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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
December 30, 1999
(Date of earliest event reported)
KINDER MORGAN ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
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DELAWARE 1-11234 76-0380342
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
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1301 McKinney, Suite 3400
Houston, Texas 77010
(Address of principal executive offices, including zip code)
713-844-9500
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
Kinder Morgan Energy Partners, L.P., a Delaware limited partnership
("KMEP"), has entered into a Contribution Agreement dated as of December 30,
1999 (the "Agreement"), among KMEP, Kinder Morgan G.P., Inc., a Delaware
corporation and the sole general partner of KMEP ("KMGP"), Kinder Morgan, Inc.,
a Kansas corporation ("KMI"), Natural Gas Pipeline Company of America, a
Delaware corporation ("NGPL"), and KN Gas Gathering, Inc., a Colorado
corporation ("KNGG"). Pursuant to the Agreement, KMEP will issue an aggregate of
9,810,000 common units representing limited partnership units of KMEP to KMI,
NGPL and KNGG and will make a special distribution in the amount of $330,000,000
to KMI in exchange for the contribution to KMEP or to KMEP's designee of:
(i) all of KMI's interest in KN Interstate Gas Transmission Co., a
Colorado corporation that will be converted into a single-member limited
liability company prior to the closing of the Agreement;
(ii) all of NGPL's interest in NGPL-Trailblazer, Inc., a Delaware
corporation that will be converted into a single-member limited liability
company prior to closing of the Agreement; and
(iii) all of KNGG's interest in Red Cedar Gathering Company, a Colorado
general partnership.
The closing of the Agreement, expected to occur in January 2000 but to
be effective as of December 31, 1999, is conditioned upon, among other things:
(i) clearance under the Hart-Scott-Rodino Act of 1976, for which early
termination was received on January 12, 2000;
(ii) the listing of KMEP's common units to be issued pursuant to the
Agreement with the New York Stock Exchange, which listing has been authorized by
the New York Stock Exchange;
(iii) the receipt of all necessary third-party consents;
(iv) satisfactory completion of due diligence;
(v) receipt of a fairness opinion by the Board of Directors of KMGP on
behalf of KMEP and by the Board of Directors of KMI from each of their
respective financial advisors; and
(vi) the approval of the Board of Directors of KMGP, on behalf of KMEP,
and the Board of Directors of KMI.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits.
The following materials are filed as exhibits to this Current
Report on Form 8-K.
Exhibit
Number Description
------- -----------
99.1 Contribution Agreement, dated as of December 30, 1999,
by and among KMEP, KMGP, KMI, NGPL and KNGG.
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S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KINDER MORGAN ENERGY PARTNERS, L.P.
(A Delaware Limited Partnership)
By: KINDER MORGAN G.P., INC.,
its general partner
Dated: January 14, 2000 By: /s/ Joseph Listengart
--------------------------------------
Joseph Listengart
Vice President, General Counsel and
Secretary
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION
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99.1 Contribution Agreement, dated as of December 30, 1999,
by and among KMEP, KMGP, KMI, NGPL and KNGG.
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EXHIBIT 99.1
CONTRIBUTION AGREEMENT
BY AND AMONG
KINDER MORGAN, INC.,
NATURAL GAS PIPELINE COMPANY OF AMERICA, AND
KN GAS GATHERING, INC.
(AS THE "CONTRIBUTORS"),
KINDER MORGAN G.P., INC.
AND
KINDER MORGAN ENERGY PARTNERS, L.P.
DECEMBER 30, 1999
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TABLE OF CONTENTS
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ARTICLE 1
CONTRIBUTION
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1.1 Contribution...........................................................1
1.2 Borrowing by KMEP; Special Distribution................................2
1.3 Transfer Taxes and Recording Fees......................................2
ARTICLE 2
CLOSING
2.1 Closing................................................................3
2.2 Deliveries at the Closing..............................................3
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CONTRIBUTORS
3.1 Organization and Existence.............................................4
3.2 Capitalization of the Contributed Entities.............................5
3.3 Subsidiaries...........................................................5
3.4 Authority and Approval.................................................6
3.5 SEC Filings............................................................6
3.6 No Conflict............................................................7
3.7 Consents...............................................................7
3.8 Laws and Regulations; Litigation.......................................7
3.9 Financial Statements...................................................8
3.10 No Adverse Changes.....................................................8
3.11 Liabilities............................................................9
3.12 Taxes..................................................................9
3.13 Employee Benefits.....................................................11
3.14 Accurate and Complete Records.........................................11
3.15 Year 2000.............................................................12
3.16 Environmental.........................................................12
3.17 Bankruptcy............................................................14
3.18 Contracts and Commitments.............................................14
3.19 Assets................................................................17
3.20 Assets Other than Real Property Interests.............................17
3.21 Title to Real Property................................................18
3.22 Intellectual Property.................................................19
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3.23 Licenses; Permits.....................................................19
3.24 Transactions with Affiliates..........................................19
3.25 Customer Accounts Receivable..........................................20
3.26 Insurance.............................................................20
3.27 Disclosure............................................................20
3.28 Government Contracts..................................................21
3.29 Securities Laws.......................................................21
3.30 Utility Status........................................................22
3.31 Brokerage Arrangements................................................22
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF KMEP
4.1 Organization and Existence............................................22
4.2 Authority and Approval................................................22
4.3 SEC Filings...........................................................23
4.4 Brokerage Arrangements................................................23
4.5 Utility Status........................................................23
4.6 Newly-Issued Units....................................................23
4.7 Securities Laws.......................................................24
4.8 Disclosure............................................................24
ARTICLE 5
ADDITIONAL AGREEMENTS,
COVENANTS, RIGHTS AND OBLIGATIONS
5.1 Certain Changes.......................................................24
5.2 Operations............................................................26
5.3 Access................................................................27
5.4 Antitrust Notification; Other Reporting Requirements..................27
5.5 Reasonable Best Efforts...............................................28
5.6 NYSE Listing..........................................................28
5.7 Financials............................................................28
5.8 Schedules.............................................................28
5.9 Intercompany Accounts.................................................29
5.10 Transfer Restrictions.................................................29
5.11 Further Assurances....................................................29
5.12 Post-Closing Further Assurances.......................................29
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ARTICLE 6
CONDITIONS TO CLOSING
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6.1 Conditions to the Obligation of KMEP..................................30
6.2 Conditions to the Obligation of the Contributors......................32
ARTICLE 7
TAX MATTERS
7.1 Liability for Taxes....................................................34
7.2 Tax Returns............................................................36
7.3 Tax Proceedings........................................................38
7.4 Cooperation and Exchange of Information................................38
7.5 Survival...............................................................39
7.6 Conflict...............................................................39
7.7 Miscellaneous..........................................................39
ARTICLE 8
INVESTIGATION; LIMITATIONS
8.1 Independent Investigation..............................................40
8.2 Survival...............................................................40
ARTICLE 9
TERMINATION
9.1 Events of Termination..................................................41
9.2 Effect of Termination..................................................41
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification of the Contributors....................................42
10.2 Indemnification of KMEP................................................42
10.3 Demands................................................................43
10.4 Right to Contest and Defend............................................43
10.5 Cooperation............................................................44
10.6 Right to Participate...................................................44
10.7 Payment of Damages.....................................................44
10.8 Limitations on Indemnification.........................................45
10.9 Sole Remedy............................................................46
10.10 Express Negligence Rule................................................46
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ARTICLE 11
MISCELLANEOUS
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11.1 Expenses.............................................................46
11.2 Notices..............................................................46
11.3 No Negotiations......................................................48
11.4 Governing Law........................................................48
11.5 Public Statements....................................................48
11.6 Form of Payment......................................................48
11.7 Entire Agreement; Amendments and Waivers.............................48
11.8 Binding Effect and Assignment........................................49
11.9 Severability.........................................................49
11.10 Interpretation.......................................................49
11.11 Headings and Schedules...............................................49
11.12 Multiple Counterparts................................................49
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DEFINED TERMS
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Agreement.....................................................................1
Balance Sheets................................................................8
Balance Sheet Date............................................................8
CERCLA.......................................................................12
Closing Date..................................................................3
Closing.......................................................................3
Code..........................................................................2
Common Units..................................................................1
Constituent Documents........................................................48
Contracts....................................................................14
Contributed Entities..........................................................5
Contributor Parties..........................................................42
Contributor's Tax............................................................37
Contributors..................................................................3
Damages......................................................................42
Deductible...................................................................45
Environmental Laws...........................................................12
Equity........................................................................3
Exchange Act..................................................................6
Financial Statements..........................................................8
GAAP..........................................................................6
Governmental Authorities......................................................7
Hazardous Materials..........................................................13
HSR Act.......................................................................7
Indemnity Claim..............................................................43
Intellectual Property........................................................19
KMEP Debt.....................................................................2
KMEP Parties.................................................................42
KMEP Notice..................................................................38
KMEP..........................................................................1
KMGP..........................................................................1
KMGP Guarantee................................................................2
KMI Debt Indemnity............................................................2
KMI Common Units..............................................................1
KMI...........................................................................1
KMI Group....................................................................36
KN Gas........................................................................1
KN Gas Common Units...........................................................2
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KNI...........................................................................1
KNI Membership Interest.......................................................1
Leased Property..............................................................18
Liens.........................................................................1
Material Adverse Effect.......................................................7
Newly-Issued Units............................................................2
NGPL..........................................................................1
NGPL Common Units.............................................................2
NGPL-Trailblazer Shares.......................................................1
NGPL-Trailblazer..............................................................1
Notice.......................................................................46
Operations and Reimbursement Agreement.......................................31
Owned Property...............................................................18
Permitted Liens..............................................................17
Pledge Agreement..............................................................5
Pre-Closing Date Period......................................................35
Proceeding Notice............................................................38
Red Cedar Interest............................................................2
Red Cedar.....................................................................1
Red Cedar Agreement...........................................................2
Schedule Delivery Date.......................................................28
Schedule Update Date.........................................................28
SEC...........................................................................6
Securities Act................................................................6
Special Distribution..........................................................2
Tax Losses...................................................................35
Tax Returns..................................................................34
Tax Items.....................................................................9
Taxes........................................................................34
Taxing Authority.............................................................34
Trailblazer...................................................................5
Transfer Cost.................................................................3
Treasury Regulations..........................................................2
Tribe.........................................................................2
Year 2000 Problem............................................................12
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SCHEDULES
Schedule 3.6 - No Conflict
Schedule 3.7 - Consents
Schedule 3.8 - Laws and Regulations; Litigation
Schedule 3.10 - No Adverse Change
Schedule 3.12 - Taxes
Schedule 3.16 - Environmental
Schedule 3.18 - Contracts and Commitments
Schedule 3.20 - Assets Other Than Real Property Interests
Schedule 3.22 - Intellectual Property
Schedule 3.23 - Licenses, Permits
Schedule 3.24 - Transactions with Affiliates
Schedule 3.25 - Customer Accounts Receivables
Schedule 3.26 - Insurance
Schedule 5.1 - Certain Changes
Schedule 5.12 - Assets Subject to Sale or Transfer
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CONTRIBUTION AGREEMENT
This Contribution Agreement (the "Agreement") is made and entered
into as of December 30, 1999, by and among Kinder Morgan, Inc., a Kansas
corporation ("KMI"), Natural Gas Pipeline Company of America, a Delaware
corporation ("NGPL"), KN Gas Gathering, Inc., a Colorado corporation ("KN Gas"),
Kinder Morgan Energy Partners, L.P., a Delaware limited partnership ("KMEP"),
and Kinder Morgan G.P., Inc., a Delaware corporation and the sole general
partner of KMEP ("KMGP").
W I T N E S S E T H:
WHEREAS, KMI desires to contribute to KMEP, or its designated
operating partnership, and KMEP desires to accept from KMI all of KMI's interest
in KN Interstate Gas Transmission Co., a Colorado corporation that will be
converted into a single-member limited liability company ("KNI") prior to the
Closing Date (as hereinafter defined);
WHEREAS, NGPL desires to contribute to KMEP, or its designated
operating partnership, and KMEP desires to accept from NGPL all of NGPL's
interest in NGPL-Trailblazer Inc., a Delaware corporation ("NGPL-Trailblazer");
WHEREAS, KN Gas desires to contribute to KMEP, or its designated
operating partnership, and KMEP desires to accept from KN Gas all of KN Gas'
interest in Red Cedar Gathering Company, a Colorado general partnership ("Red
Cedar");
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 1
CONTRIBUTION
1.1 Contribution. On the terms and subject to the conditions of this
Agreement, on the Closing Date (as hereinafter defined):
(a) KMI will contribute, assign, transfer and convey to KMEP,
or its designated operating partnership, all of the outstanding membership
interests of KNI (the "KNI Membership Interest"), free and clear of all security
interests, liens, mortgages, pledges, charges, encumbrances and rights of others
("Liens"), in exchange for a number of common units (the "KMI Common Units")
representing limited partnership units of KMEP (the "Common Units") to be agreed
upon by KMI and KMEP prior to Closing;
(b) NGPL will contribute, assign, transfer and convey to KMEP,
or its designated operating partnership, all of the outstanding capital stock of
NGPL-Trailblazer (the "NGPL-Trailblazer Shares") free and clear of all Liens, in
exchange for a number of
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Common Units (the "NGPL Common Units") to be agreed upon by KMI and KMEP prior
to Closing; and
(c) KN Gas will contribute, assign, transfer and convey to
KMEP, or its designated operating partnership, all of KN Gas' 49% general
partnership interest in Red Cedar (the "Red Cedar Interest") free and clear of
all Liens other than Liens pursuant to the terms of the Joint Venture Agreement
of Red Cedar dated March 30, 1998 (the "Red Cedar Agreement"), between KN Gas
and the Southern Ute Indian Tribe (the "Tribe"), in exchange for a number of
Common Units (the "KN Gas Common Units") to be agreed upon by KMI and KMEP prior
to Closing.
(d) The parties agree that the aggregate number of Common
Units to be agreed as KMI Common Units, NGPL Common Units and KN Gas Common
Units pursuant to clauses (a), (b) and (c) above (collectively, the
"Newly-Issued Units") shall be 9,810,000.
1.2 Borrowing by KMEP; Special Distribution. Simultaneously with the
Closing, KMEP shall incur debt in such amount and on such terms as may be
acceptable to KMEP (the "KMEP Debt"). The KMEP Debt shall be sufficient in
amount to allow KMEP to use the proceeds of KMEP Debt to fund a distribution to
KMI in the amount of $330,000,000 (the "Special Distribution") which shall be
declared and paid to KMI immediately after the contribution of the KNI
Membership Interest. KMGP shall provide to KMEP's lenders a full and
unconditional guaranty of payment of the KMEP Debt in form and substance
satisfactory to KMGP (the "KMGP Guarantee"). KMI shall provide to KMGP an
indemnity in form and substance satisfactory to KMI and KMGP (the "KMI Debt
Indemnity") indemnifying KMGP against certain amounts which may be incurred or
paid by, or assessed against, KMGP under the KMGP Guarantee or otherwise by
operation of law. The parties agree that the entire amount of KMEP Debt is
allocable to, and shall be allocated to, KMI under Sections 1.752-2 and
1.707-5(b) of the Treasury Regulations (the "Treasury Regulations") promulgated
under the Internal Revenue Code of 1986, as amended (the "Code"). If agreed by
the parties hereto, instead of the incurrence of the KMEP Debt by KMEP, KMI may
incur such debt and contribute the KNI Membership Interest and that debt to
KMEP. The KMGP Guarantee and the KMI Debt Indemnity would also be applicable in
this scenario. The parties agree that in this case the entire amount of KMEP
Debt shall be allocable to, and shall be allocated to, KMI under Sections
1.752-2 and 1.707-5(a) of the Treasury Regulations.
1.3 Transfer Taxes and Recording Fees. Each of the Contributors shall
be responsible for any and all taxes or fees imposed or incurred by reason of
the contributions hereunder and/or the filing or recording of any instruments
necessary to effect the contributions hereunder, regardless of when such taxes
or fees are levied or imposed,
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including sales, use, value-added, excise, real estate transfer, lease
assignment, stamp, documentary and similar taxes and fees (the "Transfer Cost").
To the extent under applicable law the transferee is responsible for filing tax
returns in respect of Transfer Costs, KMEP shall prepare all such returns. The
parties shall provide such certificates and other information and otherwise
cooperate to the extent reasonably required to minimize Transfer Costs.
ARTICLE 2
CLOSING
2.1 Closing. Subject to the satisfaction or waiver of the conditions
to closing set forth in Article 6, the closing (the "Closing") of the
contribution of the KNI Membership Interest, the NGPL-Trailblazer Shares and the
Red Cedar Interest (collectively, the "Equity") contemplated hereby shall be
held at the offices of Bracewell & Patterson, L.L.P. at 711 Louisiana Street,
Suite 2900, Houston, Texas on or before the third business day following such
satisfaction or waiver 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.
2.2 Deliveries at the Closing. At or before the Closing:
(a) KMI will deliver, or cause to be delivered, to KMEP the KNI
Membership Interest;
(b) KMI will deliver, or cause to be delivered, to KMGP the KMI
Debt Indemnity;
(c) NGPL will deliver, or cause to be delivered, to KMEP the
certificates representing all of the NGPL-Trailblazer Shares, duly endorsed in
blank or accompanied by stock powers duly endorsed in blank in proper form for
transfer, with appropriate transfer stamps, if any, affixed;
(d) Gas will deliver, or cause to be delivered, to KMEP the Red
Cedar Interest;
(e) KMI, NGPL and KN Gas (collectively, the "Contributors") will
deliver, or cause to be delivered, to KMEP:
(i) the officer's certificates referred to in Section 6.1(a);
and
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(ii) all the other documents, certificates and other
instruments required to be delivered or caused to be delivered, by
the Contributors pursuant hereto; and
(f) KMEP and KMGP will deliver, or cause to be delivered, to KMI
on behalf of the Contributors:
(i) the Special Distribution by wire transfer to a bank
account designated by KMI prior to the Closing Date;
(ii) the Newly-Issued Units;
(iii) the officer's certificate referred to in Section
6.2(a);
(iv) all documents and instruments satisfactory to the
Contributors to effect the substitution of KMEP, or its affiliate, as
a general partner of Red Cedar;
(v) the KMGP Guarantee; and
(vi) all the other documents, certificates and other
instruments required to be delivered or caused to be delivered, by
KMEP and KMGP pursuant hereto.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CONTRIBUTORS
Each of the Contributors hereby represent and warrant, jointly and
severally, to KMEP that as of the date hereof and as of the Closing Date:
3.1 Organization and Existence. KMI is duly incorporated, validly
existing and in good standing under the laws of the State of Kansas. NGPL is
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware. KN Gas is duly incorporated, validly existing and in good
standing under the laws of the State of Colorado. Each Contributor has full
corporate power and authority to own and hold the properties and assets it now
owns and holds and to carry on its business as and where such properties are now
owned or held and such business is now conducted. Each Contributor is duly
licensed or qualified to do business as a foreign corporation and is in good
standing in the states in which the character of the properties and assets now
owned or held by it or the nature of the business now conducted by it requires
it to be so licensed or qualified, except where the failure to be so qualified
or in good standing would not reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations of the
respective Contributor.
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3.2 Capitalization of the Contributed Entities.
(a) As of the date hereof (i) the authorized capital stock of KNI
consists of 10,000 shares of common stock, par value $1.00 per share, of which
10,000 shares are issued and outstanding, fully paid and nonassessable, and (ii)
all of the outstanding shares of KNI are owned beneficially and of record by
KMI, free and clear of all Liens. Upon Closing, the KNI Membership Interest will
be fully paid and nonassessable, owned beneficially and of record by KMI and
free and clear of all Liens.
(b) The authorized capital stock of NGPL-Trailblazer consists of
10,000 shares of common stock, no par value per share, of which 3,562 shares are
issued and outstanding, fully paid and nonassessable. The NGPL-Trailblazer
Shares are owned beneficially and of record by NGPL, free and clear of all
Liens.
(c) Red Cedar is governed by the Red Cedar Agreement. KN Gas has good
and valid title to a 49% general partnership interest in Red Cedar that is owned
free and clear of all Liens other than Liens pursuant to the Red Cedar Agreement
and the Pledge Agreement dated as of October 23, 1998, among KN Gas, the Tribe
and Chase Bank of Texas, N.A., as collateral agent for the lenders,
administrative agent and noteholders (the "Pledge Agreement").
(d) There are no outstanding subscriptions, options, convertible
securities, warrants, calls or rights of any kind (issued or granted by, or
binding upon, the Contributors or KNI, NGPL-Trailblazer or Red Cedar) to
purchase or otherwise acquire any security of or equity interest in the KNI,
NGPL-Trailblazer or Red Cedar (the "Contributed Entities"), other than pursuant
to the Red Cedar Agreement and the Pledge Agreement. The Contributors have full
legal right to contribute, assign and transfer the Equity to KMEP and will, upon
delivery of the Equity to KMEP pursuant to the terms hereof, transfer to KMEP
good and valid title to the Equity free and clear of all Liens other than
pursuant to the Red Cedar Agreement and the Pledge Agreement.
3.3 Subsidiaries. Trailblazer Pipeline Company, an Illinois general
partnership ("Trailblazer"), is the only corporation, partnership, joint venture
or other business entity in which any of the Contributed Entities has direct or
indirect investment or interest in or control over. Trailblazer is validly
existing and in good standing under the laws of the State of Illinois.
Trailblazer has full power and authority to own and hold the properties and
assets it now owns and holds and to carry on its business as and where such
properties and assets are now owned or held and such business is now conducted.
Trailblazer is duly qualified and in good standing in the states in which the
character of the properties and assets now owned or held by it or the nature of
the business now conducted by it requires
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it to be so licensed or qualified, except where the failure to be so qualified
or in good standing would not reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations of
Trailblazer. Except pursuant to Trailblazer's partnership agreement, there are
no outstanding subscriptions, options, convertible securities, warrants, calls
or rights of any kind (issued or granted by, or binding upon, the Contributed
Entities or Trailblazer) to purchase or otherwise acquire any security of or
equity interest in Trailblazer.
3.4 Authority and Approval. The Contributors have the corporate power
and authority to execute and deliver this Agreement, to consummate the
transactions contemplated hereby and to perform all the terms and conditions
hereof to be performed by them. Prior to Closing, the execution and delivery by
the Contributors of this Agreement, the performance by the Contributors of all
the terms and conditions hereof to be performed by them and the consummation of
the transactions contemplated hereby shall have been duly authorized and
approved by all requisite corporate action of the Contributors. This Agreement
constitutes the valid and binding obligation of the Contributors enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting enforcement of creditors' rights generally and by general principles
of equity (whether applied in a proceeding at law or in equity).
3.5 SEC Filings. Since January 1, 1998 (a) KMI has made all filings
required to be made by the Securities Act of 1933, as amended (the "Securities
Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
(b) all filings by KMI with the Securities and Exchange Commission (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 ("GAAP") (except as may be indicated in the notes thereto), and
fairly presented the financial condition and results of operations of KMI, 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).
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3.6 No Conflict. Except as set forth on Schedule 3.6, this
Agreement and the execution and delivery hereof by the Contributors 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 the Contributors, the Contributed Entities or
Trailblazer; (b) violate any provision of any law or administrative regulation
or any judicial, administrative or arbitration order, award, judgment, writ,
injunction or decree applicable to Contributors, the Contributed Entities or
Trailblazer; (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 material indenture, mortgage or lien, or,
any material agreement, contract, commitment or instrument to which the
Contributors, the Contributed Entities or Trailblazer is a party or by which any
of them is bound or to which any property of the Contributors, the Contributed
Entities or Trailblazer is subject, except in the case of this clause (b) or
(c), for those which individually or in the aggregate would not reasonably be
expected to have a material adverse effect on the business, financial condition
or results of operations of the Contributed Entities, taken as a whole (a
"Material Adverse Effect"); or (d) result in the creation of any material lien,
charge or encumbrance on the assets of the Contributors, the Contributed
Entities or Trailblazer under any such material indenture, mortgage, lien,
lease, agreement or instrument.
3.7 Consents. Except as set forth on Schedule 3.7 and other than
compliance with and filings under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") and consents (a) by the Tribe in connection with the
Red Cedar Agreement, and (b) by Red Cedar's lenders, no consent, approval,
license, permit, order, or authorization of, or registration, declaration, or
filing with, any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality (collectively,
"Governmental Authorities") or other person or entity is required to be obtained
or made by or with respect to Contributors, the Contributed Entities or
Trailblazer in connection with:
(i) the execution, delivery, and performance of this Agreement or
the consummation of the transactions contemplated hereby; and
(ii) the conduct by each of the Contributed Entities or Trailblazer
of its business following the Closing as conducted on the date hereof.
3.8 Laws and Regulations; Litigation. Schedule 3.8 sets forth a
list as of the date of this Agreement of all pending lawsuits or claims, with
respect to which any of the
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Contributors, the Contributed Entities or Trailblazer has been contacted in
writing by counsel for the plaintiff or claimant, against or affecting any of
the Contributed Entities or Trailblazer or any of their respective properties,
assets, operations or businesses and that (i) would individually, or in the
aggregate, reasonably be expected to have a Material Adverse Effect or (ii) seek
any material injunctive relief. Except as set forth on Schedule 3.8, and except
for those violations which would not individually, or in the aggregate, have a
Material Adverse Effect, the Contributed Entities and Trailblazer are not, to
the knowledge of the Contributors, in violation of or in default under any law
or regulation or under any order of any Governmental Authorities applicable to
them and, except to the extent set forth on Schedule 3.8, there are no claims,
fines, actions, suits, demands, investigations or proceedings pending or, to the
Contributor's knowledge, threatened in writing against or affecting the
Contributed Entities or Trailblazer, at law or in equity, or before or by any
Governmental Authorities having jurisdiction over the Contributed Entities or
Trailblazer which would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Except as set forth on Schedule 3.8,
as of the date of this Agreement there is no lawsuit or claim by either the
Contributed Entities or Trailblazer that is pending against any other person.
3.9 Financial Statements. Upon compliance with Section 5.6 hereof,
the Contributors shall have delivered to KMEP true and correct copies of the
following financial statements (the "Financial Statements"): balance sheets of
the Contributed Entities as of December 31, 1998, and September 30, 1999 (the
"Balance Sheet Date") and statements of income for the Contributed Entities for
the 12 months ended December 31, 1998 and the nine months ended September 30,
1999. The Financial Statements are accurate and complete and consistent with the
books and records of the Contributed Entities and Trailblazer and fairly present
in all material respects, in accordance with GAAP (except as noted therein,
except for the absence of footnotes and except, in the case of unaudited interim
financial statements, for normal year-end adjustments), the financial condition
of the Contributed Entities and Trailblazer as and at the respective dates and
the results of their operations for the period covered thereby consistent with
the expected disposition of the balances for the transactions contemplated by
this Agreement, if applicable.
3.10 No Adverse Changes. Except as set forth on Schedule 3.10, for
actions or items required or allowed under Article 5 of this Agreement and for
changes in the ordinary course of business due to matters that generally affect
the economy or the industry in which the Contributed Entities are engaged, since
the Balance Sheet Date there have been no material adverse changes in (a) the
assets, liabilities or financial condition of the Contributed Entities, taken as
a whole, from that set forth in the balance sheets dated as of the Balance Sheet
Date included in the Financial Statements (the "Balance Sheets") or (b) the
business, financial condition or results of operations of the Contributed
Entities and Trailblazer, taken
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as a whole. Except as set forth on Schedule 3.10, since the Balance Sheet Date,
the Contributors have caused the business of each of the Contributed Entities to
be conducted in the ordinary course and in substantially the same manner as
previously conducted and has made all reasonable efforts consistent with past
practices to preserve each of the Contributed Entities' and Trailblazer's
relationships with customers, suppliers, and others with whom each of the
Contributed Entities and Trailblazer deals. Except as set forth on Schedule
3.10, since the Balance Sheet Date, none of the Contributed Entities or
Trailblazer has taken any action that, if taken after the date of this
Agreement, would constitute a breach of any of the covenants set forth in
Section 5.1.
3.11 Liabilities. Except as set forth on the Balance Sheets or
reflected in the notes thereto, none of the Contributed Entities nor Trailblazer
have any obligations or liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due) that would individually
or in the aggregate reasonably be expected to have a Material Adverse Effect,
other than contractual liabilities incurred in the ordinary course of business
which are not required to be disclosed on the Balance Sheets under GAAP and
other than normal and ordinary liabilities which have arisen after the Balance
Sheet Date in the ordinary course of business, consistent with past practices.
3.12 Taxes.
(a) Except as set forth on Schedule 3.12 or as would not reasonably
be expected to have a Material Adverse Effect, (i) all Tax Returns (as
hereinafter defined) required to be filed by or with respect to the Contributed
Entities or Trailblazer and any affiliated, consolidated, combined, unitary or
similar group of which any of the Contributed Entities or Trailblazer is or was
a member have been duly filed on a timely basis (taking into account all
extensions of due dates); (ii) all items of income, gain, loss, deduction and
credit or other items ("Tax Items") required to be included in each such Tax
Return have been so included and all such Tax Items and any other information
provided in each such Tax Return is true, correct and complete; (iii) all Taxes
owed by any of the Contributed Entities, Trailblazer and any affiliated,
consolidated, combined, unitary or similar group of which any of the Contributed
Entities or Trailblazer is or was a member which are or have become due have
been timely paid in full; (iv) no penalty, interest or other charge is or will
become due with respect to the late filing of any such Tax Return or late
payment of any such Tax; (v) the Contributed Entities and Trailblazer have
withheld and paid over all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
in connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party; (vi) there are no Liens on any of the assets
of any of the Contributed Entities or Trailblazer that arose in connection with
any failure (or alleged failure) to pay any Tax on any of the assets of the
Contributed Entities or
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Trailblazer, with respect to Taxes, other than Liens for Taxes not yet due and
payable; (vii) there is not in force any extension of time with respect to the
due date for the filing of any Tax Return of or with respect to any of the
Contributed Entities, Trailblazer or any affiliated, consolidated, combined,
unitary or similar group of which any of the Contributed Entities or Trailblazer
is or was a member nor are there any outstanding agreements or waivers by or
with respect to the Contributed Entities or Trailblazer, extending the period
for assessment or collection of any Taxes; (viii) there is no pending action,
proceeding or investigation for assessment or collection of Taxes and no Tax
assessment, deficiency or adjustment has been asserted or proposed with respect
to the Contributed Entities or Trailblazer.
(b) Except as set forth on Schedule 3.12 or as would not reasonably
be expected to have a Material Adverse Effect, no claim has ever been made by an
authority in a jurisdiction where any of the Contributed Entities, Trailblazer
or any affiliated, consolidated, combined, unitary or similar group of which any
of the Contributed Entities or Trailblazer is or was a member does not file Tax
Returns that any of the Contributed Entities or Trailblazer is or may be subject
to taxation in that jurisdiction.
(c) Except as set forth on Schedule 3.12 or as would not reasonably
be expected to have a Material Adverse Effect, the total amounts set up as
liabilities for current and deferred Taxes in the Financial Statements (as
adjusted for operations and transactions in the ordinary course of business
since the date of the Financial Statements in accordance with past custom and
practice) will be sufficient to cover the payment of all Taxes, whether or not
assessed or disputed, which are, or are hereafter found to be, or to have been,
due by or with respect to any of the Contributed Entities and Trailblazer up to
and through the periods ending on the dates thereof.
(d) Schedule 3.12 contains a true and complete copy of each written
Tax allocation or sharing agreement and a true and complete description of each
unwritten Tax allocation or sharing arrangement affecting any of the Contributed
Entities and Trailblazer. All such Tax allocation or sharing arrangements will
be terminated effective as of the Closing Date, and no payments will become due
by any of the Contributed Entities and Trailblazer thereafter.
(e) Neither the Contributed Entities nor Trailblazer own any interest
in any controlled foreign corporation (as defined in section 957 of the Code),
foreign personal holding company (as defined in Section 552 of the Code),
passive foreign investment company (as defined in section 1297 of the Code) or
other entity the income of which is or could be required to be included in the
income of any of the Contributed Entities or Trailblazer.
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(f) None of the property of the Contributed Entities or Trailblazer
is subject to a safe-harbor lease (pursuant to section 168(f)(8) of the Internal
Revenue Code of 1954 as in effect after the Economic Recovery Tax Act of 1981
and before the Tax Reform Act of 1986) or is "tax-exempt use property" (within
the meaning of section 168(h) of the Code) or "tax-exempt bond financed
property" (within the meaning of section 168(g)(5) of the Code).
(g) Neither the Contributed Entities nor Trailblazer has made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that would
not be deductible under Section 280G of the Code.
(h) Except as set forth on Schedule 3.12, neither the Contributed
Entities nor Trailblazer (i) has been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the common parent of
which is KMI) or (ii) has any liability for the Taxes of any person or entity
(other than any of the Contributed Entities and Trailblazer) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(i) Neither the Contributed Entities nor Trailblazer have entered
into any agreement or arrangement with any Taxing Authority (as hereinafter
defined) that requires any of the Contributed Entities and Trailblazer to take
any action or to refrain from taking any action.
3.13 Employee Benefits. The Contributed Entities and Trailblazer do
not have and will not on Closing Date have any employees or other employed
individuals. None of the Contributors, the Contributed Entities or Trailblazer
is a party to or is bound by any collective bargaining agreement with respect to
any employees who perform services in connection with the business operations of
the Contributed Entities and Trailblazer and, to the knowledge of the
Contributors, there are not any union organizing efforts underway with respect
to any such employees. The Contributed Entities and Trailblazer do not and have
never sponsored, maintained, contributed to or been a party to any employee
benefit plan as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended, or any other employee benefit or compensation
arrangement, agreement or program.
3.14 Accurate and Complete Records. To the knowledge of the
Contributors, the books, ledgers, financial records and other records of the
Contributed Entities and Trailblazer since January 1, 1998:
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(a) are, or will be as of the Closing Date, in the possession of
the Contributed Entities or Trailblazer, as applicable;
(b) have been, in all material respects, maintained in accordance
with all applicable laws, rules and regulations and generally accepted standards
of practice; and
(c) are accurate and complete and do not contain or reflect any
material discrepancies.
3.15 Year 2000. The Contributed Entities and Trailblazer have
completed their review and assessment of the Year 2000 Problem (as hereinafter
defined), have developed a plan for addressing the Year 2000 Problem on a timely
basis and have implemented such plan, except where the failure to do so is not
reasonably likely to have a Material Adverse Effect. Except as would not
reasonably be expected to have a Material Adverse Effect, none of the assets or
equipment owned or utilized by the Contributed Entities or Trailblazer are
expected to fail to perform because of, or due in any way to, a Year 2000
Problem. To the Contributor's knowledge (which knowledge is based on responses
to written inquiries made by the Contributed Entities or Trailblazer or
otherwise based on information brought specifically to the attention of the
Contributed Entities or Trailblazer), no vendor, supplier or customer of the
Contributed Entities or Trailblazer is reasonably expected to experience a Year
2000 Problem that, individually or in the aggregate, would reasonably be
expected to cause a Material Adverse Effect. The term "Year 2000 Problem" means
the material inability of any hardware, software or process to recognize and
correctly calculate dates, or the failure of computer systems, products or
services to perform any of their intended functions in a proper manner in
connection with data containing any date.
3.16 Environmental.
(a) For purposes of this Agreement:
"Environmental Laws" shall include, without limitation, (i) the
Resource Conservation and Recovery Act, as amended, (ii) the Clean
Air Act, as amended; (iii) the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, ("CERCLA"); (iv) the
Federal Water Pollution Control Act, as amended; (v) the Safe
Drinking Water Act, as amended; (vi) the Toxic Substances Control
Act, as amended; (vii) the Emergency Planning and Community Right-to
Know Act, as amended; (viii) the National Environmental Policy Act,
as amended; (ix) the Occupational Safety and Health Act, as amended;
(x) the Pollution Prevention Act of 1990, as amended; (xii) the
Hazardous Materials Transportation Act, as amended; (xiii) any
regulations promulgated under (i) through (xii); or (xiv)
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any other federal, state or local statutes, laws, ordinances, rules,
regulations, orders, codes, decisions, injunctions or decrees that
regulate or otherwise pertain to the protection of human health or
the protection of the environment, including the management, control,
discharge, emission, treatment, containment, handling, removal, use,
generation, migration, storage, release, transportation, disposal,
remediation, manufacture, processing or distribution of Hazardous
Materials that are or may present a threat to public health, worker
or public safety or the environment.
"Hazardous Materials" means any substance, whether solid, liquid, or
gaseous: (i) which is listed, defined, or regulated as a "hazardous
material," "hazardous waste," "solid waste," "hazardous
substance," "toxic substance," "pollutant," or "contaminant," or
otherwise classified as hazardous or toxic, in or pursuant to any
Environmental Law; or (ii) which is or contains asbestos,
polychlorinated biphenyls, radon, urea formaldehyde foam insulation,
explosives, or radioactive materials; or (iii) any petroleum,
petroleum hydrocarbons, petroleum products, crude oil and any
components, fractions, or derivatives thereof, any oil or gas
exploration or production waste, and any natural gas, synthetic gas
and any mixtures thereof; or (iv) which causes or poses a threat to
cause contamination or nuisance on any properties, or any adjacent
property or a hazard to the environment or to the health or safety of
persons on or about any properties.
(b) Except as set forth on Schedule 3.16 or as would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect: (i) the respective properties, assets, and operations of the Contributed
Entities and Trailblazer are in compliance with applicable Environmental Laws;
(ii) to the knowledge of the Contributed Entities and Trailblazer, no
circumstances exist with respect to their respective properties, assets and
operations that give rise to an obligation by the Contributed Entities or
Trailblazer to investigate, remediate, monitor or otherwise address the
presence, on-site or offsite, of Hazardous Materials under any applicable
Environmental Laws; (iii) the Contributed Entities and Trailblazer and their
respective properties, assets, and operations are not subject to any pending or,
to the knowledge of the Contributed Entities and Trailblazer, threatened, claim,
action, suit, investigation, inquiry or proceeding under any Environmental Law
(including, without limitation, designation as a potentially responsible party
under CERCLA or any similar local or state law); (iv) all notices, permits,
permit exemptions, licenses or similar authorizations, if any, required to be
obtained or filed by the Contributed Entities or Trailblazer under any
Environmental Law in connection with their respective businesses have been duly
obtained or filed and are valid and currently in full force and effect; (v)
there has been no release of any Hazardous Material into the environment by the
Contributed Entities or Trailblazer or in connection with their properties,
assets and operations, except
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in compliance with applicable Environmental Law; (vi) there has been no exposure
of any person or property to any Hazardous Material in connection with the
properties, operations or activities of the Contributed Entities or Trailblazer,
except as would not reasonably be expected to give rise to a claim, action, suit
or proceeding by or on behalf of such person or property; and (vii) the
Contributed Entities and Trailblazer have made available to KMEP all internal
and external environmental audits and studies and correspondence on substantial
environmental matters (in each case relevant to the Contributed Entities or
Trailblazer) in the possession of the Contributed Entities or Trailblazer.
3.17 Bankruptcy. There are no bankruptcy, reorganization or arrangement
proceedings pending against, being contemplated by, or to the Contributor's
knowledge, threatened against the Contributors, the Contributed Entities or
Trailblazer.
3.18 Contracts and Commitments.
(a) Schedule 3.18 contains a complete and accurate list of all
contracts (written or oral), plans, undertakings, commitments or agreements
(including, without limitation, intercompany contracts) (the "Contracts") of the
following categories to which any of the Contributed Entities or Trailblazer is
a party or by which any of them is bound as of the date of this Agreement:
(i) (1) continuing contracts for the future purchase of
materials, supplies, or equipment (other than purchase contracts and
orders for inventory in the ordinary course of business consistent with
past practice), (2) management, service, consulting, or other similar
types of contracts or (3) advertising agreements or arrangements, in
any such case that have an aggregate future liability to any person
(other than the applicable Contributed Entity or Trailblazer) in excess
of $50,000 and is not terminable by the applicable Contributed Entity
or Trailblazer by notice of not more than 60 days for a cost of less
than $50,000;
(ii) material licenses, options, or other agreements relating
in whole or in part to the intellectual property (including any license
or other agreement under which the applicable Contributed Entity or
Trailblazer is licensee or licensor of any such intellectual property);
(iii) agreements, contracts, or other instruments (including
so-called take-or-pay or keepwell agreements) under which any person
(including each of the Contributed Entities or Trailblazer) has
directly or indirectly guaranteed indebtedness, liabilities, or
obligations of any person (in each case other than
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endorsements for the purpose of collection in the ordinary course of
business), in any such case that, individually, is in excess of
$50,000;
(iv) agreements, contracts, or other instruments under which
any of the Contributed Entities or Trailblazer has, directly or
indirectly, made any advance, loan, extension of credit, or capital
contribution to, or other investment in, any person or entity (other
than any of the Contributed Entities or Trailblazer), in any such case
that, individually, is in excess of $50,000;
(v) (1) all Contracts pertaining to the purchase and sale of
natural gas in all its forms and all other hydrocarbons (including
liquid products) having a term of more than twenty-seven days or
involving the payment or receipt of more than $300,000 per month of
cash or other value, including, without limitation, pipeline leases or
operating agreements including compressor leases; and (2) all Contracts
pertaining to the processing, treating, compression, gathering,
storage, exchange, transportation or transmission of natural gas in all
its forms and all other hydrocarbons (including liquid products)
involving the payment or receipt of more than $50,000 per month of cash
or other value;
(vi) all Contracts, leases or easements involving yearly
rental payments or receipts in excess of $10,000;
(vii) all promissory notes, loans, agreements, indentures,
evidences of indebtedness or other instruments providing for the
lending of money, whether as borrower, lender or guarantor, in excess
of $50,000 and all related security agreements or similar agreements
associated therewith;
(viii) Contracts containing covenants limiting the freedom of
the Contributed Entities or Trailblazer to engage in any line of
business or compete with any person or operate at any location,
including, without limitation, any preferential rights granted to third
parties;
(ix) any Contract pending for the acquisition or disposition,
directly or indirectly (by merger or otherwise), of assets with a value
in excess of $100,000 (other than inventory) or capital stock of any
person (including, without limitation, the Contributed Entities or
Trailblazer);
(x) Contracts between the Contributed Entities or Trailblazer,
on one hand, and the Contributors or any affiliate of the Contributors
(or any current or
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former officer, director or employee of the Contributors or any
affiliate of the Contributors) on the other hand;
(xi) all Contracts pertaining to the ownership, operation, or
maintenance of any and all facilities of the Contributed Entities or
Trailblazer having a value in excess of $100,000;
(xii) to the extent not otherwise listed on Schedule 3.18, any
Contract the primary purpose of which is to require any of the
Contributed Entities or Trailblazer to indemnify or otherwise make
whole any person with an indemnification or make whole obligation
having a value in excess of $100,000; and
(xiii) any other agreement which is material to the
Contributed Entities or Trailblazer.
(b) True copies of the written Contracts, and accurate written
summaries of the oral Contracts, identified on Schedule 3.18 have been made
available to KMEP. Except as set forth on Schedule 3.18, neither the Contributed
Entities nor Trailblazer is and, to the Contributor's knowledge, no other party
is in default under, or in breach or violation of (and no event has occurred
which, with notice or the lapse of time or both, would constitute a default
under, or a breach or violation or lapse of) any term, condition or provision of
any Contract identified on Schedule 3.18 except for defaults, breaches,
violations or events which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(c) Other than Contracts which have terminated or expired in accordance
with their terms, each of the Contracts identified on Schedule 3.18 constitutes
valid, binding and enforceable obligations of the Contributed Entities,
Trailblazer or the Contributors and the Contributor's affiliates to the extent
they are parties thereto and, to the Contributor's knowledge, enforceable
obligations of any other party thereto, in accordance with its terms (subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered on a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing) and is
in full force and effect.
(d) To the Contributor's knowledge, no event has occurred which either
entitles, or would, upon notice or lapse of time or both, entitle the holder of
any indebtedness for borrowed money affecting the Contributed Entities or
Trailblazer to accelerate, or which does accelerate, the maturity of any
indebtedness affecting the Contributed Entities or Trailblazer.
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(e) Except as set forth on Schedule 3.18 or as would not, individually,
or in the aggregate, reasonably be expected to have a Material Adverse Effect,
(i) none of the Contributors, the Contributor's affiliates, the Contributed
Entities or Trailblazer have received any prepayment, advance payment, deposits
or similar payments, and have no refund obligation, with respect to any gas or
products purchased, sold, transported, gathered, stored or processed by or on
behalf of the Contributed Entities or Trailblazer; (ii) none of the
Contributors, the Contributor's affiliates, the Contributed Entities or
Trailblazer have received any compensation for transportation, gathering,
storage or processing services which would be subject to any refund or create
any repayment obligation either by or to the Contributed Entities or
Trailblazer, and to the Contributor's knowledge, there is no basis for a claim
that a refund is due; and (iii) with regard to gas transportation, gathering,
processing, storage and sales Contracts in effect as of the Closing Date, the
Contributed Entities and Trailblazer will be entitled to receive the full
contract price in accordance with the terms of each such contract for all gas
and products transported, gathered, processed, stored and/or sold on and after
the Closing Date.
3.19 Assets. All of the assets necessary to conduct the business of the
Contributed Entities or Trailblazer, as such business is conducted on the
Closing Date, are, or will be at Closing, owned or leased by the Contributed
Entities or Trailblazer, except where the failure to own or lease such assets
would not reasonably be expected to have a Material Adverse Effect.
3.20 Assets Other than Real Property Interests. Each of the Contributed
Entities and Trailblazer has good and valid title to all material assets
reflected on the Balance Sheets or thereafter acquired, except those sold or
otherwise disposed of since the Balance Sheet Date in the ordinary course of
business consistent with past practice and not in violation of this Agreement,
in each case free and clear of all Liens except (i) such as are set forth on
Schedule 3.20, (ii) mechanics', carriers', workmen's, repairmen's or other like
Liens arising or incurred in the ordinary course of business, Liens arising
under original purchase price conditional sales contracts and equipment leases
with third parties entered into in the ordinary course of business and Liens for
Taxes that are not due and payable or that may thereafter be paid without
penalty, (iii) Liens that secure debt that is reflected as a liability on the
Balance Sheet and the existence of which is indicated in the notes thereto and
(iv) other imperfections of title or encumbrances, if any, that, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect (the Liens described in clauses (ii), (iii) and (iv) above are
hereinafter referred to collectively as "Permitted Liens").
All the material tangible personal property of each of the Contributed
Entities or Trailblazer has been maintained in accordance with generally
accepted industry practice and
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is in good operating condition and repair, ordinary wear and tear excepted, in
each case except such as would not reasonably be expected to have a Material
Adverse Effect. This Section 3.20 does not relate to real property or interests
in real property, such items being the subject of Section 3.21.
3.21 Title to Real Property. Each of the Contributed Entities or
Trailblazer has:
(a) good and valid title in fee to all real property and interests in
real property purported to be owned in fee by the Contributed Entities or
Trailblazer (individually, an "Owned Property"); and
(b) good and valid title to the leasehold estates in all real property
and interests in real property purported to be leased by the Contributed
Entities or Trailblazer (individually, a "Leased Property"),
and in the case of both clause (a) and (b), free and clear of all Liens, except:
(i) Liens set forth on Schedule 3.21;
(ii) leases, subleases and similar agreements set forth on
Schedule 3.21;
(iii) Permitted Liens;
(iv) easements, covenants, rights-of-way and other similar
restrictions (1) of record, (2) that are unrecorded and held by
affiliates of the Contributors that are the subject of Section 5.12
with respect to the Owned Property or Leased Property, and (3) that are
unrecorded and held by the Contributed Entities or Trailblazer that are
the subject of Section 5.12 with respect to real property or interests
in real property owned or leased by the Contributors or their
affiliates;
(v) any conditions that may be shown by a current, accurate
survey or physical inspection of any Owned Property or Leased Property
made prior to Closing; and
(vi)(1) zoning, building and other similar restrictions, (2)
mortgages, Liens, security interests, encumbrances, easements,
covenants, rights-of-way and other similar restrictions that have been
placed by any developer, landlord or other third party on property over
which any of the Contributed Entities or Trailblazer has easement
rights or on any Leased Property and subordination or similar
agreements relating thereto, and (3) unrecorded easements, covenants,
rights-of-way and other
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similar restrictions, none of which items set forth in clauses (1), (2)
and (3), individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect.
3.22 Intellectual Property. Schedule 3.22 sets forth a true and
complete list of all material patents, trademarks (registered or unregistered),
trade names, service marks and copyrights and applications therefor
(collectively, "Intellectual Property"), owned, used, filed by or licensed to
any of the Contributed Entities or Trailblazer. With respect to registered
trademarks, Schedule 3.22 sets forth a list of all jurisdictions in which such
trademarks are registered or applied for and all registration and application
numbers. Except as set forth on Schedule 3.22, the Contributed Entities and
Trailblazer own, and the Contributed Entities and Trailblazer have the right to
use, execute, reproduce, display, perform, modify, enhance, distribute, prepare
derivative works of and sublicense, without payment to any other person, all
Intellectual Property listed on Schedule 3.22, as applicable, and the
consummation of the transactions contemplated hereby will not conflict with,
alter or impair any such rights, in each case, except as such, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
3.23 Licenses; Permits. Schedule 3.23 sets forth a true and complete
list, as of the date of this Agreement, of all material licenses, permits and
authorizations issued or granted to any of the Contributed Entities or
Trailblazer by Governmental Authorities that are necessary or desirable for the
conduct of the business of the Contributed Entities or Trailblazer. Except as
set forth on Schedule 3.23, all such licenses, permits and authorizations are
validly held by the Contributed Entities or Trailblazer, as applicable, the
relevant Contributed Entities or Trailblazer have complied in all material
respects with all terms and conditions thereof and the same will not be subject
to suspension, modification, revocation or nonrenewal as a result of the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except such as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. All such material
licenses, permits and authorizations that are held in the name of any employee,
officer, director, stockholder, agent or otherwise on behalf of any of the
Contributed Entities or Trailblazer shall be deemed included under this
warranty.
3.24 Transactions with Affiliates. Except as set forth on Schedule
3.24, no agreement, contract or other arrangement between any of the Contributed
Entities or Trailblazer, on the one hand, and the Contributors or any of their
affiliates (other than any of the Contributed Entities or Trailblazer), on the
other hand, will continue in effect subsequent to the Closing.
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3.25 Customer Accounts Receivable. All customer accounts receivable of
each of the Contributed Entities or Trailblazer, whether reflected on the
Balance Sheets or subsequently created, have arisen from bona fide transactions
in the ordinary course of business. To the knowledge of the Contributors, all
such customer accounts receivable are good and collectible at the aggregate
recorded amounts thereof, net of any applicable reserves for doubtful accounts
reflected on the Balance Sheet. The Contributed Entities and Trailblazer have
good and marketable title to their respective accounts receivable, free and
clear of all Liens, except as set forth on Schedule 3.25. Since the Balance
Sheet Date, there have not been any write-offs as uncollectible of any notes or
accounts receivable of any of the Contributed Entities or Trailblazer, except
for write-offs in the ordinary course of business and consistent with past
practice would not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
3.26 Insurance. KMI, an affiliate of KMI, the Contributed Entities or
Trailblazer maintains, on behalf of the Contributed Entities or Trailblazer,
policies of fire and casualty, liability, and other forms of insurance in such
amounts, with such deductibles, and against such risks and losses as are, in the
Contributor's judgment, reasonable for the business and assets of the
Contributed Entities or Trailblazer. The insurance policies maintained with
respect to the Contributed Entities and Trailblazer and their respective assets
and properties owned and maintained by the Contributed Entities and Trailblazer
are listed on Schedule 3.26. All such policies are in full force and effect, all
premiums due and payable thereon have been paid (other than retroactive or
retrospective premium adjustments that are not yet, but may be, required to be
paid with respect to any period ending prior to the Closing Date under
comprehensive general liability and workmen's compensation insurance policies),
and no notice of cancellation or termination has been received with respect to
any such policy that has not been replaced on substantially similar terms prior
to the date of such cancellation. To the knowledge of the Contributors, the
activities and operations of each of the Contributed Entities and Trailblazer
have been conducted in a manner so as to conform in all material respects to all
applicable provisions of such insurance policies.
3.27 Disclosure. To the knowledge of the Contributors, no
representation or warranty of the Contributors contained in this Agreement, and
no statement made by the Contributors contained in this Agreement or any
Constituent Document (as hereinafter defined) furnished or to be furnished by or
on behalf of the Contributors to KMEP or any of its representatives, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was or will be made, in order to make the statements herein or therein not
misleading or necessary in order to fully and fairly provide the information
required to be provided in this Agreement or any Constituent Document.
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3.28 Government Contracts.
(a) None of the Contributed Entities have any Contracts with any agency
of the government of the United States involving any information, technology or
data which is classified under Executive Order 12356 of April 2, 1982; and
(b) None of the Contributed Entities have any products or services
(including research and development) with respect to which it (i) is a supplier,
direct or indirect, to any of the military services of the United States or the
Department of Defense, except the supply to individuals of such military in
their individual capacity, or (ii) has technology which has or could have
military applications.
3.29 Securities Laws.
(a) The Contributors acknowledge that upon issuance each certificate
representing the Newly-Issued Units shall bear a legend in substantially the
following form:
THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS ("ACTS"). THE UNITS HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE UNITS UNDER THE ACTS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE PARTNERSHIP THAT SUCH REGISTRATION IS NOT REQUIRED
AND THEN ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH
IN SECTION 5.10 OF THE CONTRIBUTION AGREEMENT DATED AS OF DECEMBER 30,
1999, A COPY OF WHICH MAY BE OBTAINED FROM THE PARTNERSHIP AT ITS
PRINCIPAL EXECUTIVE OFFICE.
(b) Each of the Contributors is an accredited investor within the
meaning of Rule 501(a) under the Securities Act and the Newly-Issued Units to be
issued to it pursuant to this Agreement are being acquired for its own account
and not with a view toward, or for sale in connection with, any distribution
thereof except in compliance with applicable United States federal and state
securities laws. The Contributors are aware that no federal or state
Governmental Authority has made any finding or determination as to the fairness
of an investment in the Newly-Issued Units, nor any recommendation or
endorsement with respect thereto. The Contributors acknowledge that the issuance
of the Newly-Issued Units has not been registered under the Securities Act in
reliance on an exemption therefrom.
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(c) Each of the Contributors has such knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the Newly-Issued Units and each of the Contributors
is capable of bearing the economic risks of such investment.
3.30 Utility Status. Neither the Contributors nor any of the
Contributed Entities is a "Holding Company" or a "Public Utility Company" or a
"Gas Utility Company" as those terms are defined in the Public Utility Holding
Company Act of 1935.
3.31 Brokerage Arrangements. Neither the Contributors nor any of the
Contributed Entities have entered (directly or indirectly) into any agreement
with any person, firm or corporation that would obligate KMEP or any of the
Contributed Entities to pay any commission, brokerage or "finder's fee" or other
fee in connection with this Agreement or the transactions contemplated herein.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF KMEP
KMEP hereby represents and warrants to the Contributors that as of the
date hereof and as of the Closing Date:
4.1 Organization and Existence. KMEP is a limited partnership validly
existing and in good standing under the laws of the State of Delaware. KMEP has
full partnership power and authority to own and hold the properties and assets
it now owns and holds and to carry on its business as and where such properties
are now owned or held and such business is now conducted. KMEP is duly licensed
or qualified to do business as a foreign partnership and is in good standing in
the states in which the character of the properties and assets now owned or held
by it or the nature of the business now conducted by it requires it to be so
licensed or qualified, except where the failure to be so qualified or in good
standing would not reasonably be expected to have a material adverse effect on
the business, financial condition or results of operations of KMEP.
4.2 Authority and Approval. KMEP has the partnership power and
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform all the terms and conditions hereof to be
performed by it. Prior to Closing, the execution and delivery by KMEP of this
Agreement, the performance by KMEP of all the terms and conditions hereof to be
performed by it and the consummation of the transactions contemplated hereby
shall have been duly authorized and approved by all requisite partnership action
of KMEP. This Agreement constitutes the valid and binding
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obligation of KMEP enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting enforcement of creditors' rights generally and
by general principles of equity (whether applied in a proceeding at law or in
equity).
4.3 SEC Filings. Since February 14, 1997 (a) KMEP has made all filings
required to be made by the Securities Act and the Exchange Act, (b) all filings
by KMEP 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 GAAP (except as
may be indicated in the notes thereto), and fairly presented the financial
condition and results of operations of KMEP 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 Brokerage Arrangements. KMEP has not entered (directly or
indirectly) into any agreement with any person, firm or corporation that would
obligate the Contributors or any of their affiliates (other than KMEP and its
subsidiaries) to pay any commission, brokerage or "finder's fee" or other fee in
connection with this Agreement or the transactions contemplated herein.
4.5 Utility Status. KMEP is not a "Holding Company" or a "Public
Utility Company" or a "Gas Utility Company" as those terms are defined in the
Public Utility Holding Company Act of 1935.
4.6 Newly-Issued Units. The Newly-Issued Units to be issued at Closing
shall be validly issued, fully paid and nonassessable (except as such
nonassessability may be affected by the Delaware Revised Limited Partnership
Act) and free of any preemptive or similar rights.
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4.7 Securities Laws.
(a) KMEP is an accredited investor within the meaning of Rule 501(a)
under the Securities Act and the Equity to be contributed to it pursuant to this
Agreement is being acquired for its own account and not with a view toward, or
for sale in connection with, any distribution thereof except in compliance with
applicable United States federal and state securities laws. KMEP is aware that
no federal or state Governmental Authority has made any finding or determination
as to the fairness of an investment in the Equity, nor any recommendation or
endorsement with respect thereto. KMEP acknowledges that the contribution of the
Equity has not been registered under the Securities Act in reliance on an
exemption therefrom.
(b) KMEP has such knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Equity and KMEP is capable of bearing the economic risks of such
investment.
4.8 Disclosure. To the knowledge of KMEP, no representation or warranty
of KMEP contained in this Agreement, and no statement made by KMEP contained in
this Agreement or any Constituent Document (as hereinafter defined) furnished or
to be furnished by or on behalf of KMEP to the Contributors or any of their
representatives, contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary in order to fully and
fairly provide the information required to be provided in this Agreement or any
Constituent Document.
ARTICLE 5
ADDITIONAL AGREEMENTS,
COVENANTS, RIGHTS AND OBLIGATIONS
5.1 Certain Changes. Except as set forth on Schedule 5.1, without first
obtaining the written consent of KMEP, from the date hereof until the Closing
Date, the Contributors covenant that they shall use their reasonable best
efforts to cause the Contributed Entities and Trailblazer not to:
(a) make any material change in the conduct of their businesses and
operations, or their financial reporting and accounting methods;
(b) other than in the ordinary course of business, enter into any
contract or agreement that would be defined as "Contract" hereunder or terminate
or amend in any
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material respect any Contract to which any of the Contributed Entities is a
party;
(c) declare, set aside or pay any dividends, or make any distributions,
in respect of their equity securities, or repurchase, redeem or otherwise
acquire any such securities, other than dividends or distributions by
Contributed Entities in the ordinary course of business consistent with past
practice;
(d) merge into or with or consolidate with any other entity or acquire
all or substantially all of the business or assets of any person or other
entity;
(e) make any change in their charter documents, partnership documents,
bylaws or equivalent governing instruments;
(f) purchase any securities of any corporation, person or entity,
except short term debt securities of governmental entities and banks, or make
any investment in any corporation, partnership, joint venture or other business
enterprise;
(g) increase the indebtedness of, or incur any obligation or liability,
direct or indirect, for the Contributed Entities and Trailblazer, other than the
incurrence of liabilities pursuant to existing agreements in the ordinary course
of business consistent with past practices; provided, however, that in no event
shall the Contributed Entities incur, assume or guarantee any long-term
indebtedness for borrowed money;
(h) sell, lease or otherwise dispose of any of their assets other than
the sale of their assets in the ordinary course of business pursuant to existing
contracts;
(i) purchase, lease or otherwise acquire any property of any kind
whatsoever other than in the ordinary course of business;
(j) implement or adopt any material change in their tax methods,
principles or elections;
(k) hire any employees, enter into any employment agreement or enter
into any collective bargaining or labor agreements or adopt any benefit plan;
(l) permit any of its assets to become subjected to any material Lien,
covenant, right-of-way or other similar restriction of any nature whatsoever;
(m) cancel any material indebtedness (individually or in the aggregate)
or waive any claims or rights of substantial value;
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(n) except for intercompany transactions in the ordinary course of
business, pay, loan or advance any amount to, or sell, transfer or lease any of
its assets to, or enter into any agreement or arrangement with, the Contributors
or any of their affiliates (other than the Contributed Entities or Trailblazer);
(o) enter into or agree upon any settlement or compromise of pending
litigation or other pending proceedings before any Governmental Authority;
(p) except as contemplated in Sections 5.2(d) and 5.2(e) or as may be
required to perform the Contributors' obligations under this Agreement, make any
application, filing or other request for approval from any Governmental
Authority with respect to any new rates, services, terms and conditions of
service or construction of facilities; or
(q) commit to do any of the foregoing.
5.2 Operations. Other than as provided in this Agreement, the
Contributors will cause the Contributed Entities to and shall use their
reasonable best efforts to cause Trailblazer to:
(a) maintain their properties and facilities in as good working order
and condition as of the date hereof, ordinary wear and tear excepted;
(b) use their reasonable business efforts to maintain and preserve
their business organization intact, retain their present employees and maintain
their relationship with suppliers, customers and others having business
relations with them;
(c) advise KMEP promptly in writing of any material change in any
document, schedule or other information delivered pursuant to this Agreement;
(d) file on a timely basis all notices, reports or other filings
necessary or required for the continuing operation of the business of the
Contributed Entities 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;
(e) file on a timely basis all complete and correct applications or
other documents necessary to maintain, renew or extend any permit, variance or
any other approval required by any Governmental Authority necessary or required
for the continuing operation of the businesses of the Contributed Entities
whether or not such approval would expire before or after the Closing Date; and
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(f) not grant any proxy with respect to the Equity or the Contributed
Entities' interest in Trailblazer or deposit any of the Equity or the
Contributed Entities' interest in Trailblazer into a voting trust or enter into
any voting agreement with respect to any of the Equity or the Contributed
Entities' interest in Trailblazer or enter into any other agreement, contract or
other obligation with respect to the Equity or the Contributed Entities'
interest in Trailblazer.
5.3 Access. The Contributors will afford to KMEP and its authorized
representatives reasonable access to the Contributors' and the Contributed
Entities' financial, title, tax, corporate and legal materials and operating
data and information available as of the date hereof and which becomes available
to the Contributors at any time prior to the Closing Date, and will furnish to
KMEP such other information as it may reasonably request, unless any such access
and disclosure would violate the terms of any agreement to which the
Contributors and the Contributed Entities is bound or any applicable law or
regulation. The Contributors will use their reasonable best efforts to secure
all requisite consents for the examination by KMEP and their representatives of
all information covered by confidentiality agreements. The Contributors will
cause the Contributed Entities to allow KMEP access to and consultation with the
lawyers, accountants, and other professionals employed by or used by the
Contributed Entities 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. Additionally, the Contributors will afford to KMEP and its authorized
representatives reasonable access to the books and records of the Contributors
insofar as they relate to property, accounting and tax matters of the
Contributed Entities. Until the Closing Date, the confidentiality of any data or
information so acquired shall be maintained by KMEP and its representatives.
Further, the Contributors will afford to KMEP and its authorized representatives
reasonable access from the date hereof until the Closing Date, during normal
business hours, to the Contributed Entities' assets and properties; provided
that such access shall be at the sole cost, expense and risk of KMEP.
5.4 Antitrust Notification; Other Reporting Requirements. The
Contributors and KMEP will, as promptly as practicable upon request of the
Federal Trade Commission or the Department of Justice, file any supplemental
information which may be reasonably requested in connection with the parties'
filings pursuant to the HSR Act and the rules and regulations promulgated
thereunder. The Contributors (through the Contributed Entities, if applicable)
and KMEP will duly and timely file all notices and reports required to be filed
with all other Governmental Authorities in contemplation of the consummation of
the transactions described herein.
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5.5 Reasonable Best Efforts. The Contributors and KMEP shall use their
reasonable best efforts (a) to obtain all approvals and consents required by or
necessary for the transactions contemplated by this Agreement, and (b) to ensure
that all of the conditions to the obligations of KMEP and the Contributors
contained in Sections 6.1 and 6.2, respectively, are satisfied timely.
Each of KMEP and Contributors acknowledge that certain actions may be
necessary with respect to the matters and actions contemplated by this Section
5.5 such as making notifications and obtaining consents or approvals or other
clearances that are material to the consummation of the transactions
contemplated hereby, and each of KMEP and the Contributors agree to take such
action as is reasonably necessary to complete such notifications and obtain such
consents or approvals or other clearances; provided, however, that nothing in
this Section 5.5 or elsewhere in this Agreement shall require any party hereto
to hold separate or make any divestiture of any asset or otherwise agree to, and
no consents or approvals or other clearances shall be deemed to be obtained for
purposes of this Agreement if such consent or approval or other clearance
contains any restriction on their operations or other materially burdensome
condition which would in any such case be material to the assets, liabilities or
business of any of the Contributors, KMEP, the Contributed Entities or any of
their respective subsidiaries in order to obtain any consent or approval or
other clearance required by this Agreement; provided, further, that it being
understood that such reasonable actions shall not include any requirement to
offer or grant financial accommodations to any third party or to remain
secondarily liable with respect to any liability.
5.6 NYSE Listing. KMEP shall cause the Newly-Issued Units to be issued
pursuant to this Agreement to be approved for listing on the New York Stock
Exchange on or prior to the Closing.
5.7 Financials. Within ten business days after the date of this
Agreement, the Contributors shall deliver to KMEP the Financial Statements.
5.8 Schedules. Within ten business days after the date of this
Agreement (the "Schedule Delivery Date"), the Contributors shall deliver to KMEP
all schedules set forth in this Agreement. At any time at least three (3) days
prior to the scheduled Closing Date agreed to by the parties but in no event
later than January 20, 2000 (the "Schedule Update Date"), the Contributors shall
have the right (and the obligation) to update or amend in any respect its
disclosure of any matter set forth or permitted to be set forth in the schedules
hereto, including the addition of new schedules hereto, to the extent that such
matter (i) was unknown to any officer of the Contributors on the Schedule
Delivery Date after reasonable
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due diligence with respect thereto or (ii) arises subsequent to the Schedule
Delivery Date, which fact (in the case of either (i) or (ii)) shall be certified
by an executive officer of KMI.
5.9 Intercompany Accounts. Prior to or on the Closing Date (a) the
Contributed Entities and Trailblazer shall pay all outstanding payables owed to
the Contributors or any of its affiliates (other than the Contributed Entities
or Trailblazer), and (b) the Contributors and any of its affiliates (other than
the Contributed Entities or Trailblazer) shall pay all outstanding payables owed
to the Contributed Entities or Trailblazer.
5.10 Transfer Restrictions. From and after the Closing Date, neither
the Newly-Issued Units nor any interest therein shall be transferable by the
Contributors without the prior written consent of KMEP until after the first
anniversary date of the Closing Date except for transfers to affiliated entities
of the Contributors in compliance with the provisions of the Securities Act in
respect of the transfer of any such Newly-Issued Units or any interest therein.
KMEP shall require (in form and substance reasonably satisfactory KMEP) any
proposed permitted transferee of any Newly-Issued Units or any interest therein
to be acquired from a Contributor to agree to take and hold such Newly-Issued
Units or any interest therein subject to the provisions and upon the conditions
specified in this Section 5.10. Any transfer of the Newly-Issued Units or any
interest therein otherwise than in accordance with the terms of this Agreement
shall be null and void.
5.11 Further Assurances. 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 take, all appropriate action, and to do or cause to be done,
all things necessary, proper or advisable under applicable laws and regulations
to make effective the transactions contemplated in this Agreement; provided,
however, that nothing in this Section 5.11 or elsewhere in this Agreement shall
require any party hereto to hold separate or make any divestiture of any asset
or otherwise agree to, and no consents or approvals or other clearances shall be
deemed to be obtained for purposes of this Agreement if such consent or approval
or other clearance contains any restriction on their operations or other
materially burdensome condition which would in any such case be material to the
assets, liabilities or business of any of the Contributors, KMEP, the
Contributed Entities or any of their respective subsidiaries in order to obtain
any consent or approval or other clearance required by this Agreement; provided,
further, that it being understood that such reasonable actions shall not include
any requirement to offer or grant financial accommodations to any third party or
to remain secondarily liable with respect to any liability.
5.12 Post-Closing Further Assurances. Each party hereto understands
that due to other transactions or past business practices involving some of the
parties hereto, there may be assets of the Contributed Entities previously
contractually bound (whether in writing
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or not) and subject to assignment or transfer from the Contributed Entities or
assets held by the Contributors and their affiliates that are or should be part
of the Contributed Entities business or are not or should not be part of the
Contributed Entities' business, as applicable. In that regard, each party hereto
shall use its reasonable best efforts to take, or cause to take, all appropriate
action for no additional or reduced consideration, and to do or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to effect the appropriate assignment or transfer of any such assets
identified by any party hereto after the date hereof notwithstanding any other
provision of this Agreement; provided, however, that if either KMI, on the one
hand, or KMEP, on the other, determines that any such assignment or asset shall
materially adversely affect the transaction and consideration contemplated by
this Agreement and exchanged at Closing, all parties hereto shall negotiate in
good faith to effect an agreement with respect to any appropriate reallocation
of consideration. Schedule 5.12 sets forth a list as of the date of this
Agreement, which list does not purport to be complete, of assets of the
Contributed Entities that may be affected by this Section 5.12.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 Conditions to the Obligation of KMEP. The obligation of KMEP 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 KMEP:
(a) The representations and warranties of the Contributors made in this
Agreement qualified as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material respects, as of the date
hereof and as of the time of the Closing as though made as of such time, except
to the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects, on and as of such earlier date). The
Contributors shall have performed or complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by the Contributors by the time of the Closing. The Contributors shall have
delivered to KMEP a certificate dated the Closing Date and signed by an
authorized officer of each of the Contributors confirming the foregoing matters
set forth in this Section 6.1(a).
(b) The waiting period under the HSR Act and the rules and regulations
promulgated thereunder applicable to the transactions contemplated hereunder
shall have expired or been terminated.
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(c) All necessary filings with and consents of any Governmental
Authority required for the consummation of the transactions contemplated in this
Agreement shall have been made and obtained, all waiting periods with respect to
filings made with Governmental Authorities in contemplation of the consummation
of the transactions described herein shall have expired or been terminated, and
no action or proceeding before a Governmental Authority shall have been
instituted or threatened (i) challenging or seeking to restrain or prohibit the
contribution of the Contributed Entities, (ii) seeking to prohibit or limit the
ownership or operation by KMEP or the Contributed Entities of any material
portion of the business or assets of KMEP or the Contributed Entities or to
compel KMEP or the Contributed Entities to dispose of or hold separate any
material portion of the business or assets of KMEP or the Contributed Entities,
in each case as a result of the contribution of the Equity or any of the other
transactions contemplated by this Agreement, (iii) seeking to impose limitations
on the ability of KMEP to acquire or hold, or exercise full rights of ownership
of, the Equity, including the right to vote the Equity on all matters properly
presented to the equityholders of the Contributed Entities, as applicable, or
(iv) seeking to prohibit KMEP or any of its subsidiaries from effectively
controlling in any material respect the business or operations of the
Contributed Entities.
(d) All necessary consents of any third party, other than any
Governmental Authority, required for the consummation of the transactions
contemplated in this Agreement shall have been made and obtained.
(e) No statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other order enacted,
entered, promulgated, enforced or issued by any Governmental Authority, or other
legal restraint or prohibition preventing the consummation of the transactions
contemplated hereby shall be in effect.
(f) The Board of Directors of KMGP shall have approved, in its sole
discretion, on behalf of KMEP, the transactions contemplated hereby.
(g) KMEP shall have completed all due diligence deemed necessary or
appropriate, in its sole discretion, related to the consummation of the
transactions contemplated by this Agreement and such due diligence investigation
shall not have resulted in the discovery of facts previously undisclosed that
would reasonably be expected to be have a Material Adverse Effect.
(h) An Operations and Reimbursement Agreement shall have been executed
and delivered by KMI related to the operations of KNI in form and substance
mutually acceptable to KMEP and KMI (the "Operations and Reimbursement
Agreement").
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(i) KNI shall have been converted into a limited liability company with
all related documents and instruments to be in form and substance mutually
satisfactory to KMEP and KMI.
(j) KMEP shall have executed and delivered all documents and
instruments required by the lenders to Red Cedar in connection with the
assumption of Red Cedar's debt and the pledge of the Red Cedar Interest, all in
form and substance satisfactory to KMEP and KMI.
(k) KMEP shall have received the opinion of Goldman, Sachs & Co., the
financial advisor to the Board of Directors of KMGP, that the Newly-Issued Units
to be issued by KMEP and the Special Distribution to be made by KMEP pursuant to
this Agreement are fair to KMEP from a financial point of view.
6.2 Conditions to the Obligation of the Contributors. The obligation of
the Contributors 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 the Contributors:
(a) The representations and warranties of KMEP made in this Agreement
qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, as of the date
hereof and as of the time of the Closing as though made as of such time, except
to the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects, on and as of such earlier date). KMEP
shall have performed or complied in all material respects with all obligations
and covenants required by this Agreement to be performed or complied with by
KMEP by the time of the Closing. KMEP shall have delivered to the Contributors a
certificate dated the Closing Date and signed by an authorized officer of the
general partner of KMEP confirming the foregoing matters set forth in this
Section 6.2(a).
(b) The waiting period under the HSR Act and the rules and regulations
promulgated thereunder applicable to the transactions contemplated hereunder
shall have expired or been terminated.
(c) All necessary filings with and consents of any Governmental
Authority required for the consummation of the transactions contemplated in this
Agreement shall have been made and obtained, all waiting periods with respect to
filings made with Governmental Authorities in contemplation of the consummation
of the transactions described herein shall
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have expired or been terminated, and no action or proceeding before a court or
any other governmental agency or body shall have been instituted or threatened
(A) challenging or seeking to restrain or prohibit the Contributor's
contribution of the Equity, or (B) to restrain or prohibit the consummation of
the transactions contemplated by this Agreement.
(d) All necessary consents of any third party, other than any
Governmental Authority, required for the consummation of the transactions
contemplated in this Agreement shall have been made and obtained.
(e) No statute, rule, regulation, executive order, decree, temporary
restraining order, preliminary or permanent injunction or other order enacted,
entered, promulgated, enforced or issued by any Governmental Authority, or other
legal restraint or prohibition preventing the consummation of the transactions
contemplated hereby shall be in effect.
(f) The Board of Directors of each of the Contributors shall have
approved, in its respective sole discretion, the closing of the transactions
contemplated hereby.
(g) KMI shall have completed all due diligence deemed necessary or
appropriate, in its sole discretion, related to the consummation of the
transactions contemplated by this Agreement and such due diligence investigation
shall not have resulted in the discovery of facts previously undisclosed that
would reasonably be expected to be materially adverse to the Contributors and
their subsidiaries (other than the Contributed Entities), taken as whole.
(h) KNI shall have been converted into a limited liability company with
all related documents and instruments to be in form and substance mutually
satisfactory to KMEP and KMI.
(i) KMEP shall have executed and delivered all documents and
instruments required by the lenders to Red Cedar in connection with the
assumption of Red Cedar's debt and the pledge of the Red Cedar Interest, all in
form and substance satisfactory to KMEP and KMI.
(j) KMI shall have executed and delivered the Operations and
Reimbursement Agreement.
(k) The Second Amended and Restated Agreement of Limited Partnership of
Kinder Morgan Energy Partners, L.P. shall have been amended by KMGP to provide
for the Special Distribution.
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(l) KMI shall have received the opinion of Merrill Lynch & Co., the
financial advisor to the Board of Directors of KMI, that the Newly-Issued Units
and the Special Distribution to be received by the Contributors pursuant to this
Agreement are fair to the Contributors from a financial point of view.
(m) KMI shall have received an opinion dated as of the Closing Date of
Bracewell & Patterson, LLP to the effect that KMEP is a partnership for federal
income tax purposes, and such opinion shall be reasonably satisfactory in form
and substance to KMI.
ARTICLE 7
TAX MATTERS
7.1 Liability for Taxes.
(a) For purposes of this Agreement:
(i) "Tax" or "Taxes" means all taxes, however denominated,
including any interest, penalties or other additions to tax that may
become payable in respect thereof, imposed by any federal, state, local
or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the
generality of the foregoing, all income or profits taxes (including,
but not limited to, federal income taxes and state income taxes), gross
receipts taxes, net proceeds taxes, alternative or add-on minimum,
sales taxes, use taxes, real property gains or transfer taxes, ad
valorem taxes, property taxes, value-added taxes, franchise taxes,
production taxes, severance taxes, windfall profit taxes, withholding
taxes, payroll taxes, employment taxes, excise taxes and other
obligations of the same or similar nature to any of the foregoing;
(ii) "Tax Returns" means all reports, estimates, declarations
of estimated Tax, information statements and returns relating to, or
required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and
other payments to third parties; and
(iii) "Taxing Authority" means, with respect to any Tax, the
governmental body, entity or political subdivision thereof that imposes
such Tax, and the agency (if any) charged with the collection of such
Tax for such entity or subdivision, including any governmental or
quasi-governmental entity or agency that imposes, or is charged with
collecting, social security or similar charges or premiums.
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(b) The Contributors shall be liable for, and shall indemnify and hold
KMEP, the Contributed Entities, Trailblazer and their respective affiliates
harmless from any Taxes, together with any costs, expenses, losses or damages,
including reasonable expenses of investigation and attorneys' and accountants'
fees and expenses, arising out of or incident to the determination, assessment
or collection of such Taxes ("Tax Losses"), (i) imposed on or incurred by any of
the Contributed Entities by reason of the several liability of the Contributed
Entities pursuant to Treasury Regulations Section 1.1502-6 or any analogous
state, local or foreign law or regulation which is attributable to having been a
member of any consolidated, combined or unitary group on or prior to the Closing
Date, (ii) any Tax Losses (other than Tax described in clause (i) above) imposed
on or incurred by the Contributed Entities or Trailblazer (based on the
Contributed Entities' ownership of Trailblazer) with respect to the period prior
to and including the Closing Date (the "Pre-Closing Date Period"), or (iii)
attributable to a breach by the Contributors of any representation, warranty or
covenant with respect to Taxes in this Agreement, excluding (1) any such Taxes
arising from any event occurring on the Closing Date, but after the Closing,
which is outside the ordinary course of the business of the Contributed Entities
or Trailblazer, and (2) any Taxes that have been reserved for in the Financial
Statements (as adjusted for operations and transactions in the ordinary course
of business since the date of the Financial Statements in accordance with past
custom and practice).
(c) KMEP shall be liable for, and shall indemnify and hold the
Contributors and its affiliates harmless from any Tax Losses (i) imposed on or
incurred by the Contributed Entities or Trailblazer with respect to the period
after the Closing Date or (ii) attributable to a breach by KMEP of any covenant
with respect to Taxes in this Agreement.
(d) Whenever it is necessary for purposes of this Article 7 to
determine the portion of any Taxes imposed on or incurred by the Contributed
Entities or Trailblazer (based on the Contributed Entities' ownership of
Trailblazer) for a taxable period beginning before and ending after the Closing
Date which is allocable to the Pre-Closing Date Period, the determination shall
be made, in the case of property or ad valorem taxes or franchise taxes (which
are measured by, or based solely upon capital, debt or a combination of capital
and debt), on a per diem basis and, in the case of other Taxes, by assuming that
the Pre-Closing Date Period constitutes a separate taxable period of the
Contributed Entities or Trailblazer and by taking into account the actual
taxable events occurring during such period (except that exemptions, allowances
and deductions for a taxable period beginning before and ending after the
Closing Date that are calculated on an annual or periodic basis, such as the
deduction for depreciation, shall be apportioned to the Pre-Closing Date Period
ratably on a per diem basis). Notwithstanding anything to the contrary herein,
any franchise Tax paid or payable with respect to any of the Contributed
Entities or Trailblazer shall be allocated to the taxable period during which
the income, operations, assets or capital
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comprising the base of such Tax is measured, regardless of whether the right to
do business for another taxable period is obtained by the payment of such
franchise Tax.
(e) KMEP agrees to pay to the Contributors any refund received after
the Closing Date by KMEP or its affiliates, including the Contributed Entities
or Trailblazer (to the extent of the Contributors' former interest in
Trailblazer), in respect of any Taxes for which the Contributors are liable
under clause (b) of this Section 7.1. The Contributors agree to pay to KMEP any
refund received by the Contributors or their affiliates in respect of any Taxes
for which KMEP is liable under clause (c) of this Section 7.1. The parties shall
cooperate in order to take all necessary steps to claim any such refund. Any
such refund received by a party or its affiliate for the account of the other
party shall be paid to such other party within 90 days after such refund is
received.
(f) KMEP and the Contributors agree not to make or cause any election
(including an election to ratably allocate items under Treasury Regulations
Section 1.1502- 76(b)(2)(ii)) to allocate tax items in a manner inconsistent
with Section 7.1(d) hereof.
7.2 Tax Returns.
(a) KMI shall cause to be included in the consolidated federal income
Tax Returns (and the state income Tax Returns of any state that permits
consolidated, combined or unitary income Tax Returns, if any) of the KMI Group
(as defined herein) for all periods ending on or before the Closing Date, all
Tax Items of the Contributed Entities which are required to be included therein,
shall cause such Tax Returns to be timely filed with the appropriate Taxing
Authorities, and shall be responsible for the timely payment (and entitled to
any refund) of all Taxes due with respect to the periods covered by such Tax
Returns. For purposes of this Agreement, "KMI Group" (i) means the affiliated
group of corporations within the meaning of section 1504 of the Code which files
a consolidated federal income Tax Return and as to which KMI is the common
parent, and (ii) in the case of any combined or unitary Tax Return, the group of
corporations filing such Tax Return that includes any of the Contributed
Entities or the operations of Trailblazer.
(b) With respect to any Tax Return covering a taxable period ending on
or before the Closing Date that is required to be filed after the Closing Date
with respect to any of the Contributed Entities that is not described in
paragraph (a) above, the Contributors shall cause such Tax Return to be
prepared, shall cause to be included in such Tax Return all Tax Items required
to be included therein, shall cause such Tax Return to be filed timely with the
appropriate Taxing Authority, and shall be responsible for the timely payment
(and entitled to any refund) of all Taxes due with respect to the period covered
by such Tax Return.
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(c) With respect to any Tax Return covering a taxable period beginning
on or before the Closing Date and ending after the Closing Date that is required
to be filed after the Closing Date with respect to any of the Contributed
Entities or Trailblazer, KMEP shall cause such Tax Return to be prepared, shall
cause to be included in such Tax Return all Tax Items required to be included
therein, shall furnish a copy of such Tax Return to the Contributors, shall file
timely such Tax Return with the appropriate Taxing Authority, and shall be
responsible for the timely payment of all Taxes due with respect to the period
covered by such Tax Return. KMEP shall determine, in accordance with the
provisions of Section 7.1(d) of the Agreement, the amount of Tax due with
respect to the Pre-Closing Date Period (the "Contributor's Tax") and shall
notify the Contributors of its determination of the Contributor's Tax. The
Contributors shall pay to KMEP an amount equal to the Contributor's Tax not
later than five days after the filing of such Tax Return. Any refund
attributable to Tax Returns filed pursuant to this Section 7.2(c) shall be
apportioned between KMEP and the Contributors in a manner consistent with
calculation of the Contributor's Tax.
(d) KMEP shall, with respect to any Tax Return for which KMEP is
responsible under Section 7.2(c) for preparing and filing, make such Tax work
papers available for review by the Contributors if the Tax Return is with
respect to Taxes for which the Contributors may be liable (in whole or in part)
hereunder or under applicable law. KMEP shall make such work papers available
for review sufficiently in advance of the due date for filing such Tax Returns
to provide the Contributors with a meaningful opportunity to analyze and comment
on such Tax Returns and have such Tax Returns modified before filing, accepting
the position of KMEP unless such position is contrary to the provisions of
Section 7.2(e) hereof.
(e) Any Tax Return which includes or is based on the operations,
ownership, assets or activities of the Contributed Entities or Trailblazer for
any taxable period beginning before and ending after the Closing Date, and any
Tax Return in respect of any Taxes for which the Contributors may be liable (in
whole or in part) hereunder shall be prepared in accordance with past Tax
accounting practices used with respect to the Tax Returns in question (unless
such past practices are no longer permissible under the applicable law), and to
the extent any items are not covered by past practices (or in the event such
past practices are no longer permissible under the applicable tax law), in
accordance with reasonable tax accounting practices selected by the filing party
with respect to such Tax Return under this Agreement with the consent (not to be
unreasonably withheld or delayed) of the non-filing party.
(f) Unless required by law, KMEP shall not file an amended Tax Return
for any period ending on or prior to the Closing Date without the consent of the
Contributors.
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7.3 Tax Proceedings. In the event KMEP or any of its affiliates
receives notice (the "Proceeding Notice") of any examination, claim, adjustment,
or other proceeding with respect to the liability of the Contributed Entities or
Trailblazer (to the extent of the Contributors' interest in Trailblazer) for
Taxes for any period for which the Contributors are or may be liable under
Section 7.1, KMEP shall notify the Contributors in writing thereof (the "KMEP
Notice") no later than the earlier of (a) thirty (30) days after the receipt by
KMEP or any of its affiliates of the Proceeding Notice or (b) ten (10) days
prior to the deadline for responding to the Proceeding Notice. Such KMEP Notice
shall contain factual information describing any asserted liability for Taxes in
reasonable detail and shall be accompanied by copies of any notice or other
documents received from any Taxing Authority with respect to such matter. As to
any such Taxes for which the Contributors are or may be liable under Section
7.1, the Contributors shall be entitled at their expense to control or settle
the contest of such examination, claim, adjustment, or other proceeding,
provided (i) the Contributors notify KMEP in writing that they desire to do so
no later than the earlier of (1) thirty (30) days after receipt of KMEP Notice
or (2) five (5) days prior to the deadline for responding to the Proceeding
Notice, and (ii) the Contributors may not, without the consent of KMEP, agree to
any settlement which would result in an increase in the amount of Taxes for
which any of KMEP, the Contributed Entities or Trailblazer is or may be liable
under Section 7.1. The Contributors shall be required to pay any Taxes required
to be paid in connection with any examination, claim, adjustment or other
proceeding, including, without limitation, any prepayment of Tax required to
obtain the jurisdiction of a court. The parties shall cooperate with each other
and with their respective affiliates, and shall consult with each other, in the
negotiation and settlement of any proceeding described in this Section 7.3. KMEP
will provide, or cause to be provided, to the Contributors necessary
authorizations, including powers of attorney, to control any proceedings which
the Contributors is entitled to control pursuant to this Section 7.3. The
Contributors shall pay to KMEP the amount of any Tax Losses KMEP may become
entitled to by reason of the provisions of this Article 7 within fifteen (15)
days after the extent of any Tax liability has been determined by a final
judgment or decree of a Court or a final and binding settlement with a
governmental authority having jurisdiction thereof.
7.4 Cooperation and Exchange of Information. KMEP and the Contributors
shall cooperate fully, and shall cause the Contributed Entities and Trailblazer
to cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to this Article 7
and any proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Contributors
and KMEP agree to retain all books and records in their possession or in the
possession of their respective
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affiliates with respect to Tax matters pertinent to the Contributed Entities and
Trailblazer relating to any taxable period beginning before the Closing Date
until the earlier of six years after the Closing Date or the expiration of the
applicable statute of limitations of the respective taxable periods, and to
abide by all record retention agreements entered into with any Taxing Authority,
and thereafter, upon request, allow KMEP to take possession of such books and
records. The Contributors further agree, upon request, to use their reasonable
best efforts to obtain any certificate or other document from any Governmental
Authority or any other person or entity as may be necessary to mitigate, reduce
or eliminate any Tax that could be imposed on KMEP or any of the Contributed
Entities and Trailblazer. KMEP and the Contributors further agree, upon request,
to provide the other party with all information regarding the Contributed
Entities or Trailblazer that either party may be required to report to any
Taxing Authority. Any information obtained pursuant to this Section 7.4 shall be
kept confidential, except as may be otherwise necessary in connection with the
filing of Tax Returns or claims for refund or in conducting any audit or other
proceeding. Each party shall provide the cooperation and information required by
this Section 7.4 at its own expense.
7.5 Survival. Anything to the contrary in this Agreement
notwithstanding, the representations, warranties, covenants, agreements, rights
and obligations of the parties hereto with respect to any Tax matter covered by
this Agreement shall survive the Closing and shall not terminate until thirty
days after the expiration of the statute of limitations (including extensions)
applicable to such Tax matter.
7.6 Conflict. In the event of a conflict between the provisions of this
Article 7 and any other provisions of this Agreement, the provisions of this
Article 7 shall control.
7.7 Miscellaneous.
(a) Any payment required under this Article 7 and not made when due
shall bear interest at the rate per annum determined, from time to time, under
the provisions of Section 6621(a)(2) or 6621(c) of the Code, as applicable, for
each day until paid.
(b) The indemnification provisions of this Article 7 are in addition
to, and not in derogation of, any statutory, equitable, or common law remedy
KMEP, the Contributed Entities and Trailblazer may have with respect to the
Contributors or the transactions contemplated by this Agreement.
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ARTICLE 8
INVESTIGATION; LIMITATIONS
8.1 Independent Investigation. The parties hereto acknowledge that in
making the decision to enter into this Agreement and to consummate the
transactions contemplated hereby, they have relied solely on the basis of their
own independent investigation of the Contributed Entities, Trailblazer or KMEP,
as applicable, and upon the express written representations, warranties and
covenants in this Agreement. Without diminishing the scope of the express
written representations, warranties and covenants of the parties in this
Agreement and without affecting or impairing their right to rely thereon, KMEP
AND THE CONTRIBUTORS ACKNOWLEDGE THAT NEITHER KMEP NOR THE CONTRIBUTORS HAVE
MADE, AND KMEP AND THE CONTRIBUTORS HEREBY EXPRESSLY DISCLAIM AND NEGATE ANY
OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE ASSETS AND
OPERATIONS OF KMEP, THE CONTRIBUTED ENTITIES AND TRAILBLAZER, AS APPLICABLE
(INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS).
8.2 Survival.
(a) The liability of the Contributors for the breach of any of the
representations and warranties of the Contributors set forth in Article 3 shall
be limited to claims for which KMEP delivers written notice to KMI on or before
the first anniversary date of the Closing Date; provided, however, that (i) the
representations and warranties set forth in Sections 3.16 and 3.21 shall be
limited to claims for which KMEP delivers written notice to KMI on or before the
second anniversary date of the Closing Date, (ii) the representations and
warranties set forth in Section 3.12 shall not be subject to this Section 8.2
but rather shall be governed by Section 7.5, and (iii) the representations and
warranties set forth in Sections 3.1, 3.2, 3.3, 3.4, 3.7, 3.29, 3.30 and 3.31
shall be not be limited as to time other than the applicable statute of
limitations.
(b) The liability of KMEP for the breach of any of the representations
and warranties of KMEP set forth in Article 4 shall be limited to claims for
which Contributors deliver written notice to KMEP on or before the first
anniversary date of the Closing Date; provided, however, that the
representations and warranties set forth in Sections 4.1, 4.2, 4.4, 4.5, 4.6 and
4.7 shall be not be limited as to time other than the applicable statute of
limitations.
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ARTICLE 9
TERMINATION
9.1 Events of Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual written consent of KMEP and KMI;
(b) by either KMEP or KMI in writing after March 31, 2000, if the
Closing has not occurred by such date, provided that as of such date the
terminating party is not in default under this Agreement;
(c) by either KMEP or KMI in writing without prejudice to other rights
and remedies which the terminating party or its affiliates may have (provided
the terminating party and its affiliates are not otherwise in material default
or breach of this Agreement, or have not failed or refused to close without
justification hereunder), if the other party or its affiliates shall (i)
materially fail to perform its covenants or agreements contained herein required
to be performed on or prior to the Closing Date, or (ii) materially breach or
have breached any of its representations or warranties contained herein;
provided, however, that in the case of clause (i) or (ii), the defaulting party
shall have a period of ten (10) days following written notice from the
nondefaulting party to cure any breach of this Agreement, if such breach is
curable;
(d) by either KMEP or KMI in writing, without liability, if there shall
be any order, writ, injunction or decree of any Governmental Authority binding
on KMEP or Contributors, which prohibits or restrains KMEP or Contributors from
consummating the transactions contemplated hereby, provided that KMEP and
Contributors 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 Governmental Authority;
(e) by KMI if any of the conditions set forth in Section 6.2 shall have
become incapable of fulfillment, and shall not have been waived by KMI; or
(f) by KMEP if any of the conditions set forth in Section 6.1 shall
have become incapable of fulfillment, and shall not have been waived by KMEP.
9.2 Effect of Termination. In the event of the termination of this
Agreement by a party, as provided in Section 9.1 above, this Agreement shall
thereafter become void except for this Section 9.2 and Section 11.1 hereof.
Nothing in this Section 9.2 shall be
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deemed to release either party from any liability for any breach by such party
of the terms and provisions of this Agreement or to impair the right of either
party to compel specific performance by the other party of its obligations under
this Agreement.
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification of the Contributors. KMEP, from and after the
Closing Date, shall indemnify and hold the Contributors and their affiliates
(other than KMEP, its public limited partners and its subsidiaries),
shareholders, directors, officers, employees, agents, representatives and
insurers (together with the Contributors, the "Contributor Parties") harmless
from and against any and all damages (including exemplary damages and
penalties), losses, deficiencies, costs, expenses, obligations, fines,
expenditures, claims and liabilities, including reasonable counsel fees and
reasonable expenses of investigation, defending and prosecuting litigation
(collectively, the "Damages"), suffered by the Contributor Parties as a result
of, caused by, arising out of, or in any way relating to (a) subject to Section
8.2, any breach of a representation or warranty of KMEP in this Agreement, (b)
any material breach of any agreement or covenant on the part of KMEP or KMGP
under this Agreement, (c) any liability or obligation (other than those for
which KMEP is being indemnified by the Contributors hereunder) that arises based
on or relating to any action taken, omission by or inaction of any employee of
Contributors or any of Contributors' affiliates on behalf of the Contributed
Entities or Trailblazer prior to the Closing Date, and (d) other than for those
for which KMEP is being indemnified by the Contributors hereunder, any liability
or obligation that pertains to the ownership, operation or conduct of the
businesses or affairs of the Contributed Entities and Trailblazer arising from
any acts, omissions, events, conditions or circumstances occurring on or after
the Closing Date. Nothing in this Section 10.1 shall apply to liability with
respect to Taxes, for which liability shall be as set forth in Article 7.
10.2 Indemnification of KMEP.
(a) The Contributors shall indemnify and hold KMEP and its respective
affiliates (other than any of the Contributor Parties), partners, directors,
officers, employees, agents, representatives and insurers (together with KMEP,
the "KMEP Parties") harmless from and against any and all Damages suffered by
the KMEP Parties as a result of, caused by, arising out of, or in any way
relating to (i) subject to Section 8.2, any breach of a representation or
warranty of the Contributors in this Agreement other than Section 3.12, and (ii)
any material breach of any agreement or covenant on the part of the Contributors
under this Agreement.
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Nothing in this Section 10.2 shall apply to liability with respect to Taxes, for
which liability shall be as set forth in Article 7.
(b) In addition, KMI shall indemnify and hold the KMEP Parties harmless
from and against any and all Damages suffered by the KMEP Parties as a result
of, cause by, arising out of, or in any way relating to the impact, if any, of
the transactions contemplated by this Agreement on the rates established in the
order of the Federal Energy Regulatory Commission in KN Interstate Gas
Transmission Company, 89 F.E.R.C. Paragraph 61,323 (1999) (Docket Nos.
RP98-117-000, et al.).
10.3 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 or otherwise, by any third
party (such third party actions being collectively referred to herein as the
"Indemnity 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 formal demand for indemnification under this
Agreement. The indemnifying party shall not be obligated to indemnify the
indemnified party with respect to any Indemnity 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 Indemnity Claim, only insofar as such knowing failure to notify
the indemnifying party has actually resulted in prejudice or damage to the
indemnifying party.
10.4 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 Indemnity 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 to so 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 Indemnity 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 reputable counsel employed by
the indemnifying party and not reasonably objected to by 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. The indemnifying party shall have full
authority to
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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 Indemnity Claim, the
indemnifying party shall be bound by the result obtained with respect thereto by
the indemnified party. If the indemnifying party shall have assumed the defense
of an Indemnity Claim, the indemnified party shall agree to any settlement,
compromise or discharge of an Indemnity Claim that the indemnifying party may
recommend and that by its terms obligates the indemnifying party to pay the full
amount of the liability in connection with such Indemnity Claim, which releases
the indemnified party completely in connection with such Indemnity Claim and
which would not otherwise adversely affect the indemnified party.
Notwithstanding the foregoing, the indemnifying party shall not be
entitled to assume the defense of any Indemnity Claim (and shall be liable for
the reasonable fees and expenses of counsel incurred by the indemnified party in
defending such Indemnity Claim) if the Indemnity Claim seeks an order,
injunction or other equitable relief or relief for other than money damages
against the indemnified party which the indemnified party reasonably determines,
after conferring with its outside counsel, cannot be separated from any related
claim for money damages. If such equitable relief or other relief portion of the
Indemnity Claim can be so separated from that for money damages, the
indemnifying party shall be entitled to assume the defense of the portion
relating to money damages.
10.5 Cooperation. If requested by the indemnifying party, the
indemnified party agrees to cooperate with the indemnifying party and its
counsel in contesting any Indemnity Claim that the indemnifying party elects to
contest or, if appropriate, in making any counterclaim against the person
asserting the Indemnity 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 Indemnity Claim.
10.6 Right to Participate. The indemnified party agrees to afford the
indemnifying party and its counsel the opportunity to be present at, and to
participate in, conferences with all persons, including Governmental
Authorities, asserting any Indemnity Claim against the indemnified party or
conferences with representatives of or counsel for such persons.
10.7 Payment of Damages. The indemnification required hereunder shall
be made by periodic payments of the amount thereof during the course of the
investigation or defense, within ten (10) days as and when reasonably specific
bills are received or loss,
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liability, claim, damage or expense is incurred and reasonably evidence thereof
is delivered. 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 all
tax benefits and other reimbursements (including, without limitation, insurance
proceeds) credited to or received by the other party related to the Damages.
10.8 Limitations on Indemnification.
(a) To the extent the KMEP Parties are entitled to indemnification for
Damages pursuant to Section 10.2(a)(i), the Contributors shall not be liable for
those Damages unless the aggregate amount of Damages exceeds, in the aggregate,
$7,300,000 (the "Deductible"), and then only to the extent of any such excess.
(b) In addition, to the extent the KMEP Parties are entitled to
indemnification for Damages pursuant to Section 10.2(a)(i), the Contributors
shall not be liable for Damages that exceed, in the aggregate, $73,000,000 less
the Deductible; provided, however, that any Damages under Section 10.2(a)(i) as
it relates solely to Sections 3.1, 3.2, 3.3, 3.4, 3.7, 3.12, 3.29, 3.30 and 3.31
shall not be applied toward the $73,000,000 limitation but shall be applied
against the Deductible.
(c) Notwithstanding clauses (a) and (b) above, the Contributors shall
be fully liable without respect to the Deductible under Section 10.2(a)(ii) and
for fraud.
(d) To the extent the KMEP Parties are entitled to indemnification for
Damages pursuant to Section 10.2(b), the Contributors shall not be liable for
Damages that exceed, in the aggregate, $5,000,000 in Damages incurred in a year
during each of the first five years after the Closing Date.
(e) To the extent the Contributor Parties are entitled to
indemnification for Damages pursuant to Section 10.1(a), KMEP shall not be
liable for those Damages unless the aggregate amount of Damages exceeds, in the
aggregate, the Deductible, and then only to the extent of any such excess. In
addition, to the extent the Contributor Parties are entitled to indemnification
for Damages pursuant to Section 10.1(a) as it relates solely to Sections 4.3 and
4.8, KMEP shall not be liable for Damages that exceed, in the aggregate,
$73,000,000 less the Deductible.
(f) Notwithstanding clause (e) above, KMEP shall be fully liable
without respect to the Deductible under Section 10.1(b), 10.1(c) and 10.1(d) and
for fraud.
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10.9 Sole Remedy. Should the Closing occur, no party shall have
liability under this Agreement, any of the Constituent Documents (as hereinafter
defined) or the transactions contemplated hereby or thereby except as is
provided in Article 7 or this Article 10 (other than claims or causes of action
arising from fraud).
10.10 Express Negligence Rule. THE INDEMNIFICATION AND ASSUMPTION
PROVISIONS PROVIDED FOR IN THIS AGREEMENT HAVE BEEN EXPRESSLY NEGOTIATED IN
EVERY DETAIL, ARE INTENDED TO BE GIVEN FULL AND LITERAL EFFECT, AND SHALL BE
APPLICABLE WHETHER OR NOT THE LIABILITIES, OBLIGATIONS, CLAIMS, JUDGMENTS,
LOSSES, COSTS, EXPENSES OR DAMAGES IN QUESTION ARISE OR AROSE SOLELY OR IN PART
FROM THE GROSS, ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR
OTHER FAULT OF ANY INDEMNIFIED PARTY. KMEP AND CONTRIBUTORS ACKNOWLEDGE THAT
THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND CONSTITUTES
CONSPICUOUS NOTICE. NOTICE IN THIS CONSPICUOUS NOTICE IS NOT INTENDED TO PROVIDE
OR ALTER THE RIGHTS AND OBLIGATIONS OF THE PARTIES, ALL OF WHICH ARE SPECIFIED
ELSEWHERE IN THIS AGREEMENT.
ARTICLE 11
MISCELLANEOUS
11.1 Expenses. Regardless of whether the transactions contemplated
hereby are consummated, each party hereto shall pay its own expenses incident to
this Agreement and all action taken in preparation for carrying this Agreement
into effect.
11.2 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 the Contributors, addressed to:
Kinder Morgan, Inc.
1301 McKinney, Suite 3400
Houston, Texas 77010
Attention: Joseph Listengart
Telecopy: (713) 844-9570
with a copy to:
Bracewell & Patterson, L.L.P.
South Tower Pennzoil Place
711 Louisiana, Suite 2900
Houston, Texas 77002
Attention: David L. Ronn
Telecopy: (713) 222-3208
If to KMEP, addressed to:
Kinder Morgan Energy Partners, L.P.
1301 McKinney, Suite 3400
Houston, Texas 77010
Attention: Board of Directors of
Kinder Morgan G.P., Inc.
Telecopy: (713) 844-9570
with a copy to:
Vinson & Elkins, LLP
2300 First City Tower
1001 Fannin St.
Houston, Texas 77002
Attention: Keith R. Fullenweider
Telecopy:(713) 615-5855
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. 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.
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11.3 No Negotiations. Until the first to occur of the Closing or
termination of this Agreement pursuant to the provisions of Article 9, none of
the Contributors or their respective officers, directors, stockholders, members
, partners, agents or representatives shall initiate or participate in
discussions with, or otherwise solicit from or provide information to, any
person or entity with respect to any proposals or offers relating to the
disposition of the Equity or the Contributed Entities' assets or the merger or
consolidation of the Contributed Entities with any other person or entity other
than those negotiations that have already commenced for the disposition of
specified assets of KNI that have not been included in the valuation of KNI for
purposes of this Agreement.
11.4 Governing Law. This Agreement shall be governed and construed in
accordance with the substantive laws of the State of Texas without reference to
principles of conflicts of law.
11.5 Public Statements. The parties hereto shall consult with each
other and no party shall issue any public announcement or statement with respect
to the transactions contemplated hereby without the consent of the other
parties, unless the party desiring to make such announcement or statement, after
seeking such consent from the other parties, obtains advice from legal counsel
that a public announcement or statement is required by applicable law or stock
exchange regulations.
11.6 Form of Payment. All payments hereunder shall be made in United
States dollars and, unless the parties making and receiving such payments shall
agree otherwise or the provisions hereof provide otherwise, shall be made by
wire or interbank transfer of immediately available funds by 12:00 Noon Houston,
Texas time on the date such payment is due to such account as the party
receiving payment may designate at least three business days prior to the
proposed date of payment.
11.7 Entire Agreement; Amendments and Waivers. This Agreement and the
documents and instruments and other agreements specifically referred to herein
or delivered pursuant hereto, including the schedules hereto (collectively, the
"Constituent Documents") (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof; (b) are not intended to confer upon any other person or
entity any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise. Each party to this Agreement agrees that (i) no
other party to this Agreement (including its agents and representatives) has
made any representation, warranty, covenant or agreement to or with such party
relating to this Agreement or the transactions contemplated hereby, other than
those expressly set forth in the Constituent Documents, and (ii) such party has
not relied upon any representation, warranty, covenant
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or agreement relating to the transactions contemplated by the Constituent
Documents, other than those referred to in clause (i) above. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by each party to be bound thereby. 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.
11.8 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 the other
parties; provided, however, the KMEP may assign the right to receive the
contribution of the Equity to one of its operating partnerships. Nothing in this
Agreement, express or implied, is intended to confer upon any person or entity
other than the parties hereto and their respective permitted successors and
assigns, any rights, benefits or obligations hereunder.
11.9 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 Contributors and
KMEP 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.
11.10 Interpretation. The parties agree that they have been represented
by counsel during the negotiation and execution of this Agreement and, therefore
waive the application of any law, regulation, holding or rule of construction
providing that ambiguities in an agreement or other document will be construed
against the party drafting such agreement or document.
11.11 Headings and Schedules. The headings of the several Articles and
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. The schedules referred to herein are attached hereto and incorporated
herein by this reference, and unless the context expressly requires otherwise,
such schedules are incorporated in the definition of "Agreement."
11.12 Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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EXECUTED as of the date first set forth above.
KINDER MORGAN ENERGY PARTNERS,
L.P.
By Kinder Morgan G.P., Inc.,
its general partner
By: /s/ David G. Dehaemers, Jr.
-------------------------------------------
David G. Dehaemers, Jr.
Vice President and Chief Financial Officer
KINDER MORGAN G.P., INC.
By: /s/ David G. Dehaemers, Jr.
-------------------------------------------
David G. Dehaemers, Jr.
Vice President and Chief Financial Officer
KINDER MORGAN, INC.
By: /s/ Joseph Listengart
-------------------------------------------
Joseph Listengart
Vice President, General Counsel, and Secretary
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NATURAL GAS PIPELINE COMPANY OF
AMERICA
By: /s/ Joseph Listengart
-------------------------------------------
Joseph Listengart
Vice President and Secretary
KN GAS GATHERING, INC.
By: /s/ Joseph Listengart
-------------------------------------------
Joseph Listengart
Vice President and Secretary
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