Exhibit 10.15
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made on March 15, 1999,
between SEMCO Energy, Inc., a Michigan corporation (the "Seller
Shareholder"), and CoEnergy Trading Company, a Michigan
corporation ("Buyer").
BACKGROUND
A. SEMCO Energy Services, Inc. (the "Company") is a Michigan
corporation and is engaged in the Business (as defined in
Section 11 below), with offices at various locations
including 405 Water Street, Port Huron, Michigan (the
"Premises").
B. Seller Shareholder owns all of the Company's issued and
outstanding capital stock, being 100 shares of common
stock ("Company Common Stock"). Buyer desires to purchase
from Seller Shareholder, and Seller Shareholder desires to
sell to Buyer, all of the issued and outstanding Company
Common Stock (the "Purchased Shares") upon the terms and
subject to the conditions of this Agreement.
C. As a condition to Buyer's willingness to purchase the
Purchased Shares, Seller Shareholder has agreed to not
compete with Buyer or Company in the conduct of the
Business, as provided in Section 11 of this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the Background and the
terms and conditions set forth in this Agreement, the Seller
Shareholder and Buyer agree as follows:
1. AGREEMENT OF PURCHASE AND SALE OF THE PURCHASED SHARES. On
the terms and subject to the conditions set forth in this
Agreement, Seller Shareholder agrees to sell, assign,
transfer, set over, convey, and deliver to Buyer on the
Closing Date, but effective the close of business March 31,
1999 (the "Effective Date"), the Purchased Shares, free,
clear, and discharged of and from all Encumbrances (as
defined in Section 8.4), and Buyer agrees to purchase the
Purchased Shares from Seller Shareholder.
2. PURCHASE PRICE FOR PURCHASED SHARES.
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2.1 Purchase Price. The purchase price Buyer will pay to
Seller Shareholder for the Purchased Shares (the "Purchase
Price") shall be One Million Nine Hundred Fifty Thousand
($1,950,000.00) Dollars, subject to adjustment as provided
in Section 2.3.
2.2 Payment of Purchase Price. The preliminary Purchase Price,
based upon the Preliminary Balance Sheet, shall be paid by
Buyer on the Closing Date by wire transfer of immediately
available funds, against receipt of the certificates for
the Purchased Shares duly endorsed for transfer or
accompanied by duly executed stock powers.
2.3 Purchase-Price Adjustments.
(a) Seller Shareholder shall cause Company to prepare
an estimated balance sheet (the "Preliminary
Balance Sheet") as of the Effective Date or another
date agreed upon by Buyer and Seller Shareholder.
The Preliminary Balance Sheet (i) shall contain
line items substantially consistent with the line
items in Company's Balance Sheet dated December 31,
1998 (a true copy of which is contained in Schedule
8.10), (ii) shall be prepared in accordance with
generally accepted accounting principles
consistently applied ("GAAP"), (iii) shall be
accompanied by a certificate of the chief financial
officer of Company to the effect of clause (ii)
above, (iv) shall be accompanied by a calculation
of the Working Capital of Company (as defined
below) certified by Company's chief financial
officer, and (v) consistent with Company's Balance
Sheet dated December 31, 1998 referenced above,
shall reflect no liabilities other than current
liabilities which are part of Working Capital as
defined below.
(b) If Company's Working Capital is a positive number,
the Purchase Price shall be increased by the amount
of such positive number; and if Company's Working
Capital is a negative number, the Purchase Price
shall be reduced by the amount of such negative
number. The term "Working Capital" shall mean an
amount equal to the current assets minus current
liabilities reflected on the Preliminary Balance
Sheet or the Closing Balance Sheet, as the context
indicates.
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(c) Buyer shall prepare a balance sheet as of the
Effective Date (the "Closing Balance Sheet"). The
Closing Balance Sheet (i) shall contain line items
substantially consistent with the line items in
Company's Balance Sheet dated December 31, 1998 and
(ii) shall be prepared in accordance with GAAP.
(d) Buyer shall prepare the Closing Balance Sheet in
accordance with GAAP. Buyer shall use its best
efforts to complete the Closing Balance Sheet not
later than 60 days after the Closing Date. The
Closing Balance Sheet shall be delivered to Seller
Shareholder immediately upon its completion,
together with a calculation of Working Capital, and
Buyer's work papers. Seller Shareholder shall have
30 days after receiving the Closing Balance Sheet,
the calculation of Working Capital, and Buyer's
work papers to deliver a written notice to Buyer of
any objections to the Closing Balance Sheet and the
calculation of Working Capital. Any such notice of
objections shall be in writing and shall state in
reasonable detail the basis for each objection and
the amount of adjustment that Seller Shareholder
believes is required. If Buyer and Seller
Shareholder cannot agree with respect to the
Closing Balance Sheet or the calculation of Working
Capital within 30 days after the delivery of a
notice of objections or such later date as Buyer
and Seller Shareholder may agree on, the dispute
shall be resolved by arbitration in accordance with
Section 13.8, except that in all events there shall
be a single arbitrator which shall be Ernst & Young
L.L.P. (the "Independent Accounting Firm"). Any
items not in dispute shall be deemed stipulated by
Buyer and Seller Shareholder and shall not be
determined by the Independent Accounting Firm. The
determination of the Independent Accounting Firm
shall be binding and conclusive with regard to the
matters it determines. Buyer and Seller
Shareholder shall pay equally all costs and
expenses relating to the services provided by the
Independent Accounting Firm, notwithstanding the
provisions of Section 13.8(f).
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(e) If the final Purchase Price based upon the Closing
Balance Sheet is more or less than the preliminary
Purchase Price paid on Closing Date, then (i) if
the Purchase Price has increased, Buyer shall pay
the amount of such increase to Seller Shareholder
within ten (10) days following determination of the
final Purchase Price, and (ii) if the Purchase
Price has decreased, Seller Shareholder shall pay
the amount of such decrease to Buyer within ten
(10) days following determination of the final
Purchase Price. Notwithstanding anything herein to
the contrary, there will be no Purchase Price
adjustment related to the operation of the business
from the Effective Date through the Closing Date;
any income or loss for such period shall be for the
benefit or to the detriment of Buyer.
3. WINDING UP OF WHOLESALE SEGMENT.
Company and Quantum Energy are parties to that certain Marketing
Representative Agreement dated June 1, 1998 ("Quantum
Agreement"). The Quantum Agreement covers a "Book of Business",
defined as the gas sales and purchase agreements and associated
transportation and storage and hedging agreements listed on
Schedules 8.17(c), 8.17(d), 8.27(d) and 8.27(e) hereto ("Quantum
Book"). The Quantum Book comprises the remaining Wholesale
Segment of the Company's business.
Company is negotiating the assignment of the Quantum Book to
Marathon.
In the event that the assignment of the Quantum Book to Marathon
is not consummated by March 31, 1999, the Quantum Book will be
retained by the Company, and Buyer will cause Company to perform
the obligations of the Company under the Quantum Agreement and
the contracts comprising the Quantum Book to be performed from
and after the Effective Date and hold Seller Shareholder harmless
from such obligations. In the event that the assignment of the
Quantum Book to Marathon is consummated by March 31, 1999, the
cash payment or amount due from Quantum will be recorded on the
Preliminary Balance Sheet and Final Balance Sheet as cash or an
account receivable for purposes of the computation required under
Section 2.3 hereof.
4. PRECLOSING ACTIONS. BEFORE THE CLOSING:
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4.1 Conduct of Business. Seller Shareholder shall cause
Company to carry on and conduct the Business only in the
ordinary course, without any change in the policies,
practices, and methods Company pursued before the date of
this Agreement; provided, however, Company shall continue
the already commenced process of Winding Up the Wholesale
Segment as described in Section 3. Other than Winding Up
the Wholesale Segment, Seller Shareholder will use
commercially reasonable efforts and cause Company to use
commercially reasonable efforts to preserve the Business;
to preserve the relationships with Company's customers,
suppliers, and others having business dealings with
Company; and to preserve the services of Company's
employees, agents, and representatives. Except for such
Winding Up but otherwise without limitation of the
foregoing, (a) Seller Shareholder will cause Company not
to undertake, without Buyer's prior written consent, any
action that, if taken prior to the date of this Agreement,
would be required to be disclosed on Schedule 8.12, and
(b) Seller Shareholder will cause Company not to take any
action or refrain from taking action that would result in
any change in Company's assets or liabilities, other than
in the ordinary course of business consistent with past
practices. Seller Shareholder will consult with Buyer
regarding management of the Company.
4.2 Access to Buyer. From the date of this Agreement through
the Closing, Seller Shareholder shall cause Company to
permit Buyer and its representatives to have access at all
reasonable times to Company's books, records, files and
employees. No such access, nor the due diligence
investigation of Company conducted by Buyer and its
representatives prior to the date hereof, shall affect the
representations and warranties of Seller Shareholder or
Buyer's right to rely upon such representations and
warranties.
4.3 Accuracy of Representations and Warranties and
Satisfaction of Conditions. Seller Shareholder will
immediately advise Buyer in writing if (a) any of the
representations or warranties of Seller Shareholder is
untrue or incorrect in any material respect, or (b) Seller
Shareholder becomes aware of the occurrence of any event
or state of facts that results in any of the
representations and warranties of Seller Shareholder being
untrue or incorrect as if Seller Shareholder was then
making them. Seller Shareholder will not take any action,
or omit to take any action, and shall cause Company not to
take any action, or omit to take any action, that would
result in any of Seller Shareholder's representations and
warranties set forth in this Agreement to be untrue or
incorrect as of the Closing Date. Seller Shareholder will
use its best efforts to cause all conditions set forth in
Section 5 that are within its control to be satisfied as
promptly as practicable under the circumstances.
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4.4 HSR Act Notifications. Buyer shall and Seller Shareholder
shall promptly take all steps necessary to file with the
Federal Trade Commission and U.S. Department of Justice
all pre-transaction notifications and related information
required pursuant to the provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and to seek early termination of
the waiting period under the HSR Act.
5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. Buyer's
obligation to consummate the transactions contemplated by
this Agreement is subject to the fulfillment (or waiver by
Buyer) before or at the Closing of each of the following
conditions:
5.1 Accuracy of Representations and Warranties. The
representations and warranties of Seller Shareholder
contained in this Agreement and all related documents
shall be true and correct at and as of the Closing Date
as though such representations and warranties were made
on that date.
5.2 Performance of Covenants. Seller Shareholder shall have in
all respects performed and complied with all covenants,
agreements, and conditions that this Agreement requires,
and with all other related documents to be performed or
complied with prior to or on the Closing Date.
5.3 Schedules. Buyer shall be reasonably satisfied with the
form and substance of the schedules to this Agreement.
5.4 No Casualty. Prior to the Closing Date, Company shall not
have incurred, or be threatened with, a material liability
or casualty that would materially impair the value of its
assets or of the Business.
5.5 Opinion of Counsel. Buyer shall have received the
favorable opinion of counsel to Seller Shareholder dated
the Closing Date and in form and substance reasonably
satisfactory to Buyer.
5.6 Non-Foreign Person. Seller Shareholder shall have
delivered to Buyer an affidavit stating, under penalty of
perjury, the Seller Shareholder's federal taxpayer
identification number and that it is not a foreign person,
pursuant to Section 1445(b)(2) of the Code.
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5.7 Share Certificates. Seller Shareholder shall have
delivered to Buyer certificates representing all of the
Purchased Shares registered in the name of the Seller
Shareholder (without any restrictive legend or together
with such instruments and items that shall permit, in the
reasonable opinion of Buyer's counsel, the sale and
transfer of such shares free, clear, and discharged of any
such legend). The certificates shall be duly endorsed in
blank or with accompanying stock powers or assignments
duly signed.
5.8 Certificates Regarding Conditions Precedent. The Seller
Shareholder shall have delivered to Buyer a certificate of
the Seller Shareholder certifying that as of the Closing
Date all of the conditions set forth in Sections 5.1, 5.2,
5.4, 5.6, 5.9, and 5.11 have been complied with.
5.9 No Litigation. No action, suit, proceeding, or
investigation shall have been instituted before any court
or governmental body, or instituted by any governmental
agency, to restrain or prevent the carrying out of the
transactions contemplated by this Agreement or that might
affect Buyer's right to own, operate, and control the
Purchased Shares or the Business after the Closing Date.
5.10 Lien Search. Buyer shall have received UCC lien searches
in form and content satisfactory to Buyer.
5.11 Consents. Seller Shareholder shall have obtained in
writing all consents necessary or desirable to consummate
or facilitate consummation of this Agreement and any
related transactions. The consents shall be delivered to
Buyer before Closing and shall be reasonably acceptable to
Buyer in form and substance.
5.12 Waivers. Seller Shareholder shall have delivered to Buyer
a statement from the Seller Shareholder and each of
Company's officers and directors, in form and substance
acceptable to Buyer, that each either waives or has no
claim, as appropriate, against Company for unpaid
dividends, bonuses, profit sharing, rights, or other
claims of any kind, nature, or description except salaries
and fringe benefits normally accrued and described in the
statement or otherwise contemplated under this Agreement.
5.13 Resignations. Except only as otherwise directed by Buyer,
each director and officer of Company shall have delivered
to Buyer resignations from their positions and any other
positions held in, or by appointment by or from, Company.
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5.14 HSR Notification. All pre-transaction notifications
required of all parties pursuant to the provisions of the
HSR Act have been filed with the Federal Trade Commission
and U.S. Department of Justice, and the waiting period
under the HSR Act has expired or the Federal Trade
Commission and U.S. Department of Justice have granted
early termination thereof.
5.15 Approvals by Buyer's Counsel. Buyer's counsel shall have
reasonably approved all legal matters and the form and
substance of all documents Buyer or Company or Seller
Shareholder is to deliver at the Closing.
5.16 Intentionally Blank.
5.17 Key Employees. Seller Shareholder shall use its best
reasonable efforts to encourage the marketing employees of
Company to accept employment with Buyer or Buyer's
designee.
5.18 Lease Termination. Company's lease of premises at 405
Water Street, Port Huron, Michigan, and of any other real
property, shall be assigned by Company to Seller
Shareholder at Closing but effective the Effective Date,
and Seller Shareholder shall assume and agree to perform,
and defend and hold the Company harmless from and against,
all liabilities and obligations thereunder.
5.19 Benefit Plan Terminations. Seller Shareholder shall have
made arrangements, satisfactory to Buyer, such that all of
Company's ERISA and employee benefit plans, including,
without limitation, all Plans, Pension Plan and Trusts and
all Welfare Plans, as defined in Section 8.15, shall have
been made prospectively inapplicable to Company's
employees (i.e. no further benefits or liabilities will
accrue thereafter) without further liability or obligation
on the part of Company after the Effective Date.
6. CONDITIONS PRECEDENT TO SELLER SHAREHOLDER'S OBLIGATIONS.
Seller Shareholder's obligation to consummate the
transactions contemplated by this Agreement is subject to
the fulfillment (or waiver by Seller Shareholder) before
or at the Closing of each of the following conditions:
6.1 Accuracy of Representations and Warranties. Buyer's
representations and warranties contained in this Agreement
and all related documents shall be true and correct at and
as of the Closing Date as though such representations and
warranties were made at that time.
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6.2 Performance of Covenants. Buyer shall have in all respects
performed and complied with all covenants, agreements, and
conditions required by this Agreement and all related
documents that must be performed or complied with before
and at the Closing Date.
6.3 HSR Notification. All pre-transaction notifications
required of all parties pursuant to the provisions of the
HSR Act have been filed with the Federal Trade Commission
and U.S. Department of Justice, and the waiting period
under the HSR Act has expired or the Federal Trade
Commission and U.S. Department of Justice have granted
early termination thereof.
6.4 Board Approval. Seller Shareholder's Board of Directors
shall have approved this Agreement and the transactions
contemplated hereunder.
7. CLOSING AND POST-CLOSING MATTERS.
7.1 Closing and Effective Date. The closing of the
transactions contemplated in this Agreement (the
"Closing") shall take place at the offices of Buyer on
the third business day or sooner following the date the
waiting period under the HSR Act has expired or the
Federal Trade Commission and U.S. Department of Justice
have granted early termination thereof, provided all
other conditions precedent have been fulfilled or
waived (the "Closing Date"). However: (a) the Closing
shall be effective the Effective Date, and (b) if the
Closing has not taken place on or before June 1, 1999
(subject to extension of such date by written agreement
of Seller Shareholder and Buyer) due to failure or
inability to satisfy all conditions precedent, then
Seller Shareholder and Buyer shall each have the right
to terminate this Agreement by giving thirty (30) days'
prior written notice to the other, and this Agreement
shall terminate without further obligation on the part
of any party upon the expiration of such thirty (30)
day period unless all conditions precedent have been
fulfilled or waived prior to that date.
7.2 Certain Closing Expenses. Seller Shareholder shall be
liable for and shall pay all federal, state, and local
sales, use, excise, transfer, and documentary stamp taxes
and all other taxes, duties, or other like charges, and
all recording and filing fees, properly payable on and in
connection with the conveyance and transfer of the
Purchased Shares to Buyer.
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7.3 Further Assurances. Seller Shareholder shall cooperate
with and assist Buyer and take all other reasonable
actions to ensure a smooth transition of the Company to
Buyer. From time to time after the Closing Date, Seller
Shareholder shall, at the request of Buyer, execute and
deliver additional conveyances, transfers, documents,
instruments, assignments, applications, certifications,
papers, and other assurances that Buyer reasonably
requests as necessary, appropriate, convenient, useful, or
desirable to effectively carry out this Agreement's intent
and to transfer the Purchased Shares to Buyer.
7.4 Tax Sharing Agreements. Seller Shareholder and Company
shall, as of the Effective Date, terminate any tax sharing
or allocation agreement as relates in any way to Company
so that such agreements are of no further force or effect
as to Company for any periods on or after the Effective
Date and so that there shall be no further liability of
Company under any such agreement.
7.5 Following Closing.
A. Buyer, Company, Seller Shareholder and the common
parent of the consolidated group which (prior to
the Effective Date) includes Company, shall all
take such actions, and file such forms, returns and
information (including, but without limitation,
Form 8023), at such time or times and in such
manner, as shall be necessary so that, as permitted
under Section 338(h)(10) of the Code, Company's
basis in its assets, following the Closing but
effective immediately following the Effective Date,
shall be stepped-up to include the Purchase Price,
as finally adjusted, and any deemed purchase price
relating to liabilities to which Company's assets
are subject at the Effective Date. Provided the
covenants in this Section 7.5A and in Section 7.5B
are satisfied by Seller Shareholder, by such common
parent and, to the extent of Seller Shareholder's
control, by Company, Seller Shareholder makes no
representation or warranty as to whether such
step-up in basis will be allowed.
B. The consolidated group which (prior to the
Effective Date) includes Company shall file a
consolidated return for the taxable period that
includes the Effective Date, in which Company shall
recognize gain or loss as if, while it was a member
of such group, it sold all of its assets in a
single transaction at the close of the Effective
Date (but before its deemed liquidation) as
provided in Section 1.338(h)(10)-1(e) of the
Regulations under the Code.
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C. Any refund of income taxes with respect to Company
shall belong to the party responsible for payment
of the income taxes for the period for which the
tax refund in question is paid.
D. Seller Shareholder and Buyer shall each provide the
other with such assistance as may reasonably be
requested in connection with the preparation of any
tax return, or any audit or other examination by
any taxing authority, or judicial or administrative
proceedings relating to tax liabilities, provided
the requesting party agrees to reimburse the
reasonable direct costs incurred by the responding
party in connection therewith. Seller Shareholder
and Buyer shall retain, and provide the other with
copies upon request of, any records or other
information which may be relevant to any such
return, audit or examination, proceeding or
determination. Seller Shareholder shall retain,
until expiration of the applicable statute of
limitations, including extensions, copies of all
returns, supporting work schedules and other
records and information which may be relevant to
such returns for all tax periods or portions
thereof ending on or before the Effective Date.
8. SELLER SHAREHOLDER'S REPRESENTATIONS AND WARRANTIES. As of
the date of this Agreement and as of the Closing, Seller
Shareholder represents and warrants to Buyer, and
acknowledges and confirms that Buyer is relying on these
representations and warranties in entering into this
Agreement:
8.1 Organization and Standing. Company is a corporation duly
organized, validly existing, and in good standing under
the laws of the State of Michigan, and Company has all
requisite power and authority (corporate and otherwise) to
own its properties and conduct its business as it is now
being conducted. The nature of the business and the
character of the properties Company owns or leases do not
make licensing or qualification of Company as a foreign
corporation necessary under the laws of any other
jurisdiction. Except as set forth in Schedule 8.1, Company
has not in the last five years used or assumed any other
name in connection with the conduct of its business.
8.2 Articles and Bylaws. Schedule 8.2 contains true and
complete copies of Company's Articles of Incorporation and
Bylaws.
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8.3 Capitalization. Company's authorized capital stock
consists solely of 100 shares of Company Common Stock, of
which 100 shares are issued and outstanding. All of the
issued and outstanding Company Common Stock is owned of
record and beneficially by the Seller Shareholder. A true
and complete list of the certificate numbers and number of
shares held by the Seller Shareholder is set forth in
Schedule 8.3. There are no options, calls, subscriptions,
warrants, agreements, or other securities or rights
outstanding for the purchase or other acquisition of any
of Company's capital stock; that are convertible into,
exercisable for, or relate to any of Company's capital
stock; or that have any voting rights. Company has no
outstanding contractual obligations to repurchase,
redeem, or otherwise acquire any outstanding shares of
Company's capital stock.
8.4 Company Common Stock. Seller Shareholder is the lawful
owner of the Purchased Shares, free, clear, and discharged
of and from all pledges, liens, security interests,
encumbrances, mortgages, adverse claims, charges, options,
equity interests, proxies, voting agreements or trusts,
leases, tenancies, easements, or other interests
("Encumbrances"). All shares of the Purchased Shares have
been duly authorized and validly issued and are fully
paid, nonassessable, and free of preemptive rights. On
delivery to Buyer at the Closing of the Purchased Shares,
duly endorsed for transfer, Buyer will be the absolute
owner of the Purchased Shares, free, clear, and discharged
of and from all Encumbrances.
8.5 Authorization. Subject to approval by Seller
Shareholder's Board of Directors, the Seller Shareholder
has the requisite legal capacity to execute, deliver, and
perform this Agreement and to consummate any related
transactions. The Seller Shareholder has duly executed and
delivered this Agreement. This Agreement is the legal,
valid, and binding obligation of the Seller Shareholder,
enforceable against it in accordance with its terms,
except as such enforcement may be limited by
bankruptcy, insolvency, moratorium, or similar laws
relating to the enforcement of creditors' rights and by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in
equity).
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8.6 Existing Agreements and Governmental Approvals.
(a) Except as set forth in Schedule 8.6, the execution,
delivery, and performance of this Agreement and the
consummation of the transactions contemplated
hereby (i) do not and will not violate any
provisions of law applicable to Company or the
Seller Shareholder; (ii) do not and will not
conflict with, result in the breach or termination
of any provision of, or constitute a default under
(in each case whether with or without the giving of
notice or the lapse of time, or both) Company's
Articles of Incorporation or Bylaws or any
indenture, mortgage, lease, deed of trust; other
instrument, contract, or agreement; or any order,
judgment, arbitration award, or decree to which
Company or Seller Shareholder is a party or by
which either of them or any of their respective
assets and properties are bound; and (iii) do not
and will not result in the creation of any
Encumbrance on any of the properties, assets, or
business of Company or Seller Shareholder.
(b) Except as set forth in Schedule 8.6 and except for
compliance with the HSR Act, no approval,
authority, or consent of or filing by Company or
Seller Shareholder with, or notification to, any
federal, state, or local court, authority, or
governmental or regulatory body or agency, or any
other corporation, partnership, individual, or
other entity is necessary to authorize the
execution and delivery of this Agreement or the
consummation of the transactions contemplated
hereby.
8.7 No Subsidiaries or Guaranties. Company does not have any
subsidiaries or directly or indirectly own any interest or
have any investment in any other corporation, partnership,
or other entity. Company is not a guarantor, or otherwise
liable for the payment, of any obligations of any other
person or entity.
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8.8 No Insolvency. No insolvency proceeding of any character,
including, without limitation, bankruptcy, receivership,
reorganization, composition, or arrangement with
creditors, voluntary or involuntary, affecting Company or
any of its assets or properties is pending or, to the Best
Knowledge of Seller Shareholder, threatened. Neither
Company nor Seller Shareholder has taken any action in
contemplation of, or that would constitute the basis for,
the institution of any such insolvency proceedings. For
the purposes of this Agreement, the phrase "Best Knowledge
of Company" or "Best Knowledge of Seller Shareholder," or
words of similar import, means the knowledge the Company
or the Seller Shareholder, as applicable, would have after
due inquiry into the matter in question.
8.9 Permits and Licenses. Company has all necessary permits,
certificates, licenses, approvals, consents, and other
authorizations required to carry on and conduct the
Business and to own, lease, use, and operate its assets at
the places and in the manner in which the Business is
conducted. A complete list of Company's permits,
certificates, licenses, approvals, consents, and other
authorizations is included in Schedule 8.9.
8.10 Financial Statements. Seller Shareholder has delivered to
Buyer the financial statements listed in Schedule 8.10,
and Seller Shareholder shall deliver, before the Closing,
copies of all financial statements Company has prepared
for each full month prior to the Closing (the "Financial
Statements"). The Financial Statements have been and will
be prepared in accordance with GAAP, do and will fairly
and accurately present the financial position of Company
as of the dates indicated and the results of its
operations as of the dates indicated and for the periods
covered thereby, and are and will be true and correct in
all material respects. Adequate provision has been and
will be timely made in the Financial Statements for
doubtful accounts or other receivables; sales are stated
in the Financial Statements net of discounts, returns, and
allowances; all Taxes (as defined in Section 8.22) due or
paid are and will be timely reflected in the Financial
Statements; and all Taxes not yet due and payable are and
will be fully accrued or otherwise provided for in the
Financial Statements. Any items of income or expense that
are unusual or of a nonrecurring nature during any such
period or at any such balance sheet date are and will be
separately disclosed in the Financial Statements. Except
as otherwise disclosed on Schedule 8.10, Company's books,
records, and work papers are complete and correct; have
been maintained on an accrual basis, in accordance with
GAAP; and accurately reflect, and will accurately reflect,
the basis for the financial condition and the results of
Company's operations that are set forth in the Financial
Statements and are to be set forth in the Preliminary
Balance Sheet and the Closing Balance Sheet.
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8.11 No Undisclosed Liabilities, and No Long Term Debt. Except
as otherwise disclosed on Schedule 8.11, in the Financial
Statements or otherwise in this Agreement, Company does
not have any liabilities or obligations, whether accrued,
absolute, contingent, or otherwise. As of the date of
this Agreement and as of the Closing Date, Company has no
long term debt.
8.12 Conduct of Business. Except as otherwise disclosed on
attached Schedule 8.12, since December 31, 1998, Company
has not:
(a) Issued any capital stock or other securities
convertible into or exchangeable or exercisable for
capital stock or having voting rights; declared or
paid any dividend; made any other payment from
capital or surplus or other distribution of any
nature; or directly or indirectly redeemed,
purchased, or otherwise acquired, recapitalized, or
reclassified any of its capital stock.
(b) Merged or consolidated with any other entity.
(c) Altered or amended its Articles of Incorporation or
Bylaws.
(d) Entered into, materially amended, or terminated any
contract, license, lease, commitment or permit,
except in the ordinary course of business
consistent with past practices.
(e) Experienced any labor disturbance.
(f) Incurred or become subject to any obligation or
liability (absolute, accrued, contingent, or
otherwise), except in the ordinary course of
business consistent with past practices.
(g) Discharged or satisfied any Encumbrance or paid or
satisfied any obligation or liability (absolute,
accrued, contingent, or otherwise) other than (i)
liabilities shown or reflected in Company's balance
sheet dated December 31, 1998 or (ii) liabilities
incurred since the date of the balance sheet, in
each such case only in the ordinary course of
business consistent with past practices and in
accordance with the express terms of such
obligation or liability.
(h) Mortgaged, pledged, or subjected to any Encumbrance
any of its assets.
15
(i) Sold, transferred, or agreed to sell or transfer
any asset, property, or business; canceled or
agreed to cancel any debt or claim; or waived any
right, except in the ordinary course of business
consistent with past practices.
(j) Disposed of or permitted to lapse any Intellectual
Property.
(k) Granted any increase in employee rates of pay or
any increases in salary payable or to become
payable to any employee, consultant, or agent, or
by means of any bonus or pension plan, contract, or
other commitment increased the compensation of any
employee, consultant, or agent, or hired any new
officer, employee, consultant, or agent, other than
consistent with past practices (all of which are
disclosed on Schedule 8.12).
(l) Made or authorized any capital expenditures for
additions to plant or equipment accounts in excess
of $10,000.00.
(m) Entered into any transaction (including, without
limitation, any contract or other arrangement
providing for employment, furnishing of services,
rental of real or personal property, or otherwise
requiring payments) with any shareholder, officer,
or director of Company or of Seller Shareholder;
any member of their immediate families; or any of
their affiliates.
(n) Experienced any material damage, destruction, or
loss (whether or not covered by insurance)
affecting its properties, assets, or Business.
(o) Failed to regularly maintain and repair its assets
in the ordinary course of business consistent with
past practices.
(p) Instituted or settled any litigation, action, or
proceeding before any court or governmental body
relating to it or its property, except for the
litigation instituted against Wickford as described
in Section 8.23.
(q) Made any change in any method of accounting or any
accounting practice or suffered any deterioration
in accounting controls.
(r) Varied, canceled, or allowed to expire any
insurance coverage.
16
(s) Made any payment or disbursement of moneys or
property or declared or paid any dividend or other
distribution to or on behalf of any officer,
director, or shareholder of Company or of Seller
Shareholder or any member of their immediate
families or any of their affiliates, other than for
payment of compensation or reimbursement of
expenses in accordance with past practices.
(t) Entered into any other transaction other than in
the ordinary course of business consistent with
past practices.
(u) Agreed or committed to do any of the foregoing.
8.13 No Adverse Changes. Except as otherwise disclosed in
Schedule 8.13, since December 31, 1998 there has not been
any occurrence, condition, or development that has
materially adversely affected, or is likely to
materially adversely affect, Company, its prospects,
its condition (financial or otherwise), its affairs,
its operations, the Business, or its assets.
8.14 Employees. There is not now, nor has there been at any
time during the past five years, any strike, lockout,
grievance, other labor dispute, or trouble of any nature
pending or threatened against Company or that in any
manner affects Company. Company is and has been in
compliance with all rules regulating employee wages and
hours. On or before the Closing Date, Company shall have
paid all its accrued obligations relating to employees
(whether arising by operation of law, by contract, or by
past service) or payments to trusts or other funds, to any
governmental agency, or to any individual employee (or his
or her legal representatives) with respect to unemployment
compensation benefits, profit sharing, or retirement
benefits, or Social Security benefits.
8.15 Employee Benefit Plans and Related Matters.
(a) Schedule 8.15 contains a true and complete list of
all plans, contracts, programs, and arrangements
(including, but not limited to, collective
bargaining agreements, pensions, bonuses, deferred
compensation, retirement, severance,
hospitalization, insurance, salary continuation,
and other employee benefit plans, programs, or
arrangements) maintained currently or at any time
within the previous five years by Company or under
which Company has had any obligations with respect
to an employee of Company (the "Plans").
17
(b) Except as specifically set forth in Schedule 8.15,
(i) each employee pension benefit plan, as defined
in Section 3(2) of ERISA, and its related trust
("Pension Plan and Trust") now meet, and since
their inception have met, the requirements for
qualification under Sections 401(a) and 401(k) of
the Internal Revenue Code of 1986, as amended (the
"Code"), and are now, and since their inception
have been, exempt from taxation under Section
501(a) of the Code, and the Internal Revenue
Service ("IRS") has issued a favorable
determination letter with respect to the qualified
status of each Pension Plan and Trust and has not
taken any action to revoke such letter; (ii)
Company has performed all obligations required to
be performed by it under the Plans (including, but
not limited to, the making of all contributions)
and is not in default under and has no knowledge of
any default by any other party to the Plans; (iii)
Company is in compliance with the requirements of
all statutes, orders, and governmental rules and
regulations applicable to such Plans, including,
but not limited to, ERISA and the Code; (iv)
neither Company nor, to the Best Knowledge of
Seller Shareholder, any other disqualified person
or party in interest, within the meaning of Section
4975 of the Code or Section 3(14) of ERISA, has
engaged in any prohibited transaction, as this term
is defined in Section 4975 of the Code or Section
406 of ERISA, that could, following the Closing
Date, subject any Plan (or its related trust),
Buyer, Company, or any officer, director, or
employee of Buyer or Company, to any tax or penalty
imposed under the Code or ERISA; (v) there are no
actions or claims pending (other than routine
claims for benefits) or, to the Best Knowledge of
Company or Seller Shareholder, threatened against
any Plan or against the assets of any Plan; (vi) no
Plan is subject to Part 3 of Title I of ERISA,
Section 412 of the Code, or Title IV of ERISA,
other than the existing Non-Union Employees'
Retirement Plan; (vii) each Plan's plan official,
as defined in Section 412 of ERISA, is bonded to
the extent required by Section 412; (viii) no
proceeding has been initiated to terminate any
Plan, and any such termination will not subject
Company or Buyer to liability to any person; (ix)
no Plan is a multiemployer plan, as defined in
Section 3(37) of ERISA; (x) no retiree benefits are
payable under any employee welfare benefit plan
("Welfare Plan"), as this term is defined in
Section 3(1) of ERISA, other than the existing
18
Employee Benefit Plan; and (xi) each Welfare Plan
that is a group health plan within the meaning of
Section 5000 of the Code complies with and in each
case has complied with the applicable requirements
of Sections 601 through 608 of ERISA, Section
162(k) of the Code (through December 31, 1988), and
Section 4980B of the Code (commencing January 1,
1989).
(c) Each of the following is included in the list of
agreements in Schedule 8.15: all collective
bargaining agreements, employment and consulting
agreements, executive compensation plans, bonus
plans, deferred compensation plans, employee
pension or retirement plans, employee
profit-sharing plans, employee stock purchase and
stock option plans, hospitalization insurance, and
other plans and arrangements providing for employee
benefits to Company's employees.
(d) No retired employees of Company are receiving or
are entitled to receive any payments or health or
other benefits from Company, except such benefits
as are being received or are entitled to be
received from Seller Shareholder.
8.16 Employee Matters. Schedule 8.16 contains a true and
complete list of the following: the names, positions, and
compensation of the present employees of the Company.
Except as listed in Schedule 8.16, all Company's employees
are employees-at-will, may be terminated at any time in
accordance with the written policies (copies of which are
contained in Schedule 8.16) of Company for any lawful
reason or for no reason, and are not entitled to
employment by virtue of any oral or written contract,
employer policy, or otherwise. As of the Closing, the
Company will have no employees.
8.17 Contracts and Commitments.
(a) Schedule 8.17 contains a true and complete list of
all of Company's written, and a description of all
material terms of Company's unwritten, contracts,
obligations, agreements, plans, arrangements, and
commitments of any kind or nature (the "Contracts
and Commitments"), except for
(i) those contracts that are described in
another Schedule;
19
(ii) each purchase contract with a customer made
in the ordinary course of business
consistent with past practices under which
Company is obligated to deliver less than
$10,000.00 in invoice value of product and
services in each transaction or series of
related transactions; and
(iii) each purchase commitment made in the
ordinary course of business at prevailing
prices, consistent with past practices, that
is not in excess of $10,000.00 in each
transaction or series of related
transactions.
All Contracts and Commitments are in full force and
effect without amendment (unless the amendments are
clearly noted), and Company is and shall be
entitled to all benefits from any contracts.
(b) True and complete copies of all Contracts and
Commitments have been delivered to Buyer. All
Contracts and Commitments are the result of bona
fide, arm's-length transactions and are legal,
valid, and binding obligations of the parties to
them enforceable in accordance with their
respective terms, subject to laws generally
governing bankruptcy and the enforcement of
creditor's rights.
(c) Except as set forth in attached Schedule 8.17, no
default or alleged default exists on the part of
Company nor, to the Best Knowledge of Seller
Shareholder, on the part of any other person, under
any Contract or Commitment.
8.18 Title to Assets. Company is the sole and absolute owner of
all the assets reflected in Company's Balance Sheet dated
December 31, 1998 and to be reflected in the Preliminary
Balance Sheet and the Closing Balance Sheet and has good
and marketable title to all such assets, free and clear of
any and all Encumbrances. Schedule 8.18 lists or describes
all property used in the conduct of the Business and/or
situated on the Premises that is owned by or an interest
in which is claimed by any person (whether a customer,
supplier, or other person) for which Company is
responsible, together with copies of all related
agreements. All such property is situated on the Premises
and is in such condition that, upon return to its owner,
Buyer will not be liable in any amount to the owner.
20
8.19 Condition of Assets. All items of personal property
reflected in Company's Balance Sheet dated December 31,
1998, and to be reflected in the Preliminary Balance Sheet
and the Closing Balance Sheet, are and will be in good
working order and repair. Each item is situated at the
Premises and is fit for its intended purpose, with no
material defects.
8.20 Receivables. The accounts and other receivables reflected
in Company's Balance Sheet dated December 31, 1998, and to
be reflected on the Preliminary Balance Sheet and Closing
Balance Sheet, are and will be the result of bona fide
sales or other transactions. Except to the extent that a
reserve against the possible uncollectibility of such
accounts and other receivables has been established and is
reflected on Company's Balance Sheet dated December 31,
1998, and will be established and reflected on the
Preliminary Balance Sheet and the Closing Balance Sheet,
all of the accounts and other receivables are fully
collectible within 180 days of the balance sheet date in
accordance with Company's ordinary practice (which has
been disclosed to Buyer) and without resort to legal
proceedings.
8.21 Sufficiency of Assets. The assets reflected in Company's
Balance Sheet dated December 31, 1998, and to be reflected
in the Preliminary Balance Sheet and the Closing Balance
Sheet, constitute and will constitute all of the property
and assets, real, personal, and mixed, tangible and
intangible (including, without limitation, contract
rights), that are used or useful in, or are necessary for
the conduct of, the Company's Business in accordance with
present practices, except such as are provided by Seller
Shareholder and its affiliates.
8.22 Taxes.
(a) For the purposes of this Agreement, Tax or Taxes
shall mean all federal, state, county, local, and
other taxes (including, without limitation, income
taxes; premium taxes; single-business taxes; excise
taxes; sales taxes; use taxes; value-added taxes;
gross receipts taxes; franchise taxes; ad valorem
taxes; real estate taxes; severance taxes; capital
levy taxes; transfer taxes; stamp taxes;
employment, unemployment, and payroll-related
taxes; withholding taxes; and governmental charges
and assessments), and include interest, additions
to tax, and any penalties.
21
(b) Except as otherwise disclosed on Schedule 8.22,
Company has filed on a timely basis all Tax returns
it is required to file under any federal, state, or
local law and has paid or established an adequate
reserve with respect to all Taxes for the periods
covered by such returns. No agreements have been
made by or on behalf of Company for any waiver or
for the extension of any statute of limitations
governing the time of assessment or collection of
any Taxes. Company and its officers have received
no notice of any pending or threatened audit by the
IRS, or any state or local agency, related to
Company's Tax returns or Tax liability for any
period, and no claim for assessment or collection
of Taxes has been asserted against Company. There
are no federal, state, or local tax liens
outstanding against any of Company's assets,
properties, or business.
8.23 Litigation. There are no claims, disputes, actions, suits,
proceedings, or investigations pending or, to the Best
Knowledge of the Seller Shareholder, threatened against or
affecting Company, its business, or its assets, except for
the litigation instituted by the Company on February 9,
1999 described as SEMCO Energy Services, Inc. v. Black
Hills Energy Resources, Inc., et al. (the "Wickford
Litigation"). Seller Shareholder shall assume, and defend
and hold the Company harmless from and against, all
liabilities and obligations arising out of, related to or
connected with the Wickford Litigation. The obligations of
Seller Shareholder related to the Wickford Litigation
shall not be subject to Section 10.3 hereof. Buyer agrees
to cause the Company to pay over to Seller Shareholder any
cash recovery the Company actually receives in the
Wickford Litigation.
8.24 Product Liability. No defect or deficiency exists in any
of the products sold or services provided by Company that
could give rise to any liabilities or claims for breach of
warranty, product liability, or similar liabilities or
claims, except to the extent fully insured against
(including all related costs of defense).
8.25 Environmental Matters.
(a) The following terms used in this Section 8.25 have
the meanings set forth below:
22
(i) Environmental Laws means the (A) Toxic
Substances Control Act, 15 USC 2601 et seq.;
(B) National Historic Preservation Act, 16
USC 470 et seq.; (C) Coastal Zone Management
Act of 1972, 16 USC 1451 et seq.; (D) Rivers
and Harbors Appropriation Act of 1899, 33
USC 401 et seq.; (E) Clean Water Act, 33 USC
1251 et seq.; (F) Flood Disaster Protection
Act of 1973, 42 USC 4001 et seq.; (G)
National Environmental Policy Act of 1969,
42 USC 4321 et seq.; (H) Resource
Conservation and Recovery Act of 1976
(RCRA), 42 USC 6901 et seq.; (I) Clean Air
Act, 42 USC 7401 et seq.; (J) Comprehensive
Environmental Response, Compensation, and
Liability Act (CERCLA), 42 USC 9601 et seq.;
(K) Hazardous Materials Transportation Act,
49 USC 1801 et seq.; (L) Safe Drinking Water
Act, 42 USC 300f et seq.; (M) Emergency
Planning and Community Right-to-Know Act of
1986, 42 USC 11001 et seq.; (N) Federal
Insecticide, Fungicide, and Rodenticide Act,
7 USC 136 et seq.; (O) Occupational Safety
and Health Act, 29 USC 651 et seq.; and all
other federal, state, county, municipal and
local, foreign, and other statutes, laws,
regulations, and ordinances that relate to
or deal with protection of human health or
the environment, all as may be amended from
time to time.
(ii) Hazardous Substance(s) means (A) any
flammable or combustible substance,
explosive, radioactive material, hazardous
waste, toxic substance, pollutant,
contaminant, or any related materials or
substances identified in or regulated by any
of the Environmental Laws; and (B) asbestos,
polychlorinated biphenyls (PCBs), urea
formaldehyde, chemicals and chemical wastes,
explosives, known carcinogens, petroleum
products and by-products (including
fractions thereof), and radon.
(iii) Property means any parcel of real estate now
or previously owned, leased, or operated by
Company or in which Company has or had any
interest, including the Premises.
23
(b) Except as described in Schedule 8.25: (i) Company
is now and has at all times been in full compliance
with all Environmental Laws; (ii) there are no
substances or conditions in or on the Property that
may support a claim or cause of action against
Company or Buyer under any Environmental Laws;
(iii) there are not, and never have been, any
underground storage tanks located in or under the
Property; (iv) neither Company nor its directors,
officers, employees, or agents have generated or
transported any Hazardous Substances at any time
that have been transported to or disposed of in any
landfill or other facility, where the
transportation or disposal could create liability
to any unit of government or any third party.
(c) No activity has been undertaken on the Property
that would cause or contribute to (i) the Property
becoming a treatment, storage or disposal facility
within the meaning of any Environmental Laws; (ii)
a release or threatened release of any Hazardous
Substances; or (iii) the discharge of pollutants or
effluents into any water source or system or into
the air, or the dredging or filling of any waters,
where such action would require a permit under any
Environmental Laws. Company has obtained all
permits required by all applicable Environmental
Laws, and all such permits are in full force and
effect.
(d) Seller Shareholder has disclosed and delivered to
Buyer all environmental reports and investigations
that Company or Seller Shareholder has ever
obtained or ordered with respect to the Property.
8.26 Compliance with Laws. At all times prior to the Closing
Date, Company has complied with all laws, orders,
regulations, rules, decrees, and ordinances affecting to
any extent or in any manner any aspects of the Business or
its assets.
8.27 Suppliers and Customers.
(a) A complete and accurate list of all suppliers or
vendors of products or services to Company in
connection with the Business (other than legal or
accounting services) aggregating more than
$10,000.00 (at cost) annually during Company's last
fiscal year, and the address of each supplier or
vendor and the amount sold to Company during that
period, is set forth in Schedule 8.27. The names of
any suppliers of goods or services with respect to
which practical alternative sources of supply are
not available on comparable terms and conditions
are separately listed in Schedule 8.27.
24
(b) A complete and accurate list of each of Company's
customers aggregating more than $10,000.00 in
revenues to Company annually during the last fiscal
year in connection with the Business, the address of
each customer, and the amount each customer
purchased from Company during the last fiscal year
is set forth in Schedule 8.27.
(c) Seller Shareholder has no information that might
reasonably indicate that any customer or supplier
of Company intends to cease purchasing from,
selling to, or dealing with Company. No information
has been brought to the attention of Seller
Shareholder that might reasonably lead it to
believe that any customer or supplier intends to
alter, in any material respect, the amount of its
purchases or sales or the extent of its dealings
with Company, or would alter in any material
respect its purchases from, sales to, or dealings
with Company, in the event the transactions
contemplated by this Agreement are consummated.
8.28 No Brokers. Neither Company nor Seller Shareholder has
engaged, or is responsible for any payment to, any finder,
broker, or consultant in connection with the transactions
contemplated by this Agreement.
8.29 Insider Transactions. A complete and accurate list and a
brief description of all contracts or other transactions
involving Company in which any officer, director,
employee, or shareholder of Company or Seller Shareholder;
any member of their immediate families; or any affiliate
has any interest is set forth in Schedule 8.29.
8.30 Bank Accounts. Attached Schedule 8.30 contains a true and
complete list of the names and locations of all banks or
other financial institutions that are depositories for
funds of Company, the names of all persons authorized to
draw or sign checks or drafts on the accounts, the number
of the accounts, and the names and locations of any
institutions in which Company has any safe-deposit boxes
and the names of the individuals having access to them.
Company does not have any outstanding powers of attorney.
25
8.31 Intellectual Property. Schedule 8.31 lists or briefly
describes all of Company's material intellectual property
(including, without limitation, know-how, trade secrets,
confidential and proprietary processes, and technology,
whether or not patentable) that Company directly or
indirectly owns, licenses, uses, requires for use or
controls in whole or in part ("Intellectual Property") and
all licenses and other agreements allowing the Company to
use the intellectual property of third parties. Except as
set forth in Schedule 8.31, Company is the sole and
exclusive owner of the Intellectual Property, free and
clear of all Encumbrances. None of the Company's
Intellectual Property infringes on any other person's
intellectual property, and, to the Best Knowledge of the
Seller Shareholder, no activity of any other person
infringes on any of the Intellectual Property. Company has
been and is now conducting the Business in a manner that
has not been and is not now in violation of any other
person's intellectual property, and except for Company's
blanket certificate, Company does not require a license or
other proprietary right to so operate the Business.
8.32 Insurance. All insurance policies covering Company's real
and personal property or providing for business
interruption, personal and product liability coverage, and
other insurance are described in Schedule 8.32 (which
specifies the insurer, policy number, type of insurance,
and any pending claims). Such insurance is in amounts
Company deems sufficient with respect to its assets,
properties, business, operations, products, and services
as the same are presently owned or conducted, and all such
policies are in full force and effect and the premiums
have been paid. There are no claims, actions, suits, or
proceedings arising out of or based on any of these
insurance policies, and no basis for any such claim,
action, suit, or proceeding exists. Company is not in
default with respect to any provisions contained in any
such insurance policies and has not failed to give any
notice or present any claim under any such insurance
policy in due and timely fashion.
Buyer acknowledges and agrees that (a) all such insurance
policies will cease to be of any further force or effect
with respect to the Company for all periods after the
Closing Date, and (b) Buyer shall cause desired insurance
coverages with respect to the Company to be in place and
effective as of the close of business on the Closing Date.
8.33 Materiality. No statement in this Agreement or in any
certificate delivered to Buyer pursuant to this Agreement
contains or will contain any untrue statement of a
material fact, or fails or will fail to contain any
material fact necessary to make the statements not
misleading.
26
9. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents
and warrants to Seller Shareholder that:
9.1 Organization and Standing. Buyer is a corporation duly
organized and validly existing under the laws of the State
of Michigan, and Buyer has all the requisite power and
authority corporate and otherwise) to own its properties
and to conduct its business as it is now being conducted.
9.2 Authorization. Buyer has taken all necessary action (a) to
duly approve the execution, delivery, and performance of
this Agreement, and (b) to consummate the transactions
contemplated under this Agreement. Buyer has duly executed
and delivered this Agreement. This Agreement is the legal,
valid, and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency,
moratorium, or similar laws relating to the enforcement of
creditor's rights and by general principles of equity
(regardless of whether such enforceability is
considered in a proceeding at law or in equity).
9.3 Existing Agreements and Governmental Approvals.
(a) Except as set forth on Schedule 9.3, the execution,
delivery, and performance of this Agreement and the
consummation of the transactions contemplated by it
(i) do not and will not violate any provisions of
law applicable to Buyer; (ii) do not and will not
conflict with, result in the breach or termination
of any provision of, or constitute a default under
(in each case whether with or without the giving of
notice or the lapse of time, or both) Buyer's
Articles of Incorporation or Bylaws or any
indenture, mortgage, lease, deed of trust, or other
instrument, contract, or agreement or any order,
judgment, arbitration award, or decree to which
Buyer is a party or by which it or any of its
assets and properties are bound; and (iii) do not
and will not result in the creation of any
Encumbrance on any of the Buyer's properties,
assets, or business.
(b) Except as set forth on Schedule 9.3 and except for
compliance with the HSR Act, no approval,
authority, or consent of, or filing by Buyer with,
or notification to, any federal, state, or local
court, authority, or governmental or regulatory
body or agency or any other corporation,
partnership, individual, or other entity is
necessary to authorize Buyer's execution and
delivery of this Agreement or the consummation of
the transactions contemplated by this Agreement.
27
9.4 Investment Intent. Buyer is acquiring the Purchased Shares
for its own account, for investment, and without any
present intention to resell the Purchased Shares. Buyer
acknowledges and agrees that the Purchased Shares have not
and will not be registered under the Securities Act of
1933 or the Michigan Uniform Securities Act, and Buyer
will not resell the Purchased Shares unless they are so
registered or unless an exemption from registration is
available. Buyer consents to the imposition of a legend to
this effect on the certificates for the Purchased Shares
and to a notation to this effect in the appropriate
records of Company.
10. SURVIVAL, INDEMNIFICATION AND CLAIMS PROCEDURE.
10.1 Survival. All representations, warranties and covenants
made in this Agreement shall survive, and shall not be
extinguished by, the Closing. All such representations
and warranties and all claims and causes of action with
respect thereto (other than representations and warranties
set forth in Sections 8.3, 8.4, 8.15, 8.22 and 8.25,
claims and causes of action with respect thereto, and
claims and causes of action with respect to knowing
breaches or violations of representations and warranties)
shall terminate upon expiration of one (1) year following
the Closing Date; provided such termination shall not
affect the rights of any party in respect of any such
claim or cause of action as to which Indemnification
Notice has been given prior to the expiration of such
one (1) year period. The representations and
warranties set forth in Sections 8.3, 8.4, 8.15, 8.22
and 8.25, claims and causes of action with respect
thereto, and claims and causes of action with respect
to knowing breaches or violations of representations and
warranties, shall survive for the applicable statute of
limitations.
10.2 Indemnification. Subject to the limitations set forth in
Section 10.1, Seller Shareholder shall defend, indemnify,
and hold harmless Buyer, Company, and their respective
directors, officers, shareholders, partners, members,
successors, and assigns (for the purposes of this Section
10 sometimes collectively called "Indemnified Parties",
and each an "Indemnified Party") from and against any and
all costs, losses, claims, suits, actions, assessments,
liabilities (to the extent not offset with a corresponding
asset), fines, expenses, penalties, judgments and damages,
including, without limitation, court and appeal costs and
reasonable legal fees (sometimes collectively "Loss")
arising or resulting from, related to or connected
with:
28
(a) Any falsity or inaccuracy in, or breach of, any
representation or warranty of the Seller
Shareholder contained in this Agreement;
(b) Any failure of Seller Shareholder to perform or
observe in full, or to have performed or observed
in full, any covenant, agreement, or condition to
be performed or observed by the Seller Shareholder
or (on or before Closing Date) by Company under
this Agreement;
(c) Taxes of Company for any period ending on or prior
to the Effective Date, including, but without
limitation, Taxes resulting from Company's
recognition of gain as a result of the transactions
described in this Agreement; and
(d) Any liability or obligation of Company accruing or
existing on or prior to the Effective Date, known
or unknown, whether based upon contract, tort,
strict liability or otherwise, except for: (i)
current liabilities of Company which are fully
reflected or reserved against in the Preliminary
Balance Sheet or Final Balance Sheet as provided in
Section 2.3 or as otherwise disclosed in this
Agreement, and (ii) contract obligations of Company
which, in accordance with the terms of the
contracts, are to be performed after the Effective
Date;
herein sometimes collectively called "Indemnified Claims"
and each an "Indemnified Claim".
10.3 Limitations. Notwithstanding the provisions of Section
10.2: (a) the Indemnified Parties shall have no right to
make a claim thereunder except for the amount by which the
aggregate of all claims thereunder which have not
theretofore been reimbursed to the Indemnified Parties and
which the Indemnified Parties would be entitled to assert
against Seller Shareholder absent this Section 10.3,
exceed One Hundred Thousand ($100,000.00) Dollars, and (b)
the liabilities and obligations of the Seller Shareholder
under this Section 10 shall be limited, in the aggregate,
to the amount of the Purchase Price.
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10.4 Claims Procedure. If any action is commenced against an
Indemnified Party by reason of, arising out of or in
connection with any Loss relating to an Indemnified Claim,
or if the Buyer receives notice or becomes aware of any
such Indemnified Claim, then the Indemnified Party, upon
being served with process, or the Buyer upon receiving
notice or becoming aware of such Indemnified Claim, shall
give written notice ("Indemnification Notice") to the
Seller Shareholder of the institution of such action or of
the notice received or knowledge acquired of such claim
and in such action (and with respect to such Indemnified
Claim) Seller Shareholder shall have the obligation to
defend the same at Seller Shareholder's expense by
counsel reasonably acceptable to Buyer, and to pay any
judgment entered therein, but the Buyer and the
Indemnified Parties shall have the right, at their
option and expense, to participate in any such action
or suit with counsel of their own selection. If Seller
Shareholder shall fail to timely or adequately defend any
such action or claim on behalf of the Indemnified Parties,
then the attorneys' fees and legal costs of the
Indemnified Parties in defending such action or claim
shall be fully included as part of the Loss to be
indemnified.
If any garnishment, levy, attachment, execution or
other lien reaches, garnishees, encumbers or attaches any
of the assets, property or business of an Indemnified
Party by virtue of, or as a part of, any suit or
proceeding concerning any Indemnified Claim, then Seller
Shareholder, at its expense, shall be obligated to
immediately post whatever bond is required, and do
whatever else is required, to expeditiously release the
property, assets and business of the Indemnified Parties
from any such levy, attachment, execution, lien,
garnishment or encumbrance.
10.5 Seller Shareholder's Response. The Seller Shareholder may
object to any Indemnification Notice of an Indemnified
Claim by delivering to Buyer a written statement setting
forth, in reasonable detail, the basis of its objection,
if any, to the Indemnified Claim asserted in such
Indemnification Notice (the "Seller Shareholder's
Response"). If the Seller Shareholder's Response is not
received by Buyer within thirty (30) days following the
date Seller Shareholder receives the Indemnification
Notice, the Indemnified Claim set forth in such
Indemnification Notice shall be deemed valid and
conclusive and binding upon all parties. If Buyer receives
Seller Shareholder's Response within such thirty (30) day
period, the Indemnified Claim to which the Seller
Shareholder's Response relates shall be submitted to
arbitration pursuant to the provisions of Section 13.8.
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10.6 Interest. Subject to Section 10.5, with respect to the
indemnifications set forth in Section 10.2, Seller
Shareholder shall be obligated to reimburse the
Indemnified Parties for any valid payment by any
Indemnified Party at any time after the Closing in
respect of any Loss relating to any Indemnified Claim,
including payment pursuant to any settlement or
compromise of any such Indemnified Claim approved by
Seller Shareholder, together with interest on any such
payment at a rate per annum of two (2%) percent in excess
of the prime rate as published from time to time by the
Wall Street Journal from the date paid or incurred by the
Indemnified Party until reimbursed to the Indemnified
Party.
10.7 Waiver. Seller Shareholder irrevocably waives and agrees
that it will make no claim against Company of any kind or
character, whether by way of subrogation, indemnity,
contribution, breach of contract, or any other theory
regarding any claim made by Buyer, Company, or any other
person under Section 10 or otherwise, and Seller
Shareholder irrevocably releases and discharges Company
from any such claim.
10.8 Exclusive Remedy. Buyer agrees that, from and after the
Closing, its sole remedy with respect to any and all
claims arising out of alleged breaches or violations of
Seller Shareholder's representations and warranties set
forth in this Agreement shall be pursuant to the
provisions set forth in this Section 10 and, to the extent
applicable, the provisions of Section 13.8.
11. NON-COMPETITION.
11.1 As used in this Agreement, the following terms shall have
the meanings set forth after each, as follows:
(a) "Business" means and includes the business of
acting as an unregulated natural gas marketing company.
The foregoing includes selling gas to an end user on an
unregulated basis and does not include the following
activities of SEMCO Energy Gas Company: (i) regulated
sales of natural gas, (ii) marketing its present
services to end users as an LDC, and (iii) acting as
agent for an end user to provide that end user with
services as an LDC.
(b) "Restricted Period" means the period
commencing on the Closing Date and ending upon the date
two (2) years following the Closing Date.
(c) "Restricted Territory" means and includes the
entire State of Michigan.
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11.2 The Seller Shareholder represents and warrants to Buyer
that Company has been actively engaged for many years in
the Business throughout the Restricted Territory, and
acknowledges that the only object of the covenants not to
compete set forth herein is to protect Buyer in connection
with its acquisition of the Purchased Shares (and the
value of the Purchased Shares as affected by Company's
Business and the goodwill thereof), and the covenants in
Section 11.3 are reasonable.
11.3 Seller Shareholder (as used in this Section 11, the term
"Seller Shareholder" shall mean and include the entity
identified herein as Seller Shareholder together with its
direct and remote subsidiaries, parents and affiliates,
but excluding the Company) covenants, agrees and warrants
that it will not (in any capacity whatsoever, for its own
account or for any other person, party or entity),
directly or indirectly, engage in the Business, or any
phase thereof, in the Restricted Territory, or any part
thereof, during the Restricted Period.
Seller Shareholder covenants, agrees and warrants that,
during the Restricted Period, it will not, directly or
indirectly, own, manage, operate, control or have any
interest in any business engaged in the Business, or
any phase thereof, in the Restricted Territory, or any
part thereof.
By way of illustration but without limitation, by the
above covenants and warranties not to compete, Seller
Shareholder covenants, agrees and warrants that, during
the Restricted Period, it will not do any of the
following: be a shareholder, owner, investor, lender,
partner, member, joint venturer, representative,
consultant, broker, sales representative, in or of or
to, as the case may be, any person, party or entity
engaged in the Business, or any phase thereof, in the
Restricted Territory, or any part thereof.
Seller Shareholder further covenants, agrees and warrants
that it will not at any time, use, divulge, furnish or
make accessible to anyone (other than in the ordinary
course of activities on behalf of the Company, and
consistent with the Company's policies on disclosure), any
knowledge or information with respect to the confidential
or secret aspects of the Company's Business (including
information as to Company's finances, pricing, suppliers,
customers, structure or business plan).
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Seller Shareholder further covenants, agrees and warrants
that it will not at any time during the Restricted Period,
directly or indirectly, solicit for any purpose, interfere
with or entice away from the Company or hire any employee
or agent of Company without the prior written consent of
Buyer.
Notwithstanding the foregoing, it shall not be a violation
of the provisions of this Section 11.3 for Seller
Shareholder to own, directly and indirectly, not in excess
of one (1%) percent of the total outstanding capital stock
of any corporation, engaged in the Business, whose stock
is traded on any national stock exchange or the automated
quotation system of NASD (NASDAQ), provided Seller
Shareholder does not perform any services for, and is not
otherwise active in the business of, such corporation.
11.4 Seller Shareholder agrees that any violation or attempted
violation of any of the provisions of Section 11.3 will
cause irreparable injury and damage to the Company and
that, in the event of any such violation or attempted
violation, in addition to any and all other legal and
equitable remedies which may be available (including,
without limitation, an action for damages), the said
covenants and warranties or any of them may be enforced by
a temporary and permanent injunction in an action in
equity without the necessity of proving actual damage, and
without the posting of any bond or other security, and
that an ex parte restraining order may be granted
immediately upon the commencement of any such action and
without notice. Seller Shareholder acknowledges that the
remedy at law for the breach or threatened breach of any
of the covenants or warranties contained in Section 11.3
would be inadequate.
11.5 If the aforesaid covenants and warranties not to compete
set forth in Section 11.3 are found by any court having
jurisdiction in the premises to be too broad in extent,
either as to the time period or the geographical area
designated, or otherwise, then and in such event the
covenants and warranties not to compete shall nevertheless
remain effective, but shall be considered amended (as to
the time or area or otherwise, as the case may be) to a
point considered by said court as reasonable, and as so
amended, shall be fully enforceable. If the court finds
that any restriction contained in Section 11.3 is
unenforceable and such restriction cannot be amended so as
to make it enforceable, such finding shall not affect the
enforceability of any other of the restrictions contained
in Section 11.3.
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12. TERMINATION.
12.1 This Agreement may be terminated at any time before the
Closing Date as follows:
(a) By Buyer and Seller Shareholder in a written
instrument.
(b) By either Buyer or Seller Shareholder if the
Closing does not occur on the Closing Date.
(c) By Buyer or Seller Shareholder if there shall have
been a material breach of any of the
representations or warranties set forth in this
Agreement on the part of the other, and this breach
by its nature cannot be cured before the Closing.
(d) By Buyer or Seller Shareholder if there has been a
breach of any of the covenants or agreements set
forth in this Agreement on the part of the other,
and this breach is not cured within 10 business
days after the breaching party or parties receive
written notice of the breach from the other party.
12.2 If terminated as provided in Section 12.1, this Agreement
shall forthwith become void and have no effect, except for
Sections 12.3 and 13, and except that no party shall be
relieved or released from any liabilities or damages
arising out of the party's breach of any provision of this
Agreement.
12.3 Buyer, on the one hand, and Seller Shareholder, on the
other, warrant and agree that if this Agreement is
terminated, each party will not (and, in the case of
Seller Shareholder, shall cause Company to not), during
the one-year period following the termination, directly
or indirectly solicit any employee of the other party
to leave the employment of the other party.
13. MISCELLANEOUS PROVISIONS.
13.1 Intentionally Blank.
13.2 Notices. All notices, demands, and requests required or
permitted to be given under the provisions of this
Agreement shall be in writing and shall be deemed given
(a) when personally delivered or sent by facsimile
transmission to the party to be given the notice or other
communication or (b) on the business day following the day
such notice or other communication is sent by overnight
courier to the following:
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if to Seller Shareholder: Mr. William L. Johnson
Chairman, President & CEO
SEMCO Energy, Inc.
405 Water Street
Port Huron, MI 48060
if to Buyer: CoEnergy Trading Company
150 W. Jefferson, Suite 1800
Detroit, Michigan 48226
Attention: General Counsel
Fax: 313-965-0009
or to such other address or facsimile number that the
parties may designate in writing.
13.3 Assignment. Neither Seller Shareholder nor Buyer shall
assign this Agreement, or any interest in it, without the
prior written consent of the other, except that Buyer may
assign any or all of its rights to any subsidiary or
affiliate without Seller Shareholder's consent.
13.4 Parties in Interest. This Agreement shall inure to the
benefit of, and be binding on, the named parties and their
respective successors and permitted assigns, but not any
other person.
13.5 Choice of Law. This Agreement shall be governed,
construed, and enforced in accordance with the laws of the
State of Michigan.
13.6 Counterparts. This Agreement may be signed in any number
of counterparts with the same effect as if the signature
on each counterpart were on the same instrument. 13.7
Entire Agreement. This Agreement and all related
documents, schedules, exhibits, or certificates represent
the entire understanding and agreement between the parties
with respect to the subject matter and supersede all prior
agreements or negotiations between the parties. This
Agreement may be amended, supplemented, or changed only by
an agreement in writing that makes specific reference to
this Agreement or the agreement delivered pursuant to it,
and must be signed by the party against whom enforcement
of any such amendment, supplement, or modification is
sought.
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13.8 Arbitration.
(a) Any dispute, controversy, or claim arising out of
or relating to this Agreement or relating to the
breach, termination, or invalidity of this
Agreement, whether arising in contract, tort, or
otherwise, shall at the request of any party be
resolved in binding arbitration. This arbitration
shall proceed in accordance with Title 9 of the
United States Code, as it may be amended or
recodified from time to time ("Title 9"), and the
current Commercial Arbitration Rules (the
"Arbitration Rules") of the American Arbitration
Association ("AAA"), to the extent that Title 9 and
the Arbitration Rules do not conflict with any
provision of this Section 13.8.
(b) No provision of or the exercise of any rights under
this Section 13.8 shall limit the right of any
party to seek and obtain provisional or ancillary
remedies (such as injunctive relief, attachment, or
the appointment of a receiver) from any court
having jurisdiction before, during, or after the
pendency of an arbitration proceeding under this
Section. The institution and maintenance of any
such action or proceeding shall not constitute a
waiver of the right of any party (including the
party taking the action or instituting the
proceeding) to submit a dispute, controversy, or
claim to arbitration under this Section.
(c) Any award, order, or judgment made pursuant to
arbitration shall be deemed final and may be
entered in any court having jurisdiction over the
enforcement of the award, order, or judgment. Each
party agrees to submit to the jurisdiction of any
court for purposes of the enforcement of the award,
order, or judgment.
(d) The arbitration shall be held before one arbitrator
knowledgeable in the general subject matter of the
dispute, controversy, or claim and selected by AAA
in accordance with the Arbitration Rules, except
that any arbitration in which the disputed,
controverted, or claimed amount (as reflected on
the demand for arbitration, as the same may be
amended) exceeds $500,000.00 shall be held before
three arbitrators, one arbitrator being selected by
Buyer, one by Seller Shareholder, and the third by
the other two from a panel of persons identified by
AAA who are knowledgeable in the general subject
matter of the dispute, controversy, or claim.
36
(e) The arbitration shall be held at the office of AAA
located in Southfield, Michigan (as the same may be
from time to time relocated), or at another place
the parties agree on.
(f) In any arbitration proceeding under this Section
13.8, subject to the award of the arbitrator(s),
each party shall pay all its own expenses, an equal
share of the fees and expenses of the arbitrator,
and, if applicable, the fees and expenses of its
own appointed arbitrator. The arbitrator(s) shall
have the power to award recovery of costs and fees
(including reasonable attorney fees, administrative
and AAA fees, and arbitrators' fees) among the
parties as the arbitrators determine to be
equitable under the circumstances.
(g) The interpretation and construction of this
Section, including but not limited to its validity
and enforceability, shall be governed by Title 9 of
the U.S. Code, notwithstanding the choice of law
set forth in Section 13.5 of this Agreement.
13.9 Name.
(a) Buyer agrees that, on or before the date which is
eighteen (18) months following the Closing Date
(such date being herein called the "Name Cutoff
Date"), it will cause the Company to: (i) change
its corporate name to a name which does not include
the word "SEMCO", and (ii) discontinue all use of
the name "SEMCO".
(b) During the period between the Closing Date and the
Name Cutoff Date: (i) neither the Company nor Buyer
will use the existing characteristic "SEMCO"
"circle leaf and flame" logo, except only for
temporary incidental use during the transition
period following the Closing Date (e.g., on Company
stationery and forms); (ii) use of the name "SEMCO
Energy Services, Inc." in all marketing materials,
including correspondence, will not be alone but
rather must be in conjunction with the name of
Buyer or the name of another entity in which Buyer
is not less than a 50% owner or participant, and
will include the phrase "formerly a subsidiary of
SEMCO Energy, Inc."; (iii) the use of the name
"SEMCO Energy Services, Inc." will only be used
with unbundled customers; and (iv) Seller
Shareholder shall have a right of prior approval of
all written materials using the name "SEMCO Energy
Services, Inc.", which approval shall not be
37
unreasonably withheld, delayed or conditioned. If
Seller Shareholder fails to object with specificity
in writing to any proposed materials within fifteen
(15) days following its receipt of request for
approval together with a copy of the material in
question, Seller Shareholder shall conclusively be
deemed to have approved the material so submitted.
14. EXPENSES. Buyer and Seller Shareholder shall pay all of
the costs that it incurs incident to the preparation,
execution, and delivery of this Agreement and the
performance of any related obligations (including
notifications under the HSR Act), whether or not the
transactions contemplated by this Agreement shall be
consummated.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the date first above set forth.
SELLER SHAREHOLDER:
SEMCO Energy, Inc.
By: William L. Johnson
------------------------------
Its: President and CEO
-----------------------------
BUYER:
CoEnergy Trading Company
By: Glen D. Kinder
------------------------------
Its: President and CEO
-----------------------------
(Reviewed O.G.C. by MW)
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