PARTNERSHIP INTEREST AGREEMENT PURCHASE AGREEMENT

Exhibit 10.1

 

PARTNERSHIP INTEREST

PURCHASE AGREEMENT

 

dated as of

 

AUGUST 2, 2005

 

by and between

 

DYNEGY INC.,

 

DYNEGY HOLDINGS INC.,

 

DYNEGY MIDSTREAM HOLDINGS, INC.,

 

and

 

DYNEGY MIDSTREAM G.P., INC.

 

AS SELLERS

 

and

 

TARGA RESOURCES, INC.,

 

TARGA RESOURCES PARTNERS OLP LP,

 

and

 

TARGA MIDSTREAM GP, LLC

 

AS BUYERS

 

Purchase Agreement

TABLE OF CONTENTS

 

 

 

TABLE OF CONTENTS

 

 

 

TABLE OF CONTENTS

(continued)

 

 

 

Exhibits

 

 

PARTNERSHIP INTEREST PURCHASE AGREEMENT

 

This Partnership Interest Purchase Agreement is entered into as of August 2, 2005 by and among Dynegy Inc., an Illinois corporation (“ Dynegy ”), Dynegy Holdings Inc., a Delaware corporation (“ DHI ”), Dynegy Midstream Holdings, Inc., a Delaware corporation (“ DMHI ”), and Dynegy Midstream G.P., Inc., a Delaware corporation (“ DMGP ”, and together with DMHI, “ Sellers ”), and Targa Resources, Inc., a Delaware corporation (“ Targa ”), Targa Resources Partners OLP LP, a Delaware limited partnership (“ OLP ”), and Targa Midstream GP, LLC, a Delaware limited liability company (“ TM ”, and together with OLP, “ Buyers ”).

 

R E C I T A L S

 

WHEREAS, Sellers collectively own all of the outstanding partnership interests (the “ Interests ”) in Dynegy Midstream Services, Limited Partnership, a Delaware limited partnership (the “ Partnership ”);

 

WHEREAS, (i) the Partnership owns (a) all of the outstanding membership interests in each of Midstream Barge Company, L.L.C., a Delaware limited liability company (“ MBC ”), Dynegy Liquids G.P., L.L.C., a Delaware limited liability company (“ DLGP ”), Dynegy Regulated Holdings, LLC, a Delaware limited liability company (“ DRH ”), Dynegy Energy Pipeline Company, L.L.C., a Delaware limited liability company (“ DEPC ”), and Warren Petroleum Company, LLC, a Delaware limited liability company (“ WPC ”), (b) 63% of the outstanding membership interests in Versado Gas Processors, L.L.C., a Delaware limited liability company (“ Versado ”), (c) 99% of the outstanding membership interests in Dynegy Liquids Marketing and Trade, a Delaware general partnership (“ DLMT ”), (d) 88% of the outstanding membership interests in Downstream Energy Ventures Co., L.L.C., a Delaware limited liability company (“ DEVCO ”), (e) 86.24% of the outstanding membership interests in Cedar Bayou Fractionators, LP, a Delaware limited partnership (“ CBF ”), and (f) all of the outstanding capital stock of NCLB Liquids Inc., a British Columbia corporation (“ NCLB ”); (ii) DLGP owns the remaining 1% of the outstanding membership interests in DLMT; (iii) DEVCO owns an additional 2% of the outstanding membership interests in CBF; and (iv) DRH owns all of the outstanding membership interests in each of Dynegy NGL Pipeline Company, LLC, a Delaware limited liability company (“ DNPC ”), Dynegy Intrastate Pipeline, LLC, a Delaware limited liability company (“ DIP ”), and Dynegy OPI, LLC, a Delaware limited liability company (“ DOPI ”) (the Partnership, together with MBC, DLGP, DRH, DEPC, WPC, Versado, DLMT, DEVCO, CBF, NCLB, DNPC, DIP and DOPI are referred to herein collectively as the “ DMS Entities ,” and each is individually referred to herein as a “ DMS Entity ”);

 

WHEREAS, the Partnership owns (a) 22.8958% of the outstanding membership interests in Venice Energy Services Company, LLC, a Delaware limited liability company (“ VESCO ”), and (b) 38.75% of the outstanding partnership interests in Gulf Coast Fractionators, a Texas general partnership (“ GCF ”); and

 

WHEREAS, Sellers desire to sell, and Buyers desire to purchase, all of the outstanding partnership interests of the Partnership for the consideration and on the terms and conditions described herein.

 

Purchase Agreement

A G R E E M E N T

 

In consideration of the premises and mutual promises contained herein and other good and valuable consideration, and intending to be legally bound, the Parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1 Definitions . For all purposes of this Agreement, except as otherwise expressly provided, the following definitions shall apply:

 

“ 2005 Bonus Payment Date ” has the meaning set forth in Section 7.1(d) .

 

“ Abandonment Date ” has the meaning set forth in Section 2.4(a)(4) .

 

“ Absentee List ” has the meaning set forth in Section 7.1(l) .

 

“ Accounting Firm ” means Deloitte & Touche LLP (or, if such firm shall decline or is unavailable or is not, at the time of such submission, independent of each of the Parties, another independent nationally recognized accounting firm mutually acceptable to the Parties).

 

“ Action ” means any action, complaint, petition, investigation, suit or other proceeding before any Governmental Entity.

 

“ Additional Audit Date ” means the date of delivery to Buyers by PriceWaterhouseCoopers LLP of completed and executed audit reports relating to the Additional Financial Information.

 

“ Additional Credit Support Payment ” means any payment actually made or cost actually incurred by Dynegy or its Affiliates (other than the DMS Entities) following the Closing in satisfaction of an underlying obligation of a DMS Entity pursuant to any guaranty, indemnity or keep-well agreement entered into by Dynegy or its Affiliates (other than the DMS Entities) prior to the execution of this Agreement; provided that such underlying obligation of such DMS Entity arises under any of the following (but excluding Cash Collateral and Support Letters of Credit and other pledges of cash collateral or postings of letters of credit or deliveries or maintenance of surety or performance bonds by Dynegy or its Affiliates (other than a DMS Entity)): (i) gathering, processing, treating, fractionation, storage, terminalling, transportation or purchase or sale agreements for natural gas and natural gas liquids or other agreements entered into by the DMS Entities in the ordinary course of business, (ii) Material Contracts made available to Buyers prior to the date hereof, (iii) obligations of the DMS Entities in connection with transactions specifically referenced in the Partnership Financial Statements and (iv) agreements listed on Schedule 1.1(a) ; and provided , further , that any such payment or cost shall constitute an Additional Credit Support Payment to the extent that, and only to the extent that, (1) a DMS Entity or the DMS Entities would have been required to make (taking into consideration applicable defenses, setoffs and offset rights) such payments or incur such costs pursuant to the underlying obligation and (2) none of Buyers or their Affiliates (including the DMS Entities) or any Representative thereof would be entitled to indemnification pursuant to Section 11.1 in respect of the underlying obligation (for purposes of this clause (2), without giving effect to any

 

materiality, Material Adverse Effect, or similar qualifiers, except as otherwise provided in Section 11.1 , and without giving effect to any limitations on indemnification set forth in Section 11.5 ).

 

“ Additional Financial Information ” shall have the meaning set forth in Section 6.9(a) .

 

“ Additional Information Termination Date ” has the meaning set forth in Section 6.9(e) .

 

“ Additional Required Information ” means all information (other than the Required Information) regarding the Partnership as may be reasonably requested by Buyers that would be customarily required for inclusion in an offering memorandum or offering circular for an offering in reliance on Rule 144A under the Securities Act of securities by the Partnership, assuming that any such offering were consummated at the same time during the Partnership’s fiscal year as the offering of debt securities contemplated by the Debt Financing Commitment Letter.

 

“ Adjusted Base Purchase Price ” has the meaning set forth in Section 2.2(b) .

 

“ Adjusted Working Capital ” has the meaning set forth on Exhibit A .

 

“ Affiliate ” means, with respect to a specified Person, a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the specified Person. For the purposes of this definition, “control” means the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise. The Parties hereby agree that for any purpose under this Agreement, (a) Chevron and its Affiliates shall not be deemed to be Affiliates of Dynegy, the DMS Entities or any of their respective Affiliates and (b) the Warburg Pincus Equity Investors, their Affiliates, and all private equity funds or other investment funds or portfolio companies owned or managed by Warburg Pincus or its Affiliates shall not be deemed to be Affiliates of Buyers or their Affiliates.

 

“ Agreement ” means this Partnership Interest Purchase Agreement, as may be amended or supplemented from time to time in accordance with the terms hereof, together with all Exhibits attached hereto and Disclosure Schedules.

 

“ Approval ” means any approval, authorization, consent, qualification or registration, or any extension, modification, amendment or waiver of any of the foregoing (without regard to conditions on or any rights to seek rehearing or appeal thereof) required to be obtained from, or any notice, statement or other communication required to be filed with or delivered to, any Governmental Entity.

 

“ Base Purchase Price ” has the meaning set forth in Section 2.2(a) .

 

“ BI Proceeds ” has the meaning set forth in Section 6.5(b) .

 

“ Business ” means the business of the DMS Entities as conducted by the DMS Entities on the date hereof, consisting of the gathering and processing of natural gas to produce natural gas liquids and pipeline quality natural gas, the fractionation and terminalling of natural gas liquids and the storing, marketing, purchase, sale, distribution and transportation of natural gas and natural gas liquids.

 

“ Business Assets ” has the meaning set forth in Section 3.6(b) .

 

“ Business Day ” means a day (excluding Saturday and Sunday) on which banks generally are open for the transaction of business in New York, New York.

 

“ Business Employees ” has the meaning set forth in Section 3.10(a) .

 

“ Business Segment ” means each of the following two segments of the Business: (i) North Texas Region; and (ii) Downstream Segment.

 

“ Buyer ” or “ Buyers ” has the meaning set forth in the Preamble.

 

“ Buyer Group ” has the meaning set forth in Section 10.2(c) .

 

“ Buyer Parties ” means, collectively, Targa, OLP and TM.

 

“ Buyers’ Proposal ” has the meaning set forth in Section 2.3(a) .

 

“ Buyers Replacement Letter of Credit ” has the meaning set forth in Section 2.4(b)(1) .

 

“ Buyers’ Consent Representatives ” has the meaning set forth in Section 5.2 .

 

“ Buyers’ DC Plan ” has the meaning set forth in Section 7.1(g) .

 

“ Buyers’ Taxes ” means any Tax for any Pre-Closing Taxable Period or Interim Period Tax that would not have been imposed on the DMS Entities or any Seller or Affiliate thereof but for any action taken by the DMS Entities or Buyers after the Closing that is not in the ordinary course of business or is not otherwise contemplated in this Agreement.

 

“ Buyers’ Termination Fee ” means U.S.$65,000,000.

 

“ Canadian Business Employees ” has the meaning set forth in Section 7.1(k)

 

“ Cash Collateral ” has the meaning set forth on Exhibit B .

 

“ Cash Collateral Good Faith Period ” has the meaning set forth in Section 2.4(a)(2) .

 

“ Cash Collateral Undisputed Payment Due Date ” has the meaning set forth in Section 2.4(a)(2) .

 

“ CBF ” has the meaning set forth in the Recitals.

 

“ Chevron ” means Chevron Corporation and its Affiliates (other than Dynegy and its Subsidiaries).

 

“ Closing ” has the meaning set forth in Section 2.5(a) .

 

“ Closing Condition Permitted Liens ” has the meaning set forth in Section 9.2(f) .

 

“ Closing Date ” has the meaning set forth in Section 2.5(b) .

 

“ Closing Purchase Price ” has the meaning set forth in Section 2.2(d) .

 

“ Code ” means the Internal Revenue Code of 1986, as amended.

 

“ Collateral Notice of Objections ” has the meaning set forth in Section 2.4(a)(2) .

 

“ Collateral Written Submission Date ” has the meaning set forth in Section 2.4(a)(2) .

 

“ Compliant ” means, with respect to Required Information provided hereunder by Sellers, that such Required Information does not contain any untrue statement of a material fact regarding the Partnership and its businesses or omit to state a material fact regarding the Partnership and its businesses necessary in order to make such Required Information not misleading, in each case assuming such Required Information is intended to be the information to be used for a public offering of securities by the Partnership (and without taking into account the acquisition of the Partnership by Buyers) pursuant to Regulation S-K and Regulation S-X and a registration statement on Form S-1 (or any applicable successor form) under the Securities Act.

 

“ Confidentiality Agreement ” has the meaning set forth in Section 5.1(a) .

 

“ Contaminants ” means (i) asbestos; (ii) petroleum, polychlorinated biphenyl (“ PCB ”), PCB-containing equipment or materials, lead, pollutants, contaminants, hazardous, corrosive or toxic substances, hazardous waste, waste or pesticides; or (iii) any other substance that is regulated under any applicable Environmental Law with respect to its collection, storage, transportation for disposal, treatment or disposal because of its dangerous or deleterious properties or characteristics.

 

“ Contract ” means any legally binding agreement, arrangement, purchase and sale order, bond, commitment, franchise, indemnity, indenture or lease.

 

“ Debt Financing ” has the meaning set forth in Section 4.5 .

 

“ Debt Financing Commitment Letter ” has the meaning set forth in Section 4.5 .

 

“ DEPC ” has the meaning set forth in the Recitals.

 

“ DEVCO ” has the meaning set forth in the Recitals.

 

“ DHI ” has the meaning set forth in the Preamble.

 

“ DIP ” has the meaning set forth in the Recitals.

 

“ Disclosure Schedules ” means the Disclosure Schedules dated the date of this Agreement and delivered contemporaneously herewith, as they may be supplemented from time to time after the date hereof in accordance with the terms of this Agreement.

 

“ DLGP ” has the meaning set forth in the Recitals.

 

“ DLMT ” has the meaning set forth in the Recitals.

 

“ DMGP ” has the meaning set forth in the Preamble.

 

“ DMHI ” has the meaning set forth in the Preamble.

 

“ DMS Covered Assets and Persons ” has the meaning set forth in Section 6.5(h) .

 

“ DMS Entity ” or “ DMS Entities ” has the meaning set forth in the Recitals.

 

“ DNPC ” has the meaning set forth in the Recitals.

 

“ DOPI ” has the meaning set forth in the Recitals.

 

“ Downstream Segment ” means that portion of the Business that utilizes the following principal assets: Houston Area, Louisiana Area, NGL Marketing, and Wholesale Marketing and Commercial Transportation.

 

“ DRH ” has the meaning set forth in the Recitals.

 

“ Dynegy ” has the meaning set forth in the Preamble.

 

“ Electronic Data Room ” has the meaning set forth in Section 1.2(d) .

 

“ Environmental Laws ” means all Laws relating to pollution or protection of the environment.

 

“ Equity Financing ” has the meaning set forth in Section 4.5 .

 

“ Equity Financing Commitment Letter ” has the meaning set forth in Section 4.5 .

 

“ Equity Securities ” means any capital stock or other equity interest (including partnership interests), any securities convertible into or exchangeable for capital stock or equity interests (including partnership interests), or any other rights, warrants or options to acquire any of the foregoing securities or interests from the issuer thereof.

 

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

 

“ ERISA Affiliate ” means, with respect to any Person, any other Person which, together with such Person, would be treated as a single employer under Section 414 (b) or (c) of the Code.

 

“ Estimated Adjusted Working Capital ” has the meaning set forth in Section 2.2(c) .

 

“ Estimated Cash Collateral ” has the meaning set forth in Section 2.4(a)(1) .

 

“ Final Cash Collateral Amount ” has the meaning set forth in Section 2.4(a)(2) .

 

“ Financing Commitments ” has the meaning set forth in Section 4.5 .

 

“ Final Determination ” means the final resolution of liability for any Tax for a taxable period (i) by IRS Form 870 or 870 AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the laws of other jurisdictions, except that a Form 870 or 870 AD or comparable form that reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund and/or the right of the Taxing Authority to assert a further deficiency shall not constitute a Final Determination, (ii) by an Order entered by a court of competent jurisdiction that has become final and unappealable, (iii) by a closing agreement or accepted offer in compromise under Section 7121 or 7122 of the Code, or comparable agreements under the laws of other jurisdictions, (iv) by any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the Tax imposing jurisdiction, or (v) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the Parties.

 

“ First Report For Work Day ” has the meaning set forth in Section 7.1(l) .

 

“ First Reported Day ” has the meaning set forth in Section 7.1(m) .

 

“ GAAP ” means United States generally accepted accounting principles.

 

“ GCF ” has the meaning set forth in the Recitals.

 

“ GCF Interest ” means the 38.75% percentage interest held by the Partnership in GCF.

 

“ GCF Partnership Agreement ” means the Amended and Restated Partnership Agreement effective December 1, 1992 among Trident NGL, Inc., Liquid Energy Corporation and Conoco Inc.

 

“ GCF ROFR Offer ” has the meaning set forth in Section 2.2(b) .

 

“ GCF Sale Price ” has the meaning set forth in Section 2.2(b) .

 

“ Governmental Entity ” means any government or any agency, bureau, board, commission, court, department, official, tribunal or other instrumentality of any government, whether federal, state, provincial, territorial or local, domestic or foreign, that has, in each case, jurisdiction over the matter in question.

 

“ Hart-Scott-Rodino Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the related regulations and published interpretations.

 

“ Hedging Obligation ” means any (i) financially settled rate or price swap or option transaction, basis swap, equity or equity index swap or option, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or (ii) forward priced sale or purchase of (x) natural gas in excess of 30,000 MMBtu or (y) NGL products in excess of 5,000 Bbls.

 

“ Holdback Amount ” means U.S.$15,000,000.

 

“ Houston Area ” means that portion of the Business that utilizes the following principal assets: the Cedar Bayou Fractionator, the Gulf Coast Fractionator, the Galena Park Marine Terminal, the Mont Belvieu Underground NGL Storage and Terminal Facility and the Houston Area NGL Pipeline Gathering System.

 

“ Identified Representations ” means the following representations and warranties of Sellers contained herein: (i)  Section 3.1(a) , (ii) the first two sentences of Section 3.1(b)(1) , (iii)  Section 3.1(b)(2) , (iv)  Section 3.1(c)(2) , (v)  Section 3.2(a) , (vi) the first two sentences of Section 3.7 , and (vii)  Section 3.16 .

 

“ Included Claims ” has the meaning set forth in Section 11.5(a) .

 

“ Indebtedness ” means for any Person (i) indebtedness for borrowed money, including any obligation to reimburse any bank or other Person in respect of amounts paid or payable under a standby letter of credit; (ii) indebtedness for borrowed money of others secured by a Lien on the property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (iii) capital lease obligations of such Person or (iv) any guarantee with respect to Indebtedness of another Person.

 

“ Indemnifiable Claim ” means any claim of an Indemnifiable Loss for or against which any party is entitled to indemnification under this Agreement.

 

“ Indemnifiable Loss ” means any cost, damage, disbursement, expense, liability, loss, deficiency, penalty or settlement, including any reasonable legal, accounting or other professional fee or expense or amount paid in connection therewith, that is actually imposed on or otherwise actually incurred or suffered by the specified Person.

 

“ Indemnified Party ” means the party entitled to indemnification hereunder.

 

“ Indemnifying Party ” means the party obligated to provide indemnification hereunder.

 

“ Initial Payment ” shall have the meaning set forth in Section 2.4(a)(2) .

 

“ Intellectual Property ” shall mean any (i) invention, patent application, or patent (including all reissues, reexaminations, divisions, continuations and extensions thereof), (ii) trademark, trademark registration, trademark application, service mark, trade name, business name, or brand name, (iii) copyright or copyright registration, and (iv) design, design registration, or trade secret (including confidential information, know-how, formula, process, procedure, research record, record of invention, test information, market survey and marketing know-how) and any right to any of the foregoing.

 

“ Interests ” has the meaning set forth in the Recitals.

 

“ Interim Period ” means, with respect to any Straddle Period, the portion of such Straddle Period that begins on the first day of such Straddle Period and that ends on the Closing Date.

 

“ Interim Period Taxes ” means, with respect to any Straddle Period, Taxes attributable to the Interim Period, which shall be deemed to equal: (i) in the case of Taxes based upon or related to income or receipts, the amount that would be payable if the Straddle Period had ended on the Closing Date and the books of the DMS Entities were closed as of the close of business on such date; (ii) in the case of Taxes imposed on specific transactions or events, Taxes imposed on specific transactions or events occurring on or before the Closing Date; and (iii) in the case of Taxes imposed on a periodic basis, or in the case of any other Taxes not covered by clause (i) or clause (ii), the amount of such Taxes for the entire Straddle Period multiplied by a fraction (a) the numerator of which is the number of calendar days in the Interim Period and (b) the denominator of which is the number of calendar days in the entire Straddle Period.

 

“ IRS ” means the Internal Revenue Service.

 

“ Law ” means any applicable constitutional provision, statute, law, regulation, rule, code, Order or other requirement or rule of law enacted or adopted by a Governmental Entity on or prior to the Closing Date.

 

“ Lien ” means any lien (statutory or otherwise), pledge, mortgage, hypothecation, deed of trust or security interest.

 

“ Louisiana Area ” means that portion of the Business that utilizes the following principal assets: the Lake Charles Fractionator, Hackberry Underground NGL Storage Facility, Hattiesburg Underground NGL Storage Facility, the Lake Charles NGL Pipeline Gathering System (including its distribution system), and the Lake Charles to Mont Belvieu 12 inch NGL Pipeline.

 

“ LTD Determination Date ” has the meaning set forth in Section 7.1(m) .

 

“ Marketing Period ” means the first period of 25 consecutive calendar days commencing on the day after the Marketing Period Trigger Date (i) throughout which (A) Buyers shall have the Required Information (and such Required Information is Compliant), and (B) no event shall occur and no condition shall exist that would cause any of the conditions set forth in Section 9.2(a) and Section 9.2(b) to fail to be satisfied assuming the Closing were to be scheduled for any time during such 25 consecutive calendar day period, and (ii) at the end of which the conditions set forth in Section 9.1 and Section 9.2 shall be satisfied (other than conditions which, by their nature, are to be satisfied on the Closing Date and other than the condition set forth in Section 9.2(h) if, and only if, Buyers shall have failed to comply with Section 5.7 ); provided , that the Marketing Period shall end on any earlier date that is the date on which the Debt Financing is consummated.

 

“ Marketing Period Trigger Date ” means the last day of the Pre-Marketing Period.

 

“ Material Adverse Effect ” means any change, effect, event, occurrence or circumstance (or series of related changes, effects, events, occurrences or circumstances) on the operations, assets or financial condition of the DMS Entities, which, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the DMS Entities, taken as a whole, but excluding any such effect to the extent caused by, results from or arises out of (i) any changes in prices for commodities, goods or services, or the availability or costs of hedges,

 

(ii) without limiting clause (i) above, any set of facts, circumstance, occurrence or condition that is generally applicable to the businesses or industries or markets in which the DMS Entities participate, operate or conduct business or to the United States or global economic conditions or securities or financial markets, but only if the impact of such facts, circumstances, occurrences or conditions on the DMS Entities is not materially disproportionate to the impact on the midstream industry generally, (iii) any set of facts, circumstance, occurrence or condition that is reflected in the Disclosure Schedules as of the date of execution of this Agreement, or (iv) the execution or announcement of this Agreement.

 

“ Material Contract ” has the meaning set forth in Section 3.4 .

 

“ MBC ” has the meaning set forth in the Recitals.

 

“ Midstream Consulting Firm ” means an independent industry recognized midstream consulting firm jointly chosen by the Parties within 30 days after the date hereof (or, if such firm shall decline or is unavailable or is not, at the time of the submission referred to in Section 2.3(a) , independent of each of the Parties, another independent industry recognized midstream consulting firm mutually acceptable to the Parties).

 

“ Midstream Plan ” has the meaning set forth in Section 7.1(b) .

 

“ Multiemployer Plan ” has the meaning set forth in Section 3.10(d) .

 

“ NCLB ” has the meaning set forth in the Recitals.

 

“ NGL ” means natural gas liquids.

 

“ NGL Marketing ” means that portion of the Business that purchases and fractionates unfractionated (“raw”) NGL product, mixed NGLs and spec NGLs from producers and sells fractionated NGL products to petrochemical manufacturers, refiners and other NGL marketers.

 

“ Non-Substituted Support Letter of Credit ” has the meaning set forth in Section 2.4(b)(1) .

 

“ North Texas Region ” means that portion of the Business that utilizes the following principal assets: Chico Gas Processing Plant, Shackelford Gas Processing Plant, and a common gas gathering system connected to both plants.

 

“ OLP ” has the meaning set forth in the Preamble.

 

“ Order ” means any decree, injunction, judgment, order, ruling, assessment or writ issued by a Governmental Entity.

 

“ Other GCF Partners ” means the partners in GCF other than the Partnership.

 

“ Other Party ” has the meaning set forth in Section 8.5 .

 

“ Parties ” means, collectively, the Seller Parties and the Buyer Parties.

 

“ Partnership ” has the meaning set forth in the Recitals.

 

“ Partnership Audited Financial Statements ” means the audited consolidated balance sheets of the Partnership as at December 31, 2003 and December 31, 2004 and the audited consolidated statements of operations and cash flows of the Partnership for the twelve-month periods ended December 31, 2002, December 31, 2003 and December 31, 2004, including any related notes and schedules thereto.

 

“ Partnership Benefit Plans ” has the meaning set forth in Section 7.1(e) .

 

“ Partnership Financial Statements ” means the Partnership Audited Financial Statements and the Partnership Unaudited Financial Statements.

 

“ Partnership Stub Financial Information ” shall have the meaning set forth in Section 6.9(a) .

 

“ Partnership Unaudited Financial Statements ” means the unaudited consolidated balance sheet of the Partnership as at June 30, 2005 and the unaudited consolidated statement of operations and cash flows for the six-month period ended June 30, 2005.

 

“ Payment Breach ” has the meaning set forth in Section 10.1(e) .

 

“ Permian Basin Region ” means that portion of the Business that utilizes the following principal assets: the Versado assets which include the Saunders, Monument and Eunice Processing Plant Complexes; the Sand Hills Plant Complex, the Puckett Gas Gathering System, and the West Seminole Gas Gathering System.

 

“ Permit ” means any license, permit, franchise, certificate of authority or Order and any extension, modification, amendment or waiver of the foregoing, required to be issued by any Governmental Entity.

 

“ Permitted Liens ” means: (i) Liens for current Taxes and assessments not yet due and payable or not yet delinquent, (ii) mechanics’, materialmen’s, carriers’, workers’, repairers’ and inchoate statutory liens and rights in rem and other similar Liens arising or incurred in the ordinary course of business for obligations not yet due or payable or not yet delinquent, (iii) Liens that do not materially interfere with or impair the operation of the Business as currently conducted, (iv) Liens to lenders incurred in deposits made in the ordinary course in connection with maintaining bank accounts, and (v) Liens created by this Agreement, or in connection with the transactions contemplated hereby, or by the actions of Buyers and (vi) Liens listed on Schedule 1.1(b) .

 

“ Person ” means an association, a corporation, an individual, a partnership, a limited liability company, an unlimited liability company, a limited liability partnership, a trust or any other entity or organization.

 

“ Personal Property ” has the meaning set forth in Section 3.6(a) .

 

“ Post-Closing Taxable Period ” has the meaning set forth in Section 8.3(b) .

 

“ Pre-Closing Covenants ” has the meaning set forth in Section 11.4 .

 

“ Pre-Closing Taxable Periods ” has the meaning set forth in Section 8.2(a) .

 

“ Pre-Marketing Period ” means the 45 calendar day period following the delivery of the Required Information that is Compliant; provided that the Pre-Marketing Period shall not commence until two underwriters engaged in connection with the Debt Financing have deemed, to their reasonable satisfaction, the Required Information to be substantially complete; provided further that throughout such Pre-Marketing Period, no event shall occur and no condition shall exist that would cause any of the conditions set forth in Section 9.2(a) and Section 9.2(b) to fail to be satisfied assuming the Closing were to be scheduled for any time during such period; provided further that in the event that, following commencement of the Pre-Marketing Period, Sellers become aware, either by notice from Buyers or otherwise, that any of the information specified in clause (ii) or (iii) of the definition of Required Information is not Compliant, the Pre-Marketing Period shall cease to run, and following the delivery of such corrective information as necessary such that the Required Information, as corrected, is Compliant, the Pre-Marketing Period will recommence and will end upon the date that is the number of days following the date of delivery of such corrected information equal to the greater of (x) the number of days remaining in the Pre-Marketing Period at the time Sellers become aware that the information is not or was not Compliant and (y) 20 days; provided further that in the event that, following commencement of the Pre-Marketing Period, Sellers become aware, either by notice from Buyers or otherwise, that any of the information specified in clause (i) of the definition of Required Information is not Compliant, the Pre-Marketing Period shall be deemed not to have commenced, and following the delivery of such corrective information as necessary such that the Required Information, as corrected, is Compliant, the Pre-Marketing Period will be deemed to have commenced.

 

“ Prime Rate ” means a variable rate of interest per annum equal to the rate of interest from time to time published by the Board of Governors of the Federal Reserve System in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the bank prime loan rate. The Prime Rate also includes rates published in any successor publications of the Federal Reserve System reporting the bank prime loan rate or its equivalent.

 

“ Proposed Working Capital Adjustment ” has the meaning set forth in Section 2.3(a) .

 

“ Proposed Final Cash Collateral ” has the meaning set forth in Section 2.4(a)(2) .

 

“ Purchase Price ” has the meaning set forth in Section 2.2(a) .

 

“ Purchase Price Allocation ” has the meaning set forth in Section 8.1(b) .

 

“ Real Estate Permitted Liens ” means: (i) zoning, building, entitlement and other land use and environmental regulations promulgated by Governmental Entities, (ii) such easements, covenants, conditions, restrictions, agreements, rights of way, Liens and other encumbrances identified in the title reports made available to Buyers and which title reports are listed on Schedule 1.1(c) , (iii) such easements, covenants, conditions, restrictions, agreements, rights-of-way, Liens and other encumbrances which do not materially interfere with or impair the operation of the Business as currently conducted and (iv) subleases to third party tenants and similar use and/or occupancy agreements which are listed on Schedule 1.1(c) .

 

“ Reference Balance Sheet ” means the unaudited consolidated balance sheet of the Partnership at June 30, 2005, a copy of which is attached as Schedule 1.1(d) .

 

“ Release ” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of Contaminants in the environment that (i) is required to be reported to a Governmental Entity under Environmental Laws or (ii) would constitute a violation of any Environmental Law.

 

“ Representative ” means, with respect to any Person, any officer, director, managing member, employee, agent or representative of such Person.

 

“ Required Information ” has the meaning set forth in Exhibit F .

 

“ Reserved Claim ” means the Action referenced as Defense Item 8 on Schedule 3.8 , and any additional actions, proceedings, arbitrations and investigations relating to, arising out of, or connected with the subject matter disclosed therein.

 

“ Responsible Party ” has the meaning set forth in Section 8.5 .

 

“ Retained Excluded Claims ” means the actions, proceedings, arbitrations and investigations referenced as Defense Item 1 on Schedule 3.8 , liabilities and obligations retained by Seller Parties under Section 6.11 , and any additional actions, proceedings, arbitrations and investigations (whether instituted by a Governmental Entity or other Person) relating to, arising out of, or connected with the subject matter and in the case of Defense Item 1 the subject properties disclosed therein.

 

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

 

“ Securities Act ” means the Securities Act of 1933, as amended.

 

“ Segment Financial Information ” shall have the meaning set forth in Section 6.9(a) .

 

“ Seller ” or “ Sellers ” has the meaning set forth in the Preamble.

 

“ Seller Parties ” means, collectively, Dynegy, DHI, DMHI and DMGP.

 

“ Sellers’ Benefit Plans ” has the meaning set forth in Section 3.10(c) .

 

“ Sellers’ Bonus Plans ” has the meaning set forth in Section 7.1(d) .

 

“ Sellers’ Consent Representatives ” has the meaning set forth in Section 5.2 .

 

“ Sellers’ DC Plan ” has the meaning set forth in Section 7.1(g) .

 

“ Sellers’ Insurance Policies ” has the meaning set forth in Section 6.5(a) .

 

“ Sellers’ Records ” has the meaning set forth in Section 6.7 .

 

“ Sellers’ Tax ” has the meaning set forth in Section 8.2(c) .

 

“ Southeast Louisiana Area ” means that portion of the Business that utilizes the following principal assets: the Yscloskey Gas Processing Plant, the VESCO Complex including the offshore gathering systems, and various non-operated gas processing plants in which the Partnership owns undivided interests.

 

“ Southwest Louisiana Area ” means that portion of the Business that utilizes the following principal assets: the Stingray Natural Gas Processing Plant, the Barracuda Natural Gas Processing Plant, the Lowry Natural Gas Processing Plant, the Seahawk Offshore Gas Gathering Pipeline Systems, and Pelican Offshore Gas Gathering Pipeline Systems.

 

“ Specified Cash Collateral ” means, at any time of determination, any Cash Collateral with respect to Chevron or VESCO.

 

“ Specified Representations ” has the meaning set forth in Section 6.4(b) .

 

“ Straddle Periods ” has the meaning set forth in Section 8.2(a) .

 

“ Subsidiary ” means, with respect to any Person, any Person in which such Person has a direct or indirect equity or ownership interest in excess of 50%.

 

“ Support Letters of Credit ” means letters of credit of any kind supporting the credit or facilitating the transactions of any of the DMS Entities in connection with the Business.

 

“ Targa ” has the meaning set forth in the Preamble.

 

“ Tax ” means any tax imposed of any nature, including federal, state, local or foreign net income tax, alternative or add-on minimum tax, profits or excess profits tax, franchise tax, gross income, adjusted gross income or gross receipts tax, employment related tax (including employee withholding or employer payroll tax or FICA), real or personal property tax or ad valorem tax, sales or use tax, excise tax, stamp tax, any withholding or backup withholding tax, value added tax, severance tax, prohibited transaction tax, premiums tax, occupation tax, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Entity responsible for the imposition of any such tax.

 

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

 

“ Tax Refund ” shall mean a refund of Taxes as the result of a Final Determination.

 

“ Tax Return ” means any return, declaration, report or similar statement required to be filed with respect to any Taxes (including any attached schedules), including any information return, claim for refund, declaration of estimated Tax, and any amendment to any of the foregoing.

 

“ TM ” has the meaning set forth in the Preamble.

 

“ Transition Services Agreement ” mean that certain Transition Services Agreement substantially in form and substance as set forth in Exhibit C , to be entered into among Sellers or their Affiliates, the Partnership and Buyers immediately prior to the Closing.

 

“ Undisputed Cash Collateral Amount ” has the meaning set forth in Section 2.4(a)(2) .

 

“ U.S.$ ” means the lawful currency of the United States of America.

 

“ Versado ” has the meaning set forth in the Recitals.

 

“ VESCO ” has the meaning set forth in the Recitals.

 

“ VESCO Audited Financial Statements ” means the audited consolidated balance sheet of VESCO as at December 31, 2002, and the audited consolidated statement of operations and cash flows of VESCO for the twelve-month period ended December 31, 2002, including any related notes and schedules thereto.

 

“ VESCO Business ” means the business of VESCO as conducted by VESCO on the date hereof, consisting principally of the gathering and processing of natural gas to produce natural gas liquids and pipeline quality natural gas, the fractionation of natural gas liquids and the transportation of natural gas and natural gas liquids.

 

“ VESCO Financial Statements ” means the VESCO Audited Financial Statements and the VESCO Unaudited Financial Statements.

 

“ VESCO Interests ” means the 22.8958% percentage interest held by the Partnership in VESCO.

 

“ VESCO Unaudited Financial Statements ” means (i) the unaudited consolidated balance sheet of VESCO as at December 31, 2003 and December 31, 2004, and the unaudited consolidated statement of operations and cash flows of VESCO for the twelve-month periods ended December 31, 2003 and December 31, 2004 and (ii) the unaudited consolidated balance sheet of VESCO as at June 30, 2005 and the unaudited consolidated statement of operations and cash flows for the six-month period ended June 30, 2005.

 

“ VGS ” means Venice Gathering System, LLC, a Delaware limited liability company.

 

“ Warburg Pincus Equity Investors ” means the Warburg Pincus funds that are parties to the Equity Financing Commitment Letter.

 

“ Wholesale Marketing and Commercial Transportation ” means that portion of the Business that utilizes the following principal assets: terminal assets (excluding the Mt. Belvieu Terminal and the VESCO Terminal), owned and leased truck transport fleet, NGL barge fleet and a Chevron owned rail car fleet.

 

“ Working Capital Certificate ” has the meaning set forth in Section 9.2(j) .

 

“ Working Capital Notice of Objections ” has the meaning set forth in Section 2.3(a) .

 

“ Working Capital Written Submission Date ” has the meaning set forth in Section 2.3(a) .

 

“ WPC ” has the meaning set forth in the Recitals.

 

1.2 Certain Definitional and Interpretive Provisions .

 

(a) The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Preamble, Recital, Article, and Section references are to the body of this Agreement unless otherwise specified.

 

(b) All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein shall have the meaning as defined in this Agreement unless the context otherwise requires.

 

(c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. References herein to the singular include, unless the context otherwise requires, references to the plural and vice versa.

 

(d) The phrase “made available” in this Agreement shall mean, with respect to any document, that the document containing the information referred to was actually delivered to the Party or its Representative to whom such information is asserted as having been made available, or such document was actually included in the electronic data room established by Sellers on Intralink (the “ Electronic Data Room ”) in connection with the transactions contemplated hereby and Buyers were actually permitted to enter such Electronic Data Room and access the subject document.

 

(e) When used in this Agreement, the words “include”, “includes” or “including” shall be deemed followed by the words “without limitation”. The meaning of general words herein shall not be limited by specific examples introduced by “such as” or “for example” or other similar expressions unless otherwise specified.

 

(f) References to “the date of this Agreement,” “the date hereof” or words of like import shall mean the date set forth in the Preamble to this Agreement.

 

(g) References to a Person include its successors and permitted assigns.

 

(h) The descriptive headings of the Articles, Sections and subsections of this Agreement are for convenience only and do not constitute a part of this Agreement.

 

(i) Whenever any statement herein or in any Schedule, Exhibit, certificate or other document delivered to any party pursuant to this Agreement is made “to [his, her or its] knowledge” or words of similar intent or effect of any Party or its Representative, the Person making such statement shall be accountable only for those facts, circumstances or events, which as of the date the representation is given, are actually known to the Person making such statement, which with respect to Sellers or the DMS Entities, means the persons identified on Schedule 1.2(i)(1) , and with respect to Buyers, means the persons identified on Schedule 1.2(i)(2) .

 

(j) 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.

 

ARTICLE II

PURCHASE AND SALE; CLOSING

 

2.1 Purchase and Sale . Sellers each agree to sell to Buyers, and Buyers agree to purchase from Sellers, the Interests, free and clear of any and all Liens, for the consideration and on and subject to the terms and conditions of this Agreement.

 

2.2 Purchase Price; Purchase Price Adjustment .

 

(a) Subject to the terms and conditions of this Agreement, the aggregate purchase price for the Interests shall be an amount equal to U.S.$2,350,000,000 (the “ Base Purchase Price ”). The Base Purchase Price is subject to adjustment prior to the Closing pursuant to Section 2.2(b) below and after the Closing pursuant to Sections 2.3 and 2.4(a) below (the Base Purchase Price as so finally adjusted, the “ Purchase Price ”).

 

(b) Not later than five (5) Business Days following the date hereof, Sellers shall cause the Partnership to deliver written notice to the Other GCF Partners offering the entire GCF Interest to the Other GCF Partners in accordance with Section 6.03 of the GCF Partnership Agreement (the “ GCF ROFR Offer ”) at an aggregate sale price of U.S.$40,000,000 (the “ GCF Sale Price ”). In the event the GCF ROFR Offer is accepted by any or all of the Other GCF Partners and the sale of the GCF Interests is consummated prior to the Closing, the Base Purchase Price payable at the Closing will be decreased by the GCF Sale Price (the Base Purchase Price as so adjusted, the “ Adjusted Base Purchase Price ”). Sellers agree to provide Buyers with a copy of the Partnership’s written notice upon delivery to the Other GCF Partners and a copy of the written responses of the Other GCF Partners to the Partnership’s written notice upon receipt thereof.

 

(c) Not less than five (5) Business Days prior to the Closing Date, Sellers will give to Buyers a good faith estimate of the Adjusted Working Capital as of the Closing Date (the “ Estimated Adjusted Working Capital ”). The Estimated Adjusted Working Capital shall be prepared in accordance with GAAP and in a manner consistent with the Reference Balance Sheet and shall be accompanied by a certificate executed on behalf of Sellers by the Chief Executive Officer, President or Chief Financial Officer of one of the Seller Parties; provided , however , that, notwithstanding the foregoing, in determining the Estimated Adjusted Working Capital, the inclusions, exclusions, adjustments and terms set forth on Exhibit A shall be given effect.

 

(d) The Base Purchase Price or Adjusted Base Purchase Price, as the case may be, is herein referred to as the “ Closing Purchase Price .”

 

2.3 Working Capital Adjustment .

 

(a) If Buyers determine that the statements made in the Working Capital Certificate delivered by Sellers at Closing pursuant to Section 9.2(j) were inaccurate in any respect, then, promptly following the Closing Date, but in no event later than sixty days after the Closing Date, Buyers shall prepare and submit to Sellers a certificate executed on behalf of Buyers by the Chief Executive Officer, President or Chief Financial Officer of one of the Buyer Parties dated the date of its delivery, setting forth Buyers’ proposal (“ Buyers’ Proposal ”) for an adjustment in the Purchase Price (the “ Proposed Working Capital Adjustment ”) based upon the failure of Sellers to comply with the cash amount and obligations and standards certified in the Working Capital Certificate (which Buyers’ Proposal shall set forth, in writing and in reasonable detail, a description of the basis upon which Buyers’ conclusion that Sellers have failed to comply is based, together with the Buyers’ calculation of Adjusted Working Capital as of the Closing Date and the Proposed Working Capital Adjustment), provided that in determining the Proposed Working Capital Adjustment, the inclusions, exclusions, adjustments and terms set forth on Exhibit A used in preparing the June 30, 2005 Adjusted Working Capital shall be given effect. If Buyers fail to deliver the Buyers’ Proposal within sixty days after the Closing Date, then Buyers shall be deemed to have accepted Sellers’ Working Capital Certificate. In the event Buyers deliver the Buyers’ Proposal and Sellers dispute the correctness of the Proposed Working Capital Adjustment, Sellers shall notify Buyers in writing of their objections within thirty days after receipt of the Buyers’ Proposal and shall set forth, in writing and in reasonable detail, the reasons for Sellers’ objections (the “ Working Capital Notice of Objections ”). If Sellers fail to deliver the Working Capital Notice of Objections within thirty days after receipt of the Buyers’ Proposal, Sellers shall be deemed to have accepted Buyers’ calculation. If the Proposed Working Capital Adjustment is not disputed or Sellers fail to timely deliver the Working Capital Notice of Objections, then an amount equal to the Proposed Working Capital Adjustment shall be paid by Sellers to Buyers within five (5) Business Days of such event. Sellers and Buyers shall endeavor in good faith to resolve any disputed matters concerning the Proposed Working Capital Adjustment within fifteen days after receipt of Sellers’ Working Capital Notice of Objections. If Sellers and Buyers are unable to resolve the disputed matters, Sellers and Buyers shall refer the disputed matters to the Midstream Consulting Firm on the thirtieth day after receipt of Sellers’ Working Capital Notice of Objections. Sellers and Buyers shall provide written submissions regarding their positions on the disputed matters, which written submissions shall be provided to each other and to the Midstream Consulting Firm no later than fifteen days after the date of referral of the disputed matters to the Midstream Consulting Firm (the “ Working Capital Written Submission Date ”). The determination of the Midstream Consulting Firm shall be based solely on the written submissions by Sellers and Buyers and shall not be by independent review. The Midstream Consulting Firm shall deliver a written report resolving all disputed matters and setting forth the basis for such resolution within thirty days after the Working Capital Written Submission Date. The determination of the Midstream Consulting Firm in respect of the correctness of each matter remaining in dispute shall be conclusive and binding on Sellers and Buyers. The fees and expenses, if any, of the Midstream Consulting Firm retained in accordance with this Section 2.3(a) to resolve any dispute shall be paid one-half by Buyers and one-half by Sellers.

 

(b) If the Midstream Consulting Firm determines that Buyers are entitled to all or some portion of the Proposed Working Capital Adjustment, then Sellers shall pay to

 

Buyers such amount, with simple interest thereon from the Closing Date to the date of payment at a rate per annum equal to the Prime Rate at such time plus 2%. Such payment shall be made in immediately available U.S. dollar funds not later than two Business Days after such determination by the Midstream Consulting Firm by wire transfer to a bank account designated in writing by Buyers.

 

(c) From and after the Closing, Buyers shall, and shall cause their Affiliates (including the DMS Entities) and each of their respective Representatives to, provide reasonable cooperation to Sellers, their Affiliates and each of their respective Representatives in their review of the Proposed Working Capital Adjustment and shall provide Sellers, their Affiliates and each of their respective Representatives reasonable, timely access to the personnel, properties, books and records (including providing upon request both hard and electronic copies of any and all documents (including source documents) and work papers and spreadsheets that were used, directly or indirectly, by Buyers in calculating the Proposed Working Capital Adjustment) of the DMS Entities for such purpose and for the other purposes set forth in this Section 2.3 . From and after the Closing, Sellers shall, and shall cause their Affiliates and each of their respective Representatives to, provide reasonable cooperation to Buyers, their Affiliates and each of their respective Representatives in connection with the review by Buyers of Sellers’ objections to the Proposed Working Capital Adjustment and shall provide Buyers, their Affiliates and each of their respective Representatives reasonable, timely access to the personnel, properties, books and records (including providing upon request both hard and electronic copies of any and all documents (including source documents) and work papers and spreadsheets that were used, directly or indirectly, by Sellers in preparing the Working Capital Notice of Objections) for such purpose and for the other purposes set forth in this Section 2.3 .

 

2.4 Substitutions of Credit Support Obligations .

 

(a) Payment of Cash Collateral .

 

(1) Attached as Schedule 2.4(a)(1) is Sellers’ determination of the Cash Collateral as of June 30, 2005 including the breakdown of such Cash Collateral on an item by item basis. Not less than five (5) Business Days prior to the Closing Date, Sellers shall prepare and submit to Buyers a certificate executed on behalf of Sellers by the Chief Executive Officer, President or Chief Financial Officer of one of the Seller Parties, dated the date of its delivery, setting forth Sellers’ good faith estimate of the outstanding dollar amount of Cash Collateral employed in the Business and an estimated breakdown of such Cash Collateral on an item by item basis as of the close of business on the Closing Date (the “ Estimated Cash Collateral ”). In determining the Estimated Cash Collateral, Sellers shall give effect to the inclusions, exclusions, adjustments and terms set forth on Exhibit B . There shall be no less than U.S.$15,000,000 in Cash Collateral immediately preceding the Closing. The Parties agree that Buyers shall withhold an amount of Cash Collateral equal to the Holdback Amount to be released to Sellers pursuant to Section 2.4(a)(4) .

 

(2) Promptly following the Closing Date, but in no event later than thirty days after the Closing Date, Buyers shall prepare and submit to Sellers a certificate executed on behalf of Buyers by the Chief Executive Officer, President or Chief Financial Officer of one of the Buyer Parties, dated the date of its delivery, setting forth (i) Buyers’

 

calculation of Cash Collateral employed in the Business as of the Closing Date; provided that in determining such calculation of Cash Collateral as of the Closing Date, the inclusions, exclusions, adjustments and terms set forth on Exhibit B shall be given effect (the “ Proposed Final Cash Collateral ”), and (ii) Buyers’ reasonably detailed calculation of the Proposed Final Cash Collateral, which shall include a reconciliation to the Estimated Cash Collateral on an item by item basis. Buyers agree that any adjustments proposed in accordance with the foregoing shall give effect to the inclusions, exclusions, adjustments and terms set forth on Exhibit B and will not involve changes in or challenges to Sellers’ accounting policies, procedures, principles, practices, classifications, estimates, assumptions and methodologies as of June 30, 2005 that were given effect in the calculation of Cash Collateral. In the event Sellers dispute the correctness of the Proposed Final Cash Collateral, Sellers shall notify Buyers in writing of their objections within fifteen days after receipt of the Proposed Final Cash Collateral and shall set forth, in writing and in reasonable detail, the reasons for Sellers’ objections on an item by item basis (the “ Collateral Notice of Objections ”). If Sellers fail to deliver their Collateral Notice of Objections within fifteen days after receipt of the Cash Collateral Statement, Sellers shall be deemed to have accepted Buyers’ calculation (provided that Buyers shall have fully complied with Section 2.4(a)(5) ). Sellers and Buyers shall endeavor in good faith to resolve any disputed matters concerning the Proposed Final Cash Collateral within fifteen days after receipt of Sellers’ Collateral Notice of Objections (such fifteen day period, the “ Cash Collateral Good Faith Period ”). Following the Cash Collateral Good Faith Period, but in no event later than sixty days following the Closing Date (the “ Cash Collateral Undisputed Payment Due Date ”), subject to Section 2.4(a)(4) , Buyers shall pay to Sellers an amount (the “ Initial Payment ”) equal to the amount, if any, by which the Cash Collateral that is not in dispute (the “ Undisputed Cash Collateral Amount ”) exceeds the Holdback Amount, by wire transfer to a bank account designated in writing by Sellers. If Sellers and Buyers are unable to resolve the disputed matters, Sellers and Buyers shall refer the disputed matters to the Accounting Firm on the sixteenth day after receipt of Sellers’ Collateral Notice of Objections. Sellers and Buyers shall provide written submissions regarding their positions on the disputed matters, which written submissions shall be provided to each other and to the Accounting Firm no later than fifteen days after the date of referral of the disputed matters to the Accounting Firm (the “ Collateral Written Submission Date ”). The determination of the Accounting Firm shall be based solely on the written submissions by Sellers and Buyers and shall not be by independent review. The Accounting Firm shall deliver a written report resolving all disputed matters and setting forth the basis for such resolution within thirty days after the Collateral Written Submission Date. The determination of the Accounting Firm in respect of the correctness of each matter remaining in dispute shall be conclusive and binding on Sellers and Buyers. The fees and expenses, if any, of the Accounting Firm retained in accordance with this Section 2.4(a)(2) to resolve any dispute shall be paid one-half by Buyers and one-half by Sellers. The amount of Cash Collateral as of the Closing Date, as finally determined pursuant to this Section 2.4(a)(2) (whether by failure of Sellers to deliver the Collateral Notice of Objections, by agreement of Sellers and Buyers or by determination of the Accounting Firm), is referred to herein as the “ Final Cash Collateral Amount ”.

 

(3) Within five Business Days following the final determination of the Final Cash Collateral Amount pursuant to Section 2.4(a)(2) , Buyers shall pay to Sellers an amount equal to (i) (A) if an Initial Payment was required pursuant to Section 2.4(a)(2) , the Final Cash Collateral Amount less the sum of the Initial Payment and the Holdback Amount or (B) if

 

no Initial Payment was required pursuant to Section 2.4(a)(2) , the Final Cash Collateral Amount less the Holdback Amount, plus (ii) simple interest thereon from the Cash Collateral Undisputed Payment Due Date to the date of payment at a rate per annum equal to the Prime Rate at such time plus 2%, by wire transfer of immediately available U.S. dollar funds to an account designated in writing by Sellers.

 

(4) The Holdback Amount shall be paid to Sellers as follows: (A) an amount equal to U.S.$5,000,000, on the fifth Business Day following the date of delivery to Buyers of all executed representation letters required to be delivered pursuant to Section 6.9(c) and (B) the remaining U.S.$10,000,000, on the fifth Business Day following the earliest to occur of (x) the Additional Audit Date, and (y) the date on which Buyers are no longer actively pursuing the audits of the Additional Financial Information (the “ Abandonment Date ”), in each case, by wire transfer of immediately available U.S. dollar funds to an account designated in writing by Sellers; provided , however , that no payment shall be required pursuant to clause (B) if the Abandonment Date occurs and Seller Parties are in breach of their obligations pursuant to Section 6.9 in any material respect. Each payment pursuant to this Section 2.4(a)(4) shall include simple interest on the amount of the payment calculation from the Cash Collateral Undisputed Payment Due Date to the date of payment at a rate per annum equal to the Prime Rate at such time plus 2% by wire transfer of immediately available U.S. dollar funds to an account designated in writing by Sellers; provided , however , that no such interest shall be payable with respect to any period during which Sellers are in breach of their obligations pursuant to Section 6.9 in any material respect.

 

(5) From and after the Closing, Buyers shall, and shall cause their Affiliates (including the DMS Entities) and each of their respective Representatives to, provide reasonable cooperation to Sellers, their Affiliates and each of their respective Representatives in their review of the Proposed Final Cash Collateral and shall provide Sellers, their Affiliates and each of their respective Representatives reasonable, timely access to the personnel, properties, books and records (including providing upon request both hard and electronic copies of any and all documents (including source documents) and work papers and spreadsheets that were used, directly or indirectly, by Buyers in calculating the Proposed Final Cash Collateral) of the DMS Entities for such purpose and for the other purposes set forth in this Section 2.4(a) . From and after the Closing, Sellers shall, and shall cause their Affiliates and each of their respective Representatives to, provide reasonable cooperation to Buyers, their Affiliates and each of their respective Representatives in connection with the review by Buyers of Sellers’ objections to the Proposed Final Cash Collateral and shall provide Buyers, their Affiliates and each of their respective Representatives reasonable, timely access to the personnel, properties, books and records (including providing upon request both hard and electronic copies of any and all documents (including source documents) and work papers and spreadsheets that were used by Sellers, directly or indirectly, in preparing the Collateral Notice of Objections) for such purpose and for the other purposes set forth in this Section 2.4(a) .

 

(b) Substitution of Letters of Credit .

 

(1) Schedule 2.4(b) sets forth the Support Letters of Credit provided, in whole or in part, by Dynegy, DHI or their Affiliates (other than the DMS Entities) for the benefit of the Business as of the date hereof. Buyers shall use commercially reasonable efforts to

 

cause themselves or one or more of their Affiliates to be substituted, effective as of the Closing Date, in all respects for Dynegy, DHI or one or more of their Affiliates, as the case may be, in respect of all obligations of Sellers or any of their Affiliates under each and every Support Letter of Credit outstanding as of the Closing Date and shall use commercially reasonable efforts to cause Dynegy, DHI, and each of their Affiliates, as the case may be, to be forever released and discharged from all obligations under any such Support Letter of Credit. If Buyers are unable to timely effect such substitution with respect to any Support Letter of Credit outstanding as of the Closing Date (each such Support Letter of Credit, a “ Non-Substituted Support Letter of Credit ”), then Buyers will, effective as of the Closing Date, assume all obligations of Sellers or any of their Affiliates under each and every Non-Substituted Support Letter of Credit and obtain a letter of credit for the benefit of Dynegy, DHI or one or more of their Affiliates, on terms and from a financial institution reasonably satisfactory to Sellers, with respect to the obligations of Dynegy, DHI, and each of their Affiliates under each such Non-Substituted Support Letter of Credit (the “ Buyers Replacement Letter of Credit ”).

 

(2) In addition, from and after the Closing Date, Buyers shall continue to use commercially reasonable efforts to cause themselves or one of more of their Affiliates to be substituted in all respects for Dynegy, DHI or one or more of their Affiliates, as the case may be, in respect of all obligations of Sellers or any of their Affiliates under each Non-Substituted Support Letter of Credit. If any Non-Substituted Support Letter of Credit remains outstanding ninety days after the Closing Date, then Buyers agree to promptly post cash collateral in the amount of and in respect of the Non-Substituted Support Letter of Credit, provided that the aggregate amount of cash collateral which Buyers will be obligated to post under this Section 2.4(b)(2) will not exceed U.S.$15,000,000.

 

(c) Additional Credit Support Payments . Buyers shall indemnify and hold harmless Dynegy and its Affiliates from and against any Additional Credit Support Payments.

 

2.5 The Closing .

 

(a) Unless this Agreement shall have been terminated pursuant to Article X , the transactions contemplated by this Agreement shall take place, subject to the terms and conditions contained herein, at a closing (the “ Closing ”) to be held at the offices of O’Melveny & Myers LLP, Times Square Tower, Seven Times Square, New York, New York, or at such other location as may be agreed upon in writing by Sellers and Buyers.

 

(b) The Closing shall take place on the date on which the conditions to the transactions contemplated by this Agreement contained in Article IX shall have been satisfied or waived (other than conditions which, by their nature are to be satisfied on the Closing Date) (the date on which the Closing occurs is herein referred to as the “ Closing Date ”); provided , however , that except as otherwise agreed in writing by Buyers and Sellers, the Closing shall not take place on any day other than September 30, 2005, October 31, 2005, November 30, 2005 or any day thereafter; provided further , however , that notwithstanding the satisfaction or waiver of the conditions set forth in Article IX , Buyers shall not be required to effect the Closing until the earlier of (i) a date during the Marketing Period specified by Buyers on no less than three (3) Business Days’ notice to Sellers and (ii) the final day of the Marketing Period; provided further , however , that notwithstanding the satisfaction or waiver of the conditions set forth in Article IX ,

 

22

Buyers shall not be required to effect the Closing, and this Agreement may be terminated pursuant to and in accordance with Section 10.1 , in the event the final day of the Marketing Period shall not have occurred before such termination. In the event that the Closing is to occur in December other than on December 31, the Parties will cooperate in good faith to establish a mutually agreeable date of Closing and procedures relating thereto. The Parties agree that Closing shall be deemed to occur for all purposes (other than Tax, employee benefits, payroll and accounting matters) immediately following the receipt by Sellers of the Closing Purchase Price. For purposes of Tax, employee benefits, payroll and accounting matters, the Closing shall be deemed to have occurred at 11:59 p.m., Houston, Texas time, on the Closing Date. Notwithstanding anything to the contrary contained herein, no Party shall have the obligation to effect the Closing if the conditions to such Party’s obligation to do so set forth in Article IX have not been satisfied or waived at the Closing.

 

(c) All proceedings to be taken and all documents to be executed and delivered by all Parties at the Closing shall be deemed to have been taken and executed simultaneously, and no proceedings shall be deemed taken nor any documents executed or delivered until all have been taken, executed and delivered.

 

2.6 Closing Procedures and Deliveries .

 

(a) At the Closing, Seller Parties shall deliver, or shall cause to be delivered, to Buyer Parties, the following:

 

(1) an Assignment of Interests in the form of Exhibit D in favor of Buyers;

 

(2) the certificate referred to in Section 9.2(c) ;

 

(3) the resignations referred to in Section 9.2(d) ;

 

(4) if not previously delivered, the consents and releases referred to in Sections 9.2(e) and 9.2(f) ;

 

(5) the certificate referred to in Section 9.2(j) ; and

 

(6) the Transition Services Agreement, duly executed by Dynegy Marketing and Trade, a Colorado general partnership and any other required Dynegy Affiliates.

 

(b) At the Closing, Buyer Parties shall deliver, or shall cause to be delivered, to Seller Parties, the following:

 

(1) the wire transfer of immediately available U.S. dollar funds in the amount of the Closing Purchase Price;

 

(2) the certificate referred to in Section 9.3(c) ;

 

(3) written confirmation that all Approvals required under the Hart-Scott-Rodino Act have been obtained and notices required under the Hart-Scott-Rodino Act have been given;

 

(4) the Buyers Replacement Letter of Credit, if any; and

 

(5) the Transition Services Agreement, duly executed by Buyers.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES

 

Seller Parties represent and warrant, jointly and severally, to Buyers as follows:

 

3.1 Organization and Related Matters; Interests .

 

(a) Seller Parties .

 

(1) Each Seller Party is a corporation duly incorporated, validly existing and in good standing under the laws of its respective jurisdiction of incorporation. Each Seller Party has all necessary corporate power and authority to execute, deliver and perform this Agreement.

 

(2) Sellers collectively own, beneficially and of record, all of the issued and outstanding Interests. Other than the Interests, there are no outstanding Equity Securities of the Partnership. Except as set forth on Schedule 3.1(a)(2) , the Interests are owned by Sellers, free and clear of any Lien. The Interests are duly authorized, validly issued and outstanding and are fully paid and nonassessable.

 

(b) DMS Entities .

 

(1) Each of the DMS Entities is duly formed or organized, validly existing and in good standing, as applicable, under the laws of its respective state of formation or organization. Each DMS Entity has all necessary power and authority to own its properties and assets and to carry on its business as now conducted. Each DMS Entity is duly qualified, as applicable, to do business in all jurisdictions in which the nature of its business requires it to be so qualified, except where the failure to be so qualified does not constitute a Material Adverse Effect.

 

(2) Except as set forth on Schedule 3.1(b) , no DMS Entity holds any Equity Securities in any Person. Except as set forth on Schedule 3.1(b) , there are no other outstanding Equity Securities of the DMS Entities authorized, issued or outstanding or reserved for any purpose. Except as set forth on Schedule 3.1(b) , all outstanding Equity Securities set forth on Schedule 3.1(b) as being outstanding and held by the DMS Entities are owned by the DMS Entities free and clear of any Lien and are duly authorized, validly issued and outstanding and are fully paid and nonassessable. Except as contemplated hereby or set forth on Schedule 3.1(b), there are no outstanding Contracts or other rights to subscribe for or purchase, or Contracts or other obligations to issue or grant any rights to acquire, any Equity Securities of the DMS Entities. Except as contemplated hereby or set forth on Schedule 3.1(b), there are no

 

outstanding Contracts of the DMS Entities to repurchase, redeem or otherwise acquire, or affecting the voting rights of, or requiring the registration for sale of, any Equity Securities of the DMS Entities. Except as set forth on Schedule 3.1(b) , there are no preemptive rights in respect of any Equity Securities of the DMS Entities.

 

(c) VESCO .

 

(1) To the knowledge of Sellers, VESCO is duly formed or organized, validly existing and in good standing, as applicable, under the laws of its respective state of formation or organization. To the knowledge of Sellers, VESCO has all necessary power and authority to own its properties and assets and to carry on its business as now conducted. To the knowledge of Sellers, VESCO is duly qualified to do business in all jurisdictions in which the nature of its business requires it to be so qualified, except where the failure to be so qualified does not constitute a Material Adverse Effect.

 

(2) Except for VGS, to the knowledge of Sellers, VESCO does not hold any Equity Securities in any Person. Except as set forth on Schedule 3.1(c) , to the knowledge of Sellers, there are no other outstanding Equity Securities of VESCO authorized, issued or outstanding or reserved for any purpose. Except as contemplated hereby or set forth on Schedule 3.1(c) , to the knowledge of Sellers, there are no outstanding Contracts or other rights to subscribe for or purchase, or Contracts or other obligations to issue or grant any rights to acquire, any Equity Securities of VESCO. Except as contemplated hereby or set forth on Schedule 3.1(c) , to the knowledge of Sellers, there are no outstanding Contracts of VESCO to repurchase, redeem or otherwise acquire, or affecting the voting rights of, or requiring the registration for sale of, any Equity Securities of VESCO. Except as set forth on Schedule 3.1(c) , to the knowledge of Sellers, there are no preemptive rights in respect of any Equity Securities of VESCO.

 

3.2 Financial Statements; Absence of Changes and Undisclosed Liabilities .

 

(a) The Partnership Financial Statements and VESCO Financial Statements that are attached hereto as Schedules 3.2(a)(i) and 3.2(a)(ii) , respectively, were prepared from the books and records of the Partnership and VESCO, respectively, in accordance with GAAP applied on a consistent basis (other than as set forth therein and subject to, in the case of the Partnership Unaudited Financial Statements and VESCO Financial Statements, any normal year-end adjustments and, with respect to the Partnership Unaudited Financial Statements and VESCO Unaudited Financial Statements, the absence of footnotes) and present fairly, in all material respects, the financial condition, results of operations and cash flows of the Partnership and VESCO, respectively, as of the dates thereof and for the periods indicated therein. Additional quarterly financial statements of the Partnership and footnotes provided pursuant to Section 5.9 , when delivered, will be prepared from the books and records of the Partnership in accordance with GAAP applied on a consistent basis (other than as set forth therein and subject to, in the case of any such quarterly unaudited financial statements, any normal year-end adjustments) and will present fairly, in all material respects, the financial condition, results of operations and cash flows of the Partnership as of the dates thereof and for the periods indicated therein.

 

(b) Except as set forth on Schedule 3.2(b) , since December 31, 2004, there has not been a Material Adverse Effect.

 

(c) Neither the Partnership nor VESCO has incurred any liabilities that would be required in accordance with GAAP to be disclosed in a balance sheet of the Partnership or VESCO, respectively, or the notes thereto, except liabilities which: (i) are disclosed or reserved against on the Partnership Audited Financial Statements or VESCO Audited Financial Statements, respectively, (ii) were incurred after December 31, 2004 in the ordinary course of business and that do not materially and adversely impact the Business or the VESCO Business, (iii) have been discharged or paid in full or will be discharged or paid in full prior to the Closing Date in the ordinary course of business, or (iv) are set forth on Schedule 3.2(c) .

 

3.3 Tax Returns .

 

(a) Except as set forth on Schedule 3.3(a) , all Tax Returns required to be filed on or prior to the Closing Date by or on behalf of the DMS Entities have been or will be filed prior to the Closing Date and are complete and accurate in all respects, and all Taxes due or claimed to be due have been or will be paid prior to the Closing Date.

 

(b) There are no Liens with respect to any Taxes upon any of the assets or properties of the DMS Entities, other than with respect to Taxes not yet due and payable.

 

(c) Except as set forth on Schedule 3.3(c) , no audit or other proceeding by any Governmental Entity has formally commenced and no written notification has been given to the DMS Entities that such an audit or other proceeding is pending or threatened with respect to any Taxes due from any of the DMS Entities or any Tax Return filed by or with respect to any of the DMS Entities for any Taxes. Except as set forth on Schedule 3.3(c) , no assessment of Tax has been proposed in writing against any of the DMS Entities or any of its assets or properties. Except as set forth on Schedule 3.3(c) , no waiver or extension of any statute of limitations is in effect with respect to Taxes or Tax Returns of any of the DMS Entities.

 

(d) Neither Seller is a “foreign person” (as that term is defined in Section 1445 of the Code).

 

(e) Except as set forth on Schedule 3.3(e) , each of the DMS Entities (other than NCLB) has been classified for federal tax purposes from its inception as either a partnership or an entity disregarded as separate from its owner.

 

(f) Each of the DMS Entities that is classified as a partnership for federal income tax purposes has in effect an election under Section 754 of the Code.

 

(g) The assets of each of the DMS Entities have been properly listed and described on the property tax rolls for the taxing units in which such assets are located and no portion of such assets constitutes omitted property for property tax purposes.

 

(h) No DMS Entity is a party to any ordinary course, stand alone Tax, allocation or sharing agreement that would require it to make any Tax related payments to any non DMS Entity.

 

(i) None of the assets of any of the DMS Entities is held in an arrangement (other than a DMS Entity) that could be classified as a partnership for federal tax purposes.

 

(j) None of the property of any of the DMS Entities is “tax exempt use property” (within the meaning of Section 168(h) of the Code) or “tax exempt bond financed property” (within the meaning of Section 168(g)(5) of the Code).

 

3.4 Material Contracts . Schedule 3.4(i) contains a list, as of the date of this Agreement, of the Contracts (each a “ Material Contract ”) to which any of the DMS Entities are a party:

 

(a) that account for, in the aggregate, at least 40% (or 65% in the case of the North Texas Region) of total revenues (other than revenues received under Contracts with Chevron) for calendar year 2004 for each of the following individual Business units: (i) Permian Basin Region, (ii) North Texas Region, (iii) Southwest Louisiana Area, and (iv) Southeast Louisiana Area;

 

(b) that account for, in the aggregate, at least 40% (or 65% in the case of the North Texas Region) of total revenues (other than revenues received under Contracts with Chevron) for the first calendar quarter of 2005 for each of the following individual Business units: (i) Permian Basin Region, (ii) North Texas Region, (iii) Southwest Louisiana Area, and (iv) Southeast Louisiana Area;

 

(c) under which a DMS Entity received at least U.S.$10,000,000 in the aggregate under a Contract during the first two calendar quarters of 2005 for each of the following individual Business units: (i) Louisiana Area Assets, (ii) Houston Area Assets, (iii) Wholesale Marketing and Commercial Transportation, and (iv) NGL Marketing;

 

(d) that has Chevron as a counterparty and involved payments received or payments made (x) for the period from January 1, 2004 through March 31, 2005 in excess of U.S.$5,000,000 in the aggregate for the following Business units taken as a whole: (i) Permian Basin Region, (ii) North Texas Region, (iii) Southwest Louisiana Area, and (iv) Southeast Louisiana Area, and (y) for the period from January 1, 2005 through June 30, 2005 in excess of U.S.$5,000,000 in the aggregate for the following Business units taken as a whole: (i) Louisiana Area Assets, (ii) Houston Area Assets, (iii) Wholesale Marketing and Commercial Transportation, and (iv) NGL Marketing;

 

(e) that create a partnership, limited liability company or joint venture;

 

(f) that create or cause the incurrence or assumption of Indebtedness (other than pursuant to lease obligations or Contracts or arrangements between or among DMS Entities);

 

(g) for the lease of personal property involving aggregate payments in excess of U.S.$250,000 in any calendar year;

 

(h) for the lease of real property used in the Business involving aggregate payments in excess of U.S.$50,000 in any calendar year;

 

(i) that are employment Contracts, or severance, retention or bonus arrangements, in each case other than (x) under any employee or other benefit plans and (y) Contracts or severance, retention or bonus arrangements the obligations of which will not be assumed by Buyers, retained by the DMS Entities after the Closing Date or otherwise give rise to any liability or obligations of the Buyers or the DMS Entities from and after the Closing Date;

 

(j) that has any Seller Party or any Affiliate of a Seller Party (other than a DMS Entity) as a counterparty, identifying those Contracts that will survive the Closing and those that will terminate on or prior to the Closing;

 

(k) that, to the knowledge of Sellers, provides for a limit on the ability of a DMS Entity to compete in any line of business with any Person or in any geographic area during any period of time after the Closing; and

 

(l) under which the DMS Entities made payment in excess $10,000,000 during fiscal year 2004, other than Contracts for purchases and sales of commodities in the ordinary course relating to the gathering, processing, fractionating, terminalling, and transporting of natural gas to produce natural gas and natural gas liquids.

 

Notwithstanding the provisions of Sections 3.4(a)-(l) , Material Contracts shall be deemed not to include the Contracts referred to in Section 3.10 or set forth on Schedules 3.10(b) , (c) , (d)  or (i) .

 

Except as set forth on Schedule 3.4(i), as of the date hereof, (i) each Material Contract is valid, binding, in full force and effect, and enforceable by the applicable DMS Entity in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws or equitable principles relating to or affecting the rights of creditors generally; (ii) the DMS Entities are not in default thereunder in any material respect and have not received written notice alleging a material default or a material breach under any such Material Contract (other than notices of default or breach that have been rescinded or with respect to defaults or breaches that have been cured or waived); (iii) the DMS Entities have not modified any of the material terms thereof and (iv) to the knowledge of Sellers, no other party to any Material Contract is in breach or default in any material respect thereunder. True copies of the Material Contracts, including all substantive amendments, waivers and modifications thereto, have been made available to Buyers, except for those Material Contracts identified on Schedule 3.4(i) as not having been made available to Buyers.

 

Schedule 3.4 (ii)  sets forth, as of the date hereof, each Hedging Obligation of the DMS Entities.

 

3.5 Real Property .

 

(a) The DMS Entities have good and marketable title, free and clear of all Liens, to all material real property, owned by, and a valid leasehold interest in all material real property leased by, the DMS Entities, except (a) Permitted Liens and (b) Real Estate Permitted Liens. Schedule 3.5 contains a list, as of the date of this Agreement, of all real property owned in fee by any DMS Entity.

 

(b) To the knowledge of Sellers, (i) the DMS Entities at and immediately following the Closing will have all material easements, rights of way, licenses and use

 

agreements necessary to conduct the Business (as the Business was conducted throughout the period from December 31, 2004 through the date hereof) and (ii) at and immediately following the Closing, there will not be any gaps, defects or deficiencies in the easements, rights of way, licenses and use agreements used in the Business that would, individually or in the aggregate, materially impair or disrupt the conduct of the Business (as the Business was conducted throughout the period from December 31, 2004 through the date hereof).

 

3.6 Personal Property; Sufficiency of Assets .

 

(a) The DMS Entities have good and valid title to, an adequate and valid leasehold interest in, or other right to use all of the tangible assets and properties (other than real property, which is addressed in Section 3.5 ) that are reflected in the balance sheet dated December 31, 2004 included in the Partnership Financial Statements or were acquired since December 31, 2004 (the “ Personal Property ”), except for Personal Property disposed of since December 31, 2004 in the ordinary course of business and except as disclosed on Schedule 3.11 .

 

(b) Except as set forth on Schedule 3.6(b) , the real property, Personal Property, Material Contracts, Intellectual Property, and Permits (the “ Business Assets ”) owned, leased, held or licensed by the DMS Entities constitute substantially all of the real property, Personal Property, Material Contracts, Intellectual Property, and Permits used by the DMS Entities in the conduct of the Business as conducted as of the date hereof, except assets and properties that may be necessary to the conduct of the Business as of the date hereof and that (i) are listed on Schedule 3.6(b) and will be transferred to the DMS Entities on or prior to the Closing Date, or (ii) will be provided or otherwise made available to the DMS Entities or Buyers on or after the Closing Date, including pursuant to the Transition Services Agreement. The Business Assets (including the assets and properties on Schedule 3.6(b) which, for the avoidance of doubt, are not being sold to Buyers pursuant to this Agreement unless otherwise provided) constitute such assets and rights as are sufficient to enable Buyers and the DMS Entities to conduct the Business as conducted from December 31, 2004 through date hereof from and after the Closing in substantially the same manner as it was conducted during such period, except (x) for assets that will be transferred to the DMS Entities on or prior to the Closing Date, (y) for assets and properties disposed of, eliminated, consumed, transferred, replaced or conveyed since December 31, 2004 in the ordinary course of business, and (z) as disclosed on Schedule 3.11 .

 

3.7 Authorization; No Conflicts . The execution, delivery and performance by Seller Parties of this Agreement have been duly and validly authorized by the Board of Directors of each Seller Party and by all other necessary corporate action on the part of each Seller Party. This Agreement constitutes a legally valid and binding obligation of each Seller Party enforceable against each Seller Party in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws and equitable principles relating to or limiting creditors’ rights generally. Except for matters identified on Schedule 3.7 , any Approvals set forth on Schedule 9.1(b) and any consents set forth on Schedule 9.2(e) , the execution and delivery by each Seller Party of this Agreement and performance by Sellers and the DMS Entities of the transactions contemplated by this Agreement will not (i) violate, or constitute a breach or default (whether upon lapse of time and/or the occurrence of any act or event or otherwise) under, the charter documents, by-laws or other organizational documents, as applicable, of the Seller Parties or the DMS Entities or

 

(ii) materially violate, or constitute a material breach or default (whether upon lapse of time and/or the occurrence of any act or event or otherwise) under any Material Contract, (iii) result in the imposition of any Lien against any material assets or properties of the DMS Entities, (iv) materially violate any Law, or (v) require any material Approvals or consents to be obtained.

 

3.8 Actions . There is no Order or Action pending or, to the knowledge of Sellers, threatened in writing against Sellers or any of their Affiliates that seeks to enjoin the consummation of the transactions contemplated herein. Schedule 3.8 sets forth a list as of the date hereof of all pending or, to the knowledge of Sellers, threatened Actions in which any of the DMS Entities is a party.

 

3.9 Compliance with Law . Except as set forth on Schedule 3.9 , each of the DMS Entities is, and, to the knowledge of Sellers, VESCO is, in compliance in all material respects with all Laws. To the knowledge of Sellers, there are no investigations or reviews pending or threatened by any Governmental Entity relating to any alleged violation of Law arising out of the operation of the Business. It is the intent of the Parties that this representation and warranty is not applicable to matters relating to Taxes, employees and employee benefit matters or environmental matters, which are the subject of Sections 3.3 , 3.10 and 3.12 , respectively.

 

3.10 Employees and Employee Benefit Matters .

 

(a) Schedule 3.10(a) sets forth a list as of the date hereof of all employees employed by the DMS Entities and each other employee whose duties relate primarily to the Business by name, position or job title, rate of pay and date of hire, but excluding any such employees who, as of the date hereof, are receiving long-term disability benefits under any of Sellers’ Benefit Plans or who have applied for such benefits due to a disability under such plans but are awaiting a determination as to their eligibility therefor (such list as may be modified as provided below, “ Business Employees ”). Business Employees shall not include any former employees of Sellers or their Affiliates. The information set forth on Schedule 3.10(a) shall be updated as of the Closing Date to include Business Employees hired, in the ordinary course of business, after the date hereof and to delete Business Employees who are no longer employed in the Business as of the Closing Date, and to reflect any changes with respect to long-term disability status as described above between the date hereof and the Closing Date.

 

(b) As of the date hereof, neither the DMS Entities nor Sellers are a party to any current labor or collective bargaining agreement with respect to the Business Employees. Except as set forth on Schedule 3.10(b) , as of the date hereof, (i) to the knowledge of Sellers, there are no union organizing efforts with respect to the Business Employees; (ii) there are no strikes, work stoppages or slowdowns pending or, to the knowledge of Sellers, threatened against the DMS Entities; (iii) the DMS Entities are not a party to any contract of employment with a Business Employee that cannot be terminated at no expense to the DMS Entities (other than expenses incurred pursuant to Sellers’ Benefit Plans); (iv) there are no Actions against the DMS Entities pending or, to the knowledge of Sellers, threatened to be brought or filed against the DMS Entities with any Governmental Entity in connection with the employment by the DMS Entities of the Business Employees; and (v) the DMS Entities are currently in compliance in all material respects with all Laws relating to employment and employment practices.

 

(c) Schedule 3.10(c) sets forth a list identifying each “employee welfare benefit plan,” as defined in Section 3(1) of ERISA, each “employee pension benefit plan,” as defined in Section 3(2) of ERISA, and each other plan providing for insurance coverage (including any self-insured arrangements), disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, deferred compensation, profit sharing, bonuses, stock options, stock appreciation rights, stock purchase or post-retirement benefits which is maintained, administered, or contributed to by Sellers, the DMS Entities or any of their ERISA Affiliates and which covers any employee or former employee of the DMS Entities or under which the DMS Entities or any of their ERISA Affiliates has any liability on behalf of any employee or former employee of the DMS Entities. Such plans are referred to in this Agreement as the “ Sellers’ Benefit Plans .” Sellers have made available to Buyers accurate and complete copies as of the date hereof of (i) each Sellers’ Benefit Plan, including, where applicable, the plan document, trust agreements (or other funding arrangements) and amendments, (ii) the most recent annual report (Form 5500 including all schedules thereto) prepared in connection with any Sellers’ Benefit Plan required to file such report, (iii) the most recent actuarial valuation report prepared in connection with any Sellers’ Benefit Plan required to maintain such report, and (iv) the latest IRS determination letter obtained with respect to each Sellers’ Benefit Plan intended to be qualified under Section 401(a) or 501(a) of the Code.

 

(d) Except as set forth on Schedule 3.10(d) , no Sellers’ Benefit Plan (i) constitutes a “multiemployer plan,” as defined in Section 3(37) of ERISA (for purposes of this Section, a “ Multiemployer Plan ”), (ii) is maintained in connection with a trust described in Section 501(c)(9) of the Code or welfare benefit fund described in Section 419 of the Code, or (iii) is subject to Title IV of ERISA or to the minimum funding standards of ERISA or the Code. Neither Sellers, the DMS Entities nor any of their ERISA Affiliates has incurred any material liability under Title IV of ERISA arising in connection with the termination of, or complete or partial withdrawal from, any plan covered or previously covered by Title IV of ERISA, except for any liabilities which have been satisfied or waived.

 

(e) There are no accumulated funding deficiencies as defined in Section 412 of the Code (whether or not waived) with respect to any Sellers’ Benefit Plan.

 

(f) Each Sellers’ Benefit Plan that is intended to be qualified under Section 401 of the Code either (i) has received a favorable determination letter from the Internal Revenue Service to the effect that such Sellers’ Benefit Plan is qualified and any trust thereunder is exempt from Federal income taxes under Section 501 of the Code, or (ii) is still within the “remedial amendment period,” as defined in Section 401(b) of the Code and the regulations thereunder. No such determination letter has been revoked nor, to the knowledge of Sellers, has revocation been threatened by the Internal Revenue Service, nor has any such Sellers’ Benefit Plan been amended since the date of its most recent determination letter or application therefor in any respect that would materially and adversely affect its qualification.

 

(g) Except as set forth on Schedule 3.10(g) , each Sellers’ Benefit Plan has been maintained in all material respects in accordance with (i) its terms and (ii) the requirements prescribed by all Laws, including ERISA and the Code. There is no Lien upon any Business Asset outstanding pursuant to Section 412(n) of the Code in favor of any employee benefit plan, program or arrangement. No Business Asset has been provided as security for any employee benefit plan, program or arrangement pursuant to Section 401(a)(29) of the Code.

 

(h) Neither the DMS Entities nor any of their Representatives has, with respect to any Sellers’ Benefit Plan, engaged in or been a party to any “prohibited transaction,” as such term is defined in Section 4975 of the Code or Section 406 of ERISA, which could result in the imposition of a material penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code.

 

(i) Except as set forth on Schedule 3.10(i) , neither Sellers, the DMS Entities nor any of their ERISA Affiliates provides on behalf of any Business Employees, and neither Sellers, the DMS Entities nor any of their ERISA Affiliates has any liability on behalf of any Business Employee for, post-retirement medical, health or life coverage or contributes to any employee welfare benefit plan that provides for medical, health or life benefit coverage following termination of employment except as is required by Section 4980B of the Code.

 

(j) There are no pending material claims, suits or other proceedings, or, to the knowledge of Sellers, any threatened claims, suits or other proceedings, by any Business Employees, or plan participants or the beneficiaries, spouses or Representatives of any of them, against any Sellers’ Benefit Plan, the assets held thereunder, the trustee of any such assets, or the DMS Entities relating to the Sellers’ Benefit Plans, other than ordinary and usual claims for benefits by participants or beneficiaries.

 

3.11 Operation in the Ordinary Course . Except as set forth on Schedule 3.11 , since December 31, 2004, the Business and, to the knowledge of Sellers, the VESCO Business, has been operated in the ordinary course of business in all material respects.

 

3.12 Environmental Compliance .

 

(a) Except as set forth on Schedule 3.12 :

 

(1) each of the DMS Entities is, and, to the knowledge of Sellers, VESCO is, in compliance, in all material respects, with all Environmental Laws;

 

(2) the DMS Entities hold, and, to the knowledge of Sellers, VESCO holds, all Permits that are required of the DMS Entities or VESCO, as applicable, by Environmental Laws to conduct the Business or the VESCO Business, as applicable, as conducted as of the date hereof, and all such Permits are valid and in full force and effect, except where the failure to hold any such Permit or for such Permit to be in full force and effect does not constitute a Material Adverse Effect;

 

(3) the DMS Entities have not, and, to the knowledge of Sellers, VESCO has not, during the past three years, received any written notice of any alleged violation of or liability under any Environmental Laws from any Governmental Entity;

 

(4) there are no pending Orders or Actions involving environmental matters or Environmental Laws against the DMS Entities and, to the knowledge of the Sellers, VESCO, and to the knowledge of Sellers no such Actions have been threatened; and

 

(5) there has been no Release of a Contaminant at or from the real property owned or leased by the DMS