CONTRIBUTION AGREEMENT

Exhibit 10.8

Execution Version

 

CONTRIBUTION AGREEMENT

by and among

SPECTRA ENERGY TRANSMISSION, LLC,

SPECTRA ENERGY PARTNERS (DE) GP, LP,

and

SPECTRA ENERGY PARTNERS, LP,

dated as of

December 13, 2007

 

 

TABLE OF CONTENTS

 

 

i

 

ii

 

iii

 

iv

Disclosure Schedule

 

Exhibits

 

 

v

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT, dated as of December 13, 2007 (this “ Agreement ”), is entered into by and among Spectra Energy Transmission, LLC, a limited liability company organized under the Laws of the State of Delaware (“ SE Transmission ”), Spectra Energy Partners (DE) GP, LP, a limited partnership organized under the Laws of the State of Delaware (“ MLP GP ”), and Spectra Energy Partners, LP, a limited partnership organized under the Laws of the State of Delaware (“ Spectra MLP ”).

RECITALS

WHEREAS, as of the date of this Agreement, SE Transmission owns (i) 100% of the limited liability company interests in Saltville Gas Storage Company L.L.C., a limited liability company organized under the Laws of the Commonwealth of Virginia (“ Saltville LLC ”), (ii) 100% of the capital stock of Spectra Energy Early Grove Company, a corporation organized under the Laws of the Commonwealth of Virginia (“ SE Early Grove ”), and (iii) 100% of the capital stock of Spectra Energy Virginia Pipeline Company, a corporation organized under the Laws of the Commonwealth of Virginia (“ SE Virginia Pipeline ”);

WHEREAS, prior to the Closing (as defined below):

(i) Certification of the storage facilities of SE Early Grove and SE Virginia Pipeline by the Federal Energy Regulatory Commission, and relinquishment of jurisdiction over such storage facilities by the Virginia State Corporation Commission shall have been granted or shall have been deemed granted;

(ii) Saltville LLC intends to negotiate replacement Contracts with customers of SE Early Grove and SE Virginia Pipeline related to their storage assets;

(iii) SE Early Grove and SE Virginia Pipeline intend to convert from corporations into limited liability companies;

(iv) SE Virginia Pipeline, after such conversion, intends to transfer to East Tennessee Natural Gas, LLC, a limited liability company organized under the Laws of the State of Tennessee, pursuant to that certain asset purchase agreement between such parties and dated the date hereof (the “ Asset Purchase Agreement ”), all of its right, title and interest in approximately 72 miles of 8” natural gas transmission pipeline commencing at SE Virginia Pipeline’s meter station located at Chilhowie, VA, and continuing eastward to SE Virginia Pipeline’s meter station located at Radford, VA, together with 0.5 miles of the 4” Marion lateral, and certain other assets, liabilities and obligations associated with such pipeline facilities and described on Schedule A attached hereto (collectively, the “ P-25 Assets ”), in exchange for Common Units (as defined below) and a cash reimbursement of prior capital expenditures, which Common Units and cash reimbursement would then be transferred to SE Transmission or one of its Affiliates (as defined below), other than the Saltville Companies, prior to the Closing;

(v) SE Early Grove and SE Virginia Pipeline, after conversion into limited liability companies, would then merge with and into Saltville LLC, pursuant to a merger agreement (the “ Merger Agreement ”), with Saltville LLC being the surviving entity;

(vi) SE Transmission would then contribute to Spectra MLP, and Spectra MLP would then accept from SE Transmission, 97.6% of the limited liability company interests in Saltville LLC (the “ SET Contributed Interests ”), and, in exchange, Spectra MLP would distribute, as contemplated in this Agreement, to SE Transmission (a) a certain number of Common Units and (b) a certain amount in cash as a reimbursement for capital expenditures incurred by SE Transmission with respect to certain assets of Saltville LLC;

(vii) SE Transmission would then contribute 2.376% of the limited liability company interests in Saltville LLC to Spectra Energy Southeast Pipeline Corporation, a corporation organized under the Laws of the State of Delaware (“ SE Southeast Pipeline ”) and 0.024% of its limited liability company interests in Saltville LLC to Spectra Energy Partners GP, LLC, a limited liability company organized under the Laws of the State of Delaware (“ MLP GP LLC ”), and SE Southeast Pipeline and MLP GP LLC would contribute all their respective limited liability company interests in Saltville LLC received from SE Transmission to MLP GP (the actions to be taken in sections (i) through (v) and section (vii) hereof, collectively, the “ Saltville Restructuring ”);

WHEREAS, MLP GP would then contribute to Spectra MLP, and Spectra MLP would then accept from MLP GP, all of MLP GP’s limited liability company interests in Saltville LLC (the “ MLP GP Contributed Interests ”), and, in exchange, Spectra MLP would distribute to MLP GP a certain number of General Partner Units;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties (as defined below) agree as follows:

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

Section 1.1 Definitions . As used herein, the following capitalized terms shall have the following meanings:

“ Accounting Referee ” has the meaning provided such term in Section 2.4(c).

“ Adjustment Amount ” has the meaning provided such term in Section 2.4(e).

“ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with, such specified Person through one or more intermediaries or otherwise. For the purposes of this definition, “control” means, where used with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by Contract or otherwise.

 

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“ AGL Agreement ” means that Purchase and Sale Agreement, dated as of April 27, 2005, among NUI Saltville Storage, Inc., a Delaware corporation, Virginia Gas Company, a Delaware corporation, Duke Energy Gas Transmission, LLC, a Delaware limited liability company, Duke Energy Saltville Gas Storage, L.L.C., a Delaware limited liability company, and NUI Corporation, a New Jersey corporation.

“ Agreement ” has the meaning provided such term in the preamble to this Agreement.

“ Asset Purchase Agreement ” has the meaning provided such term in the recitals of this Agreement.

“ Balance Sheet Date ” means October 31, 2007.

“ Billed Party ” has the meaning provided such term in Section 7.1(d).

“ Business ” means the operations and business conducted by the Saltville Companies.

“ Business Day ” means any day that is not a Saturday, Sunday or legal holiday in the State of Texas or a federal holiday in the United States.

“ Claim Notice ” has the meaning provided such term in Section 9.3(a).

“ Closing ” has the meaning provided such term in Section 2.3(a).

“ Closing Date ” has the meaning provided such term in Section 2.3(a).

“ Code ” means the Internal Revenue Code of 1986.

“ Commission ” means the United States Securities and Exchange Commission.

“ Common Units ” has the meaning provided such term in the Spectra MLP Partnership Agreement.

“ Company Guarantees ” means all guaranties, letters of credit, bonds, sureties, cash collateral accounts, and other credit support or assurances provided by SE Transmission or any of its Affiliates (other than the Saltville Companies) in support of any obligations of any of the Saltville Companies or the Business, including those obligations listed on Schedule 6.5 .

“ Conflicts Committee ” has the meaning provided such term in the Spectra MLP Partnership Agreement.

“ Contract ” means any legally binding agreement, commitment, lease, license or contract.

“ Contributed Interests ” means the SET Contributed Interests and/or the MLP GP Contributed Interests, as applicable.

“ Cross Receipt ” means a cross receipt acknowledging the receipt of the items in Section 2.3(b)(i) and (v) by Spectra MLP and the items in Section 2.3(c)(i), (ii) and (v) by SE Transmission and MLP GP.

 

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“ Disclosure Schedule ” means the schedules attached hereto.

“ Dollars ” and “ $ ” mean the lawful currency of the United States.

“ Effective Time ” has the meaning provided such term in Section 2.3(a).

“ Environment ” means (a) the navigable waters, the waters of the contiguous zone, and the ocean waters of which the natural resources are under the exclusive management authority of the United States under the Magnuson-Stevens Fishery Conservation and Management Act, 16 U.S.C. 1801 et seq ., and (b) any other surface water, ground water, drinking water supply, land surface or subsurface strata, or ambient air within the United States or under the jurisdiction of the United States.

“ Environmental Law ” means any Law relating to the environment, natural resources, or the protection thereof, including any applicable provisions of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq ., the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq ., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq ., the Clean Water Act, 33 U.S.C. § 1251 et seq ., the Clean Air Act, 42 U.S.C. § 7401 et seq ., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq ., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. § 136 et seq ., the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq ., the Safe Drinking Water Act, 42 U.S.C. § 300f et seq ., and any Law relating to health, safety, the Environment, natural resources or the protection thereof, and all analogous state or local statutes, and the regulations promulgated pursuant thereto.

“ ERISA ” means the Employee Retirement Income Security Act of 1974.

“ Exchange Act ” means the Securities Exchange Act of 1934 and the rules and regulations of the Commission promulgated thereunder.

“ Excluded Assets ” has the meaning provided such term in Section 6.10.

“ Final Net Working Capital ” means the difference of (x) total current assets less (y) total current liabilities, each as shown on the balance sheet of Saltville LLC as of the Closing Date (which sheet shall be prepared in the same manner, under the same basis, with the same methodology and principles, and utilizing the same line items as the Financial Statements) except that the amount of total current liabilities shall be reduced to exclude any ad valorem Taxes and federal and state income Taxes.

“ Financial Statements ” has the meaning provided such term in Section 4.5(a).

“ Fundamental Representations and Warranties ” means the representations and warranties contained in Sections 3.1, 3.2, 3.6, 4.1 and 4.4.

“ GAAP ” means generally accepted accounting principles of the United States, consistently applied.

“ General Partner Units ” has the meaning provided such term in the Spectra MLP Partnership Agreement.

 

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“ Governmental Authority ” means any federal, state, municipal, local or similar governmental authority, regulatory or administrative agency, court or arbitral body.

“Hazardous Substance(s)” means each substance defined, designated or classified as a hazardous waste, hazardous substance, hazardous material, pollutant, containment or toxic substance under any Environmental Law and any petroleum or petroleum products that have been Released into the environment.

“ Indebtedness for Borrowed Money ” means with respect to any Person, at any date, without duplication, (a) all obligations of such Person for borrowed money (including intercompany obligations), including all principal, interest, premiums, fees, expenses, overdrafts and penalties with respect thereto, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person to pay the deferred purchase price of property, except trade payables incurred in the ordinary course of business, (d) all obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (e) all capitalized lease obligations of such Person, and (f) all indebtedness of any other Person of the type referred to in clauses (a) to (e) above directly or indirectly guaranteed by such Person or secured by any assets of such Person, whether or not such indebtedness has been assumed by such Person.

“ Indemnified Party ” has the meaning provided such term in Section 9.3(a).

“ Indemnifying Party ” has the meaning provided such term in Section 9.3(a).

“ Indemnified Tax Claim ” has the meaning provided such term in Section 7.3(b).

“ Intellectual Property ” means intellectual property rights, statutory or common law, worldwide, including (a) trademarks, service marks, trade dress, slogans, logos and all goodwill associated therewith, and any applications or registrations for any of the foregoing, (b) copyrights and any applications or registrations for any of the foregoing, and (c) patents, all confidential know-how, trade secrets and similar proprietary rights in confidential inventions, discoveries, improvements, processes, techniques, devices, methods, patterns, formulae and specifications.

“ Knowledge ” as to Spectra MLP means the actual knowledge of those Persons listed on Schedule 1.1(i) , and; as to SE Transmission and MLP GP means the actual knowledge of those Persons listed on Schedule 1.1(ii) ; provided, however , that those Persons noted in such Schedule 1.1(ii) as not having knowledge as to the Saltville Companies shall be disregarded with respect to any representation relating to the Saltville Companies qualified by “Knowledge”.

“ Law ” means any applicable law, rule, regulation, ordinance, order, judgment or decree of a Governmental Authority.

“ Lien(s) ” means, with respect to any property or asset, any mortgage, pledge, charge, security interest or other encumbrance of any kind in respect of such property or asset.

“ Losses ” means all actual liabilities, losses, damages, fines, penalties, judgments, settlements, awards, costs and expenses (including reasonable fees and expenses of counsel);

 

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provided, however , that Losses shall not include any special, punitive, exemplary, incidental, consequential or indirect damages nor shall Losses include lost profits, lost opportunities or other speculative damages; provided, further, however , that the preceding proviso shall not apply to the extent a Party is required to pay such damages to a third party in connection with a matter for which such Party is entitled to indemnification under Article IX.

“ Material Adverse Effect ” means, with respect to any Person, any circumstance, change or effect that (a) is or would reasonably be expected to be materially adverse to the business, operations or financial condition of such Person (and in the case of any Saltville Company, of the Saltville Companies and the Business taken as a whole), or (b) materially impedes or would reasonably be expected to impede the ability of such Person to complete the transactions contemplated herein, but shall exclude any circumstance, change or effect resulting or arising from:

(i) any change in general economic conditions in the industries or markets in which any of the Saltville Companies operates;

(ii) seasonal reductions in revenues or earnings of the Saltville Companies substantially consistent with the historical results of such businesses;

(iii) national or international political conditions, including any engagement in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack;

(iv) changes in Law or GAAP; or

(v) the entry into or announcement of this Agreement, actions contemplated by this Agreement or the consummation of the transactions contemplated hereby.

Notwithstanding the foregoing, clauses (i), (iii) and (iv) shall not apply in the event of a disproportionate effect on the Saltville Companies as compared to other entities in the industry or markets in which the Saltville Companies operate.

“ Material Contracts ” has the meaning provided such term in Section 4.7(a).

“Material Real Estate Leases” has the meaning provided such term in Section 4.16(a).

“ Merger Agreement ” has the meaning provided such term in the recitals of this Agreement.

“ MLP GP ” has the meaning provided such term in the preamble to this Agreement.

“ MLP GP Consideration ” means an amount equal to the product of the Per Unit Value times the MLP GP General Partner Units.

“ MLP GP Contributed Interests ” has the meaning provided such term in the recitals of this Agreement.

 

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“ MLP GP General Partner Units ” means the number of General Partner Units that is computed by (i) adding the Saltville Total Value and the P-25 Total Value (as defined in the Asset Purchase Agreement), (ii) subtracting both the Saltville CapEx Reimbursement and the P-25 CapEx Reimbursement (as defined in the Asset Purchase Agreement) from that sum, (iii) dividing that difference by the Per Unit Value, and (iv) multiplying that quotient by 2%.

“ MLP GP Indemnified Parties ” has the meaning provided such term in Section 9.2(b).

“ MLP GP LLC ” has the meaning provided such term in the recitals of this Agreement.

“ Omnibus Agreement ” means the Omnibus Agreement effective as of July 2, 2007, among Spectra MLP, MLP GP, Spectra Energy Partners, GP, LLC, a limited liability company organized under the Laws of the State of Delaware, and Spectra Energy Corp, a corporation organized under the Laws of the State of Delaware.

“ Omnibus Amendment ” means the Amendment to Omnibus Agreement attached as Exhibit A .

“ Organizational Documents ” means any charter, certificate of incorporation, certificate of formation, articles of association, bylaws, partnership agreement, operating agreement or similar formation or governing documents and instruments.

“ P-25 Assets ” has the meaning provided such term in the recitals of this Agreement.

“ P-25 Indemnity Obligations ” has the meaning provided such term in Section 9.2(a).

“ P-25 Pipeline ” means approximately 72 miles of 8” transmission pipeline operated by Seller.

“ Parties ” means SE Transmission, MLP GP and Spectra MLP.

“ Per Unit Valuation Date ” means the date that is three days prior to the Closing Date.

“ Per Unit Value ” means the volume-weighted average price of the Common Units on the New York Stock Exchange during the 20 trading days immediately preceding the Per Unit Valuation Date, calculated using the Bloomberg SEP Equity AQR function.

“ Permits ” means authorizations, licenses, permits or certificates issued by Governmental Authorities; provided, however , right-of-way agreements and similar rights and approvals are not included in the definition of Permits.

“Permitted Liens” means (a) Liens for Taxes not yet delinquent or being contested in good faith by appropriate proceedings, (b) statutory Liens (including materialmen’s, warehousemen’s, mechanic’s, repairmen’s, landlord’s, and other similar Liens) arising in the ordinary course of business securing payments not yet delinquent or being contested in good faith by appropriate proceedings, (c) the rights of lessors and lessees under leases, and the rights of third parties under any agreement, in each case executed in the ordinary course of business and that do not materially and adversely affect the ability of the Saltville Companies to conduct

 

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their Business as currently conducted, (d) the rights of licensors and licensees under licenses executed in the ordinary course of business and that do not materially and adversely affect the ability of the Saltville Companies to conduct their Business as currently conducted, (e) restrictive covenants, easements and defects, imperfections or irregularities of title or Liens, if any, of a nature that do not materially and adversely affect the assets or properties subject thereto, (f) preferential purchase rights and other similar arrangements with respect to which consents or waivers are obtained for this transaction or as to which the time for asserting such rights has expired at the Closing Date without an exercise of such rights, (g) restrictions on transfer with respect to which consents or waivers are obtained for this transaction, (h) Liens granted in the ordinary course of business which do not secure the payment of Indebtedness for Borrowed Money and which do not materially and adversely affect the ability of the Saltville Companies to conduct their Business as currently conducted, (i) Liens listed in Schedule 1.1(iii) , and (j) Liens created by Spectra MLP or its successors and assigns.

“ Person ” means any individual, firm, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind.

“ Pre-Closing Tax ” has the meaning provided such term in Section 7.1(c).

“ Pre-Closing Taxable Period ” means any taxable period ending on or before the Effective Time and that portion of any taxable period beginning before and ending after the Effective Time that ends on the Effective Time.

“ Reasonable Efforts ” means efforts in accordance with reasonable commercial practice and without the incurrence of unreasonable expense.

“ Reference Net Working Capital ” means $1,122,527.

“ Refund Amount ” has the meaning provided such term in Section 2.4(e).

“ Release ” means any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, dumping, or disposing of, without limitation, Hazardous Substances, into the Environment.

“ Representatives ” means, as to any Person, its officers, directors, employees, counsel, accountants, financial advisers and consultants.

“ Saltville CapEx Reimbursement ” means 97.6% of the sum of the capital expenditures incurred by the Saltville Companies with respect to their assets other than the P-25 Assets during the 24 month period prior to the Closing Date; provided, however , that such amount shall not exceed $10,000,000.

“ Saltville Companies ” means, prior to Saltville Restructuring, Saltville LLC, SE Early Grove and SE Virginia Pipeline, and “ Saltville Company ” means any one of the foregoing. After the Saltville Restructuring, “ Saltville Company ” shall mean Saltville LLC.

“ Saltville LLC ” has the meaning provided such term in the recitals of this Agreement.

 

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“ Saltville Restructuring ” has the meaning provided such term in the recitals of this Agreement.

“ Saltville Total Value ” means $81,700,000.

“ SE Early Grove ” has the meaning provided such term in the recitals of this Agreement.

“ SE Southeast Pipeline ” has the meaning provided such term in the recitals of this Agreement.

“ SE Transmission ” has the meaning provided such term in the preamble to this Agreement.

“ SE Transmission Indemnified Parties ” has the meaning provided such term in Section 9.2(b).

“ SE Virginia Pipeline ” has the meaning provided such term in the recitals of this Agreement.

“ Securities Act ” means the Securities Act of 1933 and the rules and regulations of the Commission promulgated thereunder.

“ SET Common Units ” means the number of Common Units that is computed by (i) subtracting the Saltville CapEx Reimbursement from the Saltville Total Value, (ii) dividing that difference by the Per Unit Value, and (iii) subtracting the number of MLP GP General Partner Units from that quotient.

“ SET Consideration ” means an amount equal to the product of the Per Unit Value times the SET Common Units.

“ SET Contributed Interests ” has the meaning provided such term in the recitals of this Agreement.

“ Spectra Energy Corp ” means Spectra Energy Corp, a Delaware corporation.

“ Spectra MLP ” has the meaning provided such term in the preamble to this Agreement.

“ Spectra MLP Approvals ” has the meaning provided such term in Section 5.3.

“ Spectra MLP Financial Statements ” has the meaning provided such term in Section 5.8.

“ Spectra MLP Indemnified Parties ” has the meaning provided such term in Section 9.2(a).

“ Spectra MLP Partnership Agreement ” means the First Amended and Restated Agreement of Limited Partnership of Spectra Energy Partners, LP dated as of July 2, 2007.

“ Spectra MLP SEC Documents ” has the meaning provided such term in Section 5.8.

 

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“ Tax ” means (a) all taxes, assessments, duties, levies, imposts or other similar charges imposed by a Governmental Authority, including all income, franchise, profits, capital gains, capital stock, transfer, gross receipts, sales, use, transfer, service, occupation, ad valorem, property, excise, severance, windfall profits, premium, stamp, license, payroll, employment, social security, unemployment, disability, environmental (including taxes under Code Section 59A), alternative minimum, add-on, value-added, withholding (including backup withholding) and other taxes, assessments, duties, levies, imposts or other similar charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return), and all estimated taxes, deficiency assessments, additions to tax, additional amounts imposed by any Governmental Authority, penalties and interest, (b) any liability of any Saltville Company for the payment of any amounts of any of the foregoing types as a result of being a member of an affiliated, consolidated, combined or unitary group, or being a party to any agreement or arrangement whereby liability of such Saltville Company for payment of such amounts was determined or taken into account with reference to the liability of any other Person and (c) any liability of any Saltville Company for the payment of any amounts as a result of being a party to any Tax-Sharing Agreement or with respect to the payment of any amounts of any of the foregoing types as a result of any express or implied obligation to indemnify any other Person.

“ Tax Authority ” means any Governmental Authority having jurisdiction over the assessment, determination, collection or imposition of any Tax.

“ Tax Benefit ” means, with respect to a Loss, an amount by which the Tax liability of a Person (or group of corporations filing a Tax Return that includes the Person), with respect to a taxable period, is reduced as a result of such Loss or the amount of any Tax refund or Tax credit that is generated (including, by deduction, loss, credit or otherwise) as a result of such Loss, and any related interest received from any relevant Tax Authority; provided, however , in each case, only the reasonable present value of any Tax Benefit shall be considered with respect to a Loss.

“ Tax Indemnified Party ” has the meaning provided such term in Section 7.3(b).

“ Tax Indemnifying Party ” has the meaning provided such term in Section 7.3(b).

“ Tax Proceeding ” has the meaning provided such term in Section 7.1(f).

“ Tax Returns ” means any report, return, election, document, estimated Tax filing, declaration or other filing provided to any Tax Authority, including any amendments thereto.

“ Tax-Sharing Agreement ” means any existing agreement or arrangement (whether or not written) that is binding on any Saltville Company and regarding the sharing, allocation or payment of Taxes or amounts in lieu of Taxes.

“ Third Party Claim ” has the meaning provided such term in Section 9.3(a).

“ Transmission Approvals ” has the meaning provided such term in Section 3.3.

“ United States ” or “ U.S. ” means United States of America.

 

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Section 1.2 Rules of Construction .

(a) All article, section, schedule and exhibit references used in this Agreement are to articles, sections, schedules and exhibits to this Agreement unless otherwise specified. The schedules and exhibits attached to this Agreement constitute a part of this Agreement and are incorporated herein for all purposes.

(b) If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb). Terms defined in the singular have the corresponding meanings in the plural, and vice versa. Unless the context of this Agreement clearly requires otherwise, words importing the masculine gender shall include the feminine and neutral genders and vice versa. The term “includes” or “including” shall mean “including without limitation.” The words “hereof,” “hereto,” “hereby,” “herein,” “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular section or article in which such words appear.

(c) The Parties acknowledge that each Party and its attorney have reviewed this Agreement and that any rule of construction to the effect that any ambiguities are to be resolved against the drafting Party, or any similar rule operating against the drafter of an agreement, shall not be applicable to the construction or interpretation of this Agreement.

(d) The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.

(e) All references to currency herein shall be to, and all payments required hereunder shall be paid in, Dollars.

(f) All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP.

(g) Any event hereunder requiring the payment of cash or cash equivalents on a day that is not a Business Day shall be deferred until the next Business Day.

(h) References to any Law are references to such Law as it may be amended from time to time, and references to particular provisions of a Law include a reference to the corresponding provisions of any succeeding Law.

ARTICLE II

CONTRIBUTION; CLOSING

Section 2.1 Contribution of Contributed Interests.

(a) At the Closing, upon the terms and subject to the conditions set forth in this Agreement, SE Transmission shall contribute to Spectra MLP, and Spectra MLP shall accept from SE Transmission, the SET Contributed Interests, free and clear of any Liens other than transfer restrictions imposed thereon by securities Laws.

 

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(b) At the Closing, upon the terms and subject to the conditions set forth in this Agreement, MLP GP shall contribute to Spectra MLP, and Spectra MLP shall accept from MLP GP, the MLP GP Contributed Interests, free and clear of any Liens other than transfer restrictions imposed thereon by securities Laws.

Section 2.2 Consideration.

(a) At the Closing, upon the terms and subject to the conditions set forth in this Agreement, in exchange for the SET Contributed Interests, Spectra MLP shall (i) distribute to SE Transmission the SET Common Units and (ii) pay to SE Transmission the Saltville CapEx Reimbursement, which amount shall be payable in cash. For purposes of determining the Saltville CapEx Reimbursement, SE Transmission shall provide a binding good faith estimate of such amount at least ten days prior to the Closing Date.

(b) At the Closing, upon the terms and subject to the conditions set forth in this Agreement, in exchange for the MLP GP Contributed Interests, Spectra MLP shall distribute to MLP GP the MLP GP General Partner Units.

(c) The Parties acknowledge that the transactions described in this Article II are properly characterized as transactions described in Section 721(a) of the Code.

Section 2.3 The Closing.

(a) The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Vinson & Elkins L.L.P., 1001 Fannin, Houston, Texas 77002, commencing at 10:00 a.m. local time on the later of April 1, 2008 and the first day of the month following the date on which all conditions to the obligations of the Parties to consummate the transactions contemplated hereby have been satisfied or waived (other than conditions with respect to actions the Parties shall take at the Closing itself) or such other date as the Parties may mutually determine (the “ Closing Date ”); provided, however , the Closing shall be deemed to have been consummated at 12:30 a.m. Houston, Texas time on the Closing Date (the “ Effective Time ”).

(b) At the Closing, each of SE Transmission and MLP GP will deliver the following documents and deliverables to Spectra MLP:

(i) an assignment or assignments effecting the transfer to Spectra MLP of ownership of all of the Contributed Interests together with certificates, if any, representing the Contributed Interests and such other documentation as is required to admit Spectra MLP as a member of Saltville LLC;

(ii) a certification in the form prescribed by Treasury Regulation Section 1.1445-2(b)(2) to the effect that neither MLP GP’s owner nor SE Transmission is a foreign person;

(iii) the Omnibus Amendment executed by MLP GP LLC and MLP GP;

 

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(iv) the Cross Receipt executed by each of SE Transmission and MLP GP; and

(v) such other certificates, instruments of conveyance and documents as may be reasonably requested by Spectra MLP and agreed to by SE Transmission or MLP GP prior to the Closing Date to carry out the intent and purposes of this Agreement.

(c) At the Closing, Spectra MLP will deliver the following documents and deliverables to SE Transmission or MLP GP, as applicable, or take the following actions:

(i) the Saltville CapEx Reimbursement to SE Transmission by wire transfer of immediately available U.S. federal funds to an account or accounts specified by SE Transmission;

(ii) issue, in certificated or book entry form, to SE Transmission the SET Common Units, and to MLP the MLP GP General Partner Units;

(iii) the Omnibus Amendment executed by Spectra MLP;

(iv) the Cross Receipt executed by Spectra MLP; and

(v) such other certificates, instruments of conveyance and documents as may be reasonably requested by SE Transmission or MLP GP and agreed to by Spectra MLP prior to the Closing Date to carry out the intent and purposes of this Agreement.

Section 2.4 Post-Closing Working Capital Adjustment.

(a) Within 45 days following the Closing Date, SE Transmission shall deliver to Spectra MLP its estimate of Final Net Working Capital.

(b) If Spectra MLP objects to SE Transmission’s estimate, then it must provide a written objection notice, together with its estimate of Final Net Working Capital, to SE Transmission within 30 days after receipt of SE Transmission’s estimate. If no objection is delivered within such 30 days, then SE Transmission’s estimate shall be final and binding.

(c) If Spectra MLP objects in a timely manner and Spectra MLP and SE Transmission are unable to agree upon Final Net Working Capital within 30 days after SE Transmission’s receipt of Spectra MLP’s objection, then such dispute shall be resolved by referring the disputed items relating to such calculation to an independent accounting firm of recognized national standing (the “ Accounting Referee ”) to be selected in the following manner: (i) the Parties shall have seven additional days following the aforementioned 30 day dispute resolution period to mutually agree on the identity of the Accounting Referee or, (ii) if the Parties are unable to agree on an Accounting Referee pursuant to the preceding clause (i), SE Transmission will select three candidates and deliver a written notice containing the names of such candidates to Spectra MLP (in care of the Conflicts Committee) within five days of the expiration of the seven day period referred to in the preceding clause (i) and within five days of receiving such notice, Spectra MLP will select one of such three candidates to serve as the Accounting Referee. The Accounting Referee may not be otherwise engaged by any of SE

 

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Transmission or Spectra MLP, or their respective Affiliates, in connection with the transactions contemplated under this Agreement and may not have performed any material services on behalf of any of MLP GP, SE Transmission or Spectra MLP, or their respective Affiliates, during the two years immediately preceding the date of this Agreement.

(d) The Accounting Referee shall be instructed upon appointment to determine the disputed amounts in the manner provided in this Section 2.4 within 30 days; provided, however , the amount of the Adjustment Amount or Refund Amount, as applicable, determined by the Accounting Referee shall be no greater than the higher amount submitted and no lower than the lower amount submitted. The authority of the Accounting Referee shall be limited to determining the items disputed by Spectra MLP in its original objection that have not since been resolved by the Parties. The Accounting Referee shall have no right or authority to award interest or penalties or to grant or award damages of any kind (including indirect, consequential, punitive or exemplary damages). The determination of the Adjustment Amount or the Refund Amount, as applicable, by the Accounting Referee shall be final and binding on the Parties. The fees and expenses of the Accounting Referee shall be borne equally by Spectra MLP, on one hand, and SE Transmission, on the other hand.

(e) Spectra MLP shall pay to SE Transmission and MLP GP, in proportion to such Party’s ownership of the Saltville Companies prior to this Agreement, an amount in cash equal to the excess, if any, of Final Net Working Capital minus Reference Net Working Capital (the “ Refund Amount ”), or SE Transmission and MLP GP shall pay, in proportion to such Party’s ownership of the Saltville Companies prior to this Agreement, to Spectra MLP an amount in cash equal to the excess, if any, of Reference Net Working Capital minus Final Net Working Capital (the “ Adjustment Amount ”). The Refund Amount or Adjustment Amount, as the case may be, shall be paid by wire or interbank transfer of immediately available funds within 10 days following the agreement by the Parties or the determination by the Accounting Referee of the Final Net Working Capital. To the extent that Spectra MLP makes payment to SE Transmission and MLP GP under this Section 2.4, the Parties agree to characterize such payments for all purposes as a reduction or refund of the net working capital contributed and not as consideration for the transfer of the Contributed Interests.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

RELATING TO SE TRANSMISSION AND MLP GP

Except as disclosed in the Disclosure Schedule, each of SE Transmission and MLP GP, as applicable, hereby jointly and severally represents and warrants to Spectra MLP as follows:

Section 3.1 Organization . It is a limited liability company or limited partnership, as applicable, duly organized, validly existing and in good standing under the Laws of the State of Delaware.

Section 3.2 Authorization; Enforceability. It has all requisite limited liability company or limited partnership power and authority, as applicable, to execute and deliver this Agreement and to perform all obligations to be performed by it hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have

 

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been duly and validly authorized and approved by all requisite limited liability company or limited partnership action, as applicable, on its part, and no other limited liability company or limited partnership proceeding, as applicable, on its part is necessary to authorize this Agreement. This Agreement has been duly and validly executed and delivered by it, and this Agreement constitutes a valid and binding obligation of it, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity.

Section 3.3 No Conflict. The execution and delivery of this Agreement by it and the consummation of the transactions contemplated hereby by it (assuming all required filings, consents, approvals, authorizations and notices set forth in Schedule 3.3 (collectively, the “ Transmission Approvals ”) have been made, given or obtained) do not and shall not:

(a) violate in any material respect any Law applicable to it or Spectra Energy Corp or require of it or Spectra Energy Corp any filing with, consent, approval or authorization of, or notice to, any Governmental Authority;

(b) violate any of its or Spectra Energy Corp’s Organizational Documents; or

(c)(i) breach any material Contract to which it or Spectra Energy Corp is a party or by which it or Spectra Energy Corp may be bound, (ii) result in the termination of any such material Contract, (iii) result in the creation of any Lien upon any of its Contributed Interests or (iv) constitute an event which, after notice or lapse of time or both, would result in any such breach, termination or creation of a Lien upon any of its Contributed Interests.

Section 3.4 Litigation. There are no legal actions before any Governmental Authority or lawsuits pending or, to the Knowledge of Spectra Transmission and MLP GP, as applicable, threatened against it that would adversely affect its ability to perform its obligations under this Agreement, and there are no orders or unsatisfied judgments from any Governmental Authority binding upon it that would adversely affect its ability to perform its obligations under this Agreement.

Section 3.5 Brokers’ Fees. Except as set forth on Schedule 3.5 , no broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other commission in connection with the transactions contemplated by this Agreement based upon arrangements made by it or any of its Affiliates.

Section 3.6 Ownership of Contributed Interests.

(a) It has good and valid title to, holds of record and owns its Contributed Interests free and clear of any Liens other than transfer restrictions imposed thereon by securities Laws.

(b) SE Transmission, as of the date of this Agreement, owns 100% of the equity interests of the Saltville Companies. The Contributed Interests represent 100% of the limited liability company interests in Saltville LLC. With respect to each Saltville Company, there are no outstanding options, warrants, rights or other securities convertible into or

 

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exchangeable or exercisable for equity securities, any other commitments or agreements providing for the issuance of additional equity interests or the repurchase or redemption of equity interests, and there are no agreements of any kind which may obligate any of the Saltville Companies to issue, purchase, redeem or otherwise acquire any of their respective equity interests. Except as set forth in Schedule 3.6(b) , there are no voting agreements, proxies or other similar agreements or understandings with respect to the equity interests of any Saltville Company. All of its Contributed Interests are duly authorized, validly issued and outstanding and fully paid, and were issued free of preemptive rights in compliance with Laws. Upon consummation of the transactions contemplated by this Agreement, Spectra MLP will acquire good and valid title to all of its Contributed Interests, free and clear of any Liens other than transfer restrictions imposed thereon by securities Laws or Liens created by Spectra MLP.

Section 3.7 Investment Representation. It is purchasing the Common Units or General Partner Units, as applicable, for its own account with the present intention of holding such units for investment purposes and not with a view to or for sale in connection with any public distribution of such units in violation of any federal or state securities Laws. It acknowledges that such Common Units or General Partner Units, as applicable, have not been registered under federal and state securities Laws and that such Common Units or General Partner Units, as applicable, may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is registered under federal and state securities Laws or pursuant to an exemption from registration under any federal or state securities Laws.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

RELATING TO THE SALTVILLE COMPANIES

Except as disclosed in the Disclosure Schedule, each of SE Transmission and MLP GP hereby jointly and severally represents and warrants to Spectra MLP as follows:

Section 4.1 Organization of the Saltville Companies. Each of the Saltville Companies is a limited liability company or corporation, as applicable, duly organized, validly existing and in good standing under the Laws of the Commonwealth of Virginia, and has all requisite limited liability company or corporate power and authority, as applicable, to own, operate or lease its properties assets and to conduct the Business as it is now being conducted. Each of the Saltville Companies is duly licensed or qualified in each jurisdiction in which the ownership or operation of its assets or the character of its activities is such as to require it to be so licensed or qualified, except where the failure to be so licensed or qualified would not reasonably be expected to have a Material Adverse Effect on the Saltville Companies. SE Transmission and MLP GP has made available to Spectra MLP true copies of all existing Organizational Documents of the Saltville Companies.

Section 4.2 Enforceability of Merger Agreement. When executed, the Merger Agreement will be duly and validly executed and delivered by the Saltville Companies, and the Merger Agreement will, upon execution, constitute a valid and binding obligation of the Saltville Companies, enforceable against them in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity.

 

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Section 4.3 No Conflict. The execution and delivery of this Agreement by each of SE Transmission and MLP GP and the consummation of the transactions contemplated hereby by SE Transmission and MLP GP (assuming all of the Transmission Approvals have been made, given or obtained) do not and shall not:

(a) violate, in any material respect, any Law applicable to the Saltville Companies or require of the Saltville Companies any filing with, consent, approval or authorization of, or notice to, any Governmental Authority;

(b) violate any Organizational Document of the Saltville Companies; or

(c)(i) breach any Material Contract, (ii) result in the termination of any such Material Contract, (iii) result in the creation of any Lien under any Material Contract or (iv) constitute an event which, after notice or lapse of time or both, would result in any such breach, termination or creation of a Lien.

Section 4.4 Subsidiaries. The Saltville Companies do not own any equity interests in any Person.

Section 4.5 Financial Statements; Records; Undisclosed Liabilities.

(a) Schedule 4.5 sets forth true and complete copies of the standalone unaudited pro forma balance sheets of each Saltville Company and the consolidated unaudited pro forma balance sheet of the Saltville Companies with the adjustments set forth on Schedule 4.5 , in each case as of the Balance Sheet Date (such sheets being the “ Financial Statements ”). The Financial Statements have been prepared in accordance with GAAP, in each case except as otherwise stated in the footnotes and except for normal year-end adjustments and the absence of footnote disclosure, and present fairly in accordance with GAAP, in all material respects, the financial position of the Saltville Companies as of such date.

(b) All liabilities of the Saltville Companies that are required by GAAP to be reflected or reserved against in the Financial Statements have been so reflected or reserved against in the Financial Statements.

Section 4.6 Absence of Certain Changes. Except as disclosed on Schedule 4.6 , from the Balance Sheet Date, (a) there has not been any Material Adverse Effect on the Saltville Companies, (b) the Business of the Saltville Companies has been conducted, in all material respects, only in the ordinary course consistent with past practices, and (c) there has been no damage, destruction or loss to the assets or properties of the Saltville Companies which could reasonably be expected to have a Material Adverse Effect on the Saltville Companies.

 

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Section 4.7 Contracts.

(a) Schedule 4.7(a) contains a true and complete listing of the following Contracts to which any of the Saltville Companies is a party (such Contracts that are required to be listed on Schedule 4.7(a) being “ Material Contracts ”):

(i) each Contract for the transportation or storage of gas;

(ii) each Contract for Indebtedness for Borrowed Money except for any that will be cancelled prior to Closing;

(iii) each Contract involving a remaining commitment by a Saltville Company to pay capital expenditures in excess of $50,000;

(iv) each Contract for lease of personal property involving payments in excess of $50,000 in any calendar year;

(v) each Contract between SE Transmission, MLP GP or an Affiliate of either (other than any of the Saltville Companies) on the one hand, and any of the Saltville Companies, on the other hand, which will survive the Closing;

(vi) each Contract that provides for a limit on the ability of a Saltville Company to compete in any line of business or with any Person or in any geographic area during any period of time after the Closing;

(vii) except for Contracts of the nature described in clauses (ii) through (vi) above, any Contract for the purchase of materials, supplies, goods, services, equipment or other assets that provides for aggregate payments by a Saltville Company of $50,000 or more in any 12 month period;

(viii) any partnership or joint venture agreement (other than the Organizational Documents of the Saltville Companies);

(ix) any Contract pursuant to which any third party has rights to own or use any material asset of a Saltville Company, including any Intellectual Property right of a Saltville Company, other than pursuant to Contracts entered into by the Saltville Companies with such third parties in the ordinary course of business; and

(x) any Contract relating to the acquisition or disposition following the Closing of any business (whether by merger, sale of stock, sale of assets or otherwise) or granting to any Person a right of first refusal, first offer or right to purchase any of the assets of a Saltville Company which right survives the Closing other than Permitted Liens.

(b) True and complete copies of all Material Contracts have been made available to Spectra MLP.

(c) Except as set forth in Schedule 4.7(c) , each Material Contract (other than such Material Contracts with respect to which all performance and payment obligations have

 

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been fully performed or otherwise discharged by all parties thereto prior to the Closing) (i) is in full force and effect and (ii) represents the legal, valid and binding obligation of the Saltville Company that is a party thereto and, to the Knowledge of SE Transmission and MLP GP, represents the legal, valid and binding obligation of the other parties thereto, in each case enforceable in accordance with its terms subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity. Except as set forth in Schedule 4.7(c) , none of the Saltville Companies, or, to the Knowledge of SE Transmission and MLP GP, any other party is in breach of any Material Contract, and none of SE Transmission, MLP GP or any Saltville Company has received any written notice of termination or breach of any Material Contract.

(d) Schedule 4.7(d) lists all of the purchase and sale agreements pursuant to which the Saltville Companies have acquired or disposed of any assets or entities during the prior 24 months other than purchases and disposals of assets in the ordinary course of business. True and correct copies of the documents listed on Schedule 4.7(d) have been made available to Spectra MLP.

Section 4.8 Intellectual Property.

(a) The Saltville Companies own or have the right to use pursuant to license, sublicense, agreement or otherwise all items of Intellectual Property required in the operation of the Business as presently conducted. No third party has asserted against any of the Saltville Companies any written claim that such Saltville Company is infringing the Intellectual Property of such third party, and, to the Knowledge of SE Transmission and MLP GP, no third party is infringing the Intellectual Property owned by any of the Saltville Companies.

(b) All of the Saltville Companies’ Intellectual Property which is required to conduct the Business (as currently being conducted) is listed on Schedule 4.8(b) .

Section 4.9 Litigation. Except as set forth in Schedule 4.9 , (a) there are no legal actions before any Governmental Authority or lawsuits pending or, to the Knowledge of SE Transmission and MLP GP, threatened against any of the Saltville Companies other than lawsuits or actions which could not reasonably be expected to have a Material Adverse Effect and (b) no Saltville Companies is subject to any injunction, order or unsatisfied judgment from any Governmental Authority.

Section 4.10 Taxes. Except as set forth on Schedule 4.10 , with respect to each Saltville Company (a) all Tax Returns required to be filed have been duly and timely filed with the appropriate Tax Authority, and were, when filed, true, correct and complete in all material respects, (b) all Taxes due and owing (whether or not shown as due on any Tax Returns) have been timely paid in full, (c) there are no Liens (other than Permitted Liens) on any of the assets of the Saltville Companies that arose in connection with any failure (or alleged failure) to pay any Tax, (d) there is no claim, action or proceeding pending by any applicable Tax Authority in connection with any Tax ( provided, however , that the foregoing representation is limited to the Knowledge of SE Transmission and MLP GP for periods prior to August 10, 2005), (e) no Tax Returns are now under audit or examination by any Tax Authority ( provided, however , that the

 

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foregoing representation is limited to the Knowledge of SE Transmission and MLP GP for periods prior to August 10, 2005), (f) there are no agreements or waivers providing for an extension of time with respect to the filing of any Tax Returns or the assessment or collection of any such Tax, (g) no written claim has been made by any Tax Authority in a jurisdiction where a Saltville Company does not file a Tax Return that it is or may be subject to taxation in that jurisdiction, (h) no Saltville Company is a party to any Tax-Sharing Agreement, and is not otherwise liable for the Taxes of any other Person (including as a transferee or successor), (i) since its inception, Saltville LLC has been treated either as a partnership or has been disregarded as an entity separate from its owner for federal income tax purposes pursuant to Treasury Regulation Section 301.7701-3(b)(1), (j) no power of attorney that is currently in force has been granted with respect to any matter relating to Taxes that could affect any Saltville Company, (k) no Saltville Company has, during any period for which the statute of limitations for any relevant Tax has not expired, participated in any listed transaction required to be disclosed under Treasury Regulation Section 1.6011-4, and (l) the Saltville Companies have no liability for Taxes of any Person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by Contract, or otherwise.

Section 4.11 Environmental Matters. Except as set forth on Schedule 4.11 or as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect:

(a) the operations of the Saltville Companies are in compliance in all material respects with all Environmental Laws, which compliance includes the possession and maintenance of, and compliance with, all material Permits required under all Environmental Laws;

(b) no Saltville Company is the subject of any outstanding administrative or judicial order or judgment, agreement or arbitration award from any Governmental Authority under any Environmental Laws requiring remediation or the payment of a fine or penalty;

(c) no Saltville Company is subject to any action pending or threatened in writing, whether judicial or administrative, alleging noncompliance with or potential liability under any Environmental Law;

(d) there has been no Release of any Hazardous Substance into the Environment by the Saltville Companies or their assets, operations and the Business except in compliance with applicable Environmental Law ( provided, however , that the foregoing representation is limited to the Knowledge of SE Transmission and MLP GP for periods prior to August 10, 2005); and

(e) there has been no exposure of any Person or property to any Hazardous Substances in connection with the operation of the assets of the Saltville Companies ( provided, however , that the foregoing representation is limited to the Knowledge of SE Transmission and MLP GP for periods prior to August 10, 2005).

Spectra MLP acknowledges that this Section 4.11 shall be deemed to be the only representation and warranty in this Agreement with respect to environmental matters.

 

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Section 4.12 Legal Compliance. Except with respect to (a) matters set forth in Schedule 4.9 (b) compliance with Laws concerning Taxes (as to which representations and warranties are made only pursuant to Section 4.10), (c) compliance with Environmental Laws (as to which representations and warranties are made only pursuant to Section 4.11) and (d) compliance with Permits (as to which representations and warranties are made only pursuant to Section 4.13), the Saltville Companies are in compliance in all material respects with all Laws and, no Saltville Company has received written notice of any violation of any Law relating to the operation of the Business or to any of its assets or operations which could reasonably be expected to have a Material Adverse Effect.

Section 4.13 Permits. Except as set forth in Schedule 4.13 , the Saltville Companies possess all material Permits necessary for them to own their assets and operate the Business as currently conducted. All such Permits are in full force and effect. There are no lawsuits or other proceedings pending or, to the Knowledge of SE Transmission and MLP GP, threatened in writing before any Governmental Authority that seek the revocation, cancellation, suspension or adverse modification thereof. Except as would not reasonably be expected, individually or in the aggregate to have a Material Adverse Effect, such Permits will not be subject to suspension, modification, revocation or non-renewal as a result of the execution, delivery and consummation of the transactions contemplated hereby.

Section 4.14 Insurance. Schedule 4.14 contains a summary description of all material policies of property, fire and casualty, product liability, workers’ compensation and other insurance held by or for the benefit of any of the Saltville Companies as of the date of this Agreement. Except as reflected on Schedule 4.14 , there is no material claim by any Saltville Company pending under any of such policies as to which coverage has been denied or disputed by the underwriters of such policies. All premiums due and payable under such policies have been paid, and the Saltville Companies have complied with the terms and conditions of such written policies. All such insurance policies are in full force and effect. No notice of cancellation of, or indication of an intention not to renew, any such insurance policy has been received by SE Transmission or MLP GP other than in the ordinary course of business.

Section 4.15 Labor Relations; Employees. No Saltville Company (a) is a party to any collective bargaining agreement or other labor union Contract applicable to persons employed by SE Transmission’s or MLP GP’s Affiliates who provide services to a Saltville Company, and, to the Knowledge of SE Transmission and MLP GP, there are no organizational campaigns, petitions or other unionization activities focusing on persons employed by SE Transmission’s or MLP GP’s Affiliates who provide services to a Saltville Company which seeks recognition of a collective bargaining unit, or (b) is subject to any strikes, material slowdowns or material work stoppages pending or, to the Knowledge of SE Transmission and MLP GP, threatened in writing between a Saltville Company and any group of the foregoing employees. No Saltville Company (i) has any employees and (ii) maintains, contributes or is subject to any liability in respect of employee benefit or welfare plan of any nature, including plans subject to ERISA.

Section 4.16 Title to Properties and Related Matters.

(a) The Saltville Companies have (i) good and defensible fee simple title to or valid leasehold interests in all of their real property and (ii) good and valid title to all of their

 

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personal property used in the ordinary conduct of the Business, except (x) for such defects in title as could not, individually or in the aggregate, reasonably be expected to materially and adversely impact the ability of the Companies to conduct the Business and (y) for easements, rights of way and similar property use rights which are addressed in Section 4.16(b), in each