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 October 18, 1997
KINDER MORGAN ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 1-11234 76-0380342
(State or other (Employer I.R.S. (Commission File Number)
jurisdiction of Identification)
incorporation)
1301 McKinney Street, Ste. 3450, Houston, Texas 77010
(Address of principal executive offices)(zip code)
Registrant's telephone number, including area code: 713-844-9500
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Item 5. Other Events
See the Kinder Morgan Energy Partners, L.P. Press Release dated October 20,
1997, filed herein as Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
Exhibit 10.1 Purchase Agreement dated October 18, 1997 between Kinder Morgan
Energy Partners, L.P., Kinder Morgan G.P., Inc., Santa Fe
Pacific Pipeline Partners, L.P., Santa Fe Pacific Pipelines, Inc.
and SFP Pipeline Holdings, Inc.
Exhibit 99.1 Kinder Morgan Energy Partners, L.P. Press Release dated October
20, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
KINDER MORGAN ENERGY PARTNERS, L.P.
By: Kinder Morgan G.P., Inc.,
Its general partner
By: /s/ William V. Morgan
Name: William V. Morgan
Title: Director and Vice Chairman
Date: October 21, 1997
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PURCHASE AGREEMENT
by and among
Kinder Morgan Energy Partners, L.P. and
Kinder Morgan G.P., Inc.
and
Santa Fe Pacific Pipeline Partners, L.P.,
Santa Fe Pacific Pipelines, Inc. and
SFP Pipeline Holdings, Inc.
October 18, 1997
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TABLE OF CONTENTS
ARTICLE I - PURCHASE AND SALE........................... 1
1.1 Purchase of Acquired Interests................. 1
(a) Trading Partnership GP Interest........... 1
(b) Operating Partnership LP Interest......... 1
1.2 Liquidation of Trading Partnership............. 2
(a) Amendment of Trading Partnership
Agreement................................. 2
(b) Liquidation............................... 2
(c) Fractional Units.......................... 2
(d) Exchange Agent............................ 2
(e) Exchange Procedures....................... 3
(f) Distributions with Respect to
Unexchanged Units......................... 4
(g) No Further Ownership Rights in Trading
Partnership Common Units.................. 4
(h) Termination of Exchange Fund.............. 4
(i) No Liability.............................. 4
1.3 Transactions Involving Operating Partnership... 5
(a) Amendment of Agreement.................... 5
(b) Special Distribution...................... 5
(c) Put Right................................. 6
(d) Call Right................................ 6
(e) Registration.............................. 6
1.4 Certain Agreements with Respect to VREDs....... 7
(a) Assignment of Common Units................ 7
(b) Negotiations with VREDs and Assumption
of Obligations............................ 7
(c) Benefit of Negotiations................... 7
ARTICLE II - CLOSING.................................... 8
2.1 Closing........................................ 8
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SF
PARTIES................................................. 8
3.1 Organization and Existence..................... 8
3.2 Authority; Binding Effect...................... 8
3.3 SEC Filings.................................... 9
3.4 Information Supplied........................... 9
3.5 No Material Adverse Change..................... 9
3.6 Ownership...................................... 10
3.7 No Conflict.................................... 10
3.8 No Default..................................... 11
3.9 Financial Statements........................... 11
3.10 Copies Complete................................ 11
3.11 Recommendation of Special Committee............ 11
3.12 Brokerage Arrangements......................... 12
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ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE KM
PARTIES................................................. 12
4.1 Organization and Existence..................... 12
4.2 Authority; Binding Effect...................... 12
4.3 SEC Filings.................................... 12
4.4 Financial Statements........................... 13
4.5 Information Supplied........................... 13
4.6 No Material Adverse Change..................... 13
4.7 No Conflict.................................... 13
4.8 No Default..................................... 14
4.9 Copies Complete................................ 14
4.10 Brokerage Arrangements......................... 14
4.11 Opinion of Financial Advisor................... 14
4.12 Purchaser Common Units......................... 15
ARTICLE V - ADDITIONAL AGREEMENTS, COVENANTS, RIGHTS AND
OBLIGATIONS............................................. 15
5.1 Access to Information.......................... 15
5.2 Conduct of Business............................ 15
(a) Ordinary Course........................... 15
(b) Restrictions on Trading Partnership and
Operating Partnership..................... 15
(c) General Business......................... 17
(d) Employees of SF General Partner........... 18
(e) Restrictions on Purchaser................. 18
5.3 Certain Filings................................ 19
5.4 SF Unit Holders' Meeting....................... 19
5.5 KM Unit Holders' Meeting....................... 20
5.6 Affiliates..................................... 20
5.7 First Mortgage Notes; Credit Agreement......... 20
5.8 Other Consents................................. 20
5.9 No Solicitation................................ 20
5.10 Permitted Actions.............................. 21
5.11 Indemnified Debt............................... 21
5.12 Transfer....................................... 22
5.13 Further Action; Reasonable Best Efforts........ 23
5.14 Notification of Certain Matters................ 23
5.15 Certain Indebtedness........................... 24
5.16 Financial Statements........................... 24
5.17 Merger of New LP............................... 24
5.18 No Public Announcement......................... 24
5.19 Expenses....................................... 24
5.20 NYSE Listing................................... 25
5.21.Consistent Tax Reporting....................... 26
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ARTICLE VI - CONDITIONS TO CLOSING...................... 26
6.1 Conditions to Each Party's Obligations......... 26
(a) Purchaser's Unit Holders.................. 26
(b) Trading Partnership's Unit Holders........ 26
(c) First Mortgage Notes; Credit Agreement.... 26
(d) Kinder Morgan Credit Agreement............ 26
(e) California PUC Approval................... 26
(f) HSR Act................................... 26
(g) Escrow Agreement.......................... 26
(h) Operating Partnership Agreement........... 27
(i) Registration Statement.................... 27
(j) Governmental Approvals.................... 27
(k) No Governmental Restraint................. 27
(l) VREDs..................................... 27
6.2 Conditions to the KM Parties' Obligations...... 27
(a) No Material Adverse Change................ 27
(b) Representations and Warranties;
Performance............................... 27
(c) FIRPTA Certificate........................ 28
(d) Authority on Bank Accounts................ 28
(e) Tax Opinion............................... 28
(f) Fairness Opinion.......................... 28
(g) Tax Opinion............................... 28
6.3 Conditions to the SF Parties' Obligations...... 29
(a) No Material Adverse Change................ 29
(b) Representations and Warranties;
Performance............................... 29
(c) Tax Opinion............................... 29
(d) Tax Opinion............................... 30
(e) Liquidation Distribution.................. 30
(f) Fairness Opinion.......................... 31
(g) Pending Claims............................ 31
(h) Increased Distribution.................... 31
ARTICLE VII - EMPLOYEES AND EMPLOYEE BENEFITS........... 31
7.1 Severance Obligations.......................... 31
7.2 Severance Process.............................. 31
7.3 Increased Severance Costs...................... 32
7.4 Employment by SF General Partner............... 32
7.5 Employee Benefit Plans......................... 32
ARTICLE VIII - TERMINATION.............................. 32
8.1 Events of Termination.......................... 32
(a) Consent................................... 32
(b) Failure of KM Parties..................... 32
(c) Failure of SF Parties..................... 33
(d) Orders.................................... 33
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(e) Outside Date...............................33
(f) Failure of Unit Holders to Approve........ 33
(g) MAE of SF Parties......................... 33
(h) MAE of KM Parties......................... 33
(i) Superior Transaction...................... 34
(j) SF Recommendation......................... 34
(k) KM Recommendation......................... 34
(l) Purchaser Average Price................... 34
8.2 Effect of Termination.......................... 34
(a) No Liability.............................. 34
(b) Expense Reimbursement..................... 34
(c) Specific Performance...................... 34
(d) Other Remedies............................ 35
ARTICLE IX - INDEMNIFICATION............................ 35
9.1 Indemnification of Certain SF Parties.......... 35
9.2 Indemnification of the KM Parties.............. 35
(a) Debt Indemnity............................ 35
(b) Special Indemnity......................... 36
(c) Other Indemnity........................... 36
9.3 Termination.................................... 36
9.4 Demands........................................ 36
9.5 Right to Contest and Defend.................... 37
9.6 Cooperation.................................... 38
9.7 Right to Participate........................... 38
9.8 Payment of Damages............................. 38
ARTICLE X - MISCELLANEOUS............................... 38
10.1 Nonsurvival of Representations and Warranties. 38
10.2 Notices....................................... 38
10.3 Governing Law................................. 40
10.4 Entire Agreement; Amendments and Waivers...... 40
10.5 Binding Effect and Assignment................. 40
10.6 Severability.................................. 41
10.7 Headings...................................... 41
10.8 Execution..................................... 41
Exhibits
Exhibit 5.6 Affiliates Letter
Exhibit 7.3 Amendment to Severance Program
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Schedules
Schedule 3.1 Foreign Qualifications
Schedule 3.9 SF Financials
Schedule 4.4 KM Financials
Schedule 5.2(b)(ii)
Schedule 5.2(b)(vi)
Schedule 5.2(b)(viii)
Schedule 5.2(b)(xi)
Schedule 5.2(d)
Schedule 7.1(c)
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Defined Terms
Acquired Interests...................................1
Acquiring Person....................................19
Agreement............................................1
Amended and Restated Operating Partnership Agreement.5
Call Notice..........................................6
Certificates.........................................3
Claim...............................................37
Closing..............................................8
Closing Balance Sheet Date..........................24
Closing Date.........................................8
Closing Financial Statements........................24
Code................................................22
Common Unit Operating Partnership LP Interest........1
Confidentiality Agreements..........................15
Credit Agreement....................................20
Debt Indemnity......................................36
Employees...........................................31
Employment Agreements...............................31
Environmental Permits...............................23
Escrow Agreement.....................................7
Exchange Act.........................................9
Exchange Agent.......................................2
Exchange Fund........................................3
Financial Statements................................11
finder's fee........................................12
First Mortgage Notes................................16
Fractional Unit Payment..............................2
Goldman Opinion.....................................14
Holdings.............................................1
HSR Act.............................................10
Indemnified Debt....................................36
Joint Proxy Statement/Prospectus....................19
KM Financial Statements.............................13
KM General Partner...................................1
KM Parties...........................................8
KM Unit Holders' Meeting............................20
Letter of Transmittal................................3
Liquidation Distribution.............................2
Losses..............................................35
Material Adverse Effect.............................10
New LP...............................................1
Notice..............................................38
Operating Partnership................................1
Other Indemnity.....................................36
Other Permits.......................................23
Possible Alternatives...............................21
Purchaser............................................1
Purchaser Common Units...............................1
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Put Notice...........................................6
Put/Call Units.......................................6
Registration Statement..............................19
Remaining Operating Partnership LP Interest..........2
Required Consents...................................10
SEC.................................................19
Securities Act.......................................6
Severance Program...................................31
SF General Partner...................................1
SF Parties...........................................8
SF Unit Holders' Meeting............................19
Smith Barney Opinion................................11
Special Committee...................................11
Special Distribution.................................5
Special Limited Partnership Interest.................5
Superior Transaction................................21
Trading Partnership..................................1
Trading Partnership Agreement Amendment.............10
Trading Partnership Common Units.....................1
Trading Partnership GP Interest......................1
VREDs................................................7
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PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made and entered into as of the
18th day of October, 1997, by and among Kinder Morgan Energy Partners, L.P., a
Delaware master limited partnership (the "Purchaser"), Kinder Morgan G.P., Inc.,
a Delaware corporation and general partner of the Purchaser ("KM General
Partner"), Santa Fe Pacific Pipeline Partners, L.P., a Delaware master limited
partnership (the "Trading Partnership"), Santa Fe Pacific Pipelines, Inc., a
Delaware corporation and general partner of the Trading Partnership ("SF General
Partner") and SFP Pipeline Holdings, Inc., a Delaware corporation and the parent
corporation of the SF General Partner ("Holdings").
W I T N E S S E T H:
WHEREAS, the Trading Partnership is the sole limited partner of SFPP, L.P.,
a Delaware limited partnership (the "Operating Partnership") of which the SF
General Partner is the sole general partner;
WHEREAS, the Purchaser, directly or indirectly, desires to acquire the
interest of the Common Unit holders of the Trading Partnership in the Trading
Partnership's 98.9899% limited partnership interest in the Operating Partnership
(the "Common Unit Operating Partnership LP Interest") and the SF General
Partner's entire general partnership interest in the Trading Partnership (the
"Trading Partnership GP Interest") (together, the "Acquired Interests"); and the
Trading Partnership and the SF General Partner have agreed to sell the Acquired
Interests on the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase of Acquired Interests.
(a) Trading Partnership GP Interest. Prior to the Closing, as defined
below, Purchaser and KM General Partner shall form a new Delaware limited
partnership ("New LP"). At closing, New LP shall purchase the Trading
Partnership GP Interest from the SF General Partner in consideration of $90.2
million (less the amount of the Special Distribution, as defined below) in cash,
payable at the Closing by wire transfer of immediately available funds.
(b) Operating Partnership LP Interest. At the Closing, the Purchaser shall
purchase from the Trading Partnership the Common Unit Operating Partnership LP
Interest in consideration of a number of Common Units of Purchaser ("Purchaser
Common Units") such that, upon the liquidation of the Trading Partnership as
contemplated by Section 1.2 below, each holder of the 19,148,148 Common Units in
the Trading Partnership ("Trading Partnership
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Common Units") shall be distributed a right to receive 1.39 Purchaser Common
Units in respect of each Common Unit in the Trading Partnership ("Liquidation
Distribution"), and New LP shall establish the Exchange Fund as described in
Section 1.2(d). Upon acquisition of the Common Unit Operating Partnership LP
Interest, Purchaser shall contribute such interest to New LP.
1.2 Liquidation of Trading Partnership.
(a) Amendment of Trading Partnership Agreement. If necessary in, connection
with the proposed liquidation of the Trading Partnership set forth below, the
Amended and Restated Agreement of Limited Partnership of the Trading Partnership
("Trading Partnership Agreement") shall be amended in a manner reasonably
satisfactory to the KM General Partner and SF General Partner to (i) admit New
LP as the general partner of the Trading Partnership, (ii) provide that the
distribution upon liquidation of the Trading Partnership shall be made such that
the partners of the Trading Partnership receive the distributions set forth in
Section 1.2(b) below, and (iii) as required to implement the other transactions
contemplated by this Agreement.
(b) Liquidation. At the Closing, immediately following the completion of
the transactions described in Section 1.1, New LP (as general partner of the
Trading Partnership) shall cause the Trading Partnership to be liquidated, and
shall distribute, in accordance with the Trading Partnership Agreement, as
amended (i) to the holders of the Trading Partnership Common Units, the
Liquidation Distribution, and (ii) to New LP, the Trading Partnership's
remaining limited partnership interest in the Operating Partnership ("Remaining
Operating Partnership LP Interest") and any remaining assets of the Trading
Partnership. New LP shall cause the liquidation of the Trading Partnership and
the distribution of its assets to be effected in full compliance with all
applicable laws.
(c) Fractional Units. Notwithstanding any other provision of this Agreement
(i) no certificates or scrip representing fractional Purchaser Common Units
shall be issued upon the surrender for exchange of certificates representing
Trading Partnership Common Units, and such fractional unit interests will not
entitle the owner thereof to vote or to any rights as a limited partner of the
Purchaser, and (ii) each holder of Trading Partnership Common Units exchanged
pursuant to the liquidation of the Trading Partnership who would otherwise have
been entitled to receive a fractional Purchaser Common Unit (after taking into
account all Purchaser Common Units held by such holder at the Closing Date)
shall receive, in lieu thereof, from Purchaser in exchange for such fractional
unit upon delivery of the Certificates to the Exchange Agent (each as defined
below), an amount in cash ("Fractional Unit Payment") (payable in dollars,
without interest) equal to the product obtained by multiplying (A) the
fractional unit interest to which such holder (after taking into account all
Purchaser Common Units held by such holder at the Closing Date) would otherwise
be entitled by (B) the average of the high and low trading prices of Purchaser
Common Units on the New York Stock Exchange on the last trading day prior to the
Closing Date.
(d) Exchange Agent. Prior to the mailing of the Joint Proxy
Statement/Prospectus, as defined below, Purchaser shall cause New LP to appoint
First Chicago Trust Company of New York to act as exchange agent (the "Exchange
Agent") for the payment of the Liquidation
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Distribution and any Fractional Unit Payment. At or prior to the Closing Date,
Purchaser shall cause New LP to deposit with the Exchange Agent, for the benefit
of the holders of the Trading Partnership Common Units, the estimated aggregate
Fractional Unit Payment (the "Exchange Fund") and Purchaser will authorize the
Exchange Agent to issue Purchaser Common Units constituting the Liquidation
Distribution, for exchange in accordance with this Section 1.2. Purchaser shall
cause New LP to deposit with the Exchange Agent any additional funds in excess
of the Exchange Fund as and when necessary to pay any Fractional Unit Payment
required to be paid under this Agreement. Purchaser shall cause New LP to pay
all costs and fees of the Exchange Agent and for all expenses associated with
the Liquidation Distribution and the exchange process. Any Purchaser Common
Units, or fraction thereof, and any remaining amount of the Exchange Fund or
other funds deposited, after the earlier to occur of (i) payment in full of all
amounts due to the holders of the Certificates or to the Exchange Agent or (ii)
the expiration of the period specified in Section 1.2(h) below, shall be
returned to Purchaser or New LP, as applicable.
(e) Exchange Procedures. Promptly after the Closing Date, Purchaser shall
cause New LP to cause the Exchange Agent to mail to each record holder, as of
the Closing Date, of an outstanding certificate or certificates that immediately
prior to the Closing Date represented Trading Partnership Common Units (the
"Certificates"), a form of letter of transmittal (the "Letter of Transmittal")
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent and which shall be in such form and have such other
provisions as New LP and the SF General Partner may reasonably specify) and
instructions for use in effecting the surrender of the Certificate(s) and
payment therefor. Upon surrender to the Exchange Agent of such Certificates,
together with such properly completed and duly executed Letter of Transmittal,
the holder of a Certificate shall be entitled to a certificate or certificates
representing the number of full Purchaser Common Units into which the
Certificates surrendered shall have been converted pursuant to this Agreement
and the Fractional Unit Payment, if any, payable in redemption of any fractional
Purchaser Common Unit otherwise issuable. The instructions for effecting the
surrender of Certificates shall set forth procedures that must be taken by the
holder of any Certificate that has been lost, destroyed or stolen. It shall be a
condition to the right of such holder to receive a certificate representing
Purchaser Common Units and the Fractional Unit Payment, if any, that the
Exchange Agent shall have received, along with the Letter of Transmittal, a duly
executed lost certificate affidavit, including an agreement to indemnify
Purchaser and New LP, signed exactly as the name or names of the registered
holder or holders appeared on the books of the Trading Partnership immediately
prior to the Effective Time, together with a customary bond and such other
documents as Purchaser or New LP may reasonably require in connection therewith.
After the Closing Date, there shall be no further transfer on the records of the
Trading Partnership or its transfer agent of certificates representing Trading
Partnership Common Units and if such certificates are presented to the Trading
Partnership for transfer, they shall be canceled against delivery of the
certificate or certificates for Purchaser Common Units and Fractional Unit
Payment as hereinabove provided. If any certificate for such Purchaser Common
Units is to be issued to a person or entity other than the registered holder of
a Certificate surrendered for exchange, it shall be a condition of such exchange
that the Certificate so surrendered shall be properly endorsed, with signature
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guaranteed, or otherwise in proper form for transfer and that the person
requesting such exchange shall pay to New LP or the Exchange Agent any transfer
or other taxes required by reason of the issuance of certificates for such
Purchaser Common Units in a name other than that of the registered holder of the
Certificate(s) surrendered, or establish to the reasonable satisfaction of New
LP or the Exchange Agent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 1.2(e), each Certificate shall be
deemed at any time after the Closing Date to represent only the right to receive
upon such surrender the Liquidation Distribution and Fractional Unit Payment, if
any, as contemplated by Section 1.2. No interest will be paid or will accrue on
any Fractional Unit Payment.
(f) Distributions with Respect to Unexchanged Units. No dividends or other
distributions with respect to Purchaser Common Units with a record date after
the Closing Date shall be paid to the holder of any unsurrendered Certificate
with respect to the Purchaser Common Units issuable in respect thereof and no
Fractional Unit Payment shall be paid to any such holder until the surrender of
such Certificate in accordance with this Section 1.2. Subject to the effect of
applicable laws, there shall be paid to the holder of the Certificate, without
interest, (i) at the time of surrender of any such Certificate, the amount of
any Fractional Unit Payment to which such holder is entitled and the amount of
dividends or other distributions previously paid with respect to such whole
Purchaser Common Units with a record date after the Closing Date and (ii) at the
appropriate payment date, the amount of dividends or other distributions payable
with respect to such whole Purchaser Common Units with a record date after the
Closing Date and prior to such surrender and a payment date subsequent to such
surrender.
(g) No Further Ownership Rights in Trading Partnership Common Units. All
Purchaser Common Units issued upon the surrender for exchange of Certificates in
accordance with the terms of this Section 1.2 (including any Fractional Unit
Payment) shall be deemed to have been issued (and paid) in full satisfaction of
all rights pertaining to the Trading Partnership Common Units heretofore
represented by such Certificates, subject, however, to the Purchaser's
obligation, with respect to Trading Partnership Common Units outstanding
immediately prior to the Closing Date, to pay any dividends or make any other
distributions with a record date prior to the Closing Date which may have been
declared or made by the Trading Partnership on such Trading Partnership Common
Units in accordance with the terms of this Agreement on or prior to the Closing
Date and which remain unpaid at the Closing Date.
(h) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for twelve months after
the Closing Date shall be delivered to Purchaser, upon demand, and any holders
of Trading Partnership Common Units who have not theretofore complied with this
Section 1.2 shall thereafter look only to Purchaser and only as general
creditors thereof for payment of their claim for Purchaser Common Units, any
Fractional Unit Payment and any dividends or distributions with respect to
Purchaser Common Units to which such holders may be entitled.
(i) No Liability. None of Purchaser, New LP, the Trading Partnership or the
Exchange Agent shall be liable to any person in respect of any Purchaser Common
Units (or
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dividends or distributions with respect thereto) or Fractional Unit Payment
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates shall not have been surrendered
prior to such date on which any Purchaser Common Units, any Fractional Unit
Payment or any dividends or distributions with respect to Purchaser Common Units
in respect of such Certificate would escheat to or become the property of any
governmental entity or authority, any such shares, cash, dividends or
distributions in respect of such Certificates shall, to the extent permitted by
applicable law, become the property of New LP, free and clear of all claims or
interest of any person or entity previously entitled thereto other than the
holder of such Certificate as specified in Section 1.2(h).
1.3 Transactions Involving Operating Partnership.
(a) Amendment of Agreement. At the Closing Date, immediately following the
completion of the transactions described in Sections 1.1, 1.2(a) and 1.2(b),
Purchaser (through New LP) and the SF General Partner will cause the Agreement
of Limited Partnership of the Operating Partnership to be amended and restated
in such form as the KM General Partner and the SF General Partner shall
reasonably agree prior to the date of the Joint Proxy Statement/Prospectus (the
"Amended and Restated Operating Partnership Agreement") (i) to provide for a
98.9899% general partnership interest for which the prior limited partnership
interest owned by New LP pursuant to the operation of Sections 1.1 and 1.2 shall
be exchanged, (ii) to provide for a 1.0101% special limited partnership interest
for which the prior general partnership interest of the SF General Partner shall
be exchanged, and (iii) to provide that New LP, as general partner of the
Operating Partnership, and the KM General Partner, as general partner of New LP,
shall be subrogated to the rights of any holder of Indemnified Debt, as defined
below, to the extent that New LP, as general partner of the Operating
Partnership, and the KM General Partner, as general partner of New LP, have made
any payment in respect of such Indemnified Debt. Upon the execution of the
Amended and Restated Operating Partnership Agreement, New LP and the SF General
Partner shall exchange their prior interests in the Operating Partnership for
those interests described above. The special limited partnership interest to be
obtained by the SF General Partner shall be nontransferable (except to an
affiliate (as defined below) of the SF General Partner) other than as described
below and shall have no voting rights except with respect to mergers,
consolidations or dissolution and liquidation. As used herein, the term
"affiliate" shall have the meaning assigned to such term in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended. Any cash contributed to New LP
shall not be contributed, directly or indirectly, to the Operating Partnership.
(b) Special Distribution. Immediately following the transactions described
in Section 1.3(a), New LP shall cause the Operating Partnership to redeem that
portion of the SF General Partner's special limited partnership interest in the
Operating Partnership equal to a 0.5101% interest in the Operating Partnership,
in consideration of the amount of $5.8 million (which the parties agree
represents the fair market value of a 0.5101% interest in the Operating
Partnership) by wire transfer of immediately available funds (the "Special
Distribution"). Upon payment of the Special Distribution and the redemption of
such interest, the special limited partnership interest of the SF General
Partner in the Operating Partnership shall be reduced to 0.50% (the "Special
Limited Partnership Interest"), and the general partnership interest of New LP
in the
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Operating Partnership shall be increased to 99.50%. The Special Distribution
shall be paid solely from funds of the Operating Partnership, and shall not be
paid, directly or indirectly (including by way of post- payment reimbursement)
by Purchaser or its affiliates.
(c) Put Right. At any time on or after January 1, 1999, the SF General
Partner may require, upon 30 days prior written notice to the KM General Partner
and the Operating Partnership (the "Put Notice"), that the Operating Partnership
purchase all (but not less than all) of the Special Limited Partnership
Interest. The Operating Partnership may elect to have an affiliate make such
purchase. The purchase price shall consist of (i) cash in an amount equal to the
fair market value on the date of the Put Notice of a number of Purchaser Common
Units equal to $4.5 million divided by the average closing price of the
Purchaser Common Units on the New York Stock Exchange for the date of this
Agreement, the three trading days immediately prior to such date and the three
trading days immediately after such date; provided, that the Operating
Partnership may, in its sole discretion, elect to deliver such number of
Purchaser Common Units ("Put/Call Units") in lieu of making such cash payment.
The KM General Partner shall notify the SF General Partner within ten business
days of the Put Notice if the Operating Partnership or an affiliate thereof
chooses to deliver the Put/Call Units and if no such notification is made, the
Operating Partnership or an affiliate thereof shall be required to pay, and
Purchaser will cause the Operating Partnership or an affiliate thereof to pay,
the cash amount described in this Section 1.3(c). Any payment pursuant to this
paragraph shall be made by wire transfer of immediately available funds or by
delivery of fully paid and non-assessable Put/Call Units no later than 30 days
after the date of such Put Notice.
(d) Call Right. At any time New LP may require, upon 30 days prior written
notice to the SF General Partner (the "Call Notice"), that the SF General
Partner sell to the Operating Partnership or an affiliate thereof all (but not
less than all) of the Special Limited Partnership Interest in consideration of
(i) the payment of the cash price or issuance of the Put/Call Units as provided
in Section 1.3(c), and (ii) an additional amount in cash sufficient to result in
the SF General Partner receiving on an after-tax basis (using the rates and
methodology described in clause (B) below) under this clause (ii) an additional
amount in cash equal to (A) any incremental gain realized by the SF General
Partner resulting from a decrease in its share of partnership debt, multiplied
by (B) the maximum net marginal statutory federal and state income tax rates
applicable to the SF General Partner (taking into account the deductibility of
state income tax in determining the liability for federal income tax). Such
purchase shall be effected no later than 30 days after the date of the Call
Notice. New LP shall notify the SF General Partner in the Call Notice if the
Put/Call Units shall be delivered in lieu of the cash payment under clause (i)
hereof and if no such notification is made, the Operating Partnership or an
affiliate thereof shall be required to pay the cash amount described in clauses
(i) and (ii) in this Section 1.3(d).
(e) Registration. Purchaser and the KM General Partner shall cause all
Put/Call Units to be duly authorized and issued, and, as promptly as
practicable, but in no event more than 90 days after the issuance thereof, the
KM General Partner and Purchaser shall (i) cause the resale of the Put/Call
Units by the SF General Partner to be registered under the Securities Act of
1933, as amended ("Securities Act") and any applicable state securities laws and
cause the Put/Call Units to be approved for issuance on the New York Stock
Exchange, (ii) deliver to the
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SF General Partner an opinion of securities law counsel, which counsel shall be
reasonably satisfactory to the SF General Partner, to the effect that such
registration is not necessary to allow the SF General Partner to freely transfer
the Put/Call Units under applicable law or (iii) cause the Operating Partnership
or an affiliate thereof to pay the cash amount determined above in immediately
available funds in lieu of such Put/Call Units. The KM General Partner and
Purchaser shall cause such registration to remain effective until the earlier of
(i) such time as the SF General Partner shall have disposed of all of the
Put/Call Units held by it or (ii) twelve months after the effective date
thereof.
1.4 Certain Agreements with Respect to VREDs.
(a) Assignment of Common Units. At the Closing, the SF General Partner
shall place the Trading Partnership Common Units for which Holdings' Variable
Rate Exchangeable Debentures Due 2010 (the "VREDs") are exchangeable and the
right to receive any Purchaser Common Units distributed by the Trading
Partnership with respect thereto in escrow with a third-party escrow agent
agreed to by the parties hereto. Such units shall be released in accordance with
the terms of an escrow agreement (in form and substance reasonably acceptable to
Purchaser and the SF General Partner to be entered into prior to the date of the
Joint Proxy Statement/Prospectus) (the "Escrow Agreement") upon satisfaction and
discharge of the VREDs or as part of the satisfaction and discharge of the
VREDs. During the term of the Escrow Agreement, the SF General Partner shall be
the owner of the Purchaser Common Units for all purposes including without
limitation for tax and allocation purposes, and Holdings shall continue to be
the principal obligor on the VREDs.
(b) Negotiations with VREDs and Assumption of Obligations. Prior to the
Closing Date, the Purchaser shall use its reasonable best efforts to negotiate
agreements with the holders of the VREDs such that, at the Closing, all of the
VREDs will be satisfied and discharged (by the payment of cash, the delivery of
securities of Purchaser, exchange for Trading Partnership Common Units or
Purchaser Common Units, or otherwise) at no cost or expense to the SF General
Partner, Holdings or any of their affiliates except as otherwise provided in the
next sentence. From and after the Closing, New LP shall pay and perform, as and
when due and for the account of Holdings, all obligations of Holdings under or
with respect to the VREDs; provided, however, that any taxable gain related to
the satisfaction and discharge of the VREDs shall be for the account of the SF
General Partner or Holdings, as applicable. In addition, New LP shall have the
right to make all elections or decisions pursuant to the terms of the VREDs or
the indenture and the agreements related thereto. At Closing, Holdings shall
enter into a supplemental indenture with respect to the VREDs, in form and
substance satisfactory to New LP, to provide for the substitution of the
Purchaser Common Units for the Trading Partnership Common Units subject to the
VREDs that remain outstanding.
(c) Benefit of Negotiations. To the extent the Purchaser negotiates an
agreement with the holders of the VREDs that results in a reduction in any
amount that otherwise would have been payable to such holders, such benefit
shall be for the account of Purchaser and its affiliates and not for the SF
General Partner or its affiliates; provided, however, that no adjustment shall
be made to any consideration specifically to be paid to the SF General Partner
or the Trading
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Partnership pursuant to the terms of this Agreement except for any adjustment to
the number of Purchaser Common Units after those units have been placed in
escrow in accordance herewith due to any agreement between the Purchaser and the
holders of the VREDs.
ARTICLE II
CLOSING
2.1 Closing. Subject to the satisfaction of the conditions to closing set
forth in Article VI, the closing (the "Closing") of the acquisition of the
Acquired Interests and the transactions contemplated hereby shall be held at the
offices of Bracewell & Patterson, L.L.P. at 711 Louisiana, Suite 2900, Houston,
Texas 77002 on or before the third business day following the satisfaction of
all of the conditions set forth in Article VI commencing at 9:00 a.m., Houston,
Texas time, or such other place, date and time as may be mutually agreed upon by
the parties hereto. The "Closing Date," as referred to herein, shall mean the
date of the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SF PARTIES
The Trading Partnership, the SF General Partner and Holdings (the "SF
Parties") hereby represent and warrant, jointly and severally, to the Purchaser
and the KM General Partner (the "KM Parties") that as of the date hereof and as
of the Closing Date:
3.1 Organization and Existence. Each of the SF Parties and the Operating
Partnership is duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the SF Parties and the Operating
Partnership has full power and authority to own and hold the properties and
assets it now owns and holds and to carry on its businesses as and where such
properties are now owned or held and such business is now conducted. Each of the
SF Parties and the Operating Partnership are duly licensed or qualified to do
business as a foreign corporation or limited partnership, as applicable, and are
in good standing in each jurisdiction in which the character of the properties
and assets now owned or held by them or the nature of the business now conducted
by them requires them to be so licensed or qualified and where the failure so to
qualify might reasonably be expected to have a Material Adverse Effect, as
defined below. Schedule 3.1 contains a list of each jurisdiction in which the
Trading Partnership, the Operating Partnership or the SF General Partner are
duly licensed or qualified to do business as a foreign limited partnership or
corporation. Except as set forth on Schedule 3.1, the Trading Partnership and
the Operating Partnership have no direct or indirect investment or interest in
or control over any other corporation, partnership, joint venture or other
business entity.
3.2 Authority; Binding Effect. This Agreement has been duly authorized,
executed and delivered by each of the SF Parties, subject only to the receipt of
the unit holder approvals described in Section 6.1(b), and is the legal, valid
and binding obligation of each of the SF Parties, enforceable against each of
the SF Parties in accordance with its terms. The SF General Partner, through its
Board of Directors, has approved this Agreement and the transactions
contemplated hereby and determined that it will, subject to the fiduciary duties
of the SF General
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Partner, its Board of Directors and the Special Committee (as defined in Section
3.11) under applicable law, recommend to the unit holders of the Trading
Partnership approval of the matters listed in Section 5.4.
3.3 SEC Filings. Since January 1, 1993 (a) Holdings and the Trading
Partnership have each made all filings required to be made by the Securities Act
and the Securities Exchange Act of 1934, as amended ("Exchange Act"), (b) all
filings by Holdings and the Trading Partnership with the SEC, at the time filed
(in the case of documents filed pursuant to the Exchange Act) or when declared
effective by the SEC (in the case of registration statements filed under the
Securities Act) complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, (c) no such filing, at
the time described above, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein in order to
make the statements contained therein, in the light of the circumstances under
which they were made, not misleading, and (d) all financial statements contained
or incorporated by reference therein complied as to form when filed in all
material respects with the rules and regulations of the SEC with respect
thereto, were prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto), and fairly presented
the financial condition and results of operations of Holdings or the Trading
Partnership, as applicable, at and as of the respective dates thereof and the
consolidated results of its operations and changes in cash flows for the periods
indicated (subject in the case of unaudited statements, to normal year- end
audit adjustments).
3.4 Information Supplied. None of the information supplied or to be
supplied by any of the SF Parties in writing or otherwise approved in writing by
any of the SF Parties for inclusion in (a) the Registration Statement, as
defined below, will, at the time the Registration Statement becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (b) the Joint Proxy
Statement/Prospectus, as defined below, will not, at the date it is first mailed
to the Trading Partnership's and the Purchaser's unit holders or at the time of
the SF Unit Holders' Meeting or the KM Unit Holders' Meeting, both as defined
below, contain any statement which, in the light of the circumstances under
which such statement is made, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of any proxy for
the SF Unit Holders' Meeting or the KM Unit Holders' Meeting or any amendment or
supplement thereto. The Joint Proxy Statement/Prospectus will comply as to form
in all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder, except that no representation is made by
the SF Parties with respect to statements made or incorporated by reference
therein based on information supplied by any of the KM Parties for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus.
3.5 No Material Adverse Change. Since the date of the most recent filing
with the SEC of Holdings or the Trading Partnership, as applicable, there has
not occurred any event that
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(singly or together with any other such events) would reasonably be expected to
have a material adverse effect on the assets, properties, business, operations,
earnings or financial condition of such party or on the ability of such party to
effect the transactions contemplated hereby (a "Material Adverse Effect");
provided, however, that when used herein respecting any SF Party, a Material
Adverse Effect shall not include any matters arising out of the matters
currently pending before the Federal Energy Regulatory Commission or the
California Public Utilities Commission.
3.6 Ownership. The Trading Partnership is the owner of good and valid title
to the Common Unit Operating Partnership LP Interest and the Remaining Operating
Partnership LP Interest (which are the only limited partnership interests in the
Operating Partnership) and the SF General Partner is the owner of good and valid
title to the Trading Partnership GP Interest (which is the only general
partnership interest in the Trading Partnership), in each case, free and clear
of any material lien, claim or encumbrance other than encumbrances arising under
the Trading Partnership Agreement. There are 19,148,148 Trading Partnership
Common Units issued and outstanding, fully paid and nonassessable. The SF
General Partner's 1.0101% general partnership interest in the Operating
Partnership is the only general partnership interest in the Operating
Partnership. Other than the VREDs, there are no outstanding subscriptions,
options, convertible securities, warrants, calls or rights of any kind (issued
or granted by, or binding upon, the Trading Partnership or the Operating
Partnership) to purchase or otherwise acquire any security of or equity interest
in the Trading Partnership of the Operating Partnership.
3.7 No Conflict. Except for the required filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), any required approval by the California Public Utilities Commission,
other state utilities regulators, any required approvals or authorizations of
the Federal Communications Commission regarding the licensing of radio
frequencies, the adoption, if necessary, of the amendments to the Trading
Partnership Agreement contemplated by Section 1.2 (the "Trading Partnership
Agreement Amendment") any required filings with the SEC and the obtaining from
the SEC of such orders as may be required in connection therewith and assuming
receipt of the approvals described in Sections 6.1(a), (b), (c), (d), (e) and
(f) (the "Required Consents"), the execution and delivery of this Agreement do
not, and the fulfillment and compliance with the terms and conditions hereof and
the consummation of the transactions contemplated hereby will not (a) conflict
with any of, or require the consent of any person or entity under, the terms,
conditions or provisions of the charter documents or bylaws or equivalent
governing instruments of any of the SF Parties or the Operating Partnership, as
applicable, (b) violate any provision of, or require any consent, authorization
or approval under, any law or administrative regulation or any judicial,
administrative or arbitration order, award, judgment, writ, injunction or decree
applicable to any of the SF Parties or the Operating Partnership, (c) conflict
with, result in a breach of, constitute a default under (whether with notice or
the lapse of time or both) or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval
under, any indenture, mortgage, lien or any agreement, contract, commitment or
instrument (other than Section 6.06 of the indenture relating to the VREDs) to
which any of the SF Parties or the Operating Partnership, as applicable, is a
party or by which any of the SF Parties or the Operating Partnership is bound or
to which any asset of any of the SF Parties or the Operating Partnership
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is subject, or (d) result in the creation of any lien, charge or encumbrance on
the assets or properties of any of the SF Parties or the Operating Partnership
under any such indenture, mortgage, lien, agreement, contract or instrument
(other than the indenture relating to the VREDs).
3.8 No Default. Assuming receipt of the Required Consents and adoption of
the Trading Partnership Agreement Amendment, each of the SF Parties and the
Operating Partnership is not in default under, and no condition exists that with
notice or lapse of time or both would constitute a default under, (a) any
mortgage, loan agreement, indenture, evidence of indebtedness or other
instrument evidencing borrowed money to which it or any of its properties are
bound (other than Section 6.06 of the indenture relating to the VREDs), (b) any
judgment, order or injunction of any court, arbitrator or governmental agency,
or (c) any other agreement, except for such defaults and conditions that,
individually or in the aggregate, would not have a Material Adverse Effect on
any of the SF Parties or the Operating Partnership.
3.9 Financial Statements. Attached as Schedule 3.9 are copies of the
Trading Partnership's and the Operating Partnership's (i) unaudited consolidated
and consolidating balance sheet as at September 30, 1997 and the related
consolidated and consolidating statement of income, cash flows and unit holders'
equity for the interim periods then ended for the nine months ended September
30, 1997, and (ii) audited consolidated balance sheet as at December 31, 1996,
and the related audited consolidated statement of income, cash flows and unit
holders' equity for the fiscal year then ended (including in all cases the notes
thereto) (collectively, the "Financial Statements"). The Financial Statements
have been prepared in accordance with generally accepted accounting principles
consistently applied except as noted therein and except, in the case of
unaudited interim financial statements, for normal year-end adjustments and the
absence of footnotes, and fairly present the consolidated financial position of
the Trading Partnership and the Operating Partnership as of the respective dates
set forth therein and the results of operations and cash flows for the Trading
Partnership and the Operating Partnership for the respective fiscal periods set
forth therein.
3.10 Copies Complete. Copies of the charter documents, bylaws and other
governing documents, each as amended to date, and the copies of all leases,
contracts, instruments, agreements, licenses, permits, certificates or other
documents delivered to any of the KM Parties in connection with the transactions
contemplated by this Agreement are complete and accurate and are true and
correct copies of the originals thereof.
3.11 Recommendation of Special Committee. The Trading Partnership has
received the opinion of Smith Barney Inc., the financial advisor to the special
committee of the SF General Partner's Board of Directors ("Special Committee"),
that the Liquidation Distribution contemplated by this Agreement is fair to the
limited partners of the Trading Partnership from a financial point of view (the
"Smith Barney Opinion"). The Special Committee has recommended the transactions
contemplated by this Agreement, specifically the items listed in Section 5.4 to
be approved at the SF Unit Holders Meeting, for approval by the requisite vote
of the holders of the limited partnership interests of the Trading Partnership.
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3.12 Brokerage Arrangements. None of the SF Parties or the Operating
Partnership has entered (directly or indirectly) into any agreement with any
person, firm or corporation that would obligate any of the KM Parties to pay any
commission, brokerage or "finder's fee" in connection with the transactions
contemplated herein.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF THE KM PARTIES
The KM Parties hereby represent and warrant, jointly and severally, to the
SF Parties that as of the date hereof and as of the Closing Date:
4.1 Organization and Existence. Each of the KM Parties is duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each of the KM Parties has full power and authority to own and hold the
properties and assets it now owns and holds and to carry on its businesses as
and where such properties are now owned or held and such business is now
conducted. Each of the KM Parties are duly licensed or qualified to do business
as a foreign corporation or limited partnership, as applicable, and are in good
standing in each jurisdiction in which the character of the properties and
assets now owned or held by them or the nature of the business now conducted by
them requires them to be so licensed or qualified and where the failure so to
qualify might reasonably be expected to have a Material Adverse Effect.
4.2 Authority; Binding Effect. This Agreement has been duly authorized,
executed and delivered by each of the KM Parties, subject only to the receipt of
the unit holder approvals described in Section 6.1(a), and is the legal, valid
and binding obligation of each of the KM Parties, enforceable against each of
the KM Parties in accordance with its terms. The KM General Partner, through its
Board of Directors, has approved this Agreement and the transactions
contemplated hereby and determined that it will, subject to the fiduciary duties
of the KM General Partner and its Board of Directors under applicable law,
recommend to the unit holders of Purchaser approval of the matters listed in
Section 5.5.
4.3 SEC Filings. Since February 14, 1997 (a) Purchaser has made all filings
required to be made by the Securities Act and the Exchange Act, (b) all filings
by Purchaser with the SEC, at the time filed (in the case of documents filed
pursuant to the Exchange Act) or when declared effective by the SEC (in the case
of registration statements filed under the Securities Act) complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, (c) no such filing, at the time described above, contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein in order to make the statements contained therein,
in the light of the circumstances under which they were made, not misleading,
and (d) all financial statements contained or incorporated by reference therein
complied as to form when filed in all material respects with the rules and
regulations of the SEC with respect thereto, were prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto), and fairly presented the financial
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condition and results of operations of Purchaser at and as of the respective
dates thereof and the consolidated results of its operations and changes in cash
flows for the periods indicated (subject in the case of unaudited statements, to
normal year-end audit adjustments).
4.4 Financial Statements. Attached as Schedule 4.4 are copies of the
Purchaser's (i) unaudited consolidated and consolidating balance sheet as at
September 30, 1997 and the related consolidated and consolidating statement of
income, cash flows and unit holders' equity for the interim periods then ended
for the nine months ended September 30, 1997, and (ii) audited consolidated
balance sheet as at December 31, 1996, and the related audited consolidated
statement of income, cash flows and unitholders' equity for the fiscal year then
ended (including in all cases the notes thereto) (collectively, the "KM
Financial Statements"). The KM Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
except as noted therein and except, in the case of unaudited interim financial
statements, for normal year-end adjustments and the absence of footnotes, and
fairly present the consolidated financial position of the Purchaser as of the
respective dates set forth therein and the results of operations and cash flows
for the Purchaser for the respective fiscal periods set forth therein.
4.5 Information Supplied. None of the information supplied or to be
supplied by any of the KM Parties in writing or otherwise approved in writing by
any of the KM Parties for inclusion in (a) the Registration Statement will, at
the time the Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (b) the Joint Proxy Statement/Prospectus will not, at the
date it is first mailed to the Purchaser's and the Trading Partnership's unit
holders or at the time of the KM Unit Holders' Meeting or the SF Unit Holders'
Meeting, contain any statement which, in the light of the circumstances under
which such statement is made, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of any proxy for
the KM Unit Holders' Meeting or the SF Unit Holders' Meeting or any amendment or
supplement thereto. The Joint Proxy Statement/Prospectus will comply as to form
in all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder, except that no representation is made by
the KM Parties with respect to statements made or incorporated by reference
therein based on information supplied by any of the SF Parties for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus.
4.6 No Material Adverse Change. Since the date of the most recent filing
with the SEC of the Purchaser, there has not occurred any event that (singly or
together with any other such events) would reasonably be expected to have a
Material Adverse Effect on the Purchaser.
4.7 No Conflict. Except for the required filings under the HSR Act, any
required approval by the California Public Utilities Commission, other state
utilities regulators, any required approvals or authorizations of the Federal
Communications Commission regarding the licensing of radio frequencies, any
required filings with the SEC and the obtaining from the SEC
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of such orders as may be required in connection therewith, any required filings
with the New York Stock Exchange and assuming receipt of the Required Consents,
the execution and delivery of this Agreement do not, and the fulfillment and
compliance with the terms and conditions hereof and the consummation of the
transactions contemplated hereby will not (a) conflict with any of, or require
the consent of any person or entity under, the terms, conditions or provisions
of the charter documents or bylaws or equivalent governing instruments of any of
the KM Parties, as applicable, (b) violate any provision of, or require any
consent, authorization or approval under, any law or administrative regulation
or any judicial, administrative or arbitration order, award, judgment, writ,
injunction or decree applicable to any of the KM Parties, (c) conflict with,
result in a breach of, constitute a default under (whether with notice or the
lapse of time or both) or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval
under, any indenture, mortgage, lien or any agreement, contract, commitment or
instrument (other than Section 6.06 of the indenture relating to the VREDs) to
which any of the KM Parties, as applicable, is a party or by which any of the KM
Parties is bound or to which any asset of any of the KM Parties is subject, or
(d) result in the creation of any lien, charge or encumbrance on the assets or
properties of any of the KM Parties under any such indenture, mortgage, lien,
agreement, contract or instrument (other than the indenture relating to the
VREDs).
4.8 No Default. Assuming receipt of the Required Consents, each of the KM
Parties is not in default under, and no condition exists that with notice or
lapse of time or both would constitute a default under, (a) any mortgage, loan
agreement, indenture, evidence of indebtedness or other instrument evidencing
borrowed money to which it or any of its properties are bound (other than
Section 6.06 of the indenture relating to the VREDs), (b) any judgment, order or
injunction of any court, arbitrator or governmental agency, or (c) any other
agreement, except for such defaults and conditions that, individually or in the
aggregate, would not have a Material Adverse Effect on any of the KM Parties.
4.9 Copies Complete. Copies of the charter documents, bylaws and other
governing documents, each as amended to date, and the copies of all leases,
contracts, instruments, agreements, licenses, permits, certificates or other
documents delivered to any of the SF Parties in connection with the transactions
contemplated by this Agreement are complete and accurate and are true and
correct copies of the originals thereof.
4.10 Brokerage Arrangements. None of the KM Parties has entered (directly
or indirectly) into any agreement with any person, firm or corporation that
would obligate any of the SF Parties to pay any commission, brokerage or
"finder's fee" in connection with the transactions contemplated herein.
4.11 Opinion of Financial Advisor. The Board of Directors of the KM General
Partner has received the opinion of Goldman, Sachs & Co. to the effect that the
aggregate consideration to be paid by Purchaser pursuant to this Agreement is
fair from financial point of view to the Purchaser (the "Goldman Opinion").
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4.12 Purchaser Common Units. The Purchaser Common Units to be issued in the
Liquidation Distribution, when issued in accordance with the Letter of
Transmittal, will be fully paid, non-assessable and freely transferable (except
with respect to persons deemed to be underwriters pursuant to Rule 145(c) under
the Securities Act) Purchaser Common Units which are listed on the New York
Stock Exchange.
ARTICLE V
ADDITIONAL AGREEMENTS,
COVENANTS, RIGHTS AND OBLIGATIONS
5.1 Access to Information. From the date of this Agreement to the Closing,
each of the Purchaser, the KM General Partner, Holdings, the SF General Partner
and the Trading Partnership shall provide, the Purchaser shall cause each of its
subsidiaries to provide, and the SF General Partner shall cause the Operating
Partnership to provide to each of the parties hereto reasonable access to all of
its books, records, assets, properties and employees, and shall furnish or cause
to be furnished, as applicable, to each of the parties hereto such information
as any such party may reasonably request, unless any such access and disclosure
would violate the terms of any agreement to which any such party is bound or any
applicable law or regulation. Each of the above-named parties will use its
reasonable business efforts to secure all requisite consents for the examination
by the other parties and their representatives of all information covered by
confidentiality agreements. Each of the above-named parties will allow the other
parties access to and consultation with the lawyers, accountants, and other
professionals employed by or used by such parties for all purposes under this
Agreement. Any such consultation shall occur under circumstances appropriate to
maintain intact the attorney-client privilege as to privileged communications
and attorney work product. Until the Closing Date, the confidentiality of any
data or information so acquired shall be maintained by each of the above-named
parties and their representatives pursuant to the terms of those certain
Confidentiality Agreements executed by the parties on or about June 27, 1997,
July 1, 1997 and September 16, 1997 (the "Confidentiality Agreements"), which
each of the above-named parties hereby acknowledges is binding on it.
5.2 Conduct of Business.
(a) Ordinary Course. From the date of this Agreement to the Closing, each
of the Purchaser, the KM General Partner, the SF General Partner and the Trading
Partnership shall continue, the Purchaser and Holdings shall each cause each of
their respective subsidiaries to continue and the SF General Partners shall
cause the Operating Partnership to continue to maintain its respective assets
and properties and operate its respective business in the ordinary course as was
being conducted prior to such execution of this Agreement.
(b) Restrictions on Trading Partnership and Operating Partnership. Without
first obtaining the written consent of the Purchaser, which consent shall not be
unreasonably withheld or delayed, from the date hereof until the Closing, except
as otherwise contemplated by this Agreement, the Trading Partnership will not
(and SF General Partner covenants that it will not cause either the Trading
Partnership or the Operating Partnership to):
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(i) make any material change in the conduct of its business and
operations or its financial reporting and accounting methods;
(ii) except as set forth on Schedule 5.2(b)(ii) other than in the
ordinary course of business, enter into any material contract or agreement
or terminate or amend in any material respect any material contract or
agreement to which it is a party, or be in default in any material respect
thereunder;
(iii) except dividends or distributions from the Operating Partnership
to its partners consistent, in amount and timing, with past practice,
declare, set aside or pay any dividends or make any distributions in
respect of its equity securities, or split, combine or reclassify any of
its equity securities or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for any of its
equity securities, or purchase, redeem or otherwise acquire, directly or
indirectly, any such securities, other than the payment of cash
distributions to the partners in the Trading Partnership consistent, in
amount and timing, with past practice;
(iv) merge into or with or consolidate with any other corporation or
other entity or acquire all or substantially all of the business or assets
of any corporation, person or other entity;
(v) make any change in its agreement of limited partnership;
(vi) except in accordance with Schedule 5.2(b)(vi) or Schedule
5.2(b)(viii), (A) make any purchase of any securities of any corporation,
person or entity, or (B) make any investment in any corporation,
partnership, joint venture or other business enterprise;
(vii) except as set forth on Schedule 5.2(b)(ii), incur or increase any
material amount of indebtedness for borrowed money or guarantee any such
indebtedness or issue, sell or guarantee any debt securities, other than in
the ordinary course of business consistent with past practice (provided,
that the Operating Partnership may refinance the principal of any of the of
the First Mortgage Notes of the Operating Partnership ("First Mortgage
Notes") at the maturity thereof, substantially in accordance with past
practice);
(viii) except as set forth on Schedule 5.2(b)(viii), sell, lease or
otherwise dispose of any material portion of its assets other than in the
ordinary course of business consistent with past practice;
(ix) other than in connection with the exercise of any conversion right
respecting the VREDs and other than in connection with the Trading
Partnership's Cash Distribution Reinvestment Plan, issue, deliver or sell
or authorize or propose the issuance, delivery or sale of, any of its
equity securities or securities convertible into its equity securities, or
subscriptions, rights, warrants or options to acquire or other agreements
or commitments of any character obligating it to issue any such securities;
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(x) settle or implement (other than ministerial actions) any settlement
in excess of $1.0 million (individually or in the aggregate) of any claim,
demand, lawsuit or state or federal regulatory proceeding (including any
such related to, directly or indirectly, any rates to be charged for
service) unless prior to such settlement Purchaser shall have been given a
reasonable opportunity to consult with the SF General Partner, including
but not limited to the ability to make a presentation to the Board of
Directors of the SF General Partner if requested, regarding such
settlement;
(xi) except as set forth on Schedule 5.2(b)(viii), Schedule 5.2(b)(xi),
or as required on an emergency basis, purchase, lease or otherwise acquire
any property of any kind whatsoever other than in the ordinary course of
business or make any capital expenditure in excess of $1.0 million;
(xii) allow or permit the expiration, termination or cancellation at
any time of any material insurance policy applicable to its business or
operations, unless such policy is replaced, with no loss of coverage, by a
comparable insurance policy (to the extent available on commercially
reasonable terms) except any insurance policy which is terminated or
canceled in connection with the Sparks, Nevada environmental matters,
provided that the SF General Partner shall notify the KM General Partner if
any such insurance coverage will not be replaced;
(xiii) implement or adopt any material change in its tax methods,
principles or elections; or
(xiv) commit to do any of the foregoing.
(c) General Business. From the date hereof until the Closing, the Trading
Partnership covenants that it will (and the SF General Partner covenants that it
will cause both the Trading Partnership and the Operating Partnership to) and
the Purchaser covenants that it and each of its subsidiaries will (and the KM
General Partner covenants that it will cause the Purchaser and each of its
subsidiaries to):
(i) maintain its assets and properties in good working order and condition
as of the date hereof, ordinary wear and tear and casualty excepted;
(ii) use its reasonable business efforts to maintain and preserve in all
material respects its business organization intact and maintain in all material
respects its relationship with suppliers, customers, lessors and others having
business relations with it;
(iii) file on a timely basis all notices, reports or other filings required
to be filed with or reported to any federal, state, municipal or other
governmental department, commission, board, bureau, agency or any
instrumentality of any of the foregoing wherever located; and
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(iv) file on a timely basis all applications or other documents necessary
to maintain, renew or extend any material permit, license, variance or any other
approval required by any governmental authority necessary or required for the
continuing operation of its business, whether or not such approval would expire
before or after the Closing Date.
(d) Employees of SF General Partner. From the date hereof until the
Closing, the SF General Partner covenants that (i) it will use its reasonable
business efforts to retain its employees related to the operation of the Trading
Partnership and the Operating Partnership, (ii) it will not hire any employee
except in the ordinary course of business consistent with past practice or as
set forth on Schedule 5.2(d) and (iii) it will not hire any management personnel
with salary grade 14 or above without first giving the KM General Partner a
reasonable opportunity to consult with the SF General Partner regarding such
prospective hire.
(e) Restrictions on Purchaser. Without first obtaining the written consent
of the SF General Partner, which consent shall not be unreasonably withheld or
delayed, from the date hereof until the Closing, except as otherwise
contemplated by this Agreement, the Purchaser will not (and the KM General
Partner covenants that it will not cause the Purchaser to):
(i) make any material change in the conduct of its business and operations
or its financial reporting and accounting methods;
(ii) other than in the ordinary course of business, enter into any material
contract or agreement or terminate or amend in any material respect any material
contract or agreement to which it is a party, or be in default in any material
respect thereunder;
(iii) declare, set aside or pay any dividends or make any distributions in
respect of its equity securities, or split, combine or reclassify any of its
equity securities or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for any of its equity securities, or
purchase, redeem or otherwise acquire, directly or indirectly, any such
securities, other than the payment of cash distributions consistent, in amount
and timing, with past practice;
(iv) merge into or with or consolidate with any other corporation or other
entity, acquire all or substantially all of the business or assets of any
corporation, person or other entity or form, acquire any interest in or
contribute any assets to any partnership or joint venture or enter into any
similar arrangement;
(v) make any change in its agreement of limited
partnership;
(vi) issue any partnership interests or securities convertible or
exercisable into such interests other than an issuance of such interests or
securities at or in excess of the fair market value thereof;
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(vii) allow or permit the expiration, termination or cancellation at any
time of any material insurance policy applicable to its business or operations,
unless such policy is replaced, with no loss of coverage, by a comparable
insurance policy (to the extent available on commercially reasonable terms);
(viii) implement or adopt any material change in its tax methods,
principles or elections; or
(ix) commit to do any of the foregoing.
5.3 Certain Filings. As promptly as practicable following the execution of
this Agreement (a) the parties shall prepare and file with the Federal Trade
Commission and the Department of Justice the appropriate filings and any
supplemental information which may be reasonably requested in connection
therewith under the HSR Act, it being agreed that Purchaser is the primary
"Acquiring Person" for purposes of the HSR Act and shall pay the required filing
fee, (b) the parties shall prepare and file with the Securities and Exchange
Commission (the "SEC") a joint proxy statement/prospectus to be distributed to
the unit holders of Purchaser and the Trading Partnership in connection with the
SF Unit Holders' Meeting and the KM Unit Holders' Meeting (the "Joint Proxy
Statement/Prospectus") and to be part of the Registration Statement described
below, (c) Purchaser shall prepare and file with the SEC a registration
statement on Form S-4 (the "Registration Statement") with respect to the
issuance of the Purchaser Common Units to the Trading Partnership and the
distribution by the Trading Partnership of such Purchaser Common Units to its
partners, (d) Purchaser shall cause the Purchaser Common Units to be issued in
the Liquidation Distribution to be listed on the New York Stock Exchange, and
(e) the parties hereto shall make all required filings under applicable state
securities and blue sky laws, and under all federal and state laws relating to
the pipelines operated by Purchaser and the Operating Partnership (including,
without limitation, an application for approval by the California Public
Utilities Commission). Each party hereto shall use its reasonable best efforts
(other than qualifying to do business in any jurisdiction in which it is not now
so qualified) to cause each filing made by it with any governmental body to
become effective as promptly as possible. The Trading Partnership and Purchaser
each agree to correct any information provided by it for use in the Registration
Statement which shall have become false or misleading.
5.4 SF Unit Holders' Meeting. The Trading Partnership will take all action
necessary in accordance with and subject to applicable law and the Agreement of
Limited Partnership of the Trading Partnership to convene a meeting of the
holders of Trading Partnership Common Units (the "SF Unit Holders' Meeting") as
soon as practicable after the date of this Agreement to consider and vote upon
(a) the adoption and approval of this Agreement, (b) the sale of substantially
all of the assets of the Trading Partnership pursuant to this Agreement and (c)
the dissolution of the Trading Partnership immediately upon the Closing Date
pursuant to the terms of this Agreement and (d) if necessary, adoption of the
Trading Partnership Agreement Amendment. Subject to the fiduciary duties of the
Board of Directors of the SF General Partner and the Special Committee under
applicable law, the recommendation of the Board of Directors of the SF General
Partner that holders of Trading Partnership Common Units approve the items
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listed in this Section 5.4, together with a copy of the opinion referred to in
Section 3.11, shall be included in the Joint Proxy Statement/Prospectus.
5.5 KM Unit Holders' Meeting. Purchaser will take all action necessary in
accordance with and subject to applicable law and the Agreement of Limited
Partnership of Purchaser to convene a meeting of the holders of Purchaser Common
Units (the "KM Unit Holders' Meeting") as soon as practicable after the date of
this Agreement to consider and vote upon the issuance of the Purchaser Common
Units pursuant to this Agreement. Subject to the fiduciary duties of the Board
of Directors of the KM General Partner under applicable law, the recommendation
of the Board of Directors of the KM General Partner that holders of Purchaser
Common Units approve the items listed in this Section 5.5 shall be included in
the Joint Proxy Statement/Prospectus.
5.6 Affiliates. Prior to the Closing Date, the Trading Partnership shall
deliver to Purchaser a letter identifying all persons or entities who are, on
the record date established for the SF Unit Holders' Meeting, "affiliates" of
the Trading Partnership for purposes of Rule 145 under the Securities Act. The
Trading Partnership shall use its reasonable best efforts to cause each such
person or entity to deliver to Purchaser on or prior to the Closing Date a
written agreement substantially in the form attached as Exhibit 5.6 hereto.
5.7 First Mortgage Notes; Credit Agreement. Commencing upon the execution
of this Agreement, the Purchaser shall use its reasonable best efforts to obtain
any required consents to the transactions contemplated by this Agreement of, and
any actions required by, the requisite percentage of the holders of the First
Mortgage Notes and the requisite banks under the Operating Partnership's Amended
and Restated Credit Agreement dated as of August 11, 1997 ("Credit Agreement")
and Purchaser's subsidiaries' bank credit agreements. The other parties hereto
shall cooperate with the Purchaser as the Purchaser may reasonably request;
provided, that all costs and expenses of obtaining such consents shall be borne
solely by the Purchaser, regardless of whether the transactions contemplated by
this Agreement are consummated.
5.8 Other Consents. Commencing upon the execution of this Agreement, (a)
Purchaser and the SF General Partner shall seek to obtain any consents necessary
to transfer title to, and thereafter shall use their respective reasonable best
efforts to transfer title to, any assets used primarily in the business of the
Operating Partnership from the SF General Partner to the Operating Partnership,
(b) if such consents are not obtained, the SF General Partner shall use its
reasonable best efforts to take such other action as may be necessary to provide
Purchaser with rights to such assets substantially equivalent to those held by
the SF General Partner and (c) Purchaser and the SF General Partner shall seek
to obtain the discharge of the SF General Partner from any liabilities or
obligations arising out of or related to the Operating Partnership; provided,
that all costs and expenses of obtaining such consents shall be borne solely by
the Purchaser, if the transactions contemplated by this Agreement are
consummated.
5.9 No Solicitation. Subject to Section 5.10 below, the SF General Partner
(on behalf of itself, the Trading Partnership and the Operating Partnership) and
the Trading Partnership agree that upon execution of this Agreement, they shall
terminate all discussions and negotiations
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with others regarding a sale or other transaction involving (a) the Acquired
Interests, (b) the assets, business or securities of the Trading Partnership or
the Operating Partnership, or (c) any other transaction similar to the
transactions contemplated by this Agreement (collectively, the "Possible
Alternatives"), and thereafter will not, directly or indirectly, nor shall they
authorize or permit any of their officers, directors or employees, or any
investment banker, financial advisor, attorney, accountant or other
representative retained by them, so long as this Agreement remains in effect,
(i) to solicit, initiate, encourage (including by way of furnishing information
or assistance), conduct discussions with or engage in negotiations with or take
any other action to facilitate, any inquiries, or the making of any proposal
which constitutes or may reasonably be expected to lead to a Possible
Alternative, (ii) to enter into an agreement with any person or entity, other
than Purchaser or its affiliates, providing for a Possible Alternative, (iii) to
make or authorize any statement, recommendation or solicitation in support of
any Possible Alternative by any person or entity, other than by Purchaser or its
affiliates, or (iv) subject to the fiduciary duties of the SF General Partner,
its Board of Directors and the Special Committee under applicable law, to
withdraw or qualify the recommendation of the transactions contemplated by this
Agreement by the Board of Directors of the SF General Partner.
5.10 Permitted Actions. Notwithstanding, the provisions of Section 5.9
above, the SF General Partner, the Trading Partnership and the Operating
Partnership shall be entitled to take any action otherwise prohibited by Section
5.9 in response to any third party inquiry, contact or proposal received by them
if (a) the initial inquiry, contact or proposal from any third party was not
received in violation of Section 5.9 above, (b) the Special Committee shall have
determined, in its good faith judgment, that any such otherwise prohibited
action may lead to the negotiation and consummation of a Possible Alternative
that in the opinion of the Special Committee may be more beneficial than the
transactions contemplated by this Agreement, taken as a whole, to the holders of
limited partnership interests in the Trading Partnership other than the SF
General Partner and its affiliates (a "Superior Transaction") and (c) the
Special Committee shall have determined, after consultation with and based on
the advice of its legal counsel, that the failure to take such action would be
inconsistent with the SF General Partner's or its Board of Directors' fiduciary
duties to holders of Trading Partnership Common Units under applicable law;
provided, that none of the SF General Partner, the Trading Partnership or the
Operating Partnership may execute a binding agreement to effect a Superior
Transaction unless this Agreement has first been terminated as provided in
Section 8.1. The SF General Partner, the Trading Partnership and the Operating
Partnership agree that each of them will notify Purchaser immediately if any
inquiry, contact or proposal is received by, any such information is requested
from, or any such discussions or negotiations are sought to be initiated or
continued with, any of its representatives, and thereafter shall keep Purchaser
informed, on a current basis, on the status of any such inquiry, contact or
proposal and the status of any such negotiations or discussions.
5.11 Indemnified Debt. Following the Closing and until the termination of
the Debt Indemnity pursuant to Section 9.3, the Operating Partnership shall not
(a) prepay, defease, purchase or otherwise retire any of the Indemnified Debt
(unless such Indemnified Debt is simultaneously replaced with an equivalent
amount of new Indemnified Debt providing for no greater amortization), (b)
modify any of the Indemnified Debt so as to eliminate or limit the
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recourse liability of the Operating Partnership or the general partner of the
Operating Partnership with respect thereto, (c) merge or consolidate with or
otherwise become a corporation for federal income tax purposes or limited
liability company, (d) cause or permit any other person or entity (other than
the Operating Partnership, the KM General Partner and New LP) to assume,
guarantee, indemnify against or otherwise incur any liability with respect to
any Indemnified Debt, or (e) take or fail to take any other action (other than
the payment of the Indemnified Debt as originally scheduled) that would result
in the share of the Indemnified Debt which is allocated to the SF General
Partner for purposes of Section 752 of the Internal Revenue Code of 1986 and
Treasury Regulations promulgated thereunder (the "Code") pursuant to the Debt
Indemnity to be reduced below $190 million; provided, however, that the
Operating Partnership shall not be required to do any of the foregoing with
respect to an amount in excess of $190 million and such covenants shall not
apply to any indebtedness of Purchaser or any of its other affiliates. Following
the Closing and until the termination of the Debt Indemnity pursuant to Section
9.3, the Purchaser shall cause the Operating Partnership or its successor to
continue in existence and to remain subject to at least $190 million of
Indemnified Debt. In addition, the Operating Partnership shall use its
reasonable best efforts to refinance scheduled principal payments on the
Indemnified Debt with sufficient recourse debt so that at all times until the
termination of the Debt Indemnity pursuant to Section 9.3 hereof, the amount of
Indemnified Debt which is allocable to the SF General Partner for purposes of
Section 752 of the Code shall not be less than $190 million. Following the
Closing and until the termination of the Debt Indemnity pursuant to Section 9.3
(i) the Operating Partnership shall use its reasonable best efforts to not take
or omit to take any action, if such action or omission (with the giving of
notice or the passing of time, or both) would constitute a breach of, or give
rise to a default or event of default under, any Indemnified Debt, and (ii) the
SF General Partner shall have the right, but not the obligation, to arrange for
the refinancing described above if and only if the Operating Partnership is
unable to do so in accordance with this paragraph. From and after the Closing
and until the termination of the Debt Indemnity pursuant to Section 9.3, the
Operating Partnership shall furnish to the SF General Partner, (A) within 30
days after the end of each fiscal quarter, a certificate of the chief financial
officer of Purchaser, stating that (1) at least $190 million of Indemnified Debt
is outstanding, and (2) no event that constitutes, or with the passing of time
or the giving of notice, or both, would reasonably be expected to constitute, an
event of default under any Indemnified Debt has occurred, or if any such event
has occurred, describing such event and the action the Purchaser intends to take
with respect thereto, (B) concurrently with providing them to the lenders,
agents or trustees in respect of the Indemnified Debt, copies of any compliance
certificates, together with any attachments thereto, required pursuant to any
Indemnified Debt, (C) promptly upon obtaining knowledge thereof, a description,
in reasonable detail, of any event that constitutes, or with the passing of time
or the giving of notice, or both, would reasonably be expected to constitute, an
event of default under the Indemnified Debt and (D) such other documents or
information as the SF General Partner may reasonably request relating
specifically and primarily to the Indemnified Debt or the Debt Indemnity. The
Operating Partnership shall prepare and file applicable tax returns consistent
with the allocation of the Indemnified Debt to the SF General Partner.
5.12 Transfer. The SF General Partner and the KM General Partner shall
cooperate in (a) causing the Operating Partnership to take all actions necessary
to comply with applicable
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requirements of environmental laws concerning the transfer of property, assets,
stock or a business, including without limitation the filing with appropriate
permitting agencies of all notices required in reference to the change in
ownership for the purpose of effecting the transfer or issuance of the permits
required under environmental laws for the operation and the conduct of the
business of the Operating Partnership ("Environmental Permits"), (b)
effectuating the issuance or transfer, as promptly as is reasonably possible on
or after the Closing Date, of all Environmental Permits and any other licenses
or permits ("Other Permits") required as of the Closing Date, and (c)
identifying, preparing and filing any notices or reports required from the KM
General Partner in connection with the transfer or issuance of the required
Environmental Permits and Other Permits. For the interim period from the Closing
Date until such time as the required Environmental Permits and the Other Permits
in form and substance reasonably satisfactory to the KM General Partner shall be
transferred to or issued, and to the extent permitted by law, the SF General
Partner, on behalf of the Operating Partnership, authorizes the Operating
Partnership after acquisition by the KM Parties to operate under and utilize the
Operating Partnership's existing Environmental Permits and Other Permits.
5.13 Further Action; Reasonable Best Efforts. From the date hereof through
the Closing Date, upon the terms and subject to the conditions hereof, each of
the parties hereto shall use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including but not limited to (i) cooperating in the preparation and filing of
the Joint Proxy Statement/Prospectus and Registration Statement, and any
amendments to any thereof, (ii) using its reasonable best efforts to obtain all
Required Consents and (iii) using its reasonable best efforts to make all
required regulatory filings and applications and to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental entities or authorities and parties to contracts as are necessary
for the consummation of the transaction contemplated by this Agreement and to
fulfill the conditions to the consummation of this Agreement; provided that the
KM General Partner shall be primarily responsible for obtaining or transferring
all required licenses, permits and authorizations, and the SF General Partner
shall cooperate in such process as reasonably requested by the KM General
Partner. To the extent practicable in the circumstances and subject to
applicable laws, each party shall provide the other with the opportunity to
review all information relating to the other party, or any of its subsidiaries,
which appears in any filing made with, or written materials submitted to, any
governmental entity or authority in connection with obtaining the necessary
regulatory approvals for the consummation of the transactions contemplated by
this Agreement. In case at any time after the Closing Date any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each part to this Agreement shall use their reasonable
best efforts to take all such necessary action.
5.14 Notification of Certain Matters. The Trading Partnership shall give
prompt notice to Purchaser, and Purchaser shall give prompt notice to the
Trading Partnership, of (i) the occurrence or non-occurrence of any event which
would likely cause any representation or warranty contained in this Agreement to
be untrue or inaccurate in any material respect, and (ii) any failure of the SF
Parties, on one hand, and the KM Parties, on the other, to comply with
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or satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant this Section 5.14 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
5.15 Certain Indebtedness. Except as otherwise contemplated herein
(including, without limitation, Section 5.19), at or prior to the Closing, the
SF General Partner shall cause the Trading Partnership and the Operating
Partnership to fully repay or capitalize any indebtedness owed by the Trading
Partnership and the Operating Partnership to any of the other SF Parties or
their affiliates, and all other intercompany accounts between the Operating
Partnership and the Trading Partnership on the one hand and the other SF Parties
on the other hand, shall be eliminated by contribution to capital, dividend or
payment.
5.16 Financial Statements. At least three days prior to Closing, the SF
General Partner shall deliver to the KM General Partner the Trading
Partnership's and the Operating Partnership's unaudited consolidated and
consolidating balance sheet as at the end of the month immediately prior to
Closing or if impracticable, the next prior month ("Closing Balance Sheet Date")
and the related consolidated statement of income, cash flows and unit holders'
equity for the period ended as of the Closing Balance Sheet Date, each pro forma
for the adjustments and eliminations specified in Section 5.15 (collectively,
the "Closing Financial Statements"). The Closing Financial Statements shall have
been prepared in accordance with generally accepted accounting principles
consistently applied except as noted therein and except, in the case of
unaudited interim financial statements, for normal year-end adjustments, and
fairly present the consolidated financial position of the Trading Partnership
and the Operating Partnership as of the respective dates set forth therein and
the results of operations and cash flows for the Trading Partnership and the
Operating Partnership for the respective fiscal periods set forth therein.
5.17 Merger of New LP. From the Closing Date until the second anniversary
thereof, Purchaser shall not merge the Operating Partnership with New LP.
5.18 No Public Announcement. Immediately upon the execution of this
Agreement, the parties hereto shall issue a press release with respect to the
execution hereof and the transactions contemplated hereby which press release
shall be reasonably satisfactory to the KM General Partner and the SF General
Partner. No party hereto shall issue any other press release or make any other
public announcement concerning this Agreement or the transactions contemplated
hereby without the prior approval of the SF General Partner or the KM General
Partner, as applicable (other than as may be required by law or by obligations
pursuant to any listing agreement with the New York Stock Exchange, in which
event the party making the public announcement or press release shall notify the
SF General Partner or the KM General Partner, as applicable, in advance of such
public announcement or press release), which approval shall not be unreasonably
withheld or delayed except that the KM General Partner and the SF General
Partner may respond to telephone inquiries, conduct conversations and otherwise
communicate with securities analysts and may respond to inquiries from the news
media.
5.19 Expenses.
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(a) If the Closing occurs,
(i) the SF General Partner will be reimbursed by the Operating Partnership
for the fees and expenses of the Special Committee's financial advisors and
counsel, all SEC, HSR, California Public Utilities Commission, Federal
Communications Commission and other filing fees and expenses related to the
transactions contemplated by this Agreement, all fees and expenses associated
with the SF Unit Holders' Meeting (including, without limitation, the
preparation, printing and mailing of the Joint Proxy Statement/Prospectus and
the solicitation of proxies for use at the SF Unit Holders' Meeting), in each
case, to the extent incurred by the SF General Partner; provided, however, that
the SF General Partner will not be reimbursed by the Operating Partnership or
the Trading Partnership for any fees and expenses in connection with this
Agreement and the transactions contemplated hereby of the SF General Partner's
financial advisor, JP Morgan Securities, its counsel, Mayer, Brown & Platt, its
independent accountants, Price Waterhouse LLP, or any Losses for which it is
obligated to provide an indemnity pursuant to Section 9.2;
(ii) from time to time after the Closing Date, promptly upon request,
Purchaser will (and will cause the Operating Partnership to) reimburse the SF
General Partner for all amounts for which the Trading Partnership would have had
a reimbursement obligation under Section 6.4(b) of the Trading Partnership
Agreement (including without limitation post-retirement life insurance and
medical insurance employment benefits for former employees), except where such
reimbursement would be inconsistent with (i) above and except that no such
reimbursement shall be required with respect to the General Partner's or its
affiliates' accounting, investor communications, utilities, telephone,
secretarial, travel, entertainment, bookkeeping, reporting, data processing,
office rent and other office expenses (including overhead charges), salaries,
fees and other compensation and benefit expenses of employees, officers and
directors, other administrative or overhead expenses and any related legal
expenses (other than post- retirement life insurance and medical insurance
employment benefits) after the second anniversary of the Closing Date; and
(iii) other than as set forth in Section 9.8, none of the KM Parties, New
LP, the Trading Partnership, the Operating Partnership or their respective
successors or assigns shall seek or otherwise be entitled to any recovery,
indemnification or other benefit under any insurance policy owned or maintained
by any direct or indirect parent corporation of Holdings.
(b) If the Closing does not occur, the KM Parties and the SF Parties,
respectively, shall bear their own fees and expenses except as otherwise
contemplated by Section 8.2(b).
5.20 NYSE Listing. Purchaser shall cause the Purchaser Common Units to be
issued in the Liquidation Distribution to be approved for listing on the New
York Stock Exchange on or prior to the Closing.
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5.21. Consistent Tax Reporting. For federal income tax purposes, Purchaser
shall report the transactions contemplated by this Agreement in a manner
consistent with the descriptions of tax opinions set forth in Sections 6.3(d)(i)
and (to the extent relevant) 6.3(d)(ii).
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to Each Party's Obligations. The obligation of the parties
hereto to proceed with the Closing contemplated hereby is subject to the
satisfaction on or prior to the Closing Date of all of the following conditions,
any one or more of which may be waived in writing, in whole or in part, by such
parties:
(a) Purchaser's Unit Holders. Each of the items described in Section 5.5
to be submitted to the unit holders of Purchaser at the KM Unit Holders' Meeting
shall have been approved by a vote of the holders of a majority of the issued
and outstanding Purchaser Common Units.
(b) Trading Partnership's Unit Holders. Each of the items described in
Section 5.4 to be submitted to the unit holders of the Trading Partnership at
the SF Unit Holders' Meeting shall have been approved by the requisite vote of
the holders of the issued and outstanding Trading Partnership Common Units.
(c) First Mortgage Notes; Credit Agreement. If required, the parties shall
have received the consent to the transactions contemplated pursuant to this
Agreement from (i) holders of the requisite percentage of the First Mortgage
Notes, and (ii) the requisite lenders under the Credit Agreement of the
Operating Partnership.
(d) Kinder Morgan Credit Agreement. The parties shall have received the
consent to the transactions contemplated pursuant to this Agreement from the
requisite Lenders pursuant to that certain Credit Agreement dated as of February
14, 1997 among Kinder Morgan Operating L.P. "B", as borrower, and First Union
National Bank as Agent for the signatory Lenders (including consent in favor of
Purchaser as borrower's guarantor thereunder); and the consent of the requisite
Lenders pursuant to that certain Credit Agreement dated as of February 14, 1997
between Kinder Morgan, Inc., as borrower, and First Union National bank, as
agent for the signatory Lenders.
(e) California PUC Approval. The parties shall have received all required
approvals from the California Public Utilities Commission.
(f) HSR Act. The applicable waiting periods under the HSR Act shall have
expired or been terminated.
(g) Escrow Agreement. The Escrow Agreement shall be executed and delivered
at or prior to the Closing.
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(h) Operating Partnership Agreement. The Amended and Restated Operating
Partnership Agreement shall be executed and delivered at or prior to the
Closing.
(i) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order and the Purchaser Common Units to be issued in the Liquidation
Distribution shall be approved for listing on the New York Stock Exchange.
(j) Governmental Approvals. The parties shall have received all other
governmental consents and approvals, the absence of which would be reasonably
likely to have a Material Adverse Effect on the Purchaser, the Operating
Partnership or the Trading Partnership.
(k) No Governmental Restraint. There shall not be in effect any temporary
restraining order, preliminary injunction, injunction or other order of any
court or governmental body prohibiting the Closing of the transactions
contemplated by this Agreement.
(l) VREDs. Prior to the date of the Joint Proxy Statement/Prospectus, the
Board of Directors of the SF General Partner, the Special Committee and the KM
General Partner shall have agreed on a mutually satisfactory plan for addressing
issues associated with the exchangeability of the VREDs, and such arrangement
shall have been accepted by holders of a number of VREDs mutually satisfactory
to the SF General Partner, the Special Committee and the KM General Partner.
6.2 Conditions to the KM Parties' Obligations. The obligation of the KM
Parties to proceed with the Closing contemplated hereby is subject to the
satisfaction on or prior to the Closing Date of all of the following conditions,
any one or more of which may be waived in writing, in whole or in part, by such
parties:
(a) No Material Adverse Change. Since the date hereof there shall not have
occurred any event that (singly or together with any other such events) would
reasonably be expected to have a Material Adverse Effect on the Trading
Partnership or the Operating Partnership, and the KM General Partner shall have
received a certificate, dated as of the Closing Date, of an executive officer of
the SF General Partner certifying to the matters set forth in this Section
6.2(a).
(b) Representations and Warranties; Performance. The representations and
warranties of the SF Parties set forth herein which are qualified as to
materiality shall be true and correct as of the Closing, as if remade on the
date thereof and the representations and warranties of the SF Parties set forth
herein which are not so qualified shall be true and correct in all material
respects as of the Closing, as if remade on the date thereof, and each of the SF
Parties shall have performed in all material respects all of the obligations of
such party hereunder, and the KM General Partner shall have received a
certificate, dated as of the Closing Date, of an executive officer of the SF
General Partner certifying to the matters set forth in this Section 6.2(b).
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(c) FIRPTA Certificate. The Trading Partnership shall have provided the
Purchaser with a FIRPTA certificate certifying that such Seller is not a
"foreign person" within the meaning of Treasury Regulation 1.1445-2(b).
(d) Authority on Bank Accounts. The SF General Partner shall have, as of
the Closing Date, caused the Trading Partnership and the Operating Partnership
to cancel the authority of each person to draw checks on or withdraw funds from
any of the bank accounts maintained by the Trading Partnership and the Operating
Partnership, except for any person designated by the Purchaser in writing prior
to the Closing, and shall provide to the Purchaser evidence of said
cancellation.
(e) Tax Opinion. The Purchaser shall have received an opinion dated as of
the Closing Date of Mayer, Brown & Platt, counsel to the Trading Partnership (i)
that the transactions contemplated by this Agreement, including but not limited
to the acquisition of the Common Unit Operating Partnership LP Interest by
Purchaser and the liquidation of the Trading Partnership, will not result in the
recognition of income, gain, loss or deduction for federal income tax purposes
by the holders of the Common Units in the Trading Partnership (other than the SF
General Partner and any income, gain, loss or deduction of such holder with
respect to a fractional interest in Purchaser for which the holder receives
cash), (ii) that, for federal income tax purposes, the holding period of the
Purchaser Common Units received in the Liquidation Distribution by the holders
of Common Units in the Trading Partnership either will include the holding
period of the Trading Partnership Common Units surrendered in exchange therefor,
or will include the period beginning with the date the Trading Partnership
acquired the Common Unit Operating Partnership LP Interest (in the latter case,
with the exception of any shorter holding period arising as a result of the
deemed receipt by the Trading Partnership of a partnership interest in exchange
for an asset that is neither a capital asset nor a Section 1231 asset (as such
terms are defined in the Code) (or in exchange for a partnership interest deemed
to have been acquired in exchange for such an asset) as a result of one or more
deemed terminations of the Operating Partnership under Section 708(b)(1)(B) of
the Code), (iii) that (based on certain factual representations), immediately
prior to the Closing, and for all taxable years of its existence, each of the
Trading Partnership and the Operating Partnership (and each other partnership or
limited liability company in which the Trading Partnership owns a direct or
indirect interest) has been a partnership for federal income tax purposes and
the Trading Partnership has qualified for the passive type income exception
under Section 7704(c)(1) of the Code, and (iv) that the Joint Proxy
Statement/Prospectus accurately sets forth the material federal income tax
consequences to the holders of Common Units in the Trading Partnership of the
transactions contemplated hereby. Such opinions and representations shall be
reasonably satisfactory in form and substance to the Purchaser, and no such
opinion shall have been withdrawn or modified in any material respect.
(f) Fairness Opinion. The Goldman Opinion shall have been reaffirmed in
writing as of the date of the Joint Proxy Statement/Prospectus.
(g) Tax Opinion. The Purchaser shall have received an opinion dated as of
the Closing Date of Morrison & Hecker, L.L.P., counsel to the Purchaser, to the
effect that (i)
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(based on certain factual representations) the Purchaser is, and each
partnership and limited liability company in which Purchaser owns a direct or
indirect interest (other than Mont Belvieu Associates, the interests in which
are held by Purchaser through a corporation) has at all times prior to the
Closing been, and after the Closing will continue to be, a partnership for
federal income tax purposes, (ii) the Purchaser is not and will not be treated
as an "electing 1987 partnership" within the meaning of Section 7704(g) of the
Code, and (iii) the description in the Joint Proxy Statement/Prospectus and
Registration Statement accurately sets forth the material federal income tax
consequences to the holders of Common Units in the Trading Partnership of
holding and disposing of Purchaser Common Units subsequent to the Closing of the
transactions contemplated hereby (but such opinion may refer to and rely upon
the opinion of Mayer, Brown & Platt referred to in Section 6.2(e) hereof as to
matters contained therein). Such opinions and representations shall be
reasonably satisfactory in form and substance to the Purchaser, and no such
opinions shall have been withdrawn or modified in any material respect.
6.3 Conditions to the SF Parties' Obligations. The obligation of the SF
Parties to proceed with the Closing contemplated hereby is subject to the
satisfaction on or prior to the Closing Date of all of the following conditions,
any one or more of which may be waived in writing, in whole or in part, by such
parties:
(a) No Material Adverse Change. Since the date hereof there shall not have
occurred any event that (singly or together with any other such events) would
reasonably be expected to have a Material Adverse Effect on the Purchaser or any
of its significant subsidiaries, taken as a whole, and the SF General Partner
shall have received a certificate, dated as of the Closing Date, of an executive
officer of the KM General Partner certifying to the matters set forth in this
Section 6.3(a).
(b) Representations and Warranties; Performance. The representations and
warranties of the KM Parties set forth herein which are qualified as to
materiality shall be true and correct as of the Closing, as if remade on the
date thereof and the representations and warranties of the KM Parties set forth
herein which are not so qualified shall be true and correct in all material
respects as of the Closing, as if remade on the date thereof, and each of the KM
Parties shall have performed in all material respects all of the obligations of
such party hereunder, and the SF General Partner shall have received a
certificate, dated as of the Closing Date, of an executive officer of the KM
General Partner certifying to the matters set forth in this Section 6.3(b).
(c) Tax Opinion. The Trading Partnership shall have received an opinion
dated as of the Closing Date of Morrison & Hecker, L.L.P., counsel to the
Purchaser, to the effect that (i) (based on certain factual representations) the
Purchaser is, and each partnership and limited liability company in which
Purchaser owns a direct or indirect interest (other than Mont Belvieu
Associates, the interests in which are held by Purchaser through a corporation)
has at all times prior to the Closing been, and after the Closing will continue
to be, a partnership for federal income tax purposes, (ii) the Purchaser is not
and will not be treated as an "electing 1987 partnership" within the meaning of
Section 7704(g) of the Code, and (iii) the description in the Joint Proxy
Statement/Prospectus and Registration Statement accurately sets forth the
material
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federal income tax consequences to the holders of Common Units in the Trading
Partnership of holding and disposing of Purchaser Common Units subsequent to the
Closing of the transactions contemplated hereby (but such opinion may refer to
and rely upon the opinion of Mayer, Brown & Platt referred to in Section 6.2(e)
hereof as to matters contained therein). Such opinions and representations shall
be reasonably satisfactory in form and substance to the SF General Partner and
the Special Committee, and no such opinions shall have been withdrawn or
modified in any material respect.
(d) Tax Opinion. The Trading Partnership shall have received an opinion
dated as of the Closing Date of Mayer, Brown & Platt, counsel to the Trading
Partnership (i) that the transactions contemplated by this Agreement, including
but not limited to the acquisition of the Common Unit Operating Partnership LP
Interest by Purchaser and the liquidation of the Trading Partnership, will not
result in the recognition of income, gain, loss or deduction for federal income
tax purposes by the holders of the Common Units in the Trading Partnership
(other than the SF General Partner and any income, gain, loss or deduction of
such holder with respect to a fractional interest in Purchaser for which the
holder receives cash), (ii) that, for federal income tax purposes, the holding
period of the Purchaser Common Units received in the Liquidation Distribution by
the holders of Common Units in the Trading Partnership either will include the
holding period of the Trading Partnership Common Units surrendered in exchange
therefor, or will include the period beginning with the date the Trading
Partnership acquired the Common Unit Operating Partnership LP Interest (in the
latter case, with the exception of any shorter holding period arising as a
result of the deemed receipt by the Trading Partnership of a partnership
interest in exchange for an asset that is neither a capital asset nor a Section
1231 asset (as such terms are defined in the Code) (or in exchange for a
partnership interest deemed to have been acquired in exchange for such an asset)
as a result of one or more deemed terminations of the Operating Partnership
under Section 708(b)(1)(B) of the Code), (iii) that (based on certain factual
representations), immediately prior to the Closing, and for all taxable years of
its existence, each of the Trading Partnership and the Operating Partnership
(and each other partnership or limited liability company in which the Trading
Partnership owns a direct or indirect interest) has been a partnership for
federal income tax purposes and the Trading Partnership has qualified for the
passive type income exception under Section 7704(c)(1) of the Code, and (iv)
that the Joint Proxy Statement/Prospectus accurately sets forth the material
federal income tax consequences to the holders of Common Units in the Trading
Partnership of the transactions contemplated hereby. Such opinions and
representations shall be reasonably satisfactory in form and substance to the SF
General Partner and the Special Committee, and no such opinion shall have been
withdrawn or modified in any material respect.
(e) Liquidation Distribution. Purchaser shall have delivered to the
Trading Partnership, an opinion dated as of the Closing Date of Morrison &
Hecker, L.L.P., counsel to the Purchaser, to the effect that, (i) when issued,
the Purchaser Common Units to be issued in the Liquidation Distribution will be
(A) fully paid, non-assessable and freely transferable (except with respect to
persons deemed to be underwriters pursuant to Rule 145(c) under the Securities
Act) Purchaser Common Units and (B) approved for listing on the New York Stock
Exchange, subject to official notice of issuance, and (ii) the Liquidation
Distribution has been
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validly registered under the Securities Act, and, to such counsel's knowledge,
no stop order is in effect with respect thereto.
(f) Fairness Opinion. The Smith Barney Opinion shall have been reaffirmed
in writing as of the date of the Joint Proxy Statement/Prospectus.
(g) Pending Claims. On the intended Closing Date, there shall not be
pending in any court of competent jurisdiction any claim for money damages for
which indemnity may be sought pursuant to Section 9.2(b) unless, the KM General
Partner, Purchaser and New LP (i) shall have each waived their right to
indemnification pursuant to Section 9.2(b) or (ii) demonstrated to the
satisfaction of the SF General Partner that such claim has been settled or
compromised on terms acceptable to the SF General Partner.
(h) Increased Distribution. Prior to the Closing Date, Purchaser shall
have publicly announced that, if the Closing occurs, it intends to increase its
regular quarterly distribution to holders of Purchaser Common Units to at least
$0.5625 per Purchaser Common Unit.
ARTICLE VII
EMPLOYEES AND EMPLOYEE BENEFITS
7.1 Severance Obligations. All costs of severance (a) under the Santa Fe
Pacific Pipelines Inc. Severance Program which became effective on October 30,
1987, as amended ("Severance Program") (including related litigation costs but
other than accrued or earned vacation) with respect of the employees employed by
SF General Partner in connection with the business of the Trading Partnership
and the Operating Partnership (i) not hired by KM General Partner at Closing and
not otherwise retained by the SF General Partner or the KM General Partner
beyond three months from Closing, or (ii) hired by the KM General Partner at
Closing and terminated within one year (collectively, the employees in clauses
(i) and (ii) are referred to herein as, the "Employees"), (b) under Section 7 of
those certain Employment Agreements , as amended ("Employment Agreements") by
and between the SF General Partner and Messrs. Toole, Cunningham, Boarts, Pearl,
Abboud and Edwards on account of a "Change of Control" or "BNSF Change in
Control" (both as defined in the Employment Agreements) except for any "Tax
Gross-Up Payment" as defined in the Employment Agreements, (c) amounts related
to payments under the stock, phantom stock, unit or phantom unit plans
maintained by the SF General Partner and identified on Schedule 7.1(c) which
would be payable as a result of the transactions contemplated hereby, or (d)
arising by operation of law, shall be for the Purchaser's account, and Purchaser
shall indemnify, defend and hold harmless the SF General Partner from and
against, and shall promptly reimburse the SF General Partner for, all Losses
relating thereto; provided, that the SF General Partner shall not be entitled to
indemnity for, and shall reimburse the Purchaser for, the first $4.5 million of
such costs.
7.2 Severance Process. The parties hereto agree that the severance process
shall be conducted in good faith in accordance with any applicable benefit plans
and agreements of the SF General Partner and shall be controlled by the KM
General Partner; provided, that the KM
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General Partner shall complete all initial notifications to Employees of such
severance within thirty days from the Closing.
7.3 Increased Severance Costs. Except as otherwise contemplated or
permitted by this Agreement (including, without limitation, Section 5.2(a)
and(d) hereof), the SF General Partner shall take no action that would
reasonably be expected to result in increased severance cost obligations to
Purchaser or its affiliates as set forth in Section 7.1 hereof without the prior
written consent of the KM General Partner, and the SF General Partner shall take
all actions consistent with this Agreement (to the extent permitted by law and
the applicable benefit plans and agreements of the SF General Partner)
reasonably requested by the KM General Partner in connection with the severance
of the Employees. Attached hereto as Exhibit 7.3 is an amendment to the
Severance Program which is hereby adopted by the SF General Partner and is
hereby approved by Purchaser.
7.4 Employment by SF General Partner. The SF General Partner agrees that
in the event the SF General Partner or its affiliates at any time during the
period beginning three months after the Closing until one year after the Closing
employ any Employee, the SF General Partner shall promptly pay to Purchaser an
amount equal to the total severance benefit, if any, paid to such Employee by
Purchaser pursuant to this Section 7.4 multiplied by a fraction the numerator of
which is the number of months remaining in the above- described period after the
date of such employment and the denominator of which is 12.
7.5 Employee Benefit Plans. Except as otherwise provided in Section 7.1 or
Section 5.19(a)(ii), the Purchaser shall have no other liabilities or
obligations, contingent or otherwise, under any employee benefit plan (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended), any employment agreements (or consulting agreements with natural
persons) or any employee compensation plan, including without limitation, any
pension, retirement, profit sharing, stock option, stock purchase, bonus,
health, life, disability or fringe benefit plan sponsored or maintained by any
of the SF Parties or any other entity in the same "control group" of
organizations (as defined in Sections 414(b), (e), (m) or (o) of the Code) of
which any of the SF Parties are members.
ARTICLE VIII
TERMINATION
8.1 Events of Termination. Notwithstanding any other provision hereof,
this Agreement may be terminated as set forth below.
(a) Consent. By the KM General Partner and the SF General Partner upon
their mutual written agreement.
(b) Failure of KM Parties. By the SF General Partner in writing if any of
the KM Parties shall (i) fail to perform in any material respect their
respective agreements contained herein required to be performed by them on or
prior to the Closing Date, or (ii) materially breach any of its representations,
warranties or covenants contained herein, which failure or
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breach, either individually or in the aggregate, would constitute grounds for
the SF Parties not to consummate the transactions contemplated hereby pursuant
to Section 6.3, if either (A) such breach cannot be cured prior to the Closing
Date, or (B) has not been cured within 45 days after the date on which written
notice of such breach is given by the SF General Partner to the KM General
Partner, specifying in reasonable detail the nature of such breach.
(c) Failure of SF Parties. By the KM General Partner in writing if any of
the SF Parties shall (i) fail to perform in any material respect their
respective agreements contained herein required to be performed by then on or
prior to the Closing Date, or (ii) materially breach any of its representations,
warranties or covenants contained herein, which failure or breach, either
individually or in the aggregate, would constitute grounds for the KM Parties
not to consummate the transactions contemplated hereby pursuant to Section 6.2,
if either (A) such breach cannot be cured prior to the Closing Date, or (B) has
not been cured within 45 days after the date on which written notice of such
breach is given by the KM General Partner to the SF General Partner, specifying
in reasonable detail the nature of such breach.
(d) Orders. By either the KM General Partner or the SF General Partner in
writing if there shall be any order, writ, injunction or decree of any court or
governmental or regulatory agency binding on any of the SF Parties or the KM
Parties, which prohibits or restrains any of such parties from consummating the
transactions contemplated hereby, provided that all of such parties shall have
used their reasonable best efforts to have any such order, writ, injunction or
decree lifted and the same shall not have been lifted within 30 days after entry
by any such court or governmental or regulatory agency.
(e) Outside Date. By either the KM General Partner or the SF General
Partner in writing if the Closing has not occurred by March 16, 1998; provided,
that no party whose breach hereof or failure to negotiate in good faith has been
the cause of the failure shall have the right to terminate this Agreement under
this Section 8.1(e); and provided, further, that if additional time is required
to obtain the approval of the California Public Utilities Commission, then such
date shall be extended as required to obtain such approval, but in no event
beyond June 30, 1998.
(f) Failure of Unit Holders to Approve. By either the KM General Partner
or the SF General Partner in writing if the approval of the Purchaser's or the
Trading Partnership's unit holders required under this Agreement shall not have
been obtained by reason of the failure to obtain the required vote at a duly
held meeting of such unit holders or any adjournment thereof.
(g) MAE of SF Parties. By the KM General Partner upon the occurrence of
any event that (singly or together with any other such events) would reasonably
be expected to have a Material Adverse Effect on the Trading Partnership or the
Operating Partnership.
(h) MAE of KM Parties. By the SF General Partner upon the occurrence of
any event that (singly or together with any other such events) would reasonably
be expected to have a Material Adverse Effect on the Purchaser and its
significant subsidiaries, taken as a whole.
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(i) Superior Transaction. By the SF General Partner acting through the
Special Committee if the Special Committee determines that a Possible
Alternative would constitute a Superior Transaction.
(j) SF Recommendation. By the KM General Partner if the SF Board of
Directors or the Special Committee withdraws, modifies or changes in a manner
adverse to Purchaser its recommendation that the holders of Trading Partnership
Common Units approve the transactions contemplated by this Agreement to be
approved by them.
(k) KM Recommendation. By the SF General Partner if the Board of Directors
of the KM General Partner withdraws, modifies or changes in a manner adverse to
the SF Parties its recommendation that the holders of Purchaser Common Units
approve the transactions contemplated by this Agreement to be approved by them.
(l) Purchaser Average Price. By the SF General Partner, the Special
Committee or the KM General Partner if the Purchaser Average Price is less than
$31.32 or greater than $46.98 on any day after the date of this Agreement up to
and including the Closing Date. The term "Purchaser Average Price" means the
average of the daily high and low trading prices of Purchaser Common Units on
the New York Stock Exchange on each of the 20 trading days ending the third
trading day prior to the date as of which the calculation is made.
8.2 Effect of Termination. The following provisions shall apply in the
event of a termination of this Agreement:
(a) No Liability. If this Agreement is terminated as permitted under
Section 8.1 (other than as permitted under Section 8.1(i)), no party hereto (or
its officers or directors) will have any liability or further obligation to any
other party to this Agreement, except for obligations pursuant to the last
sentence of Section 5.1 hereof and any liability resulting from the breach
hereof.
(b) Expense Reimbursement. If this Agreement is terminated as permitted
under Section 8.1(i), or, during the pendency of a Superior Transaction, as
permitted under Section 8.1(j), then the SF General Partner shall have the
obligation to pay or cause to be paid to Purchaser its actual third party
expenses arising out of the transactions contemplated hereby up to a maximum of
$2.5 million, and upon receipt of such amount the KM Parties shall have no
further recourse or claim against any party hereto. No obligations of the SF
General Partner, the Trading Partnership or the Operating Partnership under this
Agreement shall be terminated until such payment has been made.
(c) Specific Performance. The parties hereto acknowledge that the
transactions contemplated hereby are unique and specifically identifiable.
Accordingly, the parties hereto further agree and stipulate that if the Closing
does not occur because of the willful failure of the SF Parties, on the one
hand, or the KM Parties, on the other hand, to perform their respective
obligations hereunder, (i) monetary damages and any other remedy at law will not
be adequate, (ii) the non-defaulting party shall be entitled to specific
performance as the remedy for such
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breach, (iii) each party hereto agrees to waive any objection to the remedy of
specific performance, (iv) each party agrees that the granting of specific
performance by any court will not be deemed to be harsh or oppressive to the
party who is ordered specifically to perform its obligations under this
Agreement, and (v) in connection with any action for specific performance, the
prevailing party shall be entitled to reasonable attorneys' fees and other costs
of prosecuting or defending such action.
(d) Other Remedies. The right to seek specific performance hereunder shall
not preclude any party to seek any other remedy at law or in equity.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification of Certain SF Parties. The Purchaser, from and after
the Closing, shall (and shall cause the Operating Partnership to) indemnify and
hold harmless the SF General Partner, Holdings and their respective
stockholders, officers, directors, affiliates, successors and assigns from and
against any and all losses, costs, damages, expenses, liabilities and claims
(collectively, "Losses") arising or resulting from, or relating to (a) the
Trading Partnership or the Operating Partnership (whether prior to or after the
Closing) (including, without limitation, the Sparks, Nevada environmental
matters and any obligations pursuant to that certain Promissory Note made
October 6, 1997 in the amount of $8 million and payable to Andrew B. Krafsur, in
his capacity as Chapter 7 Trustee for the Bankruptcy Estate of El Paso Refinery,
L.P. and the settlement agreement to which such note relates, (b) the VREDs,
except as set forth in Section 1.4, (c) the severance costs referred to in
Article VII in excess of the $4.5 million referred to in Section 7.1 or any
action taken by Purchaser or the KM General Partner in connection therewith, and
(d) the amounts referred to in Section 5.19(a)(ii), except in each case for
Losses for which the SF General Partner is indemnifying the Purchaser and it
affiliates pursuant to Section 9.2 below. Without limiting the generality of the
foregoing, from and after the Closing the Purchaser shall indemnify and hold
harmless the SF General Partner, Holdings and their respective stockholders,
officers, directors, affiliates, successors and assigns (including any person
who has acted in any such capacity at any time prior to Closing), in the manner
set forth in Section 6.7 of the Trading Partnership Agreement, from and against
all Losses from which such persons, or any of them, would have been entitled to
be indemnified pursuant to Section 6.7 of the Trading Partnership Agreement
except in each case for Losses for which the SF General Partner is indemnifying
the Purchaser and its affiliates pursuant to Section 9.2 below.
9.2 Indemnification of the KM Parties.
(a) Debt Indemnity. The SF General Partner, from and after the Closing
Date, shall indemnify and hold harmless the KM General Partner and New LP from
and against any and all Losses arising or resulting from, or relating to any
payments that New LP, as the general partner of the Operating Partnership, or
the KM General Partner, as general partner of New LP, is required to make (and
makes) from its own funds (after prior recourse is had to the assets of the
Operating Partnership) with respect to the First Mortgage Notes and any
refinancing,
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refunding or replacement thereof ("Indemnified Debt"), due to the inability of
the Operating Partnership to pay or refinance any such Indemnified Debt from the
assets of the Operating Partnership. The indemnity described in this Section
9.2(a) ("Debt Indemnity") shall be limited to the amount of $190 million. The SF
General Partner shall be subrogated to such rights of New LP to the extent that
the SF General Partner has made any payment in respect of the Debt Indemnity.
(b) Special Indemnity. The SF General Partner, from and after the Closing
Date, shall indemnify and hold harmless the KM General Partner, Purchaser, New
LP and their respective stockholders, unit holders, officers, directors,
affiliates, successors and assigns from and against any and all Losses arising
or resulting from, or relating to any claim for money damages by any limited
partner of the Trading Partnership (other than Purchaser and its affiliates)
relating to the fairness of the transactions contemplated by this Agreement to
such limited partners; provided, however, that any liability for fees and
expenses of attorneys for any such limited partner of the Trading Partnership
shall be borne in equal halves by the SF General Partner, on the one hand, and
the KM General Partner, Purchaser and New LP, on the other hand.
(c) Other Indemnity. The SF General Partner, from and after the Closing
Date, shall indemnify and hold harmless the KM General Partner, Purchaser, New
LP, and their respective stockholders, unit holders, officers, directors,
affiliates, successors and assigns from and against any and all Losses arising
or resulting from, or relating to ("Other Indemnity") (i) any material breach of
the representation or warranty in Section 3.6 hereof, (ii) any taxes assessed
against the Purchaser or KM General Partner due to the liquidation of the
Trading Partnership pursuant to the terms of this Agreement, (iii) any claim by
any holder of the VREDs or the First Mortgage Notes, or by any lender under the
Credit Agreement (other than by Purchaser and its affiliates) with respect to
the VREDs, the First Mortgage Notes or the Credit Agreement, to the extent
relating to any act or omission of the SF General Partner, Holdings or their
affiliates prior to Closing, if such claim has been asserted in writing prior to
the Closing and does not arise from or relate to the transactions contemplated
by this Agreement or any action or omission otherwise requested by Purchaser,
(iv) the fees and expenses referred to in Section 5.19(b), (v) any of the other
liabilities or obligations set forth in Section 7.5 hereof or (vi) matters which
are excluded from the reimbursement obligations provided for in Section
5.19(a)(ii).
9.3 Termination. All obligations of the SF General Partner (other than
obligations with respect to payments that may become due as a result of any
claims made by any holder of Indemnified Debt prior to date of termination) with
respect to the Debt Indemnity shall terminate upon the delivery of a Put Notice
or a sale pursuant to the exercise of the call rights described in Section 1.3
by the SF General Partner with respect to the Special Limited Partnership
Interest. In addition, all obligations of the SF General Partner with respect to
the Other Indemnity shall terminate on the second anniversary of the Closing.
9.4 Demands. Each indemnified party hereunder agrees that promptly upon
its discovery of facts giving rise to a claim for indemnity under the provisions
of this Agreement, including receipt by it of notice of any demand, assertion,
claim, action or proceeding, judicial
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or otherwise, by any third party (such third party actions being collectively
referred to herein as the "Claim"), with respect to any matter as to which it
claims to be entitled to indemnity under the provisions of this Agreement, it
will give prompt notice thereof in writing to the indemnifying party, together
with a statement of such information respecting any of the foregoing as it shall
have. Such notice shall include a demand for indemnification under this
Agreement. The indemnifying party shall not be obligated to indemnify the
indemnified party with respect to any Claim if the indemnified party knowingly
failed to notify the indemnifying party thereof in accordance with the
provisions of this Agreement in sufficient time to permit the indemnifying party
or its counsel to defend against such matter and to make a timely response
thereto including, without limitation, any responsive motion or answer to a
complaint, petition, notice or other legal, equitable or administrative process
relating to the Claim, only insofar as such knowing failure to notify the
indemnifying party has actually resulted in prejudice or damage to the
indemnifying party.
9.5 Right to Contest and Defend. The indemnifying party shall be entitled
at its cost and expense to contest and defend by all appropriate legal
proceedings any Claim with respect to which it is called upon to indemnify the
indemnified party under the provisions of this Agreement; provided, that notice
of the intention so to contest shall be delivered by the indemnifying party to
the indemnified party within 20 days from the date of receipt by the
indemnifying party of notice by the indemnified party of the assertion of the
Claim. Any such contest may be conducted in the name and on behalf of the
indemnifying party or the indemnified party as may be appropriate. Such contest
shall be conducted by counsel selected and employed by the indemnifying party
and reasonably acceptable to the indemnified party, but the indemnified party
shall have the right but not the obligation to participate in such proceedings
and to be represented by counsel of its own choosing at its sole cost and
expense. Provided that the indemnifying party acknowledges in writing that it is
unconditionally obligated to provide such indemnification, the indemnifying
party shall have full authority to determine all action to be taken with respect
thereto; provided, however, that the indemnifying party will not have the
authority to subject the indemnified party to any obligation whatsoever, other
than the performance of purely ministerial tasks or obligations not involving
material expense. If the indemnifying party does not elect to contest any such
Claim, the indemnifying party shall be bound by the result obtained with respect
thereto by the indemnified party. At any time after the commencement of the
defense of any Claim, the indemnifying party may request the indemnified party
to agree in writing to the abandonment of such contest or to the payment or
compromise by the indemnifying party of the asserted Claim, whereupon such
action shall be taken unless the indemnified party determines that the contest
should be continued, and so notifies the indemnifying party in writing within 15
days of such request from the indemnifying party. If such abandonment or
compromise contemplates (i) the unconditional release of the indemnified party
from all further Claims arising out of the subject matter thereof, (ii) no
admission of culpability by the indemnified party and (iii) no restrictions on
the future operations of the indemnified party, and the indemnified party
nevertheless determines that the contest should be continued, the indemnifying
party shall be liable hereunder only to the extent of the amount that the other
party to the contested Claim had agreed unconditionally to accept in payment or
compromise as of the time the indemnifying party made its request therefor to
the indemnified party.
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9.6 Cooperation. If requested by the indemnifying party, the indemnified
party agrees to cooperate with the indemnifying party and its counsel at the
cost of the indemnifying party in contesting any Claim that the indemnifying
party elects to contest or, if appropriate, in making any counterclaim against
the person asserting the Claim, or any cross-complaint against any person, and
the indemnifying party will reimburse the indemnified party for any expenses
incurred by it in so cooperating. At no cost or expense to the indemnified
party, the indemnifying party shall cooperate with the indemnified party and its
counsel in contesting any Claim.
9.7 Right to Participate. The indemnified party and the indemnifying party
each agree to afford the other party and its counsel the opportunity to be
present at, and to participate in, conferences with all persons, including
governmental authorities, asserting any Claim against the indemnified party or
conferences with representatives of or counsel for such persons.
9.8 Payment of Damages. The indemnifying party shall pay to the
indemnified party in immediately available funds any amounts to which the
indemnified party may become entitled by reason of the provisions of this
Agreement, such payment to be made within five days after any such amounts are
finally determined either by mutual agreement of the parties hereto or pursuant
to the final unappealable judgment of a court of competent jurisdiction. In
calculating any amount to be paid by an indemnifying party by reason of the
provisions of this Agreement, the amount shall be reduced by the amount of all
tax benefits and other reimbursements credited to or received by the other party
related to the applicable Losses and shall be increased by the amount of all tax
liabilities and other disbursements to be paid or incurred by the other party
related to the receipt of funds pursuant to the indemnity.
ARTICLE X
MISCELLANEOUS
10.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the Closing
except for the representations and warranties contained in Section 3.6 by the SF
General Partner, which shall survive, as to the SF General Partner, for a period
of 2 years following the Closing Date. All covenants, agreements and indemnities
contained herein which, by their terms, are to be performed after the Closing
shall survive the Closing.
10.2 Notices. Any notice, request, instruction, correspondence or other
document to be given hereunder by either party to the other (herein collectively
called "Notice") shall be in writing and delivered in person or by courier
service requiring acknowledgment of receipt of delivery or mailed by certified
mail, postage prepaid and return receipt requested, or by telecopier, as
follows:
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If to any of the SF Parties, addressed to:
Santa Fe Pacific Pipelines, Inc.
1100 Town & Country Road
Orange, California 92868
Attention: Mr. Irvin Toole, Jr.
Telecopy: (714) 560-4602
with a copy to:
Burlington Northern Santa Fe Corporation
2650 Lou Menk Drive
Fort Worth, Texas 76131
Attention: General Counsel
Telecopy: (847) 352-7924
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603-3441
Attention: Mr. Richard S. Millard
Telecopy: (312) 706-8172
with a copy to:
Gibson, Dunn & Crutcher
333 S. Grand Avenue
Los Angeles, California 90071
Attention: Mr. Peter Zeigler
Telecopy: (213) 229-6595
If to any of the KM Parties, addressed to:
Kinder Morgan Energy Partners, L.P.
1301 McKinney Street, Suite 3450
Houston, Texas 77010
Attention: Mr. William V. Morgan
Telecopy: (713) 844-9570
with a copy to:
Bracewell & Patterson, L.L.P.
711 Louisiana, Suite 2900
Houston, Texas 77002-2781
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Attention: Mr. David L. Ronn
Telecopy: (713) 221-1212
Notice given by personal delivery, courier service or mail shall be effective
upon actual receipt. Notice given by telecopier shall be confirmed by
appropriate answer back and shall be effective upon actual receipt if received
during the recipient's normal business hours, or at the beginning of the
recipient's next business day after receipt if not received during the
recipient's normal business hours. All Notices by telecopier shall be confirmed
promptly after transmission in writing by certified mail or personal delivery.
Any party may change any address to which Notice is to be given to it by giving
Notice as provided above of such change of address.
10.3 Governing Law. The provisions of this Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Delaware
and the federal laws of the United States. Each party hereto hereby irrevocably
and unconditionally (a) consents and submits to the exclusive jurisdiction of
the courts of the State of Delaware and of the United States of America located
in the State of Delaware (each a "Delaware Court") for any actions, suits or
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby, (b) agrees that any such action, suit or proceedings may be
brought or maintained only in a Delaware Court and in no other forum, (c) agrees
that service of any process, summons, notice or document by U.S. Registered or
certified mail to such party at the address specified in Section 10.2 shall be
effective service of process in any such action, suit or proceeding in any
Delaware Court, and (d) irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of or related
to this Agreement or the transactions contemplated hereby in any Delaware Court
located in Wilmington, Delaware, and further irrevocably and unconditionally
waives and agrees not to plead a claim in any such court that any such action,
suit or proceeding has been brought in an inconvenient forum.
10.4 Entire Agreement; Amendments and Waivers. This Agreement constitutes
the entire agreement between the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof except as set forth specifically
herein or contemplated hereby. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. The failure of a party to exercise any right or remedy shall not be
deemed or constitute a waiver of such right or remedy in the future. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (regardless of whether similar), nor shall
any such waiver constitute a continuing waiver unless otherwise expressly
provided.
10.5 Binding Effect and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective permitted
successors and assigns; but neither this Agreement nor any of the rights,
benefits or obligations hereunder shall be assigned, by operation of law or
otherwise, by any party hereto without the prior written consent of either the
KM General Partner or the SF General Partner, as applicable, other than as set
forth herein. Nothing in this Agreement, express or implied, is intended to
confer upon any person or entity
40
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other than the parties hereto and their respective permitted successors and
assigns, any rights, benefits or obligations hereunder.
10.6 Severability. If any provision of the Agreement is rendered or
declared illegal or unenforceable by reason of any existing or subsequently
enacted legislation or by decree of a court of last resort, the parties hereto
shall promptly meet and negotiate substitute provisions for those rendered or
declared illegal or unenforceable, but all of the remaining provisions of this
Agreement shall remain in full force and effect.
10.7 Headings. The headings of the sections herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
10.8 Execution. This Agreement may be executed in multiple counterparts
each of which shall be deemed an original and all of which shall constitute one
instrument.
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EXECUTED as of the date first set forth above.
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
By Santa Fe Pacific Pipelines, Inc.,
its general partner
By:/s/Irvin Toole, Jr.
Name: Irvin Toole, Jr.
Title: President and CEO
SANTA FE PACIFIC PIPELINES, INC.
By:/s/Irvin Toole, Jr.
Name: Irvin Toole, Jr.
Title: President and CEO
SFP PIPELINE HOLDINGS, INC.
By:/s/Irvin Toole, Jr.
Name: Irvin Toole, Jr.
Title: President and CEO
KINDER MORGAN ENERGY PARTNERS, L.P.
By Kinder Morgan G.P., Inc.
its general partner
By:/s/William V. Morgan
Name: William V. Morgan
Title: Vice Chairman
KINDER MORGAN G.P., INC.
By:/s/William V. Morgan
Name: William V. Morgan
Title: Vice Chairman
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EXHIBIT 5.6
Form of Affiliate Letter
[Date]
Kinder Morgan Energy Partners, L.P.
1301 McKinney Street, Suite 3450
Houston, Texas 77010
Ladies and Gentlemen:
The undersigned, a holder of limited partnership common units ("Common
Units") of Santa Fe Pacific Pipeline Partners, L.P., a Delaware master limited
partnership, in connection with certain transactions (the "Transactions") may be
entitled to receive limited partnership common units ("KM Units") of Kinder
Morgan Energy Partners, L.P. (the "Partnership"). The undersigned acknowledges
that the undersigned may be deemed an "affiliate" of the Partnership within the
meaning of Rule 145 ("Rule 145") promulgated under the Securities Act of 1933,
as amended (the "Act"), although nothing contained herein should be construed as
an admission of such fact.
If in fact the undersigned were an affiliate under the Act, the
undersigned's ability to sell, assign or transfer any KM Units received by the
undersigned in exchange for any Common Units pursuant to the Transactions may be
restricted unless such transaction is registered under the Act or an exemption
from such registration is available. The undersigned understands that such
exemptions are limited and the undersigned has obtained advice of counsel as to
the nature and conditions of such exemptions, including information with respect
to applicability to the sale of such securities of Rules 144 and 145(d)
promulgated under the Act.
The undersigned hereby represents to and covenants with the Partnership
that the undersigned will not sell, assign or transfer any of the KM Units that
the undersigned receives in exchange for Common Units pursuant to the
Transactions except (i) pursuant to an effective registration statement under
the Act, (ii) in conformity with the volume and other limitations of Rule 145,
or (iii) in a transaction which, in the opinion of independent counsel
reasonably satisfactory to the Partnership or as described in a "no-action" or
interpretive letter from the Staff of the Securities and Exchange Commission
(the "SEC"), is not required to be registered under the Act.
In the event of a sale or other disposition by the undersigned of KM Units
pursuant to Rule 145, the undersigned will supply the Partnership with evidence
of compliance with such Rule, in the form of a letter in the form of Annex I
hereto. The undersigned understands that the Partnership may instruct its
transfer agent to withhold the transfer of any KM Units disposed of by the
undersigned, but that upon receipt of such evidence of compliance the transfer
agent shall effectuate the transfer of KM Units sold as indicated in the letter.
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The undersigned acknowledges and agrees that the appropriate legends will
be placed on certificates representing KM Units received by the undersigned in
the Transactions or held by a transferee thereof, which legends will be removed
by delivery of substitute certificates upon receipt of an opinion in form and
substance reasonably satisfactory to the Partnership from independent counsel
reasonably satisfactory to the Partnership to the effect that such legends are
no longer required for purposes of the Act.
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of KM Units and (ii)
the receipt by the Partnership of this letter is an inducement to the
Partnership's obligations to consummate the Transactions.
Very truly yours,
[Name]
2
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ANNEX I
TO EXHIBIT 5.6
[Date]
Kinder Morgan Energy Partners, L.P.
1301 McKinney Street, Suite 3450
Houston, Texas 77010
Ladies and Gentlemen:
On _______________ the undersigned sold the limited partnership common
units ("Units") of Kinder Morgan Energy Partners, L.P., a Delaware master
limited partnership (the "Partnership"), described below in the space provided
for that purpose. The Units were received by the undersigned in connection with
the transactions between the Partnership and Santa Fe Pacific Pipeline Partners,
L.P.
Based upon the most recent report or statement filed by the Partnership
with the Securities and Exchange Commission, the Units sold by the undersigned
were within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act").
The undersigned hereby represents that the Units were sold in "brokers'
transactions" within the meaning of Section 4(4) of the Act or in transactions
directly with a "market maker" as that term is defined in Section 3(a)(38) of
the Securities Exchange Act of 1934, as amended. The undersigned further
represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Units, and that the undersigned has not made
any payment in connection with the offer or sale of the Units to any person
other than to the broker who executed the order in respect of such sale.
Very truly yours,
[Name]
[Provide description of Units in space provided below]
3
Carol Haskins
(713) 844-9500
Debra Lauden
(713) 844-9500
www.enpnet.com
KINDER MORGAN ENERGY PARTNERS, L. P. TO ACQUIRE ALL THE
ASSETS OF SANTA FE PACIFIC PIPELINE PARTNERS, L. P. FOR
APPROXIMATELY $1.0 BILLION IN UNITS AND CASH
FOR IMMEDIATE RELEASE: October 20, 1997
HOUSTON - Kinder Morgan Energy Partners, L. P. (NYSE: "ENP") and Santa Fe
Pacific Pipeline Partners, L. P. (NYSE: "SFL") today announced that they have
signed a Definitive Agreement for Kinder Morgan to purchase all of the assets of
Santa Fe. Upon closing the transaction, Santa Fe Pacific Pipeline Partners, L.
P. unitholders will receive 1.39 Kinder Morgan units in exchange for each Santa
Fe unit. This represents a 28% premium based on the average of the daily high
and low prices for the two partnerships for the last 20 trading days and will
result in the issuance of approximately 26.6 million additional Kinder Morgan
units. In addition, Kinder Morgan will pay approximately $85 million for the
acquisition of Santa Fe's general partner's interest.
Kinder Morgan Chairman and CEO Richard D. Kinder said, "The combination of
these two midstream energy companies, which will create the largest pipeline MLP
in the United States, is both strategically advantageous and is expected to be
immediately accretive in cash flow to our unitholders. Reflecting this
accretion, we anticipate raising Kinder Morgan's per unit annual distribution to
at least $2.25 beginning in the first post-closing quarter."
"We expect growth in distributions to come from three primary sources.
First, we anticipate meaningful savings by eliminating the duplicative overhead
functions associated with managing two publicly traded partnerships. Second, we
believe we can achieve significant synergies by consolidating the operations of
what will be one of the largest product pipeline systems in the U. S. Finally,
longer term, we intend to enhance our presence in Santa Fe's growing western
markets through increased asset utilization, expansion of existing pipelines,
and accretive acquisitions. We are optimistic about the long-term growth
prospects for our present businesses at Kinder Morgan and this acquisition
should enable us to continue our strategy of increasing unitholder value. We
will continue to look at additional acquisition opportunities to position Kinder
Morgan as a true growth MLP."
Mr. Kinder added, "Unitholders should take great comfort in the fact that
Kinder Morgan's management team (through its ownership of the partnership's
general partner) will be required to invest approximately $20 million upon
closing. As a result, management will be highly motivated to realize the
expected growth in distributions."
Santa Fe CEO Irvin Toole, Jr. said, "We are pleased that this combination
delivers a significant premium to Santa Fe Pacific Pipeline Partners, L. P.'s
unitholders, and affords the opportunity for continued appreciation in unit
value by combining with a company committed to growth."
The transaction is subject to customary conditions, including the approval
by certain regulatory agencies, the receipt of certain lender and bondholder
consents, and the approval of both Kinder Morgan and Santa Fe unitholders.
Management anticipates closing the transaction in the first quarter of 1998.
Kinder Morgan Energy Partners, L. P., which has an enterprise value of over
$650 million, owns and operates two interstate common carrier natural gas
liquids (NGL) pipeline systems, one carbon dioxide (CO2) pipeline system, and
two modern high speed rail-to-barge coal transfer facilities; and also owns an
indirect interest in an NGL fractionator.
Santa Fe Pacific Pipeline Partners, L. P. is one of the largest independent
refined petroleum products pipelines in the United States. Santa Fe serves six
Western states with approximately 3,300 miles of common carrier pipeline and 14
truck loading terminals.
THIS PRESS RELEASE INCLUDES FORWARD LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. ALTHOUGH THE PARTIES BELIEVE THAT THEIR EXPECTATIONS ARE
BASED ON REASONABLE ASSUMPTIONS THEY CAN GIVE NO ASSURANCE THAT SUCH ASSUMPTIONS
WILL MATERIALIZE.
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