Exhibit 10.1
PURCHASE AND SALE AGREEMENT
by and among
Blue dolphin energy company,
wbi pipeline and storage group, inc.
- and -
SEMGAS, L.P.
Executed: October 29, 2004
Table of Contents
Page
470196.13:731264:01420
ARTICLE 1 DEFINITIONS..............................................1
1.01 Definitions..................................................1
ARTICLE 2 PURCHASE AND SALE........................................7
2.01 Purchase and Sale............................................7
2.02 Further Assurances...........................................9
2.03 Agreement Regarding Records..................................9
ARTICLE 3 PURCHASE PRICE FOR BUSINESS..............................9
3.01 Purchase Price at Closing....................................9
3.02 Earn Out....................................................10
ARTICLE 4 CLOSING.................................................10
4.01 Time and Place of Closing...................................10
4.02 Closing Obligations.........................................10
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLERS...............11
5.01 Organization and Qualification..............................11
5.02 Authority, Approval and Enforceability......................12
5.03 No Violation or Consent.....................................13
5.04 Absence of Certain Changes and Operation of the Facility....13
5.05 Material Contracts..........................................14
5.06 Real Property...............................................14
5.07 Tangible Personal Property..................................15
5.08 Permits.....................................................15
5.09 Compliance with Law.........................................15
5.10 Litigation..................................................15
5.11 Environmental Matters.......................................16
5.12 Taxes.......................................................16
5.13 Regulatory Status...........................................17
5.14 Brokers.....................................................17
5.15 Title to Personal Property..................................17
5.16 Credit Support..............................................17
5.17 Employees...................................................17
5.18 Title to New Avoca Membership Interests.....................17
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Table of Contents
(continued)
Page
5.19 Capitalization of New Avoca.................................18
5.20 New Avoca Distributions.....................................18
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYER.................18
6.01 Organization and Qualification..............................18
6.02 Authority, Approval and Enforceability......................18
6.03 No Violation or Consent.....................................18
6.04 Brokers.....................................................19
6.05 Seller Disclaimer...........................................19
ARTICLE 7 COVENANTS OF SELLERS....................................20
7.01 Operation of Business Assets Prior to the Closing Date......20
7.02 Fulfillment of Closing Conditions...........................20
7.03 Access to Facility..........................................21
7.04 Title Commitments and Policies..............................21
7.06 Non-Solicitation............................................21
ARTICLE 8 COVENANTS OF BUYER......................................22
8.01 Fulfillment of Closing Conditions...........................22
ARTICLE 9 EMPLOYEE MATTERS........................................22
ARTICLE 10 COVENANTS REGARDING CREDIT SUPPORT......................22
10.01 Substitution of Credit Support..............................22
10.02....Plugging Bonds and Escrow Funds.............................22
ARTICLE 11 CONDITIONS TO CLOSING AND TERMINATION...................22
11.01 Conditions to Obligation of Buyer...........................22
11.02 Conditions to Obligation of Sellers.........................23
11.03 Termination.................................................24
11.04 Effect of Termination.......................................24
11.05 Survival....................................................25
ARTICLE 12 ADDITIONAL AGREEMENTS OF THE PARTIES....................25
12.01 Indemnification.............................................25
12.02 Exclusive Remedy............................................29
12.03 Cooperation and Preservation of Books and Records...........29
12.04 Investigation of Books and Records..........................29
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Table of Contents
(continued)
Page
12.05 Bulk Transfer Laws..........................................29
12.06 Non-Competition.............................................30
ARTICLE 13 MISCELLANEOUS...........................................30
13.01 Governing Law...............................................30
13.02 Entire Agreement............................................30
13.03 Waiver......................................................30
13.04 Captions....................................................30
13.05 Assignment..................................................31
13.06 Notices.....................................................31
13.07 Expenses....................................................32
13.08 Severability................................................32
13.09 Amendment...................................................32
13.10 Further Actions.............................................32
13.11 Third-Party Beneficiaries...................................33
13.12 Injunctive Relief...........................................33
13.13 Counterparts; Exhibits......................................33
13.14 Publicity...................................................33
13.15 Construction................................................33
13.16 Limitation of Liability.....................................34
13.17 Schedules...................................................34
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement") is made and entered into
on this 29th day of October, 2004 by and among BLUE DOLPHIN ENERGY COMPANY, a
Delaware corporation ("Blue Dolphin"), WBI PIPELINE AND STORAGE GROUP, INC., a
Delaware corporation ("WBI," Blue Dolphin and WBI are sometimes herein referred
to individually as a "Seller," and collectively as the "Sellers"), and SEMGAS,
L.P., an Oklahoma limited partnership ("Buyer," which term shall also include
any Affiliate of Buyer that becomes a party hereto by Buyer assigning its rights
hereunder to such Affiliate). Blue Dolphin, WBI and Buyer are sometimes herein
referred to individually as a "Party" and collectively as the "Parties."
RECITAL
Sellers own all of the issued and outstanding membership interests of
New Avoca Gas Storage LLC ("New Avoca"), a Texas limited liability company that
owns a natural gas storage facility near Avoca, New York (the "Facility"). Buyer
desires to purchase from Sellers, and Sellers desire to sell to Buyer, all of
the issued and outstanding membership interests of New Avoca on the terms and
conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the Parties, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.01 Definitions. Each capitalized term used herein shall have the
meaning given such term as set forth below.
"Affiliate" shall mean, with respect to a specified Person, any other
Person controlling, controlled by or under common control with that first
Person. As used in this definition, the term "control" includes (a) with respect
to any Person having voting shares or the equivalent and elected directors,
managers or Persons performing similar functions, the ownership of or power to
vote, directly or indirectly, shares or the equivalent representing 50% or more
of the power to vote in the election of directors, managers or Persons
performing similar functions, (b) ownership of 50% or more of the equity or
equivalent interest in any Person, and (c) the ability to direct the business
and affairs of any Person by acting as a general partner, manager or otherwise.
"Agreement" shall have the meaning given such term in the introductory
paragraph hereof.
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"Assumed Liabilities" shall have the meaning given such term in Section
2.01(c).
"Blue Dolphin" shall have the meaning given such term in the
introductory paragraph hereof.
"Blue Dolphin Organizational Documents" shall have the meaning given
such term in Section 5.01(a) hereof.
"Business Assets" shall have the meaning given such term in Section
2.01(b).
"Business Day" shall mean any day except a Saturday, Sunday or any
other day on which commercial banks in Houston, Texas are required or authorized
by a Legal Requirement to be closed.
"Buyer" shall have the meaning given such term in the introductory
paragraph hereof.
"Buyer Indemnified Parties" shall have the meaning given such term in
Section 12.01(a).
"Buyer Organizational Documents" shall have the meaning given such term
in Section 6.01.
"Cap" shall have the meaning given such term in Section 12.01.
"Cash Collateral" shall have the meaning given such term in Section
5.17(c).
"Claim Notice" shall have the meaning given such term in Section
12.01(c).
"Claims" shall mean any and all claims, actions, suits, injunctions,
citations, directives, summons, investigations or other demands or proceedings,
whether in the nature of judicial or prejudicial proceedings, arbitration or
mediation proceedings, made or brought against a Person for recovery of Damages.
"Closing" shall have the meaning given such term in Section 4.01.
"Closing Date" shall have the meaning given such term in Section 4.01.
"Confidentiality Agreement" shall mean that certain Confidentiality
Agreement by and between Sellers and Buyer dated as of the 10th day of
September, 2004.
"Contracts" shall have the meaning given such term in Section
2.01(b)(vi).
"Creditors' Rights" shall have the meaning given such term in Section
5.02(a).
"Damages" shall mean any and all damages, losses, costs, liabilities,
expenses (including expenses of investigation, defense and settlement of any
Claim, including reasonable fees and disbursements of counsel, court costs, and
consultants' and experts' fees), debts, accounts, liens, judgments, penalties
and fines, and consequential and incidental damages, lost profits, punitive and
special damages of a Non-Affiliated party whose claims are subject to
indemnification under this Agreement, provided, however, that (a) the term
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"Damages" shall not include any consequential or indirect damages suffered by a
Buyer Indemnified Party or a Seller Indemnified Party or punitive or special
damages payable by a Buyer Indemnified Party or a Seller Indemnified Party, and
(b) the amount of any Damage shall be offset by (i) the net tax effect of such
Damages actually realized by the Party receiving an indemnification payment
hereunder on account of such Damages and provided that such net amount shall be
increased to give effect to the income Taxes attributable to the receipt of any
such indemnification payment, or (ii) any amounts received by the Indemnified
Person from any third-party (including insurers or sureties) with respect to
such Damages.
"Deductible" shall have the meaning given such term in Section 12.01.
"Easements" shall have the meaning given such term in Section
2.01(b)(iv).
"Encumbrances" shall mean any lien, mortgage, deed of trust, pledge,
charge, security interest, conditional sales arrangement, defect in title,
option, preferential purchase right, right of first refusal, restriction on
transferability or other encumbrance or title imperfection, including any
restriction on the exercise of any attributes of ownership.
"Environmental Condition" shall mean any environmental condition or
circumstance, including a Release of or the presence of Hazardous Materials, at
or relating to any of the Business Assets.
"Environmental Legal Requirements" shall mean any and all Legal
Requirements relating to the protection or conservation of the environment,
including, but not limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, the Superfund Amendments
and Reauthorization Act of 1986, as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Clean Air Act, as amended, the Federal
Water Pollution Control Act, as amended, The Oil Pollution Act of 1990, as
amended, the Safe Drinking Water Act, as amended, the Hazardous Materials
Transportation Act, as amended, the Toxic Substances Control Act, as amended,
and other environmental conservation or protection laws.
"Environmental Liability" shall mean any Liability, known or unknown,
resulting from, relating to or arising out of an Environmental Condition.
"Environmental Permits" shall mean any and all permits, licenses,
approvals, exemptions or authorizations, and any amendments, modifications,
terminations, renewals or updates thereof required under Environmental Legal
Requirements in connection with the ownership or operation of the Business
Assets.
"Escrow Funds" shall have the meaning given such term in Section 10.02.
"Facility" shall have the meaning given such term in the recital to
this Agreement.
"Fee Acreage" shall have the meaning given such term in Section
2.01(b)(i).
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"Governmental Entity" shall mean any court, governmental department,
commission, council, board, bureau, agency or other judicial, administrative,
regulatory, legislative or other instrumentality of the United States of
America, any foreign country, tribal, state, county, municipality or local
governmental body or political subdivision.
"Guaranties" shall have the meaning set forth in Section 5.17(b).
"Hazardous Materials" shall mean (a) any hazardous materials, hazardous
wastes, solid wastes, hazardous substances or toxic substances, as those or
similar terms are defined under any Environmental Legal Requirements; (b) any
medical, infectious or special wastes, as those or similar terms are defined
under any Environmental Legal Requirements; (c) any asbestos, whether friable or
non-friable; (d) any polychlorinated biphenyls ("PCBs") or PCB-containing
materials; (e) radon gas; and (f) any petroleum, petroleum hydrocarbons,
petroleum products, crude oil and any components, fractions or derivatives
thereof, any oil or gas exploration or production waste, and any natural gas,
synthetic gas and any mixtures thereof.
"Improvements" shall have the meaning given such term in Section
2.01(b)(iii).
"Indemnified Party" shall have the meaning given such term in Section
12.01(c).
"Indemnifying Party" shall have the meaning given such term in Section
12.01(c).
"Knowledge" wherever used in the phrase "to the knowledge of" a Party
or to a Party's "knowledge" or wherever it is said that a Party has or does not
have "knowledge," shall mean, the actual awareness, knowledge, information or
belief of the senior manager(s) or other key employees of Buyer or Sellers, who
have as a principal job responsibility as of the date of this Agreement and as
of the Closing Date oversight for the subject matter of the relevant statement,
representation or warranty.
"Leases" shall have the meaning given such term in Section 2.01(b)(ii).
"Legal Requirements" shall mean (a) any and all laws, statutes, codes,
rules, regulations, ordinances, judgments, orders, writs, decrees, requirements
or determinations of any Governmental Entity, and (b) to the extent not covered
by clause (a) immediately above, any and all requirements of permits, licenses,
certificates, authorizations, concessions, franchises or other approvals granted
by any Governmental Entity, it being understood that the term "Environmental
Legal Requirements" is included within the scope of the term "Legal
Requirements."
"Letters of Credit" shall have the meaning set forth in Section
5.17(a).
"Letter of Intent" shall mean that certain letter agreement by and
among Blue Dolphin, WBI and Buyer dated as of September 28, 2004.
"Liability" shall mean any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any Person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
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"Material Contracts" shall mean any of the following type of contracts,
oral or written, to which New Avoca is a party (by execution or succession):
(i) the PILOT Agreements and the Leases;
(ii) any contract, agreement or arrangement, that requires
aggregate expenditures by or payments to New Avoca of more than
$20,000;
(iii) any contract, agreement or arrangement that may not be
cancelled on thirty (30) days or fewer notice without liability or
penalty to New Avoca or resulting in a breach thereunder;
(iv) any contract, agreement or arrangement affecting the
Business Assets, between New Avoca and a Seller or any of its
Affiliates;
(v) any contract, agreement or arrangement containing
provisions that restrict the right of New Avoca to engage in any type
of business or compete in any geographic area and which provisions
would be binding on New Avoca or Buyer following the Closing Date;
(vi) any partnership or joint venture agreement covering the
Business Assets;
(vii) any security agreement, mortgage or other agreement
creating an Encumbrance (other than Permitted Encumbrances);
(viii) any contract, agreement or arrangement affecting the
Business Assets, the performance of which by New Avoca is guaranteed by
an Affiliate of a Seller or secured by a letter of credit, surety or
other arrangements; or
(ix) any contract, agreement or arrangement affecting the
Business Assets pursuant to which New Avoca has guaranteed the
performance by another Person of any obligation of such Person.
"New Avoca" shall mean New Avoca Gas Storage, LLC, a Texas limited
liability company.
"New Avoca Membership Interests" shall have the meaning given such term
in Section 2.01(a) hereof.
"New Avoca Organizational Documents" shall have the meaning given such
term in Section 5.01(c) hereof.
"Notice Period" shall have the meaning given such term in Section
12.01(c).
"Ownership Period" means the period beginning on November 22, 1999, and
ending on the Closing Date.
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"Party(ies)" shall have the meaning given such term in the introductory
paragraph hereof.
"Permits" shall have the meaning given such term in Section
2.01(b)(viii).
"Permitted Encumbrances" shall mean the following matters:
(i) All Legal Requirements that govern or apply to the
ownership, operation or transfer of the Facility or the Business
Assets;
(ii) Any lien for Taxes that are not yet due and payable;
(iii) Materialmen's, mechanic's, repairmen's, employees',
contractors', tax and other similar liens or charges arising in the
ordinary course of business for obligations that are not delinquent or
that will be paid and discharged in the ordinary course of business or,
if delinquent, that are being contested in good faith by appropriate
action;
(iv) Preferential rights to purchase and required third-party
consents to or approvals of or waivers respecting assignments and
similar agreements with respect to which waivers or consents, approvals
or waivers are obtained from the appropriate parties;
(v) All rights reserved to or vested in any Governmental
Entity to control or regulate any part of the Business Assets;
(vi) All easements, restrictions, reservations, contracts,
rights of way, agreements, terms, conditions and covenants now of
record, or otherwise validly burdening the Business Assets and referred
to in an Exhibit or Schedule to this Agreement; and
(vii) Any Encumbrances that do not impair the continued use
and operation of the Business Assets to which they relate and do not
affect the value of the Business Assets to which they relate.
"Person" shall mean an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other legal entity or
organization, including any Governmental Entity.
"PILOT Agreements" shall have the meaning given such term in Section
2.01(b)(i).
"Plugging Bonds" shall have the meaning given such term in Section
10.02.
"Property Taxes" shall mean all ad valorem taxes, real property taxes,
personal property taxes and similar obligations.
"Real Property" shall have the meaning given such term in Section
2.01(b)(iv).
"Records" shall have the meaning given to such term in Section
2.01(b)(ix).
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"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal or leaching into the indoor
or outdoor environment.
"Required Consents" shall mean those waivers, approvals, consents,
filings and notices, which are required to be made by a Seller or given to a
Seller to transfer such Seller's rights in the New Avoca Membership Interests.
"Sellers" shall have the meaning given such term in the introductory
paragraph hereof.
"Seller Indemnified Parties" shall have the meaning given such term in
Section 12.01(b).
"Tangible Personal Property" shall have the meaning given such term in
Section 2.01(b)(v).
"Taxes" shall mean any and all federal, state, local, foreign and other
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, leases, service, service use, withholding, payroll,
property, employment, excise, severance, stamp, occupation, premium, property,
windfall profits, customs, duties or other taxes, fees, assessments or charges
of any kind whatsoever, together with any interest and any and all penalties,
additions to tax, or additional amounts with respect thereto.
"Tax Return" shall mean any return, declaration, report, claim for
refund, information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Unassumed Liability" shall have the meaning given such term in Section
2.01(c).
"WBI" shall have the meaning given such term in the introductory
paragraph hereof.
"WBI Organization Documents" shall have the meaning given such term in
Section 5.01(b) hereof.
ARTICLE 2
PURCHASE AND SALE
2.01 Purchase and Sale. (a) On the Closing Date, effective as of the
Closing Date and subject to the terms and conditions set forth in this
Agreement, Sellers shall sell, assign, transfer and convey, or cause to be sold,
assigned, transferred or conveyed, to Buyer, and Buyer shall assume, purchase
and pay for all of the issued and outstanding membership interests in New Avoca
(the "New Avoca Membership Interests").
(b) The Sellers covenant that as of the Closing Date New Avoca will own
the "Business Assets." As used herein, the term "Business Assets" shall mean any
and all of the property and assets, whether real, personal, tangible, intangible
or mixed, that are owned by New Avoca, including, without limitation:
7
(i) The rights and interests of New Avoca pursuant to the
agreements listed on Schedule 2.01(b)(i) (the "PILOT Agreements")
relating to the fee property depicted and described on Schedule
2.01(b)(i) (collectively, the "Fee Acreage");
(ii) All leases of real property by New Avoca, including, but
not limited to, the leases depicted and described on Schedule
2.01(b)(ii) (collectively, the "Leases");
(iii) All structures, fixtures, facilities and appurtenances
to the Fee Acreage, Leases and Easements, including without limitation
any buildings, pipelines, valves, fittings, distribution racks, storage
tanks and pumping facilities (collectively, the "Improvements"), which
shall be treated as real property for all purposes of this Agreement,
subject to the terms of the PILOT Agreements and the Leases;
(iv) All easements, rights-of-way, property use agreements,
line rights and real property licenses (including right-of-way permits
from Governmental Entities) including, but not limited to, those listed
as "easements," "permits" or "rights-of-way" on Schedule 2.01(b)(iv)
(the "Easements," which, together with the Fee Acreage, Leases and
Improvements are sometimes referred to collectively herein as the "Real
Property");
(v) To the extent same do not constitute Improvements, any and
all fittings, tools, spare parts, racks, rectifiers, cathodic
protection devices, storage tanks, machinery, equipment, pumps,
engines, pipes, valves, connections, gates, scraper traps and scraper
trap extenders, lines, wires, computer hardware, rolling stock, motor
vehicles, trailers and all other tangible personal property wherever
located (the "Tangible Personal Property");
(vi) All contracts, agreements, terminalling agreements,
supply agreements, purchase contracts, exchange agreements,
distribution agreements, transportation agreements, gathering
agreements, storage agreements, blending agreements and other legally
binding rights and obligations of New Avoca, including any notes or
accounts receivable of New Avoca, but excluding those contracts and
agreements constituting PILOT Agreements, Leases or Easements (the
"Contracts");
(vii) All of the rights of New Avoca with respect to any
permits, licenses, certificates, authorizations, registrations, orders,
waivers, variances and approvals granted by any Governmental Entity
with respect to the ownership and operation of the Business Assets to
the extent the same are assignable which are listed on Schedule
2.1(b)(vii) (the "Permits");
(viii) Such records and documents as Buyer and Sellers may
determine pursuant to Section 2.03 to be a part of the Business Assets
or as relate to their condition (the "Records"); and
(ix) Any intellectual property rights, including, without
limitation, New Avoca's logos, emblems, signs, trademarks, trade names
or service marks.
(c) The Buyer acknowledges that it has been advised that New Avoca is
obligated pursuant to or is otherwise subject to the Liabilities described on
Schedule 2.01(c) (the "Assumed Liabilities") and will remain obligated pursuant
8
to or will be subject to such liabilities after the Closing. Buyer is not
assuming under this Agreement or any other document contemplated hereby and
Sellers expressly acknowledge that Sellers are retaining any and all Liabilities
with respect to the Facility and the Business Assets which relate to the
Ownership Period other than the Assumed Liabilities (each, an "Unassumed
Liability"). To the extent any invoices are received by a Seller or any of its
Affiliates which are payable by Buyer hereunder, Sellers shall promptly transmit
such invoices to Buyer. To the extent any invoices are received by Buyer or any
of its Affiliates which are payable by Sellers hereunder, Buyer shall promptly
transmit such invoices to the Sellers and Sellers shall promptly pay for same.
2.02 Further Assurances. (a) If at any time after the Closing Date, any
further action is reasonably necessary to carry out the purposes of this
Agreement, Buyer and Sellers shall execute such additional conveyances or other
instruments, and take such other action, as may be reasonably necessary to more
effectively transfer, convey and assign to Buyer title to, and to put Buyer in
actual possession and operating control of the New Avoca Membership Interests
and all of the Business Assets. In connection therewith, Sellers shall cause any
of their Affiliates to execute such additional conveyances and other instruments
contemplated by the preceding sentence.
(b) The Parties shall supplement or revise the Schedules referred to in
Section 2.01 as necessary prior to and after Closing in order to insure that the
Business Assets are fully and properly described.
2.03 Agreement Regarding Records. Prior to Closing, Buyer and Sellers
shall use all reasonable efforts to identify those records and documents that
shall constitute a part of the Records. As soon as practical after the Closing
Date, Sellers shall provide to Buyer originals of the Records or copies if
originals are not available. Sellers shall deliver any Records relating to New
Avoca, the Facility and/or the Business Assets that are discovered by a Seller
to be in its possession or the possession of its Affiliates after the date on
which the Records are delivered to Buyer pursuant to the provisions hereof and
promptly notify Buyer as to such discovery.
ARTICLE 3
PURCHASE PRICE FOR BUSINESS
3.01 Purchase Price at Closing.
(a) The purchase price for the New Avoca Membership Interests shall be
Three Million Five Hundred Thousand and 00/100 Dollars ($3,500,000.00) (the
"Purchase Price"), inclusive of working capital and inventory, which Purchase
Price shall be paid by Buyer to Sellers at Closing in accordance with Section
3.01(b) hereof; provided, however, the Purchase Price shall be adjusted by the
Parties at Closing for any payment due at Closing pursuant to Section 10.02. At
the Closing, 25% of the Purchase Price shall be paid to Blue Dolphin and 75% of
the Purchase Price shall be paid to WBI.
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(b) Payment of the Purchase Price shall be made by wire transfer of
immediately available funds to a bank account(s) designated in writing by the
respective Seller to Buyer.
3.02 Earn Out. After Closing, in addition to the Purchase Price, Buyer
shall pay Sellers (25% to Blue Dolphin and 75% to WBI) an additional amount of
One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00), upon the
first commercial operation of a storage cavern located on the Real Property in
Steuben County, New York, with "commercial operation" being defined as the
earlier of (a) actual receipt by New Avoca (or any of its successors in interest
with respect to the ownership or operation of the Facility) of storage,
transfer, throughput or other fees or compensation for the storage of natural
gas or other products at or in the Facility and/or the Real Property or (b)
actual storage of natural gas or other products at or in the Facility and/or the
Real Property for which fees or other compensation are or will be payable to New
Avoca (or any of its successors in interest with respect to the ownership or
operation of the Facility), provided that such first commercial operation occurs
prior to the seventh (7th) anniversary of the Closing Date.
ARTICLE 4
CLOSING
4.01 Time and Place of Closing. Subject to the conditions stated in
this Agreement, the consummation of the transactions contemplated hereby (the
"Closing") shall occur on the latest of the following dates: (i) October 29,
2004, (ii) two (2) Business Days after the satisfaction or waiver of each
Party's closing conditions as set forth in Section 11.01 and Section 11.02
hereof or (iii) such other date as the Parties may mutually agree upon. The date
Closing actually occurs is herein called the "Closing Date." The Closing shall
be held at the offices of the law firm of Hall, Estill, Hardwick, Gable, Golden
& Nelson, P.C. located at 320 South Boston, Suite 400, Tulsa, Oklahoma, or at
such other location as may be mutually agreed upon by the Parties.
4.02 Closing Obligations. At the Closing, the following events shall
occur:
(a) Each Seller shall execute, acknowledge and deliver to Buyer one or
more Assignments conveying to Buyer good and marketable title to its respective
New Avoca Membership Interest effective as of the Closing Date and waiving any
and all rights such Seller may have to purchase or may otherwise have in the New
Avoca Membership Interest of the other Seller. Such Assignments shall be in form
acceptable to Sellers and Buyer and shall convey the New Avoca Membership
Interests free and clear of any Encumbrance except for Permitted Encumbrances;
(b) Sellers shall deliver to Buyer the bank account signature card(s)
for the following bank account: Union Bank of California, New Avoca Gas Storage
LLC Escrow, Account Number 700016127-001.
(c) Sellers and Buyer shall exchange the certificates described in
Sections 11.01(b) and 11.02(b);
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(d) Buyer shall pay the Purchase Price to Sellers as described in
Section 3.01;
(e) Sellers shall deliver written evidence that all Required Consents
have been obtained;
(f) Sellers shall deliver to Buyer and Buyer shall deliver to Sellers,
incumbency certificates with respect to any Persons executing documents at
Closing on its behalf;
(g) Sellers shall deliver to Buyer and Buyer shall deliver to Sellers,
certificates of the proper officers, certifying that a reasonable inquiry has
been made with respect to any representation contained herein that is qualified
by "Knowledge";
(h) Each Seller shall deliver to Buyer and Buyer shall deliver to
Sellers a certificate of good standing or existence from its state of formation,
as the case may be, dated not more than ten (10) days prior to the Closing Date;
(i) Sellers shall deliver resignations by all the managers and all the
officers of New Avoca;
(j) Sellers shall deliver releases, in the form of Exhibit A, attached
hereto pursuant to which Sellers and the resigning managers and officers of New
Avoca release any and all Claims against New Avoca that each may have;
(k) Sellers shall deliver to Buyer Uniform Commercial Code search
certificates and lien search certificates reflecting that the Business Assets
and the New Avoca Membership Interests are free and clear of all Encumbrances
except Permitted Encumbrances or, to the extent such Encumbrances are reflected
in such search certificates, appropriate releases of such Encumbrances in
recordable form; and
(l) Each Party shall execute such other instruments and take such other
actions as may be reasonably requested by the other Party in order to give full
effect to the obligations of such Party under this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLERS
Subject to the survival provisions set forth in Section 11.05 and the
limitations provided for in Article 12, and except as provided in the Disclosure
Schedule which has been delivered to the Buyer by the Sellers (the "Disclosure
Schedule"), Sellers jointly and severally (except to the extent the
representations and warranties of this Article are specifically limited to a
specific Seller) represent and warrant to Buyer that the representations and
warranties set forth in this Article 5 are true and accurate.
5.01 Organization and Qualification. (a) Blue Dolphin hereby represents
that it is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite power to own,
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lease and operate its properties and to carry on its business as now being
conducted. Blue Dolphin has furnished to Buyer a true, correct and complete copy
of the Certificate of Incorporation and Bylaws of Blue Dolphin (collectively,
the "Blue Dolphin Organizational Documents"). The Blue Dolphin Organizational
Documents are in full force and effect as of the date hereof and, together with
all other documents and agreements referenced therein, constitute all of the
current organizational and governing documents for Blue Dolphin. There are no
proceedings or actions pending or contemplated to dissolve Blue Dolphin.
(b) WBI hereby represents that it is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite power to own, lease and operate its properties and to
carry on its business as now being conducted. WBI has furnished to Buyer a true,
correct and complete copy of the Certificate of Incorporation and Bylaws of WBI
(collectively, the "WBI Organizational Documents"). The WBI Organizational
Documents are in full force and effect as of the date hereof and, together with
all other documents and agreements referenced therein, constitute all of the
current organizational and governing documents for WBI. There are no proceedings
or actions pending or contemplated to dissolve WBI.
(c) New Avoca is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Texas and has the
requisite power to own, lease and operate its properties and to carry on its
business as now being conducted. New Avoca is duly qualified to do business and
is in good standing as a foreign limited liability company in each of the states
in which the Business Assets are located. Sellers have furnished to Buyer a
true, correct and complete copy of the Articles of Organization and the current
Amended and Restated Regulations of New Avoca (collectively, the "New Avoca
Organizational Documents"). The New Avoca Organizational Documents are in full
force and effect as of the date hereof and, together with all other documents
and agreements referenced therein, constitute all of the current organizational
and governing documents for New Avoca. There are no proceedings or actions
pending or contemplated to dissolve New Avoca.
5.02 Authority, Approval and Enforceability. (a) Blue Dolphin hereby
represents that: (i) it has all requisite corporate power and authority to
execute and deliver this Agreement and to perform any covenant and obligation
required of it hereunder, (ii) the execution and delivery of this Agreement by
Blue Dolphin and the performance of the transactions contemplated hereunder by
Blue Dolphin have been duly and validly approved by all requisite corporate
action necessary on behalf of Blue Dolphin, (iii) this Agreement constitutes the
legal, valid and binding obligation of Blue Dolphin, enforceable against Blue
Dolphin in accordance with its terms, subject to applicable bankruptcy,
insolvency or other similar laws relating to or affecting the enforcement of
creditors' rights generally and to general principles of equity ("Creditors'
Rights"), and (iv) at the Closing all documents required hereunder to be
executed and delivered by Blue Dolphin will have been duly authorized, executed
and delivered by Blue Dolphin and will constitute legal, valid and binding
obligations of Blue Dolphin, enforceable against Blue Dolphin in accordance with
its terms, subject to Creditors' Rights.
(b) WBI hereby represents that: (i) it has all requisite corporate
power and authority to execute and deliver this Agreement and to perform any
covenant and obligation required of it hereunder, (ii) the execution and
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delivery of this Agreement by WBI and the performance of the transactions
contemplated hereunder by WBI have been duly and validly approved by all
requisite corporate action necessary on behalf of WBI, (iii) this Agreement
constitutes the legal, valid and binding obligation of WBI, enforceable against
WBI in accordance with its terms, subject to Creditors' Rights, and (iv) at the
Closing all documents required hereunder to be executed and delivered by WBI
will have been duly authorized, executed and delivered by WBI and will
constitute legal, valid and binding obligations of WBI, enforceable against WBI
in accordance with its terms, subject to Creditors' Rights.
5.03 No Violation or Consent. The execution and delivery by the
respective Seller of this Agreement and the consummation by that Seller of the
transactions contemplated hereby will not:
(a) conflict with or result in a default under its respective
organizational documents or the New Avoca Organizational Documents or entitle
any Person to exercise any preferential purchase right, option to purchase or
similar right with respect to any of the Business Assets;
(b) conflict with or result in a material default under any Contract to
which that Seller or New Avoca is a party or to which any of the Business Assets
are bound or subject;
(c) conflict with or result in a material default under any material
Legal Requirement or any material judgment, decree, order, governmental permit,
certificate or license that the respective Seller or New Avoca is a party or
that it is subject or by which any of the Business Assets is bound or subject
(other than Environmental Legal Requirements that are covered by Section 5.11);
(d) result in the creation of any Encumbrance upon any of the Business
Assets;
(e) conflict with or result in a material default under any Easement or
Lease; or
(f) require either the respective Seller or New Avoca to obtain or make
any material waiver, consent, action, approval, clearance or authorization of,
or registration, declaration or filing with, any Governmental Entity.
5.04 Absence of Certain Changes and Operation of the Facility. Since
September 28, 2004, to the Knowledge of each Seller:
(a) there has not been any material adverse change in the makeup,
condition or composition of the Business Assets, whether taken as a whole or as
to any material part thereof;
(b) there has not been any damage, destruction or loss, whether covered
by insurance or not, to the Business Assets that has had, or is reasonably
likely to have, a material adverse effect on the ownership or operation of the
Business Assets;
(c) there has not been any waiver by New Avoca of any rights that,
singularly or in the aggregate, has had, or is reasonably likely to have, a
material adverse effect on the ownership or operation of the Business Assets;
and
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(d) except to the extent the failure to do so has not had, and is not
reasonably likely to have, a material adverse effect on the ownership or
operation of the Business Assets, New Avoca has operated the Business Assets in
the ordinary course of business consistent with past practices.
5.05 Material Contracts.
(a) Schedule 5.05 to the Disclosure Schedule lists all Material
Contracts. Sellers have furnished or made available to Buyer complete and
correct copies of all written Material Contracts, together with all amendments
thereto, and accurate descriptions of all material terms of all oral Material
Contracts.
(b) New Avoca is not in default under any Material Contract. Neither
Seller has received nor has Knowledge of any written communication from, or
given any written communication to, any other party indicating that New Avoca or
such other party, as the case may be, is in default under any Material Contract.
5.06 Real Property. (a) Schedule 2.01(b)(i), Schedule 2.01(b)(ii) and
Schedule 2.01(b)(iv) collectively contain a complete and accurate description of
all Real Property. The Real Property listed on Schedule 2.01(b)(i), Schedule
2.01(b)(ii) and Schedule 2.01(b)(iv) includes all of New Avoca's interests in
all real property. Subject to Permitted Encumbrances, the Sellers warrant New
Avoca has good title to such Real Property.
(b) Subject to Permitted Encumbrances, all Improvements to the Real
Property are located within the boundary lines of the Real Property that
constitutes part of the Business Assets and to the Knowledge of each Seller, no
structure, fixture, facility or improvement on any parcel adjacent to the Real
Property encroaches onto any portion of the Real Property;
(c) Subject to Permitted Encumbrances, New Avoca has good and valid
rights of physical and legal ingress and egress to and from its Real Property
from and to the public systems for all usual street, road and utility purposes,
and no conditions exist that would reasonably be expected to result in the
termination of such ingress and egress;
(d) Neither Seller nor New Avoca has received notice or otherwise been
formally advised, nor does either Seller have any Knowledge, that any Real
Property, or any present use or operation of the Real Property, does not comply
with all applicable Legal Requirements (other than Environmental Legal
Requirements which are covered by Section 5.11) (including, those relating to
zoning, land use, safety, health, employment and employment practices and access
by the handicapped) and all valid covenants, conditions, restrictions, easements
and similar matters affecting the Real Property.
(e) Except for environmental matters that are covered by Section 5.11,
there are no pending, threatened, condemnation, fire, health, safety, building,
zoning or other land use regulatory proceedings, lawsuits or administrative
actions relating to any portion of the Real Property that would reasonably be
expected to adversely affect the current use or occupancy thereof, nor has
either Seller received notice of any pending or threatened special assessment
proceedings affecting any portion of the Real Property;
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(f) There are no approvals, consents, waivers, filings or notices
required to be made or given by a Seller or New Avoca or given to a Seller or
New Avoca in relation to New Avoca's rights to any Real Property under any
Permit, Easement, Lease or Contract by virtue of the transaction contemplated
herein, which will not, prior to the Closing Date, have been so made or given;
(g) To the Knowledge of each Seller, because of the arrangement created
pursuant to the PILOT Agreements no Property Taxes (and applicable penalties and
interest, if any) have accrued with respect to New Avoca's interest in the Real
Property during the Ownership Period;
(h) The PILOT Agreements, Leases and Easements are valid and effective
in accordance with their respective terms, and there is no material default
under any of such contracts;
(i) Neither Seller nor New Avoca has granted a third party possession
of any Real Property or any portion thereof; nor is a Seller or New Avoca a
party to any lease, sublease, license, concession or other contract granting to
any third party the right to use or occupy any portion of the Real Property; and
(j) There are no outstanding options, rights of first offer, rights of
first refusal, or other similar contracts or rights to purchase the Real
Property or any portion thereof or interest therein granted by a Seller or New
Avoca.
5.07 Tangible Personal Property. To the Knowledge of each Seller, all
of the Tangible Personal Property conforms with any Legal Requirements material
to its use and operation (except for Environmental Legal Requirements that are
covered by Section 5.11).
5.08 Permits. Schedule 2.01(b)(vii) sets forth a list of the Permits
which to the Knowledge of Sellers were previously applicable to the Facility.
The Sellers have advised the Buyer that (i) they can give no assurance regarding
the extent to which such Permits are currently effective, and (ii) additional
permits, licenses, etc. may be required to be obtained before the Facility may
be lawfully operated.
5.09 Compliance with Law. Each Seller and New Avoca are in compliance
in all material respects with all Legal Requirements (other than Environmental
Legal Requirements that are covered by Section 5.11 and Legal Requirements that
relate to tax matters that are covered by Section 5.12) applicable to the
ownership, use or operation of the Facility and the Business Assets.
5.10 Litigation. (a) There are no civil, criminal, administrative,
arbitration or other proceedings or governmental investigations pending or,
threatened against either Seller, any of its Affiliates or New Avoca relating to
the ownership or operation of the Facility or any of the Business Assets that
could materially adversely affect Buyer's ownership or operation of the Facility
15
or the Business Assets or that seek to restrain or enjoin the transactions
contemplated by this Agreement or which would reasonably be expected to have a
material adverse effect on the financial condition or results of operations, of
the Facility, and (b) neither Seller has received notice of, nor has Knowledge
of, any demand, suit, action, investigation or proceeding (whether civil,
criminal, administrative or otherwise) from any Person regarding compliance with
Legal Requirements in connection with the ownership and operation of the
Facility and the Business Assets.
5.11 Environmental Matters. (a) Neither Seller has received written
notification, nor has any Knowledge, that the Business Assets and all operations
thereon are not currently in compliance in all material respects with all
applicable Environmental Legal Requirements, and, to the Knowledge of each
Seller there are no conditions existing on or resulting from activities on or
use of the Business Assets (including any use, transportation, disposal or
arrangement for transportation or disposal of Hazardous Materials by a Seller or
New Avoca) that give rise to any required on-site or offsite Remedial Action
under any applicable Environmental Legal Requirements;
(b) Certain Environmental Permits are listed on Schedule 2.01(b)(vii).
The Sellers have advised the Buyer that additional Environmental Permits may be
required to be obtained or filed in connection with the operation or use of the
Business Assets;
(c) To the Knowledge of each Seller, the Sellers have delivered to
Buyer all audits, assessments, spill reports, risks assessments and other
material reports and studies relating to Environmental Conditions associated
with the Business Assets that are in the possession of such Seller, its
Affiliates or New Avoca;
(d) Neither Seller has received notice of, nor has any Knowledge of,
any demand, suit, action, investigation or proceeding (whether civil, criminal
or administrative) from any Governmental Entity regarding a violation of
Environmental Legal Requirements in connection with the ownership or operation
of the Facility or the Business Assets; and
(e) The execution and delivery by each Seller of this Agreement or any
other documents required hereunder to be executed and delivered by each Seller
at the Closing, or otherwise, and the consummation by each Seller of the
transactions contemplated hereby or thereby will not conflict with or result in
a default under any Environmental Legal Requirement.
5.12 Taxes. New Avoca has filed or will file in a timely manner all Tax
reports, returns and forms affecting the Business Assets and the Facility as may
have been required under applicable Legal Requirements, including, all required
federal, state and local income, sales, use, property and franchise Tax Returns,
and has paid or will pay all required Taxes or similar assessments affecting the
Business Assets and the Facility including any interest, penalties or additions
attributable thereto shown as due on all such filings for the periods ending on
or before the Closing Date. No Encumbrances (other than Permitted Encumbrances),
proceedings, lawsuits, investigations known to a Seller, inquiries known to a
Seller or other actions which are pending, to be threatened or open seek the
assessment or collection of additional Taxes of any kind from New Avoca or
relating to any portion of the Business Assets, and to each Seller's Knowledge,
16
no other examination by the Internal Revenue Service or any other taxing
authority affecting the Facility or any portion of the Business Assets is now
pending. Taxes which New Avoca was required by Legal Requirements to withhold or
collect in respect to the Business Assets or the Facility have been withheld or
collected and have been paid over to the proper Governmental Entities or are
properly held by New Avoca for such payment when due and payable.
5.13 Regulatory Status. Each Seller is exempt from, or is otherwise not
subject to regulation as, (a) a "holding company," a "subsidiary company" of a
"holding company," an "affiliate" of a "holding company," or a "public utility
company," as each of such terms is defined in the Public Utility Holding Company
Act of 1935, as amended, and the rules and regulations thereunder, (b) an
investment company or a company controlled by an investment company within the
meaning of the Investment Company Act of 1940, as amended, or (c) a "public
utility" within the meaning of the Federal Power Act, as amended, and the rules
and regulations thereunder.
5.14 Brokers. Neither Seller, nor any of their Affiliates, nor New
Avoca has entered (directly or indirectly) into any agreement with any Person
that provides for the payment of any commission, brokerage or "finders' fee"
arising out of the transactions contemplated by this Agreement for which Buyer
might have any Liability or obligation.
5.15 Title to Personal Property. New Avoca has good and indefeasible
title to all of the Tangible Personal Property and such Tangible Personal
Property is not or will not prior to the Closing Date be subject to any
Encumbrances (other than Permitted Encumbrances). There is no Tangible Personal
Property used in the operation of the Facility that is owned by any Person other
than New Avoca that, as of the Closing Date, will not be licensed or leased to
New Avoca or Buyer under valid, current license arrangements or leases. The
Business Assets are all of the assets used by New Avoca with respect to the
Facility.
5.16 Credit Support.
(a) Schedule 5.16 to the Disclosure Schedule lists all letters of
credit posted by each Seller, its Affiliates, New Avoca or third parties in
connection with the Facility (the "Letters of Credit") specifying the amounts,
term and the counterparties.
(b) Schedule 5.16 to the Disclosure Schedule lists all guaranties
posted by each Seller, its Affiliates, New Avoca or third parties in connection
with the Facility (the "Guaranties") specifying the amounts, term and the
counterparties.
(c) Schedule 5.16 to the Disclosure Schedule lists all cash collateral,
cash equivalents and surety bonds posted by each Seller, its Affiliates, New
Avoca or third parties in connection with the Facility (the "Cash Collateral")
specifying the amounts, term and the counterparties.
5.17 Employees. New Avoca does not have and has never had any
employees.
5.18 Title to New Avoca Membership Interests. Sellers are the direct
legal and beneficial owners of 100% of the New Avoca Membership Interests, free
and clear of all Encumbrances, and Sellers have the absolute, right, power and
capacity to sell, assign, transfer and deliver the New Avoca Membership
Interests to Buyer.
17
5.19 Capitalization of New Avoca. All New Avoca Membership Interests
have been duly authorized and validly issued and are fully paid and
non-assessable. There are no outstanding options, subscriptions, convertible
securities, warrants, calls, rights, commitments or other rights obligating New
Avoca to issue, transfer, deliver or sell any membership interest in New Avoca.
None of the New Avoca Membership Interests were issued in violation of any
preemptive rights.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Subject to the survival provisions set forth in Section 11.05 and the
limitations provided for in Article 12, Buyer represents and warrants to Sellers
that:
6.01 Organization and Qualification. Buyer is a limited partnership
duly organized, validly existing and is in good standing under the laws of the
State of Delaware and has the requisite power to own, lease and operate its
properties and to carry on its business as now being conducted. Buyer is duly
qualified to do business and in good standing as a foreign limited partnership
in all jurisdictions in which the character of the properties now owned or
leased by it or the nature of the business conducted by it requires it to be so
licensed or qualified. Buyer has furnished to Sellers a true, correct and
complete copy of the certificate of limited partnership of Buyer and Buyer's
agreement of limited partnership, together with all amendments thereto
(collectively, the "Buyer Organizational Documents"). The Buyer Organizational
Documents are in full force and effect as of the date hereof and, together with
all other documents and agreements referenced therein, constitute all of the
organizational and governing documents for Buyer. There are no proceedings or
actions pending or contemplated to dissolve Buyer.
6.02 Authority, Approval and Enforceability. Buyer has all requisite
power and authority to execute and deliver this Agreement and to perform its
respective obligations under this Agreement. The execution and delivery of this
Agreement by Buyer and the performance of the transactions contemplated hereby
have been duly and validly approved by all requisite partnership action on
behalf of Buyer. This Agreement constitutes the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
subject to Creditors' Rights. At the Closing, all documents required hereunder
to be executed and delivered by Buyer will have been duly authorized, executed
and delivered by Buyer and will constitute legal, valid and binding obligations
of Buyer, enforceable against Buyer in accordance with its terms, subject to
Creditors' Rights.
6.03 No Violation or Consent. The execution and delivery of this
Agreement by Buyer or the consummation of the transactions contemplated hereby
or thereby will not:
18
(a) conflict with or result in a breach, default or violation of the
Buyer Organizational Documents;
(b) conflict with or result in a breach, default or violation of, or
require a consent under, any material Legal Requirement or any material
agreement, document, instrument, judgment, decree, order, governmental permit,
certificate or license to which Buyer is a party or to which it is subject; or
(c) require Buyer to obtain or make any material waiver, consent,
action, approval, clearance or authorization of, or registration, declaration or
filing with, any Governmental Entity.
6.04 Brokers. Neither Buyer nor any of its Affiliates has incurred any
Liability for brokers' or finders' fees in respect of the matters provided for
in this Agreement that will be the responsibility of Sellers.
6.05 Seller Disclaimer. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO
THE CONTRARY, BUYER REPRESENTS, WARRANTS, ACKNOWLEDGES AND AGREES THAT BUYER IS
KNOWLEDGEABLE AND EXPERIENCED IN ACQUIRING ASSETS SIMILAR TO THE BUSINESS
ASSETS, AND IN THE DEVELOPMENT OF STORAGE PROJECTS SIMILAR TO THE FACILITY.
BUYER ACKNOWLEDGES THAT IT HAS HAD THE OPPORTUNITY TO INSPECT THE FACILITY AND
TO RETAIN CONSULTANTS OF ITS CHOICE TO MAKE SUCH INSPECTIONS OR EVALUATIONS OF
THE FACILITY AS BUYER DEEMS NECESSARY. BUYER FURTHER ACKNOWLEDGES AND AGREES
THAT EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER SELLER HAS MADE
AND EACH SELLER HEREBY DISCLAIMS ANY AND ALL, REPRESENTATIONS AND WARRANTIES
REGARDING THE VIABILITY OF THE FACILITY OR THE CONDITION OF THE BUSINESS ASSETS,
WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, INCLUDING
BUT NOT LIMITED TO:
(a) THE NATURE, QUALITY OR CONDITION OF, OR THE SUITABILITY FOR ANY
PARTICULAR PURPOSE OF, ANY AND ALL INJECTION WELLS AND DISPOSAL WELLS RELATED TO
THE FACILITY;
(b) THE INCOME TO BE DERIVED FROM THE FACILITY;
(c) THE SUITABILITY OF THE BUSINESS ASSETS FOR ANY ACTIVITIES AND USES
WHICH BUYER MAY CONDUCT THEREON;
(d) THE CONDITION OF THE BUSINESS ASSETS, WHICH ARE ACQUIRED "AS IS"
"WHERE IS"; AND
(e) THE ABILITY OF BUYER TO OBTAIN OR MAINTAIN ANY PERMITS NECESSARY TO
OPERATE THE FACILITY, WHETHER NOW HELD BY NEW AVOCA OR LISTED ON THE DISCLOSURE
SCHEDULE, OR OTHERWISE.
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BUYER HEREBY WAIVES ANY SUCH REPRESENTATION, WARRANTY, PROMISES,
COVENANTS, AGREEMENTS OR GUARANTIES SPECIFIED UNDER THIS SECTION 6.05. THE
PROVISIONS OF THIS SECTION 6.05 SHALL SURVIVE THE CLOSING.
ARTICLE 7
COVENANTS OF SELLERS
7.01 Operation of Business Assets Prior to the Closing Date. Sellers,
jointly and severally, covenant and agree that, except as expressly provided in
this Agreement or as otherwise approved by Buyer in writing, at all times from
the date hereof through the Closing Date, they shall comply with the following
with respect to the Business Assets and the Facility:
(a) The Business Assets shall in all material respects be kept,
operated and maintained in the ordinary course of business in accordance with
the past operating and maintenance practices of New Avoca.
(b) Each Seller shall use commercially reasonable efforts to continue
to preserve the present customer and supplier relations that have heretofore
been developed by New Avoca in connection with the Facility.
(c) Each Seller shall cause New Avoca to, in all material respects and
in a timely manner, make all payments due under and otherwise perform all its
other obligations under all Easements, Leases, Contracts and Permits in
accordance with its respective terms and not cancel, amend, modify, abandon,
extend or renew any of the same, or permit any of the same to lapse, other than
in the ordinary course of business. Notwithstanding the preceding, should a
Seller or New Avoca cancel, amend, modify, abandon, extend or renew any Material
Contract, or permit any of the same to lapse, the Sellers shall provide Buyer
written notification of such event within three (3) Business Days from the
occurrence thereof or prior to the Closing Date, whichever occurs first.
(d) Neither Seller shall, nor permit New Avoca to, dispose of any
interest in any of the Business Assets or take any action (including the entry
into any contract, agreement or instrument) the taking of which, or omit to take
any action the omission of which, would reasonably be expected to (i) cause an
Encumbrance to arise with respect to any of the Business Assets (other than
Permitted Encumbrances), (ii) bind New Avoca or the Business Assets in a manner
that would reasonably be expected to require capital expenditures in excess of
Five Thousand and No/100 Dollars ($5,000.00), or (iii) be outside of the normal
scope of maintaining and operating the Business Assets.
7.02 Fulfillment of Closing Conditions. Prior to the Closing, each
Seller shall:
20
(a) on a timely basis, give or cause to be given all such notices, and
use commercially reasonable efforts to obtain or cause to be obtained all
consents, approvals and waivers that are required to be given or obtained by
such Seller in connection with the consummation of the transactions contemplated
hereunder, including, without limitation the Required Consents; and
(b) use its best efforts to fulfill or cause to be fulfilled all other
conditions to the Closing set forth in Sections 11.01 to the extent of its
ability to influence same.
7.03 Access to Facility. From and after the date hereof, upon
reasonable advance notice and during reasonable business hours, Buyer, at its
own risk and expense, shall be given full and complete access to the facilities,
properties, books and records of New Avoca and Sellers pertaining to the
Business Assets; provided, however, that such access may not unreasonably
interfere with the ongoing operations of New Avoca or Sellers. Each Seller shall
furnish to Buyer, at Buyer's expense, copies of such books and records
pertaining to the Facility and the Business Assets as Buyer shall reasonably
request in connection with its investigation of the Facility and Business
Assets. Prior to Closing, Buyer, at its own risk and expense, shall have the
right to inspect the Real Property and other Business Assets, to the extent
Buyer deems it necessary in performing its environmental or operational review
of the Facility and the Business Assets.
7.04 Title Commitments and Policies. Each Seller acknowledges that
Buyer shall have the right to obtain, at Buyer's own cost and expense,
commitments for title insurance and title policies for all the Real Property at
or after the Closing Date. Each Seller agrees to cooperate in a commercially
reasonable manner with Buyer in connection with Buyer's efforts to obtain such
commitments and policies, if any, but at no cost or expense to Sellers.
7.05 Non-Solicitation. Prior to the Closing Date, neither Seller nor
any of their Affiliates will (and Sellers will cause each of its employees,
officers and agents not to) (a) solicit, initiate, entertain or encourage the
submission of any proposal or offer from any Person relating to the direct or
indirect acquisition of the Facility or any portion of the Business Assets
(other than in the ordinary course of business), or (b) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. Sellers will notify
Buyer if any Person makes any proposal, offer, inquiry or contact with respect
to any of the foregoing within two (2) Business Days after receipt of any such
offer or proposal.
7.06 Distributions. Sellers shall cause New Avoca to pay the current
obligations listed on Schedule 7.06 at or prior to the Closing. Sellers shall be
permitted to cause New Avoca to distribute. effective prior to or as of the
Closing, all of its cash, receivables, and other liquid assets remaining after
the payment of such amounts.
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ARTICLE 8
COVENANTS OF BUYER
8.01 Fulfillment of Closing Conditions. Buyer shall use its best
efforts to fulfill or cause to be fulfilled all conditions to the Closing set
forth in Sections 11.02 to the extent of its ability to influence same.
ARTICLE 9
EMPLOYEE MATTERS
[Intentionally omitted.]
ARTICLE 10
COVENANTS REGARDING CREDIT SUPPORT
10.01 Substitution of Credit Support. Subject to Section 10.02, Sellers
and Buyer hereby acknowledge that nothing contained herein shall be deemed to
cause Buyer or any of its Affiliates to be substituted for either Seller or any
of their respective Affiliates with respect to any of the Guaranties, Letters of
Credit or Cash Collateral. Should either Seller desire to have Buyer or any of
its Affiliates substitute or replace any of the Guaranties, the Letters of
Credit or Cash Collateral, such Seller shall disclose in writing such
instruments to Buyer prior to the Closing Date, and Buyer shall cause such
substitution to occur as soon as practical after the Closing. Such Guaranties,
Letters of Credit or Cash Collateral shall not have Buyer or its Affiliates
substituted thereunder unless and until specifically agreed to in writing by
Buyer or its Affiliates, but the assumption of any such obligations by Buyer or
its Affiliates shall include a complete release of Sellers in respect thereof
after Closing.
10.02 Plugging Bonds and Escrow Funds. Buyer understands that New Avoca
is obligated under those certain Well Plugging and Surface Restoration Bonds in
favor of New York State Department of Environmental Conservation, in a total
current amount of $242,200.00 ("Plugging Bonds"), and New Avoca is obligated in
similar amounts to the United States Environmental Protection Agency, which
obligations are supported by funds in an escrow account with Union Bank of
California, said funds totaling $273,624.87 as of September 30, 2004 ("Escrow
Funds"). Effective as of the Closing, Buyer or its Affiliate, as the case may be
will replace the Plugging Bonds and purchase the Escrow Funds at Closing by
paying Sellers an amount equal to the Escrow Funds on deposit at the time of
Closing.
ARTICLE 11
CONDITIONS TO CLOSING AND TERMINATION
11.01 Conditions to Obligation of Buyer. The obligation of Buyer to
perform its respective obligations hereunder at the Closing shall be subject to
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the satisfaction of the conditions set forth below (which conditions may be
waived in whole or in part by Buyer in its sole and absolute discretion in
writing on or before the Closing Date):
(a) The representations and warranties of each Seller hereunder shall
be true and correct in all material respects as of the Closing Date (without
regard to any materiality qualifier contained therein), and each Seller shall
have performed in all material respects all covenants and obligations required
of such Seller by this Agreement to be performed on or before the Closing Date
(without regard to any materiality qualifier contained therein).
(b) Each Seller shall have delivered to Buyer a certificate of a
corporate officer or other authorized person, dated as of the Closing Date,
certifying on behalf of such Seller that the conditions set forth in Section
11.01(a) have been fulfilled.
(c) Each Seller shall have given or caused to be given all such
notices, and obtained or caused to be obtained all consents, approvals and
waivers from any third parties not constituting Governmental Entities,
including, but not limited to, the Required Consents.
(d) There shall not be in effect any Legal Requirement that makes it
illegal for Buyer to perform its obligations hereunder at Closing or any
judgment, order, writ or decree that enjoins Buyer from performing such
obligations.
(e) No event shall have occurred since September 28, 2004 that has had
or would reasonably be expected to have a material adverse effect on the
Facility or Business Assets taken as a whole.
(f) Buyer shall be satisfied in its sole and absolute discretion with
the results of such due diligence, examinations, studies, tests, reviews,
assessments, audits and inspections, as Buyer deems necessary or desirable, with
respect to New Avoca, the Facility and the Business Assets.
(g) All documents, instruments, certificates or other items required to
be delivered by each Seller pursuant to Section 4.02 shall have been delivered,
including but not limited to the Required Consents.
(h) Prior to Closing, each Seller shall have full legal and beneficial
title to and ownership of its respective New Avoca Membership Interests, New
Avoca shall have full legal and beneficial title to and ownership of the
Business Assets, and the New Avoca Membership Interests and Business Assets
shall be free and clear of all Encumbrances other than Permitted Encumbrances.
11.02 Conditions to Obligation of Sellers. The obligation of each
Seller to perform its obligations hereunder at the Closing shall be subject to
the satisfaction of the conditions set forth below (which conditions may be
waived in whole or in part by Sellers in writing on or before the Closing Date).
(a) The representations and warranties of Buyer hereunder shall be true
and correct in all material respects as of the Closing Date (without regard to
any materiality qualifier contained therein), and Buyer shall have performed in
all material respects all covenants required of Buyer by this Agreement to be
performed on or before the Closing Date.
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(b) Buyer shall have delivered to Sellers a certificate of its general
partner or proper officer, dated the Closing Date, certifying on behalf of Buyer
that the conditions set forth in Section 11.02(a) have been fulfilled.
(c) There shall not be in effect any Legal Requirement that makes or
will make it illegal for either Seller to perform its obligations hereunder at
Closing or any judgment, order, writ or decree that enjoins either Seller from
performing such obligations.
(d) All other required material permits, consents, approvals and
authorizations from Governmental Entities shall have been obtained.
(e) All documents, instruments, certificates or other items required to
be delivered by Buyer pursuant to Section 4.02 shall have been delivered.
11.03 Termination. Notwithstanding anything herein to the contrary,
this Agreement may be terminated at any time without liability of any Party to
the other Parties except as set forth in Section 11.04:
(a) By either Buyer or Sellers if the Closing shall not have occurred
on or before October 29, 2004;
(b) by either Buyer or Sellers, upon delivery of ten (10) Business Days
prior written notice to the other Party, if events have occurred that have made
it impossible to satisfy a condition to the terminating Party's obligations
hereunder that such terminating Party is not willing to waive (the Parties agree
to promptly notify the other Party if such Party discovers that events have
taken place that give such Party the right to terminate this Agreement pursuant
to this Section 11.03(b));
(c) by any Party at any time prior to Closing, upon delivery of five
(5) Business Days prior written notice to the other Party, if a final order has
been issued by a Governmental Entity with appropriate jurisdiction prohibiting
the consummation of the transactions contemplated by this Agreement; or
(d) by mutual agreement of the Parties;
provided, however, no Party may exercise any right of termination pursuant to
this Agreement if the event giving rise to such termination right resulted from
the failure by such Party to fulfill any material undertaking or commitment
provided for herein that is required to be fulfilled by such Party prior to the
Closing.
11.04 Effect of Termination. If this Agreement is terminated pursuant
to Section 11.03 or otherwise pursuant to the terms hereof, this Agreement shall
become void and of no further force or effect (except for the provisions of
Sections 5.14, 6.04, 12.01, 13.01, 13.07, 13.11, 13.14 and 13.16, which shall,
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except to the extent otherwise specifically provided, survive such termination
and continue in full force and effect). If this Agreement is terminated pursuant
to the provisions hereof, nothing herein shall relieve any Party from liability
for any willful breach of this Agreement occurring prior to such termination.
11.05 Survival. The representations, warranties, covenants and
obligations of the Parties under this Agreement, and the obligation to provide
indemnification pursuant to Article 12, shall survive the Closing and may be
enforced within the time periods specified herein. The facts giving rise to any
and all Damages from the breach of a representation, warranty, covenant or
obligation hereunder or to a Claim in connection therewith or otherwise subject
to indemnification under Article XII must have occurred on or prior to the
second (2nd) anniversary of the Closing Date, and provided further that the
Party seeking a remedy pursuant to Section 12.01 must commence a Claim for such
Damages on or prior to the third (3rd) anniversary of the Closing Date;
provided, however, said time limitations shall not apply to any Damages or
Claims arising from breach of the earn out or non-compete obligations under
Sections 3.02 or 12.06.
In the event that a Claim for indemnification is properly brought under
Section 12.01, the applicable survival period under this Section 11.05 with
respect to the breach of the representation, warranty, covenant or obligation
shall be deemed to toll, with respect to such Claim only, until such Claim is
ultimately resolved by a written instrument executed by each of the Parties or
finally resolved by a court of competent jurisdiction.
ARTICLE 12
ADDITIONAL AGREEMENTS OF THE PARTIES
12.01 Indemnification. (a) Subject to the survival provisions set forth
in Section 11.05 and the limitations set forth in this Section 12.01(a), and
except to the extent any such Claims or Damages are covered by Buyer's indemnity
in favor of Seller Indemnified Parties pursuant to Section 12.01(b), the Sellers
shall, jointly and severally, indemnify, defend, hold harmless and release
Buyer, its general and limited partners and Affiliates, and its respective
directors, officers, employees, legal counsel, financial advisors and agents
(collectively, the "Buyer Indemnified Parties") from and against any and all
Claims and Damages suffered or incurred by the Buyer Indemnified Parties that
arise out of, result from or are payable as a result of the following:
(i) the breach of any representation or warranty made by a
Seller in Article 5 of this Agreement or in any certificate or other
document or instrument delivered by or on behalf of a Seller to Buyer
pursuant to this Agreement (except for Section 5.11 that will be
covered by the indemnity obligation set forth in Section
12.01(a)(iii)), provided, however, only the breaching Seller shall be
obligated to indemnify the Buyer Indemnified Parties under this Section
12.01(a)(i) with respect to its breach of a representation or warranty
that is expressly limited to that specific Seller.
(ii) the failure of a Seller to perform any covenant or
obligation required to be performed by it under this Agreement;
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(iii) any Claims made by third parties (including Governmental
Entities) against the Buyer Indemnified Parties to the extent such
Claims arise out of, result from, relate to or are payable as a result
of (A) any Environmental Condition which arose or developed with
respect to the Business Assets during the Ownership Period, other than
with respect to an Assumed Liability, or (B) the breach of any
representation or warranty made by a Seller in Section 5.11;
(iv) any Claims made by third parties (including Governmental
Entities) against the Buyer Indemnified Parties to the extent such
Claims arise out of or are attributable to events occurring during the
Ownership Period with respect to the Business Assets (except for any
Claims relating to environmental matters that are covered by the
indemnity obligation set forth in Section 12.01(a)(iii)), other than
with respect to an Assumed Liability; and
(v) any Unassumed Liability (except for any Claims relating to
environmental matters that are covered by the indemnity obligation set
forth in Section 12.01(a)(iii));
IN EACH CASE, WITHOUT REGARD TO THE SOLE, PARTIAL OR CONCURRENT
NEGLIGENCE, OR STRICT LIABILITY (BUT NOT THE WILLFUL AND WANTON
MISCONDUCT) OF THE BUYER INDEMNIFIED PARTIES; provided, however, that
the indemnity obligations of the Sellers under this Section 12.01(a)
shall be subject to the following limitations:
(1) Notwithstanding anything to the contrary in this
Agreement, Sellers shall not be obligated to indemnify the Buyer
Indemnified Parties for any Damages pursuant to (A) Section 12.01(a)
above to the extent the aggregate amount of such Damages suffered or
incurred by the Buyer Indemnified Parties does not exceed One Hundred
Thousand and 00/100 Dollars (the "Deductible") or (ii) exceeds the
Purchase Price (the "Cap"), provided further that the liability of a
specific Seller shall not exceed the share of that Seller of the
Purchase Price. All liability and responsibility for amounts outside
the limits set forth in the preceding sentence shall be borne by Buyer.
(b) Subject to the survival provisions set forth in Section 11.05, and
except to the extent that any such Claims or Damages are covered by Sellers'
indemnity in favor of the Buyer Indemnified Parties pursuant to Section
12.01(a), Buyer shall indemnify, defend, hold harmless and release Sellers and
their Affiliates, and its respective directors, officers, employees, legal
counsel, financial advisors and agents (collectively, the "Seller Indemnified
Parties") from and against all Claims and Damages arising out of or resulting
from or payable as a result of the following:
(i) the breach of any representation or warranty made by Buyer
in Article 6 of this Agreement or in any certificate or other document
or instrument delivered by or on behalf of Buyer to Sellers pursuant to
this Agreement;
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(ii) without limiting or expanding the obligations of Buyer
pursuant to the express terms of such covenants or obligations, the
failure of Buyer to perform any covenant or obligation required to be
performed by it under this Agreement;
(iii) any Claims made by third parties (including Governmental
Entities) against the Seller Indemnified Parties to the extent such
Claims arise out of or are attributable to the ownership, use,
condition or operation of the Business Assets after the Closing Date;
and
(iv) any Assumed Liability.
IN EACH CASE WITHOUT REGARD TO THE SOLE, PARTIAL OR CONCURRENT
NEGLIGENCE, OR STRICT LIABILITY (BUT NOT THE WILLFUL AND WANTON
MISCONDUCT) OF THE SELLER INDEMNIFIED PARTIES; provided, however, that
the indemnity obligations of Buyer under this Section 12.01(b) shall be
subject to the following limitation:
Notwithstanding anything to the contrary in this Agreement, Buyer shall
not be obligated to indemnify the Seller Indemnified Parties for any
Damages pursuant to Section 12.01(b) above to the extent the aggregate
amount of such Damages suffered or incurred by the Seller Indemnified
Parties (i) does not exceed the Deductible or (ii) does exceed the Cap.
All liability and responsibility for amounts outside the limits set
forth in the preceding sentence shall be borne by Sellers.
(c) In the event that any Claim for which a Seller, on the one hand, or
Buyer, on the other hand (each an "Indemnifying Party"), could be liable to the
other Party or another indemnified Person (each collectively, an "Indemnified
Party") under this Section 12.01 is asserted against or sought to be collected
from such Indemnified Party by a third party, the Indemnified Party shall notify
the Indemnifying Party of such Claim within the time periods specified in
Section 11.05 hereof, specifying the nature of and specific basis for such Claim
and the amount or the estimated amount thereof to the extent then feasible (the
"Claim Notice"); provided, however, that no failure or delay in the giving of
such Claim Notice shall relieve the Indemnifying Party of any Liability
hereunder if such delay does not materially impair the defense of such Claim.
The Indemnifying Party shall have 30 days from the delivery of the Claim Notice
(the "Notice Period") to notify the Indemnified Party whether or not it desires,
at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Claim; provided, however, that any Indemnified
Party is hereby authorized prior to and during the Notice Period to file any
motion, answer or other pleading that it shall deem necessary or appropriate to
protect its interests or those of the Indemnifying Party and not prejudicial to
the defense of such Claim. If the Indemnifying Party notifies the Indemnified
Party within the Notice Period that it desires to defend the Indemnified Party
against such Claim or demand and except as hereinafter provided, then the
Indemnifying Party shall have the right, at its own expense and after reasonable
coordination with the Indemnified Party, to assume the defense of any such Claim
either directly or through its insurer. In such case, but subject to Section
12.01(d) below, (i) the Indemnifying Party shall control the course of and make
all decisions concerning any such proceeding, select and employ counsel (with
the approval of the Indemnified Party, not to be unreasonably withheld), and
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expeditiously settle or prosecute such proceeding to a final conclusion, and
(ii) the Indemnified Party may participate in, but not control, any such defense
or settlement at its own cost and with its own counsel, and (iii) if requested
by the Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any Claim that the Indemnifying
Party elects to contest, or, if appropriate and related to the Claim in
question, in making any counterclaim against the Person asserting the
third-party Claim, or any cross-complaint against any Person. To the extent the
Indemnifying Party elects not to assume the defense of any Claim, the
Indemnified Party shall, at the cost and for the account of the Indemnifying
Party, assume all obligations with respect thereto, and shall take such prudent
steps as may be required in connection therewith as though the indemnities did
not exist and such Claim were the Indemnified Party's responsibility. In such
case, the Indemnified Party shall have the right with respect to any Claim for
which it is assuming the defense to choose counsel and make decisions regarding
any such proceeding, provided that it shall keep the Indemnifying Party advised
with respect thereto. Subject to Section 12.01(e) below, the Indemnifying Party
shall be bound by any and all rulings, judgments, compromises and settlements
reached by the Indemnified Party in good faith.
(d) If a Party becomes an Indemnified Party, it shall, at the
Indemnifying Party's expense, cooperate with the Indemnifying Party and permit
the Indemnifying Party reasonable access to the Indemnified Party's books,
records, facilities and employees for the purpose of permitting the Indemnifying
Party to perform its obligations under this Section 12.01; provided, however,
that the Indemnified Party shall not be required to disclose to the Indemnifying
Party any documents or correspondence covered by the attorney-client privilege
or the work product doctrine, except pursuant to a joint defense agreement. To
the extent that any documents or correspondence are covered by the
attorney-client privilege or the work product doctrine, the Indemnified Party
shall notify the Indemnifying Party if the Indemnified Party seeks to protect
such privilege with respect to third parties. The Indemnified Party shall
disclose to the Indemnifying Party the non-privileged contents of any such
documents or correspondence. If requested by the Indemnifying Party, the
Indemnified Party and the Indemnifying Party shall negotiate in good faith a
joint defense agreement with respect to the matter that is the subject of the
privileged communication or work product.
(e) No third-party Claim may be made the subject of a consent decree or
otherwise settled or compromised without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. No consent
decree or other settlement or compromise of any such Claim involving (i) the
entry of a plea of guilty or nolo contendere to any criminal charge, or (ii) any
admission of responsibility for which the Indemnified Party could be held
criminally liable, may be entered into without the prior written consent of the
Indemnified Party. Any consent decree or other settlement or compromise
involving or affecting Buyer's ownership, operation or use of the Business
Assets shall require the prior consent of Buyer, which shall not be unreasonably
withheld.
(f) Subject to the terms hereof, no investigation by an Indemnified
Party at or prior to the Closing shall relieve an Indemnifying Party of any
Liability hereunder.
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12.02 Exclusive Remedy. In the absence of actual fraud, Section 12.01
shall be the exclusive remedy of all Parties for monetary damages for breach of
this Agreement, and each Party hereby waives any other Claim, cause of action,
or remedy for monetary Damages that it might assert against the other Parties
for breach of this Agreement, whether under statutory or common law, or any
other Legal Requirement.
12.03 Cooperation and Preservation of Books and Records. The Parties
shall provide such assistance to each other as the other Party may reasonably
request in connection with the preparation of any Tax Return required to be
filed with respect to the Facility, any audit or other examination by a taxing
authority, any judicial or administrative proceeding relating to Liability for
federal, foreign, state or local Taxes, or any claim for refund in respect of
such Taxes. The Parties shall retain, and upon request provide, any records or
information that may be reasonably relevant to such return, audit, examination,
proceeding, or claim. Such assistance shall include, but is not limited to, (a)
making employees or counsel available at and for reasonable times to provide
additional information and explanation of any material to be provided hereunder
and (b), subject to the right of each Party to refrain from disclosing or making
available any proprietary information, any written or oral communications that
are subject to the attorney-client privilege and any documents that are covered
by the work product doctrine, furnishing access to, and permitting the copying
of any records, returns, schedules, documents, work papers or other relevant
materials which might reasonably be expected to be of use in connection with
such return, audit, examination, proceeding, or claim.
The Parties recognize that the Parties and their respective Affiliates
may need access, from time to time, after the Closing Date, to certain
accounting and Tax records and information held by the other Parties; therefore,
the Parties shall (a) use commercially reasonable efforts to properly retain and
maintain such records until the 30th day following the last date on which the
period to which such records relate is subject to audit, and (b) subject to the
right of each Party to refrain from disclosing or making available any
proprietary information, any written or oral communications that are subject to
the attorney-client privilege and any documents that are covered by the work
product doctrine, allow the requesting Party and its respective agents and other
representatives, at times and dates mutually acceptable to the Parties, to
inspect, review, and make copies of such records as the requesting Party may
deem necessary or appropriate from time to time, such activities to be conducted
during normal business hours and at the requesting Party's expense.
12.04 Investigation of Books and Records. Buyer's closing of the
transaction contemplated hereby will constitute Buyer's acknowledgment that it
has had, prior to the Closing Date, access to the Business Assets, the Records,
and the officers and employees of Sellers and New Avoca to its full and complete
satisfaction. Buyer hereby further acknowledges that in making the decision to
enter into this Agreement and consummate the transactions contemplated hereby,
it is relying solely on its own independent investigation and the express
representations, warranties, covenants and agreements of Sellers set forth in
this Agreement.
12.05 Bulk Transfer Laws. Buyer hereby waives compliance by Sellers
with the provisions of any so called bulk transfer laws of any jurisdiction in
connection with the purchase and sale of the Business Assets; provided however,
that in accordance with Article 12 hereof, Sellers shall indemnify and hold
Buyer harmless from any Damages which Buyer may incur due to failure to comply
with such laws.
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12.06 Non-Competition. Neither Seller nor any of their Affiliates shall, within
the States of New York or Pennsylvania, own or operate a natural gas storage
business that competes with the Facility, or enter or reenter such business,
until the third (3rd) anniversary of the Closing Date, without the prior written
consent of Buyer, which consent may be withheld in Buyer's sole and absolute
discretion. Each Seller acknowledges that (a) the provisions of this Section are
reasonable and necessary to protect the legitimate interests of Buyer and its
Affiliates; (b) any violation of this Section will result in irreparable injury
to Buyer and its Affiliates; and that (c) Buyer and its Affiliates shall be
entitled to injunctive relief in accordance with Section 13.12 hereof. In the
event that this Section should ever be deemed to exceed the time, geographic,
product or any other limitations permitted by Legal Requirements, such
provisions shall be deemed reformed to the maximum extent permitted by Legal
Requirements.
ARTICLE 13
MISCELLANEOUS
13.01 Governing Law. This Agreement and all instruments executed in
accordance with it shall be governed by and construed, interpreted and enforced
in accordance with the laws of the State of Texas, without regard to conflict of
law rules that would direct application of the laws of another jurisdiction
(except to the extent that such instruments otherwise provide or that the laws
of another state mandatorily apply to the Real Property located within such
state).
13.02 Entire Agreement. This Agreement (including the documents,
schedules, attachments, exhibits, annexes and instruments referred to herein and
therein) together with the Confidentiality Agreement constitute the entire
agreement between the Parties and supersedes all prior agreements, documents or
other instruments with respect to the matters covered hereby. The Parties agree
that the terms and conditions of the Confidentiality Agreement will apply to
this Agreement and all other agreements between the Parties which are attached
as exhibits hereto. The Parties make, and have made, no oral agreements or
undertakings pertaining to the subject matter of this Agreement, except for any
that are no longer in effect. In the event of any irreconcilable conflict
between the terms of this Agreement and any conveyancing documents contemplated
hereby, the terms of this Agreement shall be controlling.
13.03 Waiver. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
13.04 Captions. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
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13.05 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the Parties and its respective
successors and permitted assigns, but except as provided below, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party without the prior written consent of either Buyer or
Sellers, as applicable, and any such assignment that is not consented to shall
be null and void; provided, however, that a Party may assign this Agreement upon
notice to the other Party to (a) an Affiliate of that Party, or (b) a Person who
(i) purchases all or substantially all of the assets of such Party, or (ii)
merges with that Party, provided, further; however, that any assignment under
clause (a) or (b) shall not release, affect or reduce in any way the assigning
Party's obligations under this Agreement. The Buyer may assign the New Avoca
Membership Interests, or permit New Avoca to assign all or any part of the
Facility, if the assignee agrees to be bound by the terms of Section 3.02 hereof
and Buyer gives Sellers notice of any such assignment (delivered within a
reasonable time after such assignment) occurring within seven (7) years after
the Closing Date; provided, however, the consent of the Sellers shall not be
required for any such assignment. Nothing in this Agreement, express or implied,
is intended to confer upon any Person other than the Parties and its respective
permitted successors and assigns, any rights, benefits or obligations hereunder.
13.06 Notices. Any notice provided or permitted to be given under this
Agreement shall be in writing, and may be served by personal delivery or by
depositing same in the mail, addressed to the Party to be notified, postage
prepaid, and registered or certified with a return receipt requested. Notice
deposited in the mail in the manner hereinabove described shall be deemed to
have been given and received on the date of the delivery as shown on the return
receipt. Notice served in any other manner shall be deemed to have been given
and received only if and when actually received by the addressee (except that
notice given by facsimile shall be deemed given and received upon receipt only
if received during normal business hours and if received other than during
normal business hours shall be deemed received as of the opening of business on
the next Business Day). For purposes of notice, the addresses and facsimile
numbers of the Parties shall be as follows:
For Blue Dolphin to:
Blue Dolphin Energy Company
801 Travis, Suite 2100
Houston, Texas 77002
United States of America
Attn: President
Facsimile: (713) 227-7626
Doherty & Doherty LLP
With a copy to: 1717 St. James Place, Suite 520
Houston, Texas 77056
Attn: Casey W. Doherty
Facsimile: (713) 572-1001
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For WBI to: Barry Haugen
P.O. Box 5601
Bismarck, North Dakota
Facsimile:(701) 530-1599
SemGas, L.P.
For Buyer to: 6120 South Yale, Suite 700
Tulsa, OK 74136
Attn: President
Facsimile: (918) 388-8920
With a copy to: Hall, Estill, Harwick, Gable,
Golden & Nelson, P.C.
320 South Boston, Suite 400
Tulsa, Oklahoma 74103
Attn: Michael D. Cooke
Facsimile: (918) 594-0505
Each Party shall have the right, upon giving five days' prior notice to the
other in the manner hereinabove provided, to change its address for purposes of
notice.
13.07 Expenses. Each Party shall be solely responsible for all expenses
incurred by it in connection with this transaction (including fees and expenses
of its own counsel, accountants and consultants).
13.08 Severability. If a provision of this Agreement that does not
affect the essential nature of, or consideration for, the arrangement among the
Parties reflected hereby is ruled to be invalid or unenforceable, such
declaration shall not affect the validity or enforceability of the remaining
provisions of this Agreement, which shall continue in full force and effect. In
such event, however, the Parties shall negotiate in good faith to replace such
invalid or unenforceable provision with a valid and enforceable provision that
places each Party in substantially the same position it would have been in had
such original provision been valid and enforceable.
13.09 Amendment. This Agreement (including the documents, schedules,
attachments, exhibits, annexes and instruments referred to herein) may not be
amended except by an instrument in writing signed by each of the Parties.
13.10 Further Actions. Each Party shall execute and deliver such other
certificates, agreements and other documents and take such other actions as may
reasonably be requested by the other Parties in order to consummate or implement
the transactions contemplated by this Agreement.
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13.11 Third-Party Beneficiaries. Except as expressly set forth in
Section 12.01 with respect to Buyer Indemnified Parties or Seller Indemnified
Parties, nothing in this Agreement is intended to create any third-party
beneficiary rights respecting any Person or to confer upon any Person, other
than the Parties and its respective successors and permitted assigns, any
rights, remedies or obligations under or by reason of this Agreement, and the
Parties specifically negate any such intention.
13.12 Injunctive Relief. In the event of a breach or threatened breach
by a Seller or Buyer of the provisions of this Agreement, each Seller and Buyer
agree that the non breaching Party shall be entitled to equitable relief,
including an injunction and specific performance, alone or in combination, in
addition to all other remedies available at law or in equity to such Party in
the event of any breach of the provisions of this Agreement by the other Party
or any of its Affiliates. If a court exercising applicable jurisdiction
determines that a Party is entitled to such injunctive or equitable relief, such
Party or Parties against whom relief is sought agrees to waive any requirement
for the securing or posting of any bond or other security in connection with
such remedy.
13.13 Counterparts; Exhibits. This Agreement may be executed in one or
more counterparts (delivery of which may be made by facsimile), each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. All Attachments, Schedules and Exhibits attached hereto are
hereby made a part of this Agreement and incorporated herein by this reference.
13.14 Publicity. Prior to making any public announcement with respect
to the transactions contemplated hereby, each Party shall consult with the other
Parties and to use reasonable efforts to agree upon the text of a proposed joint
announcement or obtain the other Party's or Parties' approval of the text of
such announcement (which approval shall not be unreasonably withheld); provided,
however, that any Party may make such disclosures or statements as it reasonably
believes may be required by applicable Legal Requirements, including any rules
or regulations of any stock exchange.
13.15 Construction. (a) The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. If the date specified in this Agreement for
giving any notice or taking any action is not a Business Day (or if the period
during which any notices required to be given or any action taken expires on a
date which is not a Business Day), then the date for giving such notice or
taking such action (and the expiration date for such period during which notice
is required to be given or action taken) shall be the next day which is a
Business Day.
(b) Unless the context requires otherwise: (i) the gender (or lack of
gender) of all words used in this Agreement includes the masculine and feminine;
(ii) references to Articles and Sections refer to Articles and Sections of this
Agreement; (iii) references to Attachments, Schedules or Exhibits refer to the
Attachments, Schedules and Exhibits attached to this Agreement, each of which is
made a part hereof for all purposes; and (iv) the word "including" means
"including, without limitation."
33
(c) Any item disclosed in one Section or Schedule will be deemed to be
disclosed in any other Section or Schedule where such disclosure is relevant,
even if there is no express cross-reference, provided that the nature and the
relevance of the disclosure is reasonably apparent. Disclosure of items that may
or may not be required to be disclosed by this Agreement does not mean that such
items are material or create a standard of materiality and will not be deemed an
admission that any such disclosed matter is or may give rise to a breach of any
Contract or violation of any Legal Requirement.
13.16 Limitation of Liability. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, IN NO EVENT SHALL ANY PARTY HERETO BE LIABLE TO ANY OTHER HEREUNDER
FOR EXEMPLARY, PUNITIVE, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES
OF ANY KIND, ARISING DIRECTLY OR INDIRECTLY FROM, INCIDENT TO, OR IN ANY WAY
CONNECTED WITH THIS AGREEMENT, REGARDLESS OF SOLE OR CONCURRENT NEGLIGENCE,
STRICT LIABILITY, OR DEFECT IN PREMISES, EQUIPMENT OR MATERIAL, AND REGARDLESS
OF WHETHER PRE-EXISTING THIS AGREEMENT. This Section 13.16 shall in no way limit
or qualify the Parties' indemnification obligations under Section 12.01 with
respect to Claims made against any Party by a third person.
13.17 Schedules. In the event information from one Schedule is also
appropriate to be included on another Schedule, such information need not be
repeated and a reference to the other Schedule will have the same effect as if
the information were specifically repeated on that Schedule.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first set forth above.
SELLERS:
BLUE DOLPHIN ENERGY COMPANY
By:
--------------------------------------------
Name: Michael J. Jacobson
------------------------------------------
Title: President
-----------------------------------------
WBI PIPELINE AND STORAGE GROUP, INC.
By:
--------------------------------------------
Name: Barry D. Haugen
------------------------------------------
Title: Authorized Agent
-----------------------------------------
BUYER:
SEMGAS, L.P., by SemOperating G.P., L.L.C., its
general partner
By:
--------------------------------------------
Name: Gregory C. Wallace
------------------------------------------
Title: Vice President and Secretary
-----------------------------------------
35
EXHIBIT A
RELEASE
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are
hereby acknowledged, each undersigned party (each a "Releasing Party"), pursuant
to that certain Purchase and Sale Agreement by and among Blue Dolphin Energy
Company, WBI Pipeline and Storage Group, Inc., and SemGas, L.P., dated October
__, 2004, hereby releases, acquits and forever discharges New Avoca Gas Storage
LLC, and its legal representatives, successors and assigns (the "Released
Party"), from any and all claims, demands, suits, actions and causes of action
whatsoever, whether in law, equity or otherwise, whether known or unknown, which
such Releasing Party or its/his/her heirs, successors, assigns, subsidiaries or
affiliated entities now have or ever have had against the Released Party
("Claims").
Each Releasing Party hereby represents and warrants that it/he/she has not
assigned to any other party any Claims of the type released pursuant hereto.
Each Releasing Party also agrees on its/his/her behalf and on behalf of
its/his/her heirs, successors or assigns to forever refrain from instituting,
pursuing or in any way encouraging others to institute or pursue any Claims
released herein.
The undersigned acknowledge that they HAVE CAREFULLY READ THE FOREGOING WAIVER
AND RELEASE AND KNOW AND UNDERSTAND THE CONTENTS HEREOF AND THAT THEY ARE
EXECUTING THE SAME AS THEIR OWN FREE ACT AND DEED.
Executed on this 29th day of October, 2004.
BLUE DOLPHIN:
Blue Dolphin Energy Company
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
WBI:
WBI Pipeline and Storage Group, Inc.
By:
---------------------------------
Name:
-------------------------------
Title:
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MANAGERS:
By:
---------------------------------
Name:
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By:
---------------------------------
Name:
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By:
---------------------------------
Name:
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By:
---------------------------------
Name:
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By:
---------------------------------
Name:
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OFFICERS
By:
---------------------------------
Name:
-------------------------------
By:
---------------------------------
Name:
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By:
---------------------------------
Name:
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By:
---------------------------------
Name:
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By:
---------------------------------
Name:
-------------------------------