EXHIBIT 10(b)
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AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
BY AND AMONG
CMS GAS TRANSMISSION COMPANY,
SOUTHERN UNION COMPANY
AND
SOUTHERN UNION PANHANDLE CORP.
DATED AS OF
MAY 12, 2003
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS
Section 1.1 Specific Definitions........................................................2
ARTICLE II SALE AND PURCHASE
Section 2.1 Agreement to Sell and Purchase.............................................17
Section 2.2 Time and Place of Closing..................................................17
Section 2.3 Pre-Closing Matters........................................................17
Section 2.4 Estimated Purchase Price...................................................18
Section 2.5 Post-Closing Adjustment....................................................19
Section 2.6 Deliveries by Seller at the Closing........................................21
Section 2.7 Deliveries by Buyer at the Closing.........................................21
Section 2.8 Cooperation with Respect to Like-Kind Exchange.............................22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 Corporate Organization; Qualification......................................23
Section 3.2 Authority Relative to this Agreement.......................................23
Section 3.3 Panhandle Shares...........................................................24
Section 3.4 Consents and Approvals.....................................................25
Section 3.5 No Conflict or Violation...................................................25
Section 3.6 Financial Information......................................................26
Section 3.7 Contracts..................................................................26
Section 3.8 Compliance with Law........................................................27
Section 3.9 Permits....................................................................27
Section 3.10 Litigation................................................................27
Section 3.11 Title to Properties.......................................................28
Section 3.12 Employee Matters..........................................................28
Section 3.13 Labor Relations...........................................................30
Section 3.14 Intellectual Property.....................................................30
Section 3.15 Representations with Respect to Environmental Matters.....................31
Section 3.16 Tax Matters...............................................................32
Section 3.17 Absence of Certain Changes or Events......................................32
Section 3.18 Absence of Undisclosed Liabilities........................................33
Section 3.19 Brokerage and Finders' Fees...............................................33
Section 3.20 Affiliated Transactions...................................................33
Section 3.21 Insurance.................................................................33
Section 3.22 Regulatory Matters........................................................34
Section 3.23 Opinions of Financial Advisors............................................34
Section 3.24 Investment Representations................................................35
Section 3.25 Recent Transfers..........................................................35
Section 3.26 Date of Certain Representations...........................................35
Section 3.27 No Other Representations or Warranties....................................35
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND SOUTHERN UNION
Section 4.1 Corporate Organization; Qualification......................................36
Section 4.2 Authority Relative to this Agreement.......................................36
Section 4.3 Consents and Approvals.....................................................37
Section 4.4 No Conflict or Violation...................................................37
Section 4.5 Litigation.................................................................37
Section 4.6 Availability of Funds......................................................38
Section 4.7 Brokerage and Finders' Fees................................................38
Section 4.8 Investment Representations.................................................38
Section 4.9 Buyer Capitalization; Other Interests......................................39
Section 4.10 Compliance with Law.......................................................39
Section 4.11 Southern Union Shares.....................................................40
Section 4.12 Southern Union Financial Information......................................41
Section 4.13 Absence of Certain Changes or Events......................................41
Section 4.14 Absence of Undisclosed Liabilities........................................41
Section 4.15 Southern Union Subsidiaries...............................................41
Section 4.16 SEC Filings...............................................................42
Section 4.17 Date of Certain Representations...........................................42
Section 4.18 No Other Representations or Warranties....................................42
ARTICLE V COVENANTS OF THE PARTIES
Section 5.1 Conduct of Business........................................................42
Section 5.2 Access to Properties and Records...........................................45
Section 5.3 Southern Union Conduct of Business.........................................45
Section 5.4 Consents and Approvals.....................................................47
Section 5.5 Further Assurances.........................................................49
Section 5.6 Employee Matters...........................................................49
Section 5.7 Tax Covenants..............................................................53
Section 5.8 Intercompany Accounts......................................................60
Section 5.9 Related Agreements.........................................................61
Section 5.10 Maintenance of Insurance Policies.........................................61
Section 5.11 Preservation of Records...................................................62
Section 5.12 Public Statements.........................................................62
Section 5.13 Certain Transactions......................................................62
Section 5.14 CMS Panhandle Holdings, LLC...............................................63
Section 5.15 Change of Corporate Name..................................................63
Section 5.16 Transitional Use of Seller's Trademarks...................................63
Section 5.17 Reasonable Best Efforts...................................................65
Section 5.18 No Shopping...............................................................65
Section 5.19 Southern Union Covenants..................................................65
Section 5.20 Restated Financials.......................................................65
Section 5.21 1935 Act Jurisdiction.....................................................66
Section 5.22 Registration of Southern Union Shares.....................................66
ARTICLE VI CONDITIONS
Section 6.1 Mutual Conditions to the Closing...........................................66
Section 6.2 Buyer's Conditions to the Closing..........................................67
Section 6.3 Seller's Conditions to the Closing.........................................69
ARTICLE VII TERMINATION AND ABANDONMENT
Section 7.1 Termination................................................................70
Section 7.2 Procedure and Effect of Termination........................................71
ARTICLE VIII SURVIVAL; INDEMNIFICATION
Section 8.1 Survival...................................................................71
Section 8.2 Indemnification............................................................72
Section 8.3 Calculation of Damages.....................................................75
Section 8.4 Procedures for Third-Party Claims..........................................75
Section 8.5 Procedures for Inter-Party Claims..........................................76
ARTICLE IX MISCELLANEOUS PROVISIONS
Section 9.1 Interpretation.............................................................77
Section 9.2 Disclosure Letters.........................................................77
Section 9.3 Payments...................................................................77
Section 9.4 Expenses...................................................................77
Section 9.5 Choice of Law..............................................................78
Section 9.6 Assignment.................................................................78
Section 9.7 Notices....................................................................78
Section 9.8 Consent to Jurisdiction....................................................79
Section 9.9 Resolution of Disputes.....................................................79
Section 9.10 Waiver of Jury Trial......................................................80
Section 9.11 No Right of Setoff........................................................80
Section 9.12 Time is of the Essence....................................................81
Section 9.13 Specific Performance......................................................81
Section 9.14 Entire Agreement..........................................................81
Section 9.15 Third Party Beneficiaries.................................................81
Section 9.16 Counterparts..............................................................81
Section 9.17 Severability..............................................................81
Section 9.18 Headings..................................................................82
Section 9.19 Waiver....................................................................82
Section 9.20 Amendment.................................................................82
STOCK PURCHASE AGREEMENT
This AMENDED AND RESTATED STOCK PURCHASE AGREEMENT, dated as of May 12,
2003 (this "Agreement"), is made and entered into by and among CMS Gas
Transmission Company, a Michigan corporation (the "Seller"), Southern Union
Company, a Delaware corporation ("Southern Union"), and Southern Union Panhandle
Corp., a Delaware corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, Panhandle Eastern Pipe Line Company, a Delaware corporation
("Panhandle"), itself and through its subsidiaries, owns and operates a network
of integrated natural gas and condensate pipeline and is engaged in the business
of the interstate transportation of natural gas, natural gas storage services,
the storage and regasification of liquefied natural gas and the separation and
measurement of condensate;
WHEREAS, Seller owns all of the issued and outstanding shares of
Panhandle (the "Panhandle Shares");
WHEREAS, Southern Union has formed Buyer for the purpose of effecting
the transactions contemplated in this Agreement;
WHEREAS, Seller desires to sell all of the Panhandle Shares;
WHEREAS, Southern Union desires to cause Buyer to purchase all of the
Panhandle Shares;
WHEREAS, each of the Boards of Directors or other governing body of
each of Seller, Buyer and Southern Union has approved, and deems it advisable
and in the best interests of their respective shareholders and partners to
consummate the transactions contemplated by, this Agreement upon the terms and
subject to the conditions set forth herein;
WHEREAS, Seller, Buyer, Southern Union, AIG Highstar Capital, L.P.
("Highstar"), AIG Highstar II Funding Corp. ("Funding," and together with
Highstar, the "AIG Parties") entered into that certain Stock Purchase Agreement
(the "Original Purchase Agreement"), dated as of December 21, 2002 (the
"Original Date");
WHEREAS, Seller, Buyer, Southern Union and the AIG Parties entered into
that certain Amendment Agreement, dated as of May 12, 2003 (the "Amendment
Agreement"), amending the Original Purchase Agreement to remove the AIG Parties
as parties to the Original Purchase Agreement and terminating the AIG Parties'
participation in the sale of Panhandle; and
WHEREAS, in accordance with the terms of the Amendment Agreement,
Seller, Buyer and Southern Union shall enter into this Agreement for the sale by
Seller of Panhandle to Buyer pursuant to terms that will differ from those set
forth in the Original Purchase Agreement;
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NOW, THEREFORE, for and in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, Seller,
Buyer and Southern Union, intending to be legally bound hereby, hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Specific Definitions. For purposes of this
Agreement, the following terms shall have the meanings set forth below:
"1935 Act" shall have the meaning set forth in Section 3.22.
"743 Schedule" shall have the meaning set forth in Section 5.7 (f).
"Access and Support shall mean the access and support agreement to be
Agreement" entered into on the Closing Date between Seller and
Buyer, substantially in the form of the agreement
attached hereto as Exhibit B.
"Action" shall mean any administrative, regulatory, judicial
or other formal proceeding, action, Claim, suit,
investigation or inquiry by or before any
Governmental Authority, arbitrator or mediator.
"Affected Employees" shall mean Panhandle Employees on the Closing Date.
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
"Agreement" shall mean this Stock Purchase Agreement, together
with the Seller Disclosure Letter, Buyer Disclosure
Letter and Exhibits hereto, as the same may be
amended or supplemented from time to time in
accordance with the provisions hereof.
"AIG Parties" shall have the meaning set forth in the recitals.
"Amendment Agreement" shall have the meaning set forth in the recitals.
"Annual Financial shall have the meaning set forth in Section 6.2 (i).
Statements"
"Applicable Law" shall mean any statute, law, ordinance, executive
order, rule or regulation (including a regulation
that has been formally promulgated in a rule-making
proceeding but, pending final adoption, is in
proposed or temporary form having the force of law);
guideline or notice having the force of law; or
approval,
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permit, license, franchise, judgment, order, decree,
injunction or writ of any Governmental Authority
applicable to a specified Person or specified
property, as in effect from time to time.
"Assumption shall mean the agreement between Buyer and CMS
Agreement" Capital, L.L.C. whereby Buyer shall assume CMS
Capital L.L.C.'s obligation pursuant to its note
payable to Panhandle dated as of January 1, 2002,
substantially in the form of the agreement attached
hereto as Exhibit C.
"Auditor" shall have the meaning set forth in Section 2.5 (b).
"Base Net Working shall have the meaning set forth in Section 2.4.
Capital"
"Base Total Debt" shall have the meaning set forth in Section 2.4.
"Bonus Accrual" shall have the meaning set forth in Section 5.6 (e).
"Burdensome shall have the meaning set forth in Section 5.4 (b).
Condition"
"Business Day" shall mean a day other than a Saturday, Sunday or
other day on which banks located in New York City are
authorized or required by law to close.
"Business Materials" shall have the meaning set forth in Section 5.16 (a).
"Buyer" shall have the meaning set forth in the preamble to
this Agreement.
"Buyer Account Plan" shall have the meaning set forth in Section 5.6 (a).
"Buyer Adjustment" shall have the meaning set forth in Section 2.5 (c).
"Buyer Indemnified shall have the meaning set forth in Section 8.2 (a).
Parties"
"Buyer Plans" shall have the meaning set forth in Section 5.6 (d).
"Cap Amount" shall have the meaning set forth in Section 8.2 (d).
"Casualty Insurance shall have the meaning set forth in Section 5.10 (a).
Claims"
"Centennial" shall mean Centennial Pipeline, L.L.C., a Delaware
limited liability company.
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"Claims" shall mean any and all claims, lawsuits, demands,
causes of action, investigations and other
proceedings (whether or not before a Governmental
Authority).
"Closing" shall have the meaning set forth in Section 2.2.
"Closing Adjustment shall have the meaning set forth in Section 2.5 (a).
Amount"
"Closing Balance Sheet" shall have the meaning set forth in Section 2.5 (a).
"Closing Date" shall have the meaning set forth in Section 2.2.
"CMSGCFS" shall mean CMS Gulf Coast Field Service, L.L.C., a
Michigan limited liability company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Comparable shall have the meaning ascribed to such term in the
Employment" applicable Separation Plan.
"Confidentiality shall mean the confidentiality agreement entered
Agreement" into by and between AIG Highstar Capital, L.P., a
Delaware limited partnership, and CMS Energy
Corporation ("Parent"), dated September 20, 2002, as
modified by the letter agreement dated December 6,
2002, and the confidentiality agreement entered into
by and among Parent, Southern Union and Buyer, dated
as of the date hereof.
"Consolidated Income shall have the meaning set forth in Section 5.7
Tax Return" (b)(ix) hereof.
"Corporate Name shall have the meaning set forth in Section 5.15.
Change Transition
Period"
"Damages" shall mean all demands, Claims, causes of action,
suits, judgments, damages, amounts paid in settlement
(with the approval of the Indemnifying Party where
applicable), penalties, Liabilities, losses or
deficiencies, costs and expenses, including
reasonable attorney's fees, court costs, expenses of
arbitration or mediation, and other out-of-pocket
expenses incurred in investigating or preparing the
foregoing. "Damages" does not include incidental,
indirect or consequential damages, damages for lost
profits or other special damages or punitive or
exemplary damages; provided, however, that in the
case of Third-Party Claims, "Damages" shall be deemed
to include all forms of relief, monetary and
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otherwise, asserted therein, without any of the
foregoing exceptions.
"Determination Date" shall have the meaning set forth in Section 2.5 (b).
"Disabled Employee" shall have the meaning set forth in Section 5.6
(b)(i).
"Dispute" shall have the meaning set forth in Section 9.9.
"Election" shall have the meaning set forth in Section 5.7
(a)(i).
"Employee Benefit shall have the meaning set forth in Section 3.12 (c).
Plans"
"Encumbrances" shall mean any Claims, mortgages, pledges, liens,
security interests, conditional and installment sale
agreements or other title retention agreements,
activity and use limitations, easements, deed
restrictions, title defects, reservations,
encumbrances and charges of any kind, options,
subordination agreements or adverse claim of any
kind.
"Environmental Laws" shall mean all foreign, federal, state and local
laws, regulations, rules and ordinances relating to
pollution or protection of human health or the
environment, including laws relating to releases or
threatened releases of Hazardous Substances into the
environment (including ambient air, surface water,
groundwater, land, surface and subsurface strata).
"Environmental Permit" shall mean any Permit, formal exemption,
identification number or other authorization issued
by a Governmental Authority pursuant to an applicable
Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, and the regulations
promulgated thereunder.
"ERISA Plan(s)" shall have the meaning set forth in Section 3.12(a).
"Estimated shall have the meaning set forth in Section 2.4.
Adjustment Amount"
"Estimated Closing shall have the meaning set forth in Section 2.3.
Debt"
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"Estimated Closing Net shall have the meaning set forth in Section 2.3.
Working Capital
Amount"
"Estimated Purchase shall have the meaning set forth in Section 2.4.
Price"
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Final 743 Schedule" Shall have the meaning set forth in Section 5.7
(f)(i).
"Final Form 8023" shall have the meaning set forth in Section 5.7
(a)(ii).
"Financial Statements" shall mean the Year-End Financial Statements and the
Interim Financial Statements.
"Funding" shall have the meaning set forth in the recitals.
"GAAP" shall mean United States generally accepted
accounting principles as in effect from time to time,
applied on a consistent basis.
"Governmental shall mean any executive, legislative, judicial,
Authority" tribal, regulatory, taxing or administrative agency,
body, commission, department, board, court, tribunal,
arbitrating body or authority of the United States or
any foreign country, or any state, local or other
governmental subdivision thereof.
"Guardian" shall mean Guardian Pipeline, L.L.C., a Delaware
limited liability company.
"Hazardous Substances" shall mean any chemicals, materials or substances
defined as or included in the definition of
"hazardous substances," "hazardous wastes,"
"hazardous materials," "hazardous constituents,"
"restricted hazardous materials," "extremely
hazardous substances," "toxic substances,"
"contaminants" "pollutants," "toxic pollutants," or
words of similar meaning and regulatory effect under
any applicable Environmental Law.
"Highstar" shall have the meaning set forth in the recitals.
"HSR Act" shall have the meaning set forth in Section 6.1 (a).
"Indemnified Party" shall have the meaning set forth in Section 8.2 (c).
"Indemnifying Party" shall have the meaning set forth in Section 8.2 (c).
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"Initial Termination shall have the meaning set forth in Section 7.1 (b).
Date"
"Insurance Policies" shall have the meaning set forth in Section 3.21 (a).
"Intellectual Property shall mean the Intellectual Property Agreement to be
Agreement" entered into between Seller and Buyer, as of the
Closing Date, attached hereto as Exhibit A.
"Interim Financial shall mean the unaudited balance sheet and statement
Statements" of income as of and for (i) the three months ended
March 31, 2002, (ii) the six months ended June 30,
2002, and (iii) the nine months ended September 30,
2002, in each case for Panhandle and the Panhandle
Subsidiaries (other than CMSGCFS, but including
Centennial and Guardian) on a consolidated basis.
"Kansas Site shall have the meaning set forth in Section 1.1(a) of
Adjustment" the Seller Disclosure Letter.
"Knowledge" shall mean, as to each of Seller, Panhandle and the
Panhandle Subsidiaries, the actual knowledge, after
due inquiry, of the persons listed on Section 1.1(b)
of the Seller Disclosure Letter, or any Person who
replaces any of such listed persons between the date
of this Agreement and the Closing Date, and in the
case of Buyer and Southern Union, the actual
knowledge, after due inquiry, of those persons listed
on Section 1.1(b) of the Buyer Disclosure Letter,
applicable to Buyer or Southern Union, as the case
may be, or any Person who replaces any of such listed
persons between the date of this Agreement and the
Closing Date.
"Liabilities" shall mean any and all debts, liabilities,
commitments and obligations, whether or not fixed,
contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or unaccrued,
known or unknown, whether or not required by GAAP to
be reflected in financial statements or disclosed in
the notes thereto.
"Liens" shall mean any lien, mortgage, pledge, charge, claim
assignment by way of security or similar security
interest.
"Listing" shall mean the listing of the Southern Union Shares
on the New York Stock Exchange.
"Material Adverse shall mean any change or effect that is materially
Effect" adverse to the business, financial condition or
assets of the business of Panhandle and the Panhandle
Subsidiaries, taken as a whole;
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provided, however, that Material Adverse Effect shall
exclude any change or effect due to (a) negotiation,
execution, announcement, and consummation of this
Agreement and the transactions contemplated hereby,
including the impact thereof on relationships,
contractual or otherwise, with customers, suppliers,
distributors, partners, joint owners or venturers, or
employees, (b) any action taken by Seller, Panhandle,
the Panhandle Subsidiaries, Buyer or any of their
respective representatives or Affiliates or other
action required or permitted by the terms of this
Agreement or necessary to consummate the transactions
contemplated by this Agreement, (c) the general state
of the industries in which Panhandle or the Panhandle
Subsidiaries operate (including (i) pricing levels,
(ii) changes in the international, national, regional
or local wholesale or retail markets for natural gas,
(iii) changes in the North American, national,
regional or local interstate natural gas pipeline
systems, and (iv) rules, regulations or decisions of
the FERC or the courts affecting the interstate
natural gas transmission industry as a whole, or rate
orders, motions, complaints or other actions
affecting Panhandle or the Panhandle Subsidiaries),
except, in all cases for such effects which
disproportionately impact Panhandle and the Panhandle
Subsidiaries, taken as a whole, (d) general legal,
regulatory, political, business, economic, capital
market and financial market conditions (including
prevailing interest rate levels), or conditions
otherwise generally affecting the industries in which
Panhandle or the Panhandle Subsidiaries operate,
except, in all cases, for such effects which
disproportionately impact Panhandle and the Panhandle
Subsidiaries, taken as a whole, and (e) any condition
described in the Seller Disclosure Letter (but only
to the extent set forth in such Seller Disclosure
Letter).
"Material Contract" shall have the meaning set forth in Section 3.7 (a).
"Minimum Claim shall have the meaning set forth in Section 8.2 (d).
Amount"
"Net Working Capital shall have the meaning set forth in Section 2.3.
Amount"
"NGA" shall have the meaning set forth in Section 3.22.
"Organizational shall mean certificates of incorporation, by-laws,
Documents" certificates of formation, limited liability company
operating agreements, partnership or limited
partnership agreements or other
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formation or governing documents of a particular
entity.
"Original Date" shall have the meaning set forth in the recitals to
this Agreement.
"Original Purchase shall have the meaning set forth in the recitals to
Agreement" this Agreement.
"Panhandle" shall have the meaning set forth in the recitals to
this Agreement.
"Panhandle Employees" shall mean all employees employed by Panhandle or the
Panhandle Subsidiaries including employees on
short-term disability, military leave, maternity
leave or paternity leave and other approved leaves of
absence from active employment.
"Panhandle Shares" shall have the meaning set forth in the recitals to
this Agreement.
"Panhandle shall mean CMS Pan Gas Storage Company, LLC, a
Subsidiaries" Delaware limited liability company (d/b/a Southwest
Gas Storage Company); Trunkline Field Services
Company, a Delaware Corporation; CMS Panhandle
Holdings, LLC, a Delaware limited liability company;
CMS Panhandle Storage Company, a Delaware
corporation; CMS Trunkline Gas Company, LLC, a
Delaware limited liability company; CMS Trunkline
Offshore Pipeline Company, LLC, a Delaware limited
liability company; CMS Trunkline Deepwater Pipeline
Company, LLC, a Delaware limited liability company;
Sea Robin Pipeline Company, an unincorporated joint
venture; CMS Trunkline Gas Resources, LLC a Delaware
limited liability company; MG Ventures Storage, Inc.,
a Delaware corporation; CMS Panhandle Eastern
Resources, Inc., a Delaware corporation; CMS
Panhandle Lake Charles Generation Company, LLC, a
Delaware limited liability company; CMS Trunkline LNG
Company, LLC, a Delaware limited liability company,
CMS Trunkline LNG Holdings, LLC, a Delaware limited
liability company, Panhandle Partner LLC, a Delaware
limited liability company, CMS Panhandle LNG
Acquisition Company, a Delaware corporation,
DekaTherm Investor Trust, a Delaware trust, CMSGCFS,
and CMS Gulf Coast Holdings Company, a Delaware
corporation.
Without limiting the foregoing, for purposes of
Section 3.16 of this Agreement, a Panhandle
Subsidiary shall also include any Subsidiary of a
Panhandle Subsidiary and any entity which was merged
or combined under state corporate law with,
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liquidated into, or converted into a Panhandle
Subsidiary or a Subsidiary of a Panhandle Subsidiary.
"PBOPs" shall have the meaning set forth in Section 5.6 (d).
"Permits" shall have the meaning set forth in Section 3.9.
"Permitted shall mean (a) zoning, planning and building codes
Encumbrances" and other applicable laws regulating the use,
development and occupancy of real property and
permits, consents and rules under such laws; (b)
encumbrances, easements, rights-of-way, covenants,
conditions, restrictions and other matters affecting
title to real property which do not materially
detract from the value of such real property or
materially restrict the use of such real property;
(c) leases and subleases of real property; (d) all
easements, encumbrances or other matters which are
necessary for utilities and other similar services on
real property; (e) Encumbrances to secure
indebtedness reflected on the Financial Statements,
(f) Encumbrances to secure indebtedness incurred in
the ordinary course of business, consistent with past
practice, after the date thereof, to the extent
permitted pursuant to Section 5.1 (b)(xi), (f) Liens
for Taxes and other governmental levies not yet due
and payable or, if due, (i) not delinquent or (ii)
being contested in good faith by appropriate
proceedings during which collection or enforcement
against the property is stayed and with respect to
which adequate reserves have been established and are
being maintained to the extent required by GAAP, (g)
mechanics', workmen's, repairmen's, materialmen's,
warehousemen's, carriers' or other Liens, including
all statutory Liens, arising or incurred in the
ordinary course of business, (h) original purchase
price conditional sales contracts and equipment
leases with third parties entered into in the
ordinary course of business, (i) Liens that do not
materially interfere with or materially affect the
value or use of the respective underlying asset to
which such Liens relate, (j) Encumbrances which are
capable of being cured through condemnation
procedures under the Natural Gas Act at a total cost
to Panhandle and the Panhandle Subsidiaries of less
than $1 million and (k) Encumbrances which are
reflected in any Material Contract.
"Person" shall mean any natural person, corporation, company,
general partnership, limited partnership, limited
liability partnership, joint venture, proprietorship,
limited liability company, or other entity or
business organization or vehicle, trust,
unincorporated organization or Governmental Authority
or any
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department or agency thereof.
"Post-Closing Taxes" shall have the meaning set forth in Section 5.7
(b)(iii).
"Pre-Closing Taxes" shall have the meaning set forth in Section 5.7
(b)(iv).
"Pro Forma Adjusted shall mean the September 30, 2002 Interim Financial
Balance Sheet" Statements, adjusted to:
(A) reflect, among the other matters reflected in the
adjustments set forth in Section 1.1(c)(ii) of the
Seller Disclosure Letter, the following pro forma
adjustments:
(i) the consolidation of 100
percent of CMS Trunkline LNG Holdings, LLC,
following the purchase of Dekatherm
Investors Trust's interest therein by
Panhandle or a subsidiary of Panhandle,
(ii) the consolidation of 100% of
CMSGCFS,
(iii) the elimination of 100% of
Panhandle's interest in Centennial,
(iv) the elimination of 100% of
Panhandle's interest in Guardian, and
(v) the elimination of all account
balances relating to the Supplemental
Retirement Plan.
(B) reflect, among the other matters reflected in the
adjustments set forth in Section 1.1(c)(ii) of the
Seller Disclosure Letter, the following adjustments
for purposes of calculating the Net Working Capital
Amount:
(i) current assets shall include
the non-current portion of the system gas
account, as reflected on the applicable
balance sheet,
(ii) current assets shall exclude
(x) any Tax asset (current or deferred) or
(y) any mark to market adjustments related
to any swap agreements listed in Section
1.1(c)(i) of the Seller Disclosure Letter,
and
(iii) current liabilities shall
exclude (w) any Tax liability (current or
deferred), (x) any mark to market
adjustments related to
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any swap agreements listed in Section
1.1(c)(i) of the Seller Disclosure Letter,
(y) short term debt and current portions of
long term debt or (z) bonus amounts accrued
for Affected Employees which will be paid by
Buyer, who will be reimbursed by Seller,
pursuant to Section 5.6 (e) hereof; and
(C) reflect that current assets and current
liabilities relating to amounts owed by (or owed to)
Panhandle or the Panhandle Subsidiaries on the one
hand to (or by) Seller or any of its Affiliates,
other than Panhandle and the Panhandle Subsidiaries,
on the other hand shall be excluded; provided,
however, that none of the following shall be
excluded:
(i) receivables and/or payables for
the purchase or sale of natural gas, natural
gas liquids and other commodities between
Panhandle or the Panhandle Subsidiaries on
the one hand, and Seller (or any of its
Affiliates, other than Panhandle and the
Panhandle Subsidiaries) on the other hand;
(ii) receivables for services
rendered in the ordinary course of business
by Panhandle or the Panhandle Subsidiaries
on the one hand, to Seller (or any of its
Affiliates, other than Panhandle and the
Panhandle Subsidiaries) on the other hand;
and
(iii) payables for services
rendered, other than allocated corporate
expenses in the ordinary course of business
for Panhandle or the Panhandle Subsidiaries
on the one hand, by Seller (or any of its
Affiliates, other than Panhandle and the
Panhandle Subsidiaries) on the other hand.
The Pro Forma Adjusted Balance Sheet, reflecting the
adjustments listed above, is set forth in Section
1.1(c)(ii) of the Seller Disclosure Letter.
"Prohibited shall have the meaning set forth in Section 5.18.
Transactions"
12
"Prospectus shall have the meaning set forth in Section 5.22(a).
Supplement"
"Purchase Price" shall mean the purchase price for the Panhandle
Shares as set forth in Section 2.5 (d).
"Real Property" shall have the meaning set forth in Section 3.11.
"Related Agreements" shall mean the Transition Services Agreement, the
Intellectual Property Agreement, the Access and
Support Agreement, the Assumption Agreement, and the
Shareholder Agreement.
"Related Companies" shall mean Lee 8 Storage Partnership, a Michigan
general partnership and Atchafalaya Pipeline, L.L.C.,
a Delaware limited liability company.
"Restated Financials" shall have the meaning set forth in Section 6.2(i).
"Rights-Of-Way" shall have the meaning set forth in Section 3.11.
"SEC" shall have the meaning set forth in Section 4.10.
"Section 5.4 (b) Person" shall mean any of Southern Union and its Subsidiaries
(taken as a whole), or Buyer.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall have the meaning set forth in the preamble to
this Agreement.
"Seller Adjustment" shall have the meaning set forth in Section 2.5(c).
"Seller Counterparty" shall mean each of Seller's Affiliates that executes
and delivers any of the Related Agreements.
"Seller Indemnified shall have the meaning set forth in Section 8.2(b).
Parties"
"Seller Plans" shall have the meaning set forth in Section 5.6 (b).
"Seller Returns" shall have the meaning set forth in Section 5.7
(b)(i).
"Seller's Marks" shall have the meaning set forth in Section 5.16.
"Seller's Savings Plan" shall have the meaning set forth in Section 5.6 (a).
"Separation Plans" shall mean (i) Separation Allowance Plan for
Employees of Panhandle and the Panhandle
Subsidiaries, adopted on November 1, 2002; (ii)
Executive Separation Allowance Plan
13
for Employees of Panhandle and the Panhandle
Subsidiaries, adopted on November 1, 2002; (iii)
Executive Separation Allowance Plan for Designated
Officers of Panhandle and the Panhandle Subsidiaries,
adopted on November 1, 2002; and (iv) Executive
Separation Allowance Plan for Designated Senior
Officers of Panhandle Eastern Pipe Line Company,
adopted on November 1, 2002.
"Shareholder shall mean the shareholder agreement to be entered
Agreement" into on the Closing Date between Seller and Southern
Union, substantially in the form of the agreement
attached hereto as Exhibit D.
"Shelf Registration shall have the meaning set forth in Section 4.16(b).
Statement"
"Southern Union" shall have the meaning set forth in the recitals to
this Agreement.
"Southern Union shall mean the Southern Union Interim Financial
Financial Statements" Statements and the Southern Union Year-End Financial
Statements.
"Southern Union Interim shall mean the unaudited consolidated interim
Financial Statements" financial statements of Southern Union and the
Southern Union Subsidiaries included in Southern
Union's quarterly reports on Form 10-Q for the fiscal
quarters ended after June 30, 2002.
"Southern Union shall mean any change or effect that is materially
Material Adverse adverse to the business, financial condition or
Effect" assets of the business of Southern Union and the
Southern Union Subsidiaries, taken as a whole;
provided, however, that Southern Union Material
Adverse Effect shall exclude any change or effect due
to (a) negotiation, execution, announcement, and
consummation of this Agreement and the transactions
contemplated hereby, including the impact thereof on
relationships, contractual or otherwise, with
customers, suppliers, distributors, partners, joint
owners or venturers, or employees, (b) any action
taken by Southern Union, Buyer or any of their
respective representatives or Affiliates or other
action required or permitted by the terms of this
Agreement or necessary to consummate the transactions
contemplated by this Agreement, (c) the general state
of the industries in which Southern Union or the
Southern Union Subsidiaries operate (including (i)
pricing levels, (ii) changes in the international,
national, regional or local wholesale or retail
markets for natural gas, (iii) changes in the North
American, national, regional or local natural gas
distribution business, and (iv) rules, regulations or
decisions of state public utility commissions or the
courts
14
affecting the local natural gas distribution industry
as a whole, or rate orders, motions, complaints or
other actions affecting Southern Union or the
Southern Union Subsidiaries), except, in all cases
for such effects which disproportionately impact
Southern Union and the Southern Union Subsidiaries,
taken as a whole, (d) general legal, regulatory,
political, business, economic, capital market and
financial market conditions (including prevailing
interest rate levels), or conditions otherwise
generally affecting the industries in which Southern
Union or the Southern Union Subsidiaries operate,
except, in all cases, for such effects which
disproportionately impact Southern Union and the
Southern Union Subsidiaries, taken as a whole, and
(e) any condition described in the Buyer Disclosure
Letter (but only to the extent set forth in such
Buyer Disclosure Letter).
"Southern Union shall mean 3 million shares of Southern Union common
Shares" stock, par value $1.00 per share, registered with the
SEC pursuant to the Shelf Registration Statement and
listed on the New York Stock Exchange.
"Southern Union shall mean the subsidiaries listed in Southern
Subsidiaries" Union's annual report on Form 10-K for the year ended
June 30, 2002.
"Southern Union Year- shall mean the audited consolidated financial
End Financial statements of Southern Union and the Southern Union
Statements" Subsidiaries included in its annual report on Form
10-K for the year ended June 30, 2002.
"Straddle Period" shall have the meaning set forth in Section 5.7
(b)(ii).
"Straddle Period shall have the meaning set forth in Section 5.7
Return(s)" (b)(ii).
"Straddle Statement" shall have the meaning set forth in Section 5.7
(b)(ii).
"Subsidiary" of any entity means, at any date, any Person (a) the
accounts of which would be consolidated with and into
those of the applicable entity in such entity's
consolidated financial statements if such financial
statements were prepared in accordance with GAAP as
of such date or (b) of which securities or other
ownership interests representing more than fifty
percent (50%) of the equity or more than fifty
percent (50%) of the ordinary voting power or, in the
case of a partnership, more than fifty percent (50%)
of the general partnership interests or more than
fifty percent (50%) of the profits or losses of which
are, as of such date, owned,
15
controlled or held by the applicable entity or one or
more subsidiaries of such entity.
"Survival Period" shall have the meaning set forth in Section 8.1 (c).
"Tax Claim" shall have the meaning set forth in Section 5.7
(e)(i).
"Tax Indemnified Party" shall have the meaning set forth in Section 5.7
(e)(i).
"Tax Indemnifying shall have the meaning set forth in Section 5.7
Party" (e)(i).
"Tax Return" shall mean any report, return, declaration, or other
information required to be supplied to a Governmental
Authority in connection with Taxes including any
claim for refund or amended return.
"Taxes" shall mean all taxes, levies or other like
assessments, including net income, gross income,
gross receipts, capital gains, profits,
environmental, excise, value added, ad valorem, real
or personal property, withholding, asset, sales, use,
transfer, registration, license, payroll,
transaction, capital, business, occupation,
corporation, employment, withholding, wage, net
worth, franchise, minimum, alternative minimum, and
estimated taxes, or other governmental taxes imposed
by or payable to any foreign, Federal, state or local
taxing authority, whether computed on a separate,
consolidated, unitary, combined or any other basis;
and in each instance such term shall include any
interest, penalties or additions to tax attributable
to any such Tax.
"Third-Party Claim" shall have the meaning set forth in Section 8.4 (a).
"Threshold Amount" shall have the meaning set forth in Section 8.2 (d).
"Total Debt" shall mean all short-term and long-term indebtedness
of Panhandle and the Panhandle Subsidiaries as
reflected on a consolidated balance sheet, prepared
in accordance with GAAP, of Panhandle and the
Panhandle Subsidiaries as of a particular date, but
excluding any debt payable to Seller or Seller's
Affiliates by Panhandle or a Panhandle Subsidiary
which is eliminated by Panhandle or a Panhandle
Subsidiary prior to the Closing Date in accordance
with Section 5.8.
"Transfer Tax(es)" shall have the meaning set forth in Section 5.7 (g).
"Transition Services shall mean the transition services agreement to be
Agreement" entered into on the Closing Date between Seller and
Buyer in a form
16
mutually acceptable to both parties.
"Transitional License" shall have the meaning set forth in Section 5.16.
"Treasury Regulation" shall mean the income Tax regulations, including
temporary and proposed regulations, promulgated under
the Code, as amended.
"Year-End Financial shall mean the audited balance sheet and statement of
Statements" income, as of and for the twelve (12) months ended
December 31, 2001 for Panhandle and the Panhandle
Subsidiaries (other than CMSGCFS, but including
Centennial and Guardian) on a consolidated basis.
ARTICLE II
SALE AND PURCHASE
Section 2.1 Agreement to Sell and Purchase.
Subject to the terms and conditions of this Agreement, at the Closing,
Seller shall sell, convey, assign, transfer and deliver to Buyer the Panhandle
Shares, free and clear of all Encumbrances, and Buyer shall purchase and accept
such Panhandle Shares from Seller.
Section 2.2 Time and Place of Closing.
Upon the terms and subject to the satisfaction of the conditions
contained in this Agreement, the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 4 Times Square, New York, New York, at 10:00 a.m.,
local time, on the fourteenth (14th) day following the date on which all of the
conditions set forth in Article VI of this Agreement have been satisfied or
waived (other than those conditions contemplated to be satisfied at the Closing)
(or June 30, 2002, if such fourteenth day would be July 1, 2003 or later), or at
such other place or time as Buyer and Seller may mutually agree in writing. The
date and time at which the Closing actually occurs is hereinafter referred to as
the "Closing Date."
Section 2.3 Pre-Closing Matters.
At least five (5) Business Days prior to Closing, Seller shall deliver
to Buyer its good faith estimate of the Net Working Capital Amount at Closing
(the "Estimated Closing Net Working Capital Amount") and its good faith estimate
of the amount of Total Debt at Closing (the "Estimated Closing Debt"), in each
case together with a reasonably detailed computation of such estimates, which
shall be computed in accordance with GAAP (subject to the exceptions from GAAP
relating to the adjustments
17
reflected on the Pro Forma Adjusted Balance Sheet) and on a basis consistent
with the preparation of the Pro Forma Adjusted Balance Sheet. "Net Working
Capital Amount" shall mean (a) the current assets of Panhandle and the Panhandle
Subsidiaries minus (b) the current liabilities of Panhandle and the Panhandle
Subsidiaries, with both current assets and current liabilities determined in
accordance with GAAP, applied in a manner consistent with the preparation of the
Pro Forma Adjusted Balance Sheet (and subject to the exceptions from GAAP
relating to the adjustments reflected on the Pro Forma Adjusted Balance Sheet),
except for the calculation of Estimated Closing Net Working Capital and Net
Working Capital Amount as of the Closing Date with respect to System Gas
Inventory and Imbalance Related Accounts, which is addressed below. For purposes
of this Section 2.3, capitalized terms used but not otherwise defined herein
shall be deemed to refer to the corresponding line items in Sections 1.1(b)(ii)
or 1.1(b)(iii) of the Seller Disclosure Letter, as applicable. For purposes of
the Net Working Capital calculation, System Gas Inventory and Imbalance Related
Accounts shall be valued at $29,114,046 plus (less) the excess (deficiency) of
the actual on hand quantity of Net System Gas Owned at the closing date less the
net quantity of system gas owned at September 30, 2002 (10,789,959 MMBTU) times
the average of the closing Henry Hub spot market price for natural gas for the
five business days prior to the Closing Date as reported in the Wall Street
Journal, except for purposes of the calculation of the Estimated Closing Net
Working Capital which shall be valued based on the quantity of Net System Gas
Owned ten (10) days prior to the Closing Date times the average closing Henry
Hub spot market price for natural gas for the five (5) business days ended ten
(10) days prior to the Closing Date. System Gas Inventory and Imbalance Related
Accounts shall be defined as System Gas Inventory, Accounts Receivable -
Exchanges, Accounts Payable - Exchanges, Fuel Tracker and Line Pack as shown in
the Section 1.1(c)(ii) of the Seller Disclosure Letter. Net System Gas Owned
shall be defined as System Gas Inventory plus Accounts Receivable - Exchanges,
Accounts Payable - Exchange, including Fuel Tracker and Line Pack as shown in
the Section 1.1(c)(iii) of the Seller Disclosure Letter. Seller shall deliver to
Buyer its calculations of the Estimated Purchase Price and the Estimated
Adjustment Amount within five (5) Business Days prior to the Closing Date and
shall provide upon reasonable advance notice, Buyer and Buyer's accountants
prompt and full reasonable access during normal business hours to the personnel,
accountants and books and records of Seller, to the extent reasonably related to
the preparation of the Estimated Purchase Price and the Estimated Adjustment
Amount (and the elements of such calculation). Buyer and Seller shall in good
faith attempt to resolve any objections of Buyer to such calculation of the
Estimated Adjustment Amount; if Buyer and Seller are in disagreement with
respect to the calculation of the Estimated Adjustment Amount as of the Closing,
the Estimated Purchase Price paid pursuant to Section 2.4 shall be based on the
amount of the Estimated Adjustment Amount delivered to Buyer pursuant to this
Section 2.3, as adjusted to reflect any changes to the Estimated Adjustment
Amount agreed to by the parties prior to Closing.
Section 2.4 Estimated Purchase Price.
In consideration of the aforesaid sale, conveyance, assignment,
transfer and delivery to Buyer of the Panhandle Shares and the agreement of
Seller to enter into this Agreement, and subject to the adjustments set forth in
Section 2.5, at the Closing, Buyer
18
shall (a) pay in full to Seller (or its designated Affiliates) an amount in cash
equal to (i) $584,300,000 plus (ii) the Estimated Adjustment Amount plus (iii)
the Kansas Site Adjustment (the result of such calculation, the "Estimated
Purchase Price"), and (b) deliver to Seller the Southern Union Shares. The
"Estimated Adjustment Amount" shall mean the amount equal to (a) the Estimated
Closing Net Working Capital Amount, minus (b) the Net Working Capital Amount as
of September 30, 2002, as shown in the Pro Forma Adjusted Balance Sheet
($92,934,493) (the "Base Net Working Capital"), minus (c) the Estimated Closing
Debt, plus (d) the amount of Total Debt as of September 30, 2002
($1,165,519,106) (the "Base Total Debt"). The calculation of the Estimated
Adjustment Amount may result in an amount that is positive or negative. The
Estimated Purchase Price will be payable at the Closing by wire transfer of same
day funds to an account or accounts and in such amounts as designated by Seller.
Seller shall designate such account or accounts and amounts in writing at least
two (2) Business Days prior to Closing.
Section 2.5 Post-Closing Adjustment.
(a) As soon as reasonably practicable following the Closing
Date, and in any event within sixty (60) days thereafter, Seller shall prepare
and deliver to Buyer (i) a consolidated balance sheet of Panhandle and the
Panhandle Subsidiaries as of the close of business on the date immediately prior
to the Closing Date (the "Closing Balance Sheet"), and (ii) a calculation of the
"Closing Adjustment Amount," which shall mean the amount equal to (a) the Net
Working Capital Amount as of the Closing Date, as reflected on the Closing
Balance Sheet, minus (b) the amount of the Base Net Working Capital Amount, plus
(c) the amount of the Base Total Debt, minus (d) the Total Debt as of the
Closing Date, as reflected on the Closing Balance Sheet, which calculation may
result in an amount that is positive or negative (together with reasonable
back-up information providing the basis for such balance sheet and
calculations). In order for Seller to prepare the Closing Balance Sheet and
calculate the Closing Adjustment Amount, Buyer will provide to Seller and
Seller's accountants prompt and full access to the personnel, accountants and
books and records of Panhandle and the Panhandle Subsidiaries (and shall provide
copies of the applicable portions of such books and records as may be reasonably
requested), to the extent reasonably related to the preparation of the Closing
Balance Sheet and the calculation of the Closing Adjustment Amount (and the
elements of such calculation). In order for Buyer to review the Closing Balance
Sheet and review the calculation of the Closing Adjustment Amount, Seller will
provide to Buyer and Buyer's accountants prompt and full access to the
personnel, accountants and books and records used by Seller (and shall provide
copies of the applicable portions of such books and records as may be reasonably
requested), to the extent reasonably related to the preparation of the Closing
Balance Sheet and the calculation of the Closing Adjustment Amount (and the
elements of such calculation). The Closing Balance Sheet and the calculation of
Closing Adjustment Amount shall be prepared in accordance with GAAP, applied in
a manner consistent with the preparation of the Pro Forma Adjusted Balance Sheet
(and subject to the exceptions from GAAP relating to the adjustments reflected
on the Pro Forma Adjusted Balance Sheet).
19
(b) Disputes. If Buyer disagrees with the calculation of the
Closing Adjustment Amount, it shall notify Seller of such disagreement in
writing within thirty (30) days after its receipt of the Closing Balance Sheet,
which notice shall set forth in detail the particulars of such disagreement. In
the event that Buyer does not provide such a notice of disagreement within such
thirty (30) day period, Buyer shall be deemed to have accepted the Closing
Balance Sheet and the calculation of the Closing Adjustment Amount (and each
element of such calculation), respectively delivered by Seller, which shall be
final, binding and conclusive for all purposes hereunder. In the event any such
notice of disagreement is timely provided by Buyer, Buyer and Seller shall use
their reasonable best efforts for a period of thirty (30) days (or such longer
period as they may mutually agree) to resolve any disagreements with respect to
the calculation of the Closing Adjustment Amount (or any element thereof). If,
at the end of such period, they are unable to resolve such disagreements, then,
upon the written request of either party, an independent accounting firm (not
providing services to Buyer or Seller) acceptable to Buyer and Seller (the
"Auditor") shall resolve any remaining disagreements. The Auditor shall
determine as promptly as practicable (but in any event within sixty (60) days)
following the date on which such dispute is referred to the Auditor, based
solely on written submissions, which shall be forwarded by Buyer and Seller to
the Auditor within thirty (30) days following the Auditor's selection, whether
the Closing Balance Sheet was prepared in accordance with the standards set
forth in this Section 2.5 with respect to any items identified as disputed in
the notice of disagreement and not previously resolved by Buyer and Seller, and
if not, whether and to what extent (if any) the Closing Adjustment Amount (or
any element thereof) requires adjustment. Each party shall bear its own expenses
and the fees and expenses of its own representatives and experts in connection
with the preparation, review, dispute (if any) and final determination of the
Closing Balance Sheet and the Closing Adjustment Amount. The parties shall share
the costs, expenses and fees of the Auditor in inverse proportion to the extent
to which their respective positions are sustained (e.g., if Seller's position is
one hundred percent (100%) sustained, it shall bear none of such costs,
expenses, and fees of the Auditor). The determination of the Auditor shall be
final, conclusive and binding on the parties. The Auditor's determination of the
amount of the Closing Adjustment Amount shall then be deemed to be the Closing
Adjustment Amount for purposes of this Section 2.5. The date on which such items
are accepted or finally determined in accordance with this Section 2.5 is
referred as to the "Determination Date." As used in this Agreement, the term
"reasonable best efforts" shall not include efforts which require the performing
party (i) to do any act that is unreasonable under the circumstances, (ii) to
make any capital contribution not expressly contemplated hereunder, (iii) to
amend or waive any rights under this Agreement, or (iv) to incur or expend any
funds other than reasonable out-of-pocket expenses incurred in satisfying its
obligation hereunder, including the reasonable fees, expenses and disbursements
of accountants, counsel and other professionals.
(c) Purchase Price Adjustment. If the Estimated Adjustment
Amount is (x) less than the Closing Adjustment Amount, then the Buyer shall pay
to Seller an amount equal to such shortfall (the "Buyer Adjustment") or (y)
greater than the Closing Adjustment Amount, then Seller shall pay to Buyer an
amount equal to such excess (the "Seller Adjustment").
20
(d) Adjustment Amounts. The Estimated Purchase Price minus the
Seller Adjustment, if any, plus the Buyer Adjustment, if any, shall equal the
"Purchase Price." The Seller Adjustment, if any, and the Buyer Adjustment, if
any, shall bear simple interest at a rate equal to daily average one month LIBOR
plus one percent (1%) per annum measured from the Closing Date to the date of
such payment. Amounts owing by Seller, if any, pursuant to this Section 2.5
shall be paid by Seller by delivery of immediately available funds to an account
designated by Buyer within five (5) Business Days after the Determination Date.
Amounts owing by Buyer, if any, pursuant to this Section 2.5 shall be paid by
Buyer by delivery of immediately available funds to an account designated by
Seller within five (5) Business Days after the Determination Date.
Section 2.6 Deliveries by Seller at the Closing.
At the Closing, Seller shall deliver, or cause its appropriate
Affiliates to deliver, to Buyer:
(a) stock certificates representing one hundred percent (100%)
of the Panhandle Shares;
(b) a cross-receipt acknowledging the receipt of the Purchase
Price and the Southern Union Shares;
(c) a certificate from an authorized officer of Seller, dated
as of the Closing Date, to the effect that the conditions set forth in Section
6.2 (a), Section 6.2 (c) and Section 6.2 (j) of this Agreement have been
satisfied;
(d) all other previously undelivered documents, including duly
executed original copies of the Related Agreements, required by this Agreement
to be delivered by Seller or its Affiliates to Buyer at or prior to the Closing;
(e) resignations of each of the directors and officers of
Panhandle and the Panhandle Subsidiaries who are not employees of Panhandle or
any of the Panhandle Subsidiaries; and
(f) all such other deeds and instruments of sale, assignment,
conveyance and transfer and releases, consents and waivers as in the reasonable
opinion of Buyer may be necessary to effect the sale, transfer, assignment,
conveyance and delivery of the Panhandle Shares to Buyer in accordance with this
Agreement and the Related Agreements, and where necessary or desirable, in
recordable form, in each case, as is necessary to effect the transactions
contemplated by this Agreement.
Section 2.7 Deliveries by Buyer at the Closing.
At the Closing, Buyer and Southern Union shall deliver to Seller:
(a) the Estimated Purchase Price in US-dollar-denominated
funds by wire transfer of immediately available funds or by such other means as
are agreed to by Seller and Buyer:
21
(b) stock certificates representing one hundred percent (100%)
of the Southern Union Shares;
(c) a cross-receipt acknowledging receipt of the Panhandle
Shares;
(d) a certificate from an authorized officer of Buyer and
Southern Union, dated as of the Closing Date, to the effect that the conditions
set forth in Section 6.3 (a) and Section 6.3 (c) of this Agreement have been
satisfied; and
(e) all other previously undelivered documents, including duly
executed original copies of the Related Agreements, required by this Agreement
to be delivered by Buyer or Southern Union to Seller at or prior to the Closing.
Section 2.8 Cooperation with Respect to Like-Kind Exchange.
With the consent of the Seller, which consent shall not unreasonably be
withheld, the rights of Buyer under this Agreement may be assigned in whole or
in part to Southern Union. In the event Seller consents to such assignment to
Southern Union pursuant to Section 9.6 of this Agreement, Buyer may desire that
the transactions contemplated in this Agreement and the Related Agreements be
accomplished in a manner enabling Southern Union's purchase to qualify as part
of a like-kind exchange of property covered by Section 1031 of the Code. Seller
agrees to cooperate and consider in good faith any reasonable request or
proposal made by Southern Union in connection with efforts to effect such
like-kind exchange, including any reasonable use of a "qualified intermediary",
an "exchange accommodation titleholder" or a "qualified exchange accommodation
agreement" within the meaning of the United States Treasury Regulations and
related authority; provided, however, that Seller shall have no obligation to
take (or agree to take) any action that, in its reasonable discretion, may
create any adverse consequences to the Seller, including but not limited to
adverse Tax, financial or regulatory consequences for the transactions
contemplated by this Agreement and the Related Agreements or may cause an
unreasonable delay in the consummation of the transactions contemplated by this
Agreement and the Related Agreements. Buyer agrees that it will reimburse Seller
for any out-of-pocket costs incurred in connection its cooperation, including
but not limited to legal fees, opinions of counsel or other costs incurred in
implementing Buyer's proposals. Notwithstanding anything herein, the structuring
of the transactions in a manner that qualifies the transactions as part of a
like-kind exchange shall not be a condition to Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer and Southern Union as
follows:
22
Section 3.1 Corporate Organization; Qualification.
(a) Seller and Panhandle are each corporations duly organized,
validly existing and duly qualified or licensed and in good standing under the
laws of the state or jurisdiction of their respective incorporation and have all
requisite corporate power, as applicable, to own, lease and operate their
respective properties and to carry on their respective businesses as currently
conducted. Seller and Panhandle are each duly qualified or licensed to do
business as foreign corporations, and are, and have been, in good standing in
each jurisdiction in which the nature of the respective businesses conducted by
them or the property they own, lease or operate requires them to so qualify, be
licensed or be in good standing, except for such failures to be qualified,
licensed or in good standing that would not have a Material Adverse Effect. True
and correct copies of the Organizational Documents of Panhandle and the
Panhandle Subsidiaries with all amendments thereto to the date hereof, have been
made available by Seller to Buyer or its representatives.
(b) The Panhandle Subsidiaries are each corporations, or other
entities, as applicable, duly organized, validly existing and duly qualified or
licensed and in good standing under the laws of the state or jurisdiction of
their respective incorporation or formation and have all requisite corporate or
other power, as applicable, to own, lease and operate their respective
properties and to carry on their respective businesses as currently conducted.
The Panhandle Subsidiaries are each duly qualified or licensed to do business as
foreign corporations, or other entities, as applicable, and are, and have been,
in good standing in each jurisdiction in which the nature of the respective
businesses conducted by them or the property they own, lease or operate requires
them to so qualify, be licensed or be in good standing except where the failure
to be so authorized, qualified or licensed and in good standing would not have a
Material Adverse Effect. Section 3.1 (b) of the Seller Disclosure Letter sets
forth all of the jurisdictions in which Panhandle and the Panhandle Subsidiaries
are qualified to do business.
(c) Section 3.1 (c) of the Seller Disclosure Letter sets forth
the ownership interest of Seller (or any Subsidiary) in each Related Company.
Section 3.2 Authority Relative to this Agreement.
Seller has full corporate power and authority to execute and deliver
this Agreement, the Related Agreements and the other agreements, documents and
instruments to be executed and delivered by it in connection with this Agreement
or the Related Agreements, and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance of this Agreement,
the Related Agreements and the other agreements, documents and instruments to be
executed and delivered in connection with this Agreement or the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all the necessary action on the
part of Seller, and no other corporate or other proceedings on the part of
Seller are necessary to authorize this Agreement, the Related Agreements and the
other agreements, documents and instruments to be executed and delivered in
connection with this Agreement or the Related Agreements or to
23
consummate the transactions contemplated hereby and thereby. This Agreement has
been, and the Related Agreements and the other agreements, documents and
instruments to be executed and delivered in connection with this Agreement or
the Related Agreements as of the Closing Date will be, duly and validly executed
and delivered by Seller or the Seller Counterparties, as applicable, and
assuming that this Agreement, the Related Agreements and the other agreements,
documents and instruments to be executed and delivered in connection with this
Agreement or the Related Agreements constitute legal, valid and binding
agreements of Buyer and Southern Union, as applicable, are (in the case of this
Agreement) or will be as of the Closing Date (in the case of the Related
Agreements and the other agreements, documents and instruments to be executed
and delivered in connection with this Agreement or the Related Agreements)
enforceable against Seller and the Seller Counterparties in accordance with
their respective terms, except that such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally or general principles of
equity.
Section 3.3 Panhandle Shares.
(a) The Panhandle Shares are duly authorized, validly issued
and fully paid and were not issued in violation of any preemptive rights. Except
as set forth in Section 3.3(a) of the Seller Disclosure Letter, (i) there are no
shares of Panhandle authorized, issued or outstanding or reserved for any
purpose, and (ii) there are no (A) existing options, warrants, calls, rights of
first refusal, preemptive rights, subscriptions or other rights, agreements,
arrangements or commitments of any character, relating to the Panhandle Shares,
obligating Seller or any of its Affiliates to issue, transfer or sell, or cause
to be issued, transferred or sold, any of the Panhandle Shares, (B) outstanding
securities of Seller or its Affiliates that are convertible into or exchangeable
or exercisable for any of the Panhandle Shares, (C) options, warrants or other
rights to purchase from Seller or its Affiliates any such convertible or
exchangeable securities or (D) other than this Agreement, contracts, agreements
or arrangements of any kind relating to the issuance of any of the Panhandle
Shares, or any such options, warrants or rights, pursuant to which, in any of
the foregoing cases, Seller or its Affiliates are subject or bound.
(b) Except as set forth in Section 3.3 (b) of the Seller
Disclosure Letter, Seller owns all of the issued and outstanding Panhandle
Shares and has good, valid and marketable title to the Panhandle Shares, free
and clear of all Encumbrances or other defects in title, and the Panhandle
Shares have not been pledged or assigned to any Person. At the Closing, the
Panhandle Shares will be transferred to Buyer free and clear of all
Encumbrances. The Panhandle Shares owned by Seller are not subject to any
restrictions on transferability other than those imposed by this Agreement and
by applicable securities laws.
(c) Except for the ownership of the Panhandle Subsidiaries and
the Related Companies, Panhandle does not have any subsidiaries or any stock or
other equity interest (controlling or otherwise) in any corporation, limited
liability company, partnership, joint venture or other entity. Except as set
forth in Section 3.3 (c)(i) of the
24
Seller Disclosure Letter, all of the outstanding shares of capital stock or
other ownership interests, as applicable, of each of the Panhandle Subsidiaries
are owned directly or indirectly by Panhandle, free and clear of all
Encumbrances, and are validly issued, fully paid and nonassessable. At the
Closing, all of such shares or other ownership interests will be free and clear
of all Encumbrances. Except as set forth in Section 3.3 (c)(ii) of the Seller
Disclosure Letter, the number of outstanding shares of capital stock or other
ownership interests, as applicable, of each of the Related Companies indicated
on Section 3.1 (c) of the Seller Disclosure Letter are owned directly or
indirectly by Panhandle, free and clear of all Encumbrances or other defects in
title, and such shares or ownership interests have not been pledged or assigned
to any Person. Except as set forth in Section 3.3 (c)(iii) of the Seller
Disclosure Letter, (i) there are no shares of a Panhandle Subsidiary authorized,
issued or outstanding or reserved for any purpose, and (ii) there are no (A)
existing options, warrants, calls, rights of first refusal, preemptive rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the shares of a Panhandle Subsidiary, obligating
Panhandle or any of its Affiliates to issue, transfer or sell, or cause to be
issued, transferred or sold, any of the shares of a Panhandle Subsidiary, (B)
outstanding securities of Panhandle or its Affiliates that are convertible into
or exchangeable or exercisable for any of the shares of a Panhandle Subsidiary,
or (C) options, warrants or other rights to purchase from Panhandle or its
Affiliates any such convertible or exchangeable securities.
Section 3.4 Consents and Approvals.
Except as set forth in Section 3.4 of the Seller Disclosure Letter,
Seller requires no consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority, or any other
Person as a condition to the execution and delivery of this Agreement or the
performance of the obligations hereunder, except where the failure to obtain
such consent, approval or authorization of, or filing of, registration or
qualification with, any Governmental Authority, or any other Person would not
materially and adversely impact the operations, as currently conducted, of
Panhandle and the Panhandle Subsidiaries, taken as a whole.
Section 3.5 No Conflict or Violation.
Except as set forth in Section 3.5 of the Seller Disclosure Letter, the
execution, delivery and performance by the Seller of this Agreement does not:
(a) violate or conflict with any provision of the
organizational documents or bylaws of Seller, Panhandle or the Panhandle
Subsidiaries;
(b) violate any applicable provision of a law, statute,
judgment, order, writ, injunction, decree, award, rule or regulation of any
Governmental Authority, except where such violation would not have a Material
Adverse Effect; or
(c) violate, result in a breach of, constitute (with due
notice or lapse of time or both) a default or cause any obligation, penalty or
premium to arise or accrue under any Material Contract, lease, loan, mortgage,
security agreement, trust
25
indenture or other material agreement or instrument to which Panhandle or the
Panhandle Subsidiaries are a party or by which any of them is bound or to which
any of their respective properties or assets is subject, except as would not
have a Material Adverse Effect.
Section 3.6 Financial Information.
Seller has previously furnished to Buyer the Financial Statements.
Except as set forth in Section 3.6 of the Seller Disclosure Letter, as of the
Original Date, the Financial Statements present fairly in all material respects,
in accordance with GAAP consistently applied, on a consolidated basis, the
financial condition and results of operation of Panhandle and the Panhandle
Subsidiaries (other than CMSGCFS, but including Centennial and Guardian) as of
the date thereof and for the periods set forth therein, except for the absence
of footnotes and as otherwise noted therein, and subject, in the case of the
Interim Financial Statements, to normal recurring year-end adjustments which are
not material either individually or in the aggregate. At Closing, the Restated
Financials will present fairly in all material respects, in accordance with GAAP
consistently applied, on a consolidated basis, the financial condition and
results of operation of Panhandle and the Panhandle Subsidiaries (other than
CMSGCFS, but including Centennial and Guardian) as of the date thereof and for
the periods set forth therein, except for the absence of footnotes and as
otherwise noted therein, and subject, in the case of the Interim Financial
Statements, to normal recurring year-end adjustments which are not material
either individually or in the aggregate.
Section 3.7 Contracts.
(a) Section 3.7 (a) of the Seller Disclosure Letter sets forth
a list, as of the Original Date, of each material contract and lease to which
any of Panhandle or the Panhandle Subsidiaries is a party, other than (i) any
purchase or sale orders arising in the ordinary course of business, (ii) any
contract involving the payment or receipt of less than $1,000,000 in the
aggregate and (iii) any contract listed in any other Section of the Seller
Disclosure Letter (each contract set forth in Section 3.7 (a) of the Seller
Disclosure Letter being referred to herein as a "Material Contract").
(b) Section 3.7 (b) of the Seller Disclosure Letter sets forth
a list, as of the Original Date, of each contract that any of Panhandle or the
Panhandle Subsidiaries has with an Affiliate, other than with respect to any
purchases and sales arising in the ordinary course of business.
(c) Except as set forth in Section 3.7 (c) of the Seller
Disclosure Letter, each Material Contract is a valid and binding agreement of
Panhandle or the Panhandle Subsidiaries, as applicable, and, to the Knowledge of
Seller, is in full force and effect.
(d) Except as set forth in Section 3.7 (d) of the Seller
Disclosure Letter, Seller has no Knowledge of any default under any Material
Contract, other than defaults which have been cured or waived and which would
not have a Material Adverse
26
Effect. Panhandle or a Panhandle Subsidiary, as the case may be, and, to
Seller's Knowledge, the other party(ies) to any Material Contract, have
performed in all respects all obligations required to be performed by them under
any Material Contract, except where such non-performance would not have a
Material Adverse Effect. Seller has made available to Buyer or its
representatives true and complete originals or copies of all the Material
Contracts.
Section 3.8 Compliance with Law.
Except for Environmental Laws and Tax laws, which are the subject of
Section 3.15 and Section 3.16 respectively, and except as set forth in Section
3.8 of the Seller Disclosure Letter, since December 31, 1999, Seller, Panhandle
and the Panhandle Subsidiaries have complied with all federal, state, local or
foreign laws, statutes, ordinances, rules, regulations, judgments, orders,
writs, injunctions or decrees of any Governmental Authority applicable to their
respective properties, assets and businesses except where such noncompliance
would not have a Material Adverse Effect. None of Seller or Panhandle, and, to
the Knowledge of Seller, no Panhandle Subsidiary, has received written notice of
any material violation of any such law, license, regulation, order or other
legal requirement or, to the Knowledge of Seller, is in material default with
respect to any order, writ, judgment, award, injunction or decree of any
Governmental Authority, applicable to Panhandle or a Panhandle Subsidiary or any
of their respective assets, properties or operations.
Section 3.9 Permits.
Except as set forth in of the Seller Disclosure Letter, Seller,
Panhandle and the Panhandle Subsidiaries have all permits, licenses,
certificates of authority, orders and approvals of, and have made all filings
applications and registrations with Governmental Authorities necessary for the
conduct of the respective business operations of Panhandle and the Panhandle
Subsidiaries as presently conducted (collectively, the "Permits"), except for
those Permits the absence of which would not, individually or in the aggregate,
have a Material Adverse Effect.
Section 3.10 Litigation.
Except as identified in Section 3.10 of the Seller Disclosure Letter,
there are no lawsuits, actions, proceedings, or, to Seller's Knowledge, any
investigations, pending or, to Seller's Knowledge, threatened, against Seller or
any of its Affiliates or any executive officer or director thereof relating to
the Panhandle Shares or the transactions contemplated hereby or the respective
assets or businesses of Panhandle or the Panhandle Subsidiaries, except, in the
case of lawsuits, actions, proceedings, investigations relating to the
respective assets or businesses of Panhandle or the Panhandle Subsidiaries, as
would not, individually or in the aggregate, have a Material Adverse Effect.
Seller and its Affiliates are not subject to any outstanding judgment, order,
writ, injunction, decree or award entered in an Action to which Seller or any of
its Affiliates was a named party relating to the Panhandle Shares or the
transactions contemplated hereby or the respective assets or businesses of
Panhandle or the Panhandle Subsidiaries, except, in the case of
27
lawsuits, actions, proceedings, investigations relating to the respective assets
or businesses of Panhandle or the Panhandle Subsidiaries, as would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 3.11 Title to Properties.
Each of Panhandle and the Panhandle Subsidiaries has good and valid
title to all of the tangible assets and properties which it owns and which are
reflected in the Financial Statements (except for assets and properties sold,
consumed or otherwise disposed of in the ordinary course of business since the
date of the Financial Statements), and such tangible assets and properties are
owned free and clear of all Encumbrances, except for (a) Encumbrances listed in
Section 3.11 of the Seller Disclosure Letter, (b) Permitted Encumbrances, and
(c) Encumbrances which will be discharged on or before the Closing Date. To the
Knowledge of Seller, each of Panhandle and the Panhandle Subsidiaries owns valid
and defeasible fee title to, or holds a valid leasehold interest in, or a valid
right-of-way or easement (all such rights-of-way and easements collectively, the
"Rights of Way") through, all real property ("Real Property") used or necessary
for the conduct of Panhandle's and the Panhandle Subsidiaries' business as
presently conducted, and all such real Property (other than Rights-Of-Way) are
owned or leased free and clear of all Encumbrances, in each case except for (a)
Encumbrances listed in Section 3.11 of the Seller Disclosure Letter, (b)
Permitted Encumbrances, and (c) Encumbrances which will be discharged on or
before the Closing Date.
Section 3.12 Employee Matters.
(a) Except as set forth in Section 3.12 (a) of the Seller
Disclosure Letter, neither Panhandle nor the Panhandle Subsidiaries contributes
to any "employee benefit plan," as defined in Section 3(3) of ERISA ("ERISA
Plans").
(b) Other than the Separation Plans, neither Panhandle nor the
Panhandle Subsidiaries sponsors or administers any ERISA Plan.
(c) Except as set forth in Section 3.12 (c) of the Seller
Disclosure Letter, neither Panhandle nor the Panhandle Subsidiaries has
established or maintains any plan, agreement or arrangement providing for
employment terms; severance benefits; insurance coverage (including any
self-insured arrangements); workers' compensation; disability benefits;
supplemental unemployment benefits; vacation benefits; retirement benefits;
deferred compensation, profit-sharing, bonuses, or other forms of incentive
compensation; or post-retirement insurance, compensation or benefits (whether or
not an ERISA Plan) that (i) is entered into, sponsored or maintained, as the
case may be, by Panhandle or the Panhandle Subsidiaries, and (ii) covers any
current or former Panhandle Employee or independent contractor to Panhandle or a
Panhandle Subsidiary. The policies, agreements, plans and arrangements, copies
or descriptions, including the ERISA Plans, that are set forth in Section 3.12
(a) and Section 3.12 (c) of the Seller Disclosure Letter, of all of which
complete and accurate copies have previously have been made available to Buyer,
are hereinafter referred to collectively as the "Employee Benefit Plans."
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(d) Except as set forth in Section 3.12 (d) of the Seller
Disclosure Letter, neither Panhandle nor the Panhandle Subsidiaries has any
legal commitment to create, incur liability with respect to or cause to exist
any other employee benefit plan, program or arrangement for the benefit of any
current or former Panhandle Employee or to enter into any contract or agreement
to provide compensation or benefits to any former or current Panhandle Employee.
(e) Except as set forth in Section 3.12(e) of the Seller
Disclosure Letter, with respect to each Employee Benefit Plan:
(i) the applicable reporting, disclosure and other
requirements of ERISA (and other Applicable Law) have been complied
with in all material respects;
(ii) there is no act or omission of Panhandle or the
Panhandle Subsidiaries which would (a) constitute a breach of fiduciary
duty under Section 404 of ERISA or a transaction (including the
transactions contemplated by this Agreement) intended to evade
liability under Section 4069 of ERISA, in either case that would
subject Panhandle or the Panhandle Subsidiaries to a liability, or (b)
constitute a prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code that would subject Panhandle or the Panhandle
Subsidiaries or any plan fiduciary, directly or indirectly (through
indemnification obligations or otherwise), to an excise Tax or civil
penalty under Section 4975 of the Code or Section 502(i) of ERISA in an
amount that would be material;
(iii) none of the current or former Panhandle
Employees are entitled to benefits under a multiemployer plan (as
defined in Section 4001(a)(3) of ERISA) by reason of their employment
with Panhandle or the Panhandle Subsidiaries;
(iv) all contributions or payments required to be
made under each Employee Plan or Employee Benefit Plan, by reason of
Part 3 of Subtitle B of Title I of ERISA, Section 412 of the Code, or
otherwise prior to the Closing Date have been and will be timely made;
(v) there is no pending or, to Seller's Knowledge,
threatened litigation with respect to any Employee Benefit Plan;
(vi) except to the extent required under Section 601
of ERISA, neither Panhandle nor the Panhandle Subsidiaries has any
present or future obligation to make any payment to or with respect to
any former or current Panhandle Employee or any dependent of any such
former or current Panhandle Employee under any retiree medical benefit
plan, or other retiree welfare benefit plan;
29
(vii) there is no Employee Benefit Plan covering any
former or current Panhandle Employee that provides for the payment by
Panhandle or the Panhandle Subsidiaries of any amount (i) that is not
deductible as a result of Section 162(a)(1) or 404 of the Code or (ii)
that is an "excess parachute payment" pursuant to Section 280G of the
Code;
(viii) Seller is aware of no fact that would lead
Buyer or, after the transaction, Panhandle or a Panhandle Subsidiary,
to incur any liability under Title IV of ERISA;
(ix) Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will (x) entitle
any Panhandle Employee to severance pay to which such employee was not
previously entitled, or any increase in severance pay upon a
termination of employment, (y) accelerate the time of payment or
vesting of, or trigger any payment of compensation or benefits to, the
Panhandle Employees under any Employee Benefit Plan or (z) trigger any
other material obligation pursuant to the Employee Benefit Plans that
would be a liability of Buyer or Panhandle or the Panhandle
Subsidiaries after the Closing Date; and
(x) each ERISA Plan intended to qualify under Section
401(a) of the Code has been determined to be so qualified by the
Internal Revenue Service and, to the Knowledge of Seller, nothing has
occurred which has resulted or is likely to result in the revocation of
such determination or which requires or is reasonable likely to require
action under the compliance resolution programs of the Internal Revenue
Service to preserve such qualification.
Section 3.13 Labor Relations.
Except as set forth in Section 3.13 of the Seller Disclosure Letter,
(i) none of Panhandle or the Panhandle Subsidiaries is a party to any labor or
collective bargaining agreements, and there are no labor or collective
bargaining agreements which pertain to any employees of Panhandle or the
Panhandle Subsidiaries, (ii) within the preceding eighteen (18) months, there
have been no representation or certification proceedings, or petitions seeking a
representation proceeding, pending or, to the Knowledge of Seller, threatened in
writing to be brought or filed with the National Labor Relations Board or any
other labor relations tribunal or authority with respect to Panhandle or the
Panhandle Subsidiaries and (iii) within the preceding eighteen (18) months, to
the Knowledge of Seller, there have been no organizing activities involving
Panhandle or the Panhandle Subsidiaries with respect to any group of their
respective employees.
Section 3.14 Intellectual Property.
Except as set forth in Section 3.14 of the Seller Disclosure Letter,
Panhandle and the Panhandle Subsidiaries will, on the Closing Date, either in
their own name or by
30
operation of the Intellectual Property Agreement attached hereto as Exhibit A,
own or possess licenses or other legally enforceable rights to use all patents,
copyrights (including any copyrights in proprietary software), trademarks,
service marks, trade names, logos, and other intellectual property rights,
software object and source code as are necessary to conduct their respective
businesses as currently conducted, except those the lack of which would not,
materially and adversely impact the operations, as currently conducted, of
Panhandle and the Panhandle Subsidiaries taken as a whole; and to Seller's
Knowledge, there is no conflict by Seller or any of Panhandle or the Panhandle
Subsidiaries with the rights of others therein which, individually or in the
aggregate, would materially and adversely impact the operations, as currently
conducted, of Panhandle and the Panhandle Subsidiaries taken as a whole.
Section 3.15 Representations with Respect to Environmental
Matters.
To Seller's Knowledge, and except as set forth in Section 3.15 of the
Seller Disclosure Letter:
(a) Panhandle and the Panhandle Subsidiaries are in compliance
with all applicable Environmental Laws, except for such noncompliance as would
not, individually or in the aggregate, have a Material Adverse Effect;
(b) Panhandle and the Panhandle Subsidiaries have all of the
Environmental Permits required in order to conduct their operations or, where
such Environmental Permits have expired, have applied for a renewal of such
Environmental Permits in a timely fashion, except where the failure to have an
Environmental Permit or to have applied for a renewal of an Environmental Permit
would not, individually or in the aggregate, have a Material Adverse Effect;
(c) there is no pending or threatened written Claim, lawsuit,
or administrative proceeding against Panhandle or the Panhandle Subsidiaries
under or pursuant to any Environmental Law that, individually or in the
aggregate, would have a Material Adverse Effect. Neither Panhandle nor the
Panhandle Subsidiaries is a party or subject to any administrative or judicial
order, decree or other agreement with a Governmental Authority under or pursuant
to any applicable Environmental Law that, individually or in the aggregate,
would have a Material Adverse Effect;
(d) neither Panhandle nor the Panhandle Subsidiaries have
received written notice from any third party, including any Governmental
Authority, alleging that Panhandle or the Panhandle Subsidiaries has been or is
in violation or potentially in violation of any applicable Environmental Law or
otherwise may be liable under any applicable Environmental Law, which violation
or liability is unresolved and which, individually or in the aggregate, would
have a Material Adverse Effect; and
(e) with respect to the real property that is currently owned
or leased by Panhandle or the Panhandle Subsidiaries, there have been no spills
or discharges of Hazardous Substances on or underneath any such real property
that, individually or in the aggregate, would have a Material Adverse Effect.
31
The representations and warranties set forth in this Section 3.15 are Seller's
sole and exclusive representations and warranties related to environmental
matters.
Section 3.16 Tax Matters.
(a) Except as would not have a Material Adverse Effect, all
federal, state, and local Tax Returns required to be filed by or on behalf of
Panhandle or the Panhandle Subsidiaries, and each consolidated, combined,
unitary, affiliated or aggregate group of which any of Panhandle or the
Panhandle Subsidiaries are a member has been timely filed (taking into account
applicable extensions), and all Taxes shown as due on such Tax Returns have been
paid, or adequate reserves therefor have been established.
(b) Except as would not have a Material Adverse Effect, there
is no deficiency, proposed adjustment, or matter in controversy that has been
asserted or assessed in writing with respect to any Taxes due and owing by
Panhandle or the Panhandle Subsidiaries that has not been paid or settled in
full.
(c) Except as would not have a Material Adverse Effect,
Panhandle and the Panhandle Subsidiaries have timely withheld and timely paid
all Taxes required to be withheld by them in connection with any amounts paid or
owing to any employee, creditor, independent contractor or other third party.
(d) Except as would not have a Material Adverse Effect, there
are no liens for Taxes upon any of the assets of Panhandle or any Panhandle
Subsidiary except for liens for Taxes not yet due and payable.
(e) Except as would not have a Material Adverse Effect, no
property of Panhandle or any Panhandle Subsidiary is required to be treated as
"tax-exempt use property" within the meaning of Code Section 168(h), and no
property of Panhandle or any Panhandle Subsidiary is subject to a tax benefit
transfer lease subject to the provisions of former Section 168(f)(8) of the
Code.
(f) Except as set forth in Section 3.16 (f) of the Seller
Disclosure Letter, each Panhandle Subsidiary and each Related Company that is
treated as a partnership for United States federal income tax purposes has not
made a valid election under Section 754 of the Code that will be in effect on
the Closing Date.
Section 3.17 Absence of Certain Changes or Events.
(a) Except as set forth in Section 3.17 (a) of the Seller
Disclosure Letter, for the period beginning on March 29, 1999 and until the date
hereof, Panhandle and the Panhandle Subsidiaries have conducted their respective
businesses in the ordinary course of business, consistent with past practice (as
such practice existed during the period of Seller's ownership of Panhandle and
the Panhandle Subsidiaries).
(b) Except as set forth in Section 3.17 (b) of the Seller
Disclosure Letter, or in the Financial Statements and the notes thereto, since
the date of
32
the Financial Statements, there has not been with respect to Panhandle and the
Panhandle Subsidiaries any event or development or change which has resulted or
would reasonably be expected to result in a Material Adverse Effect.
Section 3.18 Absence of Undisclosed Liabilities.
Neither Panhandle nor the Panhandle Subsidiaries have any Liabilities
(whether absolute, accrued, contingent or otherwise) that are required by GAAP
to be reflected in the audited financial statements of Panhandle and the
Panhandle Subsidiaries except those Liabilities (a) disclosed and reserved
against in the September 30, 2002 balance sheet for Panhandle and the Panhandle
Subsidiaries, (b) set forth in Section 3.18 of the Seller Disclosure Letter, (c)
incurred in the ordinary course of business since September 30, 2002 and (d)
which have not resulted in a Material Adverse Effect.
Section 3.19 Brokerage and Finders' Fees.
Except for Merrill Lynch & Co. and Salomon Smith Barney Inc., whose
fees will be paid by Seller, none of Seller, Panhandle, the Panhandle
Subsidiaries, or any of their Affiliates or their respective stockholders,
partners, directors, officers or employees, has incurred, or will incur any
brokerage, finders' or similar fee in connection with the transactions
contemplated by this Agreement or the Related Agreements.
Section 3.20 Affiliated Transactions.
Except as described in Section 3.20 of the Seller Disclosure Letter,
and except for trade payables and receivables arising in the ordinary course of
business for purchases and sales of goods or services consistent with past
practice, neither Panhandle nor the Panhandle Subsidiaries have been a party
over the past twelve (12) months to any material transaction or agreement with
Seller or any Affiliate of Seller (other than Panhandle and the Panhandle
Subsidiaries) and no director or officer of Seller or its Affiliates (other than
Panhandle and the Panhandle Subsidiaries), has, directly or indirectly, any
material interest in any of the assets or properties of Panhandle or the
Panhandle Subsidiaries.
Section 3.21 Insurance.
(a) Section 3.21 of the Seller Disclosure Letter sets forth a
true and complete list of all current policies of all material property and
casualty insurance, insuring the properties, assets, employees and/or operations
of Panhandle and the Panhandle Subsidiaries (collectively, the "Insurance
Policies"). To the Knowledge of Seller, all premiums payable under such Policies
have been paid in a timely manner and Panhandle and the Panhandle Subsidiaries
have complied in all material respects with the terms and conditions of all such
Policies.
(b) As of the Original Date, Seller has not received any
written notification of the failure of any of the Insurance Policies to be in
full force and effect. To the Knowledge of Seller, neither Panhandle nor the
Panhandle Subsidiaries is in default under any provision of the Insurance
Policies, and except as set forth in Section
33
3.21 of the Seller Disclosure Letter, there is no claim by Panhandle or any
other Person pending under any of the Insurance Policies as to which coverage
has been denied or disputed by the underwriters or issuers thereof.
Section 3.22 Regulatory Matters.
Panhandle is a "Natural Gas Company" as that term is defined in Section
2 of the Natural Gas Act ("NGA"). Panhandle is not a "public utility company,"
"holding company" or "subsidiary" or "affiliate" of a holding company as such
terms are defined in the Public Utility Holding Company Act of 1935 (the "1935
Act"). Except as would not have a Material Adverse Effect, Panhandle and the
Panhandle Subsidiaries are in compliance with all provisions of the NGA and all
rules and regulations promulgated by FERC pursuant thereto. Except as would not
have a Material Adverse Effect, Panhandle and the Panhandle Subsidiaries are in
compliance with all orders issued by FERC that pertain to all terms and
conditions and rates charged for services. Except as set forth in Section 3.22
of the Seller Disclosure Letter, no approval of (i) the Securities and Exchange
Commission under the 1935 Act or (ii) FERC under the NGA or the Federal Power
Act is required in connection with the execution of this Agreement by Seller or
the transaction contemplated hereby with respect to Seller. The Form No. 2
Annual Reports filed by Panhandle with FERC for the years ended December 31,
2001 and December 31, 2000 were true and correct in all material respects as of
the dates thereof. Since September 30, 2002 until the date of this Agreement
none of Panhandle or the Panhandle Subsidiaries have become subject to any
proceeding under Section 5 of the NGA or any general rate case proceeding
commenced under Section 4 of the NGA by reason of a filing made with the FERC
after September 30, 2002.
Section 3.23 Opinions of Financial Advisors.
(a) The Board of Directors of Parent has received separate
opinions, dated the Original Date, from each of Merrill Lynch & Co. and Salomon
Smith Barney Inc., each addressed to the Board of Directors of Parent, to the
effect that, subject to, and based upon the assumptions, qualifications and
limitations included in such opinions, the consideration to be received by
Parent pursuant to the Original Purchase Agreement is fair from a financial
point of view to Parent. Buyer will be permitted to inspect such opinions solely
for informational purposes following receipt thereof by Parent.
(b) The Board of Directors of Parent has received an opinion,
dated as of the date of this Agreement, from Salomon Smith Barney Inc.,
addressed to the Board of Directors of Parent, to the effect that, subject to,
and based upon the assumptions, qualifications and limitations included in such
opinion, the consideration to be received by Parent pursuant to this Agreement
is fair from a financial point of view to Parent. Buyer will be permitted to
inspect such opinion solely for informational purposes following receipt thereof
by Parent.
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Section 3.24 Investment Representations.
Seller is acquiring the Southern Union Shares to be acquired by it
hereunder for its own account, solely for the purpose of investment and not with
a view to, or for sale in connection with, any distribution thereof in violation
of the federal securities laws or any applicable foreign or state securities
law.
Section 3.25 Recent Transfers.
(a) On February 28, 2002, Seller caused CMS Gulf Coast
Holdings Company, whose sole asset was 100 percent of the ownership interests in
CMSGCFS, and the contracts relating thereto, to be transferred to CMS Panhandle
Holdings, LLC.
(b) In March 2003, Panhandle's ownership interest in Guardian,
and the contracts relating thereto, was transferred to Seller.
(c) In February 2003, Panhandle sold its ownership interest in
Centennial, and the contracts relating thereto, to Marathon Ashland Petroleum,
LLC and TE Products Pipeline Company, Limited Partner.
Section 3.26 Date of Certain Representations.
All of the representations and warranties provided for in this Article
III are made only as of the Original Date except for the representations and
warranties set forth in Section 3.1 (Corporate Organization; Qualification),
Section 3.2 (Authority Relative to this Agreement), Section 3.3 (Panhandle
Shares), Section 3.4 (Consents and Approvals), Section 3.5 (No Conflict or
Violation) and Section 3.19 (Brokerage and Finders' Fees) which are made as of
the Original Date and as of the date of this Agreement and for Section 3.23(b)
(Opinions of Financial Advisors), Section 3.24 (Investment Representations) and
Section 3.25 (Recent Transfers) which are made only as of the date of this
Agreement.
Section 3.27 No Other Representations or Warranties.
Except for the representations and warranties contained in this Article
III, none of Seller, Panhandle, or the Panhandle Subsidiaries, nor any other
Person makes any other express or implied representation or warranty on behalf
of Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND SOUTHERN UNION
Buyer and Southern Union hereby represent and warrant to Seller as
follows:
35
Section 4.1 Corporate Organization; Qualification.
Buyer and Southern Union are corporations or other legal entities duly
organized, validly existing and duly qualified or licensed and in good standing
under the laws of the state or jurisdiction of their incorporation and have all
requisite corporate power to own, lease and operate their properties and to
carry on their business as currently conducted. Buyer and Southern Union are
duly qualified or licensed to do business as foreign corporations or other legal
entities and are, and have been, in good standing in each jurisdiction in which
the nature of the business conducted by each of them or the property each owns,
leases or operates requires it to so qualify, be licensed or be in good
standing, except for such failures to be qualified, licensed or in good standing
that would not materially affect the consummation of the transactions
contemplated by this Agreement.
Section 4.2 Authority Relative to this Agreement.
Buyer and Southern Union have full corporate, or other power, and
authority to execute and deliver this Agreement, the Related Agreements and the
other agreements, documents and instruments to be executed and delivered by each
of them in connection with this Agreement or the Related Agreements, and to
consummate the transactions contemplated hereby and thereby, including the
issuance and delivery of the Southern Union Shares, their registration pursuant
to the Shelf Registration Statement and the Listing. The execution, delivery and
performance of this Agreement, the Related Agreements and the other agreements,
documents and instruments to be executed and delivered in connection with this
Agreement or the Related Agreements and the consummation of the transactions
contemplated hereby and thereby, including the issuance and delivery of the
Southern Union Shares, their registration pursuant to the Shelf Registration
Statement and the Listing, have been duly and validly authorized by all the
necessary action on the part of Buyer and Southern Union and no other corporate,
or other proceedings on the part of Buyer or Southern Union are necessary to
authorize this Agreement, the Related Agreements and the other agreements,
documents and instruments to be executed and delivered in connection with this
Agreement or the Related Agreements or to consummate the transactions
contemplated hereby and thereby, including the issuance and delivery of the
Southern Union Shares, their registration pursuant to the Shelf Registration
Statement and the Listing. This Agreement has been, and the Related Agreements
and the other agreements, documents and instruments to be executed and delivered
in connection with this Agreement or the Related Agreements as of the Closing
Date will be, duly and validly executed and delivered by Buyer or Southern
Union, as applicable, and assuming that this Agreement, the Related Agreements
and the other agreements, documents and instruments to be executed and delivered
in connection with this Agreement or the Related Agreements constitute legal,
valid and binding agreements of Seller and the Seller Counterparties, as
applicable, are (in the case of this Agreement) or will be as of the Closing
Date (in the case of the Related Agreements and the other agreements, documents
and instruments to be executed and delivered in connection with this Agreement
or the Related Agreements), enforceable against Buyer and Southern Union in
accordance with their respective terms, except that such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or
36
other similar laws affecting or relating to enforcement of creditors' rights
generally or general principles of equity.
Section 4.3 Consents and Approvals.
Except as set forth in Section 4.3 of the Buyer Disclosure Letter, none
of Buyer or Southern Union requires any consent, approval or authorization of,
or filing, registration or qualification with, any Governmental Authority, or
any other Person as a condition to the execution and delivery of this Agreement
or the performance of the obligations hereunder, including the issuance and
delivery of the Southern Union Shares, their registration pursuant to the Shelf
Registration Statement and the Listing, except where the failure to obtain such
consent, approval or authorization of, or filing of, registration or
qualification with, any Governmental Authority, or any other Person would not
materially affect the consummation of the transactions contemplated by this
Agreement.
Section 4.4 No Conflict or Violation.
Except as set forth in Section 4.4 of the Buyer Disclosure Letter, the
execution, delivery and performance by Buyer and Southern Union and the issuance
and delivery of the Southern Union Shares of this Agreement do not:
(a) violate or conflict with any provision of the
organizational documents or bylaws of Buyer or Southern Union, respectively;
(b) violate any applicable provision of a law, statute,
judgment, order, writ, injunction, decree, award, rule or regulation of any
Governmental Authority, except where such violation would not have a Material
Adverse Effect; or
(c) violate, result in a breach of, constitute (with due
notice or lapse of time or both) a default or cause any material obligation,
penalty or premium to arise or accrue under any material contract, lease, loan,
agreement, mortgage, security agreement, trust indenture or other material
agreement or instrument to which Buyer or Southern Union is a party or by which
it is bound or to which any of its properties or assets is subject, except as
would not have materially affect the consummation of the transactions
contemplated by this Agreement.
Section 4.5 Litigation.
Except as set forth in Section 4.5 of the Buyer Disclosure Letter,
there are no lawsuits, actions, proceedings, or, to Buyer's Knowledge, any
investigations, pending or, to Buyer's Knowledge, threatened, against Buyer,
Southern Union or any of their respective Affiliates or any executive officer or
director thereof which would prohibit or impair Buyer, Southern Union or their
respective Affiliates from undertaking any of the transactions contemplated by
this Agreement or the Related Agreements, except as would not materially affect
the consummation of the transactions contemplated by this Agreement. Buyer,
Southern Union and their respective Affiliates are not subject to any
outstanding judgment, order, writ, injunction, decree or award entered in an
Action to which Buyer, Southern Union or any of their respective Affiliates was
a named party
37
which would prohibit or impair Buyer, Southern Union or their Affiliates from
undertaking any of the transactions contemplated by this Agreement or the
Related Agreements, except as would not materially affect the consummation of
the transactions contemplated by this Agreement.
Section 4.6 Availability of Funds.
Buyer will have on the Closing Date sufficient funds available in
immediately available funds to pay the Purchase Price and to consummate the
transactions contemplated hereby. The ability of Buyer to consummate the
transactions contemplated hereby is not subject to any condition or contingency
with respect to financing.
Section 4.7 Brokerage and Finders' Fees.
Except for Lehman Brothers and Berenson & Company, whose fees will each
be paid by Buyer, neither Buyer, Southern Union nor any of their Affiliates, or
their respective stockholders, partners, directors, officers or employees, has
incurred, or will incur any brokerage, finders' or similar fee in connection
with the transactions contemplated by this Agreement or the Related Agreements.
Section 4.8 Investment Representations.
(a) Buyer is acquiring the Panhandle Shares to be acquired by
it hereunder for its own account, solely for the purpose of investment and not
with a view to, or for sale in connection with, any distribution thereof in
violation of the federal securities laws or any applicable foreign or state
securities law.
(b) Buyer is an "accredited investor" as defined in Rule
501(a) promulgated under the Securities Act of 1933, as amended.
(c) Buyer understands that the acquisition of the Panhandle
Shares to be acquired by it pursuant to the terms of this Agreement involves
substantial risk. Buyer and its officers have experience as an investor in
securities and equity interests of companies such as the ones being transferred
pursuant to this Agreement and acknowledges that it can bear the economic risk
of its investment and has such knowledge and experience in financial or business
matters that Buyer is capable of evaluating the merits and risks of its
investment in the Panhandle Shares to be acquired by it pursuant to the
transactions contemplated hereby.
(d) Buyer understands that the Panhandle Shares to be acquired
by it hereunder have not been registered under the Securities Act on the basis
that the sale provided for in this Agreement is exempt from the registration
provisions thereof. Buyer acknowledges that such securities may not be
transferred or sold except pursuant to the registration and other provisions of
applicable securities laws or pursuant to an applicable exemption therefrom.
38
(e) Buyer acknowledges that the offer and sale of the
Panhandle Shares to be acquired by it in the transactions contemplated hereby
has not been accomplished by the publication of any advertisement.
Section 4.9 Buyer Capitalization; Other Interests
(a) Southern Union directly owns all of the issued and
outstanding shares of capital stock of Buyer.
(b) Except as set forth in Section 4.9(b) of the Buyer
Disclosure Letter, there are no (A) existing options, warrants, calls, rights of
first refusal, preemptive rights, subscriptions or other rights, agreements,
arrangements or commitments of any character, relating to the capital stock of
Buyer, obligating Buyer, Southern Union or any of their respective Affiliates to
issue, transfer or sell, or cause to be issued, transferred or sold, any of the
capital stock of Buyer, (B) outstanding securities of Buyer or its Affiliates
that are convertible into or exchangeable or exercisable for any of the capital
stock of Buyer, (C) options, warrants or other rights to purchase from Buyer,
Southern Union or their respective Affiliates any such convertible or
exchangeable securities or (D) contracts, agreements or arrangements of any kind
relating to the issuance of any of the capital stock of Buyer, or any such
options, warrants or rights, pursuant to which, in any of the foregoing cases,
Buyer, Southern Union or any of their respective Affiliates are subject or
bound.
(c) Other than as set forth on Section 4.9 (c) of the
Buyer Disclosure Letter, neither Buyer nor Southern Union own any stock or other
equity interest (controlling or otherwise) in any corporation, limited liability
corporation, joint venture or other entity engaged in the energy business,
including without limitation any business engaged in (i) the ownership or
operation of natural gas and condensate pipelines, (ii) interstate
transportation of natural gas, (iii) natural gas storage services, (iv) the
storage and regasification of liquefied natural gas and (v) the separation and
measurement of condensate. Section 4.9 (c) of the Buyer Disclosure Letter
indicates whether, and the extent to which, Southern Union has management
responsibility and/or operational control for the entities set forth in Section
4.9 (c) of the Buyer Disclosure Letter which are engaged in the energy business.
Section 4.10 Compliance with Law.
Except as set forth in Southern Union's filings with the Securities and
Exchange Commission ("SEC") filed since December 31, 1999 through the date of
this Agreement, and except as set forth in Section 4.10 of the Buyer Disclosure
Letter, since December 31, 1999, Southern Union and the Southern Union
Subsidiaries have complied with all federal, state, local or foreign laws,
statutes, ordinances, rules, regulations, judgments, orders, writs, injunctions
or decrees of any Governmental Authority applicable to their respective
properties, assets and businesses except where such noncompliance would not have
a Southern Union Material Adverse Effect. None of Southern Union or, to the
Knowledge of Buyer, no Southern Union Subsidiary, has received written notice of
any material violation of any such law, license, regulation, order or other
legal requirement
39
or, to the Knowledge of Buyer, is in material default with respect to any order,
writ, judgment, award, injunction or decree of any Governmental Authority,
applicable to Southern Union or a Southern Union Subsidiary or any of their
respective assets, properties or operations.
Section 4.11 Southern Union Shares.
(a) Except as set forth in Section 4.11 (a) of the Buyer
Disclosure Letter, (i) except as set forth in Southern Union's report on Form
10-Q for the quarterly period ended December 31, 2002, there are no shares of
Southern Union authorized, issued or outstanding or reserved for any purpose,
and (ii) there are no (A) existing options, warrants, calls, rights of first
refusal, preemptive rights, subscriptions or other rights, agreements,
arrangements or commitments of any character, relating to the Southern Union
Shares, obligating Southern Union or any of its Affiliates to issue, transfer or
sell, or cause to be issued, transferred or sold, any of the Southern Union
Shares, (B) outstanding securities of Southern Union or its Affiliates that are
convertible into or exchangeable or exercisable for any of the Southern Union
Shares, (C) options, warrants or other rights to purchase from Southern Union or
its Affiliates any such convertible or exchangeable securities or (D) other than
this Agreement, contracts, agreements or arrangements of any kind relating to
the issuance of any of the Southern Union Shares, or any such options, warrants
or rights, pursuant to which, in any of the foregoing cases, Seller or its
Affiliates are subject or bound.
(b) Southern Union has taken all necessary actions to
permit it to issue the Southern Union Shares. The Southern Union Shares will,
when issued, be duly authorized, validly issued, fully paid and non-assessable,
and no shareholder of Southern Union or other person has or will have any
preemptive right of subscription or purchase in respect thereof. At the Closing,
the Southern Union Shares will be transferred to Seller free and clear of all
Encumbrances or other defects in title. The Southern Union Shares are not, and
at Closing will not be, subject to any restrictions on transferability other
than those imposed by this Agreement and by applicable securities laws.
(c) Except as set forth in Section 4.11 (c)(i) of the
Buyer Disclosure Letter, all of the outstanding shares of capital stock or other
ownership interests, as applicable, of each of the Southern Union Subsidiaries
are owned directly or indirectly by Southern Union, free and clear of all
Encumbrances, and are validly issued, fully paid and nonassessable. At the
Closing, all of such shares or other ownership interests will be free and clear
of all Encumbrances. Except as set forth in Section 4.11 (c)(ii) of the Buyer
Disclosure Letter, there are no (A) existing options, warrants, calls, rights of
first refusal, preemptive rights, subscriptions or other rights, agreements,
arrangements or commitments of any character, relating to the shares of a
Southern Union Subsidiary, obligating Southern Union or any of its Affiliates to
issue, transfer or sell, or cause to be issued, transferred or sold, any of the
shares of a Southern Union Subsidiary, (B) outstanding securities of Southern
Union or its Affiliates that are convertible into or exchangeable or exercisable
for any of the shares of a Southern Union Subsidiary, or (C) options, warrants
or other rights to purchase from Southern Union or its Affiliates any such
convertible or exchangeable securities.
40
Section 4.12 Southern Union Financial Information.
Southern Union has previously furnished to Seller the Southern Union
Financial Statements. Except as set forth in Section 4.12 of the Buyer
Disclosure Letter, the Southern Union Financial Statements present fairly in all
material respects, in accordance with GAAP consistently applied, on a
consolidated basis, the financial condition and results of operation of Southern
Union and the Southern Union Subsidiaries as of the date thereof and for the
periods set forth therein, except as otherwise noted therein, and in the case of
the Southern Union Interim Financial Statement, except for the absence of
footnotes and subject to normal recurring year-end adjustments which are not
material either individually or in the aggregate.
Section 4.13 Absence of Certain Changes or Events.
Except as set forth in Southern Union's annual report on Form 10-K for
the year ended June 30, 2002, and its subsequent SEC filings filed prior to the
date of this Agreement:
(a) Except as set forth in Section 4.13(a) of the Buyer
Disclosure Letter, for the period beginning on July 1, 2002 and until the date
hereof, Southern Union and the Southern Union Subsidiaries have conducted their
respective businesses in the ordinary course of business, consistent with past
practice.
(b) Except as set forth in Section 4.13(b) of the Buyer
Disclosure Letter, or in the Southern Union Financial Statements and the notes
thereto, since December 31, 2002, there has not been with respect to Southern
Union and the Southern Union Subsidiaries any event or development or change
which has resulted or would reasonably be expected to result in a Southern Union
Material Adverse Effect.
Section 4.14 Absence of Undisclosed Liabilities.
Except as set forth in Southern Union's annual report on Form 10-K for
the year ended June 30, 2002, and its subsequent SEC filings filed prior to the
date of this Agreement, neither Southern Union nor the Southern Union
Subsidiaries have any Liabilities (whether absolute, accrued, contingent or
otherwise) that are required by GAAP to be reflected in the most recent Southern
Union Financial Statements except those Liabilities (a) disclosed and reserved
against in the December 31, 2002 balance sheet for Southern Union, (b) set forth
in Section 4.14 of the Buyer Disclosure Letter, (c) incurred in the ordinary
course of business since December 31, 2002 and (d) which have not resulted in a
Southern Union Material Adverse Effect.
Section 4.15 Southern Union Subsidiaries.
Except for subsidiaries not required to be listed pursuant to Item 601
of Regulation S-K in Southern Union's annual report on Form 10-K for the year
ended June 30, 2002, Southern Union has no subsidiaries other than the Southern
Union Subsidiaries.
41
Section 4.16 SEC Filings.
(a) From and including the date of Southern Union's annual
report on Form 10-K for the year ended June 30, 2002, as of their respective
filing dates with the Securities and Exchange Commission ("SEC"), Southern
Union's filings with the SEC (i) have complied as to form in all material
respects with the applicable requirements of the Exchange Act or Securities Act,
as applicable, and (ii) did not contain any untrue statement of a material fact
or omit any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not false or
misleading.
(b) Southern Union's registration statement on Form S-3,
filed with the SEC on January 7, 2003, as amended on April 1, 2003, pursuant to
which the Southern Union Shares will be issued to Seller (the "Shelf
Registration Statement"), has been declared effective by the SEC and is
currently effective.
Section 4.17 Date of Certain Representations.
The representations and warranties provided for in this Article IV are
made as of the Original Date and as the date of this Agreement except for the
representations and warranties set forth in Section 4.9 (Buyer Capitalization;
Other Interests), Section 4.10 (Compliance with Law), Section 4.11 (Southern
Union Shares), 4.12 (Southern Union Financial Information), 4.13 (Absence of
Certain Changes or Events), 4.14 (Absence of Undisclosed Liabilities), 4.15
(Southern Union Subsidiaries) and Section 4.16 (SEC Filings) which are made only
as of the date of this Agreement.
Section 4.18 No Other Representations or Warranties.
Except for the representations and warranties contained in this Article
IV, none of Buyer, Southern Union or any other Person makes any other express or
implied representation or warranty on behalf of Buyer or Southern Union.
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.1 Conduct of Business.
(a) Except as expressly provided in this Agreement or as
set forth in Section 5.1 (a) of the Seller Disclosure Letter, from and after the
Original Date and until the Closing Date, Seller shall cause Panhandle and the
Panhandle Subsidiaries to conduct and maintain their respective businesses in
the ordinary course of business, consistent with past practice.
(b) Except as contemplated by this Agreement or as set
forth in Section 5.1 (b) of the Seller Disclosure Letter, from and after the
Original Date and until the Closing Date, without the prior written consent of
Buyer (which consent shall not
42
be unreasonably withheld or delayed), Seller shall cause Panhandle and the
Panhandle Subsidiaries not to:
(i) Amend its Certificate of Incorporation, Bylaws
or other comparable charter or organizational documents or merge with
or into or consolidate with any other Person;
(ii) Issue, sell, pledge, dispose of or encumber,
or authorize or propose the issuance, sale, pledge, disposition or
encumbrance of, any shares of, or securities convertible or
exchangeable for, or options, puts, warrants, calls, commitments or
rights of any kind to acquire, any of its capital stock or other
membership or ownership interests or subdivide or in any way reclassify
any shares of its capital stock or other membership or ownership
interests or change or agree to change in any manner the rights of its
outstanding capital stock or other membership or ownership interests;
(iii) (A) Declare, set aside or pay any dividend or
other distribution payable other than in cash or cash equivalents, with
respect to any shares of any class or series of capital stock of
Panhandle or the Panhandle Subsidiaries; (B) split, combine or
reclassify any shares of any class or series of capital stock of
Panhandle or the Panhandle Subsidiaries; or (C) redeem, purchase or
otherwise acquire directly or indirectly any shares of any class or
series of capital stock of Panhandle or the Panhandle Subsidiaries, or
any instrument or security which consists of or includes a right to
acquire such shares;
(iv) Except as may be required by agreements or
arrangements identified in Section 5.1 (b)(iv) of the Seller Disclosure
Letter, grant any severance or termination pay to, or enter into,
extend or amend any employment, consulting, severance or other
compensation agreement with, or otherwise increase the compensation or
benefits provided to any of its officers or other employees whose
annual salary base is in excess of $100,000 other than in the ordinary
course of business, consistent with past practice;
(v) Sell, lease, license, mortgage or otherwise
dispose of any properties or assets material to its business, other
than (A) sales made in the ordinary course of business consistent with
past practice or (B) sales of obsolete or other assets not presently
utilized in its business;
(vi) Make any change in its accounting principals,
practices, estimates or methods, other than as may be required by GAAP,
Applicable Law or any Governmental Authority;
43
(vii) Organize any new Subsidiary or acquire any
capital stock of, or equity or ownership interest in, any other Person;
(viii) Materially modify or amend or terminate any
Material Contract or waive, release or assign any material rights or
Claims under a Material Contract, except in the ordinary course of
business and consistent with past practice;
(ix) Pay, repurchase, discharge or satisfy any of
its Claims, Liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than in the ordinary course
of business and consistent with past practice;
(x) Enter into any contract or transaction
relating to the purchase of assets material to Panhandle or the
Panhandle Subsidiaries, taken as a whole, other than in the ordinary
course of business consistent with past practice;
(xi) (A) Incur or assume any long-term debt, or
except in the ordinary course of business consistent with past
practice, incur or assume short-term indebtedness (other than
intercompany indebtedness) exceeding $5,000,000 in the aggregate from
the date hereof until Closing; (B) modify the terms of any indebtedness
or other liability, other than modifications of short-term debt in the
ordinary course of business, consistent with past practice; or (C)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of
any other Person (other than any Panhandle Subsidiary), except as
described in Section 5.1 (b)(xi)(C) of the Seller Disclosure Letter;
(xii) Adopt a plan of complete or partial
liquidation, dissolution, restructuring, recapitalization or other
reorganization;
(xiii) Make or change any material election in
respect of Taxes, adopt or request permission of any Taxing authority
to change any material accounting method in respect of Taxes, or enter
into any closing agreement in respect of Taxes that would increase the
Tax liability of Buyer, without Buyer's written consent which shall not
be unreasonably withheld; provided, however, that Panhandle and the
Panhandle Subsidiaries may make elections pursuant to Treas. Reg.
ss.301.7701-3 or Section 754 of the Code (and any comparable provisions
of state or local law).
(xiv) Other than routine compliance filings, make
any filings or submit any documents or information to FERC without
prior consultation with Buyer; or
44
xv) Authorize any of, or commit or agree to take
any of, the actions referred to in the paragraphs (i) through (xiv)
above.
(c) Seller shall, or shall cause Panhandle and the
Panhandle Subsidiaries, to provide to Buyer copies of any filings made
with any Governmental Entities after the Original Date and prior to the
Closing Date.
Section 5.2 Access to Properties and Records.
(a) Seller, Panhandle and the Panhandle Subsidiaries
shall afford to Buyer and Buyer's accountants, counsel and
representatives full reasonable access during normal business hours
throughout the period prior to the Closing Date (or the earlier
termination of this Agreement pursuant to Article VII hereof) to all of
Seller's, Panhandle's and the Panhandle Subsidiaries' properties,
books, contracts, commitments and records (including all environmental
studies, reports and other environmental records) and, during such
period, shall furnish to Buyer all information concerning the
respective businesses, properties, Liabilities and personnel of
Panhandle and the Panhandle Subsidiaries as Buyer may request, provided
that no investigation or receipt of information pursuant to this
Section 5.2 shall affect any representation or warranty of Seller or
the conditions to the obligations of Buyer. To the extent not located
at the offices or properties of Panhandle or the Panhandle Subsidiaries
as of the Closing Date, as promptly as practicable thereafter Seller
shall deliver, or cause its appropriate Affiliates to deliver to Buyer
all of the books of accounts, minute books, record books and other
records (including safety, health, environmental, maintenance and
engineering records and drawings) pertaining to the business operations
of Panhandle and the Panhandle Subsidiaries. Notwithstanding anything
to the contrary herein, neither Buyer, Southern Union nor any of their
respective representatives shall have the right to conduct any Phase II
environmental due diligence, including the collection and analysis of
any samples of environmental media or building materials.
(b) The information contained herein, in the Seller
Disclosure Letter or heretofore or hereafter delivered to Buyer or its
authorized representatives in connection with the transactions
contemplated by this Agreement shall be held in confidence by Buyer and
its representatives in accordance with the Confidentiality Agreement
until the Closing Date with respect to information relating to
Panhandle and its Subsidiaries, and for the term of the Confidentiality
Agreement with respect to information relating to Seller and its
Affiliates (other than Panhandle and its Subsidiaries).
Section 5.3 Southern Union Conduct of Business.
(a) Except as expressly provided in this Agreement or as
set forth in Section 5.3 (a) of the Buyer Disclosure Letter, from and
after the date of this Agreement and until the Closing Date, Southern
Union shall, and shall cause the Southern Union Subsidiaries to,
conduct and maintain their respective businesses in the ordinary course
of business, consistent with past practice.
45
(b) Except as contemplated by this Agreement or as set
forth in Section 5.3 (b)of the Buyer Disclosure Letter, prior to the
Closing Date, without the prior written consent of Seller (which
consent shall not be unreasonably withheld or delayed), Southern Union
shall not, and shall cause each of the Southern Union Subsidiaries not
to:
(i) Amend its Certificate of Incorporation,
Bylaws or other comparable charter or organizational documents or merge
with or into or consolidate with any other Person;
(ii) Issue, sell, pledge, dispose of or encumber,
or authorize or propose the issuance, sale, pledge, disposition or
encumbrance of, any shares of, or securities convertible or
exchangeable for, or options, puts, warrants, calls, commitments or
rights of any kind to acquire, any of its capital stock or other
membership or ownership interests or subdivide or in any way reclassify
any shares of its capital stock or other membership or ownership
interests or change or agree to change in any manner the rights of its
outstanding capital stock or other membership or ownership interests;
(iii) (A) Declare, set aside or pay any dividend or
other distribution payable other than in cash or cash equivalents, with
respect to any shares of any class or series of capital stock of
Southern Union or the Southern Union Subsidiaries; (B) split, combine
or reclassify any shares of any class or series of capital stock of
Southern Union or the Southern Union Subsidiaries; or (C) redeem,
purchase or otherwise acquire directly or indirectly any shares of any
class or series of capital stock of Southern Union or the Southern
Union Subsidiaries, or any instrument or security which consists of or
includes a right to acquire such shares;
(iv) Sell, lease, license, mortgage or otherwise
dispose of any properties or assets material to its business, other
than (A) sales made in the ordinary course of business consistent with
past practice or (B) sales of obsolete or other assets not presently
utilized in its business;
(v) Make any change in its accounting principals,
practices, estimates or methods, other than as may be required by GAAP,
Applicable Law or any Governmental Authority;
(vi) Acquire any capital stock of, or equity or
ownership interest in, any other Person;
(vii) Enter into any contract or transaction
relating to the purchase of assets material to Southern Union and the
Southern Union Subsidiaries, taken as a whole, other than in the
ordinary course of business consistent with past practice;
46
(viii) Except in connection with the consummation of
the transactions contemplated by this Agreement and except as permitted
pursuant to the terms of Southern Union's credit facilities listed in
Section 6.3(e) of the Buyer Disclosure Letter, (A) Incur or assume any
long-term debt, or except in the ordinary course of business consistent
with past practice, incur or assume short-term indebtedness (other than
intercompany indebtedness) from the date hereof until Closing; (B)
modify the terms of any indebtedness or other liability, other than
modifications of short-term debt in the ordinary course of business,
consistent with past practice; or (C) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other Person (other than any
Southern Union Subsidiary), except as described in Section 5.3
(b)(viii)(C) of the Buyer Disclosure Letter;
(ix) Adopt a plan of complete or partial
liquidation, dissolution, restructuring, recapitalization or other
reorganization; and
(x) Authorize any of, or commit or agree to take
any of, the actions referred to in the paragraphs (i) through (ix)
above.
Section 5.4 Consents and Approvals.
(a) Upon the terms and subject to the conditions of this
Agreement, each of the parties hereto agree to use, and will cause its
Affiliates to use its reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary or advisable under
Applicable Law and regulations to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable including the
preparation and filing of all forms, registrations and notices required to be
filed by such party in order to consummate the transactions contemplated by this
Agreement, the taking of all appropriate action necessary, proper or advisable
to satisfy each of the conditions to Closing that are to be satisfied by that
party or any of its Affiliates and the taking of such actions as are necessary
to obtain any approvals, consents, orders, exemptions or waivers of Governmental
Authorities and any other Person required to be obtained by such party in order
to consummate the transactions contemplated by this Agreement, including the
issuance and delivery of the Southern Union Shares.
(b) To the extent required by the HSR Act, each party
shall (i) file or cause to be filed, as promptly as practicable after the
execution and delivery of this Agreement, with the Federal Trade Commission and
the United States Department of Justice, any additional reports and other
documents required to be filed by such party under the HSR Act concerning the
transactions contemplated hereby and (ii) promptly comply with or cause to be
complied with any requests by the Federal Trade Commission or the United States
Department of Justice for additional information concerning such transactions.
The filing fees payable in connection with the filings required by the HSR
47
Act in connection with the transaction contemplated hereby shall be borne by
Buyer. Each party shall have a right to review in advance all characterizations
of the information relating to the transactions contemplated by this Agreement
which appear in Items 2 and 3 of the Antitrust Improvements Act Notification and
Report Form for certain mergers and acquisitions made in connection with the
transactions contemplated hereby. For the avoidance of doubt, no party shall be
required to provide to any other party a copy of any documents filed by it
pursuant to Item 4(c) the of the Antitrust Improvements Act Notification and
Report Form. Subject to (c) below, each party shall, and shall cause its
Affiliates to, promptly consult with the other with respect to, provide any
necessary information with respect to, and provide copies of all filings made by
such party with any Governmental Authority or any other information supplied by
such party to a Governmental Authority in connection with this Agreement and the
Related Agreements and the transactions contemplated hereby and thereby. Each
party shall, and shall cause their respective Affiliates to, with respect to a
threatened or pending preliminary or permanent injunction or other order, decree
or ruling or statute, rule, regulation or executive order that would adversely
affect the ability of any party to this Agreement or any Related Agreement to
consummate the transactions contemplated hereby or thereby, use their respective
reasonable best efforts to prevent the entry, enactment or promulgation thereof,
as the case may be (including by pursuing any available appeal process). Each of
Buyer and Southern Union shall use its respective reasonable best efforts to,
and shall cause their respective Affiliates to use their reasonable best efforts
to, promptly take or cause to be taken all actions necessary to comply with any
requests made, or conditions set, by a Governmental Authority to consummate the
transactions contemplated hereby, including, subject to the receipt of all
required third party consents (including those of lenders, shareholders and
partners), with respect to Panhandle (but subject to Section 6.1 (b)) and each
Section 5.4 (b) Person, the divestiture of assets. Each party agrees to use its
reasonable best efforts to procure any third-party consents required in the
preceding sentence. Notwithstanding the foregoing, none of Southern Union or its
Subsidiaries (i) shall be required to divest any asset or modify any arrangement
with respect to any of its respective operations that would have a material
adverse impact on the Section 5.4 (b) Person which holds the asset to be
divested or is a party to the arrangement to be modified or on any other Section
5.4 (b) Person or (ii) shall be required to take or refrain from taking any
action if such action or refraining would have a material adverse impact on the
Section 5.4 (b) Person so acting or refraining or on any other Section 5.4 (b)
Person. Without limiting the foregoing, in no event shall any of Buyer's
Affiliates be required to take any action to obtain the consent or approval of
any Governmental Authority to the transactions contemplated hereby if such
Governmental Authority imposes on such Affiliate as a condition to obtaining any
such consent any limitations or conditions materially adverse to the businesses
and activities engaged in by Southern Union and its Subsidiaries taken as a
whole (any such condition or limitation described in this paragraph being
referred to herein as a "Burdensome Condition").
(c) Without limiting the generality of the undertakings
pursuant to this Section 5.4 and subject to appropriate confidentiality
protections and limitations set forth in Section 5.4 (b) above, Seller, Buyer
and their respective Affiliates shall each furnish to the parties to this
Agreement such necessary information and reasonable assistance a party may
request in connection with the foregoing and, shall each provide
48
counsel for the other party with copies of all filings made by such party or
such Affiliate, and all correspondence between such party or such Affiliate (and
its advisors) with any Governmental Authority and any other information supplied
by such party and such party's Affiliates to a Governmental Authority in
connection with this Agreement and the transactions contemplated hereby,
provided, however, that materials may be redacted (i) to remove references
concerning the valuation of Panhandle or the Panhandle Subsidiaries, (ii) as
necessary to comply with contractual arrangements, and (iii) to remove
information that is proprietary. Subject to Applicable Law and Section 5.4 (b)
hereof, each party shall, and shall cause its Affiliates to, permit counsel for
the other party to review in advance, and consider in good faith the views of
the other party in connection with, any proposed written communication to any
Governmental Authority. Seller, Buyer and Southern Union agree not to
participate, or to permit their Affiliates to participate, in any substantive
meeting or discussion, either in person or by telephone, with any Governmental
Authority in connection with this Agreement and the transactions contemplated
hereby unless it consults with the other party in advance and, to the extent not
prohibited by such Governmental Authority, gives the other party the opportunity
to attend and participate. Upon the terms and subject to the conditions herein
provided, in case at any time after the Closing Date any further action is
necessary or desirable to secure the approvals from any and all Governmental
Authority necessary to carry out the purposes of this Agreement, the proper
officers and/or directors of the parties shall use their reasonable best efforts
to take or cause to be taken all such necessary action.
Section 5.5 Further Assurances.
On and after the Closing Date, Seller and Buyer shall cooperate and use
their respective reasonable best efforts to take or cause to be taken all
appropriate actions and do, or cause to be done, all things necessary or
appropriate to consummate and make effective the transactions contemplated
hereby, including the execution of any additional documents or instruments of
any kind, the obtaining of consents which may be reasonably necessary or
appropriate to carry out any of the provisions hereof and the taking of all such
other actions as such party may reasonably be requested to take by the other
party hereto from time to time, consistent with the terms of this Agreement and
the Related Agreements, in order to effectuate the provisions and purposes of
this Agreement and the Related Agreements and the transactions contemplated
hereby and thereby.
Section 5.6 Employee Matters.
(a) Buyer shall take all actions necessary and
appropriate to ensure that Buyer maintains or adopts one or more defined
contribution plans and related trust or trusts (the "Buyer Account Plan")
effective as of, or as soon as reasonably practicable but in no event later than
15 days after, the Closing Date for the benefit of the Affected Employees (as
defined below). Following the Closing and as soon as practicable following
receipt by Seller of (i) a copy of a favorable determination letter issued by
the Internal Revenue Service with respect to the Buyer Account Plan or (ii) an
opinion, satisfactory to Seller's counsel, of Buyer's counsel that the Buyer
Account Plan and its related trust(s) qualify under Section 401(a) and Section
501(a) of the Code, Seller shall provide each Affected Employee who is a
participant in the Savings and Incentive
49
Plan for Employees of Consumers Energy and Other CMS Energy Companies ("Seller's
Savings Plan") with the opportunity to receive a distribution of his or her
account balance and to elect to "roll over" such account balance to the Buyer
Account Plan, subject to and in accordance with the provisions of Seller's
Savings Plan and Applicable Law. The Buyer Account Plan shall accept the "roll
over" of such account balances, including any outstanding plan loans. Seller
shall take all necessary or appropriate action, to the extent consistent with
applicable law, to ensure that any plan loans of Affected Employees under the
Seller's Savings Plan shall not be deemed distributed prior to the rollover
opportunity previously described. Seller shall provide Buyer with copies of such
personnel and other records of Seller pertaining to the Affected Employees and
such records of any agent or representative of Seller pertaining to the Affected
Employees, in each case pertaining to Seller's Savings Plan and as Buyer may
reasonably request in order to administer and manage the accounts and assets
rolled over to the Buyer Account Plan.
(b) Subject to Section 5.6 (b)(i) and Section 5.6 (h)
below, prior to the Closing Date, Seller shall take all actions necessary to
cause the following events to occur as of the Closing Date, and shall give
notice to all Panhandle Employees that (i) all Affected Employees shall become
fully vested with respect to their account balances under the Seller Savings
Plan as of the Closing Date, (ii) the active participation of the Affected
Employees in those employee benefit plans, programs and arrangements that are
not sponsored by Panhandle or the Panhandle Subsidiaries (such plans, programs
and arrangements, the "Seller Plans") shall terminate on the Closing Date, and
(iii) Panhandle and the Panhandle Subsidiaries shall terminate participation of
Affected Employees in the Seller Plans as of the Closing Date. Panhandle and the
Panhandle Subsidiaries shall be solely responsible (except as provided in
Section 8.2 (a)(iii)) for all obligations and Liabilities under each employee
benefit plan listed in Section 3.12 (c) of the Seller Disclosure Letter in
existence as of the Closing Date, and each employee benefit plan that they
establish, maintain or contribute to, on or after the Closing Date, and no such
obligations or Liabilities shall be assumed or retained by Seller or its
Affiliates. Seller shall retain all obligations or Liabilities and assets with
respect to current and former Panhandle Employees or otherwise under all Seller
Plans, and no such obligations or Liabilities shall be assumed or retained by
Buyer or its affiliates, including after the transactions contemplated hereby,
Panhandle and the Panhandle Subsidiaries.
(i) Notwithstanding the foregoing, any Affected
Employee who is unable to report to work with Buyer as of the Closing
Date due to disability (each, a "Disabled Employee"), shall continue to
be eligible for any applicable long-term disability and life insurance
coverage pursuant to Seller's plans until such Disabled Employee
returns to active employment with Buyer, Panhandle or the Panhandle
Subsidiaries; provided, however, that in order to be eligible for such
benefits, each such Disabled Employee, pending approval for long-term
disability benefits or return to active employment, must continue to
pay all applicable long-term disability and life insurance premiums due
following the Closing Date for such coverage pursuant to Seller's
long-term disability plan and life insurance plans. Buyer shall, or
shall cause Panhandle or the Panhandle
50
Subsidiaries to, (A) pay Disabled Employees who are on short-term
disability as of the Closing Date the short-term disability benefits,
if any, that apply under Buyer's plans, provided, however, that such
benefits need not be provided to the extent that they would duplicate
benefits paid under the Seller Plans, and (B) honor any continuing pay
or salary obligations and return to work obligations that apply to any
such Disabled Employees. Any Disabled Employees who are on short-term
disability as of the Closing Date but who subsequently transition to
long-term disability shall be eligible for, and covered by, Seller's
long-term disability and life insurance coverage, subject to the
provisions of this Section 5.6 (b)(i).
(c) As of the Closing Date, Buyer shall cause Panhandle
and the Panhandle Subsidiaries to continue to employ all of the Affected
Employees as of the Closing Date, other than those Affected Employees whose
employment is covered by a Panhandle Eastern Pipe Line Company collective
bargaining agreement as of the Closing Date, in Comparable Employment for a
period of at least one (1) year from and after the Closing Date, or to pay
severance if due in accordance with the terms of the Separation Allowance Plan
for Employees of Panhandle and the Panhandle Subsidiaries or the Executive
Separation Allowance Plan for Employees of Panhandle and the Panhandle
Subsidiaries, as applicable. Notwithstanding the terms of the preceding
sentence, Buyer shall cause Panhandle and the Panhandle Subsidiaries to employ
all Affected Employees who are officers of Panhandle and the Panhandle
Subsidiaries in Comparable Employment for a period of at least two (2) years
from and after the Closing Date, or to pay severance if due in accordance with
the terms of the Executive Separation Allowance Plan for Designated Officers of
Panhandle and the Panhandle Subsidiaries or the Executive Separation Allowance
Plan for Designated Senior Officers of Panhandle Eastern Pipe Line Company, as
applicable. Employment of, and severance payments, if any, payable to, Affected
Employees whose employment is covered by a Panhandle Eastern Pipe Line Company
collective bargaining agreement as of the Closing Date shall be governed by the
applicable collective bargaining agreement.
(d) For no less than one-year following the Closing Date,
Buyer shall, and shall cause Panhandle and the Panhandle Subsidiaries, to
provide the Affected Employees with employee benefits that are substantially
similar in the aggregate to those provided under the Seller Plans as such plans
are to be in effect for 2003; provided, however, that Buyer shall not be
obligated to replace any equity based plans in which Affected Employees could
participate prior to Closing. With respect to those employee benefit plans of
Panhandle and the Panhandle Subsidiaries or other Affiliates of Buyer ("Buyer
Plans") in which Affected Employees may participate on or after the Closing
Date, Buyer shall, and shall cause Panhandle and the Panhandle Subsidiaries to,
credit prior service of the Affected Employees with Panhandle and the Panhandle
Subsidiaries for purposes of eligibility and vesting under Buyer Plans and for
all purposes with respect to vacation, sick days, severance and post-employment
benefits other than pensions ("PBOPs") under such Buyer Plans to the extent that
such service was recognized under the analogous Employee Benefit Plans, provided
however that such service need not be credited to the extent it would result in
a duplication of benefits. Following the Closing Date, Buyer shall, or shall
cause Panhandle and the Panhandle Subsidiaries to, honor the
51
accrued vacation and sick days of the Affected Employees which remain unused as
of the Closing Date to the extent such accruals are shown on the Closing Balance
Sheet. Affected Employees shall also be given pro rata credit for any deductible
or co-insurance payment amounts payable in respect of the Buyer Plan year in
which the Closing Date occurs, to the extent that, following the Closing Date,
they participate in any Buyer Plan during such plan year for which deductibles
or co-payments are required. Any preexisting condition restrictions and waiting
period limitations which were deemed satisfied with respect to a particular
person under any Employee Benefit Plan immediately prior to the Closing Date
shall be deemed satisfied by Buyer and its Affiliates under Buyer Plans with
respect to such person on and after the Closing Date. Seller has provided Buyer
a list of Affected Employees and the status of such Affected Employees as of the
Closing Date under Seller Plans providing for PBOPs, for the purpose of avoiding
duplication of benefits.
(e) Subject to the final sentence of this Section 5.6
(e), Buyer agrees that, at the request of Seller, it shall cause Panhandle and
the Panhandle Subsidiaries to make bonus payments to the bonus-eligible Affected
Employees (as determined by Seller) for performance in the 2002 calendar year
from funds made available by Seller for such purposes, which bonus payments
shall be available as a tax deduction to Seller and Panhandle attributable to
the pre-Closing Tax period. Buyer shall cause such payments to be made by
Panhandle and the Panhandle Subsidiaries as soon as practicable after Buyer is
informed by Seller of the bonus amounts to be paid to each bonus-eligible
Affected Employee by name, as authorized by the Board of Directors of Parent.
Seller and Buyer agree that the calculation of Net Working Capital Amount shall
not reflect the bonus amounts accrued for the Affected Employees for accounting
purposes (the "Bonus Accrual") and that the Bonus Accrual shall be transferred
to the books of Seller as of the Closing Date. To the extent not funded in
advance, Seller shall promptly reimburse Buyer for the bonus amounts so paid
(and the employer's share of any payroll taxes associated therewith), which
reimbursement shall be treated as an adjustment to the Purchase Price. Seller
and Buyer shall cooperate with respect to the development and distribution of
any employee communications to be made to the Affected Employees after the
Closing Date relating to 2002 bonuses.
(f) Buyer, Panhandle and the Panhandle Subsidiaries shall
be responsible for all Liabilities and obligations under the Worker Adjustment
and Retraining Notification Act and similar foreign, state and local rules,
statutes and ordinances resulting from the actions of Buyer, Panhandle or the
Panhandle Subsidiaries after the Closing Date. Buyer agrees to hold Seller
harmless in accordance with Article VIII for any breach of such responsibility
and Buyer's indemnification of Seller in this regard specifically includes any
Claim by the Affected Employees for back pay, front pay, benefits or
compensatory or punitive damages, any Claim by any Governmental Authority for
penalties regarding any issue of prior notification (or lack thereof) of any
plant closing or mass layoff occurring after the Closing Date and Seller's
costs, including reasonable attorney's fees, in defending any such Claims.
(g) Notwithstanding the foregoing provisions of this
Section 5.6, Buyer shall cause all obligations of Panhandle Eastern Pipe Line
Company pursuant to
52
existing collective bargaining agreements (which agreements are listed in
Section 3.13 of the Seller Disclosure Letter) to be honored following the
Closing.
(h) Parent or its Affiliates shall retain all assets that
are accumulated through the Closing Date under Financial Accounting Standards
Board Statement 106 (and deposited in various VEBA accounts and 401(h) accounts
of Parent or its Affiliates). Further, Parent or its Affiliates shall retain the
liability for PBOP for the benefit of former Panhandle Employees who are
retirees of Panhandle and/or the Panhandle Subsidiaries as of the Closing Date,
and Affected Employees who are eligible to retire and qualified for benefits
under PBOP as of the Closing Date, and Parent or its Affiliates shall retain the
responsibility for providing post-retirement benefits (other than pension) to
such employees pursuant to the eligibility requirements of the Seller Plans.
Seller shall provide a list of retirees and Affected Employees who are eligible
to retire as of the Closing Date.
Section 5.7 Tax Covenants.
(a) Section 338(h)(10) Election.
(i) Seller and Buyer shall jointly make an
election under Section 338(h)(10) of the Code (and any comparable
provision of applicable state or local income tax law) with respect to
the purchase of the Panhandle Shares by Buyer (and with respect to the
Panhandle Subsidiaries for which such an election may be made) and
shall cooperate with each other to take all actions necessary and
appropriate (including filing such additional forms, returns, elections
schedules and other documents as may be required) to effect and
preserve a timely election, in accordance with the provisions of
Treasury Regulation Section 1.338(h)(10)-1 (or any comparable
provisions of state or local tax law) (the "Election").
(ii) In connection with the Election, Buyer and
Seller shall mutually prepare a Form 8023 (or successor form) with any
attachments. Buyer shall prepare a draft Form 8023 and provide such
draft Form 8023 to Seller no later than ninety (90) days prior to the
due date of such Form 8023. If, within thirty (30) days of the receipt
of the draft Form 8023, Seller notifies Buyer that it disagrees with
the draft Form 8023 and provides Buyer with its proposed Form 8023 and
a written or oral explanation of the reasons for its adjustment, then
Seller and Buyer shall attempt to resolve their disagreement within the
twenty (20) days following Seller's notification of Buyer of such
disagreement, otherwise, the draft Form 8023 shall become the final
Form 8023 (the "Final Form 8023"). If Seller and Buyer are unable to
resolve their disagreement, the dispute shall be submitted to a
mutually agreed upon nationally recognized independent accounting firm,
whose expense shall be borne equally by Seller and Buyer, for
resolution within twenty (20) days of such submission. The Form 8023
delivered by such accounting firm shall be
53
the Final Form 8023. The Final Form 8023 shall be binding on Buyer,
Seller, and their respective Affiliates. Buyer and Seller shall take no
position, and cause their respective Affiliates to take no position,
inconsistent with the Final Form 8023.
(iii) Buyer and Seller shall mutually prepare any
forms or schedules similar to Form 8023 that are required for
provisions of state or local law that are comparable to Treasury
Regulation Section 1.338(h)(10)-1 in a manner similar to the above
procedure. In the event that the Final Form 8023 (or similar forms or
schedules required for provisions of state or local law) is disputed by
any Taxing authority, the party receiving written notice of the dispute
shall promptly notify the other party hereto concerning such dispute.
(b) Tax Return Filings, Refunds, and Credits.
(i) Seller shall timely prepare and file (or cause
such preparation and filing) with the appropriate Tax authorities all
Tax Returns (including any Consolidated Income Tax Returns) with
respect to Panhandle and the Panhandle Subsidiaries (and make all
elections with respect to such Tax Returns) for Tax periods that end on
or before the Closing Date (the "Seller Returns"), and will pay (or
cause to be paid) all Taxes due with respect to the Seller Returns.
(ii) Buyer shall timely prepare and file (or cause
such preparation and filing) with the appropriate Tax authorities all
Tax Returns (the "Straddle Period Returns") with respect to Panhandle
and the Panhandle Subsidiaries (and make all elections with respect to
such Tax Returns) for all Tax periods ending after the Closing Date
that include the Closing Date (the "Straddle Period"). All Straddle
Period Returns shall be prepared in accordance with past practice to
the extent consistent with applicable law and Panhandle's and the
Panhandle Subsidiaries' operations. Buyer shall provide Seller with
copies of any Straddle Period Returns at least forty-five (45) days
prior to the due date thereof (giving effect to any extensions
thereto), accompanied by a statement (the "Straddle Statement") setting
forth and calculating in reasonable detail the Pre-Closing Taxes as
defined below. If Seller agrees with the Straddle Period Return and
Straddle Statement, Seller shall pay to Buyer (or Buyer shall pay to
Seller, if appropriate) an amount equal to the Pre-Closing Taxes as
shown on the Straddle Statement not later than two (2) Business Days
before the due date (including any extensions thereof) for payment of
Taxes with respect to such Straddle Period Return. If, within fifteen
(15) days of the receipt of the Straddle Period Return and Straddle
Statement, Seller notifies Buyer that it disputes the manner of
preparation of the Straddle Period Return or the amount calculated in
the Straddle Statement, and provides Buyer its proposed form of
Straddle Period Return, a statement setting forth and calculating in
reasonable detail the
54
Pre-Closing taxes, and a written or oral explanation of the reasons for
its adjustment, then Buyer and Seller shall attempt to resolve their
disagreement within the five (5) days following Seller's notification
or Buyer of such disagreement. If Buyer and Seller are unable to
resolve their disagreement, the dispute shall be submitted to a
mutually agreed upon nationally recognized independent accounting firm,
whose expense shall be borne equally by Buyer and Seller, for
resolution within twenty (20) days of such submission. The decision of
such accounting firm with respect to such dispute shall be binding upon
Buyer and Seller, and Seller shall pay to Buyer (or Buyer shall pay to
Seller, if appropriate) an amount equal to the Pre-Closing Taxes as
decided by such accounting firm not later than two (2) Business Days
before the due date (including any extensions thereof) for payment of
Taxes with respect to such Straddle Period Return. If for any reason
the parties' dispute is not resolved as provided in this paragraph
prior to the date that is two (2) Business Days before the due date
(including any extensions thereof) for payment of Taxes with respect to
such Straddle Period Return, Seller shall pay to Buyer (or Buyer shall
pay to Seller, if appropriate) an amount equal to the amount of
Pre-Closing Taxes not in dispute not later than two (2) Business Days
before the due date (including any extensions thereof) for payment of
Taxes with respect to such Straddle Period Return.
(iii) From and after the Closing Date, Buyer and its
Affiliates (including Panhandle and the Panhandle Subsidiaries) will
not file any amended Tax Return, carryback claim, or other adjustment
request with respect to Panhandle or the Panhandle Subsidiaries for any
Tax period that includes or ends on or before the Closing Date unless
Seller consents in writing; provided, however, that Buyer and its
affiliates may carryback for its own account (without paying any
resulting refund or credit to Seller) any loss attributable to a tax
period ending after the Closing Date to a tax period ending on or
before the Closing Date provided that Buyer and its Affiliates shall
indemnify and make Seller whole for any detriment or cost incurred (or
to be incurred) by Seller as a result of such carryback.
(iv) For purposes of this Agreement, in the case of
any Taxes of Panhandle or the Panhandle Subsidiaries that are payable
with respect to any Straddle Period, the portion of any such Taxes that
constitutes "Pre-Closing Taxes" shall be the excess of (A) (i) in the
case of Taxes that are either (x) based upon or related to income or
receipts or (y) imposed in connection with any sale, transfer or
assignment or any deemed sale, transfer or assignment of property (real
or personal, tangible or intangible) be deemed equal to the amount that
would be payable if the Tax period ended at the close of business on
the Closing Date (including without limitation all Taxes attributable
to any Election) and (ii) in the case of Taxes (other than those
described in clause (i)) imposed on a periodic basis with respect to
the business or assets of Panhandle or the
55
Panhandle Subsidiaries, be deemed to be the amount of such Taxes for
the entire Straddle Period (or, in the case of such Taxes determined on
an arrears basis, the amount of such Taxes for the immediately
preceding Tax period) multiplied by a fraction the numerator of which
is the number of calendar days in the portion of the Straddle Period
ending on and including the Closing Date and the denominator of which
is the number of calendar days in the entire Straddle Period over (B)
any prepayment or advances of Taxes or any payments of estimated Taxes
with respect to the Straddle Period. For purposes of clause (i) of the
preceding sentence, any exemption, deduction, credit or other item that
is calculated on an annual basis shall be allocated to the portion of
the Straddle Period ending on the Closing Date on a pro rata basis
determined by multiplying the total amount of such item allocated to
the Straddle Period by a fraction, the numerator of which is the number
of calendar days in the portion of the Straddle Period ending on the
Closing Date and the denominator of which is the number of calendar
days in the entire Straddle Period. Pre-Closing Taxes include any Taxes
attributable to a Person that is treated as a partnership for federal
income tax purposes as if such Person allocated Tax items to its
partners in a manner consistent with this Section 5.7 (b)(iv). In the
case of any Tax based upon or measured by capital (including net worth
or long-term debt) or intangibles, any amount thereof required to be
allocated under this Section 5.7 (b)(iv) shall be computed by reference
to the level of such items at the close of business on the Closing
Date. The parties hereto will, to the extent permitted by Applicable
Law, elect with the relevant Tax authority to treat a portion of any
Straddle Period as a short taxable period ending as of the close of
business on the Closing Date. For purposes of this Agreement,
"Post-Closing Taxes" shall include any Taxes of Panhandle or the
Panhandle Subsidiaries that are payable with respect to a Straddle
Period, except for the portion of any such Taxes that constitutes
Pre-Closing Taxes. For purposes of this Agreement, the Texas corporate
franchise tax determined based on the income or capital of any entity
for the year during which the Closing Date occurs shall be considered
to be a Tax due with respect to the Straddle Period.
(v) Seller and Buyer shall reasonably cooperate in
preparing and filing all Tax Returns with respect to Panhandle or the
Panhandle Subsidiaries, including maintaining and making available to
each other all records reasonably necessary in connection with Taxes of
Panhandle or the Panhandle Subsidiaries and in resolving all disputes
and audits with respect to all Tax periods relating to Taxes of
Panhandle or the Panhandle Subsidiaries.
(vi) For a period of six (6) years after the
Closing Date, Seller and its representatives shall have reasonable
access to the books and records (including the right to make extracts
thereof) of Panhandle or the Panhandle Subsidiaries to the extent that
such books and
56
records relate to Taxes and to the extent that such access may
reasonably be required by Seller in connection with matters relating to
or affected by the operation of Panhandle or the Panhandle Subsidiaries
prior to the Closing Date. Such access shall be afforded by Buyer upon
receipt of reasonable advance notice and during normal business hours.
If Buyer shall desire to dispose of any of such books and records prior
to the expiration of such six-year period, Buyer shall, prior to such
disposition, give Seller a reasonable opportunity, at Seller's expense,
to segregate and remove such books and records as Seller may select.
(vii) If a Tax Indemnified Party receives a refund
or credit or other reimbursement with respect to Taxes for which it
would be indemnified under this Agreement, the Tax Indemnified Party
shall pay over such refund or credit or other reimbursement to the Tax
Indemnifying Party.
(viii) Buyer shall not, and shall cause Panhandle or
the Panhandle Subsidiaries to not, make, amend or revoke any Tax
election if such action would adversely affect any of Seller or its
Affiliates with respect to any Tax period ending on or before the
Closing Date or for the Pre-Closing Period or any Tax refund with
respect thereto unless Buyer and its Affiliates indemnify and make
Seller whole for any detriment or cost incurred (or to be incurred) by
Seller as a result of such action.
(ix) For purposes of this Agreement a "Consolidated
Income Tax Return" is any income Tax Return filed with respect to any
consolidated, combined, affiliated or unified group provided for under
Section 1501 of the Code and the Treasury regulations under Section
1502 of the Code, or any comparable provisions of state or local law,
other than any income Tax Return that includes only Panhandle or the
Panhandle Subsidiaries.
(c) Indemnity for Taxes.
(i) Seller hereby agrees to indemnify Buyer and
its affiliates against and hold them harmless from and against all
liability for (i) all Taxes imposed on Panhandle or the Panhandle
Subsidiaries with respect to Tax periods ending on or before the
Closing Date, including without limitation all Taxes incurred by reason
of any Election, (ii) Pre-Closing Taxes with respect to any Straddle
Period, and (iii) all Taxes that are attributable to Seller or any
member of an affiliated, consolidated, combined or unitary Tax group of
which at least one of Panhandle or the Panhandle Subsidiaries (or any
direct or indirect predecessor(s) of any of them) was a member at any
time on or prior to the Closing Date and not after the Closing Date
that is imposed under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign Tax law), (iv)
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any Taxes of Panhandle or any Panhandle Subsidiary incurred as a
transferee or a successor relating to any full or partial Tax period
ending on or before the Closing Date, (v) Seller's portion of Transfer
Taxes pursuant to Section 5.7(g), and (vi) any Damages arising out of,
resulting from, or incurred in connection with any breach or inaccuracy
of any representation or warranty set forth in Section 3.16; provided
that the determination of whether such a breach or inaccuracy of
Section 3.16(c), Section 3.16(d) or Section 3.16(e) occurred will be
made without the Material Adverse Effect qualifications contained
therein.
(ii) Buyer hereby agrees to indemnify Seller and
its Affiliates against and hold them harmless from all liability for
(A) all Taxes of Panhandle or the Panhandle Subsidiaries with respect
to all Tax periods beginning after the Closing Date, (B) Post-Closing
Taxes with respect to any Straddle Period, and (C) Buyer's portion of
Transfer Taxes pursuant to Section 5.7 (g).
(iii) The obligation of Seller to indemnify and hold
harmless Buyer, on the one hand, and the obligations of Buyer to
indemnify and hold harmless Seller, on the other hand, pursuant to this
Section 5.7 shall terminate upon the expiration of the applicable
statutes of limitations with respect to the Tax Liabilities in question
(giving effect to any waiver, mitigation or extension thereof) or if a
Claim is brought with respect thereto, until such time as such Claim is
resolved.
(d) Certain Payments. Buyer and Seller agree to treat
(and cause their Affiliates to treat) any payment by Seller under Section 5.7
(b)(ii) or Section 5.7 (c) as an adjustment to the Purchase Price for all Tax
purposes.
(e) Contests.
(i) After the Closing Date, Seller and Buyer each
shall notify the other party in writing within ten (10) days of the
commencement of any Tax audit or administrative or judicial proceeding
affecting the Taxes of any of Panhandle or the Panhandle Subsidiaries
that, if determined adversely to the taxpayer (the "Tax Indemnified
Party") or after the lapse of time would be grounds for indemnification
under this Section 5.7 by the other party (the "Tax Indemnifying Party"
and a "Tax Claim"). Such notice shall contain factual information
describing any asserted Tax liability in reasonable detail and shall
include copies of any notice or other document received from any Tax
authority in respect of any such asserted Tax liability. Failure to
give such notification shall not affect the indemnification provided in
this Section 5.7 except to the extent the Tax Indemnifying Party shall
have been prejudiced as a result of such failure (except that the Tax
Indemnifying Party shall not be liable for any expenses incurred during
the period in which the Tax Indemnified Party failed to give such
notice). Thereafter, the Tax Indemnified Party shall
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deliver to the Tax Indemnifying Party, as promptly as possible but in
no event later than ten (10) days after the Tax Indemnified Party's
receipt thereof, copies of all relevant notices and documents
(including court papers) received by the Tax Indemnified Party.
(ii) In the case of an audit or administrative or
judicial proceeding involving any asserted liability for Taxes relating
to any Taxable years or periods ending on or before the Closing Date,
Seller shall have the right, at its expense, to control the conduct of
such audit or proceeding; provided, however, that if Seller does not
timely take control of such audit or proceeding, Buyer may, at its
expense, control the conduct of the audit or proceeding. In the case of
an audit or administrative or judicial proceeding involving any
asserted liability for Taxes relating to any Straddle Period, Buyer
shall have the right, at its expense, to control the conduct of such
audit or proceeding; provided, however, that (A) Buyer shall keep
Seller reasonably informed with respect to the status of such audit or
proceeding and provide Seller with copies of all written correspondence
with respect to such audit or proceeding in a timely manner and (B) if
such audit or proceeding would be reasonably expected to result in a
material increase in Tax liability of Panhandle or the Panhandle
Subsidiaries for which Seller would be liable under this Section 5.7
Seller may participate in the conduct of such audit or proceeding at
its own expense.
(iii) In the case of an audit or administrative or
judicial proceeding involving any asserted liability for Taxes relating
to any Taxable years or periods beginning after the Closing Date, Buyer
shall have the right, at its expense, to control the conduct of such
audit or proceeding.
(iv) Buyer and Seller shall reasonably cooperate in
connection with any Tax Claim, and such cooperation shall include the
provision to the Tax Indemnifying Party of records and information
which are reasonably relevant to such Tax Claim and making employees
available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.
(f) Section 743 Determination.
(i) Buyer and Seller shall reasonably cooperate
with each other with respect to making any election under Section 754
of the Code for any Panhandle Subsidiary or any Related Company. Prior
to making any adjustments pursuant to Section 743 of the Code as a
result of the transactions contemplated by this Agreement Buyer shall
prepare a schedule indicating such adjustments that Buyer proposes to
make (the "743 Schedule") and provide such schedule to Seller. If,
within ten (10) days of the receipt of the 743 Schedule, Seller
notifies Buyer that it
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disagrees with the 743 Schedule and provides Buyer with its proposed
743 Schedule and a written or oral explanation of the reasons for the
adjustment, then Seller and Buyer shall attempt to resolve their
disagreement within the twenty (20) days following Buyer's notification
of Seller of such disagreement, otherwise, the 743 Schedule shall be
deemed the final 743 Schedule (the "Final 743 Schedule"). If Seller and
Buyer are unable to resolve their disagreement, the dispute shall be
submitted to a mutually agreed upon nationally recognized independent
accounting firm, whose expense shall be borne equally by Seller and
Buyer, for resolution within twenty (20) days of such submission. The
743 Schedule delivered by such accounting firm shall be the Final 743
Schedule. The Final 743 Schedule shall be binding on Buyer, Seller, and
their respective Affiliates. Buyer and Seller shall take no position,
and cause their respective Affiliates to take no position, inconsistent
with the Final 743 Schedule.
(ii) Buyer and Seller shall mutually prepare any
forms or schedules necessary to give effect to the preceding paragraph.
In the event that any Tax position taken in reliance upon the Final 743
Schedule is disputed by any Taxing authority, the party receiving
written notice of the dispute shall promptly notify the other party
hereto concerning such dispute.
(g) Transfer and Similar Taxes. Notwithstanding any other
provisions of this Agreement to the contrary, all sales, use, transfer, gains,
stamp, duties, recording and similar Taxes (collectively, "Transfer Taxes")
incurred in connection with the transactions contemplated by this Agreement
shall be borne equally by Buyer and Seller, and Seller shall accurately file all
necessary Tax Returns and other documentation with respect to Transfer Taxes and
timely pay all such Transfer Taxes. If required by Applicable Law, Buyer will
join in the execution of any such Return. Seller shall provide copies of any Tax
Returns with respect to Transfer Taxes to Buyer no later than five (5) days
after the due dates of such Tax Returns.
(h) Termination of Tax Sharing Agreements. On or prior to
the Closing Date, Seller shall cause all Tax sharing agreements between Seller
or any of its Affiliates (as determined immediately after the Closing Date) on
the one hand, and Panhandle or the Panhandle Subsidiaries on the other hand, to
be terminated, and all obligations thereunder shall be settled, and no
additional payments shall be made under any provisions thereof after the Closing
Date.
Section 5.8 Intercompany Accounts.
Except as set forth on Section 5.8 of the Seller Disclosure Letter or
as contemplated by the Assumption Agreement, prior to the Closing Date, Seller
shall, and shall cause its Affiliates (other than Panhandle and the Panhandle
Subsidiaries) to, settle intercompany accounts payable (including any debt
payable) to Panhandle or the Panhandle Subsidiaries and accounts receivable
(including any debt receivable) from Panhandle or the Panhandle Subsidiaries.
Seller shall determine the method by which
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such intercompany accounts are eliminated including, but not limited to, by
means of setoff, settlement, capital contribution or reduction in capital.
Section 5.9 Related Agreements.
At the Closing or as otherwise provided herein, (i) Southern Union and
Buyer shall execute and deliver to Seller duly executed copies of the Related
Agreements to which they are a party and (ii) Seller shall, and shall cause the
Seller Counterparties to, execute and deliver to Buyer duly executed copies of
the Related Agreements to which they are a party.
Section 5.10 Maintenance of Insurance Policies.
(a) Seller and Buyer agree that Casualty Insurance claims
relating to the businesses of Panhandle and the Panhandle Subsidiaries
(including reported claims and including incurred but not reported claims) will
remain with Panhandle and the Panhandle Subsidiaries immediately following the
Closing. For purposes hereof, "Casualty Insurance Claims" shall mean workers'
compensation, auto liability, general liability and products liability claims
and claims for damages caused to the facilities of Panhandle or the Panhandle
Subsidiaries generally insured under all risk, real property, boiler and
mechanical breakdown insurance coverage. The Casualty Insurance Claims are
subject to the provisions of the Insurance Policies with insurance carriers and
contractual arrangements with insurance adjusters maintained by Seller or its
Affiliates prior to the Closing. With respect to the Casualty Insurance Claims,
the following procedures shall apply: (i) Seller or its Affiliates shall
continue to administer, adjust, settle and pay, on behalf of Panhandle and the
Panhandle Subsidiaries, all Casualty Insurance Claims with dates of occurrence
prior to the date of Closing; provided, that Seller will obtain the consent of
Buyer prior to adjusting, settling or paying any Casualty Insurance Claim of an
amount greater than $100,000 and provided, further, that Seller shall permit
Buyer to join Seller in any settlement negotiations with claimants, insurers, or
insurance adjusters; and (ii) Seller shall invoice Panhandle and the Panhandle
Subsidiaries at the end of each month for Casualty Insurance Claims paid on
behalf of Panhandle and the Panhandle Subsidiaries by Seller. Buyer shall cause
Panhandle and the Panhandle Subsidiaries to pay the invoice within thirty (30)
days of its date. In the event that Panhandle and the Panhandle Subsidiaries do
not pay Seller within thirty (30) days of such invoice, interest at the rate of
ten percent (10%) per annum shall accrue on the amount of such invoice. Casualty
Insurance Claims to be paid by Seller hereunder shall include all costs
necessary to settle claims including compensatory, medical, legal and other
allocated expenses, net of insurance proceeds. In the event that any Casualty
Insurance Claims exceeds a deductible or self-insured retention under the
Insurance Policies, Seller shall be entitled to the benefit of any insurance
proceeds that may be available to discharge any portion of such Casualty
Insurance Claim.
(b) Other than as set forth in Section 3.21 hereof,
Seller makes no representation or warranty with respect to the applicability,
validity or adequacy of any Insurance Policies, and Seller shall not be
responsible to Buyer or any of its Affiliates for the failure of any insurer to
pay under any such Insurance Policy.
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(c) Nothing in this Agreement is intended to provide or shall
be construed as providing a benefit or release to any insurer or claims service
organization of any obligation under any Insurance Policies. Seller and Buyer
confirm that the sole intention of this Section 5.10 is to divide and allocate
the benefits and obligations under the Insurance Policies between them as of the
Closing Date and not to effect, enhance or diminish the rights and obligations
of any insurer or claims service organization thereunder. Nothing herein shall
be construed as creating or permitting any insurer or claims service
organization the right of subrogation against Seller or Buyer or any of their
Affiliates in respect of payments made by one to the other under any Insurance
Policy.
(d) If Buyer requests a copy of an Insurance Policy relating
to a pending or threatened Casualty Insurance Claim, Seller shall provide a copy
of all relevant insurance policies which insure such Casualty Insurance Claims
within five (5) Business Days, provided, that if Seller cannot provide such
policy within five (5) days after exercising reasonable best efforts to locate
such policy, Seller shall continue to exercise its reasonable best efforts to
provide such policy to Buyer as soon as possible thereafter.
Section 5.11 Preservation of Records.
Buyer agrees that it shall, at its own expense, preserve and keep the
records held by it relating to the respective businesses of Panhandle and the
Panhandle Subsidiaries that could reasonably be required after the Closing by
Seller for as long as may be required for such categories of records for the
greater of the time periods required pursuant to the Access and Support
Agreement and the time periods required pursuant to the applicable document
retention program in effect on the Closing Date (a copy of which has been
provided to Buyer). In addition, Buyer shall make such records available to
Seller as may reasonably be required by Seller in connection with, among other
things, any insurance claim, legal proceeding or governmental investigation
relating to the respective businesses of Seller and its Affiliates, including
Panhandle and the Panhandle Subsidiaries.
Section 5.12 Public Statements.
On or prior to the Closing Date, neither party shall, nor shall permit
its Affiliates to, issue or cause the publication of any press release or other
announcement with respect to this Agreement or the transactions contemplated
hereby without the consent of the other party hereto. Notwithstanding the
foregoing, in the event any such press release or announcement is required by
law, court process or stock exchange rule to be made by the party proposing to
issue the same, such party shall use its reasonable best efforts to consult in
good faith with the other party prior to the issuance of any such press release
or announcement.
Section 5.13 Certain Transactions.
Buyer and Southern Union shall not, and shall not permit any of their
respective Subsidiaries to acquire or agree to acquire by merging or
consolidating with, or by
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purchasing a substantial portion of the assets of or equity in, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets if the entering into of a definitive agreement relating to,
or the consummation of such acquisition, merger or consolidation would
reasonably be expected to (i) impose any material delay in the obtaining of, or
significantly increase the risk of not obtaining, any authorizations, consents,
orders, declarations or approvals of any Governmental Authority necessary to
consummate the transactions contemplated by this Agreement or the expiration or
termination of any applicable waiting period, (ii) significantly increase the
risk of any Governmental Authority entering an order prohibiting the
consummation of the transactions contemplated by this Agreement, (iii)
significantly increase the risk of not being able to remove any such order on
appeal or otherwise or (iv) materially delay or prevent the consummation of the
transactions contemplated by this Agreement. Prior to Closing, Southern Union
shall not, and the Subsidiaries of Southern Union shall not, acquire or agree to
acquire any ownership interest in Southern Star Central or any material asset of
Southern Star Central.
Section 5.14 CMS Panhandle Holdings, LLC.
Buyer covenants to maintain CMS Panhandle Holdings, LLC as a
partnership for all Tax purposes through December 31, 2003.
Section 5.15 Change of Corporate Name.
As soon as reasonably practicable following the Closing Date, but in no
event later than ninety (90) days following the Closing Date (the "Corporate
Name Change Transition Period"), Buyer shall cause each of Panhandle and the
Panhandle Subsidiaries, as applicable, to change its corporate name to a name
that does not include "CMS" and to make any necessary legal filings with the
appropriate Governmental Authorities to effectuate such changes. Buyer shall
hold harmless and indemnify Seller Indemnified Parties (as defined herein)
against all costs, expenses and Damages to the extent incurred by Seller
Indemnified Parties resulting from or arising in connection with Buyer's,
Panhandle's or any Panhandle Subsidiary's use of the "CMS" name during the
Corporate Name Change Transition Period.
Section 5.16 Transitional Use of Seller's Trademarks.
(a) Seller hereby grants to Panhandle and the Panhandle
Subsidiaries, effective upon the Closing Date, a limited non-transferable,
non-exclusive, royalty-free transitional right and license to use the
trademarks, service marks, and trade names listed on Section 5.16 of the Seller
Disclosure Letter, together with all slogans, logotypes, designs and trade dress
associated therewith which are, in each case, in existence at Closing Date and
currently being used in the conduct of the businesses of Panhandle and the
Panhandle Subsidiaries (collectively, the "Seller's Marks") solely on and in
connection with the goods and services of the businesses of Panhandle and the
Panhandle Subsidiaries and which are embodied in or on any stationery, business
cards, advertising and promotional materials, packaging and labels, equipment,
manuals and
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other documentation, statements of work, trucks, hard hats, e-mail addresses,
caller ID, printed facsimile headers and footers, web page content and URLs for
web sites, Messenger screens, signs on facilities owned or leased by Panhandle
and the Panhandle Subsidiaries, and inventory ("Business Materials"), and for
any administrative, corporate and legal use in connection with the transition
away from using the Seller's Marks (the "Transitional License").
(b) Panhandle's and the Panhandle Subsidiaries' right to use
the Seller's Marks shall automatically cease as soon as reasonably practicable
following the Closing Date, but in no event later than six (6) months following
the Closing Date. Upon the termination of Panhandle's and the Panhandle
Subsidiaries' right to use Seller's Marks, Panhandle and each Panhandle
Subsidiary shall immediately cease all use of Seller's Marks and all materials
bearing Seller's Marks (such materials to be returned to Seller or destroyed).
(c) All rights and goodwill arising from the use of Seller's
Marks and/or any similar names or marks (including logos) shall inure solely to
Seller's benefit. Panhandle and the Panhandle Subsidiaries agree that neither
Buyer, Panhandle nor any Panhandle Subsidiary shall use, directly or indirectly,
the word "CMS" or any marks similar thereto, as part of Buyer's, Panhandle's or
any Panhandle Subsidiary's own trade names, or in any other way that suggests
that there is any relation or affiliation between Seller and Buyer, or Seller
and Panhandle and the Panhandle Subsidiaries, other than that created by this
Agreement, or as a trademark, service mark or trade name for any other business,
product or service. Panhandle and Panhandle Subsidiaries shall have no interest
in Seller's Marks except as expressly provided in this Agreement and shall not
claim any other rights therein. Nothing in this Agreement or in the performance
thereof, or that might otherwise be implied by law, shall operate to grant
Panhandle and the Panhandle Subsidiaries any right, title, or interest in or to
Seller's Marks other than as specified in the limited license grant in this
Agreement. All rights not expressly granted in this Agreement or herein are
reserved to Seller.
(d) Panhandle and the Panhandle Subsidiaries agree to assign
to Seller and do hereby assign to Seller all rights they may acquire, if any, by
operation of law or otherwise in Seller's Marks, including all applications or
registrations therefore, along with the goodwill associated therewith. Panhandle
and the Panhandle Subsidiaries shall assist Seller in protecting and maintaining
Seller's rights in Seller's Marks in connection with Panhandle's and the
Panhandle Subsidiaries' licensed use hereunder, including preparation and
execution of documents necessary or appropriate in the ordinary course to
register Seller's Marks and/or record this Agreement. As between the parties,
Seller shall have the sole right to, and in its sole discretion may, commence,
prosecute or defend, and control any action concerning Seller's Marks.
(e) During the term of the Transitional License, Buyer,
Panhandle and the Panhandle Subsidiaries shall not take, or agree or commit to
take, any action that would or would be reasonably likely have an adverse impact
on any of the Seller's Marks.
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(f) Neither Buyer, Panhandle, nor any Panhandle Subsidiary
shall directly or indirectly, contest the validity of, by act or omission
jeopardize, or take any action inconsistent with, Seller's rights in Seller's
Marks (including attempting to register Seller's Marks or a mark incorporating
either Seller's Marks or the word "CMS" or any mark similar thereto).
Panhandle's and the Panhandle Subsidiaries' rights under the license granted
herein are personal and may not be sublicensed, assigned or otherwise
transferred.
Section 5.17 Reasonable Best Efforts.
Upon the terms and subject to the conditions of this Agreement, each of
the parties hereto will use all reasonable best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable consistent with applicable law to consummate and make effective in
the most expeditious manner practicable the transactions contemplated hereby.
Section 5.18 No Shopping.
From and after the Original Date hereof, none of Seller, Panhandle, the
Panhandle Subsidiaries nor their officers, directors, employees, affiliates,
stockholders, representatives, agents, nor anyone acting on behalf of them
shall, directly or indirectly, encourage, solicit, engage in discussions or
negotiations with, or provide any non-public information to, any Person (other
than Buyer, Southern Union or their respective representatives) concerning any
merger, sale of assets, purchase or sale of Panhandle Shares or similar
transaction involving Panhandle or the Panhandle Subsidiaries (collectively,
"Prohibited Transactions") unless this Agreement is terminated pursuant to and
in accordance with Article VII hereof; provided however, that nothing herein
shall prohibit a transaction resulting in a change of control of any direct or
indirect parent of Panhandle.
Section 5.19 Southern Union Covenants.
Southern Union shall cause Buyer to perform all of its obligations
under this Agreement which are required to be performed on and prior to the
Closing Date, including, without limitation, Buyer's requirement to consummate
the transaction in accordance with and subject to the terms of Section 2.2
hereof and to pay the Purchase Price in accordance with Article II.
Section 5.20 Restated Financials.
Seller shall use its reasonable best efforts to deliver the Restated
Financials to Buyer as soon as reasonably practicable after the date of this
Agreement. Seller shall instruct Ernst & Young LLP to conduct an audit of the
financial statements of Panhandle and the Panhandle Subsidiaries for the fiscal
year ended December 31, 2002 as soon as reasonably practicable after Panhandle
management completes such financial statements, Seller shall cooperate with such
audit, and shall deliver to Buyer a copy of the audited financial statements of
Panhandle and the Panhandle Subsidiaries for the fiscal year ended December 31,
2002 and Ernst & Young LLP's audit opinion thereon upon receipt
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of same. To the extent Buyer reasonably requires audited or reviewed financial
statements with respect to Panhandle and the Panhandle Subsidiaries in order to
comply with the reporting requirements of the Securities and Exchange Commission
set forth in Regulations S-K and S-X, Seller will reasonably cooperate with
Buyer (at Buyer's cost), including any reasonable request that Seller instruct
Ernst & Young LLP to prepare and deliver to Buyer a comfort letter, customary in
scope and substance for comfort letters delivered in similar circumstances.
Section 5.21 1935 Act Jurisdiction.
Neither Southern Union and its Affiliates nor Seller and its Affiliates
shall take any action that would cause the transactions contemplated by this
Agreement to require any filing, approval or consent under the Public Utility
Holding Company Act of 1935, as amended.
Section 5.22 Registration of Southern Union Shares.
(a) Prior to Closing, Southern Union shall prepare and file
with the SEC a prospectus supplement (the "Prospectus Supplement") to the Shelf
Registration Statement to effect the registration of the Southern Union Shares.
Southern Union shall use its reasonable best efforts to keep the Shelf
Registration Statement effective as long as is necessary to consummate the sale
of the Southern Union Shares by Seller. Seller and its Affiliates shall
cooperate with Southern Union in timely obtaining any consents, approvals, or
waivers or making any filings, or furnishing information required in connection
with the Prospectus Supplement.
(b) Southern Union will advise Seller, promptly after it
receives notice thereof, of the issuance of any stop order or the suspension of
the qualification of the Southern Union Shares for offering or sale in any
jurisdiction.
ARTICLE VI
CONDITIONS
Section 6.1 Mutual Conditions to the Closing.
The respective obligations of each party to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or waiver of
each of the following conditions at or prior to the Closing Date:
(a) Any waiting period (and any extension thereof) applicable
to the consummation of the transactions contemplated by this Agreement under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), shall have expired or have been terminated;
(b) All waiting periods applicable to the transactions
contemplated by this Agreement or any Related Agreement under any applicable
other law shall have expired or been terminated, and all filings required by law
to be made prior to Closing by Seller, Southern Union or Buyer with, and all
consents, approvals and
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authorizations required by law to be obtained prior to Closing by Seller,
Southern Union or by Buyer from, any Governmental Authority under any law in
order to consummate the transactions contemplated by this Agreement shall have
been made or obtained (as the case may be), except where the failure for such
waiting periods to expire or to be terminated, to make such filings, or to
obtain any such authorizations, individually or in the aggregate, would not have
a Material Adverse Effect; provided, however, if any consent, approval or
authorization from any Governmental Authority the absence of which would not
have a Material Adverse Effect is not obtained prior to or at the Closing and,
as a result, the transfer of one or more assets, rights or interests is
prevented at the Closing, from and after the Closing, Seller, Southern Union and
Buyer shall continue to use their reasonable best efforts to obtain such
requisite consent, approval or authorization. If the parties are unable to
obtain the necessary approvals and, as a result, such assets, rights or
interests may not be transferred to Buyer within 90 days after the Closing, the
parties shall mutually agree on an acceptable adjustment to the Purchase Price
to reflect the fair market value of such assets, rights or interests as of the
Closing Date; and
(c) No court of competent jurisdiction or other competent
Governmental Authority shall have issued a statute, rule, regulation, order,
decree or injunction or taken any other action that has the effect of
restraining, enjoining, imposing a Burdensome Condition or otherwise prohibiting
in any material respect the ownership by Buyer of the Panhandle Shares or the
ownership or operation by Buyer of a material portion of the business or assets
of Panhandle and the Panhandle Subsidiaries, taken as a whole.
Section 6.2 Buyer's Conditions to the Closing.
The obligations of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction or waiver of each of the
following conditions at or prior to the Closing Date:
(a) The representations and warranties of Seller contained in
this Agreement (i) if subject to any limitations as to "materiality" or
"Material Adverse Effect," shall be true and correct at and as of the Closing
Date as if made at and as of such time, and (ii) if not subject to any
limitations as to "materiality" or "Material Adverse Effect," shall be true and
correct at and as of the Closing Date as if made at and as of such time, except
where the failure of such representations and warranties to be true and correct
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, and except in the case of clauses (i) or (ii) for the
representations and warranties set forth in Section 3.7 (a) (Contracts), Section
3.7 (b) (Contracts), the second sentence of Section 3.6 (Financial Information),
the first sentence of Section 3.21 (b) and the last sentence of Section 3.22 ,
each of which shall be true and correct only as of the date set forth in such
representation or warranty);
(b) Seller and its Affiliates shall have made all deliveries
required under Section 2.6;
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(c) Seller shall have performed in all material respects all
of its obligations required to be performed by it under this Agreement at or
prior to the Closing Date;
(d) Seller shall have, or shall have caused the appropriate
Seller Counterparty to have, executed and delivered as of the Closing each of
the Related Agreements to be executed by Seller or a Seller Counterparty;
(e) Buyer shall have received a properly executed statement of
Seller dated as of the Closing Date and conforming to the requirements of
Treasury Regulation Section 1.1445-2(b)(2);
(f) Seller shall have delivered to Buyer an opinion, dated as
of the Closing Date, from a nationally recognized appraisal firm addressed to
Seller, that Seller and its Subsidiaries on a consolidated basis are solvent,
both immediately before and after giving effect to the consummation of the
transactions contemplated by this Agreement;
(g) Seller shall have obtained all approvals, consents,
releases and documents which are listed in Section 6.2 (g) of the Seller
Disclosure Letter;
(h) Buyer shall have received a legal opinion, dated as of the
Closing Date, from counsel to Seller, substantially in the form of Exhibit E
hereto;
(i) Seller shall have delivered to Buyer (and shall have filed
with the Securities and Exchange Commission) the restated audited financial
statements of Panhandle for each of the fiscal years ended December 31, 2000 and
December 31, 2001 (including the opinion of Ernst & Young LLP with respect
thereto) (the "Annual Financial Statements") and the restated unaudited
financial statements of Panhandle for the quarters ended March 31, 2002, June
30, 2002 and September 30, 2002 (which quarterly financial statements shall have
been reviewed by Ernst & Young LLP in accordance with the applicable rules and
regulations of the SEC) (collectively with the Annual Financials Statements, the
"Restated Financials"), and except as set forth in Section 6.2 (i) of the Seller
Disclosure Letter, the Restated Financials (including the notes thereto) shall
correspond in all material respects to the draft Restated Financials (and draft
notes thereto) delivered to Buyer prior to the date of this Agreement, and any
footnotes with respect to any restated quarterly financial statements shall be
the same in all material respects as such footnotes in the Interim Financial
Statements, except for corresponding changes reflected in the Annual Financial
Statements; and
(j) Seller shall have caused Panhandle to cure any defaults
(currently under waiver by the lenders) under the credit facility described as
Item 44 in Section 3.7(a) of the Seller Disclosure Letter relating to a failure
to furnish such lenders with certified financial statements.
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Section 6.3 Seller's Conditions to the Closing.
The obligations of Seller to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction or waiver of each of the
following conditions at or prior to the Closing Date:
(a) The representations and warranties of Buyer and Southern
Union contained in this Agreement (A) if subject to any limitations as to
"materiality" or "Material Adverse Effect," shall be true and correct at and as
of the Closing Date as if made at and as of such time, and (B) if not subject to
any limitations as to "materiality" or "Material Adverse Effect," shall be true
and correct at and as of the Closing Date as if made at and as of such time
except where the failure of such representations and warranties to be true and
correct would not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the ability of Buyer and Southern Union to
consummate the transactions contemplated by this Agreement;
(b) Buyer and Southern Union shall have made all deliveries
required under Section 2.7;
(c) Each of Buyer and Southern Union shall have performed in
all material respects all of its obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and Seller shall have
received a certificate from each of Buyer and Southern Union to that effect
dated the Closing Date;
(d) Buyer shall have, or shall have caused Southern Union to
have, executed and delivered as of the Closing each of the Related Agreements to
be executed by Buyer or Southern Union;
(e) Buyer and Southern Union shall have obtained all
approvals, consents and releases which are listed in Section 6.3 (e) of the
Buyer Disclosure Letter including any approvals required in connection with the
issuance and delivery of the Southern Union Shares, their registration pursuant
to the Shelf Registration Statement and the Listing;
(f) Seller shall have received a legal opinion, dated as of
the Closing Date, from counsel to each of Buyer and Southern Union substantially
in the form of Exhibit F hereto; and
(g) The Shelf Registration Statement shall remain effective,
the Listing shall have occurred and remain effective, and all waiting periods
applicable to the issuance and delivery of the Southern Union Shares, their
registration pursuant to the Shelf Registration Statement and the Listing shall
have expired or been terminated, and all filings required by law to be made
prior to Closing by Southern Union with, and all consents, approvals and
authorizations required by law to be obtained prior to Closing by Southern Union
from, any Governmental Authority under any law in connection with the issuance
and delivery of the Southern Union Shares, their registration pursuant to the
Shelf Registration Statement and the Listing shall have been made or obtained
(as the case may be).
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ARTICLE VII
TERMINATION AND ABANDONMENT
Section 7.1 Termination.
This Agreement may be terminated at any time prior to the Closing Date
by:
(a) mutual written consent of the parties;
(b) by either Buyer or Seller, upon written notice to the
other parties, if the Closing shall not have occurred on or before June 30, 2003
(the "Initial Termination Date"); provided, however, that if on the Initial
Termination Date the conditions to closing set forth in Section 6.1 (a), Section
6.1 (b) and Section 6.1 (c) shall have been fulfilled and certain other
conditions set forth in Section 6.1, Section 6.2 or Section 6.3 shall not have
been fulfilled but are reasonably capable of being fulfilled no later than ten
business days after the Initial Termination Date, then, if a written notice
requesting an extension of the termination date has been delivered by either
Buyer to Seller, or by Seller to Buyer, at any time during the ten business day
period ending on the Initial Termination Date, the termination date shall be
extended to July 15, 2003.
(c) by either Buyer or Seller upon written notice to the other
party, if any of the mutual conditions to the Closing set forth in Section 6.1
shall have become incapable of fulfillment by June 30, 2003 or July 15, 2003, as
the case may be, and shall not have been waived in writing by the other party;
(d) by Buyer, so long as Buyer is not then in breach of its
obligations under this Agreement, upon a breach of any covenant or agreement on
the part of Seller set forth in this Agreement, or if any representation or
warranty of Seller shall have been or become untrue, in each case such that the
conditions set forth in Section 6.2 would not be satisfied; provided, however,
that Buyer may not terminate this Agreement if such breach or untruth is capable
of being cured by Seller by not later than June 30, 2003 or July 15, 2003, as
the case may be, through the exercise of its reasonable best efforts, so long as
Seller continues to exercise such reasonable best efforts (until not later than
June 30, 2003 or July 15, 2003, as the case may be);
(e) by Seller, so long as Seller is not then in breach of its
obligations under this Agreement, upon a breach of any covenant or agreement on
the part of Buyer or Southern Union set forth in this Agreement, or if any
representation or warranty of Buyer and Southern Union shall have been or become
untrue, in each case such that the conditions set forth in Section 6.3 would not
be satisfied; provided, however, that Seller may not terminate this Agreement if
such breach or untruth is capable of being cured by Buyer and Southern Union by
not later than July 15, 2003, through the exercise of their reasonable best
efforts, so long as Buyer and Southern Union continue to exercise such
reasonable best efforts (until not later than June 30, 2003 or July 15, 2003, as
the case may be); and
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(f) by either Seller or Buyer if any Governmental Authority
shall have issued an order, decree or ruling or taken any other action, which
permanently restrains, enjoins or otherwise prohibits the transactions
contemplated by this Agreement and which order, decree, ruling or other action
is not subject to appeal; unless failure to consummate closing because of such
action by the Governmental Authority is due to the failure of the party seeking
to terminate to have fulfilled its obligations under Section 5.4 and Section
5.5.
Section 7.2 Procedure and Effect of Termination.
In the event of the termination of this Agreement pursuant to Section
7.1 (i) this Agreement, except for the provisions of Section 5.2 (b), all of
Article IX and this Section 7.2 , shall become void and have no effect, without
any Liability on the part of any party hereto or its directors, officers,
stockholders or partners; provided, however, that nothing in this Section 7.2
shall relieve any party for liability for any breach of this Agreement as set
forth in the next succeeding sentence of this Section 7.2 and (ii) all filings,
applications and other submissions made pursuant to this Agreement, to the
extent practicable, shall be withdrawn from the agency or other Person to which
they were made or appropriately amended to reflect the termination of the
transactions contemplated hereby. Notwithstanding the foregoing, (a) nothing in
this Section 7.2 shall relieve any party hereto of liability for Damages
resulting from any breach of any of its obligations under this Agreement;
provided, however, that for purposes of this clause (a), Damages shall be deemed
not to include Third Party Claims, and (b) if it shall be judicially determined
that termination of this Agreement was caused by an intentional breach of this
Agreement, then, in addition to other remedies at law or equity for breach of
this Agreement, but subject to the limitation in clause (a) above, the party so
found to have intentionally breached this Agreement shall indemnify and hold
harmless the other party hereto for its respective out-of-pocket costs,
including the fees and expenses of their counsel, accountants, financial
advisors and other experts and advisors, as well as fees and expenses incident
to the negotiation, preparation and execution of this Agreement and related
documentation.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
Section 8.1 Survival.
(a) The representations and warranties provided for in this
Agreement shall survive the Closing and remain in full force and effect until
the twelve-month (12) anniversary of this Agreement; provided however, that the
representations and warranties set forth in Section 3.2 (Authority Relative to
this Agreement), Section 3.3 (Panhandle Shares), Section 3.19 (Brokerage and
Finders' Fees), Section 4.2 (Authority Relative to this Agreement), Section 4.7
(Brokerage and Finders' Fees) and Section 4.11 (Southern Union Shares) shall
survive indefinitely, the representations and warranties set forth in Section
3.16 (Tax Matters) shall survive for a period equal to the applicable statute of
limitations for each Tax and taxable year, and the representations and
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warranties set forth in Section 3.15 (Environmental; Health and Safety Matters)
shall survive until the second (2nd) anniversary of the Closing Date.
(b) No Claim for damages or other relief of any kind
(including a Claim for indemnification under Section 8.2 hereof) arising against
an Indemnified Party out of or relating to this Agreement or the transactions
contemplated hereby, whether sounding in contract, tort, breach of warranty,
securities law, other statutory cause of action, deceptive trade practice,
strict liability, product liability or other cause of action or theory of
liability (except, in all cases Claims alleging fraud, intentional
misrepresentation or intentional misconduct), may be brought unless suit thereon
is filed, or a written notice describing the nature of that Claim, the theory of
liability, the nature of the relief sought and the material factual assertions
upon which the Claim is based is given to the other party, before the
termination of the Survival Period.
(c) The survival period of each representation or warranty as
provided in this Section 8.1 is referred to herein as the "Survival Period."
Notwithstanding the foregoing, any representation or warranty that would
otherwise terminate shall survive with respect to Damages which respect to which
suit thereon is filed or of which notice describing the nature of that Claim,
the theory of liability, the nature of the relief sought and the material
factual assertions upon which the Claim is based is given pursuant to this
Agreement prior to the end of the Survival Period, until the matter is finally
resolved and any related Damages are paid.
Section 8.2 Indemnification.
(a) Subject to the limitations set forth in this Article VIII,
subsequent to the Closing, Seller shall indemnify, defend, save and hold
harmless, Buyer, Southern Union, Panhandle and the Panhandle Subsidiaries, their
respective successors and permitted assigns, and their shareholders, members,
partners (general and limited), officers, directors, managers, trustees,
incorporators, employees, agents, attorneys, consultants and representatives,
and each of their heirs, executors, successors and assigns (collectively, the
"Buyer Indemnified Parties"), against and in respect of any and all Damages to
the extent incurred by the Buyer Indemnified Party arising out of, resulting
from or incurred in connection with:
(i) any breach or inaccuracy of any representation or
warranty of Seller contained in this Agreement;
(ii) any breach by Seller of any covenant or
agreement contained in this Agreement; and
(iii) the matters set forth on Section 8.2 (a)(iii)
of the Seller Disclosure Letter.
(b) Subject to the limitations set forth in this Article VIII,
subsequent to the Closing, Buyer shall indemnify, defend, save and hold
harmless, Seller and its Affiliates, their respective successors and permitted
assigns, and their shareholders, members, partners (general and limited),
officers, directors, managers,
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trustees, incorporators, employees, agents, attorneys, consultants and
representatives, and each of their heirs, executors, successors and assigns
(collectively, the "Seller Indemnified Parties") against and in respect of any
and all Damages to the extent incurred by the Seller Indemnified Party arising
out of, resulting from or incurred in connection with:
(i) any breach or inaccuracy of any representation or
warranty of Buyer or Southern Union contained in this Agreement; and
(ii) any breach by Buyer or Southern Union of any
covenant or agreement contained in this Agreement.
(c) Any Person providing indemnification pursuant to the
provisions of this Section 8.2 is referred to herein as an "Indemnifying Party,"
and any Person entitled to be indemnified pursuant to the provisions of this
Section 8.2 is referred to herein as an "Indemnified Party."
(d) Seller's indemnification obligations contained in Section
8.2 (a)(i) shall not apply to any Claim for Damages until the aggregate of all
such Damages total $40,000,000 (the "Threshold Amount"), in which event Seller's
indemnity obligation contained in Section 8.2 (a)(i) shall apply to all Claims
for Damages in excess of the Threshold Amount, subject to a maximum liability to
all Indemnified Parties, in the aggregate, of $200,000,000 (the "Cap Amount")
for all Claims under Section 8.2 (a)(i) in the aggregate. Damages relating to
any single breach or series of related breaches of Seller's representations and
warranties shall not constitute Damages, and therefore shall not be applied
towards the Threshold Amount or be indemnifiable hereunder, unless such Damages
relating to any single breach or series of related breaches exceed $1,000,000
(the "Minimum Claim Amount").
(e) Buyer's indemnification obligations contained in Section
8.2 (b)(i) shall not apply to any Claim for Damages until the aggregate of all
such Damages equals the Threshold Amount, in which event Buyer's indemnification
obligation contained in Section 8.2 (b)(i) shall apply to all Claims for Damages
in excess of the Threshold Amount, subject to a maximum liability to all
Indemnified Parties, in the aggregate, of the Cap Amount for all Claims under
Section 8.2 (b)(i) in the aggregate. Damages relating to any single breach or
series of related breaches of Buyer's and Southern Union's representations and
warranties shall not constitute Damages, and therefore shall not be applied
towards the Threshold Amount or be indemnifiable hereunder, unless such Damages
relating to any single breach or series of related breaches exceed the Minimum
Claim Amount.
(f) The indemnification obligations of each party hereto under
this Section 8.2 shall inure to the benefit of the Buyer Indemnified Parties and
Seller Indemnified Parties, and such Buyer Indemnified Parties and Seller
Indemnified Parties will be obligated to keep and perform the obligations
imposed on an Indemnified Party by this Section 8.2, on the same terms as are
applicable to such other party.
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(g) In all cases in which a Person is entitled to be
indemnified in accordance with this Agreement, such Indemnified Party shall be
under a duty to take all commercially reasonable measures to mitigate all
losses. Without limiting the foregoing, each Indemnified Party shall use its
reasonable best efforts to collect any amount available under insurance
coverage, or from any other Person alleged to be responsible, for any Damages
for which an indemnity claim is being made; provided, that the reasonable costs
incurred by the Indemnified Party in taking such measures shall be included in
the amount of any Claim.
(h) An Indemnified Party shall not be entitled under this
Agreement to multiple recovery for the same losses. If an Indemnified Party
receives any amount under applicable insurance policies, or from any other
Person alleged to be responsible for any Damages, subsequent to an
indemnification payment by the Indemnifying Party, then such Indemnified Party
shall promptly reimburse the Indemnifying Party for any payment made or expense
incurred by such Indemnifying Party in connection with providing such
indemnification payment up to the amount received by the Indemnified Party, net
of any expenses incurred by such Indemnified Party in collecting such amount.
(i) All amounts paid by Seller or Buyer, as the case may be,
under this Article VIII shall be treated as adjustments to the Purchase Price
for all Tax purposes.
(j) Notwithstanding any other provision in the Agreement to
the contrary, this Section 8.2 shall not apply to any Claim of indemnification
with respect to Tax matters. Claims for indemnification with respect to Tax
matters shall be governed by Section 5.7.
(k) For purposes of this Article VIII only, the existence of a
breach of a representation or warranty in this Agreement and the calculation of
Damages arising out of a breach of any representation or warranty in this
Agreement shall be determined without giving effect to any exception or
qualification of such representation or warranty as to the materiality of the
breach thereof or the Material Adverse Effect on any Person of such breach.
Except as provided in Section 5.7 hereof, the provisions of this Article VIII
shall constitute the sole and exclusive remedy of any Indemnified Party for
Damages arising out of, resulting from or incurred in connection with any
inaccuracy in any representation or the breach of any warranty made by Buyer or
Southern Union, on the one hand, or Seller, on the other hand, in this
Agreement; provided, however, that this exclusive remedy for Damages does not
preclude a party from bringing an Action for specific performance or other
equitable remedy to require a party to perform its obligations under this
Agreement or any Related Agreement; provided, further, that this exclusive
remedy for Damages does not preclude a party from bringing an Action alleging
fraud, intentional misrepresentation or intentional misconduct without reference
to the provisions of this Article VIII.
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Section 8.3 Calculation of Damages.
The Damages suffered by any Party hereto shall be calculated after
giving effect to the actual receipt of any available insurance proceeds paid
directly to the Indemnified Party. In computing the amount of any insurance
proceeds, such insurance proceeds shall be reduced by a reasonable estimate of
the present value of future premium increases attributable to the payment of
such Claim.
Section 8.4 Procedures for Third-Party Claims.
(a) In the case of any Claim for indemnification arising from
a Claim of a third party against an Indemnified Party arising under paragraph
8.2(a) or 8.2(b) as the case may be (a "Third-Party Claim"), an Indemnified
Party shall give prompt written notice to the Indemnifying Party of any Claim or
demand of which such Indemnified Party has knowledge, and as to which it may
request indemnification hereunder, specifying (to the extent known) the amount
of such Claim and any relevant facts and circumstances relating thereto;
provided, however, that any failure to give such prompt notice or to provide any
such facts and circumstances will not waive any rights of the Indemnified Party,
except to the extent that the rights of the Indemnifying Party are actually
materially prejudiced thereby. The Indemnifying Party shall have the right (and,
if it elects to exercise such right, to do so by written notice within thirty
(30) days after receiving notice from the Indemnified Party) to defend and to
direct the defense against any such Third-Party Claim, in its name or in the
name of the Indemnified Party, as the case may be, at the expense of the
Indemnifying Party, and with counsel selected by the Indemnifying Party and
reasonably satisfactory to the Indemnified Party, unless (i) the Indemnifying
Party shall not have taken any action to defend such Third-Party Claim within
such thirty-day (30-day) period, or (ii) the Indemnified Party shall have
reasonably concluded that there is a conflict of interest between the
Indemnified Party and the Indemnifying Party in the conduct of the defense of
such Third-Party Claim. Notwithstanding anything in this Agreement to the
contrary (other than the last sentence of this Section 8.4 (a)), the Indemnified
Party, at the expense of the Indemnifying Party (which shall include only
reasonable out-of-pocket expenses actually incurred), shall cooperate with the
Indemnifying Party and keep the Indemnifying Party fully informed in the defense
of such Third-Party Claim. The Indemnified Party shall have the right to
participate in the defense of any Third-Party Claim with counsel employed at its
own expense; provided, however, that in the case of any Third-Party Claim (A)
described in clause (ii) above, or (B) as to which the Indemnifying Party shall
not in fact have employed counsel to assume the defense of such Third-Party
Claim within such thirty-day (30-day) period, or (C) that involves assertion of
criminal liability on the Indemnified Party, or (D) seeks to force the
Indemnified Party to take (or prevent the Indemnified Party from taking) any
action, then in each such case the Indemnified Party shall have the right, but
not the obligation, to conduct and control the defense thereof for the account
of, and at the risk of, the Indemnifying Party, and the reasonable fees and
disbursements of such Indemnified Party's counsel shall be at the expense of the
Indemnifying Party. Except as provided in the last sentence of Section 8.4 (b),
the Indemnifying Party shall have no indemnification obligations with respect to
any Third-Party Claim which shall be
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settled by the Indemnified Party without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld, delayed or
conditioned.
(b) The Indemnifying Party, if it has assumed the defense of
any Third Party Claim as provided in this Agreement, shall not consent to a
settlement of, or the entry of any judgment arising from, any such Third-Party
Claim without the Indemnified Party's prior written consent (which consent shall
not be unreasonably withheld, delayed or conditioned) unless (i) such settlement
or judgment relates solely to monetary damages, and (ii) prior to consenting to
such settlement or such entry of judgment, the Indemnifying Party delivers to
the Indemnified Party a writing (in form reasonably acceptable to the
Indemnified Party) which unconditionally provides that, subject to the
provisions of Section 8.2 (d) or Section 8.2 (e), as appropriate, relating to
the Minimum Claim Amount, the Threshold Amount and the Cap Amount, the Damages
represented thereby are the responsibility of the Indemnifying Party pursuant to
the terms of this Agreement and that, subject to the provisions of the Threshold
Amount, the Indemnifying Party shall pay all Damages associated therewith in
accordance with the terms of this Agreement. The Indemnifying Party shall not,
without the Indemnified Party's prior written consent, enter into any compromise
or settlement that (x) commits the Indemnified Party to take, or to forbear to
take, any action or (y) involves a reasonable likelihood of an imposition of
criminal liability on the Indemnified Party, or (z) does not provide for a
complete release by such third party of the Indemnified Party. With the written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, conditioned or delayed, the Indemnified Party shall have the sole and
exclusive right to settle any Third-Party Claim, on such terms and conditions as
it deems reasonably appropriate, to the extent such Third-Party Claim involves
equitable or other nonmonetary relief against the Indemnified Party or involves
a reasonable likelihood of an imposition of criminal liability on the
Indemnified Party, and shall have the right to settle any Third-Party Claim
involving money damages for which the Indemnifying Party has not assumed the
defense pursuant to this Section 8.4.
Section 8.5 Procedures for Inter-Party Claims.
In the event that an Indemnified Party determines that it has a Claim
for Damages against an Indemnifying Party hereunder (other than as a result of a
Third-Party Claim), the Indemnified Party shall give prompt written notice
thereof to the Indemnifying Party, specifying the amount of such Claim and any
relevant facts and circumstances relating thereto, and such notice shall be
promptly given even if the nature or extent of the Damages is not then known.
The notification shall be subsequently supplemented within a reasonable time as
additional information regarding the Claim or the nature or extent of Damages
resulting therefrom becomes available to the Indemnified Party. Any failure to
give such prompt notice or supplement thereto or to provide any such facts and
circumstances will not waive any rights of the Indemnified Party, except to the
extent that the rights of the Indemnifying Party are actually materially
prejudiced thereby. The Indemnified Party and the Indemnifying Party shall
negotiate in good faith for a thirty-day (30-day) period regarding the
resolution of any disputed Claims for Damages. Promptly following the final
determination of the amount of any Damages claimed by the Indemnified Party, the
Indemnifying Party, subject to the limitations of the Minimum
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Claim Amount, Threshold Amount and the Cap Amount, shall pay such Damages to the
Indemnified Party by wire transfer or check made payable to the order of the
Indemnified Party.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Interpretation.
Unless the context of this Agreement otherwise requires, (a) words of
any gender include the other gender; (b) words using the singular or plural
number also include the plural or singular number, respectively; (c) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement; (d) the terms "Article," "Section" and "Exhibit" refer to the
specified Article, Section and Exhibit of this Agreement, respectively; and (e)
"including," shall mean "including, but not limited to." Unless otherwise
expressly provided, any agreement, instrument, law or regulation defined or
referred to herein means such agreement, instrument, law or regulation as from
time to time amended, modified or supplemented, including (in the case of
agreements or instruments) by waiver or consent and (in the case of a law or
regulation) by succession of comparable successor law and includes (in the case
of agreements or instruments) references to all attachments thereto and
instruments incorporated therein.
Section 9.2 Disclosure Letters.
The Seller Disclosure Letter and the Buyer Disclosure Letter are
incorporated into this Agreement by reference and made a part hereof.
Section 9.3 Payments.
All payments set forth in this Agreement and Exhibits are in United
States Dollars. Such payments shall be made by wire transfer of immediately
available funds or by such other means as the parties to such payment shall
designate.
Section 9.4 Expenses.
Except as expressly set forth herein, or as agreed upon in writing by
the parties, whether or not the transactions contemplated hereby are
consummated, each party shall bear its own costs, fees and expenses, including
the expenses of its Representatives, incurred by such party in connection with
this Agreement and the Related Agreements and the transaction contemplated
hereby and thereby; provided, however, that Seller shall be solely responsible
for all legal, accounting and other fees, costs and expenses incurred by Seller,
Panhandle and the Panhandle Subsidiaries in connection with the negotiation,
execution and Closing of this Agreement.
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Section 9.5 Choice of Law.
This Agreement shall be governed by and construed in accordance with
the law of the State of New York (regardless of the laws that might otherwise
govern under applicable New York principles of conflicts of law).
Section 9.6 Assignment.
This Agreement may not be assigned by either party without the prior
written consent of the other party; provided, however, that without the prior
written consent of the other party, each party shall have the right to assign
its rights and obligations under this Agreement to any third party successor to
all or substantially all of its entire business. This Agreement shall be binding
upon and, subject to the terms of the foregoing sentence, inure to the benefit
of the parties hereto and their successors, legal representatives and assigns.
Section 9.7 Notices.
All demands, notices, consents, approvals, reports, requests and other
communications hereunder must be in writing, will be deemed to have been duly
given only if delivered personally or by facsimile transmission (with
confirmation of receipt) or by an internationally-recognized express courier
service or by mail (first class, postage prepaid) to the parties at the
following addresses or telephone or facsimile numbers and will be deemed
effective upon delivery; provided, however, that any communication by facsimile
shall be confirmed by an internationally-recognized express courier service or
regular mail.
(i) If to Seller:
CMS Gas Transmission Company
CMS Energy Corporation
300 Town Center Drive, Suite 1100
Dearborn, Michigan 48126
Attention: General Counsel
Telephone: (313) 436-9214
Facsimile: (313) 436-9258
With a required copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Attention: Sheldon S. Adler, Esq.
Telephone: (212) 735-3000
Facsimile: (212) 735-2000
(ii) If to Buyer or Southern Union:
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Southern Union Company
One PEI Center
Wilkes Barre, Pennsylvania 18711-0601
Attention: Thomas F. Karam, President & COO
Telephone: (570) 829-8888
Facsimile: (570) 829-8900
with a copy (which shall not constitute notice) to:
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W., Suite 600
Washington, D.C. 20036
Attention: Stephen A. Bouchard
Telephone: (202) 939-7911
Facsimile: (202) 265-5706
or to such other address as the addressee shall have last furnished in writing
in accord with this provision to the addressor.
Section 9.8 Consent to Jurisdiction.
Each party shall maintain at all times a duly appointed agent in the
State of New York, which may be changed upon ten (10) Business Days' notice to
the other party, for the service of any process or summons in connection with
any issue, litigation, action or proceeding brought in any such court. Any such
process or summons may also be served on it by mailing a copy of such process or
summons to it at its address set forth, and in the manner provided, in Section
9.7. Each party hereby irrevocably consents to the exclusive personal
jurisdiction and venue of any New York State or United States Federal court of
competent jurisdiction sitting in New York County, New York, in any action,
Claim or proceeding arising out of or in connection with this Agreement and
agrees not to commence or prosecute any action, Claim or proceeding in any other
court. Each of the parties hereby expressly and irrevocably waives and agrees
not to assert the defense of lack of personal jurisdiction, forum non conveniens
or any similar defense with respect to the maintenance of any such action or
proceeding in New York County, New York.
Section 9.9 Resolution of Disputes.
Except for the resolution of matters which shall be resolved in
accordance with the procedures set forth in specific sections, all other
disputes arising out of or relating to this Agreement or any Related Agreement
or the breach, termination or validity thereof or the parties' performance
hereunder or thereunder ("Dispute") shall be resolved as provided by this
Section 9.9.
(a) Mediation.
(i) If the Dispute has not been resolved by executive
officer negotiation within thirty (30) days of the disputing
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party's notice requesting negotiation, or if the parties fail to meet
within twenty (20) days from delivery of said notice, such Dispute
shall be submitted to non-binding mediation in accordance with the
then-current Model Procedure for Mediation of Business Disputes of the
CPR Institute for Dispute Resolution. The mediation shall be completed
within thirty (30) days of the time the mediator is selected. Unless
otherwise agreed, the parties will select a mediator from the CPR
Panels of Distinguished Neutrals; provided, however, that if no
mediator from that list can be mutually agreed upon, each party will
submit to the CPR its own list of acceptable mediators from the CPR
Panels of Distinguished Neutrals and the CPR shall appoint one of those
listed as the mediator for the parties. The costs of the mediation,
including the mediator's fees, shall be borne equally by the parties to
the Dispute.
(ii) By agreeing to mediation, the parties do not
intend to deprive any court of its jurisdiction to issue an injunction,
attachment or other order in aid of mediation proceedings. The parties
agree to participate in good faith in the mediation to its conclusion.
If the Dispute has not been resolved by mediation within ninety (90)
days of the disputing party's notice requesting negotiation pursuant to
Section 9.9 (a)(i), then either party may pursue other available
remedies.
Section 9.10 Waiver of Jury Trial.
SELLER AND BUYER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER DOCUMENT DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF SELLER OR
BUYER. EACH OF SELLER AND BUYER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION
OF EACH OTHER DOCUMENT DELIVERED IN CONNECTION HEREWITH TO WHICH IT IS A PARTY)
AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR SUCH PARTY ENTERING INTO
THIS AGREEMENT AND EACH SUCH OTHER DOCUMENT.
Section 9.11 No Right of Setoff.
Neither party hereto nor any Affiliate thereof may deduct from, set
off, holdback or otherwise reduce in any manner whatsoever against any amounts
such Persons may owe to the other party hereto or any of its Affiliates any
amounts owed by such Persons to the other party or its Affiliates.
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Section 9.12 Time is of the Essence.
Time is of the essence in the performance of the provisions of this
Agreement.
Section 9.13 Specific Performance.
The parties hereto agree that irreparable damage would occur in the
event that any provision of this Agreement was not performed in accordance with
the terms hereof and that the parties shall be entitled to specific performance
of the terms hereof, in addition to any other remedy at law or equity, subject
to the limitations set forth in Section 7.2 of this Agreement.
Section 9.14 Entire Agreement.
This Agreement, together with the Seller Disclosure Letter, Buyer
Disclosure Letter, Exhibits hereto, Related Agreements and the Confidentiality
Agreement constitute the entire agreement between the parties hereto with
respect to the subject matter herein and supersede all previous agreements,
whether written or oral, relating to the subject matter of this Agreement and
all prior drafts of this Agreement, all of which are merged into this Agreement.
No prior drafts of this Agreement and no words or phrases from any such prior
drafts shall be admissible into evidence in any action or suit involving this
Agreement. In the case of any material conflict between any provision of this
Agreement and any other Related Agreement, this Agreement shall take precedence.
Section 9.15 Third Party Beneficiaries.
Except as expressly provided in Article VIII hereof, none of the
provisions of this Agreement shall be for the benefit of or enforceable by any
third party, including any creditor of any party or any of their affiliates.
Except as expressly provided in Article VIII hereof, no such third party shall
obtain any right under any provision of this Agreement or shall by reasons of
any such provision make any Claim in respect of any Liability (or otherwise)
against either party hereto.
Section 9.16 Counterparts.
This Agreement may be executed in two (2) counterparts, both of which,
when executed, shall be deemed to be an original and both of which together
shall constitute one and the same document.
Section 9.17 Severability.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any applicable present or future law, and if the rights or
obligations of either party under this Agreement will not be materially and
adversely affected thereby, (i) such provision shall be fully severable, (ii)
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance
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herefrom and (iv) in lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Agreement, a legal, valid
and enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
Section 9.18 Headings.
The headings used in this Agreement have been inserted for convenience
of reference only and do not define or limit the provisions hereof.
Section 9.19 Waiver.
Any term or condition of this Agreement may be waived at any time by
the party that is entitled to the benefit thereof, but no such waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the party or parties waiving such term or condition. No waiver by any party
of any term or condition of this Agreement, in any one or more instances, shall
be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
Section 9.20 Amendment.
This Agreement may be altered, amended or changed only by a writing
making specific reference to this Agreement and signed by duly authorized
representatives of each party.
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IN WITNESS WHEREOF, Seller, Buyer and Southern Union, by their duly
authorized officers, have executed this Agreement as of the date first written
above.
CMS GAS TRANSMISSION COMPANY
By:/s/ William J. Haener
-----------------------------
Name: William J. Haener
Title: President and CEO
SOUTHERN UNION PANHANDLE CORP.
By:/s/ Thomas F. Karam
-----------------------------
Name: Thomas F. Karam
Title: President and Chief Operating Officer
SOUTHERN UNION COMPANY
By:/s/ Thomas F. Karam
-----------------------------
Name: Thomas F. Karam
Title: President and Chief Operating Officer