UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Earliest Event Reported: November 08, 1999
Date of Report: November 12, 1999
Ferrellgas Partners, L.P.
Ferrellgas Partners Finance Corp.
(Exact name of registrants as specified in their charters)
Delaware 1-111331 43-1698480
Delaware 333-06693 43-1742520
- ----------------------- ----------------- ----------------------------------
(States or other Commission file (I.R.S. Employer Identification
jurisdictions of numbers Nos.)
incorporation or
organization)
One Liberty Plaza, Liberty, Missouri 64068
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (816) 792-1600
ITEM 5. OTHER EVENTS
On November 8, 1999, Ferrellgas Partners, L.P., announced that it has
signed a definitive agreement to purchase Thermogas Company, a subsidiary
of Williams (NYSE: WMB), for total consideration of $432.5 million. At closing
the seller will receive $257.5 million cash and $175 million Senior Common
Units. The closing of the transaction is subject to customary conditions,
including regulatory approval.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
The Exhibit listed in the Index to Exhibits is filed as part
of this Current Report on Form 8-K.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FERRELLGAS PARTNERS, L.P.
By Ferrellgas, Inc. (General Partner)
Date: November 12, 1999 By /s/ Kevin T. Kelly
-------------------------------------
Kevin T. Kelly
Chief Financial Officer (Principal
Financial and Accounting Officer)
FERRELLGAS PARTNERS FINANCE CORP.
Date: November 12, 1999 By /s/ Kevin T. Kelly
----------------------------------------
Kevin T. Kelly
Chief Financial Officer (Principal
Financial and Accounting Officer)
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
99.1 Purchase Agreement
PURCHASE AGREEMENT
BY AND AMONG
FERRELLGAS PARTNERS, L.P.,
FERRELLGAS, L.P.
AND
WILLIAMS NATURAL GAS LIQUIDS, INC.
November 7, 1999
TABLE OF CONTENTS
ARTICLE I
TRANSFER OF MEMBER INTEREST
SECTION1.1...Interest of the Company to be Sold 1
SECTION1.2...Purchase Price 2
SECTION1.3...Closing 2
SECTION1.4...Post Closing Purchase Price Adjustment 2
SECTION1.5...Transition Services Agreement 3
SECTION1.6...Closing Obligations 3
SECTION1.7...Deliveries 4
SECTION1.8...Contribution to Subsidiary OLP 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION2.1...Organization and Existence 6
SECTION2.2...Authority; Binding Effect 6
SECTION2.3...Financial Statements 6
SECTION2.4...Ownership 7
SECTION2.5...No Conflict 7
SECTION2.6...No Default 7
SECTION2.7...Copies Complete 8
SECTION2.8...Litigation 8
SECTION2.9...Compliance with Applicable Law 8
SECTION2.10..Certain Contracts and Arrangements 8
SECTION2.11..Employee Benefit Plans; ERISA 9
SECTION2.12..Taxes 10
SECTION2.13..Labor and Employment Matters 12
SECTION2.14..Owned Real Property 12
SECTION2.15..Leases 13
SECTION2.16..Intellectual Property 13
SECTION2.17..Title to Tangible Assets 13
SECTION2.18..No Undisclosed Liabilities 14
SECTION2.19..Transactions with Affiliates 14
SECTION2.20..Brokers or Finders 14
SECTION2.21..No Implied Representation 14
SECTION2.22..Year 2000 Compliance 14
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
SECTION3.1..Organization and Existence 15
SECTION3.2..Authority; Binding Effect 15
SECTION3.3..No Conflict 15
SECTION3.4..No Default 16
SECTION3.5..Litigation 16
SECTION3.6..Public Documents 16
SECTION3.7..No Implied Representation 17
SECTION3.8..Interpretation of Representations and Warranties and Schedule 17
SECTION3.9..Brokers or Finders 17
SECTION3.10.Fair Market Value of Senior Units 17
SECTION3.11.Conversion of the Company 17
ARTICLE IV
ADDITIONAL AGREEMENTS, COVENANTS, RIGHTS AND
OBLIGATIONS
SECTION4.1..Access to Information 18
SECTION4.2..Conduct of Business 18
(c) Restrictions on Purchaser 20
SECTION4.3..Certain Filings 22
SECTION4.4..Other Consents 23
SECTION4.5..Audited Financial Statements; Debt 23
SECTION4.6..Reasonable Efforts 24
SECTION4.7..Covenant to Satisfy Conditions 24
SECTION4.8..Transfer 24
SECTION4.9..No Public Announcement 25
SECTION4.10.No Solicitation 25
SECTION4.11.Allocation 25
SECTION4.12.Conversion 25
ARTICLE V
CONDITIONS
SECTION5.1. Conditions to the Obligations of Purchaser 26
SECTION5.2..Conditions to the Obligations of Seller 27
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ARTICLE VI
EMPLOYEES AND EMPLOYEE BENEFITS
SECTION6.1..Employees 28
SECTION6.2..Severance Obligations 29
SECTION6.3..Retention Bonus Program 29
SECTION6.4..Employee Benefit Plans 29
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
SECTION7.1..Survival of Representations 30
SECTION7.2..Seller's Agreement to Indemnify 30
SECTION7.3..Purchaser's Agreement to Indemnify 32
SECTION7.4..Third Party Indemnification 33
SECTION7.5..Environmental Indemnity 34
SECTION7.6..Procedures for Remedial Actions on Owned Real Property or
Leased Real Property 36
SECTION7.7..Exclusive Remedy for Environmental Matters 37
ARTICLE VIII
TERMINATION
SECTION8.1..Events of Termination 37
SECTION8.2..Effect of Termination 38
ARTICLE IX
MISCELLANEOUS
SECTION9.1..Notices 39
SECTION9.2..Governing Law 40
SECTION9.3..Entire Agreement; Amendments and Waivers 40
SECTION9.4..Binding Effect and Assignment 41
SECTION9.5..Severability 41
SECTION9.6..Parties in Interest 41
SECTION9.7..Headings; Survival of Covenants 42
SECTION9.8..Execution 42
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EXHIBITS
A Form of Senior Unit
B. Form of Transition Services Agreement
C. Joint Communications Plan
SCHEDULES
1.4 Working Capital
1.7(a)(vi) Term Sheet for Sale-Leaseback
1.7(a)(viii) Term Sheet for Loan Transaction
2.1 Foreign Qualifications; Investments
2.3 Financial Statements
2.8 Litigation
2.9 Compliance with Applicable Laws
2.10 Contracts and Arrangements
2.11 Employee Benefit Plans; ERISA
2.12 Taxes
2.13 Labor Matters
2.14 Owned Real Property
2.15 Leases
2.16 Intellectual Property
2.17 Title to Tangible Assets
2.18 No Undisclosed Liabilities
2.19 Transactions with Affiliates
2.22 Year 2000 Compliance
4.2(b) Seller Restrictions
6.1 Safety and Human Resources Employees
6.2 Employment and Severance Agreements
6.3 Retention Bonus Program
7.5 Environmental Indemnification
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DEFINED TERMS
Acquired Properties...........................................................10
Additional Limited Partner.....................................................3
Agreement......................................................................1
Business.......................................................................1
Cases..........................................................................8
Claim.........................................................................33
Cleanup.......................................................................34
Closing........................................................................2
Closing Date...................................................................2
Code...........................................................................9
Common Units..................................................................21
Company........................................................................1
Company Financial Statements...................................................6
Confidentiality Agreement.....................................................18
Control Group Member...........................................................9
Converted Common Unit Value...................................................21
Employees.....................................................................29
Environmental Claims..........................................................35
Environmental Laws............................................................35
Environmental Permits.........................................................24
Equity Consideration...........................................................2
ERISA..........................................................................9
Exchange Act..................................................................16
Face Value....................................................................17
Final Statement................................................................2
General Partner................................................................3
Hazardous Substances..........................................................35
HSR Act........................................................................7
HSR Material Adverse Effect...................................................23
Indemnity Period..............................................................30
Independent Accounting Firm....................................................3
Initial Equity Holder..........................................................2
Intellectual Property.........................................................13
Leases........................................................................13
Material Adverse Effect.......................................................27
Member Interest................................................................1
Net Common Unit Proceeds......................................................21
Net Senior Unit Proceeds......................................................22
New York Court................................................................40
Notice........................................................................39
Other Permits.................................................................24
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Owned Real Property...........................................................12
Partnerships..................................................................11
Permitted Encumbrances........................................................12
Plans..........................................................................9
Public Documents..............................................................16
Purchase Price.................................................................1
Purchaser......................................................................1
Purchaser Damages.............................................................30
Purchaser Indemnitees.........................................................30
Purchaser MLP Partnership Agreement............................................3
Remediation Standard..........................................................35
Resolution Period..............................................................3
Returns.......................................................................10
SEC...........................................................................16
Securities Act................................................................16
Seller.........................................................................1
Seller Damages................................................................32
Seller Indemnitees............................................................32
Seller's knowledge.............................................................9
Senior Units...................................................................2
Subsidiary OLP.................................................................1
Tax...........................................................................12
Taxes.........................................................................12
Working Capital................................................................3
Year 2000 Compliant...........................................................14
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PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made and entered into as of
the 7th day of November 1999 by and among Ferrellgas Partners, L.P.
("Purchaser"), Ferrellgas, L.P. ("Subsidiary OLP") and Williams Natural Gas
Liquids, Inc., a Delaware corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Thermogas Company, a Delaware corporation (the "Company"), is
engaged in the retail marketing of propane (the "Business");
WHEREAS, Seller is the record and beneficial owner of the common shares
of the Company and, on or prior to the closing contemplated hereunder, the
Company will convert to a Delaware limited liability company; as of the date of
this Agreement the common shares of the Company held by Seller, and as of the
Closing, the member interest in the Company (the "Member Interest") will
represent all of the issued and outstanding equity interests of the Company; and
WHEREAS, Seller desires to sell, convey, assign, transfer and deliver
to Purchaser, and Purchaser desires to purchase and accept from Seller, such
Member Interest, upon the terms and subject to the conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
TRANSFER OF MEMBER INTEREST
SECTION 1.1 Interest of the Company to be Sold.
Subject to the terms and conditions of this Agreement, at the Closing
provided for in Section 1.3, Seller will sell, convey, assign, transfer and
deliver, or will cause to be sold, conveyed, assigned, transferred and
delivered, to Purchaser, and Purchaser will purchase from Seller, the Member
Interest, which constitutes, and will constitute as of the Closing, all of the
issued and outstanding equity interests of the Company. In payment for the
Member Interest, simultaneously with the delivery by Seller of a certificate
representing the Member Interest, with appropriate stock powers duly and validly
executed, Purchaser will pay to Seller the purchase price contemplated by
Section 1.2 (the "Purchase Price"). As promptly as practicable following the
date hereof, Purchaser and Seller shall, or shall cause their respective
affiliates to, enter into any agreements which may be required under applicable
state and local laws to effect the transfer of the Member Interest, as
contemplated by this Section 1.1.
SECTION 1.2 Purchase Price.
Subject to the terms and conditions of this Agreement, in reliance on
Seller's representations, warranties and agreements contained herein, and in
consideration of the aforesaid sale, conveyance, assignment, transfer and
delivery of the Member Interest, Purchaser will deliver or cause to be delivered
to Seller, in full payment of the aforesaid sale, conveyance, assignment,
transfer and delivery of the Member Interest one or more certificates
representing a number of senior units (in form and substance as described in the
term sheet set forth as Exhibit A, the "Senior Units") equivalent to
$175,000,000 in value (the "Equity Consideration").
The Equity Consideration shall be paid at Closing by the delivery of
one or more certificates evidencing the Equity Consideration to Seller or an
affiliate of Seller, which affiliate shall be designated in writing not later
than two business days prior to the Closing Date (such designated affiliate of
Seller, if any, being herein referred to as the "Initial Equity Holder"). The
parties hereto acknowledge that following the Closing, the consideration
contemplated by this Section 1.2 may be adjusted by a cash payment pursuant to
the terms of Section 1.4.
SECTION 1.3 Closing.
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place not later than 10:00 A.M., local time, at the
offices of Andrews & Kurth L.L.P., 805 Third Avenue, New York, New York on the
third business day following the satisfaction or waiver of the conditions set
forth in Section 5.1 hereof or at such other time or place as to which the
parties shall agree. As contemplated by Section 4.7, the parties shall use all
reasonable commercial efforts to cause the Closing to occur on or prior to
December 31, 1999. The effective time of the Closing is sometimes referred to
herein as the "Closing Date."
SECTION 1.4 Post Closing Purchase Price Adjustment.
(a) Within 30 days after the Closing Date, Purchaser shall
deliver to Seller an unaudited statement of the Working Capital (as defined
below) of the Company (the "Final Statement") as of the close of business on the
Closing Date.
(b) Following the Closing, Purchaser and Seller shall give the
other party and any independent auditors and authorized representatives of such
other party full access at all reasonable times to the properties, books,
records and personnel of the Company relating to periods prior to the Closing
Date for purposes of preparing, reviewing and resolving any disputes concerning
the Final Statement. Seller shall have 15 days following delivery to Seller of
the Final Statement during which to notify Purchaser of any dispute of any item
contained in the Final Statement, which notice shall set forth in reasonable
detail the basis for such dispute. If Seller fails to notify Purchaser of any
such dispute within such 15-day period, the Final Statement shall be deemed to
be accepted. In the event that Seller shall so notify Purchaser of any dispute,
Purchaser and Seller shall cooperate in good faith to resolve such dispute as
promptly as possible.
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(c) If Purchaser and Seller are unable to resolve any such
dispute within 30 days of Seller's delivery of such notice (the "Resolution
Period"), then all amounts remaining in dispute shall be submitted to Arthur
Andersen L.L.P. (the "Independent Accounting Firm") within 10 days after the
expiration of the Resolution Period. Each party agrees to execute, if requested
by the Independent Accounting Firm, a reasonable engagement letter. All fees and
expenses relating to the work, if any, to be performed by the Independent
Accounting Firm shall be borne equally by Seller and Purchaser. The Independent
Accounting Firm shall act as an arbitrator to determine, based solely on
presentations by Seller and Purchaser, and not by independent review, only those
issues still in dispute and shall be limited to those adjustments, if any, which
need be made for the Final Statement to comply with the standards set forth in
Schedule 1.4. The Independent Accounting Firm's determination shall be requested
to be made within 30 days of their selection, shall be set forth in a written
statement delivered to Seller and Purchaser and shall be final, binding and
conclusive. The Final Statement shall be as modified by resolution of any
disputes by Purchaser and Seller or by the Independent Accounting Firm.
(d) On the tenth business day following the delivery of the
Final Statement, either (i) Purchaser shall pay to Seller the amount (together
with accrued interest) by which Working Capital as of the close of business on
the Closing Date was greater than $9,147,500 or (ii) Seller shall pay to
Purchaser the amount (together with accrued interest) by which Working Capital
as of the close of business on the Closing Date was less than $9,147,500. In the
event of a payment pursuant to (i) or (ii) above, such amount shall include
simple interest at an annual rate of 7.5% accruing from the Closing Date to the
date of payment.
(e) The term "Working Capital" means current assets less
current liabilities of the Company assumed by Purchaser calculated in accordance
with the basis of presentation and the accounting principles identified in
Schedule 1.4.
SECTION 1.5 Transition Services Agreement.
At the Closing, Purchaser and Seller shall enter into a transition
services agreement, substantially in the form attached hereto as Exhibit B, so
as to enable Purchaser to operate the Business on a basis comparable to that
upon which the Business is being operated on the date hereof.
SECTION 1.6 Closing Obligations.
Seller or the Initial Equity Holder, as the case may be, shall execute
and deliver to Ferrellgas, Inc., a Delaware corporation and the sole general
partner of Purchaser (the "General Partner"), such documents and instruments as
are required pursuant to Section 12.4 of the Agreement of Limited Partnership of
Purchaser dated as of July 5, 1994, (the "Purchaser MLP Partnership Agreement")
to reflect the admission of Seller or the Initial Equity Holder, as the case may
be, to Purchaser as an "Additional Limited Partner" thereunder in respect of the
Senior Units issued to it at Closing, and the General Partner shall consent to
such admission and reflect same in the books and records of Purchaser.
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SECTION 1.7 Deliveries.
(a) Deliveries by Seller. At the Closing, Seller shall
deliver, or cause to be delivered, to Purchaser:
(i) the Member Interest;
(ii) the officer's certificate contemplated by
Section 5.1(e);
(iii) copies, certified by the Secretary or Assistant
Secretary of Seller, of corporate resolutions authorizing the execution
and delivery of this Agreement and all of the agreements and
instruments to be executed and delivered by Seller in connection
herewith, and the consummation of the transactions contemplated hereby;
(iv) a certificate of the Secretary or Assistant
Secretary of Seller identifying the name and title and bearing the
signatures of the officers of Seller authorized to execute and deliver
this Agreement and the other agreements and instruments to be executed
and delivered by Seller in connection herewith;
(v) a recent certificate of good standing with
respect to each of Seller and the Company issued by the Secretary of
State of Delaware;
(vi) documents evidencing (A) a sale-leaseback
transaction, entered into on terms provided by Purchaser and reasonably
satisfactory to Seller between the Company and Bank of America N.A. in
accordance with the term sheet attached hereto as Schedule 1.7(a)(vi),
relating to the owned propane tanks of the Company, which transaction
yielded net proceeds of $135,000,000 to the Company and (B) the
dividend of such amount to Seller;
(vii) an assignment of the pipeline allocations
attributable to the Company's propane volumes to the extent such can be
assigned to Purchaser, and to the extent not so assignable, Seller
shall provide to Purchaser the practical economic benefit of such
allocation;
(viii) documents evidencing (A) a loan transaction,
entered into on terms provided by Purchaser and reasonably satisfactory
to Seller relating to a borrowing by the Company of not less than
$183,000,000 from Bank of America, N.A. in accordance with the term
sheet attached hereto as Schedule 1.7(a)(viii), and (B) the dividend of
$122,500,000 of such proceeds to Seller; and
(ix) such other agreements, consents, documents,
instruments and writings as are required to be delivered by Seller at
or prior to the Closing Date pursuant to this Agreement or otherwise
reasonably required in connection herewith (including the Transition
Services Agreement, a registration rights agreement, a Senior Unit
representation letter
4
between Purchaser and Seller, and evidence of the General Partner's
authorization, on behalf of Purchaser, of the Senior
Units, in form and substance satisfactory to Seller).
(b) Deliveries by Purchaser. At the Closing, Purchaser shall
deliver, or cause to be delivered, to Seller:
(i) the Equity Consideration;
(ii) the officer's certificate contemplated by
Section 5.2(e);
(iii) copies, certified by the Secretary or Assistant
Secretary of the General Partner, of corporate resolutions authorizing
the execution and delivery of this Agreement and all of the agreements
and instruments to be executed and delivered by Purchaser and
Subsidiary OLP in connection herewith, and the consummation of the
transactions contemplated hereby;
(iv) a certificate of the Secretary or Assistant
Secretary of the General Partner identifying the name and title and
bearing the signatures of the officers of the General Partner
authorized to execute and deliver this Agreement and the other
agreements and instruments to be executed and delivered by the General
Partner on behalf of Purchaser and Subsidiary OLP in connection
herewith;
(v) a recent certificate of good standing with
respect to each of Purchaser, Subsidiary OLP and the General Partner
issued by the Secretary of State of Delaware;
(vi) documents evidencing the contribution by
Purchaser of the Member Interest to Subsidiary OLP; and
(vii) such other agreements, consents, documents,
instruments and writings as are required to be delivered by Purchaser
and Subsidiary OLP at or prior to the Closing Date pursuant to this
Agreement or otherwise reasonably required in connection herewith
(including the Transition Services Agreement, a registration rights
agreement, a Senior Unit representation letter between Purchaser and
Seller, and evidence of the General Partner's authorization, on behalf
of Purchaser, of the Senior Units, in form and substance satisfactory
to Seller).
SECTION 1.8 Contribution to Subsidiary OLP
Immediately following the Closing, Purchaser shall convey to Subsidiary
OLP all of the Member Interest and other assets purchased hereunder, and
Subsidiary OLP shall assume all liabilities contemplated to be assumed by
Purchaser hereunder.
5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser that:
SECTION 2.1 Organization and Existence.
The Company is duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company has full power and
authority to own and hold the properties and assets it now owns and holds and to
carry on its business as and where such properties are now owned or held and
such business is now conducted. The Company is duly licensed or qualified to do
business as a foreign company and is in good standing in each jurisdiction in
which the character of the properties and assets now owned or held by it or the
nature of the business now conducted by it requires it to be so licensed or
qualified. Schedule 2.1 contains a list of each jurisdiction in which the
Company is duly licensed or qualified to do business as a foreign company.
Except as set forth in Schedule 2.1, the Company has no direct or indirect
investment or interest in or control over any corporation, partnership, joint
venture or other business entity.
SECTION 2.2 Authority; Binding Effect.
This Agreement has been duly authorized, executed and delivered by
Seller and is the legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except that such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights, and the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
SECTION 2.3 Financial Statements.
Attached as Schedule 2.3 are copies of the Company's unaudited
consolidated balance sheet as of September 30, 1999 and the related consolidated
statement of income, cash flows and members' equity for the nine months then
ended (collectively, the "Company Financial Statements"). The Company Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistent with those used in prior years, and fairly present the
consolidated financial position of the Company as of the respective dates set
forth therein and the results of operations and cash flows for the Company for
the respective fiscal periods set forth therein.
6
SECTION 2.4 Ownership.
At the Closing, Seller will be the owner of good and valid title to the
Member Interest (which will be the only equity interest in the Company), free
and clear of any lien, claim or encumbrance. At Closing, there will be only one
Member Interest issued and outstanding, which will be fully paid and
nonassessable. There are no outstanding subscriptions, options, convertible
securities, warrants, calls or rights of any kind to purchase or otherwise
acquire any security of or equity interest in the Company.
SECTION 2.5 No Conflict.
Except for the required filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the execution and delivery
of this Agreement do not, and the fulfillment and compliance with the terms and
conditions hereof and the consummation of the transactions contemplated hereby
will not, (a) conflict with any of, or require the consent of any person or
entity under, the terms, conditions or provisions of the charter or bylaws of
Seller or the limited liability company agreement of the Company, (b) violate
any provision of, or require any consent, authorization or approval under, any
law or administrative regulation or any judicial, administrative or arbitration
order, award, judgment, writ, injunction or decree applicable to Seller or the
Company, (c) conflict with, result in a breach of, constitute a default under
(whether with notice or the lapse of time or both) or accelerate or permit the
acceleration of the performance required by, or require any consent,
authorization or approval under, any indenture, mortgage, lien or any material
agreement, contract, commitment or instrument to which Seller or the Company is
a party or by which Seller or the Company is bound or to which any asset of the
Company is subject, or (d) result in the creation of any lien, charge or
encumbrance on the assets or properties of the Company under any such indenture,
mortgage, lien, agreement, contract or instrument, excluding from the foregoing
clauses (b), (c), and (d) such conflicts, violations, breaches, defaults,
accelerations, liens, charges, or encumbrances which become applicable as a
result of the business or activities in which Purchaser is engaged or proposes
to be engaged or as a result of any acts or omissions by, or the status of or
any facts pertaining to, Purchaser.
SECTION 2.6 No Default.
The Company is not in default under, and no condition exists that with
notice or lapse of time or both could reasonably be expected to constitute a
default under, (a) any mortgage, loan agreement, indenture, evidence of
indebtedness or other instrument evidencing borrowed money or other agreement to
which it or any of its properties are bound, or (b) any judgment, order or
injunction of any court, arbitrator or governmental agency.
7
SECTION 2.7 Copies Complete.
Copies of the certificate of incorporation and bylaws of the Company,
each as amended to date, and the copies of all leases, contracts, instruments,
agreements, licenses, permits, certificates and any such documents required
pursuant to this Agreement to be delivered by Seller to Purchaser are complete
and accurate and are true and correct copies of the originals thereof. Prior to
Closing, Seller shall deliver to Purchaser the limited liability company
agreement of the Company and related documentation.
SECTION 2.8 Litigation.
Except as set forth in Schedule 2.8, there are no claims, actions,
suits, administrative, arbitration or other proceedings or government
investigations or inquiries (collectively "Cases") pending, or, to Seller's
knowledge, threatened, against the Company or any of its properties, assets and
business operations, by or before any court, governmental or regulatory
authority or by any third party relating to the Business, or which are
reasonably likely, either individually or in the aggregate to materially and
adversely affect Seller's performance under this Agreement or the consummation
of the transactions contemplate herein.
SECTION 2.9 Compliance with Applicable Law.
Except as set forth in Schedule 2.9, the Company is, and conducts the
Business, in compliance with all applicable laws, ordinances, rules and
regulations of any federal, state or local governmental authority applicable to
the Business.
SECTION 2.10 Certain Contracts and Arrangements.
Except as set forth in Schedule 2.10 or leases for real property, as of
the date hereof, the Company is not a party to any written or oral (a)
collective bargaining agreement; (b) employment or consulting agreement
providing for annual payments in excess of $100,000; (c) indenture, mortgage,
note, installment obligation, agreement or other instrument, in each case
relating to the borrowing of money or the guaranty of any obligation for the
borrowing of money; (d) partnership, joint venture or other similar agreement or
arrangement requiring the commitment of capital in excess of $100,000; (e)
material license or other similar agreement (other than (i) governmental permits
or licenses used in connection with the operation of the Business and (ii)
off-the-shelf software licenses); (f) agency, sales representation, distribution
or other similar agreement providing for annual payments in excess of $100,000;
(g) agreement for the purchase of supplies or materials other than in the
ordinary course of business providing for annual payments in excess of $100,000;
(h) agreement for the sale of goods or services other than in the ordinary
course of business providing for annual payments in excess of $100,000; (i)
agreement for the purchase of propane, including but not limited to all
agreements with Seller or any of its affiliates; or (j) agreement (except as
otherwise set forth in (a) through (i) above), other than in the ordinary course
of business which is material to the Business taken as a whole. Except as set
forth in Schedule 2.10, all such
8
agreements are valid, binding and enforceable
in accordance with their terms and neither the Company nor, to Seller's
knowledge, any other party thereto is in default under any of the aforesaid
agreements. "Seller's knowledge" shall mean the actual knowledge, without any
requirement to investigate, as of the Closing Date, of Company employees and
officers at the district sales manager level and above.
SECTION 2.11 Employee Benefit Plans; ERISA.
(a) Schedule 2.11(a) lists all benefit and compensation plans
and contracts including, but not limited to, "employee benefit plans" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and fringe benefit, deferred compensation, stock option,
stock purchase, stock appreciation rights, stock based, incentive and bonus
plans maintained for the benefit of or contributed to by Seller or by any trade
or business, incorporated or unincorporated, which is a member of a group of
which Seller is a member and which is under common control within the meaning of
Section 414 of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations thereunder ("Control Group Member") for the benefit of any
employee or former employees of the Business (the "Plans"). Neither Seller nor
any Control Group Member participates in, contributes to or has any obligation
to contribute to any multiemployer plan (as defined in Section 4001 of ERISA).
Neither Seller nor any Control Group Member has completely or partially
withdrawn from any multiemployer plan within the six year period prior to the
date hereof. True and complete copies of all Plans, including, but not limited
to, any trust instruments and insurance contracts forming a part of any Plans,
and all amendments thereto have been provided or made available to Purchaser.
(b) Each of the Plans has been administered in accordance with
its terms and in compliance with applicable law (including without limitation,
where applicable, ERISA and the Code.
(c) Each of the Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and no fact or set of circumstances exists
that would adversely affect such qualification prior to the Closing. Neither
Seller nor the Company has engaged in any transaction with respect to any Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, could give rise to a tax or penalty imposed by either Section 4975 of
the Code or Section 502(i) of ERISA.
(d) Except as set forth in Schedule 2.11(d), no Plan provides
medical, surgical, hospitalization, death or similar benefits (whether or not
insured) or any other benefit that may be provided under a welfare plan (as
defined in Section 3(1) of ERISA) for employees or former employees of the
Business for periods extending beyond their termination of service (by
retirement or otherwise), other than (i) coverage mandated by applicable law,
(ii) death benefits under any "pension plan," as that term is defined in Section
3(2) of ERISA, or (iii) benefits the full cost of which is borne by the current
or former employee (or his beneficiary). Seller shall remain responsible for any
legally mandated continuation of health care coverage for any Company employee
and/or his dependents who have a loss of health care coverage due to a
qualifying event before or at the Closing and for satisfaction of any related
notice requirements with respect to any such Company employee and his
dependents. Seller shall assume and be responsible for all medical, dental,
workers compensation, life insurance, supplemental unemployment, and other
welfare plan expenses and benefits for Company
9
employees and their dependents with respect to claims incurred by such
employees or their dependents before or at the Closing. Long and short-term
disability benefits and other benefits for Company employees who are disabled
before or at the Closing shall remain the responsibility of Seller regardless of
whether any such employee has satisfied any elimination period with respect to
any disability benefit as of the Closing. For purposes of this paragraph, a
medical, dental, workers compensation, life insurance, supplemental
unemployment, disability or other claim is deemed incurred when the service or
event occurs which entitles the employee or his dependents to benefits.
(e) Except as set forth in Schedule 2.11(e), there are no
pending or, to the knowledge of Seller, threatened claims (other than routine
claims for benefits) by, on behalf of or against any of the Plans or any trusts
related thereto.
(f) Except as set forth in Schedule 2.11(f), the Company has
no employment, consulting or independent contractor agreement with any person,
and the consummation of the transaction contemplated herein will not entitle any
current or former Company employee or independent contractor to severance pay,
unemployment compensation or any other payment, or accelerate the time of
payment or vesting or increase the amount of any compensation due to any current
or former Company employee or independent contractor.
(g) Except as set forth in Schedule 2.11(g), Purchaser shall
not assume any obligation or responsibility with respect to any Plan in which
any current or former Company employee participates or has participated.
SECTION 2.12 Taxes.
(a) All Tax and information returns, statements, notices,
forms, reports or other documents or information filed with or submitted to, or
required to be filed with or submitted to, the United States or any other taxing
authority in connection with the determination, assessment, collection or
payment of any Tax or in connection with the administration, implementation or
enforcement of or compliance with any legal requirement relating to any Tax (the
"Returns") required to be filed by Seller on or prior to the Closing with
respect to Taxes have been or will be timely filed. All amounts shown on each of
such Returns have been paid or will be paid when due.
(b) Any Taxes which are to be assumed by Purchaser in
connection with the transactions contemplated herein in respect of the Member
Interest, the Company, any assets of the Company or the Business (the "Acquired
Properties") which at the Closing are not yet due and owing will be adequately
reflected on the Final Statement as a reserve for Taxes.
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(c) There are no grounds for the assertion or assessment of
any Taxes against Seller or the Acquired Properties other than those reflected
or reserved against on the Final Statement.
(d) None of the Acquired Properties are and will not be
encumbered by any liens arising out of any unpaid Taxes and there are no grounds
for the assertion or assessment of any liens against any of the Acquired
Properties in respect of any Taxes (other than liens for Taxes if payment
thereof is not yet required, and which are set forth on Schedule 2.12 hereto).
(e) The transactions contemplated herein will not give rise to
(i) the creation of any liens against any of the Acquired Properties in respect
of any Taxes or (ii) the assertion of any additional Taxes against any of the
Acquired Properties.
(f) There is no action or proceeding or unresolved claim for
assessment or collection, pending or threatened, by, or present or expected
dispute with, the United States or any other taxing authority for assessment or
collection from Seller of any Taxes of any nature affecting any of the Acquired
Properties.
(g) There is no extension or waiver of the period for
assertion of any Taxes against Seller affecting any of the Acquired Properties.
(h) Seller is not a "foreign person" within the meaning of
Code Section 1445(f)(3).
(i) None of the Acquired Properties are subject to, or
constitute, a safe harbor lease within the meaning of Code Section 168(f)(8).
(j) None of the Acquired Properties have been financed with,
or directly or indirectly secures, any industrial revenue bonds or debt, the
interest on which is tax exempt under Code Section 103(a).
(k) A portion of the Acquired Properties will constitute
interests in partnerships, joint ventures or other arrangements or contracts
that could be or are treated as partnerships (the "Partnerships") for federal
income tax purposes, and all Taxes with respect to Seller's ownership of an
interest in any such Partnership as a result of such Partnership's activities
for all tax periods up to the Closing (allocated on a prorated basis over a 365
day year for the current tax tear, or on a prorated basis over the number of
days in the applicable tax period, if such tax period is shorter) have been paid
or will be paid when due by Seller.
(l) None of the Acquired Properties consist of stock in a
subsidiary of Seller.
(m) None of the Acquired Properties are tax-exempt use
property within the meaning of Code Section 168(h).
11
(n) None of the Acquired Properties are subject to a tax
indemnification agreement.
(o) Seller is responsible for any withholding, employment or
payroll Taxes in connection with any of the Acquired Properties for all tax
periods up to the Closing.
(p) As used in this Agreement, the terms "Tax" and "Taxes"
shall mean all taxes, charges, fees, levies or other like assessments, including
without limitation income, gross receipts, ad valorem, value added, premium,
excise, real property, personal property, windfall profit, sales, use, transfer,
license and franchise taxes imposed by the United States or any foreign nation
or bilateral or multilateral governmental authority, or any other taxing
authority, and shall include any interest, fines, penalties, assessments or
additions to Tax resulting from, attributable to, or incurred in connection with
any such Taxes or any contest or dispute thereof.
SECTION 2.13 Labor and Employment Matters.
Except as set forth in Schedule 2.13, (a) there is no labor strike,
dispute, slowdown, stoppage or lockout actually pending (for which notice has
been provided), or to the knowledge of Seller, threatened against or affecting
the Business; (b) there is no unfair labor practice charge or complaint against
the Business pending (for which notice has been provided) or, to the knowledge
of Seller, threatened before the National Labor Relations Board, and (c) neither
Seller nor the Company has received notice of the intent of any federal or state
governmental authority responsible for the enforcement of labor or employment
laws to conduct an investigation with respect to or relating to the Business and
no such investigation is in progress. The Company is in full compliance with all
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours including, without limitation, the Fair Labor
Standards Act, the Family and Medical Leave Act of 1993, the Americans with
Disabilities Act of 1990, the Equal Employment Opportunities Act as amended by
the Civil Rights Act of 1991, the Occupational Safety and Health Act, the
Immigration Reform and Control Act of 1986, the Age Discrimination in Employment
Act, Title VII of the Civil Rights Act of 1964 and the Older Workers Benefit
Protection Act.
SECTION 2.14 Owned Real Property.
Except as set forth on Schedule 2.14, the Company has good and
marketable title to all owned real property used in connection with the Business
(the "Owned Real Property") and the Owned Real Property is subject to no liens,
pledges, mortgages or security interests except for Permitted Encumbrances (as
defined below).
"Permitted Encumbrances" means (a) those liens, encumbrances and other
matters listed on Schedule 2.14, (b) all matters in the public records of the
counties and parishes where the property or assets are located, to the extent
that same are otherwise valid and enforceable, (c) encumbrances securing
payments to mechanics, workmen and materialmen and encumbrances securing
payments of Taxes or assessments where such Taxes or assessments are not yet
delinquent, or, if delinquent,
12
that are shown in Schedule 2.14, (d) all matters
visible and apparent on the ground or that would be revealed by a true and
correct survey, (e) easements, rights-of-way, servitudes, permits, surface
leases, surface use restrictions and other surface uses and impediments on,
over, or in respect of any of the property or assets which are not such as to
materially impair the use of the property in the Business as presently
conducted, (f) all rights reserved to or vested in any municipality or
governmental, tribal, statutory, or public authority controlling or regulating
any of the property or assets in any manner, and in all applicable laws, rules,
and orders of any municipality or governmental, tribal, statutory or public
authority, (g) mortgages or security interests shown on the balance sheet of the
Company in Schedule 2.3 as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (h) mortgages or security interests
incurred in connection with the purchase of property or assets after the date of
the balance sheet of the Company in Schedule 2.3 (such mortgages and security
interest being limited to the property or assets so acquired), with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, and with respect to real property, to the extent
that such matters do not materially impair the use of the real property subject
thereto in the Business as presently conducted, (i) defects, imperfections, or
irregularities in title, if any, and (ii) zoning laws and other land use
restrictions.
SECTION 2.15 Leases.
Except as set forth in Schedule 2.15, all of the leases for real
property held by the Company and used in connection with the Business (the
"Leases") are valid, binding and enforceable in accordance with their respective
terms, and neither the Company nor, to the knowledge of Seller, the other party
to any Lease is in default under such Lease.
SECTION 2.16 Intellectual Property.
(a) Schedule 2.16 sets forth all material trademarks, trades
names, service marks, service names, mark registrations, logos, assumed names,
and copyright registrations, patents and all applications therefor which are
used in the operation of the Business as currently conducted (collectively, the
"Intellectual Property").
(b) Except as set forth in Schedule 2.16, the Company has
ownership of or other rights by license to the Intellectual Property as are
necessary to permit the Company to conduct its operations as currently
conducted.
SECTION 2.17 Title to Tangible Assets.
Except as set forth in Schedule 2.17, the Company has good title to the
owned tangible assets used in connection with the Business (and all leased
tangible assets are leased under valid leases), and at Closing, the Company will
own (or lease under valid leases) those assets listed in Schedule 2.17 used in
connection with the propane transport business conducted by an affiliate of the
Company, in all cases, free and clear of all encumbrances, except for Permitted
Encumbrances, and
13
such tangible assets are in good operating condition (subject
to normal wear and tear) and fit for use in the ordinary course of business
consistent with past practice.
SECTION 2.18 No Undisclosed Liabilities.
Except as set forth in Schedule 2.18, the Company has no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent or otherwise) except for liabilities or obligations
reflected or reserved against in the Company Financial Statements and current
liabilities and obligations incurred in the ordinary course of business since
September 30, 1999, consistent with prior practice and not prohibited by this
Agreement.
SECTION 2.19 Transactions with Affiliates.
Except as set forth in Schedule 2.19, since December 31, 1997, no
affiliate of the Company has had any material interest in any property (whether
real, personal or mixed and whether tangible or intangible) used in the
Company's business or has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in a person that has had
business dealings or a material financial interest in any transaction with the
Company other than business dealings or transactions conducted in the ordinary
course of business at substantially prevailing market prices and on
substantially prevailing market terms.
SECTION 2.20 Brokers or Finders.
Neither Seller nor the Company has incurred any obligation or
liability, contingent or otherwise, for brokerage or finder's fees or agents'
commissions or other similar payments in connection with this Agreement.
SECTION 2.21 No Implied Representation.
Notwithstanding anything contained in any other provisions of this
Agreement, Seller acknowledges and agrees that Purchaser is making no
representation or warranty whatsoever, express or implied, beyond those
expressly given in this Agreement.
SECTION 2.22 Year 2000 Compliance.
Schedule 2.22 discloses the actions taken by the Company to become Year
2000 Compliant. "Year 2000 Compliant" means, with respect to hardware and
process, including any and all enhancements, upgrades, customizations,
modifications, maintenance and the like, used in providing services, containing
or calling on a calendar function including, without limitation, any function
providing specific dates or days, or calculating spans of dates or days, will
record, store, process, provide and, where appropriate, insert, true and
accurate dates (in leap years or otherwise) and calculations for dates and spans
of dates, including and following January 1, 2000. Seller does not represent or
warrant that Seller or the Company or its subsidiaries have
taken any additional actions,
14
other than those described in Schedule 2.22,
to cause the Company, the Business, or the assets to become Year 2000
Compliant.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that:
SECTION 3.1 Organization and Existence.
Purchaser is duly formed, validly existing and in good standing under
the laws of the State of Delaware. Purchaser has full limited partnership power
and authority to own and hold the properties and assets it now owns and holds
and to carry on its businesses as and where such properties are now owned or
held and such business is now conducted. Purchaser is duly licensed or qualified
to do business as a foreign limited partnership, and is in good standing in each
jurisdiction in which the character of the properties and assets now owned or
held or the nature of the business now conducted requires Purchaser to be so
licensed or qualified.
SECTION 3.2 Authority; Binding Effect.
This Agreement has been duly authorized, executed and delivered by
Purchaser, and is the legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms except that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights,
and the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
SECTION 3.3 No Conflict.
Except for the required filings under the HSR Act, the execution and
delivery of this Agreement do not, and the fulfillment and compliance with the
terms and conditions hereof and the consummation of the transactions
contemplated hereby will not (a) conflict with any of, or require the consent of
any person or entity under, the terms, conditions or provisions of the Purchaser
MLP Partnership Agreement, (b) violate any provision of, or require any consent,
authorization or approval under, any law or administrative regulation or any
judicial, administrative or arbitration order, award, judgment, writ, injunction
or decree applicable to Purchaser, (c) conflict with, result in a breach of,
constitute a default under (whether with notice or the lapse of time or both) or
accelerate or permit the acceleration of the performance required by, or require
any consent, authorization or approval under, any indenture, mortgage, lien or
15
any material agreement, contract, commitment or instrument to which Purchaser is
a party or by which Purchaser is bound or to which any asset of Purchaser is
subject, or (d) result in the creation of any lien, charge or encumbrance on the
assets or properties of Purchaser under any such indenture, mortgage, lien,
agreement, contract or instrument.
SECTION 3.4 No Default.
Purchaser is not in default under, and no condition exists that with
notice or lapse of time or both could reasonably be expected to constitute a
default under, (a) any mortgage, loan agreement, indenture, evidence of
indebtedness or other instrument evidencing borrowed money or other agreement to
which it or any of its properties are bound, or (b) any judgment, order or
injunction of any court, arbitrator or governmental agency.
SECTION 3.5 Litigation.
There is no claim, action, suit, administrative, arbitration or other
proceeding or governmental investigation or inquiry pending, or, to Purchaser's
knowledge, threatened, against Purchaser or any affiliate, by or before any
court, governmental or regulatory authority or by any third party which is
reasonably likely, either individually or in the aggregate, to materially and
adversely affect Purchaser's performance under this Agreement or the
consummation of the transactions contemplated herein.
SECTION 3.6 Public Documents.
Purchaser has filed with the Securities and Exchange Commission ("SEC")
all reports, schedules, forms, statements and other documents required by the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to be filed by
Purchaser since July 31, 1996, (collectively, and in each case including all
exhibits and schedules thereto and documents incorporated by reference therein,
the "Public Documents"). At the time filed (in the case of filings under the
Exchange Act) or at the time declared effective (in the case of filings under
the Securities Act of 1933, as amended (the "Securities Act")), except to the
extent revised or superseded by a subsequent filing with the SEC, the Public
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and none of the Public
Documents (including any and all financial statements included therein) as of
such dates contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Purchaser included in all
Public Documents, including any amendments thereto, comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto.
16
SECTION 3.7 No Implied Representation.
Notwithstanding anything contained in Article III or any other
provision of this Agreement, Purchaser acknowledges and agrees that Seller is
making no representation or warranty whatsoever, express or implied, beyond
those expressly given in this Agreement, including any implied warranty of
merchantability or suitability as to the properties or assets of the Business.
SECTION 3.8 Interpretation of Representations and Warranties and Schedule.
Purchaser acknowledges and agrees that the specification of any dollar
amount in the representations and warranties contained in this Agreement or the
inclusion of any specific item in the Disclosure Schedules is not intended to
imply that such amounts or higher or lower amounts, or the items so included or
other items, are or are not material, and neither party shall use the fact of
the setting of such amounts or the fact of inclusion of any such item in the
Disclosure Schedules in any dispute or controversy between the parties as to
whether any obligation, item or matter not described herein or included in a
schedule is or is not material.
SECTION 3.9 Brokers or Finders.
Except for Banc of America Securities LLC, Purchaser has not incurred
any obligation or liability, contingent or otherwise, for brokerage or finder's
fees or agents' commissions or other similar payments in connection with this
Agreement.
SECTION 3.10 Fair Market Value of Senior Units.
The fair market value of each of the Senior Units is equal to at least
the face value of $40 per Senior Unit (the "Face Value").
SECTION 3.11 Conversion of the Company.
Purchaser acknowledges that the Company will convert from a Delaware
corporation to a Delaware limited liability company prior to Closing, as
contemplated by Section 4.12.
17
ARTICLE IV
ADDITIONAL AGREEMENTS, COVENANTS, RIGHTS AND
OBLIGATIONS
SECTION 4.1 Access to Information.
From the date of this Agreement to the Closing or until this Agreement
is terminated as provided in Article VIII, Seller shall provide Purchaser and
its authorized representatives reasonable access to all of the Company's books,
records, assets, properties and employees, and shall furnish or cause to be
furnished, as applicable, to Purchaser such information as Purchaser may
reasonably request, upon prior notice and during normal business hours, unless
any such access and disclosure would violate any law or the terms of any
agreement to which Seller or the Company is bound, or any applicable law or
regulation. Until the Closing, the confidentiality of any data or information so
acquired shall be maintained by Purchaser and its representatives pursuant to
the terms of the Confidentiality Agreement executed by the parties on October
19, 1999 (the "Confidentiality Agreement"), which each of the above-named
parties hereby acknowledges is binding on it.
SECTION 4.2 Conduct of Business.
(a) Ordinary Course. From the date of this Agreement to the
Closing, Seller shall cause the Company to continue to maintain its assets and
properties and operate its business in the ordinary course as was being
conducted prior to the execution of this Agreement.
(b) Restrictions on Seller. Without first obtaining the
written consent of Purchaser, which consent shall not be unreasonably withheld
or delayed, or except as set forth in Schedule 4.2(b), from the date hereof
until the Closing, except as otherwise contemplated by this Agreement, Seller
will cause the Company not to:
(i) make any material change in the conduct of its business
and operations or its financial reporting and accounting methods;
(ii)other than in the ordinary course of business, enter into
any material contract or agreement or terminate or amend in any material respect
any material contract or agreement to which it is a party, or be in default in
any material respect thereunder;
(iii) declare, set aside or pay any dividends or make any
distributions in respect of its equity securities, or split, combine or
reclassify any of its equity securities or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any of its
equity securities, or purchase, redeem or otherwise acquire, directly or
indirectly, any such securities;
18
(iv)merge into or with or consolidate with any other
corporation, partnership, person or other entity or acquire all or substantially
all of the business or assets of any corporation, partnership, person or other
entity or form, acquire any interest in or contribute any assets to any
partnership or joint venture or enter into any similar arrangement;
(v) make any change in its limited liability company agreement;
(vi)(A) make any purchase of any securities of any
corporation, partnership, person or entity, or (B) make any investment in any
corporation, partnership, joint venture or other business enterprise other than
ordinary-course overnight investments consistent with cash management practices
of Seller and its affiliates;
(vii) incur or increase any material amount of indebtedness
for borrowed money or guarantee any such indebtedness or issue, sell or
guarantee any debt securities, other than in the ordinary course of business
consistent with past practice;
(viii) sell, lease or otherwise dispose of any material
portion of its assets other than in the ordinary course of business consistent
with past practice;
(ix)issue, deliver or sell or authorize or propose the
issuance, delivery or sale of, any of its equity securities or securities
convertible into its equity securities, or subscriptions, rights, warrants or
options to acquire or other agreements or commitments of any character
obligating it to issue any such securities;
(x) settle in excess of $500,000 (individually or in the
aggregate) any claim, demand, lawsuit or state or federal regulatory proceeding
unless prior to such settlement Purchaser shall have been given a reasonable
opportunity to consult with Seller regarding such settlement;
(xi)except as required on an emergency basis, purchase, lease
or otherwise acquire any property of any kind whatsoever other than in the
ordinary course of business or make any capital expenditure in excess of
$100,000;
(xii) allow or permit the expiration, termination or
cancellation at any time of any material insurance policy applicable to its
business or operations, unless such policy is replaced, with no loss of
coverage, by a comparable insurance policy (to the extent available on
commercially reasonable terms) provided that Seller shall notify Purchaser if
any such insurance coverage will not be replaced;
(xiii) implement or adopt any material change in its
tax methods, principles or elections;
19
(xiv) increase in any manner the compensation or
bonus payable to any of its employees, except in the ordinary course of
business;
(xv)hire any new employee whose compensation is in excess of
$75,000 per year or terminate any employee without cause; or
(xvi) commit to do any of the foregoing.
(c) Restrictions on Purchaser.
Without first obtaining the written consent of Seller, which consent
shall not be unreasonably withheld or delayed, from the date hereof until the
Closing, except as otherwise contemplated by this Agreement, if the effect of
any of the following could reasonably be likely to lead to the failure of the
parties to consummate the transactions contemplated by this Agreement, Purchaser
will not:
(i) make any material change in the conduct of its business
and operations or its financial reporting and accounting methods;
(ii)other than in the ordinary course of business, enter into
any material contract or agreement or terminate or amend in any material respect
any material contract or agreement to which it is a party, or be in default in
any material respect thereunder;
(iii) except for the regularly scheduled distribution to be
made in December 1999, declare, set aside or pay any dividends or make any
distributions in respect of its equity securities, or split, combine or
reclassify any of its equity securities or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any of its
equity securities, or purchase, redeem or otherwise acquire, directly or
indirectly, any such securities;
(iv)merge into or with or consolidate with any other
corporation, partnership, person or other entity, acquire all or substantially
all of the business or assets of any corporation, partnership, person or other
entity or form, acquire any interest in or contribute any assets to any
partnership or joint venture or enter into any similar arrangement;
(v) (A) make any purchase of any securities of any
corporation, partnership, person or entity, or (B) make any investment in any
corporation, partnership, joint venture or other business enterprise other than
ordinary-course overnight investments consistent with cash management practices
of Purchaser and its affiliates;
(vi)incur or increase any material amount of indebtedness for
borrowed money or guarantee any such indebtedness or issue, sell or guarantee
any debt securities, other than in the ordinary course of business consistent
with past practice;
20
(vii) sell, lease or otherwise dispose of any material portion
of its assets other than in the ordinary course of business consistent with past
practice;
(viii) issue, deliver or sell or authorize or propose the
issuance, delivery or sale of, any of its equity securities or securities
convertible into its equity securities, or subscriptions, rights, warrants or
options to acquire or other agreements or commitments of any character
obligating it to issue any such securities;
(ix)settle in excess of $500,000 (individually or in the
aggregate) any claim, demand, lawsuit or state or federal regulatory proceeding
unless prior to such settlement Seller shall have been given a reasonable
opportunity to consult with Purchaser regarding such settlement;
(x) except as required on an emergency basis, purchase, lease
or otherwise acquire any property of any kind whatsoever other than in the
ordinary course of business or make any capital expenditure in excess of
$100,000;
(xi)allow or permit the expiration, termination or
cancellation at any time of any material insurance policy applicable to its
business or operations, unless such policy is replaced, with no loss of
coverage, by a comparable insurance policy (to the extent available on
commercially reasonable terms) provided that Purchaser shall notify Seller if
any such insurance coverage will not be replaced; or
(xii) commit to do any of the foregoing.
(d) Common Unit Make-Whole. On or prior to the fifth
anniversary of the Closing Date, promptly (and in each event, no later than five
business days) after any sale of common units issuable upon conversion of the
Senior Units ("Common Units") by Seller, Purchaser or Subsidiary OLP shall pay
to Seller in cash the product of (i) the difference, if positive, of the
Converted Common Unit Value (plus accumulated and undistributed distributions)
less the Net Common Units Proceeds, multiplied by (ii) the number of Common
Units sold.
(A) "Converted Common Unit Value" means a dollar amount
derived by dividing (a) the aggregate Face Value of the Senior Units prior
to the time of the exercise of the conversion option (as contemplated by
the terms of the Senior Units) by (b) the aggregate number of Common Units
into which such Senior Units were converted.
(B) "Net Common Unit Proceeds" means an amount equal to
the net proceeds, on a per Common Unit basis, received by Seller upon a
sale by Seller of any of the Common Units in a single transaction or a
series of transactions involving (x) a bona fide sale to an unaffiliated
third party, or (y) an underwritten public offering by a reputable
investment bank.
21
(e) Holder Vote. Purchaser will cause a proxy statement or an
information statement to be mailed to unitholders, a meeting of unitholders to
be called and, within 120 days after the Closing, unitholder approval to be
obtained, for (i) the conversion feature of the Senior Units and the issuance of
Common Units upon exercise of the conversion option set forth in the terms of
the Senior Units and (ii) an exemption under the Purchaser MLP Partnership
Agreement for Seller in order for Seller to be able to vote all of its Common
Units upon conversion.
(f) Senior Unit Make-Whole. In the event that, after the
earlier of (A) February 1, 2002 or (B) the occurrence of a Material Event, as
defined in the terms of the Senior Units, the holder(s) of the Senior Units have
not irrevocably elected to convert their Senior Units into Common Units, on or
prior to the fifth anniversary of the Closing Date, promptly (and in each event,
no later than five business days) after any sale of Senior Units by Seller (in
accordance with the definition of "Net Senior Unit Proceeds" below) Purchaser or
Subsidiary OLP shall pay to Seller in cash the product of (i) the difference, if
positive, of the Face Value per Senior Unit (plus accumulated and undistributed
distributions) less the Net Senior Units Proceeds, multiplied by (ii) the number
of Senior Units sold. "Net Senior Unit Proceeds" means an amount equal to the
net proceeds, on a per Senior Unit basis, received by Seller upon a sale by
Seller of any of the Senior Units in a single transaction or a series of
transactions involving (x) a bona fide sale to an unaffiliated third party, or
(y) an underwritten public offering by a reputable investment bank.
SECTION 4.3 Certain Filings.
As promptly as practicable following the execution of this Agreement
the parties shall (a) prepare and file with the Federal Trade Commission and the
Department of Justice the appropriate filings and any supplemental information
which may be reasonably requested in connection therewith under the HSR Act, it
being agreed that Purchaser is the primary "Acquiring Person" for purposes of
the HSR Act and shall pay the required filing fee, (b) use their reasonable best
efforts to take, or cause to be taken, all appropriate action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions, and (c)
except as contemplated by this Agreement, use their reasonable best efforts not
to take any action or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or result
in a breach of any covenant made by it in this Agreement. Each party hereto
shall use its reasonable best efforts (other than qualifying to do business in
any jurisdiction in which it is not now so qualified) to cause each filing made
by it with any governmental body to become effective as promptly as possible.
The parties hereto will coordinate and cooperate with one another in exchanging
such information and providing such reasonable assistance as may be requested in
connection with such filing.
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SECTION 4.4 Other Consents.
(a) Seller and Purchaser shall cooperate, and use their
reasonable commercial efforts, to make all filings and obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties necessary to consummate the
transactions contemplated by this Agreement on or prior to December 31, 1999,
including by agreeing to arrangements to hold separate and/or divest any assets
required to obtain governmental approvals, provided such arrangements are not
reasonably likely to have a HSR Material Adverse Effect. As used in this Section
4.4, "HSR Material Adverse Effect" means any material adverse change in, or
effect on the business, assets, financial condition or results of operations of
the Company, taken as a whole. In addition to the foregoing, Purchaser agrees to
provide such assurances as to financial capability, resources and
creditworthiness as may be reasonably requested by any third party whose consent
or approval is sought hereunder. Notwithstanding the foregoing, nothing herein
shall obligate or be construed to obligate either Seller or Purchaser to make
any payment to any third party in order to obtain the consent or approval of
such third party or to transfer any contract, license or permit in violation of
its terms.
(b) With respect to any agreements for which any required
consent or approval is not obtained prior to the Closing, Seller and Purchaser
shall each use reasonable best efforts to obtain any such consent or approval
after the Closing Date until such consent or approval has been obtained and
Seller shall use its commercially reasonable efforts to provide Purchaser with
the same benefits arising under such agreements, including performance by
Seller, as agent, if legally and commercially feasible; provided that Purchaser
shall provide Seller with such access to the premises, books and records and
personnel as is reasonably necessary to enable Seller to perform its obligations
under such agreements and Purchaser shall pay or satisfy the corresponding
liabilities for the enjoyment of such benefits to the extent Purchaser would
have been responsible therefor if such consent or approval had been obtained.
(c) In the event that any governmental authority challenges
the proposed transaction for any reason, the parties agree to take any action
(consistent with their obligations under Section 4.6) reasonably necessary to
vigorously defend, lift, mitigate or rescind the effect of any actual or
reasonably anticipated litigation or administrative proceeding adversely
affecting this Agreement or the transactions contemplated hereby, including,
without limitation, promptly appealing any adverse court or administrative order
or injunction.
SECTION 4.5 Audited Financial Statements; Debt.
(a) After the Closing, Seller shall afford reasonable access
and information to Purchaser in order to assist Purchaser with the preparation
of audited financial statements of the Company necessary for Purchaser (or an
affiliate of Purchaser) to conduct an offering of securities in accordance with
the Securities Act of 1933, as amended.
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(b) Seller shall cause the intercompany payable, net of
intercompany receivable, both as reflected on the balance sheet of the Company
as of the Closing Date, to be canceled as of the Closing Date.
(c) On or prior to the Closing, Seller shall assume from the
Company all long-term debt of the Company as of September 30, 1999.
SECTION 4.6 Reasonable Efforts.
Seller and Purchaser shall cooperate, and use their reasonable
commercial efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the transactions contemplated by this
Agreement.
SECTION 4.7 Covenant to Satisfy Conditions.
Seller will use its reasonable commercial efforts to ensure that the
conditions set forth in Article V hereof are satisfied, insofar as such matters
are within the control of Seller, and Purchaser will use its reasonable
commercial efforts to ensure that the conditions set forth in Article V hereof
are satisfied, insofar as such matters are within the control of Purchaser.
Seller and Purchaser further covenant and agree, with respect to a threatened or
pending preliminary or permanent injunction or other order, decree or ruling or
statute, rule, regulation or executive order that would adversely affect the
ability of the parties hereto to consummate the transactions contemplated
hereby, to use all commercially reasonable efforts to prevent or lift the entry,
enactment or promulgation thereof, as the case may be.
SECTION 4.8 Transfer.
Seller and Purchaser shall cooperate in (a) causing the Company to take
all actions necessary to comply with applicable requirements of environmental
laws concerning the transfer of property, assets, stock or a business, including
without limitation the filing with appropriate permitting agencies of all
notices required in reference to the change in ownership for the purpose of
effecting the transfer or issuance of the permits required under environmental
laws for the operation and the conduct of the business of the Company
("Environmental Permits"), (b) effectuating the issuance or transfer, as
promptly as is reasonably possible on or after the Closing, of all Environmental
Permits and any other licenses or permits ("Other Permits") required as of the
Closing, and (c) identifying, preparing and filing any notices or reports
required from Purchaser in connection with the transfer or issuance of the
required Environmental Permits and Other Permits. For the interim period from
the Closing until such time as the required Environmental Permits and the Other
Permits in form and substance reasonably satisfactory to Purchaser shall be
transferred to or issued, to the extent permitted by law, Seller authorizes
Buyer to operate under and utilize existing Environmental Permits and Other
Permits.
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SECTION 4.9 No Public Announcement.
Immediately upon the execution of this Agreement, the parties hereto
shall issue a press release with respect to the execution hereof and the
transactions contemplated hereby, which press release shall be reasonably
satisfactory to Seller and Purchaser. No party hereto shall issue any other
press release or, except as provided in Section 6.1, make any other public
announcement concerning this Agreement or the transactions contemplated hereby
without the prior approval of Seller or Purchaser, as applicable (other than as
may be required by law or by obligations pursuant to any listing agreement with
the New York Stock Exchange, in which event the party making the public
announcement or press release shall, to the extent practicable, notify Seller or
Purchaser, as applicable, in advance of such public announcement or press
release), which approval shall not be unreasonably withheld or delayed.
SECTION 4.10 No Solicitation.
During the period between the date of this Agreement and the Closing
Date, each of the parties hereto shall refrain from and will cause its
affiliates to refrain from causing or attempting to cause (or assisting any
other person or entity in causing or attempting to cause) (i) any customer of
the other party to replace or terminate any contract or arrangement relating to
the propane business with products of any other person or entity, and (ii) any
employee of the other party to resign from, or sever a relationship with, such
other party, it being understood that, during such period, neither party shall
employ any person who was, as of the date of this Agreement, an employee of the
other.
SECTION 4.11 Allocation.
Seller and Purchaser shall report Purchaser's purchase of the Company's
assets pursuant to Section 1060 of the Code and other applicable laws in a
consistent manner and shall take no position contrary thereto. Such allocation
shall be agreed upon in writing by Seller and Purchaser within 30 days following
the receipt of the Final Statement. Seller and Purchaser each shall be
responsible for the preparation of any statements and forms to be filed pursuant
to Section 1060 of the Code or in accordance with other applicable law.
SECTION 4.12 Conversion.
On or prior to the Closing, Seller shall cause Thermogas Company, a
Delaware corporation, to be converted into a Delaware limited liability company,
and all references to the Company and its shares shall thereafter refer to the
Company as a Delaware L.L.C. and to its member interests, respectively.
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ARTICLE V
CONDITIONS
SECTION 5.1 Conditions to the Obligations of Purchaser.
The obligations of Purchaser to purchase the Member Interest and to
consummate the other transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing Date (or the waiver in
writing by Purchaser) of the following conditions:
(a) Any waiting period (and any extension thereof) applicable
to the consummation of the transaction under the HSR Act shall have expired or
been terminated;
(b) No United States or state governmental authority or other
agency or commission or United States or state court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making the acquisition of the Member Interest by Purchaser illegal or
otherwise preventing or prohibiting consummation of the transactions
contemplated by this Agreement;
(c) Seller shall have performed and complied in all material
respects with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by Seller on or prior to the Closing
Date;
(d) The representations and warranties of Seller contained in
this Agreement or in any certificate or document delivered to Purchaser pursuant
hereto shall be true and correct on the date hereof and shall be deemed to have
been made again on the Closing Date and speak as of the Closing and shall then
also be true and correct in all material respects, subject to any changes and
exceptions thereto which are contemplated in this Agreement or consented to in
writing by Purchaser;
(e) The gross profit of the Company for the trailing 12 month
period ended September 30, 1999, shall be not less than $120,230,000, the
gallons of propane sold by the Company during such period shall be not less than
279,348,000, the Company's payroll costs/personnel expenses during such period
shall be not greater than $51,172,000;
(f) Purchaser shall have received a certificate from an
authorized officer of Seller, dated the Closing Date, to the effect that the
conditions set forth in Sections 5.1(c), (d) and (e) have been satisfied by
Seller;
(g) Seller shall have delivered, or caused to be delivered, to
Purchaser at the Closing, those items described in Section 1.7(a); and
26
(h) Since September 30, 1999, no Material Adverse Effect shall
have occurred and be continuing with respect to the Company resulting in a
reduction in value of the Company in excess of $10,000,000. As used in this
Section, "Material Adverse Effect" as applied to any person or entity means any
material adverse change in, or effect on the business, assets, financial
condition or results of operations of such person or entity, taken as a whole,
provided that any such effect resulting from (i) any change in economic
conditions generally or in the industries in which such person or entity
operates, (ii) any resignation, retirement or termination of employees and
effects thereof or (iii) any actions to be taken pursuant to this Agreement
shall not be considered when determining whether a Material Adverse Effect has
occurred.
SECTION 5.2 Conditions to the Obligations of Seller.
The obligations of Seller to sell the Member Interest to Purchaser and
to consummate the other transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing Date (or the waiver in
writing by Seller) of the following conditions:
(a) Any waiting period (and any extension thereof) applicable
to the consummation of the transaction under the HSR Act shall have expired or
been terminated;
(b) No United States or state governmental authority or other
agency or commission or United States or state court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making the acquisition of the Member Interest by Purchaser illegal or
otherwise preventing or prohibiting consummation of the transactions
contemplated by this Agreement;
(c) Purchaser shall have performed and complied in all
material respects with the covenants and agreements contained in this Agreement
which are required to be performed and complied with by Purchaser on or prior to
the Closing Date;
(d) The representations and warranties of Purchaser contained
in this Agreement or in any certificate or document delivered to Seller pursuant
hereto shall be true and correct on the date hereof and shall be deemed to have
been made again on the Closing Date and speak as of the Closing and shall then
also be true and correct in all material respects, subject to any changes and
exceptions thereto which are contemplated in this Agreement or consented to in
writing by Seller;
(e) Seller shall have received a certificate from an
authorized officer of the General Partner with respect to Purchaser, dated the
Closing Date, to the effect that the conditions set forth in Sections 5.2(c) and
(d) have been satisfied by Purchaser;
(f) Seller shall have received the dividends referred to in
Section 1.7(a)(vi) and (viii);
27
(g) Seller shall have received from Ferrell Companies, Inc. a
binding agreement satisfactory to Seller to the effect that Ferrell Companies,
Inc. will, in person or by proxy, vote all Common Units beneficially owned by
it, in favor of the proposals before the holders of Common Units, as described
in Section 4.2(e), sufficient to assure approval of the proposals;
(h) Purchaser shall have delivered, or caused to be
delivered, to Seller at the Closing, those items described in Section 1.7(b);
(i) Seller shall have received from Bank of America, N.A. a
release of all obligations of Seller and its affiliates under the sale-leaseback
transaction referred to in Section 1.7(a)(vi) and the loan transaction referred
to in Section 1.7(a)(viii), including any guarantees from The Williams
Companies, Inc.
(j) Since the date of this agreement, no Purchaser Material
Adverse Effect shall have occurred resulting in a reduction in value of
Purchaser's net assets in excess of $10,000,000.
ARTICLE VI
EMPLOYEES AND EMPLOYEE BENEFITS
SECTION 6.1 Employees.
Immediately following the Closing, Purchaser shall offer to employ (a)
each person who is a full-time or part-time employee of the Company and (b) each
person identified in Schedule 6.1 who is a full or part-time employee in the
Safety and Human Resources Departments of The Williams Companies, Inc. that
spends the majority of his or her time with matters pertaining to the Business
on terms no less favorable in the aggregate (including with respect to position,
duties, responsibilities, salary and location) than those provided on the date
hereof to such employees. In connection with the foregoing offers of employment,
Purchaser agrees that, for purposes of all employee benefit plans (including,
but not limited to, all "employee benefit plans" within the meaning of Section
3(3) of ERISA, and all policies and employee fringe benefit programs, including
vacation policies) of Purchaser in which the employees referred to in clauses
(a) and (b) above may participate following the Closing under which an
employee's eligibility for benefit depends, in whole or in part, on length of
service, credit will be given to such employees for service previously credited
with the Company prior to the Closing (except that with respect to the ESOP
Ferrell Companies, Inc., participation will begin immediately for those
employees with one year of service and vesting will occur from the date of
Closing). Promptly following the date of execution of this Agreement, Purchaser
shall have the right to meet with employees of the Company at such reasonable
times and places as shall be decided in consultation with Seller; provided,
however that Seller shall have the right to be present at all such meetings. In
communicating with employees of the Company, the parties thereto will adhere to
the joint communications plan set forth in Exhibit C.
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SECTION 6.2 Severance Obligations.
All costs of severance described below shall be paid for by Purchaser,
and Purchaser shall indemnify, defend and hold harmless Seller from and against,
and shall promptly reimburse Seller for, all Seller Damages (as defined below)
relating thereto: (a) with respect to the employees employed by the Company (i)
not hired by Purchaser at Closing; provided, however, that Purchaser shall not
be liable for severance to any employee of the Company that remains an employee
of The Williams Companies, Inc. immediately after the Closing Date (except each
Staff Employee, as defined in Schedule 6.3, to whom Purchaser shall pay
severance, if such employee does not have a position with The Williams
Companies, Inc. or Purchaser at the time the Transition Services Agreement
terminates with respect to such employee), (ii) not offered employment within a
30 mile radius of location of employment immediately prior to the Closing Date,
(iii) in which Purchaser's offer of employment is on terms less favorable in the
aggregate (including with respect to position, duties, responsibilities, salary
and location) than those provided on the date hereof to such employees, or (iv)
hired by Purchaser at Closing and terminated without cause within one year
(collectively, the employees in clauses (i) through (iv) are referred to herein
as the "Employees"), which severance costs are described in Schedule 6.2 or (b)
arising by operation of law. To the extent that Purchaser pays severance to an
employee as contemplated by this section, and such employee is, within three
months, rehired by The Williams Companies, Inc. or an affiliate thereof, Seller
shall reimburse Purchaser for the severance costs previously paid to such
employee.
SECTION 6.3 Retention Bonus Program.
Seller has adopted the retention bonus program identified on Schedule
6.3. If the transactions contemplated by this Agreement are consummated, all
costs associated with such retention bonus program shall be borne by Purchaser.
If the transactions contemplated by this Agreement are not consummated, such
costs shall be borne by Seller.
SECTION 6.4 Employee Benefit Plans.
Except as otherwise provided in Sections 6.2 and 6.3, Purchaser shall
have no other liabilities or obligations, contingent or otherwise, under any
employee benefit plan (as defined in Section 3(3) of ERISA), any employment
agreements (or consulting agreements with natural persons) or any employee
compensation plan, including without limitation, any pension, retirement, profit
sharing, stock option, stock purchase, bonus, health, life, disability or fringe
benefit plan sponsored or maintained by Seller or any other entity in the same
"control group" of organizations (as defined in Sections 414(b), (e), (m) or (o)
of the Code) of which Seller is a member.
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ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS
SECTION 7.1 Survival of Representations.
Except as otherwise provided below, all representations and warranties
made in this Agreement shall survive the Closing hereunder until one year after
the Closing Date. Notwithstanding the foregoing, the representations and
warranties contained in Sections 2.8 and 2.12 shall survive until 60 days after
the expiration of the applicable statute of limitations and the representations
and warranties contained in Section 2.2 and 2.4 shall survive indefinitely. The
applicable period of survival is sometimes referred to herein as the "Indemnity
Period." Notwithstanding the foregoing, no representation or warranty shall
survive any termination of this Agreement. The parties intend to shorten the
statute of limitations and agree that no claims or causes of action may be
brought against Seller, Purchaser or any of their (or in the case of Purchaser,
any of its general partner's) directors, officers, employees, affiliates,
controlling persons, agents or representatives based upon, directly or
indirectly, any of the representations and warranties contained in this
Agreement after the Indemnity Period or any termination of this Agreement. This
Section 7.1 shall not limit any covenant or agreement of the parties which
contemplates performance after the Closing.
SECTION 7.2 Seller's Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein, from
and after the Closing, Seller shall indemnify and hold harmless Purchaser and
the directors, officers and employees of its general partner, affiliates,
controlling persons, agents and representatives and their successors and assigns
(collectively, "Purchaser Indemnitees") from and against all liability, demands,
claims actions or causes of action, assessments, losses, damages, costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) (collectively, "Purchaser Damages") asserted against or incurred by
any Purchaser Indemnitee as a result of or arising out of (i) those matters set
forth in Schedule 2.8 and any accident, explosion or other similar catastrophic
event that occurs prior to Closing, (ii) a breach of any representation or
warranty contained in Article II of this Agreement, (iii) a breach of any
agreement or covenant of Seller set forth in this Agreement, or (iv) any
liability for employment matters, including those arising from employee benefit
plans, existing as of the Closing. Purchaser agrees that, except as provided in
Section 7.5, the indemnification provided in this Section 7.2 is the exclusive
remedy for money damages for a breach by Seller of any representation or
warranty contained in Article II, any covenant contained in Article IV and with
respect to any of the transactions contemplated in this Agreement.
(b) Seller's obligations to indemnify Purchaser Indemnitees
pursuant to clause (ii) of Section 7.2(a) hereof with respect to a breach of a
representation or warranty contained in this Agreement are subject to the
following limitations:
30
(i) Except with respect to a breach of the representations and
warranties set forth in Sections 2.2, 2.4, 2.8, 2.12. 2.20 and any claim based
on fraud, no indemnification shall be made by Seller with respect to any claim
unless (A) the amount of such claim exceeds $10,000 and (B) the aggregate amount
of Purchaser Damages under all claims exceeds $1,000,000 and, in such event,
indemnification shall be made by Seller only to the extent the aggregate amount
of Purchaser Damages exceed $1,000,000, it being understood that such amount
shall be a "deductible" for Seller;
(ii)In no event shall Seller's aggregate obligation to
indemnify Purchaser Indemnitees exceed 10% of the Purchase Price;
(iii) The amount of any Purchaser Damages shall be reduced by
(A) any tax credit, relief, set-off, deduction, right to repayment or other tax
benefit which shall become available to and realizable by a Purchaser Indemnitee
with respect thereto, and (B) any amount received by a Purchaser Indemnitee with
respect thereto under any insurance coverage or from any other party alleged to
be responsible therefor. Purchaser Indemnitees shall use commercially reasonable
efforts to collect any amounts available under such insurance coverage and from
such other party alleged to have responsibility. If a Purchaser Indemnitee
receives an amount under insurance coverage or from such other party with
respect to Purchaser Damages at any time subsequent to any indemnification
provided by Seller pursuant to this Section 7.2, then such Purchaser Indemnitee
shall promptly reimburse Seller for any payment made or expense incurred by
Seller in connection with providing such indemnification up to such amount
received by such Purchaser Indemnitee, but net of any expenses incurred by such
Purchaser Indemnitee in collecting such amount;
(iv)Seller shall be obligated to indemnify Purchaser
Indemnitees only for those claims giving rise to Purchaser Damages as to which
Purchaser Indemnitees have given Seller written notice prior to the end of the
Indemnity Period in the event that the Indemnity Period applies to such
Purchaser Damages. Any written notice delivered by a Purchaser Indemnitee to
Seller with respect to Purchaser Damages shall set forth with as much
specificity as is reasonably practicable the basis of the claim for Purchaser
Damages and, to the extent reasonably practicable, a reasonable estimate of the
amount thereof;
(v) In no event shall Seller be liable for special, indirect,
incidental or consequential losses or damages of any kind whatsoever, even if
Seller has been advised of the possibility of such losses or damages; and
(vi)In connection with Seller's obligation to indemnify
Purchaser Indemnitees, Purchaser agrees to make available to Seller, at
reasonable times and places, such employees of the Company and such records of
the Company, in each case as of the time immediately prior to the Closing, to
assist Seller in the preparation and investigation of such obligation.
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SECTION 7.3 Purchaser's Agreement to Indemnify.
(a)Subject to the terms and conditions set forth herein, from
and after the Closing, Purchaser shall indemnify and hold harmless Seller and
its directors, officers, employees, affiliates, controlling persons, agents and
representatives and their successors and assigns (collectively, "Seller
Indemnitees") from and against all liability, demands, claims, actions or causes
of action, assessments, losses, damages, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) (collectively, "Seller
Damages") asserted against or incurred by any Seller Indemnitee as a result of
or arising out of (i) liabilities, obligations or claims arising out of the
conduct or operations of the Business (whether relating to periods prior to or
after the Closing Date) to the extent such liabilities, obligations or claims
are not assertable or properly asserted by Purchaser under Section 7.2 during
the applicable Indemnity Period, (ii) a breach of any representation or warranty
contained in Article III of this Agreement, (iii) any severance or retention
costs referred to in Section 6.2 or 6.3, or (iv) a breach of any agreement or
covenant of Purchaser in this Agreement. Seller agrees that the indemnification
provided in this Section 7.3 is the exclusive remedy for money damages for a
breach by Purchaser of any representation or warranty contained in Article III,
any covenant contained in Article IV and with respect to any of the transactions
contemplated in this Agreement.
(b) Purchaser's obligations to indemnify Seller Indemnitees
pursuant to clause (ii) of Section 7.3(a) hereof with respect to a breach of a
representation or warranty contained in this Agreement are subject to the
following limitations:
(i) Except with respect to a breach of the representation and
warranty set forth in Section 3.9, no indemnification shall be made by Purchaser
with respect to any claim unless (A) the amount of such claim exceeds $10,000
and (B) the aggregate amount of Seller Damages under all claims exceeds
$1,000,000 and, in such event, indemnification shall be made by Purchaser only
to the extent the aggregate amount of Seller Damages exceed $1,000,000, it being
understood that such amount shall be a "deductible" for Purchaser;
(ii)In no event shall Purchaser's aggregate obligation to
indemnify Seller Indemnitees exceed 10% of the Purchase Price;
(iii) The amount of any Seller Damages shall be reduced by (A)
any tax credit, relief, set-off, deduction, right to repayment or other tax
benefit which shall become available to and realizable by Seller Indemnitee with
respect thereto, and (B) any amount received by a Seller Indemnitee with respect
thereto under any insurance coverage or from any other party alleged to be
responsible therefor. Seller Indemnitees shall use commercially reasonable
efforts to collect any amounts available under such insurance coverage and from
such other party alleged to have responsibility. If a Seller Indemnitee receives
an amount under insurance coverage or from such other party with respect to
Seller Damages at any time subsequent to any indemnification provided by
Purchaser pursuant to this Section 7.3, then such Seller Indemnitee shall
promptly reimburse Purchaser for any payment made or
32
expense incurred by Purchaser in connection with providing such
indemnification up to such amount received by Seller Indemnitee, but net of any
expenses incurred by such Seller Indemnitee in collecting such amount;
(iv)Purchaser shall be obligated to indemnify Seller
Indemnitees only for those claims giving rise to Seller Damages as to which
Seller Indemnitees have given Purchaser written notice prior to the end of the
Indemnity Period in the event that the Indemnity Period applies to such Seller
Damages. Any written notice delivered by a Seller Indemnitee to Purchaser with
respect to Seller Damages shall set forth with as much specificity as is
reasonably practicable the basis of the claim for Seller Damages and, to the
extent reasonably practicable, a reasonable estimate of the amount thereof; and
(v) In no event shall Purchaser be liable for special,
indirect, incidental or consequential losses or damages of any kind whatsoever,
even if Purchaser has been advised of the possibility of such losses or damages.
SECTION 7.4 Third Party Indemnification.
The obligations of any indemnifying party to indemnify any indemnified
party under this Article VII with respect to Purchaser Damages or Seller
Damages, as the case may be, resulting from the assertion of liability by third
parties (a "Claim"), will be subject to the following terms and conditions:
(a) Any party against whom any Claim is asserted will give the
party required to provide indemnity hereunder written notice of any such Claim
promptly after learning of such Claim, and the indemnifying party may at its
option undertake the defense thereof by representatives of its own choosing.
Failure to give prompt notice of a Claim hereunder shall not affect the
indemnifying party's obligations under this Section 7.4, except to the extent
that the indemnifying party is materially prejudiced by such failure to give
prompt notice. If the indemnifying party, within 30 days after notice of any
such Claim, fails to assume the defense of such Claim, the indemnified party
against whom such Claim has been made will (upon further notice to the
indemnifying party) have the right to undertake the defense, compromise or
settlement of such Claim on behalf of and for the account and risk, and at the
expense, of the indemnifying party, subject to the right of the indemnifying
party to assume the defense of such Claim at any time prior to settlement,
compromise or final determination thereof.
(b) Anything in this Section 7.4 to the contrary
notwithstanding, the indemnifying party shall not enter into any settlement or
compromise of any action, suit or proceeding or consent to the entry of any
judgment for other than monetary damages to be borne by the indemnifying party
without the prior written consent of the indemnified party, which consent shall
not be unreasonably withheld.
33
SECTION 7.5 Environmental Indemnity.
(a) Seller will conduct (in accordance with Section 7.6) and
pay for Cleanup (including without limitation, fines, penalties and
administrative expenses imposed in connection with the Cleanup) of all Hazardous
Substances present prior to Closing on, at or under the real property listed on
Schedule 7.5 or portion thereof or personal property located thereon, to the
extent required on Schedule 7.5 and will indemnify, defend and hold harmless
Purchaser Indemnitees from all liabilities arising out of a violation of any
Environmental Law and within Seller's knowledge (i) relating to the ownership,
operation or condition of such property prior to Closing and (ii) relating to
the ownership, operation or condition of other property now or previously owned
or operated by the Company, whether or not listed on Schedule 7.5 or the failure
of Seller to conduct such Cleanup. As used herein, "Cleanup" means
investigation, treatment, removal, containment, monitoring or other remediation
or response actions taken to (i) reduce to acceptable levels risks from
concentrations of Hazardous Substances present or released on, at or under a
property, or which are migrating from a property or (ii) to prevent or mitigate
a release of Hazardous Substances at a property.
(b) With respect to claims to defend, indemnify and hold
harmless Purchaser Indemnitees that are described by Section 7.5(a):
(i) Seller shall only be required to Cleanup Hazardous
Substances and to defend, indemnify and hold harmless Purchaser Indemnitees to
the extent that: (A) investigation, containment or remediation of the Hazardous
Substances is required pursuant to an applicable Environmental Law that is in
effect as of and is enforceable as of the Closing or required by any
governmental authority; (B) the Remediation Standards (as defined below) that
must be met in order to satisfy the requirements of the applicable Environmental
Law (1) are no more stringent than the Remediation Standards that were in effect
as of and were enforceable as of the Closing Date under the applicable
Environmental Law that is the source of the obligation to conduct a remediation,
or, where no such Remediation Standards had been promulgated and were
enforceable as of the Closing Date, Remediation Standards that were applied,
within one year prior to the Closing Date, on a case-by-case basis, to
properties that are most similar to the property that is subject to a
remediation and (2) are those Remediation Standards that would be the least
stringent Remediation Standards, taking into account that the normal operating
condition at the affected facility shall be maintained at all times that would
be applicable given the use of the property as of the day before the Closing
Date or as required by any governmental authority; and (C) such investigation,
containment and/or remediation is conducted using the most cost effective
methods, taking into account that the normal operating condition at the affected
facility shall be maintained at all times. To the extent that Purchaser Damages
incurred in connection with an investigation or remediation are in excess of
Purchaser Damages that would be incurred for an investigation or remediation
meeting the conditions set forth in this subsection, Seller shall have no
obligation to indemnify any Purchaser Indemnitees for such excess Purchaser
Damages.
34
(ii)If the costs of an investigation or remediation at any of
the owned real property or leased real property of the Business that is subject
to an indemnity by Seller hereunder are increased due to an act or omission
(after the Closing) by a person other than Seller or an agent, representative or
contractor of Seller, Seller shall not be responsible for any such increase in
costs incurred. Seller shall not be responsible for any increased costs or
increased Purchaser Damages under this subsection to the extent they arise by
reason of (A) the voluntary closure of operations at any owned real property or
leased real property of the Business or (B) a material change in use of any of
said property from the use of said property as of the Closing.
(c) Notwithstanding anything to the contrary herein, with
respect to claims arising pursuant to Section 7.5 on those locations set forth
in Schedule 7.5, Seller shall not be obligated to indemnify Purchaser
Indemnitees for the costs and expenses associated with Purchaser Indemnitees'
overseeing of Seller's performance of its defense and indemnity obligations
other than costs of enforcing this indemnity, including, but not limited to, the
costs and expenses of overseeing of Seller's legal counsel, consultants, or
employees, and Seller shall not be obligated to indemnify Purchaser Indemnitees
for any costs or expenses of Purchaser Indemnitees for management and employee
time costs.
(d) Claims brought pursuant to this Section 7.5 on those
locations set forth in Schedule 7.5 shall be subject to the procedures for
indemnification set forth in Section 7.4 if such claims are third party claims.
Claims that involve or also involve the investigation and/or remediation of
Hazardous Substances at the owned real property or leased real property of the
Business shall also be subject to the procedures of Section 7.6.
(e) For purposes of this Agreement, (i) the term
"Environmental Claims" means any actions, causes of action, claims,
investigations, demands, information requests, or notices by any Person alleging
or suggesting liability under or noncompliance with any Environmental Law; (ii)
the term "Environmental Laws" means all applicable federal, state and local laws
and regulations relating to protection of human health or the environment; (iii)
the term "Hazardous Substances" means any waste or other substance that is
listed, defined, designated or classified as, or otherwise determined to be,
hazardous, radioactive or toxic, or a pollutant or contaminant under or pursuant
to any Environmental Law, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefor, and asbestos and asbestos
containing materials; (iv) the term "Remediation Standard" means a numerical
standard (whether resulting from an enacted statute, promulgated regulation,
guidance or policy document issued by a regulatory agency, or developed on a
case-by-case basis through a risk assessment or other methodology authorized
pursuant to an applicable Environmental Law and acceptable to the governmental
authority) that defines the concentrations of Hazardous Substances that may be
permitted to remain in any environmental media after an investigation,
remediation or containment of a release of Hazardous Substances.
35
SECTION 7.6 Procedures for Remedial Actions on Owned Real Property or Leased
Real Property.
(a) Seller shall have the right to control the management of
an investigation or remediation of Hazardous Substances at any owned real
property or leased real property of the Business that is subject to
indemnification pursuant to this Agreement. Seller must notify Purchaser, within
thirty (30) days of receipt of notice of Purchaser's claim for indemnification
for such matter, that (1) it intends to undertake said responsibility or (2)
more information is needed from Purchaser before Seller can reasonably determine
that Purchaser's claim is subject to indemnification pursuant to this Agreement.
Purchaser shall promptly respond to such requests for information (to the extent
such information is reasonably available to Purchaser) and, within thirty (30)
days of receipt of such information, Seller shall notify Purchaser as to whether
it shall undertake the investigation and remediation. Prior to a timely
determination by Seller that it will undertake investigation and remediation
pursuant to this Section, Purchaser shall take only those actions necessary to
comply with applicable Environmental Laws, the requirements of governmental
authorities or address conditions that pose an immediate and acute environmental
or health risk.
(b) In undertaking an investigation and remediation pursuant
to this Section, Seller shall retain a qualified independent environmental
consultant, which consultant shall be subject to Purchaser's approval (such
approval not to be unreasonably withheld). Seller shall undertake such
investigation and remediation in a prompt and expeditious fashion in accordance
with applicable Environmental Laws and shall not cause, through its own
inaction, any undue delay in obtaining written notice from the appropriate
regulatory body that no further investigation or remediation is necessary with
respect to the matter that is the subject of the indemnification claim, or, if
no regulatory body is involved in such matter, a good faith determination from
its environmental consultant reasonably acceptable to Purchaser that no further
investigation or remediation is required to bring the property that is the
subject of the remedial action into conformance with applicable Environmental
Law. Seller shall comply with all applicable laws, including all applicable
Environmental Laws, with respect to its performance pursuant to this Section.
Seller shall promptly provide copies to Purchaser of all notices,
correspondence, draft reports, submissions, work plans, and final reports and
shall give Purchaser a reasonable period of time (at Purchaser's own expense) to
approve of any submissions Seller intends to deliver or submit to the
appropriate regulatory body prior to said submission, which approval shall not
be unreasonably withheld; provided, however, that so long as Purchaser has had a
reasonable time to review and approve a submission, upon the advice of counsel
that such submission is necessary, and upon reasonable notice to Purchaser,
Seller may make such submission to the appropriate regulatory body without the
prior approval of Purchaser. Purchaser may, at its own expense, hire its own
consultants, attorneys or other professionals to monitor the investigation or
remediation, including any field work undertaken by Seller, and Seller shall
provide Purchaser with the results of all such field work. Notwithstanding the
above, Purchaser shall not take any actions that shall unreasonably interfere
with Seller's performance of the investigation, remediation and/or containment.
Seller shall undertake any such work required herein in a manner designed to
minimize any disruption, to the greatest extent possible, with the conduct of
operations at the property. Purchaser shall allow Seller
36
reasonable access to conduct any of the work contemplated herein and shall
fully cooperate with Seller in the performance of the investigation, remediation
or containment, including, but not limited to, providing Seller with reasonable
access to employees and documents as necessary to conduct the cleanup.
(c) If Seller declines to undertake or unreasonably delays the
performance of an investigation and remediation hereunder, Purchaser shall be
entitled to control the investigation and remediation at Seller's sole expense.
Purchaser shall promptly provide copies to Seller of all notices,
correspondence, draft reports, submissions, work plans, and final reports and
shall give Seller a reasonable opportunity (at Seller's own expense) to comment
on any submissions Purchaser intends to deliver or submit to the appropriate
regulatory body prior to said submission. Seller may, at its own expense, hire
its own consultants, attorneys or other professionals to monitor the
investigation and remediation, including any field work undertaken by Purchaser,
and Purchaser shall provide Seller with the results of all such field work.
Notwithstanding the above, Seller shall not take any actions that shall
unreasonably interfere with Purchaser's performance of the investigation and
remediation. Seller's decision to allow Purchaser to undertake investigation and
remediation hereunder shall not limit or affect Seller's obligation to indemnify
Purchaser for said investigation and remediation as otherwise provided in this
Agreement.
SECTION 7.7 Exclusive Remedy for Environmental Matters.
Notwithstanding anything to the contrary in this Agreement, Purchaser
Indemnitees hereby agree that their sole and exclusive remedy against Seller,
with respect to any and all matters arising under or related to Environmental
Law or Hazardous Substances, in connection with Seller, the owned real property
or the leased real property of the Business, shall be the indemnity set forth in
Section 7.5. Except with respect to the remedy referred to in the preceding
sentence, Purchaser Indemnitees hereby waive, to the fullest extent permitted
under applicable law, and forever release Seller, the owned real property or the
leased real property of the Business, from any and all claims or Purchaser
Damages arising under Environmental Laws or relating to Hazardous Substances or
the environment.
ARTICLE VIII
TERMINATION
SECTION 8.1 Events of Termination
Notwithstanding any other provision hereof, this Agreement
may be terminated as set forth below.
(a) Consent. By Purchaser and Seller upon their mutual written
agreement.
37
(b) Orders. By either Purchaser or Seller in writing if there
shall be any order, writ, injunction or decree of any court or governmental or
regulatory agency binding on either Purchaser or Seller which prohibits or
restrains any of such parties from consummating the transactions contemplated
hereby, provided that all of such parties shall have used their reasonable best
efforts to have any such order, writ, injunction or decree lifted and the same
shall not have been lifted within 30 days after entry by any such court or
governmental or regulatory agency.
(c) Outside Date. By either Purchaser or Seller in writing if
the Closing has not occurred by January 31, 2000; provided, that no party whose
breach hereof or failure to negotiate in good faith has been the cause of the
failure shall have the right to terminate this Agreement under this Section
8.1(c).
SECTION 8.2 Effect of Termination.
(a) No Liability. If this Agreement is terminated as permitted
under Section 8.1, no party hereto (or its officers or directors) will have any
liability or further obligation to any other party to this Agreement, except for
obligations pursuant to Section 4.1 hereof and any liability resulting from the
breach hereof or as set forth in this Section 8.2.
(b) Termination Fees. In view of the expenses and foregone
opportunities associated with the negotiation and execution of this Agreement,
(i) if (A) the conditions to the obligations of Purchaser to consummate the
transactions contemplated by this Agreement, as set forth in Section 5.1, have
been satisfied, but Purchaser nonetheless fails to so consummate the
transactions contemplated by this Agreement for any reason other than a refusal
of Seller to consummate, or (B) if the condition to Seller's obligation set
forth in Section 5.2(g) is not satisfied by the earlier to occur of January 31,
2000 or Closing, Purchaser or Subsidiary OLP shall pay promptly (and in no event
later than three days after this Agreement is terminated) to Seller a fee of
$20,000,000 in cash and (ii) if the conditions to the obligations of Seller to
consummate the transactions contemplated by this Agreement, as set forth in
Section 5.2, have been satisfied, but Seller nonetheless fails to so consummate
the transactions contemplated by this Agreement for any reason other than a
refusal of Purchaser to consummate, Seller shall pay promptly (and in no event
later than three days after this Agreement is terminated) to Purchaser a fee of
$20,000,000 in cash. To secure (and in lieu of) the payment contemplated by
clause (i) hereof, Subsidiary OLP has delivered to Seller, as of the date
hereof, a contingent pay agreement in the principal amount of $20,000,000,
together with an agreement to allow Seller to assign such contingent pay
agreement to Bank of America, N.A. Seller agrees that it may only demand payment
under such contingent pay agreement (or assign such contingent pay agreement to
Bank of America, N.A.) under the circumstances which would entitle Seller to the
payment contemplated by clause (i). If Seller is not entitled to the payment
pursuant to clause (i), Seller shall, at the Closing or promptly following
termination of this Agreement, return the contingent pay agreement and the
agreement to assign to Subsidiary OLP. If the payment pursuant to (i) or (ii)
above is not paid within the time allowed, such payment shall bear simple
interest at an annual rate of 7.5% accruing from the date of termination to the
date of payment.
38
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Notices.
Any notice, request, instruction, correspondence or other document to
be given hereunder by either party to the other (herein collectively called
"Notice") shall be in writing and delivered in person or by courier service
requiring acknowledgment of receipt of delivery or mailed by certified mail,
postage prepaid and return receipt requested, or by telecopier, as follows:
If to Seller, addressed to:
Williams National Gas Liquids, Inc.
One Williams Center, Suite 3000
Tulsa, Oklahoma 74172
Attention: Don Wellendorf
Telecopy: (918) 573-3864
with a copy to:
The Williams Companies, Inc.
One Williams Center, Suite 4100
Tulsa, Oklahoma 74172
Attention: Lonny Townsend
Telecopy: (800) 479-6690
with a copy to:
Andrews & Kurth L.L.P.
805 Third Avenue
New York, NY 10022
Attention: Michael Swidler
Telecopy: (212) 850-2929
If to Purchaser or Subsidiary OLP, addressed to:
Ferrellgas Partners, L.P.
Ferrellgas, Inc.
One Liberty Plaza
Liberty, MO 64068
Attention: James M. Hake
Telecopy: (816) 792-7985
39
with a copy to:
Bryan Cave L.L.P.
3500 One Kansas City Place
1200 Main Street
Kansas City, MO 64105
Attention: Morris K. Withers
Telecopy: (816) 374-3300
Notice given by personal delivery, courier service or mail shall be effective
upon actual receipt. Notice given by telecopier shall be confirmed by
appropriate answer back and shall be effective upon actual receipt if received
during the recipient's normal business hours, or at the beginning of the
recipient's next business day after receipt if not received during the
recipient's normal business hours. All Notices by telecopier shall be confirmed
promptly after transmission in writing by certified mail or personal delivery.
Any party may change any address to which Notice is to be given to it by giving
Notice as provided above of such change of address.
SECTION 9.2 Governing Law.
The provisions of this Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York and the federal
laws of the United States. Each party hereto hereby irrevocably and
unconditionally (a) consents and submits to the exclusive jurisdiction of the
courts of the State of New York and of the United States of America located in
the State of New York (each a "New York Court") for any actions, suits or
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby, (b) agrees that any such action, suit or proceedings may be
brought or maintained only in a New York Court and in no other forum, (c) agrees
that service of any process, summons, notice or document by U.S. registered or
certified mail to such party at the address specified in Section 9.1 shall be
effective service of process in any such action, suit or proceeding in any New
York Court, and (d) irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of or related to
this Agreement or the transactions contemplated hereby in any New York Court
located in New York, New York, and further irrevocably and unconditionally
waives and agrees not to plead a claim in any such court that any such action,
suit or proceeding has been brought in an inconvenient forum.
SECTION 9.3 Entire Agreement; Amendments and Waivers.
This Agreement constitutes the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter hereof
except as set forth specifically herein or contemplated hereby. All schedules,
exhibits, certificates and other
40
instruments or documents referred to herein are
hereby specifically made a part of this Agreement. Any reference in this
Agreement to a Schedule or Exhibit shall be deemed to be a reference to a
Schedule or Exhibit to this Agreement unless the context expressly indicates
otherwise. Any item disclosed in a Schedule hereto in response to one Section of
this Agreement shall be deemed disclosed in response to any other Section
hereof. Seller shall have the right to revise any of the Schedules for any
inaccuracies or subsequent events; provided, however, that this Section shall
neither add to nor detract from Purchasers' rights pursuant to Articles VII and
VIII hereof. No supplement, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. The failure
of a party to exercise any right or remedy shall not be deemed or constitute a
waiver of such right or remedy in the future. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (regardless of whether similar), nor shall any such waiver
constitute a continuing waiver unless otherwise expressly provided.
SECTION 9.4 Binding Effect and Assignment.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective permitted successors and assigns; but
neither this Agreement nor any of the rights, benefits or obligations hereunder
shall be assigned, by operation of law or otherwise, by any party hereto without
the prior written consent of either Purchaser or Seller, as applicable, other
than as set forth herein. Nothing in this Agreement, express or implied, is
intended to confer upon any person or entity other than the parties hereto and
their respective permitted successors and assigns, any rights, benefits or
obligations hereunder.
SECTION 9.5 Severability.
If any provision of the Agreement is rendered or declared illegal or
unenforceable by reason of any existing or subsequently enacted legislation or
by decree of a court of last resort, the parties hereto shall promptly meet and
negotiate substitute provisions for those rendered or declared illegal or
unenforceable, but all of the remaining provisions of this Agreement shall
remain in full force and effect.
SECTION 9.6 Parties in Interest.
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
41
SECTION 9.7 Headings; Survival of Covenants.
The headings of the sections herein are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement. To the extent covenants hereunder are intended
to be performed following the Closing, such covenants shall survive Closing.
SECTION 9.8 Execution.
This Agreement may be executed in multiple counterparts each of which
shall be deemed an original and all of which shall constitute one instrument.
42
EXECUTED as of the date first set forth above.
WILLIAMS NATURAL GAS LIQUIDS, INC.
By: /s/ Don R. Wellendorf
--------------------------
Name: Don R. Wellendorf
Title:Attorney In Fact
FERRELLGAS PARTNERS, L.P.
By: Ferrellgas Inc., its
general partner
By:/s/James M. Hake
---------------------------
Name: James M. Hake
Title: Sr. V.P.Acquisitions
FERRELLGAS, L.P.
By: Ferrellgas, Inc., its
general partner
By:/s/ James M. Hake
-----------------------------
Name: James M. Hake
Title: Sr. V.P. Acquisitions
43
EXHIBITS
A. Form of Senior Unit
B. Form of Transition Service Agreement
C. Communication Plan
EXHIBIT A
Senior Units
Summary Term Sheet of Indicative Terms
Senior Unit Description
Issuer: Ferrellgas Partners, L.P.
Issue: Senior Convertible Units of the Issuer
("Senior Units")
Issue Size: $175 million (plus Senior Units paid in kind)
Face Value: $40.00 per Senior Unit
Voting Rights: The Senior Units generally have no voting
rights except, without the affirmative
vote of the holders of a majority of the
outstanding Senior Units, the Issuer may not:
* amend the partnership agreement in a
manner that adversely affects the
rights of holders of Senior Units; or
* authorize or issue any class of senior
or parity equity securities (other than
Senior Units paid in kind)
Distributions
Unit Distributions: $1.00 per Senior Unit per quarter ($4.00 per
Senior Unit, per annum), payable
on the same scheduled distribution dates
as the Issuer's Common Units,
commencing with the distribution date for
the second fiscal quarter in 2000 of
the Issuer, scheduled to occur on or about
March 15, 2000. Distributions will
accumulate from the issue date. The first
distribution will cover the period
from the issue date to January 31, 2000.
Additional Distributions: $0.50 per Senior Unit per quarter in the
event of :
* default in making of distributions;
* default in payment of Call Price after
the Issuer's exercise of its Call Right;
or
* failure to obtain unitholder approval of
the conversion option within 120 days of
the closing; and
$0.25 per Senior Unit per quarter in the
event of:
* default in timely effectiveness, or
maintenance of effectiveness, of shelf
registration statement;
payable in the currency in which
distributions are payable at the time of
such default, in each case accruing until
the default has been cured; provided,
however, that a default arising out of the
failure to obtain unitholder approval of the
conversion option may not be cured following
the 180th day after the closing without the
consent of the holders of a majority of the
outstanding Senior Units.
Indicative Yield: 10.0% (annualized)
Distribution Frequency: Quarterly
Distribution and
Liquidation Preferences: Senior Units are senior in
distribution preference and liquidation
rights to the Common Units. Upon liquidation
of the Issuer, Senior Units will be entitled
to receive the Face Value plus accumulated
and undistributed distributions in cash
(even if liquidation occurs during the
pay-in-kind period).
In-Kind Distributions: Cumulative quarterly distributions on
Senior Units are payable in kind until
payable in cash as described in "Cash
Distributions" below. The distribution
payment payable in kind ("Cumulative
In-Kind Distribution") is determined and
payable by applying the Indicative
Yield on a quarterly basis to the sum of
the Face Value of the Senior Units
(including the prior quarter(s) Cumulative
In-Kind Distributions). The Issuer, at its
option, may make distributions of
fractional Senior Units in cash.
Cash Distributions: Senior Units will be entitled
to receive cash distributions in accordance
with "Unit Distributions" above, beginning
to cumulate on the earlier of (a) February
1, 2002 or (b) the occurrence of a Material
Event. Distributions accumulated to but not
including such date will be payable in
Senior Units.
Call Features
Call Provision: The Senior Units are callable
("Call Right"), in whole or in part, by the
Issuer at any time, or from time to time, by
giving 3 business days advance notice. There
is no call right with respect to Common
Units issued upon conversion of Senior
Units.
Call Price: The Call Price is equal to the Face
Value of the Senior Units called plus an
amount in cash equal to a prorated
distribution for the period from the
distribution payment date immediately prior
to the redemption date to the redemption
date.
Effect of Call Right: On the redemption date, the Issuer will pay
in cash to the holder(s) an amount
equal to the Call Price.
Convertible Option Features
Convertible Option: If, and only if, the Issuer's unitholders
have approved the conversion of the
Senior Units into Common Units, on or
after February 1, 2002 (upon 90 days
advance notice (which may be given
prior to February 1, 2002)) or the
occurrence of a Material Event (upon advance
notice as described in the next
sentence), the Senior Units may be
converted into Common Units of the Issuer.
In the event a Material Event has occurred,
the holder(s) of the Senior Units
may, at any time, convert their Senior
Units into Common Units by giving the
Issuer 30 days advance notice of their
election to exercise their conversion
option. The holder(s) of the Senior
Units may revoke their election to
exercise their conversion option at any
time during the pendency of a Material
Event by giving notice to the Company.
If they revoke such election after the
Issuer has cured the Material Event and a
Material Event subsequently occurs,
they may convert their Senior Units into
Common Units by giving the Issuer 10
days advance notice.
Each Senior Unit will be convertible into a
number of Common Units derived by dividing
(a) 125% of the Face Value of the Senior
Units by (b) the average daily closing price
of Common Units for the preceding 20 trading
days. The Common Units received upon
conversion will have, as a substantive
matter, like intrinsic economic and federal
income tax characteristics, in all material
respects, to the intrinsic economic and
federal income tax characteristics of a
Common Unit then outstanding in the hands of
a subsequent owner.
3
Effect of Conversion: Upon conversion, the Senior Units will cease
to exist.
Expiration: Except as described above under "Conversion
Option," the conversion rights of the
holder(s) will expire upon the giving to the
Issuer of notice by the holder(s) of their
election to exercise their Senior Unit
registration rights.
Registration Rights
Common Unit and Senior
Unit Registration Rights
Upon a Material Event: Upon the occurrence of a Material Event,
the Issuer agrees to file a universal
shelf registration statement to register
all Senior Units and all Common Units
issuable upon conversion of the Senior
Units, and to cause the shelf
registration statement to become effective
no later than 90 days following the
occurrence of a Material Event remain
effective until (a) in the case of the
Senior Units, until the sale of all such
Senior Units and (b) in the case of
the Common Units, the earlier to occur of
(i) the sale of all such Common
Units or (ii) all such Common Units
becoming able to be sold without
restriction under Rule 144 of the
Securities Act of 1933; provided, however,
that the shelf registration statement
shall in any case remain effective so
long as at least $10 million of Common Units
(based on the average closing
price on the New York Stock Exchange for the
5 previous trading days), as the
case may be, have not been sold. The
Issuer will support the marketing
process of such Senior Units or Common
Units, as the case may be, under the
shelf registration statement. The Issuer
agrees to pay or reimburse all
reasonable and related costs of such
registration. Other terms of such
registration will be set forth in the
registration rights agreement referred
to in the Purchase Agreement.
Common Unit
Registration Rights
in the Absence of a
Material Event: Unless the first paragraph under
"Registration Rights" is applicable or the
Issuer is given prior notice from the
holder(s) of their election to exercise
their Senior Unit registration rights,
the Issuer agrees to file a shelf
registration statement to register all
Common Units issuable upon the exercise
of the Conversion Option and to cause the
shelf registration statement to
become effective no later than the date of
issuance of such Common Units and
remain effective until the earlier to occur
of (a) the sale of all such Common
Units or (b) all
4
such Common Units becoming able to be
sold without
restriction under Rule 144 of the
Securities Act of 1933; provided, however,
that the shelf registration statement shall
in any case remain effective so
long as at least $10 million of Common
Units (based on the average closing
price on the New York Stock Exchange for the
5 previous trading days) have not
been sold. The Issuer will support the
marketing process of such Common Units
under the shelf registration statement.
The Issuer agrees to pay or reimburse
all reasonable and related costs of such
registration. Other terms of such
registration will be set forth in the
registration rights agreement referred
to in the Purchase Agreement.
Senior Unit
Registration Rights
In the Absence of a
Material Event: In the event the Issuer fails to obtain
unitholder approval for the conversion
option within 120 days of the closing and no
Material Event has occurred, the
Issuer agrees to file a shelf registration
statement to register all Senior
Units and, unless such approval has been
obtained prior thereto, to cause the
shelf registration statement to become
effective no later than the 180th day
after the closing.
Unless the first paragraph under
"Registration Rights" is applicable, in the
event that, at any time on or after 90 days
prior to February 1, 2002, the holder(s)
have given the Issuer notice of their
election to exercise their Senior Units
registration rights, the Issuer agrees to
file a shelf registration statement to
register all the Senior Units and to cause
the shelf registration statement to become
effective no later than the 90th day after
the giving of such notice.
In any event, the shelf registration
statement shall remain effective until the
sale of all such Senior Units. The Issuer
will support the marketing process of such
Senior Units under the shelf registration
statement. The Issuer agrees to pay or
reimburse all reasonable and related costs
of such registration. Other terms of such
registration will be set forth in the
registration rights agreement referred to in
the Purchase Agreement.
Other Features
Lock Up Period: The holder(s) may not sell the
Senior Units without prior written consent
of Issuer before the earlier of (a) February
1, 2002 or (b) the
5
occurrence of a Material
Event. There is no lock-up with respect to
Common Units issued upon conversion of the
Senior Units.
Material Event: A Material Event will be deemed to occur
upon any of the following:
* if the closing price for Common Units
(on the New York Stock Exchange) is
below $10.00, as appropriately adjusted
for unit splits, combinations, etc.,
for 5 consecutive trading days;
* a change of control of (a) Ferrellgas,
Inc., the general partner of the
Issuer, (b) the Issuer or (c) the
Operating Limited Partnership (the
"OLP") shall have occurred;
* the Issuer or the OLP becomes taxable
as a corporation for federal income tax
purposes;
* the Issuer or the OLP is in default of
any material indebtedness that it does
not cure within the grace period
allowed within each debt instrument;
* the Issuer issues any of its equity
interests (other than to the Issuer's
general partner and its affiliates and
the Issuer's subsidiaries) during the
first 8 quarters following the closing,
the aggregate proceeds above $50
million of which are not used to call
and redeem the Senior Units; or
* the Issuer fails to obtain unitholder
approval of the conversion option
within 180 days of the closing.
Representations and
Warranties; Covenants: Standard underwriting representations,
warranties and legal opinions as
agreed. Standard covenants as agreed,
including:
* the Issuer will not issue any equity
that has a right to receive
distributions of available cash senior
to or on a parity with to the Senior
Units;
* the Issuer will not permit any
subsidiaries to issue equity to any
person (other than the Issuer's general
partner and its affiliates, the Issuer
and the Issuer's subsidiaries);
* the Issuer will not repurchase any
junior equity; and
6
* Issuer will not merge with or sell all
or substantially all its assets to any
person unless such person assumes the
Senior Units.
Allocations: * During the period when distributions
on the Senior Units are paid in
kind, no Code Section 704(b) income
or Code Section 704(b) deductions
will be allocated to the Senior
Units. During the period when
distributions on the Senior Units
are paid in cash, the Senior Units
will be allocated an amount of Code
Section 704(b) income equal to the
amount of cash distributed on the
Senior Units.
* Upon a sale of the Senior Units,
Williams will have the right, if
necessary, to cause the Issuer to
allocate Code Section 704(b) income to
the Senior Units received as
distributions in order to equalize the
capital accounts of all Senior Units.
* For Code Section 704(c) purposes, the
Issuer and Williams will agree to the
value of each of the assets, the
depreciation lives of each of the
assets and the depreciation method to
be used with respect to each of the
assets, in a manner consistent with the
Issuer's past practices with respect to
similar assets.
7
EXHIBIT B
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (this "Agreement") is
between Williams Natural Gas Liquids, Inc., a Delaware corporation ("Williams"
or "Seller"), and Ferrellgas, L.P., a Delaware limited partnership
("Purchaser"). This Agreement shall be effective as of the Closing Date as that
term is defined in that certain Purchase Agreement ("Purchase Agreement"), dated
November 7, 1999, among Seller, Ferrellgas Partners, L.P., and Purchaser.
Recitals:
A. Ferrellgas Partners, L.P. has agreed to purchase
from Seller the equity interest that is described in the Purchase Agreement.
B. Purchaser has requested that Williams perform, or have
performed, certain services for a period following the Closing Date in order to
facilitate the transition of the Business from Seller to Purchaser.
C. Capitalized terms not otherwise defined herein shall have
the meanings given to them in the Purchase Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
Provision of Services
Section 1.1 Performance. To facilitate the transition of the
Business from Seller's ownership to Purchaser's ownership, Williams, or an
affiliate of Williams, shall perform for the Purchaser for the term of this
Agreement the services described in Schedule A (the "Services"). Except as
otherwise provided in Schedule A, Williams shall not be required to provide any
services to Purchaser that Williams has not previously provided and/or performed
in connection with Williams' operation of the Company prior to the date hereof
or that are not described in the Schedule hereto.
Section 1.2 Employees. The employees providing Services
hereunder (the "Employees", whether or not employees of Williams or an affiliate
of Williams) will be at-will employees of Williams subject to termination at any
time. Williams will continue to pay the Employees' salaries and will permit them
to participate in the pension and other benefit plans operated by Williams for
which they are or become eligible. During the term of this Agreement, Williams
will not take any action that would result in any of the Employees having an
incentive to terminate their employment with Williams or relocate within
Williams during the period of this Agreement; provided, however, an Employee may
take another position within Williams provided such relocation does not
interfere with Employee's provision of Services pursuant to this Agreement.
Section 1.3 Staffing/Equipment. If Williams is required to
increase staffing or acquire equipment or to make any investments or capital
expenditures in order to provide Services beyond the level of use provided by
Williams to the Company prior to the Closing, Williams shall inform Purchaser of
such increases in staffing level, acquisitions of equipment, investments or
capital expenditures before any such costs or expenses are incurred. Upon mutual
agreement as to any such increase in staffing, acquisition of equipment,
investment or capital expenditure, Purchaser shall reimburse Williams for the
actual costs and expenses incurred by Williams in connection therewith allocable
to the Services. If Purchaser does not agree to reimburse Williams for the
actual costs and expenses incurred, Williams' obligation to provide the Service
shall be limited to the level of use of such Service provided by Williams prior
to the Closing Date.
Section 1.4 Segregation of Data. If any costs and expenses are
required to segregate data or systems of Purchaser from data or systems of
Williams prior to termination of this Agreement, Williams shall
inform Purchaser of such costs before such costs are incurred. Upon mutual
agreement as to any such costs, Purchaser shall reimburse Williams for such
costs. If Purchaser does not agree to reimburse Williams for the costs, Williams
shall have no obligation to segregate the data or systems. Except as agreed in
writing by Purchaser and Williams, Williams shall not be required to perform any
Service requiring the use of, and shall not be required to install or use, any
software or equipment modified or provided by Purchaser after the Closing Date
other than software or equipment modified or provided on a basis which is
consistent with past practices. Williams shall not be required to modify or
change any of Williams' software to perform any Service other than software
modifications or changes that are consistent with past practices.
Section 1.5 Information. As part of the Services, Williams
shall grant Purchaser, or Purchaser's designated representatives, reasonable
access during normal business hours to all information and records of Williams
relating to the Company, and Williams shall, at Purchaser's request, make
available and transfer to Purchaser electronic copies of such information and
records to the extent Williams is legally permitted to make such transfers.
Conversely, Purchaser shall make available on a timely basis all information and
materials requested by Williams to enable it to provide the Services.
Section 1.6 Nature of Services. Except for the conversion and
transfer services described in Schedule A, the Services shall be similar in
nature and quality to the services that Williams has provided historically for
the Business.
Section 1.7 Transportation Revenues. Any revenues generated
from propane transportation assets transferred to Purchaser pursuant to Purchase
Agreement shall be for the account of Purchaser.
ARTICLE 2
Performance of Services
Section 2.1 Manner of Performance. Williams agrees that it
shall cause Williams' personnel providing the Services to perform such Services
with the same degree of care, skill, confidentiality and diligence with which
the Williams personnel perform similar services for Williams. Williams shall
provide the Services in accordance with the reasonable instructions provided by
the authorized representatives of Purchaser, or its designee, and Williams shall
be entitled to rely upon any written or oral instructions received from such
authorized representatives or designees.
Section 2.2 Relationship of Parties. Williams and Purchaser
shall act as independent contractors, and nothing herein shall at any time be
construed to create the relationship of employer and employee, partnership,
principal and agent, broker or finder, or joint venturers as between Williams
and Purchaser. Except as expressly provided herein, no party shall have any
right or authority, and no party shall attempt to enter into any contract,
commitment, or agreement or incur any debt or liability of any nature, in the
name of or on behalf of the other party.
Section 2.3 Laws and Regulations. Williams represents and
agrees that it will perform the Services and Purchaser represents and agrees
that it will use the Services provided hereunder only in accordance with all
applicable federal, state and local laws and regulations.
Section 2.4 Service Limitation.
(a) Except as specifically provided herein, Williams shall not
be obligated to hire any additional employees or retain or acquire any
outside or additional assistance, equipment, computer programs or data
to enable Williams to provide the Services. For the purpose of this
Section 2.4, "additional" employees does not include replacements for
those Employees who may leave during the transition period.
(b) Williams shall not be required to provide any Service to
Purchaser if Williams is prohibited by law from providing such Service.
Section 2.5 No Warranty. WILLIAMS AND SELLER SHALL NOT BE
LIABLE FOR ANY DAMAGES AS A RESULT OF WILLIAMS' OR SELLER'S, OR THEIR EMPLOYEES'
PERFORMANCE OF, OR FAILURE TO PERFORM, ANY OF THE SERVICES REQUIRED HEREUNDER,
INCLUDING THOSE THAT RESULT FROM WILLIAMS' OR SELLER'S OR THEIR EMPLOYEES' SOLE,
JOINT AND/OR CONCURRENT NEGLIGENCE OR OTHER FAULT, BUT EXCLUDING THOSE RESULTING
FROM WILLIAMS' OR SELLER'S OR THEIR AFFILIATES OR ANY OTHER INDEMNIFIED PARTY'S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WILLIAMS AND SELLER DO NOT MAKE ANY
WARRANTY AS TO THE RESULTS OF THE SERVICES AND HEREBY DISCLAIM ALL WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO PERFORMANCE UNDER THIS AGREEMENT.
Section 2.6 Limitation of Liability. WILLIAMS AND SELLER SHALL
NOT BE LIABLE TO PURCHASER FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES
RESULTING FROM THE PERFORMANCE OF SERVICES OR FROM THE BREACH OF THIS AGREEMENT,
EVEN IF CAUSED BY THE SOLE, JOINT AND/OR CONCURRENT NEGLIGENCE, STRICT LIABILITY
OR OTHER FAULT OF WILLIAMS OR SELLER OR THEIR OFFICERS, DIRECTORS, OR EMPLOYEES,
EXCEPT TO THE EXTENT ARISING OUT OF, IN CONNECTION WITH, OR RESULTING FROM
WILLIAMS' OR SELLER'S OR THEIR AFFILIATES OR ANY OTHER INDEMNIFIED PARTY'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
Section 2.7 Indemnification. PURCHASER AGREES TO DEFEND,
INDEMNIFY AND HOLD WILLIAMS AND SELLER AND THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES AND REPRESENTATIVES HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
CLAIMS, LOSSES, DAMAGES, COSTS, EXPENSES, CAUSES OF ACTION, OR JUDGMENTS OF ANY
KIND OR CHARACTER (INCLUDING THOSE ARISING FROM, RELATED TO OR CAUSED, DIRECTLY
OR INDIRECTLY, BY THE SOLE, JOINT AND/OR CONCURRENT NEGLIGENCE, STRICT
LIABILITY, OR OTHER FAULT OF WILLIAMS OR SELLER OR ANY SUCH OTHER INDEMNIFIED
PARTY, INCLUDING ANY INTEREST, PENALTY, REASONABLE ATTORNEYS' FEES, AND OTHER
COSTS AND EXPENSES INCURRED IN CONNECTION THEREWITH OR IN THE DEFENSE THEREOF),
ATTRIBUTABLE TO OR ARISING OUT OF ANY CLAIMS BY OR LIABILITIES OR OBLIGATIONS
TO, ANY THIRD PARTY ARISING OUT OF, IN CONNECTION WITH OR RESULTING FROM ANY OF
THE SERVICES PROVIDED BY WILLIAMS OR SELLER OR ANY OTHER INDEMNIFIED PARTY UNDER
THIS AGREEMENT, EXCEPT TO THE EXTENT ARISING OUT OF, IN CONNECTION WITH OR
RESULTING FROM WILLIAMS' OR SELLER'S OR THEIR AFFILIATES OR ANY OTHER
INDEMNIFIED PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
ARTICLE 3
Compensation for Services
Section 3.1 Fees for Services. During the first six (6)
months, Purchaser shall pay Williams the actual cost of providing such Services
including, but not limited to, salaries prorated for the period of time
Employees provide Services, actual benefits, rent, utilities, supplies,
telephone, postage, travel and related expenses, and any other costs directly
incurred to provide Services, including without limitation third party expenses
from accountants and law firms, actuaries and other outside advisors,
investigative fees, trustee fees, investment management fees, medical
examinations, mailing costs and other out-of-pocket expenses. ("Service Cost").
If Purchaser elects to exercise the option under Section 6.4 to extend the
Services designated as "Information Technology Services" on Schedule A, the fees
for such services during the extension period shall be the Service Cost plus
10%.
Section 3.2 Reimbursements. Purchaser shall reimburse Williams
for the reasonable actual, direct, out-of-pocket costs and expenses, other than
those costs and expenses described in Section 3.1, incurred by Williams and
consistent with past practices as a result of the Employees performing the
Services, including, without limitation, with respect to Services relating to
insurance or benefit related matters, for claims paid by Williams on behalf of
Purchaser to the extent Williams is not reimbursed for such claims by a third
party and third party expenses from accountants and law firms, actuaries, and
other outside advisors, investigative fees, trustee fees, investment management
fees, medical examinations, mailing costs and other out-of-pocket expenses. In
every case, all of the Services shall be provided in accordance with the terms,
limitations and conditions set forth herein and on Schedule A.
Section 3.3 Invoices. Statements will be rendered each month
by Williams to Purchaser for Services delivered during the preceding month, and
each such statement shall set forth in reasonable detail a description of such
Services and the amounts charged therefor and shall be payable net thirty days
after the date thereof. Statements not paid within such 30-day period shall be
subject to late charges for each month or portion thereof the statement is
overdue, calculated at the then current prime rate as published on the first day
of each applicable month under the "Money Rates" section in The Wall Street
Journal. For those Services described as "Transportation Services" on Schedule A
hereof, Williams shall render a separate statement to Purchaser's Houston
office, the payment of which shall be in accordance with this Section 3.3.
Section 3.4 Disputes. In the event of a good-faith dispute as
to the amount and/or propriety of any invoices or any portions thereof submitted
by Williams to Purchaser, Purchaser will pay all undisputed charges on such
invoice and notify Williams in writing within fifteen (15) days of receipt of
such invoice of such disputed amounts and the reasons each such charge is
disputed by Purchaser. Williams will provide Purchaser with sufficient records
relating to the disputed charge so as to enable the parties to resolve the
dispute.
Section 3.5 Supporting Documentation. Williams will provide
supporting documentation with each invoice submitted to Purchaser for any amount
to be paid by Purchaser pursuant to Section 3.1 and for reimbursement of any
costs and expenses exceeding $500 as described in Section 3.2. For Employees
provided to Purchaser on a "full-time" basis, supporting documentation will
consist of the name and title of the Employee performing Services along with
number of overtime hours billed for any such Employee, if applicable. For
Employees provided to Purchaser on an "as needed" basis, such documentation will
consist of a description of the Service performed, the Employee's name and the
number of hours billed for any such Employee. For third party expenses, such
documentation will consist of a description of the costs and expenses incurred
exceeding $500 evidenced by a third party invoice, if applicable.
ARTICLE 4
Records and Audits
Records Maintenance and Audits. Purchaser or its
representatives shall have access at all reasonable times to Seller's records
from the Closing Date until one hundred and twenty (120) days after the
termination of this Agreement for the purpose of auditing and verifying the
accuracy of the invoices submitted by Williams regarding such amounts due
Williams. Purchaser shall have the right to audit or dispute Williams' books and
records related to the Services provided hereunder for a period of one hundred
and twenty (120) days after the termination of this Agreement. Any invoice not
disputed within such time period shall be considered final and no longer subject
to adjustment.
ARTICLE 5
Confidentiality
Except as may be specifically agreed otherwise in writing in
connection with any particular request for or provision of Service, each party
will treat in confidence and protect against unauthorized disclosure to third
parties of information received by it from the other in connection with the
Services using the same degree of care it uses to maintain confidentiality and
protect against unauthorized disclosure of its own information of like character
and sensitivity; provided, however, that neither party will have any obligation
to the other hereunder with respect to any information that (a) is generally
available to the public as of the date of this Agreement or thereafter becomes
generally available to the public without its fault, (b) is already known to it,
(c) is independently received from a third party having a right to disclose the
information, or (d) is independently developed by it. Nothing stated herein
shall modify in any way any confidentiality or nondisclosure obligations of any
party under any other agreement between the parties nor shall any right or
license with respect to any intellectual property of either party be implied
from any disclosure of information hereunder or use thereof in connection with
the provision or receipt of any Services.
ARTICLE 6
Term of Agreement
Section 6.1 Initial Term. The term of this Agreement shall
commence on the date hereof and shall continue thereafter as long as any Service
covered hereby shall continue in accordance with the provisions of this Article
6 (the "Term"). The parties agree that except as provided herein, all Services
covered by this Agreement shall terminate one hundred eighty (180) days from the
Closing Date.
Section 6.2 Purchaser Obligation. Purchaser will arrange for
alternative sources of supply for the Services satisfactory to Purchaser as soon
as reasonably practicable after the Closing Date. In the event Purchaser obtains
a satisfactory source of supply of a Service prior to the time limit above
specified, then Purchaser shall terminate this Agreement with respect to each
such Service. By written notice to Williams prior to the first day of each
month, Purchaser may reduce the number of Services, or portion thereof,
specified in Schedule A effective thirty (30) days thereafter. Upon the
termination by Purchaser of any particular Service in accordance with this
Agreement, Williams shall have no further obligation to provide such Service
after the termination date therefor.
Section 6.3 Early Termination. Anything herein or
elsewhere to the contrary notwithstanding, this Agreement may be
terminated at any time upon the happening of any of the following events
or conditions:
(a) Upon the written agreement of the parties to terminate
this Agreement;
(b) By Williams, upon Purchaser's failure to pay any amount
under this Agreement (not disputed in good faith by Purchaser) when due and,
after having been given written notice specifying such failure, Purchaser does
not correct such failure to pay within five (5) days of receipt of said notice;
provided, however, that Williams will not be required to provide such notice
more than twice during the Term with respect to failure to pay, the third such
non-payment constituting a default without requirement of notice; or
(c) By Purchaser, upon Williams' breach of a material
obligation under this Agreement and, after having been given written notice
specifying such breach, Williams does not correct such breach within five (5)
days of receipt of said notice. Such termination will be effective ten (10) days
from Williams' receipt of said notice of breach.
In the event of termination of this Agreement pursuant to this Section 6.3 ,
this Agreement forthwith will become void and neither party will have any
liability or obligation hereunder, except that any such termination will not
affect (i) the provisions of Article 5, which will survive any such termination,
and (ii) the rights and remedies available to a party as a result of any breach
of any provisions of this Agreement.
Section 6.4 Continuation of Certain Services. At the end of
the initial 180-day Term, Purchaser shall have the option to continue the
utilization of those Services designated as "Information Technology Services" in
Schedule A for an additional 180 days. The provision of Information Technology
Services by Williams will be subject to the terms and conditions of this
Agreement; provided, however, the compensation due to Williams pursuant to
Section 3.1 shall be increased by ten percent (10%). At the end of the initial
180-day Term, Purchaser shall also have the option to continue utilization of
those Services designated as Executive Management and Commercial Development and
Planning through September 30, 2000.
ARTICLE 7
Taxes
Purchaser shall promptly reimburse Williams for any taxes,
excises, or other similar charges (excepting any taxes, excises, or charges
based on income and/or Employee salary and related benefits) that Williams may
be required to pay on account of the performance of Services, or with respect to
payments made by Purchaser for such Services, pursuant to this Agreement.
ARTICLE 8
Force Majeure
Section 8.1 Definition. Neither party shall be liable to the
other party for its failure or delay in performing its obligations hereunder
(other than its obligation to pay money) due to any contingency beyond such
party's control including, without limitation, acts of God, fires, floods, wars,
acts of war, sabotage, terrorism, accidents, labor disputes (whether or not such
disputes are within the power of the party to settle), shortages, governmental
laws, ordinances, rules or regulations (whether valid or invalid and which
include but are not limited to import or export prohibitions or priorities,
requisitions, allocations and price adjustment restrictions), inability to
obtain power, materials, equipment or transportation and any other similar
contingency.
Section 8.2 Provision of Services. In the event of a Force
Majeure situation, which makes unavailable part, but not all, of any Service,
Williams will provide to Purchaser that quantity and level of Service as is
reasonable under the circumstances.
Section 8.3 Notice. The party affected by Force Majeure will
give notice to the other party as promptly as practicable of the nature and
probable duration of the Force Majeure situation as well as of the termination
of such Force Majeure situation. The party affected by Force Majeure will use
commercially reasonable efforts to remove the Force Majeure event.
ARTICLE 9
Other Provisions
Section 9.1 Assignment. No party shall assign, in whole or in
part, any of the rights, obligations or benefits arising under this Agreement
without the prior written consent of the other party, except that Williams may
assign its rights, obligations and benefits hereunder to an affiliate or
subsidiary upon written notice to Purchaser; provided, however, any assignment
by Williams to an affiliate shall not release Williams of any of its obligations
under this Agreement. Any attempt to assign or otherwise transfer this Agreement
or any rights or obligations hereunder will be void.
Section 9.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal
action, suit or proceeding in law or equity arising out of or relating to this
Agreement may be instituted in any state or federal court in New York City, New
York, and each party agrees not to assert, by way of motion, as a defense, or
otherwise, in any such action, suit or proceeding, any claim that is not subject
personally to the jurisdiction of such court, that its property is exempt or
immune from attachment or execution, that the action, suit or proceeding is
brought in an inconvenient forum, that the venue of the action, suit or
proceeding is improper or that this Agreement or the subject matter hereof may
not be enforced in or by such court. Each party further irrevocably submits to
the jurisdiction of any such court in any such action, suit or proceeding. Any
and all service of process and any other notice in any such action, suit or
proceeding shall be effective against any party if given by registered or
certified mail, return receipt requested or by any other means of mail which
requires a signed receipt, postage prepaid, mailed to such party at the address
listed in Section 9.3 below. Nothing herein contained shall be deemed to affect
the right of any party to serve process in any manner permitted by law or to
commence legal proceedings or otherwise proceed against any other party in any
jurisdiction other than New York.
Section 9.3 Notices. Any notice, request, consent, payment,
demand or other communication required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party or parties to whom notice is
given, on the date of confirmation of receipt if sent by facsimile or on the
third day after mailing if mailed to the party to whom the notice is to be given
by certified mail, return receipt requested, postage prepaid and properly
addressed as follows:
If to Seller, addressed to:
Williams National Gas Liquids, Inc.
One Williams Center, Suite 3000
Tulsa, Oklahoma 74172
Attention: Don Wellendorf
Telecopy: (918) 573-3864
with a copy to:
The Williams Companies, Inc.
One Williams Center, Suite 4100
Tulsa, Oklahoma 74172
Attention: Lonny Townsend
Telecopy: (800) 479-6690
with a copy to:
Andrews & Kurth L.L.P.
805 Third Avenue
New York, NY 10022
Attention: Michael Swidler
Telecopy: (212) 850-2929
If to Purchaser, addressed to:
Ferrellgas, L.P.
c/o Ferrellgas, Inc.
One Liberty Plaza
Liberty, MO 64068
Attention: James M. Hake
Telecopy: (816) 792-7985
with a copy to:
Bryan Cave L.L.P.
3500 One Kansas City Place
1200 Main Street
Kansas City, MO 64105
Attention: Morris K. Withers
Telecopy: (816) 374-3300
Either party may change its address by giving the other party hereto written
notice of the new address in the manner set forth above.
Section 9.4 Severability. In the event any portion of this
Agreement shall be found by a court of competent jurisdiction to be illegal,
unenforceable, or invalid, that portion of this Agreement will be null and void
and the remainder of this Agreement will be binding on the parties as if the
illegal, unenforceable or invalid provisions had never been contained herein.
Section 9.5 Waiver. No waiver by either party of any term or
any breach of this Agreement shall be construed as a waiver of any other term or
breach hereof, or of the same or a similar term or breach on any other occasion.
Section 9.6 Amendment. No modification or amendment of this
Agreement shall be binding upon either party unless in writing and signed by the
parties hereto.
Section 9.7 Conflicts. In the event of any conflict
between the terms of this Agreement and the Purchase Agreement, the terms of
this Agreement shall control.
Section 9.8 Entire Agreement. This Agreement and the Purchase
Agreement constitute the entire agreement between the parties pertaining to the
subject matter hereof, and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties hereto
regarding the subject matter hereof.
Section 9.9 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
WILLIAMS NATURAL GAS LIQUIDS, INC.
By:
Name:
Title:
FERRELLGAS, L.P.
By: Ferrellgas,Inc., its general partner
By:
Name:
Title:
Schedule A
EXECUTIVE MANAGEMENT
Services include management oversight of all operation and administration
activities, field communications, and management reports.
COMMERCIAL DEVELOPMENT AND PLANNING
Services include acquisitions and divestitures, performance analysis, and
benchmarking. Services also include management oversight of the North Carolina
and Florida operations.
OPERATIONS SUPPORT
Services include management of truck centers and tank refurbishing center; plant
construction; truck, tank and equipment purchasing; real estate transfers; and
assistance in field operations, including handheld computers and Year 2000
readiness.
OPERATIONS ADMINISTRATION
Services include management oversight of all field GEMS support services,
management oversight of the NRG wholesale appliance business, web site
maintenance and communication, scorecarding, and field communications.
MARKETING
Services include field support on all marketing matters, including advertising,
customer communications, administration of marketing programs; and solicitation
and maintenance of national accounts.
SAFETY
Services include communication and maintenance of all company safety standards,
safety training, plant inspections, maintenance of all field safety reports and
Department of Transportation reporting, and field communication on safety
matters.
HUMAN RESOURCES
Services include handling all field and corporate employee matters; field
training, including leadership training and the manager trainee program;
tracking and maintenance of all employee records; employee performance
appraisals; and field communication on employee matters.
ACCOUNTING
Services include all monthly accounting reports, tracking and maintenance of all
daily accounting entries, reconciliations, field audits, and field communication
on accounting matters.
INFORMATION TECHNOLOGY
Hardware Management
Services include set up and configuration of personal computers, installation of
software, troubleshooting and other hardware support.
Application Support
Services include development and testing of software enhancements, development
and testing of systems interfaces, maintenance of database operating systems,
implementation of new software and software enhancements.
Technical Response
Services include research and resolution of all field and headquarters technical
problems.
LEGAL
Services include management of all ongoing litigation including hiring and
management of outside counsel, contract drafting and review, research and
counsel with operations management on all legal matters.
CORPORATE SUPPORT
Services include accounts payable, sales tax reporting, property accounting,
maintenance and use of financial application systems, payroll services, credit
services, cash management, risk management, and environmental services as
currently provided.
TRANSPORTATION SERVICES
Services include the dispatch and transportation of propane from wholesale sale
terminals to those retail locations transferred to Purchaser in connection with
this transaction.
CONVERSION AND TRANSFER SERVICES
At the request of Purchaser, and with full reimbursement for all costs, services
needed to assist in the conversion of information systems and to transfer
records and data, as mutually agreed to by William and Purchaser, will be
provided.