CONTRIBUTION AGREEMENT
by and among
TEJAS ENERGY, LLC,
TEJAS MIDSTREAM ENTERPRISES, LLC,
ENTERPRISE PRODUCTS PARTNERS L.P.,
ENTERPRISE PRODUCTS OPERATING L.P.,
ENTERPRISE PRODUCTS COMPANY,
ENTERPRISE PRODUCTS GP, LLC
AND
EPC PARTNERS II, INC.
Dated September 17, 1999
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND TERMS..........................................................2
Section 1.01 Specific Definitions..................................2
Section 1.02 General Definitions..................................10
Section 1.03 Construction and Interpretation......................10
ARTICLE II
CONTRIBUTION AND RELATED ITEMS................................................11
Section 2.01 The Closing..........................................11
Section 2.02 The Transactions.....................................11
Section 2.03 Special Units........................................11
Section 2.04 Other Closing Matters................................11
Section 2.05 Additional Special Units Following Closing...........12
Section 2.06 Prorations of Property Taxes.........................12
Section 2.07 Adjustment for Interim Operations....................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TEJAS AND TEJAS ENERGY AS
TO TEJAS AND TEJAS ENERGY.....................................................14
Section 3.01 Organization.........................................14
Section 3.02 Ownership of Company Interest........................14
Section 3.03 Validity and Enforceability..........................14
Section 3.04 Approvals and Consents...............................15
Section 3.05 No Violation.........................................15
Section 3.06 Litigation...........................................15
Section 3.07 Investment Intent....................................15
Section 3.08 No Brokers...........................................16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TEJAS AND TEJAS ENERGY AS
TO THE COMPANY AND ITS SUBSIDIARIES...........................................17
Section 4.01 Organization.........................................17
Section 4.02 Capitalization.......................................17
Section 4.03 No Violation.........................................18
Section 4.04 Permits..............................................18
Section 4.05 Compliance With Applicable Law.......................19
Section 4.06 Litigation...........................................19
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Section 4.07 Taxes................................................19
Section 4.08 Financial Statements.................................20
Section 4.09 Absence of Certain Changes...........................20
Section 4.10 Bank Accounts........................................21
Section 4.11 Conduct of Business From the Effective Date to the
Closing Date.........................................21
Section 4.12 Material Contracts or Indebtedness...................22
Section 4.13 Assets...............................................24
Section 4.14 Employees, Employee Benefits.........................24
Section 4.15 Sufficiency of Assets Held by the Company
and its Subsidiaries.................................24
Section 4.16 Intellectual Property................................24
Section 4.17 Non-Business Related Assets..........................25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ENTERPRISE PARTIES......................25
Section 5.01 Organization.........................................25
Section 5.02 Authorization of Agreement...........................26
Section 5.03 No Violations........................................27
Section 5.04 Approvals............................................27
Section 5.05 Litigation; Impairment...............................27
Section 5.06 Compliance With Applicable Law.......................28
Section 5.07 Permits..............................................28
Section 5.08 Taxes................................................28
Section 5.09 SEC Reports..........................................29
Section 5.10 Ownership; Issuance of Special Units.................29
Section 5.11 Financing............................................30
Section 5.12 No Brokers...........................................30
Section 5.13 Investment Intent....................................31
ARTICLE VI
COVENANTS.....................................................................31
Section 6.01 Access to Information Following the Closing...........31
Section 6.02 Intentionally Deleted.................................32
Section 6.03 Public Announcements..................................32
Section 6.04 Removal of Tradenames.................................32
Section 6.05 Further Assurances....................................32
Section 6.06 Books and Records.....................................33
Section 6.07 Intercompany Indebtedness.............................33
Section 6.08 Excluded Assets.......................................33
Section 6.09 Acts of Amendment.....................................34
Section 6.10 Collections...........................................34
Section 6.11 Preferential Rights...................................34
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Section 6.12 Preparation of Historical Financials................34
Section 6.13 Unitholder Approval.................................34
ARTICLE VII
EMPLOYEE MATTERS..............................................................35
Section 7.01 Employees...........................................35
Section 7.02 Solicitation of Employees...........................35
Section 7.03 Employee Benefit Plans..............................36
Section 7.04 Vacation............................................36
Section 7.05 Access to Information and Personnel.................37
Section 7.06 Tejas and Affiliates Benefit Plans..................37
Section 7.07 Third-Party Beneficiaries...........................37
ARTICLE VIII
INDEMNIFICATION; SURVIVAL.....................................................37
Section 8.01 Indemnification by the Enterprise Parties, EPC II and
Enterprise Products.........................................37
Section 8.02 Indemnification by Tejas and Tejas Energy............38
Section 8.03 Indemnification Procedure............................39
Section 8.04 Survival.............................................40
Section 8.05 Limitation on Claims.................................41
Section 8.06 Tejas Environmental Indemnity........................42
Section 8.07 Enterprise Contingent Environmental Payment..........43
Section 8.08 Louisiana Fuel Tax Audit.............................44
ARTICLE IX
GENERAL PROVISIONS............................................................44
Section 9.01 Expenses and Taxes; Tax Returns......................44
Section 9.02 Amendment............................................45
Section 9.03 Waiver...............................................45
Section 9.04 Notices..............................................45
Section 9.05 Headings; Disclosure Memorandum......................47
Section 9.06 Applicable Law.......................................47
Section 9.07 No Third Party Rights................................47
Section 9.08 Counterparts.........................................47
Section 9.09 Severability.........................................47
Section 9.10 Entire Agreement.....................................47
Section 9.11 Arbitration; Waiver..................................47
Section 9.12 Fair Construction....................................48
Section 9.13 Disclaimer of Other Representations and Warranties...48
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EXHIBITS
Exhibit 1.01(a) EPC II Assignment of GP Interest
Exhibit 1.01(b) Tejas Assignment of Company Interest
Exhibit 9.11 Arbitration Procedures
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SCHEDULES
Schedule 1.01(a) Assets of the Business
Schedule 1.01(b) Excluded Assets
Schedule 1.01(c) Permitted Liens
Schedule 1.01(d) Retained Liabilities
Schedule 2.02(c) Other Consideration
Schedule 2.04(d) Ancillary Agreements
Schedule 2.07 Interim Operations
Schedule 3.04 Tejas Required Consents
Schedule 3.06 Litigation Against Tejas or Tejas Energy
Schedule 4.02(b) Subsidiaries and Joint Ventures
Schedule 4.03 No Violation
Schedule 4.04 Permits
Schedule 4.05 Compliance with Applicable Law
Schedule 4.06(a) Pending Litigation Against the Company or its Subsidiaries
Schedule 4.06(b) Material Litigation
Schedule 4.07 Taxes
Schedule 4.08 Financial Statements
Schedule 4.09 Absence of Certain Changes
Schedule 4.10 Bank Accounts
Schedule 4.12(a) Material Contracts
Schedule 4.12(c) Defaults or Breaches
Schedule 4.13(a) Real Property
Schedule 4.13(b) Facilities
Schedule 4.13(c) Encumbered Assets
Schedule 4.15 Sufficiency of Assets
Schedule 4.16 Material Intellectual Property Rights
Schedule 5.04 Enterprise Required Consents
Schedule 5.10(e) Ownership of Units
Schedule 5.10(f) Enterprise Options/Obligations to Issue Units
Schedule 6.09 Act of Amendment
Schedule 7.01 Business Employees
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CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT dated September 17, 1999, is by and among TEJAS
ENERGY, LLC, a Delaware limited liability company ("Tejas Energy"), TEJAS
MIDSTREAM ENTERPRISES, LLC, a Delaware limited liability company ("Tejas"),
ENTERPRISE PRODUCTS PARTNERS L.P., a Delaware limited partnership ("Enterprise
Partners"), ENTERPRISE PRODUCTS OPERATING L.P., a Delaware limited partnership
("Enterprise Operating"), ENTERPRISE PRODUCTS GP, LLC, a Delaware limited
liability company ("Enterprise GP" and, together with Enterprise Partners and
Enterprise Operating, the "Enterprise Parties"), EPC PARTNERS II, INC., a
Delaware corporation ("EPC II") and ENTERPRISE PRODUCTS COMPANY, a Texas
corporation ("Enterprise Products") for the limited purposes of its obligations
in Articles V, VII and VIII hereof.
RECITALS:
WHEREAS, Tejas Energy is the sole member of Tejas;
WHEREAS, Tejas is the owner of all of the issued and outstanding limited
liability company membership interests of Tejas Natural Gas Liquids, LLC, a
Delaware limited liability company (the "Company"), which along with its
Subsidiaries (as defined herein) operates the Business (as defined herein);
WHEREAS, Tejas desires to contribute its interest in the Company to
Enterprise Partners (or Enterprise Operating as the designee of Enterprise
Partners) in exchange for Enterprise Partners issuing to Tejas (or Tejas Energy
as the designee of Tejas) certain special partnership units and Enterprise
Operating paying to Tejas the Other Consideration (as defined herein) on the
terms and conditions as hereinafter provided;
WHEREAS, the parties acknowledge and agree that the transactions
contemplated herein involve a transfer by Tejas of its interest in the Company
to Enterprise Partners and a subsequent contribution of such interest by
Enterprise Partners to Enterprise Operating;
WHEREAS, Tejas Energy (as the designee of Tejas) desires to acquire from
EPC II and EPC II desires to sell to Tejas Energy a 30% membership interest in
Enterprise GP, which is the general partner of Enterprise Partners and
Enterprise Operating, for a cash payment to EPC II on the terms and conditions
hereinafter provided; and
WHEREAS, the parties hereto desire to enter into this Agreement to set
forth the terms, conditions and procedures of the above-described transactions.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained herein and for other good and valuable
consideration (the
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receipt and sufficiency of which are hereby confirmed and acknowledged), the
parties hereto hereby agree as follows:
ARTICLE
DEFINITIONS AND TERMS
Section - Specific Definitions. As used in this Agreement, the following
terms have the following meanings:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with, such Person.
For the purposes of this definition, "control" (including, with correlative
meaning, the terms "controlling," "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of management and policies of such Person, by contract or
otherwise.
"Agreement" means this Contribution Agreement, as the same may be amended
or supplemented from time to time.
"Ancillary Agreements" shall have the meaning specified in Section 2.04(d).
"Business" means all of the midstream natural gas processing and NGL
business generated by the NGL assets, properties and commercial arrangements
listed on Schedule 1.01(a) and the NGL assets, properties and commercial
arrangements transferred or intended to be transferred pursuant to the acts of
amendment and conveyances referenced in Section 6.09 (which includes all of the
midstream natural gas processing and NGL business conducted by the Company and
its Subsidiaries) which involves the processing of raw natural gas and the
fractionation of NGLs in the States of Louisiana and Mississippi at the
Facilities listed on Schedule 1.01(a) and all related transporting, storing,
exchanging and marketing of NGLs. The parties intend that the Business includes
all business generated by the assets, properties and commercial arrangements
(other than the distribution or marketing of pipeline-quality natural gas)
related to such gas processing and NGL operations to the extent located
downstream of the inlet flange of each gas processing plant referenced on
Schedule 1.01(a) including: (i) the fractionation facilities listed on Schedule
1.01(a), (ii) pipelines, underground storage, shipping and receiving facilities
and transportation assets listed on Schedule 1.01(a) and related rights of way
and other real property interests used in such gas processing and fractionation
operations, (iii) processing, exchange, storage, marketing, sales and
transportation agreements related to the business conducted at such Facilities,
(iv) rail tank cars used to transport NGLs as listed on Schedule 1.01(a), (v)
equity interests in Venice Energy Services Company, L.L.C., Dixie Pipeline
Company, Entell NGL Services, L.L.C., Tri-States NGL Pipeline, L.L.C., K/D/S
Promix L.L.C., Belle Rose NGL Pipeline, L.L.C. and Progas, LLC as listed on
Schedule 1.01(a) and (vi) all assets used in the Business, wherever located,
including, without limitation, contracts, intangibles, books and records,
financial and accounting systems and records, management information systems,
files, computer hardware and software (including the Solarc
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RightAngle license and the risk control model relating to the Business), office
equipment and other assets currently used in the Business, and the assets listed
for purposes of illustration but not limitation on Schedule 1.01(a) hereto;
provided, however, that the term Business shall not include any of the assets
listed on Schedule 1.01(b) hereto (the "Excluded Assets").
"Benefit Plan Date" has the meaning specified in Section 7.03.
"Business Day" means any day other than a Saturday, a Sunday or a legal
holiday on which banks in Houston, Texas and New York, New York are authorized
or obligated by Law to close.
"Business Employees" has the meaning specified in Section 7.01.
"Claim Notice" has the meaning specified in Section 8.03(a).
"Closing" means the closing of the transactions provided for in this
Agreement.
"Closing Date" means the date on which the Closing occurs.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Common Units" means the common units representing limited partner
interests in Enterprise Partners having the rights specified in the Enterprise
Partners Amended Partnership Agreement.
"Company" has the meaning specified in the recitals.
"Company Interest" means 100% of the outstanding membership and other
equity interests in the Company.
"Company Required Consents" has the meaning specified in Section 4.03.
"Confidentiality Agreement" means the Confidentiality Agreement dated
January 19, 1999, between the Company and Enterprise Operating, as adopted by
Tejas and Enterprise Partners.
"Consent" means any consent, waiver, approval, authorization, exemption,
registration or declaration.
"Contingent Environmental Payments" has the meaning specified in
Section 8.07(a).
"Conversion Dates" has the meaning specified in Section 2.03.
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"Court" shall mean any federal, state, or local court, arbitration tribunal
or other judicial authority.
"Damages" means all claims, liabilities, damages, penalties, Judgments,
assessments, losses, costs and expenses, including reasonable attorneys' fees.
"Direct Claim" has the meaning specified in Section 8.03(a).
"Effective Date" means 12:01 a.m. on August 1, 1999.
"Employment Commencement Date" has the meaning specified in Section 7.01.
"Enterprise Environmental Payments" has the meaning specified in
Section 8.07(a).
"Enterprise GP" has the meaning specified in the introductory paragraph of
this Agreement.
"Enterprise Indemnified Parties" has the meaning specified in Section 8.02.
"Enterprise Operating" has the meaning specified in the introductory
paragraph of this Agreement.
"Enterprise Operating Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of Enterprise Operating dated July 31, 1998, as
amended, restated, supplemented or otherwise as defined.
"Enterprise Parties" has the meaning specified in the introductory
paragraph of this Agreement.
"Enterprise Partners" has the meaning specified in the introductory
paragraph of this Agreement.
"Enterprise Partners Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of Enterprise Partners dated July 31, 1998, as
amended, restated, supplemented or otherwise updated.
"Enterprise Partners Amended Partnership Agreement" means the Second
Amended and Restated Agreement of Limited Partnership of Enterprise Partners.
"Enterprise Products" has the meaning specified in the introductory
paragraph of this Agreement.
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"Enterprise Representations and Warranties" has the meaning specified in
Section 8.01.
"Enterprise Required Consents" means the requirements of the HSR Act and
the Consents listed in Schedule 5.04.
"Enterprise Third-Party Environmental Claims" has the meaning specified in
Section 8.07(a).
"Environmental Law" means any Law that relates to (i) the prevention,
abatement, remediation or elimination of pollution, (ii) the protection of the
environment, (iii) the protection of individuals or property from actual or
potential exposure (or the effects of exposure) to an actual or potential spill,
release or threatened release of a Hazardous Substance, or petroleum or produced
brine, or (iv) the operation, manufacture, processing, production, gathering,
transportation, importation, use, treatment, storage or disposal, arrangement
for transportation or arrangement for disposition of a Hazardous Substance, or
petroleum or produced brine. The term "Environmental Law" includes the Clean Air
Act, the Comprehensive Environmental, Response, Compensation, and Liability Act
of 1980, the Federal Water Pollution Control Act, the Occupational Safety and
Health Act of 1970, the Resource Conservation and Recovery Act of 1976, the Safe
Drinking Water Act, the Toxic Substances Control Act, the Hazardous & Solid
Waste Amendments Act of 1984, the Superfund Amendments and Reauthorization Act
of 1986, the Hazardous Materials Transportation Act, the Oil Pollution Act of
1990, any state Laws implementing the foregoing federal Laws and any Laws
pertaining to the handling of oil and gas exploration and production wastes or
the use, maintenance, and closure of pits and impoundments, and all other
environmental conservation or protection Laws.
"EPC II" has the meaning specified in the introductory paragraph of this
Agreement.
"EPC II Assignment" means the Assignment Agreement in the form of
Exhibit 1.01(a) hereto pursuant to which EPC II will assign the GP Interest to
Tejas Energy.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Securities
and Exchange Commission promulgated thereunder, and as the same shall be in
effect from time to time.
"Facilities" means the gas processing plants, fractionation plants,
pipeline assets and storage facilities specified on Schedule 1.01(a) hereto.
"Governmental Authority" shall mean any federal, state or local
governmental agency or authority.
"Governmental Authorization" shall mean any required consent or approval by
a Governmental Authority.
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"GP Interest" means a membership interest in Enterprise GP representing a
30% ownership interest in Enterprise GP.
"Hazardous Substance" means any substance, chemical, pollutant, waste or
other material (i) that consists, wholly or in part, of a substance that is
regulated as toxic or hazardous to human health or the environment under any
Environmental Law, or (ii) that exists in a condition or under circumstances
that constitute a violation of an Environmental Law. The term "Hazardous
Substance" includes any petroleum products, oils or derivatives thereof;
asbestos or asbestos- containing materials; polychlorinated biphenols; as well
as any "hazardous substance" as that term is defined in the Comprehensive
Environmental, Response, Compensation and Liability Act of 1980, any "hazardous
material" as that term is defined in the Hazardous Materials Transportation Act,
any "hazardous chemical substance" or "pollutant" as those terms are defined in
the Federal Water Pollution Control Act, and any "solid waste" or "hazardous
waste" as those terms are defined in the Resource Conservation and Recovery Act
of 1976 and any toxic substance as that term is defined under the Toxic
Substances Control Act.
"HSR Act" means the United States Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness for Borrowed Money" means all obligations for borrowed money,
including (a) any capital lease obligation, (b) any obligation (whether fixed or
contingent) to reimburse any bank or other Person in respect of amounts paid or
payable under a standby letter of credit (other than obligations under standby
letters of credit securing performance under Material Contracts), or (c) any
guarantee with respect to indebtedness for borrowed money (of the kind otherwise
described in this definition) of another Person.
"Indemnified Party" has the meaning specified in Section 8.03.
"Indemnifying Party" has the meaning specified in Section 8.03.
"Intellectual Property Right" means all registered trade marks, trade
names, patents and copyrights, unregistered trade marks, trade names and
copyrights and all patent applications, all technology, trade secrets, designs,
drawings, computer programs, processes and know how, both domestic and foreign,
used in connection with the Business.
"IRS" means the United States Internal Revenue Service.
"Joint Venture" means any corporation, partnership, limited liability
company, association, trust, joint venture or other entity or organization
(other than Subsidiaries) in which the Company or any of its Subsidiaries has an
interest.
"Judgments" means any judgments, injunctions, orders, decrees, writs,
rulings or awards of any Court or any Governmental Authority of competent
jurisdiction.
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"Knowledge" or "knowledge" means, with respect to any party hereto, the
actual knowledge of the executive officers of such party; provided that none of
the executive officers shall be deemed to have performed, or be obligated to
perform, any independent investigation or inquiry with respect to the matter to
which such Knowledge relates other than, in each case, making reasonable inquiry
with the head of the department who is principally responsible for the subject
matter of any representation or warranty given to the knowledge of such party.
"Laws" means any federal, state, local or foreign law, statute, ordinance,
rule, regulation, order or decree.
"Lien" means mortgages, deeds of trust, liens, pledges, security interests,
leases, conditional sale contracts, claims, rights of first refusal, options,
charges, liabilities, obligations, agreements, privileges, liberties, easements,
rights-of-way, limitations, reservations, restrictions and other encumbrances of
any kind.
"Material Adverse Effect" means a material adverse effect on the business,
assets, liabilities, or condition (financial or otherwise) of the subject party
and its Subsidiaries, taken as a whole.
"Material Contract" has the meaning set forth in Section 4.12.
"NGLs" means natural gas liquids.
"Other Consideration" has the meaning prescribed in Section 2.02(c).
"Permits" means all permits, authorizations, approvals, registrations,
licenses, certificates or variances granted by or obtained from any Governmental
Authority.
"Permitted Liens" means (i) Liens for or in respect of Taxes, impositions,
assessments, fees, rents and other governmental charges levied or assessed or
imposed which are not yet delinquent or are being contested in good faith by
appropriate proceedings and, if being contested, for which the appropriate party
has set forth reserves on its books, records and financial statements in
accordance with generally accepted accounting principles applied in a manner
consistent with past practice, (ii) the rights of lessors and lessees under
leases executed in the ordinary course of business, (iii) the rights of
licensors and licensees under licenses executed in the ordinary course of
business, and (iv) Liens, and rights to Liens, of mechanics, warehousemen,
carriers, repairmen and others arising by operation of law and incurred in the
ordinary course of business, securing obligations not yet delinquent or being
contested in good faith by appropriate proceedings, (v) any Liens which are
publicly recorded, (vi) other Liens entered into in the ordinary course of
business that do not secure the payment of indebtedness for borrowed money and
that do not materially and adversely affect the ability of Enterprise Operating,
directly or indirectly, to use the encumbered assets and properties in the
conduct of the Business and (vii) Liens set forth on Schedule 1.01(c) of the
Tejas Disclosure Memorandum.
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"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"Proceeding" means any action, suit, demand, claim or legal,
administrative, arbitration or other alternative dispute resolution proceeding,
hearing or investigation.
"Retained Liabilities" means the liabilities identified as "Retained
Liabilities" on Schedule 1.01(d) of the Tejas Disclosure Memorandum.
"Securities Act" means the Securities Act of 1933, as amended or any
successor or federal statute, and the rules and regulations of the Securities
and Exchange Commission promulgated thereunder, and as the same shall be in
effect from time to time.
"Shell Affiliate" means any Affiliate of Shell Oil Company.
"Shell Processing Agreement" means that certain Fourth Amendment to
Conveyance of Gas Processing Rights among the Company, Shell Oil Company, Shell
Exploration & Production Company, Shell Offshore Inc., Shell Deepwater
Development Inc., Shell Deepwater Production Inc., Shell Consolidated Energy
Resources Inc., Shell Land & Energy Company and Shell Frontier Oil & Gas Inc.,
and any other parties thereto, dated as of August 1, 1999.
"Special Units" means each series of the Class A Special Units of limited
partnership interest in Enterprise Partners as described in Sections 2.03 and
2.05 and in the Enterprise Partners Amended Partnership Agreement.
"Subordinated Units" means the subordinated units representing partnership
interests in Enterprise Partners created under the Enterprise Partners Amended
Partnership Agreement.
"Subsidiary" or "Subsidiaries" of any Person means any corporation,
partnership, limited liability company, association, trust, joint venture or
other entity or organization of which such Person, either alone or through or
together with any other Subsidiary, owns, directly or indirectly, more than 50%
of the issued and outstanding stock or other equity or ownership interests, the
holder of which is generally entitled to vote for the election of the board of
directors or other governing body of such corporation, partnership, limited
liability company, association, trust, joint venture or other entity or
organization.
"Taxes" means all taxes, however denominated, including any interest or
penalties that may become payable in respect thereof, imposed by any
Governmental Authority, which taxes shall include all net income, alternative or
add-on minimum tax, gross income, gross receipts, sales, use, goods and
services, ad valorem or property, earnings, franchise, profits, license,
withholding (including all obligations to withhold or collect for Taxes imposed
on others), payroll, employment, excise, severance, stamp, occupation, premium,
property, excess profit or windfall profit tax, custom
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duty, value added or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest and any penalty,
addition to tax or additional amount (whether payable directly, by withholding
or otherwise).
"Tax Returns" means any report, return, declaration or other filing
required to be supplied to any taxing authority or jurisdiction with respect to
Taxes including any amendments thereto.
"Tax Statute of Limitations Date" shall mean the close of business on the
30th day after the expiration of the applicable statute of limitations with
respect to Taxes, including any tollings or extensions thereof.
"Tejas" has the meaning specified in the introductory paragraph of this
Agreement.
"Tejas Assignment" means the Assignment Agreement in the form of Exhibit
1.01(b) hereto pursuant to which Tejas will assign the Company Interest to
Enterprise Operating (as Enterprise Partners' designee).
"Tejas Co-ownership" means a co-ownership arrangement wherein the Company
or its Subsidiary is a co-owner of assets and the co-owners have elected (or are
deemed to have elected under Treasury Regulation, Paragraph 1.761-2(b)) under
Section 761(a) of the Code to be excluded from the provisions of subchapter K of
chapter 1 of the Code.
"Tejas Disclosure Memorandum" means the disclosure memorandum delivered by
Tejas to the Enterprise Parties prior to execution of this Agreement containing
the disclosures contemplated by this Agreement.
"Tejas Energy" has the meaning specified in the introductory paragraph to
this Agreement.
"Tejas Indemnified Parties" has the meaning specified in Section 8.01.
"Tejas Joint Venture" means a limited liability company, association,
trust, partnership, joint venture or other entity or organization in which the
Company or any of its Subsidiaries owns, either alone or through or together
with any Subsidiary, directly or indirectly, less than 100% of the issued and
outstanding stock or other equity or ownership interests.
"Tejas LLC" means a limited liability company wherein the Company or its
Subsidiary owns 100% of the equity interests.
"Tejas Representations and Warranties" has the meaning specified in
Section 8.02.
"Tejas Required Consents" has the meaning specified in Section 3.04.
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"Tejas Third-Party Environmental Claims" has the meaning specified in
Section 8.06(a).
"Third Party Claim" has the meaning specified in Section 8.03(a).
"Transactions" means the transactions contemplated by the Transaction
Agreements.
"Transaction Agreements" means this Agreement, and the other agreements
referred to in Sections 2.04(a), (b), (c), (e) and (g).
"Transferred Employees" has the meaning specified in Section 7.01.
"United States" means the United States of America, its territories and
possessions, any state of the United States, and the District of Columbia.
"Unitholder Rights Agreement" has the meaning specified in Section 2.04(b).
"Units" means, collectively or individually or in any combination, as the
context may require, the Special Units and any Common Units into which the
Special Units are converted in accordance with the Enterprise Partners Amended
Partnership Agreement.
Section General Definitions. Capitalized terms used in this Agreement and
not defined in Section 1.01 shall have the meanings ascribed to them elsewhere
in this Agreement.
Section Construction and Interpretation. The following rules of
construction and interpretation shall apply to this Agreement, unless elsewhere
specifically indicated to the contrary:
(a) all terms defined herein in the singular shall include the plural,
as the context requires, and vice-versa;
(b) pronouns stated in the neuter gender shall include the masculine,
the feminine and the neuter genders;
(c) the term "or" is not exclusive and shall be deemed to mean
"and/or;"
(d) the term "including" (or any form thereof) shall not be limiting
or exclusive and shall be deemed to mean "including, without limitation;"
and
(e) unless otherwise indicated, any reference made in this Agreement
to a Section is a reference to a section of this Agreement, any reference
to an exhibit is a reference to an exhibit to this Agreement.
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ARTICLE
CONTRIBUTION AND RELATED ITEMS
Section The Closing. Subject to the terms and conditions of this
Agreement, the consummation of the transactions contemplated by this Agreement
as set forth in Section 2.02 (the "Closing") will take place simultaneously with
the execution hereof or on such other date as may be agreed upon by the parties
hereto at 4:00 p.m. local time at the offices of Andrews & Kurth L.L.P. at 600
Travis, Houston, Texas.
Section The Transactions. Subject to the terms and conditions of this
Agreement, at the Closing:
(a) Tejas will contribute and assign the Company Interest to
Enterprise Operating (as Enterprise Partner's designee) by executing and
delivering the Tejas Assignment to Enterprise Operating;
(b) Enterprise Partners will issue and deliver to Tejas Energy (as
Tejas' designee) 14,500,000 Special Units;
(c) Enterprise Operating (as Enterprise Partners' designee) will pay
to Tejas $166,000,000 in cash as reflected on Schedule 2.02(c) attached
hereto (the "Other Consideration");
(d) EPC II will convey the GP Interest to Tejas Energy (as Tejas'
designee) by executing and delivering the EPC II Assignment to Tejas
Energy; and
(e) Tejas Energy shall pay $4,000,000 in cash to EPC II in
consideration for the GP Interest.
Section Special Units. The Special Units shall be represented by
certificates in the form contemplated by the Enterprise Partners Amended
Partnership Agreement and will have the rights and features set forth therein.
The Special Units will be automatically converted on a one- for-one basis into
Common Units of Enterprise Partners effective as of the Class A Special Units
Conversion Dates set forth in the Enterprise Partners Amended Partnership
Agreement (the "Conversion Dates").
Section Other Closing Matters. Subject to the terms and conditions of
this Agreement, simultaneously with the execution hereof unless waived by the
parties:
Enterprise Partners and Tejas will enter into the Registration Rights
Agreement in the form agreed upon by the parties;
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Tejas, the Enterprise Parties, Enterprise Products and EPC II will enter
into the Unitholder Rights Agreement in the form agreed upon by the parties;
Tejas and Enterprise Operating will enter into the Interim Services
Agreement in the form agreed upon by the parties;
Each of the agreements set forth on Schedule 2.04(d) hereto (the "Ancillary
Agreements") shall be or have been executed by the appropriate parties thereto;
Enterprise GP shall enter into the Enterprise Partners Amended Partnership
Agreement in the form agreed upon by the parties;
Tejas shall receive the opinion of counsel to the Enterprise Parties in the
form agreed upon by the parties and the Enterprise Parties shall receive the
opinion of counsel to Tejas in the form agreed upon by the parties; and
Tejas, Dan Duncan LLC, EPC II and Tejas shall enter into the Amended and
Restated Limited Liability Company Agreement of Enterprise GP in the form agreed
upon by the parties.
Section Additional Special Units Following Closing. Enterprise Partners
will issue to Tejas up to an additional 6,000,000 Special Units, at the times
and in accordance with and subject to the performance tests and procedures set
forth in the Enterprise Partners Amended Partnership Agreement.
Section Prorations of Property Taxes.
(a) The 1999 general property tax assessed against or pertaining to
the assets included in the Business for the taxable period that includes
the Closing Date shall be prorated between Tejas and the Company and its
Subsidiaries as of the Closing Date. Tejas' 1999 general property tax
responsibility will be for the period January 1, 1999 up to and including
the Closing Date (the "Tejas Property Tax"). The Tejas Property Tax shall
be an amount equal to the product of (i) the amount of such general
property Tax for the entire taxable period that includes the Closing Date
(or the amount of such general property Tax for the immediately preceding
taxable period in the case of those assets and properties, if any, for
which such general property Tax for the current period cannot be
determined), times (ii) a fraction, the numerator of which is the number of
days from January 1, 1999 to the Closing Date and the denominator of which
is the total number of days in the entire taxable period.
(b) Tejas shall pay the 1999 general property tax statement in full
and shall invoice Enterprise Partners and its Subsidiaries for the period
from the Closing Date to December 31, 1999. Enterprise Partners agrees to
make or cause to be made such payment
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(reimbursement) for the amount of the general property tax so prorated and
invoiced. Enterprise Partners shall provide the name and address to which
such invoice shall be sent.
Section Adjustment for Interim Operations.
The parties acknowledge and agree that the operations of the Company
and its Subsidiaries from and after the Effective Date shall be for the
account of Enterprise Partners; provided, Tejas and Tejas Energy will be
responsible for administering and shall administer, the financial accounts
of the Company and its Subsidiaries from the Effective Date through
September 30, 1999 (the "Interim Period"), including processing cash
collections and making required expenditures.
As promptly as practicable, but no later than November 15, 1999,
Enterprise Partners (with the assistance of Tejas and Tejas Energy to the
extent requested by Enterprise Partners) will cause to be prepared and
delivered to Tejas a certificate setting forth Enterprise Partners'
calculation of the Interim Period Adjustment as determined in accordance
with the procedures set forth in Schedule 2.07 hereto (the "Interim Period
Adjustment").
If Tejas or Tejas Energy disagrees with Enterprise Partners'
calculation of the Interim Period Adjustment, Tejas may, within 20 days
after delivery of such calculation, deliver a notice to Enterprise Partners
disagreeing with Enterprise Partners' calculation of the Interim Period
Adjustment and setting forth Tejas' calculation of the Interim Period
Adjustment.
If a notice of disagreement shall be duly delivered pursuant to
paragraph (c), Enterprise Partners, Tejas and Tejas Energy shall, during
the 30 days following such delivery, use their reasonable efforts to reach
agreement on the amounts in order to determine the final Interim Period
Adjustment. If, during such period, Enterprise Partners, Tejas and Tejas
Energy are unable to reach such agreement, they shall promptly thereafter
retain independent accountants (a "big 5" accounting firm other than
Deloitte & Touche LLP and PricewaterhouseCoopers LLP) to promptly review
this Agreement and the disputed amounts for the purpose of calculating the
final Interim Period Adjustment. The independent accountants shall deliver
to Enterprise Partners, Tejas and Tejas Energy, as promptly as practicable,
a report setting forth each such calculation. Such report shall be final
and binding upon Enterprise Partners, Tejas and Tejas Energy. The cost of
such review and report shall be borne equally by Enterprise Partners and
Tejas.
If the final Interim Period Adjustment is a positive number, then such
amount will be paid by Tejas or Tejas Energy to Enterprise Partners within
ten days following calculation of the final Interim Period Adjustment and
if the final Interim Period Adjustment is a negative number, then such
amount will be paid by Enterprise Partners to Tejas or Tejas Energy within
ten days following calculation of the final Interim Period Adjustment.
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ARTICLE
REPRESENTATIONS AND
WARRANTIES OF TEJAS AND TEJAS
ENERGY AS TO TEJAS AND TEJAS
ENERGY
Tejas and Tejas Energy, jointly and severally, represent and warrant to the
Enterprise Parties that the following statements were true and correct as of the
Effective Date and are true and correct as of the Closing Date:
Section Organization. Tejas is a limited liability company duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, with all requisite power and authority to own the Company and its
Subsidiaries (each of which is listed in Schedule 4.02(b) of the Tejas
Disclosure Memorandum) and to carry on its business as it is now conducted.
Tejas is a wholly-owned subsidiary of Tejas Energy. Tejas Energy is a limited
liability company duly organized, validly existing and in good standing under
the Laws of the State of Delaware, with all requisite power and authority to
carry on its business as it is now conducted. Tejas Energy is an indirect
majority-owned subsidiary of Shell Oil Company.
Section Ownership of Company Interest. Tejas is the owner, beneficially
and of record, of all the Company Interest free and clear of any Lien. At the
Closing, Tejas will assign and contribute all the Company Interest to Enterprise
Operating (as Enterprise Partners' designee) free and clear of any Lien as a
result of which Enterprise Operating (as Enterprise Partners' designee) will own
100% of the outstanding equity interests in the Company.
Section Validity and Enforceability. Each of Tejas Energy and Tejas has
the requisite power and authority to execute and deliver the Transaction
Agreements to which it is a party and to perform its obligations under such
Transaction Agreements. The execution and delivery of the Transaction Agreements
to which Tejas or Tejas Energy is a party and the consummation of the
Transactions have been duly authorized by Tejas and Tejas Energy, respectively,
and no additional authorization on the part of Tejas or Tejas Energy or any
Affiliate thereof is necessary in order to authorize the Transaction Agreements
or consummate the Transactions contemplated thereby. The Transaction Agreements
to which Tejas or Tejas Energy is a party have been or at Closing will be duly
executed and delivered by Tejas and Tejas Energy, respectively, and constitute
legal, valid and binding obligations of Tejas and Tejas Energy, respectively,
enforceable against Tejas and Tejas Energy in accordance with their terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting the rights and remedies of creditors, or by general principles of
equity
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(regardless of whether such enforceability is considered in a proceeding in
equity or at law), including the availability of specific performance.
Section Approvals and Consents. (a) Except for the requirements of
(i) the requirements and Consents listed in Schedule 3.04 of the Tejas
Disclosure Memorandum (the "Tejas Required Consents"), and (ii) those Laws,
noncompliance with which could not reasonably be expected to have an adverse
effect on the ability of Tejas or Tejas Energy to perform their respective
obligations under the Transaction Agreements, no filing or notice or
registration with, no waiting period imposed by and no Permit or Judgment of,
any Governmental Authority is required under any Law applicable to Tejas or
Tejas Energy and no notice to or Consent of any Person is required to permit
Tejas or Tejas Energy to execute, deliver or perform their obligations under the
Transaction Agreements to be executed and delivered by either of them at the
Closing.
(b) Tejas represents that all filings required under the HSR Act to be made
by Tejas or its Affiliates in order for Tejas to consummate the Transactions
have been made and the applicable waiting period thereunder has expired.
Section No Violation. Assuming receipt of all Tejas Required Consents,
neither the execution and delivery by Tejas Energy and Tejas of the Transaction
Agreements nor the performance by Tejas Energy or Tejas of their respective
obligations thereunder will violate or breach the terms of or cause a default
under (i) any Law or Judgment applicable to Tejas or Tejas Energy, (ii) the
certificate of formation, the limited liability company agreement or other
organizational documents of Tejas or Tejas Energy, or (iii) any contract or
agreement to which Tejas or Tejas Energy or any of their respective Affiliates
(other than the Company and its Subsidiaries) is a party or by which it or any
of its properties or assets is bound, except in any such case for any matters
described in this Section 3.05 that would not reasonably be expected to have an
adverse effect upon the ability of Tejas or Tejas Energy to perform their
respective obligations under the Transaction Agreements.
Section Litigation. Except as set forth on Schedule 3.06 of the Tejas
Disclosure Memorandum, there are no Proceedings pending, or, to the Knowledge of
Tejas or Tejas Energy, threatened, against Tejas or Tejas Energy, at law or in
equity, in any Court or before or by any Governmental Authority that
(i) questions the validity of any Transaction Agreement or seeks to restrain,
prohibit, invalidate, set aside, prevent or make unlawful any Transaction
Agreement or any of the Transactions, or (ii) if adversely determined (x) would
prevent or impair the ability of Tejas or Tejas Energy to perform any of their
obligations under the Transaction Agreements or (y) would have a Material
Adverse Effect on the Company.
Section Investment Intent.
(a) Each of Tejas and Tejas Energy is capable of evaluating the merits
and risks of its investment in the Units and the GP Interest. Tejas Energy
is taking the Units and the GP Interest for its own account and not with
any current view to or intent to sell in
HOU04:132863.11
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connection with any distribution of such securities as such terms are
defined under the Securities Act. Each of Tejas and Tejas Energy has
reviewed Enterprise Partners' Annual Report on Form 10-K for the year ended
December 31, 1998 and Quarterly Report on Form 10-Q for the quarters ended
March 31, 1999 and June 30, 1999 (the "Enterprise Partners SEC Reports").
Each of Tejas and Tejas Energy has had an opportunity to discuss Enterprise
Partners' and Enterprise GP's business and financial condition, properties,
operations and prospects with Enterprise Partners' and Enterprise GP's
management and to ask questions of officers of Enterprise Partners and
Enterprise GP.
(b) Tejas and Tejas Energy understand that (i) the Units and the GP
Interest will be "restricted securities" under the applicable federal
securities laws, (ii) the Securities Act and the rules of the SEC provide
in substance that such unitholder may dispose of the Units and the GP
Interest only pursuant to an effective registration statement under the
Securities Act or in a transaction exempt from the registration
requirements of the Securities Act, and (iii) except as set forth in the
Registration Rights Agreement, Enterprise Partners has no obligation or
intention to register the sale of the Units or the GP Interest pursuant to
the Securities Act, and that, accordingly, Tejas Energy and Tejas may be
required to bear the economic risk of the investment in Units and the GP
Interest for a substantial period of time.
(c) Tejas and Tejas Energy agree that certificates representing the
Units shall be subject to appropriate stop-transfer instructions to be
given by Enterprise Partners to its transfer agents and shall have endorsed
thereon a legend substantially as follows:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
or under any applicable state law, and may not be transferred without
registration under the Act or such applicable state law unless an
exemption from such registration is available thereunder.
Enterprise Partners agrees to remove such legend at such time as
the Units are freely tradeable under Rule 144 or otherwise.
Section No Brokers. None of Tejas Energy, Tejas, the Company nor any of
their respective Subsidiaries or Affiliates has, directly or indirectly, entered
into any agreement with any Person that would obligate the Company, any of its
Subsidiaries or any of the Enterprise Parties to pay any commission, brokerage
fee or "finder's fee" in connection with the Transactions.
HOU04:132863.11
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ARTICLE
REPRESENTATIONS AND
WARRANTIES OF TEJAS AND TEJAS
ENERGY AS TO THE COMPANY AND
ITS SUBSIDIARIES
Tejas and Tejas Energy, jointly and severally, represent and warrant to the
Enterprise Parties as to the Company and its Subsidiaries that the following
statements were true and correct at the Effective Date and are true and correct
as of the Closing Date:
Section Organization. Each of the Company and its Subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite power and authority to
carry on its business as it is now being conducted and to own, lease and operate
its properties where now conducted, owned, leased or operated. Each of the
Company and its Subsidiaries is duly licensed or qualified to do business and is
in good standing in each jurisdiction where such license or qualification is
required to carry on its business as now conducted, except where the failure to
be so qualified or licensed or in good standing, as the case may be, could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
Section Capitalization.
(a) All of the issued and outstanding Company Interest has been duly
authorized and is validly issued. There are no outstanding or authorized
(i) options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments, other than this
Agreement, that could require the Company or Tejas to issue, sell, or
otherwise cause to become outstanding any member interests in the Company
or (ii) securities or rights convertible into or exchangeable or
exercisable for, membership interests of the Company or any contracts,
commitments, understandings or arrangements by which the Company or Tejas
is or may be bound to issue, redeem, purchase or sell membership interests
in the Company or securities convertible into or exchangeable for any such
membership interests in the Company.
(b) Schedule 4.02(b) of the Tejas Disclosure Memorandum sets forth a
complete list of (i) all of the Subsidiaries of the Company, the
jurisdiction of incorporation or formation of each such Subsidiary and the
number of issued and outstanding membership interests of each such
Subsidiary and the record holders thereof, (ii) all Joint Ventures,
including a description of the type of such entity, the ownership interest
of the Company its Subsidiaries therein and, to the Knowledge of Tejas, the
names and ownership interests of the other holders thereof and (iii) the
ownership interest of the Company and each Company Subsidiary in any
co-ownership arrangement wherein the Company or its Subsidiary is a co-
owner of assets. Except as set forth on Schedule 4.02(b) of the Tejas
Disclosure
HOU04:132863.11
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Memorandum all of the outstanding membership interests of the Company's
Subsidiaries are owned beneficially and of record by the Company or the
Company's Subsidiaries, free and clear of all Liens. There are no
outstanding or authorized (i) options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts
or commitments other than as contemplated by this Agreement, that would
require the Company or any of its Subsidiaries or Tejas to issue, sell or
otherwise cause to become outstanding any membership interests of the
Company or any of its Subsidiaries or (ii) securities or rights convertible
into or exchangeable or exercisable for, any such membership interests or
any contracts, commitments, understandings or arrangements by which the
Company or Tejas is or may be bound to issue, redeem, purchase or sell such
membership interests or securities convertible into or exchangeable for any
such membership interests. Except as set forth on Schedule 4.02(b) of the
Tejas Disclosure Memorandum, all of the Company's or any of its
Subsidiary's interests in the Joint Ventures are owned beneficially and of
record by the Company or the Company's Subsidiaries, free and clear of all
Liens and neither Tejas, the Company nor any Subsidiary has entered into
any contracts or agreements by which the Company or any of its Subsidiaries
is or may be bound to sell or otherwise transfer, directly or indirectly,
such interests provided this representation is not intended to cover
preferential rights and other similar rights of refusal or purchase rights
contained in any of the Material Contracts listed on Schedule 4.12(a).
Section No Violation. Assuming receipt of all Company required consents
("Company Required Consents") indicated as required in Schedule 4.03 of the
Tejas Disclosure Memorandum, neither the execution and delivery by Tejas and
Tejas Energy of the Transaction Agreements nor the performance by Tejas or Tejas
Energy of their obligations hereunder or thereunder will (a) (i) violate or
breach the terms of or cause a default under any Law or any Judgment applicable
to the Company or any of its Subsidiaries, (ii) conflict with or violate any
provisions of the certificate of organization, the limited liability company
agreement or other organizational documents of the Company or any of its
Subsidiaries or (iii) conflict with, or result in the breach of, or constitute a
default under, or result in the termination, cancellation or acceleration
(whether after the giving of notice or the lapse of time or both) of any right
or obligation under, any note, bond, mortgage, indenture, license, lease,
agreement, contract, arrangement or commitment to which the Company or any of
its Subsidiaries is a party or by which they or any of their properties or
assets are bound, or (b) result in the creation or imposition of any Lien on any
of the properties or assets of the Company or any of its Subsidiaries, except in
any such case for any matters described in this Section 4.03 that individually
or in the aggregate could not reasonably be expected to have a Material Adverse
Effect on the Company.
Section Permits. Except as set forth on Schedule 4.04 of the Tejas
Disclosure Memorandum, the Company and each of its Subsidiaries have all Permits
required to conduct their respective businesses as currently conducted and the
Company and each of the Subsidiaries have been operating their respective
businesses pursuant to and in compliance with the terms of all such Permits,
except for such failures to comply which have not resulted in, individually or
in the aggregate, a Material Adverse Effect on the Company. Except as set forth
on Schedule 4.04 of the
HOU04:132863.11
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Tejas Disclosure Memorandum, such Permits held by the Company and its
Subsidiaries are valid and in full force and effect and none of such Permits
will, assuming the Company Required Consents have been obtained, be cancelled,
forfeited, revoked, suspended or terminated as a result of the transactions
contemplated by this Agreement, except, in each case, such Permits the
cancellation, forfeiture, revocation, suspension or termination of which would
not have a Material Adverse Effect on the Company.
Section Compliance With Applicable Law. Except as set forth on
Schedule 4.05 of the Tejas Disclosure Memorandum, each of the Company and its
Subsidiaries is presently complying with and in the past has complied with all
applicable Laws and Judgments, except for such failures to comply which,
individually or in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect on the Company.
Section Litigation.
(a) Except as set forth on Schedule 4.06(a) of the Tejas Disclosure
Memorandum, there are no Proceedings pending or, to the Knowledge of Tejas
or Tejas Energy, threatened, against the Company or any of its Subsidiaries
or to which the Company or any of the Subsidiaries is or will be a party.
(b) Except as set forth on Schedule 4.06(b) of the Tejas Disclosure
Memorandum, none of the Proceedings referred to in Section 4.06(a) above
would reasonably be expected to result in a Material Adverse Effect on the
Company or materially impair Tejas' or Tejas Energy's ability to effect the
Closing.
Section Taxes.
(a) The Company, its Subsidiaries, the Tejas Joint Ventures and the Tejas
Co- ownerships have not, on or prior to the Closing Date, filed an election
under Treasury Regulation, Paragraph 301.7701-3 to be classified as a
corporation for federal income Tax purposes. During the entirety of the period
from the date of its formation through the Closing Date, each of the Company and
the Tejas LLCs has been a business entity that has had and will have a single
owner at any given point in time and is and will be disregarded as an entity
separate from its owner for federal income Tax purposes under Treasury
Regulation Sections 301.7701-2 and -3 and any comparable provision of applicable
state or local Tax law that permits such treatment. Each of the Tejas Joint
Ventures (other than the Dixie Pipeline Company) is treated and classified as a
partnership for federal income Tax purposes under Treasury Regulation, Paragraph
301.7701-2 and -3. Each of the Tejas Co-ownerships is classified and treated as
a co-ownership rather than a partnership or association taxable as a corporation
for federal income Tax purposes under Treasury Regulation, Paragraph 301.7701-2
and -3.
(b) Except as set forth on Schedule 4.07 of the Tejas Disclosure
Memorandum, all Tax Returns of the Company, its Subsidiaries, the Tejas
Joint Ventures and the Tejas Co-
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ownerships that are required to be filed (taking into account any
extensions of time within which to file) before the Closing Date, have been
filed, the information provided in such Tax Returns is complete and
accurate in all material respects, and all Taxes owed by the Company, its
Subsidiaries, the Tejas Joint Ventures and the Tejas Co-ownerships have
been timely paid in full.
(c) There are no Liens for Taxes upon the assets of any of the Company
and its Subsidiaries or the Tejas Co-Ownerships, or, to the Knowledge of
Tejas or Tejas Energy, upon the assets of any of the Tejas Joint Ventures
(excluding the Company's Subsidiaries), other than with respect to ad
valorem Taxes which are not yet delinquent or Permitted Liens. Each of the
Company and its Subsidiaries, and, to the Knowledge of Tejas or Tejas
Energy, each of the Tejas Joint Ventures (excluding the Company's
Subsidiaries) has fully complied with all applicable federal, state and
local employment Tax, withholding and contribution obligations with respect
to its employees, and all other Tax withholding obligations required by
law.
(d) Each of the Company and its Subsidiaries and, to the Knowledge of
Tejas or Tejas Energy, the Joint Ventures (excluding the Company's
Subsidiaries) (or the operators of the Joint Ventures and/or Tejas), to the
extent required by Section 4081 et seq. of the Code, has obtained a
currently effective IRS Form 637 registration number.
Section Financial Statements. Copies of the financial statements of the
Company and its Subsidiaries consisting of a statement of assets acquired and
liabilities assumed of the Company and its Subsidiaries as of December 31, 1998,
and the related statement of revenues and direct operating expenses for the year
ended December 31, 1998 (including the notes thereto), which financial
statements have been audited, and are accompanied by the audit opinion of
Deloitte & Touche LLP (the "Financial Statements") have been provided to
Enterprise Partners. Except for the Retained Liabilities, such Financial
Statements present fairly, in all material respects, the assets acquired and
liabilities assumed as of December 31, 1998 and the revenues and direct
operating expenses for the year ended December 31, 1998 of the Company and its
Subsidiaries pursuant to this Agreement in conformity with generally accepted
accounting principles consistently applied.
Section Absence of Certain Changes. Since December 31, 1998, except as
set forth in Schedule 4.09 of the Tejas Disclosure Memorandum, the Company and
its Subsidiaries have conducted their respective businesses in the ordinary
course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of circumstances or
facts (other than economic conditions or facts or circumstances applicable
to the natural gas liquids industry in general) which, individually or in
the aggregate, has had or could reasonably be expected to have a Material
Adverse Effect on the Company;
HOU04:132863.11
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(b) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the Company and its Subsidiaries which,
individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect on the Company;
(c) any material transaction or commitment made, or, any Material
Contract entered into, by the Company or any of its Subsidiaries (including
the acquisition or disposition of any assets) or any relinquishment by the
Company or any of its Subsidiaries of any Material Contract, other than
transactions and commitments in the ordinary course of business consistent
with past practices and those contemplated by the Transaction Agreements;
(d) except as contemplated by this Agreement and except for any such
change after the date of this Agreement required by reason of a concurrent
change in generally accepted accounting principles, any change in any
method of accounting or accounting practice with respect to the Company and
its Subsidiaries; and
(e) any amendment of the terms of or breach of the provisions of (or
any event which, with notice or passage of time or both would constitute a
breach by the Company or the Subsidiaries of) the Shell Processing
Agreement which could result in the termination of such agreement by any
Shell Affiliate party thereto.
Section Bank Accounts. Schedule 4.10 of the Tejas Disclosure Memorandum
includes the names and locations of all banks in which the Company or any of its
Subsidiaries has an account or safe deposit box related to the Business and the
names of all persons authorized to draw thereon or to have access thereto.
Section Conduct of Business From the Effective Date to the Closing Date.
From the Effective Date to the Closing Date and, except as otherwise
contemplated by this Agreement, Tejas and Tejas Energy:
(a) have caused the Company and its Subsidiaries to conduct the
business and operations of the Company and its Subsidiaries in the ordinary
course;
(b) have not permitted the Company or its Subsidiaries to dispose of
any assets of the Business except for Excluded Assets and inventory sold in
the ordinary course of business;
(c) have not permitted the Company or its Subsidiaries to make any
loans, advances, distributions or dividends to Tejas or its Affiliates
(other than the Company or its Subsidiaries);
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(d) have not permitted the Company or its Subsidiaries to use their
respective cash or properties to pay any Retained Liabilities other than as
adjusted for in Section 2.07;
(e) have not permitted the Company or its Subsidiaries to incur,
create or assume any Lien on any individual asset of the Company or its
Subsidiaries other than Permitted Liens; and
(f) have not permitted the Company or its Subsidiaries to incur any
Indebtedness for Borrowed Money except for amounts borrowed from Tejas or
its Affiliates which will be extinguished pursuant to Section 6.07 below.
Section Material Contracts or Indebtedness.
(a) Schedule 4.12(a) of the Tejas Disclosure Memorandum includes a
list of the following agreements, arrangements or understandings to which
the Company or any Subsidiary or any Joint Venture of which the Company or
a Company Subsidiary is the operator is a party (or with respect to
subsection (xii) below to which any such party or Tejas or Tejas Energy or
any other Shell Affiliate is a party) (each, a "Material Contract"):
(i) any site lease with respect to a Facility;
(ii) any lease (whether of real or personal property) providing
for annual rental payments or receipts of $1,500,000 or more;
(iii) any operating agreements under which the Company or any
Company Subsidiary is the operator;
(iv) any construction agreements providing for annual payments by
the Company or any Subsidiary of $1,500,000 or more;
(v) any pipeline tariff agreements;
(vi) any storage agreements providing for annual payments or
receipts by the Company or any Subsidiary of $1,500,000 or more, other
than agreements which have a term of 30 days or less or can be
terminated with 30 days or less notice without penalty;
(vii) partnership agreements, limited liability agreements and
joint venture agreements and construction and operation agreements;
(viii) any gas processing agreements, fractionation agreements,
NGL supply and sale agreements, marketing agreements, straddle
agreements, balancing agreements, interconnection agreements or
utility contracts in each case providing
HOU04:132863.11
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for annual payments or receipts in excess of $1,500,000 other than
agreements which have a term of 30 days or less or can be terminated
with 30 days or less notice without penalty;
(ix) any agreement (other than the Transaction Agreements)
relating to the acquisition or disposition of a Subsidiary or any
material asset outside the ordinary course of business (whether by
merger, sale of stock, sale of assets or otherwise), other than as set
forth on Schedule 4.12(a)(ix) of the Tejas Disclosure Memorandum;
(x) any agreement or series of related agreements relating to
Indebtedness for Borrowed Money or any guarantee thereof in excess of
$1,500,000;
(xi) any agreement or arrangement with Tejas Energy or Tejas or
an Affiliate of Shell Oil Company on the one hand and the Company or
any of its Subsidiaries on the other hand; and
(xii) any agreement which restricts the Company or its
Subsidiaries or Enterprise Partners or any of its Affiliates from
engaging in any line of business which the Company or any of the
Subsidiaries is conducting immediately prior to the Closing Date.
(b) True and complete copies of each such Material Contract have been
made available to Enterprise Partners.
(c) Except as disclosed in Schedule 4.12(c) of the Tejas Disclosure
Memorandum, each Material Contract is a legal, valid and binding obligation
of each of the Company and/or any Subsidiary that is a party thereto and,
to the Knowledge of Tejas or Tejas Energy, each other party to such
Material Contract, enforceable against the Company and/or such Subsidiary
and, to the Knowledge of Tejas or Tejas Energy, each such other party in
accordance with its terms (except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally and general equitable principles
(regardless of whether such enforceability is considered in a proceeding at
law or in equity)), and neither the Company nor any Subsidiary nor, to the
Knowledge of Tejas Energy or Tejas, any other party to such Material
Contract is in material default or has failed to perform any material
obligation under such Material Contract, and there does not exist any
event, condition or omission which would constitute a material breach or
material default (whether by lapse of time or notice or both), except for
any such defaults, failures or breaches as, individually or in the
aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect.
(d) Neither the Company nor any Subsidiary is in breach of or has
failed to perform or has taken any action or failed to perform any action
that, with notice or passage of time or both, would be a breach, under any
Material Contract referred to in clause (a)(xi)
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above where such breach could result in the Shell Oil Company Affiliate
terminating or having the right to terminate or cancel such agreement or
which would otherwise have a Material Adverse Effect on the Company.
Section Assets.
(a) Schedule 4.13(a) of the Tejas Disclosure Memorandum correctly
describes all real property (the "Real Property") which the Company or any
of its Subsidiaries owns, leases or subleases, any title insurance policies
and surveys with respect to such Real Property, specifying in the case of
leases or subleases, the name of the lessor or sublessor, the lease term
and the basic annual rent.
(b) Schedule 4.13(b) of the Tejas Disclosure Memorandum sets forth,
with respect to each Facility, the name and location of such Facility,
whether such Facility is a gas processing, fractionation, storage or
pipeline facility, the capacity of such Facility, the ownership interest of
the Company and its Subsidiaries in each such Facility and the name of the
operator of each Facility.
(c) Subject to execution and filing of the acts of amendment and
conveyances (as described in Section 6.09), the Company or a Subsidiary
thereof has good and indefeasible title to, or in the case of leased Real
Property or personal property, valid leasehold interests in, all material
assets (whether real, personal, tangible or intangible) reflected in the
Audited Financial Statements or acquired after December 31, 1998, including
the interests in the Facilities described in Schedule 1.01(a) of the Tejas
Disclosure Memorandum. Except as set forth on Schedule 4.13(c) of the Tejas
Disclosure Memorandum, no material asset of the Company or any of its
Subsidiaries is subject to any Lien, except for Permitted Liens.
Section Employees, Employee Benefits. None of the Company nor any
Subsidiary thereof has any employees or maintains or is liable under any
employee compensation, benefit, pension or welfare plan or arrangement.
Section Sufficiency of Assets Held by the Company and its Subsidiaries.
Except as provided in Schedule 4.15 of the Tejas Disclosure Memorandum, the
assets to be held by the Company and its Subsidiaries as of the Closing will
constitute all of the properties or assets necessary to conduct the Business as
conducted at the Effective Date.
Section Intellectual Property.
(a) Schedule 4.16 of the Tejas Disclosure Memorandum contains a list
of all Intellectual Property Rights owned or licensed by Tejas Energy, or
Tejas or the Company or any of its Subsidiaries that Enterprise Partners
has identified that it desires to use following the Closing ("Material
Intellectual Property Rights").
HOU04:132863.11
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(b) Schedule 4.16 of the Tejas Disclosure Memorandum sets forth a list
of all material licenses, sublicenses and other agreements involving
Material Intellectual Property Rights as to which the Company or any of its
Subsidiaries is a party.
(c) (i) Except as set forth in Schedule 4.16 of the Tejas Disclosure
Memorandum, since February 2, 1998, none of the Company and its
Subsidiaries has been a defendant in any action, suit, investigation or
proceeding relating to, or otherwise has been notified of, any alleged
claim of infringement of any Material Intellectual Property Right, and none
of Tejas or the Company or any of its Subsidiaries has any Knowledge of any
other such infringement by the Company or any of its Subsidiaries, and (ii)
none of the Company and its Subsidiaries has any outstanding claim or suit
for, and has no Knowledge of, any continuing infringement by any other
Person of any Material Intellectual Property Rights. No Material
Intellectual Property Right is subject to any outstanding judgment,
injunction, order, decree or agreement restricting the use of such Material
Intellectual Property Right by the Company or any of its Subsidiaries or
restricting the licensing of such Material Intellectual Property Right by
the Company or any of its Subsidiaries to any Person. None of the Company
and its Subsidiaries has entered into any agreement to indemnify any other
Person against any charge of infringement of any Material Intellectual
Property Right.
Section Non-Business Related Assets. Since its formation in 1998 and
other than the Excluded Assets, neither the Company nor any of its Subsidiaries
has owned any assets which were not involved in, used in or otherwise related to
the conduct of the Business.
ARTICLE
REPRESENTATIONS AND
WARRANTIES OF THE ENTERPRISE
PARTIES
The Enterprise Parties, jointly and severally, and EPC II, severally and
only as to representations and warranties applicable to EPC II in Sections
5.01(b), 5.02(b), 5.03, 5.04(a), and 5.05, and to the representations and
warranties in 5.01(c) and 5.10(a), (b), (c), (e) and (h) and Enterprise Products
severally and only as to the representations applicable to Enterprise Products
in Sections 5.02(a), 5.03, 5.04(a) and 5.05, represent and warrant to Tejas and
Tejas Energy that the following statements were true and correct as of the
Effective Date and are true and correct as of the Closing Date:
Section Organization.
(a) Each of Enterprise Partners and Enterprise Operating is a limited
partnership duly organized, validly existing and in good standing under the
Laws of the State of Delaware with all requisite power and authority to
own, lease and operate its properties and to carry on its business as
currently conducted.
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(b) EPC II is a corporation duly incorporated, validly existing and in
good standing under the laws of Delaware with all requisite power and to
own, lease and operate its properties and to carry on its business as
currently conducted.
(c) Enterprise GP is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware with all requisite power and authority to own, lease and operate
its properties and to carry on its business as currently conducted.
Section Authorization of Agreement.
(a) Each of the Enterprise Parties and Enterprise Products has all
requisite power and authority to enter into the Transaction Agreements to
which it is a party, to perform its obligations thereunder and to
consummate the Transactions to which it is a party. The execution and
delivery by each of the Enterprise Parties and Enterprise Products of such
Transaction Agreements, and the performance of their obligations
thereunder, have been duly and validly authorized by all requisite action
on the part of the Enterprise Parties and Enterprise Products. The
Transaction Agreements to which the Enterprise Parties or Enterprise
Products are a party have been executed and delivered by such Enterprise
Parties and Enterprise Products, constitute legal, valid and binding
obligations of such Enterprise Parties and Enterprise Products, and are
enforceable against them in accordance with their terms, except as the same
may be limited by bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting the rights and
remedies of creditors, or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law), including the availability of specific performance.
(b) EPC II has all requisite corporate power and authority to enter
into the Transaction Agreements to which it is a party, to perform its
obligations thereunder and to consummate the Transactions. The execution
and delivery by EPC II of the Transaction Agreements to which it is a
party, and the performance of its obligations thereunder, have been duly
and validly authorized by all requisite action on the part of EPC II. Each
Transaction Agreement to which EPC II is a party has been duly executed and
delivered by EPC II, constitutes a legal, valid and binding obligation of
EPC II, and is enforceable against EPC II in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating
to or affecting the rights and remedies of creditors, or by general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), including the availability
of specific performance.
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Section No Violations. The execution, delivery and performance by the
Enterprise Parties, EPC II and Enterprise Products of the Transaction
Agreements, and the consummation of the Transactions do not and will not
(i) conflict with or violate any provision of the organizational documents of
the Enterprise Parties, EPC II or Enterprise Products, (ii) subject to obtaining
the Enterprise Required Consents, conflict with, or result in the breach of, or
constitute a default under, or result in the termination, cancellation or
acceleration (whether after the giving of notice or the lapse of time or both)
of any right or obligation of the Enterprise Parties, EPC II or Enterprise
Products, under any note, bond, mortgage, indenture, Permit, license, lease,
agreement, contract, arrangement or commitment to which any of the Enterprise
Parties, EPC II or Enterprise Products is a party or by which the Enterprise
Parties, EPC II or Enterprise Products or any of their assets or properties are
bound or affected, or (iii) subject to obtaining the Enterprise Required
Consents, violate or result in a breach of or constitute a default under any Law
or Judgment applicable to the Enterprise Parties, EPC II or Enterprise Products,
or by which the Enterprise Parties, EPC II or Enterprise Products, or any of
their respective assets are bound or affected, except, in the cases of clauses
(ii) and (iii), for any conflict, breach, default, termination, cancellation,
acceleration, loss or violation which, individually or in the aggregate, would
not materially impair the Enterprise Parties', EPC II's or Enterprise Products'
ability to effect the Closing or have a Material Adverse Effect on Enterprise
Partners, Enterprise Operating and their respective Subsidiaries or on
Enterprise GP.
Section Approvals. (a) Except for the requirements of the Consents listed
in Schedule 5.04 ("Enterprise Required Consents"), no Consent is required to be
obtained by the Enterprise Parties, EPC II or Enterprise Products, or any of
their respective Affiliates from, and no notice or filing is required to be
given by the Enterprise Parties, EPC II or Enterprise Products or any of their
respective Affiliates to or made by the Enterprise Parties, EPC II or Enterprise
Products or any of their respective Affiliates with, any Governmental Authority
or other Person in connection with the execution, delivery and performance by
the Enterprise Parties, EPC II or Enterprise Products of the Transaction
Agreements, other than in all cases where the failure to obtain such Consent or
approval or to give or make such notice or filing would not, individually or in
the aggregate, impair the Enterprise Parties', EPC II's or Enterprise Products'
ability to effect the Closing or have a Material Adverse Effect on Enterprise
Partners, Enterprise Operating and their respective Subsidiaries or on
Enterprise GP.
(b) The Enterprise Parties represent that all filings required under the
HSR Act to be made by the Enterprise Parties or their Affiliates in order for
the Enterprise Parties to consummate the Transactions have been made and early
termination of the applicable waiting period thereunder has expired.
Section Litigation; Impairment. There are no actions, suits, claims or
proceedings pending (whether at law or in equity) or, to the Knowledge of the
Enterprise Parties, EPC II and Enterprise Products, threatened against or
involving Enterprise Partners, Enterprise Operating, or their respective
Subsidiaries or Enterprise GP in any Court or before or by any Governmental
Authority which (i) questions the validity of any Transaction Agreement or seeks
to
HOU04:132863.11
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restrain, prohibit, invalidate, set aside, prevent or make unlawful any
Transaction Agreement or any of the Transactions, or (ii) if adversely
determined (x) would prevent or impair the ability of Enterprise Partners or
Enterprise Operating to purchase the Company Interest, the ability of EPC II to
sell the GP Interest to Tejas or the ability of the Enterprise Parties or
Enterprise Products to perform any of their obligations under the Transaction
Agreements or (y) would have a Material Adverse Effect on Enterprise Partners,
Enterprise Operating and their respective Subsidiaries or on Enterprise GP.
Section Compliance With Applicable Law. Each of Enterprise Partners,
Enterprise Operating and its Subsidiaries and Enterprise GP is presently
complying with all applicable Laws and Judgments, except for such failures to
comply which, individually or in the aggregate, would not reasonably be expected
to result in a Material Adverse Effect on Enterprise Partners, Enterprise
Operating or its Subsidiaries or Enterprise GP.
Section Permits. Each of the Enterprise Partners, Enterprise Operating
and each of their respective Subsidiaries and Enterprise GP have all Permits
required to conduct their respective business as currently conducted and such
entities have been operating their respective businesses pursuant to and in
compliance with the terms of all such Permits, except for such failures to
comply which have not resulted in, individually or in the aggregate, a Material
Adverse Effect on the Enterprise Parties, Enterprise Operating and their
respective Subsidiaries or on Enterprise GP. Such Permits held by the Enterprise
Partners, Enterprise Operating and their respective Subsidiaries and Enterprise
GP are valid and in full force and effect and none of the Permits will, assuming
the Enterprise Required Consents have been obtained, be terminated or become
terminable as a result of the transactions contemplated by this Agreement,
except, in each case, such Permits the termination or impairment of which would
not have a Material Adverse Effect on Enterprise Partners, Enterprise Operating
and their respective Subsidiaries or Enterprise GP.
Section Taxes.
(a) All Tax Returns of Enterprise Partners, Enterprise Operating,
Enterprise GP and their respective Subsidiaries that are required to be
filed (taking into account any extensions of time within which to file)
before the Closing Date, have been or will be filed, the information
provided in such Tax Returns is complete and accurate in all material
respects, and all Taxes shown to be due and payable by Enterprise Partners,
Enterprise Operating, Enterprise GP and their respective Subsidiaries on
such Tax Returns have been or will be paid in full.
(b) Enterprise Partners and Enterprise Operating have not, and will
not on or prior to the Closing Date, file an election under Treasury Reg.
Paragraph 301.7701-3 to be classified as a corporation for federal income
tax purposes. During the entirety of the period from the date of the
formation through the Closing, each of the Enterprise Partners and
Enterprise Operating has been and will be treated and classified as a
partnership for federal income tax purposes under Treasury Reg. Paragraph
301.7701-2 and -3 and ninety percent (90%) or more of
HOU04:132863.11
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Enterprise Partners' gross income is income derived from the exploration,
development, mining or production, processing, refining, transportation or
marketing of any mineral or natural resource or other items of "qualifying
income" within the meaning of Section 7704 of the Code.
Section SEC Reports. Since August 1, 1998 (a) Enterprise Partners
has timely made all filings required to be made by the Securities Act and
the Exchange Act, (b) all filings by Enterprise Partners with the SEC, at
the time filed (in the case of documents filed pursuant to the Exchange
Act) or when declared effective by the SEC (in the case of registration
statements filed under the Securities Act) complied in all material
respects with the applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations of the SEC thereunder, (c) no
such filing, at the time described above, contained any untrue statement of
a material fact or omitted to state any material fact required to be stated
therein in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading, and (d) all
financial statements contained or incorporated by reference therein
complied as to form when filed in all material respects with the rules and
regulations of the SEC with respect thereto, were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto), and fairly present in all material respects the financial
condition and results of operations of Enterprise Partners at and as of the
respective dates thereof and the consolidated results of its operations and
changes in cash flows for the periods indicated (subject in the case of
unaudited statements, to normal year-end audit adjustments).
Section Ownership; Issuance of Special Units.
(a) Enterprise GP is the sole general partner of Enterprise Partners,
with a 1% general partner interest in Enterprise Partners.
(b) Enterprise GP is the sole general partner of Enterprise Operating,
with a 1.0101% general partner interest in Enterprise Operating.
(c) All of the general partner interests in Enterprise Partners and
Enterprise Operating have been duly authorized and have been validly issued
to Enterprise GP in accordance with the Enterprise Partners Partnership
Agreement and Enterprise Operating Partnership Agreement, and are owned by
Enterprise GP free and clear of all Liens.
(d) Enterprise Partners is the sole limited partner of Enterprise
Operating with a 98.9899% limited partner interest in Enterprise Operating;
such limited partner interest has been duly authorized and validly issued
in accordance with the Enterprise Operating Partnership Agreement, is fully
paid (to the extent required by the Enterprise Operating Partnership
Agreement) and nonassessable (as such nonassessability may be affected by
matters described in the Enterprise Partners' Prospectus dated July 27,
1998 under the
HOU04:132863.11
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caption "The Partnership Agreement--Limited Liability") and is owned by
Enterprise Partners free and clear of all Liens.
(e) Except as set forth on Schedule 5.10(e), all of the membership
interests in Enterprise GP have been duly authorized and validly issued and
are fully paid and nonassessable, and are owned 95% by EPC II and 5% by Dan
Duncan LLC free and clear of Liens.
(f) The only outstanding limited partner interests of Enterprise
Partners (other than the Special Units) are 45,552,915 Common Units and
21,409,870 Subordinated Units, which have been duly authorized by the
Enterprise Partners Partnership Agreement and are validly issued and fully
paid (to the extent required under the Enterprise Partners Partnership
Agreement) and nonassessable (except as such nonassessability may be
affected by matters described in the Enterprise Partners' Prospectus dated
July 27, 1998 under the caption "The Partnership Agreement--Limited
Liability"). Except as set forth on Schedule 5.10(f), there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other contracts, commitments
or obligations that could require Enterprise Partners to issue any
additional units or equity other than as set forth in this Agreement.
Enterprise Partners has not granted any registration rights with respect to
partnership units or other equity to any third parties.
(g) When issued and delivered to Tejas at the Closing, the Special
Units shall have been duly authorized and validly issued to Tejas in
accordance with the Enterprise Partners Amended Partnership Agreement and
fully paid and nonassessable (except as such nonassessability may be
affected by matters described in the Enterprise Partners' Prospectus dated
July 27, 1998 under the caption "The Partnership Agreement--Limited
Liability.") Upon its receipt of the Special Units at Closing, Tejas will
receive good and indefeasible title to the Special Units free and clear of
Liens.
(h) EPC II owns Common Units representing 73.657% of the issued and
outstanding Common Units.
Section Financing. Enterprise Partners has, or has arranged for, the
funds necessary to pay the Other Consideration to Tejas.
Section No Brokers. None of the Enterprise Parties has employed any
investment banker, broker, or finder in connection with the transactions
contemplated by this Agreement, nor has any of them taken any action which would
give rise to a valid claim against Tejas or Tejas Energy for a brokerage
commission, finde's fee, or other like payment.
HOU04:132863.11
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Section Investment Intent.
(a) The Enterprise Parties are capable of evaluating the merits and
risks of their investment in the Company Interest. The Enterprise Parties
are taking the Company Interest for their own account and not with a
current view to or intent to sell in connection with any distribution of
such securities as such terms are defined under the Securities Act. The
Enterprise Parties have had an opportunity to discuss the Company's and its
Subsidiaries' and its Joint Ventures' and co-ownerships' business and
financial condition, properties, operations and prospects with the
Company's and its Subsidiaries' management and to ask questions of officers
of the Company and its Subsidiaries.
(b) The Enterprise Parties understand that (i) the Company Interests
will be "restricted securities": under the applicable federal securities
laws, and (ii) that the Securities Act and the rules of the SEC provide in
substance that such equity holder may dispose of the Company Interests only
pursuant to an effective registration statement under the Securities Act or
in a transaction exempt from the registration requirements of the
Securities Act, and that, accordingly, the Enterprise Parties may be
required to bear the economic risk of the investment in the Company
Interests for a substantial period of time.
ARTICLE
COVENANTS
Section Access to Information Following the Closing.
(a) To the extent reasonably necessary or desirable in connection
with Tejas' ownership of the Company Interest (including tax related
matters), after the consummation of the Transactions, Tejas will have
reasonable access at all reasonable times and in a manner so as not to
interfere with the normal business operations of the Company and its
Subsidiaries, to all premises, properties, personnel, books, records, work
papers, contracts and documents of or pertaining to each of the Company and
its Subsidiaries to the extent relating to the Business or assets of the
Business as existing at the Closing. Enterprise Partners shall preserve all
such information, records and documents for a period of seven (7) years
following the Closing.
(b) Each of the parties hereto will preserve and retain all schedules,
work papers and other documents relating to any Tax Returns of or with
respect to the Company or any of its Subsidiaries or to any claims, audits
or other proceedings affecting the Company or any of its Subsidiaries until
the expiration of the statute of limitations (including extensions)
applicable to the taxable period to which such documents relate or until
the final determination of any controversy with respect to such taxable
period and until the final determination of any payments that may be
required with respect to such taxable period under this Agreement.
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Section Intentionally Deleted.
Section Public Announcements. The Enterprise Parties and Tejas and Tejas
Energy will consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or the
transactions contemplated by this Agreement and, except as may be required by
applicable Law or any securities exchange on which the securities of the parties
or their Affiliates are listed (following notice and consultation), neither the
Enterprise Parties nor Tejas or Tejas Energy shall issue any such press release
or make any such public statement without the prior approval of the other party
to this Agreement, such approval not to be unreasonably withheld or delayed.
Section Removal of Tradenames. As soon as reasonably practicable after
the Closing (and in any event, within 180 days after the actual date of the
Closing (or such later date as may be reasonably requested by Enterprise
Operating and consented to by Tejas, such consent not to be unreasonably
withheld), the Enterprise Parties will remove the "Tejas," "Coral" and "Shell"
names (and all derivatives thereof), trademarks and symbols from the properties
and assets of the Company and its Subsidiaries (including changing all signage
relating thereto) and provide the requisite notices to, the appropriate federal,
state or local agencies to place the title or other evidences of ownership,
including operation of the properties and assets, in a name other than any name
of Tejas or any of its Affiliates or any variations thereof. In addition, within
15 days of the actual date of Closing (and 90 days of the actual date of Closing
with respect to Tejas NGL Pipelines, LLC), Enterprise Operating will change all
of the legal names of the Company and its Subsidiaries to delete from the name
thereof the word "Tejas".
Section Further Assurances.
(a) The parties hereto agree to cooperate fully with each other and
from time to time after the Closing, upon request and without further
consideration, to (i) execute, deliver, acknowledge and file (where
necessary) all such further instruments, agreements and documents, as may
be reasonably required to more effectively evidence the transfer of the
assets comprising the Business to the Company and its Subsidiaries or to
consummate the Transactions and carry out the intent and purposes of this
Agreement and (ii) take such actions as may be reasonably required to cause
Enterprise Operating (or its designee) to have actual control and
possession of the assets comprising the Business. Without in any manner
limiting the generality of the foregoing, if record and beneficial title to
any of the assets comprising the Business is not held by the Company or its
Subsidiaries but rather is held by an Affiliate of Tejas as of the Closing,
Tejas Energy and Tejas agree to execute and to cause their Affiliates to
execute such agreements as shall be reasonably required to cause such title
to effectively be transferred and conveyed from Tejas, Tejas Energy or
their Affiliates to the Company or its Subsidiaries.
(b) As to pre-closing Consents or governmental filings required to
transfer the Business to the Company or its Subsidiaries which are not
obtained prior to Closing, Tejas
HOU04:132863.11
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will (i) designate an in-house lawyer or business person (at Tejas' cost)
to assist Enterprise Partners in obtaining such Consents for a period of
twelve months following the Closing, (ii) subject to the limitation
contained in subsection (c) below, will be obligated to provide Enterprise
Partners funds to obtain such Consents and (iii) will, to the extent
possible (without any cost to Tejas or its Affiliates, which shall not
include the loss of such economic benefit) provide to the Company and its
Subsidiaries the economic benefit of such items if the necessary Consent is
not obtained within the above-referenced twelve month period. Except as
provided in this Section 6.05, neither Tejas nor Tejas Energy will have any
liability for obtaining Consents after the Closing.
(c) Tejas' payments to unaffiliated third parties pursuant to
paragraphs (a) and (b) of this Section 6.05 shall not exceed $500,000 in
the aggregate; provided, however, that if Tejas or its Affiliates shall
incur a cost that exceeds such amount, in connection with undertaking an
action requested by Enterprise Partners or one of its Affiliates, then
Enterprise Partners and Enterprise Operating shall reimburse such amount to
Tejas or its Affiliates as the case may be. The cost of the in-house lawyer
or business person referenced in subsection (b)(i) above and loss of
economic benefit pursuant to subsection (b)(iii) shall not be included in
or charged against the $500,000 ceiling. Tejas, subject to and as part of
the above-referenced $500,000 ceiling, agrees to reimburse Enterprise
Partners for local counsel fees incurred in connection with remedial
actions pursuant to subsections (a) and (b) above.
Section Books and Records. Within a reasonable period of time after
Closing, Tejas Energy and Tejas will, and will cause their respective Affiliates
to deliver to Enterprise Operating (or its designee) all books, accounting
records, contracts, leases, property files and other files and records relating
to the Business.
Section Intercompany Indebtedness. On or prior to the Closing, Tejas
Energy and Tejas shall (i pay or cause their Affiliates to pay to the Company
and its Subsidiaries all long- term debt (including current maturities) and
other Indebtedness for Borrowed Money owed by Tejas, Tejas Energy or any
Affiliate of Tejas or Tejas Energy (other than the Company and its Subsidiaries
and Joint Ventures) as of such date to the Company and its Subsidiaries and
(ii) pay to the Company a capital contribution and cause such capital
contribution to be applied to pay or satisfy all long-term debt (including
current maturities) and other Indebtedness for Borrowed Money owed by the
Company and its Subsidiaries to Tejas, Tejas Energy or their respective
Affiliates (other than the Company and its Subsidiaries and Joint Ventures) as
of such date. Tejas and Tejas Energy further agree to pay all Retained
Liabilities when, as and if they become due and payable.
Section Excluded Assets. On or prior to the Closing, Tejas and Tejas
Energy will cause the Excluded Assets to be transferred and conveyed out of the
Company and its Subsidiaries pursuant to documentation reasonably acceptable to
Enterprise Partners.
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Section Acts of Amendment. Tejas Energy and Tejas shall cause their
Affiliates which conveyed, assigned and contributed assets and properties to the
Company and its Subsidiaries as reflected in Section 6.09 of the Tejas
Disclosure Memorandum to enter into with the Company and its Subsidiaries, and
shall cause the Company and its Subsidiaries to execute an act of amendment to
the applicable conveyance and assignments or acts of sale or conveyances as
reflected on Schedule 6.09, effective as of the date of the original conveyance,
assignment and/or contribution.
Section Collections.
(a) After Closing, Tejas and Tejas Energy agree to cause to be paid to
the Company any amounts received in respect of accounts receivable related
to the Business after the Effective Date promptly upon receipt thereof.
(b) After Closing, the Enterprise Parties agree to, and to cause the
Company and its Subsidiaries to, pay to Tejas or Tejas Energy any amounts
received in respect of the Excluded Assets after the Effective Date
promptly upon receipt thereof.
Section Preferential Rights. The parties hereto acknowledge and agree
that if following the Closing and as a consequence of the transactions
contemplated by this Agreement, the Company or any of its Subsidiaries or Tejas
or any of its Affiliates is required to transfer title to any of the assets
included in the Business to satisfy a preferential right, then the Company or
its Subsidiary (as the case may be) shall be entitled to receive and retain such
proceeds paid by the Person exercising the preferential right.
Section Preparation of Historical Financials. Tejas and Tejas Energy
agree (at no out-of-pocket cost to Tejas or Tejas Energy) to cooperate with
Enterprise Partners and to provide Enterprise Partners with reasonable access
(at all reasonable times and in a manner so as not to interfere with the normal
business operations of Tejas and Tejas Energy) to books, records and personnel
reasonably required for Enterprise Partners to prepare statements of direct
operating revenues and expenses of the Company and its Subsidiaries for fiscal
years 1996 and 1997 as may be required for Enterprise Partners' SEC filings in
connection with the transactions contemplated by this Agreement.
Section Unitholder Approval.
Enterprise GP and EPC II agree to and shall call and schedule a meeting of
the Unitholders of Enterprise Partners and submit to the Unitholders of
Enterprise Partners for their approval a proposal to approve the issuance of the
Common Units to be issued upon conversion of the Special Units as soon as
practicable following the Closing Date and in any event prior to May 1, 2000.
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EPC II represents that it (alone and without any other equity holder in
Enterprise Partners) has the requisite ownership in Enterprise Partners to
approve the issuance of the Common Units upon conversion of the Special Units.
EPC II covenants and agrees that it will not dispose of any of its equity
interests in Enterprise Partners prior to such meeting of the Unitholders and
will vote its equity interests in favor of the issuance of the Common Units
required to be issued upon conversion of the Special Units.
The Enterprise Partners will, as soon as practicable, following the
Unitholders' meeting referenced in (a) above and in any event within 20 days
following such Unitholders' meeting, use its best efforts to cause the Common
Units which are to be issued upon conversion of the Special Units to be listed
on the New York Stock Exchange.
ARTICLE
EMPLOYEE MATTERS
Section Employees. Tejas has furnished Enterprise Products with a list of
the employees of Tejas or its Affiliates who are assigned to the Business (the
"Business Employees"), which list is attached hereto as Schedule 7.01.
Enterprise Products shall have the sole and absolute discretion in determining
which, if any, of the Business Employees it will offer employment and the terms,
conditions and benefits relating to such offers of employment, provided that the
same shall be substantially comparable with the terms, conditions and benefits
Enterprise Products provides to similarly situated employees of Enterprise
Products. Employment under such offers shall commence on the later of October 1,
1999, or the date such Business Employee, if not actively at work on October 1,
1999 for any reason, excluding vacation, sick leave or regularly scheduled days
off, returns to full-time active employment with Enterprise Products (the
"Employment Commencement Date"), provided such Business Employee returns within
180 days of the Closing Date. The Business Employees who accept and actually
commence employment with Enterprise Products are hereinafter collectively
referred to as "Transferred Employees."
Section Solicitation of Employees.
(a) Without the prior written consent of Enterprise Products, Tejas
shall cause its Affiliates to refrain for a period of one year from the
Closing Date, from soliciting directly or indirectly, the employment of or
otherwise seeking to engage the services of any Transferred Employee. Tejas
shall be responsible for all obligations and liabilities, if any, under the
Worker Adjustment and Retraining Notification Act and any comparable state
laws with respect to the current and former Business Employees who do not
become Transferred Employees.
(b) Without the prior written consent of Tejas, the Enterprise
Parties, Enterprise Products and their respective Affiliates shall refrain
for a period of one year from the Closing Date, from soliciting directly or
indirectly, the employment of or otherwise seeking to
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engage the services of any employee of Tejas or any of its respective
Affiliates, other than the Transferred Employee.
(c) Notwithstanding paragraphs (a) and (b) of this Section 7.02,
nothing herein shall prevent a party hereto (the "Hiring Party") from
hiring any employee of another party hereto if such person responds to a
general advertisement of employment which is not directed to such
individual specifically or was otherwise not directly or indirectly
solicited by the Hiring Party.
Section Employee Benefit Plans. Effective as of their Employment
Commencement Dates, Enterprise Products shall provide to the Transferred
Employees its employee benefit plans and programs ("Enterprise Products' Benefit
Plans") on substantially the same basis such plans and programs are provided to
similarly situated employees of Enterprise Products, except that coverage under
Enterprise Products' group health, life and disability plans shall commence as
of the Benefit Plan Date (as defined below). With respect to the Enterprise
Products' Benefit Plans, Enterprise Products shall grant the Transferred
Employees credit for their service with Tejas Affiliates as of their Employment
Commencement Date for all purposes (other than the accrual of benefits under a
defined benefit pension plan) for which such service was recognized by Tejas
Affiliates under a similar plan or program. With respect to Enterprise Products'
Benefit Plans that provide group health, life and disability benefits: (i)
Enterprise Products shall make Transferred Employees eligible to participate on
their Employment Commencement Date (the "Benefit Plan Date"), (ii) Enterprise
Products shall cause such plans to waive any exclusions or limitations with
respect to pre-existing conditions, waiting periods and actively-at-work
exclusions, except to the same extent the Transferred Employee is subject to a
pre-existing condition or actively-at-work exclusion on the Closing Date under
any health plan of Tejas Affiliates, and (iii) Enterprise Products shall provide
that any health expenses incurred by a Transferred Employee or his or her
covered dependents during 1999 on or before the Benefit Plan Date shall be taken
into account under such plan for purposes of satisfying applicable deductible,
coinsurance and maximum out-of-pocket provisions. Enterprise Products' group
health plan shall be responsible for all benefit claims by Transferred Employees
and their dependents for covered services rendered on and after the date their
participation in Enterprise Products' group health plan commences, and the
respective group health plans of Tejas Affiliates shall be responsible for all
benefit claims by Transferred Employees and their dependents for covered
services rendered before their participation in Enterprise Products' group
health plan commences.
Section Vacation. The Transferred Employees shall receive credit under
Enterprise Products' vacation schedule such that the vacation time they earn
with Enterprise Products is not less than that which they are eligible to earn
under the vacation schedules of Tejas Affiliates as of the Closing Date.
Transferred Employees shall be entitled to vacation time with Enterprise
Products for the remainder of 1999 based only on their actual service with
Enterprise Products, and Enterprise Products' vacation schedule shall be
prorated for the remainder of 1999 for this purpose. Tejas shall cause its
Affiliates to pay each Transferred Employee his or her accrued but unused paid
personal leave as soon as reasonably practicable following the Closing Date.
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Section Access to Information and Personnel. (a) After the Closing Date,
Tejas shall cause its Affiliates to make reasonably available to Enterprise
Products such financial, personnel and related information as may be reasonably
requested by Enterprise Products with respect to any Transferred Employee,
including, but not limited to, compensation and employment histories; except
that neither Tejas nor its Affiliates will provide any historical performance
related data with respect to any Transferred Employee.
(b) After the Closing Date, Enterprise shall make available to Tejas any
Transferred Employees with respect to continuing litigation, audits and other
reasonable business requests at no cost to Tejas.
Section Tejas and Affiliates Benefit Plans. (a) Enterprise Products is
not assuming any employee benefit plan or program or any liability of Tejas and
its Affiliates thereunder or any other liability of Tejas or any Affiliate with
respect to any Business Employee or other current or former employee of Tejas or
any Affiliate, including, without limitation, any liability under COBRA.
(b) Tejas and its Subsidiaries shall cause each Transferred Employee to be
fully vested as of the Closing Date in each plan of Tejas and its Subsidiaries
that is a qualified plan under Section 401(a) of the Code.
(c) Each Transferred Employee who would be eligible to immediately retire
from Tejas and its Subsidiaries on the Closing Date and receive retiree health
benefits under a health plan of Tejas and its Subsidiaries shall be eligible
notwithstanding his active employment with Enterprise Products and its
Affiliates to immediately begin receiving retiree health or pension benefits
under the retiree health plan of Tejas and its Subsidiaries subject to the then
terms of such plan.
Section Third-Party Beneficiaries. No provision of this Article VII shall
create any third-party beneficiary rights in any Transferred Employee (including
any beneficiary or dependent thereof), including, without limitation, any right
to employment or employment in any particular position with Enterprise Products
for any specified period of time after the Closing Date.
ARTICLE
INDEMNIFICATION; SURVIVAL
Section Indemnification by the Enterprise Parties, EPC II and Enterprise
Products. Subject to the limitations set forth in this Article VIII,
(i) the Enterprise Parties, jointly and severally, hereby agree
to indemnify and hold harmless Tejas, Tejas Energy and any of their
respective Affiliates and their respective officers, directors,
partners, members and shareholders (collectively the "Tejas
Indemnified Parties") from and against any and all Damages incurred by
Tejas Indemnified Parties in
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connection with (a) any breach of any representation or any warranty
made by the Enterprise Parties under Sections 5.01 (Organization),
5.02 (Authorization of Agreement), 5.03 (No Violations), 5.04
(Approvals), 5.08 (Taxes), 5.09 (SEC Reports), 5.10 (Ownership;
Issuance of Special Units), 5.12 (No Brokers) and 5.13 (Investment
Intent) (collectively, the "Enterprise Representations and
Warranties"); or (b) any failure by any of the Enterprise Parties to
perform any covenant or other agreement hereunder;
(ii) EPC II hereby agrees to indemnify and hold harmless the
Tejas Indemnified Parties from and against any and all Damages
incurred by the Tejas Indemnified Parties in connection with (a) any
breach of any of the Enterprise Representations and Warranties to the
extent and only to the extent that such representations and warranties
are made by EPC II under Article V hereof, or (b) any failure by EPC
II to perform any covenant or other agreement made by it hereunder;
and
(iii) Enterprise Products hereby agrees to indemnify and hold
harmless the Tejas Indemnified Parties from and against any and all
Damages incurred by the Tejas Indemnified Parties in connection with
(a) any breach of any of the Enterprise Representations and Warranties
to the extent and only to the extent that such representations and
warranties are made by Enterprise Products under Article V hereof, or
(b) any failure by Enterprise Products to perform any covenant or
other agreement made by it hereunder;
in each case regardless of whether such Damages are caused in whole or
in part by the strict liability or negligent act or omission of the
Indemnified Party.
Section Indemnification by Tejas and Tejas Energy. Subject to the
limitations set forth in this Article VIII, Tejas and Tejas Energy agree,
jointly and severally, to indemnify and hold harmless the Enterprise Parties and
their respective officers, directors, partners, members and shareholders
(collectively, the "Enterprise Indemnified Parties") from and against any and
all Damages arising in connection with or out of (a) any breach by Tejas and
Tejas Energy of any of their representations and warranties contained in
Sections 3.01 (Organization); 3.02 (Ownership of Company Interest), 3.03
(Validity and Enforceability), 3.04 (Approvals and Consents), 3.05 (No
Violation), 3.07 (Investment Intent), 3.08 (No Brokers), 4.01 (Organization),
4.02 (Capitalization), 4.06(a) (Litigation), 4.07 (Taxes), 4.11 (Conduct of
Business From the Effective Date to the Closing Date), and 4.12(a), (b) and (d)
(Material Contracts or Indebtedness) and 4.17 (Non-Business Related Assets)
(collectively, the "Tejas Representations and Warranties"), (b) any failure by
Tejas or Tejas Energy to perform any covenant or other agreement hereunder,
(c) the Excluded Assets, (d) the Retained Liabilities, or (e) any claims which
may hereafter be made against the Company or its Subsidiaries pursuant to the
Contribution Agreement dated as of January 12, 1998 among Shell Oil Company,
Tejas Holdings, LLC, Sierra Capital Acquisition Corp., and Tejas Gas
Corporation, in each case regardless of whether such Damages are caused in whole
or in part by the strict liability or negligent act or omission of the
Indemnified Party.
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Section Indemnification Procedure. The party or parties making a claim
for indemnification under this Article VIII shall be, for the purposes of this
Agreement, referred to as the "Indemnified Party" and the party or parties
against whom such claims are asserted under this Article VIII shall be, for the
purposes of this Agreement, referred to as the "Indemnifying Party." All claims
by any Indemnified Party under this Article VIII shall be asserted and resolved
as follows:
(a) In the event that (i) any claim, demand or Proceeding is asserted
or instituted by any Person other than the parties to this Agreement or
their Affiliates which could give rise to Damages for which an Indemnifying
Party could be liable to an Indemnified Party under this Agreement (such
claim, demand or Proceeding, a "Third Party Claim") or (ii) any Indemnified
Party under this Agreement shall have a claim to be indemnified by any
Indemnifying Party under this Agreement which does not involve a Third
Party Claim (such claim, a "Direct Claim"), the Indemnified Party shall,
with reasonable promptness, send to the Indemnifying Party a written notice
specifying the nature of such claim, demand or Proceeding and the amount or
estimated amount thereof (which amount or estimated amount shall not be
conclusive of the final amount, if any, of such claim, demand or
Proceeding) (a "Claim Notice"), provided that a delay in notifying the
Indemnifying Party shall not relieve the Indemnifying Party of its
obligations under this Agreement except to the extent that (and only to the
extent that) such failure shall have caused the Damages for which
Indemnifying Party is obligated to be greater than such Damages would have
been had the Indemnified Party given the Indemnifying Party proper notice.
(b) In the event of a Third Party Claim, the Indemnifying Party shall
be entitled to appoint counsel of the Indemnifying Party's choice at the
expense of the Indemnifying Party to represent the Indemnified Party in
connection with such claim, demand or Proceeding (in which case the
Indemnifying Party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by any Indemnified Party except
as set forth below); provided that such counsel is reasonably acceptable to
the Indemnified Party. Notwithstanding an Indemnifying Party's election to
appoint counsel to represent an Indemnified Party in connection with a
Third Party Claim, an Indemnified Party shall have the right to employ
separate counsel, and the Indemnifying Party shall bear the reasonable
fees, costs and expenses of such separate counsel if (i) the use of counsel
selected by the Indemnifying Party to represent the Indemnified Party would
present such counsel with a conflict of interest or (ii) the Indemnifying
Party shall not have employed counsel to represent the Indemnified Party
within a reasonable time after notice of the institution of such Third
Party Claim. If requested by the Indemnifying Party, the Indemnified Party
agrees to cooperate with the Indemnifying Party and its counsel in
contesting any claim, demand or Proceeding which the Indemnifying Party
defends, or, if appropriate and related to the claim, demand or Proceeding
in question, in making any counterclaim against the Person asserting the
Third Party Claim, or any cross-complaint against any Person. No Third
Party Claim may be settled or compromised (i) by the Indemnified Party
without the prior written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed or (ii) by the Indemnifying
Party without the prior written consent of the
HOU04:132863.11
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Indemnified Party, which consent shall not be unreasonably withheld or
delayed. In the event any Indemnified Party settles or compromises or
consents to the entry of any Judgment with respect to any Third Party Claim
without the prior written consent of the Indemnifying Party, each
Indemnified Party shall be deemed to have waived all rights against the
Indemnifying Party for indemnification under this Article VIII.
(c) In the event of a Direct Claim, the Indemnifying Party shall
notify the Indemnified Party within 30 Business Days of receipt of a Claim
Notice whether or not the Indemnifying Party disputes such claim.
(d) From and after the delivery of a Claim Notice under this Agreement
relating to a Third Party Claim, at the reasonable request of the
Indemnifying Party, each Indemnified Party shall grant the Indemnifying
Party and its representatives all reasonable access to the books, records
and properties of such Indemnified Party to the extent reasonably related
to the matters to which the Claim Notice relates. All such access shall be
granted during normal business hours and shall be granted under conditions
which will not unreasonably interfere with the business and operations of
such Indemnified Party. The Indemnifying Party will not, and shall require
that its representatives do not, use (except in connection with such Claim
Notice) or disclose to any third Person other than the Indemnifying Party's
representatives (except as may be required by applicable Law) any
information obtained pursuant to this Section 8.03(d) which is designated
as confidential by an Indemnified Party.
Section Survival. The representations and warranties of the parties
contained in this Agreement shall terminate at and not survive the Closing;
provided that the Tejas Representations and Warranties and the Enterprise
Representations and Warranties shall each survive the Closing for the periods
set forth below:
(a) the representations and warranties of Tejas and Tejas Energy in
Sections 3.04, 3.05, 3.07, 4.02, 4.06(a) and 4.12(a), (b) and (d) and 4.17
and the representations and warranties of the Enterprise Parties, EPC II,
and Enterprise Products in Sections 5.03, 5.04, 5.09 and 5.13 shall survive
the Closing until the second anniversary of the Closing Date;
(b) the representations and warranties of Tejas and Tejas Energy in
Section 4.07 and of the Enterprise Parties in Section 5.08 shall survive
the Closing until the expiration of the applicable Tax Statute of
Limitations Date; and
(c) the representations and warranties of Tejas and Tejas Energy in
Sections 3.01, 3.02, 3.03, 3.08, 4.01, and 4.11 and the representations and
warranties of the Enterprise Parties, EPC II and Enterprise Products in
Sections 5.01, 5.02, 5.10 and 5.12 shall survive the Closing for the
applicable statute of limitations.
Following the Closing, no party shall have the right to make any claim for
indemnification for any representations or warranties under this Agreement which
do not expressly survive the Closing or
HOU04:132863.11
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after the expiration of the applicable survival period thereof; provided that,
with respect to any representation or warranty that survives the Closing in
respect of which indemnity may be sought under this Agreement, such
representation or warranty shall survive the time at which it would otherwise
terminate pursuant to the preceding sentence, only if a bona fide, written
notice of the inaccuracy of such representation or warranty giving rise to such
right of indemnity (including the specific nature of such inaccuracy) shall have
been given to the party against whom such indemnity may be sought prior to such
time. The covenants and agreements of the parties (including, without
limitation, the covenants and agreements of the parties set forth in this
Article VIII) contained in this Agreement or in any other Transaction Agreement
shall survive the Closing indefinitely.
Section Limitation on Claims.
(a) Each party hereto acknowledges and agrees that (except as set
forth in subsection (d) below), the provisions of this Article VIII shall
be the exclusive remedy of such party with respect to any matter arising
under this Agreement; provided, however, that (i) the foregoing shall not
limit the right of any such party to seek any equitable remedy (including
specific performance) available to enforce the rights of such party under
this Agreement or any other Transaction Agreement in accordance with the
terms of this Agreement and (ii) nothing herein is intended to restrict the
rights of Tejas (or its Affiliates) as a unitholder under the Enterprise
Partners Amended Partnership Agreement, applicable securities laws or
otherwise arising independently of this Agreement.
(b) The liability of Tejas or Tejas Energy for Damages for breaches of
any Tejas Representations and Warranties pursuant to Section 8.02(a), other
than with respect to breaches of Sections 3.02, 3.08 and 4.07 shall be
limited as follows:
(i) Tejas and Tejas Energy shall not be liable for or have
responsibility for any such Damages until the aggregate of such
Damages incurred by the Enterprise Indemnified Parties with respect to
such claims exceeds $8,000,000 in the aggregate and then only to the
extent of the excess over such amount; and
(ii) The obligations and total liability of Tejas and Tejas
Energy for such Damages shall not exceed $60,000,000 in the aggregate.
(c) The liability of any of the Enterprise Parties, EPC II or
Enterprise Products for Damages for breaches of any Enterprise
Representations and Warranties pursuant to Sections 8.01(i)(a), (ii)(a),
and (iii)(a), other than with respect to Sections 5.08, 5.10(f) and (g) and
5.12 shall be limited as follows:
(i) None of the Enterprise Parties, EPC II or Enterprise Products
shall be liable for or have responsibility for any such Damages until
the aggregate of such Damages incurred by the Tejas Indemnified
Parties with respect to such claims
HOU04:132863.11
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exceeds $8,000,000 in the aggregate, and then only to the extent of
the excess over such amount; and
(ii) The obligations and total liability of the Enterprise
Parties, EPC II and Enterprise Products for such Damages shall not
exceed $60,000,000 in the aggregate.
(d) Nothing in this Section 8.05 shall prevent any party from making a
claim against the other party for actual and intentional fraud (as opposed
to a fraud claim based on constructive knowledge, or negligent
misrepresentation or similar theory).
Section Tejas Environmental Indemnity.
(a) Subject to the limitations set forth in Section 8.06(b) below,
Tejas and Tejas Energy agree, jointly and severally, to indemnify and hold
harmless each of the Enterprise Indemnified Parties from and against all
Damages to the extent resulting from or arising out of Tejas Third-Party
Environmental Claims made against the Company (or its successors or
assigns) or any of its Subsidiaries or any of the Enterprise Indemnified
Parties following the Closing Date. For purposes hereof, "Tejas Third-Party
Environmental Claims" shall mean (x) a bona fide claim by a third party
(other than a Governmental Authority acting in its regulatory capacity)
alleging property damage resulting from exposure to Hazardous Substances
prior to the Closing Date from properties owned by the Company or its
Subsidiaries on or prior to the Closing Date and (y) a written directive
from a Governmental Authority requiring remediation of properties owned by
the Company or its Subsidiaries on or prior to the Closing Date pursuant to
Environmental Laws in effect at the Closing Date.
(b) The liability of Tejas or Tejas Energy for Damages under this
Section 8.06 shall be limited as follows:
(i) Tejas and Tejas Energy shall not be liable or have
responsibility for any Damages under this Section 8.06 until the
aggregate Damages incurred by the Company and its Subsidiaries with
respect to all Tejas Third-Party Environmental Claims exceed
$5,000,000 in the aggregate and then only to the extent of the excess
over $5,000,000. Individual Tejas Third-Party Environmental Claims
shall not be included in the $5,000,000 deductible until the Company
or its Subsidiaries incurs Damages in excess of $500,000 with respect
to such Tejas Third-Party Environmental Claim and then only to the
extent of the excess over the $500,000 deductible.
(ii) The obligations and total liability for Damages of Tejas and
Tejas Energy under this Section 8.06 shall not exceed $100,000,000 in
the aggregate.
(iii) The obligations and liability of Tejas and Tejas Energy
under this Section 8.06 shall cease in their entirety five (5) years
after the Closing Date except
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with respect to bona fide claims for indemnification made in writing
prior to such date which remain unresolved as of such date.
(c) The Enterprise Indemnified Parties acknowledge and agree that the
liability of Tejas, Tejas Energy or any of their Affiliates (other than the
Company and the Subsidiaries) for Damages resulting out of or relating to
environmental claims, matters or liabilities (including violations of
Environmental Law and required remediation of properties due to the
presence of Hazardous Substances in the soil, groundwater or surface water)
shall be governed exclusively by the indemnification provisions contained
in this Section 8.06.
(d) With regard to all Tejas Third Party-Environmental Claims, the
Enterprise Indemnified Parties shall give written notice identifying such
claim to Tejas and Tejas Energy so that Tejas or Tejas Energy may
participate, at its expense, in any discussions or negotiations with any
applicable Governmental Authority concerning the remediation plan or
project.
Section Enterprise Contingent Environmental Payment.
(a) If, following the Closing Date, any of Enterprise Partners,
Enterprise Operating or any of their respective Subsidiaries or Enterprise
GP incurs any Damages with respect to Enterprise Third-Party Environmental
Claims (the "Enterprise Environmental Payments") then the Enterprise
Parties shall within 20 days following such Enterprise Environmental
Payment make a payment to Tejas (or its successors or designees) equal to
25% of such Enterprise Environmental Payment (the "Contingent Environmental
Payments"). For purposes hereof, "Enterprise Third-Party Environmental
Claims' shall mean (x) a bona fide claim by a third party (other than a
Governmental Authority) alleging personal injury or property damage
resulting from exposure to Hazardous Substances prior to the Closing and
(y) a written directive from a Governmental Authority requiring remediation
of properties, now, previously or hereafter, owned by the Enterprise
Parties or any of their Subsidiaries; provided, however, that the term
Enterprise Third-Party Environmental Claim shall not include any matters
relating to the properties or assets included in the Business as
contemplated by this Agreement.
(b) The obligation of the Enterprise Parties to make the Contingent
Environmental Payments will be subject to the following limitations:
(i) The Enterprise Parties shall not be required to make any
Contingent Environmental Payments under this Section 8.07 until the
aggregate Damages incurred by the Enterprise Parties with respect to
all Enterprise Third-Party Environmental Claims exceeds $5,000,000 in
the aggregate. Individual Enterprise Third-Party Environmental claims
shall not be included in the $5,000,000 threshold unless and until the
Enterprise Parties incur Damages in excess of $500,000 with respect to
such Enterprise Third-Party Environmental Claim.
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(ii) The obligations and total liability for Contingent
Environmental Payments under this Section 8.07 shall not exceed
$100,000,000 in the aggregate .
(iii) The obligation and liability of the Enterprise Parties
under this Section 8.07 shall cease in their entirety five (5) years
after the Closing Date, except with respect to bona fide claims for
indemnification made prior to such date which remain unresolved as of
such date.
Section Louisiana Fuel Tax Audit. Tejas and Tejas Energy, agree, jointly
and severally, to indemnify and hold harmless each of the Enterprise Indemnified
Parties from and against any Taxes which may be assessed against the Company,
any of its Subsidiaries or the assets of the Business as a result of any audit
by the State of Louisiana of fuel gas consumed in plant operations for any
period prior to the Effective Date.
(b) The Enterprise Parties, agree, jointly and severally, to indemnify
and hold harmless each of the Tejas Indemnified Parties from and against
any Taxes which may be assessed against the Company, any of its
Subsidiaries or the assets of the Business as a result of any audit by the
State of Louisiana of fuel gas consumed in plant operations for any period
after the Effective Date.
ARTICLE
GENERAL PROVISIONS
Section Expenses and Taxes; Tax Returns.
(a) Each party to this Agreement shall pay all fees and expenses
incurred by it in connection with this Agreement and the transactions
contemplated by this Agreement. The parties to this Agreement agree that
all applicable excise, sales, transfer, documentary, filing, recordation
and other similar Taxes, levies, fees and charges, if any, that may be
imposed upon, or payable or collectible or incurred in connection with,
this Agreement and the transactions contemplated by this Agreement shall be
borne by the party on which such Taxes, levies, fees or charges are imposed
by operation of law. Each party to this Agreement agrees to file all
necessary documentation (including all Tax Returns) with respect to such
Taxes in a timely manner.
(b) Tejas shall timely file (taking into account any extensions
received from the relevant Tax authorities) all Tax Returns accurately
reflecting the operations of the Company and its Subsidiaries for periods
ending prior to the Closing Date and shall pay all Taxes with respect
thereto.
(c) Enterprise Partners shall timely file (taking into account any
extensions received from the relevant Tax authorities) all Tax Returns
accurately reflecting the
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operations of the Company and its Subsidiaries for periods ending on or
after the Closing Date and shall pay all Taxes with respect thereto. For
purposes of this Section 9.01(c), in the case of any Taxes based upon or
related to income or receipts, including franchise Taxes, that are payable
for a Tax period that includes (but does not end on) the Closing Date,
Tejas shall pay to Enterprise Partners, the portion of such Tax which
relates to the portion of such Tax period ending prior to the Closing Date.
This amount due from Tejas shall be deemed equal to the amount which would
be payable if the relevant Tax period ended on the Closing Date.
(d) Enterprise Partners agrees to and shall reimburse Tejas for any
Taxes relating to the Business which may be paid by Tejas with respect to
the Interim Period, within ten (10) days following notice from Tejas.
Section Amendment. This Agreement may not be amended except by an
instrument in writing signed by the Enterprise Parties, Enterprise Products,
EPC II, Tejas and Tejas Energy.
Section Waiver. Either the Enterprise Parties or the Tejas or Tejas
Energy may (a) extend the time for the performance of any of the obligations or
other acts of the other, (b) waive any inaccuracies in the representations and
warranties of the other contained in this Agreement or in any document delivered
by the other pursuant to this Agreement or (c) waive compliance with any of the
agreements, or satisfaction of any of the conditions, contained in this
Agreement by the other. Any agreement on the part of a party to this Agreement
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party against whom enforcement is sought.
Section Notices. Any notices or other communications required or
permitted under, or otherwise in connection with, this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person or
upon confirmation of receipt when transmitted by facsimile transmission or on
receipt after dispatch by registered or certified mail, postage prepaid,
addressed, as follows:
If to Tejas or Tejas Energy:
Tejas Midstream Enterprises, LLC
1301 McKinney Street, Suite 700
Houston, Texas 77010
Attn: Chief Operating Officer
Phone: (713) 230-3000
Fax: (713) 230-2900
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Tejas Energy, LLC
1301 McKinney Street, Suite 700
Houston, Texas 77010
Attn: Chief Operating Officer
Phone: (713) 230-3000
Fax: (713) 230-1800
With a copy to:
Tejas Energy, LLC
1301 McKinney Street, Suite 700
Houston, TX 77010
Attn: General Counsel
Phone: (713) 230-3000
Fax: (713) 230-2900
If to an Enterprise Party:
Enterprise Products Company
P. O. Box 4324 (77210-4324)
2727 North Loop West, Suite 700
Houston, Texas 77008
Attention: President
Telephone: 713-880-6500
Facsimile: 713-880-6570
With a copy to:
Enterprise Products Company
P. O. Box 4324 (77210-4324)
2727 North Loop West, Suite 700
Houston, Texas 77008
Attention: Chief Legal Officer
Telephone: 713-880-6500
Facsimile: 713-880-6570
or such other address as the person to whom notice is to be given has furnished
in writing to the other parties. A notice of change in address shall not be
deemed to have been given until received by the addressee.
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Section Headings; Disclosure Memorandum. The descriptive headings of the
Articles and Sections of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement. The Tejas Disclosure Memorandum
constitutes an integral part of this Agreement and modifies the respective
representations, warranties, covenants or agreements of the Tejas and Tejas
Energy contained herein to the extent that such representations, warranties,
covenants or agreements expressly refer specifically to the applicable section
of the Tejas Disclosure Memorandum. Each item of disclosure set forth in the
Tejas Disclosure Memorandum specifically refers to the article and section of
the Agreement to which such disclosure responds, and shall not be deemed to be
disclosed with respect to any other article or section of the Agreement.
Section Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas regardless of principles of
conflicts of laws.
Section No Third Party Rights. Except as specifically provided in
Article VIII, this Agreement is intended to be solely for the benefit of the
parties to this Agreement and is not intended to confer any benefits upon, or
create any rights in favor of, any Person other than the parties to this
Agreement.
Section Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single instrument.
Section Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions of this Agreement shall not be affected thereby, and there
shall be deemed substituted for the provision at issue a valid, legal and
enforceable provision as similar as possible to the provision at issue.
Section Entire Agreement. This Agreement (including the documents and
instruments referred to in this Agreement) sets forth the entire understanding
and agreement among the parties as to the matters covered in this Agreement and
supersedes and replaces any prior understanding, agreement, including the
Confidentiality Agreement, the Term Sheet dated April 19, 1999 between
Enterprise Partners and Tejas Energy or any other statement of intent, in each
case, written or oral, of any and every nature with respect to such
understanding, agreement or statement.
Section Arbitration; Waiver.
(a) Any controversy or claim, whether based on contract, tort, statute
or other legal or equitable theory arising out of or related to this
Agreement (including any amendments or extensions), or the breach of
termination hereof or any right to indemnity hereunder shall be settled by
arbitration in accordance with the arbitration terms set forth in Exhibit
9.11 hereto.
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47
(b) Without any way limiting Section 9.11(a), each of the parties
hereto hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement or the actions of any of them
in the negotiation, administration, performance and enforcement thereof.
Section Fair Construction. This Agreement shall be deemed to be the joint
work product of the Enterprise Parties, Enterprise Products, EPC II, Tejas and
Tejas Energy without regard to the identity of the draftsperson, and any rule of
construction that a document shall be interpreted or construed against the
drafting party shall not be applicable.
Section Disclaimer of Other Representations and Warranties.
(a) EXCEPT AS EXPRESSLY SET FORTH IN ARTICLES III, IV AND V, NO PARTY
MAKES ANY ORAL OR WRITTEN REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
AT LAW OR IN EQUITY, WITH RESPECT TO ANY OF THEIR OR THEIR SUBSIDIARIES' OR
JOINT VENTURE'S RESPECTIVE ASSETS, LIABILITIES OR OPERATIONS (INCLUDING THE
ASSETS, LIABILITIES OR OPERATIONS OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES), INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR ANY REPRESENTATION
OR WARRANTIES WITH RESPECT TO THE DESIGN, QUALITY, DURABILITY, VALUE, OR
CONDITION OR SUITABILITY OF SUCH ASSETS AND ANY SUCH REPRESENTATIONS OR
WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.
(b) EACH OF THE PARTIES ACKNOWLEDGES THAT, PRIOR TO ITS EXECUTION OF
THIS AGREEMENT, IT HAS CONDUCTED SUCH EXAMINATION OF THE OTHER PARTY'S
TITLE TO THEIR RESPECTIVE PROPERTIES AND ASSETS AS ITS HAS DEEMED NECESSARY
OR ADVISABLE IN ORDER TO SATISFY ITSELF AS TO THE CONDITION OF TITLE TO
SUCH PROPERTIES AND ASSETS, EXCEPT FOR THE LIMITED WARRANTIES EXPRESSLY SET
FORTH IN THIS AGREEMENT.
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Each of the parties to this Agreement has caused this Agreement to be
executed on its behalf by its duly authorized officer, all as of the day and
year first above written.
TEJAS ENERGY, LLC
By: /s/ Curtis R. Frasier
Name: Curtis R. Frasier
Title: Executive Vice President and Chief Operating
Officer
TEJAS MIDSTREAM ENTERPRISES, LLC
By: /s/ Curtis R. Frasier
Name: Curtis R. Frasier
Title: President and Chief Operating Officer
ENTERPRISE PRODUCTS PARTNERS L.P.
By Enterprise Products GP, LLC, General Partner
By: /s/ O.S. Andras
Name: O. S. Andras
Title: President and Chief Executive Officer
ENTERPRISE PRODUCTS OPERATING L.P.
By Enterprise Products GP, LLC, General Partner
By: /s/ O.S. Andras
Name: O. S. Andras
Title: President and Chief Executive Officer
ENTERPRISE PRODUCTS GP, LLC
By: /s/ O.S. Andras
Name: O. S. Andras
Title: President and Chief Executive Officer
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ENTERPRISE PRODUCTS COMPANY
(for limited purposes of Articles V, VII and VIII
hereof)
By: /s/ O.S. Andras
Name: O. S. Andras
Title: President and Chief Executive Officer
EPC PARTNERS II, INC.
By: /s/ Francis B. Jacobs
Name: Francis B. Jacobs
Title: President
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