**Exhibit 10.26**

 

**Execution Version**

 

 

**MEMBERSHIPINTEREST PURCHASE AGREEMENT**

 

**byand among**

 

**SCISSORTAILENERGY, LLC**

 

**HAMILTONSCISSORTAIL LLC,**

 

**SCISSORTAILHOLDINGS, LLC,**

 

**JAYA. PRECOURT,**

 

**FREDERICC. HAMILTON,**

 

**COPANOENERGY, L.L.C.**

 

**and**

 

**COPANOENERGY/ROCKY MOUNTAINS AND MID-CONTINENT, L.L.C.**

 

**datedas of**

 

**June 20,2005**

 

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**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                                                    |   |

 

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|      |   | (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                        |   |

 

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| **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** | ** ** |

 

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**MEMBERSHIP INTEREST PURCHASE AGREEMENT**

 

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

 

Sellers in theaggregate own 100% of the outstanding membership interests (the “MembershipInterests”) of the Company.

 

This Agreementcontemplates a transaction in which Buyer will purchase from Sellers, andSellers will sell to Buyer, the Membership Interests of the Company in returnfor cash.

 

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

 

**§1.**                               Definitions.

 

“AccreditedInvestor” has the meaning set forth in Regulation D promulgated under theSecurities Act.

 

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

 

“AdverseConsequences” means all Proceedings, charges, complaints, claims, demands,injunctions, judgments, orders, decrees, rulings, damages, remedialobligations, dues, penalties, fines, costs, reasonable amounts paid insettlement, 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 regulationspromulgated under the Securities Exchange Act of 1934.

 

“AllocablePortion” means with respect to the share of any Seller in a particularamount that fraction equal to 75% as to Holdings LLC and 25% as to HamiltonLLC.

 

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

 

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“Assets”means all of the Company’s right, title and interest in and to all of theassets 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 appurtenantsthereto, (b) tangible personal property (such as machinery, equipment,linefill, inventories of raw materials and supplies, manufactured and purchasedparts, goods in process and finished goods, furniture, automobiles, pickup andother 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 rightsthereunder, remedies against infringements thereof, and rights to protection ofinterests therein under the laws of all jurisdictions, (d) leases,subleases, and rights thereunder, (e) agreements, contracts, indentures,mortgages, instruments, guaranties, other similar arrangements, and rightsthereunder, (f) accounts, notes, and other receivables, (g) securities,(h) claims, deposits, prepayments, refunds, causes of action, choses inaction, 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 strategicplans and other printed or written materials, and (k) rights in and withrespect to the assets associated with its Employee Benefit Plans, but excludingthe membership interests in the Excluded Subsidiary.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Change ofControl Agreements” shall mean the following agreements:  (i) Long Term Profits ParticipationAgreement, dated February 17, 2005, by and between the Company and SharonRobinson, (ii) Long Term Profits Participation Agreement, dated March 2,2005, by and between the Company and John Raber, (iii) Long Term ProfitsParticipation Agreement, dated February 17, 2005, by and between theCompany and Bruce Roderick, (iv) Long Term Profits ParticipationAgreement, dated February 22, 2005, by and between the Company and LeeFiegener, (v) Long Term Profits Participation Agreement, dated February 17,2005, by and between the Company and Tom Coleman and (vi) Change ofControl Agreement, dated June 8, 2005, by and between the Company and JohnE. Elgin.

 

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“Claim forIndemnification” means a written notice by Buyer or Sellers to the otherasserting 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 ageneral description of the Adverse Consequences that the Indemnified Party maysuffer, with an estimate of the extent of the dollar amount of AdverseConsequences.

 

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

 

“ClosingDate” 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.

 

“ConfidentialInformation” means any information concerning the business and affairs ofCompany that is not already generally available to the public.

 

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

 

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

 

“CreditFacility” means the Amended and Restated Loan and Security Agreement datedas of May 30, 2003, as amended, among the Company, the lenders namedtherein and Bank of America, N.A. as agent for such lenders.

 

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

 

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

 

“DisclosureSchedule” has the meaning set forth in §4.

 

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

 

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“EmployeeBenefit Plan” means any “employee benefit plan” (as such term is defined inERISA §3(3)) and any other material employee benefit compensation plan, programor arrangement.

 

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

 

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

 

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

 

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

 

“EscrowAgent” means JP Morgan Chase Bank, or such other escrow agent mutuallyagreeable to Buyer and Sellers, as escrow agent pursuant to the EscrowAgreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“GovernmentalAuthorities” means (a) the United States of America or any state orpolitical subdivision thereof within the United States of America and (b) anycourt or any governmental or administrative department, commission, board,bureau or agency of the United States of America or of any state or politicalsubdivision thereof within the United States of America.

 

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

 

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

 

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

 

“HazardousMaterials” means: (a) any chemicals, materials or substances definedor included in the definition of “hazardous substance,” “hazardous material,” “toxicsubstance,” “solid waste,” “pollutant,” “contaminant,” or words of similarimport, under any applicable Environmental Law and (b) radioactivematerials (other than naturally occurring radioactive materials), friableasbestos, mercury, lead based paints, polychlorinated biphenyls, and any wasteor spilled petroleum (including, without limitation, crude oil or any factionthereof), petroleum products, natural gas liquids, or natural gas condensate(but excluding petroleum, petroleum products, natural gas liquids, or naturalgas condensate that has not been Released).

 

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

 

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

 

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

 

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

 

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

 

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

 

“IntellectualProperty” means (a) all inventions (whether patentable or unpatentableand whether or not reduced to practice), all improvements thereto, and allpatents, patent applications, and patent disclosures, together with allreissuances, continuations, continuations-in-part, revisions, extensions, andreexaminations 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 associatedtherewith, and all

 

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

 

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

 

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

 

“Knowledgeof either Seller” means actual knowledge without independent investigationof 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 GovernmentalAuthority.

 

“Leased RealProperty” means all leasehold or subleasehold estates and other rights touse or occupy any land, buildings, structures, improvements, fixtures, or otherinterest 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 holdsany Leased Real Property.

 

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

 

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

 

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

 

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

 

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anyadverse change, event, development, or effect arising from or relating to (1) generalbusiness or economic conditions, (2) national or international politicalor social conditions, including the engagement or continuation by the United Statesin hostilities, whether or not pursuant to the declaration of a nationalemergency or war, or the occurrence of any military or terrorist attack uponthe United States, or any of its territories, possessions, or diplomatic orconsular offices or upon any military installation, equipment or personnel ofthe 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 generallyaccepted accounting principles (5) changes in Laws or other bindingdirectives issued by any Governmental Authority, or (6) the taking of anyaction required by this Agreement; provided that none of the changes, events,developments or effects described in clauses (1) through (5) specificallyrelate to or have the effect of specifically relating to or having a materiallydisproportionate effect on the Company relative to most other industryparticipants in the midstream natural gas industry and (b) any adversechange in or effect on the business of the Company arising after the date ofthis Agreement that is cured by a Seller before the earlier of (1) theClosing Date and (2) the date on which this Agreement is terminatedpursuant to §9 of this Agreement.  Forpurposes of this Agreement, (i) any reference to “Material Adverse Effect”in any representation or warranty contained in §4 of this Agreement shall bedeemed to include any event, circumstance or occurrence or change that has orcould reasonably be expected to result in Adverse Consequences of at least$2,000,000 and (ii) any reference to “material” in respect to anyrepresentation or warranty contained in §4 of this Agreement shall be deemed toinclude any event, circumstance, occurrence or change that has or couldreasonably be expected to result in Adverse Consequences of at least $500,000.

 

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

 

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

 

“Net WorkingCapital” means an amount (which may be a positive or negative number) equalto the difference between the Company’s (a) Current Assets and OtherAssets and (b) Current Liabilities, indebtedness in respect of borrowedmoney and capital leases as recorded in accordance with GAAP and not otherwiseincluded in Current Liabilities, and as determined in accordance with §1(d) ofthe Disclosure Schedule.

 

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

 

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

 

“OtherAssets” means the sum of (a) the costs incurred prior to Closing forcapital 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 andexcluding any capital improvements made on behalf of the Excluded Subsidiary),plus (b) those assets denominated as such on the Company’s regularlyprepared balance sheets in accordance with GAAP to the extent not included inCurrent Assets.

 

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

 

“OxleyReceivable” means the imbalance receivable described in the third paragraphof §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 similarrights and privileges granted by a Governmental Authority.

 

“PermittedEncumbrances” means: (a) real estate Taxes, assessments and otherlevies, fees, or charges imposed by a Governmental Authority that are (i) notdue and payable as of the Closing Date or (ii) being contested in goodfaith by appropriate Proceedings; (b) any Lien consisting of (i) rightsreserved to or vested in any Governmental Authority to control or regulate anyAsset of the Company or to limit the use of such Asset in any manner which doesnot materially impair the use of such Asset for the purposes for which it isheld by the Company or (ii) obligations or duties to any GovernmentalAuthority with respect to any Permit relating to any period after Closing andthe rights reserved or vested in any Governmental Authority to terminate anysuch Permit or to condemn or expropriate any property; (c) mechanics Liensand similar Liens for labor, materials, or supplies provided with respect toOwned Real Property incurred in the Ordinary Course of Business for amountsthat are (i) not delinquent and would not, in the aggregate, have aMaterial Adverse Effect or (ii) being contested in good faith byappropriate Proceedings; (d) zoning, building codes, and other land useLaws regulating the use or occupancy of Owned Real Property or the activitiesconducted thereon that are imposed by any Governmental Authority havingjurisdiction over such Owned Real Property; (e) any Lien for financingsecured by Assets that is an obligation of the Company that will not be paidoff at Closing and is listed on §1(e) of the Disclosure Schedule; and (f) easements,servitudes, rights-of-way, covenants, conditions, restrictions, and other similarmatters affecting title to Owned Real Property and other title defects that donot or would not materially impair the use or occupancy of such Owned RealProperty 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, anunincorporated organization, any other business entity or a GovernmentalAuthority (including any department, agency, or political subdivision thereof).

 

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

 

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

 

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

 

“PurchasePrice” 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 Materialsinto or upon the environment (including the abandonment or discarding ofbarrels, containers, and other closed receptacles containing any HazardousMaterial and which are not empty as defined by 40 C.F.R. §261.7(b)).

 

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

 

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

 

“SouthernDome 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 ofOklahoma.

 

“Subsidiary”means, with respect to any Person, any corporation, limited liability company,partnership, association, or other business entity of which (i) if acorporation, a majority of the total voting power of shares of stock entitled(without regard to the occurrence of any contingency) to vote in the electionof 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 Subsidiariesof that Person or a combination thereof or (ii) if a limited liabilitycompany, partnership, association, or other business entity (other than acorporation), a majority of the partnership or other similar ownershipinterests thereof is at the time owned or controlled, directly or indirectly,by that Person or one or more Subsidiaries of that Person or a combinationthereof and for this purpose, a Person or Persons own a majority ownershipinterest in such a business entity (other than a corporation) if such Person orPersons shall be allocated a majority of such business entity’s gains or lossesor shall be or control any managing director or general partner of suchbusiness entity (other than a corporation). The term “Subsidiary” shall includeall Subsidiaries of such Subsidiary.

 

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

 

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

 

“Tax” or“Taxes” means any federal, state, local, or foreign income, grossreceipts, 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-onminimum, estimated, or other tax of any kind whatsoever, including anyinterest, penalty, or addition thereto, whether disputed or not.

 

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

 

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

 

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

 

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

 

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

 

**§2.**                               Purchase and Sale of MembershipInterests.

 

(a)                                 Basic Transaction.  On the terms and subject to the conditions ofthis Agreement and at Closing, Buyer agrees to purchase from each Seller, andeach Seller severally agrees to sell to Buyer, the following MembershipInterests, free and clear of all Liens, for the consideration specified belowin 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 ascalculated in §2(c)(i) (together with the Holdings Base Amount, the “HoldingsPurchase Price”), and (y) to Hamilton LLC (i) $125,000,000 (the “HamiltonBase Amount”) plus (ii) its Allocable Portion of the Estimated NetWorking Capital as calculated in §2(c)(i) (together with the Hamilton BaseAmount, the “Hamilton Purchase Price”, and the Hamilton Purchase Pricetogether with the Holdings Purchase Price, the “Purchase Price”) bydelivery of cash payable by wire transfer in accordance with the instructionsprovided by Sellers; provided, however, that in lieu of delivery to Sellers,Buyer shall deposit (A) Fifteen Million Dollars ($15,000,000) of theHoldings Purchase Price and Five Million Dollars ($5,000,000) of the HamiltonPurchase Price into escrow at the Closing (such amounts, in the aggregate, the “EscrowAmount”) on the terms and subject to the conditions of the Escrow Agreementand (B) such amount, if any, required to be deposited in the Pre-ClosingBuyer Escrow Fund pursuant to §5(e)(v) or §5(e)(vi) to be held on theterms 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, afterClosing by the aggregate of the Working Capital True Up pursuant to §2(c), andany increase or decrease shall be allocated among Sellers in accordance withtheir Allocable Portions.

 

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(c)                                  NetWorking Capital.

 

(i)                                     At least five (5) BusinessDays prior to Closing, Sellers will cause the Company to deliver to Buyer inwriting a good faith determination of the estimated Net Working Capital as ofthe Closing Date (the “Estimated Net Working Capital”), together withsuch supporting documentation and other data as is reasonably requested byBuyer.  The Estimated Net Working Capitalshall reflect any distributions to be declared by the Company to Sellers priorto the Closing.

 

(ii)                                  As soon as reasonablypracticable, but in any event no later than ninety (90)****days following Closing, Buyer shall causethe Company to prepare and deliver to Buyer and Sellers a written statement(the “Actual Working Capital Statement”), prepared by the ChiefFinancial Officer of the Company, certifying the actual amount of Net WorkingCapital on the Closing Date, upon which a payment (the “Working Capital TrueUp”) will be based, and setting forth the calculation of such amount. TheWorking Capital True Up may be a positive or negative number and shall be anamount equal to (A) the Company’s actual amount of Net Working Capital onthe Closing Date, less (B) the Estimated Net Working Capital. If,within fifteen (15) Business Days following delivery of the Actual WorkingCapital Statement to Buyer and Sellers, Sellers shall not have given Buyernotice of Sellers’ objection to the computation of the Working Capital True Up(which notice shall contain a statement of the basis of such objection), thenthe amount of Working Capital True Up at the Closing Date will be final andbinding upon the Parties, absent manifest error. If Sellers give notice toBuyer of Sellers’ objection, and Buyer and Sellers are unable to resolve theissues in dispute within thirty (30) days after delivery of such notice ofobjection, 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 independentcertified public accountants that is selected by Buyer and Sellers (the “NeutralAuditor”). The Neutral Auditor shall be engaged by the Company withinfifteen (15) days after the expiration of the thirty (30) day period set forthin the preceding sentence. The Neutral Auditor shall make such review andexamination of the relevant facts and documents as the Neutral Auditor deemsappropriate (including inquiry of such experts in the gas gathering andprocessing industry as it deems necessary and advisable), and shall permit eachof Buyer and Sellers to make a written presentation of their respectivepositions; *provided, however*,that the Neutral Auditor shall require all facts, documents and writtenpresentations from Buyer and Sellers jointly to be completely submitted withinthirty (30) days after the Neutral Auditor has been engaged. Within thirty (30)days after submission of such facts, documents and written presentations, theNeutral Auditor shall resolve all disputed items in writing and shall prepareand deliver its decision, which shall be final and binding upon the Partieswithout further recourse or collateral attack; provided that the NeutralAuditor shall not assign a value to any particular disputed item greater thanthe greatest value for such item claimed by Buyer or Sellers or less that thesmallest value for such item claimed by Buyer or Sellers.  All costs of the dispute resolution processcontemplated by this §2(c)(ii) (including, without limitation, the NeutralAuditor’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 suchprocess, as determined by the Neutral Auditor, which shall be determined bycomparing (x) the position asserted by each Party on all disputed matters takentogether to (y) the final decision of the Neutral Auditor on all disputedmatters taken together. If the Neutral Auditor determines that Sellers shallbear such costs each Seller shall bear its Allocable Portion. For purposes ofthe second preceding sentence: the

 

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

 

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

 

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

 

(d)                                 Closing.  The closing of the transactions contemplatedby 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 laterto occur of August 1, 2005 (with an effective time of 12:01 a.m.) andthe last Business Day of the month during which the satisfaction or waiver ofall conditions to the obligations of the Parties to consummate the transactionscontemplated by this Agreement (other than conditions with respect to actionsthe respective Parties are required to take at Closing itself) or such otherdate as Buyer and Sellers may mutually determine (the “Closing Date”).  Notwithstanding the foregoing, (a) in noevent shall Buyer be obligated to purchase any Membership Interests pursuant tothis Agreement if either of Sellers defaults in its obligation to sell itsMembership Interests to Buyer and (b) if Buyer purchases any MembershipInterests pursuant to this Agreement, Buyer shall purchase all of theMembership Interests of Sellers pursuant to this Agreement.

 

(e)                                  Deliveriesat Closing.  AtClosing, (i) each Seller will deliver to Buyer the various certificates,instruments, and documents referred to in §7(a), (ii) Buyer will deliverto each Seller the various certificates, instruments, and documents referred toin §7(b), (iii) each Seller will deliver to Buyer an instrument ofassignment transferring to Buyer all of Seller’s right, title and interest inand to the percentage of Membership Interests to be sold by such Seller toBuyer as set forth in §2(a), (iv) Buyer will deliver to each Seller theconsideration specified in §2(b), (v) Buyer will deliver the Escrow Amountto the Escrow Agent to hold pursuant to the Escrow Agreement, (vi) eachSeller will deliver to Buyer a certificate of good standing, existence orsimilar document with respect to such Seller and the Company issued by theappropriate Governmental Authority of the jurisdiction of formation as of adate not more than five (5) days prior to the Closing Date, (v) Buyerwill deliver to such Seller a certificate of good standing, existence orsimilar document with respect to Buyer Parent and Buyer issued by theappropriate Governmental Authority of the jurisdiction of formation as of adate not more than five (5) days prior to the Closing Date, (vi) Sellerswill deliver the written resignations of Jay A. Precourt, John E. Elgin andeach other manager and director of the Company designated in writing by Buyerat least five Business Days prior to the Closing Date, such resignations to beeffective

 

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

 

(f)                                   Purchase Price Allocation.The Purchase Price shall be allocated among the Assets in accordance with theestimated allocation schedule (the “Estimated Allocation Schedule”)set forth on §2(f) of the Disclosure Schedule. After Closing, Sellers andBuyer shall jointly prepare a final allocation schedule (the “FinalAllocation Schedule”) that will be mutually acceptable to the Parties.  Should Sellers and Buyer fail to mutuallyagree upon a Final Allocation Schedule with forty-five (45) days afterClosing, the issue shall be subject to the Dispute resolution provisions of Section 10(j).  The Parties agree that they will not take norwill they permit any Affiliate to take, for income tax purposes, any positioninconsistent with the Final Allocation Schedule. Upon resolution of any Disputes,or in the event there are no Disputes, the Final Allocation Schedule shallbe signed by the Parties.

 

**§3.**                               Representations and WarrantiesConcerning Transaction.

 

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

 

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

 

(ii)                                  Authorization ofTransaction.  Seller has requisitelimited liability company power and authority to execute and deliver thisAgreement and to perform its obligations under this Agreement. This Agreementhas been duly executed by each Seller and constitutes the valid and legallybinding obligation of Seller, enforceable in accordance with its terms andconditions, subject to applicable bankruptcy, insolvency, reorganization,moratorium and other similar Laws affecting creditor’s rights generally andgeneral principals of equity. Seller need not give any notice to, make anyfiling with, or obtain any authorization, consent, or approval of anyGovernmental Authority in order to consummate the transactions contemplated bythis Agreement or to effect the legality, validity, binding effect orenforceability of this Agreement.  Theexecution, delivery and performance of this Agreement and all other agreementscontemplated by this Agreement have been duly authorized by Seller.

 

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

 

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provision of its certificate of formation, limited liability companyagreement, or other governing documents, (B) conflict with, result in abreach of, constitute a default (or an event which with the giving of notice orlapse of time, or both, would become a default) under, result in theacceleration 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 aparty or by which it is bound or to which any of its assets is subject, or (C) resultin the imposition or creation of a Lien upon or with respect to the MembershipInterests owned by such Seller.

 

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

 

(v)                                 Membership Interests.  Seller holds of record and owns beneficiallythe 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 theSecurities Act, state securities Laws and the Company’s limited liabilitycompany agreement (the “LLC Agreement”)), Taxes, Liens, options,warrants, purchase rights, contracts, commitments, equities, claims, anddemands. At Closing, Seller will transfer and deliver to Buyer good and validtitle to the percentage of Membership Interests set forth in §2(b), free andclear of any restrictions on transfer (other than restrictions under theSecurities 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. TheMembership Interests are duly authorized, validly issued and fully paid andnon-assessable. Seller is not a party to any option, warrant, purchase right,or other contract or commitment (other than this Agreement) that could requireSeller to sell, transfer, or otherwise dispose of any Membership Interests.Seller is not a party to any voting trust, proxy, or other agreement orunderstanding with respect to the voting of any Membership Interests of theCompany.

 

(b)                                 Buyer’sRepresentations and Warranties.  Buyer represents and warrants to the Companyand each Seller that the statements contained in this §3(b) are correctand complete as of the date of this Agreement and will be correct and completeas of the Closing Date (as though made then and as though the Closing Date weresubstituted for the date of this Agreement throughout this §3(b)), except asset forth in Annex II attached hereto.

 

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

 

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

 

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notice to, make any filing with, or obtain any authorization, consent,or approval of any Governmental Authority in order to consummate thetransactions 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 agreementscontemplated by this Agreement have been duly authorized by Buyer Parent andBuyer.

 

(iii)                               Non-contravention.  Neither the execution and delivery of thisAgreement, nor the consummation of the transactions contemplated by thisAgreement, will (A) violate any Law or other restriction of anyGovernmental Authority to which Buyer Parent or Buyer is subject or anyprovision of their certificates of formation, limited liability companyagreements or other governing documents or (B) conflict with, result in abreach of, constitute a default (or an event which with the giving of notice orlapse of time, or both, would become a default) under, result in theacceleration 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 BuyerParent or Buyer is a party or by which it is bound or to which any of itsassets is subject.

 

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

 

(v)                                 Investment.  Buyer is acquiring Membership Interests forits own account for investment and not with a view to any distribution thereofwithin the meaning of the Securities Act. Buyer acknowledges that theMembership Interests have not been registered under the Securities Act or thesecurities Laws of any state and neither Sellers nor the Company has anyobligation to register the Membership Interests. Without such registration, theMembership Interests may not be sold, pledged, hypothecated or otherwisetransferred unless it is determined that registration is not required. Buyerhas received certain information concerning the Company from the Company andSellers and Buyer has had the opportunity to obtain additional information asdesired. Buyer is an Accredited Investor and Buyer itself, or through itsofficers, employees or agents, has sufficient knowledge and experience infinancial and business matters to be capable of evaluating the merits and risksof an investment such as an investment in the Membership Interests. Buyer,either alone or through its officers, employees or agents, has evaluated themerits and risks of the investment in the Membership Interests and is able tobear the economic risk and lack of liquidity inherent in holding the MembershipInterests.

 

(vi)                              Available Funds.  A copy of the written commitment from Bank ofAmerica, N.A. to provide financing in an amount of not less than $655 millionis attached hereto as Exhibit B.** **At the Closing, Buyer will havesufficient cash resources to enable it to make payment in immediately availablefunds of the Purchase Price when due and any other amounts to be paid by itunder this Agreement or as a result of the transactions contemplated by thisAgreement, including, without limitation, the payment in full of indebtednessin respect of money borrowed by the Company required to be retired as a resultof the Closing.

 

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

 

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

 

**§4.****                               Representationsand****Warranties of the Company**.  The Company represents and warrants to Buyerthat the statements contained in this §4 are correct and complete as of thedate 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 thedate of this Agreement throughout this §4), except as set forth in thedisclosure schedule delivered to Buyer on the date of this Agreementarranged in sections corresponding to the lettered and numbered sectionscontained in this Agreement (the “Disclosure Schedule”), whichexceptions contained in the Disclosure Schedule shall be deemed to havebeen disclosed for purposes of another section or sections of thisAgreement if the relevance or applicability of such disclosure to the subjectmatter of such other section or sections is reasonably apparent on theface of such disclosure.

 

(a)                                 Organization,Qualification, and Power. The Company is a limited liability company duly organized, validlyexisting, and in good standing under the Laws of the State of Delaware. TheCompany is duly authorized to own, lease and operate its properties and conductbusiness and is in good standing under the Laws of each jurisdiction where suchqualification is required, except where the lack of such qualification wouldnot, individually or in the aggregate, have a Material Adverse Effect. The Companyhas requisite limited liability company power and authority to carry on thebusiness in which it is engaged and to own and use the properties owned andused by it.  §4(a) of the DisclosureSchedule lists the managers and officers of the Company.  There are (i) no outstanding limitedliability company interests or other voting securities of the Company otherthan the Membership Interests, (ii) no securities of the Companyconvertible into or exchangeable for limited liability company interests orother voting securities of the Company and (iii) no options or otherrights to acquire, and no obligations of the Company to issue or sell,

 

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any limited liability company interests or other voting securities ofthe Company or any securities convertible into or exchangeable for such limitedliability company interests.  There areno obligations of the Company to repurchase, redeem, or otherwise acquire anyMembership 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 thisAgreement, nor the consummation of the transactions contemplated by thisAgreement, will (i) violate any Law or other restriction of anyGovernmental Authority to which Company is subject or any provision of thecertificate of formation or LLC Agreement of the Company or (ii) conflictwith, result in a breach of, constitute a default (or an event which with thegiving 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 anyagreement, contract, lease, license, instrument, or other arrangement to whichCompany is a party or by which it is bound or to which any of the Assets issubject (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 setforth in §4(b) of the Disclosure Schedule, the Company does not need togive any notice to, make any filing with, or obtain any authorization, consent,or approval of any Governmental Authority in order for the Parties toconsummate the transactions contemplated by this Agreement.

 

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

 

(d)                                 TangibleAssets.  The Company (i) ownsor leases all tangible Assets necessary for the conduct of its business aspresently conducted free and clear of all Liens (except for PermittedEncumbrances) and (ii) has good and valid****titleto all tangible Assets reflected on the balance sheet included in the UnauditedFinancial 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 thisAgreement in the Ordinary Course of Business and (y) defects in title that arenot material) free and clear of all Liens (except for Permitted Encumbrances).The Company is currently operating its tangible Assets in material compliancewith applicable Laws. Each such tangible Asset is free from material defects,has been maintained in accordance with normal gas gathering and processingindustry practice, is in satisfactory operating condition and repair (subjectto normal wear and tear), and is suitable for the purposes for which itpresently is used.

 

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

 

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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 Care the following financial statements (collectively the “FinancialStatements”): (i) audited balance sheets and statements of income(loss), comprehensive income (loss) and members’ equity, and statements of cashflow as of and for the fiscal years ended December 31, 2002, 2003 and 2004for the Company (the “Audited Financial Statements”); and (ii) unauditedbalance sheets, statements of earnings and statements of cash flow each ofwhich shall exclude any and all assets, liabilities, income and expenseassociated 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 thefour months ended April 30, 2005 for the Company. The Financial Statements(including the notes thereto) have been prepared in accordance with GAAPapplied on a consistent basis throughout the periods covered thereby andpresent fairly the financial condition of the Company as of such dates and theresults of operations of the Company for such periods; provided, however, thatthe Unaudited Financial Statements are subject to normal year-end adjustmentsand lack certain footnotes otherwise required by GAAP.  The Company does not have any off-balancesheet arrangements that have or are reasonably likely to have a current orfuture material effect on the financial condition, results of operations,liquidity, capital expenditures or capital resources of the Company.

 

(ii)                                  The Company has received nowritten notice from any Governmental Authority concerning noncompliance with,or deficiencies in, the Company’s financial reporting practices.  All material transactions have been properlyrecorded in the accounting records underlying the Financial Statements.  There are no significant deficiencies,including material weaknesses, in the design or operation of internal controlover the Company’s financial reporting. To the Knowledge of the Company, no member of the Company’s managementnor any other employee with a significant role in the Company’s internalcontrols has committed any act of fraud having a material effect on theFinancial Statements.

 

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

 

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

 

(g)                                  SubsequentEvents.  Except as set forth in §4(g) ofthe Disclosure Schedule since April 30, 2005, (i) there has notbeen any Material Adverse Change in the business, financial condition,operations, results of operations, assets, liabilities, obligations or futureprospects of the Company since April 30, 2005 and (ii) the businessof the Company has been conducted only

 

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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, orassigned any of its Assets, tangible or intangible, other than for a fair considerationin 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 theOrdinary Course of Business;

 

(iii)                               accelerated, terminated,modified, or cancelled any agreement, contract, lease, or license (or series ofrelated 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 itsAssets, tangible or intangible;

 

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

 

(vi)                              made any capital investment in,any loan to, or any acquisition (by merger, consolidation or acquisition ofstock 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 otherdebt security or created, incurred, assumed, or guaranteed any indebtedness forborrowed money or capitalized lease obligation either involving more than$250,000 singly or $1,000,000 in the aggregate other than advances and lettersof credit under the Credit Facility in accordance with its terms;

 

(viii)                        delayed or postponed the paymentof accounts payable and other Liabilities outside the Ordinary Course ofBusiness;

 

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

 

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

 

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

 

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

 

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

 

(xiv)                       made any loan to, or enteredinto or modified the terms of any other transaction or agreement with, any ofits managers, officers, employees, consultants, or Affiliates outside theOrdinary Course of Business;

 

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

 

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

 

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

 

(xviii)                 made any other change inemployment terms for any of its managers, officers, employees and consultantsoutside the Ordinary Course of Business;

 

(xix)                       made or pledged to make anycharitable or other capital contribution outside the Ordinary Course ofBusiness;

 

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

 

(xxi)                       made or changed any electionrelating to Taxes, settled any claim or assessment relating to Taxes orconsented to any claim or assessment relating to Taxes or any waiver of thestatute of limitations for any such claim or assessment;

 

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

 

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

 

(xxiv)                committed to do any of theforegoing.

 

(h)                                 LegalCompliance.  The Companyhas complied with all applicable Laws of Governmental Authorities, except wherethe failure to comply would not, individually or in the aggregate, have aMaterial Adverse Effect; the Company has not received any written communicationfrom any Governmental Authority or any other Person that alleges that thebusiness of the Company may not be in compliance in any material respect, ormay be subject to material liability, under any Law; and to the Knowledge ofthe Company, there are no investigations or reviews pending or threatened byany Governmental Authority relating to any

 

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alleged violation arising out of the operation of the business of theCompany.  Notwithstanding anything inthis Agreement to the contrary, the provisions of this §4(h) shall notrelate to or cover compliance with Laws related to Taxes, Employee BenefitPlans, employees, or Environmental Laws which are covered exclusively by §4(i),§4(o), §4(p) and §4(r), respectively.

 

(i)                                     TaxMatters. 

 

(i)                                     The Company has timely filed allTax Returns that it was required to file, and has paid all Taxes shown thereonas owing, except where the failure to file Tax Returns or to pay Taxes wouldnot have a Material Adverse Effect. All such Tax Returns when filed werecorrect and complete in all material respects.

 

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

 

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

 

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

 

(v)                                 There is no dispute or claimconcerning any Tax Liability of the Company either claimed or raised by anyauthority in writing or which, to the Knowledge of the Company, has beenasserted by any Governmental Authority.

 

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

 

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

 

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

 

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

 

(j)                                    RealProperty.

 

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

 

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

 

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

 

(C)                               there are no outstandingoptions, rights of first offer or rights of first refusal to purchase suchOwned Real Property or any portion thereof or interest therein;

 

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

 

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

 

(ii)                                  §4(j)(ii) of the DisclosureSchedule sets forth the address of each parcel of Leased Real Propertywhich is material to the business of the Company (“Material Leases”) anda true and complete list of all Material Leases for each such parcel of LeasedReal Property. The Company has made available to Buyer a true and complete copyof each Material Lease document. With respect to each of the Material Leaseslisted in §4(j)(ii) of the Disclosure Schedule and except for mattersthat would not, individually or in the aggregate, have a Material AdverseEffect:

 

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

 

(B)                               each such Material Lease willcontinue to be legal, valid, binding, enforceable, and in full force and effecton identical terms following the consummation of the transactions contemplatedby this Agreement;

 

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

 

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

 

(E)                                all facilities leased orsubleased under such Material Lease have received all approvals of GovernmentalAuthorities (including Permits) required in connection with the operationthereof and have been operated and maintained in accordance with applicableLaws; and

 

(F)                                 all facilities leased orsubleased under such Material Leases are supplied with utilities and otherservices necessary for the operation of such facilities, including electricity,water, telephone all of which services are adequate and are provided via publicroads or via appurtenant easements benefiting the parcel of Leased RealProperty.

 

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

 

(k)                                 IntellectualProperty.  Except as described in§4(k) of the Disclosure Schedule, the Company has not received any writtennotice of infringement, misappropriation or conflict with respect toIntellectual Property from any Person with respect to the ownership, use oroperation of the Company’s Assets or the conduct of the Company’s business. Tothe Knowledge of the Company, the ownership, use and operation of the Assets orthe conduct of the Company’s business have not infringed, misappropriated orotherwise 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 otherPerson.  The Company owns or has thevalid right to use pursuant to license, sublicense, agreement or permission allIntellectual Property necessary or desirable for the operation of the businessof the Company as presently conducted. In connection with the acquisition of the Membership Interests, Buyershall acquire any rights that Sellers, the Company and any of their respectiveAffiliates have to the name “ScissorTail” (or any derivation therefrom) or anytrademark, trade name or symbol related thereto.

 

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

 

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

 

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

 

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

 

(iii)                               any agreement concerning apartnership or joint venture;

 

(iv)                              any agreement (or group ofrelated agreements) under which it has created, incurred, assumed, orguaranteed any indebtedness for borrowed money, or any capitalized leaseobligation;

 

(v)                                 any agreement concerningconfidentiality or noncompetition;

 

(vi)                              any agreement with any ofSellers or their Affiliates;

 

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

 

(viii)                        any collective bargainingagreement;

 

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

 

(x)                                 any agreement under which it hasadvanced or loaned any amount to any of its managers, officers, employees andconsultants;

 

(xi)                              any agreement under which theconsequences of a default or termination could have a Material Adverse Effecton the business, financial condition, operations, assets, liabilities,obligations results of operations, assets, liabilities, obligations or futureprospects of the Company; or

 

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

 

The Company has made available to Buyer acorrect and complete copy of each written agreement listed in §4(l) of theDisclosure Schedule (as amended to date). With respect to each suchagreement: (A) the agreement is legal, valid, binding, enforceable, and infull force and effect; (B) the agreement will continue to be legal, valid,binding, enforceable, and in full force and effect on identical terms followingthe consummation of the transactions contemplated by this Agreement; (C) theCompany is not in breach or default, and no event has occurred which withnotice or lapse of time would constitute a breach or default by the Company, orpermit termination, modification, or acceleration, under the agreement; and (D) tothe Knowledge of the Company, no other party is in breach or default, and noevent has occurred which with notice or lapse of time would constitute a breachor default by such other party, or permit termination, modification oracceleration under the agreement other than in accordance with its terms norhas any other party repudiated any provision of the agreement.

 

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(m)                             Powersof Attorney.  There areno outstanding powers of attorney executed on behalf of Company.

 

(n)                                 Litigation.  There is no injunction, restraining order orProceeding pending against the Company that restrains or prohibits theconsummation of the transactions contemplated by this Agreement. Except for theProceedings identified on §4(n) of the Disclosure Schedule, there are nowritten claims, investigations or examinations pending, or to the Knowledge ofthe Company, threatened, against or affecting the Company, the MembershipInterests, the Assets or the Company’s ownership or operation of its Assets,before or by any Governmental Authority or any Person. Notwithstanding anythingin this Agreement to the contrary, the provisions of this §4(n) shall notrelate 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)                                 EmployeeBenefits.

 

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

 

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

 

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

 

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

 

(D)                               The Company has made availableto Buyer correct and complete copies of the plan documents, summary plandescriptions, and summaries of material modifications, the most recentdetermination letter received from the Internal Revenue Service, the mostrecent Form 5500 Annual Report, and all related trust arrangements,insurance contracts, and other funding agreements which implement each suchEmployee Benefit Plan.

 

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

 

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

 

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

 

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

 

(I)                                   § 4(o) of the Disclosure Schedule listseach agreement requiring the Company to make a payment or provide any otherform of compensation or benefit to any person performing services for theCompany upon the consummation of a sale of more than 50% of the Membership Interestsof 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 suchperson if such termination follows a Qualifying Sale.

 

(J)                                   No such Employee Benefit Planthat is an Employee Welfare Benefit Plan contains any provision which by itsterms would impose liability on the Company in the event of any amendment ortermination of such Employee Benefit Plan, except as to benefits accruedthereunder prior to such amendment or termination.

 

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

 

(L)                                The vacation policies of theCompany do not provide for carryover of vacation from one calendar year to thenext.

 

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

 

(A)          NoProceeding with respect to the administration or the investment of the Assetsof any such Employee Benefit Plan (other than routine claims for benefits) ispending or, to the Knowledge of the Company, threatened and, to the Knowledgeof the Company, no facts or circumstances exist that could give rise to anysuch Proceedings, except as would not, individually or in the aggregate, have aMaterial Adverse Effect.

 

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

 

(p)           Employees.

 

(i)            § 4(p) of the Disclosure Schedule identifies,as of the date of this Agreement, the following with respect to each employeeof the Company:  (A) the name, jobtitle, original hire date, service date, bonus, if any, paid for calendar years2003 and 2004, accrued and unused vacation as of May 31, 2005, and currentannual salary (or rate of pay) and other compensation (including, withoutlimitation, normal bonus, profit-sharing, pension benefits and othercompensation) payable to each such employee; and (B) all transactionsoutside of the Ordinary Course of Business of the Company between the Companyand any such employee since December 31, 2004, which transactions are nototherwise reflected in any of the contracts listed in § 4(l) of theDisclosure Schedule.

 

(ii)           Except as set forth on § 4(p) ofthe Disclosure Schedule or to the extent accrued as a current liability onthe 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 employeesof the Company have been paid in full to such employees prior to Closing.  The compensation and benefits (includingvacation benefits) paid or provided with respect to all employees of theCompany have been reflected in the Financial Statements for the periods coveredthereby.  The Company has complied withall applicable Laws of Governmental Authorities pertaining to employment andemployment practices, terms and conditions of employment, immigration wages,and hours, occupational health and safety, payment of unemployment benefits andsocial security contributions, withholding and other payroll taxes and workerscompensation, except where the failure to comply would not, individually or inthe aggregate, have a Material Adverse Effect.

 

(iii)          The Company is not a party to or boundby any collective bargaining agreement or any other contract with any laborunion, and no such agreement or contract is being negotiated. Within the pastthree (3) years, the Company has not experienced any strikes, workstoppages, slow downs, picketing or any other interference with work orproduction, grievances,

 

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claims of unfair labor practices, or othercollective bargaining disputes or concerted action by employees.  To the Knowledge of the Company, (A) theCompany has not committed any unfair labor practice, (B) there are noorganizational efforts presently being made or threatened by or on behalf ofany labor union with respect to employees of the Company, and (C) there isno pending, or threatened grievance, charge, complaint or other legal actionagainst the Company by the National Labor Relations Board or any comparableagency of any state of the United States.

 

(iv)          To the Knowledge of the Company, therelationships of the Company with its employees, as a group, are satisfactoryand there are no facts that would indicate that such employees will notcontinue in their employ following the Closing (other than any resignationsreferred to in §2(e)).  Except as listedon § 4(l) of the Disclosure Schedule, the Company is not currentlynegotiating, and does not have any outstanding offer with respect to, anyemployment, 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) noProceeding has been commenced with respect to the Company under any Lawsaffecting the employment relationship, (B) no Proceedings, charges, orcomplaints are threatened under any such Laws and (C) no facts orcircumstances exist which would give rise to any such Proceedings, charges,complaints, or claims.  The Company isnot subject to any settlement or consent decree with any present or formeremployee, employee representative or any Governmental Authority relating toclaims of discrimination or other claims in respect of employment practices andpolicies.  No Governmental Authority hasissued a judgment, order, decree or finding with respect to the labor andemployment practices (including practices relating to discrimination) of theCompany.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(vii)         (A) The Company has not been namedor, to the Knowledge of the Company, threatened to be named as a potentiallyresponsible 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 subjectto an existing or, to the Knowledge of the Company, threatened claim underCERCLA or any similar state Law; and (C) none of the Assets is subject toany Lien arising under Environmental Laws.

 

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

 

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

 

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

 

(s)            Certain BusinessRelationships with Company.  Except as set forth on §4(l) or §4(s) of theDisclosure Schedules, (i) neither Seller nor any of their respectiveofficers, directors, members or Affiliates (excluding the Company) has beeninvolved in any material business

 

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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) neitherSeller 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) allinsurance policies of the Company (including the amounts and types ofcoverage), (ii) each material claim under any insurance policy made by oron behalf of the Company during the past three years, which claim was denied bythe insurer and (iii) each application for insurance coverage made by oron behalf of the Company during the last three years that was rejected by theproposed insurer.  All such insurancepolicies are in full force and effect and all premiums due and payable on suchpolicies have been paid.  No notice ofcancellation of, or indication of an intention not to renew, any such insurancepolicy has been received by the Company other than in the Ordinary Course ofBusiness.

 

(u)           Governmental Regulation.  The Company is not subject to regulationunder the Public Utility Holding Company Act of 1935, the Federal Power Act,the Interstate Commerce Act, the Natural Gas Act, the Investment Company Act of1940 or any state public utilities laws.

 

(v)           Disclaimer of OtherRepresentations and Warranties.  **EXCEPT AS EXPRESSLY SET FORTH IN §3 AND THIS §4, NEITHER THE COMPANYNOR ANY SELLER MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAWOR IN EQUITY, IN RESPECT OF THE COMPANY, OR ANY OF ITS ASSETS, LIABILITIES OROPERATIONS, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO THE CONDITION,USEFULNESS OR ADEQUACY OF THE ASSETS, QUALITY, MERCHANTABILITY AND/OR FITNESSFOR A PARTICULAR PURPOSE, MARKETABILITY, CONFORMITY TO SAMPLES, AND ANY SUCHOTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. THEREPRESENTATIONS AND WARRANTIES SET FORTH IN THIS §4 ARE MADE EXCLUSIVELY BY THECOMPANY AND THE BUYER SHALL HAVE NO RECOURSE AGAINST ANY SELLER AS A RESULT OFA BREACH OF ANY SUCH REPRESENTATION OR WARRANTY, OTHER THAN WITH RESPECT TOBREACHES OF REPRESENTATIONS, WARRANTIES AND COVENANTS DISCLOSED PRIOR TOCLOSING IN ACCORDANCE WITH §5(E) AND THE ESCROW AMOUNT AS PROVIDED IN §8.BUYER HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THE EXTENT SPECIFICALLY SETFORTH 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 EACHSELLER HEREBY DISCLAIMS ANY CLAIMS BY BUYER FOR DAMAGES BECAUSE OF LATENT VICESOR DEFECTS, WHETHER KNOWN OR UNKNOWN, IT BEING THE INTENTION OF THE COMPANY,SELLERS AND BUYER THAT, SUBJECT TO THE**

 

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

 

**§5.          Pre-Closing Co****venants**.  Buyer, theCompany and each Seller agree as follows with respect to the period between theexecution of this Agreement and Closing.

 

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

 

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

 

(ii)           Without limiting the generality ofthe foregoing, each of the Parties will (A) file (or use its commerciallyreasonable efforts to cause its appropriate Affiliates to file) anynotification, report forms and related material that it may be required to filewith the Federal Trade Commission and the Antitrust Division of the UnitedStates Department of Justice under the HSR Act, and will use its commerciallyreasonable efforts to obtain an early termination of

 

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the applicable waiting period and (B) makeany further filings pursuant thereto that may be necessary, proper, oradvisable in connection therewith.

 

(c)           Operation of Business.  Except as provided in §5(c) to theDisclosure Schedule, Sellers shall cause the Company to not engage in anypractice, take any action, or enter into any transaction outside the OrdinaryCourse of Business and to use commercially reasonable efforts to preserve,maintain and protect its business, assets, rights and properties and itsrelationships with its employees, customers, suppliers and others havingrelationships with the Company, provided however that the Company shall bepermitted to take all actions in its discretion to enforce its rights undercontracts with such persons. Without limiting the generality of the foregoingand except as provided in §5(c) to the Disclosure Schedule, Sellers willnot permit the Company to engage in any practice, take any action, or enterinto any transaction of the sort described in §4(g) without the priorwritten consent of Buyer. Notwithstanding the foregoing, at or prior to theClosing Date, Sellers shall cause the Company shall be required to (i) closeits positions in all of its open hedges and (ii) distribute the entiremembership interest in the Excluded Subsidiary to Sellers.

 

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

 

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

 

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

 

(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 theCompany or Sellers, there has been any development causing a breach of any ofthe Company’s or Sellers’ representations,

 

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

 

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

 

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

 

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

 

(v)           Upon delivery of anysuch notice with respect to a breach by the Company or either Seller of any ofits representations, warranties or covenants contained in this Agreement,Sellers (or the applicable Seller) shall elect to either (A) cure or causethe Company to cure such breach (if curable, meaning that the Company shallexperience no Adverse Consequences resulting from or arising out of such breachafter affecting such cure)*,* at Sellers’ (or such Seller’s) orthe Company’s cost (and if at the Company’s cost, the Parties agree that suchcost shall be reflected in the calculation of Net Working Capital), prior tothe earlier to occur of the second Business Day immediately preceding theClosing Date and 15 days after receipt of such notice or (B) have aportion of the Purchase Price equal to the estimated cost of curing such breach(together with the estimated Adverse Consequences resulting from or arising outof 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-ClosingBuyer Escrow Fund”) pursuant to an escrow agreement in the form of Exhibit D(the “Pre-Closing Buyer Escrow Agreement”), and, in either case Buyershall be obligated, subject to the other terms and conditions of thisAgreement, to consummate the transactions contemplated by this Agreement andshall not be entitled to any remedy pursuant to §8 of this Agreement for anyAdverse Consequences arising from or related to such breach.  If Sellers (or such Seller) elect to curesuch 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 specifiedin clause (B).

 

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

 

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election to Buyer and (y)Buyer shall have the right to terminate this Agreement without any liability toSellers 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 suchbreaches) sufficient to make the Cost of Curing all such non-waived breaches nogreater than $20,000,000.  In such case,Buyer shall notify Sellers that Buyer desires to consummate the transactions contemplatedby this Agreement by providing written notice to Sellers of such election,within the earlier to occur of the second Business Day immediately prior to thethen scheduled Closing Date or 10 Business Days of receipt of the writtennotice from Sellers electing to terminate this Agreement, in which case Sellersand the Company shall be required to consummate the transactions contemplatedby 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 consummatethe transactions contemplated by this Agreement, (x) Sellers shall take theactions specified in clause (A) of the first sentence of §5(e)(v) withrespect to all such breaches not waived by Buyer or, in lieu of taking theactions specified by clause (A), Sellers shall place $20,000,000 (or suchportion of $20,000,000 attributable to any breach not so cured) into thePre-Closing Buyer Escrow Fund at Closing, (y) the breaching Party shall have noobligation to take the actions specified in clauses (A) and (B) of thefirst 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 tosuch breaches.

 

(vii)         Upon delivery of anysuch notice with respect to a breach by Buyer of any of its representations,warranties or covenants contained in this Agreement, Buyer shall elect toeither (A) cure such breach (if curable, meaning that Sellers shallexperience no Adverse Consequences resulting from or arising out of such breachafter affecting such cure), at Buyer’s cost prior to the earlier to occur ofthe second Business Day immediately preceding the Closing Date and 15 daysafter receipt of such notice or (B) place an amount equal to the estimatedCost of Curing such breach into a separate escrow fund with the Escrow Agent atClosing (the “Pre-Closing Sellers Escrow Fund”) pursuant to an escrowagreement in the form of Exhibit E (the “Pre-Closing SellersEscrow Agreement”), and, in either case, Sellers and the Company shall beobligated, subject to the other terms and conditions of this Agreement, toconsummate the transactions contemplated in this Agreement and Sellers shallnot be entitled to any remedy pursuant to §8 of this Agreement for any AdverseConsequences arising from or related to such breach.  If Buyer elects to cure such breach and doesnot cure the breach within the time specified in clause (A), then Buyer shallbe deemed to have elected the action specified in clause (B).

 

(viii)        Notwithstandinganything to the contrary contained in §5(e)(vii), if the estimated Cost ofCuring all such breaches by Buyer pursuant to this Agreement is expected toexceed $20,000,000 in the aggregate (such breaches in the aggregate, a “SubstantialBuyer Breach”), (x) subject to the next sentence, Buyer shall have theright to terminate this Agreement without any liability to Sellers, except asprovided in §5(e)(xi) below, by providing written notice of such election toSellers and (y) Sellers shall have the right to terminate this Agreementwithout any liability to Buyer by providing written notice of such election toBuyer.  If Buyer provides such writtennotice 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 suchnon-waived

 

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breaches no greater than $20,000,000.  In such case, Sellers shall notify Buyer thatSellers desire to consummate the transactions contemplated by this Agreement byproviding written notice to Buyer of such election, within the earlier to occurof the second Business Day immediately prior to the then scheduled Closing Dateor 10 Business Days of receipt of the written notice from Buyer electing toterminate this Agreement, in which case Buyer shall be required to consummatethe transactions contemplated by this Agreement, subject to the terms andconditions of this Agreement.  If Sellerselect to waive any such breaches (or portion of such breaches) and cause Buyerto consummate the transactions contemplated by this Agreement, (x) Buyer shalltake 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) intothe Pre-Closing Sellers Escrow Fund at Closing, (y) Buyer shall have noobligation to take the actions specified in clauses (A) and (B) of thefirst sentence of §5(e)(vii) with respect to all breaches (or portionsthereof ) waived by Sellers, and (z) Sellers shall not be entitled to anyremedy pursuant to §8 of this Agreement for any Adverse Consequences arisingfrom or related to such breaches.

 

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

 

(x)           The Expert shallresolve all issues related to the Cost of Curing after the Closing.  If Buyer and Sellers previously determinedthe estimated Cost of Curing to be placed in escrow in good faith without anyExpert, Buyer and Sellers shall appoint an Expert at or prior to Closing to actin accordance with this §5(e)(x).  If anyamount is deposited into either the Pre-Closing Buyer Escrow Fund or the Pre-ClosingSeller Escrow Fund, within ten (10) days after the Closing Date, Buyer andSellers may make a written presentation of their respective positions relatedto the Cost of Curing any such breach and the Expert shall make such review andexamination of the presentations and relevant facts and documents regardingsuch breach as the Expert deems appropriate. Within ten (10) days after submission of such facts, documents andwritten presentations, the Expert shall resolve all disputed items in writingand shall prepare and deliver its decision, which shall be final and bindingupon the Parties without further recourse or collateral attack and shall constitutea Final Determination of such dispute; provided that the Expert shall notassign a value to any particular disputed item greater than the greatest valuefor such item claimed by Buyer or Sellers or less that the smallest value forsuch item claimed by Buyer or Sellers. All costs of engaging the Expert (including the Expert’s fees, but exclusiveof attorneys’ fees) shall be borne by the Party (that is, either Buyer orSellers jointly) who is the least successful in such process, as determined by theExpert, which shall be determined by

 

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

 

(xi)          The rights set forth in this §5(e) shallbe the Parties’ sole and exclusive remedy for any breach of another Party’srepresentations, warranties or covenants that is disclosed to the other Partiesby 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 causeor permit Company to) solicit, initiate, or encourage the submission of anyproposal or offer from any Person relating to the acquisition of MembershipInterests or all or substantially all of the Assets of the Company (includingany acquisition structured as a merger, consolidation, or equity interestexchange).

 

(g)           Southern Dome.  Buyer and Sellers acknowledge that, (i) immediatelyprior to the Closing, Sellers shall cause the Company to distribute the entiremembership interest of the Excluded Subsidiary to Sellers, and (ii) theParties will enter into one of more definitive agreements with respect to theExcluded Subsidiary substantially as contemplated by Exhibit F tothis Agreement.

 

(h)           Expansion ofInsurance Policies.  Buyer and Sellers shall (and Sellers shallcause the Company to) use commercially reasonable efforts to obtain acommitment from the insurers to amend, on the Closing Date at Buyer’s expense,the Company’s Pollution Legal Liability AISLIC Policy No. PLS7619775 (the “ExistingPolicy”) to expand the Existing Policy to cover all of the Company’s Assetson 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 thisAgreement (such expanded and extended insurance policy being referred to hereinas the “Expanded Insurance Policy”).

 

**§6.          Post-Closing Coven****ants**.  The Partiesagree as follows with respect to the period following Closing.

 

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

 

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

 

(b)           Litigation Support.  In the event and for so long as any Partyactively is contesting or defending against any Proceeding (other than any inwhich Buyer, on the one hand, and Sellers, on the other hand, are adverse toeach other), in connection with (i) any transaction contemplated underthis 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 theCompany, each of the other Parties shall cooperate with it and its counsel inthe defense or contest, make available its personnel, and provide suchtestimony and access to its books and records as shall be necessary inconnection with the defense or contest, all at the sole cost and expense of thecontesting or defending Party (unless the contesting or defending Party isentitled to indemnification therefor under §8).

 

(c)           Reporting ProceduresUnder Section 751.  Each Sellershall notify the Company in writing of the Membership Interests sold to Buyerwithin thirty (30) days of the Closing Date (or, if earlier, January 15 ofthe calendar year following the calendar year in which the Closing Dateoccurred). The notice from each Seller to the Company shall include: (i) thenames and addresses of such Seller and Buyer; (ii) the taxpayeridentification numbers of such Seller and the Buyer; and (iii) the ClosingDate. The Company shall prepare a separate return on IRS Form 8308 withrespect to the Membership Interest sold by each Seller to Buyer.  The Company shall furnish a copy of thecompleted IRS Form 8308, on or before January 31 of the calendar yearfollowing the calendar year in which the Closing Date occurred, to Sellers andBuyer listed in the IRS Form 8308. The Company shall file the completedIRS Forms 8308 as an attachment to the Company’s Tax Return for the taxableyear in which the Closing Date occurred. Each Seller shall include with its TaxReturn for the taxable year in which the Closing Date occurred a statementsetting forth separately the following information: (a) the Closing Date; (b) theamount of gain or loss attributable to Section 751 property of the Company(determined in accordance with the Final Allocation Schedule); and (c) theamount of any gain or loss attributable to capital gain or loss on the sale ofthe Membership Interests by such Seller to Buyer (determined in accordance withthe Final Allocation Schedule).  TheParties’ respective obligations pursuant to this §6(c) shall survive untilthe expiration of the applicable statute of limitations (after giving effect toany extension).

 

(d)           Employee Matters.

 

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

 

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his or her employment as a result ofdisability prior to the first anniversary of the Closing Date shall not beentitled to any salary or benefits attributable to the period following theeffective date of the termination of his employment (“Termination Date”),except as otherwise provided in any written agreement between such ContinuingEmployee and the Company, (B) no Continuing Employee whose employment withthe Company is terminated prior to the first anniversary of the Closing Dateshall be eligible to participate in any Employee Benefit Plan of the Company orany 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 TerminationDate, (C) in the event that a particular Employee Benefit Plan (other thana Qualified Plan) does not permit the participation of the Continuing Employeedue to the termination of his or her employment, with respect to the Company’sagreement under this paragraph to continue such Continuing Employee’sparticipation in such Employee Benefit Plan until the first anniversary of theClosing Date, the Company shall pay such Continuing Employee an amount equal tothe then monthly out-of-pocket cost to the Company of providing such ContinuingEmployee coverage under such Employee Benefit Plan multiplied by the number ofwhole months between such Continuing Employee’s Termination Date and the firstanniversary of the Closing Date. Notwithstanding the preceding provisions of this §6(d)(i), in the caseof any Continuing Employee who is party to an agreement providing for severanceor change of control benefits in the event of the termination of his or heremployment with the Company or any of its Affiliates following the ClosingDate, such Continuing Employee shall be entitled to receive the more valuableof the payments and other benefits provided for under this paragraph (in theaggregate) or the payments and benefits provided for under such agreement (inthe aggregate) but no Continuing Employee shall be entitled to claim benefitsunder both this paragraph and such agreement or in part under this paragraphand in part under such agreement.  Anybenefits provided to a terminated Continuing Employee under this paragraphunder any Employee Benefit Plan that constitutes a “group health plan” withinthe meaning of Code § 5000(b)(1) shall count towards the Company’sobligation to make continuation coverage available to such Continuing Employeepursuant to Code § 4980B(f) and ERISA §§ 601-608.  Notwithstanding the preceding provisions ofthis §6(d)(i), Buyer and the Company shall comply with the applicableprovisions of the Employee Benefit Plans, ERISA and the Code with respect toeach Continuing Employee.

 

**(ii)          **After Closing, Buyer shall causethe Company to, satisfy all post-Closing obligations of the Company pursuant toany written employment, severance, profits participation or other employeecompensation plan adopted by the Company or any agreements between the Companyand any employee of the Company. To the extent that the employees of theCompany become eligible to participate in any Employee Benefit Plans orprograms that Buyer or the Company implement on or after the Closing Date (eacha “Buyer Benefit Plan”), then for all purposes (including, withoutlimitation, determining eligibility to participate, vesting under plans, earlyretirement and benefit accrual), service with the Company shall be treated asservice 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) underany Buyer Benefit Plan which is a qualified defined benefit pension plan or (B) tothe 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 participationby and coverage of the employees and their eligible dependents and, withrespect to the 2005 calendar year, shall

 

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

 

(iii)          For a period of ten (10) yearsafter the Closing Date, Buyer shall (A) maintain in effect the currentprovisions regarding indemnification of any of the Company’s members, managers,officers, agents and employees (“Covered Persons”) contained in the LLCAgreement, and (B) indemnify the Covered Persons to the fullest extent towhich Buyer is permitted to indemnify current or former members, managers,officers, directors, agents or employees under its certificate ofincorporation, certificate of organization, bylaws, limited liability companyagreement, operating agreement or other organizational documents and applicableLaw.

 

(e)           Tax Matters.  

 

(i)            Sellers shall prepare or cause to beprepared and file or cause to be filed any required Tax Returns for allPre-Closing Tax Periods with respect to the Company. Buyer shall, and shallcause the Company to, cooperate fully, as and to the extent reasonablyrequested by Sellers in connection with the filing of Tax Returns pursuant tothis Section and any audit, litigation or other Proceeding, including theretention of books and records relevant to any such Tax Returns until Sellers’notice to Buyer of the expiration of the applicable statute of limitations (orany extension), and make employees available on a mutually convenient basis toprovide additional information and explanation of any material providedhereunder.

 

(ii)           Sellers shall pay to Buyer (or Buyershall pay to Sellers) the amount by which Taxes attributable to the portion ofsuch 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 NetWorking Capital as of the Closing Date. Any such payment by Sellers to Buyer (orby 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 suchPre-Closing Periods. For purposes of this §6(e)(ii), in the case of any Taxesthat are imposed on a periodic basis and are payable for a Taxable period thatincludes (but does not end on) the Closing Date, the portion of such Tax whichrelates to the portion of such Taxable period ending on the Closing Date shallbe deemed to be the amount of such Tax for the entire Taxable period multipliedby a fraction the numerator of which is the number of days in the Taxableperiod ending on the Closing Date and the denominator of which is the number ofdays in the entire Taxable period. Any credits relating to a Pre-Closing Periodthat begins before and ends after the Closing Date shall be allocated so that aportion of such credits that relate to the portion of a Taxable period endingon the Closing Date are allocated to the Pre-Closing Period. All determinationsnecessary to give effect to the foregoing allocations shall be made in a mannerconsistent with prior practice of the Company.

 

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

 

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(iv)          Buyer shall provide prompt writtennotice to Sellers of any pending or threatened tax audit, assessment orProceeding that it becomes aware of related to the Company for any Pre-ClosingTax Period. Such notice shall contain factual information (to the extent known)describing the asserted tax adjustment, assessment, Proceeding or Liability inreasonable detail and shall be accompanied by copies of any notice or otherdocument received from or with any tax authority in respect of any suchmatters. Sellers shall control audits and disputes related to such Taxes due orTax matters for any Pre-Closing Tax Period (including action taken to pay,compromise or settle such Taxes or Tax matters). Buyer and the Company andtheir Affiliates shall provide Sellers and their Affiliates with such powers ofattorney or other authorizing documentation as are reasonably necessary toempower them to execute and file Pre-Closing Tax Returns, file refund andequivalent claims for Taxes related to Pre-Closing Tax Periods, and contest,settle, and resolve any related audits and disputes (including any refundclaims 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 aPre-Closing Tax Period, Buyer or such Affiliate receiving such refund shall,within ten (10) days after receipt of such refund, remit it to Sellers inaccordance with their Allocable Portions.

 

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

 

(f)            CompanyConfidential Information.For a period oftwo years following the****Closing, noneof Jay A. Precourt, Frederic C. Hamilton or Sellers shall, directly orindirectly, disclose or permit any Affiliate, directly or indirectly, todisclose to any Person any confidential information of the Company, unlesscompelled to disclose by any applicable Law, except to the extent that suchinformation can be shown to have been (i) in the public domain through nofault of Jay A. Precourt, Frederic C. Hamilton or Sellers or any of theirAffiliates or (ii) lawfully acquired by Jay A. Precourt, Frederic C.Hamilton or Sellers after the Closing Date on a non-confidential basis fromsources other than Buyer or the Company or any of their Affiliates, but only tothe extent that any such source is not bound by a confidentiality agreement orother duty to keep such information confidential.

 

(g)           Financial Statements.   Each  Seller shall use its commercially reasonable efforts to assist Buyer inpreparing financial statements of the Company in such form and covering suchperiods as may be required by any applicable securities laws to be filed withthe Securities and Exchange Commission by Buyer as a result of the transactionscontemplated by this Agreement.  EachSeller shall use its commercially reasonable efforts to cause the independentpublic accountants of the Company to provide any consent necessary to thefiling of such financial statements with the Securities and Exchange Commissionand to provide such customary representation letters as are necessary inconnection therewith.

 

(h)           Right to Name.  As soon as reasonably practicable after theClosing (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” (andall derivations therefrom), and all trademarks, trade names and symbols relatedthereto from the properties and assets of Sellers and their Affiliates.  Within

 

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

 

(i)            Non-Competitionand Non-Solicitation Covenant.

 

(i)            Each of Jay A. Precourt and FredericC. Hamilton (the “Non-Competition Parties”) hereby acknowledge andrecognize the highly competitive nature of the business of the Company beingacquired by Buyer pursuant to this Agreement, including the intellectualproperty, trade secrets and confidential information of the Company.  Accordingly, each of the Non-CompetitionParties hereby agrees that he or it will not, directly or indirectly throughPersons they Control, during the period commencing on the Closing Date andending on the second anniversary of such date, (A) engage in, or own,manage, operate, control or participate in the ownership, management, operationor control of, or have any interest, financial or otherwise, in or act as apartner, manager, member, principal, agent, representative, consultant orindependent contractor of, licensor to, or lessor to, or in any way assist, anyPerson 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 existsimmediately after the Closing, including without limitation the business ofgathering, treating, processing, storing, transporting and selling natural gasand transporting, fractionating and selling natural gas liquids, and suchrestriction shall be limited to the area described in Exhibit H tothis Agreement * *or (B) solicit or hire any ofthe officers or employees of the Company as of the date hereof or as ofimmediately prior to the Closing. Notwithstanding anything in this §6(i) to the contrary, (x) any ofthe Non-Competition Parties may own (collectively with their Affiliates) up to5% of the outstanding equity securities in any Person that is listed upon anational stock exchange or actively traded in the over-the-counter market, (y)any Non-Competition Party may participate in the business of the ExcludedSubsidiary or its successors as contemplated by Exhibit F, and (z)each of Jay A. Precourt and Frederic C. Hamilton may serve on the Board ofDirectors of any Person that files reports pursuant Section 13 or 15(d) ofthe Exchange Act.

 

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

 

(j)       Termination ofRelated Party Contracts.  Each ofSellers and Jay A. Precourt shall cause the following agreements to beterminated on or prior to the Closing Date with the Company having no furtherobligations or liabilities thereunder:  (i) SalaryAgreement effective January 1, 2002 between the Company and Jay A.Precourt and (ii) Services Agreement dated February 24, 2005, betweenthe Company and Wyoming Refining Company (collectively, the “Related PartyContracts”).

 

(k)      Payment of Obligationsunder Lehman Agreement.  At theClosing, Sellers shall pay and discharge all amounts owed at Closing by theCompany or Sellers to Lehman Brothers,

 

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

 

**§7.          Conditionsto Obligation to Clos**e.

 

(a)           Conditions toBuyer’s Obligation.  Buyer’sobligation to consummate the transactions with Sellers to be performed by Buyerin connection with Closing is subject to satisfaction of the followingconditions:

 

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

 

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

 

(iii)          there shall not be any preliminary orpermanent injunction, judgment, order, decree, ruling, or charge, and no Lawpromulgated or enacted by any Governmental Authority, shall be in effectpreventing or otherwise making illegal consummation of any of the transactionswith Sellers contemplated by this Agreement or any Proceeding pending by anyGovernmental Authority seeking to enjoin or restrain consummation of thetransactions contemplated hereby or to recover damages in connection therewith;

 

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

 

(v)           Buyer Parent, Buyer, Sellers and theCompany shall have received all authorizations, consents, and approvals ofGovernmental Authorities referred to in §3(a)(ii), §3(b)(ii), and §4(b) thatare required to consummate the transactions with Sellers contemplated by thisAgreement, including, without limitation all required approvals, clearance ordecisions under the HSR Act;

 

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

 

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

 

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(viii)        Buyer, Sellers, the Company and theEscrow Agent shall have entered into the Escrow Agreement dated as of theClosing 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 Companylisted in §7(a)(ix) of the Disclosure Schedule shall have executedand delivered to Buyer an employment agreement substantially in the formattached hereto as Exhibit I;

 

(x)           the insurers under the ExistingPolicy 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 auditedfinancial statements (which shall be accompanied by an unqualified report ofthe Company’s independent public accountants) and any unaudited financialstatements, in each case that are required to be included under Item 2.01 of Form 8-Kfiled by the Company under the Securities Exchange Act of 1934, as amended (the“Exchange Act”) as a result of the consummation of the transactionscontemplated hereby assuming such Form 8-K is filed on the firstBusiness Day immediately following the Closing Date and (b) any consentsof the Company’s independent public accountants required under the SecuritiesAct of 1933, as amended, or the Exchange Act in connection with the filing ofsuch Form 8-K;

 

(xii)         all actions to be taken by Sellers inconnection with consummation of the transactions contemplated by this Agreementwith respect to Sellers and all certificates, instruments, and other documentsrequired to effect the transactions contemplated by this Agreement, includingdelivering to Buyer instruments of assignment and transfer as shall benecessary to transfer to Buyer all of Sellers’ right, title and interest in andto the percentage of the Membership Interests to be sold by Sellers to Buyerpursuant to §2(e), will be reasonably satisfactory in form and substance toBuyer; and

 

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

 

Buyer may waiveany condition specified in this §7(a) if it executes a writing so statingat or prior to Closing.

 

(b)           Conditions to EachSeller’s Obligation.  The Company’sand each Seller’s obligation to consummate the transactions to be performed byit in connection with Closing is subject to satisfaction of the followingconditions:

 

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

 

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

 

(iii)          there shall not be any preliminary orpermanent injunction, judgment, order, decree, ruling, or charge, and no Lawpromulgated or enacted by any Governmental Authority, shall be in effectpreventing or otherwise making illegal consummation of any of the transactionswith Buyer Parent or Buyer contemplated by this Agreement or any Proceedingpending by any Governmental Authority seeking to enjoin or restrainconsummation of the transactions contemplated hereby or to recover damages inconnection therewith;

 

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

 

(v)           Buyer Parent, Buyer, Sellers and theCompany shall have received all authorizations, consents, and approvals ofGovernmental Authorities referred to in §3(a)(ii), §3(b)(ii), and §4(b) thatare required to consummate the transactions contemplated by this Agreement,including, without limitation all required approvals, clearance or decisionsunder the HSR Act;

 

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

 

(vii)         all consents from Persons other thanGovernmental Authorities that are listed in §7(b)(vii) of the Disclosure Schedule withrespect to the transactions contemplated by this Agreement shall have beenreceived;

 

(viii)        Buyer, Sellers, the Company and theEscrow Agent shall have entered into the Escrow Agreement dated as of theClosing 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 inconnection with consummation of the transactions contemplated by thisAgreement, including the payment of the amounts to Sellers and the Escrow Agentas required pursuant to §2, and all certificates, instruments, and otherdocuments required to effect the transactions contemplated by this Agreementwill be reasonably satisfactory in form and substance to Sellers.

 

Sellers maywaive any condition specified in this §7(b) if it executes a writing sostating at or prior to Closing.

 

**§8.          Remediesfor Breaches of This Agreement.**

 

(a)           Survival ofRepresentations, Warranties and Covenants.

 

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All of therepresentations and warranties of the Parties contained in §3 shall survive theClosing (except for misrepresentations or breaches of warranty which aredisclosed to the Parties pursuant to §5(e)) and continue in full force andeffect after Closing subject to any applicable statute of limitations. All ofthe representations and warranties of the Company contained in §4 shall surviveClosing (except for misrepresentations or breaches of warranty which aredisclosed to the Parties pursuant to §5(e)) and continue in full force andeffect for a period of twelve (12) months thereafter.  The obligations of the Parties to perform thecovenants set forth in §5 shall terminate at and as of Closing, providedhowever, that a Party may make a Claim for Indemnification for a breach of anysuch covenant that occurs prior to Closing until twelve (12) months after theClosing Date.  All of the other covenantsand agreements of the Parties contained herein shall survive Closing until thelater of (i) the end of the period of time required by the applicableprovisions of this Agreement or (ii) twelve (12) months after the ClosingDate.  Claims for Indemnificationpursuant to this §8 may only be made after the Closing.

 

(b)           IndemnificationProvisions for Buyer’s Benefit.  (i)  In the event the Company breachesany of its representations and warranties set forth in §4 of this Agreement,provided that Buyer or any of its Affiliates makes a written Claim forIndemnification to the Escrow Agent against the Company, pursuant to the noticeprovisions of the Escrow Agreement within any applicable survival period, thenSellers shall indemnify Buyer and its Affiliates from and against any AdverseConsequences Buyer or any of its Affiliates (including the Company) shallsuffer through and after the date of the Claim for Indemnification resulting fromor arising out of the breach; subject to the terms and conditions of the EscrowAgreement and the applicable limitations of this §8.

 

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

 

(iii)          Sellers shall have no obligation toindemnify Buyer or its Affiliates pursuant to §8(b)(i) until Buyer and itsAffiliates (including the Company) has suffered Adverse Consequences by reasonof all such breaches in excess of $5,000,000 (the “Threshold”), afterwhich point Sellers will be obligated to indemnify Buyer and its Affiliatesonly 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 resultingin Adverse Consequences to Buyer or its Affiliates of $100,000 or less;provided that such Adverse Consequences shall be included in calculating theThreshold.

 

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(v)           Each Seller’s obligation to indemnifyBuyer pursuant to §8(b)(ii) from and against any breach of a covenant madeby 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 AdverseConsequences Buyer shall suffer through and after the date of the Claim forIndemnification and may not be increased under any circumstances.

 

(vi)          Sellers shall have no obligation toindemnify Buyer or its Affiliates pursuant to §8(b)(i) by reason of anybreaches of the Company’s representations and warranties set forth in §4(d) and4(r) of this Agreement until the Company has exhausted all remedies availableto 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 topursue a Claim for Indemnification for the Company’s breach of therepresentations and warranties set forth in §4(d) and 4(r) shall surviveduring the time Buyer or its Affiliates are actively pursuing the PrimaryRemedies and for the period thereafter required to bring any related Claim forIndemnification against Sellers, so long as Buyer has provided notice of itspotential 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 ofthis Agreement, the Escrow Amount shall be the sole and exclusive source offunds available to Buyer with respect to any Claim for Indemnification madeafter the Closing arising pursuant to §8(b)(i), and after distribution to Buyerof the entire Escrow Amount, Sellers will have no obligation to further indemnifyBuyer from and against such Adverse Consequences.

 

(c)           Indemnification Provisionsfor Sellers’ Benefit.  In the eventBuyer breaches any of its representations, warranties, or covenants containedin this Agreement, and, provided that any Seller or any of its Affiliates makesa written Claim for Indemnification against Buyer pursuant to the noticeprovisions of §10(h) within any applicable survival period, then Buyershall indemnify each Seller and its Affiliates from and against any AdverseConsequences Sellers or any of its Affiliates shall suffer through and afterthe date of the Claim for Indemnification resulting from or arising out of thebreach subject to the applicable limitations of this §8.

 

(d)           Matters InvolvingThird Parties.  (i)  If any thirdparty shall notify any Party (the “Indemnified Party”) with respect toany matter (a “Third Party Claim”) which may give rise to a Claim forIndemnification against any other Party (the “Indemnifying Party”) underthis §8, then the Indemnified Party shall promptly notify each IndemnifyingParty thereof in writing; *provided, however*,that no delay on the part of the Indemnified Party in notifying anyIndemnifying Party shall relieve the Indemnifying Party from any obligationunder this Agreement unless (and then solely to the extent) the IndemnifyingParty thereby is prejudiced.

 

(ii)           Any Indemnifying Party will have theright to defend the Indemnified Party against the Third Party Claim withcounsel of its choice reasonably satisfactory to the Indemnified Party so longas (A) the Third Party Claim involves only money damages and does not seekan injunction or other equitable relief and, in respect of Third Party Claimsin which Buyer or its Affiliates is the Indemnified Party, in Buyer’sreasonable judgment could not result in money damages in excess of anyremaining Escrow Amount, (B) settlement of, or an adverse

 

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judgment with respect to, the Third PartyClaim is not, in the good faith judgment of the Indemnified Party, likely toestablish a precedential custom or practice materially adverse to thecontinuing business interests of the Indemnified Party, and (C) theIndemnifying Party conducts the defense of the Third Party Claim actively anddiligently.

 

(iii)          So long as the Indemnifying Party isconducting the defense of the Third Party Claim in accordance with §8(d)(ii), (A) theIndemnified Party may retain separate co-counsel at its sole cost and expenseand participate in the defense of the Third Party Claim, (B) theIndemnified Party will not consent to the entry of any judgment or enter intoany settlement with respect to the Third Party Claim without the prior writtenconsent of the Indemnifying Party (not to be withheld unreasonably), and (C) theIndemnifying Party will not consent to the entry of any judgment or enter intoany settlement with respect to the Third Party Claim without the prior writtenconsent 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 IndemnifiedParty may defend against, and consent to the entry of any judgment or enterinto any settlement with respect to, the Third Party Claim in any manner it maydeem appropriate subject to the consent of the Indemnifying Party in the caseof any proposed entry of a judgment or settlement, (B) the IndemnifyingParties will have sixty (60) days from the receipt of any notice under §8(d)(i) tocure to the Indemnified Party’s satisfaction the subject matter of the notice,and, in the absence of such a timely, satisfactory cure, the IndemnifyingParties will reimburse the Indemnified Party promptly and periodically for thecosts of defending against the Third Party Claim (including reasonableattorneys’ fees and expenses), and (C) the Indemnifying Parties willremain responsible for any Adverse Consequences the Indemnified Party maysuffer resulting from, arising out of, relating to, in the nature of, or causedby the Third Party Claim to the fullest extent provided in this §8.

 

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

 

(f)            Claims AgainstEscrow Amount.  Subject to this §8, any Claim forIndemnification by Buyer against Sellers pursuant to §8(b)(i) shall bemade solely with respect to the Escrow

 

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Amount and may be made at any time within the applicable survival period.Upon any Final Determination (as defined below) of a Claim for Indemnificationagainst Sellers, Sellers and Buyer shall provide joint written instructions tothe Escrow Agent to pay to Buyer the amount of such Claim for Indemnificationas determined by such Final Determination. Upon the expiration of theapplicable survival period without any pending claims, the remaining balance ofthe Escrow Amount will be disbursed by the Escrow Agent (pursuant to jointwritten instructions by Sellers and Buyer) to Sellers in accordance with theEscrow Agreement; *provided, however*,that in the event that there are any pending Claims for Indemnification at thetime of such expiration: (i) the claimed amounts shall remain in escrow; (ii) theremaining balance of the Escrow Amount after such retention will be sodisbursed by Escrow Agent (pursuant to joint written instructions by Sellersand Buyer) to Sellers in accordance with the Escrow Agreement; and (iii) aseach such Claim for Indemnification is resolved by a Final Determination, anyamount retained with respect thereto that remains in escrow after suchresolution will be disbursed by Escrow Agent (pursuant to joint writteninstructions by Sellers and Buyer) to Sellers in accordance with the EscrowAgreement.

 

(g)           Payment ofClaims.  Upon Final Determination ofthe amount of a Claim for Indemnification, the Indemnifying Party (or theEscrow Agent, if applicable) shall pay the amount of such claim within ten (10) daysof the date of such Final Determination. A “Final Determination” of a claimshall be (i) a judgment of any court determining the validity or amount ofa disputed claim, if no appeal is pending from such judgment or if the time toappeal therefrom has elapsed (it being understood that the Indemnified Party shallhave no obligation to appeal); (ii) an award of any arbitrator orarbitration panel determining the validity or amount of such disputed claim, ifthere is not pending any motion to set aside such award or if the time withinwhich to move to set such award aside has elapsed; (iii) a writtentermination of the dispute with respect to such claim signed by all of theparties thereto or their attorneys; (iv) a written acknowledgment of theIndemnifying Party that it does not dispute the validity or amount of suchclaim; (v) a failure by an Indemnifying Party to respond to a Claim forIndemnification by the date specified in §8(e); or (vi) such otherevidence of final determination of a disputed claim as shall be reasonablyacceptable to the Parties.

 

(h)           Determination of AdverseConsequences.  All indemnificationpayments under this §8 shall be paid by the Indemnifying Party net of any Taxbenefits, insurance coverage and other indemnification rights that areavailable to the Indemnified Party and shall be computed on a present valuebasis (using the Applicable Rate as the discount rate). All indemnificationpayments under this §8 shall be deemed adjustments to the Purchase Price.

 

(i)            Exclusive Remedy.  **EXCEPT WITH RESPECT TOBREACHES OF REPRESENTATIONS, WARRANTIES AND COVENANTS DISCLOSED PRIOR TOCLOSING AS PROVIDED IN §5(E), BUYER, THE COMPANY AND SELLERS ACKNOWLEDGE ANDAGREE THAT THE FOREGOING INDEMNIFICATION PROVISIONS IN THIS §8 SHALL BE THEEXCLUSIVE REMEDY OF BUYER, THE COMPANY AND SELLERS WITH RESPECT TO THISAGREEMENT AND THE EVENTS GIVING RISE THERETO AND THE TRANSACTIONS CONTEMPLATEDBY THIS AGREEMENT.  BUYER, THE COMPANYAND EACH SELLER ACKNOWLEDGES THAT NEITHER IT, NOR ANY SUCCESSOR OR ASSIGN,**

 

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**SHALL HAVE ANY RIGHTS AGAINST THE OTHER PARTIES OR ITS AFFILIATES WITHRESPECT TO THE TRANSACTIONS PROVIDED FOR IN THIS AGREEMENT OTHER THAN AS ISEXPRESSLY PROVIDED IN THIS AGREEMENT.**

 

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

 

**§9.          Termination**.

 

(a)           Terminationof Agreement.  Certain of the Parties may terminate thisAgreement as follows:

 

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

 

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

 

(iii)          Buyer may terminate this Agreement bygiving written notice to Sellers at any time prior to Closing if Closing shallnot have occurred on or before August 31, 2005 (unless the failure resultsprimarily from Buyer itself breaching any representation, warranty, or covenantcontained in this Agreement); and

 

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

 

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

 

**§10.        Miscellaneous.**

 

(a)           Natureof Sellers’ Obligations.

 

(i)            The covenants of each Seller in §2(a) concerningthe sale of its Membership Interests to Buyer, the representations andwarranties 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 thatthe particular Seller making the representation, warranty, or covenant shall besolely responsible to the extent provided in §5(e) and §8(b) for anyAdverse Consequences Buyer may suffer as a result of any breach thereof.

 

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

 

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

 

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

 

(d)           Entire Agreement.  This Agreement (including the EscrowAgreement and the other documents referred to in this Agreement) and the ConfidentialityAgreement dated March 24, 2005 among the Parties constitute the entireagreement among the Parties and supersede any prior understandings, agreements,or representations by or among the Parties, written or oral, to the extent theyrelate in any way to the subject matter of this Agreement.

 

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

 

(f)            Counterparts.  This Agreement may be executed in one or morecounterparts (including by means of facsimile), each of which shall be deemedan original but all of which together will constitute one and the sameinstrument.

 

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

 

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

 

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If to theCompany:

 

ScissorTail Energy, LLC624 South Boston, Suite 800 Tulsa, Oklahoma 74119-1239

Facsimile: (918) 587-2990

Attention: John A. Raber

 

With copies to:

 

Bartlit Beck Herman Palenchar &Scott LLP1899 Wynkoop, Suite 800Denver, Colorado 80202 Facsimile:  (303) 592-3140Attention:  James L. Palenchar

 

If to Sellers:

 

ScissorTail Holdings, LLC 1600 Broadway, Suite 2300Denver, Colorado 80202-4923Facsimile: (303) 837-9089Attention: Jay A. Precourt

 

Hamilton ScissorTail LLC 1560 Broadway, Suite 2200 Denver, Colorado 80202Facsimile: (303) 863-3006 Attention: Frederic C. Hamilton

 

With copies to:

 

Bartlit Beck Herman Palenchar &Scott LLP1899 Wynkoop, Suite 800 Denver, Colorado 80202 Facsimile: (303) 592-3140 Attention: James L. Palenchar

 

ScissorTail Holdings, LLC 1600 Broadway, Suite 2300 Denver, Colorado 80202-4923Facsimile: (303) 837-9089 Attention: John E. Elgin

 

 

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If to BuyerParent:

 

Copano Energy, L.L.C.2727 Allen Parkway, Suite 1200

Houston, Texas 77019Facsimile: (713) 621-9545Attention:  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 andMid-Continent, L.L.C. 2727 Allen Parkway, Suite 1200

Houston, Texas 77019Facsimile: (713) 621-9545Attention:  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 intendedrecipient at the address set forth above using any other means (includingpersonal delivery, expedited courier, messenger service, telecopy, ordinarymail, or electronic mail), but no such notice, request, demand, claim, or othercommunication shall be deemed to have been duly given unless and until itactually is received by the intended recipient. Any Party may change theaddress to which notices, requests, demands, claims, and other communicationsunder this Agreement are to be delivered by giving the other Parties notice inthe manner set forth in this Agreement.

 

(i)            GoverningLaw.  This Agreement shall begoverned by and construed in accordance with the domestic laws of the State ofDelaware without giving effect to any choice or conflict of law provision or rule (whetherof the State of Delaware or any other jurisdiction) that would cause theapplication of the laws of any jurisdiction other than the State of Delaware.

 

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(j)            Arbitration.  Any dispute, controversy or claim arising outof or relating to this Agreement (a “Dispute”) (excluding any dispute ordisagreement among the Parties concerning the Working Capital True Up, whichshall be resolved pursuant to the provisions of §2(c)), shall be settled bybinding arbitration in accordance with the commercial arbitration rules ofthe American Arbitration Association.  Any such Dispute shall be arbitrated on an individual basis, and shallnot be consolidated in any arbitration with any dispute, claim or controversyof any other Party.  The arbitrationshall be conducted in Denver, Colorado, and any court having jurisdictionthereof may immediately issue judgment on the arbitration award. The Partiesagree that the arbitration provided for in this §10(j) shall be the exclusivemeans to resolve all Disputes and the arbitrator shall be empowered to grantspecific performance or other equitable remedies to a Party.

 

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

 

(l)            Severability.  Any term or provision of this Agreement thatis invalid or unenforceable in any situation in any jurisdiction shall notaffect the validity or enforceability of the remaining terms and provisions ofthis Agreement or the validity or enforceability of the offending term orprovision 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 Agreementand 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 penaltiesand interest)** **incurredin connection with the consummation of the transactions contemplated by thisAgreement 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 suchTaxes, 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 TaxReturns and other documentation.

 

(n)           Buyer ParentGuaranty.

 

**Buyer Parentirrevocably and unconditionally guarantees to each Seller (the “Guaranty”) thefull and punctual performance and compliance by Buyer with each and everycovenant, indemnity, term and condition to be performed or complied with byBuyer under this Agreement, the Confidentiality Agreement and the EscrowAgreement.  The Guaranty expressed inthis §10(n) is an absolute, present, primary and continuing guaranty ofperformance and compliance. Buyer Parent acknowledges and agrees that itsliability under the Guaranty is joint and several with Buyer and, upon anydefault by Buyer, Sellers shall not be obligated to first**

** **

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** **

**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 reasonablecosts and expenses, including reasonable attorney fees and related costs,incurred by Sellers or any Affiliates in enforcing the Guaranty**.

 

**(o)           IndividualJoinder.****** Jay A. Precourt joins as a signatory to thisAgreement 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 asignatory to this Agreement solely and exclusively with respect to thecovenants set forth in §6(f) and (i) and for no other purpose

 

(p)           Construction.  The Parties have participated jointly in thenegotiation and drafting of this Agreement. In the event an ambiguity orquestion of intent or interpretation arises, this Agreement shall be construedas if drafted jointly by the Parties and no presumption or burden of proofshall arise favoring or disfavoring any Party by virtue of the authorship ofany of the provisions of this Agreement. All references in this Agreement toarticles, sections or subdivisions thereof shall refer to the correspondingarticle, section or subdivision thereof of this Agreement unless specificreference is made to such articles, sections, or subdivisions of anotherdocument or instrument. Any reference to any federal, state, local, or foreignstatute or law shall be deemed also to refer to all rules and regulationspromulgated thereunder, unless the context requires otherwise. The word “including”means including without limitation.

 

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

 

(r)            Bold and/orCapitalized Letters.  **THE PARTIES AGREE THAT THEBOLD AND/OR CAPITALIZED LETTERS IN THIS AGREEMENT CONSTITUTE CONSPICUOUSLEGENDS.**

 

**[Signature page follows.]**

 

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IN WITNESSWHEREOF, the Parties hereto have executed this Agreement as of the date firstabove 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:                                 |   |   |
|        |                                        |  |  |  |  |

 

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|   | 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                                                                                                                             |

 

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