreement unless the context specifically and
expressly requires otherwise.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of
the parties as of the date first above written.
WBI SOUTHERN, INC., BLACK MARLIN PIPELINE COMPANY,
a Delaware corporation a Texas corporation
By:_________________________ By:___________________________________
John K. Castleberry William Fisher,
President and Chief Executive Officer Senior Vice President
EXHIBIT 10.33
ASSET PURCHASE AGREEMENT
This Agreement is made and entered into on the 25th day of February, 1999,
by and among Black Marlin Pipeline Company, a Texas corporation ("Seller"),
Black Marlin Energy Company, a Delaware corporation ("BMEC") and MCNIC Offshore
Pipeline & Processing Company, a Michigan corporation ("Buyer").
WITNESSETH:
WHEREAS, the Seller owns certain natural transmission assets located in
the Gulf of Mexico offshore Texas and onshore in Galveston County, Texas and
related offshore separation storage and dehydration facilities more particularly
described on Exhibit A;
WHEREAS, BMEC has entered into that certain Purchase and Sale Agreement
with Enron Pipeline Company ("Enron") and Blue Dolphin Energy Company ("BDEC")
dated September 28, 1998 (the "Enron Agreement"), pursuant to which BMEC has
agreed to purchase, and Enron has agreed to sell, all of the outstanding stock
of Seller (the "Black Marlin Purchase");
WHEREAS, effective upon the closing of the Black Marlin Purchase (the
"Black Marlin Closing"), BMEC desires for the Seller to sell to Buyer, and Buyer
desires to acquire from Seller, an undivided 1/3 interest in the operating
assets of Seller; and
WHEREAS, effective upon the Black Marlin Closing, BMEC desires for WBI
Southern, Inc., a Delaware corporation ("WBI"), to purchase an undivided 1/6
interest in the operating assets of Seller.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and the benefits to be derived herefrom, the parties hereby agree as
follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.01 AGREEMENT TO PURCHASE AND SELL. Subject to the terms and the
conditions set forth in this Agreement, as of the Effective Time (as defined in
Section 1.03) Seller will sell to Buyer, and Buyer will purchase from Seller, an
undivided 1/3 interest in and to:
(a) the Assets, as defined in the Enron Agreement, as amended; and
(b) the High Island Lateral, as defined in the Enron Agreement.
The undivided 1/3 interests to be acquired by Buyer pursuant to this
Section are sometimes referred to herein collectively as the "Purchased
Interests" or singularly as a "Purchased Interest".
<PAGE>
1.02 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Purchased Interests shall be (i) the payment of $1,801,423.33 in cash
(the "Payment"), (ii) the assumption by Buyer of the Assumed Obligations (as
defined in Section 5.01) and (iii) the reimbursement by Buyer to Seller of 1/3
of the out of pocket costs incurred by Seller in connection with this
transaction and the Black Marlin Purchase (which share equals approximately
$31,000) (the "Cost Reimbursement"). The Purchase Price shall be allocated to
Class III assets as defined in Temporary Treasury Regulation Section
1.1060-1T(d)(2)(ii) and among the Purchased Interests in the manner set forth in
Schedule 1.02.
1.03 EFFECTIVE TIME. The transfer of the ownership of the Purchased
Interests shall be effective as of 9:00 a.m., Central Daylight Time (the
"Effective Time") on the date of the Black Marlin Closing. All sums owing on
account of the ownership, operation, or use of the Purchased Interests prior to
the Effective Time shall be for the account of and charged to the Seller, and
all sums owing on account of the ownership, operation, or use of the Purchased
Interests on or after the Effective Time shall be charged to and for the account
of Buyer. The Seller shall be entitled to any and all revenues, refunds, sums or
amounts attributable to the ownership, operation, or use of the Purchased
Interests prior to the Effective Time. Buyer shall be entitled to any and all
revenues, refunds, sums or amounts attributable to the ownership, operation, or
use of the Purchased Interests on and after the Effective Time. Nothing set
forth in this Section 1.03 shall be construed, however, to supersede any
agreements made pursuant to the Operating Agreement (as hereafter defined) with
respect to the operation of the Assets subsequent to the Effective Time, which
shall be controlling for all such purposes. For purposes of this Section 1.03,
(i) revenues shall be treated as realized with respect to the storage of crude
oil, condensate, and natural gas liquids prior to the Effective Time to the
extent such liquids were in storage in or on the Assets at the Effective Time
and (ii) such liquids shall be deemed delivered from storage on a "FIFO" basis.
1.04 OTHER AGREEMENTS. Seller, Buyer and WBI are entering into on the date
hereof (i) an operating agreement in the form attached hereto as Exhibit 1.04(i)
(the "Operating Agreement"), and (ii) a Purchase Rights and Participation
Agreement in the form attached hereto as Exhibit 1.04(ii) (the "Purchase Rights
Agreement").
ARTICLE II
CLOSING
2.01 THE CLOSING. The closing of the transactions contemplated by this
Agreement ("Closing") is occurring simultaneously with the execution of this
Agreement. The Buyer and the Seller have entered into and delivered on the date
hereof the instruments and agreements necessary to effect the transaction
contemplated pursuant to Article I, including but not limited to the Operating
Agreement and the Purchase Rights Agreement (the "Closing Documents").
2.02 EFFECT OF CLOSING. The Closing will only be effective on, and is
contingent upon, the Black Marlin Closing. The individual who has executed this
Agreement and the Closing Documents on behalf of Seller has done so in
anticipation of being elected as an officer of the Seller effective as of the
Black Marlin Closing. Regardless of the foregoing, however, Buyer agrees not to
revoke its execution of any of the Closing Documents.
<PAGE>
2.03 FUNDING. Immediately upon the Black Marlin Closing, Buyer will wire
transfer the Payment and the Cost Reimbursement in the manner designated by
Seller.
ARTICLE III
ADDITIONAL COVENANTS
3.01 TAX MATTERS.
(a) Buyer shall pay all transfer taxes, including without limitation,
sales, use, excise (including excise taxes on petroleum, products of petroleum,
petrochemicals, chemicals, and other taxable substances), stamp, documentary,
filing, recording, permit, license, authorization, and other similar taxes,
filing fees and similar charges ("Transfer Taxes"), incurred or imposed in
connection with or as a result of the transactions effected pursuant to this
Agreement regardless of upon whom such Transfer Tax is levied or imposed by law.
Buyer shall prepare and file all returns and reports for such Transfer Taxes.
Should any of the Seller be required by law to pay such Transfer Tax, Buyer
shall notify the appropriate Seller of such amount and the due dates thereof and
remit the amount of such Transfer Tax and pre-prepared filings associated
therewith to the Seller for remittance at least ten days before such Transfer
Tax is due.
(b) The Seller and Buyer agree that the Purchase Price shall be allocated
among the Purchased Interests in the manner set forth in Schedule 3.01. Each
party agrees to complete IRS Form 8594 consistently with the agreed allocation
and to furnish the other party with a draft copy of such form within a
reasonable period before the filing due date of such form. Neither the Seller
nor Buyer shall file any return with a tax authority that is inconsistent with
such allocation.
3.02 THIRD PARTY CONSENTS. After the Black Marlin Closing, the Seller and
Buyer shall use their respective reasonable best efforts to obtain all consents,
approvals, orders, authorizations, and waivers of, and to effect all
declarations, filings, and registrations with, all third parties (including
governmental entities) that are necessary or required to enable the Seller to
transfer the Purchased Interests to Buyer as contemplated by this Agreement and
to otherwise consummate the transactions contemplated hereby such as the costs
and expenses of obtaining the approval of the Federal Regulatory Commission
("FERC") of this transaction. All costs and expenses of obtaining or effecting
any and all of the consents, approvals, orders, authorizations, waivers,
declarations, filings, and registrations referred to in this Section shall be
borne by the Seller, provided, however, that the foregoing shall not affect the
obligation of Buyer to pay recording costs and such expenses as required to
comply with regulatory requirements imposed by the Federal Energy Regulatory
Commission and the Minerals Managements Service with respect to this
transaction.
3.03 RIGHTS UNDER THE ENRON AGREEMENT. BMEC and the Seller hereby assigns
to Buyer, effective as of the Black Marlin Closing, an undivided 1/3 interest in
all of the rights of BMEC and Seller under the Enron Agreement, including but
not limited to the right of BMEC and the Seller to receive indemnification from
Enron with respect to certain matters (the "Enron Indemnification Rights") and
Buyer hereby assumes, as of the Closing a proportionate amount of the
obligations of BMEC under the Agreement, including but not limited to the
obligation to
<PAGE>
resell up to a 33 1/3% undivided interest in the Purchased Interests to Enron
pursuant to Section 5.13 of the Enron Agreement.
ARTICLE IV
ASSUMPTION AND INDEMNIFICATION
As of the Effective Time, Buyer shall assume and agree to pay, perform,
and discharge or cause to be paid, performed, and discharged all duties,
obligations, and liabilities (the "Assumed Obligations") arising out of, in
connection with, or otherwise in respect of the ownership or operation of the
Purchased Interests, whether primary or secondary, fixed or contingent,
including but not limited to a pro rata portion of the duties, obligations, and
liabilities of the Seller under the contracts and agreements referenced in
schedules and exhibits to the Enron Agreement, subject to the Enron
Indemnification Rights.
ARTICLE V
MISCELLANEOUS
5.01 DUE DILIGENCE REVIEW. Buyer acknowledges that it has assumed the
responsibility for conducting its own due diligence review with respect to the
Assets and the High Island Lateral and the transactions contemplated hereby.
Buyer acknowledges that it has been provided full access to such information as
it has requested with respect to the assets of Seller and the books, records,
facilities, leases, equipment, consultants, and personnel of the Seller and all
other matters and things sought to be examined by Buyer in connection with its
due diligence investigation, and that it has conducted its due diligence review
to its satisfaction. Buyer acknowledges that it has conducted its own
independent evaluation of any forecast or projection provided to it by any of
the Seller or their representatives, and specifically has independently
evaluated the future throughput, revenue, and expenses of the Purchased
Interests.
5.02 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
5.03 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without reference to the
conflicts of law principles thereof.
5.04 ENTIRE AGREEMENT. The Agreements and the Schedules and Exhibits
hereto supersede all prior agreements between the parties (written or oral) and,
except as aforesaid, is intended as a complete and exclusive statement of the
terms of the agreement between the parties. This Agreement may be amended only
by a written instrument duly executed by the parties.
5.05 EXPENSES. Except as expressly set forth in this Agreement, whether
the transactions contemplated hereby are or are not consummated, all legal and
other costs and
<PAGE>
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
5.06 NOTICES. All notices hereunder shall be sufficiently given (and
deemed made) for all purposes hereunder if in writing and (a) delivered
personally, (b) sent by documented overnight delivery service, (c) to the extent
receipt is confirmed, sent by telecopy, telefax, or other electronic
transmission service to the appropriate address or number as set forth below, or
(d) sent by United States mail, postage prepaid with return receipt requested.
Notices to the Seller shall be transmitted or addressed to:
801 Travis, Suite 2100
Houston, Texas 77002
Attention: President
Telecopier No.: (713) 227-7626
with a copy to:
Doherty, Doherty & Adams, L.L.P.
1717 St. James Place, Suite 520
Houston, Texas 77056
Attention: Mr. Casey W. Doherty
Telecopier No.: (713) 572-1001
or at such other addresses or telefax numbers and to the attention of such other
person as the Seller may designate by written notice to each of the other
parties.
Notices to Buyer shall be transmitted or addressed to:
1360 Post Oak Blvd., Suite 1500
Houston, Texas 77056
Attention: Vice President
Telecopier No.: (713) 585-4860
With a copy to:
MCN Energy Group Inc.
500 Griswold Street
Detroit, Michigan 48226
Attention: Daniel L. Schiffer
or at such other addresses or telefax numbers and to the attention of such other
person as Buyer may designate by written notice to each of the other parties.
5.07 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that no party hereto may assign its rights or
delegate its obligations under this Agreement without the express prior written
consent of each other party hereto.
<PAGE>
5.08 HEADINGS. The section and article headings contained in this
Agreement are inserted for convenience of reference only and will not affect the
meaning or interpretation of this Agreement.
5.09 SEVERABILITY. If any term or provision of this Agreement is invalid,
illegal, or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any material adverse manner
to any party. Upon such determination that any term or other provision is
invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
5.10 CROSS-REFERENCES. References in this Agreement to Articles, Sections,
Exhibits, or Schedules shall be deemed to be references to Articles, Sections,
Exhibits, and Schedules of this Agreement unless the context specifically and
expressly requires otherwise.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of
the parties as of the date first above written.
MCNIC OFFSHORE PIPELINE BLACK MARLIN PIPELINE COMPANY,
& PROCESSING COMPANY, a Texas corporation
a Michigan corporation
By:_________________________ By:___________________________________
Name:_______________________ William Fisher,
Title:________________________ Senior Vice President
BLACK MARLIN ENERGY COMPANY,
a Delaware corporation
By:___________________________________
William Fisher,
Senior Vice President
