Exhibit 10.1
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EXECUTION COPY
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STOCK PURCHASE AGREEMENT
BY AND AMONG
CMS GAS TRANSMISSION COMPANY,
AIG HIGHSTAR CAPITAL, L.P.,
AIG HIGHSTAR II FUNDING CORP.,
SOUTHERN UNION COMPANY
AND
SOUTHERN UNION PANHANDLE CORP.
DATED AS OF
DECEMBER 21, 2002
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS
Section 1.1 Specific Definitions...............................................1
ARTICLE II SALE AND PURCHASE
Section 2.1 Agreement to Sell and Purchase....................................15
Section 2.2 Time and Place of Closing.........................................15
Section 2.3 Pre-Closing Matters...............................................16
Section 2.4 Estimated Purchase Price..........................................17
Section 2.5 Post-Closing Adjustment...........................................17
Section 2.6 Deliveries by Seller at the Closing...............................19
Section 2.7 Deliveries by Buyer at the Closing................................20
Section 2.8 Cooperation with Respect to Like-Kind Exchange....................20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 Corporate Organization; Qualification.............................21
Section 3.2 Authority Relative to this Agreement..............................22
Section 3.3 Shares............................................................23
Section 3.4 Consents and Approvals............................................24
Section 3.5 No Conflict or Violation..........................................24
Section 3.6 Financial Information.............................................25
Section 3.7 Contracts.........................................................25
Section 3.8 Compliance with Law...............................................26
Section 3.9 Permits...........................................................26
Section 3.10 Litigation.......................................................26
Section 3.11 Title to Properties..............................................27
Section 3.12 Employee Matters.................................................27
Section 3.13 Labor Relations..................................................29
Section 3.14 Intellectual Property............................................30
Section 3.15 Representations with Respect to Environmental Matters............30
Section 3.16 Tax Matters......................................................31
Section 3.17 Absence of Certain Changes or Events.............................32
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Section 3.18 Absence of Undisclosed Liabilities...............................32
Section 3.19 Brokerage and Finders' Fees......................................32
Section 3.20 Affiliated Transactions..........................................32
Section 3.21 Insurance........................................................33
Section 3.22 Regulatory Matters...............................................33
Section 3.23 Opinions of Financial Advisors...................................34
Section 3.24 No Other Representations or Warranties...........................34
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND THE SPONSORS
Section 4.1 Corporate Organization; Qualification.............................34
Section 4.2 Authority Relative to this Agreement..............................35
Section 4.3 Consents and Approvals............................................35
Section 4.4 No Conflict or Violation..........................................36
Section 4.5 Litigation........................................................36
Section 4.6 Availability of Funds.............................................36
Section 4.7 Brokerage and Finders' Fees.......................................37
Section 4.8 Investment Representations........................................37
Section 4.9 Buyer Capitalization; Other Interests.............................38
Section 4.10 No Other Representations or Warranties...........................38
ARTICLE V COVENANTS OF THE PARTIES
Section 5.1 Conduct of Business...............................................39
Section 5.2 Access to Properties and Records..................................41
Section 5.3 Consents and Approvals............................................42
Section 5.4 Further Assurances................................................44
Section 5.5 Employee Matters..................................................44
Section 5.6 Tax Covenants.....................................................48
Section 5.7 Intercompany Accounts.............................................55
Section 5.8 Related Agreements................................................56
Section 5.9 Preliminary Transfer..............................................56
Section 5.10 Maintenance of Insurance Policies................................57
Section 5.11 Preservation of Records..........................................58
Section 5.12 Public Statements................................................58
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Section 5.13 Certain Transactions.............................................58
Section 5.14 CMS Panhandle Holdings, LLC......................................59
Section 5.15 Change of Corporate Name.........................................59
Section 5.16 Transitional Use of Seller's Trademarks..........................59
Section 5.17 Reasonable Best Efforts..........................................61
Section 5.18 No Shopping......................................................61
Section 5.19 Sponsor Covenants................................................61
Section 5.20 Closing Delay....................................................62
Section 5.21 Restated Financials..............................................63
ARTICLE VI CONDITIONS
Section 6.1 Mutual Conditions to the Closing..................................63
Section 6.2 Buyer's Conditions to the Closing.................................64
Section 6.3 Seller's Conditions to the Closing................................66
ARTICLE VII TERMINATION AND ABANDONMENT
Section 7.1 Termination.......................................................67
Section 7.2 Procedure and Effect of Termination...............................68
ARTICLE VIII SURVIVAL; INDEMNIFICATION
Section 8.1 Survival..........................................................68
Section 8.2 Indemnification...................................................69
Section 8.3 Calculation of Damages............................................72
Section 8.4 Procedures for Third-Party Claims.................................72
Section 8.5 Procedures for Inter-Party Claims.................................73
ARTICLE IX MISCELLANEOUS PROVISIONS
Section 9.1 Interpretation....................................................74
Section 9.2 Disclosure Letters................................................74
Section 9.3 Payments..........................................................74
Section 9.4 Expenses..........................................................75
Section 9.5 Choice of Law.....................................................75
Section 9.6 Assignment........................................................75
Section 9.7 Notices...........................................................75
Section 9.8 Consent to Jurisdiction...........................................77
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Section 9.9 Resolution of Disputes............................................78
Section 9.10 Waiver of Jury Trial.............................................79
Section 9.11 No Right of Setoff...............................................79
Section 9.12 Time is of the Essence...........................................79
Section 9.13 Specific Performance.............................................79
Section 9.14 Entire Agreement.................................................79
Section 9.15 Third Party Beneficiaries........................................80
Section 9.16 Counterparts.....................................................80
Section 9.17 Severability.....................................................80
Section 9.18 Headings.........................................................80
Section 9.19 Waiver...........................................................81
Section 9.20 Amendment........................................................81
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EXHIBITS
A INTELLECTUAL PROPERTY AGREEMENT
B ACCESS AND SUPPORT AGREEMENT
C ASSUMPTION AGREEMENT
D FORM OF OPINIONS FROM SELLER'S COUNSEL
E FORM OF OPINIONS FROM COUNSEL TO BUYER, SOUTHERN UNION, HIGHSTAR AND
FUNDING
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of December 21, 2002 (this
"AGREEMENT"), is made and entered into by and among CMS Gas Transmission
Company, a Michigan corporation (the "SELLER"), AIG Highstar Capital, L.P., a
Delaware limited partnership ("HIGHSTAR"), AIG Highstar II Funding Corp., a
Delaware corporation ("FUNDING"), Southern Union Company, a Delaware corporation
("SOUTHERN UNION", and together with Highstar and Funding, the "SPONSORS"), 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 "SHARES");
WHEREAS, the Sponsors have formed Buyer for the purpose of effecting the
transactions contemplated in this Agreement;
WHEREAS, Seller desires to sell all of the Shares;
WHEREAS, the Sponsors desire to cause Buyer to purchase all of the Shares;
and
WHEREAS, each of the Boards of Directors or other governing body of each of
Seller, Buyer, Southern Union, Highstar and Funding 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;
NOW, THEREFORE, for and in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, Seller,
Buyer, Southern Union, Highstar and Funding, 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:
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"743 Schedule" shall have the meaning set forth in
Section 5.6(f).
"1935 Act" shall have the meaning set forth in
Section 3.22.
"Access and Support Agreement" shall mean the access
and support agreement to be 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. For purposes of
Section 5.3 of this Agreement and only under
Section 5.3 of this Agreement, Southern Star
Central shall be deemed to be an Affiliate of
Highstar, Funding and Buyer. Notwithstanding
the foregoing, American International Group,
Inc. and its Affiliates (other than Highstar
and Funding) and any portfolio investment of
Highstar and Funding shall be deemed not to
be an Affiliate of Buyer, Highstar or Funding
for purposes of this Agreement.
"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.
"Annual Financial Statements" shall have the meaning set forth in Section
6.2(i).
"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, 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 Agreement" shall mean the agreement between Buyer and
CMS 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
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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 Capital" shall have the meaning set forth in Section
2.3.
"Base Total Debt" shall have the meaning set forth in Section
2.3.
"Bonus Accrual" shall have the meaning set forth in Section
5.5(e).
"Burdensome Condition" shall have the meaning set forth in Section
5.3(b).
"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
5.5(a).
"Buyer Adjustment" shall have the meaning set forth in Section
2.5(c).
"Buyer Counterparty" shall mean each Sponsor that executes and
delivers any of the Related Agreements.
"Buyer Indemnified Parties" shall have the meaning set forth in Section
8.2(a).
"Buyer Plans" shall have the meaning set forth in Section
5.5(d).
"Cap Amount" shall have the meaning set forth in Section
8.2(d).
"Casualty Insurance Claims" shall have the meaning set forth in Section
5.10(a).
"Centennial" shall have the meaning set forth in Section
5.9(a).
"Claims" shall mean any and all claims, lawsuits,
demands, causes of action, investigations and
other proceedings (whether or not before a
Governmental Authority).
"Closing Adjustment Amount" shall have the meaning set forth in Section
2.5(a).
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"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.
"Closing" shall have the meaning set forth in Section
2.2.
"CMSGCFS" shall have the meaning set forth in Section
5.9(a).
"Code" shall mean the Internal Revenue Code of 1986,
as amended.
"Comparable Employment" shall have the meaning ascribed to such term
in the applicable Separation Plan.
"Confidentiality Agreement" shall mean the confidentiality agreement
entered into by and between Highstar and CMS
Energy Corporation ("PARENT"), dated
September 20, 2002, as modified by the letter
agreement dated December 6, 2002.
"Consolidated Income Tax Return" shall have the meaning set forth in Section
5.6(b)(ix) hereof.
"Corporate Name Change Transition shall have the meaning set forth in Section
Period" 5.15.
"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 otherwise,
asserted therein, without any of the
foregoing exceptions.
"Delay Penalty" shall have the meaning set forth in Section
5.20.
"Determination Date" shall have the meaning set forth in Section
2.5(b).
"Disabled Employee" shall have the meaning set forth in Section
5.5(b)(i).
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"Dispute" shall have the meaning set forth in Section
9.9.
"Election" shall have the meaning set forth in Section
5.6(a)(i).
"Employee Benefit Plans" shall have the meaning set forth in Section
3.12(c).
"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 Plan(s)" shall have the meaning set forth in Section
3.12(a).
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the
regulations promulgated thereunder.
"Estimated Adjustment Amount" shall have the meaning set forth in Section
2.3.
"Estimated Closing Debt" shall have the meaning set forth in Section
2.3.
"Estimated Closing Net Working shall have the meaning set forth in Section
Capital Amount" 2.3.
"Estimated Purchase Price" shall have the meaning set forth in Section
2.3.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
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"Final Form 8023" shall have the meaning set forth in Section
5.6(a)(ii).
"Final 743 Schedule" Shall have the meaning set forth in Section
5.6(f)(i)
"Financial Statements" shall mean the Year End Financial Statements
and the Interim Financial Statements.
"Funding" shall have the meaning set forth in the
preamble to this Agreement.
"GAAP" shall mean United States generally accepted
accounting principles as in effect from time
to time, applied on a consistent basis.
"Governmental Authority" shall mean any executive, legislative,
judicial, 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 have the meaning set forth in Section
5.9(a).
"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).
"Initial Termination Date" shall have the meaning set forth in Section
7.1(b).
"Insurance Policies" shall have the meaning set forth in Section
3.21(a).
"Intellectual Property Agreement" shall mean the Intellectual Property
Agreement to be entered into between Seller
and Buyer, as of the Closing Date,
substantially in the form of the agreement
attached hereto as
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Exhibit A.
"Interim Financial Statements" shall mean the unaudited balance sheet and
statement 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 on a consolidated basis.
"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(a) 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 the Sponsors, the
actual knowledge, after due inquiry, of those
persons listed on Section 1.1(a) of the Buyer
Disclosure Letter, applicable to Buyer or
such Sponsor, 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.
"Material Adverse Effect" shall mean any change or effect that is
materially adverse to the business, financial
condition or assets of the business of
Panhandle and the Panhandle Subsidiaries,
taken as a whole; 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,
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(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 Amount" shall have the meaning set forth in Section
8.2(d).
"Net Working Capital Amount" shall have the meaning set forth in Section
2.3.
"NGA" Shall have the meaning set forth in Section
3.22.
"Organizational Documents" shall mean certificates of incorporation,
by-laws, certificates of formation, limited
liability company operating agreements,
partnership or limited partnership agreements
or other formation or governing documents of
a particular entity.
"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 Subsidiaries" shall mean CMS Pan Gas Storage Company, LLC,
a 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,
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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,
and DekaTherm Investor Trust, a Delaware
trust. On and after the date of the transfer
of CMSGCFS to Panhandle or a Panhandle
Subsidiary pursuant to Section 5.9 hereof,
CMSGCFS shall be deemed a Panhandle
Subsidiary for all purposes of this
Agreement.
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, liquidated into, or
converted into a Panhandle Subsidiary or a
Subsidiary of a Panhandle Subsidiary.
"PBOPs" shall have the meaning set forth in Section
5.5(d).
"Permits" shall have the meaning set forth in Section
3.9.
"Permitted Encumbrances" shall mean (a) zoning, planning and building
codes 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
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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 department or agency
thereof.
"Post-Closing Taxes" shall have the meaning set forth in Section
5.6(b)(iii).
"Pre-Closing Taxes" shall have the meaning set forth in Section
5.6(b)(iv).
"Pro Forma Adjusted Balance Sheet" shall mean the September 30, 2002 Interim
Financial Statements, adjusted to:
(A) reflect, among the other matters
reflected in the adjustments set forth in
Section 1.1(b)(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
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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(b)(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(b)(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 any swap
agreements listed in Section 1.1(b)(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 5.5(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;
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(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(b)(ii) of the Seller
Disclosure Letter.
"Prohibited shall have the meaning set forth in Section
Transactions" 5.18.
"Purchase Price" shall mean the purchase price for the Shares
as set forth in Section 2.5(d).
"Related Agreements" shall mean the Transition Services Agreement,
the Intellectual Property Agreement, the
Access and Support Agreement, and the
Assumption Agreement.
"Related Companies" shall mean Centennial, Guardian and Lee 8
Storage Partnership, a Michigan general
partnership. On and after the date of the
transfer of the holding company, whose sole
asset is 100 percent of the ownership
interests in CMSGCFS, to Panhandle or a
Panhandle Subsidiary, Atchafalaya Pipeline,
L.L.C., a Delaware limited liability company
shall also be considered a Related Company.
On and after the date of the transfer of
Centennial and Guardian to Seller, Centennial
and Guardian shall no longer be deemed
Related Companies for all purposes of this
Agreement.
"Real Property" shall have the meaning set forth in Section
3.11.
"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.
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"Section 5.3(b) Person" shall mean any of Southern Union and its
Subsidiaries (taken as a whole), Highstar and
Funding (taken as whole), Buyer, or Southern
Star Central.
"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 Parties" shall have the meaning set forth in Section
8.2(b).
"Seller Plans" shall have the meaning set forth in Section
5.5(b).
"Seller Returns" shall have the meaning set forth in Section
5.6(b)(i).
"Seller" shall have the meaning set forth in the
preamble to this Agreement.
"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
5.5(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 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.
"Shares" shall have the meaning set forth in the
recitals to this Agreement.
"Southern Union" shall have the meaning set forth in the
recitals to this Agreement.
"Southern Star Central" shall mean, collectively, Southern Star
Central Corp. and its Subsidiaries.
"Sponsors" shall have the meaning set forth in the
recitals to this Agreement.
"Straddle Period shall have the meaning set forth in Section
5.6(b)(ii).
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Return(s)"
"Straddle Period" shall have the meaning set forth in Section
5.6(b)(ii).
"Straddle Statement" shall have the meaning set forth in Section
5.6(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, 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
5.6(e)(i).
"Tax Indemnified Party" shall have the meaning set forth in Section
5.6(e)(i).
"Tax Indemnifying Party" shall have the meaning set forth in Section
5.6(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.
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"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
5.7.
"Transfer Tax(es)" shall have the meaning set forth in Section
5.6(g).
"Transitional License" shall have the meaning set forth in Section
5.16.
"Transition Services shall mean the transition services agreement
Agreement" to be entered into on the Closing Date
between Seller and Buyer in a form mutually
acceptable to both parties.
"Treasury Regulation" shall mean the income Tax regulations,
including temporary and proposed regulations,
promulgated under the Code, as amended.
"Year End Financial Statements" shall mean the audited balance sheet and
statement of income, as of and for the twelve
(12) months ended December 31, 2001 for
Panhandle and the Panhandle Subsidiaries 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 Shares,
free and clear of all Encumbrances, and Buyer shall purchase and accept such
Shares from Seller.
Section 2.2 TIME AND PLACE OF CLOSING
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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 third (3rd) 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 at such other place or time as Buyer and Seller may mutually agree
in writing; PROVIDED, HOWEVER, that in no event shall the Closing take place
earlier than January 2, 2003. 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 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(b)(ii) of the Seller
Disclosure Letter. Net System Gas Owned shall be defined as System Gas
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Inventory plus Accounts Receivable - Exchanges, Accounts Payable - Exchange,
including Fuel Tracker and Line Pack as shown in the Section 1.1(b)(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 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 shall pay in full to Seller (or its designated Affiliates) an
amount in cash equal to (a) $662,300,000 plus (b) the Estimated Adjustment
Amount (the result of such calculation, the "ESTIMATED PURCHASE PRICE"). 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), minus (c) the Estimated Closing Debt, plus (d) the amount of
Total Debt as of September 30, 2002, ($1,165,519,106). 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
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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).
(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.
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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").
(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 Shares;
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(b) a cross-receipt acknowledging the receipt of the Purchase
Price;
(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 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
Subject to Section 5.19 hereof, at the Closing, Buyer and the Sponsors
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:
(b) a cross-receipt acknowledging receipt of the Shares;
(c) a certificate from an authorized officer of Buyer and each
of the Sponsors, 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
(d) all other previously undelivered documents, including duly
executed original copies of the Related Agreements, required by this Agreement
to be delivered by Buyer or a Sponsor to Seller at or prior to the Closing.
Section 2.8 COOPERATION WITH RESPECT TO LIKE-KIND EXCHANGE.
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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; PROVIDED FURTHER, that Seller shall have
no further obligation under this Section 2.8 if Buyer has not made a proposal
reasonably acceptable to Seller by January 8, 2003. 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 the Sponsors as follows:
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
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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 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 the Buyer Counterparties and each of the Sponsors, 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
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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 SHARES
(a) The 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 Shares, obligating
Seller or any of its Affiliates to issue, transfer or sell, or cause to be
issued, transferred or sold, any of the Shares, (B) outstanding securities of
Seller or its Affiliates that are convertible into or exchangeable or
exercisable for any of the 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 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 Shares and has
good, valid and marketable title to the Shares, free and clear of all
Encumbrances or other defects in title, and the Shares have not been pledged or
assigned to any Person. At the Closing, the Shares will be transferred to Buyer
free and clear of all Encumbrances. The 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 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(a)
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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 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.
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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 Date of
this Agreement, 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 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 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 date hereof, 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 date hereof, 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 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
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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 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
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the 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.
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
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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."
(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
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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;
(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
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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 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;
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(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.
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.
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(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 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 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
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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 date hereof, 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 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
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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
and 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.
The Board of Directors of Parent has received separate opinions, dated the
date of this Agreement, from each of Merrill Lynch & Co. and 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 opinions, 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 opinions solely for informational purposes
following receipt thereof by Parent.
Section 3.24 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 THE SPONSORS
Buyer hereby represents and warrants to Seller as follows; provided, that
each of the Sponsors represents and warrants only as to Buyer and as to such
Sponsor and not as to the other Sponsors:
Section 4.1 CORPORATE ORGANIZATION; QUALIFICATION
Buyer and each of the Sponsors is a corporation or other legal entity duly
organized, validly existing and duly qualified or licensed and in good standing
under the laws of the state or jurisdiction of its incorporation and has all
requisite corporate power to own, lease and operate its properties and to carry
on its business as currently conducted. Buyer and each of the Sponsors is duly
qualified or licensed to do business as a foreign corporation or other legal
entity and is, and has been, in good standing in each jurisdiction in which the
nature of the business conducted by it or the property it owns, leases or
operates requires it to so qualify, be licensed or be in good standing, except
for
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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 each of the Sponsors has 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 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 Buyer and each of the Sponsors and no other
corporate, or other proceedings on the part of Buyer or any of the Sponsors 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. 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
the Buyer Counterparties and the Sponsors, 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, the Buyer Counterparties and each of the Sponsors 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 4.3 CONSENTS AND APPROVALS
Except as set forth in Section 4.3 of the Buyer Disclosure Letter, none of
Buyer or the Sponsors 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, 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
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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 the Sponsors of this Agreement
does not:
(a) violate or conflict with any provision of the organizational
documents or bylaws of Buyer or any of the Sponsors, 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 any of the Sponsors 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, the
Sponsors or any of their respective Affiliates or any executive officer or
director thereof which would prohibit or impair Buyer, the Sponsors 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, the
Sponsors and their respective Affiliates are not subject to any outstanding
judgment, order, writ, injunction, decree or award entered in an Action to which
Buyer, the Sponsors or any of their respective Affiliates was a named party
which would prohibit or impair Buyer, the Sponsors 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
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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 Minella & Company, whose fees will
each be paid by Buyer, neither Buyer, the Sponsors 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 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 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 Shares to be acquired by it pursuant to the transactions
contemplated hereby.
(d) Buyer understands that the 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.
(e) Buyer acknowledges that the offer and sale of the Shares to
be acquired by it in the transactions contemplated hereby has not been
accomplished by the publication of any advertisement.
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Section 4.9 BUYER CAPITALIZATION; OTHER INTERESTS
(a) As of the date of this Agreement, Southern Union directly
owns all of the issued and outstanding shares of capital stock of Buyer.
Simultaneously with the execution of this Agreement, the Sponsors and the Buyer
have entered into a letter agreement regarding their ownership of the Buyer, a
true and correct copy of which has previously been provided to Seller (the
"Buyer Letter Agreement"). As of the Closing, the Sponsors will own all of the
issued and outstanding shares of capital stock of Buyer in accordance with the
Buyer Letter Agreement.
(b) Except as contemplated in the Buyer Letter Agreement or in
Section 4.9 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, any of the Sponsors 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, any of the Sponsors 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, the Sponsors 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 any of the Sponsors 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, the Sponsors have 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 NO OTHER REPRESENTATIONS OR WARRANTIES
Except for the representations and warranties contained in this Article IV,
none of Buyer, the Sponsors or any other Person makes any other express or
implied representation or warranty on behalf of Buyer or the Sponsors.
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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 date
of this Agreement 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, prior to the Closing Date,
without the prior written consent of Buyer (which consent shall not 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
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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;
(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; (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;
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(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. Section 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
(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 date of this Agreement 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, the Sponsors 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.
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(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 CONSENTS AND APPROVALS
(a) Upon the terms and subject to the conditions of this
Agreement, each of the parties hereto agrees 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.
(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, all 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. Each party agrees to
request and seek, and to cooperate with the other party in requesting and
seeking, early termination of any applicable waiting period under the HSR Act or
other HSR clearance with respect to the transactions contemplated by this
Agreement. The filing fees payable in connection with the filings required by
the HSR 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
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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 each of the Sponsors 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 5.3(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
Highstar, Funding, Southern Star Central, 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 5.3(b) Person which holds the asset to be divested or is a party to
the arrangement to be modified or on any other Section 5.3(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 5.3(b) Person so
acting or refraining or on any other Section 5.3(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 or by Highstar and Funding,
taken as a whole, or by Southern Star Central (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 5.3 and subject to appropriate confidentiality protections and
limitations set forth in Section 5.3(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 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
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remove information that is proprietary. Subject to Applicable Law and Section
5.3(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 the Sponsors 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 5.4 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 5.5 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
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
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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 5.5(b)(i) and Section 5.5(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 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
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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 5.5(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 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
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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. Promptly after the date hereof, Seller
shall provide 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 5.5(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 5.5, Buyer shall cause all obligations of Panhandle Eastern Pipe Line
Company pursuant to existing collective bargaining agreements (which agreements
are listed in Section 3.13 of the Seller Disclosure Letter) to be honored
following the Closing.
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(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 5.6 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 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 the Final Form 8023.
The Final Form 8023 shall be binding on Buyer,
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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 Pre-Closing taxes,
and a written or oral explanation of the reasons for its
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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
Panhandle Subsidiaries, be deemed to be the amount of such Taxes for the
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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 5.6(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 5.6(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
records relate to Taxes and to the extent that such access may reasonably
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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) any Taxes of Panhandle or any Panhandle Subsidiary
incurred as a
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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 5.6(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)(d),
or (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 5.6(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 5.6,
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 5.6(b)(ii)
or Section 5.6(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 5.6 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 5.6 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 deliver to the Tax Indemnifying Party, as promptly as possible but in
no
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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 5.6, 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 disagrees
with the 743 Schedule and provides Buyer with its proposed 743
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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 5.7 INTERCOMPANY ACCOUNTS
Except as set forth on Section 5.7 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
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Panhandle or the Panhandle Subsidiaries. Seller shall determine the method by
which such intercompany accounts are eliminated including, but not limited to,
by means of setoff, settlement, capital contribution or reduction in capital.
Section 5.8 RELATED AGREEMENTS
At the Closing or as otherwise provided herein, (i) Buyer and the Buyer
Counterparties 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 5.9 PRELIMINARY TRANSFER
(a) In each case, prior to the Closing and in the form described
in Section 5.9 of the Seller Disclosure Letter, Seller shall (i) cause the
transfer of a newly formed holding company whose sole asset will be 100 percent
of the ownership interests in CMS Gulf Coast Field Services, LLC ("CMSGCFS") to
Panhandle or a Panhandle Subsidiary, and (ii) use its reasonable best efforts to
cause the transfer of all of the ownership interests held by CMS Panhandle
Holdings, LLC in each of Centennial Pipeline, L.L.C., a Delaware limited
liability company ("CENTENNIAL"), and Guardian Pipeline, L.L.C., a Delaware
limited liability company ("GUARDIAN"), and the contracts relating to such
ownership interests to Seller or a Subsidiary of Seller (other than Panhandle or
any of the Panhandle Subsidiaries). At the Closing, Seller shall update the
Seller Disclosure Letter, where appropriate, to reflect the inclusion of such
holding company, which owns the interests in CMSGCFS, as a Panhandle Subsidiary,
and, assuming the transfer of the ownership interests in Centennial and/or
Guardian and the contracts relating to such ownership interests have occurred
prior to the Closing, the deletion of Centennial and/or Guardian as Related
Companies.
(b) If despite using its reasonable best efforts, Seller is
unable to cause the transfer of the ownership interests in either Centennial or
Guardian and the contracts relating to such ownership interests prior to the
Closing, from and after the Closing Seller shall continue to use its reasonable
best efforts to effect such transfer(s) as promptly as reasonably practical
following the Closing. Until such time (after the Closing), as such ownership
interests and contract rights have been transferred in accordance herewith, the
ownership interests and contracts interests shall be held on behalf of Seller,
such that all of the benefits and burdens appurtenant to such ownership
interests and contracts shall remain with Seller and its Affiliates. All
decisions relating to the operation and management of such ownership interests
and contracts shall be made by Seller and implemented by Buyer in accordance
with Seller's instructions, subject to applicable law. Seller shall indemnify
Buyer, Panhandle and the Panhandle Subsidiaries in accordance with Article VIII
for any Damages and Liabilities arising out of or relating
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to such ownership interests and contracts relating to such ownership interests
after the Closing and until the transfer(s) have been completed in accordance
with this Section 5.9.
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.
(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
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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, Southern Union and Funding shall not, and shall not permit any of
their respective Subsidiaries to, and Highstar shall not, and shall not permit
Southern Star
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Central to, acquire or agree to acquire by merging or consolidating with, or by
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
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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 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.
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(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.
(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 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, the
Sponsors or their respective representatives) concerning any merger, sale of
assets, purchase or sale of 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 SPONSOR COVENANTS
(a) The Sponsors, severally, 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
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the Purchase Price in accordance with Article II. The Sponsors obligations
shall be several, and not joint or joint and several; PROVIDED, HOWEVER, that
if a Sponsor's action or inaction has resulted in a breach by such Sponsor, or
in any way caused a breach by Buyer of any of its pre-Closing or Closing
obligations under the Agreement, such Sponsor (and only such Sponsor) shall be
solely liable for all Damages arising out of, resulting from or incurred in
connection with such breach, and Seller shall have no claim against, and
hereby releases, the non-breaching Sponsors, from any Liability with respect
to such breach. Each of the Sponsors, Buyer and Seller acknowledges and agrees
that no action shall be taken by Buyer hereunder without the consent of all
Sponsors. Southern Union hereby irrevocably and unconditionally guaranties the
performance by Funding of all of its obligations for the benefit of Seller
under this Agreement.
(b) Subject to the last sentence in Section 5.19(a) hereof, with
respect to any payment obligations of Buyer under this Agreement, Southern
Union's, Funding's and Highstar's obligations shall be several, and not joint or
joint and several, and the funding of such payment obligations shall be borne
77.9% by Southern Union, 18.4% by Funding and 3.7% by Highstar. If a Sponsor
does not fund its percentage of the Estimated Purchase Price at the intended
Closing Date, notwithstanding that all of the condition's to Buyer's obligation
to consummate the Closing have either been fulfilled or are capable of
fulfillment on the Closing Date, each Sponsor who shall have funded or is
prepared to fund shall be required to deposit their respective percentage of the
Estimated Purchase Price into an escrow account designated by Seller pending the
payment of each other Sponsor's share of the Estimated Purchase Price, at which
time said funds shall be released to Seller. Seller and each Sponsor who shall
have funded or been prepared to fund its percentage of the Estimated Purchase
Price shall mutually agree in good faith upon an escrow agent to hold such
funds, and together with the escrow agent, shall in good faith enter into an
escrow agreement that will govern the holding of such funds. The escrow
agreement shall provide that the escrow funds shall be released to each such
Sponsor in the event that the Closing has not been consummated within 30 days of
the date on which such funds were deposited.
Section 5.20 CLOSING DELAY
If the Closing has not occurred on or prior to March 31, 2003, a delay
penalty (the "DELAY PENALTY") shall begin accruing on a daily basis on April 1,
2003 and shall continue until the earlier of the Closing Date or the termination
of this Agreement in accordance with Article VII hereof, provided, as of such
date, each of the conditions to Seller's obligation have been fulfilled or are
reasonably capable of being fulfilled within a reasonable time. Southern Union
shall pay the Delay Penalty to Seller in accordance with this Section 5.20, and
the Delay Penalty shall be calculated as follows:
(i) $100,000 per day in April, 2003;
(ii) $200,000 per day in May 2003; and
(iii) $300,000 per day on and after June 1, 2003;
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Southern Union shall pay the Delay Penalty on the last day of each calendar
month or, with respect to such month in which the Closing occurs or in which
this Agreement is terminated in accordance with its terms, on the Closing Date
or the termination date, as the case may be. For the avoidance of doubt, the
Delay Penalty shall be retained by Seller whether or not the Closing occurs;
provided, however, 25% of the Delay Penalty shall be credited towards Buyer's
payment of the Estimated Purchase Price. Any Delay Penalty payable hereunder
shall be paid exclusively by Southern Union and Seller shall have no claim
against, and hereby releases, Buyer, Highstar and Funding and their respective
affiliates (other than Southern Union) from any claim or Liability with respect
to any such Delay Penalty.
Section 5.21 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 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.
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-
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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, a Sponsor or Buyer with, and all
consents, approvals and authorizations required by law to be obtained prior to
Closing by Seller, Sponsor 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, the affected
Sponsor 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 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 (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 (except to the extent expressly made as
of an earlier date, in which case as of such earlier date), 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 to the extent expressly made as of an earlier date, in which
case as of such earlier date) except where the failure of such representations
and warranties to be
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true and correct would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect;
(b) Seller and its Affiliates shall have made all deliveries
required under Section 2.6;
(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 D
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
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(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.
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 the Sponsors
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 (except to the extent
expressly made as of an earlier date, in which case as of such earlier date),
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 to the extent expressly made as of an
earlier date, in which case as of such earlier date) 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 the Sponsors to consummate the
transactions contemplated by this Agreement;
(b) Buyer and the Sponsors shall have made all deliveries
required under Section 2.7;
(c) Each of Buyer, Southern Union, Highstar and Funding 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, Southern Union, Highstar
and Funding to that effect dated the Closing Date;
(d) Buyer shall have, or shall have caused the appropriate Buyer
Counterparty to have, executed and delivered as of the Closing each of the
Related Agreements to be executed by Buyer or a Buyer Counterparty;
(e) Buyer and the Sponsors shall have obtained all approvals,
consents and releases which are listed in Section 6.3(e) of the Buyer Disclosure
Letter; and
(f) Seller shall have received a legal opinion, dated as of the
Closing Date, from counsel to each of Buyer, Southern Union, Highstar and
Funding, substantially in the form of Exhibit E hereto.
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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 Sections 6.1(a), 6.1(b)
and 6.1(c) shall have been fulfilled and certain other conditions set forth in
Sections 6.1, 6.2 or 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 the Sponsors set forth in this Agreement, or if any
representation or warranty of Buyer and the Sponsors 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 the Sponsors by
not later than July 15, 2003, through the exercise of their reasonable best
efforts, so long as Buyer and the Sponsors 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 5.3 and Section
5.4.
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
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Agreement), Section 3.3 (Shares), Section 3.19 (Brokerage and Finders'
Fees), 4.2 (Authority Relative to this Agreement) and 4.7 (Brokerage and
Finders' Fees) shall survive indefinitely, the representations and warranties
set forth in Section 3.16 (Taxes) shall survive for a period equal to the
applicable statute of limitations for each Tax and taxable year, and the
representations and 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, the Sponsors, 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.
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(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, 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 the Sponsors contained in this Agreement; and
(ii) any breach by Buyer or the Sponsors 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 the Sponsors' 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.
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(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.
(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 5.6.
(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 5.6 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
the Sponsors, 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
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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.
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 (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
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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 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
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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 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
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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.
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
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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
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(ii) If to Buyer, Southern Union, Highstar or Funding:
AIG Highstar Capital, L.P.
175 Water Street - 26th Floor
New York, New York 10038
Attention: Christopher Lee, Managing Partner
Telephone: (212) 458-2338
Facsimile: (212) 458-2222
And to:
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:
Bingham McCutchen LLP
150 Federal Street
Boston, MA 02110
Attention: Victor J. Paci, Esq.
Telephone: (617) 951-8924
Facsimile: (617) 951-8736
and
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
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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
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.
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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.
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
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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 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
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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 the Sponsors, 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: Chairman
SOUTHERN UNION COMPANY
By:/s/Thomas F. Karam
------------------------------
Name: Thomas F. Karam
Title: President and Chief Operating Officer
AIG HIGHSTAR CAPITAL, L.P.
By:/s/Christopher H. Lee
------------------------------
Name: Christopher H. Lee
Title: Managing Partner
AIG HIGHSTAR II FUNDING CORP.
By:/s/Michael Walsh
------------------------------
Name: Michael Walsh
Title: Treasurer