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EXHIBIT 10.2
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AGREEMENT OF PURCHASE AND SALE
BY
AND BETWEEN
CMS ENTERPRISES COMPANY AND CMS ENERGY INVESTMENT LLC,
COLLECTIVELY AS SELLER,
AND
LUCID ENERGY, L.L.C. AND MICHIGAN PIPELINE AND PROCESSING, LLC,
COLLECTIVELY AS BUYER,
DATED AS OF
MARCH 12, 2007
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ARTICLE I
DEFINITIONS....................................................
1
Section 1.1
Specific
Definitions..................................... 1
ARTICLE II SALE AND
PURCHASE............................................. 8
Section 2.1
Agreement to Sell and
Purchase........................... 8
Section 2.2
Time and Place of
Closing................................ 8
Section 2.3
Effective
Date........................................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
SELLER..................... 10
Section 3.1
Corporate
Organization; Qualification.................... 10
Section 3.2
Authority Relative to
this Agreement..................... 10
Section 3.3 Equity
Interests......................................... 11
Section 3.4
Consents and
Approvals................................... 12
Section 3.5
No Conflict or
Violation................................. 12
Section 3.6
Financial
Information.................................... 12
Section 3.7
Contracts................................................
13
Section 3.8
Compliance with
Law...................................... 13
Section 3.9
Permits..................................................
13
Section 3.10
Litigation...............................................
14
Section 3.11
Employee Matters.........................................
14
Section 3.12
Labor Relations..........................................
15
Section 3.13
Intellectual Property....................................
15
Section 3.14
Representations with Respect to Environmental Matters....
16
Section 3.15 Tax
Matters.............................................. 16
Section 3.16
Insurance................................................
17
Section 3.17
Absence of Certain Changes or Events.....................
17
Section 3.18
Absence of Undisclosed Liabilities.......................
18
Section 3.19
Property.................................................
19
Section 3.20
Brokerage and Finders' Fees..............................
19
Section 3.21
Corporate and Accounting Records.........................
19
Section 3.22
Affiliated Transactions..................................
19
Section 3.23 No
Other Representations or Warranties................... 19
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
BUYER................... 20
Section 4.1
Corporate
Organization; Qualification.................... 20
Section 4.2
Authority Relative to
this Agreement..................... 20
Section 4.3
Consents and
Approvals................................... 21
Section 4.4
No Conflict or
Violation................................. 21
Section 4.5
Litigation...............................................
21
Section 4.6
Brokerage and Finders'
Fees.............................. 22
Section 4.7
Investment
Representations............................... 22
Section 4.8
No Other
Representations or Warranties................... 22
ARTICLE V COVENANTS OF THE
PARTIES....................................... 22
Section 5.1
Consents and
Approvals................................... 22
Section 5.2
Further
Assurances....................................... 24
Section 5.3
Employee
Matters......................................... 24
Section 5.4
Tax
Covenants............................................ 25
Section 5.5
Maintenance of
Insurance Policies........................ 30
Section 5.6
Transfers of Title and
Possession of Assets of
Entities.................................................
31
Section 5.7
Preservation of
Records.................................. 31
Section 5.8
Public
Statements........................................ 32
Section 5.9
Use of Corporate Name;
Transitional Use of Seller's
Name.....................................................
32
Section 5.10
Release of Guarantees....................................
32
Section 5.11
Confidentiality..........................................
33
ARTICLE VI SURVIVAL;
INDEMNIFICATION..................................... 33
Section 6.1
Survival.................................................
33
Section 6.2
Indemnification..........................................
34
Section 6.3
Calculation of
Damages................................... 36
Section 6.4
Procedures for
Third-Party Claims........................ 36
Section 6.5
Procedures for
Inter-Party Claims........................ 37
Section 6.6
Special
Indemnification Provision Relating to
Environmental Matters....................................
38
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ARTICLE VII MISCELLANEOUS
PROVISIONS..................................... 39
Section 7.1
Interpretation...........................................
39
Section 7.2
Disclosure
Letters....................................... 40
Section 7.3
Payments.................................................
40
Section 7.4
Expenses.................................................
40
Section 7.5
Choice of
Law............................................ 40
Section 7.6
Assignment...............................................
40
Section 7.7
Notices..................................................
40
Section 7.8
Resolution of
Disputes................................... 42
Section 7.9
No Right of
Setoff....................................... 43
Section 7.10
Time is of the Essence...................................
43
Section 7.11
Specific Performance.....................................
43
Section 7.12
Entire Agreement.........................................
43
Section 7.13
Binding Nature; Third Party Beneficiaries................
43
Section 7.14
Counterparts.............................................
44
Section 7.15
Severability.............................................
44
Section 7.16
Headings.................................................
44
Section 7.17
Waiver...................................................
44
Section 7.18
Amendment................................................
44
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EXHIBITS
A
TRANSITION SERVICES AGREEMENT
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INDEX OF DEFINED TERMS
Action..................................................................
1
Affected
Employees......................................................
2
Affiliate...............................................................
2
Agreement...............................................................
2
Applicable
Law..........................................................
2
Argentine
Businesses....................................................
1
Business
Day............................................................
2
Buyer...................................................................
1
Buyer Disclosure
Letter.................................................
2
Buyer Indemnified
Parties............................................... 33
Buyer
Plans.............................................................
24
Cap
Amount..............................................................
34
Casualty Insurance
Claims............................................... 29
Claims..................................................................
2
Code....................................................................
2
Common
Agreement........................................................
1
Confidentiality
Agreement...............................................
2
Consolidated Income Tax
Return.......................................... 27
Cut-off
Date............................................................
29
Damages.................................................................
2
Dispute.................................................................
41
Distribution............................................................
3
Entities................................................................
1
Environmental
Laws......................................................
3
Environmental
Permit....................................................
3
Equity
Interests........................................................
1
ERISA...................................................................
3
Exchange
Act............................................................
3
Financial
Statements....................................................
12
GAAP....................................................................
3
Governmental
Authority..................................................
3
Guarantees..............................................................
32
Hazardous
Substances....................................................
3
Indebtedness............................................................
4
Indemnified
Party.......................................................
34
Indemnifying
Party......................................................
34
Indemnity
Period........................................................
33
Insurance
Policies......................................................
30
Intellectual
Property...................................................
4
Knowledge of
Seller.....................................................
4
Knowledge of such
Person................................................ 4
Liabilities.............................................................
4
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Liens...................................................................
4
Lucid...................................................................
1
Material Adverse
Effect.................................................
5
Material
Contract.......................................................
13
Michigan
Businesses.....................................................
1
Michigan
Courts.........................................................
42
Minimum Claim
Amount....................................................
34
PBOPs...................................................................
24
Pension
Plans...........................................................
6
Permits.................................................................
13
Permitted
Liens.........................................................
6
Person..................................................................
6
Plans...................................................................
14
Policies................................................................
16
Post-Cut-off
Taxes......................................................
26
Pre-Cut-off
Taxes.......................................................
26
Released
Parties........................................................
32
Representatives.........................................................
6
Rules...................................................................
42
Seller..................................................................
1
Seller Disclosure
Letter................................................ 7
Seller Indemnified
Parties.............................................. 34
Seller
Plans............................................................
24
Seller
Returns..........................................................
25
Straddle
Period.........................................................
25
Straddle Period
Returns.................................................
25
Straddle
Statement......................................................
25
Subsidiary..............................................................
7
Tax
Claim...............................................................
28
Tax Indemnified
Party...................................................
28
Tax Indemnifying
Party..................................................
28
Tax
Return..............................................................
7
Taxes...................................................................
7
Third-Party
Claim.......................................................
36
Threshold
Amount........................................................
34
Transfer
Taxes..........................................................
29
Transition Services
Agreement........................................... 7
Treasury
Regulation.....................................................
7
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AGREEMENT OF PURCHASE AND SALE
This
AGREEMENT OF PURCHASE AND SALE, dated as of March 12, 2007, is
made
and entered into by and between CMS Enterprises Company, a Michigan
corporation,
and CMS Energy Investment LLC, a Delaware limited liability
company
(collectively the "Seller"), and Lucid Energy, L.L.C., a Michigan
limited
liability company ("Lucid"), and Michigan Pipeline and Processing,
LLC, a
Michigan limited liability company (collectively the "Buyer").
WITNESSETH:
WHEREAS, Seller and Lucid have entered into that certain Common
Agreement
dated as of the date hereof (the "Common Agreement"), pursuant to
which Seller,
directly or through Affiliates of Seller, agreed to sell, and
Lucid, directly or
through Affiliates of Lucid, agreed to acquire, upon the terms and
conditions
set forth in this Agreement, certain Michigan-based natural gas
transmission,
gathering and processing businesses (the "Michigan Businesses"),
and upon the
terms and conditions entered into contemporaneously herewith,
Argentina-based
natural gas transmission and marketing and independent power
production
businesses (the "Argentine Businesses");
WHEREAS, Seller and Buyer intend that the transactions contemplated
by this
Agreement relating to the sale of the Michigan Businesses will be
consummated if
and only if the sale of the Argentine Businesses is
consummated;
WHEREAS, the Michigan Businesses are conducted through various
domestic
legal entities (the "Entities" as described on Annex I), the
equity
participations in which are owned, directly or indirectly and in
relevant
amounts, by Seller ("Equity Interests" as described on Annex
I);
WHEREAS, Buyer desires to purchase, and Seller desires to sell to
Buyer,
the Equity Interests, upon the terms and subject to the conditions
set forth
herein;
NOW,
THEREFORE, in consideration of the foregoing, the
representations,
warranties, covenants and agreements set forth in this Agreement,
and other good
and valuable consideration, the adequacy and receipt of which are
hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Specific Definitions. For purposes of this Agreement,
the
following terms shall have the meanings set forth below:
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"Action"
shall mean any administrative, regulatory,
judicial or other formal proceeding, action,
Claim, suit, investigation or inquiry
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by or before any Governmental Authority,
arbitrator or mediator, at law or at equity.
"Affected Employees"
shall mean the Employees listed on Section
1.1(a) of the Seller Disclosure Letter.
"Affiliate"
shall have the meaning set forth in Rule 12b-2
of the General Rules and Regulations under the
Exchange Act.
"Agreement"
shall mean this Agreement of Purchase and Sale,
together with the Seller Disclosure Letter,
Buyer Disclosure Letter, Annex I and Exhibits
hereto, as the same may be amended or
supplemented from time to time in accordance
with the provisions hereof.
"Applicable Law"
shall mean any statute, treaty, code, law,
ordinance, executive order, rule or regulation
(including a regulation that has been formally
promulgated in a rule-making proceeding but,
pending final adoption, is in proposed or
temporary form having the force of law);
guideline or notice having the force of law; or
approval, permit, license, franchise, judgment,
order, decree, injunction or writ of any
Governmental Authority applicable to a
specified Person or specified property, as in
effect from time to time.
"Business Day"
shall mean any day that is not a Saturday,
Sunday or other day on which banks are required
or authorized by law to be closed in the City
of New York.
"Buyer Disclosure Letter"
shall mean the Buyer Disclosure Letter
delivered to Seller concurrently with this
Agreement, which is an integral part of this
Agreement.
"Claims"
shall mean any and all claims, lawsuits,
demands, causes of action, investigations and
other
proceedings (whether or not before a
Governmental Authority).
"Code"
shall mean the Internal Revenue Code of 1986,
as amended.
"Confidentiality Agreement" shall mean
the confidentiality agreement
entered into by and between the EE Group (an
Affiliate of Buyer) and CMS Enterprises Company
dated October 23, 2006.
"Damages"
shall mean judgments, settlements, fines,
penalties, damages, Liabilities, losses or
deficiencies, costs and expenses, including
reasonable attorney's fees, court costs,
expenses of arbitration or mediation, and other
out-of-pocket expenses
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incurred in investigating or preparing the
foregoing; provided, however, that "Damages"
shall not include incidental, indirect or
consequential damages, damages for lost profits
or other special, punitive or exemplary
damages.
"Distribution"
shall mean:
(i) any dividend, distribution, repayment or
repurchase of share capital, capital
contribution or other return of capital to such
Person's shareholders or equivalent holders of
its ownership interests;
(ii) any repayment of any loan owed to an
Affiliate of such Person;
(iii) any loan made to an Affiliate of such
Person, in each case, other than to any of the
Entities.
"Environmental Laws"
shall mean all foreign, federal, state and
local laws, regulations, rules and ordinances
in effect and existence as of the closing Date
where the Michigan Businesses currently operate
relating to pollution or protection of human
health or the environment, natural resources or
safety and health, including laws relating to
releases or threatened releases of Hazardous
Substances into the environment (including
ambient air, surface water, groundwater, land,
surface and subsurface strata).
"Environmental Permit"
shall mean any Permit, formal exemption,
identification number or other authorization
issued by a Governmental Authority pursuant to
an applicable Environmental Law.
"ERISA"
shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the
regulations promulgated thereunder.
"Exchange Act"
shall mean the Securities Exchange Act of 1934,
as amended.
"GAAP"
shall mean United States generally accepted
accounting principles as in effect from time to
time
"Governmental Authority"
shall mean any executive, legislative,
judicial, tribal, regulatory, taxing or
administrative agency, body, commission,
department, board, court, tribunal, arbitrating
body or authority of the United States or any
foreign country, or any state, local or other
governmental subdivision thereof.
"Hazardous Substances"
shall mean any chemicals, materials or
substances defined as
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or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous
materials", "hazardous constituents",
"restricted hazardous materials", "extremely
hazardous substances", "toxic substances",
"contaminants", "pollutants", "toxic
pollutants", or words of similar meaning and
regulatory effect under any applicable
Environmental Law.
"Indebtedness"
of any Person shall mean (i) all liabilities
and obligations of such Person for borrowed
money or evidenced by notes, bonds or similar
instruments, (ii) obligations in respect of the
deferred purchase price of property or services
(other than any amount that would constitute
current assets) to the extent that such amount
would be accrued as a liability on a balance
sheet prepared in accordance with GAAP, (iii)
obligations in respect of capitalized leases,
(iv) obligations in respect of letters of
credit, acceptances or similar obligations, (v)
obligations under interest rate cap agreements,
interest rate swap agreements, foreign currency
exchange contracts or other hedging contracts,
and (vi) any guarantee of the obligations of
another Person with respect to any of the
foregoing.
"Intellectual Property"
shall mean all U.S. and foreign (a) patents and
patent applications, (b) trademarks, service
marks, logos, slogans, and trade dress, (c)
copyrights, (d) software (excluding commercial
off-the-shelf software), and (e) all
confidential and proprietary information and
know-how.
"Knowledge of Seller"
shall mean the knowledge, after due inquiry, of
those Persons set forth in Section 1.1(b) of
the Seller Disclosure Letter.
"Knowledge of such Person"
shall mean, and with respect to Lucid, the
knowledge, after due inquiry, of those Persons
set forth in Section 1.1(b) of the Buyer
Disclosure Letter, and with respect to Michigan
Pipeline and Processing, LLC, the knowledge,
after due inquiry, of those Persons set forth
in Section 1.1(c) of the Buyer Disclosure
Letter.
"Liabilities"
shall mean any and all debts, liabilities,
commitments and obligations, whether or not
fixed, contingent or absolute, matured or
unmatured, liquidated or unliquidated, accrued
or unaccrued, known or unknown, whether or not
required by GAAP to be reflected in financial
statements or disclosed in the notes thereto.
"Liens"
shall mean any mortgage, pledge, lien
(statutory or
otherwise
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and including, without limitation,
environmental, ERISA and tax liens), security
interest, easement, right of way, limitation,
encroachment, covenant, claim, restriction,
right, option, conditional sale or other title
retention agreement, charge or encumbrance of
any kind or nature (except for any restrictions
arising under any applicable securities laws).
"Material Adverse Effect"
shall mean actions, circumstances or omissions
that have an effect, individually or in the
aggregate, that is materially adverse to (a)
the business, operations, financial condition
or assets of the Entities, taken as a whole, or
(b) the ability of Seller to consummate the
transactions contemplated hereby, in each case,
other than any effect resulting from, relating
to or arising out of: (i) the negotiation,
execution, announcement of this Agreement and
the transactions contemplated hereby, including
the impact thereof on relationships,
contractual or otherwise, with customers,
suppliers, distributors, partners, joint owners
or venturers and employees, (ii) any action
taken by Seller, the Entities, Buyer or any of
their respective Representatives or Affiliates
required or permitted to be taken by the terms
of this Agreement or necessary to consummate
the transactions contemplated by this
Agreement, (iii) the general state of the
industries in which the Entities operate
(including (A) pricing levels, (B) changes in
national, regional or local wholesale or retail
markets for natural gas or electricity, (C)
changes in the national, regional or local
interstate natural gas pipeline systems, (D)
rules, regulations or decisions of Governmental
Authorities or the courts affecting the gas
transmission, gathering or processing
industries as a whole, or rate orders, motions,
complaints or other actions affecting the
Entities and (E) any condition described in the
Seller Disclosure Letter), (iv) general legal,
regulatory, political, business, economic,
capital market and financial market conditions
(including prevailing interest rate levels), or
conditions otherwise generally affecting the
industries in which the Entities operate, (v)
any change in law, rule or regulation or GAAP
or interpretations thereof applicable to the
Entities, Seller or Buyer, (vi) acts of God,
national or international political or social
conditions or (vii) general economic conditions
in Michigan; provided, that, for purposes of
determining a "Material Adverse Effect", any
effect on the business, financial conditions or
assets of the business of any Person shall
include only the portion of such effect
attributable to the ownership interest of the
Entities and their Affiliates and shall exclude
any portion of such effect attributable to the
ownership interest of any third party in such
Person.
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"Pension Plans"
shall mean all Plans providing pensions,
superannuation benefits or retirement savings,
including pension plans, top up pensions or
supplemental pensions.
"Permitted Liens"
shall mean (a) zoning, planning and building
codes and other applicable laws regulating the
use, development and occupancy of real property
and permits, consents and rules under such
laws; (b) encumbrances, easements,
rights-of-way, covenants, conditions,
restrictions and other matters affecting title
to real property which do not materially
detract from the value of such real property or
materially restrict the use of such real
property; (c) leases and subleases of real
property; (d) all easements, encumbrances or
other matters which are necessary for utilities
and other similar services on real property;
(e) Liens to secure indebtedness reflected on
the Financial Statements or indebtedness
incurred in the ordinary course of business,
consistent with past practice, after the date
thereof, (f) Liens for Taxes and other
governmental levies not yet due and payable or,
if due, (i) not delinquent or (ii) being
contested in good faith by appropriate
proceedings during which collection or
enforcement against the property is stayed and
with respect to which adequate reserves have
been established and are being maintained to
the extent required by GAAP, (g) mechanics',
workmen's, repairmen's, materialmen's,
warehousemen's, carriers' or other Liens,
including all statutory Liens, arising or
incurred in the ordinary course of business,
(h) original purchase price conditional sales
contracts and equipment leases with third
parties entered into in the ordinary course of
business, (i) Liens that do not materially
interfere with or materially affect the value
or use of the respective underlying asset to
which such Liens relate, (j) Liens which are
capable of being cured through condemnation
procedures under the Natural Gas Act, and (k)
Liens which are reflected in any Material
Contract.
"Person"
shall mean any natural person, corporation,
company, general partnership, limited
partnership, limited
liability partnership,
joint venture, proprietorship, limited
liability company, or other entity or business
organization or vehicle, trust, unincorporated
organization or Governmental Authority or any
department or agency thereof.
"Representatives"
Shall mean accountants, counsel or
representatives.
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"Seller Disclosure Letter"
shall mean the Seller Disclosure Letter
delivered to Buyer concurrently with this
Agreement, which is an integral part of this
Agreement.
"Subsidiary"
of any Entity means, at any date, any Person
(a) the
accounts of which would be consolidated
with and into those of the applicable Person in
such Person's consolidated financial statements
if such financial statements were prepared in
accordance with GAAP as of such date or (b) of
which securities or other ownership interests
representing more than fifty percent (50%) of
the equity or more than fifty percent (50%) of
the ordinary voting power or, in the case of a
partnership, more than fifty percent (50%) of
the general partnership interests or more than
fifty percent (50%) of the profits or losses of
which are, as of such date, owned, controlled
or held by the applicable Person or one or more
subsidiaries of such Person.
"Tax Return"
shall mean any report, return, declaration, or
other information required to be supplied to a
Governmental Authority in connection with Taxes
including any claim for refund or amended
return.
"Taxes"
shall mean all taxes, levies or other like
assessments, including income, gross receipts,
excise, value added, real or personal property,
withholding, asset, sales, use, license,
payroll, transaction, capital, business,
corporation, employment, net worth and
franchise taxes, or other governmental taxes
imposed by or payable to any foreign, Federal,
state or local taxing authority, whether
computed on a separate, consolidated, unitary,
combined or any other basis; and in each
instance such term shall include any interest,
penalties or additions to tax attributable to
any such Tax.
"Transition Services
shall mean the transition services agreement to
Agreement"
be entered into on the date hereof between
Seller and Buyer, substantially in the form of
the agreement attached hereto as Exhibit A.
"Treasury Regulation"
shall mean the income Tax regulations,
including temporary and proposed regulations,
promulgated under the Code, as amended.
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ARTICLE II
SALE AND PURCHASE
Section 2.1 Agreement to Sell and Purchase.
(a) Simultaneously
with the payment of the Purchase Price in
accordance with Section 2.1(b) of this Agreement, Buyer shall
purchase,
acquire and accept from Seller, and Seller shall sell, convey,
assign,
transfer and deliver to Buyer, all of Seller's interests in the
Equity
Interests, free and clear of all Liens, as well as certain rights
and
interests in related tangible and intangible property being granted
in
support of the consummation of the transactions contemplated
hereby.
(b) As of the date hereof, Buyer shall pay to Seller, in
consideration for the purchase of the Equity Interests and such
related
rights and interests pursuant to Section 2.1(a), an amount in cash
equal to
$55,000,000 (the "Purchase Price") by wire transfer of same day
funds to an
account or accounts and in such amounts as designated by
Seller.
Section 2.2 Time and Place of Closing.
(a) Upon payment of the Purchase Price, Seller shall deliver or
cause to be delivered, in form and substance satisfactory to Buyer
(unless
previously delivered), the following items:
(i) a certificate or certificates representing the Equity
Interests (or other appropriate instruments evidencing transfer
of
ownership), accompanied by stock or similar powers duly endorsed in
blank
by
Seller or accompanied by instruments of transfer duly executed
by
Seller;
(ii) a certificate of incumbency and authority of Seller dated
the
date hereof;
(iii) a duly executed counterpart of the Transition Services
Agreement;
(iv) written resignations, effective as of the date hereof,
from
each
of the officers and directors of the Entities;
(v) title to all assets attributed to the Entities and their
businesses that are not in their possession or titled in their name
and
would not otherwise be transferred by transfer of the
certificates
representing the Equity Interests;
(vi) an estimated payment of $2,200,000, which payment shall be
made
by wire transfer of same day funds to an account or accounts and
in
such
amounts as designated by Buyer in writing. The estimated payment
will
be
reconciled in accordance with the provisions of Section 2.3.;
and
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(vii) evidence of termination of the Intercompany Cash Pooling
Arrangement between CMS Energy Investment LLC and/or CMS Capital
LLC and
the
Entities (other than Jackson Pipeline Company LLC, which is not a
party
to
such arrangement).
(b) As of the date hereof, Buyer shall deliver or cause to be
delivered to Seller (unless previously delivered), the following
items:
(i) the Purchase Price by wire transfer of same day funds to an
account or accounts and in such amounts as designated by Seller in
writing;
(ii) a certificate of incumbency and authority of Buyer dated
the
date
hereof; and
(iii) a duly executed counterpart of the Transition Services
Agreement.
Section 2.3 Effective Date.
The Effective Date of the transaction for financial purposes shall
be
December 31, 2006, so that Buyer will receive the assets and
liabilities
shown on the December 31, 2006 Financial Statements plus all of the
results
of
operations (including net cash flow) in the ordinary course of
business
consistent with past practices of each of the Entities after
December 31,
2006. To avoid confusion, Buyer and Seller agree that:
(a) Buyer shall receive the assets and liabilities shown on the
December 31, 2006 Financial Statements, less the following
Intercompany
Notes receivables:
(i) $2,494,058 loan from CMS Antrim Gas LLC to CMS Energy
Investment LLC
(ii) $855,989 loan from CMS Litchfield LLC to CMS Energy
Investment LLC
(iii) $716,663 loan from CMS Grands Lacs LLC to CMS Energy
Investment LLC
(iv) $950,341 loan from CMS Bay Area Pipeline, LLC to CMS
Energy
Investment LLC
(v) $566,887 loan from CMS Jackson LLC to CMS Energy Investment
LLC.
(b) Buyer shall also receive all the results of operations
(including net cash flow) from January 1, 2007 through the date
hereof.
Buyer and Seller shall work in good faith to reconcile and settle
all
accounts as of the date hereof,
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consistent with the intent described above, within thirty (30) days
after
the
date hereof. If it is determined that Seller owes money to Buyer,
it
shall pay Buyer within five (5) days of such determination. If it
is
determined that Buyer owes money to Seller, it shall pay Seller
within five
(5)
days of such determination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
Section 3.1 Corporate Organization; Qualification.
Each Seller is duly organized and validly existing and in good
standing under the Laws of its governing jurisdiction. Each of the
Entities
is
duly organized and validly existing and in good standing under the
Laws
of
its governing jurisdiction and each (a) has the requisite power to
carry
on
its businesses as currently conducted and (b) is duly qualified to
do
business in each of the jurisdictions in which the ownership,
operation or
leasing of its properties or assets or the conduct of its business
requires
it
to be so qualified, except where the failure to be so qualified
would
not
have a Material Adverse Effect.
Section 3.2 Authority Relative to this Agreement.
Each Seller has full corporate power and authority to execute
and
deliver this Agreement, the Transition Services Agreement (as
applicable)
and
the other agreements, documents and instruments to be executed
and
delivered by it in connection with this Agreement or the
Transition
Services Agreement, and to consummate the transactions contemplated
hereby
and
thereby. The execution, delivery and performance of this Agreement,
the
Transition Services Agreement and the other agreements, documents
and
instruments to be executed and delivered in connection with this
Agreement
or
the Transition Services Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and
validly
authorized by all the necessary action on the part of each Seller
(as
applicable) and no other corporate or other proceedings on the part
of
Seller are necessary to authorize this Agreement, the Transition
Services
Agreement and the other agreements, documents and instruments to
be
executed and delivered in connection with this Agreement or the
Transition
Services Agreement or to consummate the transactions contemplated
hereby
and
thereby. This Agreement, the Transition Services Agreement and
the
other agreements, documents and instruments to be executed and
delivered in
connection with this Agreement or the Transition Services Agreement
have
been, duly and validly executed and delivered by Seller and
assuming that
this
Agreement, the Transition Services Agreement and the other
agreements,
documents and instruments to be executed and delivered in
connection with
this
Agreement or the Transition Services Agreement constitute legal,
valid
and
binding agreements of the Buyer, are enforceable against Seller
in
accordance with their respective terms, except that such
enforceability may
be
limited by applicable
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bankruptcy, insolvency, moratorium or other similar laws affecting
or
relating to enforcement of creditors' rights generally or
general
principles of equity.
Section 3.3 Equity Interests.
(a) The Equity Interests are duly authorized, validly issued
and
fully paid and were not issued in violation of any preemptive
rights.
Except as set forth in Section 3.3(a) of the Seller Disclosure
Letter, (i)
there are no equity interests of the Entities authorized, issued
or
outstanding or reserved for any purpose and (ii) there are no (A)
existing
options, warrants, calls, preemptive rights, subscriptions or other
rights,
agreements, arrangements or commitments of any character, relating
to the
Entities, obligating Seller or any of its Affiliates to issue,
transfer or
sell, or cause to be issued, transferred or sold, any additional
equity
interest in the Entities, (B) outstanding securities of Seller or
its
Affiliates that are convertible into or exchangeable or exercisable
for any
equity interest in the Entities, (C) options, warrants or other
rights to
purchase from Seller or its Affiliates any such convertible or
exchangeable
securities or (D) other than this Agreement, contracts, agreements
or
arrangements of any kind relating to the issuance of any equity
interest in
the
Entities, or any such options, warrants or rights, pursuant to
which,
in
any of the foregoing cases, Seller or its Affiliates are subject
or
bound.
(b) Except as set forth in Section 3.3(b) of the Seller
Disclosure Letter, Seller owns all of the issued and outstanding
Equity
Interests and has good, valid and marketable title to the Equity
Interests,
free
and clear of all Liens or other defects in title, and the
Equity
Interests have not been pledged or assigned to any Person. The
Equity
Interests owned by Seller are not subject to any restrictions
on
transferability other than those imposed by this Agreement and
by
applicable securities laws. Following the transfer of the Equity
Interests
to
Buyer, Buyer will own all of the issued and outstanding Equity
Interests
owned by Seller and will have good and valid title to the Equity
Interests,
free
and clear of all Liens.
(c) Section 3.3(c) of the Seller Disclosure Letter sets forth,
as
of
the date hereof, a list of each of the Entities, including its
name, its
jurisdiction of organization, its authorized and outstanding
capital stock
(or
equivalent equity interest) and the percentage of its
outstanding
capital stock owned by the Seller and/or the Entities, as
applicable.
(d) Except as set forth in Section 3.3(d) of the Seller
Disclosure Letter, there are no Persons (other than any of the
Entities) in
which any of the Entities owns any equity or other similar
interest.
Section
3.4 Consents and Approvals.
Except as set forth in Section 3.4 of the Seller Disclosure
Letter,
Seller requires no consent, approval or authorization of, or
filing,
registration or qualification with, any Governmental Authority, or
any
other Person as a condition to the execution and delivery of this
Agreement
or
the performance of the obligations hereunder, except where the
11
<PAGE>
failure to obtain such consent, approval or authorization of, or
filing of,
registration or qualification with, any Governmental Authority, or
any
other Person would not have a Material Adverse Effect.
Section 3.5 No Conflict or Violation.
Except as set forth in Section 3.5 of the Seller Disclosure
Letter,
the
execution, delivery and performance by the Seller of this
Agreement
does
not:
(a) violate or conflict with any provision of the
organizational
documents or bylaws of Seller or any of the Entities;
(b) violate any applicable provision of a law, statute,
judgment,
order, writ, injunction, decree, award, rule or regulation of
any
Governmental Authority, except where such violation would not have
a
Material Adverse
Effect;
(c) violate, result in a breach of, constitute (with due notice
or
lapse of time or both) a default, or cause any material
obligation,
penalty or premium to arise or accrue including without limitation
the
acceleration of maturity of any indebtedness or other obligation
or
imposition of any lien, charge or encumbrance on any assets of any
of the
Entities, under any Material Contract, lease, loan, mortgage,
security
agreement, trust indenture or other material agreement or
instrument to
which any of the Entities is a party or by which any of them is
bound or to
which any of their respective properties or assets is subject,
except for
violations, breaches or defaults that would not have a Material
Adverse
Effect;
(d) result in the imposition or creation of any material Lien
upon
or with respect to any of the properties or assets owned or used
by
the
Entities; or;
(e) result in the cancellation, modification, revocation or
suspension of any material Permits or in the failure to renew any
material
Permit.
Section 3.6 Financial Information.
(a) Prior to the date hereof, Seller has made available to
Buyer
or
its Representatives certain unaudited financial information
relating to
each
of the Entities as of December 31, 2004, 2005 and 2006
detailing
assets, liabilities, income and cash flows (collectively, the
"Financial
Statements"). A copy of the unaudited financial statements as of
December
31,
2006 of the Entities is disclosed in Section 3.6(a) of the
Seller
Disclosure Letter.
(b) The Financial Statements were prepared in accordance with
GAAP, consistently applied throughout the periods indicated and
fairly
present, in all material respects, the combined financial position,
results
of
operations and cash flows of each of the Entities, as of the
dates
thereof and for the periods covered thereby, in each case, except
as
disclosed in Section 3.6(b) of the Seller Disclosure Letter.
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<PAGE>
Section 3.7 Contracts.
(a) Section 3.7(a) of the Seller Disclosure Letter sets forth a
list, as of the date hereof, of each material contract, lease or
similar
agreement or instrument to which any of the Entities is a party,
other than
(i)
any purchase or sale orders arising in the ordinary course of
business,
(ii) any contract
involving the payment or receipt of less than $100,000 in
any
one year, (iii) any contract terminable within 30 days or less by
its
terms, and (iv) any contract listed in any other Section of the
Seller
Disclosure Letter (each contract set forth in Section 3.7(a) of the
Seller
Disclosure Letter being referred to herein as a "Material
Contract").
(b) Section 3.7(b) of the Seller Disclosure Letter sets forth a
list, as of the date hereof, of each Material Contract that any of
the
Entities has with Seller or with any Affiliate of Seller that is
not one of
the
Entities.
(c) Except as set forth in Section 3.7(c) of the Seller
Disclosure Letter, each Material Contract is a valid and binding
agreement
of
the Entities party thereto and, to the Knowledge of Seller, is in
full
force and effect.
(d) Except as set forth in Section 3.7(d) of the Seller
Disclosure Letter, there is no default by Seller or any of the
Entities
under any Material Contract to which it is a party, and Seller has
no
Knowledge of any default by any counterparties under any Material
Contract,
in
each case other than defaults which have been cured or waived and
which
would not have a Material Adverse Effect.
Section 3.8 Compliance with Law.
Except for Environmental Laws and Tax laws, which are the subject
of
Section 3.14 and Section 3.15, respectively, and except as set
forth in
Section 3.8 of the
Seller Disclosure Letter, the Entities are in compliance
with
all federal, state, local or foreign laws, statutes,
ordinances,
rules, regulations, judgments, orders, writs, injunctions or
decrees of any
Governmental Authority applicable to their respective properties,
assets
and
businesses except where such noncompliance would, individually or
in
the
aggregate, not have a Material Adverse Effect.
Section 3.9 Permits.
(a) Except as set forth in Section 3.9(a) of the Seller
Disclosure Letter, Seller, and the Entities have all permits,
licenses,
certificates of authority, orders and approvals of, and have made
all
filings applications and registrations with Governmental
Authorities
necessary for the conduct of their respective business operations
as
presently conducted (collectively, the "Permits"), except for those
Permits
the
absence of which would not have a Material Adverse Effect.
(b) Except as set forth in Section 3.9(b) of the Seller
Disclosure, all Permits are issued to, and in the name of, the
Entities
which require such Permit.
13
<PAGE>
(c) Except as set forth in Section 3.9(c) of the Seller
Disclosure Letter, the Permits are in full force and effect, no
violations
thereof have been recorded and no proceedings are pending or, to
the
Knowledge of Seller, threatened for the revocation or partial
revocation
thereof, in each case
other than such failures, violations or proceedings
that
have been cured or waived and those which would not have a
Material
Adverse Effect. Seller and Buyer shall use their reasonable best
efforts to
cooperate with respect to the use and transfer of any Permits and
licenses
that
cannot be readily transferred.
Section 3.10 Litigation.
Except as identified in Section 3.10 of the Seller Disclosure
Letter,
there are no Actions before any Governmental Authority or
arbitration panel
or
tribunal pending or in progress or, to the Knowledge of Seller,
threatened, against Seller, the Entities, or any of their
respective
Affiliates or any executive officer or director thereof relating to
the
Equity Interests or the respective assets or businesses of the
Entities,
except as would not, individually or in the aggregate, have a
Material
Adverse Effect. None of Seller, the Entities, or any of their
respective
Affiliates are subject to any outstanding judgment, order,
writ,
injunction, decree or award entered in an Action to which such
Person was a
named party relating to the Equity Interests or the respective
assets or
businesses of such Persons, except as would not, individually or in
the
aggregate, have a Material Adverse Effect.
Section 3.11 Employee Matters.
(a) All material benefit and compensation plans and contracts,
including, but not limited to, "employee benefit plans" within the
meaning
of
Section 3(3) of ERISA, and deferred compensation, stock option,
stock
purchase, stock appreciation rights, stock-based incentive
bonus,
severance, employment, change in control, vacation or fringe
benefit
programs, policies,
agreements, arrangements or plans maintained by the
Entities or by the Seller or their Affiliates for the benefit of
any of
their current employees of the Entities (collectively, the "Plans")
have
been
or are being terminated and, if applicable, vested as of the
date
hereof, in each case as determined by Seller and its Affiliates in
its sole
discretion and subject to the provisions of such Plans and
applicable Law.
(b) All Affected Employees are subject to "at will" employment
arrangements under applicable policies of Seller and the Entities
as of the
date
hereof.
Section 3.12 Labor Relations.
Except as set forth in Section 3.12 of the Seller Disclosure
Letter,
(i) none of the Entities is
a party to any labor or collective bargaining
agreements, and there are no labor or collective bargaining
agreements
which pertain to any employees of the Entities, (ii) within the
preceding
eighteen (18) months, there have been no representation or
certification
proceedings, or petitions seeking a representation proceeding,
pending or,
to
14
<PAGE>
the
Knowledge of Seller, threatened in writing to be brought or filed
with
the
National Labor Relations Board or any other labor relations
tribunal or
authority with respect to the Entities, (iii) within the preceding
twelve
(12)
months, to the Knowledge of Seller, there have been no
organizing
activities involving
the Entities with respect to any group of their
respective employees, (iv) there are no pending or, to the
Knowledge of
Seller, threatened strikes, work stoppages, slowdowns or lockouts
against
the
Entities, or their respective Employees or involving any of the
Entities' facilities; and (v) there are no pending unfair
employment
practice charges, grievances or complaints filed or, to the
Knowledge of
Seller, threatened to be filed with any Governmental Authority
based on the
employment or termination of employment by the Entities of any
employee
Section 3.13 Intellectual Property.
(a) Section 3.13(a) of the Seller Disclosure Letter sets forth
a
list
of all material U.S. and foreign: (i) patents and patent
applications;
(ii)
trademark registrations and applications; and (iii) copyright
registrations and applications, owned by the Entities. The
foregoing
schedules set forth at Section 3.13(a) of the Seller Disclosure
Letter are
complete and accurate in all material respects. To the Knowledge of
Seller,
the
foregoing registrations are in effect and subsisting. Except as
set
forth in Section 3.13(a) of the Seller Disclosure Letter, the
Entities have
all
licenses necessary to use the equipment and processes as
currently
being used by them in the ordinary conduct of their respective
businesses
and
operations and, to the Knowledge of Seller, no further licenses
are
required to so conduct their businesses and operations.
(b) Except as would not, individually or in the aggregate, have
a
Material Adverse Effect, or as set forth in Section 3.13(b) of the
Seller
Disclosure Letter, (i) to the Knowledge of Seller, the conduct of
the
respective businesses of the Entities does not infringe or
otherwise
violate any Person's Intellectual Property, and there is no such
claim
pending or to the Seller's Knowledge threatened against the
Entities, and
(ii)
to the Knowledge of Seller, no Person is infringing or
otherwise
violating any Intellectual Property owned by the Entities, and no
such
claims are pending or threatened against any Person by the
Entities.
(c) Except as set forth in Section 3.13(c) of the Seller
Disclosure, all owned or licensed Intellectual Property is owned by
or
licensed to the Entities which utilize such Intellectual
Property.
Section 3.14 Representations with Respect to Environmental
Matters.
To the Knowledge of Seller, and except as set forth in Section 3.14
of
the
Seller Disclosure Letter or as would not, individually or in
the
aggregate, have Material Adverse Effect:
(a) The Entities are in compliance with all applicable
Environmental Laws;
15
<PAGE>
(b) The Entities have all of the Environmental Permits required
in
order to conduct their operations or, where such Environmental
Permits
have
expired, have applied for a renewal of such Environmental Permits
in a
timely fashion;
(c) There is no pending or threatened written Claim, lawsuit,
or
administrative proceeding against the Entities under or pursuant to
any
Environmental Law;
(d) None of the Entities is a party or subject to any
administrative or judicial order, decree or other agreement with
a
Governmental Authority under or pursuant to any applicable
Environmental
Law;
(e) None of the Entities has received written notice from any
third party, including any Governmental Authority, alleging that
any of the
Entities has been or is in violation or potentially in violation of
any
applicable Environmental Law or otherwise may be liable under
any
applicable Environmental Law; and
(f) With respect to the real property that is currently owned,
leased or under easement or right of way by the Entities, there
have been
no spills or
discharges of Hazardous Substances on or underneath any such
real
property.
The
representations and warranties set forth in this Section 3.14
are
Seller's sole and exclusive representations and warranties related
to
environmental matters.
Section 3.15 Tax Matters.
Except as would not have a Material Adverse Effect:
(a) All federal, state, and local Tax Returns required to be
filed by or on behalf of the Entities, and each consolidated,
combined,
unitary, affiliated or aggregate group of which any of the Entities
are a
member has been timely filed (taking into account applicable
extensions)
and
in each case are correct and complete in so far as the Entities
are
concerned, and all Taxes
shown as due on such Tax Returns have been paid,
or
adequate reserves therefor have been established.
(b) There is no deficiency, proposed adjustment, or matter in
controversy that has been asserted or assessed in writing with
respect to
any
Taxes due and owing by the Entities that has not been paid or
settled
in
full.
(c) Each of the Entities is treated as a disregarded entity for
federal tax purposes.
Section 3.16 Insurance.
(a) Section 3.16(a) of the Seller Disclosure Letter sets forth
a
true
and complete list of all current policies of all material property
and
casualty insurance, insuring the properties, assets, employees
and/or
operations of the Entities (collectively, the "Policies"). To the
Knowledge
of
Seller, all premiums payable under
16
<PAGE>
such
Policies have been paid in a timely manner and the Entities, as
applicable, have complied in all material respects with the terms
and
conditions of all such Policies.
(b) As of the date hereof, Seller has not received any written
notification of the failure of any of the Policies to be in full
force and
effect. To the Knowledge of Seller, none of the Entities is in
default
under any provision of the Policies, and except as set forth in
Section
3.16(b) of the Seller Disclosure Letter, there is no claim by the
Entities
or
any other Person pending under any of the Policies as to which
coverage
has
been denied or disputed by the underwriters or issuers thereof.
Section 3.17 Absence of Certain Changes or Events.
(a) Except as set forth in Section 3.17(a) of the Seller
Disclosure Letter, each of the Entities conducts its respective
businesses
in
the ordinary course of business, consistent with past practice in
all
material respects, since December 31, 2006.
(b) Except as set forth in Section 3.17(b) of the Seller
Disclosure Letter, or in the Financial Statements, and the notes
thereto,
there has not been with respect to each of the Entities any event
or
development or change which has resulted or would reasonably be
likely to
result in a Material Adverse Effect.
(c) Section 3.17(c) of the Seller Disclosure Letter sets forth
a
true
and complete list of the Distributions made by each of the
Entities
since December 31, 2006.
(d)
Except as set forth in Section 3.17(d) of the Seller
Disclosure Letter, since December 31, 2006, each of the Entities
has not:
(i) granted any severance or termination pay to, or entered
into,
extended or amended any employment, consulting, severance or
other
compensation agreement with, or otherwise increased the
compensation or
benefits provided to any of its officers or other employees whose
annual
salary
