Exhibit 2.1
ASSET PURCHASE AGREEMENT
DATED SEPTEMBER 20, 2006
BY AND BETWEEN
HOUSTON ENERGY SERVICES COMPANY, L.L.C.,
AS "SELLER",
AND
COMMERCE ENERGY, INC.,
AS "BUYER"
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS.................................................... 1
ARTICLE II THE ASSET PURCHASE............................................ 11
2.1 Purchase and Sale of Assets.................................... 11
2.2 Assumption of Liabilities...................................... 11
2.3 Purchase Price................................................. 11
2.4 The Closing.................................................... 11
2.5 Allocation..................................................... 14
2.6 Apportionment.................................................. 14
2.7 Gas Imbalances................................................. 14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER................. 15
3.1 Organization, Qualification and Limited Liability
Company Power.................................................. 16
3.2 Authorization of Transaction................................... 16
3.3 Noncontravention............................................... 16
3.4 Tax Matters.................................................... 17
3.5 Ownership and Condition of Assets.............................. 17
3.6 Assigned Contracts; Risk Management............................ 18
3.7 Litigation..................................................... 19
3.8 Employees...................................................... 19
3.9 Employee Benefits.............................................. 20
3.10 Legal Compliance............................................... 21
3.11 Customers and Suppliers........................................ 21
3.12 Permits........................................................ 22
3.13 Certain Business Relationships With Affiliates................. 22
3.14 Brokers' Fees.................................................. 22
3.15 Books and Records.............................................. 22
3.16 Limitations of Seller's Representations and Warranties......... 22
3.17 Buyer's Breach of Representation or Warranty................... 23
3.18 Non-Foreign Entity............................................. 23
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TABLE OF CONTENTS
(continued)
PAGE
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3.19 Solvency; the Seller's Intent.................................. 23
3.20 Trading Book................................................... 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER................... 24
4.1 Organization and Corporate Power............................... 24
4.2 Authorization of the Transaction............................... 24
4.3 Noncontravention............................................... 24
4.4 Litigation..................................................... 25
4.5 Financing...................................................... 25
4.6 Broker's Fees.................................................. 25
4.7 Buyer's Reliance............................................... 25
4.8 Limitations of the Buyer's Representations and Warranties...... 25
4.9 Seller's Breach of Representation or Warranty................. 25
ARTICLE V COVENANTS...................................................... 26
5.1 Governmental and Third-Party Notices and Consents.............. 26
5.2 Proprietary Information........................................ 26
5.3 Solicitation and Hiring........................................ 27
5.4 Non-Competition................................................ 27
5.5 Tax Matters.................................................... 27
5.6 Sharing of Data................................................ 27
5.7 Cooperation in Litigation...................................... 28
5.8 Employees...................................................... 28
5.9 Transition Services............................................ 28
5.10 Substitution Letters of Credit................................. 29
5.11 Collection of Receivables...................................... 29
5.12 Further Assurances............................................. 29
5.13 Assistance with Preparation of Financial Statements............ 29
5.14 Refund of Customer Deposits.................................... 29
ARTICLE VI INDEMNIFICATION............................................... 30
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TABLE OF CONTENTS
(continued)
PAGE
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6.1 Indemnification by the Seller.................................. 30
6.2 Indemnification by the Buyer................................... 30
6.3 Indemnification Claims......................................... 30
6.4 Survival of Representations and Warranties..................... 33
6.5 Limitations.................................................... 33
6.6 Treatment of Indemnity Payments................................ 34
6.7 Waiver of Deceptive Trade Practices Acts....................... 34
ARTICLE VII MISCELLANEOUS................................................ 35
7.1 Press Releases and Announcements............................... 35
7.2 No Third Party Beneficiaries................................... 36
7.3 Entire Agreement............................................... 36
7.4 Succession and Assignment...................................... 36
7.5 Counterparts and Facsimile Signature........................... 36
7.6 Headings....................................................... 36
7.7 Notices........................................................ 36
7.8 Governing Law.................................................. 37
7.9 Amendments and Waivers......................................... 37
7.10 Severability................................................... 37
7.11 Expenses....................................................... 38
7.12 Submission to Jurisdiction..................................... 38
7.13 Specific Performance........................................... 38
7.14 Construction................................................... 38
7.15 Limitation on Damages.......................................... 39
7.16 Acknowledgement................................................ 39
7.17 Conspicuousness of Provisions.................................. 39
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Exhibits
Exhibit A - Xxxx of Sale
Exhibit B - Assumption Agreement
Exhibit C - Non-Solicitation Agreement
Exhibit D - Transition Services Agreement
Exhibit E - Trading Book Side Letter
Exhibit F - Guaranty Agreement
Schedules
Schedule 2.1(b) - Excluded Assets
Schedule 2.5 - Allocation of Purchase Price
Disclosure Schedule
Schedule 5.8 - Transferred Employees
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into on September 20, 2006 by and
between Houston Energy Services Company, L.L.C., a Texas limited liability
company (the "Seller"), and Commerce Energy, Inc., a California corporation (the
"Buyer").
WITNESSETH:
In consideration of the representations, warranties and covenants herein
contained, the Parties agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, each of the following terms shall have the
meaning set forth below.
"Acquired Assets" shall mean the following assets, properties and rights of
the Seller existing as of the Closing to the extent they relate to the Business:
(a) all rights under Assigned Contracts relating to periods from and
after September 1, 2006, including all accounts receivable arising thereunder
during such periods;
(b) all Permits;
(c) all books, records, accounts, ledgers, files, documents,
correspondence, lists (including customer and prospect or lead lists, including
oil users), employment records, operating and/or procedural manuals, end-user
customer records (including credit review files, to the extent permitted to be
transferred by applicable Law), sales and promotional materials, studies,
reports and other printed or written materials;
(d) all positions comprising the Trading Book, except for the
Designated NYMEX Positions;
(e) all rights to firm distribution capacity released to the Seller by
Central Florida Gas for end-user customers of the Business in the Central
Florida Gas distribution territory;
(f) all rights to storage, peaking and transportation capacity
released to the Seller by TECO Peoples Gas for end-user customers of the Seller
in the TECO Peoples Gas distribution territory;
(g) all rights to storage, peaking and transportation capacity
released to the Seller by Sequent Energy for end-user customers of the Seller in
the Central Florida Gas, Florida Public Utilities and Florida City Gas
distribution territories;
(h) all rights to storage, peaking and transportation capacity
released to the Seller by any party for end-user customers of the Seller in the
Restricted Area used in the Business; and
(i) all Customer Deposits.
"Affiliate" shall mean any affiliate, as defined in Rule 12b-2 under the
Securities Exchange Act of 1935.
"Agreed Amount" shall mean part, but not all, of the Claimed Amount.
"Ancillary Agreements" shall mean the Xxxx of Sale, the Assumption
Agreement, the Non-Solicitation Agreement, the Transition Services Agreement,
the Guaranty Agreement and the Trading Book Side Letter.
"Arbitrator" shall have the meaning set forth in Section 6.3(e).
"Assigned Contracts" shall mean all Contracts, other than the Supply
Agreements, to which the Seller is a party relating exclusively to the Business
existing as of the Closing, each of which is set forth on Section 3.6 of the
Disclosure Schedule (but shall not include any such Contracts reflected on
Schedule 2.1(b)), including:
(a) All Customer Contracts;
(b) All Hedging Agreements to which the Seller is a party, including
all Contracts evidencing existing basis positions backing Customer Contracts,
and all credit support agreements or other collateral arrangements relating to
Customer Contracts, but not including the NYMEX positions;
(c) All of Seller's rights to storage, peaking and transportation
capacity released by Central Florida Gas for end-user customers of the Business
in the Central Florida Gas distribution territory;
(d) All of Seller's rights to storage, peaking and transportation
capacity released by TECO Peoples Gas for end-user customers of the Business in
the TECO Peoples Gas distribution territory; and
(e) All of Seller's rights to storage, peaking and transportation
capacity released by Sequent Energy for end-user customers of the Business in
the Central Florida Gas, Florida Public Utilities and Florida City Gas
distribution territories.
"Assumed Liabilities" shall mean the Liabilities of the Seller arising from
and after September 1, 2006 under the Assigned Contracts.
"Assumption Agreement" shall have the meaning set forth in Section
2.4(b)(vi).
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"Xxxx of Sale" shall have the meaning set forth in Section 2.4(b)(v).
"Business" shall mean the Seller's business of selling natural gas to
Customers in California, Florida, Nevada, Kentucky and Texas.
"Buyer" shall have the meaning set forth in the first paragraph of this
Agreement.
"Buyer Certificate" shall mean a certificate to the effect that the
representations and warranties of the Buyer set forth in the first sentence of
Section 4.1 and in Section 4.2 and any representations and warranties of the
Buyer set forth in this Agreement that are qualified as to materiality shall be
true and correct in all respects, and all other representations and warranties
of the Buyer set forth in this Agreement shall be true and correct in all
material respects, in each case as of the date of this Agreement, except to the
extent such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties shall be true
and correct as of such date).
"Buyer Indemnified Party" shall have the meaning set forth in Section
6.1(a).
"Buyer's Knowledge" means the actual knowledge, following reasonable
inquiry, of each of the officers of Buyer that are involved in the negotiation,
structuring or effectuation of the Transactions or the due diligence review of
the operations of the Seller or its Subsidiaries conducted by or on behalf of
the Buyer in connection therewith.
"Claimed Amount" shall mean the amount of any Damages incurred or
reasonably expected to be incurred by the Indemnified Party.
"Claim Notice" shall mean written notification which contains (i) a
description of the Damages incurred or reasonably expected to be incurred by the
Indemnified Party and the Claimed Amount of such Damages, to the extent then
known, (ii) a statement that the Indemnified Party is entitled to
indemnification under Article VI for such Damages (or, if applicable, a
statement that the Indemnified Party is entitled to injunctive relief) and a
reasonable explanation of the basis therefor, and (iii) a demand for payment in
the amount of such Damages (or, if applicable, a demand for action to cure the
applicable breach).
"Closing" shall have the meaning set forth in Section 2.4(a).
"Closing Amount" shall mean the meaning set forth in Section 2.3.
"Closing Date" shall have the meaning set forth in Section 2.4(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder.
"Commercial Rules" shall mean the Commercial Arbitration Rules of the AAA.
"Contract" means any contract, agreement, lease, license, sales order,
purchase order, instrument or other commitment or arrangement, whether written
or oral, that is binding on any Person or any part of its property under
applicable Law, and any amendments thereto.
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"Controlling Party" shall mean the party controlling the defense of any
Third Party Action.
"Customer" means the Seller's counterparty with respect to each contract
for the sale of natural gas by the Seller, including existing Customers and
pending additional Customers.
"Customer Contracts" means all of the Seller's retail natural gas Contracts
for sales of gas to Customers in the State of California, the State of Florida,
the State of Nevada, the State of Kentucky and the State of Texas, each of which
is set forth on Section 3.6(a)(xii) of the Disclosure Schedule and each of which
is an Assigned Contract.
"Customer Deposits" means deposits of cash or cash equivalents made by or
on behalf of any Customers as of September 1, 2006 as security under any
Customer Contract that are in the possession or control of the Seller.
"Customer Letters of Credit" means letters of credit issued by or on behalf
of any Customers in favor of the Seller as of September 1, 2006 as security
under any Customer Contract that are in the possession or control of the Seller.
"Damages" shall mean any and all debts, obligations and other Liabilities
(whether absolute, accrued, contingent, fixed or otherwise, or whether known or
unknown, or due or to become due or otherwise), diminution in value, monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including amounts paid in settlement, interest, court costs, costs of
investigators, fees and expenses of attorneys, accountants, financial advisors
and other experts, and other expenses of litigation), other than those costs and
expenses of arbitration of a Dispute which are to be shared equally by the
Indemnified Party and the Indemnifying Party as set forth in Section 6.3(e)(vi).
"Designated NYMEX Positions" shall mean the Seller's existing NYMEX
positions set forth on Exhibit A to the Trading Book Side Letter.
"Disclosure Schedule" shall mean the disclosure schedule provided by the
Seller to the Buyer on the date hereof and accepted in writing by the Buyer or
otherwise attached to this Agreement.
"Dispute" shall mean the dispute resulting if the Indemnifying Party in a
Response disputes its liability for all or part of the Claimed Amount.
"Employee Benefit Plan" shall mean any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA), any "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA), and any other written or oral plan, agreement
or arrangement involving direct or indirect compensation, including insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement compensation.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any Person which is, or at any applicable time
was, a member of (1) a controlled group of corporations (as defined in Section
414(b) of the Code), (2) a group of trades or businesses under common control
(as defined in Section 414(c) of the Code), or (3) an affiliated service group
(as defined under Section 414(m) of the Code or the regulations under Section
414(o) of the Code), any of which includes or included the Seller or a
Subsidiary.
"Excluded Assets" shall mean those assets listed on Schedule 2.1(b)
attached hereto.
"Expected Claim Notice" shall mean a notice that, as a result of a legal
proceeding instituted by or written claim made by a third party, an Indemnified
Party reasonably expects to incur Damages for which it is entitled to
indemnification under Article VI.
"GAAP" shall mean United States generally accepted accounting principles,
applied consistent with prior practice of the party to which it relates.
"Governmental Entity" shall mean any domestic or foreign national, state or
local government, any subdivision, agency, board, commission, bureau, court,
tribunal or other instrumentality or authority thereof, or any
quasi-governmental or private body exercising any regulatory or taxing authority
thereunder.
"Guaranty Agreement" shall mean the guaranty agreement being entered into
between all of the members of the Seller and the Buyer at the Closing,
substantially in the form attached to this Agreement as Exhibit F.
"Hedging Agreements" means (i) any hedging agreements, futures Contracts,
commodity price swap agreements, forward agreements, Contracts of sale, collars,
puts, calls, floors, caps, options or other Contracts that are intended to
benefit from or reduce or eliminate the risk associated with fluctuations in the
price of hydrocarbons, interest rates and/or currency exchange rates and (ii)
any other agreements, including physical and financial purchase and sale
Contracts, transportation agreements, throughput agreements, in each case
relating to the Business.
"Indemnified Party" shall mean any Person entitled, or seeking to assert
rights, to indemnification under Article VI of this Agreement.
"Indemnifying Party" shall mean the Party from whom indemnification is
sought by the Indemnified Party.
"Law" shall mean any United States or non-United States statute, law,
ordinance, regulation, rule, code, executive order, injunction, judgment, decree
or other order.
"LDC" shall have the meaning set forth in Section 2.7(a).
"Legal Proceeding" shall mean any action, suit, proceeding, claim,
arbitration or investigation before any Governmental Entity or before any
arbitrator.
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"Liabilities" shall mean any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including those arising under any Law or Legal
Proceeding and those arising under any Contract.
"Non-controlling Party" shall mean the Party not controlling the defense of
any Third Party Action.
"Non-Solicitation Agreement" shall have the meaning set forth in Section
2.4(b)(iv).
"Ordinary Course of Business" shall mean the ordinary course of business of
the Business consistent with past custom and practice (including with respect to
frequency and amount).
"Organizational Documents" shall mean, with respect to an entity, all of
the following that are applicable: its Certificate or Articles of Incorporation,
Organization or Formation, its by-laws, its limited liability company operating
agreement, its regulations, its indenture of trust or any organizational
document or agreement functionally equivalent to any of the foregoing.
"Parties" shall mean the Buyer and the Seller.
"Party" shall mean any of the Buyer and the Seller, as applicable.
"Payment Period" shall mean any period of time for which payments have been
made in advance by the Seller or are to be made in arrears by the Buyer.
"Permits" shall mean all permits, licenses, registrations, certificates,
orders, approvals, franchises, variances, exemptions, tariffs, rate schedules,
authorizations and similar rights issued by or obtained from any Governmental
Entity (including those issued or required under environmental Laws and those
relating to the occupancy or use of owned or leased real property).
"Person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person, trust, association or
entity or government, political subdivision, agency or instrumentality of a
government.
"Purchase Price" shall have the meaning set forth in Section 2.3.
"Quantifiable Losses" shall mean (without duplication) any losses and
Liabilities incurred by or imposed upon the Seller or any of its Subsidiaries,
but excluding Liabilities which are disclosed in the Disclosure Schedule, it
being understood and agreed that the purposes of this Agreement the amount of
such losses and Liabilities shall be quantified using valuation methods that are
generally accepted in the natural gas industry (to the extent that such methods
exist).
"Reasonable Best Efforts" shall mean best efforts, to the extent
commercially reasonable, but without any requirement to institute a Legal
Proceeding or expend in excess of $1,000.00
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(other than expenditures for attorneys' fees and costs) with respect to efforts
made as to any individual matter or thing.
"Response" shall mean a written response containing the information
provided for in Section 6.3(c).
"Restricted Area" shall mean the Service Territories of: Louisville Gas and
Electric; Central Florida Gas; Florida Public Utilities; TECO Peoples Gas;
Florida City Gas; SoCal Edison; Pacific Gas & Electric; Southwest Gas (Southern
Div.); Southern California Gas Company; Southwest Gas Corporation; and Pacific
Gas and Electric Company.
"Restricted Employee" shall mean any individual who either (i) was an
employee of the Buyer on the date of this Agreement or (ii) was an employee of
the Seller on the date of this Agreement and received an employment offer from
the Buyer within five business days following the Closing Date.
"Retained Liabilities" shall mean any and all Liabilities (whether known or
unknown, absolute or contingent, liquidated or unliquidated, due or to become
due and accrued or unaccrued, and whether claims with respect thereto are
asserted before or after the Closing) of the Seller and its Affiliates that are
not Assumed Liabilities. The Retained Liabilities shall include all Liabilities
of the Seller and any of its Affiliates arising out of, relating to, resulting
from or in connection with:
(a) income taxes accruing with respect to Seller's ownership and
operation of the Business prior to the Closing;
(b) costs and expenses incurred in connection with this Agreement or
the consummation of the Transactions;
(c) this Agreement and the Ancillary Agreements;
(d) any Taxes, including deferred taxes or taxes measured by income of
the Seller earned prior to September 1, 2006 or in connection with the
consummation of the Transactions, any Liabilities for federal and state income
tax and FICA taxes of employees of the Seller which the Seller is legally
obligated to withhold, any Liabilities of the Seller for employer FICA and
unemployment taxes incurred, and any Liabilities of the Seller for sales, use or
excise taxes or customs and duties;
(e) any Contracts which are listed on Schedule 2.1(b);
(f) all Liabilities arising prior to September 1, 2006 under the
Assigned Contracts, and all Liabilities for any breach, act or omission by the
Seller prior to the Closing under any of the Assigned Contracts;
(g) events, conduct or conditions existing or occurring prior to the
Closing that constitute a violation of or non-compliance with any Law, any
judgment, decree or order of any Governmental Entity, or any Permit;
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(h) severance benefits to any employee of the Seller whose employment
is terminated (or treated as terminated) in connection with the consummation of
the Transactions;
(i) the employment, or termination of employment, of current and
former employees of the Seller and its Affiliates;
(j) indemnification obligations owed to any Person by reason of the
fact that such Person was a director, officer, employee, or agent of the Seller
or was serving at the request of the Seller as a partner, trustee, director,
officer, employee, or agent of another Person (whether such indemnification is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such indemnification is pursuant to
any statute, charter document, bylaw, agreement, or otherwise);
(k) injury to or death of persons or damage to or destruction of
property occurring prior to the Closing (including any workers' compensation
claim);
(l) any Seller Plan, together with all medical, dental and disability
benefits (both long-term and short-term benefits), whether insured or
self-insured, owed to employees or former employees of the Seller based upon
conditions or disabilities existing prior to the Closing (including any
liabilities arising out of any conditions or disabilities which may have been
aggravated following the Closing);
(m) the servicing of Customer accounts by the Seller prior to
September 1, 2006, including short-term shipping costs, charges and
pass-throughs; and
(n) obligations to Customers arising prior to September 1, 2006.
"Security Interest" shall mean any mortgage, pledge, security interest,
encumbrance, charge, option, pledge, restriction on transfer of title or voting,
restrictive covenant, right of first refusal, other lien or any adverse claim of
any nature whatsoever (whether arising by Contract or by operation of Law),
other than (i) mechanic's, materialmen's, and similar liens, (ii) liens arising
under worker's compensation, unemployment insurance, social security,
retirement, and similar legislation and (iii) liens on goods in transit incurred
pursuant to documentary letters of credit, in each case arising in the Ordinary
Course of Business of the Seller and not material to the Seller.
"Seller" shall have the meaning set forth in the first paragraph of this
Agreement.
"Seller Certificate" shall mean a certificate to the effect that the
representations and warranties of the Seller set forth in the first sentence of
Section 3.1 and in Section 3.2 and any representations and warranties of the
Seller set forth in this Agreement that are qualified as to materiality shall be
true and correct in all respects, and all other representations and warranties
of the Seller set forth in this Agreement shall be true and correct in all
material respects, in each case as of the date of this Agreement, except to the
extent such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties shall be true
and correct as of such date).
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"Seller's Knowledge" shall mean the actual knowledge, following reasonable
inquiry, of the officers of the Seller that are involved in the operations of
the Seller or any of its Subsidiaries.
"Seller Material Adverse Effect" shall mean any material adverse change,
event, circumstance or development with respect to, or material adverse effect
on, (i) the business, assets, Liabilities, capitalization, financial condition,
or results of operations of the Business that (x) results in Quantifiable Losses
of more than $10,000.00, or (y) results in the imposition of a Lien or a third
party adverse claim on the Acquired Assets (other than a Lien or third party
adverse claim that can be discharged through the payment of not more than
$10,000.00), or (ii) makes impossible the consummation of the Transactions, but
in each case excludes:
(a) any change or effect generally affecting the international, national,
regional or local natural gas gathering, transmission or distribution industry
as a whole and not adversely affecting the Acquired Assets in any manner or
degree materially different than other facilities similar to the Acquired
Assets.
(b) any change or effect resulting from changes in the international,
national, regional or local markets for natural gas or in natural gas prices
paid in any such markets; or
(c) any Order or act of any Governmental Authority applicable to the
gathering, transmission or distribution of natural gas generally that imposes
restrictions, regulations or other requirements thereon.
Any determination as to whether any condition or other matter has a Seller
Material Adverse Effect shall be reasonable and shall be made only after taking
into account all proceeds or amounts that are expected to be received by Buyer
or any of its Subsidiaries with respect to such condition or matter from (i)
insurance coverages, (ii) indemnification provisions or (iii) commitments by
Seller or its Affiliates to the Buyer or any of its Subsidiaries in anticipation
of receipt of insurance proceeds or indemnification payments. For the avoidance
of doubt, the parties agree that the terms "material", "materially" or
"materiality" as used in this Agreement with an initial lower case "m" shall
have their respective customary and ordinary meanings, without regard to the
meaning ascribed to Seller Material Adverse Effect.
"Seller Plan" shall mean any Employee Benefit Plan maintained, or
contributed to, by the Seller, any Subsidiary of the Seller, or any ERISA
Affiliate, or with respect to which the Seller, any Subsidiary of the Seller, or
any ERISA Affiliate has any Liabilities.
"Subsidiary" shall mean, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interests thereof is at the time
owned or controlled, directly or indirectly, by any
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Person or one or more Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general partner
of such Person.
"Supply Agreements" means those agreements of the Seller providing for gas
supply relating to the Business, as listed on and comprising a part of Schedule
2.1(b).
"Taxes" shall mean all taxes, charges, fees, levies or other similar
assessments or Liabilities, including income, gross receipts, ad valorem,
premium, value-added, excise, real property, personal property, sales, use,
transfer, withholding, employment, unemployment, insurance, social security,
business license, business organization, environmental, natural gas, workers
compensation, payroll, profits, license, lease, service, service use, severance,
stamp, occupation, windfall profits, customs, duties, franchise and other taxes
imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the United
States or any such government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof.
"Tax Returns" shall mean all reports, returns, declarations, statements or
other information required to be supplied to a taxing authority in connection
with Taxes.
"Third Party Action" shall mean any suit or proceeding by a Person other
than a Party for which indemnification may be sought by a Party under Article
VI.
"Trading Book" shall mean the combination of active risk positions,
including discretionary trading, system supply, prompt and future sales, xxxxxx,
options, physical and financial purchase and sale Contracts, transportation
agreements, throughput agreements and other Hedging Agreements, in each case
relating to the Business, all of which are set forth on Section 3.20 of the
Disclosure Schedule.
"Trading Book Side Letter" shall mean the side letter to be entered into
between the Buyer and the Seller at the Closing regarding the Trading Book,
substantially in the form attached hereto as Exhibit E.
"Transactions" means the transactions contemplated by this Agreement and
the Ancillary Agreements.
"Transition Services Agreement" shall mean the Transition Services
Agreement being entered into between the Buyer and the Seller at the Closing,
substantially in the form attached to this Agreement as Exhibit D.
"Transferred Employees" shall have the meaning set forth in Section 5.8(a).
"WARN Act" shall have the meaning set forth in Section 3.8(c).
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ARTICLE II
THE ASSET PURCHASE
2.1 Purchase and Sale of Assets.
(a) Concurrently with the execution of this Agreement, the Buyer is
purchasing from the Seller, and the Seller is selling, transferring, assigning
and delivering to the Buyer, for the consideration specified below in this
Article II, all right, title and interest of Seller in, to and under the
Acquired Assets, free and clear of all Security Interests.
(b) Notwithstanding the provisions of Section 2.1(a), the Acquired
Assets shall not include the Excluded Assets.
2.2 Assumption of Liabilities.
(a) Concurrently with the execution of this Agreement, the Buyer is
assuming and becoming responsible for the Assumed Liabilities.
(b) Notwithstanding the terms of Section 2.2(a) or any other provision
of this Agreement to the contrary, the Buyer shall not assume or become
responsible for, and the Seller shall remain liable for, the Retained
Liabilities.
2.3 Purchase Price. The amount being paid by the Buyer for the Acquired
Assets is two million two hundred twenty-five thousand and no/100 dollars
($2,225,000.00) (the "Closing Amount"), subject to adjustment as provided in
Section 2.6 (as adjusted, the "Purchase Price").
2.4 The Closing.
(a) The purchase and sale of the Acquired Assets and Assumed
Liabilities provided for in this Agreement is taking pace (the "Closing") at the
offices of the Buyer at 000 Xxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxx Xxxx, Xxxxxxxxxx
00000, commencing at 9:00 a.m. local time on the date hereof (the "Closing
Date"). All transactions at the Closing shall be deemed to take place
simultaneously, and no transaction shall be deemed to have been completed and no
documents or certificates shall be deemed to have been delivered until all other
transactions are completed and all other documents and certificates are
delivered.
(b) At the Closing, the Seller is:
(i) executing and delivering to the Buyer the Seller Certificate;
(ii) executing and delivering to the Buyer documents evidencing
the release or termination of all Security Interests on the Acquired Assets, and
copies of filed UCC-3 termination statements with respect to all UCC-1 financing
statements pertaining to the Acquired Assets, or alternatively, executed letters
from the owner(s) and holder(s) of all such Security Interests, addressed to the
Buyer and agreeing to execute and deliver such releases, and file such UCC-3
termination statements immediately following the Closing, in each case in form
and substance reasonably satisfactory to the Buyer;
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(iii) delivering a certificate to the Buyer, executed by its
Secretary and dated as of the date hereof, certifying (A) as to the incumbency
of the persons executing this Agreement and the Ancillary Agreements on the
Seller's behalf, (B) that attached to such certificate is a true and complete
copy of resolutions that have been duly and validly adopted by the board of
directors (or managing member) of the Seller evidencing (i) the authorization of
the execution and delivery of this Agreement and each Ancillary Agreement to
which the Seller is a party and the consummation of the Transactions, and (ii)
the matters set forth in Section 3.19, together with a statement to the effect
that such resolutions are in full force and effect on the Closing Date, (C) that
attached to such certificate is a copy of the Seller's Organizational Documents
that are in effect on the Closing Date and (D) that attached to such certificate
is a copy of a certificate of good standing of the Seller in its jurisdiction of
organization, dated as of a date on or after September 1, 2006;
(iv) delivering to the Buyer counterparts of that certain
non-solicitation agreement attached hereto as Exhibit C executed by Xxxxxx X.
Xxxxxx and Xxxxx Xxxxxxx, Xx. (the "Non-Solicitation Agreement");
(v) executing and delivering to the Buyer a xxxx of sale in
substantially the form attached hereto as Exhibit A (the "Xxxx of Sale"), and
such other instruments of conveyance (such as assigned negotiable instruments)
as the Buyer may reasonably request in order to effect the sale, transfer,
conveyance and assignment to the Buyer of valid ownership of the Acquired
Assets;
(vi) executing and delivering to the Seller an assumption
agreement in substantially the form attached hereto as Exhibit B (the
"Assumption Agreement");
(vii) executing and delivering to the Buyer a duplicate original
of the Transition Services Agreement;
(viii) executing and delivering to the Buyer a duplicate original
of the Trading Book Side Letter;
(ix) causing all of the members of Seller to execute and deliver
the Guaranty Agreement to Buyer;
(x) executing and delivering to the Buyer a duplicate original of
the guaranty to be issued by Commerce Energy Group, Inc., as required by Section
2.08 of the Transition Services Agreement; and
(xi) paying to the Buyer, by wire transfer or other delivery of
immediately available funds to an account designated by the Seller, an amount in
cash equal to the aggregate amount of the Customer Deposits.
(c) At the Closing, the Buyer is:
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(i) executing and delivering to the Seller the Buyer Certificate;
(ii) delivering a certificate to the Seller, executed by its
Secretary and dated as of the date hereof, certifying (A) as to the incumbency
of the persons executing this Agreement and the Ancillary Agreements on the
Buyer's behalf, (B) that attached to such certificate is a true and complete
copy of resolutions that have been duly and validly adopted by the board of
directors (or managing member) of the Buyer evidencing the authorization of the
execution and delivery of this Agreement and each Ancillary Agreement to which
the Buyer is a party and the consummation of the Transactions, together with a
statement to the effect that such resolutions are in full force and effect on
the Closing Date, and (C) that attached to such certificate is a copy of a
certificate of good standing of the Buyer in its jurisdiction of organization,
dated as of a date on or after September 1, 2006;
(iii) executing and delivering to the Seller a duplicate original
of the Non-Solicitation Agreement;
(iv) executing and delivering to the Seller a duplicate original
of the Xxxx of Sale;
(v) executing and delivering to the Seller a duplicate original
of the Assumption Agreement and such other instruments as the Seller may
reasonably request in order to effect the assumption by the Buyer of the Assumed
Liabilities;
(vi) executing and delivering to the Seller a duplicate original
of the Transition Services Agreement;
(vii) executing and delivering to the Seller a duplicate original
of the Trading Book Side Letter;
(viii) executing and delivering to the Seller a duplicate
original of the Guaranty Agreement;
(ix) paying to the Seller, by wire transfer or other delivery of
immediately available funds to an account designated by the Seller, the Closing
Amount, as adjusted pursuant to Section 2.6;
(x) paying to the Seller by wire transfer or other delivery of
immediately available funds to an account designated by the Seller, the sum of
twelve thousand four hundred forty-five and 30/100 dollars ($12,445.30), as
reimbursement to the Seller for (i) payroll and payroll taxes attributable to
the Transferred Employees for the period from September 1, 2006 through
September 20, 2006, and (ii) health insurance premiums paid by the Seller with
respect to the Transferred Employees for the month of September, 2006;
(xi) paying to the Seller by wire transfer or other delivery of
immediately available funds to an account designated by the Seller, the sum of
one million eight hundred thirty-seven thousand one hundred ten and no/100
dollars ($1,837,110.00), as required by Section 1(b) of the Trading Book Side
Letter;
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(xii) causing an irrevocable and unconditional standby letter of
credit in the amount of one million five hundred thousand and no/100 dollars
($1,500,000.00) to be issued and delivered by Wachovia Bank, National
Association, to the Seller as required by Section 2.08 of the Transition
Services Agreement; and
(xiii) causing a guaranty to be issued by Commerce Energy Group,
Inc. and delivered to the Seller, as required by Section 2.08 of the Transition
Services Agreement.
2.5 Allocation. The Buyer and the Seller agree to allocate the Purchase
Price (and all other capitalizable costs) among the Acquired Assets and the
non-solicitation and non-competition covenants set forth in Sections 5.3 and 5.4
for all purposes (including financial accounting and tax purposes) in accordance
with the allocation attached hereto as Schedule 2.5. Further, the Buyer and the
Seller have completed Internal Revenue Service Form 8594 in accordance with
Schedule 2.5 and will file such Form 8594 promptly after the Closing. The Seller
and the Buyer each covenant and agree not to voluntarily take any tax position
inconsistent herewith on any Tax Returns or in any legal or administration
proceedings or otherwise.
2.6 Apportionment.
(a) The Closing Amount shall be subject to adjustment as set forth in
this Section 2.6. In the event that any of the adjustments provided for in this
Section 2.6 cannot be calculated as of the Closing Date, the appropriate payment
shall be made by the Buyer or the Seller, as the case may be, to the other party
as promptly following the Closing Date as is practicable.
(b) For each Assigned Contract for which payments have been made in
advance by the Seller covering a Payment Period that includes time after
September 1, 2006, the Closing Amount shall be increased by the amount
determined by multiplying such advance payment by a fraction, the numerator of
which is the number of days remaining in the Payment Period after September 1,
2006 and the denominator of which is the total number of days in the Payment
Period.
(c) For each Assigned Contract for which payments are to be made in
arrears by the Buyer covering a Payment Period that includes time on or before
September 1, 2006, the Closing Amount shall be decreased by the amount
determined by multiplying such payment by a fraction, the numerator of which is
the number of days in the Payment Period through and including September 1, 2006
and the denominator of which is the total number of days in the Payment Period.
(d) [INTENTIONALLY OMITTED]
(e) The allocation of the Purchase Price among the Acquired Assets as
set forth in Schedule 2.5 attached hereto shall be appropriately modified to
reflect the adjustments made pursuant to this Section 2.6.
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2.7 Gas Imbalances. With respect to the Assigned Contracts, the Seller
shall be responsible for gas imbalances occurring prior to September 1, 2006 and
the Buyer shall be responsible for gas imbalances occurring on and after
September 1, 2006. To that end, the Seller and the Buyer agree that gas
imbalances of the Seller as of September 1, 2006 will be handled in the manner
provided for in subsections (a), (b) and (c) of this Section 2.7.
(a) LDC Imbalances. Each gas balancing position of the Seller as of
September 1, 2006 with each local distribution company ("LDC") pertaining to the
Business, whether a positive or negative position, will be cashed out by the
Seller prior to the Closing, with the exception of the Seller's accounts with
Southwest Gas Corporation and City Gas Florida, so that the Buyer's net gas
balancing position with respect to the Assigned Contracts as of September 1,
2006 will be zero (with the exception of Southwest Gas Corporation and City Gas
Florida).
(b) Southwest Gas Corporation Imbalance. The Seller anticipates that
as of September 1, 2006 there will be a small gas imbalance (whether short or
long) with Southwest Gas Corporation. Accordingly, the Parties agree to
"true-up" with respect to the Seller's gas imbalance position with Southwest Gas
Corporation as of September 1, 2006. If the Seller's position is short, then the
Seller shall pay to the Buyer, and, if Seller's position is long, then the Buyer
shall pay to the Seller, a cash sum of money equal to (i) the number of
dekatherms by which its position is short or long, as applicable, times (ii) the
Mid-Point Price for SoCal on the Closing Date as published by "Gas Daily".
(c) Florida City Gas. The Seller anticipates that the dictated volumes
customers behind Florida City Gas will generate a small gas imbalance during
September and/or October, 2006, which the Parties will need to "true-up". The
"true-up" volumes will be deliveries or credits established by the LDC which
will cause the Seller's gas pool balance with the LDC to be zero following the
migration of the Seller's customers to the Buyer's pool with the LDC. Should the
Seller have "true-up" volumes that it must deliver to its pool with the LDC for
any period on or after September 1, 2006, then the Buyer shall nominate and
deliver those volumes to the Seller's pool and invoice the customers of such
pool for those "true-up" volumes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that, except as set forth
in the Disclosure Schedule, the statements contained in this Article III are
true and correct as of the date of this Agreement, except to the extent such
representations and warranties are specifically made as of a particular date (in
which case such representations and warranties will be true and correct as of
such date). The Disclosure Schedule is arranged in sections and subsections
corresponding to the numbered and lettered sections and subsections contained in
this Article III. The disclosure in any section or subsection of the Disclosure
Schedule shall qualify not only the corresponding section or subsection in this
Article III, but all other sections and subsections in this Article III so long
as such disclosure contains sufficient factual detail to render its relevance to
such other purpose readily apparent.
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3.1 Organization, Qualification and Limited Liability Company Power. The
Seller is a limited liability company duly organized, validly existing and in
organizational and tax good standing under the Laws of the State of Texas. The
Seller is duly qualified to conduct business and is in organizational and tax
good standing under the Laws of each jurisdiction listed in Section 3.1 of the
Disclosure Schedule, which jurisdictions constitute the only jurisdictions in
which the conduct of the Business or the ownership or leasing of the Seller's
properties used in the Business requires such qualification, except for those
jurisdictions in which the failure to be so qualified or in good standing,
individually or in the aggregate, would not reasonably be expected to adversely
affect the ability of the Seller to satisfy its obligations under this Agreement
and the Ancillary Agreements. The Seller has all requisite limited liability
company power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it.
3.2 Authorization of Transaction. The Seller has all requisite power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform its obligations hereunder and thereunder. The execution and delivery
by the Seller of this Agreement, the performance by the Seller of this Agreement
and the Ancillary Agreements and the consummation by the Seller of the
Transactions have been duly and validly authorized by all necessary action on
the part of the Seller, and no other proceedings on the part of any of the
Seller and the holders of its limited liability company interests, as
applicable, are necessary to authorize this Agreement or to consummate the
Transactions. Each of this Agreement and the Ancillary Agreements to which the
Seller is a party has been duly and validly executed and delivered by the Seller
and constitutes a valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms. Each of this Agreement and the
Ancillary Agreements to which any Guarantor is a party has been duly and validly
executed and delivered by such Guarantor and constitutes a valid and binding
obligation of such Guarantor, enforceable against him, her or it in accordance
with its terms.
3.3 Noncontravention. Neither the execution and delivery by the Seller of
this Agreement or the Ancillary Agreements, nor the consummation by the Seller
of the Transactions, will (a) conflict with or violate any provision of the
Organizational Documents of the Seller, (b) require on the part of the Seller
any notice to or filing with, or any permit, authorization, consent or approval
of, any Person, including any Governmental Entity, (c) conflict with, result in
a breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of obligations under, create in any
party the right to terminate, modify or cancel, or require any notice, consent
or waiver under, any Contract to which the Seller is a party or by which the
Seller is bound or to which any of its assets is subject, including the Assigned
Contracts, (d) result in the imposition of any Security Interest upon any assets
of the Seller, including the Acquired Assets, or (e) violate any Law applicable
to the Seller or any of its properties or assets. Section 3.3(a) of the
Disclosure Schedule sets forth a complete and accurate list of each Assigned
Contract with respect to which notice was delivered (or, in the case of notice
to Customers, will be delivered) to any Person, or with respect to which the
consent or approval of any Person was obtained, in order for the Seller to
execute and deliver this Agreement and the Ancillary Agreements, and consummate
the Transactions, including the assignment of the Assigned Contracts, without
otherwise breaching the representations and warranties contained in the
preceding sentence. Section 3.3(b) of the Disclosure Schedule contains a
complete and accurate copy of each such notice (or, in the case of notice to
Customers, form of notice), consent or approval, as applicable.
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3.4 Tax Matters.
(a) The Seller has filed on a timely basis all Tax Returns that it was
required to file, and all such Tax Returns were complete and accurate in all
material respects. The Seller has paid on a timely basis all Taxes that were due
and payable. All Taxes that the Seller is or was required by Law to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Entity.
(b) Section 3.4(b) of the Disclosure Schedule sets forth the tax basis
of the Seller in the Acquired Assets.
(c) Neither the U.S. Internal Revenue Service nor any other United
States or non-United States taxing authority or agency is now asserting or, to
Seller's Knowledge, threatening to assert against the Seller any deficiency or
claim for any Taxes or interest thereon or penalties in connection therewith.
The Seller has not granted any waiver of any statute of limitations with respect
to, or any extension of a period for the assessment or collection of, any Tax
with respect to the Business.
(d) There are no Tax liens upon any property or assets of the Seller
except liens for current Taxes not yet due.
3.5 Ownership and Condition of Assets.
(a) The Seller is the true and lawful owner, and has good title to,
all of the Acquired Assets, free and clear of all Security Interests, except as
set forth in Section 3.5(a) of the Disclosure Schedule. Through the execution
and delivery by the Seller to the Buyer of the instruments of conveyance
referred to in Section 2.4, the Buyer is becoming the true and lawful owner of,
and is receiving good title to, the Acquired Assets, free and clear of all
Security Interests.
(b) After giving effect to the services and support contemplated by
the Transition Services Agreement, the Acquired Assets are sufficient for the
conduct of the Business as presently conducted and as presently proposed to be
conducted and, except as set forth in Section 3.5(b) of the Disclosure Schedule,
constitute all of the assets used by the Seller in the Business. Each tangible
Acquired Asset is free from material defects, has been maintained in accordance
with normal industry practice, is in good operating condition and repair
(subject to normal wear and tear) and is suitable for the purposes for which it
presently is used or is intended to be used.
(c) Section 3.5(c) of the Disclosure Schedule lists individually (i)
all Acquired Assets that are fixed assets (within the meaning of GAAP),
indicating the cost, accumulated book depreciation (if any) and the net book
value of each such fixed asset as of the Most Recent Balance Sheet Date, and
(ii) all other Acquired Assets of a tangible nature.
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3.6 Assigned Contracts; Risk Management.
(a) Section 3.6(a) of the Disclosure Schedule sets forth complete and
accurate lists of the following, organized in accordance with the following
clauses:
(i) all Hedging Agreements to which the Seller is a party,
including all Contracts evidencing existing basis positions and fixed price
positions backing Customer Contracts, other than the Designated NYMEX Positions;
(ii) all of the storage, peaking and transportation capacity, and
firm distribution capacity released to the Seller by Central Florida Gas for
Customers business in the Central Florida Gas distribution territory;
(iii) all of the storage, peaking and transportation capacity
released to the Seller by TECO Peoples Gas for Customers in the TECO Peoples Gas
distribution territory;
(iv) all of the storage, peaking and transportation capacity
released to the Seller by Sequent Energy for Customers in the Florida City Gas,
TECO Peoples Gas, Central Florida Gas and Florida Public Utilities distribution
territories;
(v) all of the storage, peaking and transportation capacity
released to the Seller by Louisville Gas & Electric Company for Customers in the
State of Kentucky;
(vi) all of the storage, peaking and transportation capacity
released to the Seller by Florida City Gas for Customers in the State of
Florida;
(vii) all of the storage, peaking and transportation capacity
released to the Seller by Southwest Gas Corporation for Customers in the State
of Nevada;
(viii) all of the storage, peaking and transportation capacity
released to the Seller by Atmos Energy Corporation for Customers in the State of
Texas;
(ix) all other storage, peaking and transportation capacity
released to the Seller by any party for Customers;
(x) any natural gas inventory or supply Contracts relating to
service to the Contracts for the sale of natural gas to Customers that are being
transferred under this Agreement;
(xi) all other positions comprising the Trading Book;
(xii) all Customer Contracts, including complete and accurate
information regarding identification of each Contract by Customer name, end date
of current term, contract term in months, contract type, specific price data,
and trailing 12 months MMBtu volume; and
(xiii) all credit support agreements or other collateral
arrangements relating to the Customer Contracts, such as customer provided
deposits, letters of credit, corporate or parental guarantees or pre-payment.
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(b) Except as otherwise provided in Section 3.6(b) of the Disclosure
Schedule, the Seller has previously made available to the Buyer, and is
delivering to the Buyer contemporaneously with the Closing, a complete and
accurate copy of each Assigned Contract. All of the terms and conditions of any
Assigned Contracts that have not been completely and accurately disclosed to the
Buyer are commercially reasonable. The Assigned Contracts represent all of the
Contracts of the types described in Section 3.6(a) relating to or used by the
Seller in the Business, other than the Designated NYMEX Positions. With respect
to each Assigned Contract, other than those provided in Section 3.6(b) of the
Disclosure Schedule: (i) it is legal, valid, binding and enforceable and in full
force and effect and will continue to be legal, valid, binding and enforceable
and in full force and effect immediately following the Closing in accordance
with the terms thereof as in effect immediately prior to the Closing; (ii)
except as set forth in Section 3.3(a) of the Disclosure Schedule, it is
assignable by the Seller to the Buyer without the notice to or the consent or
approval of any Person, including any Governmental Entity; (iii) the Seller is
not, and, to Seller's Knowledge, no other party thereto, is in breach or
violation of, or default under, any such Assigned Contract, and no event has
occurred, is pending or, to Seller's Knowledge, is threatened, which, after the
giving of notice, with lapse of time, or otherwise, would constitute a breach or
default by the Seller or, to Seller's Knowledge, any other party under such
Assigned Contract; and (iv) the Seller has not received any notice of
termination or cancellation under any such Assigned Contract.
(c) All of the storage, peaking and transportation capacity released
to the Seller by TECO Peoples Gas, Central Florida Gas, Louisville Gas &
Electric Company, Florida City Gas, Southwest Gas Corporation, Atmos Energy
Corporation or any other party for Customers are governed by the respective
local distribution company tariffs with regard to the transfer of customers and
assets between marketer pools.
(d) Section 3.6(d) of the Disclosure Schedule sets forth a complete
and correct list of all of the Customer Deposits. None of the Customers has
delivered to Seller a letter of credit in connection with the Business.
3.7 Litigation. There is no Legal Proceeding which is pending or has been
threatened in writing against the Seller with respect to the Business (a) which
seeks either damages in excess of $5,000.00 either individually or in the
aggregate, or equitable relief or (b) wherein an unfavorable judgment, order,
decree, stipulation or injunction would (i) prevent consummation of the
Transactions, (ii) cause the Transactions to be rescinded following consummation
or (iii) affect adversely the right of the Buyer to own, operate or control any
of the Acquired Assets, or to conduct the Business as currently conducted,
following the Closing. No such judgment, order, decree, stipulation or
injunction is in effect.
3.8 Employees.
(a) Section 3.8(a) of the Disclosure Schedule contains a list of all
employees of the Seller and its Affiliates who are engaged in the Business,
along with the position and the
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annual rate of compensation of each such person, identifying any such employees
who are not citizens of the United States. All such employees are terminable at
will. To Seller's Knowledge, no key employee or group of employees engaged in
the Business has any plans to terminate employment with the Seller or its
Affiliates (other than for the purpose of accepting employment with the Buyer
following the Closing) or not to accept employment with the Buyer.
(b) The Seller and its Affiliates are not a party to or bound by any
collective bargaining agreement or any other labor organization contract
relating to the Business, and none of them has breached or failed to comply with
any such Contract. The Seller and its Affiliates have not experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes, nor, to Seller's Knowledge, are any such strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes pending or threatened. The Seller has no knowledge of any
organizational effort made or threatened, either currently or within the past
five years, by or on behalf of any labor organization with respect to employees
of the Seller and its Affiliates engaged in the Business.
(c) The Seller and its Affiliates are and have been in compliance with
all Laws relating to the employment of labor with respect to the Business,
including all such Laws relating to wages, hours, employee classification, the
Worker Adjustment and Retraining Notification Act and similar state laws
(collectively, the "WARN Act"), collective bargaining, immigration,
discrimination, civil rights, safety and health, workers' compensation and the
collection and payment of withholding and/or social security taxes and any
similar tax. The Seller and its Affiliates have not incurred any Liabilities
under the WARN Act that remains unsatisfied. There are no actions, suits,
claims, audits, inquiries or examinations pending or, to Seller's Knowledge,
threatened or reasonably anticipated relating to any labor, safety or employment
matters involving the employees of the Seller and its Affiliates engaged in the
Business.
3.9 Employee Benefits.
(a) Each Seller Plan has been administered in all material respects in
accordance with its terms and each of the Seller and the ERISA Affiliates has in
all material respects met its obligations with respect to each Seller Plan and
has made all required contributions thereto. The Seller, each ERISA Affiliate
and each Seller Plan are in compliance in all material respects with the
currently applicable provisions of ERISA and the Code and the regulations
thereunder (including Section 4980 B of the Code, Subtitle K, Chapter 100 of the
Code and Sections 601 through 608 and Section 701 et seq. of ERISA). All filings
and reports as to each Seller Plan required to have been submitted to the
Internal Revenue Service or to the United States Department of Labor have been
duly submitted. No Seller Plan has assets that include securities issued by the
Seller or any ERISA Affiliate. The consummation of the Transactions will not
result in any Liabilities to the Buyer under any Seller Plan.
(b) Section 3.9(b) of the Disclosure Schedule discloses each: (i)
agreement with any stockholder, director, executive officer or other key
employee of the Seller engaged in the Business (A) the benefits of which are
contingent, or the terms of which are altered, upon the occurrence of a
transaction involving the Seller of the nature of any of the Transactions, (B)
providing any term of employment or compensation guarantee or (C) providing
severance
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benefits or other benefits after the termination of employment of such director,
executive officer or key employee; (ii) agreement, plan or arrangement under
which any officer or employee of the Seller engaged in the Business may receive
payments from the Seller that may be subject to the tax imposed by Section 4999
of the Code or included in the determination of such person's "parachute
payment" under Section 280G of the Code; and (iii) agreement or plan with any
officer or employee of the Seller engaged in the Business that is binding the
Seller, including any stock option plan, stock appreciation right plan,
restricted stock plan, stock purchase plan, severance benefit plan or Seller
Plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
Transactions or the value of any of the benefits of which will be calculated on
the basis of any of the Transactions.
(c) At no time has the Seller or any ERISA Affiliate maintained,
contributed to, had any Liabilities under, any benefit plan, program or
arrangement that is, (i) a "multiemployer plan" (within the meaning of Section
3(37) of ERISA), (ii) a "multiple employer plan" (within the meaning of Section
413(c) of the Code), (iii) a single employer plan or other pension plan that is
subject to Title IV or Section 302 of ERISA or Section 412 of the Code, or (iv)
a "multiple employer welfare arrangement" (as defined in Section 3(40)(A) of
ERISA). No event has occurred, and to Seller's Knowledge, no condition exists
that would, either directly or by reason of the Seller's affiliation with any
ERISA Affiliate, subject the Seller or the Business to any tax, fine, lien,
penalty or other Liabilities imposed by ERISA, the Code, or other applicable
Laws.
3.10 Legal Compliance.
(a) To Seller's Knowledge, the Seller is currently conducting, and has
at all times conducted, the Business in compliance with each applicable Law,
except for any violations or defaults that, individually or in the aggregate,
have not had and would not reasonably be expected to have a Seller Material
Adverse Effect. The Seller has not received any notice or communication from any
Governmental Entity alleging noncompliance with any applicable Law with respect
to the Business.
(b) To Sellers' Knowledge, the Seller (i) is not in violation of any
Law applicable to the Business and (ii) did not fraudulently induce any Person
to enter into any Assigned Contract, in each case, in connection with the
Seller's entering into any Customer Contract.
(c) The Seller is not required to obtain any prior approval from any
Governmental Entity in order to transfer the Business to the Buyer, nor are
there any proceedings or hearings before any Governmental Entity now pending or
required to be held in connection with the transfer of the Business to Buyer.
3.11 Customers and Suppliers.
(a) The payment histories of each Customer provided by the Seller to
the Buyer are true, complete and correct in all material respects.
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(b) No Customer or supplier of or to the Business has notified Seller
within the past year that it will stop, or decrease the rate of (or, to Seller's
Knowledge, otherwise taken any action that would reasonably be interpreted to
reflect an intention to stop or decrease the rate of), buying products or
supplying products, as applicable, to the Seller.
(c) No purchase order or commitment of the Seller relating to the
Business is in excess of normal requirements, nor are prices provided therein
for the current month in excess of current market prices for the products or
services to be provided thereunder.
(d) To Seller's Knowledge, the Seller is not, and, after the Closing,
the Buyer will not be, subject to any charges, penalties, balancing riders or
similar costs or obligations, other than ordinary service costs, with respect to
any transmission or distribution service provider relating to the Business as a
result of any action, inaction, condition or occurrence prior to the Closing.
(e) Section 3.11(e) of the Disclosure Schedule sets forth a complete
and accurate list of all letters of credit, bonds or other credit support
arrangements made by the Seller with any supplier of any product or service to
the Business.
3.12 Permits. Section 3.12 of the Disclosure Schedule sets forth a complete
and accurate list of all Permits issued to or held by the Seller in connection
with the conduct of the Business. To Seller's Knowledge, such listed Permits are
the only Permits that are required for the Seller to conduct the Business. Each
such Permit is in full force and effect; the Seller is in compliance with the
terms of each such Permit; and, to the Seller's Knowledge, no suspension or
cancellation of such Permit is threatened and there is no basis for believing
that such Permit will not be renewable upon expiration.
3.13 Certain Business Relationships With Affiliates. No Affiliate of the
Seller owns any property or right, tangible or intangible, which is used in the
Business.
3.14 Brokers' Fees. The Seller does not have any Liability to pay any fees
or commissions to any broker, finder or agent with respect to the Transactions.
3.15 Books and Records. The books and records of the Seller relating to the
Business (i) accurately reflect in all material respects the assets,
Liabilities, business, financial condition and results of operations of the
Business, (ii) have been maintained in accordance with good business and
bookkeeping practices and (iii) are in all material respects complete and
correct, and do not contain or reflect any material inaccuracies or
discrepancies.
3.16 Limitations of Seller's Representations and Warranties. The following
limitations apply with regard to the representations and warranties made by the
Seller:
(a) THE BUYER ACKNOWLEDGES THAT (I) IT HAS HAD ACCESS TO SELLER AND
THE OFFICERS AND EMPLOYEES OF SELLER AND (II) IN MAKING THE DECISION TO ENTER
INTO THIS AGREEMENT AND CONSUMMATE THE TRANSACTIONS, THE BUYER HAS RELIED SOLELY
ON ITS OWN INDEPENDENT INVESTIGATION AND UPON THE EXPRESS REPRESENTATIONS,
WARRANTIES,
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COVENANTS, AND AGREEMENTS SET FORTH IN THIS AGREEMENT AND THE ANCILLARY
AGREEMENTS. WITHOUT LIMITING THE ABOVE, THE BUYER HAS, PRIOR TO THE EXECUTION
AND DELIVERY OF THIS AGREEMENT, (I) CONDUCTED DUE DILIGENCE TO ITS SATISFACTION,
AND (II) HAD FULL OPPORTUNITY TO CONDUCT TO ITS SATISFACTION A REVIEW OF ALL
TANGIBLE ACQUIRED ASSETS AND TO ANALYZE ALL OF THE ASSIGNED CONTRACTS, THE
HEDGING AGREEMENTS AND THE NYMEX POSITIONS.
(b) WITHOUT LIMITING THE ABOVE, THE BUYER ACKNOWLEDGES THAT, EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE ANCILLARY AGREEMENTS, THE SELLER
HAS NOT MADE, AND THE SELLER MAKES NO, AND DISCLAIMS ANY, REPRESENTATIONS OR
WARRANTIES, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE, OR
OTHERWISE, REGARDING THE ACQUIRED ASSETS OR THE BUSINESS.
(c) IN NO EVENT SHALL SELLER BE LIABLE HEREUNDER (ON THE BASIS OF
BREACH OF CONTRACT, INDEMNITY, WARRANTY OR TORT, OR OTHERWISE) FOR ANY (I)
NON-FORESEEABLE DAMAGES, (II) DAMAGES BASED UPON A MULTIPLE OF THE LOSS OF
EARNINGS BY THE BUYER, IF ANY, OR (III) ANY EXEMPLARY OR PUNITIVE DAMAGES,
RESULTING FROM OR ARISING OUT OF THIS AGREEMENT (OTHER THAN EXEMPLARY OR
PUNITIVE DAMAGES PAYABLE TO A THIRD PARTY).
3.17 Buyer's Breach of Representation or Warranty. To the Seller's
Knowledge as of the date of this Agreement, there is no fact or circumstance
that would cause the Buyer to be in breach of any representation or warranty set
forth in this Agreement.
3.18 Non-Foreign Entity. The Seller is not a non-resident alien, foreign
corporation, foreign trust, or foreign trust or foreign estate for purposes of
U.S. income taxation.
3.19 Solvency; the Seller's Intent.
(a) The Seller is not now, will not be immediately after the Closing
and does not expect in the foreseeable future to be, "insolvent," as defined in
the Texas Uniform Fraudulent Transfer Act.
(b) The Seller is not consummating any of the Transactions with actual
intent to hinder, delay or defraud any creditor of the Seller. The board of
directors (or equivalent managerial body) of the Seller has, in consultation
with its legal, financial and other advisors, determined that the Purchase Price
is "reasonably equivalent value" (as defined in the Texas Uniform Fraudulent
Transfer Act) in exchange for the Acquired Assets and such other consideration
being offered by the Seller hereunder and under the Ancillary Agreements.
(c) The Seller has complied with the requirements of all applicable
bulk sale, bulk transfer or similar Laws in all jurisdictions.
(d) The Seller has marketed the Business and exercised its
commercially reasonable efforts to sell it to a third party on terms and
conditions most favorable to the Seller.
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The Seller notified multiple potential buyers of the Acquired Assets of its
intention to sell the Acquired Assets. Any third party expressing a bona fide
interest in the acquisition of all or any part of the Business was given access
to due diligence materials and other information about the Business. No
participant in the marketing process was treated preferentially over any other
participant. As a consequence of the competitive bidding process arising from
the Seller's marketing efforts, in addition to the Buyer, three of the parties
contacted by the Seller made bona fide offers to acquire all or part of the
Acquired Assets.
3.20 Trading Book. Section 3.20 of the Disclosure Schedule contains a
complete and accurate list of all active risk positions, including discretionary
trading, system supply, prompt and future sales, xxxxxx, options, physical and
financial purchase and sale Contracts, transportation agreements, throughput
agreements and other Hedging Agreements, in each case relating to the Business.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the statements
contained in this Article IV are true and correct as of the date of this
Agreement.
4.1 Organization and Corporate Power. The Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
California. The Buyer has all requisite corporate power and authority to carry
on the businesses in which it is engaged and to own and use the properties owned
and used by it.
4.2 Authorization of the Transaction. The Buyer has all requisite power and
authority to execute and deliver this Agreement and the Ancillary Agreements and
to perform its obligations hereunder and thereunder. The execution and delivery
by the Buyer of this Agreement and the Ancillary Agreements and the consummation
by the Buyer of the Transactions have been duly and validly authorized by all
necessary corporate action on the part of the Buyer. This Agreement has been
duly and validly executed and delivered by the Buyer and constitutes a valid and
binding obligation of the Buyer, enforceable against it in accordance with its
terms.
4.3 Noncontravention. Neither the execution and delivery by the Buyer of
this Agreement or the Ancillary Agreements, nor the consummation by the Buyer of
the Transactions, will (a) conflict with or violate any provision of the
Organizational Documents of the Buyer, (b) require on the part of the Buyer any
filing with, or permit, authorization, consent or approval of, any Governmental
Entity, (c) conflict with, result in breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration of
obligations under, create in any party any right to terminate, modify or cancel,
or require any notice, consent or waiver under, any Contract to which the Buyer
is a party or by which it is bound or to which any of its assets is subject,
except for (i) any conflict, breach, default, acceleration, termination,
modification or cancellation which would not adversely affect the consummation
of the Transactions or (ii) any notice, consent or waiver the absence of which
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would not adversely affect the consummation of the Transactions, or (d) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Buyer or any of its properties or assets.
4.4 Litigation. There is no Legal Proceeding which is pending or has been
threatened in writing against the Buyer wherein an unfavorable judgment, order,
decree, stipulation or injunction would (i) prevent consummation of the
Transactions or (ii) cause the Transactions to be rescinded following
consummation. No such judgment, order, decree, stipulation or injunction is in
effect.
4.5 Financing. The Buyer has sufficient funds to enable Buyer to pay the
full Closing Amount, in cash, to the Seller, and to otherwise perform all of its
other obligations under this Agreement.
4.6 Broker's Fees. The Buyer has no Liability to pay any fees or
commissions to any broker, finder, or agent with respect to the Transactions for
which the Seller or its Affiliates could become liable or obligated.
4.7 Buyer's Reliance. The Buyer acknowledges and agrees that it is entitled
to rely only upon the express representations and warranties of the Seller set
forth in Article III of this Agreement.
4.8 Limitations of the Buyer's Representations and Warranties. The
following limitations apply with regard to the representations and warranties
made by the Buyer:
(a) THE SELLER ACKNOWLEDGES THAT IN MAKING THE DECISION TO ENTER INTO
THIS AGREEMENT AND CONSUMMATE THE TRANSACTIONS CONTEMPLATED UNDER THIS
AGREEMENT, THE SELLER HAS RELIED SOLELY UPON THE EXPRESS REPRESENTATIONS,
WARRANTIES, COVENANTS, AND AGREEMENTS SET FORTH IN THIS AGREEMENT AND THE
ANCILLARY AGREEMENTS.
(b) WITHOUT LIMITING THE ABOVE, THE SELLER ACKNOWLEDGES THAT, EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE ANCILLARY AGREEMENTS, THE BUYER
HAS NOT MADE, AND THE BUYER MAKES NO, AND DISCLAIMS ANY, REPRESENTATIONS OR
WARRANTIES, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE, OR
OTHERWISE.
(c) IN NO EVENT SHALL BUYER BE LIABLE HEREUNDER (ON THE BASIS OF
BREACH OF CONTRACT, INDEMNITY, WARRANTY OR TORT, OR OTHERWISE) FOR ANY (I)
NON-FORESEEABLE DAMAGES, (II) DAMAGES BASED UPON A MULTIPLE OF THE LOSS OF
EARNINGS BY THE SELLER, IF ANY, OR (III) ANY EXEMPLARY OR PUNITIVE DAMAGES,
RESULTING FROM OR ARISING OUT OF THIS AGREEMENT (OTHER THAN EXEMPLARY OR
PUNITIVE DAMAGES PAYABLE TO A THIRD PARTY).
4.9 Seller's Breach of Representation or Warranty. To the Buyer's Knowledge
as of the date of this Agreement, there is no fact or circumstance that would
cause the Seller to be in breach of any representation or warranty set forth in
this Agreement.
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ARTICLE V
COVENANTS
5.1 Governmental and Third-Party Notices and Consents. Following the
Closing, each of the Seller and the Buyer shall use commercially reasonable
efforts to obtain all waivers, permits, consents, approvals or other
authorizations from Governmental Entities or any third parties, and to effect
all registrations, filings and notices with or to Governmental Entities or any
third parties, as may be required for the Buyer to own and operate the Acquired
Assets as of the Closing and to otherwise comply with all applicable Laws in
connection therewith; provided, however, that none of Seller's employees or
other representatives shall have any obligation to travel in connection with the
obtaining of consents from the SoCal LDC pool customers as to the change of gas
pools. If the Seller and the Buyer are unable to obtain any third party consent
to the transfer of any Assigned Contract, unless or until such consent is
received or said agreement is terminated (by lapse of time or by the
counterparty thereto but not by the Seller), the Seller shall exercise
commercially reasonable efforts at the Buyer's expense to cause the applicable
Assigned Contract to remain in full force and effect for so long as this Section
5.1 is applicable to it), (a) the applicable Assigned Contract shall be held by
the Seller after Closing as the Buyer's agent, for the benefit of Buyer, to the
extent such holding by the Seller does not violate any Law or violate the terms
of the agreement(s) applicable thereto, (b) the Seller shall provide the Buyer
with the economic and other benefits of such Assigned Contract, including by
forwarding to the Buyer any monies received pursuant to such Assigned Contracts
and (c) the Seller shall endeavor to institute alternative arrangements intended
to put the Buyer in substantially the same economic and operational position as
if such Assigned Contract were transferred to the Buyer. Any fees and costs of
each Party's attorneys arising in connection with complying with this Section
5.1 will be borne by such Party. All costs and expenses of the Seller (other
than the fees and costs of the Seller's attorney) arising in connection with
complying with this Section 5.1, up to $15,000, will be borne by the Buyer, and
all of the Seller's costs and expenses in excess thereof will be borne by the
Seller. Any of such costs and expenses of the Seller being borne by the Buyer
will be reimbursable by the Buyer to the Seller promptly following receipt by
the Buyer of appropriate receipts or other documentary evidence thereof. All
costs and expenses incurred by the Buyer in complying with this Section 5.1 will
be borne solely by the Buyer.
5.2 Proprietary Information. From and after the Closing, the Seller shall
not disclose or make use of (except to pursue its rights, under this Agreement
or the Ancillary Agreements), and shall use its best efforts to cause all of its
Affiliates not to disclose or make use of, any knowledge, information or
documents of a confidential nature or not generally known to the public with
respect to Acquired Assets, the Seller's business or the Buyer or its business
(including the financial information, technical information or data relating to
the Seller's products and names of customers of the Seller), as well as filings
and testimony (if any) presented in the course of any arbitration of a Dispute
pursuant to Section 6.3 and the arbitral award and the Arbitrator's reasons
therefor relating to the same), except to the extent that such knowledge,
information or documents shall have become public knowledge other than through
improper disclosure by the Seller or an Affiliate. The Seller shall enforce, for
the benefit of the Buyer, all confidentiality, invention assignments and similar
agreements between the Seller and any other party relating to the Acquired
Assets or the business of the Seller which are not Assigned Contracts.
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5.3 Solicitation and Hiring. For a period of five (5) years after the
Closing Date, the Seller shall not, either directly or indirectly (including
through an Affiliate), (a) solicit or attempt to induce any Restricted Employee
to terminate his employment with the Buyer or any subsidiary of the Buyer or (b)
hire or attempt to hire any Restricted Employee; provided, that this clause (b)
shall not apply to any individual whose employment with the Buyer or a
Subsidiary of the Buyer has been terminated for a period of six months or
longer.
5.4 Non-Competition.
(a) For a period of two (2) years after the Closing Date, the Seller
shall not, either directly or indirectly, as a stockholder, investor, partner,
joint venturer, member, creditor, consultant or otherwise, (i) market or sell
any product or provide any service anywhere in the Restricted Area which is
competitive with any product marketed or sold or any service provided by the
Seller in the Restricted Area within the three-year period prior to the Closing
Date or (ii) engage anywhere in the Restricted Area in any business competitive
with the Business as conducted as of the Closing Date or during the three-year
period prior to the Closing Date. The Seller shall enforce, for the benefit of
the Buyer, all non-competition and similar agreements between the Seller and any
other party that are not Assigned Contracts.
(b) The Seller agrees that the duration and geographic scope of the
non-competition provision set forth in this Section 5.4 are reasonable. In the
event that any court determines that the duration or the geographic scope, or
both, are unreasonable and that such provision is to that extent unenforceable,
the Parties agree that the provision shall remain in full force and effect for
the greatest time period and in the greatest area that would not render it
unenforceable. The Parties intend that this non-competition provision shall be
deemed to be a series of separate covenants, one for each and every county of
each and every state of the United States of America and each and every
political subdivision of each and every country outside the United States of
America where this provision is intended to be effective.
(c) The Seller shall, and shall use its best efforts to cause its
Affiliates to, refer all inquiries regarding the business, products and services
of the Seller to the Buyer.
5.5 Tax Matters. The Buyer hereby acknowledges and agrees that the Purchase
Price is net of any and all sales taxes, use taxes, transfer taxes, deed excise
stamps and similar charges arising from the sale of the Acquired Assets
contemplated by this Agreement, and the Buyer agrees that to the extent
applicable, the same shall be paid by the Buyer.
5.6 Sharing of Data.
(a) The Seller shall have the right for a period of five (5) years
following the Closing Date to have reasonable access to such books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other records that are transferred to the Buyer
pursuant to the terms of this Agreement for the limited purposes
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of concluding its involvement in the Business and for complying with its
obligations under applicable securities, tax, environmental, employment or other
Laws. The Buyer shall have the right for a period of five (5) years following
the Closing Date to have reasonable access to those books, records and accounts,
including financial and accounting records (including the work papers of the
Seller's independent accountants), tax records, correspondence, production
records, employment records and other records that are retained by the Seller
pursuant to the terms of this Agreement to the extent that any of the foregoing
is needed by the Buyer for the purpose of conducting the Business after the
Closing and complying with its obligations under applicable securities, tax,
environmental, employment or other Laws. Neither the Buyer nor the Seller shall
destroy any such books, records or accounts retained by it without first
providing the other Party with the opportunity to obtain or copy such books,
records, or accounts at such other Party's expense.
(b) Promptly upon request by the Buyer made at any time following the
Closing Date, the Seller shall authorize the release to the Buyer of all files
pertaining to the Business or the Acquired Assets held by any Governmental
Entity.
5.7 Cooperation in Litigation. From and after the Closing Date, the Seller
and the Buyer shall each fully cooperate with the other in the defense or
prosecution of any litigation or proceeding already instituted or which may be
instituted hereafter against or by such other Party relating to or arising out
of the conduct of the Business by the Seller or the Buyer prior to or after the
Closing Date (other than litigation among the Parties and/or their Affiliates
arising out the Transactions). The Party requesting such cooperation shall pay
the reasonable out-of-pocket expenses incurred in providing such cooperation
(including legal fees and disbursements) by the Party providing such cooperation
and by its officers, directors, employees and agents, but shall not be
responsible for reimbursing such Party or its officers, directors, employees and
agents, for their time spent in such cooperation.
5.8 Employees
(a) Effective as of the Closing, the Seller shall terminate the
employment of each of its employees designated on Schedule 5.8(a) attached
hereto (which may be updated prior to the Closing by the mutual agreement of the
Buyer and the Seller) (the "Transferred Employees"). The Buyer shall offer
employment to each such employee, terminable at the will of the Buyer. The
Seller hereby consents to the hiring of any such employees by the Buyer and
waives, with respect to the employment by the Buyer of such employees, any
claims or rights the Seller may have against the Buyer or any such employee
under any non-competition, confidentiality or employment agreement.
(b) The Seller shall provide the Buyer with all information relating
to each Transferred Employee as the Buyer may reasonably require in connection
with its employment or engagement of such individuals, including their initial
employment dates, termination dates, reemployment dates, hours of service,
compensation and tax withholding history, in a form that shall be usable by the
Buyer, and such information shall be true and correct in all respects.
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5.9 Transition Services. Following the Closing, the Seller shall provide,
or cause to be provided, to the Business certain services that are currently
provided by the Seller and its Affiliates to the Business, all as more fully set
forth in the Transition Services Agreement being entered into between the Seller
and the Purchaser on the date hereof.
5.10 Substitution Letters of Credit. The Buyer shall, within 15 days
following the Closing Date, cause substitute letters of credit to be provided to
suppliers to the Business in favor of such suppliers where required upon
Seller's withdrawal or cancellation of its outstanding letters of credit.
5.11 Collection of Receivables. Each Party agrees that it shall promptly
deliver to the other Party (and in any event within three (3) business days of
the date received), any cash, checks or other property received by such Party or
any of its Affiliates on or after the Closing which properly belongs to the
other Party or which is allocated to such other Party pursuant to this Agreement
or any Ancillary Agreement, including any payments on account, and will account
to the other Party for all such receipts. In connection with the foregoing, each
Party shall execute, transfer, convey and deliver any such checks or other
documents as necessary in order to properly transfer such property to the other
Party.
5.12 Further Assurances. At any time and from time to time after the
Closing, at the request of the Buyer and without further consideration, the
Seller shall execute and deliver such other instruments of sale, transfer,
conveyance and assignment and take such actions as the Buyer may reasonably
request to more effectively transfer, convey and assign to the Buyer, and to
confirm the Buyer's rights to, title in and ownership of, the Acquired Assets,
free and clear of Security Interests, and to place the Buyer in actual
possession and operating control thereof from and after the date hereof.
5.13 Assistance with Preparation of Financial Statements. From and after
the Closing, the Seller shall use its Reasonable Best Efforts to assist the
Buyer in the preparation of audited consolidated balance sheets, income
statements and statements of operations, changes in stockholders' equity and
cash flows of the Business for such fiscal periods as the Buyer may request,
prepared in accordance with GAAP and the requirements of Regulation S-X,
together with all related notes and schedules thereto, to be filed with the U.S.
Securities and Exchange Commission, accompanied by the reports thereon of the
Buyer's accountant and any consents required from the Seller's accountant for
the filing of such reports with the U.S. Securities and Exchange Commission. The
Buyer shall pay for all costs in preparing such audited financial statements,
including the costs of the Seller's accountant in connection therewith.
5.14 Refund of Customer Deposits. The Buyer shall be responsible for
refunding the amount of the Customer Deposits due each of the Customers and
shall indemnify the Seller for all Liabilities in connection therewith.
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ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Seller.
Subject to the limitations set forth in Section 6.4 and 6.5 of this
Agreement, from and after the Closing Date, the Seller shall release, protect,
defend and indemnify the Buyer, and its Affiliates and its and their respective
officers, directors, members, shareholders, partners, employees, consultants,
attorneys and advisors in respect of, and hold each of them harmless against,
Damages incurred or suffered by any of them resulting from, relating to or
constituting:
(a) any breach of any representation or warranty of the Seller
contained in this Agreement, any Ancillary Agreement or any other agreement or
instrument furnished by the Seller to the Buyer pursuant to this Agreement;
(b) any failure to perform any covenant or agreement of the Seller
contained in this Agreement, any Ancillary Agreement or any agreement or
instrument furnished by the Seller to the Buyer pursuant to this Agreement;
(c) any noncompliance by the Seller with any bulk sale, bulk transfer
or similar Laws in all jurisdictions applicable to the Transactions; or
(d) any Retained Liabilities.
6.2 Indemnification by the Buyer. Subject to the limitations set forth in
Sections 6.4 and 6.5 of this Agreement, from and after the Closing Date, the
Buyer shall release, protect, defend and indemnify the Seller, and its
Affiliates and its and their respective officers, directors, members,
shareholders, partners, employees, consultants, attorneys and advisors, in
respect of, and hold them harmless against, any and all Damages incurred or
suffered by the Seller resulting from, relating to or constituting:
(a) any breach of any representation or warranty of the Buyer
contained in this Agreement, any Ancillary Agreement or any other agreement or
instrument furnished by the Buyer to the Seller pursuant to this Agreement;
(b) any failure to perform any covenant or agreement of the Buyer
contained in this Agreement, any Ancillary Agreement or any other agreement or
instrument furnished by the Buyer to the Seller pursuant to this Agreement; or
(c) any Assumed Liabilities.
6.3 Indemnification Claims.
(a) An Indemnified Party shall give written notification to the
Indemnifying Party of the commencement of any Third Party Action. Such
notification shall be given within 20 days after receipt by the Indemnified
Party of notice of such Third Party Action, and shall
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describe in reasonable detail (to the extent known by the Indemnified Party) the
facts constituting the basis for such Third Party Action and the amount of the
claimed damages; provided, however, that no delay or failure on the part of the
Indemnified Party in so notifying the Indemnifying Party shall relieve the
Indemnifying Party of any Liability hereunder except to the extent of any damage
or Liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnifying Party may, upon written notice
thereof to the Indemnified Party, assume control of the defense of such Third
Party Action with counsel reasonably satisfactory to the Indemnified Party;
provided that (i) the Indemnifying Party may only assume control of such defense
if (A) it acknowledges in writing to the Indemnified Party that any damages,
fines, costs or other Liabilities that may be assessed against the Indemnified
Party in connection with such Third Party Action constitute Damages for which
the Indemnified Party shall be indemnified pursuant to this Article VI and (B)
the ad damnum is less than or equal to the amount of Damages for which the
Indemnifying Party is liable under this Article VI and (ii) the Indemnifying
Party may not assume control of the defense of Third Party Action involving
criminal liability or in which equitable relief is sought against the
Indemnified Party. If the Indemnifying Party does not, or is not permitted under
the terms hereof to, so assume control of the defense of a Third Party Action,
the Indemnified Party shall control such defense. The Non-controlling Party may
participate in such defense at its own expense. The Controlling Party shall keep
the Non-controlling Party advised of the status of such Third Party Action and
the defense thereof and shall consider in good faith recommendations made by the
Non-controlling Party with respect thereto. The Non-controlling Party shall
furnish the Controlling Party with such information as it may have with respect
to such Third Party Action (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense of such
Third Party Action. The fees and expenses of counsel to the Indemnified Party
with respect to a Third Party Action shall be considered Damages for purposes of
this Agreement if (i) the Indemnified Party controls the defense of such Third
Party Action pursuant to the terms of this Section 6.3(a) or (ii) the
Indemnifying Party assumes control of such defense and the Indemnified Party
reasonably concludes that the Indemnifying Party and the Indemnified Party have
conflicting interests or different defenses available with respect to such Third
Party Action. The Indemnifying Party shall not agree to any settlement of, or
the entry of any judgment arising from, any Third Party Action without the prior
written consent of the Indemnified Party, which shall not be unreasonably
withheld, conditioned or delayed; provided that the consent of the Indemnified
Party shall not be required if the Indemnifying Party agrees in writing to pay
any amounts payable pursuant to such settlement or judgment and such settlement
or judgment includes a complete release of the Indemnified Party from further
Liability and has no other adverse effect on the Indemnified Party. The
Indemnified Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such Third Party Action without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld,
conditioned or delayed.
(b) In order to seek indemnification under this Article VI, an
Indemnified Party shall deliver a Claim Notice to the Indemnifying Party.
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(c) Within 20 days after delivery of a Claim Notice, the Indemnifying
Party shall deliver to the Indemnified Party a Response, in which the
Indemnifying Party shall: (i) agree that the Indemnified Party is entitled to
receive all of the Claimed Amount (in which case the Response shall be
accompanied by a payment by the Indemnifying Party to the Indemnified Party of
the Claimed Amount, by check or by wire transfer), (ii) agree that the
Indemnified Party is entitled to receive the Agreed Amount (in which case the
Response shall be accompanied by a payment by the Indemnifying Party to the
Indemnified Party of the Agreed Amount, by check or by wire transfer) or (iii)
dispute that the Indemnified Party is entitled to receive any of the Claimed
Amount.
(d) During the 30-day period following the delivery of a Response that
reflects a Dispute, the Indemnifying Party and the Indemnified Party shall use
good faith efforts to resolve the Dispute. If the Dispute is not resolved within
such 30-day period, the Indemnifying Party and the Indemnified Party shall
discuss in good faith the submission of the Dispute to binding arbitration, and
if the Indemnifying Party and the Indemnified Party agree in writing to submit
the Dispute to such arbitration, then the provisions of Section 6.3(e) shall
become effective with respect to such Dispute. The provisions of this Section
6.3(d) shall not obligate the Indemnifying Party and the Indemnified Party to
submit to arbitration or any other alternative dispute resolution procedure with
respect to any Dispute, and in the absence of an agreement by the Indemnifying
Party and the Indemnified Party to arbitrate any Dispute, such Dispute shall be
resolved in a state or federal court sitting in the State of Texas, in
accordance with Section 7.13.
(e) If, as set forth in Section 6.3(d), the Indemnified Party and the
Indemnifying Party agree to submit any Dispute to binding arbitration, the
arbitration shall be conducted by a single arbitrator (the "Arbitrator") in
accordance with the Commercial Rules in effect from time to time and the
following provisions.
(i) In the event of any conflict between the Commercial Rules in
effect from time to time and the provisions of this Agreement, the provisions of
this Agreement shall prevail and be controlling.
(ii) The Seller and the Buyer shall commence the arbitration by
jointly filing a written submission with the Houston, Texas office of the AAA in
accordance with Commercial Rule 5 (or any successor provision).
(iii) No depositions or other discovery shall be conducted in
connection with the arbitration.
(iv) Not later than 30 days after the conclusion of the
arbitration hearing, the Arbitrator shall prepare and distribute to the parties
a writing setting forth the arbitral award and the Arbitrator's reasons
therefor. Any award rendered by the Arbitrator shall be final, conclusive and
binding upon the parties, and judgment thereon may be entered and enforced in
any court of competent jurisdiction (subject to Section 7.12), provided that the
Arbitrator shall have no power or authority to award damages in excess of the
portion of the Claimed Amount that is subject to such Dispute.
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(v) The Arbitrator shall have no power or authority, under the
Commercial Rules or otherwise, to (x) modify or disregard any provision of this
Agreement, including the provisions of this Section 6.3(e), or (y) address or
resolve any issue not submitted by the Parties.
(vi) In connection with any arbitration proceeding pursuant to
this Agreement, each Party shall bear its own costs and expenses, except that
the fees and costs of the AAA and the Arbitrator, the costs and expenses of
obtaining the facility where the arbitration hearing is held, and such other
costs and expenses as the Arbitrator may determine to be directly related to the
conduct of the arbitration and appropriately borne jointly by the Seller and the
Buyer (which shall not include any Party's attorneys' fees or costs, witness
fees (if any), costs of investigation and similar expenses) shall be shared
equally by the Indemnified Party and the Indemnifying Party.
(f) Notwithstanding the other provisions of this Section 6.3, if a
third party asserts (other than by means of a lawsuit) that an Indemnified Party
is liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which such Indemnified Party may be entitled
to indemnification pursuant to this Article VI, and such Indemnified Party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Party shall be entitled to satisfy such
obligation, without prior notice to or consent from the Indemnifying Party, (ii)
such Indemnified Party may subsequently make a claim for indemnification in
accordance with the provisions of this Article VI, and (iii) such Indemnified
Party shall be reimbursed, in accordance with the provisions of this Article VI,
for any such Damages for which it is entitled to indemnification pursuant to
this Article VI (subject to the right of the Indemnifying Party to dispute the
Indemnified Party's entitlement to indemnification, or the amount for which it
is entitled to indemnification, under the terms of this Article VI).
6.4 Survival of Representations and Warranties. All representations and
warranties that are covered by the indemnification agreements in Section 6.1(a)
and Section 6.2(a) shall survive the Closing and expire on the date twelve (12)
months following the Closing Date, except that the representations and
warranties set forth in Sections 3.10 and 3.12 shall survive until eighteen (18)
months following the Closing Date, the representations and warranties set forth
in Sections 3.1, 3.2, 4.1 and 4.2 shall survive the Closing without limitation,
and the representations and warranties set forth in Sections 3.4 shall survive
until thirty (30) days following expiration of all statutes of limitation
applicable to the matters referred to therein. If an Indemnified Party delivers
to an Indemnifying Party, before expiration of a representation or warranty,
either a Claim Notice based upon a breach of such representation or warranty, or
an Expected Claim Notice based upon a breach of such representation or warranty,
then the applicable representation or warranty shall survive until, but only for
purposes of, the resolution of the matter covered by such notice. If the legal
proceeding or written claim with respect to which an Expected Claim Notice has
been given is definitively withdrawn or resolved in favor of the Indemnified
Party, the Indemnified Party shall promptly so notify the Indemnifying Party.
6.5 Limitations.
(a) Notwithstanding anything to the contrary herein, excluding
obligations for
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post-Closing adjustments to the Closing Amount pursuant to Section 2.6 of this
Agreement, (i) the aggregate liability of the Seller for Damages under Section
6.1(a) or otherwise to Buyer under applicable Law in connection with this
Agreement and the Transactions shall not exceed twenty percent (20%) of the
Purchase Price, and (ii) the Seller shall not be liable under Section 6.1(a)
unless and until the aggregate Damages for which it would otherwise be liable
under Section 6.1(a) exceed $50,000.00 (and then only for the amount in excess
of $50,000.00); provided that the limitations set forth in this sentence shall
not apply to a claim pursuant to Section 6.1(a) relating to a breach of the
representations and warranties set forth in Sections 3.1, 3.2 or 3.5(a). For
purposes solely of this Article VI, all representations and warranties of the
Seller in Article III shall be construed as if the term "material" and any
reference to "Seller Material Adverse Effect" (and variations thereof) were
omitted from such representations and warranties.
(b) Notwithstanding anything to the contrary herein, excluding
obligations for post-Closing adjustments to the Closing Amount pursuant to
Section 2.6 of this Agreement, (i) the aggregate liability of the Buyer for
Damages under Section 6.2(a) and the transaction closed pursuant to this
Agreement shall not exceed twenty percent (20%) of the Purchase Price, and (ii)
the Buyer shall not be liable under Section 6.2(a) unless and until the
aggregate Damages for which it would otherwise be liable under Section 6.2(a)
exceed $50,000.00 (and then only for the amount in excess of $50,000.00);
provided that the limitation set forth in this sentence shall not apply to a
claim pursuant to Section 6.2(a) relating to a breach of the representations and
warranties set forth in Sections 4.1 or 4.2. For purposes solely of this Article
VI, all representations and warranties of the Buyer in Article IV shall be
construed as if the term "material" were omitted from such representations and
warranties.
(c) After the Closing, the rights of the Indemnified Parties under
this Article VI shall be the sole and exclusive remedy of the Indemnified
Parties with respect to claims and damages resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement contained in this Agreement, or omission in any documents or other
information furnished to the Buyer or its Affiliates in connection with this
Agreement or the Transactions.
(d) THE INDEMNITIES PROVIDED HEREIN SHALL BE EFFECTIVE WHETHER OR NOT
THE CLAIM IS CAUSED BY THE SOLE, CONCURRENT OR PARTIAL NEGLIGENCE, FAULT OR
STRICT LIABILITY OF THE INDEMNIFIED PARTY.
6.6 Treatment of Indemnity Payments. Any payments made to an Indemnified
Party pursuant to this Article VI shall be treated as an adjustment to the
Purchase Price for tax purposes.
6.7 Waiver of Deceptive Trade Practices Acts.
(a) IT IS THE INTENTION OF THE PARTIES THAT THE BUYER'S RIGHTS AND
REMEDIES WITH RESPECT TO THIS TRANSACTION AND WITH RESPECT TO ALL ACTS OR
PRACTICES OF THE SELLER, PAST, PRESENT OR
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FUTURE, IN CONNECTION WITH THIS TRANSACTION SHALL BE GOVERNED BY LEGAL
PRINCIPLES OTHER THAN THE TEXAS DECEPTIVE TRADE PRACTICES--CONSUMER PROTECTION
ACT, TEX. BUS. & COM. CODE XXX. SECTION 17.41 ET SEQ. (THE "DTPA"). AS SUCH, THE
BUYER HEREBY WAIVES THE APPLICABILITY OF THE DTPA TO THIS TRANSACTION AND AN AND
ALL DUTIES, RIGHTS OR REMEDIES THAT MIGHT BE IMPOSED BY THE DTPA, WHETHER SUCH
DUTIES, RIGHTS AND REMEDIES ARE APPLIED DIRECTLY THE DTPA ITSELF OR INDIRECTLY
IN CONNECTION WITH OTHER STATUTES; PROVIDED, HOWEVER, BUYER DOES NOT WAIVE
SECTION 17.555 OF THE DTPA. THE BUYER ACKNOWLEDGES, REPRESENTS AND WARRANTS THAT
IT IS PURCHASING THE ACQUIRED ASSETS FOR COMMERCIAL OR BUSINESS USE; THAT IT HAS
ASSETS OF $5 MILLION OR MORE ACCORDING TO ITS MOST RECENT FINANCIAL STATEMENT
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES; THAT IS
HAD KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO
EVALUATE THE MERITS AND RISKS OF A TRANSACTION SUCH AS THIS; AND THAT IT IS NOT
IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH SELLER.
(b) TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE BUYER HEREBY WAIVES
ALL PROVISIONS OF CONSUMER PROTECTION ACTS, DECEPTIVE TRADE PRACTICE ACTS AND
OTHER ACTS SIMILAR TO THE DTPA AND/OR THE UTPL IN ALL JURISDICTION IN WHICH ANY
OF THE ACQUIRED ASSETS ARE LOCATED (SUCH ACTS, TOGETHER WITH THE DTPA AND THE
UTPL, ARE HEREINAFTER COLLECTIVELY REFERRED TO AS THE "TRADE PRACTICES ACTS").
(c) BUYER EXPRESSLY RECOGNIZED THAT THE PRICE FOR WHICH THE SELLER HAS
AGREED TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT HAS BEEN PREDICATED UPON
THE INAPPLICABILITY OF THE TRADE PRACTICES ACTS AND THE BUYER'S WAIVER OF THE
TRADE PRACTICES ACTS. THE BUYER FURTHER RECOGNIZES THAT THE SELLER, IN
DETERMINING TO PROCEED WITH THE ENTERING INTO OF THIS AGREEMENT, HAS EXPRESSLY
RELIED ON THIS WAIVER AND THE INAPPLICABILITY OF THE TRADE PRACTICES ACTS.
ARTICLE VII
MISCELLANEOUS
7.1 Press Releases and Announcements. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of both the Seller and the Buyer; provided,
however, that either the Seller or the Buyer may make any public disclosure it
believes in good faith is required by applicable Law or stock market rule (in
which case the disclosing Party shall use reasonable efforts to advise the other
Party and provide it with a copy of the proposed disclosure prior to making the
disclosure).
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7.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
7.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, with respect to the subject matter hereof, provided that the
Confidentiality Agreement previously executed by the Parties shall survive the
execution and delivery of this Agreement.
7.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and
permitted assigns. No Party may assign either this Agreement or any of his, her
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Seller; provided that the Buyer may assign some or
all of its rights, interests and/or obligations hereunder to one or more
Affiliates of the Buyer.
7.5 Counterparts and Facsimile Signature. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. This Agreement may
be executed by facsimile signature.
7.6 Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered four
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent for next
business day delivery via a reputable nationwide overnight courier service, in
each case to the intended recipient as set forth below:
If to the Seller: Copy (which shall not constitute notice) to:
---------------- -------------------------------------------
Houston Energy Services Company, L.L.C. Xxxxxx X. Xxxxxxxx
00000 Xxxx & Xxxxxxx Xxx, Xxxxx 000 Xxxxxxxx-xx-Xxx
Xxxxxxx, XX 00000 000 X. Xxxxx Xxxxxxxx, #0000
TEL: (000) 000-0000 Xxxxxx Xxxxxxx, Xxxxx 00000
FAX: (000) 000-0000 TEL: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx FAX: (000) 000-0000
President
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If to the Buyer: Copy (which shall not constitute notice) to:
--------------- -------------------------------------------
Commerce Energy, Inc. Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxx., Xxxxx 0000 000 Xxxx Xxxxxx Xxxxx
Xxxxx Xxxx, XX 00000 Seventeenth Floor
TEL: (000) 000-0000 Xxxxx Xxxx, XX 00000
FAX: (000) 000-0000 TEL: (000) 000-0000
Attention: General Counsel FAX: (000) 000-0000
Attention: Xxxx X. Xxxxx Xxxxxx, Esq.
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
7.8 Governing Law. This Agreement (including the validity and applicability
of the arbitration provisions of this Agreement, the conduct of any arbitration
of a Dispute, the enforcement of any arbitral award made hereunder and any other
questions of arbitration law or procedure arising hereunder) shall be governed
by and construed in accordance with the internal Laws of the State of Texas,
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Texas or any other jurisdiction) that would cause the
application of Laws of any jurisdictions other than those of the State of Texas.
7.9 Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by each of the
Parties. No waiver by any Party of any right or remedy hereunder shall be valid
unless the same shall be in writing and signed by the Party giving such waiver.
No waiver by any Party with respect to any default, misrepresentation, or breach
of warranty or covenant hereunder shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
7.10 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
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7.11 Expenses. Except as set forth in Article VI, each Party shall bear its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the Transactions.
7.12 Submission to Jurisdiction. Each Party (a) submits to the jurisdiction
of any state or federal court sitting in the State of Texas in any action or
proceeding arising out of or relating to this Agreement or the Ancillary
Agreements (including any action or proceeding for the enforcement of any
arbitral award made in connection with any arbitration of a Dispute hereunder),
(b) agrees that all claims in respect of such action or proceeding may be heard
and determined in any such court, (c) waives any claim of inconvenient forum or
other challenge to venue in such court, (d) agrees not to bring any action or
proceeding arising out of or relating to this Agreement or the Ancillary
Agreements in any other court and (e) waives any right it may have to a trial by
jury with respect to any action or proceeding arising out of or relating to this
Agreement or the Ancillary Agreements; provided in each case that, solely with
respect to any arbitration of a Dispute, the Arbitrator shall resolve all
threshold issues relating to the validity and applicability of the arbitration
provisions of this Agreement, contract validity, applicability of statutes of
limitations and issue preclusion, and such threshold issues shall not be heard
or determined by such court. Each Party agrees to accept service of any summons,
complaint or other initial pleading made in the manner provided for the giving
of notices in Section 7.7, provided that nothing in this Section 7.12 shall
affect the right of any Party to serve such summons, complaint or other initial
pleading in any other manner permitted by Law.
7.13 Specific Performance. Each of the Seller and the Buyer acknowledges
and agrees that the other Party would be damaged irreparably in the event any of
the provisions of this Agreement (including Sections 5.3, 5.4 and 5.5) are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Seller and the Buyer agrees that the other Party shall
be entitled to an injunction or other equitable relief to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter, in addition to any other remedy to which it may be entitled, at Law or
in equity. Notwithstanding the foregoing, the Parties agree that if a Dispute is
submitted to arbitration in accordance with Section 6.3(d) and Section 6.3(e),
then the foregoing provisions of this Section 7.13 shall not apply to such
Dispute, and the provisions of Section 6.3(d) and Section 6.3(e) shall govern
availability of injunctive relief, specific performance or other equitable
relief with respect to such Dispute.
7.14 Construction.
(a) The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local, or foreign Law shall
be deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise.
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(c) Any reference herein to "including" shall be interpreted as
"including without limitation".
(d) Any reference to any Article, Section or paragraph shall be deemed
to refer to an Article, Section or paragraph of this Agreement, unless the
context clearly indicates otherwise.
7.15 Limitation on Damages. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS AGREEMENT, TO THE EXTENT THAT A PARTY IS ENTITLED TO DAMAGES RESULTING FROM
A BREACH OR VIOLATION OF ANY REPRESENTATION, WARRANTY OR COVENANT CONTAINED IN
THIS AGREEMENT OR IN THE ANCILLARY AGREEMENTS, SHALL NOT INCLUDE ANY (I)
NON-FORSEEABLE DAMAGES, (II) DAMAGES BASED UPON A MULTIPULE OF THE LOSS OF
EARNINGS BY THE BUYER, IF ANY, OR (III) ANY EXEMPLARY OR PUNITIVE DAMAGES (OTHER
THAN EXEMPLARY OR PUNITIVE DAMAGES PAYABLE TO A THIRD PARTY).
7.16 Acknowledgement. EACH OF THE PARTIES HERETO SPECIFICALLY ACKNOWLEDGES
AND AGREES (I) THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THAT IT IS CHARGED
WITH NOTICE AND KNOWLEDGE OF THE TERMS HEREOF AND (II) THAT IT HAS IN FACT READ
THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE
TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT. EACH PARTY HERETO FURTHER
AGREES THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY PROVISIONS
OF THIS AGREEMENT ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH
PROVISIONS, WAS NOT THE DRAFTER THEREOF OR THAT SUCH PROVISIONS ARE NOT
"CONSPICUOUS".
7.17 Conspicuousness of Provisions. THE PARTIES ACKNOWLEDGE THAT THE
PROVISIONS CONTAINED IN THIS AGREEMENT THAT ARE SET IN "BOLD" SATISFY THE
REQUIREMENT OF THE EXPRESS NEGLIGENCE RULE AND ANY OTHER REQUIREMENT AT LAW OR
IN EQUITY THAT PROVISIONS CONTAINED IN A CONTRACT BE CONSPICUOUSLY MARKED OR
HIGHLIGHTED.
[remainder of page intentionally left blank; signatures appear on following
page(s)]
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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date
first above written.
SELLER:
HOUSTON ENERGY SERVICES
COMPANY, L.L.C.
By: /S/ XXXXXX X. XXXXXX
----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
BUYER:
COMMERCE ENERGY, INC.
By: /S/ XXXXXX X. BOSS
----------------------------------
Name: Xxxxxx X. Boss
Title: President
SCHEDULES AND EXHIBITS OMITTED FROM ASSET PURCHASE AGREEMENT
Exhibits:
---------
Exhibit A Xxxx of Sale
Exhibit B Assumption Agreement
Exhibit C Non-Solicitation Agreements
Exhibit D Transition Services Agreement
Exhibit E Trading Book Side Letter
Exhibit F Guaranty Agreement
Schedules:
----------
Schedule 2.1(b) Excluded Assets
Schedule 2.5 Allocation of Purchase Price
Schedule 5.8 Transferred Employees
Disclosure Schedule:
--------------------
Section 3.1 Organization and Tax Good Standing
Section 3.3(a) Noncontravention
Section 3.3(b) Assigned Contracts not provided
Section 3.4(b) Tax Basis in Acquired Assets
Section 3.5(a) Security Interests
Section 3.5(b) Excluded Assets
Section 3.5(c) Fixed/Tangible Acquired Assets
Section 3.6(a) Assigned Contracts; Risk Management
Section 3.6(b) List of Incomplete of Missing Assigned Contracts
Section 3.6(d) List of Customer Deposits and Customer Letters of Credit
Section 3.8(a) Employees
Section 3.9(b) Agreements with Key Employees, etc.
Section 3.11(e) Letters of Credit, Bonds and other Credit Support Agreements
Section 3.12 Permits
Section 3.20 Trading Book Positions
