Document:

exv10w2

 

Exhibit 10.2

AMENDMENT No. 1

TO

STOCK PURCHASE AGREEMENT

     This Amendment No. 1 (“Amendment”) to that Stock Purchase Agreement (the
“Agreement”) entered into as of the 30th day of January, 2007, by and between SEMPRA
ENERGY, a corporation incorporated under the laws of the State of California, USA
(“Seller”), and Energy West Incorporated, a corporation incorporated under the laws of the
State of Montana, USA (“Purchaser”), is entered into as of April 11, 2007 by and between
Seller and Purchaser. Any capitalized term used but not defined herein shall have the same meaning
as in the Agreement.

RECITALS

     A. The parties hereto (or their predecessors in interest) have entered into the Agreement.

     B. The parties hereto desire to amend the Agreement by replacing in Section 8.7 thereof the
amount One Million Five Hundred Thousand Dollars ($1,500,000) with the amount Two Million One
Hundred Thousand Dollars ($2,100,000), all as set forth herein.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and
for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:

AGREEMENT

     1. Maritimes Guarantee. Section 8.7 of the Agreement is hereby amended by deleting
the words “One Million Five Hundred Thousand Dollars ($1,500,000)” and inserting in their place the
words “Two Million One Hundred Thousand Dollars ($2,100,000).”

     2. Effect of Amendment. The Agreement is hereby ratified and confirmed in all
respects, and all terms, conditions and provisions of the Agreement, except as amended by this
Amendment, shall remain in full force and effect.

     3. Governing Law. This Amendment shall be governed by and construed in accordance
with the laws of the State of New York, without regards to the principles of conflicts of laws
thereof other than Sections 5-1401 and 5-1402 of the New York General Obligations Law.

     4. Counterparts. This Amendment may be executed in any number of counterparts, and
each such counterpart shall for all purposes be deemed an original, and all such counterparts shall
together constitute but one and the same Amendment.

 

 

     5. Effective Date. This Amendment is made effective as of the date hereof.

          IN WITNESS WHEREOF, the parties hereto have executed this Amendment, or caused this Amendment
to be duly executed by their respective authorized officers, as of the day and year first above
written.

	 	 	 	 	 	 	 	 	 
	 	 	Seller:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	SEMPRA ENERGY	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Mark A. Snell	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Mark A. Snell, Executive Vice President
and Chief Financial Officer	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Dated: April 11, 2007	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Purchaser:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	ENERGY WEST INCORPORATED	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	/s/ David A. Certozke	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	David A. Cerotzke, President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Dated: April 11, 2007	 	 

2exv10w3

 

Exhibit 10.3

AMENDMENT
No. 2

TO

STOCK PURCHASE AGREEMENT

     This Amendment No. 2 (“Amendment”) to that Stock Purchase Agreement (the
“Agreement”) entered into as of the 30th day of January, 2007, by and between SEMPRA
ENERGY, a corporation incorporated under the laws of the State of California, USA
(“Seller”), and Energy West Incorporated, a corporation incorporated under the laws of the
State of Montana, USA (“Purchaser”), is entered into as of August 7, 2007 by and between
Seller and Purchaser. Any capitalized term used but not defined herein shall have the same meaning
as in the Agreement.

RECITALS

     A. The parties hereto (or their predecessors in interest) have entered into the Agreement
whereby Seller has agreed to sell and Purchaser has agreed to purchase all of the issued and
outstanding capital stock of Penobscot Natural Gas Company, Inc., excluding the Excluded Assets and
Liabilities, pursuant to the terms and conditions of the Agreement.

     B. The parties hereto desire to amend the Agreement to provide that the Purchase Price shall
be increased on a dollar-for-dollar basis by the amount of any capital contributed by the Seller in
cash to the Company or the Subsidiary to fund a capital project undertaken outside the Ordinary
Course of Business that has been approved in writing (which writing shall include a description of
the proposed capital project and the amount of capital to be contributed by Seller) by Purchaser.

     NOW, THEREFORE, in consideration of the promises and the mutual covenants herein contained and
for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:

AGREEMENT

     1. Conduct of the Business of the Company and the Subsidiary Prior to Closing. Section
3.2 of the Agreement is hereby amended as follows:

	 	(a)	 	by inserting the section number “3.2.1.” immediately before the first full
paragraph of Section 3.2 which begins with the words “Except with the prior written
consent of Purchaser (which consent shall not be unreasonably withheld, delayed or
conditioned). . .“; and
	 
	 	(b)	 	by inserting immediately after what will after the amendment above be Section
3.2.1. (q), a new paragraph to read as follows:

     “3.2.2. Seller and Purchaser acknowledge and agree that it may become necessary or
advisable prior to the Closing for the Company or the

 

 

Subsidiary to undertake a capital
project, outside the Ordinary Course of Business, that requires Seller to contribute
capital to the Company or the Subsidiary in cash over and above the normal and ordinary
capital requirements of the Company or Subsidiary (such project a “Proposed Capital
Investment,” and such amount, a “Project Capital Contribution”). Prior to
making any Project Capital Contribution, Seller shall inform Buyer in writing
describing the nature of the Proposed Capital Investment and the proposed amount of the
Project Capital Contribution. Promptly after the receipt of such notice Buyer shall
either consent to the Seller undertaking the Proposed Capital Investment and providing
the Project Capital Contribution or provide notice to the Seller that Buyer does not so
consent. The amount of any Project Capital Contribution approved by Buyer in writing
shall be added to the Preliminary Purchase Price as provided in Section 2.2.2. For
purposes of this subsection, a Proposed Capital Investment shall include only those
capital expenditures of the Company or Subsidiary which are incurred outside the
Ordinary Course of Business and approved by Purchaser in writing prior to such
expenditure being incurred. This Section shall not be construed to require an increase
in the Purchase Price for capital contributions or expenditures made by Seller in the
Ordinary Course of Business.”

     2. Payment of the Purchase Price. Section 2.2.2. of the Agreement is hereby amended
by deleting it in its entirety and replacing it with the following:

     “2.2.2. Upon the terms and subject to the conditions hereinafter set forth, in
consideration of the delivery by Seller of the Purchased Shares, Purchaser shall pay to
Seller at the Closing an amount equal to the sum of (i) Five Hundred Thousand Dollars
($500,000), and (ii) the amount of any Project Capital Contribution approved by the Buyer
in writing under Section 3.2.2 (the “Preliminary Purchase Price”) in cash
by wire transfer of immediately available US. federal funds.”

     3. Definitions. Section 1.1 of the Agreement is hereby amended by adding thereto in
the appropriate location alphabetically the following definitions:

     “‘Project Capital Contribution’ has the meaning set forth in Section 3.2.2.”

     “‘Proposed Capital Investment’ has the meaning set forth in Section 3.2.2.”

     4. Effect of Amendment. The Agreement is hereby ratified and confirmed in all
respects, and all terms, conditions and provisions of the Agreement, except as amended by this
Amendment, shall remain in full force and effect.

     5. Governing Law. This Amendment shall be governed by and construed in accordance with
the laws of the State of New York, without regards to the principles of
conflicts of laws thereof other than Sections 5-1401 and 5-1402 of the New York General Obligations
Law.

 

 

     6. Counterparts. This Amendment may be executed in any number of counterparts, and
each such counterpart shall for all purposes be deemed an original, and all such counterparts shall
together constitute but one and the same Amendment.

     7. Effective Date. This Amendment is made effective as of the date
hereof.

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment, or caused this Amendment
to be duly executed by their respective authorized officers, as of the day and year first above
written.

	 	 	 	 	 	 	 
	 	 	Seller:	 	 
	 
	 	 	 	 	 	 
	 	 	SEMPRA ENERGY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mark A. Snell	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Mark A. Snell	 	 
	 

	 	 	 	Executive Vice President and	 	 
	 

	 	 	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Purchaser:	 	 
	 
	 	 	 	 	 	 
	 	 	ENERGY WEST INCORPORATED	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David A. Cerotzke,	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	David A. Cerotzke, President	 	 
	 
	 	 	 	 	 	 
	 	 	Dated: August 7, 2007exv10w4

 

Exhibit 10.4

Execution Copy

 

STOCK PURCHASE AGREEMENT

by and between

Sempra Energy

and

Energy West Incorporated

Dated as of January 30, 2007

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	1.DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	 
	 	1.1.	 	Defined Terms	 	 	1	 
	 
	 	1.2.	 	Construction of Certain Terms and Phrases	 	 	9	 
	 
	 	 	 	 	 	 	 	 
	2.THE PURCHASE AND SALE OF STOCK	 	 	10	 
	 
	 	 	 	 	 	 	 	 
	 
	 	2.1.	 	Sale and Transfer	 	 	10	 
	 
	 	2.2.	 	Payment of the Purchase Price	 	 	10	 
	 
	 	2.3.	 	Preparation of the Closing Date Balance Sheet	 	 	10	 
	 
	 	 	 	 	 	 	 	 
	3.PRE-CLOSING COVENANTS AND UNDERTAKINGS	 	 	11	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.1.	 	Satisfaction of Closing Conditions	 	 	12	 
	 
	 	3.2.	 	Conduct of the Business of the Company and the Subsidiary Prior to Closing	 	 	12	 
	 
	 	3.3.	 	Consents and Approvals	 	 	14	 
	 
	 	3.4.	 	Access, Information and Confidentiality	 	 	16	 
	 
	 	3.5.	 	Delivery of Financial Statements and Regulatory Filings	 	 	18	 
	 
	 	3.6.	 	Pre-Closing Transfers and Debt Forgiveness	 	 	18	 
	 
	 	3.7.	 	Public Announcements	 	 	18	 
	 
	 	 	 	 	 	 	 	 
	4.ADDITIONAL AGREEMENTS	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	 
	 	4.1.	 	Tax Matters	 	 	19	 
	 
	 	4.2.	 	Employee and Benefit Matters	 	 	23	 
	 
	 	4.3.	 	Transition Services Agreement; Post-Closing Cooperation	 	 	25	 
	 
	 	4.4.	 	Guaranties or Bonds	 	 	25	 
	 
	 	4.5.	 	Agreement Not to Solicit Employees	 	 	28	 
	 
	 	4.6.	 	The Company’s or the
Subsidiary’s Use of Seller Marks	 	 	28	 
	 
	 	4.7.	 	Insurance Claims	 	 	29	 
	 
	 	 	 	 	 	 	 	 
	5. REPRESENTATIONS AND WARRANTIES OF SELLER REGARDING THE COMPANY AND THE SUBSIDIARY	 	 	29	 
	 
	 	 	 	 	 	 	 	 
	 
	 	5.1.	 	Organization and Good Standing of the Company and the Subsidiary; Foreign Qualifications	 	 	29	 
	 
	 	5.2.	 	Capitalization of the Company and the Subsidiary	 	 	30	 
	 
	 	5.3.	 	Financial Statements; Undisclosed Liabilities	 	 	31	 
	 
	 	5.4.	 	Taxes	 	 	31	 
	 
	 	5.5.	 	Tangible Personal Property	 	 	31	 
	 
	 	5.6.	 	Agreement Related to Other Instruments; Consents	 	 	32	 
	 
	 	5.7.	 	Absence of Changes	 	 	32	 
	 
	 	5.8.	 	Material Claims	 	 	33	 
	 
	 	5.9.	 	Permits; Compliance With Laws	 	 	33	 
	 
	 	5.10.	 	Real Property	 	 	34	 
	 
	 	5.11.	 	Intellectual Property; Software	 	 	34	 
	 
	 	5.12.	 	Material Contracts	 	 	35	 

i

 

	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	5.13.	 	Labor Matters	 	 	37	 
	 
	 	5.14.	 	ERISA and Related Matters	 	 	37	 
	 
	 	5.15.	 	Guaranties or Bonds	 	 	38	 
	 
	 	5.16.	 	Employees	 	 	38	 
	 
	 	5.17.	 	Environmental Matters	 	 	38	 
	 
	 	5.18.	 	Insurance Coverage	 	 	39	 
	 
	 	5.19.	 	Governmental Filings	 	 	39	 
	 
	 	5.20.	 	Accounts Receivable	 	 	39	 
	 
	 	 	 	 	 	 	 	 
	6. REPRESENTATIONS AND WARRANTIES OF SELLER REGARDING SELLER AND THE PURCHASED SHARES	 	 	39	 
	 
	 	 	 	 	 	 	 	 
	 
	 	6.1.	 	Organization and Standing	 	 	40	 
	 
	 	6.2.	 	Corporate Power and Authority; Enforceability	 	 	40	 
	 
	 	6.3.	 	No Violation or Conflict by Seller	 	 	40	 
	 
	 	6.4.	 	Seller Governmental Approvals	 	 	40	 
	 
	 	6.5.	 	Title to the Purchased Shares	 	 	41	 
	 
	 	6.6.	 	Litigation Against Seller	 	 	41	 
	 
	 	 	 	 	 	 	 	 
	7. REPRESENTATIONS AND WARRANTIES OF PURCHASER	 	 	41	 
	 
	 	 	 	 	 	 	 	 
	 
	 	7.1.	 	Organization and Standing	 	 	41	 
	 
	 	7.2.	 	Corporate Power and Authority; Enforceability	 	 	41	 
	 
	 	7.3.	 	No Violation or Conflict by Purchaser	 	 	42	 
	 
	 	7.4.	 	Purchaser Governmental Approvals	 	 	42	 
	 
	 	7.5.	 	Litigation Against Purchaser	 	 	42	 
	 
	 	7.6.	 	Purchase for Investment	 	 	42	 
	 
	 	7.7.	 	Financial Capacity; Solvency	 	 	43	 
	 
	 	7.8.	 	“As Is” Sale	 	 	43	 
	 
	 	 	 	 	 	 	 	 
	8. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER	 	 	43	 
	 
	 	 	 	 	 	 	 	 
	 
	 	8.1.	 	Representations True at the Closing	 	 	44	 
	 
	 	8.2.	 	Covenants of Seller	 	 	44	 
	 
	 	8.3.	 	No Injunction, Etc.	 	 	44	 
	 
	 	8.4.	 	Consents, Approvals and Waivers	 	 	44	 
	 
	 	8.5.	 	Absence of Material Adverse Effect	 	 	44	 
	 
	 	8.6.	 	Other Agreements	 	 	44	 
	 
	 	 	 	 	 	 	 	 
	9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER	 	 	45	 
	 
	 	 	 	 	 	 	 	 
	 
	 	9.1.	 	Representations True at Closing	 	 	45	 
	 
	 	9.2.	 	Covenants of Purchaser	 	 	45	 
	 
	 	9.3.	 	No Injunction, Etc.	 	 	45	 
	 
	 	9.4.	 	Consents, Approvals and Waivers	 	 	45	 
	 
	 	9.5.	 	Other Agreements	 	 	45	 
	 
	 	 	 	 	 	 	 	 
	10.
	 	CLOSING	 	 	 	 	45	 
	 
	 	 	 	 	 	 	 	 
	 
	 	10.1.	 	Time and Place of Closing	 	 	46	 

ii

 

	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	10.2.	 	Transactions at Closing	 	 	46	 
	 
	 	 	 	 	 	 	 	 
	11. SURVIVAL OF REPRESENTATION AND WARRANTIES; INDEMNIFICATION	 	 	47	 
	 
	 	 	 	 	 	 	 	 
	 
	 	11.1.	 	Survival of Representations, Warranties and Agreements	 	 	48	 
	 
	 	11.2.	 	Agreements to Indemnify Purchaser Indemnitees	 	 	48	 
	 
	 	11.3.	 	Agreements to Indemnify the Seller Indemnitees	 	 	49	 
	 
	 	11.4.	 	Recoveries	 	 	49	 
	 
	 	11.5.	 	Limitations on Indemnity	 	 	49	 
	 
	 	11.6.	 	Survival	 	 	50	 
	 
	 	11.7.	 	Notice and Defense of Actions	 	 	50	 
	 
	 	11.8.	 	Exclusive Remedy	 	 	52	 
	 
	 	11.9.	 	Treatment	 	 	52	 
	 
	 	 	 	 	 	 	 	 
	12. TERMINATION	 	 	52	 
	 
	 	 	 	 	 	 	 	 
	 
	 	12.1.	 	Method of Termination	 	 	52	 
	 
	 	12.2.	 	Procedure and Effect of Termination	 	 	53	 
	 
	 	 	 	 	 	 	 	 
	13. GENERAL PROVISIONS	 	 	54	 
	 
	 	 	 	 	 	 	 	 
	 
	 	13.1.	 	Notices	 	 	54	 
	 
	 	13.2.	 	Brokers	 	 	55	 
	 
	 	13.3.	 	Expenses	 	 	56	 
	 
	 	13.4.	 	Further Assurances	 	 	56	 
	 
	 	13.5.	 	Attribution of Knowledge	 	 	56	 
	 
	 	13.6.	 	Waiver	 	 	56	 
	 
	 	13.7.	 	Assignment; Binding Effect; No Third-Party Beneficiaries	 	 	56	 
	 
	 	13.8.	 	Headings	 	 	57	 
	 
	 	13.9.	 	Entire Agreement	 	 	57	 
	 
	 	13.10.	 	Modifications	 	 	57	 
	 
	 	13.11.	 	Governing Law	 	 	57	 
	 
	 	13.12.	 	Severability	 	 	57	 
	 
	 	13.13.	 	Counterparts	 	 	58	 
	 
	 	13.14.	 	Exhibits and Schedules Incorporated	 	 	58	 
	 
	 	13.15.	 	Waiver of Certain Damages	 	 	58	 
	 
	 	13.16.	 	Joint Preparation	 	 	58	 
	 
	 	13.17.	 	Performance by Affiliates	 	 	58	 
	 
	 	13.18.	 	Consent to Jurisdiction; Waivers of Trial by Jury	 	 	58	 

iii

 

LIST OF EXHIBITS

	 	 	 
	 
	 	 
	Exhibit A
	 	Assumed Working Capital Calculation
	 
	 	 
	Exhibit B
	 	Form of Transition Services Agreement
	 
	 	 
	Exhibit C
	 	Form of Seller’s Closing Certificate
	 
	 	 
	Exhibit D
	 	Form of Purchaser’s Closing Certificate

iv

 

LIST OF SCHEDULES

	 	 	 
	 
	 	 
	Schedule 3.2
	 	Conduct of the Business Prior to Closing
	Schedule 3.6(a)
	 	Excluded Assets and Liabilities
	Schedule 3.6(b)
	 	Pro Forma Balance Sheets
	Schedule 4.2.1
	 	Company’s Employees
	Schedule 5.2
	 	Capitalization of the Company and the Subsidiary
	Schedule 5.3.1
	 	Financial Statements
	Schedule 5.3.2
	 	Undisclosed Liabilities
	Schedule 5.4
	 	Taxes
	Schedule 5.5.1
	 	Tangible Personal Property
	Schedule 5.6
	 	Company’s Consents and Approvals
	Schedule 5.7
	 	Absence of Changes
	Schedule 5.8
	 	Material Claims
	Schedule 5.9
	 	Permits; Compliance with Laws
	Schedule 5.10.1
	 	Owned Real Property
	Schedule 5.10.2
	 	Leased Real Property
	Schedule 5.11.1
	 	Intellectual Property
	Schedule 5.11.2(a)
	 	Company’s and Subsidiary’s Software
	Schedule 5.11.2(b)
	 	Non-Company Affiliates’ Software
	Schedule 5.11.3
	 	Intellectual Property Infringement
	Schedule 5.12
	 	Material Contracts
	Schedule 5.13
	 	Labor Matters
	Schedule 5.14
	 	ERISA and Related Matters
	Schedule 5.15
	 	Guaranties or Bonds
	Schedule 5.16
	 	Employees
	Schedule 5.17
	 	Environmental Compliance
	Schedule 5.18
	 	Insurance Coverage
	Schedule 5.19
	 	Government Filings
	Schedule 5.20
	 	Accounts Receivable
	Schedule 6.3
	 	No Violation or Conflict by Seller
	Schedule 6.4
	 	Seller Governmental Approvals
	Schedule 6.6
	 	Litigation Against Seller
	Schedule 7.3
	 	No Violation or Conflict by Purchaser
	Schedule 7.4
	 	Purchaser Governmental Approvals
	Schedule 8.5
	 	Material Adverse Effect
	Schedule 13.5(a)
	 	Attribution of Knowledge for Seller
	Schedule 13.5(b)
	 	Attribution of Knowledge for Purchaser

v

 

STOCK PURCHASE AGREEMENT

          THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of this
30th day of January, 2007 (the “Effective Date”), by and between SEMPRA ENERGY, a
corporation incorporated under the laws of the State of California, USA (“Seller”), and
Energy West Incorporated, a corporation incorporated under the laws of the State of Montana, USA
(“Purchaser”).

W I T N E S S E T H:

          WHEREAS, Seller owns all of the issued and outstanding capital stock of Frontier Utilities of
North Carolina, Inc. (the “Company”);

          WHEREAS, the Company owns a one hundred percent (100%) membership interest in Frontier Energy,
LLC (the “Subsidiary”); and

          WHEREAS, Purchaser desires to purchase from Seller, and Seller desires to sell to Purchaser,
all of the issued and outstanding capital stock of the Company after the transfer of the Excluded
Assets and Liabilities (as defined herein), all in accordance with the terms and subject to the
conditions set forth herein.

          NOW, THEREFORE, in consideration of the premises and the mutual promises, representations,
warranties and covenants hereinafter set forth, the parties hereto agree as follows:

1. DEFINITIONS

     1.1. Defined Terms.

          As used herein, the following terms shall have the following meanings unless the context
otherwise requires:

          “Accounting
Expert” has the meaning set forth in
Section 2.3.2.

          “Accounts Receivable” means any and all accounts receivable of the Company or the
Subsidiary, as the term “accounts receivable” is understood under GAAP.

          “Accrued Tax Liability” means the aggregate amount of Income Tax liabilities
(including deferred Taxes) of the Company and the Subsidiary as reflected on the Closing Date
Balance Sheet.

          “Action”
has the meaning set forth in Section 11.7.1.

          “Adjustment Amount” means an amount equal to the sum of: (i) the Assumed Working
Capital Amount; minus (ii) the Closing Date Working Capital Amount.

          “Affiliate” means (a) with respect to each of Seller, the Company and the Subsidiary,
and any other member of the Sempra Group; and (b) with respect to any other Person, any Person

 

 

that, directly or indirectly, through one or more intermediaries, Controls, is Controlled by,
or is under common Control with, such first Person. For purposes of this definition and this
Agreement, the Company and the Subsidiary shall be deemed to be Affiliates of Seller prior to the
Closing and Affiliates of Purchaser from and after the Closing.

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

          “Assets” means all of the assets, rights, interests, contract rights, accounts,
claims, credits, franchises and properties of the Company and the Subsidiary, whether real,
personal, tangible or intangible.

          “Assumed Working Capital Amount” means an amount equal to the sum of: (i) the
Consolidated Working Capital Assets reflected in the Interim Financial Statements; minus (ii) the
Consolidated Working Capital Liabilities reflected in the Interim Financial Statements, calculated
as set forth on Exhibit A hereto.

          “Benefit Plan” means: (a) each “employee benefit plan,” as such term is defined in
Section 3(3) of ERISA, (b) each plan that would be an “employee benefit plan”, as such term is
defined in Section 3(3) of ERISA, if it was subject to ERISA, such as foreign plans and plans for
directors, (c) each stock bonus, stock ownership, stock option, stock purchase, stock appreciation
rights, phantom stock, or other stock plan (whether qualified or nonqualified), and (d) each bonus
or incentive compensation plan; provided, however, the term “Benefit Plan” shall
not include (i) routine employment policies and procedures or payroll plans developed and applied
in the ordinary course of business and consistent with past practice, including wage, vacation,
holiday, and sick or other leave policies, (ii) workers’ compensation insurance, and
(iii) directors’ and officers’ liability insurance.

          “Big Four Accounting Firm” means and includes any of the following independent
certified public accounting firms: PricewaterhouseCoopers, LLP, KPMG LLP, Deloitte & Touche LLP,
Ernst & Young LLP and any combined entity including two or more of such firms; provided,
however, that in no event shall the term “Big Four Accounting Firm” include any such
accounting firm that at the relevant time is the principal outside financial auditing firm for
Seller or Purchaser.

          “Business Day” means any day excluding Saturday, Sunday and any day that is a legal
holiday in the State of California, the State of New York or the State of North Carolina.

          “Cap” has the meaning set forth in Section 11.5.2.

          “CERCLA” has the meaning given to it in the definition of “Environmental Law.”

          “Closing” or “Closing Date” means the consummation of the transactions
contemplated by Section 10.2.

          “Closing Date” has the meaning set forth in Section 10.1.

          “Closing Date Balance Sheet” has the meaning set forth in Section 2.3.1.

 

 

          “Closing Date Working Capital Amount” means an amount equal to the sum of: (i) the
Consolidated Working Capital Assets reflected in the Closing Date Balance Sheet; minus (ii) the
Consolidated Working Capital Liabilities reflected in the Closing Date Balance Sheet.

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

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

          “Company Plan” means each Benefit Plan (other than the Seller Plans) that is sponsored
or maintained as of the date of this Agreement by the Company or the Subsidiary for the benefit of
any of their current or former directors, officers or employees.

          “Company’s Employees” has the meaning set forth in Section 4.2.

          “Confidential Information” means (a) all information concerning a party hereto and/or
its Affiliates furnished to another party hereto or any director, officer, employee, agent,
advisor, or other representative (a “Representative”) of such receiving party or any of its
Affiliates in writing, orally or electronically by such disclosing party or any Representative of
such disclosing party or any of its Affiliates in connection with this Agreement or the
transactions contemplated herein, whether before or after the date hereof, including, but not
limited to, any such information (i) concerning the business, financial condition, operations,
products, services, assets, customers, forecasts and/or liabilities of such disclosing party and/or
its Affiliates, (ii) which relates to technologies, intellectual property or capital, models,
concepts, or ideas of such disclosing party and/or its Affiliates, (iii) of third parties that such
disclosing party and/or its Affiliates is required under applicable Law or contracts to keep
confidential, or (iv) that has been clearly identified as confidential; and (b) terms and
conditions of this Agreement and any other agreement entered into pursuant hereto, the fact that
the parties hereto have entered into this Agreement, and that this Agreement exists;
provided, however, the term “Confidential Information” shall not include
information that: (i) is already known or in the possession of such receiving party at the time of
disclosure, as evidenced by such receiving party’s written documentation, unless received or
obtained as confidential information; (ii) becomes subsequently available to such receiving party
on a non-confidential basis from a source not known or reasonably suspected by such receiving party
to be bound by a confidentiality agreement or secrecy obligation owed to such disclosing party;
(iii) is or becomes generally available to the public other than as a result of a breach of
Section 3.4.2 by such receiving party or any Representative of such receiving party or any
of its Affiliates; or (iv) is independently developed by such receiving party without use, directly
or indirectly, of Confidential Information of such disclosing party, as evidenced by such receiving
party’s written documentation; provided further, however, if only a portion
of the Confidential Information falls under one of the foregoing exceptions, then only that portion
shall not be deemed Confidential Information.

          “Consolidated” means: (i) with respect to the financial statement(s) of the Company
and the Subsidiary, the presentation of the results of operations and the financial position of the
Company and the Subsidiary essentially as if the Company and the Subsidiary were a single company
with one or more branches or divisions; and (ii) with respect to any financial item(s) of the
Company and the Subsidiary, the presentation of such item(s) essentially as if the Company
and the Subsidiary were a single company with one or more branches or divisions, in each case

 

 

as determined in accordance with GAAP (whether or not the Company and the Subsidiary would in fact
be Consolidated under GAAP).

          “Consolidated Income Tax Returns” means any Income Tax Returns filed for any
consolidated, combined or unitary group of corporations under federal, state or local laws, the
common parent of which is Seller or a direct or indirect subsidiary of Seller other than the
Company or the Subsidiary.

          “Consolidated Working Capital Assets” means the sum of: (i) all current assets of the
Company and the Subsidiary, including, without limitation, cash and cash equivalents, marketable
securities, accounts receivable, notes receivable, prepayment expenses (including, without
limitation, prepaid rent, personal property taxes, real property taxes, business license taxes,
pipeline franchise taxes and insurance), inventory (including, without limitation, fuel and spare
parts), and allowance for doubtful accounts and other current asset accounts; minus (ii)
deferred taxes, mark-to-market accruals, and intercompany receivables, of the Company and the
Subsidiary on a Consolidated basis as of the Closing Date.

          “Consolidated Working Capital Liabilities” means the sum of: (i) all current
liabilities of the Company and the Subsidiary, including, without limitation, accounts payable,
accrued expenses, short-term debt and other current liability accounts; minus (ii) accrued
taxes, current portion of long-term debt, mark-to-market accruals, and intercompany payables, of
the Company and the Subsidiary on a Consolidated basis as of the Closing Date.

          “Continuation Period” has the meaning set forth in Section 4.2.2.

          “Contract” means any legally binding obligation or agreement (other than a Benefit
Plan) to which the Company or the Subsidiary is a party, whether or not reduced to writing, and
specifically including but not limited to any note, bond, mortgage, lease of real or personal
property, license agreement, construction contract, subcontract, engineering contract, guarantee,
suretyship agreement, pledge agreement, indemnity, joint venture or partnership agreement,
confidentiality agreement, non-competition agreement, insurance contract, employment agreement or
other contract or agreement.

          “Control” means (a) the possession, directly or indirectly, of the power to direct or
cause the direction of management and policies of a Person, whether through the ownership of voting
securities, as a trustee or executor, by contract or credit arrangement, or otherwise, or (b) the
ownership of more than fifty percent (50%) of the equity interest in a Person.

          “Deductible” has the meaning set forth in Section 11.5.1.

          “Default” shall mean (a) a material breach or default, or (b) the occurrence of an
event that with the passage of time or the giving of notice or both would constitute a material
breach or default.

          “DOJ” means the United States Department of Justice.

          “Dollar” or “$” means the lawful currency of the United States.

 

 

          “Environmental Law” means any federal, state, provincial or local law, statute,
ordinance, rule, regulation, or order relating to the protection of the environment, including the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq.)
(“CERCLA”), the Hazardous Material Transportation Act (49 U.S.C. § 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. § 2601 et seq.), and the Safe Drinking Water Act (42 U.S.C. § 300
et seq.), as amended or supplemented, that is in effect on the Closing Date.

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

          “Evaluation Period” has the meaning set forth in Section 3.2.

          “Excluded Assets and Liabilities” has the meaning set forth in Section 3.6.

          “FERC” means the United States Federal Energy Regulatory Commission.

          “Financial Statements” means, collectively, the Interim Financial Statements and the
Year-End Financial Statements.

          “FIRPTA Certificate” means a certificate, as described in Treasury Regulation Section
1.1445-2(b)(2), which is signed under penalties of perjury by an authorized representative of
Seller, and which (i) certifies that the Seller is not a “foreign person,” as defined in Treasury
Regulation Section 1.1445-2(b)(2), and (ii) provides Seller’s name, identifying number (as defined
in Section 6109 of the Code), and office address.

          “FTC” means the United States Federal Trade Commission.

          “GAAP” means generally accepted accounting principles as recognized by the American
Institute of Certified Public Accountants, as in effect from time to time.

          “Governmental Authority” means any nation, province, state, county, municipality and
any other political subdivision of any of the foregoing, and any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to government, including NCUC,
FERC, FTC, DOJ, SEC and IRS.

          “Guaranty or Bond” means any guaranty, letter of credit, surety bond and any other
similar material agreement or arrangement pursuant to which Seller or one or more Non-Company
Affiliates has obligations with respect to any obligations of the Company or the Subsidiary, and
any security or collateral furnished in connection with any such guaranty, letter of credit, surety
bond or other similar agreement or arrangement.

          “Hazardous Substance” means and includes each substance designated as a hazardous
waste, hazardous substance, hazardous material, pollutant, contaminant or toxic substance under any
Environmental Law and any petroleum hydrocarbons.

          “Income Tax” means any Taxes imposed on, or measured by, net income.

 

 

          “Income Tax Returns” means any Tax Returns relating to Income Taxes.

          “Indemnified Party” means any Person seeking indemnification from another Person
pursuant to Section 11.

          “Indemnifying Party” means any Person against whom a claim for indemnification is
asserted pursuant to Section 11.

          “Intellectual Property” means the following intellectual property rights, including
both statutory and common law rights, if applicable: (a) copyrights and registrations for
copyrights, (b) trademarks, service marks, trade names, slogans, domain names, logos, symbols, and
trade dress, and registrations and applications for registrations thereof, and (c) trade secrets
and confidential information, including ideas, designs, concepts, compilations of information,
methods, techniques, procedures, processes and other know-how, whether or not patentable.

          “Interim Financial Statements” means the unaudited, pro forma consolidated balance
sheet of the Company and the Subsidiary dated September 30, 2006.

          “IRS” means the United States Internal Revenue Service.

          “Law” means any law, statute, code, ordinance, regulation, order, reporting or
licensing requirement, or rule, including those promulgated, interpreted or enforced by any
Governmental Authorities.

          “Lien” means any mortgage, pledge, lien, security interest, hypothecation, conditional
sale agreement, restriction, option, defect in title, easement, encumbrance, charge, or other
similar title exception; provided, however, that the term “Lien” shall not include
(a) liens for current Taxes not yet due and payable, including liens for nondelinquent ad valorem
taxes and nondelinquent statutory liens arising other than by reason of any default on the part of
the Company, the Subsidiary, Seller or any of their Affiliates, (b) liens in favor of carriers,
warehousemen, mechanics, landlords and materialmen imposed by mandatory provisions of Law and
incurred in the Ordinary Course of Business for sums not yet due and payable, and (c) as to any
leased Asset, the rights of the lessor or landlord with respect to such leased Asset.

          “Losses” has the meaning set forth in Section 11.2.1.

          “Major Customer” shall mean any customer of the Company or the Subsidiary from which
the Company or the Subsidiary recognized in accordance with GAAP at least Twenty-Five Thousand
Dollars ($25,000) in revenue between January 1, 2006, and June 30, 2006.

          “Marked Materials” has the meaning set forth in Section 4.6.2.

          “Material Adverse Effect” means any change (or changes taken together) in, or effect
on, the business, financial condition or operations of the Company or the Subsidiary that is (are)
materially adverse to the business, financial condition or operations
of the Company or the Subsidiary, taken as a whole, but excluding (1) any change (or changes taken together) or
effect generally affecting natural gas distribution companies as a whole, (2) any change (or
changes taken together) or effect which is cured (including by the payment of money) before the
earlier

 

 

of the Closing or the termination of this Agreement under Section 12.1, or (3) any
order of or action by any Governmental Authority applicable to natural gas distribution companies
generally that imposes restrictions, regulations or other requirements thereon. Without limiting
the foregoing and except for purposes of Sections 5,7(1) and
8.5, any uninsured loss or damage suffered by the Company or
the Subsidiary in excess of Twenty-Five Thousand Dollars ($25,000) shall be deemed to have a
Material Adverse Effect.

          “Material Contracts” has the meaning set forth in Section 5.12.1.

          “Minimum Severance Benefit” has the meaning set forth in Section 4.2.4.

          “NCUC” means the North Carolina Utilities Commission.

          “New Guaranty or Bond” has the meaning set forth in Section 4.4.1.

          “Non-Company Affiliate” means any Affiliate of Seller other than the Company or the
Subsidiary.

          “Ordinary Course of Business” means, with respect to the Company and the Subsidiary,
the ordinary course of business which is commercially reasonable and consistent with past practices
of the Company and the Subsidiary.

          “Organizational Documents” means articles of incorporation, certificate of
incorporation, charter, bylaws, certificate of formation, limited liability company operating
agreement, joint venture agreement or partnership agreement, as applicable.

          “Outstanding Guaranty or Bond” has the meaning set forth in Section 4.4.4.

          “Patent” means (a) any patent granted by the U.S. Patent and Trademark Office or
comparable agency of any other country, as well as any reissued and reexamined patent and
extensions corresponding to such patent, and (b) any patent application filed with the U.S. Patent
and Trademark Office or comparable agency in any other country, as well as any related continuation
or continuation in part, any divisional application and patent issuing therefrom, and any
respective foreign counterpart patent application or foreign patent issuing therefrom.

          “Permits” means all licenses and permits issued by any Governmental Authority.

          “Person” means an individual, partnership, limited partnership, joint venture, limited
liability company or partnership, corporation, bank, trust, company, business entity, governmental
entity or organization, or unincorporated organization.

          “Pre-Closing Separate Income Tax Returns” has the meaning set forth in
Section 4.1.1.

          “Preliminary Purchase Price” has the meaning set forth in Section 2.2.2.

          “Property and Casualty Claims” has the meaning set forth in Section 4.7.

          “Purchase Price” has the meaning set forth in Section 2.2.1.

 

 

          “Purchased Shares” has the meaning set forth in Section 2.1.

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

          “Purchaser Indemnitees” has the meaning set forth in Section 11.2.1.

          “Purchaser’s Plans” has the meaning set forth in Section 4.2.2.

          “Real Property Leases” has the meaning set forth in Section 5.10.2.

          “Regulatory Approval” means the approval by the NCUC of the transaction contemplated
by this Agreement.

          “Regulatory Filing” has the meaning set forth in Section 3.3.3(a).

          “Replacement Guaranty or Bond” has the meaning set forth in Section 4.4.3.

          “Representative” has the meaning given to it in the definition of “Confidential
Information.”

          “Restricted Period” means the period commencing on the Closing Date and expiring on
the second anniversary of the Closing Date.

          “Retained Employee Liabilities” has the meaning set forth in Section 4.2.

          “Scheduled Claim” means any of the matters set forth in Schedule 5.8.

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

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

          “Seller Indemnitees” has the meaning set forth in Section 11.3.

          “Seller Insurance Policies” means policies of insurance with insurance carriers and
contractual arrangements with insurance adjusters maintained by Seller or its Affiliates prior to
the Closing.

          “Seller Marks” has the meaning set forth in Section 4.6.1.

          “Seller Plan” means each Benefit Plan (other than the Company Plans) that is
sponsored, maintained or contributed to as of the Closing Date by Seller or a Non-Company Affiliate
and that covers the current or former directors, officers or employees of the Company or the
Subsidiary.

          “Sempra Group” means the affiliated group of entities of which Seller is the common
parent corporation.

          “Separate Income Tax Returns” means Income Tax Returns of the Company or the
Subsidiary, other than Consolidated Income Tax Returns.

 

 

          “Software” means computer software programs including operating systems, application
programs and software tools.

          “Straddle Returns” has the meaning set forth in Section 4.1.2.

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

          “Tangible Personal Property” means all machines, equipment, tools, computers,
terminals, telephones, telephone systems, furniture, automobiles, fixtures, leasehold improvements,
parts and other tangible personal property and fixtures owned or leased by the Company and the
Subsidiary, including the property listed on Schedule 5.5.1.

          “Tax” or “Taxes” means all United States, federal, state and local, and all
foreign, income, profits, franchise, gross receipts, payroll, transfer, sales, employment, use,
property, excise, value added, ad valorem, estimated, stamp, alternative or ad-on minimum,
recapture, environmental, withholding and any other taxes, charges, duties, impositions or
assessments, together with all penalties and additions imposed on or with respect to such amounts,
or levied, assessed or imposed against the Company or the Subsidiary, including any liability for
taxes of any predecessor entity.

          “Tax Audit” has the meaning set forth in Section 4.1.10(a).

          “Tax Indemnified Person” has the meaning set forth in Section 4.1.10(a).

          “Tax Indemnifying Person” has the meaning set forth in Section 4.1.10(a).

          “Tax Return” means any return, declaration, report, claim for refund, or information
return or statement filed or required to be filed by the Company or the Subsidiary, including any
predecessor entities, with any taxing authority in connection with the determination, assessment,
collection or imposition of any Taxes.

          “Third Party” means any Person other than Seller, Purchaser, any Indemnified Party or
any Affiliate of Seller, Purchaser or any Indemnified Party.

          “Transfer Tax” has the meaning set forth in Section 4.1.7.

          “Transferred Employee” has the meaning set forth in Section 4.2.

          “Transition Services Agreement” has the meaning set forth in Section 4.3.

          “Year-End Financial Statements” means the unaudited, pro forma consolidated balance
sheet of the Company and the Subsidiary dated December 31, 2005.

     1.2. Construction of Certain Terms and Phrases

          Unless the context of this Agreement otherwise requires, (a) words of any gender include the
other gender; (b) words using the singular or plural number also include the plural or singular
number, respectively; (c) the terms “hereof,” “herein,” “hereunder,” “hereby” and derivative or

 

 

similar words refer to this entire Agreement; (d) the terms “include,” “includes,” and “including”
shall be deemed to be followed by the words “but not limited to;” (e) the term “Section” refers to
the specified Section of this Agreement; (f) the term “Schedule” or “Exhibit” refers to a Schedule
or Exhibit attached to this Agreement; (g) references to time are to San Diego, California time;
and (h) the term “material” and derivative or similar words refer to materiality with respect to
the Company and the Subsidiary on an aggregate basis. Whenever this Agreement refers to a number
of days, such number shall refer to calendar days unless Business Days are specified. Except as
otherwise stated herein, all accounting terms used herein and not expressly defined herein shall
have the meanings given to them under GAAP.

2. THE PURCHASE AND SALE OF STOCK

     2.1. Sale and Transfer

Upon the terms and subject to the conditions hereinafter set forth, Seller shall, at the Closing,
sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase and acquire
from Seller, all of Seller’s right, title and interest in and to all of the issued and outstanding
shares of common stock of the Company (the “Purchased Shares”), in exchange for the
Purchase Price.

     2.2. Payment of the Purchase Price

          2.2.1. Upon the terms and subject to the conditions hereinafter set forth, the aggregate
purchase price (the “Purchase Price”) to be paid by Purchaser to, or caused to be paid
to, Seller for the Purchased Shares shall be equal to the Preliminary Purchase Price, subject to
adjustment up or down, as the case may be, by the Adjustment Amount, payable in cash.

          2.2.2. Upon the terms and subject to the conditions hereinafter set forth, in consideration
of the delivery by Seller of the Purchased Shares, Purchaser shall pay to Seller at the Closing
an amount equal to Four Million Five Hundred Thousand Dollars ($4,500,000) (the “Preliminary
Purchase Price”), in cash by wire transfer of immediately available U.S. federal funds.

          2.2.3. Subject to the consummation of the Closing, within three (3) Business Days after the
Closing Date Balance Sheet and determination of the Adjustment Amount are deemed final and
binding upon the parties as provided in Section 2.3, (a) if the Adjustment Amount is a
negative amount, Purchaser shall pay to Seller the Adjustment Amount in cash by wire transfer of
immediately available U.S. federal funds, or (b) if the Adjustment Amount is a positive amount,
Seller shall pay to Purchaser the Adjustment Amount in cash by wire transfer of immediately
available U.S. federal funds, as the case may be.

     2.3. Preparation of the Closing Date Balance Sheet

          2.3.1. After the Closing Date, Purchaser, with the cooperation and assistance of Seller,
shall prepare an unaudited consolidated balance sheet of the Company and the Subsidiary as of
the Closing Date (but after taking into account the transactions to occur at or prior to the
Closing pursuant to this Agreement) (the “Closing Date Balance Sheet”), together

 

 

with
supporting schedules with respect thereto. The Closing Date Balance Sheet shall be prepared in
accordance with GAAP (except for required footnotes) applied in a manner consistent with the
preparation of the Financial Statements and at a level of detail sufficient to identify the
components necessary to calculate the Adjustment Amount. Purchaser shall deliver the Closing
Date Balance Sheet and all supporting schedules with respect thereto to Seller as soon as
practicable, but in any event no later than ninety (90) days after the Closing Date, together
with Purchaser’s determination of the Adjustment Amount based upon the Closing Date Balance
Sheet, certified by an officer of Purchaser, and the work papers relating thereto. Unless
disputed as contemplated by Section 2.3.2, such determination by Purchaser shall be
deemed final and binding on the parties hereto for all purposes of this Agreement. All costs
and expenses of preparing the Closing Date Balance Sheet and determining the Adjustment Amount
pursuant to this Section 2.3.1 shall be borne solely by Purchaser.

          2.3.2. If Seller desires to dispute any matter set forth on the Closing Date Balance Sheet
relating to the Adjustment Amount or Purchaser’s calculation of the Adjustment Amount, Seller
must, within thirty (30) days of Seller’s receipt of all documents and computations required to
be delivered to it pursuant to Section 2.3.1, deliver to Purchaser a written notice of
its objection, setting forth in reasonable detail the basis of the objection.
Thereafter, the parties hereto shall use their commercially reasonable efforts to resolve
such dispute. If the parties hereto are unable to resolve such dispute within thirty (30) days
after Purchaser receives Seller’s notice of objection, Purchaser and Seller shall, within five
(5) days after the foregoing 30-day period, submit such dispute or controversy for resolution by
a senior partner at a Big Four Accounting Firm mutually agreed to by Purchaser and Seller (the
“Accounting Expert”). Purchaser and Seller, respectively, shall submit their
determinations of the items in dispute to the Accounting Expert within five (5) days from the
engagement of the Accounting Expert. The Accounting Expert shall review the books and records
of the Company and the Subsidiary to resolve the dispute in question, applying the terms of this
Agreement, including, where applicable, GAAP in a manner consistent with the preparation of the
Financial Statements. The Accounting Expert shall deliver to Purchaser and Seller his or her
resolution of such dispute, together with his or her work papers relating thereto, as soon as
practicable, but in any event, no later than thirty (30) days from the engagement of the
Accounting Expert as described above. The scope of the Accounting Expert’s work shall be
limited to that necessary to resolve the particular issues in dispute that affect the
determination of the Adjustment Amount. In no event shall the decision by the Accounting Expert
exceed the scope of the relief sought by the parties. The Accounting Expert shall follow the
provisions of this Section 2.3 and shall have no power to alter, amend or deviate from
the provisions of this Section 2.3. All hearings and reports, correspondence and other
documents related to the resolution of such dispute shall be conducted or written in the English
language. The determination of the Accounting Expert shall be deemed final and binding on the
parties for all purposes of this Agreement. Each party in any dispute resolution proceeding
commenced under this Section 2.3.1 shall bear such party’s own costs and expenses
(including expert witness and attorneys’ fees) of investigating, preparing and pursuing such
dispute. The fees and expenses of the Accounting Expert in connection with the foregoing shall
be shared equally by Purchaser and Seller.

3. PRE-CLOSING COVENANTS AND UNDERTAKINGS

 

 

     3.1. Satisfaction of Closing Conditions

The parties shall use their commercially reasonable efforts to bring about, as soon as practical
after the date hereof, the satisfaction of all the conditions set forth in Sections 8 and 9.

     3.2. Conduct of the Business of the Company and the Subsidiary Prior to Closing

          Except with the prior written consent of Purchaser (which consent shall not be unreasonably
withheld, delayed or conditioned) or as otherwise provided in Schedule 3.2, and except as
may be required to effect the transactions contemplated by this Agreement, or as is otherwise
authorized by this Agreement (including Section 3.6 with
respect to the Excluded Assets and Liabilities), Seller covenants that it will, and will cause the
Company and the Subsidiary to, during the period commencing on the date of this Agreement and
terminating at the Closing:

               (a) preserve intact the legal existence of the Company and the Subsidiary to the extent within
Seller’s control, carry on the Company’s and the Subsidiary’s
business in the Ordinary Course of Business, and use its commercially reasonable efforts to
preserve the goodwill of all Persons having business relations with the Company or the Subsidiary;

               (b) maintain the Tangible Personal Property in the Ordinary Course of Business;

               (c) keep in force at no less than their present limits all existing surety bonds and policies
of insurance insuring the Assets and the Company’s and the Subsidiary’s business, except to the
extent that any such surety bond or insurance policy is no longer applicable or otherwise required
pursuant to the business of the Company or the Subsidiary;

               (d) use commercially reasonable efforts to maintain in full force and effect all Permits held
by the Company and the Subsidiary, except those Permits the failure of which to hold, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse Effect;

               (e) neither enter into, modify, amend or terminate any Material Contract or Real Property
Lease except in the Ordinary Course of Business, nor waive, release, compromise or assign any
material rights or claims thereunder except in the Ordinary Course of Business, nor suffer, permit
or incur any of the transactions or events described in Section 5.7 to the extent such events or transactions are within the reasonable control of Seller,
the Company or the Subsidiary;

               (f) not make any distributions of the Assets to Seller in the form of return of capital or
dividends, except for the transactions contemplated in Sections 3.6 and 4.1;

               (g) not make or permit any change in the Company’s or the Subsidiary’s Organizational
Documents, or in the Company’s or the Subsidiary’s authorized, issued or outstanding securities;

 

 

               (h) not issue any additional shares of capital stock, membership interests or other securities
or ownership interests of the Company or the Subsidiary, grant any stock option or right to
purchase any security or ownership interest of the Company or the Subsidiary, issue any security or
ownership interest convertible into such securities or ownership interests, purchase, redeem,
retire or otherwise acquire any of such securities or ownership interests, or declare, set aside or
pay any dividend or cash distribution in respect of the securities or ownership interests of the
Company or the Subsidiary, except for the transactions contemplated in Sections 3.6 and 4.1;

               (i) not make any changes in the Company’s or the Subsidiary’s accounting methods or practices,
except any such change which could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect;

               (j) not (i) pay, or incur any obligation for any payment of, any contribution or other amount
to, or with respect to, any Company Plan, (ii) pay any bonus to, make any loan, pay or transfer any Assets to, or grant any increase in the compensation of,
any director, officer, or employee of the Company or the Subsidiary, or (iii) make any increase in
the pension, retirement or other benefits of the Company’s or the Subsidiary’s directors, officers,
or employees, except, with respect to any of the foregoing subsections (i) through (iii), (A) in
the Ordinary Course of Business, (B) to the extent required by Law or (C) with respect to any
officer or director of the Company or the Subsidiary who receives no compensation from the Company
or the Subsidiary;

               (k) not have the Company or the Subsidiary pay, lend or advance any amount to or in respect
of, or sell, transfer or lease any Assets to, or enter into any agreement, arrangement or
transaction with, Seller or any Non-Company Affiliate, except for (i) payments, agreements,
transactions and arrangements in the Ordinary Course of Business, (ii) payments pursuant to
agreements existing on the date hereof, and (iii) the transactions contemplated in
Sections 3.6 and 4.1;

               (l) except in the Ordinary Course of Business, not permit the Company or the Subsidiary to (i)
incur or assume any indebtedness for borrowed money or issue any debt securities, or (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any Person other than itself or its respective subsidiaries;

               (m) not permit the Company or the Subsidiary to (i) make any loans, advances or capital
contributions to, or investments in, any Person other than itself or its respective subsidiaries,
(ii) pledge or otherwise encumber shares of capital stock of itself or its respective subsidiaries,
or (iii) mortgage or pledge any of the Assets, or create or suffer to exist any Lien thereupon;

               (n) not permit the Company or the Subsidiary to acquire, sell, lease or dispose of any Assets
except (i) in the Ordinary Course of Business or (ii) as contemplated in Sections 3.6
and 4.1;

 

 

               (o) not permit the Company or the Subsidiary to (i) acquire any Person (or division thereof),
any equity interest therein or all or substantially all of the assets thereof whether through a
merger, consolidation or purchase, or (ii) enter into a joint venture, partnership or any other
equity alliance with any Person except in the Ordinary Course of Business;

               (p) not (i) permit the Company or the Subsidiary to terminate the employment of any of its
employees, (ii) permit the Company or the Subsidiary to hire any employee of Seller or any
Non-Company Affiliate, (iii) permit Seller or any Non-Company Affiliate to hire away any employee
of the Company or the Subsidiary or (iv) permit the Company or the Subsidiary to hire any
additional employees who were not employees of the Company or the Subsidiary as of the date of this
Agreement, except, with respect to the foregoing subsections (i) through (iv), (A) in the Ordinary
Course of Business, (B) with Purchaser’s prior written consent or (C) in connection with any
transfer of the Excluded Assets and Liabilities; and

               (q) not agree to do anything that would violate any of the foregoing affirmative and negative
covenants of this Section 3.2.

   3.3. Consents and Approvals

          3.3.1. Subject to the allocation of responsibility set forth in Section 3.3.3,
Seller agrees to, and agrees to cause the Company and the Subsidiary to, apply for and use
commercially reasonable efforts to obtain no later than at the Closing (a) the Regulatory
Approval, (b) the waiver, consent and approval of all Persons whose waiver, consent or approval
is required by Law for Seller’s execution and delivery of this Agreement and Seller’s, the
Company’s and the Subsidiary’s consummation of the transactions contemplated herein, including
any consents or approvals in connection with the transfer of the Excluded Assets and
Liabilities, and (c) the waiver, consent and approval of all Persons whose waiver, consent or
approval is required by any Material Contract, Real Property Lease, consent, judgment, decree,
order or Permit to which Seller, the Company or the Subsidiary is a party or subject immediately
prior to the Closing, and which would prohibit or require the waiver, consent or approval of any
Person to, such transactions or under which, without such waiver, consent or approval, such
transactions would constitute an occurrence of Default under the provisions thereof, except for
any such waiver, consent or approval, with respect to subsections (b) and (c) only, which could
not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect
or a material adverse effect on the ability of Seller to consummate the transactions described
herein; provided, however, that none of Seller, the Company or the Subsidiary
shall make any agreements or understandings adversely affecting the Assets, the Company and the
Subsidiary, or their business, as a condition to obtaining any waivers, consents or approvals
required by this Section 3.3.1, except with the prior written consent of Purchaser
(which consent shall not be unreasonably withheld, delayed or conditioned). Purchaser agrees to
apply for and use commercially reasonable efforts to obtain no later than the Closing the
waiver, consent and approval of all Persons whose waiver, consent or approval is (i) required by
Law for Purchaser’s execution and delivery of this Agreement and Purchaser’s consummation of the
transactions contemplated herein, including the consents and approvals described in the first
sentence of

 

 

Section 9.4, or (ii) is required by any
material contract, consent, judgment, decree, order or Permit to which Purchaser is a party or
subject immediately prior to the Closing, and which would prohibit, or require the waiver,
consent or approval of any Person to, such transaction or under which, without such waiver,
consent or approval, such transaction would constitute an occurrence of Default under the
provisions thereof, except for any such waiver, consent or approval (with respect to either such
subsection (i) or (ii)) which could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of Purchaser to consummate the
transactions described herein.

          3.3.2. Each of the parties hereto (a) will take all commercially reasonable actions
necessary to comply promptly with all Laws that may be imposed on such party with respect to the
transactions contemplated herein (including requesting all necessary approvals for and executing
all necessary agreements for the novation of any Material Contracts with any Governmental
Authority, requesting all necessary approvals of subcontractors to such contracts, providing
notices and disclosures as required for foreign Persons, and furnishing
all information required under any Law in connection with approvals of or filings with any
Governmental Authority (including NCUC, FTC, DOJ, SEC or IRS)); provided,
however, the foregoing shall not require any of the parties hereto or any of their
Affiliates to sell or otherwise divest of a material portion of their respective assets or
properties or discontinue any of their respective significant operations; and (b) will promptly
cooperate with and furnish information to each other in connection with any such legal
requirements imposed upon any of them in connection with the transactions contemplated herein.
Any filings or approvals required to be accomplished by Seller, the Company, the Subsidiary or
any Non-Company Affiliate in accordance with this Section 3.3.2 shall be at Seller’s or
such Non-Company Affiliate’s expense, and any filings or approvals required to be accomplished
by Purchaser or any of its Affiliates in accordance with this Section 3.3.2 shall be at
Purchaser’s or any such Purchaser Affiliate’s expense.

          3.3.3. NCUC Regulatory Filing.

               (a) Purchaser and Seller shall have joint responsibility for the preparation and filing of
the regulatory filing(s) to be made to the NCUC requesting the Regulatory Approval (the
“Regulatory Filing”). Upon the request of the other party, Seller and Purchaser shall use
commercially reasonable efforts to cooperate with such other party to prepare and file the
Regulatory Filing.

               (b) Purchaser and Seller shall use commercially reasonable efforts to file as soon as
practicable after the date hereof the Regulatory Filing, and execute all agreements and
documents, in each case, to obtain as promptly as practicable the Regulatory Approval.
Purchaser and Seller shall act diligently, and shall coordinate in completing and submitting the
Regulatory Filing. Purchaser and Seller shall each have the right to review and approve (which
such approval shall not be unreasonably withheld, delayed or conditioned) in advance all of the
information relating to the transactions contemplated by this Agreement which appears in the
Regulatory Filing. Purchaser and Seller agree that all telephonic calls and meetings with the
NCUC relating to the transactions contemplated by this Agreement shall be conducted by Purchaser
and Seller jointly. Each party will bear its own legal costs incurred in connection with the
preparation and filing of the Regulatory Filing.

 

 

          3.3.4. Nothing in this Agreement will require either party to accept any condition to,
limitation on or other term concerning the grant of the Regulatory Approval if such condition,
limitation or other term, alone or in the aggregate with such other conditions, limitation or
other terms would (i) require the disposition by Purchaser of any material asset(s); (ii) have a
material adverse effect on either party or any of its Affiliates in its acquisition, ownership,
use, operation or disposition of any property other than the Assets; or (iii) materially change
or impair the commercial expectation of the Purchaser with respect to the sale or distribution
of gas by the Company or Subsidiary.

   3.4. Access, Information and Confidentiality

          3.4.1. Prior to the Closing, Seller shall cause the Company and the Subsidiary to (a) give
Purchaser and its authorized Representatives reasonable access, during normal
business hours and upon reasonable notice, to the books, records, files, documents and
contracts of the Company and the Subsidiary, and (b) allow Purchaser (together with its
authorized Representatives) to make a reasonable number of visits, during normal business hours
and upon reasonable notice, to each office, facility and other property owned or leased by the
Company or the Subsidiary; provided, however, that (i) Purchaser shall not have
access to the personnel files of the Company or the Subsidiary prior to Closing; (ii) any such
investigation or visit by Purchaser and its authorized Representatives shall be conducted in
such a manner as not to interfere unreasonably with the normal operations of the Company and the
Subsidiary; and (iii) Seller shall have the right to have a representative of its choice present
at any such investigation or visit by Purchaser.

          3.4.2. (a) Subject to the first sentence of subsection (b) of this Section 3.4.2, a
party hereto receiving Confidential Information from another party hereto shall not disclose and
shall keep strictly confidential all such Confidential Information of such disclosing party;
provided, however, that such receiving party may disclose Confidential Information of such
disclosing party (i) to any Representative of such receiving party or any of its Affiliates who
needs to know such information for purposes of consummating the transactions contemplated
herein, provided that (A) each such Representative shall have been provided with a copy of this
Section 3.4.2 and (B) such receiving party agrees to be responsible for such
Representative’s compliance with the terms of this Section 3.4.2 binding on such
receiving party; (ii) to any partner, Affiliate, lender or investor of such receiving party or
any of its Affiliates, or any Representative of such partner, Affiliate, lender or investor who
needs to know such information for purposes of consummating the transactions contemplated
herein, provided that, prior to any disclosure, each such partner, Affiliate, lender, investor
or Representative shall have entered into an agreement with such disclosing party that contains
terms and conditions regarding confidential treatment of such information that are substantially
the same as the provisions of this Section 3.4.2 and (iii) to the extent that such
receiving party or Representative is required to disclose such information in order to avoid
committing a violation of any applicable law, rule or regulation, including any rules or
regulations of any securities association, stock exchange or national securities quotation
system, provided that such receiving party provides prompt written notice to such disclosing
party of the proposed disclosure and, if applicable, takes the other actions required in

 

 

connection with a required disclosure pursuant to the first sentence of subsection (b) of this
Section 3.4.2. A receiving party shall not use any Confidential Information of a
disclosing party for any purpose other than for purposes of consummating the transactions
contemplated herein.

               (b) In the event that a receiving party or any Representative of such receiving party or any
of its Affiliates is requested or required, pursuant to any applicable court order, administrative
order, statute, regulation or other official order by any Governmental Authority, to disclose any
Confidential Information of a disclosing party, such receiving party shall (i) provide such
disclosing party with prompt written notice of any such request or requirement so that such
disclosing party may seek a protective order or other appropriate remedy and/or waive compliance
with the provisions of this Section 3.4.2, and (ii) reasonably cooperate with such
disclosing party to obtain such protective order or other remedy. In the event such protective
order or other remedy is not obtained and a disclosing party fails to waive compliance with the
relevant provisions of this Section 3.4.2, such receiving party agrees to
(A) furnish only that portion of the Confidential Information for which such receiving party
is advised by written opinion of its legal counsel, which counsel and opinion are reasonably
satisfactory to such disclosing party, is legally required to be disclosed, (B) upon such
disclosing party’s request and expense, use its commercially reasonable efforts to obtain
assurances that confidential treatment will be accorded to such information, and (C) give such
disclosing party prior written notice of the Confidential Information to be disclosed as far in
advance of its disclosure as is reasonably practicable.

               (c) If this Agreement is terminated prior to the Closing or at any other time for any reason,
upon the written request of a disclosing party, each receiving party will, and will cause all
Representatives of such receiving party or any of its Affiliates to promptly, (i) deliver to such
disclosing party all original Confidential Information (whether written or electronic) furnished to
such receiving party or any Representative of such receiving party or any of its Affiliates by or
on behalf of such disclosing party, and (ii) if specifically requested by such disclosing party,
destroy (A) any copies of such Confidential Information (including any extracts therefrom), and (B)
any portion of such Confidential Information that may be found in reports, analyses, notes,
compilations, studies and other documents prepared by or for such receiving party. After the
written request referenced in the foregoing sentence is given, upon written request of such
disclosing party for any reason, such receiving party shall cause one of its duly authorized
officers to certify in writing to such disclosing party that the requirements of the preceding
sentence have been satisfied in full. From and after the Closing, Purchaser shall be released from
all obligations owed by it to Seller under this Section 3.4.2 with respect to the
Confidential Information owned by the Company or the Subsidiary.

      3.4.3. During the period commencing on the date of this Agreement and terminating at the
Closing, Purchaser shall not contact or have discussions with any of the employees, customers or
vendors of Seller, the Company or the Subsidiary, whether in person or by telephone, mail or
other means of communication, without the specific prior written authorization of Richard
Vaccari, Amy Chiu or Randall L. Clark (which consent shall not be unreasonably withheld, delayed
or conditioned). In the event such consent is granted, Seller shall have the right to have one
of its representatives present during any such contact or discussion, Purchaser shall only
contact and hold discussions with such employees,

 

 

customers and vendors through Representatives of Purchaser previously approved by Seller,
Purchaser shall cause such Representatives to comply with all procedures and protocols regarding
such contacts and discussions that may be established by Seller, and any such contract or
discussion with employees shall occur only during normal business hours of the Company or the
Subsidiary.

3.5. Delivery of Financial Statements and Regulatory Filings

          During the period commencing on the date of this Agreement and terminating at the Closing,
Seller shall deliver to Purchaser, within thirty (30) days of being available or filed, copies of
(a) all regularly prepared unaudited monthly, quarterly and annual consolidated financial
statements of the Company and the Subsidiary prepared after the date of this Agreement, and (b) all
material filings or submissions by the Company or the Subsidiary with any Governmental Authority
made after the date of this Agreement.

3.6. Pre-Closing Transfers and Debt Forgiveness

          The parties hereto acknowledge and agree that prior to Closing, Seller shall cause the Company
and the Subsidiary to transfer to Seller (or any Non-Company Affiliate or a Third Party selected by
Seller) (a) any brokerage account balances or credits, and rights in and to brokerage accounts held
or owned by the Company or the Subsidiary, (b) the Company’s and the Subsidiary’s rights or
licenses to any Intellectual Property containing, referencing or otherwise pertaining to the words,
marks or names “Sempra Energy,” “Sempra” or any derivations or variations thereof, and (c) all of
the Company’s and the Subsidiary’s right, title and interest in and to the assets, properties and
rights and associated liabilities, obligations and employees described in Schedule 3.6(a)
(collectively, the “Excluded Assets and Liabilities”). Notwithstanding anything herein to
the contrary, (i) all references herein to any assets, liabilities or employees of the Company or
the Subsidiary (including the Assets and the Tangible Personal Property) shall expressly exclude
the Excluded Assets and Liabilities, and (ii) all references herein to the business or operation of
the business of the Company or the Subsidiary, whether with respect to financial, accounting,
legal, tax or other operations, shall expressly exclude the businesses or the operation of the
businesses related to the Excluded Assets and Liabilities. Prior to the Closing Date, Seller shall
eliminate all inter-company indebtedness between itself and the Company through the cancellation or
equitization of such inter-company indebtedness. An unaudited, pro forma consolidated balance
sheet of the Company and the Subsidiary, dated as of December 2006, and reflecting the elimination
of such inter-company indebtedness, is attached hereto as Schedule 3.6(b).

3.7. Public Announcements

          No party hereto or any of its Affiliates shall make any public announcement of the execution
and delivery of this Agreement or the transactions contemplated by this Agreement without first
obtaining the prior written consent of the other party hereto, such consent not to be unreasonably
withheld, delayed or conditioned; provided, however, that nothing contained in this
Section 3.7 shall prohibit any party hereto or any of its Affiliates from (i) making any
disclosures or having any discussions with the NCUC regarding this Agreement or the transaction
contemplated by this Agreement in accordance with Section 3.3.3, or (ii) making any public

 

 

announcement if such party or its Affiliate determines in good faith, on the advice of legal
counsel, that such public disclosure is required by applicable Law; provided
further, that in such event, such party or its Affiliate shall consult with the other party
hereto prior to making such disclosure to the extent reasonably practicable.

4. ADDITIONAL AGREEMENTS

4.1. Tax Matters

               4.1.1. Seller shall (i) cause the Company and the Subsidiary to prepare and file on a
timely basis all Tax Returns of the Company or the Subsidiary for all Tax periods which end on
or prior to the Closing Date and which are filed after the Closing Date; and (ii) pay all Taxes
of the Company and the Subsidiary with respect to such Tax periods, or shall reimburse Purchaser
within fifteen (15) days after payment by Purchaser of such Taxes. Seller shall prepare, or
cause to be prepared, (i) all Consolidated Income Tax Returns and (ii) all Separate Income Tax
Returns of the Company or the Subsidiary due after the Closing Date that relate solely to
periods ending on or before the Closing Date (such Separate Income Tax Returns being referred to
as “Pre-Closing Separate Income Tax Returns”). Seller shall submit to Purchaser any
Pre-Closing Separate Income Tax Returns at least thirty (30) days prior to the due date (after
all appropriate extensions) of such Tax Return for Purchaser’s review. Purchaser shall cause
the Company and the Subsidiary to timely and appropriately file all Pre-Closing Separate Income
Tax Returns submitted by the Seller in accordance with this Section 4.1.1.

               4.1.2. Purchaser shall cause the Company and the Subsidiary to prepare and file on a timely
basis all Tax Returns of the Company or the Subsidiary (other than Consolidated Income Tax
Returns and Pre-Closing Separate Income Tax Returns) due after the Closing Date, including all
Tax Returns that relate to periods beginning before and ending after the Closing Date
(“Straddle Returns”). All Straddle Returns shall be prepared on a basis consistent with
procedures and practices of the Company or the Subsidiary in effect as of the date hereof for
filing such Tax Returns. Purchaser shall submit all Straddle Returns related to Income Taxes to
Seller at least thirty (30) days prior to the due date (after all appropriate extensions) of
such Straddle Return for Seller’s review and approval (which will not be unreasonably withheld).
Purchaser shall not, or allow the Company or the Subsidiary to, amend a Tax Return (or extend
the statute of limitations for assessment or collection of any Taxes with respect to a Tax
Return) that relates to any period (or portion thereof) ending on or before the Closing Date
without the prior written permission of Seller (which will not be unreasonably withheld).

               4.1.3. Purchaser and Seller shall to the extent permitted under applicable law (i) elect to
have the tax year of the Company and the Subsidiary that ends on the Closing Date to end on (and
include) the Closing Date and (ii) treat all transactions occurring on the Closing Date but
after the Closing as occurring on the day after the Closing Date. To the extent that the tax
year of the Company or the Subsidiary does not end on the Closing Date such that the Tax Return
is a Straddle Return, the Income Taxes payable on the Straddle Return shall be allocated between
the portion of the period ending on the Closing Date and the portion of the period beginning
after the Closing Date assuming that the taxable period

 

 

for the Straddle Return actually included two separate periods, one ending on the Closing
Date and one beginning on the date after the Closing Date, provided that all exemptions,
allowances, or deductions for the entire taxable for the Straddle Return which are calculated on
an annual basis (including, but not limited to, depreciation and amortization deductions) shall
be allocated between the two short periods in proportion to the number of days in each period.

               4.1.4. The parties hereto acknowledge and agree that Seller shall be entitled exclusively
to control, defend and settle any action or proceeding associated with any Tax, audit, appeals
process or litigation involving the Company or the Subsidiary that relates solely to periods
ending on or before the Closing Date.

               4.1.5. Access to Information

                              (a) From and after the Effective Date, Seller shall grant to Purchaser (or its designees)
access at all reasonable times to the information, books and records relating to the Company and
the Subsidiary within the possession of Seller (including without limitation work papers and
correspondence with taxing authorities, but excluding personnel files), and shall afford Purchaser
(or its designees) the right (at Purchaser’s expense) to take extracts therefrom and to make copies
thereof, to the extent reasonably necessary to permit Purchaser (or its designees) to prepare Tax
Returns, to conduct negotiations with taxing authorities, and to implement the provisions of, or to
investigate or defend any claims between the parties arising under, this Section 4.1.

                              (b) From and after the Effective Date, Purchaser shall grant to Seller (or its designees)
access at all reasonable times to all of the information, books and records relating to the Company
and the Subsidiary within the possession of Purchaser or the Company or the Subsidiary (including
without limitation work papers and correspondence with taxing authorities), and shall afford Seller
(or its designees) the right (at Seller’s expense) to take extracts therefrom and to make copies
thereof, to the extent reasonably necessary to permit Seller (or its designees) to prepare Tax
Returns, to conduct negotiations with taxing authorities, and to implement the provisions of, or to
investigate or defend any claims between the parties arising under, this Agreement.

                              (c) Each of the parties hereto will preserve and retain all schedules, work papers and other
documents relating to any Tax Returns of or with respect to the Company or the Subsidiary or to any
claims, audits or other proceedings affecting the Company or the Subsidiary until the expiration of
the statute of limitations (including extensions) applicable to the taxable period to which such
documents relate or until the final determination of any controversy with respect to such taxable
period, and until the final determination of any payments that may be required with respect to such
taxable period under this Agreement.

               4.1.6. Purchaser and Seller shall provide (and Purchaser shall cause the Company and the
Subsidiary to provide) each other with such assistance as may reasonably be requested by the
other in connection with the preparation of any Tax Return (including, without limitation, any
Consolidated Income Tax Return), any audit or other examination by any taxing authority, or any
judicial or administrative proceedings relating to liabilities for

 

 

Taxes. Such assistance shall include making employees available on a mutually convenient
basis to provide additional information or explanation of material provided hereunder and shall
include providing copies of relevant tax returns and supporting material. Purchaser and Seller
will retain (and Purchaser shall cause the Company and the Subsidiary to retain) for the full
period of any statute of limitations any documents which may be relevant to such preparation,
audit, examination, proceeding or determination.

               4.1.7. All real or personal property Taxes assessed on an annual basis shall be prorated
between Seller and Purchaser as of the Closing Date based on the assumption that an equal amount
of Taxes applies to each day of the year, regardless of how any installment payments are billed
or made, except that Purchaser will bear all supplemental or other state and local real and
personal property Taxes which arise out of a change in ownership of the Company or of the
Subsidiary. Amounts attributable to the period beginning before and ending on the Closing Date
shall be borne by Seller and amounts attributable to the remainder of the year shall be borne by
Purchaser. Seller shall pay its portion of such real and personal property Taxes to Purchaser
on the Closing Date, and except as provided in the next sentence, shall have no further
liability or obligation with respect to such Taxes. If the amount of all real and personal
property Taxes due for the 2007 year (commencing January 1, 2007) has not been assessed by the
taxing authorities as of the Closing Date, then the amount of real and personal property Taxes
as prorated between Seller and Purchaser for the 2007 tax year will be estimated on the basis of
the 2006 tax year’s real and personal property Taxes and such amount will be subject to a
true-up adjustment after the Closing Date based upon the actual amount of Taxes assessed. If
any 2007 property Tax bills are received by Seller, Seller shall immediately forward such Tax
bills to Purchaser, who will remit payment of such Tax bills on or before the date on which the
Tax is due.

               4.1.8. Purchaser and Seller shall each pay one-half of all federal, state, local, foreign
and other transfers, sales, use or similar Tax (a “Transfer Tax”) applicable to, imposed
upon or arising out of the transfer of the Purchased Shares or any other transaction
contemplated by this Agreement.

               4.1.9. All refunds (whether direct or in the form of credit), plus interest thereon, for
Taxes received by the Company or the Subsidiary for periods (or portions thereof) ending on or
before the Closing Date to the extent not included as an asset on the Closing Date Balance Sheet
shall be property of Seller. Purchaser shall cooperate with Seller and its Affiliates in order
to take all necessary steps to claim any such refund for Seller. To the extent that the Company
or the Subsidiary receives a refund for Taxes that is property of Seller, Purchaser shall notify
Seller within three (3) Business Days of receipt by the Company or the Subsidiary of such
refund. Within ten (10) Business Days of its receipt of such refund, the Company or the
Subsidiary, as the case may be, shall pay to Seller an amount equal to the refund received plus
any interest received from the applicable governmental authority with respect to such refund.

               4.1.10. Contest Provisions.

                              (a) Each of Purchaser, on the one hand, and Seller, on the other hand (the “Tax
Indemnified Person”), shall notify the chief tax officer (or other appropriate person) of

 

 

Seller or Purchaser, as the case may be (the “Tax Indemnifying Person”), in writing
within ten (10) Business Days of receipt by the Tax Indemnified Person of written notice of any
pending or threatened audits, adjustments, claims, examinations, assessments or other proceedings
(a “Tax Audit”) which are likely to affect the liability for Taxes of such other party. If
the Tax Indemnified Person fails to give such timely notice to the other party, it shall not be
entitled to indemnification for any Taxes arising in connection with such Tax Audit if such failure
to give notice adversely affects the other party’s rights to participate in the Tax Audit.

                              (b) If such Tax Audit relates to any taxable period, or portion thereof, ending on or before
the Closing Date or for any Taxes for which Seller is liable in full under this Agreement, Seller
shall, at its expense, control the defense and settlement of such Tax Audit. If such Tax Audit
relates to any taxable period, or portion thereof, beginning on or after the Closing Date or for
any Taxes for which Purchaser is liable in full under this Agreement, Purchaser shall, at its
expense, control the defense and settlement of such Tax Audit.

                              (c) If such Tax Audit relates to Taxes for which both Seller and Purchaser are liable under
this Agreement, to the extent practicable, such Tax items will be distinguished and each party will
control the defense and settlement of Taxes for which it is so liable. If such Tax Audit relates
to a taxable period, or portion thereof, beginning before and ending after the Closing Date and any
Tax item cannot be identified as being a liability of only one party or cannot be separated from a
Tax item for which the other party is liable, Seller, at its expense, shall control the defense and
settlement of the Tax Audit, provided that such party defends the items as reported on the relevant
Tax Return and provided further that no such matter shall be settled without the written consent of
both parties, not to be unreasonably withheld.

                              (d) Any party whose liability for Taxes may be affected by a Tax Audit shall be entitled to
participate at its expense in such defense and to employ counsel of its choice at its expense and
shall have the right to consent to any settlement of such Tax Audit (not to be unreasonably
withheld) to the extent such settlement would have an adverse effect for a period for which that
party is not liable for Taxes, under this Agreement or otherwise.

               4.1.11. All Tax sharing or similar agreements that include Seller and the Company or the
Subsidiary shall be cancelled prior to the Closing Date such that the Company and the Subsidiary
shall have no further rights or obligations under such agreements. On or prior to the Closing
Date, Seller shall have the right, notwithstanding any other provision of this Agreement, to
have the Company and the Subsidiary distribute an amount equal to the Company’s or the
Subsidiary’s share of the Income Tax liability of any consolidated group including Seller and
the Company or the Subsidiary.

               4.1.12. Post-Closing Actions Which Affect Seller’s Tax Liability.

                              (a) Except to the extent required by applicable Laws, Purchaser shall not permit the Company,
the Subsidiary or any other Affiliate of Purchaser to take any action on or after the Closing Date
which could materially increase Seller’s liability for Taxes (including any liability of Seller to
indemnify Purchaser for Taxes under this Agreement).

                              (b) Except to the extent required by applicable Laws, Purchaser shall not

 

 

permit the Company, the Subsidiary or any other Affiliate of Purchaser to amend any Tax Return
filed by, or with respect to, the Company or the Subsidiary for any taxable period, or portion
thereof, beginning before the Closing. This provision shall not be construed to limit or prohibit
Purchaser’s right to challenge real or personal property tax assessments for periods prior to the
Closing Date; provided, however, Purchaser shall indemnify and hold Seller and its
Affiliates harmless from any adverse Tax consequences resulting from any such challenge.

               4.1.13. Neither the Company nor the Subsidiary shall carry back any net operating losses,
other tax attributes or tax item to any period ending on or before the Closing Date. If the
Company or the Subsidiary is required to carry back a net operating loss, other tax attribute,
or tax item to a period ending on or before the Closing Date, Purchaser shall indemnify and hold
Seller and its Affiliates harmless from any adverse Tax consequences resulting from such
carryback.

               4.1.14. FIRPTA Certificate. Prior to Closing, Seller shall deliver a FIRPTA
Certificate to Purchaser.

4.2. Employee and Benefit Matters

               4.2.1. Schedule 4.2.1 contains a list of employees who are actively employed by the Company
or the Subsidiary (including individuals on vacation, short-term disability or similar leave but
excluding those persons on long-term disability leave) on the date hereof who the parties agree
and acknowledge will be treated as employees of the Company or the Subsidiary for purposes of
this Agreement, which such Schedule 4.2.1 shall be amended as of the Closing Date to add or
delete any employees that were hired or terminated after the Effective Date in accordance with
Section 3.2(p) hereof. All employees listed on Schedule 4.2.1 as of the Closing Date shall be
referred to herein as “Company’s Employees.” For the sixty (60) day period following the
Closing Date (the “Evaluation Period”), Purchaser shall evaluate Company’s Employees and
determine which of Company’s Employees, if any, will be terminated at the end of the Evaluation
Period; provided, however, that Purchaser shall not terminate more than forty
percent (40%) of Company’s Employees during or at the end of the Evaluation Period. Each of
Company’s Employees who is not terminated as of the end of the Evaluation Period shall
hereinafter be referred to as a “Transferred Employee.” Each of Company’s Employees who is
terminated as of the end of the Evaluation Period shall be referred to as a “Terminated
Employee.” Seller shall retain and satisfy, or reimburse the Subsidiary as applicable for, any
and all responsibility, and Purchaser shall have no liability or responsibility whatsoever, for
any and all claims, liabilities and obligations, whether contingent or otherwise, relating to
(i) any former or retired employee of the Company or the Subsidiary whose employment terminated
prior to the Effective Date and who is not a Transferred Employee, including, without
limitation, any unpaid salary, wages, bonuses or other compensation or severance pay or
benefits, (ii) severance payments in an amount equal to three (3) months’ base pay due to any of
Company’s Employees whose employment was terminated by Purchaser during the Evaluation Period,
unless Seller or the Subsidiary has already made a payment to such Company’s Employee pursuant
to any of the employment, retention or similar agreements set forth on Schedule
5.12.1.5, in which case Seller shall have no further obligation with respect to severance or
retention payments for such employee, (iii) any Transferred Employee arising out of or relating
to any period, or otherwise incurred,

 

 

prior to the Closing Date, including, without limitation, any unpaid salary, wages, bonuses
or other compensation or severance pay, benefits or group health care coverage required by
Section 4980B of the Code or Section 601 of ERISA, except for those benefits referenced in
Section 4.2.5, and (iv) the Seller Plans (such claims, liabilities and obligations, collectively
the “Retained Employee Liabilities”). Any severance payment or retention payment made by Seller
pursuant to subsection (ii) above shall be conditioned upon the Terminated Employee executing a
general release of claims against Seller, the Company, the Subsidiary and Purchaser.

               4.2.2. Continuation Period. For the nine (9) month period following the Closing Date
(the “Continuation Period”), Purchaser shall (i) provide each Transferred Employee, during
any portion of the Continuation Period that such employee is employed by Purchaser, a rate of pay
that is no less than the rate of pay that such Transferred Employee receives immediately prior to
the Closing Date and (ii) provide such Transferred Employees (as a group) with the employee
benefit plans, programs and policies (other than equity-based plans, programs or policies) that
are substantially similar in the aggregate to those employee benefit plans, programs and policies
that are maintained by Purchaser or its Affiliates from time to time for the benefit of similarly
situated employees of Purchaser or its Affiliates (any such employee benefit plans of Purchaser in
which Transferred Employees become eligible to participate after the Closing shall be referred
hereinafter as, the “Purchaser’s Plans”). If Purchaser has no similarly situated
employees, Purchaser shall provide such Transferred Employees with benefit plans, programs and
policies substantially similar in the aggregate to the benefit plans, programs and policies
provided to such Transferred Employees immediately prior to the Closing Date. Notwithstanding any
other provision herein, Purchaser shall not have any obligation to continue the employment of any
Transferred Employee for any period following the Closing Date. Neither Purchaser nor Purchaser’s
Plans shall receive assets from, nor be required to assume any of the liabilities of, the Seller
Plans.

               4.2.3. With respect to the Purchaser’s Plans, except to the extent otherwise required by
applicable law, Purchaser shall use commercially reasonable efforts (i) with respect to each such
plan that is a medical or health plan, to waive, or cause the waiver of, any exclusions for
pre-existing conditions and waiting periods for each Transferred Employee and his/her dependents
to the extent that such pre-existing condition exclusions and waiting periods were previously
satisfied by such Transferred Employee or his/her dependents under the comparable Benefit Plan
covering such Transferred Employee immediately prior to becoming eligible to participate in
Purchaser’s Plan, (ii) with respect to each such plan that is a medical or health plan, provide
each Transferred Employee with credit for any deductibles and out- of-pocket expenses paid or
incurred by such Transferred Employee under the comparable Benefit Plan covering such Transferred
Employee immediately prior to becoming eligible to participate in Purchaser’s Plan (to the same
extent such credit was given under such comparable Benefit Plan) in satisfying any applicable
deductible or out- of-pocket requirements under such Purchaser’s Plan for the plan year in which
such Transferred Employee became eligible to participate in Purchaser’s Plan, and (iii) recognize
service of the Transferred Employees credited by Seller solely for purposes of eligibility to
participate and vesting in any Purchaser’s Plan in which the Transferred Employees are eligible to
participate after the Closing Date to the extent that such service was recognized for that purpose
under the analogous Benefit Plan prior to such transfer; provided however, that in
no event shall the

 

 

Transferred Employees be entitled to any credit to the extent that it would result in a
duplication of benefits with respect to the same period of service.

               4.2.4. Purchaser shall provide severance benefits in an amount no less than three (3) months’
base pay (hereinafter referred to as the “Minimum Severance Benefit”), to any Transferred
Employee who is terminated without cause during the Continuation Period.

               4.2.5. On the Closing Date, Purchaser shall receive a credit against the Purchase Price in
an amount equal to the sum of all Company’s Employees’ unused flexible holiday and vacation
time.

4.3. Transition Services Agreement; Post-Closing Cooperation

                              (a) Within sixty (60) days of the Effective Date but in no event later than the Closing Date,
Purchaser and Seller shall reasonably cooperate with the other to identify such transition services
that Purchaser may require to transition the operations of the Company and the Subsidiary to
Purchaser on the Closing Date. To the extent such transition services are identified, at the
Closing, Seller and Purchaser shall enter into a Transition Services Agreement in the form attached
hereto as Exhibit B (the “Transition Services Agreement”).

                              (b) Following the Closing, Seller and Purchaser shall, upon request by the other party,
cooperate with such other party by furnishing any additional information, executing and delivering
any additional documents and/or instruments and doing any and all such other things as may be
reasonably required by the parties or their counsel to consummate or otherwise implement the
transactions contemplated by this Agreement.

4.4. Guaranties or Bonds

               4.4.1. After the date hereof and prior to the Closing, Seller shall not, and shall cause
the Non-Company Affiliates not to, without the prior written consent of Purchaser, (a) enter
into, issue or obtain any Guaranty or Bond (each individually, a “New Guaranty or
Bond”), or (b) amend or otherwise modify any Guaranty or Bond; provided,
however, that notwithstanding anything to the contrary contained in this
Section 4.4:

                              (a) Purchaser shall not unreasonably withhold, delay or condition its consent to any New
Guaranty or Bond which is entered into in the Ordinary Course of Business, and Purchaser shall not
unreasonably withhold, delay or condition its consent to any amendment or other modification of any
Guaranty or Bond in the Ordinary Course of Business if such amendment or other modification would
not result in a breach of any provision of this Agreement; and

                              (b) Seller and the Non-Company Affiliates may, without the prior written consent of Purchaser,
enter into, issue or obtain any New Guaranty or Bond to replace, substitute for or backstop any
Guaranty or Bond, or amend or otherwise modify any Guaranty or Bond, if such New Guaranty or Bond
or such amendment or other modification contains terms and conditions that, in all material
respects, are no more adverse to Seller and/or the applicable Non-Company Affiliate than such
existing Guaranty or Bond.

 

 

               4.4.2. Seller shall promptly provide Purchaser with a true and correct copy of any New
Guaranty or Bond or amendment or other modification to a Guaranty or Bond. In no event shall
the Company or the Subsidiary pay or commit to pay Seller, any Non-Company Affiliate or any
other Person any fee or other compensation in consideration of Seller and/or any Non-Company
Affiliate agreeing to enter into any New Guaranty or Bond or any amendment or other modification
to a Guaranty or Bond, but nothing in this sentence is a limitation on rights of subrogation in
favor of Seller or any Non-Company Affiliate.

               4.4.3. Purchaser shall use its commercially reasonable efforts to (a) obtain complete and
unconditional release of Seller and any Non-Company Affiliates at or prior to the Closing with
respect to each of the Guaranties or Bonds, and (b) subject to the final sentence of this
Section 4.4.3, cause the beneficiary or beneficiaries of each such Guaranty or Bond to
terminate and redeliver to Seller and such Non-Company Affiliates such Guaranty or Bond. The
commercially reasonable efforts obligation of Purchaser described in this Section 4.4.3
shall include the obligation to offer and deliver to the beneficiary of such Guaranty or Bond,
promptly upon request by Seller, (i) in the case such Guaranty or Bond is a guaranty, a
replacement guaranty issued to such beneficiary by Purchaser or another Person having a net
worth and a credit rating at least equal to those of Purchaser, and which replacement guaranty
contains terms and conditions not less favorable to such beneficiary in any material respect
than the terms and conditions of such existing guaranty, (ii) in the case such Guaranty or Bond
is a letter of credit, a replacement letter of credit issued to such beneficiary by a Person
having a net worth and a credit rating at least equal to those of the issuer of such existing
letter of credit, and which replacement letter of credit contains terms and conditions not less
favorable to such beneficiary in any material respect than the terms and conditions of such
existing letter of credit, (iii) in the case such Guaranty or Bond is a surety bond, a
replacement surety bond issued to such beneficiary by a Person having a net worth and a credit
rating at least equal to those of the issuer of such existing surety bond, and which replacement
surety bond contains terms and conditions not less favorable to such beneficiary in any material
respect than the terms and conditions of such existing surety bond, and (iv) in the case such
Guaranty or Bond is any other security agreement or arrangement, a replacement security
agreement or arrangement provided to such beneficiary by a Person having a net worth and a
credit rating at least equal to those of the provider of such existing security agreement or
arrangement, and which replacement security agreement or arrangement contains terms and
conditions not less favorable to such beneficiary in any material respect than the terms and
conditions of such existing security agreement or arrangement (each individually, a
“Replacement Guaranty or Bond”). Notwithstanding anything in this Agreement to the
contrary, during the period commencing on the date of this Agreement and terminating at the
Closing, Purchaser, with Seller’s prior written approval, may contact and have discussions with
each beneficiary of a Guaranty or Bond in order to satisfy its obligations under this
Section 4.4; provided, however, Seller shall have the right to have one
of its representatives present during any such contact or discussion, and Purchaser shall only
contact and hold discussions with such beneficiaries through Representatives of Purchaser
previously approved by Seller, and Purchaser shall cause such Representatives to comply with all
procedures and protocols regarding such contacts and discussions that may be established by
Seller.

 

 

               4.4.4. If any Guaranty or Bond is not released, terminated and returned as of the Closing
as contemplated in Section 4.4.2 (each individually an “Outstanding Guaranty or
Bond”), then Purchaser shall from and after the Closing:

                              (a) continue to use its commercially reasonable efforts to (i) obtain complete and
unconditional release of Seller and any Non-Company Affiliates with respect to each of the
Outstanding Guaranties or Bonds, and (ii) cause the beneficiary or beneficiaries of each such
Outstanding Guaranty or Bond to terminate and redeliver to Seller and such Non-Company Affiliates
such Outstanding Guaranty or Bond; and

                              (b) promptly pay to Seller, after receipt by Purchaser of any invoice therefor, all reasonable
out-of-pocket costs and expenses incurred by Seller or any Non-Company Affiliate after the Closing
Date in connection with, or pursuant to the terms of, any Outstanding Guaranty or Bond until the
complete and unconditional release of Seller and any Non-Company Affiliate’s obligations with
respect to such Outstanding Guaranty or Bond.

          The commercially reasonable efforts obligation of Purchaser described in this
Section 4.4.3 shall be the same as those set forth in Section 4.4.2;
provided, however, if any Outstanding Guaranty or Bond is not released and
terminated as contemplated in this Section 4.4.3 within ninety (90) days of the Closing
Date, Purchaser shall promptly upon Seller’s request offer and deliver to the beneficiary of such
Outstanding Guaranty or Bond (i) in the case such Outstanding Guaranty or Bond is a guaranty, a
replacement guaranty issued to such beneficiary by Purchaser or another Person having a net worth
and a credit rating at least equal to those of Purchaser, and which replacement guaranty contains
terms and conditions that are substantially identical to the terms and conditions of such existing
guaranty, (ii) in the case such Outstanding Guaranty or Bond is a letter of credit, a replacement
letter of credit issued to such beneficiary by a Person having a net worth and a credit rating at
least equal to those of the issuer of such existing letter of credit, and which replacement letter
of credit contains terms and conditions that are substantially identical to the terms and
conditions of such existing letter of credit, (iii) in the case such Outstanding Guaranty or Bond
is a surety bond, a replacement surety bond issued to such beneficiary by a Person having a net
worth and a credit rating at least equal to those of the issuer of such existing surety bond, and
which replacement surety bond contains terms and conditions that are substantially identical to the
terms and conditions of such existing surety bond, and (iv) in the case such Outstanding Guaranty
or Bond is any other security agreement or arrangement, a replacement security agreement or
arrangement provided to such beneficiary by a Person having a net worth and a credit rating at
least equal to those of the provider of such existing security agreement or arrangement, and which
replacement security agreement or arrangement contains terms and conditions that are substantially
identical to the terms and conditions of such existing security agreement or arrangement.

               4.4.5. From and after the Closing Date, Purchaser hereby agrees to indemnify and hold
harmless Seller and each Non-Company Affiliate that is a party to or has furnished any Guaranty
or Bond from and against any and all Losses (including any increase in the liability of Seller
or any Non-Company Affiliate in respect of Taxes) suffered or incurred by Seller or any
Non-Company Affiliate arising from or related to any Outstanding Guaranty or Bond.

 

 

4.5. Agreement Not to Solicit Employees

          Unless otherwise consented to in writing by Purchaser, Seller agrees that during the
Restricted Period, neither Seller nor any Non-Company Affiliate will solicit or hire away any
Transferred Employee, except (a) in so far that such employee responds to a bona fide public job
advertisement made by Seller or any Non-Company Affiliate (whether posted on a public site on the
Internet or in a newspaper, magazine or other publication of general circulation), (b) if such
employee initiates contacts regarding employment or engagement with Seller or a Non-Company
Affiliate without any direct or indirect solicitations by Seller or any Non-Company Affiliate,
(c) if the employment of such employee has been terminated by the Company, the Subsidiary,
Purchaser or any Affiliate of Purchaser prior to commencement of employment discussions between
such employee and Seller or any Non-Company Affiliate, or (d) if such employee is submitted to
Seller or any Non-Company Affiliate by a third-party unaffiliated employment agency provided
neither Seller nor any Non-Company Affiliate has provided such employment agency any information
regarding its interest in such employee.

4.6. The Company’s or the Subsidiary’s Use of Seller Marks

               4.6.1. Except to the extent otherwise provided in Section 4.6.1, Purchaser shall
not acquire, nor shall the Company or the Subsidiary retain, reserve, or hold, any rights or
licenses to, any Intellectual Property containing, referencing or otherwise pertaining to the
words, marks or names “Sempra Energy,” “Sempra” or any derivatives or variations thereof
(collectively, the “Seller Marks”) or any names, servicemarks, trademarks, designs,
trade dress, or logos confusingly similar thereto. Within twenty (20) days after the Closing
Date, Purchaser will cause the Company and the Subsidiary to amend their Organizational
Documents to the extent necessary to remove the Seller Marks from the name of the Company and
the Subsidiary. Except to the extent otherwise provided in Section 4.6.1, as soon as
reasonably practicable after the Closing (but in any event, not later than ninety (90) days
thereafter), Purchaser will cause the Company and the Subsidiary (a) to remove all trademarks,
service marks, trade names, slogans, domain names, logos, symbols and trade dress including the
Seller Marks from the properties and assets (including all signage, equipment, training material
and Software) of the Company and the Subsidiary, and (b) otherwise to cease all use of the
Seller Marks or any other terms that are confusingly similar thereto.

               4.6.2. To the extent that any Seller Marks are used by the Company or the Subsidiary in
operating its business on stationery, signage, equipment, invoices, receipts, forms, packaging,
advertising and promotional materials, product, training and service literature and materials,
Software or like materials (collectively, the “Marked Materials”), then, effective as of
the Closing, Seller grants to the Company or the Subsidiary a non-exclusive, non-transferable,
limited license to use any such Marked Materials for a period not to exceed ninety (90) days
after the Closing solely and exclusively for its own internal use, consistent with the past
practices of the Company or the Subsidiary in operating its business; provided
that (a) the Company or the Subsidiary shall not without the prior written consent of
Seller use such Seller Marks in any other manner during such time, and (b) Purchaser shall
within ninety (90) days after the Closing Date cause the Company and the Subsidiary not to use
any Marked Materials (other than signage on equipment and on training materials or

 

 

Software for internal use only) without first crossing out or marking over such Seller
Marks or otherwise clearly indicating on such Marked Materials that the Company or the
Subsidiary is no longer an Affiliate of Seller. After the Closing, Purchaser shall cause the
Company and the Subsidiary not to reorder any Marked Materials.

               4.6.3. Notwithstanding anything to the contrary herein, any use by Purchaser of any Seller
Mark or Marked Materials shall include any and all notices or disclaimers required by Law to be
included with or on such Seller Marks or Marked Materials including but not limited to any
disclaimers required by the California Public Utilities Commission to be used by Affiliates of
San Diego Gas & Electric Company and Southern California Gas Company.

4.7. Insurance Claims

               Seller shall be solely responsible for the administration and, to the extent applicable,
payment of any Property and Casualty Claims with a date of occurrence prior to the Closing, and
hereby releases Purchaser, the Company, the Subsidiary and their Affiliates of any responsibility
or liability therefor. Purchaser shall be solely responsible for the administration and, to the
extent applicable, payment of any Property and Casualty Claims with a date of occurrence on or
after the Closing, and hereby releases Seller and each Non-Company Affiliate of any responsibility
or liability therefor. For purposes hereof, “Property and Casualty Claims” shall mean
workers’ compensation, auto liability, general liability, products liability, professional
liability, fiduciary liability, pollution liability and director and officer liability claims
relating to the business of the Company or the Subsidiary and claims for damages caused to
facilities of the Company or the Subsidiary generally insured under all risk property and boiler
and machinery insurance coverage, in each case including reported claims and incurred but not
reported claims. Seller shall be solely responsible for the administration and payment of all
costs associated with claims for workers’ compensation and other occupational health or injury
claims of employees of Seller or the Subsidiary prior to the Closing Date and for any claim filed
subsequent to the Closing Date made in connection with any injury, event or occurrence taking place
prior to the Closing Date.

5. REPRESENTATIONS AND WARRANTIES OF SELLER REGARDING THE COMPANY AND THE SUBSIDIARY

Seller represents and warrants to Purchaser that:

5.1. Organization and Good Standing of the Company and the Subsidiary; Foreign
Qualifications

               5.1.1. The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of North Carolina, USA, and has all requisite corporate
power and authority to own and lease the properties it currently owns and leases and to carry on
its business as such business is currently conducted. The Subsidiary is a limited liability
company duly formed, validly existing and in good standing under the laws of the State of North
Carolina, USA, and has all requisite limited liability company power and authority to own and
lease the properties it currently owns and leases and to carry on its business as such business
is currently conducted.

 

 

               5.1.2. The Company and the Subsidiary are duly licensed, registered and qualified to do
business as a foreign corporation or limited liability company, as the case may be, and is in
good standing in all jurisdictions in which the ownership, leasing or operation of its assets or
the conduct of its business as currently conducted requires such qualification under applicable
Law, except where the failure to be so licensed, registered or qualified, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

               5.1.3. Seller has heretofore made available to Purchaser true, correct and complete copies
of the Organizational Documents, each as amended to the date hereof, of the Company and the
Subsidiary.

5.2. Capitalization of the Company and the Subsidiary

               5.2.1. The authorized capital stock of the Company consists of 10,000,000 shares of common
stock, no par value per share, of which 1,276,279 shares are issued and outstanding. The
Purchased Shares (a) constitute all of the issued and outstanding shares of capital stock of the
Company, (b) are validly authorized and issued, fully paid, and nonassessable, and (c) are, and
at the Closing will be, owned beneficially and of record entirely by Seller. No Purchased
Shares were issued in violation of any preemptive, first refusal or other subscription rights of
any shareholder of the Company or any other Person, and, to the knowledge of Seller, all
Purchased Shares were offered and sold in compliance with all applicable federal, state and
provincial securities Laws. There are no outstanding options, warrants, calls, commitments or
plans by the Company to issue any additional shares of its capital stock, or to pay any
dividends on such shares, or to purchase, redeem or retire any outstanding shares of its capital
stock, nor are there outstanding any securities or obligations which are convertible into or
exchangeable for any shares of capital stock of the Company. There are no stock appreciation
rights, phantom stock or similar rights in existence with respect to the Company. No Person
other than Seller owns or otherwise has any rights to any equity securities of the Company.

               5.2.2. The Company owns one hundred percent (100%) of the issued and outstanding equity
interests in the Subsidiary. All of such issued and outstanding equity interests were duly
authorized for issuance and were not issued in violation of any preemptive, first refusal or
other subscription rights, and, to the knowledge of Seller, all equity interests in the
Subsidiary were offered and sold in compliance with all applicable federal, state and provincial
securities Laws. There are no outstanding options, warrants, calls, commitments or plans by the
Subsidiary to issue any additional equity interests, or to pay any dividends on such equity, or
to purchase, redeem or retire any outstanding equity interests, nor are there outstanding any
securities or obligations which are convertible into or exchangeable for any equity interest in
the Subsidiary. No Person other than the Company owns or otherwise has any rights to any equity
interests in the Subsidiary.

               5.2.3. Neither the Company nor the Subsidiary owns, directly or indirectly, any capital
stock or other equity interest in any corporation, partnership, joint venture, limited liability
company or partnership, association or other legal entity except as set forth on Schedule
5.2.

 

 

5.3. Financial Statements; Undisclosed Liabilities

               5.3.1. Attached hereto as Schedule 5.3.1 are true, correct and complete copies of
the Financial Statements which have been generated in accordance with the books and records of
the Company. Except as set forth in Schedule 5.3.1, the Financial Statements (a) have
been prepared in accordance with GAAP (except that they do not include required footnotes), and
(b) fairly and accurately present the financial position and the results of operations of the
Company and the Subsidiary on a consolidated, pro forma basis (as explained in
Schedule 5.3.1) as of the dates and for the periods indicated in accordance with GAAP
(except that they do not include required footnotes).

               5.3.2. Neither the Company nor the Subsidiary has any liability or obligation that would be
required to be disclosed on a balance sheet prepared in accordance with GAAP, except for the
liabilities and obligations of the Company or the Subsidiary (a) disclosed or reserved against
in the Interim Financial Statements, (b) set forth in Schedule 5.3.2, or (c) incurred or
accrued in the Ordinary Course of Business since December 31, 2005.

5.4. Taxes

          Except as provided in Schedule 5.4: (i) the Company and the Subsidiary have timely
filed all material Separate Income Tax Returns and other material Tax Returns required to be filed
for the Company or the Subsidiary on a separate basis, and all such returns are true and accurate
in all material respects; (ii) the Company and the Subsidiary have paid (or have established
adequate reserves on their books and records amounts for) all material Taxes due and payable in
respect of such Tax Returns except those being contested in good faith; (iii) the Company and the
Subsidiary have withheld all amounts known to the Company or the Subsidiary to be required to be
withheld from payments to employees and other third parties and have remitted such amounts to the
appropriate taxing authority in accordance with applicable laws; (iv) neither the Company nor the
Subsidiary has executed or filed with any taxing authority (whether federal, state, local or
foreign) any agreement or other document (other than normal requests to extend the time for filing
a Tax Return) extending or having the effect of extending the period for assessment of any Tax that
is due with respect to a Separate Income Tax Return or other material Tax Returns that the Company
or the Subsidiary is required to file on a separate basis; and (v) to Seller’s knowledge, no
federal, state, local or foreign Tax audits or other administrative proceeding, discussions or
court proceedings are presently in progress with regard to any Separate Income Tax Returns or other
material Tax Returns that the Company or the Subsidiary is required to file on a separate basis.

5.5. Tangible Personal Property

               5.5.1. Schedule 5.5.1 sets forth a list of all Tangible Personal Property with a
cost greater than Five Thousand Dollars ($5,000.00) owned by the Company or the Subsidiary, and
designates which entity owns said property. Except as set forth in Schedule 5.5.1, the
Company and the Subsidiary have good and valid title (or, in the case of leased Tangible
Personal Property, a good and valid leasehold interest) to all of the Tangible Personal Property
used in the operation of the business of the Company and the Subsidiary as currently conducted,
in each case free and clear of any material Lien.

 

 

               5.5.2. All of the Accounts Receivable shown on the Financial Statements and the Accounts
Receivable constituting a part of the Assets arose in the Ordinary Course of Business in
connection with bona fide transactions.

5.6. Agreement Related to Other Instruments; Consents

          Except as set forth in Schedule 5.6, the execution, delivery and performance by Seller
of this Agreement and the other documents, instruments and agreements to be entered into by Seller
pursuant hereto do not and will not, and the consummation of the transactions contemplated hereby
and thereby will not, conflict with or violate any provision of the Organizational Documents of the
Company or the Subsidiary, or constitute an occurrence of a Default or require the consent or
approval of any Person under any provision of (a) any mortgage, deed of trust, conveyance to secure
debt, note or loan to which the Company or the Subsidiary is a party, or (b) any Material Contract
or any Real Property Lease.

5.7. Absence of Changes

          Since September 30, 2006, neither the Company nor the Subsidiary has, except as set forth in
Schedule 5.7:

                              (a) transferred, assigned or conveyed any material Assets except in the Ordinary Course of
Business or as contemplated in Sections 3.6 and 4.1;

                              (b) suffered any material destruction, damage or loss to any material Assets (casualty or
other), whether or not covered by insurance;

                              (c) except as described in Schedule 5.12, entered into any Material Contract except in
the Ordinary Course of Business;

                              (d) except as described in Schedule 5.12, terminated or amended or suffered the
termination or amendment of, failed to perform in all material respects its obligations under, or
suffered or permitted any Default to exist under, any Material Contract or Real Property Lease;

                              (e) caused or consented to the imposition of a material Lien on any Asset;

                              (f) made any distributions to Seller in the form of the return of capital, dividends or cash
distributions, except for the transaction contemplated in Sections 3.6 and 4.1;

                              (g) incurred or assumed any indebtedness for borrowed money or issued any debt security,
except for payables incurred in the Ordinary Course of Business;

                              (h) waived any material right of the Company or the Subsidiary of cancelled any debt or claim
held by the Company of the Subsidiary;

                              (i) made any loan to any officer, director, employee or shareholder of the Company or the
Subsidiary;

 

 

                              (j) increased, directly or indirectly, the compensation paid or payable to any officer,
director, employee or agent of the Company or the Subsidiary except in accordance with Section
3.2(j) hereof;

                              (k) hired or fired any employees of the Company or the Subsidiary or changed any such
employee’s terms or conditions of employment except in accordance with Section 3.2(p)
hereof ;

                              (l) taken or suffered any other act that may reasonably be expected to cause or result in a
Material Adverse Effect;

                              (m) received any adverse ruling or denial of any request by any Governmental Authority,
including but not limited to the NCUC;
or

                              (n) agreed to do any of the foregoing items of this Section 5.7.

5.8. Material Claims

          Except as set forth in Schedule 5.8, there is no litigation, suit, action, proceeding
or claim pending or, to the knowledge of Seller, proposed or threatened against the Company or the
Subsidiary that (a) affects the Company, the Subsidiary or the Assets and could, individually or in
the aggregate, if pursued or resulting in a judgment against the Company or the Subsidiary,
reasonably be expected to have a Material Adverse Effect, or (b) seeks restraint, prohibition, or
other injunctive relief in connection with this Agreement or the consummation of the transactions
contemplated hereby. Except as set forth in Schedule 5.8, there is no judgment, decree,
injunction, order, determination, award, finding or letter of deficiency of any Governmental
Authority or arbitrator outstanding with respect to the Agreement or against the Company, the
Subsidiary or, to the knowledge of Seller, any of the Assets, except in each case that could not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

5.9. Permits; Compliance With Laws

          Except as set forth in Schedule 5.9 and for Environmental Matters, which are addressed
exclusively in Section 5.17, the Company and the Subsidiary possess all Permits that are
required under applicable Law for the ownership or operation of the business of the Company and the
Subsidiary as currently conducted, all such Permits are in full force and effect, and the Company
and the Subsidiary are in compliance with all of the terms and conditions of such Permits, except
in each case for any Permit or violation which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. No proceeding is pending or, to the
knowledge of Seller, threatened seeking the revocation or limitation of any such Permit. Except as
set forth in Schedule 5.9, the Company and the Subsidiary are in compliance with all
applicable Laws, except for any violation under any such Law which could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the Company nor
the Subsidiary has received any written notice from any Governmental Authority alleging its
violation of any applicable Law, which violation could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. 

 

 

5.10. Real Property

               5.10.1. The Company and the Subsidiary do not own any fee simple interest in real property
other than the real property, buildings and improvements described in Schedule 5.10.1.
The Company owns good, valid and marketable fee simple title to such real property, free and
clear of any Lien other than any Liens that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect or materially adversely affect the
function of such property in connection with its use in the Ordinary Course of Business. Except
as set forth on Schedule 5.10.1, no part of such real property is subject to any
assignment, lease, license, sublease or other agreement granting to any Person any right to the
possession, use, occupancy or enjoyment of such property. To the knowledge of Seller, such real
property complies in all material respects with all federal, state, provincial and local Laws
and all applicable private restrictions.

               5.10.2. Seller has heretofore delivered to Purchaser true, correct and complete copies of
all leases (including all amendments thereto) of real property currently leased by the Company
or the Subsidiary, a list of which is set forth in Schedule 5.10.2 (collectively, the
“Real Property Leases”). Each Real Property Lease is valid and binding on the Company
or the Subsidiary that is a party thereto and, to the knowledge of Seller, on the other parties
thereto, and is enforceable against the Company or the Subsidiary and, to the knowledge of
Seller, the other parties thereto in accordance with the terms thereof, except as enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer,
reorganization, moratorium, applicable equitable principles or other similar Laws from time to
time in effect affecting the enforcement of creditors’ rights generally. Except as described in
Schedule 5.10.2, the Company or the Subsidiary that is a party to a Real Property Lease
has performed all material obligations required to be performed by it to date under such Real
Property Lease, and neither the Company nor the Subsidiary nor, to the knowledge of Seller, any
other party thereto is in Default under any of the Real Property Leases. Except as set forth in
Schedule 5.10.2 and to the knowledge of Seller, no part of the property leased pursuant
to a Real Property Lease is subject to any assignment, lease, license, sublease, or other
agreement granting to any Person other than as specified in such Real Property Lease any right
to the possession, use, occupancy or enjoyment of such leased property.

5.11. Intellectual Property; Software

               5.11.1. Except for the Seller Marks, Schedule 5.11.1 sets forth a list of all
issued Patents and registered copyrights, trademarks, service marks and trade names owned or
licensed by the Company or the Subsidiary and currently used in conducting its business in the
United States or any foreign country, and the annual licensing fee to be paid by the Company or
the Subsidiary for the use of such Intellectual Property, if any. The Company and the
Subsidiary own, or have the license or right to use in the United States and in any foreign
country in which they conduct business, all Intellectual Property currently used and necessary
to conduct the business of the Company or the Subsidiary as presently conducted, in each case in
the United States and in each foreign country where the Company or the Subsidiary uses such
Intellectual Property, except for such Intellectual Property the failure of which to own or
license would not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

 

               5.11.2. Except for “off-the-shelf” commercially available word processing, accounting,
inventory control and similar Software used by the Company or the Subsidiary, Schedule
5.11.2(a) sets forth a list of all Software owned or licensed by the Company or the
Subsidiary, and Schedule 5.11.2(b) sets forth a list of all Software owned or licensed
by any Non-Company Affiliate, which is currently used in conducting any Company business in the
United States or any foreign country, except for Software the failure of which to own or license
would not, individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect. Schedules 5.11.2(a) and 5.11.2(b) also set forth the annual licensing
fee owed by the Company or the Subsidiary to utilize said Software. The Company and the
Subsidiary own, or have the license or right to use all such Software currently used and
necessary to conduct the business of the Company or the Subsidiary as presently conducted, in
each case in the United States and in each foreign country where the Company or the Subsidiary
uses such Software, except for such Software the failure of which to own or license would not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

               5.11.3. To the knowledge of Seller, no Third Party has asserted against the Company or the
Subsidiary a claim in writing that the Company or the Subsidiary is infringing the Intellectual
Property of such Third Party. Except as set forth in Schedule 5.11.3, to the knowledge
of Seller, no Third Party is infringing the Intellectual Property owned or exclusively licensed
by the Company or the Subsidiary, except for any such infringement which could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

5.12. Material Contracts

                              5.12.1. Schedule 5.12 sets forth a true, correct and complete list, as of the date
hereof, of all Contracts (other than Real Property Leases) of the following categories
(collectively, the “Material Contracts”):

                              5.12.1.1.   any Contract (including any confidentiality agreements) between the Company or the
Subsidiary and one or more Major Customers;

                              5.12.1.2.   any Contract (other than agreements for the license or purchase of Software)
involving payments by the Company or the Subsidiary in excess of $10,000;

                              5.12.1.3.   any partnership agreement, joint venture agreement or non-wholly-owned limited
liability company operating agreement;

                              5.12.1.4.   any Contract (including any confidentiality agreements) between the Company or the
Subsidiary, on the one hand, and Seller or any Non-Company Affiliate, on the other hand;

                              5.12.1.5.   any employment, personal services, consulting, severance, noncompetition, golden
parachute or similar contract with or for the benefit of officers, directors or other individuals
and requiring payments by the Company or the Subsidiary;

 

 

                              5.12.1.6.   any guaranty, surety bond or letter of credit issued or posted, as applicable, by
the Company or the Subsidiary in which the Company or the Subsidiary is the guarantor, indemnitor
or reimbursing party, as applicable;

                              5.12.1.7. any agreement requiring payment to any Person of a commission or fee other than in
the Ordinary Course of Business;

                              5.12.1.8.   any distributor, sales representative, independent contractor or similar
agreement;

                              5.12.1.9.  any agreement under which the Company or the Subsidiary or any of their officers or
directors are restricted from carrying on any business, or competing in any line of business, in
the State where the Company does business;

                              5.12.1.10. any indenture, trust agreement, loan agreement or note to which the Company or
Subsidiary is a party that involves or evidences outstanding indebtedness, obligation or
liabilities for borrowed monies;

                              5.12.1.11. any agreement for the disposition of a material portion of the Company’s or the
Subsidiary’s Assets (other than the sale of inventory in the Ordinary Course of Business);

                              5.12.1.12. any stand-alone indemnification agreement providing for indemnification obligations
on the part of the Company or Subsidiary;

                              5.12.1.13.  any agreement for the acquisition of any of the properties, securities or other
ownership interest of the Company or the Subsidiary or the grant to any Person of any options,
rights of first refusal, exclusive negotiation or preferential similar rights to purchase any of
such Assets, properties, securities or other ownership interest; and

                              5.12.1.14. any commitment or agreement to enter into or post any of the foregoing items of
this Section 5.12.1.

As of the date of this Agreement, Seller has made available to Purchaser true, correct and complete
copies of all written Material Contracts. Each Material Contract is in full force and effect, and
is valid and binding on the Company or the Subsidiary, as applicable, that is a party thereto and,
to the knowledge of Seller, the other parties thereto, and is enforceable against the Company or
the Subsidiary and, to the knowledge of Seller, the other parties thereto in accordance with the
terms thereof, except as enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, fraudulent transfer, reorganization, moratorium, applicable equitable principles or
similar laws from time to time in effect affecting the enforcement of creditors’ rights generally.
Any and all Equity Financing Agreements, at the request of the Purchaser, shall be terminated by
the Company, the Subsidiary, and/or by the Seller as of the Closing Date. Except as set forth in
Schedule 5.12, the Company or the Subsidiary that is a party to a Material Contract has
performed all material obligations required to be performed by it to date under such Material
Contract, and neither the Company nor the Subsidiary, nor, to the knowledge of Seller, any other
party thereto is in Default under such Material Contract, nor does any condition exist that with

 

 

notice or lapse of time would constitute a Default thereunder. To the knowledge of Seller, no
surety bond or letter of credit that constitutes a Material Contract has been called or drawn upon.

5.13. Labor Matters

          Except as set forth on Schedule 5.13, within the last three (3) years, to the
knowledge of Seller, (a) neither the Company nor the Subsidiary has been the subject of any union
activity, nor has there been any strike of any kind called against the Company or the Subsidiary,
nor has there been any lockout or work stoppage involving the Company or the Subsidiary, and (b)
neither the Company nor the Subsidiary has violated any applicable federal, state or provincial Law
relating to labor or labor practices with regard to the Company’s and the Subsidiary’s business,
except for any such violation which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Except as set forth on Schedule 5.13, neither
the Company nor the Subsidiary is a party to any collective bargaining agreement.

5.14. ERISA and Related Matters

               5.14.1. Schedule 5.14 sets forth a true, correct and complete list, as of the date
hereof, of all Company Plans. Seller has made available to Purchaser true, correct and complete
copies of the most recent summary plan descriptions, if any, with respect to the Company Plans.
Schedule 5.14 also sets forth a true, correct and complete list, as of the date hereof, of
all Seller Plans. Seller has made available to Purchaser true, correct and complete copies of the
most recent summary plan descriptions, if any, with respect to the Seller Plans.

               5.14.2. Neither the Company nor the Subsidiary contributes or has an obligation to contribute,
and has not within six (6) years prior to the date of this Agreement contributed or had an
obligation to contribute, to a multiemployer plan (within the meaning of Section 3(37) of ERISA) or
a Benefit Plan (other than a Seller Plan) subject to Title IV of ERISA, Section 302 of ERISA or
Section 412 of the Code.

               5.14.3. With respect to any “employee benefit plan,” within the meaning of Section 3(3) of
ERISA, that is not a Company Plan, and which is sponsored, maintained, or contributed to, or has
been sponsored, maintained, or contributed to within six (6) years prior to the date of this
Agreement, by the Company, the Subsidiary or any corporation, trade, business, or entity under
common control with the Company or the Subsidiary, within the meaning of Section 414(b), (c), or
(m) of the Code or Section 4001 of ERISA, (a) no withdrawal liability, within the meaning of
Section 4201 of ERISA, has been incurred, which withdrawal liability has not been satisfied, (b) no
liability to the Pension Benefit Guaranty Corporation has been incurred by any such entity, which
liability has not been satisfied, (c) no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code has been incurred, and
(d) all contributions (including installments) to such plan required by Section 302 of ERISA and
Section 412 of the Code have been timely made.

               5.14.4. In connection with the consummation of the transactions contemplated by this
Agreement, no payments of money or other property, acceleration of benefits, or provision of other
rights have been or will be made hereunder, under any agreement contemplated herein, or under any
Company Plan that would be reasonably likely to be nondeductible under Section

 

 

280G of the Code, whether or not some other subsequent action or event would be required to cause
such payment, acceleration, or provision to be triggered.

     5.15. Guaranties or Bonds

             Schedule 5.15 sets forth a true, correct and complete list, as of the date hereof, of
all Guaranties or Bonds.

     5.16. Employees

             Except as set forth on Schedule 5.12, neither the Company nor the Subsidiary has any
written or oral contract with any individual currently engaged, or previously engaged, in the
business of the Company or the Subsidiary as an employee. Schedule 5.16 sets forth a true,
correct and complete list, as of the date(s) set forth therein, of the names, position and initial
employment date of all current employees of the Company and the Subsidiary. Prior to the date
hereof, Seller has made available to Purchaser on a confidential basis for each such employee his
or her current base pay. No changes in such base pay for such employees have been made, promised
or authorized by the Company or the Subsidiary since September 30, 2006, except as described in
Schedule 5.16 and except in accordance with the requirements of Section 3.2(p)
hereof. Except as set forth in Schedule 5.16 or as provided under any Material Contract,
there are no loans or other obligations payable or owing by the Company or the Subsidiary to any
officer, director or employee of the Company or the Subsidiary, except salaries, wages, bonuses and
salary advances and reimbursement of expenses incurred and accrued in the Ordinary Course of
Business, nor are any loans or debts payable or owing by any such individuals to the Company or the
Subsidiary, nor have the Company or the Subsidiary guaranteed any of such individuals’ respective
loans or obligations.

     5.17. Environmental Matters

             Except as set forth in Schedule 5.17, and except for any matter which could not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:

               5.17.1. the Company and the Subsidiary and their respective operations are in compliance
with all applicable Environmental Laws;

               5.17.2. neither the Company nor the Subsidiary is subject to any pending or, to the
knowledge of Seller, threatened claim, action, suit, investigation, inquiry or proceeding under
any Environmental Law and to Seller’s knowledge there is no such action proposed or threatened;

               5.17.3. all Permits, if any, required to be obtained by the Company and the Subsidiary
under any Environmental Law in connection with its respective operations as they are currently
being conducted, including those relating to the management of Hazardous Substances, have been
obtained by the Company or the Subsidiary, and are in full force and effect on the date hereof;

               5.17.4. to the knowledge of Seller, there have been no releases of Hazardous Substances on
any real property owned or leased by the Company or the Subsidiary in

 

 

connection with the operations of the Company and the Subsidiary that requires remediation
under applicable Environmental Laws;

               5.17.5. Seller has made available to Purchaser on a confidential basis all environmental
site assessment reports, studies and related documents in the possession of the Company, the
Subsidiary, Seller or any Non-Company Affiliate and relating to environmental matters in
connection with operation of the Assets.

             Notwithstanding any other provision of this Agreement, including without limitation
Section 5.9, Seller makes no representation or warranty regarding any environmental matters
except as expressly set forth in this Section 5.17.

     5.18. Insurance Coverage

             Schedule 5.18 sets forth a true, correct and complete summary of all Seller Insurance
Policies and any surety bonds (if applicable) covering the Company, the Subsidiary, the Assets, the
business of the Company and the Subsidiary, and the employees of the Company and the Subsidiary,
other than any such insurance policies related to Benefit Plans. There is no claim by the Company
or the Subsidiary pending under any such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies and bonds. All premiums due
and payable under such policies and bonds have been paid, and the Company and the Subsidiary are
otherwise in material compliance with the terms and conditions of all such policies and bonds. To
the knowledge of Seller, there is no threatened termination of such policies and bonds.

     5.19. Governmental Filings

             Except as disclosed on the attached Schedule 5.19, no Person needs to provide any
notice to, or obtain any Permits from any Governmental Authority for the consummation of the
transactions contemplated by this Agreement.

     5.20. Accounts Receivable

             All Accounts Receivable represent valid obligations and are not subject to any set offs or
counterclaims. All Accounts Receivable and all Accounts Receivable arising between the Effective
Date and the Closing Date are owned by the Company or the Subsidiary free and clear of any security
interests, and are collectible in the aggregate face amount thereof, without result to litigation
or extraordinary collection activity within ninety (90) days after the Closing Date. Seller has
not received any written notice from an account debtor stating that any Account Receivable in an
amount in excess of Five Thousand Dollars ($5,000.00) is subject to any contest, claim or set off
by such account debtor. No discount or allowance from any Account Receivable has been made or
agreed to, and none represents billing prior to the actual sale of gas or provision of services.

	6.	 	REPRESENTATIONS AND WARRANTIES OF SELLER REGARDING SELLER AND THE PURCHASED SHARES

             Seller represents and warrants to Purchaser that:

 

 

     6.1. Organization and Standing

            Seller is a corporation duly incorporated, validly existing and in good standing under the
laws of the State of California, USA.

     6.2. Corporate Power and Authority; Enforceability

            Seller has all requisite corporate power and authority to execute and deliver this Agreement
and the other documents, instruments and agreements to be entered into by it pursuant hereto, to
perform its obligations hereunder and thereunder, and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by Seller of this Agreement and each
and every agreement, document and instrument to be executed, delivered and performed by Seller in
connection herewith have been duly authorized and approved by all requisite corporate action on the
part of Seller. This Agreement has been duly and validly executed and delivered by Seller, and, on
the Closing Date, all other agreements to be entered into by Seller pursuant hereto will have been
duly and validly executed and delivered by Seller. This Agreement is, and each and every
agreement, document and instrument provided for herein to be executed and delivered and to which
Seller is a party will be, when executed and delivered by the parties thereto, valid and binding on
Seller, and enforceable against Seller in accordance with its respective terms, except as
enforceability may be limited by applicable equitable principles or by bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization, moratorium or similar Laws from time to
time in effect affecting the enforcement of creditors’ rights generally.

     6.3. No Violation or Conflict by Seller

            Except as set forth in Schedule 6.3, the execution, delivery and performance by Seller
of this Agreement and each and every other agreement, document and instrument to be entered into by
Seller pursuant hereto do not and will not, and the consummation of the transactions contemplated
hereby and thereby will not, conflict with or violate any provision of the certificate of
incorporation or bylaws of Seller, or constitute an occurrence of a Default or require the consent
or approval of any Person under any provision of any contract or agreement to which Seller is a
party or by which it is bound.

     6.4. Seller Governmental Approvals

            Except as set forth in Schedule 6.4, the execution, delivery and performance by Seller
of this Agreement, and the other documents, instruments and agreements to be entered into by Seller
pursuant hereto, do not and will not, and the consummation of the transactions contemplated hereby
and thereby will not (a) violate any consent, judgment, order or decree or any applicable rule or
regulation of any Governmental Authority to which Seller, the Company, the Subsidiary or any
Non-Company Affiliate is a party or is subject to, (b) require of Seller, the Company, the
Subsidiary or any Non-Company Affiliate a filing or registration with any Governmental Authority,
or (c) require Seller, the Company, the Subsidiary or any Non-Company Affiliate to obtain any
consent, approval, Permit, certificate or order of any Governmental Authority under applicable Law
or by any applicable consent, judgment, order or decree or any applicable rule or regulation of any
Governmental Authority.

 

 

     6.5. Title to the Purchased Shares

            Seller owns, beneficially and of record, all of the Purchased Shares free and clear of any and
all Liens. There are no outstanding subscriptions, options, warrants, rights of first refusal or
other agreements or commitments, other than this Agreement, obligating Seller to transfer, or
granting an option or right by Seller to any Person to purchase or acquire from Seller the
Purchased Shares or any other securities of the Company.

     6.6. Litigation Against Seller

            Except as set forth in Schedule 6.6, there is no litigation, suit, action, proceeding,
claim or investigation pending or, to the knowledge of Seller, proposed or threatened against
Seller that (a) affects Seller, any Non-Company Affiliate, the Company, the Subsidiary or the
Assets, and could, individually or in the aggregate, if pursued or resulting in a judgment against
Seller, reasonably be expected to have a material adverse effect on the ability of Seller to
consummate the transactions described herein, or (b) seeks restraint, prohibition, or other
injunctive relief in connection with this Agreement or the consummation of the transactions
contemplated hereby. There is no judgment, decree, injunction, order, determination, award,
finding or letter of deficiency of any Governmental Authority or arbitrator outstanding against
Seller with respect to this Agreement.

	7.	 	REPRESENTATIONS AND WARRANTIES OF PURCHASER

            Purchaser represents and warrants to Seller that:

     7.1. Organization and Standing

            Purchaser is a corporation duly incorporated, validly existing and in good standing under the
laws of the State of Montana.

     7.2. Corporate Power and Authority; Enforceability

            Purchaser has all requisite corporate power and authority to execute and deliver this
Agreement and the other documents, instruments and agreements to be entered into by it pursuant
hereto, to perform its obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by Purchaser of this
Agreement and each and every other agreement, document and instrument to be executed, delivered and
performed by Purchaser in connection herewith have been duly authorized and approved by all
requisite corporate action on the part of Purchaser. This Agreement has been duly and validly
executed and delivered by Purchaser, and, on the Closing Date, all other agreements to be entered
into by Purchaser pursuant hereto will have been duly and validly executed and delivered by
Purchaser. This Agreement is, and each and every agreement, document and instrument provided for
herein to be executed and delivered and to which Purchaser is a party will be, when executed and
delivered by the parties thereto, valid and binding on Purchaser, and enforceable against Purchaser
in accordance with their respective terms, except as enforceability may be limited by applicable
equitable principles or by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer,
reorganization, moratorium

 

 

or similar Laws from time to time in effect affecting the enforcement of creditors’ rights
generally.

     7.3. No Violation or Conflict by Purchaser

            Except as set forth in Schedule 7.3, the execution, delivery and performance by
Purchaser of this Agreement and each and every other agreement, document and instrument to be
entered into by Purchaser pursuant hereto do not and will not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with or violate any provisions of
the articles of incorporation or the bylaws of Purchaser, or constitute an occurrence of Default or
require the consent or approval of any Person under any provision of any contract or agreement to
which Purchaser is a party or by which it is bound.

     7.4. Purchaser Governmental Approvals

            Except as set forth in Schedule 7.4, the execution, delivery and performance by
Purchaser of this Agreement, and the other documents, instruments and agreements to be entered into
by Purchaser pursuant hereto, do not and will not, and the consummation of the transactions
contemplated hereby and thereby will not (a) violate any consent, judgment, order or decree or any
rule or regulation of any Governmental Authority to which Purchaser or any Affiliate of Purchaser
is a party or is subject to, (b) require of Purchaser or any Affiliate of Purchaser a filing or
registration with any Governmental Authority, or (c) require Purchaser or any Affiliate of
Purchaser to obtain any consent, approval, Permit, certificate or order of any Governmental
Authority under applicable Law or by any applicable consent, judgment, order or decree or any
applicable rule or regulation of any Governmental Authority.

     7.5. Litigation Against Purchaser

            There is no litigation, suit, action, proceeding, claim or investigation pending or, to the
knowledge of Purchaser, proposed or threatened against Purchaser that (a) affects Purchaser or any
Affiliate of Purchaser and could, individually or in the aggregate, if pursued or resulting in a
judgment against Purchaser or such Affiliate, reasonably be expected to have a material adverse
effect on the ability of Purchaser to consummate the transactions described herein, or (b) seeks
restraint, prohibition, or other injunctive relief in connection with this Agreement or the
consummation of the transactions contemplated hereby. There is no judgment, decree, injunction,
order, determination, award, finding or letter of deficiency of any Governmental Authority or
arbitrator outstanding against Purchaser with respect to this Agreement.

     7.6. Purchase for Investment

            Purchaser is acquiring the Purchased Shares pursuant to the exemption provided by Section 4(2)
of the Securities Act of 1933, as amended, and has made, independently and without reliance on
Seller (except to the extent that Purchaser has relied upon the representations and warranties of
Seller contained herein), its own analysis of the Purchased Shares, the Company, the Subsidiary and
the Assets for the purpose of acquiring the Purchased Shares, and Purchaser has had reasonable and
sufficient access to such documents and other information and materials as it considers appropriate
to make its necessary evaluation. Purchaser is acquiring the Purchased Shares solely for its own
account for investment and not with a view to or for the

 

 

distribution thereof. Purchaser acknowledges that the Purchased Shares are not registered
under the Securities Act of 1933, as amended, and that none of the Purchased Shares may be
transferred or sold except pursuant to the registration provisions of the Securities Act of 1933,
as amended, or pursuant to an applicable exemption therefrom.

     7.7. Financial Capacity; Solvency

            Purchaser will (a) at the Closing have the financial capacity to satisfy all of its payment
obligations due at the Closing under this Agreement and the other documents, instruments and
agreements to be entered into by it pursuant hereto, and (b) after the payment of the Purchase
Price and the Closing, be solvent and have the ability to pay its current obligations as they come
due, including all post-closing obligations of Purchaser under this Agreement and the other
documents, instruments and agreements to be entered into by it pursuant hereto.

     7.8. “As Is” Sale

            EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH IN THIS AGREEMENT, PURCHASER
UNDERSTANDS AND AGREES THAT THE ASSETS, INCLUDING THE TANGIBLE PERSONAL PROPERTY, ARE BEING
ACQUIRED “AS IS, WHERE IS” ON THE CLOSING DATE, AND IN THEIR CONDITION ON THE CLOSING DATE “WITH
ALL FAULTS,” AND THAT PURCHASER IS RELYING ON ITS OWN EXAMINATION OF THE ASSETS. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING AND EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER
EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER UNDERSTANDS AND AGREES THAT SELLER EXPRESSLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES AS TO THE OPERATION OF THE ASSETS, INCLUDING THE TITLE,
CONDITION, VALUE OR QUALITY OF THE ASSETS OR THE PROSPECTS, LIABILITIES, RISKS AND OTHER INCIDENTS
OF THE ASSETS AND ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE ASSETS OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP
THEREOF OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT. PURCHASER FURTHER AGREES
THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER EXPRESSLY SET FORTH IN THIS
AGREEMENT, NO DUE DILIGENCE MATERIALS OR OTHER INFORMATION OR MATERIALS PROVIDED BY, OR
COMMUNICATION MADE BY, SELLER OR ANY REPRESENTATIVE OF SELLER WILL CONSTITUTE, CREATE OR OTHERWISE
CAUSE TO EXIST ANY REPRESENTATION OR WARRANTY WHATSOEVER, WHETHER OR NOT EXPRESSLY DISCLAIMED BY
THE FOREGOING.

	8.	 	CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER

            The obligations of Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction, on or before the Closing, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part, by Purchaser for
purposes of consummating such transactions:

 

 

     8.1. Representations True at the Closing

            The representations and warranties made by Seller in this Agreement shall be true and correct
when made, and immediately prior to the Closing with the same force and effect as though such
representations and warranties had been made as of such time.

     8.2. Covenants of Seller

            Seller shall have duly performed in all material respects all of the covenants, acts and
undertakings to be performed by it on or prior to the Closing pursuant to the Agreement, and a duly
authorized officer of Seller shall have delivered to Purchaser a certificate in the form attached
hereto as Exhibit C dated as of the Closing Date certifying to the fulfillment of this
condition and the condition set forth in Section 8.1.

     8.3. No Injunction, Etc.

            No action, proceeding, investigation, regulation or legislation shall have been instituted or
threatened by any Person other than Purchaser or any Affiliate of Purchaser before any court or
Governmental Authority to enjoin, restrain, or prohibit the consummation of the transactions
contemplated hereby.

     8.4. Consents, Approvals and Waivers

            Seller’s execution and delivery of this Agreement and consummation of the transactions
contemplated hereby shall have been approved by all Governmental Authorities, including the
Regulatory Approval, and no such approvals, independently or in the aggregate, shall have resulted
in a Material Adverse Effect on the regulatory treatment of the Company or the Subsidiary. Either
(i) Purchaser shall have received a true, correct and complete copy of each consent, approval,
waiver and agreement required to be obtained by Seller no later than the Closing pursuant to
Section 3.3, or (ii) if Seller was unable to obtain such consent, approval, waiver or
agreement after having complied with its obligations under Section 3.3, Seller shall have
obtained for, or provided Purchaser with, in a form reasonably acceptable to Purchaser, the
economic practical benefit to Purchaser as if such consent, approval, waiver or agreement had been
received. .

     8.5. Absence of Material Adverse Effect

            Except as set forth on Schedule 8.5, since September 30, 2006, no Material Adverse
Effect shall have occurred.

     8.6. Other Agreements

            Seller shall have entered into the Transition Services Agreement with Purchaser as
contemplated in Section 4.3.

 

 

	9.	 	CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER

            The obligations of Seller to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction, on or before the Closing, of each and every one of the following
conditions, all or any of which may be waived, in whole or in part, by Seller for purposes of
consummating such transactions:

     9.1. Representations True at Closing

            The representations and warranties made by Purchaser in this Agreement shall be true and
correct when made, and immediately prior to the Closing with the same force and effect as though
such representations and warranties had been made on and as of such time.

     9.2. Covenants of Purchaser

            Purchaser shall have duly performed in all material respects all of the covenants, acts and
undertakings to be performed by it on or prior to the Closing pursuant to the Agreement, and the
President of Purchaser shall have delivered to Seller a certificate in the form attached hereto as
Exhibit D dated as of the Closing Date certifying to the fulfillment of this condition and
the condition set forth in Section 9.1.

     9.3. No Injunction, Etc.

            No action, proceeding, investigation, regulation or legislation shall have been instituted or
threatened by any Person other than Seller, the Company, the Subsidiary or any Non-Company
Affiliate before any court or Governmental Authority to enjoin, restrain or prohibit the
consummation of the transactions contemplated hereby.

     9.4. Consents, Approvals and Waivers

            Purchaser’s execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby shall have been approved by (a) the board of directors of Purchaser, and
(b) all Governmental Authorities whose approvals are required by Law. Seller shall have received a
true, correct and complete copy of each consent, approval, waiver and agreement required to be
obtained by Purchaser no later than the Closing pursuant to Section 3.3. Seller’s
execution and delivery of this Agreement and the consummation of the transactions contemplated
hereby shall have been approved by all Governmental Authorities whose approvals are required by
Law, except for any such approval which could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of Seller to consummate the transactions
described herein.

     9.5. Other Agreements

            Seller shall have entered into the Transition Services Agreement with Purchaser as
contemplated in Section 4.3.

	10.	 	CLOSING

 

 

     10.1. Time and Place of Closing

             Upon the terms and subject to the conditions set forth herein, the Closing shall take place at
the offices of Winston & Strawn LLP, 1700 K Street NW, Washington DC 20006, commencing at 10:00
a.m., on the tenth (10th) Business Day after the Business Day on which all of the conditions to the
Closing set forth in Sections 8 and 9 are satisfied or waived, or at such other
place, time or date the parties may agree in writing (the date of the Closing being referenced
herein as the “Closing Date”).

     10.2. Transactions at Closing

             At the Closing, each of the following shall occur:

               10.2.1. Seller’s Performance. At the Closing, Seller shall deliver to Purchaser
each of the following:

                               10.2.1.1.   all certificates representing the Purchased Shares or, if applicable, replacement
certificates together with lost certificate affidavits and indemnifications (in form and substance
reasonably acceptable to Purchaser), duly endorsed for transfer or accompanied with executed blank
stock powers (in form and substance reasonably acceptable to Purchaser), together with a new
certificate representing such shares issued in the name of Purchaser;

                               10.2.1.2.   original stock ledgers, articles of incorporation, certificates of incorporation,
charters, certificates of formation, bylaws, joint venture agreements, partnership agreements,
limited liability company operating agreements, and board of directors’, shareholders’ and members’
minutes of the Company and the Subsidiary;

                               10.2.1.3.   a receipt of Seller evidencing Seller’s receipt of the Preliminary Purchase Price;

                               10.2.1.4.   the certificate of a duly authorized officer of Seller as described in
Section 8.4;

                               10.2.1.5.   satisfactory evidence of the consents, approvals, waivers and agreements described
in Section 8.4;

                               10.2.1.6.   certificates of existence or good standing of the Company and the Subsidiary, as
of the most recent practicable date, from the appropriate Governmental Authority of the
jurisdiction of their respective incorporations or formations and the jurisdictions in which each
is qualified to do business;

                               10.2.1.7.   certificates of existence or good standing of Seller, as of the most recent
practicable date, from the appropriate Governmental Authority of the jurisdiction of its
incorporation;

 

 

                               10.2.1.8.   Secretary or Assistant Secretary certificates of incumbency for the officers of
Seller who sign on behalf of Seller this Agreement and any other documents, instruments or
agreements to be entered into by Seller pursuant hereto;

                               10.2.1.9.   the Transition Services Agreement signed by Seller;

                               10.2.1.10.   resignations, or evidence of termination of his or her office, by each director
and officer of the Company, unless otherwise agreed by the parties;

                               10.2.1.11.   such other evidence of the performance of all covenants and satisfaction of all
conditions required of Seller by this Agreement, at or prior to the Closing, as Purchaser may
reasonably require; and

                               10.2.1.12. all books and records relating to the operation of the Company and the Subsidiary
to the extent separate from those of Seller, including but not limited to all such electronic
records, files, ledgers and other documentation reasonably required by Purchaser in connection with
the ongoing operation of the Company and the Subsidiary.

                         10.2.2. Purchaser’s Performance. At the Closing, Purchaser shall deliver to Seller
each of the following:

                               10.2.2.1.   the Preliminary Purchase Price in cash by wire transfer of immediately available
U.S. federal funds to an account designated by Seller, which account shall be identified to
Purchaser by Seller not less than three (3) Business Days prior to the Closing Date;

                               10.2.2.2.   the certificate of the President of Purchaser described in Section 9.2;

                               10.2.2.3.   certificates of existence or good standing of Purchaser, as of the most recent
practicable date, from the appropriate Governmental Authority of the jurisdiction of its
incorporation;

                               10.2.2.4.   Secretary or Assistant Secretary certified copies of resolutions of the board of
directors of Purchaser approving the transactions contemplated by this Agreement;

                               10.2.2.5.   Secretary or Assistant Secretary certificates of incumbency for the officers of
Purchaser who sign on behalf of Purchaser this Agreement and any other documents, instruments or
agreements to be entered into by Purchaser pursuant hereto;

                               10.2.2.6.   the Transition Services Agreement signed by Purchaser; and

                               10.2.2.7.   such other evidence of the performance of all covenants and satisfaction of all
conditions required of Purchaser by this Agreement, at or prior to the Closing, as Seller may
reasonably require.

	11.	 	SURVIVAL OF REPRESENTATION AND WARRANTIES; INDEMNIFICATION

 

 

     11.1. Survival of Representations, Warranties and Agreements

               11.1.1. All representations, warranties, covenants, indemnities and obligations made or
undertaken by Seller in this Agreement are material, have been relied upon by Purchaser and
shall survive the Closing hereunder as set forth in Section 11.6, and shall not merge in
the performance of any obligation by any party hereto. EXCEPT FOR THE SPECIFIC REPRESENTATIONS
AND WARRANTIES OF SELLER SET FORTH IN THIS AGREEMENT, SELLER MAKES NO OTHER REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.

               11.1.2. All representations, warranties, covenants, indemnities and obligations made or
undertaken by Purchaser in this Agreement are material, have been relied upon by Seller and
shall survive the Closing hereunder as set forth in Section 11.6, and shall not merge in
the performance of any obligation by any party hereto. EXCEPT FOR THE SPECIFIC REPRESENTATIONS
AND WARRANTIES OF PURCHASER SET FORTH IN THIS AGREEMENT, PURCHASER MAKES NO OTHER REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.

     11.2. Agreements to Indemnify Purchaser Indemnitees

               11.2.1. Subject to the other provisions of this Section 11, Seller hereby agrees to
indemnify and hold harmless Purchaser, each Affiliate of Purchaser, their respective directors
and officers, and their respective successors and assigns (collectively, “Purchaser
Indemnitees”), from and against any and all liability, obligation, loss, Lien, damage,
injury, cost and expense (including reasonable attorneys’ fees and costs and expenses related
thereto) (collectively, “Losses”) suffered or incurred by any Purchaser Indemnitee
arising from: (a) any breach of any indemnity, covenant, representation or warranty of Seller
contained in this Agreement, (b) any misrepresentation in the certificate delivered at the
Closing pursuant to Section 8.2, (c) the Excluded Assets and Liabilities, whether
arising before or after Closing, (d) the Seller Plans, (e) all Income Taxes (other than for
Income Taxes resulting from any transaction engaged in by the Company or the Subsidiary on the
Closing Date, but after the Closing) of the Company or the Subsidiary (including Income Taxes of
any other Person for which the Company or the Subsidiary is liable under Treasury Regulation
section 1.1502-6 or similar provision of foreign, state or local law) for periods (or portions
thereof) ending on or prior to the Closing Date to the extent such Income Taxes exceed the
Accrued Tax Liability; or (f) any Scheduled Claim, which claims the parties acknowledge and
agree that Seller has acknowledged its duty to defend in accordance with Section 11.7.2
and, thereby, Seller has a right to control the defense of in accordance with the provisions of
Section 11.7.2

               11.2.2. For all purposes of this Section 11, after the Closing, any Loss suffered
or incurred by the Company or the Subsidiary arising from any breach of any indemnity, covenant,
representation or warranty by Seller referenced in Section 11.2.1 shall be deemed
suffered and incurred by Purchaser for purposes of such Section 11.2.1, and Purchaser
shall be entitled to seek indemnification under such Section 11.2.1 against Seller alone
for any

 

 

such Loss without any liability of the Company or the Subsidiary. In addition, effective
as of the Closing, Seller waives any and all rights of contribution, cost recovery or other
payment from the Company or the Subsidiary, whether arising by agreement or operation of Law
(including Environmental Law), to the extent of any liability of Seller under this Agreement.

     11.3. Agreements to Indemnify the Seller Indemnitees

             Subject to the other provisions of this Section 11, Purchaser hereby agrees to
indemnify and hold harmless Seller, the Company, the Subsidiary, each Non-Company Affiliate, their
respective directors and officers, and their respective successors and assigns (collectively, the
“Seller Indemnitees”), from and against all Losses suffered or incurred by any Seller
Indemnitee arising from: (a) any breach of any indemnity, covenant, representation, or warranty of
Purchaser contained in this Agreement, (b) any misrepresentation in the certificate delivered at
the Closing pursuant to Section 9.2, (c) any Income Taxes incurred as a result of any
transaction engaged in by the Company or the Subsidiary on the Closing Date but after the Closing,
or (d) the termination on or after the Closing Date of employment or change in compensation,
incentive opportunities or benefits of any Transferred Employee on or after the Closing Date.

     11.4. Recoveries

             The determination of the amount of any Loss for purposes of this Section 11 shall take
into account the amount of insurance proceeds payable with respect thereto pursuant to any Third
Party insurance policy, but only to the extent such amounts are actually paid to the Indemnified
Party.

     11.5. Limitations on Indemnity

                    11.5.1. The Indemnified Parties agree not to seek recourse against, and shall not recover
from, any Indemnifying Party under this Section 11 on account of any Loss resulting from a
breach of any representation or warranty herein or in any certificate delivered pursuant hereto
until the aggregate amount of all Losses suffered by the Indemnified Parties as a result of
breaches of all representations or warranties herein (as adjusted pursuant to Section 11.4)
exceeds One Hundred Thousand Dollars ($100,000) (the “Deductible”), in which case the
Indemnifying Party shall be liable only for the aggregate amount of Losses suffered by the
Indemnified Party in excess of the Deductible; provided, however, that (a) the
limitation of the Deductible shall not apply to Losses resulting from a breach of any
representation or warranty contained in Section 5.2.1, Section 5.2.2,
Section 5.4, the first three sentences of Section 6.2, Section 6.5, or the
first three sentences of Section 7.2; and (b) for purposes of determining Losses under this
Section 11 resulting from any breach of any representation or warranty, such
representations and warranties shall be interpreted to disregard all qualifications and conditions
in such representations and warranties relating to materiality or Material Adverse Effect.

                    11.5.2. The aggregate liability of the Indemnifying Parties under this Section 11
resulting from breaches of representations or warranties herein and in any certificates delivered
pursuant hereto shall be limited to an amount equal to forty percent (40%) of the Purchase Price
(the “Cap”); provided, however, that the limitation of the Cap shall not
apply to Losses resulting from a breach of any representation or warranty contained in
Section 5.2.1, Section 5.2.2,

 

 

Section 5.4, the first three sentences of Section 6.2, Section 6.5, or
the first three sentences of Section 7.2.

     11.6. Survival

               11.6.1. All claims by a Purchaser Indemnitee for indemnification pursuant to this
Section 11 resulting from breaches of representations or warranties herein shall be
forever barred unless Seller is notified:

                                  11.6.1.1.   in the case of a claim based upon a breach of Section 5.4 with respect to
any taxable period ending on or prior to the Closing Date, within the statutory period of
limitations (including any extensions thereof), unless such claim is raised by the taxing authority
by way of an offset against any claim or suit for refund by or on behalf of the Company or the
Subsidiary, or pursuant to the mitigation provisions contained in the Code or any applicable
statutes, in which case a claim may be made within one (1) year after such offset or assessment; or

                                   11.6.1.2.   in all other cases within eighteen (18) months after the Closing Date;
provided that if written notice for a claim of indemnification has been given by
Purchaser pursuant to Section 11.7.1 on or prior to the last day of the foregoing 18-month
period, then the obligation of Seller to indemnify any Purchaser Indemnitee pursuant to this
Section 11 shall survive with respect to such claim until such claim is finally resolved;
provided, further, however, that claims based upon a breach of Section
5.2.1, Section 5.2.2, the first three sentences of Section 6.2, or Section
6.5 may be brought at any time within the statute of limitations that applies to such claim or
claims.

               11.6.2. All claims by a Seller Indemnitee for indemnification pursuant to this Section
11 resulting from breaches of representations or warranties herein shall be forever barred
unless Purchaser is notified within eighteen (18) months after the Closing Date; provided
that if written notice for a claim of indemnification has been given by Seller on behalf of
any Seller Indemnitee pursuant to Section 11.7.1 on or prior to the last day of the
foregoing 18-month period, then the obligation of Purchaser to indemnify any Seller Indemnitee
pursuant to this Section 11 shall survive with respect to such claim until such claim is
finally resolved; provided, further, however, that claims based upon a
breach of the first three sentences of Section 7.2 may be brought at any time within the
statute of limitations that applies to such claim or claims.

     11.7. Notice and Defense of Actions

             The obligations and liabilities of each Indemnifying Party hereunder shall be subject to the
following terms and conditions:

                    11.7.1. Notice. Except with respect to any Scheduled Claim, the Indemnified Party
shall give written notice to the Indemnifying Parties promptly after it becomes aware of any claim,
action or proceeding (each, an “Action”) as to which indemnity may be sought under this
Section 11; provided that in any event, the Indemnified Parties shall give
written notice of an Action within thirty (30) days after being served with the related process or
legal proceeding. Such notice shall state the nature and basis of such claims or events and the
amounts thereof, to the extent known, and shall attach copies of any complaint, demand or
arbitration notice received

 

 

by the Indemnified Party. Such notice shall be given in accordance with Section 13.1.
The failure of the Indemnified Party to give notice as provided herein shall relieve the
Indemnifying Party of any obligation under this Section 11 only if and to the extent that
such failure materially prejudices the ability of the Indemnifying Party to defend such Action, and
such failure shall in no event relieve the Indemnifying Party of any liability that the
Indemnifying Party may have to the Indemnified Party otherwise under this Section 11.

            11.7.2. Defense of Actions.

                         11.7.2.1.   (a)  Except with respect to any Scheduled Claim, in the event that the
Indemnifying Parties acknowledge in writing a duty to defend with respect to such Action, the
Indemnifying Parties shall have the right, at their expense, to control the defense of any such
Action. If the Indemnifying Parties wish to control the defense of such Action, they shall deliver
written notice thereof to the Indemnified Parties within sixty (60) days after receipt of the
notice described in Section 11.7.1. After such notice, the Indemnifying Parties shall
engage independent internal or external legal counsel (and reasonably acceptable to the Indemnified
Parties) to assume the defense of such Action; provided, however, that the
Indemnified Party may also participate in such defense, at its own expense; and provided,
further, that any Indemnifying Party shall not be entitled to assume the defense or
control of any Action if (i) the Indemnifying Party fails to acknowledge its duty to defend as set
forth in the preceding sentence, (ii) the Indemnified Party agrees, in writing, to assume the
defense of such Action and forego any indemnity claimed under this Section 11, (iii) in the
reasonable opinion of legal counsel for the Indemnified Party, such Action involves the potential
imposition of a criminal liability on the Indemnified Party, its directors, officers, employees or
agents, (iv) in the reasonable opinion of legal counsel for the Indemnified Party, an actual or
potential conflict of interest exists where it is advisable for such Indemnified Party to be
represented by separate legal counsel, or (v) with respect to Purchaser only, failure to stay the
enforcement of such Action will result in the imminent risk of sale, forfeiture or loss of all or
any material portion of the Assets or a material disruption in the operation of the acquired
business. In the circumstances identified in the foregoing subsections 11.7.2(a)(i)
through (v), the Indemnified Party shall be entitled to control and assume responsibility
for the defense of such Action, at the cost and expense of the Indemnifying Party. The
Indemnifying Party may, in any event, participate in such proceedings at its own cost and expense.

         
                                 (b)  With respect to any Scheduled Claim, Seller shall have the right and obligation, at its
expense, to control the defense of such Scheduled Claim. Purchaser also may participate in such
defense, at its own expense. Seller shall have the right to select and engage internal or external
legal counsel (which shall be reasonably acceptable to Purchaser if selected and engaged after the
date of this Agreement) to assume the defense of such Scheduled Claim.

                         11.7.2.2.   The Indemnifying Party, in the defense of any such Action, shall have the right in
its sole discretion to settle such Action only if (a) settlement involves only the payment of money
and execution of appropriate releases of the Indemnified Party and its Affiliates, (b) there is no
finding or admission of any violation of Law or violation of the rights of any Person by the
Indemnified Party or its Affiliates, and (c) the Indemnified Party or its Affiliates will have no
liability with respect to such compromise or settlement. Otherwise, no

 

 

such Action shall be settled or agreed to without the prior written consent of the Indemnified
Party (which consent shall not be unreasonably withheld, delayed or conditioned). If the
Indemnified Party withholds, delays or conditions its consent in an unreasonable manner, the
Indemnified Party shall not be entitled to indemnification under this Section 11 for any
Loss in excess of the amount for which the Action could reasonably have been compromised but for
such withholding, delay or conditioning of consent.

                         11.7.2.3.   Except with respect to any Scheduled Claim, in the event that the Indemnifying
Parties shall not agree in writing to assume the defense of such Action or in the event the
Indemnified Party assumes control of such Action pursuant to Section 11.7.2, the
Indemnified Parties may engage internal or external legal counsel acceptable to them to assume the
defense and may contest, pay, settle or compromise any such Action on such terms and conditions
reasonably acceptable to the Indemnified Parties. If the Indemnifying Parties are obligated to
indemnify the Indemnified Parties in respect to such Action under this Agreement, the fees and
expenses of such counsel retained by the Indemnified Parties shall constitute litigation expenses
subject to indemnification under this Section 11.

                         11.7.2.4.   In the defense of any Action, regardless of who is in control, the Indemnified
Parties and the Indemnifying Parties shall fully cooperate in good faith in connection with such
defense and shall cause their legal counsel, accountants and Affiliates to do so, and shall make
available to the other party all relevant books, records, and information (in such Person’s
control) during normal business hours, and shall furnish to each other, at the Indemnifying Party’s
expense, such other assistance as the other party may reasonably require in connection with such
defense.

     11.8. Exclusive Remedy

              Except for remedies that cannot be waived as a matter of law and remedies available for
breaches under Section 13.2, the indemnification obligations under this Section 11
shall be the sole and exclusive remedies of the parties hereto with respect to any breach of any
representation, warranty, covenant, indemnity, or agreement under this Agreement or any certificate
delivered pursuant hereto by any party hereto, except that nothing contained herein shall be
construed as limiting or impairing the rights and remedies that the parties hereto may have at
equity for injunctive relief and specific performance, including such equitable remedies with
respect to enforcement of rights and obligations under Sections 2.1, 2.2, 3.4.2, 3.6, 3.7,
4.3, 4.4, 4.5 and 4.6.

     11.9. Treatment

              All indemnification payments under this Agreement shall be treated as adjustments to the
Purchase Price.

	12.	 	TERMINATION

     12.1. Method of Termination

              This Agreement constitutes the binding and irrevocable agreement of the parties hereto to
consummate the transactions contemplated hereby subject to the terms and conditions contained

 

 

herein, the consideration for which is the covenants set forth in Sections 2,
3 and 4, and expenditures and obligations incurred and to be incurred by Purchaser,
on the one hand, and by Seller, the Company and the Subsidiary, on the other hand, in respect of
this Agreement, and this Agreement may be terminated or abandoned only as follows:

               12.1.1. By the unanimous written consent of Seller and Purchaser, notwithstanding prior
approval (if any) by the board of directors of either Purchaser or Seller;

               12.1.2. If any condition to the Closing under Sections 8 and 9 has not been
satisfied (or waived) by 5:00 p.m. on the one (1) year anniversary of the Effective Date or at
such other time and date as may be mutually agreed upon by the parties in writing, Seller may
terminate this Agreement by written notice given to Purchaser if Seller has neither (a)
proximately contributed to the occurrence of the failure to satisfy the conditions set forth in
Sections 8 and 9 by such date, nor (b) failed to use its commercially reasonable
efforts to satisfy the conditions set forth in Sections 8 and 9;

               12.1.3. If any condition to the Closing under Sections 8 and 9 has not
been satisfied (or waived) by 5:00 p.m. on the one (1) year anniversary of the Effective Date or
at such other time and date as may be mutually agreed upon by the parties in writing, Purchaser
may terminate this Agreement by written notice given to Seller if Purchaser has neither (a)
proximately contributed to the occurrence of the failure to satisfy the conditions set forth in
Sections 8 and 9 by such date, nor (b) failed to use its commercially reasonable
efforts to satisfy the conditions set forth in Sections 8 and 9; or

               12.1.4. By either Seller or Purchaser if (a) there shall be any Law that makes consummation
of the transactions contemplated herein illegal or otherwise prohibited; or (b) any judgment,
injunction, order or decree permanently enjoining any of the parties hereto from consummating
the transactions contemplated herein is entered and such judgment, injunction, order or decree
shall become final and non-appealable.

             Notwithstanding anything in this Section 12.1 to the contrary, no party hereto that is
in breach of a material obligation under this Agreement shall be entitled to terminate this
Agreement except with the prior written consent of the other party hereto.

     12.2. Procedure and Effect of Termination

               12.2.1. In the event of a termination by any party pursuant to and in accordance with
Section 12.1, such terminating party shall give prompt written notice thereof as
provided therein to the other party, and the transactions contemplated hereby shall be abandoned
and terminated, without further action by any of the parties hereto, except as provided in
Section 12.2.1.

               12.2.2. In the event of a termination pursuant to Section 12.1:

                                   12.2.2.1.   All filings, applications and other submissions relating to the consummation of
the transactions contemplated herein shall, to the extent practicable, be withdrawn from the
Governmental Authority or other Person to which made; and

 

 

                                   12.2.2.2.   No party hereto, or any of its Affiliates, nor any shareholder, member, partner,
director, officer, employee, or agent of any such party or any of its Affiliates, shall have any
liability or further obligation to any other party hereto or any of its Affiliates, nor to any
shareholder, member, partner, director, officer, employee, or agent of such other party or any of
its Affiliates pursuant to this Agreement, except (a) that the provisions of Sections
3.4.2, 3.7, 12.2 and 13 (and associated defined terms) shall survive
any such termination and not be extinguished thereby, provided that the provisions
of Section 3.4.2 shall terminate on the later of the second anniversary of such termination
or the date the Confidential Information loses its status as a trade secret or no longer qualify as
confidential under applicable Law; and (b) any party hereto nevertheless shall be entitled to seek
any remedy to which it may be entitled at law or in equity for the violation or breach by the other
party hereto of any agreement, covenant, indemnity, representation or warranty contained in this
Agreement that occurs prior to the termination.

	13.	 	GENERAL PROVISIONS

     13.1. Notices

             All notices, demands and requests hereunder by any party hereto to the other party hereto
shall be in writing, and shall be delivered by hand, nationally recognized overnight courier,
facsimile, or registered or certified mail, return receipt requested, first class postage prepaid,
addressed as follows:

               13.1.1. If to Seller:

Sempra Energy

101 Ash Street

HQ 17

San Diego, CA 92101-3017

Attn: Richard Vaccari

Facsimile No. 619-696-2911

and copies to legal counsel to Seller, the Company and the Subsidiary:

Sempra Energy

101 Ash Street

San Diego, CA 92101-3017

Attn: Assistant General Counsel, Corporate

Facsimile No. 619-696-4310

and

Winston & Strawn LLP

1700 K Street, N.W.

Washington, D.C. 20006

Attn: Gerald P. Farano

Facsimile No. 202-282-5100

 

 

               13.1.2. If to Purchaser:

Energy West, Incorporated and Energy West Propane Inc.

P.O. Box 2229

Great Falls, MT 59403

Attn: David A. Cerotzke, President and Chief Executive Officer

Facsimile No.: (406) 791-7560

and copies to legal counsel to Purchaser:

Dworken & Bernstein Co., LPA

60 South Park Place

Painesville, OH 44077

Attn: Melvyn E. Resnick and Jodi Littman Tomaszewski

Facsimile No.: (440) 352-3469

               13.1.3. If delivered by hand or nationally recognized overnight courier, the day on which a
notice, demand or request is delivered shall be the date on which such delivery is made, if
delivered by facsimile, the day upon which sender receives from its facsimile machine the
correct answerback of the addressee and confirmation of uninterrupted transmission by a
transmission report or the recipient confirming by telephone to the sender that the recipient
has received the facsimile message shall be the date on which such delivery is made (provided a
hard copy of such transmission is dispatched by first class mail within 48 hours), and, if
delivered by mail, the day on which such notice, demand or request is received shall be the date
of delivery; provided that a notice given in accordance with this Section
13.1 but received on any day other than a Business Day or after business hours in the place
of receipt, will be deemed to be received on the next Business Day in that place.

               13.1.4. Any party hereto may change its address or facsimile number specified for notices
herein by designating a new address or facsimile number for notices by notice to the other party
in accordance with this Section 13.1.

     13.2. Brokers

               13.2.1. Purchaser represents and warrants to Seller that no investment banker, broker or
finder has acted for Purchaser or any of its Affiliates in connection with this Agreement or the
transactions contemplated herein. Purchaser hereby agrees to indemnify and hold harmless
Seller, the Company, the Subsidiary and their respective Affiliates against any fee, loss or
expense arising out of any claim by any investment banker, broker or finder employed or alleged
to have been employed by Purchaser or any of its Affiliates in connection with this Agreement or
the transactions contemplated herein.

               13.2.2. Seller represents and warrants to Purchaser that no investment banker, broker or
finder has acted for Seller, the Company, the Subsidiary or any of their Affiliates in
connection with this Agreement or the transactions contemplated herein, except for WestLB AG and
ABN AMRO Incorporated. Seller hereby agrees to indemnify and hold harmless Purchaser, any
Affiliate of Purchaser, and, after the Closing, the Company and the Subsidiary

 

 

against any fee, loss or expense arising out of any claim by any investment banker, broker
or finder employed or alleged to have been employed by Seller, the Company, the Subsidiary or
any of their Affiliates in connection with this Agreement or the transactions contemplated
herein, including WestLB AG and ABN AMRO Incorporated.

     13.3. Expenses

              All expenses incurred by a party hereto in connection with or related to the authorization,
preparation, negotiation and execution of this Agreement and the Closing of the transactions
contemplated hereby, including all fees and expenses of agents, representatives, legal counsel,
accountants and other technical consultants employed by such party, shall be borne solely and
entirely by the party that has incurred the same (except as otherwise expressly provided herein),
and provided that all expenses incurred by Seller shall be paid by Sempra, as opposed to the
Company and the Subsidiary.

     13.4. Further Assurances

              Each party covenants that at any time, and from time to time, after the Closing, it will
execute such additional instruments and take such actions as may be reasonably requested by the
other party to confirm or perfect or otherwise to carry out the intent and purposes of this
Agreement.

     13.5. Attribution of Knowledge

              With respect to any representation or warranty set forth in this Agreement or any other
agreements, certificates or instruments delivered pursuant hereto that is expressly qualified by:
(a) the phrase “to the knowledge of Seller” or “to the best knowledge of Seller” and variations
thereof when used with respect to Seller shall refer only to matters actually known, and not
constructively known, to any of the individuals listed on Schedule 13.5(a); and (b) the
phrase “to the knowledge of Purchaser” or “to the best knowledge of Purchaser” and variations
thereof when used with respect to Purchaser shall refer only to matters actually known, and not
constructively known, to any of the individuals listed on Schedule 13.5(b). Without
limiting the foregoing, a matter shall be deemed to be “actually known” by an individual listed on
Schedule 13.5 if such individual has received written notice of such matter.

     13.6. Waiver

            Any failure on the part of any party hereto to comply with any of its obligations, agreements
or conditions hereunder may be waived in writing by the other party to whom such compliance is
owed. No waiver of any provision of this Agreement shall be deemed, or shall constitute, a waiver
of any other provision, whether or not similar, nor shall any waiver constitute a continuing
waiver.

     13.7. Assignment; Binding Effect; No Third-Party Beneficiaries

              Neither this Agreement nor any of the rights, interests or obligations under this Agreement
may be assigned or delegated, in whole or in part, by operation of law or otherwise by any party
hereto without the prior written consent of the other party hereto, and any such

 

 

assignment without such prior written consent shall be null and void. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted assigns. No
provision of this Agreement or any agreement referenced herein shall create a third-party
beneficiary relationship or otherwise confer any benefit, entitlement or right upon any Person
other than the parties to this Agreement or such referenced agreement, as the case may be, except
for Sections 11.2 and 11.3, which are intended to benefit and be enforceable by any
of the Purchaser Indemnitees or the Seller Indemnitees, respectively.

     13.8. Headings

              The section and other headings in this Agreement are inserted solely as a matter of
convenience and for reference, and are not a part of this Agreement. References to any “Section”
herein (such as “Section 5”) shall be construed to include a reference to all subsections
thereunder (i.e., 5.1, 5.1.1, 5.1.2, ... 5.6, 5.7 ... etc).

     13.9. Entire Agreement

              This Agreement constitutes the entire agreement between the parties hereto with respect to the
subject matter herein and supersedes and cancels any prior agreements, representations, warranties,
or communications, whether oral or written, between the parties hereto relating to the transactions
contemplated hereby or the subject matter herein.

     13.10. Modifications

               Neither this Agreement nor any provision hereof may be modified, amended, changed, waived,
discharged or terminated orally, but only by an agreement in writing signed by the party against
whom or which the enforcement of such modification, amendment, change, waiver, discharge or
termination is sought.

      13.11. Governing Law

               Except with respect to regulatory matters that by their nature are expressly governed by North
Carolina law, this Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without regards to the principles of conflicts of laws thereof other than
Sections 5-1401 and 5-1402 of the New York General Obligations Law.

     13.12. Severability

               The provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or enforceability of the other
provisions hereof. If any provision of this Agreement, or the application thereof to any Person or
any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and
purpose of such invalid or unenforceable provision, and (b) the remainder of this Agreement and the
application of such provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity
or enforceability of such provision, or the application thereof, in any other jurisdiction.

 

 

     13.13. Counterparts

             This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument. Execution by
facsimile signature shall be deemed to be, and shall have the same effect as, execution by original
signature.

     13.14. Exhibits and Schedules Incorporated

               All Exhibits and Schedules attached hereto are incorporated herein by reference. The section
numbers in the Schedules correspond to the section numbers in this Agreement; provided, however,
that any information disclosed in the Schedules under any section number shall be deemed to be
disclosed and incorporated in any other section of this Agreement where such disclosure is made
with such specificity, or in such a context, that it is reasonably apparent that such disclosure is
applicable to such other section numbers. Prior to the Closing Date, Seller shall supplement or
amend the Schedules with respect to any matter relating to the subject matter thereof hereafter
arising which, if existing or occurring at the date of this Agreement, would have been required to
be set forth or described in the Schedules. No supplement or amendment of any Schedule made
pursuant to this Section 13.14 shall be deemed to cure any breach of, or expand or limit
the scope of, or otherwise modify or affect any representation or warranty made in this Agreement
unless the parties agree thereto in writing.

     13.15. Waiver of Certain Damages

               Each of the parties hereto (a) agrees that only actual damages shall be recoverable under this
Agreement, (b) hereby waives any right to recover special, punitive, consequential, incidental or
exemplary damages and loss of revenues or profits; provided, however, that the
foregoing limitations shall not limit the amount recoverable by an Indemnified Party pursuant to
Section 11 for claims by any Third Party against such Indemnified Party.

     13.16. Joint Preparation

               The parties have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the provisions of this
Agreement.

     13.17. Performance by Affiliates

               Any obligation of any party hereto owed to any other party hereto under this Agreement, which
obligation is performed, satisfied or fulfilled by an Affiliate of such party, shall be deemed to
have been performed, satisfied or fulfilled by such party.

     13.18. Consent to Jurisdiction; Waivers of Trial by Jury 

               Each party irrevocably agrees that any legal action or proceeding arising out of or relating
to this Agreement or for recognition and enforcement of any judgment in respect hereof or

 

 

thereof brought by another party hereto or its successors or assigns may be brought and
determined in the Supreme Court of the State of New York located in New York, New York, or the
United States District Court for the Southern District of New York located in New York, New York,
and each party hereby irrevocably submits with regard to any action or proceeding for itself and in
respect to its property, generally and unconditionally, to the nonexclusive jurisdiction of the
aforesaid courts. Each party hereto hereby irrevocably waives, and agrees not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this
Agreement, (a) any claim that it is not personally subject to the jurisdiction of the above-named
courts for any reason other than the failure to lawfully serve process, (b) that it or its property
is exempt or immune from jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise), and (c) to the fullest extent permitted
by applicable law, that (i) the suit, action or proceeding in any such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof or thereof, may not be enforced in or by such courts. Each
party hereto further agrees that service of any process, summons, notice or document by U.S.
registered mail to such party’s respective address set forth in Section 13 shall be effective
service of process for any action, suit or proceeding with respect to any matters to which it has
submitted to jurisdiction in this Section 13.18. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING RELATING TO A DISPUTE AND FOR ANY
COUNTERCLAIM WITH RESPECT THERETO.

[Signatures On The Following Page]

 

 

               IN WITNESS WHEREOF, each party hereto has caused this Stock Purchase Agreement to be executed
on its behalf, all as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	Seller:	 	 
	 
	 	 	 	 	 	 
	 	 	SEMPRA ENERGY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mark A. Snell
 

     Mark A. Snell, Executive Vice President and
	 	 
	 

	 	 	 	     Chief Financial Officer	 	 
	 	 	Dated: January
30, 2007	 	 
	 
	 	 	 	 	 	 
	 	 	Purchaser:	 	 
	 
	 	 	 	 	 	 
	 
	 	ENERGY WEST INCORPORATED	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/David A. Cerotzke
 

     David A. Cerotzke, President
	 	 
	 	 	Dated: January 30, 2007	 	 

[Frontier Stock Purchase Agreement Signature Page]

 

 

EXHIBIT A

to

Stock Purchase Agreement

Assumed Working Capital Calculation

See attached.

 

 

EXHIBIT B

to

Stock Purchase Agreement

Form of Transition Services Agreement

See attached.

 

 

EXHIBIT C

to

Stock Purchase Agreement

Form of Seller’s Closing Certificate

 

 

EXHIBIT D

to

Stock Purchase Agreement

Form of Purchaser’s Closing Certificate

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