Exhibit 10.27
Execution Version
PURCHASE AGREEMENT
dated as of December 12, 2002,
by and among
DUKE ENERGY GAS TRANSMISSION CORPORATION,
ALGONQUIN ENERGY, INC.,
KEYSPAN LNG GP, LLC
and
KEYSPAN LNG LP, LLC
ARTICLE I DEFINITIONS.....................................................................................................2
Section 1.1. Certain Definitions...............................................................................2
ARTICLE II CLOSING, DELIVERIES AT CLOSING AND ADDITIONAL AGREEMENTS.......................................................9
Section 2.1. Closing...........................................................................................9
Section 2.2. Deliveries by Seller to Buyer.....................................................................9
Section 2.3. Deliveries by Buyer to Seller....................................................................10
Section 2.4. Intercompany Debt................................................................................11
Section 2.5. Certain Agreements...............................................................................11
ARTICLE III CONSIDERATION; POST-CLOSING ADJUSTMENT.......................................................................11
Section 3.1. Amount and Form of Consideration.................................................................11
Section 3.2. Payment of Consideration and Delivery of Partnership Interests at Closing........................12
Section 3.3. Post-Closing Adjustment..........................................................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER......................................................................14
Section 4.1. Organization; Power and Authority................................................................14
Section 4.2. Authorizations; Execution and Validity...........................................................15
Section 4.3. No Conflict; Consents............................................................................15
Section 4.4. Subsidiaries.....................................................................................16
Section 4.5. Capitalization...................................................................................16
Section 4.6. Financial Statements.............................................................................16
Section 4.7. Legal Proceedings; Orders........................................................................17
Section 4.8. Environmental Matters............................................................................17
Section 4.9. Employees........................................................................................18
Section 4.10. Taxes........................................................................................19
Section 4.11. Title to Partnership Interests...............................................................20
Section 4.12. Material Contracts...........................................................................20
Section 4.13. Bank Accounts; Directors and Officers........................................................20
Section 4.14. Title to and Condition of Properties.........................................................20
Section 4.15. Insurance....................................................................................22
Section 4.16. Absence of Certain Changes...................................................................22
Section 4.17. Fees.........................................................................................23
Section 4.18. Accounts Receivable and Accounts Payable.....................................................23
Section 4.19. Intellectual Property Rights; Computer Programs and Software.................................24
Section 4.20. Governmental Authorizations..................................................................24
Section 4.21. FERC Form No. 2-A............................................................................24
Section 4.22. Compliance with Law..........................................................................25
Section 4.23. Customers and Vendors........................................................................25
Section 4.24. Disclaimer...................................................................................25
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER........................................................................25
Section 5.1. Organization; Power and Authority................................................................25
Section 5.2. Authorizations; Execution and Validity...........................................................26
Section 5.3. No Conflicts; Consents...........................................................................26
Section 5.4. Litigation.......................................................................................26
Section 5.5. Access to Documents; Opportunity to Ask Questions................................................26
Section 5.6. Investment Intent; Sophisticated Buyer...........................................................27
Section 5.7. Fees.............................................................................................27
Section 5.8. Disclaimer.......................................................................................27
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ARTICLE VI COVENANTS.....................................................................................................27
Section 6.1. Covenants........................................................................................27
ARTICLE VII TAX MATTERS..................................................................................................32
Section 7.1. Preparation and Filing of Tax Returns............................................................32
Section 7.2. Access to Information............................................................................34
Section 7.3. Indemnification by Seller........................................................................34
Section 7.4. Buyer Tax Indemnification........................................................................35
Section 7.5. Tax Indemnification Procedures...................................................................35
Section 7.6. Conflict.........................................................................................37
Section 7.7. Tax Sharing Agreements...........................................................................37
ARTICLE VIII INDEMNIFICATION.............................................................................................37
Section 8.1. Seller Indemnification...........................................................................37
Section 8.2. Buyer Indemnification............................................................................37
Section 8.3. Indemnification Procedures.......................................................................38
Section 8.4. Limits on Indemnification........................................................................40
Section 8.5. Remedies Exclusive...............................................................................41
Section 8.6. Certain Damages..................................................................................41
Section 8.7. Miscellaneous....................................................................................42
ARTICLE IX GENERAL.......................................................................................................42
Section 9.1. Amendments.......................................................................................42
Section 9.2. Waivers..........................................................................................42
Section 9.3. Notices..........................................................................................42
Section 9.4. Successors and Assigns; Parties in Interest......................................................43
Section 9.5. Severability.....................................................................................44
Section 9.6. Entire Agreement.................................................................................44
Section 9.7. Governing Law....................................................................................44
Section 9.8. Expenses.........................................................................................44
Section 9.9. Release of Information...........................................................................45
Section 9.10. Specific Performance.........................................................................45
Section 9.11. Confidentiality..............................................................................45
Section 9.12. Certain Construction Rules...................................................................46
Section 9.13. Counterparts.................................................................................46
Section 9.14. Further Assurances...........................................................................46
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Schedules
---------
Schedule 1.1(a) - Buyer's Knowledge
Schedule 1.1(b) - Seller's Knowledge
Schedule 3.3 - Net Working Capital; Principles and Procedures
Schedule 4.3 - Conflicts and Consents (Seller's Representations)
Schedule 4.6(a) - FERC Forms 2-A; Interim Financial Statements
Schedule 4.6(b) - Undisclosed Liabilities
Schedule 4.7 - Legal Proceedings
Schedule 4.8 - Environmental Matters
Schedule 4.10 - Taxes
Schedule 4.12 - Material Contracts
Schedule 4.13 - Bank Accounts
Schedule 4.14(a) - Real Property
Schedule 4.15 - Insurance
Schedule 4.16 - Certain Changes
Schedule 4.19(a) - Intellectual Property
Schedule 4.19(b) - Computer Programs Software
Schedule 4.20 - Permits
Schedule 4.2 - Customers and Vendors
Schedule 5.3 - Conflicts and Consents (Buyer's Representations)
Schedule 6.1(g) - Excluded Personal Property
Schedule 8.1(d) - Seller Indemnification
Exhibit A Form of Opinion of Seller's Counsel
Exhibit B Form of Transition Agreement
Exhibit C-1 Form of Seller Release Agreement
Exhibit C-2 Form of ALNG Release Agreement
Exhibit D Form of Con Ed Letter Agreement
Exhibit E Form of Balancing Agreement
Exhibit F Form of Opinion of Buyer's Counsel
Exhibit G Form of Assignment of Seller's Marks, Certain Accounts
Receivable and Bank Accounts
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PURCHASE AGREEMENT
This PURCHASE AGREEMENT, dated as of December 12, 2002 (this "Agreement"),
is entered into by and among DUKE ENERGY GAS TRANSMISSION CORPORATION ("DEGT")
and ALGONQUIN ENERGY, INC. ("AEI"), each a Delaware corporation (individually
and collectively, "Seller") and KEYSPAN LNG GP, LLC ("KLNG GP") and KEYSPAN LNG
LP, LLC ("KLNG LP"), each a Delaware limited liability company (individually and
collectively, "Buyer"). Buyer and Seller may be referred to herein individually
as a "Party" or collectively as the "Parties."
RECITALS
Seller collectively owns 100% of the general partnership interests and
limited partnership interests (collectively, the "Partnership Interests") in
Algonquin LNG, LP, a Delaware limited partnership ("ALNG Partnership").
ALNG Partnership owns and operates a 600,000-barrel liquefied natural gas
storage tank, located in Providence, Rhode Island, together with facilities to
receive and deliver liquefied natural gas in gaseous and liquid states ("ALNG
Facility").
ALNG Partnership is the successor by conversion to Algonquin LNG, Inc., a
Delaware corporation ("ALNGI" and, together with ALNG Partnership, "ALNG"),
99.5% of the common stock of which was owned by Duke Energy GT Funding
Corporation and 0.5% of the common stock of which was owned by AEI immediately
prior to such conversion. Following the Conversion, Duke Energy GT Funding
Corporation transferred its partnership interest in ALNG to DEGT.
Buyer desires to purchase from Seller, and Seller is willing to sell to
Buyer, the Partnership Interests. Buyer and Seller desire that the 0.5% general
partnership interest in the ALNG Partnership held by AEI be transferred to KLNG
GP and that the 99.5% limited partnership interest in ALNG Partnership held by
DEGT be transferred to KLNG LP.
NOW, THEREFORE, in consideration of the premises, the terms and provisions
set forth herein, the mutual benefits to be gained by the performance thereof
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.1. Certain Definitions
(a) As used in this Agreement, the terms set forth below shall have the
following respective meanings:
"Adverse Claim" means, with respect to any security or other financial
instrument, an "adverse claim" as defined in Section 8-102(a)(1) of the Uniform
Commercial Code as in effect in the State of New York.
"Affiliate" means, with respect to any Person, (a) any Subsidiary of such
Person or (b) any other Person that, directly or indirectly, controls, is
controlled by, or is under common control with, such Person. For the purposes of
this definition, "control" means the possession of the power to direct or cause
the direction of management and policies of such Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Business Day" means any day other than a Saturday, Sunday, or day on which
commercial banks in Houston, Texas and/or New York, New York are authorized or
required by Law to remain closed.
"Buyer Confidentiality Agreement" means that certain confidentiality
agreement, dated as of the 11th day of May, 2001, between Seller and Buyer.
"Capital Stock" means, with respect to any corporation, all shares,
interests, participations or other equivalents of capital stock of such
corporation, however designated.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any contract, agreement, indenture, note, bond, loan,
instrument, lease, conditional sale contract, mortgage, or insurance policy.
"DEOC" means Duke Energy Operating Company.
"Derivative Instrument" means a financial instrument or other contract
which (i) has one or more of the following: a specified interest rate, security
price, commodity price, foreign exchange rate, index of prices or rates, or
other variables, and one or more of the following: number of currency units,
shares, bushels, pounds or other units specified in the contract, or payment
provisions or both; (ii) requires no initial investment or an initial net
investment that is smaller than would be required for other types of contracts
that would be expected to have a similar response to change in market factors;
and (iii) its terms require or permit net settlement, it can readily net by
means outside the contract, or it provides for delivery of an asset that puts
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the recipient in a position not substantially different from net settlement, all
as more fully described in FAS 133, Accounting for Derivative Instruments and
Hedging Activities.
"Employee Benefit Plan" means any "employee benefit plan" within the
meaning of Section 3(3) of ERISA.
"Environmental Laws" means any Law, directive, Permit, authorization or
Order relating to (i) protection of the environment, human health, or workplace
safety, (ii) damages to natural resources, (iii) the actual or potential
exposure (or the effects of exposure) to any actual or potential release,
discharge, spill or emission of Hazardous Materials, or (iv) the manufacture,
generation, handling, processing, production, gathering, transportation, use,
treatment, storage or disposal of, any Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Estimated Indebtedness" means the estimated Indebtedness as of November
30, 2002, based on the September 30, 2002 balance sheet of ALNG, as set forth in
the Estimated Closing Report.
"Estimated Net Working Capital" means the estimated Net Working Capital as
of November 30, 2002, based on the September 30, 2002 balance sheet of ALNG, as
set forth in the Estimated Closing Report.
"Estimated Net Working Capital Adjustment" means the positive or negative
number, as the case may be, which is determined in the following manner: (i) if
$552,407 is greater than the Estimated Net Working Capital, then the Estimated
Net Working Capital Adjustment is a positive number equal to such excess (in
which event the Purchase Price would be reduced by such amount); (ii) if
$552,407 is equal to the Estimated Net Working Capital, then the Estimated Net
Working Capital Adjustment is equal to zero; and (iii) if $552,407 is less than
the Estimated Net Working Capital, then the Estimated Net Working Capital
Adjustment is a negative number equal to such deficit (in which event the
Purchase Price would be increased by such amount).
"Estimated Other Purchase Price Adjustments" means the estimated Other
Purchase Price Adjustments as of November 30, 2002 based on the September 30,
2002 balance sheet of ALNG as set forth in the Estimated Closing Report.
"FERC" means the Federal Energy Regulatory Commission.
"GAAP" means generally accepted accounting principles of the United States
applied on a consistent basis.
"Governmental Authority" means any federal, state, or local government or
governmental regulatory body and any of their respective subdivisions, agencies,
instrumentalities, authorities or tribunals.
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"Hazardous Materials" means any substance, whether solid, liquid, gaseous,
or any combination of the foregoing: (a) that is listed, defined, or regulated
as a "hazardous material," "hazardous waste," "solid waste," "hazardous
substance," "toxic substance," "contaminant," or "pollutant" or otherwise
classified as hazardous or toxic, in or pursuant to any Environmental Law or
otherwise prohibited, limited or regulated under any Environmental Law; or (b)
that is or contains asbestos, polychlorinated biphenyls, radon, urea
formaldehyde foam insulation, or explosive or radioactive material, or waste
petroleum hydrocarbons.
"Indebtedness" means without duplication the sum of (1) the principal
amount of any indebtedness of ALNG for borrowed money outstanding as of the
Closing Date, (2) any unpaid interest and bank fees owing on any such
indebtedness of ALNG as of the Closing Date, (3) obligations for the deferred
purchase price of goods or services (other than trade payables incurred in the
ordinary course of business) of ALNG as of the Closing Date, (4) obligations in
respect of banker's acceptances or letters of credit (other than letters of
credit in respect of accounts payable reflected in Net Working Capital) issued
or created for the account of ALNG as of the Closing Date, (5) all indebtedness
or obligations of the types referred to in the preceding clauses (1) through (4)
of any other Person secured by any Lien on any assets of ALNG, even though ALNG
has not assumed or otherwise become liable for the payment thereof, but
excluding customer deposits and interest payable thereon in the ordinary course
of business, (6) obligations in the nature of guarantees of obligations entered
into by ALNG of the type described in clauses (1) through (5) above of any other
Person, and (7) any payment obligation in respect of, including any costs
associated with the termination of, any Derivative Instrument.
"Intellectual Property" means any and all ideas, inventions, marks
(including trademarks, service marks, certification marks, collective marks,
domain names and collective membership marks, whether word, logo, or other forms
of designations of origin, all of the foregoing collectively referred to as
"Marks"), trade names, designs, expressions and works of authorship, copyrights,
moral rights, database rights, mask works, applications therefor, patents
thereon, registrations thereof and licenses thereof, royalty rights, any and all
goodwill of ALNG, proprietary and/or confidential information (including
technical information relating to development, design, manufacture, scheduling,
installation, assembly or testing, trade secrets, secret processes and
procedures, know-how, business and financial information, and all confidential
information of any nature, collectively referred to as "Proprietary
Information"), and any other similar property, whether or not embodied in
tangible form (including but not limited to technical drawings and
specifications, shop drawings, manuals, forms, working notes and memos, market
studies, consultants' reports, technical and laboratory data, notebooks, samples
and engineering prototypes), including all property listed or described on
Schedule 4.19(a).
"Knowledge" means (a) with respect to Buyer, the actual knowledge of any of
the individuals specified on Schedule 1.1(a), and (b) with respect to Seller,
the actual knowledge of any of the individuals specified on Schedule 1.1(b).
"Law" means any federal, state, or local law (including common law),
statute, rule, ordinance, code, directive, decree, treaty or regulation.
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"Legal Proceeding" means any judicial, administrative, regulatory or
arbitral action, suit or proceeding (public or private), inquiry or
investigation by or before any court or other Governmental Authority.
"Lien" means any lien, pledge, mortgage, deed of trust, security interest,
attachment, levy, restriction, claim, option, charge or other similar
encumbrance affecting title.
"Losses" means claims, judgments, causes of action, liabilities,
obligations, damages (including diminution in value), losses, deficiencies,
costs, penalties, fines and expenses (including, without limitation, reasonable
professional fees and costs of settlement, judgment and interest).
"Material Adverse Effect" means any condition, circumstance, event or
effect that is material and adverse to the business, assets, results of
operations or financial condition of ALNG.
"Material Contract" means any Contract to which ALNG is a party that (a)
can reasonably be expected to result in (i) aggregate payments by ALNG of more
than $25,000 during any year (based solely on the terms thereof and without
regard to any expected increase in volumes or revenues) or (ii) aggregate
revenues to ALNG of more than $25,000 during any year (based solely on the terms
thereof and without regard to any expected increase in volumes or revenues); (b)
imposes a non-competition or non-solicitation obligation on ALNG; (c) has a term
of twelve (12) months or more; (d) is a collective bargaining or similar labor
agreement; (e) is an employment, consulting or similar agreement or arrangement;
(f) is an indenture, credit agreement, note, mortgage, security or other
commitment or arrangement pursuant to which ALNG has made or will make loans or
advances, or has or will have incurred Indebtedness or becomes a guarantor or
surety or pledge its credit on or otherwise become responsible with respect to
any undertaking of another; (g) is a Contract (including purchase orders,
blanket purchase orders and agreements and delivery orders) with any
Governmental Authority; (h) is a Contract between ALNG and any Seller or any
officer, director, key employee or Affiliate of any Seller, including any such
Contract providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring payments to or
from, ALNG, or to or from any corporation, partnership, trust or other entity in
which any such Person, or group of such Persons, owns in excess of 5% of the
outstanding equity interest; (i) is an agreement or arrangement with any
customer of ALNG which provides that such customer shall be sold products or
services at the lowest price ALNG charges its customers for any such products or
services or which contains any other "most favored nation" or similar clause;
(j) is a Derivative Instrument; (k) is a performance, bid or completion bond,
surety or indemnification agreement or power of attorney; (l) is a material
secrecy or confidentiality agreement imposing confidentiality obligations upon
ALNG; (m) is a partnership or joint venture agreement; or (n) is an agreement
related to the acquisition or divestiture of Capital Stock, other equity
interest or assets by or of ALNG entered into other than in the ordinary course
of business.
"Net Working Capital" means the excess of the aggregate current assets over
the current liabilities of ALNG, determined as of November 30, 2002, as
5
calculated in accordance with and in a manner consistent with the illustration
set forth in Schedule 3.3, including the statement of accounting principles
attached to and made a part of such Schedule 3.3.
"Other Purchase Price Adjustments" means the (i) the sum of the values of
accounts receivable of ALNG assigned to Seller pursuant to the assignment
attached as Exhibit G, working funds of ALNG and prepayments of ALNG, and
accrued ad valorem and sales taxes minus (ii) the sum of the values of overdrawn
cash amounts contained in the bank accounts of ALNG assigned to Seller pursuant
to the assignment attached as Exhibit G, employee-related liabilities included
in the accounts payable of ALNG and the amount reflected on ALNG's balance sheet
described as "Investment Plan Loan"; in each case determined as of November 30,
2002, as calculated in accordance with and in a manner consistent with the
illustration set forth in Schedule 3.3.
"Order" means any order, judgment, injunction, ruling, or decree of any
court or other Governmental Authority.
"Partnership Agreement" means that certain Limited Partnership Agreement of
Algonquin LNG, LP, dated October 17, 2002, by and between DEGT and AEI.
"Permit" means any permit, license, authorization, consent, waiver,
variance, extension, filing, franchise, certificate, Order, exemption,
registration or approval issued by a Governmental Authority.
"Person" means any natural person, corporation, partnership, limited
liability company, trust, unincorporated organization, Governmental Authority,
or other entity.
"Prime Rate" means the rate of interest publicly announced from time to
time by Citibank, N.A., New York branch, as its "prime" or "base" lending rate.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Group" means the affiliated group of corporations of which Duke
Energy Corporation is the common parent, which join in the filing of a
consolidated federal income Tax return (and any similar group under state Law).
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, or other entity of which a majority of
the shares of Capital Stock or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other similar managing
body of such corporation, partnership, limited liability company, or other
entity are owned by such Person.
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
receipts, ad valorem, sales and use, employment, social security, disability,
occupation, withholding, payroll, unemployment, property (both real and
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personal), severance, value added, transfer, Capital Stock, excise, estimated,
custom duties or any other taxes of any kind whatsoever including any interest,
penalty, or addition thereto whether or not disputed.
"Taxing Authority" means, with respect to any Tax, the domestic, foreign,
federal, national, state, county or municipal or other local governmental entity
or political subdivision thereof that imposes such Tax, and the agency or
commission (if any) charged with the collection of such Tax for such entity or
subdivision.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement or other document relating to Taxes filed or
required to be filed with any Taxing Authority, including any schedule or
attachment thereto and including any amendment thereof.
"Third Party Claim" means any claim that (i) is brought by a Person other
than Buyer, Seller or their respective Affiliates, or (ii) is brought against
ALNG by any Affiliate of Buyer and that relates to matters occurring prior to
the Closing Date.
(b) Each of the terms set forth below has the meaning set forth in the
provision set forth opposite such term in the following table:
Term Provision
---- ---------
Agreement Preamble
AEI Preamble
ALNG Recitals
ALNG Employees Section 6.1(b)(i)
ALNG Facility Recitals
ALNG GP Preamble
ALNG Recitals
ALNG LP Preamble
ALNG Partnership Recitals
Basket Amount Section 8.4(a)
Books and Records Section 6.1(a)
Buyer Preamble
Buyer Tax Indemnitees Section 7.3(a)
Claim Notice Section 8.3(a)
Closing Section 2.1
Closing Date Section 2.1
Closing Balance Sheet Section 3.3(b)
Closing Report Section 3.3(b)
COBRA Section 6.1(d)(ii)
Conversion Section 4.1(b)
DEGT Preamble
FERC Forms 2-A Section 4.6(a)
Election Period Section 8.3(b)
Estimated Closing Balance Sheet Section 3.1(b)
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Term Provision
---- ---------
Estimated Closing Report Section 3.1(b)
Estimated Purchase Price Section 3.1(b)
Fee Property Section 4.14(a)
FERC Forms 2-A Section 4.6(a)
Final Arbiter Section 3.3(e)
Financial Statements Section 4.6(a)
Indebtedness Adjustment Amount Section 3.3(a)
Indemnified Party Section 8.3(a)
Indemnifying Party Section 8.3(a)
Indemnity Notice Section 8.3(e)
Interim Financial Statements Section 4.6(a)
Leased Property Section 4.14(a)
Liability Cap Section 8.4(a)
Marked Materials Section 6.1(e)(ii)
Marks Section 1.1 - Definition of
Intellectual Property
Net Working Capital Adjustment Amount Section 3.3(a)
Objection Notification Date Section 3.3(c)
Partnership Interests Recitals
Party(ies) Preamble
PCBs Section 4.8(d)
Permitted Liens Section 4.14(a)
Pre-Closing Tax Period Section 7.1(a)
Proprietary Information Section 1.1 - Definition of
Intellectual Property
Purchase Price Section 3.1(a)
RAP Section 4.6(a)
Seller Preamble
Seller Marks Section 6.1(e)(i)
Straddle Period Section 7.1(e)
Tax Claim Section 7.5(a)
Tax Indemnified Party Section 7.5(a)
Tax Indemnifying Party Section 7.5(a)
Tax Items Section 7.1(a)
Termination Date Section 6.1(b)(i)
Transferred Employees Section 6.1(b)(i)
Transition Agreement Section 2.2(d)
USTs Section 4.8(c)
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ARTICLE II
CLOSING, DELIVERIES AT CLOSING AND ADDITIONAL AGREEMENTS
Section 2.1. Closing
The closing of the transactions contemplated hereby (the "Closing") shall
take place at a time and place on the date hereof ("Closing Date") that is
mutually acceptable to the Parties.
Section 2.2. Deliveries by Seller to Buyer
At the Closing, Seller shall deliver, or shall cause to be delivered, to
Buyer the following:
(a) one or more assignments of partnership interests and bills of sale
evidencing the assignment and transfer of the Partnership Interests and all
rights of Seller under the Partnership Agreement to Buyer free and clear of any
Liens or Adverse Claims;
(b) a certificate of the Secretary or an Assistant Secretary of each
Seller, dated as of the date of this Agreement, setting forth and attesting to
(i) the resolutions of the board of directors of such Seller authorizing the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby; (ii) the incumbency and signature of each
officer of such Seller executing this Agreement; and (iii) the organizational
documents of such Seller;
(c) A written opinion dated as of the Closing Date from Seller's counsel,
in the form attached hereto as Exhibit A;
(d) a transition agreement in the form attached hereto as Exhibit B (the
"Transition Agreement");
(e) an amendment to or an amendment and restatement of the Certificate of
Limited Partnership of ALNG as necessary to reflect the withdrawal of Seller
from ALNG and the admission of Buyer to ALNG;
(f) a copy of the certificate of limited partnership for ALNG, certified by
the Delaware Secretary of State, and a copy of the ALNG partnership agreement
certified by an officer of its general partner;
(g) certificates from appropriate authorities, dated no earlier than
December 3, 2002, as to the good standing and legal existence of each Seller and
ALNG and qualification to do business by each Seller and ALNG in each
jurisdiction where they are so qualified;
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(h) (i) the minute books and partnership records of ALNG and any books and
records necessary for the operation of ALNG's business (including the property
insurance certificates provided by customers of ALNG pursuant to Section 21 of
the General Terms and Conditions of its tariff), and (ii) any other books and
records maintained with respect to ALNG or its business operations; provided,
however, that with respect to the books and records described in (ii) that also
contain information relating to Seller or any of its Affiliates (other than
ALNG), Seller shall deliver such books and records as soon as reasonably
practicable, but in any event within 6 months, following the Closing Date and
shall be entitled to redact from such books and records all information that
does not directly relate to ALNG or its business operations; provided, further,
that in no event shall Seller be obligated pursuant to this Agreement to provide
to Buyer any records relating to the offering and negotiation of the terms and
conditions of the sale of the Partnership Interests to Buyer;
(i) a release in the form attached hereto as Exhibit C-1, pursuant to which
each Seller agrees on behalf of itself and its Affiliates to release any claims
it may have against ALNG with respect to matters arising prior to Closing;
(j) an agreement in the form attached hereto as Exhibit D among each
Seller, each Buyer and ALNG;
(k) an agreement in the form attached hereto as Exhibit E among each Seller
and each Buyer;
(l) affidavits, in a form reasonably acceptable to Buyer, that neither
Seller is a foreign Person within the meaning of Section 1445 of the Code;
(m) evidence satisfactory to Buyer of the termination of the agreements
referred to in Section 2.5 and Section 7.7 hereof; and
(n) all other previously undelivered items required to be delivered by
Seller to Buyer at or prior to the Closing pursuant to this Agreement or
otherwise required in connection herewith unless waived in writing by Buyer.
Section 2.3. Deliveries by Buyer to Seller
At the Closing, Buyer shall deliver to Seller the following:
(a) a wire transfer of immediately available funds (to such account as
Seller shall have specified to Buyer within 24 hours prior to the Closing) in
the amount equal to the Estimated Purchase Price;
(b) the certificate of the Secretary or an Assistant Secretary of Buyer,
dated as of the date of this Agreement, setting forth and attesting to (i) the
resolutions of the Board of Directors of Buyer authorizing the execution,
10
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, (ii) the incumbency and signature of each
officer of Buyer executing this Agreement and (iii) the organizational documents
of Buyer;
(c) the Transition Agreement ; and
(d) a written opinion dated as of the Closing Date from Buyer's counsel, in
the form attached hereto as Exhibit F; and
(e) a release in the form attached hereto as Exhibit C-2, pursuant to which
ALNG agrees to release any claims it may have against either Seller or its
Affiliates with respect to matters arising prior to Closing.
Section 2.4. Intercompany Debt
At or prior to Closing, Seller shall have caused all intercompany accounts
between ALNG, on the one hand, and Seller and its Affiliates, on the other, to
have been eliminated without the transfer of cash from ALNG and without ALNG
incurring or retaining any liability with respect thereto.
Section 2.5. Certain Agreements
Seller shall cause all agreements, whether written or oral, direct or
indirect, between ALNG and Seller or any Affiliate of ALNG or Seller, including
that certain Assignment of Maintenance Services Agreement and Pipeline
Interconnection Agreement between DEOC and ALNG dated effective as of January 1,
1998, and any guaranties of any obligations of Seller or such Affiliate to third
parties (but excluding those agreements to be executed and delivered to Buyer on
the Closing Date as contemplated by Sections 2.2 (a), (d), (e), (i), (j) and
(k), the agreement referenced under item 3 of Schedule 4.14(a), and the
assignment attached as Exhibit G), to be terminated at or prior to Closing,
including the Operating and Maintenance Services Agreement by and between ALNG
Partnership and DEOC dated effective as of January 1, 1998.
ARTICLE III
CONSIDERATION; POST-CLOSING ADJUSTMENT
Section 3.1. Amount and Form of Consideration
(a) Subject to adjustment pursuant to Section 3.3, the aggregate purchase
price to be paid by Buyer to Seller in consideration of the Partnership
Interests shall be $28,400,000 minus the Indebtedness, minus the Estimated Net
Working Capital Adjustment, minus the Estimated Other Purchase Price
Adjustments, plus or minus the Net Working Capital Adjustment Amount pursuant to
Section 3.3(a) and plus or minus the Other Purchase Price Adjustments Amount
pursuant to Section 3.3(a) (the "Purchase Price").
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(b) Seller, at its expense, shall prepare, in accordance with the statement
of accounting principles and procedures attached to Schedule 3.3, an estimated
balance sheet of ALNG as of the close of business on November 30, 2002 (the
"Estimated Closing Balance Sheet") and a report as of November 30, 2002 (the
"Estimated Closing Report") setting forth the Estimated Net Working Capital, the
Estimated Indebtedness and the Estimated Other Purchase Price Adjustments, each
based on ALNG's September 30, 2002 balance sheet. Buyer and its accountants
shall have the opportunity to review with Seller the drafts of the Estimated
Closing Balance Sheet and the Estimated Closing Report (each of which Seller is
to prepare and deliver to Buyer not later than three (3) Business Days prior to
the issuance of the Estimated Closing Balance Sheet and the Estimated Closing
Report). Not later than two (2) Business Days prior to the Closing Date, Seller
shall deliver to Buyer (i) the Estimated Closing Balance Sheet and the Estimated
Closing Report and (ii) an estimate of the amount of the Purchase Price, which
shall be equal to $28,400,000 minus the sum of (i) the Estimated Indebtedness,
(ii) the Estimated Net Working Capital Adjustment and (iii) the Estimated Other
Purchase Price Adjustments (such estimate is referred to herein as the
"Estimated Purchase Price").
(c) Seller and Buyer will each bear one half of the cost of any
documentary, stamp, sales, use, and excise or other transfer Taxes (if any),
payable in respect of the transfer of the Partnership Interests.
Section 3.2. Payment of Consideration and Delivery of Partnership Interests at
Closing
At the Closing, Buyer shall pay the Estimated Purchase Price to Seller, by
wire transfer of immediately available funds, and Seller shall deliver to Buyer
one or more assignments of partnership interests and bills of sale evidencing
the assignment and transfer of the Partnership Interests and all rights of
Seller under the Partnership Agreement to Buyer.
Section 3.3. Post-Closing Adjustment
(a) In accordance with the terms and provisions of this Section 3.3, Buyer
shall pay to Seller, or Seller shall pay to Buyer (as the case may be), an
amount (the "Net Working Capital Adjustment Amount") equal to the amount by
which Net Working Capital is greater (in which case the Purchase Price shall be
increased by such amount and Buyer shall pay the Net Working Capital Adjustment
Amount to Seller) or is less (in which case the Purchase Price shall be reduced
by such amount and Seller shall pay the Net Working Capital Adjustment Amount to
Buyer) than Estimated Net Working Capital, together with interest thereon at the
Prime Rate plus 2% per annum from the Closing Date until the date such payment
is made. In accordance with the terms and provisions of this Section 3.3, Seller
shall pay to Buyer an amount, if any (the "Indebtedness Adjustment Amount"),
equal to the amount by which the Indebtedness exceeds Estimated Indebtedness,
together with interest thereon at the Prime Rate plus 2% per annum from the
Closing Date until the date such payment is made. In accordance with the terms
and provisions of this Section 3.3, Buyer shall pay to Seller, or Seller shall
pay to Buyer (as the case may be) an amount, if any (the "Other Purchase Price
Adjustments Amount"), equal to the amount by which Other Purchase Price
Adjustments is less (in which case the Purchase Price shall be increased by such
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amount and Buyer shall pay the Other Purchase Price Adjustments Amount to
Seller) or is greater (in which case the Purchase Price shall be reduced by such
amount and Seller shall pay the Other Purchase Price Adjustments Amount to
Buyer) than the Estimated Other Purchase Price Adjustments, together with
interest thereon at the Prime Rate plus 2% per annum from the Closing Date until
the date such payment is made.
(b) Within ninety (90) days after the Closing Date, Buyer shall deliver to
Seller the balance sheet of ALNG as of November 30, 2002 (the "Closing Balance
Sheet"). The Closing Balance Sheet shall be prepared in accordance with Schedule
3.3. In addition, no later than the date upon which Buyer delivers the Closing
Balance Sheet to Seller, Buyer shall deliver to Seller a report setting forth
its proposed calculation of Net Working Capital, Indebtedness and Other Purchase
Price Adjustments, which shall be made in accordance with and in a manner
consistent with the illustration set forth in Schedule 3.3, including the
statement of accounting principles attached to and made a part of such Schedule
3.3 (the "Closing Report"). The calculation of Net Working Capital, Indebtedness
and Other Purchase Price Adjustments set forth in the Closing Report shall be
binding upon both Parties, unless Seller objects, at Seller's expense, to such
calculation in accordance with Section 3.3(c).
(c) If, within thirty (30) days after Buyer delivers the Closing Balance
Sheet and the Closing Report to Seller, Seller notifies Buyer of any objections
to the calculation by Buyer of Net Working Capital, Indebtedness and Other
Purchase Price Adjustments (the date upon which Seller notifies Buyer of any
such objections shall be referred to herein as the "Objection Notification
Date"), Buyer and Seller will attempt in good faith to agree upon the Net
Working Capital Adjustment Amount, the Indebtedness Adjustment Amount and the
Other Purchase Price Adjustments Amount prior to or on the date that is
forty-five (45) days after the Objection Notification Date.
(d) If Buyer and Seller agree prior to or on the date that is forty-five
(45) days after the Objection Notification Date to a Net Working Capital
Adjustment Amount, the Indebtedness Adjustment Amount and/or Other Purchase
Price Adjustments Amount that is different from the amount that would be
calculated based upon the Closing Report, the payment described in Section
3.3(a) shall be the agreed upon amount.
(e) If Buyer and Seller do not agree prior to or on the date that is
forty-five (45) days after the Objection Notification Date to a Net Working
Capital Adjustment Amount, the Indebtedness Adjustment Amount and/or Other
Purchase Price Adjustments Amount, as the case may be, payment shall be made by
Buyer or Seller, as appropriate, with respect to all "agreed upon" issues on
said forty-fifth (45th) day and either Party may submit the remaining matters in
dispute (but no other matters) to PriceWaterhouse Coopers or, if that firm
declines to act as provided in this paragraph, another firm of independent
public accountants mutually acceptable to Buyer and Seller (in either case, the
"Final Arbiter"), which firm shall make a final and binding determination as to
all matters in dispute with respect to the calculation of the Net Working
Capital Adjustment Amount, the Indebtedness Adjustment Amount and/or Other
Purchase Price Adjustments Amount,, as the case may be, within forty-five (45)
days after its appointment. The Final Arbiter shall send its written
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determination of Net Working Capital, Indebtedness and Other Purchase Price
Adjustments to Buyer and Seller, together with a calculation of the Net Working
Capital Adjustment Amount, the Indebtedness Adjustment Amount and/or Other
Purchase Price Adjustments Amount, as the case may be, that results from that
determination, at which point the determination of the Final Arbiter, and the
resulting calculation of the Net Working Capital Adjustment Amount, the
Indebtedness Adjustment Amount and/or Other Purchase Price Adjustments Amount,
as the case may be, shall be binding on Buyer and Seller, absent fraud or
manifest error.
(f) The fees and expenses of the Final Arbiter shall be allocated between
Seller and Buyer so that the amount of fees and expenses paid by Buyer shall be
equal to the product of (A) and (B), where (A) is the aggregate amount of such
fees and expenses, and where (B) is a fraction, the numerator of which is the
amount in dispute that is ultimately successfully disputed by Seller (as
determined by the Final Arbiter), and the denominator of which is the total
value in dispute, and the remainder of such fees and expenses shall be paid by
Seller.
(g) The payment of the Net Working Capital Adjustment Amount, the
Indebtedness Adjustment Amount and/or the Other Purchase Price Adjustments
Amount, as contemplated by paragraph (a) above (together with interest thereon
as provided in such paragraph (a)) will be made on the day that is five (5)
Business Days after the date upon which such amount has been finally determined
in accordance with the provisions of this Section 3.3. Such payment will be made
to Buyer or Seller, as the case may be, by wire transfer of immediately
available funds to an account specified by the Party that is to receive the
payment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SELLER
Seller hereby, jointly and severally, represents and warrants to Buyer, and
Buyer in agreeing to consummate the transactions contemplated by this Agreement
has relied upon such representations and warranties, that:
Section 4.1. Organization; Power and Authority
(a) Each Seller is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Delaware. ALNG is a limited
partnership duly organized, validly existing and in good standing under the Laws
of the State of Delaware and is qualified to transact business in each
jurisdiction in which such qualification is required by Law, except where the
failure to be so qualified would not reasonably be expected to have a Material
Adverse Effect. ALNG has all requisite power and authority to own, lease and
operate its assets and properties and conduct its businesses and operations as
presently being conducted.
(b) ALNG was duly converted (the "Conversion") from a Delaware corporation
to a Delaware limited partnership in accordance with the applicable provisions
of the Delaware General Corporation Law and the Delaware Revised Limited
Partnership Act.
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Section 4.2. Authorizations; Execution and Validity
Seller has all requisite power and authority to execute and deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Seller, the
performance by Seller of its obligations hereunder, and the consummation by
Seller of the transactions contemplated hereby have been duly authorized by all
necessary action on the part of Seller. This Agreement has been duly and validly
executed and delivered by Seller and constitutes a valid and binding obligation
of Seller, enforceable against Seller in accordance with its terms, except to
the extent that enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, or similar Laws now or hereafter in effect affecting
creditors' rights generally or general principles of equity.
Section 4.3. No Conflict; Consents
(a) Except as set forth on Schedule 4.3, neither the execution and delivery
by Seller of this Agreement nor the performance by Seller of its obligations
under this Agreement nor the consummation by Seller of the transactions
contemplated hereby will (i) violate any Law or Order, (ii) violate the
certificate of limited partnership or Partnership Agreement of ALNG, (iii)
violate or conflict with, or result in a breach in any provision of, or
constitute a default (or any event which, with or without due notice or lapse of
time, or both, would constitute such a default) under, or result in the
termination of, accelerate the performance required by, or result in the
creation of any Lien upon the Partnership Interests or any of the properties or
assets of ALNG under any of the terms, conditions or provisions of any material
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation of which any of Seller or ALNG is a party or by
which any of Seller, ALNG or any of their respective assets are bound, or (iv)
require any consent or authorization from or filing with or notice to any
Governmental Authority or any consent or authorization from or filing or notice
to any other Person.
(b) Except as set forth on Schedule 4.3 or, in the case of (ii) below, as
would not reasonably be expected to have a Material Adverse Effect, the
Conversion did not (i) violate any Law or Order in any material respect, (ii)
violate or conflict with, or result in a breach in any provision of, or
constitute a default (or any event which, with or without due notice or lapse of
time, or both, would constitute such a default) under, or result in the
termination of, accelerate the performance required by, or result in the
creation of any Lien upon the Partnership Interests or any of the properties or
assets of ALNG under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation of which any of Seller or ALNG is a party or by which
any of Seller, ALNG or any of their respective assets are bound, or (iii)
require any consent or authorization from or filing with or notice to any
Governmental Authority or any consent or authorization from or filing or notice
to any other Person, in each case which consent or authorization has not been
obtained or which notice has not been duly provided.
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Section 4.4. Subsidiaries
ALNG does not own any securities or any other equity or ownership interest
in any Person. ALNG has no obligation nor is subject to any requirement to make
any investment (whether in the form of a loan, capital or guaranty) in any
Person.
Section 4.5. Capitalization
The Partnership Interests represent 100% of the general and limited
partnership interests in ALNG and such Partnership Interests are owned 99.5%
beneficially and of record by DEGT as a limited partner and 0.5% beneficially
and of record by AEI as a general partner, in each case free and clear of all
Liens and other Adverse Claims. There are no outstanding warrants, options,
calls, rights, agreements, subscriptions, convertible or exchangeable securities
or other commitments pursuant to which ALNG is or may become obligated to issue,
sell, purchase, return or redeem any interest in ALNG. There are no voting
trusts, proxies, registration rights agreements, or other agreements to which
Seller or ALNG is a party with respect to the voting or transfer of any
interests in ALNG.
Section 4.6. Financial Statements
(a) Attached as Schedule 4.6(a) are (i) copies of the FERC Form No. 2-A
(Annual Report of Nonmajor Natural Gas Companies) for the years ending December
31, 2001 and December 31, 2000 audited by Deloitte & Touche LLP and filed by
ALNG with the Federal Energy Regulatory Commission (the "FERC Forms 2-A") and
(ii) the unaudited balance sheet of ALNG as of September 30, 2002, together with
the related statements of income, cash flow and stockholder's equity of ALNG for
the nine-month period ended September 30, 2002 (the "Interim Financial
Statements" and, together with the FERC Forms 2-A, the "Financial Statements").
Except as described on Schedule 4.6(a), (i) the FERC Forms 2-A present fairly,
in all material respects, the consolidated financial position of ALNG as of the
dates indicated, and the results of operations of ALNG for the periods
presented, in accordance with the financial requirements of the Federal Energy
Regulatory Commission, as set forth in the applicable Uniform System of Accounts
and published accounting releases, which is a comprehensive basis of accounting
other than GAAP (such financial requirements, "RAP") and (ii) the Interim
Financial Statements present fairly, in all material respects, the financial
position of ALNG as of the dates indicated, and the results of operations of
ALNG for the periods presented in accordance with GAAP consistently applied
throughout and among the dates indicated (except for the absence of notes and
subject to normal year-end adjustments made in accordance with GAAP).
(b) Since December 31, 2001, ALNG has not incurred any liability or
obligation (whether direct, indirect, inchoate or contingent) except for (i)
liabilities or obligations incurred in the ordinary course of business and
consistent with past practice, (ii) liabilities or obligations accrued or
reserved against or disclosed in the Financial Statements, (iii) liabilities or
16
obligations disclosed in the Schedules hereto, (iv) liabilities or obligations
disclosed in Schedule 4.6(b) hereto, or (v) liabilities or obligations that
would not reasonably be expected to have a Material Adverse Effect.
Section 4.7. Legal Proceedings; Orders
Schedule 4.7 lists all Legal Proceedings pending or, to Seller's Knowledge,
threatened against ALNG, and all Orders, arbitration awards (or agreements
entered into in any administrative, judicial or arbitration proceeding), and
settlement agreements binding upon ALNG. Schedule 4.7 also lists all demands and
claims pending or, to Seller's Knowledge, threatened against ALNG or each
Seller, in each case indicating whether such claim or demand arises out of an
act or occurrence for which coverage is provided under any of the insurance
policies referred to in Schedule 4.15. There are no Legal Proceedings pending
against Seller or, to Seller's Knowledge, threatened that question the validity
of this Agreement or any action taken or to be taken by Seller in connection
with, or which seek to enjoin or obtain monetary damages in respect of, this
Agreement or the consummation by Seller of the transactions contemplated hereby.
Section 4.8. Environmental Matters
(a) Except as set forth in Schedule 4.8: (i) the operations and activities
of ALNG are currently and, for the time period beginning five years prior to the
Closing Date and ending on the Closing Date, have been in substantial compliance
with all applicable Environmental Laws; (ii) to the Knowledge of Seller, the
operations and activities of ALNG prior to the time period referenced in (i)
above, were in substantial compliance with all applicable Environmental Laws;
(iii) ALNG is not subject to any existing, pending or, to Seller's Knowledge,
threatened Legal Proceedings or Orders under any Environmental Law and neither
ALNG nor its Affiliates have received any notices of non-compliance, requests
for information, claims, demands or any other communications related to
compliance with or liability under any Environmental Law; (iv) all Permits, if
any, required to be obtained or filed by ALNG under any Environmental Law in
connection with its business or properties have been obtained or filed and are
valid and currently in full force and effect; (v) there has been no release of
any Hazardous Material, pollutant or contaminant into the environment by ALNG or
in connection with its properties or operations that could reasonably be
expected to give rise to obligations arising under any Environmental Law in
excess of $25,000 individually or $100,000 in the aggregate other than routine
compliance obligations incurred in the ordinary course of business; (vi) except
as would not have a Material Adverse Effect, there are no conditions on, about,
beneath or arising from any real property currently or formerly owned, used or
leased by ALNG which might give rise to liability, the imposition of a statutory
lien or which may require any investigation, removal or remedial action under
any Environmental Law; and (vii) no capital expenditures or other costs in
excess of $25,000 individually or $100,000 in the aggregate are currently
anticipated to maintain or achieve compliance with existing Environmental Law or
Environmental Law which has been enacted but is not yet in effect.
(b) Schedule 4.8 contains a complete list of all (i) Permits necessary for
operation of the ALNG Facility as it is currently operating and (ii) material
documents in the possession, custody or control of ALNG or its Affiliates
17
relating to environmental matters or compliance with Environmental Laws, copies
of which have been provided to Buyer. To the best of ALNG's and its Affiliates'
information and belief, ALNG and its Affiliates have responded fully and
accurately to Buyer's (including its consultants' and attorneys') written and
oral requests for information relating to Environmental Laws or Permits.
(c) Except as set forth on Schedule 4.8, neither ALNG nor any of its
predecessors in interest has at any time within the five (5) year period prior
to the Closing Date owned or operated any underground storage tanks ("USTs")
subject to regulation or permitting requirements under Environmental Laws at the
property currently owned or leased by ALNG. All active USTs owned or operated by
ALNG are in compliance with Environmental Laws. All USTs located on property
currently owned or leased by ALNG that are no longer active, and which were
closed by Seller or its Affiliates, have been closed in compliance with
Environmental Laws. To the Knowledge of Seller, all USTs located on property
currently owned or leased by ALNG that are no longer active, and which have been
closed by parties other than Seller or its Affiliates, have been closed in
compliance with Environmental Laws.
(d) To the Knowledge of Seller, there are no polychlorinated biphenyls
("PCBs") present in concentrations exceeding those permitted by Environmental
Laws in or at the property currently owned or leased by ALNG, and all prior use,
handling, storage, transport or disposal of PCBs by ALNG and its predecessors in
interest has been in compliance with Environmental Laws.
(e) Except as set forth in Schedule 4.8, to the Knowledge of Seller, the
property currently owned or leased by ALNG (i) has no friable asbestos or
asbestos containing material on or in such property; (ii) has never had any
asbestos-containing product manufactured at such property; and (iii) complies
with Environmental Laws relating to ambient air exposures to asbestos.
(f) Neither ALNG nor, to the Knowledge of Seller, any of its predecessors
in interest has assumed the liability of any other person or entity under
Environmental Laws by or in connection with any contract or agreement.
(g) Notwithstanding anything to the contrary set forth in this Article IV,
Seller makes no representation or warranty to Buyer relating to Environmental
Laws, Permits under Environmental Laws, or Hazardous Materials other than
pursuant to this Section 4.8, which is intended to contain the sole and
exclusive representations and warranties of Seller relating to Environmental
Laws, Permits under Environmental Laws, and Hazardous Materials.
Section 4.9. Employees
ALNG does not currently have any employees. ALNG is not the sponsor of, nor
does it currently provide participation in, nor does it have any obligation with
respect to, any Employee Benefit Plan. ALNG has not incurred: (a) any withdrawal
18
liability, within the meaning of Section 4201 of ERISA, which withdrawal
liability has not been satisfied, (b) any liability to the Pension Benefit
Guaranty Corporation, which liability has not been satisfied, (c) any
accumulated funding deficiency, whether or not waived, within the meaning of
Section 302 of ERISA or Section 412 of the Code, or (d) any fiduciary liability
under Section 409 of ERISA.
Section 4.10. Taxes
Except as set forth on Schedule 4.10:
(a) All Tax Returns that are required to be filed on or before the Closing
Date by ALNG have been or will be duly and timely filed. ALNG is not the
beneficiary of any extension of time within which to file any income Tax or
other material Tax Return. All Taxes due and owing by ALNG (whether or not shown
on any Tax Return) have been timely paid in full. ALNG has withheld and paid all
amounts required to be withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, equity holder or other
third party as required by applicable Laws. ALNG does not have in force any
waiver of any statute of limitations in respect of Taxes or any extension of
time with respect to a Tax assessment or deficiency. There are no pending
written proposed deficiencies or other written claims for any Tax liability of
ALNG. There are no Liens for Taxes (other than Taxes not yet due and payable)
upon ALNG or any of the assets of ALNG.
(b) Schedule 4.10 (i) lists all income Tax or other material federal,
state, local, and foreign Tax Returns filed with respect to ALNG for taxable
periods ending on or after December 31, 1998, (ii) indicates those Tax Returns
that have been the subject of an audit or examination in which material
adjustments have been made or proposed with respect to ALNG, and (iii) indicates
those Tax Returns which are currently the subject of an audit or examination in
which adjustments have been made or proposed with respect to ALNG. Seller has
delivered to Buyer complete and correct copies of all federal and state income
Tax Returns (determined on an individual company pro forma basis in the case of
any Tax Returns filed on a consolidated or combined basis), examination reports
and statements of deficiencies assessed against or agreed to by ALNG since
December 31, 1998. No claim has ever been made by an authority in a jurisdiction
where ALNG does not file Tax Returns that ALNG may be subject to Tax in that
jurisdiction.
(c) ALNG will not be required to include any item of income in, or exclude
any item of deduction from, taxable income as a result of any (i) change in
method of accounting for a taxable period ending on or before the Closing Date;
(ii) "closing agreement" as described in Code Section 7121 (or any corresponding
provision of state, local or foreign Tax Law) executed on or before the Closing
Date; (iii) installment sale or open transaction disposition made on or prior to
the Closing Date; or (iv) prepaid amount received on or prior to the Closing
Date.
(d) ALNG has not elected to be taxed as an association pursuant to Section
301.7701-3(c) of the Treasury Regulations (or any corresponding provision of
state, local or foreign Tax Law), and ALNG has been treated as a partnership for
19
federal, state and local income Tax purposes since October 17, 2002, the date of
the Conversion, and will continue to be treated as such up to and including the
Closing Date.
Section 4.11. Title to Partnership Interests
The delivery by Seller to Buyer at the Closing of one or more assignments
of partnership interests and bills of sale in accordance with the terms of this
Agreement will vest Buyer immediately with good title to all of the Partnership
Interests, free and clear of all Liens and other Adverse Claims, other than any
Liens or other Adverse Claims imposed by or arising as a result of any action on
the part of Buyer.
Section 4.12. Material Contracts
Schedule 4.12 lists each Material Contract to which ALNG is a party. Seller
has provided or made available to Buyer true and correct copies of each Material
Contract identified on Schedule 4.12 and each amendment thereto, and a written
description of the material terms of any oral Material Contract. Each Material
Contract is in full force and effect and is a valid and binding obligation of
ALNG, and to Seller's Knowledge, the other party or parties thereto, enforceable
in accordance with its terms in all material respects. ALNG is not in breach or
default in any material respect in the performance of its duties and obligations
under any Material Contract. To Seller's Knowledge, none of the other parties to
any Material Contract is in breach or default in any material respect in the
performance of its duties and obligations under any Material Contract. No party
to any Material Contract has given notice to ALNG or made a claim against ALNG
with respect to a breach or default thereunder and there exists no condition,
event or occurrence that, after notice or lapse of time, or both, would
constitute such a breach or default by ALNG or, to the Knowledge of Seller, by
any party to any such Material Contract. No Material Contract has been
terminated, canceled or revoked and no material term thereof has been waived or
modified in any material respect. To the Knowledge of Seller, no Material
Contract has been threatened to be terminated, cancelled or revoked by any other
party to such Material Contract.
Section 4.13. Bank Accounts; Directors and Officers
Schedule 4.13 lists all accounts (and all signatories thereto) maintained
by ALNG with any bank, brokerage firm or other financial institution or
depository. ALNG has no officers or directors.
Section 4.14. Title to and Condition of Properties
(a) Seller has provided Buyer with a complete and correct list of all real
property formerly owned, leased, operated or controlled by ALNG or its
predecessors in interest by virtue of merger or conversion. Schedule 4.14(a)
lists all of the real property (i) to which ALNG has fee title; provided, as to
the real property referenced in item 2 of Schedule 4.14(a), ALNG owns whatever
20
right, title and interest that was conveyed to ALNG pursuant to the document
referenced in such item 2 of Schedule 4.14(a) (the "Fee Property"), (ii) that is
leased or subleased by ALNG (the "Leased Property") or (iii) that ALNG has
agreed (or has an option) to lease or sublease, or may be obligated to lease or
sublease. ALNG is the sole legal and equitable owner of the leasehold interests
in the Leased Property (including, without limitation, the leasehold interest
pursuant to the Ground Lease from Providence Gas Company to ALNG dated March 31,
1999). The Fee Property is free and clear of all Liens (including, without
limitation, rights-of-way, easements, exceptions, encumbrances and other matters
affecting title) arising by, through or under ALNG or any of its Affiliates,
except for (a) Liens listed on Schedule 4.14(a), (b) Liens for Taxes not yet due
or being contested in good faith by appropriate proceedings, and (c) Liens of
mechanics, materialmen, carriers, warehousemen, and similar Liens arising by
operation of Law that in each case secure payments not yet due or being
contested in good faith by appropriate proceedings ("Permitted Liens"). The
leasehold estates of ALNG in the Leased Property are free and clear of all Liens
(including, without limitation, rights-of-way, easements, exceptions,
encumbrances and other matters affecting title), except for Permitted Liens.
(b) Other than ALNG, there are no other parties in possession of the Fee
Property, the Leased Property, or any portion or portions thereof, and on the
Closing Date the fee estate in the Fee Property and the leasehold estates in the
Leased Property will be free and clear of any and all lessees, licensees,
occupants or tenants except as set forth on Schedule 4.14(a). There are no
pending or, to Seller's Knowledge, threatened condemnation, eminent domain or
other Legal Proceedings affecting the Fee Property, the Leased Property, the
Leased Improvements or any portion or portions thereof. Neither ALNG nor any of
its Affiliates has received notice of any pending or threatened requests,
applications or proceedings to alter or restrict any zoning or other use
restrictions applicable to the Leased Property or the Leased Improvements that
would interfere with the conduct of the business of ALNG or the ALNG Facility,
in any material respect. Neither ALNG nor any of its Affiliates has received any
notice from any Governmental Authority or other Person that the use and
occupancy of the Leased Property as currently used and occupied, violates in any
material respect any deed or easement restrictions or covenants, or applicable
Law, including building codes, zoning, subdivision or other land use or similar
Laws. Except as set forth on Schedule 4.14(a), to the Knowledge of Seller, all
water, sewer, gas, electric, telephone, drainage and other utility equipment,
facilities and services required by Law or necessary for the operation of the
ALNG Facility (as historically operated by ALNG) are installed and connected
pursuant to valid Permits (to the extent Permits are required therefor) and no
notice has been received by ALNG or any of its Affiliates regarding the
termination or material impairment of any such service. Access to the Leased
Property is governed by that certain Agreement dated June 30, 1972 between
Marquette Cement Manufacturing Company and Algonquin LNG, Inc., and Algonquin
Gas Transmission Company.
(c) The ALNG Facility is in operating condition and repair (ordinary wear
and tear excepted) and has been reasonably maintained, except for any failure to
maintain that would not reasonably be expected to have a Material Adverse
Effect. The assets of ALNG, including the ALNG Facility, are sufficient to
operate the business of ALNG as it is presently operated consistent with the
historical practice of ALNG.
(d) ALNG has good title to all of its tangible and intangible personal
property (including the tangible and intangible personal property reflected on
the FERC Forms 2-A or acquired since December 31, 2001, except property sold or
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otherwise disposed of in the ordinary course of business since December 31,
2001), free and clear of all Liens, except for Permitted Liens. The foregoing
shall not apply with respect to any item of Intellectual Property, which is
governed exclusively by Section 4.19.
Section 4.15. Insurance
Schedule 4.15 lists all insurance policies that are maintained by ALNG or
by any of its Affiliates on its behalf, showing for each policy the deductibles
or self-insured retentions, policy limits, coverage and expiration dates. All of
the policies listed on Schedule 4.15 are in full force and effect, all premiums
due thereon have been paid, and ALNG has complied in all material respects with
the provisions of such policies. No pending claims made by or on behalf of ALNG
against any of the insurance policies listed or required to be listed on
Schedule 4.15 have been denied or are being defended against by third parties
under a reservation of rights by the applicable insurer. Since December 31,
2001, no insurance policy maintained by ALNG or by any of its Affiliates on its
behalf has been cancelled or terminated.
Section 4.16. Absence of Certain Changes
Except as set forth on Schedule 4.16, since September 30, 2002, ALNG has
conducted its business in the ordinary course and consistent with past practice,
and there has not been any:
(a) damage to or destruction or loss of any material asset or property of
ALNG;
(b) sale, lease, or disposition of any material asset or property of ALNG,
other than the disposition of obsolete inventory in the ordinary course of
business;
(c) cancellation or waiver of any claims or rights with a value to ALNG in
excess of $25,000 in the aggregate;
(d) write off as uncollectible of any notes or accounts receivable of ALNG
having a value in excess of $25,000 in the aggregate;
(e) material change in the accounting methods used by ALNG, except as
required by Law, Order, or changes in RAP;
(f) capital expenditures by ALNG prior to Closing in excess of $250,000 in
the aggregate or (except as otherwise provided by the express terms of the
Material Contracts) commitments by ALNG for capital expenditures which would be
payable after Closing in excess of $5,000 in the aggregate;
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(g) change in its financial condition, assets, liabilities or business or
any other event or condition of any character which individually or in the
aggregate had or has a Material Adverse Effect, excluding matters that are
industry-wide or economy-wide or result from general market conditions;
(h) sale, assignment, encumbrance, license, pledge, abandonment or other
transfer of any Intellectual Property or other intangible assets;
(i) payment of cash or transfer of any assets to any partner or any
Affiliate of any partner or former partner, other than (i) the transfer of cash
to Seller as part of the ordinary course of business cash management procedures
of Seller and its Affiliates and (ii) the transfer described in Section 6.1(g)
and the transfers contemplated by Exhibit G;
(j) loans or guarantee of any loans to any customer or vendor of ALNG;
(k) except in the ordinary course of business, reduction in the amounts of
any liabilities or reserves, except by reason of corresponding cash payments;
(l) failure to maintain accounts receivable, accounts payable, accrued
liabilities, income taxes payable, or other tangible or capital accounts at
levels consistent with normal business practice; or
(m) legal commitment by ALNG to any of the foregoing.
Section 4.17. Fees
Neither of Seller nor ALNG have paid or become obligated to pay any fee or
commission to any broker, finder or intermediary in connection with the
transactions contemplated hereby.
Section 4.18. Accounts Receivable and Accounts Payable
All accounts receivable of ALNG in existence as of the Closing Date
(whether reflected on the Financial Statements or otherwise) (i) represent
services actually rendered or sales actually made in the ordinary course of
business or valid claims as to which full performance has been rendered and (ii)
are less than sixty (60) days old. The reserves against the accounts receivable
are commercially reasonable and have been determined in accordance with RAP,
consistently applied. Except to the extent reserved against the accounts
receivable or as reflected by prepayments or unused credits, no counterclaims or
offsetting claims with respect to the accounts receivable are pending or, to the
Knowledge of Seller, threatened. The accounts payable of ALNG reflected on the
Interim Financial Statements arose from bona fide transactions in the ordinary
course of business, and all such accounts payable have been paid, or are not yet
due and payable under ALNG's payment policies and procedures, or are being
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contested by ALNG in good faith. The accounts payable and accrued liabilities of
ALNG have been incurred by ALNG in the ordinary course of business and
consistent with past practice.
Section 4.19. Intellectual Property Rights; Computer Programs and Software
(a) Schedule 4.19(a) contains a complete and correct list of the following
assets and related matters: (i) all patents and applications for patents, all
Marks and registration of Marks and applications for registration of Marks, all
copyright registrations and applications for copyright registration, and all
trade names, owned or used in the business conducted with respect to the ALNG
Facility as such business is currently conducted by ALNG and the jurisdictions
in or by which such assets or any of them have been registered, filed or issued
and (ii) to the extent not listed on Schedule 4.12, all contracts, agreements or
understandings pursuant to which ALNG has authorized any Person to use any of
such Intellectual Property. Except as set forth on Schedule 4.19(a): (i) ALNG
owns or has the right to use the items of Intellectual Property that are
required to conduct the business of ALNG as now conducted without conflict with
the rights of others; (ii) the consummation of the transactions contemplated
hereby will not alter or impair any such rights; (iii) ALNG has not received any
written notice or claim of infringement or any claim challenging or questioning
the validity or effectiveness of any of the items of Intellectual Property, and,
to the Knowledge of Seller, there is no valid basis for any such claim; and (iv)
except as may be provided in the Material Contracts, ALNG is not liable, nor has
it made any contract or arrangement whereby it may become liable, to any Person
for any royalty or other compensation for use of any of the items of
Intellectual Property.
(b) Schedule 4.19(b) contains a complete and correct list and description
of all computer programs and software owned or licensed by ALNG, excluding
off-the-shelf commercially available systems owned or licensed to ALNG and
computer programs included in purchased or leased equipment.
Section 4.20. Governmental Authorizations
ALNG has all material Permits from Governmental Authorities required for
the ownership of its properties and assets and operation of its business in the
manner presently conducted, and such Permits are in full force and effect.
Except as specified on Schedule 4.20, no registrations, filings, applications,
notices, transfers, consents, approvals, Orders, qualifications, waivers or
other actions of any kind are required by virtue of the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby to
enable ALNG to continue the possession and operation of its properties and
assets as presently conducted in all material respects.
Section 4.21. FERC Form No. 2-A
Each FERC Form No. 2-A (Annual Report of Nonmajor Natural Gas Companies)
filed by or on behalf of ALNG with respect to the years 2000 and 2001 complied
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in all material respects with the requirements of FERC and any rules and
regulations promulgated by FERC applicable to such filing.
Section 4.22. Compliance with Law
ALNG has been, is and on the Closing Date will continue to be, in
compliance in all material respects with all applicable Laws (including duties
imposed by common Law) and Permits of all Governmental Authorities.
Section 4.23. Customers and Vendors
Schedule 4.23 sets forth a complete and correct list of the three (3)
largest (by dollar volume) customers and ten (10) largest (by dollar volume)
vendors of ALNG during fiscal 2001 and to date in fiscal 2002, indicating the
existing contractual arrangements, if any, with each such customer or vendor. No
customer or vendor listed on Schedule 4.23 has given notice to ALNG of its
intention to terminate or materially curtail its business relationship with ALNG
or otherwise materially and adversely alter the terms of its relationship with
ALNG, and there are no outstanding disputes with any customer or vendor listed
on Schedule 4.23 that may reasonably be expected to result in such customer or
vendor not continuing to do business with ALNG or otherwise materially and
adversely altering the terms of its relationship with ALNG.
Section 4.24. Disclaimer
Except to the extent expressly set forth in this Agreement, Seller makes no
representations or warranties whatsoever (whether express, implied, by statute,
common Law, or otherwise). Without limiting the generality of the foregoing,
SELLER EXPRESSLY DISCLAIMS AND NEGATES ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, AND OF CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer hereby represents and warrants to Seller, and the Seller in agreeing
to consummate the transactions contemplated by this Agreement has relied upon
such representations and warranties, that:
Section 5.1. Organization; Power and Authority
Each Buyer is a limited liability company duly organized, validly existing
and in good standing under the Laws of the State of Delaware. Buyer has all
requisite corporate power and authority to own, lease and operate its assets and
properties and conduct its business and operations as presently being conducted.
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Section 5.2. Authorizations; Execution and Validity
The execution and delivery of this Agreement by Buyer, the performance by
Buyer of its obligations under this Agreement and the consummation by Buyer of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed and
delivered by Buyer, constitutes a valid and binding obligation of Buyer and is
enforceable against Buyer in accordance with its terms, except to the extent
that enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar Laws now or hereafter in effect affecting creditors'
rights generally or general principles of equity.
Section 5.3. No Conflicts; Consents
Except as set forth in Schedule 5.3, neither the execution and delivery by
Buyer of this Agreement nor the performance by Buyer of its obligations under
this Agreement nor the consummation by Buyer of the transactions contemplated
hereby will (a) violate any Law or Order, except as would not materially
adversely affect the ability of Buyer to perform its obligations under and
consummate the transactions contemplated by this Agreement, (b) violate the
certificates of formation or operating agreements of Buyer, (c) require any
consent or authorization from, filing with or notice to any Governmental
Authority, or any consent or authorization from, filing with or notice to any
other Person, except as would not adversely affect the ability of Buyer to
perform its obligations under and consummate the transactions contemplated by
this Agreement, or (d) violate or breach any material Contract of Buyer, except
as would not adversely affect the ability of Buyer to perform its obligations
under and consummate the transactions contemplated by this Agreement.
Section 5.4. Litigation
There are no Legal Proceedings pending against Buyer or, to Buyer's
Knowledge, threatened that question the validity of this Agreement or any action
taken or to be taken by Buyer in connection with, or which seek to enjoin or
obtain monetary damages in respect of, this Agreement or the consummation by
Buyer of the transactions contemplated hereby or that, if adversely determined,
would adversely affect in any material respect the ability of Buyer to perform
its obligations under and consummate the transactions contemplated by this
Agreement.
Section 5.5. Access to Documents; Opportunity to Ask Questions
Seller and ALNG have made available for inspection by Buyer and its
representatives the corporate and partnership records, books of account,
Contracts and other documents relating to the business, operations and affairs
of ALNG requested by Buyer. All access and information was provided subject to,
and remains until Closing subject to, the terms and conditions of the Buyer
Confidentiality Agreement.
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Section 5.6. Investment Intent; Sophisticated Buyer
Buyer (a) is an informed sophisticated entity with sufficient knowledge and
experience in investment and financial matters so as to be capable of evaluating
the risks and merits of its purchase of the Partnership Interests, (b)
acknowledges that the purchase of the Partnership Interests is consistent with
its general investment objectives, (c) understands that the purchase of the
Partnership Interests involves a high degree of risk, (d) is financially able to
bear the risks of purchasing the Partnership Interests, (e) has had an
opportunity to discuss the business, management and financial affairs of ALNG
with Seller and, in entering into this Agreement, is relying upon the
representations, warranties and other terms and provisions of this Agreement and
on its informed conclusions of its own investigations of such businesses, (f) is
acquiring the Partnership Interests for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof, (g) understands that the Partnership Interests have not
been registered under the Securities Act or the applicable securities or blue
sky Laws of any state and, accordingly, must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, (h) is an "accredited investor" as defined in
Rule 501(a) under the Securities Act, (i) understands that the exemptions from
registration under the Securities Act relied upon by Seller are based in part on
the fact that Buyer is an "accredited investor" as defined in Rule 501(a) under
the Securities Act, and (j) has no present need for liquidity in connection with
its purchase of the Partnership Interests.
Section 5.7. Fees
Buyer has not paid or become obligated to pay any fee or commission to any
broker, finder or intermediary in connection with the transactions contemplated
hereby.
Section 5.8. Disclaimer
Except to the extent expressly set forth in this Agreement, Buyer makes no
representations or warranties whatsoever (whether express, implied, by statute,
common Law, or otherwise).
ARTICLE VI
COVENANTS
Section 6.1. Covenants
(a) Seller's Access to Documents; Preservation of Books and Records.
(i) For a period of five (5) years from the date hereof, (A) Buyer
shall cause ALNG not to dispose of or destroy any of the material books and
records of ALNG relating to periods prior to the Closing ("Books and
Records") without first offering to turn over possession thereof to Seller
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by written notice to Seller at least thirty (30) days prior to the proposed
date of such disposition or destruction, (B) Buyer shall cause ALNG to
allow Seller and its agents reasonable access, at Seller's expense, to
Books and Records at reasonable times and upon reasonable advance notice in
connection with a claim, investigation, audit or proceeding by or before
any Governmental Authority with respect to the conduct of the business of
ALNG prior to Closing (provided, however, that any such access or copying
shall be had or done in such a manner so as not to unduly interfere with
the normal conduct of ALNG's businesses and the representatives of Seller
who are agents inspecting the Books and Records shall be reasonably
satisfactory to Buyer).
(ii) The five-year period referred to in Section 6.1(a)(i) shall be
extended with respect to the relevant Books and Records in the event that
Seller advises Buyer in writing that any Legal Proceeding or investigation
is pending or threatened at the termination of such five-year period and
such extension shall continue with respect to the relevant Books and
Records until any such Legal Proceeding or investigation has been settled
through judgment or otherwise and/or is no longer pending or threatened.
(b) Certain Employees.
(i) Offers and Severance. Schedule 6.1(b) sets forth those employees
of DEOC who spend a majority of their time providing field-related services
with respect to the ALNG Facility ("ALNG Employees"). The current base
salary paid to each such ALNG Employee is set forth opposite the name of
such ALNG Employee on the schedule provided by Seller to Buyer via e-mail
dated December 10, 2002. On or after the date hereof, Buyer or its designee
shall interview each of the ALNG Employees and shall offer employment to
those individuals as Buyer shall determine in its sole discretion;
provided, however, that Buyer or its designee shall complete all such
interviews and make offers of employment, if any, to the ALNG Employees
prior to termination of the field-related services under the Transition
Services Agreement (the "Termination Date"). With respect to each ALNG
Employee, if any, who does not receive an offer of employment from Buyer or
its designee prior to or on the Termination Date, if DEOC terminates the
employment of such ALNG Employee no later than thirty (30) days after the
Termination Date, then Buyer shall reimburse Seller for one hundred percent
(100%) of the amount of the severance benefits to which such ALNG Employee
is entitled under the 2001-2002 Duke Energy Corporation Transition
Severance Benefit Plan, as such plan exists on the date hereof, up to the
maximum amount set forth opposite the name of such ALNG Employee on the
schedule provided by Seller to Buyer by email dated November 1, 2002. Buyer
and ALNG shall have no other obligations with respect to ALNG Employees who
do not receive an offer of employment from Buyer or its designee and shall
have no obligations at all with respect to ALNG Employees who do not accept
an offer of employment from Buyer or its designee. Buyer or its designee
shall employ each such individual accepting Buyer's (or its designee's)
offer of employment (collectively, the "Transferred Employees") as of
January 1, 2003 or such later date as Buyer and Seller may agree, provided
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that any such later date shall in any event be the first day of a month
(the "Employment Commencement Date") at the same rate of base pay paid to
them by Seller on the Closing Date; provided, however, that such
Transferred Employees shall in all events be employees at will of Buyer or
its designee.
(ii) Benefits for Transferred Employees. Effective as of the
Employment Commencement Date , except as specifically provided herein,
Buyer shall cause each such Transferred Employee to be eligible to
participate in all of Buyer's Employee Benefit Plans, and other employee
plans, programs, policies, and practices, including severance, vacation and
sick leave, on substantially the same basis as similarly situated employees
of Buyer.
(iii) Past Service Credit.
(A) Except for employee pension benefit plans (as defined in
ERISA), Buyer shall cause all of its Employee Benefit Plans
and other employee plans, programs, policies, and practices,
including but not limited to severance, vacation and sick
leave, in which the Transferred Employees participate, to
recognize past service as recognized by the employee plans,
programs, policies and practices of DEOC on the date hereof,
for purposes of eligibility to participate, eligibility for
enrollment, eligibility for, or for the commencement of,
benefits, and eligibility for the levels of benefits where
there are service-related benefit schedules in effect and
for any other purpose for which service is considered under
such plans, programs, policies and practices.
(B) Buyer shall cause all of its Employee Benefit Plans that are
employee pension benefit plans (as defined in ERISA) in
which the Transferred Employees participate to recognize
past service as recognized by the employee pension benefit
plans of DEOC for purposes of eligibility to participate,
eligibility for enrollment, eligibility for vesting,
eligibility for commencement of benefits, and eligibility
for benefit accrual credits under the Buyer's cash balance
plan and for the forms of benefits where such credits, or
the amount of such credits, or payments from the plan depend
in whole or in part on service.
(C) Upon the date each Transferred Employee commences employment
with Buyer, Buyer shall provide coverage to such Transferred
Employee under Buyer's group health insurance plans and, as
may be necessary to effect such coverage, shall waive, or
caused to be waived, any pre-existing condition restrictions
relating to Buyer's group health insurance plans.
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(c) Vacation and Sick Leave.
From and after the year in which the Closing occurs, Buyer shall provide
vacation and sick leave to the Transferred Employees in accordance with Buyer's
then current practices and policies for similarly situated employees.
(d) Liabilities.
(i) Any obligation or liability under any Employee Benefit Plan or
other employee benefit plan, program, policy or practice, including but not
limited to severance, vacation, sick leave and bonus/incentive compensation
("Other Employee Plans") of DEOC or its Affiliates to pay claims or provide
benefits, including, without limitation, claims for health, dental, life,
accidental death, disability, pension, retirement, bonus/incentive
compensation and related benefits, for covered services rendered, covered
Losses sustained or benefits earned prior to the Employment Commencement
Date with respect to a Transferred Employee, his or her spouse, or his or
her dependents or beneficiaries, shall remain the responsibility of DEOC or
its Affiliates, or of the carrier or carriers under the Employee Benefit
Plans or Other Employee Plans of DEOC or its Affiliates. Any obligation
under an Employee Benefit Plan or Other Employee Plan of Buyer to pay
claims, including, without limitation, claims for health, dental, life,
accidental death, disability, and related benefits, for services rendered
on or after the Employment Commencement Date with respect to a Transferred
Employee, his or her spouse, or his or her dependents or beneficiaries,
shall be the responsibility of Buyer and its employee plans or of the
carrier or carriers under the Employee Benefit Plans of Buyer.
(ii) DEOC shall have no liability under Title X of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") with
respect to any continuation coverage under any medical or health plan of
Buyer for Transferred Employees, their spouses, their dependents and
beneficiaries. Buyer shall have no liability under Title X of COBRA with
respect to any continuation coverage under any medical or health plans of
DEOC for those individuals who do not become Transferred Employees, their
spouses, their dependents and beneficiaries.
(e) Seller's Marks.
(i) Buyer shall not acquire, nor shall ALNG retain, reserve, or hold,
any rights or licenses to the names, servicemarks, and trademarks "Duke,"
"Duke Energy," "Algonquin" or any derivatives or variations thereof as well
as any designs, trade dress, or logos used by Seller or any Affiliate in
association with the foregoing names, servicemarks, or trademarks
(collectively "Seller Marks") or any names, servicemarks, trademarks,
designs, trade dress, or logos similar thereto. As soon as reasonably
practicable after the Closing (and in any event, not later than forty-five
30
(45) days thereafter), Buyer will cause ALNG to amend its organizational
documents to the extent necessary to remove the Seller's Marks from the
name of ALNG and to remove all trademarks, trade names and symbols related
to the Seller Marks from the properties and assets (including all signs) of
ALNG, and otherwise to cease all use of or right to use the Seller's Marks
or any other terms that are confusingly similar thereto. Contemporaneous
with the Closing, ALNG shall execute an assignment of all right, title, and
interest in the form of Exhibit G in and to the ▇▇▇▇ "Algonquin," including
all goodwill associated therewith, subject to ALNG's rights to temporarily
use such ▇▇▇▇ during the forty-five day period described in the preceding
sentence.
(ii) To the extent that any Seller Marks are used by ALNG in operating
its business on stationery, signage, equipment, invoices, receipts, forms,
packaging, advertising and promotional materials, product, training and
service literature and materials, software or like materials (collectively,
"Marked Materials") or appear on any inventory of ALNG, Seller grants a
non-exclusive, limited license to ALNG to use any such remaining Marked
Materials or to sell such inventory for a period not to exceed forty-five
(45) days after the Closing, provided that (1) ALNG shall not without prior
written consent of Seller use such Seller Marks in any other manner during
such time; and (2) Buyer shall within forty-five (45) days after the
Closing Date cause ALNG not to use any Marked Materials (other than signage
on equipment and on training materials or software for internal use only)
without first crossing out or marking over such Seller Marks or otherwise
clearly indicating on such Marked Materials that ALNG is no longer an
Affiliate of or affiliated with Seller. After the Closing, Buyer shall
cause ALNG not to reorder any Marked Materials. Within forty-five (45) days
following the Closing, Buyer shall cause ALNG to replace or alter any
signage to remove any reference to any Seller Marks and shall remove any
Seller Marks from any equipment, training materials or software.
(f) Insurance. From and after the Closing Date, Buyer shall not, and shall
cause ALNG not to, make any claim under any policy or program of insurance
maintained by Seller or any of its Affiliates regardless of whether ALNG may be
a named insured or additional insured under any such policy or program;
provided, the preceding provision shall not apply with respect to any demand,
claim or Legal Proceeding described or required to be described in Schedule 4.7
and which is covered by any of the insurance referred to in Schedule 4.15.
(g) Seller shall have the right to cause the tangible personal property
described in Schedule 6.1(g) to be removed from the ALNG Facility and, following
such removal, ALNG will have no further use of such items of personal property;
provided, prior to the termination of the Transition Agreement those items
described in Schedule 6.1(g) that are necessary for the operation of the ALNG
Facility as it has historically been operated shall not be removed; provided
further, the foregoing shall not require Seller or any of its Affiliates to
renew or extend any lease of any such item.
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(h) From and after December 1, 2002, Seller shall not permit ALNG (i) to
distribute to Seller or any partner of Seller by way of dividend, distribution
or otherwise any cash, accounts receivable or other assets of Seller other than
the bank accounts (and cash contained therein) and accounts receivable described
in Exhibit G or (ii) to incur any Indebtedness. In connection with the Closing,
Seller shall cause the applicable parties to execute the assignment attached as
Exhibit G and a copy of the same shall be provided to Buyer.
ARTICLE VII
TAX MATTERS
Section 7.1. Preparation and Filing of Tax Returns
(a) Seller shall prepare or cause to be prepared all income Tax Returns of
ALNG for all periods ending on or prior to the Closing Date and cause to be
included in such income Tax Returns or in the consolidated federal income Tax
Returns (and the state income Tax Returns of any state that permits
consolidated, combined or unitary income Tax Returns, if any) of the Seller
Group, all items of ALNG's income, gain, loss, deduction or credit ("Tax Items")
that are required to be included therein for all periods through the Closing
Date (the "Pre-Closing Tax Period"), shall cause such income Tax Returns to be
timely filed with the appropriate Taxing Authorities, and shall be responsible
for the timely payment (and entitled to any refund) of all income Taxes due with
respect to the periods covered by such income Tax Returns.
(b) Seller shall prepare or cause to be prepared all Tax Returns of ALNG
for all periods ending on or prior to the Closing Date that are filed after the
Closing Date and are not income Tax Returns described in paragraph (a) above.
Seller shall deliver a copy of each such Tax Return to Buyer at least thirty
(30) days prior to the due date (including extensions) for filing such Tax
Return. Seller shall permit Buyer to review and comment on any such Tax Returns
and shall make such revisions to such Tax Return as are reasonably requested by
Buyer. Buyer shall cause ALNG to timely file such Tax Returns and, subject to
this Section 7.1(b) and Section 7.3(a), pay all Taxes due with respect to such
Tax Returns. Seller shall promptly pay to Buyer the amount, if any, by which the
unpaid Taxes on any such Tax Return exceeds the sum of (x) the amounts accrued
for such Taxes on the Closing Balance Sheet and (y) any amounts previously paid
by Seller to Buyer in respect of accrued ad valorem and sales taxes of ALNG as
part of Other Purchase Price Adjustments, or Buyer shall promptly pay to Seller
the amount, if any, by which the unpaid Taxes reflected on any such Tax Return
are less than the sum of (x) the amounts accrued for such Taxes on the Closing
Balance Sheet, and (y) any amounts previously paid by Seller to Buyer in respect
of accrued ad valorem and sales taxes of ALNG as part of Other Purchase Price
Adjustments.
(c) With respect to any Tax Return covering a taxable period beginning on
or before the Closing Date and ending on or after the Closing Date that is
required to be filed after the Closing Date with respect to ALNG, Buyer shall
cause such Tax Return to be prepared in a manner consistent with practices
followed in prior years, except as otherwise required by Law or fact (or where
such inconsistency would not result in any additional Tax liability to Seller),
shall cause to be included in such Tax Return all Tax Items required to be
included therein, and at least thirty (30) days prior to the due date (including
32
extensions) of such Tax Return shall furnish a copy of such Tax Return to
Seller. Buyer shall permit Seller to review and comment on such Tax Return and
shall make such revisions to such Tax Return as reasonably requested by Seller.
Buyer shall cause ALNG to timely file each such Tax Return with the appropriate
Taxing Authority, and, subject to this Section 7.1(c) and Section 7.3(a), shall
be responsible for the timely payment of all Taxes due with respect to the
period covered by such Tax Return. Seller shall promptly pay to Buyer the
amount, if any, by which the unpaid Taxes attributable to the Pre-Closing Tax
Period exceed the amount accrued for such Taxes on the Closing Date Balance
Sheet or Buyer shall promptly pay to Seller the amount, if any, by which the
unpaid Taxes attributable to the Pre-Closing Tax Period are less than the amount
accrued for such Taxes on the Closing Date Balance Sheet.
(d) To the extent permitted by Law or administrative practice, (i) the
taxable year of ALNG that includes the date hereof shall be treated as closing
on (and including) the Closing Date, and (ii) all transactions occurring outside
the ordinary course of business on the Closing Date after the Closing shall have
occurred shall be reported on Buyer's consolidated United States federal income
tax return and shall be similarly reported on other Tax Returns of Buyer or its
Affiliates.
(e) The portion of the Taxes for any period that includes, but does not end
on, the Closing Date (the "Straddle Period") that is attributable to the
Pre-Closing Tax Period shall be: (i) in the case of Taxes that are either (x)
based upon or related to income or receipts, or (y) imposed in connection with
any sale or other transfer or assignment of property (real or personal, tangible
or intangible), deemed equal to the amount which would be payable if the taxable
period ended on and included the Closing Date; and (ii) in the case of Taxes
imposed on a periodic basis or otherwise measured by the level of any item,
deemed to be the amount of such Taxes for the entire period (or, in the case of
such Taxes determined on an arrears basis, the amount of such Taxes for the
immediately preceding period), multiplied by a fraction the numerator of which
is the number of days in the Pre-Closing Tax Period and the denominator of which
is the number of days in the entire taxable period.
(f) If after the Closing Date Buyer or ALNG receives a refund or utilizes a
credit of any Tax attributable to a Pre-Closing Tax Period that is in excess of
the amount, if any, reflected as a Tax asset on the Closing Date Balance Sheet,
Buyer shall pay to Seller within ten (10) Business Days after such receipt an
amount equal to such refund received or credit utilized (or, in the case of a
Straddle Period, so much of such refund or credit as relates to the portion of
the taxable period ending on or before the Closing Date), together with any
interest received or credited thereon, less the costs incurred by Buyer in
obtaining such refund on Seller's behalf and the amount of any Taxes, including
federal income Taxes, imposed on the receipt of such refund. Buyer shall, and
shall cause ALNG to, at Seller's expense, take such action to obtain a refund or
credit attributable to a Pre-Closing Tax Period or to mitigate, reduce or
eliminate any Taxes that could be imposed for a Pre-Closing Tax Period
(including with respect to the transactions contemplated hereby) as is
reasonably requested by Seller.
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Section 7.2. Access to Information
(a) After the Closing, Seller shall grant to Buyer (or its designees)
access at all reasonable times to all of the information, books and records
relating to ALNG within the possession of Seller or Seller's Affiliates
(including work papers and correspondence with Taxing Authorities), and shall
afford Buyer (or its designees) the right (at Buyer's expense) to take extracts
therefrom and to make copies thereof, to the extent reasonably necessary to
permit Buyer (or its designees) to prepare Tax Returns, to conduct negotiations
with Taxing Authorities, and to implement the provisions of, or to investigate
or defend any claims between Buyer and any other Buyer Tax Indemnitees, on the
one hand, or Seller on the other hand, arising under this Agreement.
(b) After the Closing, Buyer shall grant or cause ALNG to grant to Seller
(or its designees) access at all reasonable times to all of the information,
books and records relating to ALNG within the possession of Buyer or ALNG
(including work papers and correspondence with Taxing Authorities), and shall
afford Seller (or its designees) the right (at Seller's expense) to take
extracts therefrom and to make copies thereof, to the extent reasonably
necessary to permit Seller (or its designees) to prepare Tax Returns, to conduct
negotiations with Tax authorities, and to implement the provisions of, or to
investigate or defend any claims between Buyer or any other Buyer Tax
Indemnitees, on the one hand, or Seller on the other hand, arising under this
Agreement.
(c) Each of Buyer and Seller will preserve and retain all schedules, work
papers and other documents relating to any Tax Returns of or with respect to
ALNG or to any claims, audits or other proceedings, or other Tax matters
affecting ALNG 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. Each of the Parties
will give the other Party reasonable written notice prior to transferring,
destroying or discarding any such material and, if so requested by the other
Party, allow the other Party (at its expense) to take possession of such
materials.
(d) Nothing in this Section 7.2 is intended to limit the obligations of the
Parties with respect to the delivery of, or the provision of access to, books,
records and other information under any other Section of this Agreement.
Section 7.3. Indemnification by Seller
(a) Seller, jointly and severally, shall indemnify, defend and hold
harmless Buyer, ALNG and any members of any group filing consolidated, combined
or unitary, federal, state or local income Tax Returns with Buyer (collectively,
the "Buyer Tax Indemnitees") from and against all Losses attributable to (i)
Taxes of ALNG for any Pre-Closing Tax Period, (ii) Taxes of any member of an
affiliated, consolidated, combined or unitary group that ALNG was a member of
prior to the Closing Date, including pursuant to Treasury Regulation Section
1.1502-6 or any analogous or similar state, local or foreign Law or regulation,
(iii) Taxes of any other Person imposed on ALNG as a transferee or successor, by
34
contract or otherwise, which Taxes relate to an event or transaction occurring
before the Closing, or (iv) any breach of any representation or warranty made in
Section 4.10or any covenants or agreements made by Seller in this Article VII;
provided, however, that Seller shall be liable for and shall indemnify the Buyer
Tax Indemnitees with respect to Losses described in clauses (i)-(iii) above only
to the extent that the amount of such Losses exceeds the sum of (x) the amounts
accrued as a liability for Taxes on the Closing Balance Sheet and (y) any
amounts previously paid by Seller to Buyer in respect of accrued ad valorem and
sales taxes of ALNG as part of Other Purchase Price Adjustments. Seller shall
reimburse the appropriate Buyer Tax Indemnitee for any Losses which are the
responsibility of Seller pursuant to this Section 7.3(a) within five (5)
Business Days after the payment of such Taxes by the Buyer Tax Indemnitee;
provided, however, that in the case of any such Losses attributable to Taxes
shown on any Tax Return described in Section 7.1 (b) or Section 7.1(c), Seller
shall reimburse the appropriate Tax Indemnitee for such Taxes prior to the due
date for the filing of such Tax Return.
(b) Notwithstanding anything to the contrary in this Agreement, no claim
for Taxes shall be permitted under this Section 7.3 unless such claim is first
made not later than sixty (60) days after the expiration of the applicable
statute of limitations (including extensions) with respect to such Taxes.
Section 7.4. Buyer Tax Indemnification
Buyer agrees to protect, defend, indemnify and hold harmless Seller from
and against, and agrees to pay all Losses attributable to (a) any Taxes of ALNG
that are not attributable to a Pre-Closing Tax Period, and (b) any liability
arising from a breach by Buyer of its covenants set forth in this Article VII.
Section 7.5. Tax Indemnification Procedures
(a) If a claim, audit, examination or other proceeding ("Tax Claim") shall
be made by any Taxing Authority that, if successful, would result in the
indemnification of a Party (or other Buyer Tax Indemnitee) under this Agreement
(referred to herein as the "Tax Indemnified Party"), the Tax Indemnified Party
shall promptly notify the party obligated under this Agreement to so indemnify
(referred to herein as the "Tax Indemnifying Party") in writing of such fact;
provided, however, that the failure of the Tax Indemnified Party to so notify
the Tax Indemnifying Party shall not release the Tax Indemnifying Party from its
obligations hereunder except to the extent that such failure materially
prejudices the Tax Indemnifying Party's position.
(b) The Tax Indemnified Party shall, at its sole cost, be entitled to
contest all Tax Claims except that the Tax Indemnifying Party shall have the
right, at its sole cost, to control the defense, prosecution, settlement or
compromise of any Tax contest that is related exclusively to the liability of
any Taxes , the entire amount of which the Tax Indemnifying Party acknowledges
in advance in writing is recoverable from the Tax Indemnifying Party hereunder.
If the Tax Indemnifying Party provides such written acknowledgement to the Tax
Indemnified Party, the Tax Indemnified Party shall take such action in
connection with contesting a Tax Claim as the Tax Indemnifying Party shall
35
reasonably request in writing from time to time, including the selection of
counsel and experts and the execution of powers of attorney, provided that the
Tax Indemnifying Party shall have agreed to pay to the Tax Indemnified Party all
costs and expenses that the Tax Indemnified Party incurs in connection with
contesting such Tax Claim, including, without limitation, reasonable attorneys'
and accountants' fees and disbursements. The Tax Indemnified Party may elect to
participate, at its sole cost, in any Tax contest controlled by the Tax
Indemnifying Party with counsel of its choice. The Tax Indemnified Party shall
not make any payment of such claim for at least 30 days (or such shorter period
as may be required by applicable Law) after the giving of the notice required by
Section 7.5(a), shall give to the Tax Indemnifying Party any information
reasonably requested relating to such claim, and otherwise shall cooperate with
the Tax Indemnifying Party in good faith in order to contest effectively any
such claim. With respect to any Tax Claims for which a Tax Indemnifying Party is
partially liable, the Tax Indemnifying Party may elect to participate, at its
sole cost, in any Tax contest controlled by the Tax Indemnified Party with
counsel of its choice and the Tax Indemnified Party may not enter into a
settlement of such a Tax Claim, without the written consent of the Tax
Indemnifying Party, which consent will not be unreasonably withheld; provided,
however, that if the Tax Indemnified Party notifies the Tax Indemnifying Party
that it wishes to settle such a Tax Claim and the Tax Indemnifying Party
reasonably refuses to consent to such settlement, the Tax Indemnifying Party
shall be required to continue such Tax contest at its sole expense, and the
indemnification obligation of the Tax Indemnifying Party shall be expanded to
include any Taxes incurred by the Tax Indemnified Party in excess of the amount
computed as though the settlement for which such consent was sought had been
implemented.
(c) Subject to the provisions of Section 7.5(b), the Tax Indemnified Party
shall only enter into a settlement of a contest of a Tax Claim that the Tax
Indemnifying Party has the right to control with the applicable Taxing Authority
or prosecute such contest to a determination in a court or other tribunal of
initial or appellate jurisdiction as instructed by the Tax Indemnifying Party;
provided, however, that if the Tax Indemnifying Party notifies the Tax
Indemnified Party that it wishes to settle a Tax contest, the Tax Indemnified
Party may elect to continue such Tax contest at its sole expense, and the
indemnification obligation of the Tax Indemnifying Party shall be limited to the
amount of such indemnification obligation computed as though the settlement for
which such consent was sought had been implemented.
(d) If, after actual receipt by the Tax Indemnified Party of an amount
advanced by the Tax Indemnifying Party pursuant to this Section 7.5, the extent
of the liability of the Tax Indemnified Party with respect to the claim shall be
established by the final judgment or decree of a court or other tribunal or a
final and binding settlement with an administrative agency having jurisdiction
thereof, the Tax Indemnified Party shall promptly repay to the Tax Indemnifying
Party the amount advanced to the extent of any refund received by the Tax
Indemnified Party with respect to the claim together with any interest received
thereon from the applicable Taxing Authority and any recovery of legal fees from
such Taxing Authority, net of any Taxes as are required to be paid by the Tax
Indemnified Party with respect to such refund, interest or legal fees
(calculated at the maximum applicable statutory rate of Tax in the year of
recovery without regard to any other Tax Items).
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Section 7.6. Conflict
In the event of a conflict between the provisions of this Article VII and
any other provisions of this Agreement (other than Section 3.1(c), which Section
shall control as to the Taxes referenced therein), this Article VII shall
control.
Section 7.7. Tax Sharing Agreements
All Tax sharing or similar agreements with respect to or involving ALNG
shall be terminated as of the Closing Date and, after the Closing Date, ALNG
shall not be bound thereby or have any liability thereunder.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Seller Indemnification
Subject to the limitations set forth in this Article VIII, from and after
the date hereof, Seller jointly and severally hereby agrees to indemnify and
hold Buyer and each of its officers, directors, partners, members, managers,
employees, and agents thereof, harmless from and against any and all Losses
arising out of, based upon, attributable to or resulting from (a) any breach of
any representation or warranty of Seller contained in Article IV (other than in
Section 4.1, Section 4.2, Section 4.3(a)(i) and (ii), Section 4.5, Section
4.11and Section 4.17) or any inaccuracy in any certificate delivered to Buyer
pursuant to this Agreement, (b) any breach of any representation or warranty of
Seller in Section 4.1, Section 4.2, Section 4.3(a)(i) and (ii), Section 4.5,
Section 4.11and Section 4.17, (c) any breach of any agreement or covenant on the
part of Seller contained in this Agreement, (d) any Losses relating to or
arising under the matters set forth on Schedule 8.1(d), (e) any and all costs
and expenses (including, without limitation, reasonable legal fees and
accounting fees) incident to the enforcement of the provisions of this Section
8.1, (f) any obligation or liability of ALNG with respect to any Employee
Benefit Plan subject to Title IV of ERISA, sponsored, maintained or contributed
to within six years prior to the Closing Date by any entity (other than ALNG)
that is or was considered one employer with ALNG under Section 4001 of ERISA or
Section 414 of the Code, and (g) any obligation or liability of ALNG to or with
respect to any person employed by ALNG (including obligations or liabilities
under Employee Benefit Plans and Other Employee Plans) and that is attributable
to such person's employment by ALNG prior to the Closing Date. This Article VIII
shall not apply to any breach of Seller's representations and warranties set
forth in Section 4.10, or to any breach of Seller's covenants set forth in
Article VII, it being agreed and understood that Buyer's sole and exclusive
remedies for any matters relating to Taxes shall be as provided in Article VII.
Section 8.2. Buyer Indemnification
Subject to the limitations set forth in this Article VIII, from and after
the date hereof, Buyer hereby agrees to indemnify and hold each Seller and each
of its officers, directors, employees, and agents, harmless from and against any
37
and all Losses arising out of, based upon, attributable to or resulting from (a)
any breach of any representation or warranty of Buyer contained in Article V
(other than Section 5.1, Section 5.2, Section 5.3, and Section 5.8) or any
inaccuracy in the certificate delivered to Buyer pursuant to this Agreement, (b)
any breach of any representation or warranty of Buyer in Section 5.1, Section
5.2, Section 5.3, or Section 5.8, (c) any breach of any agreement or covenant on
the part of Buyer contained in this Agreement, and (d) any and all costs and
expenses (including, without limitation, reasonable legal fees and accounting
fees) incident to the enforcement of the provisions of this Section 8.2. The
foregoing shall not apply to any breach of Buyer's covenants set forth in
Article VII, it being agreed and understood that Seller's sole and exclusive
remedies for matters relating to Taxes shall be as provided in Article VII.
Section 8.3. Indemnification Procedures
All claims for indemnification under this Article VIII shall be resolved as
follows:
(a) A party claiming indemnification under this Agreement (an "Indemnified
Party") shall promptly (i) notify the party from whom indemnification is sought
(the "Indemnifying Party") of any Third Party Claim asserted against the
Indemnified Party which could give rise to a right of indemnification under this
Agreement and (ii) transmit to the Indemnifying Party, a written notice ("Claim
Notice") describing the nature of the Third Party Claim, a copy of all papers
served with respect to such claim (if any), and the basis of the Indemnified
Party's request for indemnification under this Agreement.
(b) Within thirty (30) days after receipt of any Claim Notice (the
"Election Period"), the Indemnifying Party shall notify the Indemnified Party
(i) whether the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Agreement with respect to such Third Party Claim
and (ii) whether the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against such Third Party
Claim.
(c) If the Indemnifying Party notifies the Indemnified Party within the
Election Period that the Indemnifying Party does not dispute its potential
liability to the Indemnified Party under this Agreement and that the
Indemnifying Party elects to assume the defense of the Third Party Claim, then
the Indemnifying Party shall have the right to defend, at its sole cost and
expense, such Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted diligently by the Indemnifying Party to a final
conclusion or settled at the discretion of the Indemnifying Party in accordance
with this Section 8.3. The Indemnifying Party shall have full control of such
defense and proceedings including any compromise or settlement thereof;
provided, however, that any such compromise or settlement involving non-monetary
obligations of the Indemnified Party, or otherwise having a direct effect upon
its continuing operations, shall be subject to the consent of the Indemnified
Party. The Indemnified Party is hereby authorized, at the sole cost and expense
of the Indemnifying Party, to file, during the Election Period, any motion,
answer or other pleadings which the Indemnified Party shall deem necessary or
appropriate to protect its interests or those of the Indemnifying Party and
which are not unnecessarily prejudicial to the Indemnifying Party. If requested
38
by the Indemnifying Party, the Indemnified Party shall, at the sole cost and
expense of the Indemnifying Party, cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim which the Indemnifying Party elects
to contest, including, without limitation, the making of any related
counterclaim against the Person asserting the Third Party Claim or any
cross-complaint against any Person. The Indemnified Party may participate in,
but not control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this Section 8.3 and, except as permitted
above or pursuant to this Section 8.3, shall bear its own costs and expenses
with respect to such participation.
(d) If the Indemnifying Party fails to notify the Indemnified Party within
the Election Period that the Indemnifying Party elects to defend the Indemnified
Party pursuant to this Section 8.3, or if the Indemnifying Party elects to
defend the Indemnified Party pursuant to Section 8.3 but fails to diligently and
promptly defend or settle the Third Party Claim, then the Indemnified Party
shall have the right to defend, at the sole cost and expense of the Indemnifying
Party, the Third Party Claim. The Indemnified Party shall have full control of
such defense and proceedings; provided, however, that the Indemnified Party may
not enter into, without the Indemnifying Party's consent, which shall not be
unreasonably withheld, conditioned or delayed, any compromise or settlement of
such Third Party Claim. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party pursuant
to this Section 8.3, and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation.
(e) In the event an Indemnified Party should have a claim against an
Indemnifying Party hereunder which does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party, a written notice
(the "Indemnity Notice") describing the nature of the claim and the basis of the
Indemnified Party's request for indemnification under this Agreement. If the
Indemnifying Party does not notify the Indemnified Party within thirty (30) days
from its receipt of the Indemnity Notice that the Indemnifying Party disputes
such claim, the claim specified by the Indemnified Party in the Indemnity Notice
shall be deemed a liability of the Indemnifying Party hereunder. If the
Indemnifying Party has timely disputed such claim, as provided above, such
dispute shall be resolved by litigation in an appropriate court of competent
jurisdiction.
(f) Payments of all amounts owing by the Indemnifying Party pursuant to
Section 8.3(c) and Section 8.3(d) shall be made not later than thirty (30) days
after the latest of (A) the settlement of the Third Party Claim, (B) the
expiration of the period for appeal of a final adjudication of such Third Party
Claim or (C) the expiration of the period for appeal of a final adjudication of
the Indemnifying Party's liability to the Indemnified Party under this
Agreement. Payments of all amounts owing by the Indemnifying Party pursuant to
Section 8.3(e) shall be made not later than thirty (30) days after the
expiration of the thirty-day Indemnity Notice period or, if the Indemnifying
Party has timely disputed such claim, the expiration of the period for appeal of
a final adjudication of the Indemnifying Party's liability to the Indemnified
Party under this Agreement.
39
(g) The failure to provide notice as provided in this Section 8.3 shall not
excuse any party from its continuing obligations hereunder; however, any claim
shall be reduced by the damages resulting from such party's delay or failure to
provide notice as provided in this Section 8.3.
(h) Notwithstanding anything to the contrary in this Section 8.3, should
any Third Party Claim hereunder involve a situation where the Indemnified Party
reasonably anticipates that part of the claim will be borne by it and part of
the claim will be borne by the Indemnifying Party due to the existence of the
limitations in Section 8.4, the parties shall jointly consult and proceed as to
any such Third Party Claim.
Section 8.4. Limits on Indemnification
Notwithstanding anything to the contrary contained in this Agreement:
(a) Seller shall not have any obligation to provide indemnification for
Losses pursuant to Section 8.1(a) or Section 8.1(e) (to the extent incurred in
connection with Section 8.1(a)) except to the extent that the aggregate amount
of all such Losses pursuant to such subsections exceeds $250,000.00 (the "Basket
Amount"), in which case Seller shall be liable to Buyer only for such Losses in
excess of the Basket Amount; provided, however, that the Basket Amount shall not
apply with respect to any breach of Section 4.3(a)(iii) or Section 4.3(a)(iv).
The maximum obligation of Seller to provide indemnification for all Losses
pursuant to Section 8.1(a) or Section 8.1(e) (to the extent incurred in
connection with Section 8.1(a)) shall be limited to an aggregate amount equal to
$10,000,000.00 (the "Liability Cap"). Without prejudice to the foregoing
limitations, Seller shall not have any obligation to provide indemnification for
Losses to the extent such Losses are accrued or reserved for in the Net Working
Capital Adjustment Amount determined pursuant to Section 3.3.
(b) Buyer shall not have any obligation to provide indemnification for
Losses pursuant to Section 8.2(a) or Section 8.2(d) (to the extent incurred in
connection with Section 8.2(a)) except to the extent that the aggregate amount
of all such Losses pursuant to such subsections exceeds the Basket Amount, in
which case Buyer shall be liable to Seller only for such Losses in excess of the
Basket Amount. The maximum obligation of Buyer to provide indemnification for
Losses pursuant to Section 8.2(a) or Section 8.2(d) (to the extent incurred in
connection with Section 8.2(a)) shall be limited to the Liability Cap.
(c) Neither Party shall have any obligation to provide indemnification
hereunder for any Losses pursuant to Section 8.1(a), Section 8.1(b) (solely with
respect to breaches of the representations and warranties in Section 4.1,
Section 4.2 and Section 4.3(a)), Section 8.2(a) and Section 8.2(b) (solely with
respect to breaches of the representations and warranties in Section 5.1,
Section 5.2, and Section 5.3) hereof for which a written notice of claim
specifying in reasonable detail the specific nature and basis of the Losses and
the estimated amount of such Losses is not delivered to the Indemnifying Party
prior to 5:00 p.m., Eastern Time, on the eighteen (18) month anniversary of the
date hereof; provided, however, that such indemnities shall survive with respect
only to the specific matter that is the subject of any notice delivered in good
40
faith in compliance with the requirements of this Section 8.4(c) prior to 5:00
p.m., Eastern Time on such eighteen (18) month anniversary date until the
earlier to occur of (i) the date on which a final nonappealable resolution of
the matter described in such notice has been reached, or (ii) the date on which
the matter described in such notice has otherwise reached final resolution; and
provided further that (x) the representations and warranties set forth in
Section 4.5, Section 4.11, Section 4.17, and Section 5.8 hereof shall survive
until ninety (90) days after the end of the applicable statute of limitations
period, (y) the representations and warranties set forth in Section 4.14(a) and
4.14(d) hereof shall survive until the second anniversary of the Closing Date
and (z) the representations and warranties set forth in Section 4.8 shall
survive until the second anniversary of the date hereof.
(d) The obligation of either Party to provide indemnification hereunder for
any Losses for breaches of representations and warranties hereunder shall be net
of (a) any insurance proceeds received by an Indemnified Party or any of its
Affiliates with respect to such Loss (except to the extent such insurance
proceeds must be repaid by the Indemnified Party or its Affiliates to the
insurer through adjustments to past, present or future insurance premiums or
other similar mechanisms), and (b) any Tax benefit received by the Indemnified
Party or any of its Affiliates with respect to such Losses (determined after
taking into account the Tax consequences of any related indemnification
payment).
(e) The Parties agree that any payment made pursuant to Article VIII or the
indemnification provisions of Article VII are intended to be an adjustment to
the Purchase Price.
Section 8.5. Remedies Exclusive
THE PARTIES ACKNOWLEDGE AND AGREE THAT THE REMEDIES SET FORTH IN ARTICLE
VII AND THIS ARTICLE VIII, INCLUDING THE BASKET AMOUNT, LIABILITY CAP, SURVIVAL
PERIODS, DISCLAIMERS AND LIMITATIONS ON SUCH REMEDIES, ARE INTENDED TO BE, AND
SHALL BE, THE SOLE AND EXCLUSIVE REMEDIES UNDER THIS AGREEMENT.
Section 8.6. Certain Damages
NEITHER PARTY NOR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES
SHALL BE LIABLE TO THE OTHER PARTY OR TO ANY OF ITS AFFILIATES OR
REPRESENTATIVES FOR PUNITIVE OR EXEMPLARY DAMAGES (OTHER THAN THIRD PARTY
PUNITIVE OR EXEMPLARY DAMAGES) IN CONNECTION WITH THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF WHETHER SUCH DAMAGES ARE BASED
ON CONTRACT, TORT, STRICT LIABILITY, VIOLATION OF LAW, OR ANY OTHER LEGAL OR
EQUITABLE PRINCIPLE.
41
Section 8.7. Miscellaneous
The indemnification obligations set forth in this Article VIII and in
Article VII are made notwithstanding any investigation made by or on behalf of
any of the Parties hereto or the results of any such investigation and
notwithstanding the participation of any Party in the Closing.
ARTICLE IX
GENERAL
Section 9.1. Amendments
This Agreement may only be amended by an instrument in writing executed by
Buyer and Seller.
Section 9.2. Waivers
The observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
by the Party entitled to enforce such term, but such waiver shall be effective
only if it is in a writing signed by the Party entitled to enforce such term and
against which such waiver is to be asserted. Unless otherwise expressly provided
in this Agreement, no delay or omission on the part of any Party in exercising
any right or privilege under this Agreement shall operate as a waiver thereof,
nor shall any waiver on the part of any Party of any right or privilege under
this Agreement operate as a waiver of any other right or privilege under this
Agreement, nor shall any single or partial exercise of any right or privilege
preclude any other or further exercise thereof or the exercise of any other
right or privilege under this Agreement.
Section 9.3. Notices
Any notices or other communications required or permitted hereunder shall
be in writing and shall be sufficiently given (and shall be deemed to have been
duly given upon receipt) if sent by fax (with machine confirmation) overnight
mail, registered mail or certified mail, postage prepaid, or by hand, to the
Parties at the following addresses (or at such other address for a Party as
shall be specified by like notice):
(a) If to Seller, to:
Duke Energy Gas Transmission Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
42
With a copy (which shall not constitute effective notice)
to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
2300 First City Tower
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Rell ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Buyer, to:
KeySpan LNG GP, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which shall not constitute effective notice)
to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.4. Successors and Assigns; Parties in Interest
This Agreement shall be binding upon and shall inure solely to the benefit
of the Parties and their respective successors, legal representatives and
permitted assigns. Neither this Agreement nor any rights or obligations
hereunder may be assigned without the written consent of the other Party, and
any purported assignment made without such written consent shall be void;
provided, however, that Buyer may assign its rights and obligations hereunder
(a) in whole or in part to one or more Affiliates of Buyer in connection with
the transfer of the Partnership Interests and/or interests in ALNG to such
Affiliate and (b) to one or more lending institutions or trustees in connection
with a pledge or granting of a security interest in the Partnership Interests,
in interests in ALNG, in assets of ALNG and/or in this Agreement. In no event
shall the assignment by any Party of its respective rights or obligations under
this Agreement release such Party for its respective liabilities and obligations
hereunder. Nothing in this Agreement, express or implied, is intended to or
shall confer upon any Person, other than the Parties and their respective
successors, legal representatives, and permitted assigns, any rights, benefits
or remedies of any nature whatsoever under or by reason of this Agreement, and
no Person shall be deemed a third party beneficiary under or by reason of this
Agreement.
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Section 9.5. Severability
If any provision of this Agreement or the application of any such provision
to any Person or circumstance shall be declared judicially to be invalid,
unenforceable, or void, such decision shall not have the effect of invalidating
or voiding the remainder of this Agreement, it being the intent and agreement of
the Parties that this Agreement shall be deemed amended by modifying such
provision to the extent necessary to render it valid, legal and enforceable
while preserving its intent or, if such modification is not possible, by
substituting therefor another provision that is valid, legal, and enforceable
and that achieves the same objective.
Section 9.6. Entire Agreement
This Agreement (including the Schedules hereto and the documents and
instruments executed and delivered in connection herewith) constitutes the
entire agreement between the Parties with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings,
whether written or oral, between the Parties with respect to the subject matter
hereof, and there are no representations, understandings or agreements relating
to the subject matter hereof that are not fully expressed in this Agreement and
the documents and instruments executed and delivered in connection herewith. All
Schedules attached to this Agreement are expressly made a part of, and
incorporated by reference into, this Agreement. If and to the extent any
information required to be furnished in any Schedule is contained in any other
Schedule attached hereto, such information shall be deemed to be included in all
Schedules in which the information is required to be included to the extent such
disclosure is reasonably apparent on its face and provided such disclosure is
reasonably related to the Schedule in which it is included.
Section 9.7. Governing Law
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO SUCH JURISDICTION'S CONFLICT OF
LAWS PROVISIONS. THE PARTIES AGREE THAT VENUE OR ANY SUIT, ACTION, PROCEEDING OR
LITIGATION ARISING OUT OF OR IN RELATION TO THIS AGREEMENT SHALL BE IN FEDERAL
OR STATE COURT IN THE STATE OF DELAWARE HAVING SUBJECT MATTER JURISDICTION.
Section 9.8. Expenses
Except as otherwise provided herein, each of the Parties shall bear its own
expenses (including, without limitation, fees and disbursements of its counsel,
accountants and other experts) incurred by it in connection with the
preparation, negotiation, execution, delivery, and performance of this
Agreement, each of the other documents and instruments executed in connection
with or contemplated by this Agreement and the consummation of the transactions
contemplated hereby.
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Section 9.9. Release of Information
The Parties shall cooperate with each other in releasing information
concerning this Agreement and the transactions contemplated hereby. No press
releases or other public announcements concerning the transactions contemplated
by this Agreement shall be made by any Party without prior consultation with,
and agreement of, the other Party, except for any legally required communication
by any Party and then only with prior consultation and as much advance notice as
is practicable under the circumstances requiring any announcement, together with
copies of all drafts of the proposed text.
Section 9.10. Specific Performance
Each of the Parties hereto acknowledges and agrees that the other Parties
hereto would be irreparably damaged in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, each of the Parties hereto agrees that, in
addition to any other remedy to which such Party may be entitled at Law or in
equity, they each shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof.
Section 9.11. Confidentiality
Seller agrees on behalf of itself and its Affiliates that, at all times
from and after the Closing Date, it shall keep secret and retain in strictest
confidence, and shall not use for its benefit or for the benefit of others,
confidential information with respect to ALNG, including Proprietary
Information, customer lists, details of client or consultant contracts, pricing
policies, operational methods, marketing plans or strategies, product
development techniques or plans, other than any of the foregoing are in the
public domain (except such materials that enter the public domain through
conduct of Seller or its Affiliates which violates this Section 9.11 prior to
any disclosure by Buyer), and provided that the foregoing shall not restrict any
disclosure of information that, pursuant to the advice of counsel, is required
by Law, legal process, or stock exchange regulation and is implemented in
accordance with the following provisions of this Section 9.11. In the event
Seller or any of its Affiliates receives a request or becomes compelled (by
deposition, interrogatory, request for documents, subpoena, civil investigative
demand, order or similar process) to disclose any of such confidential
information, Seller agrees to cause the following to occur prior to any such
disclosure:
(a) provide Buyer with prompt written notice of such requirements so that
Buyer may seek a protective order or other appropriate remedy and/or waive
compliance with the terms of this Section;
(b) consult with Buyer on the advisability of taking steps to resist or
narrow such request; and
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(c) cooperate with Buyer in any attempt it may make to obtain a protective
order or other appropriate remedy or assurance that confidential treatment will
be afforded such information.
In the event such protective order or other remedy is not obtained, or
Buyer waives compliance with the provisions hereof, Seller agrees to cause to be
furnished only that portion of such confidential information which Seller or its
Affiliates is advised by written opinion of counsel that it is legally required
to furnish, and to exercise reasonable efforts to obtain assurance that
confidential treatment will be accorded such information.
Section 9.12. Certain Construction Rules
The article and section headings and the table of contents contained in
this Agreement are for convenience of reference only and shall in no way define,
limit, extend, or describe the scope or intent of any provisions of this
Agreement. Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns, and verbs shall include the plural and vice
versa. In addition, as used in this Agreement, unless otherwise provided to the
contrary, (a) all references to days, months or years shall be deemed references
to calendar days, months or years, and (b) any reference to a "Section,"
"Article," or "Schedule" shall be deemed to refer to a section or article of
this Agreement or a schedule attached to this Agreement. The words "hereof,"
"herein," "hereunder," and words of similar import referring to this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specifically provided for herein, the term "or"
shall not be deemed to be exclusive. The term "including" shall mean "including
without limitation."
Section 9.13. Counterparts
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and all of which taken together shall constitute one
instrument binding on both Parties, notwithstanding that both Parties are not
signatories to the original or the same counterpart.
Section 9.14. Further Assurances
Subject to the terms and conditions of this Agreement, at any time, or from
time to time, after the Closing, at any Party's request and without further
consideration, the other Parties shall execute and deliver to such Party such
other instruments of sale, transfer, conveyance, assignment and confirmation,
provide such materials and information and take such other actions as such Party
may reasonably request in order to consummate the transactions contemplated by
this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first above written.
SELLER:
DUKE ENERGY GAS TRANSMISSION CORPORATION
By: /s/
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
ALGONQUIN ENERGY, INC.
By: /s/
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
BUYER:
KEYSPAN LNG GP, LLC
By: /s/
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President-Operations
KEYSPAN LNG LP, LLC
By: /s/
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President-Operations
Signature Page to Purchase Agreement
