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EXHIBIT 10.17
FORMATION AGREEMENT
BY AND BETWEEN
SEI HOLDINGS, INC.
AND
VASTAR RESOURCES, INC.
AUGUST 8, 1997
--------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
FORMATION AGREEMENT
<TABLE>
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ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.2 Certain Additional Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
1.3 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
ARTICLE II
TERMS OF THE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
2.1 Adoption of Partnership Agreement and Limited Liability Company Agreement; Assets to
be Contributed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
2.3 Instruments of Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
2.4 Transfer of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
2.5 Liabilities Assumed by Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
2.6 Liabilities Not Assumed by Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
2.7 Sale of Partial Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
2.8 Retail Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
2.9 Reimbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
ARTICLE III-A
FIRST CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
3.1-A Deliveries by VRI and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
3.2-A Deliveries by SEI Holdings and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
3.3-A Deliveries by the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
3.4-A Deliveries by the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
ARTICLE III-B
SECOND CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.1-B Deliveries by VRI and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.2-B Deliveries by SEI Holdings and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.3-B Deliveries by the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
3.4-B Deliveries by the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VRI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.2 Charter and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
4.3 Authority Relative to This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
4.4 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
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4.5 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
4.6 Exclusive Operation of the Vastar Marketing Business . . . . . . . . . . . . . . . . . . . . -26-
4.7 Title to Vastar Business Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
4.8 Financial Statements; Absence of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . -26-
4.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
4.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
4.11 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
4.12 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
4.13 Sufficiency of Assets and Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
4.14 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
4.15 Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
4.16 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
4.17 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
4.18 Intellectual Property; Technology; Software . . . . . . . . . . . . . . . . . . . . . . . . . -29-
4.19 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
4.20 Change in Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
4.21 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
4.22 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
4.23 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
4.24 Financial Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
4.25 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
4.26 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
4.27 No Material Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SEI HOLDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
5.2 Charter and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
5.3 Authority Relative to This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
5.4 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
5.5 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
5.6 Exclusive Operation of the SETM Business . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
5.7 Title to SETM Business Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
5.8 Financial Statements; Absence of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . -36-
5.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
5.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
5.11 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
5.12 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
5.13 Sufficiency of Assets and Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
5.14 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
5.15 Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
5.16 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
5.17 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
5.18 Intellectual Property; Technology; Software . . . . . . . . . . . . . . . . . . . . . . . . . -38-
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5.19 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
5.20 Change in Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
5.21 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
5.22 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
5.23 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
5.24 Financial Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
5.25 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
5.26 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
5.27 No Material Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
ARTICLE VI-A
CONDUCT OF VASTAR MARKETING BUSINESS PENDING CLOSINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
6.1-A Conduct and Preservation of the Vastar Marketing Business . . . . . . . . . . . . . . . . . . -43-
6.2-A Restrictions on Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
ARTICLE VI-B
CONDUCT OF SETM BUSINESS PENDING CLOSINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
6.1-B Conduct and Preservation of the SETM Business . . . . . . . . . . . . . . . . . . . . . . . . -45-
6.2-B Restrictions on Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
ARTICLE VII
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
7.1 Access to Information, Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
7.2 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
7.3 Release of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
7.4 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
7.5 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
7.6 Certain Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
7.7 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
7.8 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
7.9 Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
7.10 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
7.11 Access to Records After Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -51-
7.12 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -51-
7.13 Taxes; Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
7.14 Officers and Directors of General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
7.15 Covenants Not To Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
7.16 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
7.17 Staff Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
7.18 Post-Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
7.19 Assignment of LDC Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
7.20 Amendment of Disclosure Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF VRI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
8.1 Conditions to First Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
8.2 Conditions to Second Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
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ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SEI HOLDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -57-
9.1 Conditions to First Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -57-
9.2 Conditions to Second Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -60-
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -60-
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -60-
10.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -61-
10.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -61-
10.5 Remedies Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
10.6 No Special or Consequential Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
ARTICLE XI
INDEMNIFICATION;SURVIVAL OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
11.1 Indemnification Obligations of VRI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
11.2 Indemnification Obligations of SEI Holdings . . . . . . . . . . . . . . . . . . . . . . . . . -63-
11.3 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -64-
11.4 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -65-
ARTICLE XII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -66-
12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -66-
12.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -67-
12.3 Binding Effect; Assignment; No Third Party Benefit . . . . . . . . . . . . . . . . . . . . . -67-
12.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -67-
12.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -67-
12.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -67-
12.7 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -68-
12.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -68-
12.9 Dispute Resolution; Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -68-
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CLOSING SCHEDULES
Section 1.1(c) - First Closing Schedule of Assumed Contracts and Liabilities
- Second Closing Schedule of Assumed Contracts and Liabilities
EXHIBITS
Exhibit 1.1(aa) - SEI Holdings Disclosure Schedule
Section 1.1(j)(viii) - List of Certain Excluded Assets
Section 5.4 - List of exceptions to noncontravention representation
Section 5.5 - List of exceptions to no required governmental approvals representation
Section 5.6 - List of exceptions to exclusive operations of the SETM Business
Section 5.7 - List of title exceptions
Section 5.9 - List of exceptions for absence of changes representation
Section 5.10 - List of exceptions to tax representations
Section 5.12 - List of litigation and claims
Section 5.13 - List of exceptions to sufficiency of assets and personnel
Section 5.14 - List of leased real estate
Section 5.15 - List of tangible personal property
Section 5.18 - List of intellectual property, technology and software related to SETM Business
Section 5.19(a) - List of Permits related to SETM Business
Section 5.19(b) - List of exceptions to all necessary Permits representation
Section 5.21(a) - List of agreements
Section 5.21(b) - List of exceptions to agreements representations
Section 5.22 - List of environmental exceptions
Section 5.24 - List of bonds, etc.
Section 6.1-B - List of exceptions to limitations on conduct of business pending Second Closing
Exhibit 1.1(mm) - Vastar Disclosure Schedule
Section 1.1(j)(viii) - List of Certain Excluded Assets
Section 1.1(j)(ix) - List of LDC Contracts
Section 4.4 - List of exceptions to noncontravention representation
Section 4.5 - List of exceptions to no required governmental approvals representation
Section 4.6 - List of exceptions to exclusive operations of the Vastar Marketing Business
Section 4.7 - List of title exceptions
Section 4.9 - List of exceptions to absence of changes representation
Section 4.10 - List of exceptions to tax representations
Section 4.12 - List of litigation and claims
Section 4.13 - List of exceptions to sufficiency of assets and personnel
Section 4.14 - List of leased real estate
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Section 4.15 - List of tangible personal property
Section 4.18 - List of intellectual property, technology and software related to Vastar Marketing Business
Section 4.19(a) - List of Permits related to Vastar Marketing Business
Section 4.19(b) - List of exceptions to all necessary Permits representation
Section 4.21(a) - List of agreements
Section 4.21(b) - List of exceptions to agreements representations
Section 4.22 - List of environmental exceptions
Section 4.24 - List of bonds, etc.
Section 6.1-A - List of exceptions to limitations on conduct of business pending Second Closing
Exhibit 2.1(a)(i) - Amended and Restated Limited Liability Company Agreement of General Partner
Exhibit 2.1(b) - Amended and Restated Limited Partnership Agreement
of the Partnership (with Exhibit A (Certificate of Limited Partnership) attached)
Exhibit 2.7 - Escrow Agreement
Exhibit 7.6(a) - Gas Purchase and Sale Agreement
Exhibit 7.6(c)(i) - List of Executives to Receive Executive Employment Agreement
Exhibit 7.6(f) - Transfer Restriction Agreement
Exhibit 7.6(h) - Power Supply Agreement
Exhibit 7.6(l) - Noncompetition and Confidentiality Agreement
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FORMATION AGREEMENT
THIS FORMATION AGREEMENT (this "Agreement"), dated as of August 8,
1997, is entered into by and between SEI HOLDINGS, INC., a Delaware corporation
("SEI Holdings"), and VASTAR RESOURCES, INC., a Delaware corporation ("VRI").
WHEREAS, Vastar Gas Marketing, Inc. ("VGM"), a Delaware corporation
and wholly-owned indirect subsidiary of VRI, is in the business, among other
things, of gas marketing and trading (the "Vastar Gas Business," which
definition expressly excludes VGM's crude oil and natural gas liquids marketing
and trading business and gas gathering and processing business) and Vastar
Power Marketing, Inc. ("VPM"), a Delaware corporation and indirect wholly-owned
subsidiary of VRI, is in the business of marketing and trading electric energy
(the "Vastar Power Business") (together the Vastar Gas Business and the Vastar
Power Business constitute the "Vastar Marketing Business"); and
WHEREAS, Southern Energy Trading and Marketing, Inc., a Delaware
corporation and indirect wholly-owned subsidiary of SEI Holdings ("SETM"), is
in the business, among other things, of trading and marketing natural gas
(excluding gas contracts and trading positions which are tied to or incidental
to SETM power contracts, the "SETM Gas Business") and electric energy, crude
oil and other energy and energy-linked commodities, including gas contracts and
trading positions which are tied to or incidental to SETM power contracts (the
"SETM Power Business") (together the SETM Gas Business and the SETM Power
Business constitute the "SETM Business"); and
WHEREAS, the parties have identified opportunities in the marketplace
which may become open to them if they combine the SETM Business and the Vastar
Marketing Business (together, the "Marketing Business"); and
WHEREAS, VRI and SEI Holdings desire to create a limited partnership
for the purpose of further developing and continuing the Marketing Business;
and
WHEREAS, for this purpose, VRI desires to, and to cause its Affiliates
to, contribute the assets of the Vastar Gas Business and Vastar Power Business,
and SEI Holdings desires to, and to cause its Affiliates to, contribute the
assets of the SETM Gas Business and the SETM Power Business to the Partnership
to be formed by the parties and to the limited liability company that will act
as general partner of the Partnership, each in exchange for limited partnership
interests in the Partnership (and in exchange for interests in the limited
liability company that will act as general partner of the Partnership) to be
held by Vastar Energy, Inc., a Delaware corporation ("Vastar LP Sub") and SC
Energy Ventures, Inc., a Georgia corporation ("Southern LP Sub"), which will
use such assets to continue and develop the Marketing Business; and
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WHEREAS, at the First Closing, (a) VRI desires (i) to cause the Vastar
Gas Business to be contributed to the Partnership and to the General Partner
and (ii) to obligate itself to contribute, and to cause its Affiliates to
contribute, the Vastar Power Business at the Second Closing and the LDC
Contracts to the Partnership at January 1, 1998, and (b) SEI Holdings desires
(i) to cause the SETM Gas Business to be contributed to the Partnership and to
the General Partner and (ii) to obligate itself to contribute, and to cause its
Affiliates to contribute, the SETM Power Business to the Partnership at the
Second Closing; and
WHEREAS, the parties desire that, among other considerations, Southern
LP Sub (or its designee) shall immediately after the First Closing and subject
to Section 10.2, purchase a portion of the interest of Vastar LP Sub (or its
designee) in such limited partnership for $40 million;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, each of the
following terms has the meaning given it below:
(a) "AFFILIATE" means, with respect to a Person, (i) any other
Person 50% or more of whose outstanding voting securities are directly or
indirectly owned, controlled or held with the power to vote by such Person or
(ii) any other Person directly or indirectly controlling, controlled by or
under common control with such Person. Notwithstanding the preceding sentence,
with respect to VRI, Vastar Holdings, Inc., a Delaware corporation ("Vastar
Holdings"), VGM, VPM or Vastar LP Sub, "Affiliate" shall not include Atlantic
Richfield Company, a Delaware corporation or any entity owned or controlled by
it other than VRI or an entity also, directly or indirectly, owned or
controlled by VRI and with respect to SEI Holdings, SETM, Southern Member Sub
or Southern LP Sub, "Affiliate" shall not include The Southern Company, a
Delaware corporation ("Southern Company") or any entity, directly or
indirectly, owned or controlled by it other than SEI Holdings or an entity
also, directly or indirectly, owned or controlled by SEI Holdings. The term
"controls" as used above means the possession of the power to direct or cause
the direction of the management and policies of a person by virtue of ownership
of voting securities or otherwise.
(b) "APPLICABLE LAW" means any statute, law, rule or regulation or
any judgment, order, writ, injunction or decree of any Governmental Entity to
which a specified Person or property is subject.
Formation Agreement
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(c) "ASSUMED CONTRACTS AND LIABILITIES" means the contracts and
liabilities that SEI Holdings and VRI mutually determine (with the economic
value of such contracts Marked to Market, as applicable, as of the respective
Closing Date) and identify on a schedule mutually executed for identification
purposes and which schedule specifies the Marked to Market value, and delivered
to each other at the First Closing and at the Second Closing (the "First
Closing and Second Closing Schedules of Assumed Contracts and Liabilities,"
respectively), will be assumed by the Partnership as of such respective First
Closing or Second Closing. (Schedule 1.1(c)). In the event the Marked to
Market value cannot be precisely determined at the respective Closing Date, the
parties shall agree on an approximation thereof at such Closing and shall
settle the actual value as described in Section 7.18, by paying additional cash
to the Partnership or receiving a refund of cash from the Partnership to meet
the obligations under Sections 2.1(b)(vii), 3.1-A(g), 3.2-A(g), 3.1-B(e) and
3.2-B(e). The First Closing Schedule of Assumed Contracts and Liabilities
shall include the LDC Contracts even though such Contracts will not be assigned
until January 1, 1998.
(d) "BUSINESS" shall mean the Vastar Marketing Business, when
referring to VGM, VPM, Vastar Holdings or VRI, the SETM Business when referring
to SEI Holdings or SETM, and the Marketing Business when referring to the
Partnership.
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
(f) "CLOSING" means the First Closing or Second Closing, as
applicable.
(g) "CLOSING DATE" means the First Closing Date or the Second
Closing Date, as applicable.
(h) "ENCUMBRANCES" means liens, charges, pledges, options,
mortgages, deeds of trust, security interests, claims, restrictions, easements
and other encumbrances of every type and description, whether imposed by law,
agreement, understanding or otherwise.
(i) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(j) "EXCLUDED ASSETS" means as to SEI Holdings and its Affiliates
with respect to either the SETM Gas Business or the SETM Power Business, or as
to VRI and its Affiliates with respect to either the Vastar Gas Business or the
Vastar Power Business:
(i) any assets sold or otherwise disposed of by it in the
ordinary course of business and not in violation of the provisions of
this Agreement during the period commencing on the date of this
Agreement and ending on the respective Closing Date;
(ii) all articles of incorporation, bylaws, minutes,
capital stock ledgers, corporate seals and similar corporate
instruments of such Person;
Formation Agreement
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(iii) its general ledgers and original books of entry
ancillary thereto, Tax Returns and supporting papers, checks, vouchers
and bank statements;
(iv) all contracts (including specifically the cogen
contracts), contract rights and similar rights of it under or pursuant
to contracts that are not Assumed Contracts and Liabilities pursuant
to Section 2.5;
(v) all rights, claims and causes of action of it for
federal, state, local or foreign Tax refunds and all Tax loss carry
forward benefits and other benefits, rights and claims of it arising
in connection with or otherwise relating to Taxes relating to the
business of it for any period or partial period prior to the
respective Closing;
(vi) all rights of it under or pursuant to this Agreement,
the Partnership Agreement and Limited Liability Company Agreement, and
the Ancillary Agreements referred to in Section 7.6 to which it is a
party;
(vii) all cash, inventories, accounts receivable, pipeline
imbalances, notes receivable, deposits and Marked to Market contract
values (certain of which are to be transferred to the Partnership but
as a part of the respective Working Capital Contribution/Loans);
(viii) the assets, rights, and other interests described in
Schedule 1.1(j)(viii) of the SEI Holdings Disclosure Schedule or
Schedule 1.1(j)(viii) of the Vastar Disclosure Schedule;
(ix) as to VRI and its Affiliates, but only with respect
to the period between the First Closing and January 1, 1998, the LDC
contracts listed on Section 1.1(j)(ix) of the Vastar Disclosure
Schedule (the "LDC Contracts", such definition shall, to the extent
consent to transfer of any of such contracts as of January 1, 1998
cannot be obtained through the exercise of commercially reasonable
best efforts, or the General Partner concurs that obtaining such
consent is not advisable, include an agency or other agreement with
respect thereto in a form agreed to by the parties); and
(x) with respect to the period between the First Closing
and the Second Closing, the SETM Power Business and the SETM Power
Assets, and the Vastar Power Business and the Vastar Power Assets.
(k) "GENERAL PARTNER" means Southern Company Energy Marketing
G.P., L.L.C., a Delaware limited liability company formed under the Limited
Liability Company Agreement to act as general partner of the Partnership.
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(l) "GOVERNMENTAL ENTITY" means any court or tribunal in any
jurisdiction (domestic or foreign) or any federal, Indian, state, municipal or
other governmental body, agency, department, commission, board, bureau or
instrumentality (domestic or foreign).
(m) "INTELLECTUAL PROPERTY" means patents, technical drawings,
trademarks, service marks, trade names, service names, copyrights and similar
rights, and all registrations, applications, licenses and rights with respect
to any of the foregoing.
(n) "IRS" means the Internal Revenue Service.
(o) "LDC" means a local distribution company.
(p) "LEGAL EXPENSES" means the reasonable fees, costs and expenses
of any kind incurred by any Person entitled to indemnification pursuant to
Article XI in investigating, preparing for, defending against or providing
evidence, producing documents or taking other action with respect to any claim
as to which such person is entitled to indemnification pursuant to Article XI.
(q) "MARKED TO MARKET" means the future profit or loss to be
realized from the fair market value of forward positions that exist at the
applicable measurement date.
(r) "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means,
with respect to the representations, warranties and covenants of a party
contained herein, any change, development or effect (individually or in the
aggregate) which is, or is reasonably likely to be, materially adverse (A) to
the business, assets, results of operations, condition (financial or otherwise)
or prospects of the respective Businesses or to the ownership or operation of
the Vastar Business Assets or the SETM Business Assets, taken as a whole, (B)
to the ability of that party to perform on a timely basis any of its material
obligations under this Agreement, any Ancillary Agreement or any other
agreement, instrument or document entered into or delivered in connection
herewith, or (C) to the ability of the Partnership to function as contemplated
herein.
(s) "NET AFTER-TAX BASIS" means, with respect to the calculation
of any indemnification payment owed to any party pursuant to this Agreement,
calculation thereof in a manner taking into account any Taxes owing by the
indemnified party or its Affiliates as a result of receipt or accrual of the
indemnity payment and any savings in Taxes realized by the indemnified party or
its Affiliates as a result of the indemnified liability.
(t) "PARTNER" means any of the General Partner, Vastar LP Sub and
Southern LP Sub.
(u) "PARTNERSHIP" means Southern Company Energy Marketing L.P., a
limited partnership formed under the Delaware Revised Uniform Limited
Partnership Act and to operate under the Partnership Agreement, of which the
Partners are the partners.
Formation Agreement
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(v) "PERMITS" means licenses, permits, franchises, consents,
approvals, variances, exemptions and other authorizations of or from
Governmental Entities.
(w) "PERMITTED ENCUMBRANCES" means (i) the Encumbrances set forth
in each party's Disclosure Schedule and specifically identified as such, (ii)
liens for Taxes not yet due and payable or the validity of which is being
contested in good faith by appropriate legal proceedings and for which adequate
reserves have been set aside, (iii) statutory liens (including materialmen's,
mechanic's, repairmen's, landlord's and other similar liens) arising in
connection with the ordinary course of business securing payments not yet due
and payable or, if due and payable, the validity of which is being contested in
good faith by appropriate legal proceedings and for which adequate reserves
have been set aside, and (iv) such imperfections or irregularities of title, if
any, as (A) are not substantial in character, amount or extent and do not
materially detract from the value of the property subject thereto, (B) do not
materially interfere with either the present or intended use of such property
and (C) do not, individually or in the aggregate, materially interfere with the
conduct of the respective Businesses.
(x) "PERSON" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, enterprise, unincorporated organization, Governmental Entity or other
entity.
(y) "PROCEEDINGS" means all proceedings, actions, claims, suits,
investigations and inquiries by or before any arbitrator or Governmental
Entity.
(z) "SALE OF PARTIAL INTEREST" means the sale (subject to Section
10.2) immediately after the First Closing by Vastar LP Sub (or its designee) to
Southern LP Sub (or its designee) of an 8.00% limited partnership interest in
the Partnership for $40 million in cash.
(aa) "SEI HOLDINGS DISCLOSURE SCHEDULE" means the disclosure
schedule delivered by SEI Holdings to VRI and the Partnership and attached
hereto as Exhibit 1.1(aa).
(bb) "SETM BUSINESS ASSETS" means the SETM Gas Assets and the SETM
Power Assets.
(cc) "SETM GAS ASSETS" means all assets and properties of SETM or
any Affiliate of every kind, character and description, whether tangible,
intangible, real, personal or mixed, and wherever located, which are owned,
used or held for use by SETM or any Affiliate on the First Closing Date in
connection with the SETM Gas Business, excluding the Excluded Assets, but
including the following assets and properties of SETM or any Affiliate owned,
used, or held for use on the First Closing Date for the SETM Gas Business:
(i) all furniture, fixtures, leasehold improvements,
equipment, machinery, computer hardware, supplies, materials, motor
vehicles, apparatus, tools, implements, appliances and other tangible
personal property;
Formation Agreement
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(ii) to the extent assignable or transferable, all
Intellectual Property, Technology and Software relating to, or used in
connection with the operation of, the SETM Gas Business, including the
Intellectual Property, Technology and Software described in Section
5.18 of the SEI Holdings Disclosure Schedule;
(iii) all right, title and interest that may be assignable
or transferable in, to and under all Permits relating to, or used in
connection with the operation of, the SETM Gas Business or relating to
the use, operation or enjoyment of the SETM Gas Assets, including the
Permits described in Section 5.19(a) of the SEI Holdings Disclosure
Schedule;
(iv) all right, title and interest in, to and under the
Assumed Contracts and Liabilities listed on the First Closing Schedule
of Assumed Contracts and Liabilities;
(v) all right, title and interest in and to all prepaid
rentals and other prepaid expenses arising from payments made in the
ordinary course of the operation of the SETM Gas Business prior to the
First Closing for goods or services where such goods or services have
not been received by the First Closing;
(vi) all books and records relating to the SETM Gas Assets
or the operation of the SETM Gas Business, including (A) financial and
accounting records, (B) all books and records relating to employees to
the extent permitted by Applicable Law to be transferred hereunder
other than those related to non-qualified plans and associated funding
arrangements, (C) all books and records relating to the purchase of
materials, supplies and services, and (D) all books and records
relating to dealings with customers, vendors and suppliers of the SETM
Gas Business, and including computerized books and records and other
computerized storage media (or, in each case, copies thereof in
accessible form or access thereto reasonably satisfactory to VRI);
(vii) all customer and potential customer lists and
customer and potential customer data, vendor lists and vendor data,
supplier lists and supplier data and sales and promotional material
and other sales-related material relating to, or used in connection
with the operation of, the SETM Gas Business;
(viii) to the extent assignable or transferable, all rights,
claims and causes of action under or pursuant to all warranties,
representations, indemnifications, hold harmless provisions and
guarantees made by suppliers, licensors, manufacturers or contractors
in respect of the SETM Gas Assets;
(ix) all goodwill associated with the SETM Gas Business;
and
(x) all rights to offer to employ the personnel listed in
a schedule previously delivered to VRI (the "SETM Gas Business
Personnel").
Formation Agreement
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(dd) "SETM POWER ASSETS" means all assets and properties of SETM or
any Affiliate of every kind, character and description, whether tangible,
intangible, real, personal or mixed, and wherever located, which are owned,
used or held for use by SETM or any Affiliate on the Second Closing Date in
connection with the SETM Power Business, excluding the Excluded Assets, but
including the following assets and properties of SETM or any Affiliate owned,
used, or held for use on the Second Closing Date for the SETM Power Business:
(i) all furniture, fixtures, leasehold improvements,
equipment, machinery, computer hardware, supplies, materials, motor
vehicles, apparatus, tools, implements, appliances and other tangible
personal property;
(ii) to the extent assignable or transferable, all
Intellectual Property, Technology and Software relating to, or used in
connection with the operation of, the SETM Power Business, including
the Intellectual Property, Technology and Software described in
Section 5.18 of the SEI Holdings Disclosure Schedule;
(iii) all right, title and interest that may be assignable
or transferable in, to and under all Permits relating to, or used in
connection with the operation of, the SETM Power Business or relating
to the use, operation or enjoyment of the SETM Power Assets, including
the Permits described in Section 5.19(a) of the SEI Holdings
Disclosure Schedule;
(iv) all right, title and interest in, to and under the
Assumed Contracts and Liabilities listed on the Second Closing
Schedule of Assumed Contracts and Liabilities;
(v) all right, title and interest in and to all prepaid
rentals and other prepaid expenses arising from payments made in the
ordinary course of the operation of the SETM Power Business prior to
the Second Closing for goods or services where such goods or services
have not been received by the Second Closing;
(vi) all books and records relating to the SETM Power
Assets or the operation of the SETM Power Business, including (A)
financial and accounting records, (B) all books and records relating
to employees to the extent permitted by Applicable Law to be
transferred hereunder other than those related to non-qualified plans
and associated funding arrangements, (C) all books and records
relating to the purchase of materials, supplies and services, and (D)
all books and records relating to dealings with customers, vendors and
suppliers of the SETM Power Business, and including computerized books
and records and other computerized storage media (or, in each case,
copies thereof in accessible form or access thereto reasonably
satisfactory to VRI);
(vii) all customer and potential customer lists and
customer and potential customer data, vendor lists and vendor data,
supplier lists and supplier data and sales and promotional
Formation Agreement
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material and other sales-related material relating to, or used in
connection with the operation of, the SETM Power Business;
(viii) to the extent assignable or transferable, all rights,
claims and causes of action under or pursuant to all warranties,
representations, indemnifications, hold harmless provisions and
guarantees made by suppliers, licensors, manufacturers or contractors
in respect of the SETM Power Assets;
(ix) all goodwill associated with the SETM Power Business;
and
(x) all rights to offer to employ the personnel listed in
a schedule previously delivered to VRI (the "SETM Power Business
Personnel").
(ee) "SOFTWARE" means computer software, including systems
software, documentation and object and source codes.
(ff) "SOUTHERN PERCENTAGE" means, with respect to the General
Partner, 60.00% until July 1, 2001, and 75.00% on July 1, 2001 and thereafter,
and with respect to the Partnership, 51.40% from the First Closing until the
Sale of Partial Interest, 59.40% from the Sale of Partial Interest until July
1, 2001, and 74.25% on July 1, 2001 and thereafter, in each case subject to
adjustment pursuant to the terms of the Transfer Restriction Agreement.
(gg) "TAX RETURN" means any return or report, including any related
or supporting information, with respect to Taxes.
(hh) "TAXES" means any income taxes or similar assessments or any
sales, gross receipts, excise, occupation, use, ad valorem, property,
production, severance, transportation, employment, payroll, franchise or other
tax imposed by any United States federal, state or local (or any foreign or
provincial) taxing authority, including any interest, penalties or additions
attributable thereto.
(ii) "TECHNOLOGY" means trade secrets, confidential information
(whether or not of a technological commercial nature), proprietary information,
inventions, patents, technical data, spreadsheets, technical plans and
drawings, blueprints, general specifications, tooling specifications, purchase
specifications, know-how, formulae, processes, procedures, research records,
records of inventions, test information, market surveys and marketing know-how.
(jj) "TO THE BEST KNOWLEDGE" of a specified Person (or similar
references to a person's knowledge) means the actual knowledge of any such
Person's officers, as such knowledge has been obtained in the normal conduct of
the business of such person or in connection with the preparation of that
Person's Disclosure Schedule or the furnishing of information to the other
party hereto as contemplated by this Agreement.
Formation Agreement
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(kk) "U.S. GAAP" means generally accepted accounting principles as
in effect in the United States of America from time to time.
(ll) "VASTAR BUSINESS ASSETS" means the Vastar Gas Assets and the
Vastar Power Assets.
(mm) "VASTAR DISCLOSURE SCHEDULE" means the disclosure schedule
delivered by VRI to SEI Holdings and the Partnership and attached hereto as
Exhibit 1.1(mm). (Together, the Vastar Disclosure Schedule and the SEI
Holdings Disclosure Schedule are referred to as the "Disclosure Schedules".)
(nn) "VASTAR GAS ASSETS" means all assets and properties of VGM or
any Affiliate of every kind, character and description, whether tangible,
intangible, real, personal or mixed, and wherever located, which are owned,
used or held for use by VGM or any Affiliate on the First Closing Date in
connection with the Vastar Gas Business, excluding the Excluded Assets, but
including the following assets and properties of VGM or any Affiliate owned,
used, or held for use on the First Closing Date for the Vastar Gas Business:
(i) all furniture, fixtures, leasehold improvements,
equipment, machinery, computer hardware, supplies, materials, motor
vehicles, apparatus, tools, implements, appliances and other tangible
personal property;
(ii) to the extent assignable or transferable, all
Intellectual Property, Technology and Software of VGM relating to, or
used in connection with the operation of, the Vastar Gas Business,
including the Intellectual Property, Technology and Software described
in Section 4.18 of the Vastar Disclosure Schedule;
(iii) all right, title and interest that may be assignable
or transferable in, to and under all Permits relating to, or used in
connection with the operation of, the Vastar Gas Business or relating
to the use, operation or enjoyment of the Vastar Gas Assets, including
the Permits described in Section 4.19(a) of the Vastar Disclosure
Schedule;
(iv) all right, title and interest in, to and under the
Assumed Contracts and Liabilities listed on the First Closing Schedule
of Assumed Contracts and Liabilities;
(v) all right, title and interest in and to all prepaid
rentals and other prepaid expenses arising from payments made in the
ordinary course of the operation of the Vastar Gas Business prior to
the First Closing for goods or services where such goods or services
have not been received by the First Closing;
(vi) all books and records relating to the Vastar Gas
Assets or the operation of the Vastar Gas Business, including (A)
financial and accounting records, (B) all books and records relating
to employees to the extent permitted by Applicable Law to be
transferred
Formation Agreement
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hereunder other than those related to non-qualified plans and
associated funding arrangements, (C) all books and records relating to
the purchase of materials, supplies and services, and (D) all books
and records relating to dealings with customers, vendors and suppliers
of the Vastar Gas Business, and including computerized books and
records and other computerized storage media (or, in each case, copies
thereof in accessible form or access thereto reasonably satisfactory
to SEI Holdings);
(vii) all customer and potential customer lists and
customer and potential customer data, vendor lists and vendor data,
supplier lists and supplier data and sales and promotional material
and other sales-related material relating to, or used in connection
with the operation of, the Vastar Gas Business;
(viii) to the extent assignable or transferable, all rights,
claims and causes of action under or pursuant to all warranties,
representations, indemnifications, hold harmless provisions and
guarantees made by suppliers, licensors, manufacturers or contractors
in respect of the Vastar Gas Assets;
(ix) all goodwill associated with the Vastar Gas Business;
and
(x) all rights to offer to employ the personnel listed in
a schedule previously delivered to SEI Holdings (the "Vastar Gas
Business Personnel").
(oo) "VASTAR PERCENTAGE" means, with respect to the General
Partner, 40.00% until July 1, 2001, and 25.00% on July 1, 2001 and thereafter,
and with respect to the Partnership, 47.60% from the First Closing until the
Sale of Partial Interest, 39.60% from the Sale of Partial Interest until July
1, 2001, and 24.75% on July 1, 2001 and thereafter, in each case subject to
adjustment pursuant to the terms of the Transfer Restriction Agreement.
(pp) "VASTAR POWER ASSETS" means all assets and properties of VPM
or any Affiliate of every kind, character and description, whether tangible,
intangible, real, personal or mixed, and wherever located, which are owned,
used or held for use by VPM or any Affiliate on the Second Closing Date in
connection with the Vastar Power Business, excluding the Excluded Assets, but
including the following assets and properties of VPM or any Affiliate owned,
used, or held for use on the Second Closing Date for the Vastar Power Business:
(i) all furniture, fixtures, leasehold improvements,
equipment, machinery, computer hardware, supplies, materials, motor
vehicles, apparatus, tools, implements, appliances and other tangible
personal property;
(ii) to the extent assignable or transferable, all
Intellectual Property, Technology and Software relating to, or used in
connection with the operation of, the Vastar Power
Formation Agreement
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Business, including the Intellectual Property, Technology and Software
described in Section 4.18 of the Vastar Disclosure Schedule;
(iii) all right, title and interest that may be assignable
or transferable in, to and under all Permits relating to, or used in
connection with the operation of, the Vastar Power Business or
relating to the use, operation or enjoyment of the Vastar Power
Assets, including the Permits described in Section 4.19(a) of the
Vastar Disclosure Schedule;
(iv) all right, title and interest in, to and under the
Assumed Contracts and Liabilities listed on the Second Closing
Schedule of Assumed Contracts and Liabilities;
(v) all right, title and interest in and to all prepaid
rentals and other prepaid expenses arising from payments made in the
ordinary course of the operation of the Vastar Power Business prior to
the Second Closing for goods or services where such goods or services
have not been received by the Second Closing;
(vi) all books and records relating to the Vastar Power
Assets or the operation of the Vastar Power Business, including (A)
financial and accounting records, (B) all books and records relating
to employees to the extent permitted by Applicable Law to be
transferred hereunder other than those related to non-qualified plans
and associated funding arrangements, (C) all books and records
relating to the purchase of materials, supplies and services, and (D)
all books and records relating to dealings with customers, vendors and
suppliers of the Vastar Power Business, and including computerized
books and records and other computerized storage media (or, in each
case, copies thereof in accessible form or access thereto reasonably
satisfactory to SEI Holdings);
(vii) all customer and potential customer lists and
customer and potential customer data, vendor lists and vendor data,
supplier lists and supplier data and sales and promotional material
and other sales-related material relating to, or used in connection
with the operation of, the Vastar Power Business;
(viii) to the extent assignable or transferable, all rights,
claims and causes of action under or pursuant to all warranties,
representations, indemnifications, hold harmless provisions and
guarantees made by suppliers, licensors, manufacturers or contractors
in respect of the Vastar Power Assets;
(ix) all goodwill associated with the Vastar Power
Business; and
(x) all rights to offer to employ the personnel listed in
a schedule previously delivered to SEI Holdings (the "Vastar Power
Business Personnel").
Formation Agreement
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1.2 CERTAIN ADDITIONAL DEFINED TERMS. In addition to such terms
as are defined in Section 1.1, the following terms are used in this Agreement
as defined in the Articles or Sections set forth opposite such terms:
<TABLE>
<CAPTION>
Defined Term Article or Section Reference
------------ ----------------------------
<S> <C>
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.5
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sections 4.21(a) and 5.21(a)
Alternate Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . Section 12.9
Ancillary Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.6
Applicable Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.22(a)
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.22(a)
Certificate of Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1(a)
commercially reasonable best efforts . . . . . . . . . . . . . . . . . . . . . . Section 7.4
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 12.9(b)
Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(mm)
Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.7
First Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article III-A
First Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article III-A
First Closing Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . Article III-A
First Closing Schedule of Assumed Contracts and Liabilities . . . . . . . . . . Section 1.1(c)
Hazardous Substance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.22(c)
indemnified party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 11.3(a)
indemnifying party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 11.3(a)
Instruments of Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.3
JAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 12.9(b)
LDC Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(j)(ix)
Limited Liability Company Agreement . . . . . . . . . . . . . . . . . . . . . . Section 2.1(a)
LLC Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.4(b)
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 11.1
Marketing Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Partnership Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1(b)(i)
Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.4(a)
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.22(a)
Second Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article III-B
Second Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article III-B
Second Closing Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . Article III-B
Second Closing Schedule of Assumed Contracts and Liabilities . . . . . . . . . . Section 1.1(c)
SEI Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
</TABLE>
Formation Agreement
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<TABLE>
<CAPTION>
Defined Term Article or Section Reference
------------ ----------------------------
<S> <C>
SEI Holdings Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.3
SENA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1
SETM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
SETM Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
SETM Gas Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
SETM Gas Business Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(dd)(x)
SETM Power Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
SETM Power Business Personnel . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(ee)(x)
Solid Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.22(c)
Southern Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(a)
Southern LP Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Staff Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.13
Third Party Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 11.3(a)
transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1(b)(ii)
Vastar Gas Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Vastar Gas Business Personnel . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(nn)x)
Vastar Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(a)
Vastar LP Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Vastar Marketing Business . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Vastar Power Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Vastar Power Business Personnel . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(pp)(x)
VGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
VPM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
VRI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
VRI Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.3
Working Capital Contribution/Loans . . . . . . . . . . . . . . . . . . . . . . . Section 2.1(b)(vii)
</TABLE>
1.3 CONSTRUCTION. Unless herein otherwise provided, or unless the
context shall otherwise require, words imparting the singular number shall
include the plural number, and vice versa; the terms "herein", "hereof",
"hereby" and "hereunder", or other similar terms, refer to this Agreement as a
whole and not only to the particular Article, Section or other subdivision in
which any such terms may be employed; references to Articles, Sections and
other subdivisions refer to the Articles, Sections and other subdivisions of
this Agreement; a reference to any person shall include such person's
predecessors and successors; the word "includes" and its derivatives means
"includes, but is not limited to," and corresponding derivative expressions;
and all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with U.S. GAAP. Each reference herein to a
Schedule or Exhibit refers to the item identified separately in writing by the
parties hereto as the described Schedule or Exhibit to this Agreement.
Formation Agreement
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ARTICLE II
TERMS OF THE TRANSACTION
2.1 ADOPTION OF PARTNERSHIP AGREEMENT AND LIMITED LIABILITY
COMPANY AGREEMENT; ASSETS TO BE CONTRIBUTED.
(a) At the First Closing, VRI and SEI Holdings shall cause Vastar
Member Sub and Southern Member Sub to execute and deliver the Amended and
Restated Limited Liability Company Agreement of the General Partner
substantially in the form attached hereto as Exhibit 2.1(a)(i) (the "Limited
Liability Company Agreement").
(b) At the First Closing, and on the terms and subject to the
conditions set forth in this Agreement
(i) VRI and SEI Holdings shall cause the Amended and
Restated Limited Partnership Agreement of the Partnership
substantially in the form attached hereto as Exhibit 2.l(b) (the
"Partnership Agreement") to be executed and delivered by the parties
named therein as the general and limited partners of the Partnership,
and VRI and SEI Holdings shall cause such parties to make such other
filings or recordings and take such other action as may be required by
Applicable Law to evidence the adoption of the Partnership Agreement;
(ii) VRI shall contribute, assign, transfer, deliver and
convey (collectively, "transfer"), or cause its Affiliates to
transfer, to the Partnership, and the Partnership shall accept, a 99%
undivided interest in the Vastar Gas Business and the Vastar Gas
Assets and the LDC Contracts (but the transfer of the LDC Contracts
shall be effective on January 1, 1998);
(iii) SEI Holdings shall transfer, or cause its Affiliates
to transfer, to the Partnership, and the Partnership shall accept, a
99% undivided interest in the SETM Gas Business and the SETM Gas
Assets;
(iv) VRI shall transfer, or cause its Affiliates to
transfer, to the General Partner, and the General Partner shall
accept, a 1% undivided interest in the Vastar Gas Business and the
Vastar Gas Assets and the LDC Contracts (but the transfer of the LDC
Contracts shall be effective on January 1, 1998);
(v) SEI Holdings shall transfer, or cause its Affiliates
to transfer, to the General Partner, and the General Partner shall
accept, a 1% undivided interest in the SETM Gas Business and the SETM
Gas Assets;
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(vi) VRI and SEI Holdings shall cause the General Partner
to transfer to the Partnership, and the Partnership shall accept, the
1% undivided interest in the Vastar Gas Business and the Vastar Gas
Assets and the 1% undivided interest in the SETM Gas Business and the
SETM Gas Assets; and
(vii) VRI shall, or shall cause its Affiliates to, transfer
$16,000,000 to the Partnership and SEI Holdings shall, or shall cause
its Affiliates to, transfer $24,000,000 to the Partnership for working
capital each in the form of a contribution to capital or an
interest-free subordinated loan as determined by the General Partner
pro rata based on the Partnership Interest of the limited partners
(the "Working Capital Contribution/Loans").
(c) At the Second Closing, and on the terms and subject to the
conditions set forth in this Agreement
(i) VRI shall transfer, or cause its Affiliates to
transfer, to the Partnership, and the Partnership shall accept, a 100%
undivided interest in the Vastar Power Business and the Vastar Power
Assets; and
(ii) SEI Holdings shall transfer, or cause its Affiliates
to transfer, to the Partnership, and the Partnership shall accept, a
100% undivided interest in the SETM Power Business and the SETM Power
Assets.
2.2 EXCLUDED ASSETS. Notwithstanding any provision contained in
this Agreement to the contrary, the Excluded Assets shall be excluded from the
assets to be transferred to the Partnership pursuant to Section 2.1.
2.3 INSTRUMENTS OF CONVEYANCE. In order to effectuate the
transfer of the Vastar Business Assets and the SETM Business Assets
contemplated by Sections 2.1(b) and (c), at each Closing, each of SEI Holdings
and VRI shall execute and deliver, or cause its Affiliates to execute and
deliver, to the Partnership or the General Partner, as applicable, dated the
respective Closing Date, all such documents or instruments of assignment,
transfer or conveyance as the Partnership shall reasonably deem necessary or
appropriate to vest in or confirm to the Partnership or the General Partner, as
applicable, good and indefeasible title to the respective transferred Vastar
Business Assets and SETM Business Assets free and clear of all Encumbrances
other than Permitted Encumbrances (the "Instruments of Conveyance").
2.4 TRANSFER OF INTERESTS.
(a) At the First Closing, the Partnership shall issue to VRI and
SEI Holdings, or their designees, all of the limited partnership interests in
the Partnership ("Partnership Interests"), as follows:
Formation Agreement
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(i) as provided in the Partnership Agreement, the
Partnership shall issue to VRI, or its designees, at the First
Closing, Partnership Interests which, immediately upon (and after
taking into account) the consummation of the First Closing, shall
represent the Vastar Percentage of all Partnership Interests then
issued and outstanding; and
(ii) as provided in the Partnership Agreement, the
Partnership shall issue to SEI Holdings, or its designees, at the
First Closing, Partnership Interests which, immediately upon (and
after taking into account) the consummation of the First Closing,
shall represent the Southern Percentage of all Partnership Interests
then issued and outstanding.
(b) At the First Closing, the General Partner shall issue to VRI
and SEI Holdings, or their designees, all of the membership interests in the
General Partner ("LLC Interests"), as follows:
(i) as provided in the Limited Liability Company
Agreement, the General Partner shall issue to VRI, or its designees,
at the First Closing, LLC Interests which, immediately upon (and after
taking into account) the consummation of the First Closing, shall
represent the Vastar Percentage of all LLC Interests then issued and
outstanding; and
(ii) as provided in the Limited Liability Company
Agreement, the General Partner shall issue to SEI Holdings, or its
designees, at the First Closing, LLC Interests which, immediately upon
(and after taking into account) the consummation of the First Closing,
shall represent the Southern Percentage of all LLC Interests then
issued and outstanding.
(c) At the Second Closing, each of the Partnership and the General
Partner shall adjust their respective accounts to take into account the
additional contributions to capital by the parties on behalf of the Partners
and of the members of the General Partner without any adjustment in the
respective Partnership Interests of the Partners or LLC Interests of the
Members of the General Partner.
2.5 LIABILITIES ASSUMED BY PARTNERSHIP.
(a) As further consideration for the contribution of the Vastar
Gas Assets and the SETM Gas Assets to the Partnership, the Partnership shall,
upon the terms and subject to the conditions set forth herein, assume, at the
First Closing, and agree to thereafter perform all Assumed Contracts and
Liabilities listed on the First Closing Schedule of Assumed Contracts and
Liabilities.
(b) As further consideration for the contribution of the Vastar
Power Assets and the SETM Power Assets to the Partnership, the Partnership
shall, upon the terms and subject to the conditions set forth herein, assume,
at the Second Closing, and agree to thereafter perform all Assumed Contracts
and Liabilities listed on the Second Closing Schedule of Assumed Contracts and
Liabilities.
Formation Agreement
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2.6 LIABILITIES NOT ASSUMED BY PARTNERSHIP. Neither the
Partnership nor the General Partner shall assume or take title to or be subject
to, or in any way be liable or responsible for, any liabilities or obligations
of VRI, SEI Holdings or their respective Affiliates (whether or not referred to
in any Schedule or Exhibit hereto), except as specifically provided in Section
2.5 or in the Partnership Agreement. The parties expressly acknowledge that it
is the intention of the parties hereto that all liabilities and obligations
that VRI, SEI Holdings or their respective Affiliates has or may have in the
future (whether accrued, absolute, contingent, unliquidated or otherwise,
whether or not known to VRI or SEI Holdings, and whether due or to become due,
including, without limitation, those arising on account of bank, institutional
and other financings, Taxes, royalties, warranties, employee benefit plan
obligations, claims or any other matter), other than under the Assumed
Contracts and Liabilities, shall be and remain the liabilities and obligations
of VRI, SEI Holdings or their respective Affiliates, as the case may be.
2.7 SALE OF PARTIAL INTEREST. Immediately after the First
Closing, Southern LP Sub (or its designee) shall purchase (subject to Section
10.2) from Vastar LP Sub (or its designee) an 8.00% interest in the Partnership
for $40,000,000 in cash delivered to Texas Commerce Bank, N.A. as Escrow Agent
(the "Escrow Agent") pursuant to the Escrow Agreement among Vastar LP Sub,
Southern LP Sub and the Escrow Agent in the form attached as Exhibit 2.7 so
that the relative interests of Southern LP Sub and Vastar LP Sub in the
Partnership shall be, respectively, 59.40% and 39.60%.
2.8 RETAIL BUSINESS. The parties agree that the Partnership and
their respective Affiliates may create such additional entities as they deem
necessary or desirable to permit the Partnership to enter into retail marketing
of energy and energy-linked commodities and to meet applicable regulatory and
tax requirements, so long as the governance thereof is controlled by the
provisions of the Limited Liability Company Agreement and the distributions
therefrom directly to Affiliates of VRI or Affiliates of SEI Holdings (other
than to the General Partner) are treated as Cash Distributions to Vastar LP Sub
or Southern LP Sub, respectively, for purposes of the Partnership Agreement.
2.9 REIMBURSEMENTS. It is agreed that SEI Holdings, VRI and their
respective Affiliates shall pay and be solely responsible for all costs,
expenses and liabilities arising or accruing with respect to their respective
Business prior to the respective Closing Dates. If the Partnership pays any
amount which was properly payable by SEI Holdings or one of its Affiliates or
VRI or one of its Affiliates, as the case may be, then such Person shall
reimburse the Partnership for such payments promptly following notice from the
Partnership.
Formation Agreement
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ARTICLE III-A
FIRST CLOSING
The First Closing of the transactions contemplated by Article II (the
"First Closing") shall be effective as of 12:01 a.m., Eastern Time, on
September 1, 1997 (the "First Closing Effective Date") and shall take place (i)
at the offices of Andrews & Kurth L.L.P., Houston, Texas, at 9:00 a.m., local
time, on August 28, 1997, or (ii) at such other time or place or on such other
date as VRI and SEI Holdings shall agree in writing. The date on which the
First Closing is required to take place is referred to herein as the "First
Closing Date." All First Closing transactions shall be deemed to have occurred
simultaneously.
At the First Closing, subject to the satisfaction or waiver of the
conditions to their respective obligations set forth in this Agreement, the
parties hereto shall make the following deliveries or such deliveries in
substitution therefor as are satisfactory to the indicated recipient:
3.1-A DELIVERIES BY VRI AND AFFILIATES.
(a) VRI shall execute and deliver, or cause its Affiliates to
execute and deliver, to the Partnership the Instruments of Conveyance in form
and substance reasonably satisfactory to SEI Holdings and the Partnership and
sufficient to transfer to the Partnership and effectively vest in the
Partnership good and indefeasible title to the 99% undivided interest in the
Vastar Gas Business, the Vastar Gas Assets and the LDC Contracts (but the
transfer of the LDC Contracts shall be effective on January 1, 1998), subject
only to Permitted Encumbrances.
(b) VRI shall execute and deliver, or cause its Affiliates to
execute and deliver, to the General Partner the Instruments of Conveyance in
form and substance reasonably satisfactory to SEI Holdings and the General
Partner and sufficient to transfer to the General Partner and effectively vest
in the General Partner good and indefeasible title to the 1% undivided interest
in the Vastar Gas Business, the Vastar Gas Assets and the LDC Contracts (but
the transfer of the LDC Contracts shall be effective on January 1, 1998),
subject only to Permitted Encumbrances.
(c) VRI shall deliver, or cause its Affiliates to deliver,
possession of the Vastar Gas Business and the Vastar Gas Assets to the General
Partner and the Partnership.
(d) VRI shall deliver to SEI Holdings and the Partnership a
certificate of an officer of VRI dated the First Closing Date certifying (i)
that attached to such certificate are true and correct copies of the
resolutions adopted by the Board of Directors, and, if necessary, the
stockholders, of VRI and each of VGM, VPM and Vastar LP Sub authorizing the
execution, delivery and performance of this Agreement and the execution,
delivery and performance of the Instruments of Conveyance and Ancillary
Agreements delivered at the First Closing and that such resolutions are in full
force and effect as of the First Closing, and (ii) the incumbency and
signatures of the officers
Formation Agreement
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of VRI or its Affiliates who have executed this Agreement and the other
certificates, instruments and documents delivered at the First Closing.
(e) VRI shall execute and deliver, or cause its Affiliates to
execute and deliver, to SEI Holdings and the Partnership the Partnership
Agreement, the Limited Liability Company Agreement and such other certificates,
instruments and documents as may be reasonably requested by, and in form and
substance reasonably satisfactory to, SEI Holdings and the Partnership in order
to effect the transactions contemplated by this Agreement to occur at the First
Closing.
(f) VRI and SEI Holdings shall execute and deliver the agreed
First Closing Schedule of Assumed Contracts and Liabilities.
(g) VRI shall deliver, or cause its Affiliates to deliver, to the
Partnership cash, deposits (including Oklahoma tax deposits), gas storage
inventory at market value, Marked to Market values of Assumed Contracts and
Liabilities, or other cash equivalents satisfactory to SEI Holdings and the
Partnership as its part of the Working Capital Contribution/Loan pursuant to
Section 2.1(b)(vii).
(h) Immediately after the First Closing, VRI shall deliver, or
cause its Affiliates to deliver, to Southern LP Sub or its designees, the
Instruments of Conveyance in form and substance reasonably satisfactory to SEI
Holdings and sufficient to transfer to Southern LP Sub or its designees the
8.00% Partnership Interest to be sold in the Sale of Partial Interest.
3.2-A DELIVERIES BY SEI HOLDINGS AND AFFILIATES.
(a) SEI Holdings shall execute and deliver, or cause its
Affiliates to execute and deliver, to the Partnership the Instruments of
Conveyance in form and substance reasonably satisfactory to VRI and the
Partnership and sufficient to transfer to the Partnership and effectively vest
in the Partnership good and indefeasible title to the 99% undivided interest in
the SETM Gas Business and the SETM Gas Assets, subject only to Permitted
Encumbrances.
(b) SEI Holdings shall execute and deliver, or cause its
Affiliates to execute and deliver, to the General Partner the Instruments of
Conveyance in form and substance reasonably satisfactory to VRI and the General
Partner and sufficient to transfer to the General Partner and effectively vest
in the General Partner good and indefeasible title to the 1% undivided interest
in the SETM Gas Business and the SETM Gas Assets, subject only to Permitted
Encumbrances.
(c) SEI Holdings shall deliver, or cause its Affiliates to
deliver, possession of the SETM Gas Business and the SETM Gas Assets to the
General Partner and the Partnership.
(d) SEI Holdings shall deliver to VRI and the Partnership a
certificate of an officer of SEI Holdings dated the First Closing Date
certifying (i) that attached to such certificate are true and correct copies of
the resolutions adopted by the Board of Directors, and, if necessary, the
Formation Agreement
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stockholders, of SEI Holdings and its Affiliates authorizing the execution,
delivery and performance of this Agreement and the execution, delivery and
performance of the Instruments of Conveyance and Ancillary Agreements delivered
at the First Closing and that such resolutions are in full force and effect as
of the First Closing, and (ii) the incumbency and signatures of the officers of
SEI Holdings or its Affiliates who have executed this Agreement and the other
certificates, instruments and documents delivered at the First Closing.
(e) SEI Holdings shall execute and deliver, or cause its
Affiliates to execute and deliver, to VRI and the Partnership the Partnership
Agreement, the Limited Liability Company Agreement and such other certificates,
instruments and documents as may be reasonably requested by, and in form and
substance reasonably satisfactory to, VRI and the Partnership in order to
effect the transactions contemplated by this Agreement to occur at the First
Closing.
(f) VRI and SEI Holdings shall execute and deliver the agreed
First Closing Schedule of Assumed Contracts and Liabilities.
(g) SEI Holdings shall deliver, or cause its Affiliates to deliver
to the Partnership cash, deposits, gas storage inventory at market value,
Marked to Market values of Assumed Contracts and Liabilities, or other cash
equivalents satisfactory to VRI and the Partnership as its part of the Working
Capital Contribution/Loan pursuant to Section 2.1(b)(vii).
(h) Immediately after the First Closing, SEI Holdings shall cause
Southern LP Sub to deliver to the Escrow Agent under the Escrow Agreement for
the benefit of Vastar LP Sub or its designee(s) a wire transfer of immediately
available funds in the amount of $40,000,000 as consideration for the Sale of
Partial Interest.
3.3-A DELIVERIES BY THE GENERAL PARTNER. VRI and SEI Holdings shall
cause the General Partner (i) to execute and deliver the Partnership Agreement
and (ii) to deliver to the Partnership the 1% undivided interest in the SETM
Gas Business and the SETM Gas Assets and the 1% undivided interest in the
Vastar Gas Business and the Vastar Gas Assets.
3.4-A DELIVERIES BY THE PARTNERSHIP.
(a) VRI and SEI Holdings shall cause the Partnership to deliver to
them or their respective designees instruments of assumption in form and
substance reasonably satisfactory to VRI and SEI Holdings pursuant to which the
Partnership shall assume at the First Closing, and thereafter perform the
Assumed Contracts and Liabilities listed on the First Closing Schedule of
Assumed Contracts and Liabilities.
(b) VRI and SEI Holdings shall cause the Partnership to deliver
such other certificates, instruments and documents as may be reasonably
requested by, and in form and substance
Formation Agreement
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reasonably satisfactory to, VRI and SEI Holdings to effect the transactions
contemplated by this Agreement to occur at the First Closing.
ARTICLE III-B
SECOND CLOSING
The Second Closing of the transactions contemplated by Article II (the
"Second Closing") shall be effective as of 12:01 a.m., Eastern Time, on the
later of the last day of the month in which all the conditions to the Second
Closing are met or January 1, 1998 (the "Second Closing Effective Date") and
shall take place (i) at the offices of Andrews & Kurth L.L.P., Houston, Texas,
at 9:00 a.m., local time, on the second business day after the Second Closing
Effective Date, or (ii) at such other time or place or on such other date as
VRI and SEI Holdings shall agree in writing. The date on which the Second
Closing is required to take place is referred to herein as the "Second Closing
Date." All Second Closing transactions shall be deemed to have occurred
simultaneously.
At the Second Closing, subject to the satisfaction or waiver of the
conditions to their respective obligations set forth in this Agreement, the
parties hereto shall make the following deliveries or such deliveries in
substitution therefor as are satisfactory to the indicated recipient:
3.1-B DELIVERIES BY VRI AND AFFILIATES.
(a) VRI shall execute and deliver, or cause its Affiliates to
execute and deliver, to the Partnership the Instruments of Conveyance in form
and substance reasonably satisfactory to SEI Holdings and the Partnership and
sufficient to transfer to the Partnership and effectively vest in the
Partnership good and indefeasible title to the 100% undivided interest in the
Vastar Power Business and the Vastar Power Assets, subject only to Permitted
Encumbrances.
(b) VRI shall deliver, or cause its Affiliates to deliver,
possession of the Vastar Power Business and the Vastar Power Assets to the
Partnership.
(c) VRI shall deliver to SEI Holdings and the Partnership a
certificate of an officer of VRI dated the Second Closing Date certifying (i)
that attached to such certificate are true and correct copies of the
resolutions adopted by the Board of Directors, and, if necessary, the
stockholders, of VRI, Vastar Holdings and each of VGM, VPM and Vastar LP Sub,
authorizing the execution, delivery and performance of this Agreement and the
execution, delivery and performance of all the Instruments of Conveyance and
Ancillary Agreements delivered at the Second Closing and that such resolutions
are in full force and effect as of the Second Closing, (ii) the incumbency and
signatures of the officers of VRI or its Affiliates who have executed the
certificates, instruments and documents delivered at the Second Closing, and
(iii) that the employment of the Vastar Gas Business Personnel and Vastar Power
Business Personnel by VRI and its Affiliates has been terminated.
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(d) VRI shall execute and deliver, or cause its Affiliates to
execute and deliver, to SEI Holdings and the Partnership such other
certificates, instruments and documents as may be reasonably requested by, and
in form and substance reasonably satisfactory to, SEI Holdings and the
Partnership in order to effect the transactions contemplated by this Agreement
to occur at the Second Closing.
(e) VRI shall execute and deliver the agreed Second Closing
Schedule of Assumed Contracts and Liabilities and shall cause to be adjusted,
by way of cash payments to or from the Partnership, the then proportionate
Working Capital Contribution/Loans to accommodate the Marked to Market values
thereof.
(f) VRI shall cause Vastar LP Sub to cause the Escrow Agent to
deliver to VRI or its designees the $40,000,000 (plus interest) placed in
escrow in connection with the Sale of Partial Interest.
3.2-B DELIVERIES BY SEI HOLDINGS AND AFFILIATES.
(a) SEI Holdings shall execute and deliver, or cause its
Affiliates to execute and deliver, to the Partnership the Instruments of
Conveyance in form and substance reasonably satisfactory to VRI and the
Partnership and sufficient to transfer to the Partnership and effectively vest
in the Partnership good and indefeasible title to the 100% undivided interest
in the SETM Power Business and the SETM Power Assets subject only to Permitted
Encumbrances.
(b) SEI Holdings shall deliver, or cause its Affiliates to
deliver, possession of the SETM Power Business and the SETM Power Assets to the
Partnership.
(c) SEI Holdings shall deliver to VRI and the Partnership a
certificate of an executive officer of SEI Holdings dated the Second Closing
Date certifying (i) that attached to such certificate are true and correct
copies of resolutions adopted by the Board of Directors, and, if necessary the
stockholders, of SEI Holdings and its Affiliates authorizing the execution,
delivery and performance of this Agreement and the execution, delivery and
performance of the Instruments of Conveyance and Ancillary Agreements delivered
at the Second Closing and that such resolutions are in full force and effect as
of the Second Closing, (ii) the incumbency and signatures of the officers of
SEI Holdings or its Affiliates who have executed the certificates, instruments
and documents delivered at the Second Closing, and (iii) that the employment of
the SETM Gas Business Personnel and SETM Power Business Personnel by SEI
Holdings and its Affiliates has been terminated.
(d) SEI Holdings shall execute and deliver, or cause its
Affiliates to execute and deliver, to VRI and the Partnership such other
certificates, instruments and documents as may be reasonably requested by, and
in form and substance reasonably satisfactory to, VRI and the Partnership in
order to effect the transactions contemplated by this Agreement to occur at the
Second Closing.
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(e) SEI Holdings shall execute and deliver the agreed Second
Closing Schedule of Assumed Contracts and Liabilities and shall cause to be
adjusted, by way of cash payments to or from the Partnership, the then
proportionate Working Capital Contribution/Loans to accommodate the Marked to
Market values thereof.
(f) SEI Holdings shall cause Southern LP Sub to cause the Escrow
Agent to deliver to Vastar LP Sub or its designee the$40,000,000 (plus
interest) placed in escrow in connection with the Sale of Partial Interest.
3.3-B DELIVERIES BY THE GENERAL PARTNER. VRI and SEI Holdings shall
cause the General Partner to deliver such certificates, instruments and
documents as may be reasonably requested by, and in form and substance
reasonably satisfactory to, VRI and SEI Holdings to effect the transactions
contemplated by this Agreement to occur at the Second Closing.
3.4-B DELIVERIES BY THE PARTNERSHIP.
(a) VRI and SEI Holdings shall cause the Partnership to deliver to
them or their respective designees instruments of assumption in form and
substance reasonably satisfactory to VRI and SEI Holdings pursuant to which the
Partnership shall assume at the Second Closing, and thereafter perform the
Assumed Contracts and Liabilities listed on the Second Closing Schedule of
Assumed Contracts and Liabilities.
(b) VRI and SEI Holdings shall cause the Partnership to deliver
such other certificates, instruments and documents as may be reasonably
requested by, and in form and substance reasonably satisfactory to, VRI and SEI
Holdings to effect the transactions contemplated by this Agreement to occur at
the Second Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VRI
VRI represents and warrants to SEI Holdings as of the date hereof
that:
4.1 CORPORATE ORGANIZATION. Each of VRI, Vastar Holdings, VGM,
VPM and Vastar LP Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of VRI, Vastar
Holdings, VGM, VPM and Vastar LP Sub has all requisite corporate power and
authority to own, lease and operate the Vastar Business Assets and to carry on
the Vastar Marketing Business as now being conducted. No actions or
proceedings to dissolve VRI, Vastar Holdings, VGM, VPM or Vastar LP Sub are
pending.
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4.2 CHARTER AND BYLAWS. VRI has delivered or made available to
SEI Holdings accurate and complete copies of the Certificate of Incorporation
and Bylaws of each of VRI, Vastar Holdings, VGM, VPM and Vastar LP Sub as
currently in effect.
4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of VRI, Vastar
Holdings, VGM, VPM and Vastar LP Sub has full corporate power and authority to
execute, deliver and perform this Agreement, the Partnership Agreement, the
Limited Liability Company Agreement, the Ancillary Agreements (as defined in
Section 7.6 of this Agreement), and the Instruments of Conveyance
(collectively, the "VRI Documents") to which it is a party, and to consummate
the transactions contemplated thereby. The execution, delivery and performance
by each of VRI, Vastar Holdings, VGM, VPM, and Vastar LP Sub, as the case may
be, of the VRI Documents, to which it is a party, and the consummation by it of
the transactions contemplated thereby, have been duly authorized by all
necessary corporate action. This Agreement has been duly executed and
delivered by VRI and constitutes, and each of the VRI Documents and each other
agreement, instrument or document executed or to be executed by VRI, Vastar
Holdings, VGM, VPM and/or Vastar LP Sub in connection with the transactions
contemplated hereby has been, or when executed will be, duly executed and
delivered by each of VRI, Vastar Holdings, VGM, VPM and/or Vastar LP Sub and
constitutes, or when executed and delivered will constitute, a valid and
legally binding obligation of VRI, Vastar Holdings, VGM, VPM or Vastar LP Sub,
as the case may be, enforceable against it in accordance with their respective
terms, except that such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights generally and (ii) equitable principles which may limit the
availability of certain equitable remedies (such as specific performance) in
certain instances.
4.4 NONCONTRAVENTION. Except as disclosed in Section 4.4 of the
Vastar Disclosure Schedule, the execution, delivery and performance by each of
VRI, Vastar Holdings, VGM, VPM and/or Vastar LP Sub of the VRI Documents, to
which it is a party, and the consummation by it of the transactions
contemplated thereby do not and will not (i) conflict with or result in a
violation of any provision of the respective charter or bylaws or other
governing instruments of each of VRI, Vastar Holdings, VGM, VPM, and Vastar LP
Sub (ii) conflict with or result in a violation of any provision of, or
constitute (with or without the giving of notice or the passage of time or
both) a default under, or give rise (with or without the giving of notice or
the passage of time or both) to any right of termination, cancellation or
acceleration under, any bond, debenture, note, mortgage, indenture, lease,
contract, agreement or other instrument or obligation to which it is a party or
by which it, its Business or any of the Vastar Business Assets may be bound,
(iii) result in the creation or imposition of any Encumbrance upon any of the
Vastar Business Assets or (iv) assuming compliance with the matters referred to
in Section 4.5, violate any Applicable Law binding upon it, its Business or any
of the Vastar Business Assets, except, in the case of clauses (ii), (iii) and
(iv) above, for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which would not, individually or in the
aggregate, have a Material Adverse Effect.
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4.5 GOVERNMENTAL APPROVALS. No consent, approval, order or
authorization of, or declaration, filing or registration with, any Governmental
Entity is required to be obtained or made by VRI, Vastar Holdings, VGM, VPM or
Vastar LP Sub in connection with the execution, delivery or performance by VRI,
Vastar Holdings, VGM, VPM or Vastar LP Sub of the VRI Documents or the
consummation by it of the transactions contemplated thereby, other than (i) as
set forth in Section 4.5 of the Vastar Disclosure Schedule; (ii) filings with
Governmental Entities with respect to the transfer of the Vastar Business
Assets, to occur in the ordinary course following the consummation of the
transactions contemplated hereby; and (iii) such consents, approvals, orders or
authorizations which, if not obtained, and such declarations, filings or
registrations which, if not made, would not, individually or in the aggregate,
have a Material Adverse Effect.
4.6 EXCLUSIVE OPERATION OF THE VASTAR MARKETING BUSINESS. Except
as set forth in Schedule 4.6 to the Vastar Disclosure Schedule, VRI does not
have any direct or indirect equity or ownership interest in any corporation,
partnership, joint venture or other entity other than VGM or VPM which is
involved, directly or indirectly, in the conduct of the Vastar Marketing
Business, and the Vastar Gas Business is conducted solely and exclusively by
VGM and the Vastar Power Business is conducted solely and exclusively by VPM.
4.7 TITLE TO VASTAR BUSINESS ASSETS. Except as set forth in
Section 4.7 of the Vastar Disclosure Schedule, VRI, Vastar Holdings, VGM or VPM
is the owner of, and has good and marketable title to, all the Vastar Business
Assets. Upon transfer of the Vastar Business Assets as provided in Article III
of this Agreement, the Partnership will have good and marketable title to all
the Vastar Business Assets (including, except as set forth in Section 4.7 of
the Vastar Disclosure Schedule, the Intellectual Property, Technology and
Software), free and clear of all Encumbrances (other than the Permitted
Encumbrances).
4.8 FINANCIAL STATEMENTS; ABSENCE OF LIABILITIES.
(a) VRI ACKNOWLEDGES THAT NEITHER IT NOR ANY OF ITS AFFILIATES HAS
RELIED ON ANY FINANCIAL STATEMENTS OF SETM OR ITS SUBSIDIARIES IN CONNECTION
WITH ITS DECISION TO ENTER INTO THIS AGREEMENT.
(b) Neither VGM nor VPM has any liabilities or obligations
(whether accrued, absolute, contingent, unliquidated or otherwise, whether or
not known to VRI, and whether due or to become due) that will become
liabilities or obligations of the General Partner or the Partnership except for
the Assumed Contracts and Liabilities (or as otherwise contemplated hereby) or
that will create or result in any Encumbrances on the assets of the General
Partner or the Partnership except for Permitted Encumbrances.
4.9 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Section
4.9 of the Vastar Disclosure Schedule, since June 30, 1997, (i) there has been
no Material Adverse Effect with respect to the Vastar Marketing Business; (ii)
the Vastar Marketing Business has been conducted only in the
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ordinary course consistent with past practice; (iii) except for, or as
contemplated by, this Agreement, neither VRI, VGM nor VPM has, in respect of
its Business, incurred any material liability, engaged in any material
transaction or entered into any material agreement outside the ordinary course
of business consistent with past practice; (iv) neither VRI, VGM nor VPM has
suffered any material loss, damage, destruction or other casualty to any of the
Vastar Business Assets (whether or not covered by insurance); and (v) neither
VRI, VGM nor VPM has, in respect of its Business, taken any of the actions set
forth in Section 6.2-A except as permitted thereunder.
4.10 TAX MATTERS. Except as disclosed in Section 4.10 of the
Vastar Disclosure Schedule, VRI, Vastar Holdings, VGM and VPM have (and as of
each Closing will have) (either directly or indirectly or as part of a
consolidated or combined group) (i) duly filed all material federal, state,
local and foreign Tax Returns required to be filed by or with respect to it
with the IRS or other applicable Taxing authority, (ii) paid, or adequately
reserved against all Taxes due, or claimed by any Taxing authority to be due,
from or with respect to it, and (iii) made all material deposits required with
respect to Taxes, in each such case to the extent that the failure to do so
would result in the imposition of any Encumbrance (other than a Permitted
Encumbrance) on the Vastar Business Assets. To the best knowledge of VRI,
there has been no material issue raised or material adjustment proposed (and
none is pending) by the IRS or any other Taxing authority in connection with
any Tax Returns relating to the Vastar Business Assets or the operation of the
Vastar Marketing Business. Except as set forth in Section 4.10 of the Vastar
Disclosure Schedule, no waiver or extension of any statute of limitations as to
any federal, state, local or foreign Tax matter relating to the Vastar Business
Assets or the operation of the Vastar Marketing Business has been given by or
requested from VRI, Vastar Holdings, VGM or VPM with respect to any Tax year.
Neither VRI, Vastar Holdings, VGM nor VPM has filed a consent under Section
341(f) of the Code.
4.11 COMPLIANCE WITH LAWS. To the best knowledge of VRI, each of
VRI, Vastar Holdings, VGM and VPM has complied with all Applicable Laws
relating to the ownership or operation of the Vastar Business Assets and the
operation of the Vastar Marketing Business, except for noncompliance with such
Applicable Laws which, individually or in the aggregate, does not and will not
have a Material Adverse Effect. Neither VRI, Vastar Holdings, VGM nor VPM is
charged or, to the best knowledge of VRI, threatened with, or, to the best
knowledge of VRI, under investigation with respect to, any violation of any
Applicable Law relating to any aspect of the ownership or operation of the
Vastar Business Assets or the operation of the Vastar Marketing Business, other
than violations which, individually or in the aggregate, do not and will not
have a Material Adverse Effect.
4.12 LEGAL PROCEEDINGS. To the best knowledge of VRI, except as
set forth on Section 4.12 of the Vastar Disclosure Schedule, there are no
Proceedings pending or threatened against or involving VRI, Vastar Holdings,
VGM, VPM or Vastar LP Sub relating to the Vastar Business Assets or the
operation of the Vastar Marketing Business which, individually or in the
aggregate, might reasonably be expected to have a Material Adverse Effect or to
result in a material adverse change in the Assumed Contracts and Liabilities.
Except as set forth in Section 4.12 of the
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Vastar Disclosure Schedule, neither VRI, Vastar Holdings, VGM, VPM nor Vastar
LP Sub is subject to any judgment, order, writ, injunction or decree of any
Governmental Entity which is reasonably likely to have a Material Adverse
Effect or result in a material adverse change in the Assumed Contracts and
Liabilities. To the best knowledge of VRI, except as set forth in Section 4.12
of the Vastar Disclosure Schedule, there are no Proceedings pending or
threatened seeking to restrain, prohibit or obtain damages or other relief in
connection with this Agreement or the transactions contemplated hereby.
4.13 SUFFICIENCY OF ASSETS AND PERSONNEL. Except for the Excluded
Assets and except as set forth in Section 4.13 of the Vastar Disclosure
Schedule and except for staff services (such as accounting, treasury, human
resources, tax advice, insurance, information technology and legal services)
which are currently provided by Affiliates of the parties ("Staff Services")
which VRI or an Affiliate is available to perform on an arm's-length contract
basis, the Vastar Business Assets, and the Vastar Gas Business Personnel and
Vastar Power Business Personnel, (i) constitute all the assets and properties
used or held for use, and all of the employees employed, in connection with the
operation of the Vastar Marketing Business and (ii) constitute all the assets
and properties and personnel the use, employment or benefit of which are
reasonably necessary for the operation of the Vastar Marketing Business as
currently conducted. The Vastar Business Assets and their uses conform to all
Applicable Laws, except for such nonconformance as does not and will not have a
Material Adverse Effect. All tangible assets and properties included in the
Vastar Business Assets are in the possession, or under the control, of VRI, VGM
or VPM.
4.14 REAL PROPERTY. Neither VGM nor VPM owns any real property.
Set forth in Section 4.14 of the Vastar Disclosure Schedule is the street
address and a brief description of the principal facilities and structures
leased by VRI, Vastar Holdings, VGM or VPM and used or held for use in
connection with the operation of the Vastar Marketing Business.
4.15 TANGIBLE PERSONAL PROPERTY. Set forth in Section 4.15 of the
Vastar Disclosure Schedule is a list, as of the date hereof, of all furniture,
fixtures, leasehold improvements, equipment, machinery, computer hardware,
prototypes, spare parts, supplies, materials, motor vehicles, apparatus, tools,
implements, appliances and other tangible personal property (other than
inventories) owned or leased by VRI, Vastar Holdings, VGM or VPM and used or
held for use in connection with the operation of the Vastar Marketing Business,
except for items having a value individually of less than $5,000 which do not,
in the aggregate, have a value exceeding $100,000.
4.16 INVENTORY. The value of each item of inventory included in
the Vastar Business Assets transferred as a part of the Working Capital
Contribution/Loan shall be reflected at market value as of the respective
Closing.
4.17 RECEIVABLES. There are no accounts receivable of VRI, Vastar
Holdings, VGM or VPM generated by the Vastar Marketing Business to be
transferred to the General Partner or the Partnership pursuant to Section 2.1.
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4.18 INTELLECTUAL PROPERTY; TECHNOLOGY; SOFTWARE.
(a) Set forth in Section 4.18 of the Vastar Disclosure Schedule is
a list of all Intellectual Property, Technology and Software relating to or
used in connection with the operation of the Vastar Marketing Business.
Section 4.18 of the Vastar Disclosure Schedule specifies, as applicable: (i)
the nature of such Intellectual Property, Technology and Software; (ii) the
owner of such Intellectual Property, Technology and Software; and (iii) all
licenses, sublicenses and other agreements to which VRI, VGM or VPM is a party
and pursuant to which any person is authorized to use the Intellectual
Property, Technology and Software, including the identity of all parties
thereto, a description of the nature and subject matter thereof, the applicable
royalty (if any) and the term thereof.
(b) The Intellectual Property, Technology and Software listed in
Section 4.18 of the Vastar Disclosure Schedule constitutes all Intellectual
Property, Technology and Software necessary for the conduct of the Vastar
Marketing Business on a basis consistent with past practice. VRI, VGM or VPM
has good and marketable title to or is validly licensed to use all such
Intellectual Property, Technology and Software. Each item of such Intellectual
Property, Technology and Software is in full force and effect, each of VRI,
Vastar Holdings, VGM and VPM is in compliance in all material respects with all
its obligations with respect thereto and, to the best knowledge of VRI, no
event has occurred which permits, or upon the giving of notice or the passage
of time or otherwise would permit, the revocation or termination of any
thereof. To the best knowledge of VRI, there are no Proceedings pending or
threatened against it, Vastar Holdings, VGM or VPM asserting that the use by
VRI, VGM or VPM of any of such Intellectual Property, Technology or Software
infringes the rights of any other person or seeking revocation, termination or
concurrent use of any of such Intellectual Property, Technology or Software,
and there is, to the best knowledge of VRI, no basis for any such Proceeding.
To the best knowledge of VRI, none of the Intellectual Property, Technology or
Software that is owned by VRI or its Affiliates is being infringed upon by any
other person. Except as set forth in Section 4.18 of the Vastar Disclosure
Schedule, none of such Intellectual Property, Technology or Software that is
owned by VRI or its Affiliates is subject to any outstanding judgment, order,
writ, injunction or decree of any Governmental Entity, or any agreement,
arrangement or understanding, restricting the scope or use thereof. To the
best knowledge of VRI, the conduct of the Vastar Marketing Business at any time
prior to the First Closing or Second Closing, as the case may be, did not, and
the conduct of the Vastar Marketing Business on a basis consistent with VRI's
past practice as of such Closing will not, infringe upon or otherwise
misappropriate any Intellectual Property, Technology or Software of any other
person.
4.19 PERMITS.
(a) Set forth in Section 4.19 (a) of the Vastar Disclosure
Schedule is a list of all Permits held by VGM or VPM which relate to the Vastar
Business Assets or the Vastar Marketing Business. Each of such Permits is in
full force and effect, each of VRI, VGM and VPM is in compliance in all
material respects with all its obligations with respect thereto and, to the
best knowledge of VRI, no event has occurred which permits, or with or without
the giving of notice or the passage of time or
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both would permit, the revocation or termination of any thereof. Except as
disclosed in Section 4.19(a) of the Vastar Disclosure Schedule, to the best
knowledge of VRI, no notice has been issued by any Governmental Entity and no
Proceeding is pending or threatened with respect to any alleged failure by VRI,
VGM or VPM to have any Permit the absence of which would have a Material
Adverse Effect.
(b) Except as set forth in Section 4.19(b) of the Vastar
Disclosure Schedule and, except for Permits the absence of which do not and
will not have a Material Adverse Effect, the Permits listed in Section 4.19(a)
of the Vastar Disclosure Schedule constitute all the Permits necessary or
required for the ownership and operation of the Vastar Business Assets and the
conduct of the Vastar Marketing Business as of the First Closing or Second
Closing, as the case may be.
4.20 CHANGE IN CORPORATE STRUCTURE. Except as previously
disclosed in writing, the board of directors of each of VRI, Vastar Holdings,
VGM, VPM or Vastar LP Sub (as reflected in their respective minutes) is not
currently contemplating and does not have any plans to consolidate, merge with
or, reorganize or recapitalize with any other Person or to convey, transfer,
sell, or lease a substantial portion of its assets to any other Person in a
single transaction or series of transactions.
4.21 AGREEMENTS.
(a) Set forth in Section 4.21(a) of the Vastar Disclosure Schedule
is a list of all the following contracts, agreements and arrangements
(collectively, for purposes of this Section only, "agreements") to which VRI,
VGM or VPM is a party or by which VRI, VGM or VPM is otherwise bound that
relate to the Vastar Business Assets or the Vastar Marketing Business:
(i) collective bargaining agreements and similar
agreements with employees as a group;
(ii) agreements, trusts, plans, funds or other employee
benefit arrangements of any nature;
(iii) agreements with any director, officer, employee,
consultant or advisor of VRI or any of its Affiliates;
(iv) agreements between or among VRI and any of its
Affiliates;
(v) indentures, mortgages, security agreements, notes,
loan or credit agreements or other agreements relating to the
borrowing of money by VRI, VGM or VPM or to the direct or indirect
guarantee or assumption by VRI, VGM or VPM of any obligation of
others;
(vi) agreements relating to the acquisition or disposition
of assets;
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(vii) agreements with respect to the lease of real or
personal property;
(viii) agreements concerning the management or operation of
any real property;
(ix) supplier, broker, distributor, dealer, manufacturer's
representative, sales, agency, sales promotion, advertising,
marketing, consulting, research and development, maintenance, service
and repair agreements;
(x) license, royalty or other agreements relating to
Intellectual Property, Technology or Software;
(xi) partnership, joint venture and profit sharing
agreements;
(xii) agreements with any Governmental Entity;
(xiii) agreements in the nature of a settlement or a
conciliation agreement arising out of any claim asserted by any other
person;
(xiv) agreements containing any covenant limiting the
freedom of VRI, VGM or VPM to engage in any line of business or
compete with any other person in any geographic area or during any
period of time;
(xv) powers of attorney granted by VRI, VGM or VPM in
favor of any person;
(xvi) agreements not made in the ordinary course of the
Vastar Marketing Business;
(xvii) agreements for the purchase, sale, exchange,
marketing, or other use of natural gas, electric energy, or other
commodities that may not be terminated for convenience and without
penalty prior to January 1, 1998, and all exchange, swap, hedging, and
other financial or future contracts and agreements; and
(xviii) other agreements, whether or not made in the ordinary
course of the Vastar Marketing Business, that are material to the
Vastar Marketing Business or the ownership or operation of the Vastar
Business Assets or any material portion thereof.
(b) VRI has delivered or made available to SEI Holdings accurate
and complete copies of the agreements listed in Section 4.21(a) of the Vastar
Disclosure Schedule. Except as set forth in Section 4.21(b) of the Vastar
Disclosure Schedule, each of such agreements is a valid and binding agreement
of VRI, VGM or VPM, as the case may be, and (to the best knowledge of VRI) the
other parties thereto. Except as set forth in Section 4.21(b) of the Vastar
Disclosure Schedule, neither VRI, VGM nor VPM is in breach of or in default in
any material respect under, nor has any event
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occurred which (with or without the giving of notice or the passage of time or
both) would constitute a material default by it under, any material provision
of any of such agreements, and neither VRI, VGM nor VPM has received any
written notice from any other party indicating that it is in breach of or in
default under any such material provision. To the best knowledge of VRI, no
other party to any of such agreements is in breach of or in default under such
agreements, nor has any assertion been made by VRI, VGM or VPM of any such
breach or default except as would not have a Material Adverse Effect. Except
as disclosed in Section 4.21(b) of the Vastar Disclosure Schedule and except as
would not have a Material Adverse Effect, each of such agreements is freely and
fully assignable to the Partnership without penalty or other adverse
consequence.
4.22 ENVIRONMENTAL MATTERS.
(a) To the best knowledge of VRI, neither VRI, VGM nor VPM is in
violation of, or subject to, any pending or threatened Proceeding under, or
subject to any remedial obligations under, any Applicable Laws pertaining to
health, safety, the environment, Hazardous Substances or Solid Wastes (such
Applicable Laws as they now exist are herein collectively called "Applicable
Environmental Laws") relating to the ownership or operation of the Vastar
Business Assets or the operation of the Vastar Marketing Business, including
without limitation (i) the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended ("CERCLA"), and (ii) the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"). To the best
knowledge of VRI, VRI, Vastar Holdings, VGM and VPM have obtained all Permits
to construct, occupy, operate or use any equipment or other tangible property
forming a part of the Vastar Business Assets by reason of any Applicable
Environmental Laws.
(b) Except as disclosed in Section 4.22 of the Vastar Disclosure
Schedule, to the best knowledge of VRI, there are no past or present events,
conditions, circumstances or plans (i) that interfere with or prevent
compliance or continued compliance, with respect to the Vastar Marketing
Business or the Vastar Business Assets, with Applicable Environmental Laws or
(ii) that are reasonably expected to give rise to any common law or other legal
liability or obligation with respect to the Vastar Marketing Business or the
Vastar Business Assets, including but not limited to, liability or obligation
under CERCLA or RCRA, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling or the
emission, discharge, release or threatened release into the environment, of any
pollutant, contaminant, chemical, industrial toxic or Hazardous Substance or
Solid Waste.
(c) As used in this Agreement, the term "Hazardous Substance"
shall have the meaning currently specified in CERCLA, and the term "Solid
Waste" shall have the meaning currently specified in RCRA; provided that to the
extent the laws of the jurisdiction in which the particular asset is located
have currently established a meaning for such term that is broade