Exhibit 10.26


 


Execution Version


 


 


MEMBERSHIP
INTEREST PURCHASE AGREEMENT


 


by
and among


 


SCISSORTAIL
ENERGY, LLC


 


HAMILTON
SCISSORTAIL LLC,


 


SCISSORTAIL
HOLDINGS, LLC,


 


JAY
A. PRECOURT,


 


FREDERIC
C. HAMILTON,


 


COPANO
ENERGY, L.L.C.


 


and


 


COPANO
ENERGY/ROCKY MOUNTAINS AND MID-CONTINENT, L.L.C.


 


dated
as of


 


June 20,
2005


 





















 


TABLE OF CONTENTS


 


	
  §1.

  	
   

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  §2.

  	
   

  	
  Purchase
  and Sale of Membership Interests

  	
   

  
	
   

  	
   

  	
  (a)

  	
  Basic
  Transaction

  	
   

  
	
   

  	
   

  	
  (b)

  	
  Purchase
  Price

  	
   

  
	
   

  	
   

  	
  (c)

  	
  Net Working
  Capital

  	
   

  
	
   

  	
   

  	
  (d)

  	
  Closing

  	
   

  
	
   

  	
   

  	
  (e)

  	
  Deliveries
  at Closing

  	
   

  
	
   

  	
   

  	
  (f)

  	
  Purchase
  Price Allocation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  §3.

  	
   

  	
  Representations
  and Warranties Concerning Transaction

  	
   

  
	
   

  	
   

  	
  (a)

  	
  Sellers’
  Representations and Warranties

  	
   

  
	
   

  	
   

  	
  (b)

  	
  Buyer’s
  Representations and Warranties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  §4.

  	
   

  	
  Representations and Warranties
  of the Company

  	
   

  
	
   

  	
   

  	
  (a)

  	
  Organization,
  Qualification, and Power

  	
   

  
	
   

  	
   

  	
  (b)

  	
  Non-contravention

  	
   

  
	
   

  	
   

  	
  (c)

  	
  Brokers’ Fees

  	
   

  
	
   

  	
   

  	
  (d)

  	
  Tangible
  Assets

  	
   

  
	
   

  	
   

  	
  (e)

  	
  Subsidiaries

  	
   

  
	
   

  	
   

  	
  (f)

  	
  Financial
  Statements; Internal Controls; Undisclosed Liabilities

  	
   

  
	
   

  	
   

  	
  (g)

  	
  Subsequent
  Events

  	
   

  
	
   

  	
   

  	
  (h)

  	
  Legal
  Compliance

  	
   

  
	
   

  	
   

  	
  (i)

  	
  Tax Matters

  	
   

  
	
   

  	
   

  	
  (j)

  	
  Real Property

  	
   

  
	
   

  	
   

  	
  (k)

  	
  Intellectual
  Property

  	
   

  
	
   

  	
   

  	
  (l)

  	
  Contracts

  	
   

  
	
   

  	
   

  	
  (m)

  	
  Powers of
  Attorney

  	
   

  
	
   

  	
   

  	
  (n)

  	
  Litigation

  	
   

  
	
   

  	
   

  	
  (o)

  	
  Employee
  Benefits

  	
   

  
	
   

  	
   

  	
  (p)

  	
  Employees

  	
   

  
	
   

  	
   

  	
  (q)

  	
  Permits

  	
   

  
	
   

  	
   

  	
  (r)

  	
  Environmental
  Matters

  	
   

  
	
   

  	
   

  	
  (s)

  	
  Certain Business
  Relationships with Company

  	
   

  
	
   

  	
   

  	
  (t)

  	
  Insurance

  	
   

  
	
   

  	
   

  	
  (u)

  	
  Governmental Regulation

  	
   

  
	
   

  	
   

  	
  (v)

  	
  Disclaimer of Other
  Representations and Warranties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  §5.

  	
   

  	
  Pre-Closing Covenants

  	
   

  
	
   

  	
   

  	
  (a)

  	
  General

  	
   

  
	
   

  	
   

  	
  (b)

  	
  Notices and Consents

  	
   

  
	
   

  	
   

  	
  (c)

  	
  Operation of Business

  	
   

  
	
   

  	
   

  	
  (d)

  	
  Full Access

  	
   

  
	
   

  	
   

  	
  (e)

  	
  Notice of Developments

  	
   

  
	
   

  	
   

  	
  (f)

  	
  Exclusivity

  	
   

  
	
   

  	
   

  	
  (g)

  	
  Southern Dome

  	
   

  
	
   

  	
   

  	
  (h)

  	
  Expansion of Insurance
  Policies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  §6.

  	
   

  	
  Post-Closing Covenants

  	
   

  
	
   

  	
   

  	
  (a)

  	
  General

  	
   

  
	
   

  	
   

  	
  (b)

  	
  Litigation Support

  	
   

  
	
   

  	
   

  	
  (c)

  	
  Reporting Procedures Under Section 751

  	
   

  
	
   

  	
   

  	
  (d)

  	
  Employee Matters

  	
   

  
	
   

  	
   

  	
  (e)

  	
  Tax Matters

  	
   

  
	
   

  	
   

  	
  (f)

  	
  Company Confidential
  Information

  	
   

  
	
   

  	
   

  	
  (g)

  	
  Financial Statements

  	
   

  
	
   

  	
   

  	
  (h)

  	
  Right
  to Name

  	
   

  



 


i





















 


	
   

  	
   

  	
  (i)

  	
  Non-Competition
  and Non-Solicitation Covenant

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  §7.

  	
   

  	
  Conditions to
  Obligation to Close

  	
   

  
	
   

  	
   

  	
  (a)

  	
  Conditions to Buyer’s Obligation

  	
   

  
	
   

  	
   

  	
  (b)

  	
  Conditions to Each Seller’s
  Obligation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  §8.

  	
   

  	
  Remedies
  for Breaches of This Agreement

  	
   

  
	
   

  	
   

  	
  (a)

  	
  Survival of
  Representations, Warranties and Covenants

  	
   

  
	
   

  	
   

  	
  (b)

  	
  Indemnification Provisions for
  Buyer’s Benefit

  	
   

  
	
   

  	
   

  	
  (c)

  	
  Indemnification Provisions for
  Sellers’ Benefit

  	
   

  
	
   

  	
   

  	
  (d)

  	
  Matters Involving Third Parties

  	
   

  
	
   

  	
   

  	
  (e)

  	
  Matters not Involving Third Party
  Claims

  	
   

  
	
   

  	
   

  	
  (f)

  	
  Claims Against Escrow Amount

  	
   

  
	
   

  	
   

  	
  (g)

  	
  Payment
  of Claims

  	
   

  
	
   

  	
   

  	
  (h)

  	
  Determination of Adverse
  Consequences

  	
   

  
	
   

  	
   

  	
  (i)

  	
  Exclusive Remedy

  	
   

  
	
   

  	
   

  	
  (j)

  	
  Limitation on Damages

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  §9.

  	
   

  	
  Termination

  	
   

  
	
   

  	
   

  	
  (a)

  	
  Termination of Agreement

  	
   

  
	
   

  	
   

  	
  (b)

  	
  Effect of Termination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  §10.

  	
   

  	
  Miscellaneous

  	
   

  
	
   

  	
   

  	
  (a)

  	
  Nature of Sellers’ Obligations

  	
   

  
	
   

  	
   

  	
  (b)

  	
  Press Releases and Public
  Announcements

  	
   

  
	
   

  	
   

  	
  (c)

  	
  No Third-Party Beneficiaries

  	
   

  
	
   

  	
   

  	
  (d)

  	
  Entire
  Agreement

  	
   

  
	
   

  	
   

  	
  (e)

  	
  Succession and Assignment

  	
   

  
	
   

  	
   

  	
  (f)

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
  (g)

  	
  Headings

  	
   

  
	
   

  	
   

  	
  (h)

  	
  Notices

  	
   

  
	
   

  	
   

  	
  (i)

  	
  Governing
  Law

  	
   

  
	
   

  	
   

  	
  (j)

  	
  Arbitration

  	
   

  
	
   

  	
   

  	
  (k)

  	
  Amendments and Waivers

  	
   

  
	
   

  	
   

  	
  (l)

  	
  Severability

  	
   

  
	
   

  	
   

  	
  (m)

  	
  Expenses

  	
   

  
	
   

  	
   

  	
  (n)

  	
  Buyer Parent Guaranty

  	
   

  
	
   

  	
   

  	
  (o)

  	
  Individual Joinder

  	
   

  
	
   

  	
   

  	
  (p)

  	
  Construction

  	
   

  
	
   

  	
   

  	
  (q)

  	
  Incorporation of
  Exhibits, Annexes, and Schedules

  	
   

  
	
   

  	
   

  	
  (r)

  	
  Bold and/or Capitalized Letters

  	
   

  



 


ii





















 


	
  Exhibit A

  	
   

  	
  —

  	
  Escrow Agreement

  	
   

  
	
  Exhibit B

  	
   

  	
  —

  	
  Bank of America Commitment Letter

  	
   

  
	
  Exhibit C

  	
   

  	
  —

  	
  Financial Statements

  	
   

  
	
  Exhibit D

  	
   

  	
  —

  	
  Pre-Closing Buyer Escrow Agreement

  	
   

  
	
  Exhibit E

  	
   

  	
  —

  	
  Pre-Closing Sellers Escrow Agreement

  	
   

  
	
  Exhibit F

  	
   

  	
  —

  	
  Terms of Agreements Related to the Excluded
  Subsidiary

  	
   

  
	
  Exhibit G

  	
   

  	
  —

  	
  Terms of Expanded Insurance Policy

  	
   

  
	
  Exhibit H

  	
   

  	
  —

  	
  Non-Competition Area

  	
   

  
	
  Exhibit I

  	
   

  	
  —

  	
  Form of Employment Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annex I

  	
   

  	
  —

  	
  Exceptions to Sellers’ Representations and
  Warranties Concerning Transaction

  	
   

  
	
  Annex II

  	
   

  	
  —

  	
  Exceptions to Buyer’s Representations and
  Warranties Concerning Transaction

  	
   

  
	
  Disclosure Schedule

  	
   

  	
  —

  	
  Exceptions to Representations and
  Warranties Concerning the Company and Certain Other Exceptions and
  Disclosures

  	
   

  



 


i





















 


MEMBERSHIP INTEREST PURCHASE AGREEMENT


 


This Membership
Interest Purchase Agreement (this “Agreement”) is entered into as of June 20,
2005, by and among ScissorTail Energy, LLC, a Delaware limited liability
company (the “Company”), Hamilton ScissorTail LLC, a Colorado limited
liability company (“Hamilton LLC”) and ScissorTail Holdings, LLC, a
Delaware limited liability company (“Holdings LLC”) together with
Hamilton LLC the “Sellers” and each a “Seller”), Jay A. Precourt,
Frederic C. Hamilton, Copano Energy, L.L.C., a Delaware limited liability
company (“Buyer Parent”), and Copano Energy/Rocky Mountains and
Mid-Continent, L.L.C., a Delaware limited liability company (“Buyer”).
Each of the Company, Buyer Parent, Buyer and Sellers as a group are referred in
this Agreement as a “Party” and collectively as the “Parties.”  Jay A. Precourt joins as a signatory to this
Agreement solely and exclusively with respect to the covenants set forth in §6(f),
(i) and (j) and for no other purpose, and Frederic C. Hamilton joins as a
signatory to this Agreement solely and exclusively with respect to the
covenants set forth in §6(i) and (f) and for no other purpose.


 


Sellers in the
aggregate own 100% of the outstanding membership interests (the “Membership
Interests”) of the Company.


 


This Agreement
contemplates a transaction in which Buyer will purchase from Sellers, and
Sellers will sell to Buyer, the Membership Interests of the Company in return
for cash.


 


Now, therefore,
in consideration of the premises and the mutual promises made in this
Agreement, and in consideration of the representations, warranties, and
covenants contained in this Agreement, the Parties agree as follows.


 


§1.                               Definitions.


 


“Accredited
Investor” has the meaning set forth in Regulation D promulgated under the
Securities Act.


 


“Actual
Working Capital Statement” has the meaning set forth in §2(c)(ii).


 


“Adverse
Consequences” means all Proceedings, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, remedial
obligations, dues, penalties, fines, costs, reasonable amounts paid in
settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees,
including court costs and reasonable attorneys’ fees and expenses.


 


“Affiliate”
has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934.


 


“Allocable
Portion” means with respect to the share of any Seller in a particular
amount that fraction equal to 75% as to Holdings LLC and 25% as to Hamilton
LLC.


 


“Applicable
Rate” as of any date means the Prime Rate as published in the “Money Rates”
section of the Wall Street Journal.


 


1





















 


“Assets”
means all of the Company’s right, title and interest in and to all of the
assets that are used in its business, including (a) real property,
pipeline systems, leaseholds and subleaseholds therein, improvements, fixtures,
and fittings thereon, and easements, rights of way, and other appurtenants
thereto, (b) tangible personal property (such as machinery, equipment,
linefill, inventories of raw materials and supplies, manufactured and purchased
parts, goods in process and finished goods, furniture, automobiles, pickup and
other trucks, tractors, vehicles, rail cars, compressors, trailers, tools,
jigs, and dies), (c) Intellectual Property, goodwill associated therewith,
licenses and sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against infringements thereof, and rights to protection of
interests therein under the laws of all jurisdictions, (d) leases,
subleases, and rights thereunder, (e) agreements, contracts, indentures,
mortgages, instruments, guaranties, other similar arrangements, and rights
thereunder, (f) accounts, notes, and other receivables, (g) securities,
(h) claims, deposits, prepayments, refunds, causes of action, choses in
action, rights of recovery, rights of set off, and rights of recoupment
(including any such item relating to the payment of Taxes), (i) Permits,
(j) books, records, ledgers, files, documents, correspondence, lists, plats,
architectural plans, drawings and specifications, creative materials,
advertising and promotional materials, studies, reports, business and strategic
plans and other printed or written materials, and (k) rights in and with
respect to the assets associated with its Employee Benefit Plans, but excluding
the membership interests in the Excluded Subsidiary.


 


“Audited
Financial Statements” has the meaning set forth in §4(f)(i).


 


“Business
Day” means any day that is not a Saturday, a Sunday or other day on which
banks are closed in the City of New York.


 


“Business of
Southern Dome” means the purchase, sale, gathering, processing,
fractionating, compression and transportation of natural gas and related
by-products from the Southern Dome Prospect by and through contract rights and
facilities owned or to be acquired by the Excluded Subsidiary.


 


“Buyer”
has the meaning set forth in the preface.


 


“Buyer
Benefit Plan” has the meaning set forth in §6(d)(ii).


 


“Buyer
Parent” has the meaning set forth in the preface.


 


“Change of
Control Agreements” shall mean the following agreements:  (i) Long Term Profits Participation
Agreement, dated February 17, 2005, by and between the Company and Sharon
Robinson, (ii) Long Term Profits Participation Agreement, dated March 2,
2005, by and between the Company and John Raber, (iii) Long Term Profits
Participation Agreement, dated February 17, 2005, by and between the
Company and Bruce Roderick, (iv) Long Term Profits Participation
Agreement, dated February 22, 2005, by and between the Company and Lee
Fiegener, (v) Long Term Profits Participation Agreement, dated February 17,
2005, by and between the Company and Tom Coleman and (vi) Change of
Control Agreement, dated June 8, 2005, by and between the Company and John
E. Elgin.


 


2





















 


“Claim for
Indemnification” means a written notice by Buyer or Sellers to the other
asserting a claim under §8 delivered in accordance with the Escrow Agreement or
§10(h), as the case may be; provided,
however, that such notice shall be sufficient if it provides a
general description of the Adverse Consequences that the Indemnified Party may
suffer, with an estimate of the extent of the dollar amount of Adverse
Consequences.


 


“Closing”
has the meaning set forth in §2(d).


 


“Closing
Date” has the meaning set forth in §2(d).


 


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


 


“Company”
has the meaning set forth in the preface.


 


“Confidential
Information” means any information concerning the business and affairs of
Company that is not already generally available to the public.


 


“Control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.


 


“Covered
Persons” has the meaning set forth in §6(d)(iii).


 


“Credit
Facility” means the Amended and Restated Loan and Security Agreement dated
as of May 30, 2003, as amended, among the Company, the lenders named
therein and Bank of America, N.A. as agent for such lenders.


 


“Current
Assets” means the current Assets of the Company, excluding the Oxley
Receivable, in all cases as such amounts are shown on the Company’s balance
sheet, determined in accordance with GAAP applied consistently with the Company’s
past practices, other than imbalances, if any, which shall be marked to market.


 


“Current
Liabilities” means the current liabilities of the Company, excluding
amounts accrued in respect of overpayments from Oneok Energy Services, in all
cases as such amounts are shown on the Company’s balance sheet, determined in
accordance with GAAP (except as set forth in §4(f)(iv) of the
Disclosure Schedule) applied consistently with the Company’s past practices, other than
imbalances, if any, which shall be marked to market.  For the avoidance of doubt, any amounts that
become due and payable under the Change of Control Agreements as a result of
the transactions contemplated by this Agreement (and are not paid by the
Company prior to Closing) shall be deemed to be Current Liabilities as of the
Closing Date.


 


“Disclosure
Schedule” has the meaning set forth in §4.


 


“Duke
Agreement” that certain Purchase and Sale Agreement dated May 1, 2003
among the Company, United LP Gas, LLC and Duke Energy Field Services, LP.


 


3





















 


“Employee
Benefit Plan” means any “employee benefit plan” (as such term is defined in
ERISA §3(3)) and any other material employee benefit compensation plan, program
or arrangement.


 


“Employee
Welfare Benefit Plan” has the meaning set forth in ERISA §3(1).


 


“Environmental
Law” means any and all Laws, statutes, ordinances, rules, or regulations of
any Governmental Authority pertaining to the protection of the environment or
natural resources or to Hazardous Materials in any and all jurisdictions in
which the Company owns property or conducts business or in which the Assets are
located, including the Clean Air Act, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (“CERCLA”), the Federal Water
Pollution Control Act, the Occupational Safety and Health Act of 1970 (to the
extent relating to environmental matters), the Resource Conservation and
Recovery Act of 1976, the Safe Drinking Water Act, the Toxic Substances Control
Act, the Hazardous & Solid Waste Amendments Act of 1984, the Superfund
Amendments and Reauthorization Act of 1986, the Hazardous Materials
Transportation Act, the Oil Pollution Act of 1990, any state or local Laws
implementing or substantially equivalent to the foregoing federal Laws, and any
state or local Laws pertaining to the handling of oil and gas exploration,
production, gathering, and processing wastes or the use, maintenance, and
closure of pits and impoundments, all as amended through the Closing Date.


 


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


 


“ERISA
Affiliate” means each entity that is treated as a single employer with
Company for purposes of Code §414 or ERISA §4001.


 


“Escrow
Agent” means JP Morgan Chase Bank, or such other escrow agent mutually
agreeable to Buyer and Sellers, as escrow agent pursuant to the Escrow
Agreement.


 


“Escrow
Agreement” means the Escrow Agreement, in the form of Exhibit A
to this Agreement, to be entered into by the Company, Sellers, Buyer and Escrow
Agent at the Closing.


 


“Escrow
Amount” has the meaning set forth in §2(b).


 


“Estimated
Allocation Schedule” has the meaning set forth in §2(f).


 


“Estimated
Net Working Capital” has the meaning set forth in §2(c).


 


“Exchange
Act” has the meaning set forth in §7(a)(xi).


 


“Excluded
Subsidiary” means the Company’s wholly owned Subsidiary, Southern Dome,
LLC, a Delaware limited liability company.


 


“Existing
Policy” has the meaning set forth in §5(h).


 


“Expanded
Insurance Policy” has the meaning set forth in §5(h).


 


4





















 


“Final
Allocation Schedule” has the meaning set forth in §2(f).


 


“Financial
Statements” has the meaning set forth in §4(f).


 


“GAAP”
means United States generally accepted accounting principles as in effect from
time to time, consistently applied.


 


“Governmental
Authorities” means (a) the United States of America or any state or
political subdivision thereof within the United States of America and (b) any
court or any governmental or administrative department, commission, board,
bureau or agency of the United States of America or of any state or political
subdivision thereof within the United States of America.


 


“Hamilton
Base Amount” has the meaning set forth in §2(b).


 


“Hamilton
LLC” has the meaning set forth in the preface.


 


“Hamilton
Purchase Price” has the meaning set forth in §2(b).


 


“Hazardous
Materials” means: (a) any chemicals, materials or substances defined
or included in the definition of “hazardous substance,” “hazardous material,” “toxic
substance,” “solid waste,” “pollutant,” “contaminant,” or words of similar
import, under any applicable Environmental Law and (b) radioactive
materials (other than naturally occurring radioactive materials), friable
asbestos, mercury, lead based paints, polychlorinated biphenyls, and any waste
or spilled petroleum (including, without limitation, crude oil or any faction
thereof), petroleum products, natural gas liquids, or natural gas condensate
(but excluding petroleum, petroleum products, natural gas liquids, or natural
gas condensate that has not been Released).


 


“Holdings
Base Amount” has the meaning set forth in §2(b).


 


“Holdings
LLC” has the meaning set forth in the preface.


 


“Holdings
Purchase Price” has the meaning set forth in §2(b).


 


“HSR Act”
shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and regulations and rules promulgated pursuant to that act or any
successor law.


 


“Indemnified
Party” has the meaning set forth in §8(d)(i).


 


“Indemnifying
Party” has the meaning set forth in §8(d)(i).


 


“Intellectual
Property” means (a) all inventions (whether patentable or unpatentable
and whether or not reduced to practice), all improvements thereto, and all
patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress,
logos, trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all


 


5





















 


applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets
and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data
and related documentation), (g) all other proprietary rights, and (h) all
copies and tangible embodiments thereof (in whatever form or medium).


 


“Knowledge
of Buyer” means actual knowledge without independent investigation of the
individuals listed in §1(a) of the Disclosure Schedule.


 


“Knowledge
of the Company” means actual knowledge without independent investigation of
the individuals listed in §1(b) of the Disclosure Schedule


 


“Knowledge
of either Seller” means actual knowledge without independent investigation
of the individuals listed in §1(c) of the Disclosure Schedule.


 


“Laws”
means all applicable statutes, laws (including common law), regulations, rules,
rulings, ordinances, orders, restrictions, requirements, writs, judgments,
injunctions, decrees and other official acts of or by any Governmental
Authority.


 


“Leased Real
Property” means all leasehold or subleasehold estates and other rights to
use or occupy any land, buildings, structures, improvements, fixtures, or other
interest in real property that is used in the Company’s business.


 


“Leases”
means all leases, subleases, licenses, concessions and other agreements
(written or oral), including all amendments, extensions, renewals, guaranties,
and other agreements with respect thereto, pursuant to which the Company holds
any Leased Real Property.


 


“Liability”
means any liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due), including any
liability for Taxes.


 


“Lien”
means any mortgage, pledge, lien, encumbrance, charge, or other security
interest or restriction (whether on voting, sale, transfer, disposition or
otherwise).


 


“LLC
Agreement” has the meaning set forth in §3(a)(v).


 


“Material
Adverse Effect” or “Material Adverse Change” means any effect,
event, circumstance or occurrence or change that is or could reasonably be
expected to be materially adverse to the business, condition (financial or
otherwise), results of operations, assets, liabilities or obligations of the
Company, taken as a whole, or to the ability of any Party to consummate timely
the transactions contemplated by this Agreement; provided that none of the
following shall be deemed to constitute, and none of the following shall be
taken into account in determining whether there has been, a Material Adverse
Effect or Material Adverse Change: (a)


 


6





















 


any
adverse change, event, development, or effect arising from or relating to (1) general
business or economic conditions, (2) national or international political
or social conditions, including the engagement or continuation by the United States
in hostilities, whether or not pursuant to the declaration of a national
emergency or war, or the occurrence of any military or terrorist attack upon
the United States, or any of its territories, possessions, or diplomatic or
consular offices or upon any military installation, equipment or personnel of
the United States, (3) financial, banking, or securities markets
(including any disruption thereof and any decline in the price of any security,
commodity or market index), (4) changes in United States generally
accepted accounting principles (5) changes in Laws or other binding
directives issued by any Governmental Authority, or (6) the taking of any
action required by this Agreement; provided that none of the changes, events,
developments or effects described in clauses (1) through (5) specifically
relate to or have the effect of specifically relating to or having a materially
disproportionate effect on the Company relative to most other industry
participants in the midstream natural gas industry and (b) any adverse
change in or effect on the business of the Company arising after the date of
this Agreement that is cured by a Seller before the earlier of (1) the
Closing Date and (2) the date on which this Agreement is terminated
pursuant to §9 of this Agreement.  For
purposes of this Agreement, (i) any reference to “Material Adverse Effect”
in any representation or warranty contained in §4 of this Agreement shall be
deemed to include any event, circumstance or occurrence or change that has or
could reasonably be expected to result in Adverse Consequences of at least
$2,000,000 and (ii) any reference to “material” in respect to any
representation or warranty contained in §4 of this Agreement shall be deemed to
include any event, circumstance, occurrence or change that has or could
reasonably be expected to result in Adverse Consequences of at least $500,000.


 


“Material
Leases” has the meaning set forth in §4(j)(ii).


 


“Membership
Interests” has the meaning set forth in the preface.


 


“Net Working
Capital” means an amount (which may be a positive or negative number) equal
to the difference between the Company’s (a) Current Assets and Other
Assets and (b) Current Liabilities, indebtedness in respect of borrowed
money and capital leases as recorded in accordance with GAAP and not otherwise
included in Current Liabilities, and as determined in accordance with §1(d) of
the Disclosure Schedule.


 


“Octagon
Agreement” means that certain Stock and Asset Purchase Agreement entered
into as of June 29, 2000, among the Company, Octagon Resources, Inc.,
and G. Curtis Harris.


 


“Ordinary
Course of Business” means the ordinary course of business consistent with
past custom and practice (including with respect to quantity and frequency.


 


“Other
Assets” means the sum of (a) the costs incurred prior to Closing for
capital improvements that have been or will be placed in service after December 31,
2004, not to exceed $6,000,000 (unless otherwise agreed in writing by Buyer and
excluding any capital improvements made on behalf of the Excluded Subsidiary),
plus (b) those assets denominated as such on the Company’s regularly
prepared balance sheets in accordance with GAAP to the extent not included in
Current Assets.


 


7





















 


“Owned Real
Property” means all land, together with all buildings, structures,
improvements, and fixtures located thereon, and all easements and other rights
and interests appurtenant thereto, owned by the Company.


 


“Oxley
Receivable” means the imbalance receivable described in the third paragraph
of §4(f)(iv) of the Disclosure Schedule.


 


“Party”
has the meaning set forth in the preface.


 


“PBGC”
means the Pension Benefit Guaranty Corporation.


 


“Permits”
means all permits, licenses, certificates, orders, approvals, authorizations,
registrations, grants, consents, concessions, warrants, franchises and similar
rights and privileges granted by a Governmental Authority.


 


“Permitted
Encumbrances” means: (a) real estate Taxes, assessments and other
levies, fees, or charges imposed by a Governmental Authority that are (i) not
due and payable as of the Closing Date or (ii) being contested in good
faith by appropriate Proceedings; (b) any Lien consisting of (i) rights
reserved to or vested in any Governmental Authority to control or regulate any
Asset of the Company or to limit the use of such Asset in any manner which does
not materially impair the use of such Asset for the purposes for which it is
held by the Company or (ii) obligations or duties to any Governmental
Authority with respect to any Permit relating to any period after Closing and
the rights reserved or vested in any Governmental Authority to terminate any
such Permit or to condemn or expropriate any property; (c) mechanics Liens
and similar Liens for labor, materials, or supplies provided with respect to
Owned Real Property incurred in the Ordinary Course of Business for amounts
that are (i) not delinquent and would not, in the aggregate, have a
Material Adverse Effect or (ii) being contested in good faith by
appropriate Proceedings; (d) zoning, building codes, and other land use
Laws regulating the use or occupancy of Owned Real Property or the activities
conducted thereon that are imposed by any Governmental Authority having
jurisdiction over such Owned Real Property; (e) any Lien for financing
secured by Assets that is an obligation of the Company that will not be paid
off at Closing and is listed on §1(e) of the Disclosure Schedule; and (f) easements,
servitudes, rights-of-way, covenants, conditions, restrictions, and other similar
matters affecting title to Owned Real Property and other title defects that do
not or would not materially impair the use or occupancy of such Owned Real
Property in the operation of the business of the Company taken as a whole.


 


“Person”
means an individual, a partnership, a corporation, a limited liability company,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, any other business entity or a Governmental
Authority (including any department, agency, or political subdivision thereof).


 


“Pipeline
Rights” has the meaning set forth in §4(j)(iii).


 


“Pre-Closing
Tax Period” means any Tax periods or portions thereof ending on or before
the Closing Date.


 


8





















 


“Proceeding”
means any action, suit, claim, investigation, review or other judicial or
administrative proceeding, at law or in equity, before or by any Governmental
Authority or arbitration or other dispute resolution proceeding.


 


“Purchase
Price” has the meaning set forth in §2(b).


 


“Release”
means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, or disposing of Hazardous Materials
into or upon the environment (including the abandonment or discarding of
barrels, containers, and other closed receptacles containing any Hazardous
Material and which are not empty as defined by 40 C.F.R. §261.7(b)).


 


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


 


“Sellers”
has the meaning set forth in the preface.


 


“Southern
Dome Prospect” means the area covered by Township 10 north, Ranges 1 west,
2 west and 3 west; Township 11 north, Ranges 1 west, 2 west and 3 west;
Township 12 north, Ranges 1 west, 2 west and 3 west all in the state of
Oklahoma.


 


“Subsidiary”
means, with respect to any Person, any corporation, limited liability company,
partnership, association, or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers, or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof or (ii) if a limited liability
company, partnership, association, or other business entity (other than a
corporation), a majority of the partnership or other similar ownership
interests thereof is at the time owned or controlled, directly or indirectly,
by that Person or one or more Subsidiaries of that Person or a combination
thereof and for this purpose, a Person or Persons own a majority ownership
interest in such a business entity (other than a corporation) if such Person or
Persons shall be allocated a majority of such business entity’s gains or losses
or shall be or control any managing director or general partner of such
business entity (other than a corporation). The term “Subsidiary” shall include
all Subsidiaries of such Subsidiary.


 


“Substantial
Buyer Breach” has the meaning set forth in §5(e)(viii).


 


“Substantial
Seller Breach” has the meaning set forth in §5(e)(vi).


 


“Tax” or
“Taxes” means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including Taxes under Code §59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, ad valorem, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.


 


9





















 


“Tax Return”
means any return, declaration, report, claim for refund, or information return
or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.


 


“Threshold”
has the meaning set forth in §8(b)(iii).


 


“Third-Party
Claim” has the meaning set forth in §8(d).


 


“Unaudited
Financial Statements” has the meaning set forth in §4(f).


 


“Working
Capital True Up” has the meaning set forth in §2(c)(ii).


 


§2.                               Purchase and Sale of Membership
Interests.


 


(a)                                 Basic Transaction.  On the terms and subject to the conditions of
this Agreement and at Closing, Buyer agrees to purchase from each Seller, and
each Seller severally agrees to sell to Buyer, the following Membership
Interests, free and clear of all Liens, for the consideration specified below
in this §2:


 


	
  Seller

  	
   

  	
  Membership Interests to be Sold to Buyer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Holdings LLC

  	
   

  	
   

  	
  75.00

  	
  %

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hamilton LLC

  	
   

  	
   

  	
  25.00

  	
  %

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
   

  	
  100.00

  	
  %

  	
   

  



 


(b)                                 Purchase Price.
 At Closing, Buyer agrees to pay
(x) to Holdings LLC (i) $375,000,000 (the “Holdings Base Amount”)
plus (ii) its Allocable Portion of the Estimated Net Working Capital as
calculated in §2(c)(i) (together with the Holdings Base Amount, the “Holdings
Purchase Price”), and (y) to Hamilton LLC (i) $125,000,000 (the “Hamilton
Base Amount”) plus (ii) its Allocable Portion of the Estimated Net
Working Capital as calculated in §2(c)(i) (together with the Hamilton Base
Amount, the “Hamilton Purchase Price”, and the Hamilton Purchase Price
together with the Holdings Purchase Price, the “Purchase Price”) by
delivery of cash payable by wire transfer in accordance with the instructions
provided by Sellers; provided, however, that in lieu of delivery to Sellers,
Buyer shall deposit (A) Fifteen Million Dollars ($15,000,000) of the
Holdings Purchase Price and Five Million Dollars ($5,000,000) of the Hamilton
Purchase Price into escrow at the Closing (such amounts, in the aggregate, the “Escrow
Amount”) on the terms and subject to the conditions of the Escrow Agreement
and (B) such amount, if any, required to be deposited in the Pre-Closing
Buyer Escrow Fund pursuant to §5(e)(v) or §5(e)(vi) to be held on the
terms and subject to the conditions of the Pre-Closing Buyer Escrow Agreement.
The Purchase Price shall be increased or decreased, as the case may be, after
Closing by the aggregate of the Working Capital True Up pursuant to §2(c), and
any increase or decrease shall be allocated among Sellers in accordance with
their Allocable Portions.


 


10





















 


(c)                                  Net
Working Capital.


 


(i)                                     At least five (5) Business
Days prior to Closing, Sellers will cause the Company to deliver to Buyer in
writing a good faith determination of the estimated Net Working Capital as of
the Closing Date (the “Estimated Net Working Capital”), together with
such supporting documentation and other data as is reasonably requested by
Buyer.  The Estimated Net Working Capital
shall reflect any distributions to be declared by the Company to Sellers prior
to the Closing.


 


(ii)                                  As soon as reasonably
practicable, but in any event no later than ninety (90) days following Closing, Buyer shall cause
the Company to prepare and deliver to Buyer and Sellers a written statement
(the “Actual Working Capital Statement”), prepared by the Chief
Financial Officer of the Company, certifying the actual amount of Net Working
Capital on the Closing Date, upon which a payment (the “Working Capital True
Up”) will be based, and setting forth the calculation of such amount. The
Working Capital True Up may be a positive or negative number and shall be an
amount equal to (A) the Company’s actual amount of Net Working Capital on
the Closing Date, less (B) the Estimated Net Working Capital. If,
within fifteen (15) Business Days following delivery of the Actual Working
Capital Statement to Buyer and Sellers, Sellers shall not have given Buyer
notice of Sellers’ objection to the computation of the Working Capital True Up
(which notice shall contain a statement of the basis of such objection), then
the amount of Working Capital True Up at the Closing Date will be final and
binding upon the Parties, absent manifest error. If Sellers give notice to
Buyer of Sellers’ objection, and Buyer and Sellers are unable to resolve the
issues in dispute within thirty (30) days after delivery of such notice of
objection, such issues will be submitted for resolution to Ernst &
Young LLP, independent certified public accountants, or if Ernst &
Young is unable or unwilling to serve in such role, such other independent
certified public accountants that is selected by Buyer and Sellers (the “Neutral
Auditor”). The Neutral Auditor shall be engaged by the Company within
fifteen (15) days after the expiration of the thirty (30) day period set forth
in the preceding sentence. The Neutral Auditor shall make such review and
examination of the relevant facts and documents as the Neutral Auditor deems
appropriate (including inquiry of such experts in the gas gathering and
processing industry as it deems necessary and advisable), and shall permit each
of Buyer and Sellers to make a written presentation of their respective
positions; provided, however,
that the Neutral Auditor shall require all facts, documents and written
presentations from Buyer and Sellers jointly to be completely submitted within
thirty (30) days after the Neutral Auditor has been engaged. Within thirty (30)
days after submission of such facts, documents and written presentations, the
Neutral Auditor shall resolve all disputed items in writing and shall prepare
and deliver its decision, which shall be final and binding upon the Parties
without further recourse or collateral attack; provided that the Neutral
Auditor shall not assign a value to any particular disputed item greater than
the greatest value for such item claimed by Buyer or Sellers or less that the
smallest value for such item claimed by Buyer or Sellers.  All costs of the dispute resolution process
contemplated by this §2(c)(ii) (including, without limitation, the Neutral
Auditor’s fees, but exclusive of attorneys’ fees) shall be borne by the Party
(that is, either Buyer or Sellers jointly) who is the least successful in such
process, as determined by the Neutral Auditor, which shall be determined by
comparing (x) the position asserted by each Party on all disputed matters taken
together to (y) the final decision of the Neutral Auditor on all disputed
matters taken together. If the Neutral Auditor determines that Sellers shall
bear such costs each Seller shall bear its Allocable Portion. For purposes of
the second preceding sentence: the


 


11





















 


“disputed matters” shall be all matters raised in Sellers’ notice of
objection provided pursuant to the fourth sentence of this §2(c)(ii) and
the “position asserted” by Sellers and by Buyer shall be determined by
reference to the written presentations submitted pursuant to the sixth sentence
of this §2(c)(ii). The Neutral Auditor shall not preside over any hearing of
the Parties nor permit the Parties to make any oral arguments to the Neutral
Auditor.


 


(iii)                               Within five (5) Business
Days of the completion of the computations required by §2(c)(ii), if the
Working Capital True Up is a positive number, it shall be paid by Buyer to
Sellers in their Allocable Portions, and if it is a negative number, it shall
be paid by Sellers in their Allocable Portions to Buyer, in either case by wire
transfer of immediately available funds.


 


(iv)                              Except as set forth in this
§2(c), Buyer and Sellers jointly shall each bear their own expenses incurred in
connection with the preparation and review of the Actual Working Capital
Statement, with Sellers bearing their Allocable Portion of such expenses.


 


(d)                                 Closing.  The closing of the transactions contemplated
by this Agreement with respect to the sale by Sellers of Membership Interests (“Closing”)
shall take place at the offices of Bartlit Beck Herman Palenchar &
Scott LLP in Denver, Colorado commencing at 9:00 a.m. local time on the later
to occur of August 1, 2005 (with an effective time of 12:01 a.m.) and
the last Business Day of the month during which the satisfaction or waiver of
all conditions to the obligations of the Parties to consummate the transactions
contemplated by this Agreement (other than conditions with respect to actions
the respective Parties are required to take at Closing itself) or such other
date as Buyer and Sellers may mutually determine (the “Closing Date”).  Notwithstanding the foregoing, (a) in no
event shall Buyer be obligated to purchase any Membership Interests pursuant to
this Agreement if either of Sellers defaults in its obligation to sell its
Membership Interests to Buyer and (b) if Buyer purchases any Membership
Interests pursuant to this Agreement, Buyer shall purchase all of the
Membership Interests of Sellers pursuant to this Agreement.


 


(e)                                  Deliveries
at Closing.  At
Closing, (i) each Seller will deliver to Buyer the various certificates,
instruments, and documents referred to in §7(a), (ii) Buyer will deliver
to each Seller the various certificates, instruments, and documents referred to
in §7(b), (iii) each Seller will deliver to Buyer an instrument of
assignment transferring to Buyer all of Seller’s right, title and interest in
and to the percentage of Membership Interests to be sold by such Seller to
Buyer as set forth in §2(a), (iv) Buyer will deliver to each Seller the
consideration specified in §2(b), (v) Buyer will deliver the Escrow Amount
to the Escrow Agent to hold pursuant to the Escrow Agreement, (vi) each
Seller will deliver to Buyer a certificate of good standing, existence or
similar document with respect to such Seller and the Company issued by the
appropriate Governmental Authority of the jurisdiction of formation as of a
date not more than five (5) days prior to the Closing Date, (v) Buyer
will deliver to such Seller a certificate of good standing, existence or
similar document with respect to Buyer Parent and Buyer issued by the
appropriate Governmental Authority of the jurisdiction of formation as of a
date not more than five (5) days prior to the Closing Date, (vi) Sellers
will deliver the written resignations of Jay A. Precourt, John E. Elgin and
each other manager and director of the Company designated in writing by Buyer
at least five Business Days prior to the Closing Date, such resignations to be
effective


 


12





















 


concurrently with the Closing on the Closing Date, (vii) each
Seller will deliver resolutions of the Board of Directors or other managing
body of each Seller and the Company authorizing the execution, delivery and
performance of this Agreement and a certificate of an officer of each Seller
and the Company, dated as of the Closing Date, to the effect that such
resolutions were duly adopted and are in full force and effect and (viii) each
Seller will deliver such other certificates, instruments of conveyance and
documents as may be reasonably requested by Buyer prior to the Closing Date to
consummate the transactions contemplated by this Agreement.


 


(f)                                   Purchase Price Allocation.
The Purchase Price shall be allocated among the Assets in accordance with the
estimated allocation schedule (the “Estimated Allocation Schedule”)
set forth on §2(f) of the Disclosure Schedule. After Closing, Sellers and
Buyer shall jointly prepare a final allocation schedule (the “Final
Allocation Schedule”) that will be mutually acceptable to the Parties.  Should Sellers and Buyer fail to mutually
agree upon a Final Allocation Schedule with forty-five (45) days after
Closing, the issue shall be subject to the Dispute resolution provisions of Section 10(j).  The Parties agree that they will not take nor
will they permit any Affiliate to take, for income tax purposes, any position
inconsistent with the Final Allocation Schedule. Upon resolution of any Disputes,
or in the event there are no Disputes, the Final Allocation Schedule shall
be signed by the Parties.


 


§3.                               Representations and Warranties
Concerning Transaction.


 


(a)                                  Sellers’
Representations and Warranties.  Each
Seller represents and warrants to Buyer (subject to the limitations set forth
in §10(a)(i)) that the statements contained in this §3(a) are correct and
complete as of the date of this Agreement and will be correct and complete as
of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this §3 (a)) with respect
to itself, except as set forth in Annex I attached hereto.


 


(i)                                     Organization.  Seller is a limited liability company duly
organized, validly existing, and in good standing under the Laws of the
jurisdiction of its formation.


 


(ii)                                  Authorization of
Transaction.  Seller has requisite
limited liability company power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement. This Agreement
has been duly executed by each Seller and constitutes the valid and legally
binding obligation of Seller, enforceable in accordance with its terms and
conditions, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar Laws affecting creditor’s rights generally and
general principals of equity. Seller need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
Governmental Authority in order to consummate the transactions contemplated by
this Agreement or to effect the legality, validity, binding effect or
enforceability of this Agreement.  The
execution, delivery and performance of this Agreement and all other agreements
contemplated by this Agreement have been duly authorized by Seller.


 


(iii)                               Non-contravention.  Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated by this
Agreement, will (A) violate any Law or other restriction of any
Governmental Authority to which Seller is subject or any


 


13





















 


provision of its certificate of formation, limited liability company
agreement, or other governing documents, (B) conflict with, result in a
breach of, constitute a default (or an event which with the giving of notice or
lapse of time, or both, would become a default) under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice or consent under any agreement,
contract, lease, license, instrument, or other arrangement to which Seller is a
party or by which it is bound or to which any of its assets is subject, or (C) result
in the imposition or creation of a Lien upon or with respect to the Membership
Interests owned by such Seller.


 


(iv)                              Brokers’ Fees.  Seller has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Buyer or the Company
could become liable or obligated.


 


(v)                                 Membership Interests.  Seller holds of record and owns beneficially
the percentage of Membership Interests set forth next to its name in §2(a),
free and clear of any restrictions on transfer (other than restrictions under the
Securities Act, state securities Laws and the Company’s limited liability
company agreement (the “LLC Agreement”)), Taxes, Liens, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. At Closing, Seller will transfer and deliver to Buyer good and valid
title to the percentage of Membership Interests set forth in §2(b), free and
clear of any restrictions on transfer (other than restrictions under the
Securities Act, state securities Laws and the LLC Agreement (as defined)),
Taxes, Liens (other than any Lien created by Buyer), options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. The
Membership Interests are duly authorized, validly issued and fully paid and
non-assessable. Seller is not a party to any option, warrant, purchase right,
or other contract or commitment (other than this Agreement) that could require
Seller to sell, transfer, or otherwise dispose of any Membership Interests.
Seller is not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any Membership Interests of the
Company.


 


(b)                                 Buyer’s
Representations and Warranties.  Buyer represents and warrants to the Company
and each Seller that the statements contained in this §3(b) are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this §3(b)), except as
set forth in Annex II attached hereto.


 


(i)                                     Organization.  Each of Buyer Parent and Buyer is a limited
liability company duly organized, validly existing, and in good standing under
the Laws of the State of Delaware.


 


(ii)                                  Authorization of
Transaction.  Each of Buyer Parent and
Buyer has requisite limited liability company power and authority to execute
and deliver this Agreement and to perform its obligations under this Agreement.
This Agreement has been duly executed by Buyer Parent and Buyer and constitutes
the valid and legally binding obligation of Buyer Parent and Buyer, enforceable
in accordance with its terms and conditions, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar Laws affecting
creditor’s rights generally and general principals of equity. Neither Buyer
Parent nor Buyer need give any 


 


14





















 


notice to, make any filing with, or obtain any authorization, consent,
or approval of any Governmental Authority in order to consummate the
transactions contemplated by this Agreement or to effect the legality,
validity, binding effect or enforceability of this Agreement. The execution,
delivery and performance of this Agreement and all other agreements
contemplated by this Agreement have been duly authorized by Buyer Parent and
Buyer.


 


(iii)                               Non-contravention.  Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated by this
Agreement, will (A) violate any Law or other restriction of any
Governmental Authority to which Buyer Parent or Buyer is subject or any
provision of their certificates of formation, limited liability company
agreements or other governing documents or (B) conflict with, result in a
breach of, constitute a default (or an event which with the giving of notice or
lapse of time, or both, would become a default) under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice or consent under any agreement,
contract, lease, license, instrument, or other arrangement to which Buyer
Parent or Buyer is a party or by which it is bound or to which any of its
assets is subject.


 


(iv)                              Brokers’ Fees.  Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which either Seller could
become liable or obligated.


 


(v)                                 Investment.  Buyer is acquiring Membership Interests for
its own account for investment and not with a view to any distribution thereof
within the meaning of the Securities Act. Buyer acknowledges that the
Membership Interests have not been registered under the Securities Act or the
securities Laws of any state and neither Sellers nor the Company has any
obligation to register the Membership Interests. Without such registration, the
Membership Interests may not be sold, pledged, hypothecated or otherwise
transferred unless it is determined that registration is not required. Buyer
has received certain information concerning the Company from the Company and
Sellers and Buyer has had the opportunity to obtain additional information as
desired. Buyer is an Accredited Investor and Buyer itself, or through its
officers, employees or agents, has sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of an investment such as an investment in the Membership Interests. Buyer,
either alone or through its officers, employees or agents, has evaluated the
merits and risks of the investment in the Membership Interests and is able to
bear the economic risk and lack of liquidity inherent in holding the Membership
Interests.


 


(vi)                              Available Funds.  A copy of the written commitment from Bank of
America, N.A. to provide financing in an amount of not less than $655 million
is attached hereto as Exhibit B.  At the Closing, Buyer will have
sufficient cash resources to enable it to make payment in immediately available
funds of the Purchase Price when due and any other amounts to be paid by it
under this Agreement or as a result of the transactions contemplated by this
Agreement, including, without limitation, the payment in full of indebtedness
in respect of money borrowed by the Company required to be retired as a result
of the Closing.


 


15





















 


(vii)                           Qualified for Permits.  Buyer is qualified to obtain, maintain and
control any Permit necessary for the ownership and operation by Buyer of the
Company as of Closing in the same manner as the Company is presently owned or
operated by Sellers.


 


(viii)                        Independent Investigation.  Buyer is knowledgeable in the business of (A) owning
and operating natural gas gathering, processing and treatment facilities, and (B) the
handling, storage and delivery of natural gas, natural gas liquids and
condensate and has had access to the Assets, the Company’s representatives, and
to the Company’s records with respect to the Assets. In making the decision to
enter into this Agreement and consummate the transaction contemplated by this
Agreement, Buyer has relied solely on its own independent due diligence
investigations regarding the Company and its Assets, the representations and
warranties of Sellers and the Company made in this Agreement, and the covenants
and undertakings of Sellers and the Company in this Agreement.  BUYER
ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY SET OUT IN THIS AGREEMENT, NEITHER THE
COMPANY NOR ANY SELLER HAS MADE ANY REPRESENTATION OR WARRANTY OF ANY KIND OR NATURE,
EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF THE
CONDITION, USEFULNESS OR ADEQUACY OF THE ASSETS, QUALITY, MERCHANTABILITY,
AND/OR FITNESS FOR A PARTICULAR PURPOSE, MARKETABILITY, AND CONFORMITY TO
SAMPLES, ALL OF WHICH ARE EXPRESSLY DISCLAIMED BY SELLERS AND THE COMPANY AND,
EXCEPT AS SET FORTH IN THIS AGREEMENT, WAIVED BY BUYER.


 


§4.                               Representations
and Warranties of the Company.  The Company represents and warrants to Buyer
that the statements contained in this §4 are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this §4), except as set forth in the
disclosure schedule delivered to Buyer on the date of this Agreement
arranged in sections corresponding to the lettered and numbered sections
contained in this Agreement (the “Disclosure Schedule”), which
exceptions contained in the Disclosure Schedule shall be deemed to have
been disclosed for purposes of another section or sections of this
Agreement if the relevance or applicability of such disclosure to the subject
matter of such other section or sections is reasonably apparent on the
face of such disclosure.


 


(a)                                 Organization,
Qualification, and Power. 
The Company is a limited liability company duly organized, validly
existing, and in good standing under the Laws of the State of Delaware. The
Company is duly authorized to own, lease and operate its properties and conduct
business and is in good standing under the Laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would
not, individually or in the aggregate, have a Material Adverse Effect. The Company
has requisite limited liability company power and authority to carry on the
business in which it is engaged and to own and use the properties owned and
used by it.  §4(a) of the Disclosure
Schedule lists the managers and officers of the Company.  There are (i) no outstanding limited
liability company interests or other voting securities of the Company other
than the Membership Interests, (ii) no securities of the Company
convertible into or exchangeable for limited liability company interests or
other voting securities of the Company and (iii) no options or other
rights to acquire, and no obligations of the Company to issue or sell,


 


16





















 


any limited liability company interests or other voting securities of
the Company or any securities convertible into or exchangeable for such limited
liability company interests.  There are
no obligations of the Company to repurchase, redeem, or otherwise acquire any
Membership Interests of the Company or any of the foregoing securities,
options, equity equivalents, interests or rights.


 


(b)                                 Non-contravention.  Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated by this
Agreement, will (i) violate any Law or other restriction of any
Governmental Authority to which Company is subject or any provision of the
certificate of formation or LLC Agreement of the Company or (ii) conflict
with, result in a breach of, constitute a default (or an event which with the
giving of notice or lapse of time, or both, would become a default) under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice or consent under any
agreement, contract, lease, license, instrument, or other arrangement to which
Company is a party or by which it is bound or to which any of the Assets is
subject (or result in the imposition of any Lien upon any of the Assets),
except where the violation, conflict, breach, default, acceleration, termination,
modification, cancellation, failure to give notice, or Lien would not,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth in §4(b) of the Disclosure Schedule, the Company does not need to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any Governmental Authority in order for the Parties to
consummate the transactions contemplated by this Agreement.


 


(c)                                  Brokers’
Fees.  The Company has not entered
into any agreement or arrangement that would result in any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.


 


(d)                                 Tangible
Assets.  The Company (i) owns
or leases all tangible Assets necessary for the conduct of its business as
presently conducted free and clear of all Liens (except for Permitted
Encumbrances) and (ii) has good and valid title
to all tangible Assets reflected on the balance sheet included in the Unaudited
Financial Statements as of and for the four months ended April 30, 2005
(except for (x) Assets sold or otherwise disposed of since the date of this
Agreement in the Ordinary Course of Business and (y) defects in title that are
not material) free and clear of all Liens (except for Permitted Encumbrances).
The Company is currently operating its tangible Assets in material compliance
with applicable Laws. Each such tangible Asset is free from material defects,
has been maintained in accordance with normal gas gathering and processing
industry practice, is in satisfactory operating condition and repair (subject
to normal wear and tear), and is suitable for the purposes for which it
presently is used.


 


(e)                                  Subsidiaries.  The Company has no Subsidiaries, other than
the Excluded Subsidiary.  The Company
does not own or have any right to acquire, directly or indirectly, any
outstanding capital stock of, or other equity interests in, any Person, other
than the Excluded Subsidiary.  §4(e) of
the Disclosure Schedules contains a true and complete list of all assets of the
Excluded Subsidiary.  Except as set forth
in §4(e) of the Disclosure Schedules, (i) the Excluded Subsidiary has
not been involved in any business arrangement or relationship with the Company
within the past twelve (12) months, (ii) the Excluded Subsidiary does not
own any asset, tangible or intangible, that is used in the Company’s business
and (iii) the Excluded


 


17





















 


Subsidiary is not a party to any contract, commitment or agreement
(whether written or oral) with the Company.


 


(f)                                   Financial Statements;
Internal Controls; Undisclosed Liabilities.


 


(i)                                     Attached hereto as Exhibit C
are the following financial statements (collectively the “Financial
Statements”): (i) audited balance sheets and statements of income
(loss), comprehensive income (loss) and members’ equity, and statements of cash
flow as of and for the fiscal years ended December 31, 2002, 2003 and 2004
for the Company (the “Audited Financial Statements”); and (ii) unaudited
balance sheets, statements of earnings and statements of cash flow each of
which shall exclude any and all assets, liabilities, income and expense
associated with or attributable to the Excluded Subsidiary (the “Unaudited Financial Statements”)
as of and for the three months ended March 31, 2005 and as of and for the
four months ended April 30, 2005 for the Company. The Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby and
present fairly the financial condition of the Company as of such dates and the
results of operations of the Company for such periods; provided, however, that
the Unaudited Financial Statements are subject to normal year-end adjustments
and lack certain footnotes otherwise required by GAAP.  The Company does not have any off-balance
sheet arrangements that have or are reasonably likely to have a current or
future material effect on the financial condition, results of operations,
liquidity, capital expenditures or capital resources of the Company.


 


(ii)                                  The Company has received no
written notice from any Governmental Authority concerning noncompliance with,
or deficiencies in, the Company’s financial reporting practices.  All material transactions have been properly
recorded in the accounting records underlying the Financial Statements.  There are no significant deficiencies,
including material weaknesses, in the design or operation of internal control
over the Company’s financial reporting. 
To the Knowledge of the Company, no member of the Company’s management
nor any other employee with a significant role in the Company’s internal
controls has committed any act of fraud having a material effect on the
Financial Statements.


 


(iii)                               The Company has not received or
otherwise had or obtained Knowledge of any complaint, allegation, assertion or
claim, whether written or oral, alleging fraud or suspected fraud affecting the
Company.


 


(iv)                              All Liabilities that are required
by GAAP to be reflected or reserved against in the balance sheet included in
Unaudited Financial Statements have been so reflected or reserved against in
such balance sheet.  Since April 30,
2005, the Company has not incurred any material liability other than in the
Ordinary Course of Business.


 


(g)                                  Subsequent
Events.  Except as set forth in §4(g) of
the Disclosure Schedule since April 30, 2005, (i) there has not
been any Material Adverse Change in the business, financial condition,
operations, results of operations, assets, liabilities, obligations or future
prospects of the Company since April 30, 2005 and (ii) the business
of the Company has been conducted only


 


18





















 


in the Ordinary Course of Business. 
Without limiting the generality of the foregoing, except as set forth on
§4(g) of the Disclosure Schedule, since that date the Company has not:


 


(i)                                     sold, leased, transferred, or
assigned any of its Assets, tangible or intangible, other than for a fair consideration
in the Ordinary Course of Business;


 


(ii)                                  entered into any agreement,
contract, lease, or license (or series of related agreements, contracts,
leases, and licenses) either involving more than $1,000,000 or outside the
Ordinary Course of Business;


 


(iii)                               accelerated, terminated,
modified, or cancelled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more than
$1,000,000 to which it is a party or by which it is bound;


 


(iv)                              imposed any Lien upon any of its
Assets, tangible or intangible;


 


(v)                                 made any capital expenditure (or
series of related capital expenditures) outside the Ordinary Course of Business
(it being understood that capital expenditures contemplated by the definition
of “Other Assets” in §1 of this Agreement are in the Ordinary Course of
Business);


 


(vi)                              made any capital investment in,
any loan to, or any acquisition (by merger, consolidation or acquisition of
stock or assets or otherwise) of the securities or Assets of, any other Person
(or series of related capital investments, loans, and acquisitions);


 


(vii)                           issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$250,000 singly or $1,000,000 in the aggregate other than advances and letters
of credit under the Credit Facility in accordance with its terms;


 


(viii)                        delayed or postponed the payment
of accounts payable and other Liabilities outside the Ordinary Course of
Business;


 


(ix)                              cancelled, compromised, waived,
or released any right or claim (or series of related rights and claims) either
involving more than $1,000,000 or outside the Ordinary Course of Business;


 


(x)                                 made or authorized any change in
its certificate of formation or the LLC Agreement;


 


(xi)                              issued, sold, or otherwise
disposed of any Membership Interests, or granted any options, warrants, or
other rights to purchase or obtain (including upon conversion, exchange, or
exercise) any Membership Interests, other than Buyer’s right to purchase the
Membership Interests pursuant to this Agreement;


 


(xii)                           made any distribution with
respect to its Membership Interests (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of its Membership Interests;


 


19





















 


(xiii)                        experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its Assets;


 


(xiv)                       made any loan to, or entered
into or modified the terms of any other transaction or agreement with, any of
its managers, officers, employees, consultants, or Affiliates outside the
Ordinary Course of Business;


 


(xv)                          entered into any employment
contract, consulting agreement or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement;


 


(xvi)                       granted any increase in the
compensation of any of its managers, officers, employees and consultants;


 


(xvii)                    adopted, amended, modified, or
terminated any bonus, profit sharing, incentive, severance, retention, change
of control or other plan, contract, arrangement or commitment for the benefit
of any of its managers, officers, employees and consultants (or taken any such
action with respect to any other Employee Benefit Plan);


 


(xviii)                 made any other change in
employment terms for any of its managers, officers, employees and consultants
outside the Ordinary Course of Business;


 


(xix)                       made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;


 


(xx)                          changed any of the accounting
principles or practices used by it;


 


(xxi)                       made or changed any election
relating to Taxes, settled any claim or assessment relating to Taxes or
consented to any claim or assessment relating to Taxes or any waiver of the
statute of limitations for any such claim or assessment;


 


(xxii)                    entered into any settlement of
any pending or threatened Proceeding other than solely for cash;


 


(xxiii)                 entered into any non-compete
agreements under which the Company is the obligor or modified or waived the
Company’s rights under existing confidentiality or non-compete agreements under
which the Company is the beneficiary; or


 


(xxiv)                committed to do any of the
foregoing.


 


(h)                                 Legal
Compliance.  The Company
has complied with all applicable Laws of Governmental Authorities, except where
the failure to comply would not, individually or in the aggregate, have a
Material Adverse Effect; the Company has not received any written communication
from any Governmental Authority or any other Person that alleges that the
business of the Company may not be in compliance in any material respect, or
may be subject to material liability, under any Law; and to the Knowledge of
the Company, there are no investigations or reviews pending or threatened by
any Governmental Authority relating to any


 


20





















 


alleged violation arising out of the operation of the business of the
Company.  Notwithstanding anything in
this Agreement to the contrary, the provisions of this §4(h) shall not
relate to or cover compliance with Laws related to Taxes, Employee Benefit
Plans, employees, or Environmental Laws which are covered exclusively by §4(i),
§4(o), §4(p) and §4(r), respectively.


 


(i)                                     Tax
Matters. 


 


(i)                                     The Company has timely filed all
Tax Returns that it was required to file, and has paid all Taxes shown thereon
as owing, except where the failure to file Tax Returns or to pay Taxes would
not have a Material Adverse Effect. All such Tax Returns when filed were
correct and complete in all material respects.


 


(ii)                                  §4(i) of the Disclosure Schedule lists
all Tax Returns filed with respect to Company for taxable periods ended on or
after December 31, 2001, indicates those Tax Returns that have been audited,
and indicates those Tax Returns that currently are the subject of audit. The
Company has made available to Buyer correct and complete copies of all federal
and state Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by Company since December 31, 2001.


 


(iii)                               The Company has not waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.


 


(iv)                              The Company has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party, except where the failure to withhold or pay
such Taxes would not have a Material Adverse Effect.


 


(v)                                 There is no dispute or claim
concerning any Tax Liability of the Company either claimed or raised by any
authority in writing or which, to the Knowledge of the Company, has been
asserted by any Governmental Authority.


 


(vi)                              The Company has not filed an
election under Treasury Regulation §301.7701-3 to be classified as a
corporation for federal income tax purposes. Since its formation, the Company
has been a business entity that will be classified as a partnership under
Treasury Regulation §§301.7701-2 and - 3.


 


(vii)                           The Company has not agreed to
make, nor is required to make, any adjustment under Section 481 of the
Code or any comparable provision of state, local or foreign Law by reason of a
change in accounting method or otherwise.


 


(viii)                        Except for those Assets located
on the lands identified on the map set forth on §4(i)(viii) of the
Disclosure Schedule, for the purposes of Code §168(j), all of the Company’s “tangible
depreciable property” (as defined in the Code) is located on “Indian
reservations” (as defined in IRS Notice 98-45).


 


21





















 


(ix)                              This §4(i) contains the
sole and exclusive representations and warranties of the Company with respect
to any tax matters, including without limitation any arising under any Laws
related to Taxes.


 


(j)                                    Real
Property.


 


(i)                                     §4(j)(i) of the Disclosure Schedule sets
forth the address and description of each parcel of Owned Real Property which
is material to the business of the Company. With respect to each parcel of
Owned Real Property, and except for matters that would not, individually or in
the aggregate, have a Material Adverse Effect:


 


(A)                               the Company has good and
marketable title, free and clear of all Liens, except Permitted Encumbrances;


 


(B)                               except as set forth in §4(j)(i)(B) of
the Disclosure Schedule, the Company has not leased or otherwise granted to any
Person the right to use or occupy such Owned Real Property or any portion
thereof;


 


(C)                               there are no outstanding
options, rights of first offer or rights of first refusal to purchase such
Owned Real Property or any portion thereof or interest therein;


 


(D)                               there are no parties (other than
the Company) in possession of the parcel of Owned Real Property, other than
tenants under any leases disclosed in §4(j)(i)(D) of the Disclosure Schedule who
are in possession of space to which they are entitled; and


 


(E)                                all facilities located on the
parcels of Owned Real Property are supplied with utilities and other services
necessary for the operation of such facilities, including electricity, water,
telephone all of which services are adequate and are provided via public roads
or via appurtenant easements benefiting the parcels of Owned Real Property.


 


(ii)                                  §4(j)(ii) of the Disclosure
Schedule sets forth the address of each parcel of Leased Real Property
which is material to the business of the Company (“Material Leases”) and
a true and complete list of all Material Leases for each such parcel of Leased
Real Property. The Company has made available to Buyer a true and complete copy
of each Material Lease document. With respect to each of the Material Leases
listed in §4(j)(ii) of the Disclosure Schedule and except for matters
that would not, individually or in the aggregate, have a Material Adverse
Effect:


 


(A)                               each such Material Lease is
legal, valid, binding, enforceable, and in full force and effect;


 


(B)                               each such Material Lease will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
by this Agreement;


 


22





















 


(C)                               the Company is not in breach or
default under such Material Lease, and no event has occurred which, with notice
or lapse of time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;


 


(D)                               no other party to such Material
Lease has repudiated any provision thereof;


 


(E)                                all facilities leased or
subleased under such Material Lease have received all approvals of Governmental
Authorities (including Permits) required in connection with the operation
thereof and have been operated and maintained in accordance with applicable
Laws; and


 


(F)                                 all facilities leased or
subleased under such Material Leases are supplied with utilities and other
services necessary for the operation of such facilities, including electricity,
water, telephone all of which services are adequate and are provided via public
roads or via appurtenant easements benefiting the parcel of Leased Real
Property.


 


(iii)                               The Company has not received
written notice of any claims or disputes which challenge the rights of the
Company to use, or allege a breach or default of agreements granting to the
Company rights to pipeline easements, right-of-way, licenses and land use
Permits (the “Pipeline Rights”), which claims or disputes, breaches or
defaults would, individually or in the aggregate, have a Material Adverse
Effect.


 


(k)                                 Intellectual
Property.  Except as described in
§4(k) of the Disclosure Schedule, the Company has not received any written
notice of infringement, misappropriation or conflict with respect to
Intellectual Property from any Person with respect to the ownership, use or
operation of the Company’s Assets or the conduct of the Company’s business. To
the Knowledge of the Company, the ownership, use and operation of the Assets or
the conduct of the Company’s business have not infringed, misappropriated or
otherwise conflicted with any patents, patent applications, patent rights,
trademarks, trademark applications, service marks, service mark applications,
copyrights, trade names, unregistered copyrights, trade secrets of any other
Person.  The Company owns or has the
valid right to use pursuant to license, sublicense, agreement or permission all
Intellectual Property necessary or desirable for the operation of the business
of the Company as presently conducted. 
In connection with the acquisition of the Membership Interests, Buyer
shall acquire any rights that Sellers, the Company and any of their respective
Affiliates have to the name “ScissorTail” (or any derivation therefrom) or any
trademark, trade name or symbol related thereto.


 


(l)                                     Contracts.  §4(l) of the Disclosure Schedule lists
the following contracts and other agreements to which the Company is a party:


 


(i)                                     any agreement (or group of
related agreements) for the lease of personal property to or from any Person
providing for lease payments in excess of $2,000,000 per annum;


 


(ii)                                  any agreement (or group of
related agreements) for the purchase or sale of raw materials, commodities,
supplies, products, or other personal property, or for the furnishing


 


23





















 


or receipt of services, the performance of which is reasonably expected
to involve annual consideration in excess of $5,000,000;


 


(iii)                               any agreement concerning a
partnership or joint venture;


 


(iv)                              any agreement (or group of
related agreements) under which it has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any capitalized lease
obligation;


 


(v)                                 any agreement concerning
confidentiality or noncompetition;


 


(vi)                              any agreement with any of
Sellers or their Affiliates;


 


(vii)                           any profit sharing, equity
option, equity purchase, equity appreciation, deferred compensation, severance,
retention, change of control or other plan or arrangement for the benefit of
its current or former managers, officers, employees and/or consultants;


 


(viii)                        any collective bargaining
agreement;


 


(ix)                              any agreement for or with respect
to employment of any individual on a full-time, part-time, or consulting basis;


 


(x)                                 any agreement under which it has
advanced or loaned any amount to any of its managers, officers, employees and
consultants;


 


(xi)                              any agreement under which the
consequences of a default or termination could have a Material Adverse Effect
on the business, financial condition, operations, assets, liabilities,
obligations results of operations, assets, liabilities, obligations or future
prospects of the Company; or


 


(xii)                           any other agreement (or group of
related agreements) not enumerated in this §4(l), the performance of which
involves consideration in excess of $5,000,000.


 


The Company has made available to Buyer a
correct and complete copy of each written agreement listed in §4(l) of the
Disclosure Schedule (as amended to date). With respect to each such
agreement: (A) the agreement is legal, valid, binding, enforceable, and in
full force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated by this Agreement; (C) the
Company is not in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default by the Company, or
permit termination, modification, or acceleration, under the agreement; and (D) to
the Knowledge of the Company, no other party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default by such other party, or permit termination, modification or
acceleration under the agreement other than in accordance with its terms nor
has any other party repudiated any provision of the agreement.


 


24





















 


(m)                             Powers
of Attorney.  There are
no outstanding powers of attorney executed on behalf of Company.


 


(n)                                 Litigation.  There is no injunction, restraining order or
Proceeding pending against the Company that restrains or prohibits the
consummation of the transactions contemplated by this Agreement. Except for the
Proceedings identified on §4(n) of the Disclosure Schedule, there are no
written claims, investigations or examinations pending, or to the Knowledge of
the Company, threatened, against or affecting the Company, the Membership
Interests, the Assets or the Company’s ownership or operation of its Assets,
before or by any Governmental Authority or any Person. Notwithstanding anything
in this Agreement to the contrary, the provisions of this §4(n) shall not
relate to or cover Proceedings related to Taxes, Employee Benefit Plans,
employees, or Environmental Laws which are covered exclusively by §4(i), §4(o),
§4(p) and §4(r), respectively.


 


(o)                                 Employee
Benefits.


 


(i)                                     §4(o) of the Disclosure Schedule lists
each Employee Benefit Plan that Company sponsors, maintains or to which the
Company contributes or has any obligation to contribute for the benefit of its
current or former employees, officers or managers.


 


(A)                               Each such Employee Benefit Plan
(and each related trust, insurance contract, or fund) complies in form and in
operation in all material respects with its governing documents and the
applicable requirements of ERISA and the Code.


 


(B)                               All required reports (including Form 5500
Annual Reports) and other material descriptions, summary annual reports,
summary plan descriptions, and summaries of material modifications have been
timely filed and distributed appropriately with respect to each such Employee
Benefit Plan. The material requirements of COBRA have been met with respect to
each such Employee Benefit Plan that is a group health plan within the meaning
of Code § 5000(b)(1).


 


(C)                               All contributions, premiums or
other payments that are due for all periods ending on or before the Closing
Date have been timely paid with respect to each such Employee Benefit Plan.


 


(D)                               The Company has made available
to Buyer correct and complete copies of the plan documents, summary plan
descriptions, and summaries of material modifications, the most recent
determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report, and all related trust arrangements,
insurance contracts, and other funding agreements which implement each such
Employee Benefit Plan.


 


(E)                                No such Employee Benefit Plan is
a defined benefit plan within the meaning of ERISA §3(35) and no such Employee
Benefit Plan is a multiemployer plan within the meaning of ERISA § 3(37).


 


25





















 


(F)                                 As to each such Employee Benefit
Plan that is intended to be qualified under Code § 401(a), (i) such
Employee Benefit Plan has been adopted on a prototype form that has received a
favorable opinion letter from the Internal Revenue Service regarding the
qualified status of plans adopted by plan sponsors who utilize such form (and a
copy of any such opinion letter has been provided to Buyer), (ii) there
has been no termination or partial termination of such plan within the meaning
of Code § 411(d)(3) and (iii) to the Knowledge of the Company,
there exist no facts or circumstances that could adversely affect the qualified
status of any such Employee Benefit Plan.


 


(G)                              To the Knowledge of the Company,
no act, omission or transaction has occurred which would result in imposition
on the Company of (i) breach of fiduciary duty liability damages under
ERISA § 409, (ii) a civil penalty assessed pursuant to subsections
(c), (i) or (l) of ERISA § 502, or (iii) a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code.


 


(H)                              Except as listed on §4(o) of the
Disclosure Schedule, no such Employee Benefit Plan contains terms or provisions
that would be triggered by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.


 


(I)                                   § 4(o) of the Disclosure Schedule lists
each agreement requiring the Company to make a payment or provide any other
form of compensation or benefit to any person performing services for the
Company upon the consummation of a sale of more than 50% of the Membership Interests
of the Company or the sale of all or substantially all of the Company’s Assets
(a “Qualifying Sale”) or upon the termination of services of any such
person if such termination follows a Qualifying Sale.


 


(J)                                   No such Employee Benefit Plan
that is an Employee Welfare Benefit Plan contains any provision which by its
terms would impose liability on the Company in the event of any amendment or
termination of such Employee Benefit Plan, except as to benefits accrued
thereunder prior to such amendment or termination.


 


(K)                              Except to the extent required
pursuant to Code § 4980B(f) and ERISA §§601-608 or other
applicable Law, no Employee Benefit Plan of the Company or Contract listed on
§4(l) of the Disclosure Schedule provides medical or life insurance
benefits to any Person upon retirement or termination of employment, and the
Company is not contractually or otherwise obligated (whether or not in writing)
to provide any Person with life insurance or medical benefits upon retirement
or termination of employment.


 


(L)                                The vacation policies of the
Company do not provide for carryover of vacation from one calendar year to the
next.


 


26










 













 


(ii)           With respect to each Employee Benefit
Plan that the Company and any ERISA Affiliate sponsors, maintains, or
contributes to or which any of them has sponsored, maintained or contributed to
during the prior six (6) years:


 


(A)          No
Proceeding with respect to the administration or the investment of the Assets
of any such Employee Benefit Plan (other than routine claims for benefits) is
pending or, to the Knowledge of the Company, threatened and, to the Knowledge
of the Company, no facts or circumstances exist that could give rise to any
such Proceedings, except as would not, individually or in the aggregate, have a
Material Adverse Effect.


 


(B)          The
Company has not incurred, and the Company has no reason to expect that the
Company will incur, any material Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
liability as defined in ERISA §4201) or under the Code, which liability has not
been satisfied.


 


(p)           Employees.


 


(i)            § 4(p) of the Disclosure Schedule identifies,
as of the date of this Agreement, the following with respect to each employee
of the Company:  (A) the name, job
title, original hire date, service date, bonus, if any, paid for calendar years
2003 and 2004, accrued and unused vacation as of May 31, 2005, and current
annual salary (or rate of pay) and other compensation (including, without
limitation, normal bonus, profit-sharing, pension benefits and other
compensation) payable to each such employee; and (B) all transactions
outside of the Ordinary Course of Business of the Company between the Company
and any such employee since December 31, 2004, which transactions are not
otherwise reflected in any of the contracts listed in § 4(l) of the
Disclosure Schedule.


 


(ii)           Except as set forth on § 4(p) of
the Disclosure Schedule or to the extent accrued as a current liability on
the Unaudited Financial Statements as of and for the four months ended April 30,
2005, all bonuses, if any, due and payable as of the Closing Date to employees
of the Company have been paid in full to such employees prior to Closing.  The compensation and benefits (including
vacation benefits) paid or provided with respect to all employees of the
Company have been reflected in the Financial Statements for the periods covered
thereby.  The Company has complied with
all applicable Laws of Governmental Authorities pertaining to employment and
employment practices, terms and conditions of employment, immigration wages,
and hours, occupational health and safety, payment of unemployment benefits and
social security contributions, withholding and other payroll taxes and workers
compensation, except where the failure to comply would not, individually or in
the aggregate, have a Material Adverse Effect.


 


(iii)          The Company is not a party to or bound
by any collective bargaining agreement or any other contract with any labor
union, and no such agreement or contract is being negotiated. Within the past
three (3) years, the Company has not experienced any strikes, work
stoppages, slow downs, picketing or any other interference with work or
production, grievances,


 


27





















 


claims of unfair labor practices, or other
collective bargaining disputes or concerted action by employees.  To the Knowledge of the Company, (A) the
Company has not committed any unfair labor practice, (B) there are no
organizational efforts presently being made or threatened by or on behalf of
any labor union with respect to employees of the Company, and (C) there is
no pending, or threatened grievance, charge, complaint or other legal action
against the Company by the National Labor Relations Board or any comparable
agency of any state of the United States.


 


(iv)          To the Knowledge of the Company, the
relationships of the Company with its employees, as a group, are satisfactory
and there are no facts that would indicate that such employees will not
continue in their employ following the Closing (other than any resignations
referred to in §2(e)).  Except as listed
on § 4(l) of the Disclosure Schedule, the Company is not currently
negotiating, and does not have any outstanding offer with respect to, any
employment, consulting, non-compete, management, severance, change of control,
retention, termination pay or similar contract with any individual or employee.


 


(v)           To the Knowledge of the Company, (A) no
Proceeding has been commenced with respect to the Company under any Laws
affecting the employment relationship, (B) no Proceedings, charges, or
complaints are threatened under any such Laws and (C) no facts or
circumstances exist which would give rise to any such Proceedings, charges,
complaints, or claims.  The Company is
not subject to any settlement or consent decree with any present or former
employee, employee representative or any Governmental Authority relating to
claims of discrimination or other claims in respect of employment practices and
policies.  No Governmental Authority has
issued a judgment, order, decree or finding with respect to the labor and
employment practices (including practices relating to discrimination) of the
Company.


 


(vi)          All employees of the Company have been
employed and work in the United States.


 


(q)           Permits.  Except as set forth in §4(q) of the
Disclosure Schedules, (i) all material Permits required or necessary for
the Company to own and operate the Assets in the places and in the manner
currently owned or operated or otherwise necessary to conduct its business as
it is currently conducted have been obtained and are in full force and effect, (ii) the
Company has received no written notification concerning violations that are
currently in existence with respect to such Permits and (iii) no
Proceeding is pending or, to the Knowledge of the Company, has been threatened
with respect to the revocation or limitation of any of such Permits.  Notwithstanding anything in this Agreement to
the contrary, the provisions of this §4(q) shall not relate to or cover any
Permit or matter relating to or arising out of any Environmental Laws.


 


(r)            Environmental
Matters.  Except as set forth in
§4(r) of the Disclosure Schedules:


 


(i)            The Company has not caused or
allowed the generation, use, treatment, manufacture, storage, or disposal of,
or the exposure of any Person or property to, any Hazardous Materials at, on or
from the Assets, except in material compliance with all applicable
Environmental Laws.


 


28





















 


(ii)           There has been no Release of any
Hazardous Materials at, on, from, or underlying any of the Assets in violation
of applicable Environmental Laws or in any concentration or location that
requires remediation or other corrective action under Environmental Laws.


 


(iii)          The Company has secured all material
Permits required under Environmental Laws for the ownership, use and operation
of the Assets, such Permits are in full force and effect and are not subject to
any challenge by any Person, and the Company is in material compliance with
such Permits.


 


(iv)          The Company has received no written
inquiry or notice of any actual or threatened claim related to or arising under
any Environmental Law relating to the Assets.


 


(v)           The Company is not operating any of
the Assets under any compliance order, decree or agreement, any consent decree
or order, or corrective action decree or order issued by or entered into with
any Governmental Authority under any Environmental Law or any Law regarding
health or safety in the workplace.


 


(vi)          The Company, the Assets and their
operations are and, within the term of all applicable statutes of limitations,
have been in compliance with Environmental Laws with respect to any matter that
is not referred to in clauses (i) through (v), and (vii) through (ix) of
this §4(r), except where the lack of such compliance would not, individually or
in the aggregate, have a Material Adverse Effect.


 


(vii)         (A) The Company has not been named
or, to the Knowledge of the Company, threatened to be named as a potentially
responsible party under CERCLA or any similar state Law relating to the Assets,
(B) none of the Assets has been designated as a facility that is subject
to an existing or, to the Knowledge of the Company, threatened claim under
CERCLA or any similar state Law; and (C) none of the Assets is subject to
any Lien arising under Environmental Laws.


 


(viii)        To the Knowledge of the Company, none of
the off-site locations where Hazardous Materials from any of the Assets have
been stored, treated, recycled, disposed of or Released is subject to any
remedial obligation or other corrective action requirement under Environmental
Laws.


 


(ix)          The Company has provided Buyer with
copies of all material environmental studies, audits and assessments prepared
by or in the possession of the Company with respect to any of the Assets.


 


(x)           This §4(r) contains the sole and
exclusive representations and warranties of the Company with respect to any
environmental matters, including without limitation any arising under any
Environmental Laws.


 


(s)            Certain Business
Relationships with Company.  Except as set forth on §4(l) or §4(s) of the
Disclosure Schedules, (i) neither Seller nor any of their respective
officers, directors, members or Affiliates (excluding the Company) has been
involved in any material business


 


29





















 


arrangement or relationship with Company within the past twelve (12)
months, (ii) neither Seller nor any of their respective officers,
directors, members or Affiliates (excluding the Company) owns any asset,
tangible or intangible, that is used in the Company’s business and (iii) neither
Seller nor any of their respective officers, directors, members or Affiliates
(excluding the Company) is a party to any contract, commitment or agreement
(whether written or oral) with the Company.


 


(t)            Insurance.  §4(t) of the Disclosure Schedules sets forth (i) all
insurance policies of the Company (including the amounts and types of
coverage), (ii) each material claim under any insurance policy made by or
on behalf of the Company during the past three years, which claim was denied by
the insurer and (iii) each application for insurance coverage made by or
on behalf of the Company during the last three years that was rejected by the
proposed insurer.  All such insurance
policies are in full force and effect and all premiums due and payable on such
policies have been paid.  No notice of
cancellation of, or indication of an intention not to renew, any such insurance
policy has been received by the Company other than in the Ordinary Course of
Business.


 


(u)           Governmental Regulation.  The Company is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act,
the Interstate Commerce Act, the Natural Gas Act, the Investment Company Act of
1940 or any state public utilities laws.


 


(v)           Disclaimer of Other
Representations and Warranties.  EXCEPT AS EXPRESSLY SET FORTH IN §3 AND THIS §4, NEITHER THE COMPANY
NOR ANY SELLER MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW
OR IN EQUITY, IN RESPECT OF THE COMPANY, OR ANY OF ITS ASSETS, LIABILITIES OR
OPERATIONS, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO THE CONDITION,
USEFULNESS OR ADEQUACY OF THE ASSETS, QUALITY, MERCHANTABILITY AND/OR FITNESS
FOR A PARTICULAR PURPOSE, MARKETABILITY, CONFORMITY TO SAMPLES, AND ANY SUCH
OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS §4 ARE MADE EXCLUSIVELY BY THE
COMPANY AND THE BUYER SHALL HAVE NO RECOURSE AGAINST ANY SELLER AS A RESULT OF
A BREACH OF ANY SUCH REPRESENTATION OR WARRANTY, OTHER THAN WITH RESPECT TO
BREACHES OF REPRESENTATIONS, WARRANTIES AND COVENANTS DISCLOSED PRIOR TO
CLOSING IN ACCORDANCE WITH §5(E) AND THE ESCROW AMOUNT AS PROVIDED IN §8.
BUYER HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THE EXTENT SPECIFICALLY SET
FORTH IN §3 AND THIS §4, BUYER IS PURCHASING THE MEMBERSHIP INTERESTS ON AN “AS-IS,
WHERE-IS” AND “WITH ALL FAULTS” BASIS. 
EXCEPT AS EXPRESSLY SET FORTH IN §3 AND THIS §4, THE COMPANY AND EACH
SELLER HEREBY DISCLAIMS ANY CLAIMS BY BUYER FOR DAMAGES BECAUSE OF LATENT VICES
OR DEFECTS, WHETHER KNOWN OR UNKNOWN, IT BEING THE INTENTION OF THE COMPANY,
SELLERS AND BUYER THAT, SUBJECT TO THE


 


30





















 


TERMS OF THIS AGREEMENT, THE ASSETS ARE TO BE ACCEPTED BY BUYER IN
THEIR PRESENT CONDITION AND STATE OF REPAIR.


 


§5.          Pre-Closing Covenants.  Buyer, the
Company and each Seller agree as follows with respect to the period between the
execution of this Agreement and Closing.


 


(a)           General.  Each of the Parties will cooperate with each
other and use its commercially reasonable efforts to take all actions and to do
all things necessary, proper, or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the Closing conditions set forth in §7).  Sellers agree to provide, and shall cause the
Company and each of its officers and employees to provide, all cooperation
reasonably requested by Buyer, at Buyer’s sole cost and expense, and necessary
in connection with the arrangement of any equity or debt financing (“Financing”)
required by Buyer to consummate the transactions contemplated by this
Agreement, it being understood that the primary responsibility of such officers
and employees is to the management of the Company’s business, including (i) preparation
of financial statements for use in any offering document prepared by Buyer and (ii) delivery
by the Company of any pledge and security documents, lien releases, other
definitive financing documents, including any indemnity agreements or other
requested certificates or documents relating to the Financing; provided,
however, that no such agreements or documents shall impose any monetary
obligation or liability on the Company prior to the Closing Date or on such
officers, employees or Sellers at any time. 
Sellers and the Company shall take all actions reasonably requested by
Buyer, at Buyer’s sole cost, to cause Grant Thornton LLP to provide any
unqualified opinions, consents or customary comfort letters with respect to the
financial statements needed in connection with the Financing.


 


(b)           Notices and
Consents.  (i)  Each of the
Parties shall give any notices to third parties, and use commercially
reasonable efforts to obtain any third party consents required in connection
with the consummation of the transactions contemplated by this Agreement,
provided that neither Party shall be required to (i) provide any
consideration to such third party or (ii) commence any Proceeding, in
either case to secure any such consent. Each of the Parties shall give any
notices to, make any filings with, and use its commercially reasonable efforts
to obtain any authorizations, consents, and approvals of Governmental
Authorities in connection with the matters referred to in §3(a)(ii), §3(b)(ii) and
§4(b), including reviewing the other Parties’ filings with Governmental
Authorities, if any. The Parties shall cooperate in connection with the making
of all such filings or obtaining such authorizations, consents and approvals, through,
among other means, providing copies of all such documents to the nonfiling
party and its advisors prior to filing and, if requested, accepting all
reasonable additions, deletions, or changes suggested in connection therewith.
The Parties shall furnish or cause to be furnished all information required for
any application or other filing to be made pursuant to any applicable Law in
connection with the transactions contemplated by this Agreement.


 


(ii)           Without limiting the generality of
the foregoing, each of the Parties will (A) file (or use its commercially
reasonable efforts to cause its appropriate Affiliates to file) any
notification, report forms and related material that it may be required to file
with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the HSR Act, and will use its commercially
reasonable efforts to obtain an early termination of


 


31





















 


the applicable waiting period and (B) make
any further filings pursuant thereto that may be necessary, proper, or
advisable in connection therewith.


 


(c)           Operation of Business.  Except as provided in §5(c) to the
Disclosure Schedule, Sellers shall cause the Company to not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business and to use commercially reasonable efforts to preserve,
maintain and protect its business, assets, rights and properties and its
relationships with its employees, customers, suppliers and others having
relationships with the Company, provided however that the Company shall be
permitted to take all actions in its discretion to enforce its rights under
contracts with such persons. Without limiting the generality of the foregoing
and except as provided in §5(c) to the Disclosure Schedule, Sellers will
not permit the Company to engage in any practice, take any action, or enter
into any transaction of the sort described in §4(g) without the prior
written consent of Buyer. Notwithstanding the foregoing, at or prior to the
Closing Date, Sellers shall cause the Company shall be required to (i) close
its positions in all of its open hedges and (ii) distribute the entire
membership interest in the Excluded Subsidiary to Sellers.


 


(d)           Full Access.  (i)  Sellers shall cause the Company to
permit representatives of Buyer (including legal counsel and accountants) to
have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Company, to all premises,
properties, personnel, books, records (including tax records), contracts, and
documents of or pertaining to the Company. Buyer acknowledges that any access
to the Assets utilized by Buyer or any representative, consultant or other Person
acting by or on behalf of Buyer shall be at the sole risk, cost, and expense of
Buyer. Notwithstanding the preceding sentence to the contrary, nothing in this
Agreement shall be construed to permit Buyer or its representatives to have
access to any personnel, books, records, contracts or documents of the Company,
Sellers or any of their Affiliates to the extent that any related disclosure to
Buyer, in the reasonable judgment of Sellers, could risk violating any
antitrust or similar Law.


 


(ii)           Other than in connection with
obtaining consent under the HSR Act necessary to consummate the transactions
contemplated under this Agreement, Buyer and its representatives and Affiliates
shall not, prior to the Closing Date, contact any customer, vendor or supplier or
employee of, the Company or with respect to any aspect of the transactions
contemplated under this Agreement, without the prior consent of Sellers which
consent shall not be unreasonably withheld or delayed.


 


(iii)          Buyer will treat as confidential and hold
as such any Confidential Information it receives from any of Sellers and the
Company in accordance with the terms of the Confidentiality Letter between the
Company and Buyer dated as of March 24, 2005 (the “Confidentiality
Letter”).


 


(e)           Notice of Developments.


 


(i)  Between the date of this Agreement and the Closing Date,
Sellers shall give prompt written notice to Buyer if, to the Knowledge of the
Company or Sellers, there has been any development causing a breach of any of
the Company’s or Sellers’ representations,


 


32





















 


warranties or covenants and
Buyer shall give prompt written notice to Sellers if, to the Knowledge of
Buyer, there has been any development causing a breach of any of Buyer’s
representations, warranties or covenants.


 


(ii)           Between the date of
this Agreement and the Closing Date, (A) Sellers shall give prompt written
notice to Buyer, if to the Knowledge of the Company or the Knowledge of
Sellers, there has been a breach of any of Buyer’s representations, warranties
or covenants and (B) Buyer shall give prompt written notice to the Company
or Sellers, as the case may be, if to the Knowledge of Buyer, there has been a
breach of any of the representations, warranties or covenants of the Company or
Sellers, as the case may be.


 


(iii)          Between the date of
this Agreement and the Closing Date, each Party shall give prompt written
notice to the other Parties, if to the Knowledge of such notifying Party, there
has occurred any event that may make the satisfaction of the conditions in §7
impossible or unlikely.


 


(iv)          No disclosure by any
Party pursuant to this §5(e) shall be deemed to amend or supplement the
Annexes or Disclosure Schedules or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant, except to the extent set forth in
this §5(e).


 


(v)           Upon delivery of any
such notice with respect to a breach by the Company or either Seller of any of
its representations, warranties or covenants contained in this Agreement,
Sellers (or the applicable Seller) shall elect to either (A) cure or cause
the Company to cure such breach (if curable, meaning that the Company shall
experience no Adverse Consequences resulting from or arising out of such breach
after affecting such cure), at Sellers’ (or such Seller’s) or
the Company’s cost (and if at the Company’s cost, the Parties agree that such
cost shall be reflected in the calculation of Net Working Capital), prior to
the earlier to occur of the second Business Day immediately preceding the
Closing Date and 15 days after receipt of such notice or (B) have a
portion of the Purchase Price equal to the estimated cost of curing such breach
(together with the estimated Adverse Consequences resulting from or arising out
of such breach, if any, after affecting such cure, the “Cost of Curing”),
placed into a separate escrow fund with the Escrow Agent at Closing (the “Pre-Closing
Buyer Escrow Fund”) pursuant to an escrow agreement in the form of Exhibit D
(the “Pre-Closing Buyer Escrow Agreement”), and, in either case Buyer
shall be obligated, subject to the other terms and conditions of this
Agreement, to consummate the transactions contemplated by this Agreement and
shall not be entitled to any remedy pursuant to §8 of this Agreement for any
Adverse Consequences arising from or related to such breach.  If Sellers (or such Seller) elect to cure
such breach and do not cure the breach within the time specified in clause (A),
then Sellers (or such Seller) shall be deemed to have elected the action specified
in clause (B).


 


(vi)          Notwithstanding
anything to the contrary contained in §5(e)(v), if the estimated Cost of Curing
all such breaches pursuant to §5(e)(v) is expected to exceed $20,000,000
in the aggregate (such breaches in the aggregate a “Substantial Seller
Breach”), (x) subject to the next sentence, Sellers shall have the right to
terminate this Agreement without any liability to Buyer, except as provided in
§5(e)(xi) below, by providing written notice of such


 


33





















 


election to Buyer and (y)
Buyer shall have the right to terminate this Agreement without any liability to
Sellers by providing written notice of such election to Sellers.  If Sellers provide such written notice to Buyer,
then Buyer may elect to waive any such breach or breaches (or portion of such
breaches) sufficient to make the Cost of Curing all such non-waived breaches no
greater than $20,000,000.  In such case,
Buyer shall notify Sellers that Buyer desires to consummate the transactions contemplated
by this Agreement by providing written notice to Sellers of such election,
within the earlier to occur of the second Business Day immediately prior to the
then scheduled Closing Date or 10 Business Days of receipt of the written
notice from Sellers electing to terminate this Agreement, in which case Sellers
and the Company shall be required to consummate the transactions contemplated
by this Agreement, subject to the terms and conditions of this Agreement.  If Buyer elects to waive any such breaches
(or portion of such breaches) and cause Sellers and the Company to consummate
the transactions contemplated by this Agreement, (x) Sellers shall take the
actions specified in clause (A) of the first sentence of §5(e)(v) with
respect to all such breaches not waived by Buyer or, in lieu of taking the
actions specified by clause (A), Sellers shall place $20,000,000 (or such
portion of $20,000,000 attributable to any breach not so cured) into the
Pre-Closing Buyer Escrow Fund at Closing, (y) the breaching Party shall have no
obligation to take the actions specified in clauses (A) and (B) of the
first sentence of §5(e)(v) with respect to all such breaches (or portions)
waived by Buyer, and (z) Buyer shall not be entitled to any remedy pursuant to
§8 of this Agreement for any Adverse Consequences arising from or related to
such breaches.


 


(vii)         Upon delivery of any
such notice with respect to a breach by Buyer of any of its representations,
warranties or covenants contained in this Agreement, Buyer shall elect to
either (A) cure such breach (if curable, meaning that Sellers shall
experience no Adverse Consequences resulting from or arising out of such breach
after affecting such cure), at Buyer’s cost prior to the earlier to occur of
the second Business Day immediately preceding the Closing Date and 15 days
after receipt of such notice or (B) place an amount equal to the estimated
Cost of Curing such breach into a separate escrow fund with the Escrow Agent at
Closing (the “Pre-Closing Sellers Escrow Fund”) pursuant to an escrow
agreement in the form of Exhibit E (the “Pre-Closing Sellers
Escrow Agreement”), and, in either case, Sellers and the Company shall be
obligated, subject to the other terms and conditions of this Agreement, to
consummate the transactions contemplated in this Agreement and Sellers shall
not be entitled to any remedy pursuant to §8 of this Agreement for any Adverse
Consequences arising from or related to such breach.  If Buyer elects to cure such breach and does
not cure the breach within the time specified in clause (A), then Buyer shall
be deemed to have elected the action specified in clause (B).


 


(viii)        Notwithstanding
anything to the contrary contained in §5(e)(vii), if the estimated Cost of
Curing all such breaches by Buyer pursuant to this Agreement is expected to
exceed $20,000,000 in the aggregate (such breaches in the aggregate, a “Substantial
Buyer Breach”), (x) subject to the next sentence, Buyer shall have the
right to terminate this Agreement without any liability to Sellers, except as
provided in §5(e)(xi) below, by providing written notice of such election to
Sellers and (y) Sellers shall have the right to terminate this Agreement
without any liability to Buyer by providing written notice of such election to
Buyer.  If Buyer provides such written
notice to Sellers, then Sellers may elect to waive any such breach or breaches
(or portion of such breach) sufficient to make the Cost of Curing all such
non-waived


 


34





















 


breaches no greater than $20,000,000.  In such case, Sellers shall notify Buyer that
Sellers desire to consummate the transactions contemplated by this Agreement by
providing written notice to Buyer of such election, within the earlier to occur
of the second Business Day immediately prior to the then scheduled Closing Date
or 10 Business Days of receipt of the written notice from Buyer electing to
terminate this Agreement, in which case Buyer shall be required to consummate
the transactions contemplated by this Agreement, subject to the terms and
conditions of this Agreement.  If Sellers
elect to waive any such breaches (or portion of such breaches) and cause Buyer
to consummate the transactions contemplated by this Agreement, (x) Buyer shall
take the actions specified in clause (A) of the first sentence of §5(e)(vii) or,
in lieu of taking the actions specified by clause (A), Buyer shall place $20,000,000
(or such portion of $20,000,000 attributable to any breach not so cured) into
the Pre-Closing Sellers Escrow Fund at Closing, (y) Buyer shall have no
obligation to take the actions specified in clauses (A) and (B) of the
first sentence of §5(e)(vii) with respect to all breaches (or portions
thereof ) waived by Sellers, and (z) Sellers shall not be entitled to any
remedy pursuant to §8 of this Agreement for any Adverse Consequences arising
from or related to such breaches.


 


(ix)          The amount to be
placed into the Pre-Closing Buyer Escrow Fund or the Pre-Closing Seller Escrow
Fund at Closing, as the case may be, shall be determined in good faith by
Sellers and Buyer and, if Sellers and Buyer are unable to agree upon the
estimated Cost of Curing within five (5) Business Days after notice of
such breach, the estimated Cost of Curing such breach shall be determined by a
mutually agreed upon Person experienced in the area at issue (an “Expert”).  Buyer and Sellers shall direct the Expert to
determine the estimated Cost of Curing no later than the second Business Day
immediately preceding the then scheduled Closing Date.  In the event the Cost of Curing any breach or
potential breach by a Party pursuant to this Agreement cannot be determined or
reasonably estimated on or prior to the Closing Date, then, subject to the
other terms and conditions of this Agreement, the Closing Date shall be automatically
extended until the last Business Day of the immediately following month to
permit such determination.


 


(x)           The Expert shall
resolve all issues related to the Cost of Curing after the Closing.  If Buyer and Sellers previously determined
the estimated Cost of Curing to be placed in escrow in good faith without any
Expert, Buyer and Sellers shall appoint an Expert at or prior to Closing to act
in accordance with this §5(e)(x).  If any
amount is deposited into either the Pre-Closing Buyer Escrow Fund or the Pre-Closing
Seller Escrow Fund, within ten (10) days after the Closing Date, Buyer and
Sellers may make a written presentation of their respective positions related
to the Cost of Curing any such breach and the Expert shall make such review and
examination of the presentations and relevant facts and documents regarding
such breach as the Expert deems appropriate. 
Within ten (10) days after submission of such facts, documents and
written presentations, the Expert shall resolve all disputed items in writing
and shall prepare and deliver its decision, which shall be final and binding
upon the Parties without further recourse or collateral attack and shall constitute
a Final Determination of such dispute; provided that the Expert shall not
assign a value to any particular disputed item greater than the greatest value
for such item claimed by Buyer or Sellers or less that the smallest value for
such item claimed by Buyer or Sellers. 
All costs of engaging the Expert (including the Expert’s fees, but exclusive
of attorneys’ fees) shall be borne by the Party (that is, either Buyer or
Sellers jointly) who is the least successful in such process, as determined by the
Expert, which shall be determined by


 


35





















 


comparing (x) the position asserted by each
Party on the actual Cost of Curing to (y) the final decision of the Expert.  If the Expert determines that Sellers shall
bear such costs each Seller shall bear its Allocable Portion.  If a Pre-Closing Buyer Escrow Fund is
established, disbursements shall be made from such fund to Buyer to reimburse
Buyer for any Adverse Consequences resulting from or arising out of such
breach.  Any proceeds remaining in the
Pre-Closing Buyer Escrow Fund following such reimbursement of Buyer shall be
disbursed to Sellers.  If a Pre-Closing
Sellers Escrow Fund is established, disbursements shall be made from such fund
to Sellers to reimburse Sellers for any Adverse Consequences resulting from or
arising out of such breach.  Any proceeds
remaining in the Pre-Closing Sellers Escrow Fund following such reimbursement
of Sellers shall be disbursed to Buyer.


 


(xi)          The rights set forth in this §5(e) shall
be the Parties’ sole and exclusive remedy for any breach of another Party’s
representations, warranties or covenants that is disclosed to the other Parties
by written notice pursuant to §5(e)(i), §5(e)(ii) or §5(e)(iii) above,
other than for intentional breaches of any of such other Parties’
representations and warranties or covenants.


 


(f)            Exclusivity.  No Seller will (and neither Seller will cause
or permit Company to) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of Membership
Interests or all or substantially all of the Assets of the Company (including
any acquisition structured as a merger, consolidation, or equity interest
exchange).


 


(g)           Southern Dome.  Buyer and Sellers acknowledge that, (i) immediately
prior to the Closing, Sellers shall cause the Company to distribute the entire
membership interest of the Excluded Subsidiary to Sellers, and (ii) the
Parties will enter into one of more definitive agreements with respect to the
Excluded Subsidiary substantially as contemplated by Exhibit F to
this Agreement.


 


(h)           Expansion of
Insurance Policies.  Buyer and Sellers shall (and Sellers shall
cause the Company to) use commercially reasonable efforts to obtain a
commitment from the insurers to amend, on the Closing Date at Buyer’s expense,
the Company’s Pollution Legal Liability AISLIC Policy No. PLS7619775 (the “Existing
Policy”) to expand the Existing Policy to cover all of the Company’s Assets
on the Closing Date and to extend the term of the Existing Policy until May 30,
2013 on substantially the terms set forth on Exhibit G to this
Agreement (such expanded and extended insurance policy being referred to herein
as the “Expanded Insurance Policy”).


 


§6.          Post-Closing Covenants.  The Parties
agree as follows with respect to the period following Closing.


 


(a)           General.  In case at any time after Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party (unless the request is made pursuant to §§2(c), 2(f) or 6(e) or
the requesting Party is entitled to indemnification therefor under §8).  Following the Closing, Buyer (i) will
use commercially


 


36





















 


reasonable efforts to collect amounts owed under the Oxley Receivable;
provided, that Buyer shall not be required to commence any Proceeding against
any other Person to collect amounts owing thereunder, and will pay to Sellers
any amounts collected thereunder less any costs incurred by Buyer in collecting
the same.


 


(b)           Litigation Support.  In the event and for so long as any Party
actively is contesting or defending against any Proceeding (other than any in
which Buyer, on the one hand, and Sellers, on the other hand, are adverse to
each other), in connection with (i) any transaction contemplated under
this Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to the Closing Date involving the
Company, each of the other Parties shall cooperate with it and its counsel in
the defense or contest, make available its personnel, and provide such
testimony and access to its books and records as shall be necessary in
connection with the defense or contest, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under §8).


 


(c)           Reporting Procedures
Under Section 751.  Each Seller
shall notify the Company in writing of the Membership Interests sold to Buyer
within thirty (30) days of the Closing Date (or, if earlier, January 15 of
the calendar year following the calendar year in which the Closing Date
occurred). The notice from each Seller to the Company shall include: (i) the
names and addresses of such Seller and Buyer; (ii) the taxpayer
identification numbers of such Seller and the Buyer; and (iii) the Closing
Date. The Company shall prepare a separate return on IRS Form 8308 with
respect to the Membership Interest sold by each Seller to Buyer.  The Company shall furnish a copy of the
completed IRS Form 8308, on or before January 31 of the calendar year
following the calendar year in which the Closing Date occurred, to Sellers and
Buyer listed in the IRS Form 8308. The Company shall file the completed
IRS Forms 8308 as an attachment to the Company’s Tax Return for the taxable
year in which the Closing Date occurred. Each Seller shall include with its Tax
Return for the taxable year in which the Closing Date occurred a statement
setting forth separately the following information: (a) the Closing Date; (b) the
amount of gain or loss attributable to Section 751 property of the Company
(determined in accordance with the Final Allocation Schedule); and (c) the
amount of any gain or loss attributable to capital gain or loss on the sale of
the Membership Interests by such Seller to Buyer (determined in accordance with
the Final Allocation Schedule).  The
Parties’ respective obligations pursuant to this §6(c) shall survive until
the expiration of the applicable statute of limitations (after giving effect to
any extension).


 


(d)           Employee Matters.


 


(i)            Subject to applicable Law and all
agreements and other arrangements with the Company’s employees, Buyer shall,
and shall cause the Company to, for a period of twelve (12) months following
the Closing Date, provide salary and benefits to employees of the Company who
continue to be employed by the Company immediately after the Closing Date (“Continuing
Employees”), including participation in the Company’s Employee Benefit Plans
(or comparable Buyer Benefit Plans), which will be no less favorable (taken as
a whole) to those currently provided by the Company to its similarly situated
employees. Notwithstanding the foregoing, (A) any Continuing Employee who
resigns his or her employment, dies or terminates


 


37





















 


his or her employment as a result of
disability prior to the first anniversary of the Closing Date shall not be
entitled to any salary or benefits attributable to the period following the
effective date of the termination of his employment (“Termination Date”),
except as otherwise provided in any written agreement between such Continuing
Employee and the Company, (B) no Continuing Employee whose employment with
the Company is terminated prior to the first anniversary of the Closing Date
shall be eligible to participate in any Employee Benefit Plan of the Company or
any of its Affiliates that is intended to be qualified under Code § 401(a) (a
“Qualified Plan”) with respect to any period following his or her Termination
Date, (C) in the event that a particular Employee Benefit Plan (other than
a Qualified Plan) does not permit the participation of the Continuing Employee
due to the termination of his or her employment, with respect to the Company’s
agreement under this paragraph to continue such Continuing Employee’s
participation in such Employee Benefit Plan until the first anniversary of the
Closing Date, the Company shall pay such Continuing Employee an amount equal to
the then monthly out-of-pocket cost to the Company of providing such Continuing
Employee coverage under such Employee Benefit Plan multiplied by the number of
whole months between such Continuing Employee’s Termination Date and the first
anniversary of the Closing Date. 
Notwithstanding the preceding provisions of this §6(d)(i), in the case
of any Continuing Employee who is party to an agreement providing for severance
or change of control benefits in the event of the termination of his or her
employment with the Company or any of its Affiliates following the Closing
Date, such Continuing Employee shall be entitled to receive the more valuable
of the payments and other benefits provided for under this paragraph (in the
aggregate) or the payments and benefits provided for under such agreement (in
the aggregate) but no Continuing Employee shall be entitled to claim benefits
under both this paragraph and such agreement or in part under this paragraph
and in part under such agreement.  Any
benefits provided to a terminated Continuing Employee under this paragraph
under any Employee Benefit Plan that constitutes a “group health plan” within
the meaning of Code § 5000(b)(1) shall count towards the Company’s
obligation to make continuation coverage available to such Continuing Employee
pursuant to Code § 4980B(f) and ERISA §§ 601-608.  Notwithstanding the preceding provisions of
this §6(d)(i), Buyer and the Company shall comply with the applicable
provisions of the Employee Benefit Plans, ERISA and the Code with respect to
each Continuing Employee.


 


(ii)           After Closing, Buyer shall cause
the Company to, satisfy all post-Closing obligations of the Company pursuant to
any written employment, severance, profits participation or other employee
compensation plan adopted by the Company or any agreements between the Company
and any employee of the Company. To the extent that the employees of the
Company become eligible to participate in any Employee Benefit Plans or
programs that Buyer or the Company implement on or after the Closing Date (each
a “Buyer Benefit Plan”), then for all purposes (including, without
limitation, determining eligibility to participate, vesting under plans, early
retirement and benefit accrual), service with the Company shall be treated as
service under such Buyer Benefit Plan, in as similar a manner as practicable;
provided, however that such service need not be recognized as benefit service (A) under
any Buyer Benefit Plan which is a qualified defined benefit pension plan or (B) to
the extent that such recognition would result in any duplication of benefits.
All Buyer Benefit Plans shall waive any pre-existing conditions,
actively-at-work exclusions and waiting periods with respect to participation
by and coverage of the employees and their eligible dependents and, with
respect to the 2005 calendar year, shall


 


38





















 


provide that any expenses incurred on or
before Closing by or on behalf of any such individuals shall be taken into
account under the applicable Buyer Benefit Plans for purposes of satisfying
applicable deductible, coinsurance and maximum out-of-pocket provisions.


 


(iii)          For a period of ten (10) years
after the Closing Date, Buyer shall (A) maintain in effect the current
provisions regarding indemnification of any of the Company’s members, managers,
officers, agents and employees (“Covered Persons”) contained in the LLC
Agreement, and (B) indemnify the Covered Persons to the fullest extent to
which Buyer is permitted to indemnify current or former members, managers,
officers, directors, agents or employees under its certificate of
incorporation, certificate of organization, bylaws, limited liability company
agreement, operating agreement or other organizational documents and applicable
Law.


 


(e)           Tax Matters.  


 


(i)            Sellers shall prepare or cause to be
prepared and file or cause to be filed any required Tax Returns for all
Pre-Closing Tax Periods with respect to the Company. Buyer shall, and shall
cause the Company to, cooperate fully, as and to the extent reasonably
requested by Sellers in connection with the filing of Tax Returns pursuant to
this Section and any audit, litigation or other Proceeding, including the
retention of books and records relevant to any such Tax Returns until Sellers’
notice to Buyer of the expiration of the applicable statute of limitations (or
any extension), and make employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.


 


(ii)           Sellers shall pay to Buyer (or Buyer
shall pay to Sellers) the amount by which Taxes attributable to the portion of
such Pre-Closing Period ending on the Closing Date exceed (or are less than)
any reserve for Tax Liability for such Taxes included in the calculation of Net
Working Capital as of the Closing Date. Any such payment by Sellers to Buyer (or
by Buyer to Sellers) under this §6(e)(ii) shall be made within fifteen
(15) days after the date on which Taxes are paid with respect to such
Pre-Closing Periods. For purposes of this §6(e)(ii), in the case of any Taxes
that are imposed on a periodic basis and are payable for a Taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such Taxable period ending on the Closing Date shall
be deemed to be the amount of such Tax for the entire Taxable period multiplied
by a fraction the numerator of which is the number of days in the Taxable
period ending on the Closing Date and the denominator of which is the number of
days in the entire Taxable period. Any credits relating to a Pre-Closing Period
that begins before and ends after the Closing Date shall be allocated so that a
portion of such credits that relate to the portion of a Taxable period ending
on the Closing Date are allocated to the Pre-Closing Period. All determinations
necessary to give effect to the foregoing allocations shall be made in a manner
consistent with prior practice of the Company.


 


(iii)          Any information shared in connection
with Taxes shall be kept confidential, except as may otherwise be necessary in
connection with the filing of Tax Returns or reports, tax audits, tax claims
and tax litigation, or as required by Law.


 


39





















 


(iv)          Buyer shall provide prompt written
notice to Sellers of any pending or threatened tax audit, assessment or
Proceeding that it becomes aware of related to the Company for any Pre-Closing
Tax Period. Such notice shall contain factual information (to the extent known)
describing the asserted tax adjustment, assessment, Proceeding or Liability in
reasonable detail and shall be accompanied by copies of any notice or other
document received from or with any tax authority in respect of any such
matters. Sellers shall control audits and disputes related to such Taxes due or
Tax matters for any Pre-Closing Tax Period (including action taken to pay,
compromise or settle such Taxes or Tax matters). Buyer and the Company and
their Affiliates shall provide Sellers and their Affiliates with such powers of
attorney or other authorizing documentation as are reasonably necessary to
empower them to execute and file Pre-Closing Tax Returns, file refund and
equivalent claims for Taxes related to Pre-Closing Tax Periods, and contest,
settle, and resolve any related audits and disputes (including any refund
claims or amended Tax Returns which result in audits or disputes).


 


(v)           If Buyer or any Affiliate of Buyer
(including the Company) receives a refund of any Taxes attributable to a
Pre-Closing Tax Period, Buyer or such Affiliate receiving such refund shall,
within ten (10) days after receipt of such refund, remit it to Sellers in
accordance with their Allocable Portions.


 


(vi)          The Parties’ respective obligations
pursuant to this §6(e) shall survive until the expiration of the
applicable statute of limitations (after giving effect to any extensions).


 


(f)            Company
Confidential Information.For a period of
two years following the Closing, none
of Jay A. Precourt, Frederic C. Hamilton or Sellers shall, directly or
indirectly, disclose or permit any Affiliate, directly or indirectly, to
disclose to any Person any confidential information of the Company, unless
compelled to disclose by any applicable Law, except to the extent that such
information can be shown to have been (i) in the public domain through no
fault of Jay A. Precourt, Frederic C. Hamilton or Sellers or any of their
Affiliates or (ii) lawfully acquired by Jay A. Precourt, Frederic C.
Hamilton or Sellers after the Closing Date on a non-confidential basis from
sources other than Buyer or the Company or any of their Affiliates, but only to
the extent that any such source is not bound by a confidentiality agreement or
other duty to keep such information confidential.


 


(g)           Financial Statements.   Each  
Seller shall use its commercially reasonable efforts to assist Buyer in
preparing financial statements of the Company in such form and covering such
periods as may be required by any applicable securities laws to be filed with
the Securities and Exchange Commission by Buyer as a result of the transactions
contemplated by this Agreement.  Each
Seller shall use its commercially reasonable efforts to cause the independent
public accountants of the Company to provide any consent necessary to the
filing of such financial statements with the Securities and Exchange Commission
and to provide such customary representation letters as are necessary in
connection therewith.


 


(h)           Right to Name.  As soon as reasonably practicable after the
Closing (and in any event, within 30 days after the Closing Date) Sellers will,
and will cause each of their Affiliates to, remove the name “ScissorTail” (and
all derivations therefrom), and all trademarks, trade names and symbols related
thereto from the properties and assets of Sellers and their Affiliates.  Within


 


40





















 


10 days after the Closing Date, each Seller will change its legal name
to delete from such name the word “ScissorTail.”


 


(i)            Non-Competition
and Non-Solicitation Covenant.


 


(i)            Each of Jay A. Precourt and Frederic
C. Hamilton (the “Non-Competition Parties”) hereby acknowledge and
recognize the highly competitive nature of the business of the Company being
acquired by Buyer pursuant to this Agreement, including the intellectual
property, trade secrets and confidential information of the Company.  Accordingly, each of the Non-Competition
Parties hereby agrees that he or it will not, directly or indirectly through
Persons they Control, during the period commencing on the Closing Date and
ending on the second anniversary of such date, (A) engage in, or own,
manage, operate, control or participate in the ownership, management, operation
or control of, or have any interest, financial or otherwise, in or act as a
partner, manager, member, principal, agent, representative, consultant or
independent contractor of, licensor to, or lessor to, or in any way assist, any
Person in the conduct of any business that is engaged or may become engaged in,
any business competitive to the business of the Company as it exists
immediately after the Closing, including without limitation the business of
gathering, treating, processing, storing, transporting and selling natural gas
and transporting, fractionating and selling natural gas liquids, and such
restriction shall be limited to the area described in Exhibit H to
this Agreement  or (B) solicit or hire any of
the officers or employees of the Company as of the date hereof or as of
immediately prior to the Closing. 
Notwithstanding anything in this §6(i) to the contrary, (x) any of
the Non-Competition Parties may own (collectively with their Affiliates) up to
5% of the outstanding equity securities in any Person that is listed upon a
national stock exchange or actively traded in the over-the-counter market, (y)
any Non-Competition Party may participate in the business of the Excluded
Subsidiary or its successors as contemplated by Exhibit F, and (z)
each of Jay A. Precourt and Frederic C. Hamilton may serve on the Board of
Directors of any Person that files reports pursuant Section 13 or 15(d) of
the Exchange Act.


 


(ii)      Although the
Non-Competition Parties and Buyer consider the restrictions contained in clause
(i) above to be reasonable, if a final determination is made by an
arbitration panel selected in accordance with §10(j) that the time or territory
or any other restriction contained in clause (i) is an unenforceable
restriction against the Non-Competition Parties under applicable law, the
provisions of clause (i) will not be rendered void, but will be deemed
amended as to such restriction as such arbitration panel may determine or
indicate to be reasonable.


 


(j)       Termination of
Related Party Contracts.  Each of
Sellers and Jay A. Precourt shall cause the following agreements to be
terminated on or prior to the Closing Date with the Company having no further
obligations or liabilities thereunder:  (i) Salary
Agreement effective January 1, 2002 between the Company and Jay A.
Precourt and (ii) Services Agreement dated February 24, 2005, between
the Company and Wyoming Refining Company (collectively, the “Related Party
Contracts”).


 


(k)      Payment of Obligations
under Lehman Agreement.  At the
Closing, Sellers shall pay and discharge all amounts owed at Closing by the
Company or Sellers to Lehman Brothers,


 


41





















 


Inc. (“Lehman”) pursuant to that
Letter Agreement, dated February 4, 2005 between Lehman and the Company.


 


§7.          Conditions
to Obligation to Close.


 


(a)           Conditions to
Buyer’s Obligation.  Buyer’s
obligation to consummate the transactions with Sellers to be performed by Buyer
in connection with Closing is subject to satisfaction of the following
conditions:


 


(i)            the representations and warranties
of the Company in this Agreement that are qualified by materiality (whether by
reference to the terms “material”, “Material Adverse Effect,” “Material Adverse
Change,” any threshold amount or otherwise) and the representations and
warranties of Sellers shall be true and correct in all respects as of the date
of this Agreement and at and as of the Closing Date, and the representations
and warranties of the Company in this Agreement that are not so qualified by
materiality shall be true and correct in all material respects as of the date
of this Agreement and at and as of the Closing Date;


 


(ii)           the Company and Sellers shall have
performed and complied with all covenants, agreements and obligations that are
qualified by materiality and are required by this Agreement to be so performed
or complied with by the Company and Sellers, and the Company and Sellers shall
have performed and complied in all material respects with all other covenants,
agreements and obligations required by this Agreement to be so performed or
complied with by the Company and Sellers, all at or prior to Closing;


 


(iii)          there shall not be any preliminary or
permanent injunction, judgment, order, decree, ruling, or charge, and no Law
promulgated or enacted by any Governmental Authority, shall be in effect
preventing or otherwise making illegal consummation of any of the transactions
with Sellers contemplated by this Agreement or any Proceeding pending by any
Governmental Authority seeking to enjoin or restrain consummation of the
transactions contemplated hereby or to recover damages in connection therewith;


 


(iv)          Sellers shall have delivered to Buyer
a certificate to the effect that each of the conditions specified in §7(a)(i)-(iii) is
satisfied in all respects;


 


(v)           Buyer Parent, Buyer, Sellers and the
Company shall have received all authorizations, consents, and approvals of
Governmental Authorities referred to in §3(a)(ii), §3(b)(ii), and §4(b) that
are required to consummate the transactions with Sellers contemplated by this
Agreement, including, without limitation all required approvals, clearance or
decisions under the HSR Act;


 


(vi)          the applicable Parties shall have
entered into the agreements contemplated by Exhibit F;


 


(vii)         all consents from Persons other than
Governmental Authorities that are listed in §7(a)(vii) of the Disclosure Schedule with
respect to the transactions contemplated by this Agreement shall have been received;


 


42





















 


(viii)        Buyer, Sellers, the Company and the
Escrow Agent shall have entered into the Escrow Agreement dated as of the
Closing Date in the form of Exhibit A attached to this Agreement,
and the same shall be in full force and effect;


 


(ix)          each of the officers of the Company
listed in §7(a)(ix) of the Disclosure Schedule shall have executed
and delivered to Buyer an employment agreement substantially in the form
attached hereto as Exhibit I;


 


(x)           the insurers under the Existing
Policy shall have committed to enter into the Expanded Insurance Policy;


 


(xi)          Sellers shall have delivered to Buyer,
at the expense of Buyer, (a) true and complete copies of any audited
financial statements (which shall be accompanied by an unqualified report of
the Company’s independent public accountants) and any unaudited financial
statements, in each case that are required to be included under Item 2.01 of Form 8-K
filed by the Company under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) as a result of the consummation of the transactions
contemplated hereby assuming such Form 8-K is filed on the first
Business Day immediately following the Closing Date and (b) any consents
of the Company’s independent public accountants required under the Securities
Act of 1933, as amended, or the Exchange Act in connection with the filing of
such Form 8-K;


 


(xii)         all actions to be taken by Sellers in
connection with consummation of the transactions contemplated by this Agreement
with respect to Sellers and all certificates, instruments, and other documents
required to effect the transactions contemplated by this Agreement, including
delivering to Buyer instruments of assignment and transfer as shall be
necessary to transfer to Buyer all of Sellers’ right, title and interest in and
to the percentage of the Membership Interests to be sold by Sellers to Buyer
pursuant to §2(e), will be reasonably satisfactory in form and substance to
Buyer; and


 


(xiii)        the Related Party Contracts shall have
been terminated in accordance with §6(j).


 


Buyer may waive
any condition specified in this §7(a) if it executes a writing so stating
at or prior to Closing.


 


(b)           Conditions to Each
Seller’s Obligation.  The Company’s
and each Seller’s obligation to consummate the transactions to be performed by
it in connection with Closing is subject to satisfaction of the following
conditions:


 


(i)            the representations and warranties
of Buyer in this Agreement that are qualified by materiality (whether by reference
to the terms “material”, “Material Adverse Effect,” “Material Adverse Change,”
any threshold amount or otherwise) shall be true and correct in all respects as
of the date of this Agreement and at and as of the Closing Date, and the
representations and warranties of Buyer in this Agreement that are not so
qualified by materiality shall be true and correct in all material respects as
of the date of this Agreement and at and as of the Closing Date;


 


43





















 


(ii)           Buyer Parent and Buyer shall have
performed and complied with all covenants, agreements and obligations that are
qualified by materiality and required by this Agreement to be so performed or
complied with by them, and Buyer Parent and Buyer shall have performed and
complied in all material respects with all other covenants, agreements and
obligations required by this Agreement to be so performed or complied with by
them, all at or prior to Closing;


 


(iii)          there shall not be any preliminary or
permanent injunction, judgment, order, decree, ruling, or charge, and no Law
promulgated or enacted by any Governmental Authority, shall be in effect
preventing or otherwise making illegal consummation of any of the transactions
with Buyer Parent or Buyer contemplated by this Agreement or any Proceeding
pending by any Governmental Authority seeking to enjoin or restrain
consummation of the transactions contemplated hereby or to recover damages in
connection therewith;


 


(iv)          Buyer shall have delivered to the
Company and Sellers a certificate to the effect that each of the conditions
specified in §7(b)(i)-(iii) is satisfied in all respects;


 


(v)           Buyer Parent, Buyer, Sellers and the
Company shall have received all authorizations, consents, and approvals of
Governmental Authorities referred to in §3(a)(ii), §3(b)(ii), and §4(b) that
are required to consummate the transactions contemplated by this Agreement,
including, without limitation all required approvals, clearance or decisions
under the HSR Act;


 


(vi)          the applicable Parties shall have
entered into the agreements contemplated by Exhibit F;


 


(vii)         all consents from Persons other than
Governmental Authorities that are listed in §7(b)(vii) of the Disclosure Schedule with
respect to the transactions contemplated by this Agreement shall have been
received;


 


(viii)        Buyer, Sellers, the Company and the
Escrow Agent shall have entered into the Escrow Agreement dated as of the
Closing Date in the form of Exhibit A attached to this Agreement,
and the same shall be in full force and effect; and


 


(ix)          all actions to be taken by Buyer in
connection with consummation of the transactions contemplated by this
Agreement, including the payment of the amounts to Sellers and the Escrow Agent
as required pursuant to §2, and all certificates, instruments, and other
documents required to effect the transactions contemplated by this Agreement
will be reasonably satisfactory in form and substance to Sellers.


 


Sellers may
waive any condition specified in this §7(b) if it executes a writing so
stating at or prior to Closing.


 


§8.          Remedies
for Breaches of This Agreement.


 


(a)           Survival of
Representations, Warranties and Covenants.


 


44





















 


All of the
representations and warranties of the Parties contained in §3 shall survive the
Closing (except for misrepresentations or breaches of warranty which are
disclosed to the Parties pursuant to §5(e)) and continue in full force and
effect after Closing subject to any applicable statute of limitations. All of
the representations and warranties of the Company contained in §4 shall survive
Closing (except for misrepresentations or breaches of warranty which are
disclosed to the Parties pursuant to §5(e)) and continue in full force and
effect for a period of twelve (12) months thereafter.  The obligations of the Parties to perform the
covenants set forth in §5 shall terminate at and as of Closing, provided
however, that a Party may make a Claim for Indemnification for a breach of any
such covenant that occurs prior to Closing until twelve (12) months after the
Closing Date.  All of the other covenants
and agreements of the Parties contained herein shall survive Closing until the
later of (i) the end of the period of time required by the applicable
provisions of this Agreement or (ii) twelve (12) months after the Closing
Date.  Claims for Indemnification
pursuant to this §8 may only be made after the Closing.


 


(b)           Indemnification
Provisions for Buyer’s Benefit.  (i)  In the event the Company breaches
any of its representations and warranties set forth in §4 of this Agreement,
provided that Buyer or any of its Affiliates makes a written Claim for
Indemnification to the Escrow Agent against the Company, pursuant to the notice
provisions of the Escrow Agreement within any applicable survival period, then
Sellers shall indemnify Buyer and its Affiliates from and against any Adverse
Consequences Buyer or any of its Affiliates (including the Company) shall
suffer through and after the date of the Claim for Indemnification resulting from
or arising out of the breach; subject to the terms and conditions of the Escrow
Agreement and the applicable limitations of this §8.


 


(ii)           In the event any Seller breaches any
of its representations and warranties set forth in §3(a) of this Agreement
or any Seller breaches any of its covenants contained in this Agreement,
provided that Buyer or any of its Affiliates makes a written Claim for
Indemnification against such Seller within any applicable survival period and
pursuant to the notice provisions of §10(h), then such Seller shall indemnify
Buyer and its Affiliates from and against any Adverse Consequences Buyer or any
of its Affiliates (including the Company) shall suffer through and after the
date of the Claim for Indemnification resulting from or arising out of such
breach subject to the applicable limitations of this §8.


 


(iii)          Sellers shall have no obligation to
indemnify Buyer or its Affiliates pursuant to §8(b)(i) until Buyer and its
Affiliates (including the Company) has suffered Adverse Consequences by reason
of all such breaches in excess of $5,000,000 (the “Threshold”), after
which point Sellers will be obligated to indemnify Buyer and its Affiliates
only from and against further Adverse Consequences in excess of such Threshold.


 


(iv)          No amount shall be payable pursuant to
§8(b)(i) with respect to any matter or series of related matters resulting
in Adverse Consequences to Buyer or its Affiliates of $100,000 or less;
provided that such Adverse Consequences shall be included in calculating the
Threshold.


 


45





















 


(v)           Each Seller’s obligation to indemnify
Buyer pursuant to §8(b)(ii) from and against any breach of a covenant made
by both Sellers or the Company (other than pursuant to §2(a), §6(f), §6(g) or
§6(i)) shall be limited to such Seller’s Allocable Portion of any Adverse
Consequences Buyer shall suffer through and after the date of the Claim for
Indemnification and may not be increased under any circumstances.


 


(vi)          Sellers shall have no obligation to
indemnify Buyer or its Affiliates pursuant to §8(b)(i) by reason of any
breaches of the Company’s representations and warranties set forth in §4(d) and
4(r) of this Agreement until the Company has exhausted all remedies available
to it under the Expanded Policy, the Duke Agreement and the Octagon Agreement
(the “Primary Remedies”). 
Notwithstanding any other provision of this Agreement, Buyer’s rights to
pursue a Claim for Indemnification for the Company’s breach of the
representations and warranties set forth in §4(d) and 4(r) shall survive
during the time Buyer or its Affiliates are actively pursuing the Primary
Remedies and for the period thereafter required to bring any related Claim for
Indemnification against Sellers, so long as Buyer has provided notice of its
potential Claim for Indemnification (and the assertion of its Primary Remedies)
to Sellers within twelve (12) months after the Closing Date.


 


(vii)         Notwithstanding any other provision of
this Agreement, the Escrow Amount shall be the sole and exclusive source of
funds available to Buyer with respect to any Claim for Indemnification made
after the Closing arising pursuant to §8(b)(i), and after distribution to Buyer
of the entire Escrow Amount, Sellers will have no obligation to further indemnify
Buyer from and against such Adverse Consequences.


 


(c)           Indemnification Provisions
for Sellers’ Benefit.  In the event
Buyer breaches any of its representations, warranties, or covenants contained
in this Agreement, and, provided that any Seller or any of its Affiliates makes
a written Claim for Indemnification against Buyer pursuant to the notice
provisions of §10(h) within any applicable survival period, then Buyer
shall indemnify each Seller and its Affiliates from and against any Adverse
Consequences Sellers or any of its Affiliates shall suffer through and after
the date of the Claim for Indemnification resulting from or arising out of the
breach subject to the applicable limitations of this §8.


 


(d)           Matters Involving
Third Parties.  (i)  If any third
party shall notify any Party (the “Indemnified Party”) with respect to
any matter (a “Third Party Claim”) which may give rise to a Claim for
Indemnification against any other Party (the “Indemnifying Party”) under
this §8, then the Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any obligation
under this Agreement unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.


 


(ii)           Any Indemnifying Party will have the
right to defend the Indemnified Party against the Third Party Claim with
counsel of its choice reasonably satisfactory to the Indemnified Party so long
as (A) the Third Party Claim involves only money damages and does not seek
an injunction or other equitable relief and, in respect of Third Party Claims
in which Buyer or its Affiliates is the Indemnified Party, in Buyer’s
reasonable judgment could not result in money damages in excess of any
remaining Escrow Amount, (B) settlement of, or an adverse


 


46





















 


judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (C) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.


 


(iii)          So long as the Indemnifying Party is
conducting the defense of the Third Party Claim in accordance with §8(d)(ii), (A) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably).


 


(iv)          In the event any of the conditions in
§8(d)(ii) is or becomes unsatisfied, however, (A) the Indemnified
Party may defend against, and consent to the entry of any judgment or enter
into any settlement with respect to, the Third Party Claim in any manner it may
deem appropriate subject to the consent of the Indemnifying Party in the case
of any proposed entry of a judgment or settlement, (B) the Indemnifying
Parties will have sixty (60) days from the receipt of any notice under §8(d)(i) to
cure to the Indemnified Party’s satisfaction the subject matter of the notice,
and, in the absence of such a timely, satisfactory cure, the Indemnifying
Parties will reimburse the Indemnified Party promptly and periodically for the
costs of defending against the Third Party Claim (including reasonable
attorneys’ fees and expenses), and (C) the Indemnifying Parties will
remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim to the fullest extent provided in this §8.


 


(e)           Matters not Involving
Third Party Claims.  Buyer or Sellers
may make a claim for any matter that does not involve a Third Party Claim in
any amount to which they may be entitled under this §8 by providing a Claim for
Indemnification against the other promptly after such Indemnified Party has
notice of any Adverse Consequence which may give rise to a Claim for
Indemnification; provided, however,
that no delay on the part of Buyer or Sellers in notifying the other shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party is actually prejudiced by such
delay. The Indemnifying Party shall have thirty (30) days to object to the
Claim for Indemnification by delivery of a written notice of such objection to
the Indemnified Party specifying in reasonable detail the basis for such
objection. Failure to timely respond shall constitute a final and binding
acceptance of the Claim for Indemnification by the Indemnifying Party, and the
Claim for Indemnification shall be paid in accordance with §8(g). If an
objection is timely interposed by the Indemnifying Party, then the Indemnified
Party and the Indemnifying Party shall negotiate in good faith for a period of
twenty (20) Business Days from the date the Indemnified Party receives such
objection prior to commencing any arbitration, formal legal action, suit or
proceeding with respect to such Claim for Indemnification.


 


(f)            Claims Against
Escrow Amount.  Subject to this §8, any Claim for
Indemnification by Buyer against Sellers pursuant to §8(b)(i) shall be
made solely with respect to the Escrow


 


47





















 


Amount and may be made at any time within the applicable survival period.
Upon any Final Determination (as defined below) of a Claim for Indemnification
against Sellers, Sellers and Buyer shall provide joint written instructions to
the Escrow Agent to pay to Buyer the amount of such Claim for Indemnification
as determined by such Final Determination. Upon the expiration of the
applicable survival period without any pending claims, the remaining balance of
the Escrow Amount will be disbursed by the Escrow Agent (pursuant to joint
written instructions by Sellers and Buyer) to Sellers in accordance with the
Escrow Agreement; provided, however,
that in the event that there are any pending Claims for Indemnification at the
time of such expiration: (i) the claimed amounts shall remain in escrow; (ii) the
remaining balance of the Escrow Amount after such retention will be so
disbursed by Escrow Agent (pursuant to joint written instructions by Sellers
and Buyer) to Sellers in accordance with the Escrow Agreement; and (iii) as
each such Claim for Indemnification is resolved by a Final Determination, any
amount retained with respect thereto that remains in escrow after such
resolution will be disbursed by Escrow Agent (pursuant to joint written
instructions by Sellers and Buyer) to Sellers in accordance with the Escrow
Agreement.


 


(g)           Payment of
Claims.  Upon Final Determination of
the amount of a Claim for Indemnification, the Indemnifying Party (or the
Escrow Agent, if applicable) shall pay the amount of such claim within ten (10) days
of the date of such Final Determination. A “Final Determination” of a claim
shall be (i) a judgment of any court determining the validity or amount of
a disputed claim, if no appeal is pending from such judgment or if the time to
appeal therefrom has elapsed (it being understood that the Indemnified Party shall
have no obligation to appeal); (ii) an award of any arbitrator or
arbitration panel determining the validity or amount of such disputed claim, if
there is not pending any motion to set aside such award or if the time within
which to move to set such award aside has elapsed; (iii) a written
termination of the dispute with respect to such claim signed by all of the
parties thereto or their attorneys; (iv) a written acknowledgment of the
Indemnifying Party that it does not dispute the validity or amount of such
claim; (v) a failure by an Indemnifying Party to respond to a Claim for
Indemnification by the date specified in §8(e); or (vi) such other
evidence of final determination of a disputed claim as shall be reasonably
acceptable to the Parties.


 


(h)           Determination of Adverse
Consequences.  All indemnification
payments under this §8 shall be paid by the Indemnifying Party net of any Tax
benefits, insurance coverage and other indemnification rights that are
available to the Indemnified Party and shall be computed on a present value
basis (using the Applicable Rate as the discount rate). All indemnification
payments under this §8 shall be deemed adjustments to the Purchase Price.


 


(i)            Exclusive Remedy.  EXCEPT WITH RESPECT TO
BREACHES OF REPRESENTATIONS, WARRANTIES AND COVENANTS DISCLOSED PRIOR TO
CLOSING AS PROVIDED IN §5(E), BUYER, THE COMPANY AND SELLERS ACKNOWLEDGE AND
AGREE THAT THE FOREGOING INDEMNIFICATION PROVISIONS IN THIS §8 SHALL BE THE
EXCLUSIVE REMEDY OF BUYER, THE COMPANY AND SELLERS WITH RESPECT TO THIS
AGREEMENT AND THE EVENTS GIVING RISE THERETO AND THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT.  BUYER, THE COMPANY
AND EACH SELLER ACKNOWLEDGES THAT NEITHER IT, NOR ANY SUCCESSOR OR ASSIGN,


 


48





















 


SHALL HAVE ANY RIGHTS AGAINST THE OTHER PARTIES OR ITS AFFILIATES WITH
RESPECT TO THE TRANSACTIONS PROVIDED FOR IN THIS AGREEMENT OTHER THAN AS IS
EXPRESSLY PROVIDED IN THIS AGREEMENT.


 


(j)            Limitation on Damages.  NOTWITHSTANDING ANYTHING TO
THE CONTRARY IN THIS AGREEMENT, IN NO EVENT SHALL THE COMPANY, ANY SELLER OR
BUYER BE LIABLE TO THE OTHER UNDER THIS AGREEMENT FOR ANY EXEMPLARY, PUNITIVE,
REMOTE, SPECULATIVE, CONSEQUENTIAL, SPECIAL OR INCIDENTAL DAMAGES OR LOSS OF
PROFITS.


 


§9.          Termination.


 


(a)           Termination
of Agreement.  Certain of the Parties may terminate this
Agreement as follows:


 


(i)            Buyer and each Seller may terminate
this Agreement by mutual written consent at any time prior to Closing;


 


(ii)           Buyer or Sellers may terminate this
Agreement as provided by §5(e);


 


(iii)          Buyer may terminate this Agreement by
giving written notice to Sellers at any time prior to Closing if Closing shall
not have occurred on or before August 31, 2005 (unless the failure results
primarily from Buyer itself breaching any representation, warranty, or covenant
contained in this Agreement); and


 


(iv)          Either Seller may terminate this
Agreement by giving written notice to Buyer at any time prior to Closing if
Closing shall not have occurred on or before August 31, 2005 (unless the
failure results primarily from the Company or a Seller breaching any
representation, warranty, or covenant contained in this Agreement).


 


(b)           Effect of Termination.  If any Party terminates this Agreement
pursuant to §9(a), all rights and obligations of the applicable Parties under
this Agreement shall terminate without any Liability of any Party to any other
Party (except for any Liability of any Party then in breach); provided, however, that the
confidentiality provisions contained in §5(d) shall survive termination.


 


§10.        Miscellaneous.


 


(a)           Nature
of Sellers’ Obligations.


 


(i)            The covenants of each Seller in §2(a) concerning
the sale of its Membership Interests to Buyer, the representations and
warranties of each Seller in §3(a) and the covenants contained in §6(f), (g) or
(i) are individual and not joint or several obligations. This means that
the particular Seller making the representation, warranty, or covenant shall be
solely responsible to the extent provided in §5(e) and §8(b) for any
Adverse Consequences Buyer may suffer as a result of any breach thereof.


 


49





















 


(ii)           The remainder of Sellers’
representations, warranties, and covenants in this Agreement are based on each
Seller’s Allocable Portion of any Adverse Consequences Buyer may suffer as a
result of any breach thereof as set forth in §5(e) and §8(b).


 


(b)           Press Releases
and Public Announcements.  No Party shall issue any press release or
make any public announcement relating to the subject matter of this Agreement
prior to Closing without the prior written approval of Buyer and Sellers;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable Law or any listing or trading agreement concerning
its publicly traded securities (in which case the disclosing Party will use its
commercially reasonable efforts to advise the other Parties prior to making the
disclosure).


 


(c)           No Third-Party Beneficiaries.  Except for the rights conferred on the Company’s
employees and Covered Persons pursuant to §6(d) of this Agreement, this
Agreement shall not confer any rights or remedies upon any Person other than
the Parties and their respective successors and permitted assigns and with
respect to the rights conferred pursuant to §6(d), any remedies shall be
limited to actual damages and not punitive or consequential damages.


 


(d)           Entire Agreement.  This Agreement (including the Escrow
Agreement and the other documents referred to in this Agreement) and the Confidentiality
Agreement dated March 24, 2005 among the Parties constitute the entire
agreement among the Parties and supersede any prior understandings, agreements,
or representations by or among the Parties, written or oral, to the extent they
relate in any way to the subject matter of this Agreement.


 


(e)           Succession and
Assignment.  This Agreement shall be
binding upon and inure to the benefit of the Parties named in this Agreement
and their respective successors and permitted assigns. No Party may assign either
this Agreement or any of its rights, interests, or obligations under this
Agreement without the prior written approval of Buyer and Sellers. A reference
to a Party to this Agreement or another agreement or document includes the
Party’s successors and assigns.


 


(f)            Counterparts.  This Agreement may be executed in one or more
counterparts (including by means of facsimile), each of which shall be deemed
an original but all of which together will constitute one and the same
instrument.


 


(g)           Headings.  The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.


 


(h)           Notices.  All notices, requests, demands, claims, and
other communications under this Agreement shall be in writing. Any notice,
request, demand, claim, or other communication under this Agreement shall be
deemed duly given if (and then two (2) Business Days after) it is sent by
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:


 


50





















 


If to the
Company:


 


ScissorTail Energy, LLC

624 South Boston, Suite 800 

Tulsa, Oklahoma 74119-1239


Facsimile: 
(918) 587-2990


Attention: 
John A. Raber


 


With copies to:


 


Bartlit Beck Herman Palenchar &
Scott LLP

1899 Wynkoop, Suite 800

Denver, Colorado 80202 

Facsimile:  (303) 592-3140

Attention:  James L. Palenchar


 


If to Sellers:


 


ScissorTail Holdings, LLC 

1600 Broadway, Suite 2300

Denver, Colorado 80202-4923

Facsimile: (303) 837-9089

Attention: Jay A. Precourt


 


Hamilton ScissorTail LLC 

1560 Broadway, Suite 2200 

Denver, Colorado 80202

Facsimile: (303) 863-3006 

Attention: Frederic C. Hamilton


 


With copies to:


 


Bartlit Beck Herman Palenchar &
Scott LLP

1899 Wynkoop, Suite 800 

Denver, Colorado 80202 

Facsimile: (303) 592-3140 

Attention: James L. Palenchar


 


ScissorTail Holdings, LLC 

1600 Broadway, Suite 2300 

Denver, Colorado 80202-4923

Facsimile: (303) 837-9089 

Attention: John E. Elgin


 


 


51





















 


If to Buyer
Parent:


 


Copano Energy, L.L.C.

2727 Allen Parkway, Suite 1200


Houston, Texas 77019

Facsimile: (713) 621-9545

Attention:  Ron W. Bopp


 


With copies to:


 


Vinson & Elkins, L.L.P.


2300 First City Tower


1001 Fannin Street


Houston, Texas 77002-6760


Facsimile: 
(713) 615-5861


Attention: 
David P. Oelman


 


If to Buyer:


 


Copano Energy/Rocky Mountains and
Mid-Continent, L.L.C. 

2727 Allen Parkway, Suite 1200


Houston, Texas 77019

Facsimile: (713) 621-9545

Attention:  Ron W. Bopp


 


With copies to:


 


Vinson & Elkins, L.L.P.


2300 First City Tower


1001 Fannin Street


Houston, Texas 77002-6760


Facsimile: 
(713) 615-5861


Attention: 
David P. Oelman


 


Any Party may send any notice, request,
demand, claim, or other communication under this Agreement to the intended
recipient at the address set forth above using any other means (including
personal delivery, expedited courier, messenger service, telecopy, ordinary
mail, or electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any Party may change the
address to which notices, requests, demands, claims, and other communications
under this Agreement are to be delivered by giving the other Parties notice in
the manner set forth in this Agreement.


 


(i)            Governing
Law.  This Agreement shall be
governed by and construed in accordance with the domestic laws of the State of
Delaware without giving effect to any choice or conflict of law provision or rule (whether
of the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.


 


52





















 


(j)            Arbitration.  Any dispute, controversy or claim arising out
of or relating to this Agreement (a “Dispute”) (excluding any dispute or
disagreement among the Parties concerning the Working Capital True Up, which
shall be resolved pursuant to the provisions of §2(c)), shall be settled by
binding arbitration in accordance with the commercial arbitration rules of
the American Arbitration Association.  
Any such Dispute shall be arbitrated on an individual basis, and shall
not be consolidated in any arbitration with any dispute, claim or controversy
of any other Party.  The arbitration
shall be conducted in Denver, Colorado, and any court having jurisdiction
thereof may immediately issue judgment on the arbitration award. The Parties
agree that the arbitration provided for in this §10(j) shall be the exclusive
means to resolve all Disputes and the arbitrator shall be empowered to grant
specific performance or other equitable remedies to a Party.


 


(k)           Amendments and Waivers.  No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Company, Buyer and Sellers. No waiver by any Party of any provision of this
Agreement or any default, misrepresentation, or breach of warranty or covenant
under this Agreement, whether intentional or not, shall be valid unless the
same shall be in writing and signed by the Party making such waiver, nor shall
such waiver be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant under this Agreement or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.


 


(l)            Severability.  Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions of
this Agreement or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.


 


(m)          Expenses.  Except as otherwise provided in this §10(m)
or in §2(c), Buyer and each Seller will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated by this Agreement. All transfer, documentary,
sales, use, stamp, registration and other such Taxes, and all conveyance fees,
recording charges and other similar fees and charges (including any penalties
and interest)  incurred
in connection with the consummation of the transactions contemplated by this
Agreement shall be paid by Buyer when due, and Buyer shall, at its own expense,
file all necessary Tax Returns and other documentation with respect to all such
Taxes, fees and charges, and, if required by applicable Law, the Parties will,
and will cause their Affiliates to, join in the execution of any such Tax
Returns and other documentation.


 


(n)           Buyer Parent
Guaranty.


 


Buyer Parent
irrevocably and unconditionally guarantees to each Seller (the “Guaranty”) the
full and punctual performance and compliance by Buyer with each and every
covenant, indemnity, term and condition to be performed or complied with by
Buyer under this Agreement, the Confidentiality Agreement and the Escrow
Agreement.  The Guaranty expressed in
this §10(n) is an absolute, present, primary and continuing guaranty of
performance and compliance. Buyer Parent acknowledges and agrees that its
liability under the Guaranty is joint and several with Buyer and, upon any
default by Buyer, Sellers shall not be obligated to first


 


53





















 


attempt enforcement against Buyer. 
Buyer Parent waives any and all defenses to enforcement of the Guaranty,
now existing or hereafter arising, which may be available to guarantors,
sureties and other secondary parties at law or in equity.  Buyer Parent agrees to pay all reasonable
costs and expenses, including reasonable attorney fees and related costs,
incurred by Sellers or any Affiliates in enforcing the Guaranty.


 


(o)           Individual
Joinder.  Jay A. Precourt joins as a signatory to this
Agreement solely and exclusively with respect to the covenants set forth in §6(f),
(i) and (j) and for no other purpose and Frederic C. Hamilton joins as a
signatory to this Agreement solely and exclusively with respect to the
covenants set forth in §6(f) and (i) and for no other purpose


 


(p)           Construction.  The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. All references in this Agreement to
articles, sections or subdivisions thereof shall refer to the corresponding
article, section or subdivision thereof of this Agreement unless specific
reference is made to such articles, sections, or subdivisions of another
document or instrument. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word “including”
means including without limitation.


 


(q)           Incorporation of
Exhibits, Annexes, and Schedules.  The Exhibits, Annexes, and Schedules
identified in this Agreement are incorporated in this Agreement by reference
and made a part of this Agreement.


 


(r)            Bold and/or
Capitalized Letters.  THE PARTIES AGREE THAT THE
BOLD AND/OR CAPITALIZED LETTERS IN THIS AGREEMENT CONSTITUTE CONSPICUOUS
LEGENDS.


 


[Signature page follows.]


 


54





















 


IN WITNESS
WHEREOF, the Parties hereto have executed this Agreement as of the date first
above written.


 


	
   

  	
  THE
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  SCISSORTAIL
  ENERGY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
  COPANO
  ENERGY/ROCKY MOUNTAINS AND

  
	
   

  	
  MID-CONTINENT,
  L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BUYER
  PARENT:

  
	
   

  	
   

  
	
   

  	
  COPANO
  ENERGY, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SELLERS:

  
	
   

  	
   

  
	
   

  	
  HAMILTON
  SCISSORTAIL LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SCISSORTAIL
  HOLDINGS, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 





















 


	
   

  	
  Joining as
  signatory solely and

  exclusively with respect to the covenants

  set forth in §6(f),(i) and (j) and for no

  other purpose:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Jay A. Precourt

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Joining as
  signatory solely and

  exclusively with respect to the covenants

  set forth in §6(f) and (i) and for no other

  purpose:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Frederic C.
  Hamilton

  



 


2