\n SEI Holdings Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.3
\n SENA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1
\n SETM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
\n SETM Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
\n SETM Gas Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
\n SETM Gas Business Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(dd)(x)
\n SETM Power Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
\n SETM Power Business Personnel . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(ee)(x)
\n Solid Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.22(c)
\n Southern Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(a)
\n Southern LP Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
\n Staff Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.13
\n Third Party Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 11.3(a)
\n transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1(b)(ii)
\n Vastar Gas Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
\n Vastar Gas Business Personnel . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(nn)x)
\n Vastar Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(a)
\n Vastar LP Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
\n Vastar Marketing Business . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
\n Vastar Power Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
\n Vastar Power Business Personnel . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1(pp)(x)
\n VGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
\n VPM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
\n VRI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
\n VRI Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.3
\n Working Capital Contribution\/Loans . . . . . . . . . . . . . . . . . . . . . . . Section 2.1(b)(vii)
\n<\/c><\/s><\/caption>\n<\/table>\n 1.3 CONSTRUCTION. Unless herein otherwise provided, or unless the
\ncontext shall otherwise require, words imparting the singular number shall
\ninclude the plural number, and vice versa; the terms “herein”, “hereof”,
\n“hereby” and “hereunder”, or other similar terms, refer to this Agreement as a
\nwhole and not only to the particular Article, Section or other subdivision in
\nwhich any such terms may be employed; references to Articles, Sections and
\nother subdivisions refer to the Articles, Sections and other subdivisions of
\nthis Agreement; a reference to any person shall include such person’s
\npredecessors and successors; the word “includes” and its derivatives means
\n“includes, but is not limited to,” and corresponding derivative expressions;
\nand all accounting terms not otherwise defined herein have the meanings
\nassigned to them in accordance with U.S. GAAP. Each reference herein to a
\nSchedule or Exhibit refers to the item identified separately in writing by the
\nparties hereto as the described Schedule or Exhibit to this Agreement.<\/p>\n
Formation Agreement
\nPage 14
\n 22
\n ARTICLE II<\/p>\n
TERMS OF THE TRANSACTION<\/p>\n
2.1 ADOPTION OF PARTNERSHIP AGREEMENT AND LIMITED LIABILITY
\n COMPANY AGREEMENT; ASSETS TO BE CONTRIBUTED.<\/p>\n
(a) At the First Closing, VRI and SEI Holdings shall cause Vastar
\nMember Sub and Southern Member Sub to execute and deliver the Amended and
\nRestated Limited Liability Company Agreement of the General Partner
\nsubstantially in the form attached hereto as Exhibit 2.1(a)(i) (the “Limited
\nLiability Company Agreement”).<\/p>\n
(b) At the First Closing, and on the terms and subject to the
\nconditions set forth in this Agreement<\/p>\n
(i) VRI and SEI Holdings shall cause the Amended and
\n Restated Limited Partnership Agreement of the Partnership
\n substantially in the form attached hereto as Exhibit 2.l(b) (the
\n “Partnership Agreement”) to be executed and delivered by the parties
\n named therein as the general and limited partners of the Partnership,
\n and VRI and SEI Holdings shall cause such parties to make such other
\n filings or recordings and take such other action as may be required by
\n Applicable Law to evidence the adoption of the Partnership Agreement;<\/p>\n
(ii) VRI shall contribute, assign, transfer, deliver and
\n convey (collectively, “transfer”), or cause its Affiliates to
\n transfer, to the Partnership, and the Partnership shall accept, a 99%
\n undivided interest in the Vastar Gas Business and the Vastar Gas
\n Assets and the LDC Contracts (but the transfer of the LDC Contracts
\n shall be effective on January 1, 1998);<\/p>\n
(iii) SEI Holdings shall transfer, or cause its Affiliates
\n to transfer, to the Partnership, and the Partnership shall accept, a
\n 99% undivided interest in the SETM Gas Business and the SETM Gas
\n Assets;<\/p>\n
(iv) VRI shall transfer, or cause its Affiliates to
\n transfer, to the General Partner, and the General Partner shall
\n accept, a 1% undivided interest in the Vastar Gas Business and the
\n Vastar Gas Assets and the LDC Contracts (but the transfer of the LDC
\n Contracts shall be effective on January 1, 1998);<\/p>\n
(v) SEI Holdings shall transfer, or cause its Affiliates
\n to transfer, to the General Partner, and the General Partner shall
\n accept, a 1% undivided interest in the SETM Gas Business and the SETM
\n Gas Assets;<\/p>\n
Formation Agreement
\nPage 16
\n 23
\n (vi) VRI and SEI Holdings shall cause the General Partner
\n to transfer to the Partnership, and the Partnership shall accept, the
\n 1% undivided interest in the Vastar Gas Business and the Vastar Gas
\n Assets and the 1% undivided interest in the SETM Gas Business and the
\n SETM Gas Assets; and<\/p>\n
(vii) VRI shall, or shall cause its Affiliates to, transfer
\n $16,000,000 to the Partnership and SEI Holdings shall, or shall cause
\n its Affiliates to, transfer $24,000,000 to the Partnership for working
\n capital each in the form of a contribution to capital or an
\n interest-free subordinated loan as determined by the General Partner
\n pro rata based on the Partnership Interest of the limited partners
\n (the “Working Capital Contribution\/Loans”).<\/p>\n
(c) At the Second Closing, and on the terms and subject to the
\nconditions set forth in this Agreement<\/p>\n
(i) VRI shall transfer, or cause its Affiliates to
\n transfer, to the Partnership, and the Partnership shall accept, a 100%
\n undivided interest in the Vastar Power Business and the Vastar Power
\n Assets; and<\/p>\n
(ii) SEI Holdings shall transfer, or cause its Affiliates
\n to transfer, to the Partnership, and the Partnership shall accept, a
\n 100% undivided interest in the SETM Power Business and the SETM Power
\n Assets.<\/p>\n
2.2 EXCLUDED ASSETS. Notwithstanding any provision contained in
\nthis Agreement to the contrary, the Excluded Assets shall be excluded from the
\nassets to be transferred to the Partnership pursuant to Section 2.1.<\/p>\n
2.3 INSTRUMENTS OF CONVEYANCE. In order to effectuate the
\ntransfer of the Vastar Business Assets and the SETM Business Assets
\ncontemplated by Sections 2.1(b) and (c), at each Closing, each of SEI Holdings
\nand VRI shall execute and deliver, or cause its Affiliates to execute and
\ndeliver, to the Partnership or the General Partner, as applicable, dated the
\nrespective Closing Date, all such documents or instruments of assignment,
\ntransfer or conveyance as the Partnership shall reasonably deem necessary or
\nappropriate to vest in or confirm to the Partnership or the General Partner, as
\napplicable, good and indefeasible title to the respective transferred Vastar
\nBusiness Assets and SETM Business Assets free and clear of all Encumbrances
\nother than Permitted Encumbrances (the “Instruments of Conveyance”).<\/p>\n
2.4 TRANSFER OF INTERESTS.<\/p>\n
(a) At the First Closing, the Partnership shall issue to VRI and
\nSEI Holdings, or their designees, all of the limited partnership interests in
\nthe Partnership (“Partnership Interests”), as follows:<\/p>\n
Formation Agreement
\nPage 17
\n 24
\n (i) as provided in the Partnership Agreement, the
\n Partnership shall issue to VRI, or its designees, at the First
\n Closing, Partnership Interests which, immediately upon (and after
\n taking into account) the consummation of the First Closing, shall
\n represent the Vastar Percentage of all Partnership Interests then
\n issued and outstanding; and<\/p>\n
(ii) as provided in the Partnership Agreement, the
\n Partnership shall issue to SEI Holdings, or its designees, at the
\n First Closing, Partnership Interests which, immediately upon (and
\n after taking into account) the consummation of the First Closing,
\n shall represent the Southern Percentage of all Partnership Interests
\n then issued and outstanding.<\/p>\n
(b) At the First Closing, the General Partner shall issue to VRI
\nand SEI Holdings, or their designees, all of the membership interests in the
\nGeneral Partner (“LLC Interests”), as follows:<\/p>\n
(i) as provided in the Limited Liability Company
\n Agreement, the General Partner shall issue to VRI, or its designees,
\n at the First Closing, LLC Interests which, immediately upon (and after
\n taking into account) the consummation of the First Closing, shall
\n represent the Vastar Percentage of all LLC Interests then issued and
\n outstanding; and<\/p>\n
(ii) as provided in the Limited Liability Company
\n Agreement, the General Partner shall issue to SEI Holdings, or its
\n designees, at the First Closing, LLC Interests which, immediately upon
\n (and after taking into account) the consummation of the First Closing,
\n shall represent the Southern Percentage of all LLC Interests then
\n issued and outstanding.<\/p>\n
(c) At the Second Closing, each of the Partnership and the General
\nPartner shall adjust their respective accounts to take into account the
\nadditional contributions to capital by the parties on behalf of the Partners
\nand of the members of the General Partner without any adjustment in the
\nrespective Partnership Interests of the Partners or LLC Interests of the
\nMembers of the General Partner.<\/p>\n
2.5 LIABILITIES ASSUMED BY PARTNERSHIP.<\/p>\n
(a) As further consideration for the contribution of the Vastar
\nGas Assets and the SETM Gas Assets to the Partnership, the Partnership shall,
\nupon the terms and subject to the conditions set forth herein, assume, at the
\nFirst Closing, and agree to thereafter perform all Assumed Contracts and
\nLiabilities listed on the First Closing Schedule of Assumed Contracts and
\nLiabilities.<\/p>\n
(b) As further consideration for the contribution of the Vastar
\nPower Assets and the SETM Power Assets to the Partnership, the Partnership
\nshall, upon the terms and subject to the conditions set forth herein, assume,
\nat the Second Closing, and agree to thereafter perform all Assumed Contracts
\nand Liabilities listed on the Second Closing Schedule of Assumed Contracts and
\nLiabilities.<\/p>\n
Formation Agreement
\nPage 18
\n 25
\n 2.6 LIABILITIES NOT ASSUMED BY PARTNERSHIP. Neither the
\nPartnership nor the General Partner shall assume or take title to or be subject
\nto, or in any way be liable or responsible for, any liabilities or obligations
\nof VRI, SEI Holdings or their respective Affiliates (whether or not referred to
\nin any Schedule or Exhibit hereto), except as specifically provided in Section
\n2.5 or in the Partnership Agreement. The parties expressly acknowledge that it
\nis the intention of the parties hereto that all liabilities and obligations
\nthat VRI, SEI Holdings or their respective Affiliates has or may have in the
\nfuture (whether accrued, absolute, contingent, unliquidated or otherwise,
\nwhether or not known to VRI or SEI Holdings, and whether due or to become due,
\nincluding, without limitation, those arising on account of bank, institutional
\nand other financings, Taxes, royalties, warranties, employee benefit plan
\nobligations, claims or any other matter), other than under the Assumed
\nContracts and Liabilities, shall be and remain the liabilities and obligations
\nof VRI, SEI Holdings or their respective Affiliates, as the case may be.<\/p>\n
2.7 SALE OF PARTIAL INTEREST. Immediately after the First
\nClosing, Southern LP Sub (or its designee) shall purchase (subject to Section
\n10.2) from Vastar LP Sub (or its designee) an 8.00% interest in the Partnership
\nfor $40,000,000 in cash delivered to Texas Commerce Bank, N.A. as Escrow Agent
\n(the “Escrow Agent”) pursuant to the Escrow Agreement among Vastar LP Sub,
\nSouthern LP Sub and the Escrow Agent in the form attached as Exhibit 2.7 so
\nthat the relative interests of Southern LP Sub and Vastar LP Sub in the
\nPartnership shall be, respectively, 59.40% and 39.60%.<\/p>\n
2.8 RETAIL BUSINESS. The parties agree that the Partnership and
\ntheir respective Affiliates may create such additional entities as they deem
\nnecessary or desirable to permit the Partnership to enter into retail marketing
\nof energy and energy-linked commodities and to meet applicable regulatory and
\ntax requirements, so long as the governance thereof is controlled by the
\nprovisions of the Limited Liability Company Agreement and the distributions
\ntherefrom directly to Affiliates of VRI or Affiliates of SEI Holdings (other
\nthan to the General Partner) are treated as Cash Distributions to Vastar LP Sub
\nor Southern LP Sub, respectively, for purposes of the Partnership Agreement.<\/p>\n
2.9 REIMBURSEMENTS. It is agreed that SEI Holdings, VRI and their
\nrespective Affiliates shall pay and be solely responsible for all costs,
\nexpenses and liabilities arising or accruing with respect to their respective
\nBusiness prior to the respective Closing Dates. If the Partnership pays any
\namount which was properly payable by SEI Holdings or one of its Affiliates or
\nVRI or one of its Affiliates, as the case may be, then such Person shall
\nreimburse the Partnership for such payments promptly following notice from the
\nPartnership.<\/p>\n
Formation Agreement
\nPage 19
\n 26<\/p>\n
ARTICLE III-A<\/p>\n
FIRST CLOSING<\/p>\n
The First Closing of the transactions contemplated by Article II (the
\n“First Closing”) shall be effective as of 12:01 a.m., Eastern Time, on
\nSeptember 1, 1997 (the “First Closing Effective Date”) and shall take place (i)
\nat the offices of Andrews & Kurth L.L.P., Houston, Texas, at 9:00 a.m., local
\ntime, on August 28, 1997, or (ii) at such other time or place or on such other
\ndate as VRI and SEI Holdings shall agree in writing. The date on which the
\nFirst Closing is required to take place is referred to herein as the “First
\nClosing Date.” All First Closing transactions shall be deemed to have occurred
\nsimultaneously.<\/p>\n
At the First Closing, subject to the satisfaction or waiver of the
\nconditions to their respective obligations set forth in this Agreement, the
\nparties hereto shall make the following deliveries or such deliveries in
\nsubstitution therefor as are satisfactory to the indicated recipient:<\/p>\n
3.1-A DELIVERIES BY VRI AND AFFILIATES.<\/p>\n
(a) VRI shall execute and deliver, or cause its Affiliates to
\nexecute and deliver, to the Partnership the Instruments of Conveyance in form
\nand substance reasonably satisfactory to SEI Holdings and the Partnership and
\nsufficient to transfer to the Partnership and effectively vest in the
\nPartnership good and indefeasible title to the 99% undivided interest in the
\nVastar Gas Business, the Vastar Gas Assets and the LDC Contracts (but the
\ntransfer of the LDC Contracts shall be effective on January 1, 1998), subject
\nonly to Permitted Encumbrances.<\/p>\n
(b) VRI shall execute and deliver, or cause its Affiliates to
\nexecute and deliver, to the General Partner the Instruments of Conveyance in
\nform and substance reasonably satisfactory to SEI Holdings and the General
\nPartner and sufficient to transfer to the General Partner and effectively vest
\nin the General Partner good and indefeasible title to the 1% undivided interest
\nin the Vastar Gas Business, the Vastar Gas Assets and the LDC Contracts (but
\nthe transfer of the LDC Contracts shall be effective on January 1, 1998),
\nsubject only to Permitted Encumbrances.<\/p>\n
(c) VRI shall deliver, or cause its Affiliates to deliver,
\npossession of the Vastar Gas Business and the Vastar Gas Assets to the General
\nPartner and the Partnership.<\/p>\n
(d) VRI shall deliver to SEI Holdings and the Partnership a
\ncertificate of an officer of VRI dated the First Closing Date certifying (i)
\nthat attached to such certificate are true and correct copies of the
\nresolutions adopted by the Board of Directors, and, if necessary, the
\nstockholders, of VRI and each of VGM, VPM and Vastar LP Sub authorizing the
\nexecution, delivery and performance of this Agreement and the execution,
\ndelivery and performance of the Instruments of Conveyance and Ancillary
\nAgreements delivered at the First Closing and that such resolutions are in full
\nforce and effect as of the First Closing, and (ii) the incumbency and
\nsignatures of the officers<\/p>\n
Formation Agreement
\nPage 20
\n 27
\nof VRI or its Affiliates who have executed this Agreement and the other
\ncertificates, instruments and documents delivered at the First Closing.<\/p>\n
(e) VRI shall execute and deliver, or cause its Affiliates to
\nexecute and deliver, to SEI Holdings and the Partnership the Partnership
\nAgreement, the Limited Liability Company Agreement and such other certificates,
\ninstruments and documents as may be reasonably requested by, and in form and
\nsubstance reasonably satisfactory to, SEI Holdings and the Partnership in order
\nto effect the transactions contemplated by this Agreement to occur at the First
\nClosing.<\/p>\n
(f) VRI and SEI Holdings shall execute and deliver the agreed
\nFirst Closing Schedule of Assumed Contracts and Liabilities.<\/p>\n
(g) VRI shall deliver, or cause its Affiliates to deliver, to the
\nPartnership cash, deposits (including Oklahoma tax deposits), gas storage
\ninventory at market value, Marked to Market values of Assumed Contracts and
\nLiabilities, or other cash equivalents satisfactory to SEI Holdings and the
\nPartnership as its part of the Working Capital Contribution\/Loan pursuant to
\nSection 2.1(b)(vii).<\/p>\n
(h) Immediately after the First Closing, VRI shall deliver, or
\ncause its Affiliates to deliver, to Southern LP Sub or its designees, the
\nInstruments of Conveyance in form and substance reasonably satisfactory to SEI
\nHoldings and sufficient to transfer to Southern LP Sub or its designees the
\n8.00% Partnership Interest to be sold in the Sale of Partial Interest.<\/p>\n
3.2-A DELIVERIES BY SEI HOLDINGS AND AFFILIATES.<\/p>\n
(a) SEI Holdings shall execute and deliver, or cause its
\nAffiliates to execute and deliver, to the Partnership the Instruments of
\nConveyance in form and substance reasonably satisfactory to VRI and the
\nPartnership and sufficient to transfer to the Partnership and effectively vest
\nin the Partnership good and indefeasible title to the 99% undivided interest in
\nthe SETM Gas Business and the SETM Gas Assets, subject only to Permitted
\nEncumbrances.<\/p>\n
(b) SEI Holdings shall execute and deliver, or cause its
\nAffiliates to execute and deliver, to the General Partner the Instruments of
\nConveyance in form and substance reasonably satisfactory to VRI and the General
\nPartner and sufficient to transfer to the General Partner and effectively vest
\nin the General Partner good and indefeasible title to the 1% undivided interest
\nin the SETM Gas Business and the SETM Gas Assets, subject only to Permitted
\nEncumbrances.<\/p>\n
(c) SEI Holdings shall deliver, or cause its Affiliates to
\ndeliver, possession of the SETM Gas Business and the SETM Gas Assets to the
\nGeneral Partner and the Partnership.<\/p>\n
(d) SEI Holdings shall deliver to VRI and the Partnership a
\ncertificate of an officer of SEI Holdings dated the First Closing Date
\ncertifying (i) that attached to such certificate are true and correct copies of
\nthe resolutions adopted by the Board of Directors, and, if necessary, the<\/p>\n
Formation Agreement
\nPage 21
\n 28
\nstockholders, of SEI Holdings and its Affiliates authorizing the execution,
\ndelivery and performance of this Agreement and the execution, delivery and
\nperformance of the Instruments of Conveyance and Ancillary Agreements delivered
\nat the First Closing and that such resolutions are in full force and effect as
\nof the First Closing, and (ii) the incumbency and signatures of the officers of
\nSEI Holdings or its Affiliates who have executed this Agreement and the other
\ncertificates, instruments and documents delivered at the First Closing.<\/p>\n
(e) SEI Holdings shall execute and deliver, or cause its
\nAffiliates to execute and deliver, to VRI and the Partnership the Partnership
\nAgreement, the Limited Liability Company Agreement and such other certificates,
\ninstruments and documents as may be reasonably requested by, and in form and
\nsubstance reasonably satisfactory to, VRI and the Partnership in order to
\neffect the transactions contemplated by this Agreement to occur at the First
\nClosing.<\/p>\n
(f) VRI and SEI Holdings shall execute and deliver the agreed
\nFirst Closing Schedule of Assumed Contracts and Liabilities.<\/p>\n
(g) SEI Holdings shall deliver, or cause its Affiliates to deliver
\nto the Partnership cash, deposits, gas storage inventory at market value,
\nMarked to Market values of Assumed Contracts and Liabilities, or other cash
\nequivalents satisfactory to VRI and the Partnership as its part of the Working
\nCapital Contribution\/Loan pursuant to Section 2.1(b)(vii).<\/p>\n
(h) Immediately after the First Closing, SEI Holdings shall cause
\nSouthern LP Sub to deliver to the Escrow Agent under the Escrow Agreement for
\nthe benefit of Vastar LP Sub or its designee(s) a wire transfer of immediately
\navailable funds in the amount of $40,000,000 as consideration for the Sale of
\nPartial Interest.<\/p>\n
3.3-A DELIVERIES BY THE GENERAL PARTNER. VRI and SEI Holdings shall
\ncause the General Partner (i) to execute and deliver the Partnership Agreement
\nand (ii) to deliver to the Partnership the 1% undivided interest in the SETM
\nGas Business and the SETM Gas Assets and the 1% undivided interest in the
\nVastar Gas Business and the Vastar Gas Assets.<\/p>\n
3.4-A DELIVERIES BY THE PARTNERSHIP.<\/p>\n
(a) VRI and SEI Holdings shall cause the Partnership to deliver to
\nthem or their respective designees instruments of assumption in form and
\nsubstance reasonably satisfactory to VRI and SEI Holdings pursuant to which the
\nPartnership shall assume at the First Closing, and thereafter perform the
\nAssumed Contracts and Liabilities listed on the First Closing Schedule of
\nAssumed Contracts and Liabilities.<\/p>\n
(b) VRI and SEI Holdings shall cause the Partnership to deliver
\nsuch other certificates, instruments and documents as may be reasonably
\nrequested by, and in form and substance<\/p>\n
Formation Agreement
\nPage 22
\n 29
\nreasonably satisfactory to, VRI and SEI Holdings to effect the transactions
\ncontemplated by this Agreement to occur at the First Closing.<\/p>\n
ARTICLE III-B<\/p>\n
SECOND CLOSING<\/p>\n
The Second Closing of the transactions contemplated by Article II (the
\n“Second Closing”) shall be effective as of 12:01 a.m., Eastern Time, on the
\nlater of the last day of the month in which all the conditions to the Second
\nClosing are met or January 1, 1998 (the “Second Closing Effective Date”) and
\nshall take place (i) at the offices of Andrews & Kurth L.L.P., Houston, Texas,
\nat 9:00 a.m., local time, on the second business day after the Second Closing
\nEffective Date, or (ii) at such other time or place or on such other date as
\nVRI and SEI Holdings shall agree in writing. The date on which the Second
\nClosing is required to take place is referred to herein as the “Second Closing
\nDate.” All Second Closing transactions shall be deemed to have occurred
\nsimultaneously.<\/p>\n
At the Second Closing, subject to the satisfaction or waiver of the
\nconditions to their respective obligations set forth in this Agreement, the
\nparties hereto shall make the following deliveries or such deliveries in
\nsubstitution therefor as are satisfactory to the indicated recipient:<\/p>\n
3.1-B DELIVERIES BY VRI AND AFFILIATES.<\/p>\n
(a) VRI shall execute and deliver, or cause its Affiliates to
\nexecute and deliver, to the Partnership the Instruments of Conveyance in form
\nand substance reasonably satisfactory to SEI Holdings and the Partnership and
\nsufficient to transfer to the Partnership and effectively vest in the
\nPartnership good and indefeasible title to the 100% undivided interest in the
\nVastar Power Business and the Vastar Power Assets, subject only to Permitted
\nEncumbrances.<\/p>\n
(b) VRI shall deliver, or cause its Affiliates to deliver,
\npossession of the Vastar Power Business and the Vastar Power Assets to the
\nPartnership.<\/p>\n
(c) VRI shall deliver to SEI Holdings and the Partnership a
\ncertificate of an officer of VRI dated the Second Closing Date certifying (i)
\nthat attached to such certificate are true and correct copies of the
\nresolutions adopted by the Board of Directors, and, if necessary, the
\nstockholders, of VRI, Vastar Holdings and each of VGM, VPM and Vastar LP Sub,
\nauthorizing the execution, delivery and performance of this Agreement and the
\nexecution, delivery and performance of all the Instruments of Conveyance and
\nAncillary Agreements delivered at the Second Closing and that such resolutions
\nare in full force and effect as of the Second Closing, (ii) the incumbency and
\nsignatures of the officers of VRI or its Affiliates who have executed the
\ncertificates, instruments and documents delivered at the Second Closing, and
\n(iii) that the employment of the Vastar Gas Business Personnel and Vastar Power
\nBusiness Personnel by VRI and its Affiliates has been terminated.<\/p>\n
Formation Agreement
\nPage 23
\n 30
\n (d) VRI shall execute and deliver, or cause its Affiliates to
\nexecute and deliver, to SEI Holdings and the Partnership such other
\ncertificates, instruments and documents as may be reasonably requested by, and
\nin form and substance reasonably satisfactory to, SEI Holdings and the
\nPartnership in order to effect the transactions contemplated by this Agreement
\nto occur at the Second Closing.<\/p>\n
(e) VRI shall execute and deliver the agreed Second Closing
\nSchedule of Assumed Contracts and Liabilities and shall cause to be adjusted,
\nby way of cash payments to or from the Partnership, the then proportionate
\nWorking Capital Contribution\/Loans to accommodate the Marked to Market values
\nthereof.<\/p>\n
(f) VRI shall cause Vastar LP Sub to cause the Escrow Agent to
\ndeliver to VRI or its designees the $40,000,000 (plus interest) placed in
\nescrow in connection with the Sale of Partial Interest.<\/p>\n
3.2-B DELIVERIES BY SEI HOLDINGS AND AFFILIATES.<\/p>\n
(a) SEI Holdings shall execute and deliver, or cause its
\nAffiliates to execute and deliver, to the Partnership the Instruments of
\nConveyance in form and substance reasonably satisfactory to VRI and the
\nPartnership and sufficient to transfer to the Partnership and effectively vest
\nin the Partnership good and indefeasible title to the 100% undivided interest
\nin the SETM Power Business and the SETM Power Assets subject only to Permitted
\nEncumbrances.<\/p>\n
(b) SEI Holdings shall deliver, or cause its Affiliates to
\ndeliver, possession of the SETM Power Business and the SETM Power Assets to the
\nPartnership.<\/p>\n
(c) SEI Holdings shall deliver to VRI and the Partnership a
\ncertificate of an executive officer of SEI Holdings dated the Second Closing
\nDate certifying (i) that attached to such certificate are true and correct
\ncopies of resolutions adopted by the Board of Directors, and, if necessary the
\nstockholders, of SEI Holdings and its Affiliates authorizing the execution,
\ndelivery and performance of this Agreement and the execution, delivery and
\nperformance of the Instruments of Conveyance and Ancillary Agreements delivered
\nat the Second Closing and that such resolutions are in full force and effect as
\nof the Second Closing, (ii) the incumbency and signatures of the officers of
\nSEI Holdings or its Affiliates who have executed the certificates, instruments
\nand documents delivered at the Second Closing, and (iii) that the employment of
\nthe SETM Gas Business Personnel and SETM Power Business Personnel by SEI
\nHoldings and its Affiliates has been terminated.<\/p>\n
(d) SEI Holdings shall execute and deliver, or cause its
\nAffiliates to execute and deliver, to VRI and the Partnership such other
\ncertificates, instruments and documents as may be reasonably requested by, and
\nin form and substance reasonably satisfactory to, VRI and the Partnership in
\norder to effect the transactions contemplated by this Agreement to occur at the
\nSecond Closing.<\/p>\n
Formation Agreement
\nPage 24
\n 31
\n (e) SEI Holdings shall execute and deliver the agreed Second
\nClosing Schedule of Assumed Contracts and Liabilities and shall cause to be
\nadjusted, by way of cash payments to or from the Partnership, the then
\nproportionate Working Capital Contribution\/Loans to accommodate the Marked to
\nMarket values thereof.<\/p>\n
(f) SEI Holdings shall cause Southern LP Sub to cause the Escrow
\nAgent to deliver to Vastar LP Sub or its designee the$40,000,000 (plus
\ninterest) placed in escrow in connection with the Sale of Partial Interest.<\/p>\n
3.3-B DELIVERIES BY THE GENERAL PARTNER. VRI and SEI Holdings shall
\ncause the General Partner to deliver such certificates, instruments and
\ndocuments as may be reasonably requested by, and in form and substance
\nreasonably satisfactory to, VRI and SEI Holdings to effect the transactions
\ncontemplated by this Agreement to occur at the Second Closing.<\/p>\n
3.4-B DELIVERIES BY THE PARTNERSHIP.<\/p>\n
(a) VRI and SEI Holdings shall cause the Partnership to deliver to
\nthem or their respective designees instruments of assumption in form and
\nsubstance reasonably satisfactory to VRI and SEI Holdings pursuant to which the
\nPartnership shall assume at the Second Closing, and thereafter perform the
\nAssumed Contracts and Liabilities listed on the Second Closing Schedule of
\nAssumed Contracts and Liabilities.<\/p>\n
(b) VRI and SEI Holdings shall cause the Partnership to deliver
\nsuch other certificates, instruments and documents as may be reasonably
\nrequested by, and in form and substance reasonably satisfactory to, VRI and SEI
\nHoldings to effect the transactions contemplated by this Agreement to occur at
\nthe Second Closing.<\/p>\n
ARTICLE IV<\/p>\n
REPRESENTATIONS AND WARRANTIES OF VRI<\/p>\n
VRI represents and warrants to SEI Holdings as of the date hereof
\nthat:<\/p>\n
4.1 CORPORATE ORGANIZATION. Each of VRI, Vastar Holdings, VGM,
\nVPM and Vastar LP Sub is a corporation duly organized, validly existing and in
\ngood standing under the laws of the State of Delaware. Each of VRI, Vastar
\nHoldings, VGM, VPM and Vastar LP Sub has all requisite corporate power and
\nauthority to own, lease and operate the Vastar Business Assets and to carry on
\nthe Vastar Marketing Business as now being conducted. No actions or
\nproceedings to dissolve VRI, Vastar Holdings, VGM, VPM or Vastar LP Sub are
\npending.<\/p>\n
Formation Agreement
\nPage 25
\n 32
\n 4.2 CHARTER AND BYLAWS. VRI has delivered or made available to
\nSEI Holdings accurate and complete copies of the Certificate of Incorporation
\nand Bylaws of each of VRI, Vastar Holdings, VGM, VPM and Vastar LP Sub as
\ncurrently in effect.<\/p>\n
4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of VRI, Vastar
\nHoldings, VGM, VPM and Vastar LP Sub has full corporate power and authority to
\nexecute, deliver and perform this Agreement, the Partnership Agreement, the
\nLimited Liability Company Agreement, the Ancillary Agreements (as defined in
\nSection 7.6 of this Agreement), and the Instruments of Conveyance
\n(collectively, the “VRI Documents”) to which it is a party, and to consummate
\nthe transactions contemplated thereby. The execution, delivery and performance
\nby each of VRI, Vastar Holdings, VGM, VPM, and Vastar LP Sub, as the case may
\nbe, of the VRI Documents, to which it is a party, and the consummation by it of
\nthe transactions contemplated thereby, have been duly authorized by all
\nnecessary corporate action. This Agreement has been duly executed and
\ndelivered by VRI and constitutes, and each of the VRI Documents and each other
\nagreement, instrument or document executed or to be executed by VRI, Vastar
\nHoldings, VGM, VPM and\/or Vastar LP Sub in connection with the transactions
\ncontemplated hereby has been, or when executed will be, duly executed and
\ndelivered by each of VRI, Vastar Holdings, VGM, VPM and\/or Vastar LP Sub and
\nconstitutes, or when executed and delivered will constitute, a valid and
\nlegally binding obligation of VRI, Vastar Holdings, VGM, VPM or Vastar LP Sub,
\nas the case may be, enforceable against it in accordance with their respective
\nterms, except that such enforceability may be limited by (i) applicable
\nbankruptcy, insolvency, reorganization, moratorium and similar laws affecting
\ncreditors’ rights generally and (ii) equitable principles which may limit the
\navailability of certain equitable remedies (such as specific performance) in
\ncertain instances.<\/p>\n
4.4 NONCONTRAVENTION. Except as disclosed in Section 4.4 of the
\nVastar Disclosure Schedule, the execution, delivery and performance by each of
\nVRI, Vastar Holdings, VGM, VPM and\/or Vastar LP Sub of the VRI Documents, to
\nwhich it is a party, and the consummation by it of the transactions
\ncontemplated thereby do not and will not (i) conflict with or result in a
\nviolation of any provision of the respective charter or bylaws or other
\ngoverning instruments of each of VRI, Vastar Holdings, VGM, VPM, and Vastar LP
\nSub (ii) conflict with or result in a violation of any provision of, or
\nconstitute (with or without the giving of notice or the passage of time or
\nboth) a default under, or give rise (with or without the giving of notice or
\nthe passage of time or both) to any right of termination, cancellation or
\nacceleration under, any bond, debenture, note, mortgage, indenture, lease,
\ncontract, agreement or other instrument or obligation to which it is a party or
\nby which it, its Business or any of the Vastar Business Assets may be bound,
\n(iii) result in the creation or imposition of any Encumbrance upon any of the
\nVastar Business Assets or (iv) assuming compliance with the matters referred to
\nin Section 4.5, violate any Applicable Law binding upon it, its Business or any
\nof the Vastar Business Assets, except, in the case of clauses (ii), (iii) and
\n(iv) above, for any such conflicts, violations, defaults, terminations,
\ncancellations or accelerations which would not, individually or in the
\naggregate, have a Material Adverse Effect.<\/p>\n
Formation Agreement
\nPage 26
\n 33
\n 4.5 GOVERNMENTAL APPROVALS. No consent, approval, order or
\nauthorization of, or declaration, filing or registration with, any Governmental
\nEntity is required to be obtained or made by VRI, Vastar Holdings, VGM, VPM or
\nVastar LP Sub in connection with the execution, delivery or performance by VRI,
\nVastar Holdings, VGM, VPM or Vastar LP Sub of the VRI Documents or the
\nconsummation by it of the transactions contemplated thereby, other than (i) as
\nset forth in Section 4.5 of the Vastar Disclosure Schedule; (ii) filings with
\nGovernmental Entities with respect to the transfer of the Vastar Business
\nAssets, to occur in the ordinary course following the consummation of the
\ntransactions contemplated hereby; and (iii) such consents, approvals, orders or
\nauthorizations which, if not obtained, and such declarations, filings or
\nregistrations which, if not made, would not, individually or in the aggregate,
\nhave a Material Adverse Effect.<\/p>\n
4.6 EXCLUSIVE OPERATION OF THE VASTAR MARKETING BUSINESS. Except
\nas set forth in Schedule 4.6 to the Vastar Disclosure Schedule, VRI does not
\nhave any direct or indirect equity or ownership interest in any corporation,
\npartnership, joint venture or other entity other than VGM or VPM which is
\ninvolved, directly or indirectly, in the conduct of the Vastar Marketing
\nBusiness, and the Vastar Gas Business is conducted solely and exclusively by
\nVGM and the Vastar Power Business is conducted solely and exclusively by VPM.<\/p>\n
4.7 TITLE TO VASTAR BUSINESS ASSETS. Except as set forth in
\nSection 4.7 of the Vastar Disclosure Schedule, VRI, Vastar Holdings, VGM or VPM
\nis the owner of, and has good and marketable title to, all the Vastar Business
\nAssets. Upon transfer of the Vastar Business Assets as provided in Article III
\nof this Agreement, the Partnership will have good and marketable title to all
\nthe Vastar Business Assets (including, except as set forth in Section 4.7 of
\nthe Vastar Disclosure Schedule, the Intellectual Property, Technology and
\nSoftware), free and clear of all Encumbrances (other than the Permitted
\nEncumbrances).<\/p>\n
4.8 FINANCIAL STATEMENTS; ABSENCE OF LIABILITIES.<\/p>\n
(a) VRI ACKNOWLEDGES THAT NEITHER IT NOR ANY OF ITS AFFILIATES HAS
\nRELIED ON ANY FINANCIAL STATEMENTS OF SETM OR ITS SUBSIDIARIES IN CONNECTION
\nWITH ITS DECISION TO ENTER INTO THIS AGREEMENT.<\/p>\n
(b) Neither VGM nor VPM has any liabilities or obligations
\n(whether accrued, absolute, contingent, unliquidated or otherwise, whether or
\nnot known to VRI, and whether due or to become due) that will become
\nliabilities or obligations of the General Partner or the Partnership except for
\nthe Assumed Contracts and Liabilities (or as otherwise contemplated hereby) or
\nthat will create or result in any Encumbrances on the assets of the General
\nPartner or the Partnership except for Permitted Encumbrances.<\/p>\n
4.9 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Section
\n4.9 of the Vastar Disclosure Schedule, since June 30, 1997, (i) there has been
\nno Material Adverse Effect with respect to the Vastar Marketing Business; (ii)
\nthe Vastar Marketing Business has been conducted only in the<\/p>\n
Formation Agreement
\nPage 27
\n 34
\nordinary course consistent with past practice; (iii) except for, or as
\ncontemplated by, this Agreement, neither VRI, VGM nor VPM has, in respect of
\nits Business, incurred any material liability, engaged in any material
\ntransaction or entered into any material agreement outside the ordinary course
\nof business consistent with past practice; (iv) neither VRI, VGM nor VPM has
\nsuffered any material loss, damage, destruction or other casualty to any of the
\nVastar Business Assets (whether or not covered by insurance); and (v) neither
\nVRI, VGM nor VPM has, in respect of its Business, taken any of the actions set
\nforth in Section 6.2-A except as permitted thereunder.<\/p>\n
4.10 TAX MATTERS. Except as disclosed in Section 4.10 of the
\nVastar Disclosure Schedule, VRI, Vastar Holdings, VGM and VPM have (and as of
\neach Closing will have) (either directly or indirectly or as part of a
\nconsolidated or combined group) (i) duly filed all material federal, state,
\nlocal and foreign Tax Returns required to be filed by or with respect to it
\nwith the IRS or other applicable Taxing authority, (ii) paid, or adequately
\nreserved against all Taxes due, or claimed by any Taxing authority to be due,
\nfrom or with respect to it, and (iii) made all material deposits required with
\nrespect to Taxes, in each such case to the extent that the failure to do so
\nwould result in the imposition of any Encumbrance (other than a Permitted
\nEncumbrance) on the Vastar Business Assets. To the best knowledge of VRI,
\nthere has been no material issue raised or material adjustment proposed (and
\nnone is pending) by the IRS or any other Taxing authority in connection with
\nany Tax Returns relating to the Vastar Business Assets or the operation of the
\nVastar Marketing Business. Except as set forth in Section 4.10 of the Vastar
\nDisclosure Schedule, no waiver or extension of any statute of limitations as to
\nany federal, state, local or foreign Tax matter relating to the Vastar Business
\nAssets or the operation of the Vastar Marketing Business has been given by or
\nrequested from VRI, Vastar Holdings, VGM or VPM with respect to any Tax year.
\nNeither VRI, Vastar Holdings, VGM nor VPM has filed a consent under Section
\n341(f) of the Code.<\/p>\n
4.11 COMPLIANCE WITH LAWS. To the best knowledge of VRI, each of
\nVRI, Vastar Holdings, VGM and VPM has complied with all Applicable Laws
\nrelating to the ownership or operation of the Vastar Business Assets and the
\noperation of the Vastar Marketing Business, except for noncompliance with such
\nApplicable Laws which, individually or in the aggregate, does not and will not
\nhave a Material Adverse Effect. Neither VRI, Vastar Holdings, VGM nor VPM is
\ncharged or, to the best knowledge of VRI, threatened with, or, to the best
\nknowledge of VRI, under investigation with respect to, any violation of any
\nApplicable Law relating to any aspect of the ownership or operation of the
\nVastar Business Assets or the operation of the Vastar Marketing Business, other
\nthan violations which, individually or in the aggregate, do not and will not
\nhave a Material Adverse Effect.<\/p>\n
4.12 LEGAL PROCEEDINGS. To the best knowledge of VRI, except as
\nset forth on Section 4.12 of the Vastar Disclosure Schedule, there are no
\nProceedings pending or threatened against or involving VRI, Vastar Holdings,
\nVGM, VPM or Vastar LP Sub relating to the Vastar Business Assets or the
\noperation of the Vastar Marketing Business which, individually or in the
\naggregate, might reasonably be expected to have a Material Adverse Effect or to
\nresult in a material adverse change in the Assumed Contracts and Liabilities.
\nExcept as set forth in Section 4.12 of the<\/p>\n
Formation Agreement
\nPage 28
\n 35
\nVastar Disclosure Schedule, neither VRI, Vastar Holdings, VGM, VPM nor Vastar
\nLP Sub is subject to any judgment, order, writ, injunction or decree of any
\nGovernmental Entity which is reasonably likely to have a Material Adverse
\nEffect or result in a material adverse change in the Assumed Contracts and
\nLiabilities. To the best knowledge of VRI, except as set forth in Section 4.12
\nof the Vastar Disclosure Schedule, there are no Proceedings pending or
\nthreatened seeking to restrain, prohibit or obtain damages or other relief in
\nconnection with this Agreement or the transactions contemplated hereby.<\/p>\n
4.13 SUFFICIENCY OF ASSETS AND PERSONNEL. Except for the Excluded
\nAssets and except as set forth in Section 4.13 of the Vastar Disclosure
\nSchedule and except for staff services (such as accounting, treasury, human
\nresources, tax advice, insurance, information technology and legal services)
\nwhich are currently provided by Affiliates of the parties (“Staff Services”)
\nwhich VRI or an Affiliate is available to perform on an arm’s-length contract
\nbasis, the Vastar Business Assets, and the Vastar Gas Business Personnel and
\nVastar Power Business Personnel, (i) constitute all the assets and properties
\nused or held for use, and all of the employees employed, in connection with the
\noperation of the Vastar Marketing Business and (ii) constitute all the assets
\nand properties and personnel the use, employment or benefit of which are
\nreasonably necessary for the operation of the Vastar Marketing Business as
\ncurrently conducted. The Vastar Business Assets and their uses conform to all
\nApplicable Laws, except for such nonconformance as does not and will not have a
\nMaterial Adverse Effect. All tangible assets and properties included in the
\nVastar Business Assets are in the possession, or under the control, of VRI, VGM
\nor VPM.<\/p>\n
4.14 REAL PROPERTY. Neither VGM nor VPM owns any real property.
\nSet forth in Section 4.14 of the Vastar Disclosure Schedule is the street
\naddress and a brief description of the principal facilities and structures
\nleased by VRI, Vastar Holdings, VGM or VPM and used or held for use in
\nconnection with the operation of the Vastar Marketing Business.<\/p>\n
4.15 TANGIBLE PERSONAL PROPERTY. Set forth in Section 4.15 of the
\nVastar Disclosure Schedule is a list, as of the date hereof, of all furniture,
\nfixtures, leasehold improvements, equipment, machinery, computer hardware,
\nprototypes, spare parts, supplies, materials, motor vehicles, apparatus, tools,
\nimplements, appliances and other tangible personal property (other than
\ninventories) owned or leased by VRI, Vastar Holdings, VGM or VPM and used or
\nheld for use in connection with the operation of the Vastar Marketing Business,
\nexcept for items having a value individually of less than $5,000 which do not,
\nin the aggregate, have a value exceeding $100,000.<\/p>\n
4.16 INVENTORY. The value of each item of inventory included in
\nthe Vastar Business Assets transferred as a part of the Working Capital
\nContribution\/Loan shall be reflected at market value as of the respective
\nClosing.<\/p>\n
4.17 RECEIVABLES. There are no accounts receivable of VRI, Vastar
\nHoldings, VGM or VPM generated by the Vastar Marketing Business to be
\ntransferred to the General Partner or the Partnership pursuant to Section 2.1.<\/p>\n
Formation Agreement
\nPage 29
\n 36
\n 4.18 INTELLECTUAL PROPERTY; TECHNOLOGY; SOFTWARE.<\/p>\n
(a) Set forth in Section 4.18 of the Vastar Disclosure Schedule is
\na list of all Intellectual Property, Technology and Software relating to or
\nused in connection with the operation of the Vastar Marketing Business.
\nSection 4.18 of the Vastar Disclosure Schedule specifies, as applicable: (i)
\nthe nature of such Intellectual Property, Technology and Software; (ii) the
\nowner of such Intellectual Property, Technology and Software; and (iii) all
\nlicenses, sublicenses and other agreements to which VRI, VGM or VPM is a party
\nand pursuant to which any person is authorized to use the Intellectual
\nProperty, Technology and Software, including the identity of all parties
\nthereto, a description of the nature and subject matter thereof, the applicable
\nroyalty (if any) and the term thereof.<\/p>\n
(b) The Intellectual Property, Technology and Software listed in
\nSection 4.18 of the Vastar Disclosure Schedule constitutes all Intellectual
\nProperty, Technology and Software necessary for the conduct of the Vastar
\nMarketing Business on a basis consistent with past practice. VRI, VGM or VPM
\nhas good and marketable title to or is validly licensed to use all such
\nIntellectual Property, Technology and Software. Each item of such Intellectual
\nProperty, Technology and Software is in full force and effect, each of VRI,
\nVastar Holdings, VGM and VPM is in compliance in all material respects with all
\nits obligations with respect thereto and, to the best knowledge of VRI, no
\nevent has occurred which permits, or upon the giving of notice or the passage
\nof time or otherwise would permit, the revocation or termination of any
\nthereof. To the best knowledge of VRI, there are no Proceedings pending or
\nthreatened against it, Vastar Holdings, VGM or VPM asserting that the use by
\nVRI, VGM or VPM of any of such Intellectual Property, Technology or Software
\ninfringes the rights of any other person or seeking revocation, termination or
\nconcurrent use of any of such Intellectual Property, Technology or Software,
\nand there is, to the best knowledge of VRI, no basis for any such Proceeding.
\nTo the best knowledge of VRI, none of the Intellectual Property, Technology or
\nSoftware that is owned by VRI or its Affiliates is being infringed upon by any
\nother person. Except as set forth in Section 4.18 of the Vastar Disclosure
\nSchedule, none of such Intellectual Property, Technology or Software that is
\nowned by VRI or its Affiliates is subject to any outstanding judgment, order,
\nwrit, injunction or decree of any Governmental Entity, or any agreement,
\narrangement or understanding, restricting the scope or use thereof. To the
\nbest knowledge of VRI, the conduct of the Vastar Marketing Business at any time
\nprior to the First Closing or Second Closing, as the case may be, did not, and
\nthe conduct of the Vastar Marketing Business on a basis consistent with VRI’s
\npast practice as of such Closing will not, infringe upon or otherwise
\nmisappropriate any Intellectual Property, Technology or Software of any other
\nperson.<\/p>\n
4.19 PERMITS.<\/p>\n
(a) Set forth in Section 4.19 (a) of the Vastar Disclosure
\nSchedule is a list of all Permits held by VGM or VPM which relate to the Vastar
\nBusiness Assets or the Vastar Marketing Business. Each of such Permits is in
\nfull force and effect, each of VRI, VGM and VPM is in compliance in all
\nmaterial respects with all its obligations with respect thereto and, to the
\nbest knowledge of VRI, no event has occurred which permits, or with or without
\nthe giving of notice or the passage of time or<\/p>\n
Formation Agreement
\nPage 30
\n 37
\nboth would permit, the revocation or termination of any thereof. Except as
\ndisclosed in Section 4.19(a) of the Vastar Disclosure Schedule, to the best
\nknowledge of VRI, no notice has been issued by any Governmental Entity and no
\nProceeding is pending or threatened with respect to any alleged failure by VRI,
\nVGM or VPM to have any Permit the absence of which would have a Material
\nAdverse Effect.<\/p>\n
(b) Except as set forth in Section 4.19(b) of the Vastar
\nDisclosure Schedule and, except for Permits the absence of which do not and
\nwill not have a Material Adverse Effect, the Permits listed in Section 4.19(a)
\nof the Vastar Disclosure Schedule constitute all the Permits necessary or
\nrequired for the ownership and operation of the Vastar Business Assets and the
\nconduct of the Vastar Marketing Business as of the First Closing or Second
\nClosing, as the case may be.<\/p>\n
4.20 CHANGE IN CORPORATE STRUCTURE. Except as previously
\ndisclosed in writing, the board of directors of each of VRI, Vastar Holdings,
\nVGM, VPM or Vastar LP Sub (as reflected in their respective minutes) is not
\ncurrently contemplating and does not have any plans to consolidate, merge with
\nor, reorganize or recapitalize with any other Person or to convey, transfer,
\nsell, or lease a substantial portion of its assets to any other Person in a
\nsingle transaction or series of transactions.<\/p>\n
4.21 AGREEMENTS.<\/p>\n
(a) Set forth in Section 4.21(a) of the Vastar Disclosure Schedule
\nis a list of all the following contracts, agreements and arrangements
\n(collectively, for purposes of this Section only, “agreements”) to which VRI,
\nVGM or VPM is a party or by which VRI, VGM or VPM is otherwise bound that
\nrelate to the Vastar Business Assets or the Vastar Marketing Business:<\/p>\n
(i) collective bargaining agreements and similar
\n agreements with employees as a group;<\/p>\n
(ii) agreements, trusts, plans, funds or other employee
\n benefit arrangements of any nature;<\/p>\n
(iii) agreements with any director, officer, employee,
\n consultant or advisor of VRI or any of its Affiliates;<\/p>\n
(iv) agreements between or among VRI and any of its
\n Affiliates;<\/p>\n
(v) indentures, mortgages, security agreements, notes,
\n loan or credit agreements or other agreements relating to the
\n borrowing of money by VRI, VGM or VPM or to the direct or indirect
\n guarantee or assumption by VRI, VGM or VPM of any obligation of
\n others;<\/p>\n
(vi) agreements relating to the acquisition or disposition
\n of assets;<\/p>\n
Formation Agreement
\nPage 31
\n 38
\n (vii) agreements with respect to the lease of real or
\n personal property;<\/p>\n
(viii) agreements concerning the management or operation of
\n any real property;<\/p>\n
(ix) supplier, broker, distributor, dealer, manufacturer’s
\n representative, sales, agency, sales promotion, advertising,
\n marketing, consulting, research and development, maintenance, service
\n and repair agreements;<\/p>\n
(x) license, royalty or other agreements relating to
\n Intellectual Property, Technology or Software;<\/p>\n
(xi) partnership, joint venture and profit sharing
\n agreements;<\/p>\n
(xii) agreements with any Governmental Entity;<\/p>\n
(xiii) agreements in the nature of a settlement or a
\n conciliation agreement arising out of any claim asserted by any other
\n person;<\/p>\n
(xiv) agreements containing any covenant limiting the
\n freedom of VRI, VGM or VPM to engage in any line of business or
\n compete with any other person in any geographic area or during any
\n period of time;<\/p>\n
(xv) powers of attorney granted by VRI, VGM or VPM in
\n favor of any person;<\/p>\n
(xvi) agreements not made in the ordinary course of the
\n Vastar Marketing Business;<\/p>\n
(xvii) agreements for the purchase, sale, exchange,
\n marketing, or other use of natural gas, electric energy, or other
\n commodities that may not be terminated for convenience and without
\n penalty prior to January 1, 1998, and all exchange, swap, hedging, and
\n other financial or future contracts and agreements; and<\/p>\n
(xviii) other agreements, whether or not made in the ordinary
\n course of the Vastar Marketing Business, that are material to the
\n Vastar Marketing Business or the ownership or operation of the Vastar
\n Business Assets or any material portion thereof.<\/p>\n
(b) VRI has delivered or made available to SEI Holdings accurate
\nand complete copies of the agreements listed in Section 4.21(a) of the Vastar
\nDisclosure Schedule. Except as set forth in Section 4.21(b) of the Vastar
\nDisclosure Schedule, each of such agreements is a valid and binding agreement
\nof VRI, VGM or VPM, as the case may be, and (to the best knowledge of VRI) the
\nother parties thereto. Except as set forth in Section 4.21(b) of the Vastar
\nDisclosure Schedule, neither VRI, VGM nor VPM is in breach of or in default in
\nany material respect under, nor has any event<\/p>\n
Formation Agreement
\nPage 32
\n 39
\noccurred which (with or without the giving of notice or the passage of time or
\nboth) would constitute a material default by it under, any material provision
\nof any of such agreements, and neither VRI, VGM nor VPM has received any
\nwritten notice from any other party indicating that it is in breach of or in
\ndefault under any such material provision. To the best knowledge of VRI, no
\nother party to any of such agreements is in breach of or in default under such
\nagreements, nor has any assertion been made by VRI, VGM or VPM of any such
\nbreach or default except as would not have a Material Adverse Effect. Except
\nas disclosed in Section 4.21(b) of the Vastar Disclosure Schedule and except as
\nwould not have a Material Adverse Effect, each of such agreements is freely and
\nfully assignable to the Partnership without penalty or other adverse
\nconsequence.<\/p>\n
4.22 ENVIRONMENTAL MATTERS.<\/p>\n
(a) To the best knowledge of VRI, neither VRI, VGM nor VPM is in
\nviolation of, or subject to, any pending or threatened Proceeding under, or
\nsubject to any remedial obligations under, any Applicable Laws pertaining to
\nhealth, safety, the environment, Hazardous Substances or Solid Wastes (such
\nApplicable Laws as they now exist are herein collectively called “Applicable
\nEnvironmental Laws”) relating to the ownership or operation of the Vastar
\nBusiness Assets or the operation of the Vastar Marketing Business, including
\nwithout limitation (i) the Comprehensive Environmental Response, Compensation,
\nand Liability Act of 1980, as amended (“CERCLA”), and (ii) the Resource
\nConservation and Recovery Act of 1976, as amended (“RCRA”). To the best
\nknowledge of VRI, VRI, Vastar Holdings, VGM and VPM have obtained all Permits
\nto construct, occupy, operate or use any equipment or other tangible property
\nforming a part of the Vastar Business Assets by reason of any Applicable
\nEnvironmental Laws.<\/p>\n
(b) Except as disclosed in Section 4.22 of the Vastar Disclosure
\nSchedule, to the best knowledge of VRI, there are no past or present events,
\nconditions, circumstances or plans (i) that interfere with or prevent
\ncompliance or continued compliance, with respect to the Vastar Marketing
\nBusiness or the Vastar Business Assets, with Applicable Environmental Laws or
\n(ii) that are reasonably expected to give rise to any common law or other legal
\nliability or obligation with respect to the Vastar Marketing Business or the
\nVastar Business Assets, including but not limited to, liability or obligation
\nunder CERCLA or RCRA, based on or related to the manufacture, processing,
\ndistribution, use, treatment, storage, disposal, transport or handling or the
\nemission, discharge, release or threatened release into the environment, of any
\npollutant, contaminant, chemical, industrial toxic or Hazardous Substance or
\nSolid Waste.<\/p>\n
(c) As used in this Agreement, the term “Hazardous Substance”
\nshall have the meaning currently specified in CERCLA, and the term “Solid
\nWaste” shall have the meaning currently specified in RCRA; provided that to the
\nextent the laws of the jurisdiction in which the particular asset is located
\nhave currently established a meaning for such term that is broader than that
\nspecified in CERCLA or RCRA, such broader meaning shall apply.<\/p>\n
Formation Agreement
\nPage 33
\n 40
\n 4.23 INSURANCE. Except as would not have a Material Adverse
\nEffect, VRI and its Affiliates have fire, liability, casualty and other
\ninsurance coverage with respect to the Vastar Business Assets and the Vastar
\nMarketing Business sufficient to satisfy all material requirements of
\nApplicable Laws and any agreements, arrangements or understandings to which
\nVRI, Vastar Holdings, VGM or VPM is a party, and which is customary for
\nbusinesses of similar size engaged in similar lines of business.<\/p>\n
4.24 FINANCIAL REQUIREMENTS. Except as reflected on Section 4.24
\nof the Vastar Disclosure Schedule, there are no currently effective bonds,
\ndeposits, financial assurance requirements or insurance coverages required to
\nbe submitted to Governmental Entities or any third parties for the continued
\nownership and operation of the Vastar Business Assets and the operation of the
\nVastar Marketing Business.<\/p>\n
4.25 BOOKS AND RECORDS. All the books and records of VRI, Vastar
\nHoldings, VGM or VPM relating to the Vastar Business Assets or the Vastar
\nMarketing Business, including all personnel files, employee data and other
\nmaterials relating to employees of the Vastar Marketing Business, are
\nsubstantially complete and correct in all material respects, have been in all
\nmaterial respects maintained in accordance with good business practice and all
\nApplicable Laws, and, in the case of the books of account, have been in all
\nmaterial respects prepared and maintained in accordance with U.S. GAAP
\nconsistently applied. Such books and records accurately and fairly reflect, in
\nreasonable detail, all material transactions, assets and liabilities of VRI,
\nVGM or VPM with respect to the Vastar Marketing Business.<\/p>\n
4.26 INVESTMENT INTENT. VRI or its designees are acquiring the
\nPartnership Interests and members’ interests in the General Partner to be
\nacquired by it at the respective Closing for its own account for investment and
\nnot with a view to, or for sale or other disposition in connection with, any
\npublic distribution of all or any part thereof.<\/p>\n
4.27 NO MATERIAL OMISSIONS. To the best knowledge of VRI, there
\nare no factors or circumstances that are material to the Vastar Marketing
\nBusiness or the Vastar Business Assets, or the continued ownership or operation
\nthereof, that have not been disclosed to SEI Holdings in this Agreement or in
\nthe Vastar Disclosure Schedule or to representatives of SEI Holdings prior to
\nthe date hereof. EXCEPT AS PROVIDED SPECIFICALLY IN THIS AGREEMENT, VRI MAKES
\nNO REPRESENTATIONS OR WARRANTIES IN THIS AGREEMENT OR IN ANY INSTRUMENT,
\nEXHIBIT, SCHEDULE OR DOCUMENT DELIVERED IN CONNECTION HEREWITH OR REFERRED TO
\nHEREIN AS TO ANY FINANCIAL PROJECTIONS, ESTIMATES TO COMPLETE TRANSACTIONS,
\nVALUES AT RISK, TRANSACTION LOSS PROJECTIONS, OR SIMILAR PREDICTIVE
\nINFORMATION, AND SEI HOLDINGS SPECIFICALLY ACKNOWLEDGES THAT IT IS NOT SEEKING
\nOR RELYING ON ANY SUCH REPRESENTATIONS OR WARRANTIES.<\/p>\n
Formation Agreement
\nPage 34
\n 41
\n ARTICLE V<\/p>\n
REPRESENTATIONS AND WARRANTIES OF SEI HOLDINGS<\/p>\n
SEI Holdings represents and warrants to VRI as of the date hereof
\nthat:<\/p>\n
5.1 CORPORATE ORGANIZATION. Each of SEI Holdings, Southern Energy
\nNorth America, Inc.,(“SENA”) and SETM is a corporation duly organized, validly
\nexisting and in good standing under the laws of the State of Delaware. Each of
\nSouthern LP Sub and Southern Member Sub is a corporation duly organized,
\nvalidly existing and in good standing under the laws of the State of Georgia.
\nEach of SEI Holdings, SENA, SETM and Southern LP Sub has all requisite
\ncorporate power and authority to own, lease and operate the SETM Business
\nAssets and to carry on the SETM Business as now being conducted. No actions or
\nproceedings to dissolve SEI Holdings, SENA, SETM, Southern Member Sub or
\nSouthern LP Sub are pending.<\/p>\n
5.2 CHARTER AND BYLAWS. SEI Holdings has delivered or made
\navailable to VRI accurate and complete copies of the Certificate of
\nIncorporation and Bylaws of each of SEI Holdings, SETM, Southern Member Sub and
\nSouthern LP Sub as currently in effect.<\/p>\n
5.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of SEI Holdings,
\nSENA, SETM, Southern Member Sub and Southern LP Sub has full corporate power and
\nauthority to execute, deliver and perform this Agreement, the Partnership
\nAgreement, the Limited Liability Company Agreement, the Ancillary Agreements (as
\ndefined in Section 7.6 of this Agreement) and the Instruments of Conveyance
\n(collectively, the “SEI Holdings Documents”) to which it is a party, and to
\nconsummate the transactions contemplated thereby. The execution, delivery and
\nperformance by each of SEI Holdings, SENA, SETM, Southern Member Sub and
\nSouthern LP Sub, as the case may be, of the SEI Holdings Documents to which it
\nis a party, and the consummation by it of the transactions contemplated thereby,
\nhave been duly authorized by all necessary corporate action. This Agreement has
\nbeen duly executed and delivered by SEI Holdings, and constitutes, and each of
\nthe SEI Holdings Documents and each other agreement, instrument or document
\nexecuted or to be executed by SEI Holdings, SENA, SETM, Southern Member Sub
\nand\/or Southern LP Sub in connection with the transactions contemplated hereby
\nhas been, or when executed will be, duly executed and delivered by each of SEI
\nHoldings, SENA, SETM, Southern Member Sub and\/or Southern LP Sub and
\nconstitutes, or when executed and delivered will constitute, a valid and legally
\nbinding obligation of SEI Holdings, SENA, SETM, Southern Member Sub or Southern
\nLP Sub, as the case may be, enforceable against it in accordance with their
\nrespective terms, except that such enforceability may be limited by (i)
\napplicable bankruptcy, insolvency, reorganization, moratorium and similar laws
\naffecting creditors’ rights generally and (ii) equitable principles which may
\nlimit the availability of certain equitable remedies (such as specific
\nperformance) in certain instances.<\/p>\n
5.4 NONCONTRAVENTION. Except as disclosed in Section 5.4 of the
\nSEI Holdings Disclosure Schedule, the execution, delivery and performance by
\neach of SEI Holdings, SENA, <\/p>\n
Formation Agreement
\nPage 35
\n 42
\nSETM, Southern Member Sub and\/or Southern LP Sub of the SEI Holdings Documents,
\nto which it is a party, and the consummation by it of the transactions
\ncontemplated thereby do not and will not (i) conflict with or result in a
\nviolation of any provision of the respective charter or bylaws or other
\ngoverning instruments of each of SEI Holdings, SENA, SETM, Southern Member Sub
\nand Southern LP Sub, (ii) conflict with or result in a violation of any
\nprovision of, or constitute (with or without the giving of notice or the passage
\nof time or both) a default under, or give rise (with or without the giving of
\nnotice or the passage of time or both) to any right of termination, cancellation
\nor acceleration under, any bond, debenture, note, mortgage, indenture, lease,
\ncontract, agreement or other instrument or obligation to which it is a party or
\nby which it, the SETM Business or any of the SETM Business Assets may be bound,
\n(iii) result in the creation or imposition of any Encumbrance upon any of the
\nSETM Business Assets or (iv) assuming compliance with the matters referred to in
\nSection 5.5, violate any Applicable Law binding upon it, the SETM Business or
\nany of the SETM Business Assets, except, in the case of clauses (ii), (iii) and
\n(iv) above, for any such conflicts, violations, defaults, terminations,
\ncancellations or accelerations which would not, individually or in the
\naggregate, have a Material Adverse Effect.<\/p>\n
5.5 GOVERNMENTAL APPROVALS. No consent, approval, order or
\nauthorization of, or declaration, filing or registration with, any Governmental
\nEntity is required to be obtained or made by SEI Holdings, SENA, SETM, Southern
\nMember Sub or Southern LP Sub in connection with the execution, delivery or
\nperformance by SEI Holdings, SENA, SETM, Southern Member Sub or Southern LP Sub
\nof the SEI Holdings Documents or the consummation by it of the transactions
\ncontemplated thereby, other than (i) as set forth in Section 5.5 of the SEI
\nHoldings Disclosure Schedule; (ii) filings with Governmental Entities with
\nrespect to the transfer of the SETM Business Assets, to occur in the ordinary
\ncourse following the consummation of the transactions contemplated hereby; and
\n(iii) such consents, approvals, orders or authorizations which, if not
\nobtained, and such declarations, filings or registrations which, if not made,
\nwould not, individually or in the aggregate, have a Material Adverse Effect.<\/p>\n
5.6 EXCLUSIVE OPERATION OF THE SETM BUSINESS. Except as set forth
\nin Schedule 5.6 to the SEI Holdings Disclosure Schedule, SEI Holdings does not
\nhave any direct or indirect equity or ownership interest in any corporation,
\npartnership, joint venture or other entity which is involved, directly or
\nindirectly, in the conduct of the SETM Business, and the SETM Business is
\nconducted solely and exclusively by SETM.<\/p>\n
5.7 TITLE TO SETM BUSINESS ASSETS. Except as set forth in Section
\n5.7 of the SEI Holdings Disclosure Schedule, SEI Holdings or SETM is the owner
\nof, and has good and marketable title to, all the SETM Business Assets. Upon
\ntransfer of the SETM Business Assets as provided in Article III of this
\nAgreement, the Partnership will have good and marketable title to all the SETM
\nBusiness Assets (including, except as set forth in Section 5.7 of the SEI
\nHoldings Disclosure Schedule, the Intellectual Property, Technology and
\nSoftware), free and clear of all Encumbrances (other than the Permitted
\nEncumbrances).<\/p>\n
Formation Agreement
\nPage 36
\n 43
\n 5.8 FINANCIAL STATEMENTS; ABSENCE OF LIABILITIES.<\/p>\n
(a) SEI HOLDINGS ACKNOWLEDGES THAT NEITHER IT NOR ANY OF ITS
\nAFFILIATES HAS RELIED ON ANY FINANCIAL STATEMENTS OF VGM, VPM OR THEIR
\nSUBSIDIARIES IN CONNECTION WITH ITS DECISION TO ENTER INTO THIS AGREEMENT.<\/p>\n
(b) SETM has no liabilities or obligations (whether accrued,
\nabsolute, contingent, unliquidated or otherwise, whether or not known to SEI
\nHoldings, and whether due or to become due) that will become liabilities or
\nobligations of the General Partner or the Partnership except for the Assumed
\nContracts and Liabilities (or as otherwise contemplated hereby) or that will
\ncreate or result in any Encumbrances on the assets of the General Partner or
\nthe Partnership except for Permitted Encumbrances.<\/p>\n
5.9 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Section
\n5.9 of the SEI Holdings Disclosure Schedule, since June 30, 1997, (i) there has
\nbeen no Material Adverse Effect with respect to the SETM Business; (ii) the
\nSETM Business has been conducted only in the ordinary course consistent with
\npast practice; (iii) except for or as contemplated by this Agreement, SETM has
\nnot, in respect of the SETM Business, incurred any material liability, engaged
\nin any material transaction or entered into any material agreement outside the
\nordinary course of business consistent with past practice; (iv) SETM has not
\nsuffered any material loss, damage, destruction or other casualty to any of the
\nSETM Business Assets (whether or not covered by insurance); and (v) SETM has
\nnot, in respect of the SETM Business, taken any of the actions set forth in
\nSection 6.2-B except as permitted thereunder.<\/p>\n
5.10 TAX MATTERS. Except as disclosed in Section 5.10 of the SEI
\nHoldings Disclosure Schedule, SEI Holdings, SENA and SETM have (and as of each
\nClosing will have) (either directly or indirectly or as part of a consolidated
\nor combined group) (i) duly filed all material federal, state, local and
\nforeign Tax Returns required to be filed by or with respect to it with the IRS
\nor other applicable Taxing authority, (ii) paid, or adequately reserved against
\nall Taxes due, or claimed by any Taxing authority to be due, from or with
\nrespect to it, and (iii) made all material deposits required with respect to
\nTaxes, in each such case to the extent that the failure to do so would result
\nin the imposition of any Encumbrance (other than a Permitted Encumbrance) on
\nthe SETM Business Assets. To the best knowledge of SEI Holdings, there has
\nbeen no material issue raised or material adjustment proposed (and none is
\npending) by the IRS or any other Taxing authority in connection with any Tax
\nReturns relating to the SETM Business Assets or the operation of the SETM
\nBusiness. Except as set forth in Section 5.10 of the SEI Holdings Disclosure
\nSchedule, no waiver or extension of any statute of limitations as to any
\nfederal, state, local or foreign Tax matter relating to the SETM Business
\nAssets or the operation of the SETM Business has been given by or requested
\nfrom SEI Holdings, SENA and SETM with respect to any Tax year. Neither SEI
\nHoldings, SENA nor SETM has filed a consent under Section 341(f) of the Code.<\/p>\n
Formation Agreement
\nPage 37
\n 44
\n 5.11 COMPLIANCE WITH LAWS. To the best knowledge of SEI Holdings,
\neach of SEI Holdings, SENA and SETM has complied with all Applicable Laws
\nrelating to the ownership or operation of the SETM Business Assets and the
\noperation of the SETM Business, except for noncompliance with such Applicable
\nLaws which, individually or in the aggregate, does not and will not have a
\nMaterial Adverse Effect. Neither SEI Holdings, SENA nor SETM is charged or, to
\nthe best knowledge of SEI Holdings, threatened with, or, to the best knowledge
\nof SEI Holdings, under investigation with respect to, any violation of any
\nApplicable Law relating to any aspect of the ownership or operation of the SETM
\nBusiness Assets or the operation of the SETM Business, other than violations
\nwhich, individually or in the aggregate, do not and will not have a Material
\nAdverse Effect.<\/p>\n
5.12 LEGAL PROCEEDINGS. To the best knowledge of SEI Holdings,
\nexcept as set forth in Section 5.12 of the SEI Holdings Disclosure Schedule,
\nthere are no Proceedings pending or threatened against or involving SEI
\nHoldings, SETM or Southern LP Sub relating to the SETM Business Assets or the
\noperation of the SETM Business which, individually or in the aggregate, might
\nreasonably be expected to have a Material Adverse Effect or to result in a
\nmaterial adverse change in the Assumed Contracts and Liabilities. Except as
\nset forth in Section 5.12 of the SEI Holdings Disclosure Schedule, neither SEI
\nHoldings, SETM nor Southern LP Sub is subject to any judgment, order, writ,
\ninjunction or decree of any Governmental Entity which is reasonably likely to
\nhave a Material Adverse Effect or result in a material adverse change in the
\nAssumed Contracts and Liabilities. To the best knowledge of SEI Holdings,
\nexcept as set forth in Section 5.12 of the SEI Holdings Disclosure Schedule,
\nthere are no Proceedings pending or threatened seeking to restrain, prohibit or
\nobtain damages or other relief in connection with this Agreement or the
\ntransactions contemplated hereby.<\/p>\n
5.13 SUFFICIENCY OF ASSETS AND PERSONNEL. Except for the Excluded
\nAssets and except as set forth in Section 5.13 of the SEI Holdings Disclosure
\nSchedule and except for Staff Services which SEI Holdings or an Affiliate is
\navailable to perform on an arm’s length contract basis, the SETM Business
\nAssets, and the SETM Gas Business Personnel and SETM Power Business Personnel,
\n(i) constitute all the assets and properties used or held for use, and all of
\nthe employees employed, in connection with the operation of the SETM Business
\nand (ii) constitute all the assets and properties and personnel the use,
\nemployment or benefit of which are reasonably necessary for the operation of
\nthe SETM Business as currently conducted. The SETM Business Assets and their
\nuses conform to all Applicable Laws, except for such nonconformance as does not
\nand will not have a Material Adverse Effect. All tangible assets and
\nproperties included in the SETM Business Assets are in the possession, or under
\nthe control, of SETM.<\/p>\n
5.14 REAL PROPERTY. SETM does not own any real property. Set
\nforth in Section 5.14 of the SEI Holdings Disclosure Schedule is the street
\naddress and a brief description of the principal facilities and structures
\nleased by SEI Holdings, SENA or SETM and used or held for use in connection
\nwith the operation of the SETM Business.<\/p>\n
Formation Agreement
\nPage 38
\n 45
\n 5.15 TANGIBLE PERSONAL PROPERTY. Set forth in Section 5.15 of the
\nSEI Holdings Disclosure Schedule is a list, as of the date hereof, of all
\nfurniture, fixtures, leasehold improvements, equipment, machinery, computer
\nhardware, prototypes, spare parts, supplies, materials, motor vehicles,
\napparatus, tools, implements, appliances and other tangible personal property
\n(other than inventories) owned or leased by SEI Holdings, SENA or SETM and used
\nor held for use in connection with the operation of the SETM Business, except
\nfor items having a value individually of less than $5,000 which do not, in the
\naggregate, have a value exceeding $100,000.<\/p>\n
5.16 INVENTORY. The value of each item of inventory included in
\nthe SETM Business Assets transferred as part of the Working Capital
\nContribution\/Loan shall be reflected at market value as of the respective
\nClosing.<\/p>\n
5.17 RECEIVABLES. There are no accounts receivable of SEI
\nHoldings, SENA or SETM generated by the SETM Business to be transferred to the
\nGeneral Partner or the Partnership pursuant to Section 2.1.<\/p>\n
5.18 INTELLECTUAL PROPERTY; TECHNOLOGY; SOFTWARE.<\/p>\n
(a) Set forth in Section 5.18 of the SEI Holdings Disclosure
\nSchedule is a list of all Intellectual Property, Technology and Software
\nrelating to or used in connection with the operation of the SETM Business.
\nSection 5.18 of the SEI Holdings Disclosure Schedule specifies, as applicable:
\n(i) the nature of such Intellectual Property, Technology and Software; (ii) the
\nowner of such Intellectual Property, Technology and Software; and (iii) all
\nlicenses, sublicenses and other agreements to which SEI Holdings is a party and
\npursuant to which any person is authorized to use the Intellectual Property,
\nTechnology and Software, including the identity of all parties thereto, a
\ndescription of the nature and subject matter thereof, the applicable royalty
\n(if any) and the term thereof.<\/p>\n
(b) The Intellectual Property, Technology and Software listed in
\nSection 5.18 of the SEI Holdings Disclosure Schedule constitutes all
\nIntellectual Property, Technology and Software necessary for the conduct of the
\nSETM Business on a basis consistent with past practice. Each of SEI Holdings,
\nSENA and SETM has good and marketable title to or is validly licensed to use
\nall such Intellectual Property, Technology and Software. Each item of such
\nIntellectual Property, Technology and Software is in full force and effect, and
\neach of SEI Holdings, SENA and SETM is in compliance in all material respects
\nwith all its obligations with respect thereto and, to the best knowledge of SEI
\nHoldings, no event has occurred which permits, or upon the giving of notice or
\nthe passage of time or otherwise would permit, the revocation or termination of
\nany thereof. To the best knowledge of SEI Holdings, there are no Proceedings
\npending or threatened against SEI Holdings, SENA or SETM asserting that the use
\nby SEI Holdings, SENA or SETM of any of such Intellectual Property, Technology
\nor Software infringes the rights of any other person or seeking revocation,
\ntermination or concurrent use of any of such Intellectual Property, Technology
\nor Software, and there is, to the best knowledge of SEI Holdings, no basis for
\nany such Proceeding.<\/p>\n
Formation Agreement
\nPage 39
\n 46
\nTo the best knowledge of SEI Holdings, none of such Intellectual Property,
\nTechnology or Software that is owned by SEI Holdings or its Affiliates is being
\ninfringed upon by any other person. Except as set forth in Section 5.18 of the
\nSEI Holdings Disclosure Schedule, none of the Intellectual Property, Technology
\nor Software that is owned by SEI Holdings or its Affiliates is subject to any
\noutstanding judgment, order, writ, injunction or decree of any Governmental
\nEntity, or any agreement, arrangement or understanding, restricting the scope
\nor use thereof. To the best knowledge of SEI Holdings, the conduct of the SETM
\nBusiness at any time prior to the First or Second Closing, as the case may be,
\ndid not, and the conduct of the SETM Business on a basis consistent with SEI
\nHoldings’ past practice as of such Closing will not, infringe upon or otherwise
\nmisappropriate any Intellectual Property, Technology or Software of any other
\nperson.<\/p>\n
5.19 PERMITS.<\/p>\n
(a) Set forth in Section 5.19 (a) of the SEI Holdings Disclosure
\nSchedule is a list of all Permits held by SETM which relate to the SETM
\nBusiness Assets or the SETM Business. Each of such Permits is in full force
\nand effect, SETM is in compliance in all material respects with all its
\nobligations with respect thereto and, to the best knowledge of SEI Holdings, no
\nevent has occurred which permits, or with or without the giving of notice or
\nthe passage of time or both would permit, the revocation or termination of any
\nthereof. Except as disclosed in Section 5.19(a) of the SEI Holdings Disclosure
\nSchedule, to the best knowledge of SEI Holdings, no notice has been issued by
\nany Governmental Entity and no Proceeding is pending or threatened with respect
\nto any alleged failure by SEI Holdings or SETM to have any Permit the absence
\nof which would have a Material Adverse Effect.<\/p>\n
(b) Except as set forth in Section 5.19(b) of the SEI Holdings
\nDisclosure Schedule and, except for Permits the absence of which do not and
\nwill not have a Material Adverse Effect, the Permits listed in Section 5.19(a)
\nof the SEI Holdings Disclosure Schedule constitute all the Permits necessary or
\nrequired for the ownership and operation of the SETM Business Assets and the
\nconduct of the SETM Business as of the First or Second Closing, as the case may
\nbe.<\/p>\n
5.20 CHANGE IN CORPORATE STRUCTURE. Except as previously disclosed
\nin writing, the board of directors of each of SEI Holdings, SENA, SETM,
\nSouthern Member Sub or Southern LP Sub (as reflected in their respective
\nminutes) is not currently contemplating and does not have any plans to
\nconsolidate, merge with or, reorganize or recapitalize with any other Person or
\nto convey, transfer, sell, or lease a substantial portion of its assets to any
\nother Person in a single transaction or series of transactions.<\/p>\n
5.21 AGREEMENTS.<\/p>\n
(a) Set forth in Section 5.21(a) of the SEI Holdings Disclosure
\nSchedule is a list of all the following contracts, agreements and arrangements
\n(collectively, for purposes of this Section<\/p>\n
Formation Agreement
\nPage 40
\n 47
\nonly, “agreements”) to which SEI Holdings, SENA or SETM is a party or by which
\nSEI Holdings, SENA or SETM is otherwise bound that relate to the SETM Business
\nAssets or the SETM Business:<\/p>\n
(i) collective bargaining agreements and similar
\n agreements with employees as a group;<\/p>\n
(ii) agreements, trusts, plans, funds or other employee
\n benefit arrangements of any nature;<\/p>\n
(iii) agreements with any director, officer, employee,
\n consultant or advisor of SEI Holdings or any of its Affiliates;<\/p>\n
(iv) agreements between or among SEI Holdings and any of
\n its Affiliates;<\/p>\n
(v) indentures, mortgages, security agreements, notes,
\n loan or credit agreements or other agreements relating to the
\n borrowing of money by SEI Holdings, SENA or SETM or to the direct or
\n indirect guarantee or assumption by SEI Holdings, SENA or SETM of any
\n obligation of others;<\/p>\n
(vi) agreements relating to the acquisition or disposition
\n of assets;<\/p>\n
(vii) agreements with respect to the lease of real or
\n personal property;<\/p>\n
(viii) agreements concerning the management or operation of
\n any real property;<\/p>\n
(ix) supplier, broker, distributor, dealer, manufacturer’s
\n representative, sales, agency, sales promotion, advertising,
\n marketing, consulting, research and development, maintenance, service
\n and repair agreements;<\/p>\n
(x) license, royalty or other agreements relating to
\n Intellectual Property, Technology or Software;<\/p>\n
(xi) partnership, joint venture and profit sharing
\n agreements;<\/p>\n
(xii) agreements with any Governmental Entity;<\/p>\n
(xiii) agreements in the nature of a settlement or a
\n conciliation agreement arising out of any claim asserted by any other
\n person;<\/p>\n
Formation Agreement
\nPage 41
\n 48
\n (xiv) agreements containing any covenant limiting the
\n freedom of SEI Holdings, SENA or SETM to engage in any line of
\n business or compete with any other person in any geographic area or
\n during any period of time;<\/p>\n
(xv) powers of attorney granted by SEI Holdings, SENA or
\n SETM in favor of any person;<\/p>\n
(xvi) agreements not made in the ordinary course of the
\n SETM Business;<\/p>\n
(xvii) agreements for the purchase, sale, exchange,
\n marketing, or other use of natural gas, electric energy, or other
\n commodities that may not be terminated for convenience and without
\n penalty prior to January 1, 1998, and all exchange, swap, hedging, and
\n other financial or future contracts and agreements; and<\/p>\n
(xviii) other agreements, whether or not made in the ordinary
\n course of the SETM Business, that are material to the SETM Business or
\n the ownership or operation of the SETM Business Assets or any material
\n portion thereof.<\/p>\n
(b) SEI Holdings has delivered or made available to VRI accurate
\nand complete copies of the agreements listed in Section 5.21(a) of the SEI
\nHoldings Disclosure Schedule. Except as set forth in Section 5.21(b) of the
\nSEI Holdings Disclosure Schedule, each of such agreements is a valid and
\nbinding agreement of SEI Holdings, SENA or SETM, or as the case may be, and (to
\nthe best knowledge of SEI Holdings) the other parties thereto. Except as set
\nforth in Section 5.21(b) of the SEI Holdings Disclosure Schedule, neither SEI
\nHoldings, SENA nor SETM is in breach of or in default in any material respect
\nunder, nor has any event occurred which (with or without the giving of notice
\nor the passage of time or both) would constitute a material default by it
\nunder, any material provision of any of such agreements, and neither SEI
\nHoldings, SENA nor SETM has received any written notice from any other party
\nindicating that it is in breach of or in default under any such material
\nprovision. To the best knowledge of SEI Holdings, no other party to any of
\nsuch agreements is in breach of or in default under such agreements, nor has
\nany assertion been made by SEI Holdings, SENA or SETM of any such breach or
\ndefault except as would not have a Material Adverse Effect. Except as
\ndisclosed in Section 5.21(b) of the SEI Holdings Disclosure Schedule and except
\nas would not have a Material Adverse Effect, each of such agreements is freely
\nand fully assignable to the Partnership without penalty or other adverse
\nconsequence.<\/p>\n
5.22 ENVIRONMENTAL MATTERS.<\/p>\n
(a) To the best knowledge of SEI Holdings, neither SEI Holdings,
\nSENA nor SETM is in violation of, or subject to, any pending or threatened
\nProceeding under, or subject to any remedial obligations under, any Applicable
\nEnvironmental Laws relating to the ownership or operation of the SETM Business
\nAssets or the operation of the SETM Business, including without limitation (i)
\nCERCLA and (ii) RCRA. To the best knowledge of SEI Holdings, SEI Holdings,
\nSENA and SETM<\/p>\n
Formation Agreement
\nPage 42
\n 49
\nhave obtained all Permits to construct, occupy, operate or use any equipment or
\nother tangible property forming a part of the SETM Business Assets by reason of
\nany Applicable Environmental Laws.<\/p>\n
(b) Except as disclosed in Section 5.22 of the SEI Holdings
\nDisclosure Schedule, to the best knowledge of SEI Holdings, there are no past
\nor present events, conditions, circumstances or plans (i) that interfere with
\nor prevent compliance or continued compliance, with respect to the SETM
\nBusiness or the SETM Business Assets, with Applicable Environmental Laws or
\n(ii) that are reasonably expected to give rise to any common law or other legal
\nliability or obligation with respect to the SETM Business or the SETM Business
\nAssets, including but not limited to, liability or obligation under CERCLA or
\nRCRA, based on or related to the manufacture, processing, distribution, use,
\ntreatment, storage, disposal, transport or handling or the emission, discharge,
\nrelease or threatened release into the environment, of any pollutant,
\ncontaminant, chemical, industrial toxic or Hazardous Substance or Solid Waste.<\/p>\n
5.23 INSURANCE. Except as would not have a Material Adverse
\nEffect, SEI Holdings and its Affiliates have fire, liability, casualty and
\nother insurance coverage with respect to the SETM Business Assets and the SETM
\nBusiness sufficient to satisfy all material requirements of Applicable Laws and
\nany agreements, arrangements or understandings to which SEI Holdings, SENA or
\nSETM is a party, and which is customary for businesses of similar size engaged
\nin similar lines of business.<\/p>\n
5.24 FINANCIAL REQUIREMENTS. Except as reflected on Section 5.24
\nof the SEI Holdings Disclosure Schedule, there are no currently effective
\nbonds, deposits, financial assurance requirements or insurance coverages
\nrequired to be submitted to Governmental Entities or any third parties for the
\ncontinued ownership and operation of the SETM Business Assets and the operation
\nof the SETM Business.<\/p>\n
5.25 BOOKS AND RECORDS. All the books and records of SEI Holdings,
\nSENA or SETM relating to the SETM Business Assets or the SETM Business,
\nincluding all personnel files, employee data and other materials relating to
\nemployees of the SETM Business, are substantially complete and correct in all
\nmaterial respects, have been in all material respects maintained in accordance
\nwith good business practice and all Applicable Laws, and, in the case of the
\nbooks of account, have been in all material respects prepared and maintained in
\naccordance with U.S. GAAP consistently applied. Such books and records
\naccurately and fairly reflect, in reasonable detail, all material transactions,
\nassets and liabilities of SEI Holdings, SENA or SETM with respect to the SETM
\nBusiness.<\/p>\n
5.26 INVESTMENT INTENT. SEI Holdings or its designees are acquiring
\nthe Partnership Interests and member’s interests in the General Partner to be
\nacquired by it at the respective Closing for its own account for investment and
\nnot with a view to, or for sale or other disposition in connection with, any
\npublic distribution of all or any part thereof.<\/p>\n
Formation Agreement
\nPage 43
\n 50
\n 5.27 NO MATERIAL OMISSIONS. To the best knowledge of SEI Holdings,
\nthere are no factors or circumstances that are material to the SETM Business or
\nthe SETM Business Assets, or the continued ownership or operation thereof, that
\nhave not been disclosed to VRI in this Agreement or in the SEI Holdings
\nDisclosure Schedule or to representatives of VRI prior to the date hereof.
\nEXCEPT AS PROVIDED SPECIFICALLY IN THIS AGREEMENT, SEI HOLDINGS MAKES NO
\nREPRESENTATIONS OR WARRANTIES IN THIS AGREEMENT OR ANY INSTRUMENT, EXHIBIT,
\nSCHEDULE OR DOCUMENT DELIVERED IN CONNECTION HEREWITH OR REFERRED TO HEREIN AS
\nTO ANY FINANCIAL PROJECTIONS, ESTIMATES TO COMPLETE TRANSACTIONS, VALUES AT
\nRISK, TRANSACTION LOSS PROJECTIONS, OR SIMILAR PREDICTIVE INFORMATION, AND VRI
\nSPECIFICALLY ACKNOWLEDGES THAT IT IS NOT SEEKING OR RELYING ON ANY SUCH
\nREPRESENTATIONS OR WARRANTIES.<\/p>\n
ARTICLE VI-A<\/p>\n
CONDUCT OF VASTAR MARKETING BUSINESS PENDING CLOSINGS<\/p>\n
VRI hereby covenants and agrees with SEI Holdings and the Partnership
\nas follows:<\/p>\n
6.1-A CONDUCT AND PRESERVATION OF THE VASTAR MARKETING BUSINESS.
\nExcept as expressly provided in this Agreement, or except as listed in Section
\n6.1-A of the Vastar Disclosure Schedule, during the period from the date hereof
\nto the First Closing Effective Date with respect to the Vastar Gas Business and
\nVastar Gas Assets and to the Second Closing Effective Date with respect to the
\nVastar Power Business and the Vastar Power Assets, and to January 1, 1998, with
\nrespect to the LDC Contracts, VRI shall, and shall cause VGM and VPM and its
\nother Affiliates to, (i) conduct the Vastar Marketing Business substantially as
\nit is being conducted on the date hereof; (ii) use its commercially reasonable
\nbest efforts to preserve, maintain and protect the Vastar Business Assets,
\nconsistent with available resources; and (iii) use its commercially reasonable
\nbest efforts to preserve intact the business organization of the Vastar
\nMarketing Business, consistent with its available resources, to keep available
\nthe services of the employees of the Vastar Marketing Business and to maintain
\nexisting relationships with suppliers, contractors, distributors, customers and
\nothers having business relationships with the Vastar Marketing Business.<\/p>\n
6.2-A RESTRICTIONS ON CERTAIN ACTIONS. Without limiting the
\ngenerality of Section 6.1-A, or except as listed in Section 6.1-A of the Vastar
\nDisclosure Schedule and except as otherwise expressly provided in this
\nAgreement, prior to the First Closing Effective Date with respect to the Vastar
\nGas Business and Vastar Gas Assets and to the Second Closing Effective Date
\nwith respect to the Vastar Power Business and the Vastar Power Assets, VRI,
\nwithout the written consent of SEI Holdings, shall not, and shall not permit
\nVGM or VPM to:<\/p>\n
Formation Agreement
\nPage 44
\n 51
\n (a) make any expenditures outside the ordinary course of
\n the Vastar Marketing Business consistent with past practice which,
\n individually or in the aggregate, exceed $250,000;<\/p>\n
(b) make any material change in the ongoing operations of
\n the Vastar Marketing Business or its assets;<\/p>\n
(c) create, incur, guarantee or assume any indebtedness
\n for borrowed money outside the ordinary course of the Vastar Marketing
\n Business;<\/p>\n
(d) mortgage or pledge any of the Vastar Business Assets
\n or create or suffer to exist any Encumbrance thereupon, other than
\n Permitted Encumbrances;<\/p>\n
(e) sell, lease, transfer or otherwise dispose of,
\n directly or indirectly, any of the Vastar Business Assets, except in
\n the ordinary course of the Vastar Marketing Business consistent with
\n past practice, or sell, lease, transfer, or otherwise dispose of any
\n fixed assets, whether or not in the ordinary course of the Vastar
\n Marketing Business, which have a value, individually, in excess of
\n $10,000, or, in the aggregate, in excess of $250,000;<\/p>\n
(f) enter into any lease, contract, agreement,
\n commitment, arrangement or transaction relating to the Vastar
\n Marketing Business other than in the ordinary course of business;<\/p>\n
(g) amend, modify or change any existing lease, contract
\n or agreement relating to the Vastar Marketing Business, other than in
\n the ordinary course of the business of the Vastar Marketing Business
\n consistent with past practice;<\/p>\n
(h) waive, release, grant or transfer any rights of value
\n relating to the Vastar Marketing Business, other than in the ordinary
\n course of the business of the Vastar Marketing Business consistent
\n with past practice;<\/p>\n
(i) except in the ordinary course of business, hire any
\n new employees or recall any laid-off employees of VGM or VPM;<\/p>\n
(j) delay payment of any account payable or other
\n liability of VGM or VPM relating to the Vastar Marketing Business
\n beyond the later of its due date or the date when such liability would
\n have been paid in the ordinary course of the Vastar Marketing Business
\n consistent with past practice;<\/p>\n
(k) permit any current insurance or reinsurance coverage
\n to lapse if such policy covers Vastar Business Assets or insures
\n risks, contingencies or liabilities of the Vastar Marketing Business;<\/p>\n
Formation Agreement
\nPage 45
\n 52
\n (l) except as set forth in this Section 6.2-A, take any
\n action which would make any of the representations or warranties of
\n VRI contained in this Agreement untrue or inaccurate as of any time
\n from the date of this Agreement to the date of the First Closing or
\n the Second Closing, as applicable, or would result in any of the
\n conditions set forth in this Agreement not being satisfied; or<\/p>\n
(m) authorize or propose, or agree in writing or
\n otherwise to take, any of the actions described in this Section.<\/p>\n
ARTICLE VI-B<\/p>\n
CONDUCT OF SETM BUSINESS PENDING CLOSINGS<\/p>\n
SEI Holdings hereby covenants and agrees with VRI and the Partnership
\nas follows:<\/p>\n
6.1-B CONDUCT AND PRESERVATION OF THE SETM BUSINESS. Except as
\nexpressly provided in this Agreement, or except as listed on Section 6.1-B of
\nthe SEI Holdings Disclosure Schedule during the period from the date hereof to
\nthe First Closing Effective Date with respect to the SETM Gas Business and SETM
\nGas Assets and to the Second Closing Effective Date with respect to the SETM
\nPower Business and SETM Power Assets, SEI Holdings shall, and shall cause SETM
\nand its other Affiliates to, (i) conduct the SETM Business substantially as it
\nis being conducted on the date hereof; (ii) use its commercially reasonable
\nbest efforts to preserve, maintain and protect the SETM Business Assets,
\nconsistent with available resources; and (iii) use its commercially reasonable
\nbest efforts to preserve intact the business organization of the SETM Business,
\nconsistent with its available resources, to keep available the services of the
\nemployees of the SETM Business and to maintain existing relationships with
\nsuppliers, contractors, distributors, customers and others having business
\nrelationships with the SETM Business.<\/p>\n
6.2-B RESTRICTIONS ON CERTAIN ACTIONS. Without limiting the
\ngenerality of Section 6.1-B, or except as listed on Section 6.1-B of the SEI
\nHoldings Disclosure Schedule and except as otherwise expressly provided in this
\nAgreement, prior to the First Closing Effective Date with respect to the SETM
\nGas Business and SETM Gas Assets and to the Second Closing Effective Date with
\nrespect to the SETM Power Business and SETM Power Assets, SEI Holdings, without
\nthe written consent of VRI, shall not, and shall not permit SETM to:<\/p>\n
(a) make any expenditures outside the ordinary course of
\n the SETM Business consistent with past practice which, individually or
\n in the aggregate, exceed $250,000;<\/p>\n
(b) make any material change in the ongoing operations of
\n the SETM Business or its assets;<\/p>\n
Formation Agreement
\nPage 46
\n 53
\n (c) create, incur, guarantee or assume any indebtedness
\n for borrowed money outside the ordinary course of the SETM Business;<\/p>\n
(d) mortgage or pledge any of the SETM Business Assets or
\n create or suffer to exist any Encumbrance thereupon, other than
\n Permitted Encumbrances;<\/p>\n
(e) sell, lease, transfer or otherwise dispose of,
\n directly or indirectly, any of the SETM Business Assets, except in the
\n ordinary course of the SETM Business consistent with past practice, or
\n sell, lease, transfer, or otherwise dispose of any fixed assets,
\n whether or not in the ordinary course of the SETM Business, which have
\n a value, individually, in excess of $10,000, or, in the aggregate, in
\n excess of $250,000;<\/p>\n
(f) enter into any lease, contract, agreement,
\n commitment, arrangement or transaction relating to the SETM Business
\n other than in the ordinary course of business;<\/p>\n
(g) amend, modify or change any existing lease, contract
\n or agreement relating to the SETM Business, other than in the ordinary
\n course of the business of the SETM Business consistent with past
\n practice;<\/p>\n
(h) waive, release, grant or transfer any rights of value
\n relating to the SETM Business, other than in the ordinary course of
\n the business of the SETM Business consistent with past practice;<\/p>\n
(i) except in the ordinary course of business, hire any
\n new employees or recall any laid-off employees of SETM;<\/p>\n
(j) delay payment of any account payable or other
\n liability of SETM relating to the SETM Business beyond the later of
\n its due date or the date when such liability would have been paid in
\n the ordinary course of the SETM Business consistent with past
\n practice;<\/p>\n
(k) permit any current insurance or reinsurance coverages
\n to lapse if such policy covers SETM Business Assets or insures risks,
\n contingencies or liabilities of the SETM Business;<\/p>\n
(l) except as set forth in this Section 6.2-B, take any
\n action which would make any of the representations or warranties of
\n SEI Holdings contained in this Agreement untrue or inaccurate as of
\n any time from the date of this Agreement to the date of the First
\n Closing or the Second Closing, as applicable, or would result in any
\n of the conditions set forth in this Agreement not being satisfied; or<\/p>\n
(m) authorize or propose, or agree in writing or
\n otherwise to take, any of the actions described in this Section.<\/p>\n
Formation Agreement
\nPage 47
\n 54<\/p>\n
ARTICLE VII<\/p>\n
ADDITIONAL AGREEMENTS<\/p>\n
7.1 ACCESS TO INFORMATION, CONFIDENTIALITY.<\/p>\n
(a) Between the date hereof and the Second Closing, VRI (i) shall
\ngive SEI Holdings and its authorized representatives reasonable access to all
\nemployees, all facilities and all books and records of VRI, Vastar Holdings,
\nVGM and VPM relating to the Vastar Business Assets or the Vastar Marketing
\nBusiness, (ii) shall permit SEI Holdings and its authorized representatives to
\nmake such inspections of the Vastar Business Assets as they may reasonably
\nrequire to verify the accuracy of any representation or warranty contained in
\nArticle IV and (iii) shall cause officers of VRI, Vastar Holdings, VGM and VPM
\nto furnish SEI Holdings and its authorized representatives with such financial
\nand operating data and other information with respect to the Vastar Business
\nAssets and the Vastar Marketing Business as SEI Holdings may from time to time
\nreasonably request; provided, however, that VRI shall have the right to have a
\nrepresentative present at all times of any such inspections or examinations
\nconducted at the offices or other facilities of VRI or its Affiliates.<\/p>\n
(b) Between the date hereof and the Second Closing, SEI Holdings
\n(i) shall give VRI and its authorized representatives reasonable access to all
\nemployees, all facilities and all books and records of SEI Holdings, SENA and
\nSETM relating to the SETM Business Assets or the SETM Business, (ii) shall
\npermit VRI and its authorized representatives to make such inspections of the
\nSETM Business Assets as they may reasonably require to verify the accuracy of
\nany representation or warranty contained in Article V and (iii) shall cause
\nofficers of SEI Holdings, SENA and SETM to furnish VRI and its authorized
\nrepresentatives with such financial and operating data and other information
\nwith respect to the SETM Business Assets and the SETM Business as VRI may from
\ntime to time reasonably request; provided, however, that SEI Holdings shall
\nhave the right to have a representative present at all times of any such
\ninspections or examinations conducted at the offices or other facilities of SEI
\nHoldings or its Affiliates.<\/p>\n
(c) The Confidentiality Agreement dated March 25, 1997, between
\nSEI Holdings and VGM shall remain in full force and effect as set out therein
\nuntil the First Closing at which time such Confidentiality Agreement shall be
\nsuperseded in its entirety by the Confidentiality and Noncompetition Agreement
\nreferred to in Section 7.6(l).<\/p>\n
7.2 THIRD PARTY CONSENTS. Each party shall use its commercially
\nreasonable best efforts to obtain all consents, approvals, orders,
\nauthorizations and waivers of, and to effect all declarations, filing and
\nregistrations with, all third parties (including Governmental Entities) that
\nare necessary or required to permit the transfers of assets to the Partnership
\nas contemplated by this Agreement and to otherwise consummate the transactions
\ncontemplated hereby.<\/p>\n
Formation Agreement
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\n 55
\n 7.3 RELEASE OF LIENS. Each party shall use its commercially
\nreasonable best efforts to obtain full releases of the liens and encumbrances
\non the assets to be transferred by it other than Permitted Encumbrances.<\/p>\n
7.4 BEST EFFORTS. Each party hereto agrees that it will not
\nvoluntarily undertake any course of action inconsistent with the provisions or
\nintent of this Agreement and will use its commercially reasonable best efforts
\nto take, or cause to be taken, all action and to do, or cause to be done, all
\nthings reasonably necessary, proper or advisable under Applicable Laws to
\nconsummate the transactions contemplated by this Agreement. Each party hereto
\nshall cooperate with and assist the other parties hereto in order to provide an
\nefficient and orderly transfer of the control and management of the assets and
\nits Business to the Partnership and to avoid any undue interruption in the
\nongoing operations of such assets and Businesses following the respective
\nClosing. The phrase “commercially reasonable best efforts” or any phrase of
\nsimilar tenor as used in this Agreement or any Ancillary Agreement shall mean
\nsuch good faith efforts as are commercially reasonable, comparing the cost and
\nexpense of the efforts to the benefit to be gained (without regard to the
\nidentity of the beneficiary).<\/p>\n
7.5 ACQUISITION PROPOSALS. From and after the date of this
\nAgreement until the earlier of the Second Closing or the termination of this
\nAgreement, neither party nor any Affiliate, director, officer, employee or
\nrepresentative of either party shall, directly or indirectly, (a) solicit,
\ninitiate or knowingly encourage any Acquisition Proposal with respect to the
\nVastar Business Assets, the SETM Business Assets or the respective Businesses
\nor (b) engage in discussions or negotiations with, or provide any information
\nto, any person that is considering making or has made such an Acquisition
\nProposal. If any party or any of its respective Affiliates shall receive any
\nsuch Acquisition Proposal, the party receiving such proposal shall immediately
\ncommunicate to the other the terms of such proposal including the identity of
\nthe person making such proposal. The term “Acquisition Proposal”, as used in
\nthis Section with respect to any assets or business, means any offer or
\nproposal for, or any indication of interest in, the acquisition of any of such
\nassets or business, directly or indirectly, other than the transactions
\nexpressly permitted by this Agreement.<\/p>\n
7.6 CERTAIN ANCILLARY AGREEMENTS. The parties hereto covenant
\nwith each other that they shall do the following, cause their Affiliates to do
\nthe following, or in the case of a parent company not controlled by the party
\nhereto, represent and warrant that their respective parents have agreed to do
\nthe following:<\/p>\n
(a) VRI and the Partnership shall enter into the Gas
\n Purchase and Sale Agreement substantially in the form attached hereto
\n as Exhibit 7.6(a) and a Gas Accounting Services Agreement in a form
\n satisfactory to the parties at (and subject to the occurrence of) the
\n First Closing;<\/p>\n
(b) the Partnership, SEI Holdings and its Affiliates (as
\n necessary) and VRI and its Affiliates (as necessary) shall enter into
\n a Technology Licensing and Transfer Agreement<\/p>\n
Formation Agreement
\nPage 49
\n 56
\n in a form satisfactory to the parties at (and subject to the
\n occurrence of) the First Closing with respect to Intellectual Property
\n included in the Vastar Gas Business or the SETM Gas Business, and at
\n (and subject to the occurrence of) the Second Closing, with respect to
\n Intellectual Property included in the Vastar Power Business or the
\n SETM Power Business;<\/p>\n
(c) the Partnership and the employees listed on Exhibit
\n 7.6(c)(i) shall have entered into Employment Agreements satisfactory
\n to the Partnership and such employees on or prior to the First Closing
\n (but effective subject to the occurrence of the Second Closing);<\/p>\n
(d) the Partnership, the General Partner and Southern
\n Company and its Affiliates shall enter into a Service Mark License
\n Agreement relating to the use of the name “Southern Company” and the
\n Partnership and the General Partner and VRI shall enter into a Service
\n Mark License Agreement relating to the use of the name “Vastar” and
\n the required use of the tagline “A Vastar Partnership” as part of the
\n Partnership’s identity, both in forms satisfactory to the parties at
\n (and subject to the occurrence of) the First Closing;<\/p>\n
(e) the Partnership, the General Partner and SEI Holdings
\n and VRI and their Affiliates shall enter into the Secondment
\n Agreements in forms satisfactory to the parties at (and subject to the
\n occurrence of) the First Closing;<\/p>\n
(f) the Partnership, the General Partner and SEI Holdings
\n and VRI and their Affiliates shall enter into the Transfer Restriction
\n Agreement substantially in the form attached hereto as Exhibit 7.6(f)
\n at (and subject to the occurrence of) the First Closing;<\/p>\n
(g) SEI Holdings, VRI and the Partnership shall enter
\n into an Indemnity and Contribution Agreement in a form satisfactory to
\n the parties at (and subject to the occurrence of) the First Closing;<\/p>\n
(h) SEI Holdings, SENA and the Partnership shall enter
\n into the Power Supply Agreement substantially in the form attached
\n hereto as Exhibit 7.6(h) at (and subject to the occurrence of) the
\n Second Closing;<\/p>\n
(i) VRI or its Affiliates and the Partnership shall enter
\n into agency, services and gas supply agreements, respecting certain
\n cogeneration, LDC and other gas contracts, satisfactory to the parties
\n at (and subject to the occurrence of) the First Closing or Second
\n Closing as specified on such Exhibit;<\/p>\n
(j) SEI Holdings and VRI shall have entered into the
\n Parent Guaranty of Floor and Put Payments in form satisfactory to the
\n parties at (and subject to the occurrence of) the First Closing;<\/p>\n
Formation Agreement
\nPage 50
\n 57
\n (k) Vastar LP Sub, Southern LP Sub and the Escrow Agent
\n shall have entered into the Escrow Agreement at (and subject to the
\n occurrence of) the First Closing;<\/p>\n
(l) SEI Holdings, VRI and the Partnership shall enter
\n into the Confidentiality and Noncompetition Agreement substantially in
\n the form attached hereto as Exhibit 7.6(l) at (and subject to the
\n occurrence of) the First Closing; and<\/p>\n
(m) SEI Holdings and VRI shall enter into certain parent
\n guaranties for the benefit of the Partnership or the seller of gas to
\n the Partnership satisfactory to the parties.<\/p>\n
The foregoing are the “Ancillary Agreements.”<\/p>\n
7.7 PUBLIC ANNOUNCEMENTS. Except as may be required by Applicable
\nLaw or stock exchange rule, neither party hereto nor any of its Affiliates or
\nparents shall issue any press release or otherwise make any public statement
\nwith respect to this Agreement or the transactions contemplated hereby without
\nthe prior written consent of both VRI and SEI Holdings.<\/p>\n
7.8 BROKERAGE. In the event any person shall assert a claim to a
\nfee, commission or other compensation on account of alleged employment as a
\nbroker or finder, or performance of services as a broker or finder, in
\nconnection with the transactions contemplated by this Agreement or any
\ntransactions prior to this Agreement, the party (or parties) alleged to have
\nbeen responsible for such employment or performance of services shall hold
\nharmless the other party (or parties) as well as the party’s directors,
\nofficers and employees, from and against such claim and at the indemnifying
\nparty’s (or parties’) sole expense defend any and all actions, suits or
\nproceedings involving such claim that may at any time be brought against those
\nso indemnified and satisfy promptly any settlement or judgment arising
\ntherefrom. If, however, it is ultimately determined in any action, suit or
\nproceeding in which the indemnifying party (or parties) were afforded the
\nopportunity to have their counsel participate in the defense, that the
\nemployment was by or services were performed for the indemnified party (or
\nparties), then the latter shall be responsible under this Section and shall
\nreimburse any amounts theretofore paid by the indemnifying party (or parties)
\nby reason hereof.<\/p>\n
7.9 BULK SALES LAWS. Each of the parties hereto waives compliance
\nby the other parties with any applicable bulk sales or bulk transfer laws in
\nconnection with the transfer of the assets to the Partnership pursuant to this
\nAgreement.<\/p>\n
7.10 NOTIFICATION OF CERTAIN MATTERS.<\/p>\n
(a) Until the Second Closing, any party, upon learning of the
\nsame, shall promptly notify the other of any Proceeding which is commenced or
\nthreatened against it and which affects this Agreement or the transactions
\ncontemplated hereby.<\/p>\n
Formation Agreement
\nPage 51
\n 58
\n (b) VRI shall give prompt notice to SEI Holdings of (i) the
\noccurrence or nonoccurrence of any event the occurrence or nonoccurrence of
\nwhich would be likely to cause any representation or warranty contained in
\nArticle IV to be untrue or inaccurate in any material respect at or prior to
\neither the First or Second Closing and (ii) any material failure of VRI to
\ncomply with or satisfy any covenant, condition or agreement to be complied with
\nor satisfied by VRI hereunder at the time of either the First or Second
\nClosing. SEI Holdings shall give prompt notice to VRI of (i) the occurrence or
\nnonoccurrence of any event the occurrence or nonoccurrence of which would be
\nlikely to cause any representation or warranty contained in Article V to be
\nuntrue or inaccurate in any material respect at or prior to the First or Second
\nClosing and (ii) any material failure of SEI Holdings to comply with or satisfy
\nany covenant, condition or agreement to be complied with or satisfied by SEI
\nHoldings hereunder either at the time of either the First or Second Closing.<\/p>\n
(c) The delivery of any notice pursuant to this Section shall not
\nbe deemed to (i) modify the representations or warranties hereunder of the
\nparty delivering such notice, (ii) modify the conditions set forth in Articles
\nVIII and IX or (iii) limit or otherwise affect the remedies available hereunder
\nto the party receiving such notice.<\/p>\n
7.11 ACCESS TO RECORDS AFTER CLOSING. For a period of three years
\nfrom and after the Second Closing Date, each party and its representatives
\nshall have reasonable access to inspect and copy all books and records relating
\nto the assets or the Businesses transferred to the Partnership hereunder to the
\nextent that such access may reasonably be required in connection with matters
\nrelating to or affected by the operation of the such assets or its Business
\nprior to the Second Closing Date. Such access shall be afforded by the
\nPartnership upon receipt of reasonable advance notice and during normal
\nbusiness hours. If the Partnership shall desire to dispose of any of such
\nbooks and records prior to the expiration of such period, the Partnership
\nshall, prior to such disposition, give the affected party a reasonable
\nopportunity, at its expense, to segregate and remove such books and records as
\nit may select. Each party shall be solely responsible for any costs or
\nexpenses incurred by it pursuant to this Section.<\/p>\n
7.12 FEES AND EXPENSES. Except as otherwise expressly provided in
\nthis Agreement, each party hereto shall pay its own fees and expenses
\n(including (i) its own internal company expenses, including all salaries and
\nexpenses of its employees performing legal or accounting duties and (ii) the
\nfees and expenses of counsel, financial advisors, accountants and others
\nengaged by such party) incurred in connection with the negotiation, execution,
\ndelivery and the First Closing and Second Closing hereof. This Agreement and
\nthe transactions contemplated hereby, whether or not any Closing shall have
\noccurred, except that the parties agree that those transition expenses agreed
\nto by the parties and one-half of certain employee retention costs (as agreed
\nto by the parties) shall be borne by the Partnership, and that they shall cause
\nthe Partnership to pay the same.<\/p>\n
Formation Agreement
\nPage 52
\n 59
\n 7.13 TAXES; OTHER CHARGES.<\/p>\n
(a) All sales, use, registration, stamp, property transfer,
\ntransfer and similar Taxes (including any real estate transfer taxes) incurred
\nin connection with the consummation of the transactions contemplated by this
\nAgreement shall be borne by the transferring party. VRI and SEI Holdings
\nmutually agree to cooperate in the filing of all necessary documentation and
\nreturns with respect to all such Taxes.<\/p>\n
(b) Subject to the occurrence of the respective Closings, the
\nparties shall cause the Partnership to pay all real and personal property taxes
\nattributable to the transferred assets that are due after the respective
\nClosing Date, whether accruing prior to or after such Closing Date; provided,
\nhowever, that each party shall pay to the Partnership with respect to its
\nassets being transferred, at the time payment of such taxes is made by the
\nPartnership, all such taxes attributable to any period or periods prior to such
\nClosing Date and the Partnership shall pay to each party at each Closing Date
\nthe amounts of such taxes, if any, paid by that party or its Affiliates and
\nattributable to periods after such Closing Date. For the taxable period within
\nwhich a Closing Date occurs, the real and personal property taxes attributable
\nto the portion of the period prior to the respective Closing Date shall be
\nconsidered to be the amount of such Taxes for the entire taxable period in
\nwhich such Closing Date occurs, multiplied by a fraction, the numerator of
\nwhich is the number of days in the portion of such period ending on such
\nClosing Date and the denominator of which is the number of days in the entire
\nperiod.<\/p>\n
(c) All utility and other service charges and prepaid rentals and
\ninsurance premiums, relating to the assets transferred to the Partnership
\nhereunder shall be prorated as between the transferor and the Partnership as of
\nthe respective Closing Date.<\/p>\n
7.14 OFFICERS AND DIRECTORS OF GENERAL PARTNER. Effective upon the
\nFirst Closing, SEI Holdings and VRI shall cause the members of the General
\nPartner to elect the persons listed below to be the members of the Board of
\nGovernors of the General Partner:<\/p>\n
Board of Governors: Thomas G. Boren
\n Charles D. Davidson
\n S. Marce Fuller
\n Richard J. Pershing
\n Steven J. Shapiro
\n W. L. Westbrook, III<\/p>\n
7.15 COVENANTS NOT TO COMPETE. The parties shall abide by the
\ncovenants not to compete and confidentiality covenants in the Confidentiality
\nand Noncompetition Agreement referred to in Section 7.6(l).<\/p>\n
Formation Agreement
\nPage 53
\n 60
\n 7.16 INSURANCE. SEI Holdings shall use commercially reasonable
\nbest efforts to obtain fire, liability, casualty and other insurance coverage
\nwith respect to the Marketing Business of the Partnership sufficient to satisfy
\nall material requirements of Applicable Laws and any agreements, arrangements
\nor understandings to which the Partnership is a party, and which is customary
\nfor businesses of similar size engaged in similar lines of business, effective
\non and after the First Closing Date on arm’s-length terms acceptable to VRI and
\nmaintain such coverage at the request and expense of the Partnership.<\/p>\n
7.17 STAFF SERVICES. The parties each agree that it and its
\nAffiliates shall provide Staff Services to the Partnership from the First
\nClosing until the Second Closing on the same terms, conditions, prices, cost
\nallocations and basis as currently being provided to their respective
\nBusinesses, except that SEI Holdings alone shall be responsible for insurance
\ncoverage as described in Section 7.16. Both parties agree to provide Staff
\nServices during 1998 at cost. Neither party nor its Affiliates can charge
\nadministrative costs or overhead to the Partnership unless the General Partner
\nagrees to such charges except as required by the Public Utility Holding Company
\nAct of 1935, as amended.<\/p>\n
7.18 POST-CLOSING. Good Faith estimates of Marked to Market
\nvalues, the Working Capital Contribution\/Loans, and any other financial or
\naccounting issue associated with either of the Closings shall be adjusted by
\nagreement of the parties within 30 days after the respective Closing, and if
\nthe parties are not able to agree within such time, then by determination by a
\nBig Six accounting firm selected by the unanimous vote of the Board of the
\nGeneral Partner, the fees and expenses of which shall be paid by the
\nPartnership (which determination shall be conclusive).<\/p>\n
7.19 ASSIGNMENT OF LDC CONTRACTS. VRI shall, and shall cause its
\nAffiliates to, use commercially reasonable best efforts to obtain all consents
\nand approvals that are required from third parties.<\/p>\n
7.20 AMENDMENT OF DISCLOSURE SCHEDULES. Each party hereto agrees
\nthat, with respect to the representations and warranties of such party
\ncontained in this Agreement, such party shall have the continuing obligation
\nuntil 24 hours prior to the First Closing to supplement or amend promptly its
\nrespective Disclosure Schedule with respect to any matter hereafter arising or
\ndiscovered which, if existing or known at the date of this Agreement, would
\nhave been required to be set forth or described in such Disclosure Schedule,
\nprovided however, that supplements and amendments to such Disclosure Schedules
\nshall only have to be delivered at the First Closing Date if they involve an
\namount in excess of $100,000. For all purposes of this Agreement, including
\nfor purposes of determining whether the conditions set forth in Articles VIII
\nand IX have been fulfilled, the Disclosure Schedules hereto shall be deemed to
\nbe the Disclosure Schedules as amended or supplemented pursuant to this Section
\n7.20. Notwithstanding the foregoing sentence, no amendment or supplement to a
\ndisclosure schedule prepared by a party that constitutes or reflects an event
\nor occurrence that would have any changes thereon that are less favorable to
\nthe Partnership or other party by an amount in excess of $500,000 may be made
\nunless the other party consents to such<\/p>\n
Formation Agreement
\nPage 54
\n 61
\namendment or supplement. If the other party does not consent to the amendment
\nor supplement referred to in the preceding sentence, the other party may
\nterminate this Agreement or require that the Closing take place without the
\namendment to such Disclosure Schedule, unless the first party offers to make
\nthe Partnership whole in a reasonably satisfactory manner.<\/p>\n
ARTICLE VIII<\/p>\n
CONDITIONS TO OBLIGATIONS OF VRI<\/p>\n
8.1 CONDITIONS TO FIRST CLOSING. The obligations of VRI to
\nconsummate the transactions contemplated by this Agreement at the First Closing
\nshall be subject to the fulfillment on or prior to the First Closing Date of
\neach of the following conditions:<\/p>\n
(a) REPRESENTATIONS AND WARRANTIES TRUE. All the representations
\nand warranties of SEI Holdings contained in this Agreement, and in any
\nagreement, instrument or document delivered pursuant hereto on or prior to the
\nFirst Closing Date, shall be true and correct in all material respects as of
\nthe date made and (having been deemed to have been made again on and as of the
\nFirst Closing Date in the same language) shall be true and correct in all
\nmaterial respects on and as of the First Closing Date.<\/p>\n
(b) COVENANTS AND AGREEMENTS PERFORMED. SEI Holdings shall have
\nperformed and complied with, in all material respects, all covenants and
\nagreements required by this Agreement to be performed or complied with by it.<\/p>\n
(c) CERTIFICATES. VRI shall have received certificates executed
\nby an officer of SEI Holdings, dated such Closing Date, representing and
\ncertifying, in such detail as VRI may reasonably request, that the conditions
\nset forth in Sections 8.1(a) and 8.1(b) have been fulfilled.<\/p>\n
(d) LEGAL PROCEEDINGS. No preliminary or permanent injunction or
\nother order, decree or ruling issued by a Governmental Entity, and no statute,
\nrule, regulation or executive order promulgated or enacted by a Governmental
\nEntity, shall be in effect (i) that restrains, enjoins, prohibits or otherwise
\nmakes illegal the consummation of the transactions contemplated hereby or (ii)
\nthat would impose any material limitation on the ability of the Partnership
\neffectively to exercise full rights of ownership of the businesses and assets
\nto be acquired by the Partnership hereunder. No Proceeding before a
\nGovernmental Entity shall be pending (i) seeking to restrain or prohibit the
\nconsummation of the transactions contemplated hereby or (ii) that could
\nreasonably be expected, if adversely determined, to impose any material
\nlimitation on the ability of the Partnership effectively to exercise full
\nrights of ownership of the businesses and assets to be acquired by the
\nPartnership hereunder.<\/p>\n
Formation Agreement
\nPage 55
\n 62
\n (e) CONSENTS. All consents, approvals and waivers of, and all
\ndeclarations, filings and registrations with, Governmental Entities required
\nfor the consummation of the transactions contemplated hereby, and all consents,
\napprovals and waivers of third parties required for the transfer of the Vastar
\nGas Assets and the SETM Gas Assets and the respective Gas Businesses to the
\nPartnership hereunder at such Closing, shall have been obtained or made and
\nshall be in full force and effect at the time of such Closing or the
\nPartnership shall be entitled to substantially the same economic benefits of
\nany contract for which consent to transfer has not been obtained under one of
\nthe agreements referred to in Section 7.6(i). VRI acknowledges that some
\nowners of Software may not consent to transfer of their Software and licenses
\nto the Partnership and may require that the Partnership purchase new licenses,
\nand if so, such event shall not constitute a failure to obtain a consent
\nhereunder unless the cost of such new license, would in the aggregate exceed
\n$100,000.<\/p>\n
(f) NO MATERIAL ADVERSE CHANGE. Since the date hereof, there
\nshall not have been any material adverse change in the business, assets,
\nresults of operations, condition (financial or otherwise) or prospects of the
\nSETM Business to be transferred hereunder at or after the First Closing or the
\nownership or operation of the SETM Gas Assets to be transferred hereunder at or
\nafter such Closing.<\/p>\n
(g) DELIVERIES. SEI Holdings and its Affiliates shall have made
\nthe deliveries required at the First Closing by Section 3.2-A, the General
\nPartner shall have made the deliveries required by Section 3.3-A, and the
\nPartnership shall have made the deliveries required by Section 3.4-A, as the
\ncase may be.<\/p>\n
(h) CERTAIN ANCILLARY AGREEMENTS. The Ancillary Agreements
\nreferred to in Section 7.6 to be executed and delivered as of the First Closing
\nshall have been executed and delivered by all parties thereto other than VRI
\nand its Affiliates and parent. Furthermore, the Partnership or an Affiliate
\nshall have entered into an agreement with SEI Holdings with respect to retail
\nresidential and small commercial and industrial (mass market) customers, in a
\nform acceptable to VRI and SEI Holdings.<\/p>\n
(i) RELEASE OF LIENS AND ENCUMBRANCES. All liens and encumbrances
\non the SETM Business Assets to be transferred at the First Closing other than
\nPermitted Encumbrances shall have been fully released.<\/p>\n
8.2 CONDITIONS TO SECOND CLOSING. The obligations of VRI to
\nconsummate transactions contemplated by this Agreement at the Second Closing
\nshall be subject to the fulfillment on or prior to the Second Closing Date of
\neach of the following conditions:<\/p>\n
(a) COVENANTS AND AGREEMENTS PERFORMED. SEI Holdings shall have
\nperformed and complied with, in all material respects, all covenants and
\nagreements required by this Agreement to be performed or complied with by it on
\nor prior to the Second Closing Date.<\/p>\n
Formation Agreement
\nPage 56
\n 63<\/p>\n
(b) CERTIFICATES. VRI shall have received certificates executed
\nby an officer of SEI Holdings, dated such Closing Date, representing and
\ncertifying, in such detail as VRI may reasonably request, that the conditions
\nset forth in Section 8.2(a) have been fulfilled.<\/p>\n
(c) LEGAL PROCEEDINGS. No preliminary or permanent injunction or
\nother order, decree or ruling issued by a Governmental Entity, and no statute,
\nrule, regulation or executive order promulgated or enacted by a Governmental
\nEntity, shall be in effect (i) that restrains, enjoins, prohibits or otherwise
\nmakes illegal the consummation of the transactions contemplated hereby or (ii)
\nthat would impose any material limitation on the ability of the Partnership
\neffectively to exercise full rights of ownership of the businesses and assets
\nto be acquired by the Partnership hereunder. No Proceeding before a
\nGovernmental Entity shall be pending (i) seeking to restrain or prohibit the
\nconsummation of the transactions contemplated hereby or (ii) that could
\nreasonably be expected, if adversely determined, to impose any material
\nlimitation on the ability of the Partnership effectively to exercise full
\nrights of ownership of the businesses and assets to be acquired by the
\nPartnership hereunder.<\/p>\n
(d) CONSENTS. All consents, approvals and waivers of, and all
\ndeclarations, filings and registrations with, Governmental Entities required
\nfor the consummation of the transactions contemplated hereby, and all consents,
\napprovals and waivers of third parties required for the transfer of the Vastar
\nPower Assets and the SETM Power Assets and the respective Power Businesses to
\nthe Partnership hereunder at such Closing, shall have been obtained or made and
\nshall be in full force and effect at the time of such Closing or the
\nPartnership shall be entitled to substantially the same economic benefits of
\nany contract for which consent to transfer has not been obtained under one of
\nthe agreements referred to it in Section 7.6(i).<\/p>\n
(e) DELIVERIES. SEI Holdings and its Affiliates shall have made
\nthe deliveries required to be made at the Second Closing by Section 3.2-B, the
\nGeneral Partner shall have made the deliveries required by Section 3.3-B and
\nthe Partnership shall have made the deliveries required by Section 3.4-B, as
\nthe case may be.<\/p>\n
(f) CERTAIN ANCILLARY AGREEMENTS. The Ancillary Agreements
\nreferred to in Section 7.6 to be executed and delivered as of the Second
\nClosing shall have been executed and delivered by all parties thereto other
\nthan VRI and its Affiliates.<\/p>\n
(g) RELEASE OF LIENS AND ENCUMBRANCES. All liens and encumbrances
\non the SETM Power Assets to be transferred at the Second Closing other than
\nPermitted Encumbrances shall have been fully released.<\/p>\n
Formation Agreement
\nPage 57
\n 64
\n ARTICLE IX<\/p>\n
CONDITIONS TO OBLIGATIONS OF SEI HOLDINGS<\/p>\n
9.1 CONDITIONS TO FIRST CLOSING. The obligations of SEI Holdings
\nto consummate the transactions contemplated by this Agreement shall be subject
\nto the fulfillment on or prior to the First Closing Date of each of the
\nfollowing conditions:<\/p>\n
(a) REPRESENTATIONS AND WARRANTIES TRUE. All the representations
\nand warranties of VRI contained in this Agreement, and in any agreement,
\ninstrument or document delivered pursuant hereto on or prior to such Closing
\nDate, shall be true and correct in all material respects as of the date made
\nand (having been deemed to have been made again on and as of the First Closing
\nDate in the same language) shall be true and correct in all material respects
\non and as of the First Closing Date.<\/p>\n
(b) COVENANTS AND AGREEMENTS PERFORMED. VRI shall have performed
\nand complied with, in all material respects, all covenants and agreements
\nrequired by this Agreement to be performed or complied with by it on or prior
\nto such Closing Date.<\/p>\n
(c) CERTIFICATES. SEI Holdings shall have received certificates
\nexecuted by an officer of VRI, dated such Closing Date, representing and
\ncertifying, in such detail as SEI Holdings may reasonably request, that the
\nconditions set forth in Sections 9.1(a) and 9.1(b) have been fulfilled.<\/p>\n
(d) LEGAL PROCEEDINGS. No preliminary or permanent injunction or
\nother order, decree or ruling issued by a Governmental Entity, and no statute,
\nrule, regulation or executive order promulgated or enacted by a Governmental
\nEntity, shall be in effect (i) that restrains, enjoins, prohibits or otherwise
\nmakes illegal the consummation of the transactions contemplated hereby or (ii)
\nthat would impose any material limitation on the ability of the Partnership
\neffectively to exercise full rights of ownership of the businesses and assets
\nto be acquired by the Partnership hereunder. No Proceeding before a
\nGovernmental Entity shall be pending (i) seeking to restrain or prohibit the
\nconsummation of the transactions contemplated hereby or (ii) that could
\nreasonably be expected, if adversely determined, to impose any material
\nlimitation on the ability of the Partnership effectively to exercise full
\nrights of ownership of the businesses and assets to be acquired by the
\nPartnership hereunder.<\/p>\n
(e) CONSENTS. All consents, approvals and waivers of, and all
\ndeclarations, filings and registrations with, Governmental Entities required
\nfor the consummation of the transactions contemplated hereby, and all consents,
\napprovals and waivers of third parties required for the transfer of the Vastar
\nGas Assets and the SETM Gas Assets and the respective Gas Businesses, to the
\nPartnership hereunder at such Closing, shall have been obtained or made and
\nshall be in full force and effect at the time of such Closing or the
\nPartnership shall be entitled to substantially the same economic benefits of
\nany contract for which consent to transfer has not been obtained under one of
\nthe agreements referred to in Section 7.6(i). SEI Holdings acknowledges that
\nsome owners of<\/p>\n
Formation Agreement
\nPage 58
\n 65
\nSoftware may not consent to transfer of their Software and licenses to the
\nPartnership and may require that the Partnership purchase new licenses, and if
\nso, such event shall not constitute a failure to obtain a consent hereunder
\nunless the cost of such new license, would in the aggregate exceed $100,000.<\/p>\n
(f) NO MATERIAL ADVERSE CHANGE. Since the date hereof, there
\nshall not have been any material adverse change in the business, assets,
\nresults of operations, condition (financial or otherwise) or prospects of the
\nVastar Marketing Business or the ownership or operation of the Vastar Gas
\nAssets to be transferred hereunder at or after the First Closing.<\/p>\n
(g) DELIVERIES. VRI and its Affiliates shall have made the
\ndeliveries required at the First Closing by Section 3.1-A, the General Partner
\nshall have made the deliveries required by Section 3.3-A, and the Partnership
\nshall have made the deliveries required by Section 3.4-A, as the case may be.<\/p>\n
(h) CERTAIN ANCILLARY AGREEMENTS. The Ancillary Agreements
\nreferred to in Section 7.6 to be executed and delivered at the First Closing
\nshall have been executed and delivered by all parties thereto other than SEI
\nHoldings and its Affiliates and parent. Furthermore, the Partnership or an
\nAffiliate shall have entered into an agreement with SEI Holdings with respect
\nto retail residential small commercial and industrial (mass market) customers,
\nin a form acceptable to VRI and SEI Holdings.<\/p>\n
(i) RELEASE OF LIENS AND ENCUMBRANCES. All liens and
\nencumbrances, on the Vastar Gas Assets to be transferred at the First Closing
\nother than Permitted Encumbrances shall have been fully released.<\/p>\n
(j) PERSONNEL. SEI Holdings shall be satisfied, in its reasonable
\ndiscretion, that the traders, marketers, asset managers, schedulers, contract
\nadministrators and other personnel of the Vaster Marketing business which have
\n(as of the First Closing Date) agreed to become employees, of the Partnerhsip
\nrepresent a sufficient personnel base for the Partnerhsip to thereafter
\ncontinue to conduct and to expand the Marketing Business in substantially the
\nsame manner as conducted prior to the First Closing.<\/p>\n
9.2 CONDITIONS TO SECOND CLOSING. The obligations of SEI Holdings
\nto consummate the transactions contemplated by this Agreement at the Second
\nClosing shall be subject to the fulfillment on or prior to the Second Closing
\nDate of each of the following conditions:<\/p>\n
(a) COVENANTS AND AGREEMENTS PERFORMED. VRI shall have performed
\nand complied with, in all material respects, all covenants and agreements
\nrequired by this Agreement to be performed or complied with by it on or prior
\nto the Second Closing Date.<\/p>\n
Formation Agreement
\nPage 59
\n 66
\n (b) CERTIFICATES. SEI Holdings shall have received certificates
\nexecuted by an officer of VRI, dated such Closing Date, representing and
\ncertifying, in such detail as SEI Holdings may reasonably request, that the
\nconditions set forth in Section 9.2(a) have been fulfilled.<\/p>\n
(c) LEGAL PROCEEDINGS. No preliminary or permanent injunction or
\nother order, decree or ruling issued by a Governmental Entity, and no statute,
\nrule, regulation or executive order promulgated or enacted by a Governmental
\nEntity, shall be in effect (i) that restrains, enjoins, prohibits or otherwise
\nmakes illegal the consummation of the transactions contemplated hereby or (ii)
\nthat would impose any material limitation on the ability of the Partnership
\neffectively to exercise full rights of ownership of the businesses and assets
\nto be acquired by the Partnership hereunder. No Proceeding before a
\nGovernmental Entity shall be pending (i) seeking to restrain or prohibit the
\nconsummation of the transactions contemplated hereby or (ii) that could
\nreasonably be expected, if adversely determined, to impose any material
\nlimitation on the ability of the Partnership effectively to exercise full
\nrights of ownership of the businesses and assets to be acquired by the
\nPartnership hereunder.<\/p>\n
(d) CONSENTS. All consents, approvals and waivers of, and all
\ndeclarations, filings and registrations with, Governmental Entities required
\nfor the consummation of the transactions contemplated hereby, and all consents,
\napprovals and waivers of third parties required for the transfer of the Vastar
\nPower Assets and the SETM Power Assets and the respective Power Businesses to
\nthe Partnership hereunder at such Closing, shall have been obtained or made and
\nshall be in full force and effect at the time of such Closing or the
\nPartnership shall be entitled to substantially the same economic benefits of
\nany contract for which consent to transfer has not been obtained under one of
\nthe agreements referred to it in Section 7.6(i).<\/p>\n
(e) DELIVERIES. VRI and its Affiliates shall have made the
\ndeliveries required to be made at the Second Closing by Section 3.1-B, the
\nGeneral Partner shall have made the deliveries required by Section 3.3-B and
\nthe Partnership shall have made the deliveries required by Section 3.4-B, as
\nthe case may be.<\/p>\n
(f) CERTAIN ANCILLARY AGREEMENTS. The Ancillary Agreements
\nreferred to in Section 7.6 to be executed and delivered as of the Second
\nClosing shall have been executed and delivered by all parties thereto other
\nthan SEI Holdings and its Affiliates.<\/p>\n
(g) RELEASE OF LIENS AND ENCUMBRANCES. All liens and
\nencumbrances, on the Vastar Power Assets to be transferred at the Second
\nClosing other than Permitted Encumbrances shall have been fully released.<\/p>\n
Formation Agreement
\nPage 60
\n 67
\n ARTICLE X<\/p>\n
TERMINATION, AMENDMENT AND WAIVER<\/p>\n
10.1 TERMINATION. This Agreement may be terminated and the
\ntransactions contemplated hereby abandoned at any time prior to the Second
\nClosing in the following manner:<\/p>\n
(a) by mutual written consent of VRI and SEI Holdings; or<\/p>\n
(b) by either VRI or SEI Holdings if the First Closing shall not
\nhave occurred on or before October 1, 1997, or if the Second Closing shall not
\nhave occurred on or before July 1, 1998, unless such failure to close shall be
\ndue to a breach of this Agreement by the party seeking to terminate this
\nAgreement pursuant to this clause (b); or<\/p>\n
(c) by either VRI or SEI Holdings, if there shall be any statute,
\nrule or regulation that makes consummation of the transactions contemplated
\nhereby illegal or otherwise prohibited or a Governmental Entity (i) shall have
\nissued an order, decree or ruling or taken any other action restraining,
\nenjoining or otherwise prohibiting the consummation of the transactions
\ncontemplated hereby, and such order, decree, ruling or other action shall have
\nbecome final and nonappealable or (ii) shall have made any order, decree,
\nruling or other action consenting to or approving consummation of the
\ntransactions contemplated hereby contingent or conditional in any manner that
\nhas a Material Adverse Effect on the business of the Partnership, such party
\nand its Affiliates taken as a whole; or<\/p>\n
(d) by VRI, if there has been any violation or breach by SEI
\nHoldings of any representation, warranty, covenant or agreement contained in
\nthis Agreement that has rendered the satisfaction of any condition to the
\nobligations of VRI set forth in Article VIII impossible and such violation or
\nbreach has not been waived by VRI or if any other event shall occur that shall
\nrender the satisfaction of any such condition to the obligations of VRI
\nimpossible and such condition has not been waived by VRI; or<\/p>\n
(e) by SEI Holdings, if there has been a violation or breach by
\nVRI of any representation, warranty, covenant or agreement contained in this
\nAgreement that has rendered the satisfaction of any condition to the
\nobligations of SEI Holdings set forth in Article IX impossible and such
\nviolation or breach has not been waived by SEI Holdings or if any other event
\nshall occur that shall render the satisfaction of any such condition to the
\nobligations of SEI Holdings impossible and such condition has not been waived
\nby SEI Holdings.<\/p>\n
10.2 EFFECT OF TERMINATION.<\/p>\n
(a) In the event of the termination of this Agreement pursuant to
\nSection 10.1 by VRI or SEI Holdings, written notice thereof shall forthwith be
\ngiven to the other party specifying the<\/p>\n
Formation Agreement
\nPage 61
\n 68
\nprovision hereof pursuant to which such termination is made, and this Agreement
\nshall become void and have no effect, except that the agreements contained in
\nthis Section 10.2 and in Sections 7.1(c), 7.7, 7.8, 7.12 and 10.5 and Articles
\nXI and XII shall survive the termination hereof. Nothing contained in this
\nSection shall relieve any party from liability for any breach of this
\nAgreement.<\/p>\n
(b) In the event a termination of this Agreement as set forth
\nabove shall have occurred after the First Closing Date, then the First Closing
\nshall be unwound as follows:<\/p>\n
(i) the parties shall cause the General Partner and the
\n Partnership<\/p>\n
(x) to transfer to VRI or its designees (A) all
\n assets, personnel and liabilities associated with the natural
\n gas trading and marketing business of the Partnership
\n (including the Gas Purchase and Sale Agreement referred to in
\n Section 7.6(a)) originally transferred from VRI and its
\n Affiliates (but not those originally transferred from SEI
\n Holdings and its Affiliates), (B) all rights to, and to
\n require the contribution of, the Vastar Power Business, the
\n Vastar Power Assets and the LDC Contracts, and (C) all
\n portions of combined gas and power business allocated to it by
\n agreement of the parties hereto and<\/p>\n
(y) to transfer to SEI Holdings or its designees
\n (A) all assets, personnel and liabilities associated with the
\n natural gas trading and marketing business, originally
\n transferred from SEI Holdings and its Affiliates (but not
\n those originally transferred from VRI and its Affiliates), (B)
\n all rights to, and to require the contribution of, the SETM
\n Power Business and the SETM Power Assets, and (C) all portions
\n of combined gas and power business allocated to it by
\n agreement of the parties hereto;<\/p>\n
(ii) the parties shall cause the Partnership and the
\n General Partner to terminate and dissolve and to distribute any
\n remaining net assets in accordance with the then applicable Southern
\n Percentage and Vastar Percentage with respect to the Partnership and
\n the General Partner; and<\/p>\n
(iii) thereafter, VRI and SEI Holdings shall cause Vastar
\n LP Sub and Southern LP Sub, respectively, shall cause the Escrow Agent
\n to refund (without interest) the $40,000,000 received for the Sale of
\n Partial Interest to Southern LP Sub or its designee.<\/p>\n
10.3 AMENDMENT. This Agreement may not be amended except by an
\ninstrument in writing signed by or on behalf of both VRI and SEI Holdings.<\/p>\n
10.4 WAIVER. Each of VRI and SEI Holdings may (i) waive any
\ninaccuracies in the representations and warranties of the other and the other’s
\nAffiliates contained herein or in any document, certificate or writing
\ndelivered pursuant hereto, (ii) waive compliance by the other and<\/p>\n
Formation Agreement
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\n 69
\nthe other’s Affiliates with any of the agreements of the other and the other’s
\nAffiliates contained herein and (iii) waive fulfillment of any conditions to
\nits own and its Affiliate’s or Affiliates’ obligations contained herein. Any
\nagreement on the part of a party hereto to any such waiver shall be valid only
\nif set forth in an instrument in writing signed by or on behalf of such party.
\nNo failure or delay by a party hereto in exercising any right, power or
\nprivilege hereunder shall operate as a waiver thereof nor shall any single or
\npartial exercise thereof preclude any other or further exercise thereof or the
\nexercise of any other right, power or privilege.<\/p>\n
10.5 REMEDIES NOT EXCLUSIVE. The rights and remedies herein
\nprovided shall be cumulative and not exclusive of any rights or remedies
\nprovided by law. The rights and remedies of any party based upon, arising out
\nof or otherwise in respect of any inaccuracy in or breach of any
\nrepresentation, warranty, covenant or agreement contained in this Agreement
\nshall in no way be limited by the fact that the act, omission, occurrence or
\nother state of facts upon which any claim of any such inaccuracy or breach is
\nbased may also be the subject matter of any other representation, warranty,
\ncovenant or agreement contained in this Agreement (or in any other agreement
\nbetween the parties) as to which there is no inaccuracy or breach.<\/p>\n
10.6 NO SPECIAL OR CONSEQUENTIAL DAMAGES. NO PARTY SHALL BE
\nENTITLED TO RECOVER SPECIAL OR CONSEQUENTIAL DAMAGES FROM THE OTHER PARTIES,
\nAND EACH PARTY HEREBY WAIVES ANY CLAIM OR RIGHT TO SPECIAL, CONSEQUENTIAL,
\nEXEMPLARY OR PUNITIVE DAMAGES HEREUNDER, EVEN IF CAUSED BY THE ACTIVE, PASSIVE,
\nSOLE, JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY, OR OTHER
\nFAULT OF ANY PARTY.<\/p>\n
ARTICLE XI<\/p>\n
INDEMNIFICATION;
\n SURVIVAL OF REPRESENTATIONS<\/p>\n
11.1 INDEMNIFICATION OBLIGATIONS OF VRI. From and after the First
\nClosing, VRI shall indemnify the Partnership or SEI Holdings, as the case may
\nbe and hold it harmless on a Net After-Tax Basis against and in respect of any
\nand all “Losses”, (defined herein to be any and all losses, damages,
\nliabilities, claims, costs and expenses (including, without limitation, Legal
\nExpenses), but excluding losses in connection with lost profits or punitive or
\nconsequential damages), arising out of, based upon or resulting from:<\/p>\n
(a) the breach of any representation or warranty of VRI or any of
\nits Affiliates contained in this Agreement or any of the Ancillary Agreements
\nor Instruments of Conveyance;<\/p>\n
(b) the breach by VRI or any of its Affiliates of, or failure of
\nVRI or any of its Affiliates to observe or perform in any material respect any
\nof, its covenants or agreements contained in this Agreement or any of the
\nAncillary Agreements or Instruments of Conveyance;<\/p>\n
Formation Agreement
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\n 70
\n (c) any liability or obligation of or attributable to VRI, Vastar
\nHoldings, VGM, VPM or, with respect to periods prior to the respective Closing
\nas of which transferred, the Vastar Business Assets other than the Assumed
\nContracts and Liabilities;<\/p>\n
(d) the ownership, management or use of the Vastar Business Assets
\nprior to the respective Closing as of which transferred and the conduct of the
\nVastar Marketing Business prior to the respective Closing as of which
\ntransferred; and<\/p>\n
(e) any litigation arising out of or in connection with the Vastar
\nMarketing Business or the Vastar Business Assets in connection with events
\noccurring prior to the respective Closing as of which transferred; provided
\nthat VRI shall not have any obligation to indemnify the Partnership or SEI
\nHoldings under this Section 11.1 unless and until the aggregate amount of all
\nLosses exceeds $100,000 (regardless of whether, in the case of third party
\nactions, suits or proceedings with respect to any of the foregoing, VRI may
\nhave a meritorious defense).<\/p>\n
11.2 INDEMNIFICATION OBLIGATIONS OF SEI HOLDINGS. From and after
\nthe First Closing, SEI Holdings shall indemnify the Partnership or VRI, as the
\ncase may be and hold it harmless on a Net After-Tax Basis against and in
\nrespect of any and all Losses, arising out of, based upon or resulting from:<\/p>\n
(a) the breach of any representation or warranty of SEI Holdings
\ncontained in this Agreement or any of the Ancillary Agreements or Instruments
\nof Conveyance;<\/p>\n
(b) the breach by SEI Holdings or any of its Affiliates of, or
\nfailure of SEI Holdings or any of its Affiliates to observe or perform in any
\nmaterial respect any of, its covenants or agreements contained in this
\nAgreement or any of the Ancillary Agreements or Instruments of Conveyance;<\/p>\n
(c) any liability or obligation of or attributable to SEI Holdings
\nor, with respect to the period prior to the respective Closing as of which
\ntransferred, the SETM Business Assets, other than the Assumed Contracts and
\nLiabilities;<\/p>\n
(d) the ownership, management or use of the SETM Business Assets
\nprior to the respective Closing as of which transferred and the conduct of the
\nSETM Business prior to the respective Closing as of which transferred; and<\/p>\n
(e) any litigation arising out of or in connection with the SETM
\nBusiness or the SETM Business Assets in connection with events occurring prior
\nto the respective Closing as of which transferred; provided that SEI Holdings
\nshall not have any obligation to indemnify the Partnership or VRI under this
\nSection 11.2 unless and until the aggregate amount of all Losses exceeds
\n$100,000 (regardless of whether, in the case of third party actions, suits or
\nproceedings with respect to any of the foregoing, SEI Holdings may have a
\nmeritorious defense).<\/p>\n
Formation Agreement
\nPage 64
\n 71
\n 11.3 INDEMNIFICATION PROCEDURES.<\/p>\n
(a) Promptly after receipt by any person entitled to
\nindemnification under Section 11.1 or 11.2 (an “indemnified party”) of notice
\nof the commencement of any action, suit or proceeding by a person not a party
\nto this Agreement in respect of which the indemnified party will seek
\nindemnification hereunder (a “Third Party Action”), the indemnified party shall
\nnotify the person that is obligated to provide such indemnification (an
\n“indemnifying party”) thereof in writing, but any failure to so notify the
\nindemnifying party shall not relieve it from any liability that it may have to
\nthe indemnified party under Section 11.1 or 11.2, except to the extent that the
\nindemnifying party is prejudiced by the failure to give such notice. The
\nindemnifying party shall be entitled to participate in the defense of such
\nThird Party Action and to assume control of such defense with counsel
\nreasonably satisfactory to such indemnified party; provided, however, that:<\/p>\n
(i) the indemnified party shall be entitled to
\n participate in the defense of such Third Party Action and to employ
\n counsel at its own expense to assist in the handling of such Third
\n Party Action;<\/p>\n
(ii) the indemnifying party shall obtain the prior written
\n approval of the indemnified party before entering into any settlement
\n of such Third Party Action or ceasing to defend against such Third
\n Party Action, if pursuant to or as a result of such settlement or
\n cessation, injunctive or other equitable relief would be imposed
\n against the indemnified party or the indemnified party would be
\n adversely affected thereby;<\/p>\n
(iii) no indemnifying party shall consent to the entry of
\n any judgment or enter into any settlement that does not include as an
\n unconditional term thereof the giving by each claimant or plaintiff to
\n each indemnified party of a release from all liability in respect of
\n such Third Party Action; and<\/p>\n
(iv) the indemnifying party shall not be entitled to
\n control the defense of any Third Party Action unless within 15 days
\n after receipt of such written notice from the indemnified party the
\n indemnifying party confirms in writing its responsibility to indemnify
\n the indemnified party with respect to such Third Party Action and
\n reasonably demonstrates that it will be able to pay the full amount of
\n the reasonably expected Losses in connection with any such Third Party
\n Action.<\/p>\n
After written notice by the indemnifying party to the indemnified
\nparty of its election to assume control of the defense of any such Third Party
\nAction in accordance with the foregoing and compliance by the indemnifying
\nparty with Section 11.3(a)(iv), (i) the indemnifying party shall not be liable
\nto such indemnified party hereunder for any Legal Expenses subsequently
\nincurred by such indemnified party attributable to defending against such Third
\nParty Action, and (ii) as long as the indemnifying party is reasonably
\ncontesting such Third Party Action in good faith, the indemnified party shall
\nnot admit any liability with respect to, or settle, compromise or discharge the
\nclaim<\/p>\n
Formation Agreement
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\n 72
\nunderlying, such Third Party Action without the indemnifying party’s prior
\nwritten consent. If the indemnifying party does not assume control of the
\ndefense of such Third Party Action in accordance with this Section 11.3, the
\nindemnified party shall have the right to defend and\/or settle such Third Party
\nAction in such manner as it may deem appropriate at the cost and expense of the
\nindemnifying party, and the indemnifying party will promptly reimburse the
\nindemnified party therefor in accordance with this Article XI. The
\nreimbursement of fees, costs and expenses required by this Article XI shall be
\nmade by periodic payments during the course of the investigation or defense, as
\nand when bills are received or expenses incurred.<\/p>\n
(b) If the indemnifying party shall be obligated to indemnify the
\nindemnified party pursuant to this Article XI, the indemnifying party shall,
\nupon payment of such indemnity in full, be subrogated to all rights of the
\nindemnified party with respect to the claims to which such indemnification
\nrelates. If an indemnified party becomes entitled to any indemnification from
\nan indemnifying party, such indemnification shall be made in cash upon demand.<\/p>\n
(c) The right of indemnification pursuant to this Article XI shall
\nconstitute the sole and exclusive remedy of each of the parties to this
\nAgreement for a breach of any representation or warranty by another party
\ncontained in this Agreement or in any statement or certification furnished
\npursuant to this Agreement. So long as a claim for indemnification pursuant to
\nthis Article XI is being contested in good faith by the indemnifying party or
\nsuch claim shall otherwise remain unliquidated, such claim shall not affect any
\nof the rights of the indemnifying party under the Partnership Agreement,
\nincluding any right to current distributions by the Partnership.<\/p>\n
11.4 SURVIVAL. All covenants and agreements contained in this
\nAgreement shall survive (and not be affected in any respect by) either Closing,
\nany investigation conducted by any party hereto and any information which any
\nparty may receive. The right to indemnification:<\/p>\n
(a) with respect to all representations and warranties contained
\nin this Agreement with the exception of those representations and warranties
\ncontained in Sections 4.10, 4.22, 5.10 and 5.22 of this Agreement, shall
\nsurvive for one year after the date of the audit for the first full fiscal year
\nof the Partnership; and<\/p>\n
(b) with respect to the representations and warranties contained
\nin Sections 4.10, 4.22, 5.10 and 5.22 of this Agreement, shall survive until
\nthe applicable statute of limitations as extended has run; provided that, in
\neach case there shall be no termination of any such representation or warranty
\nas to which a bona fide claim has been asserted prior to the termination of
\nsuch survival period.<\/p>\n
Formation Agreement
\nPage 66
\n 73
\n ARTICLE XII<\/p>\n
MISCELLANEOUS<\/p>\n
12.1 NOTICES. All notices, requests, demands and other
\ncommunications required or permitted to be given or made hereunder by any party
\nhereto shall be in writing, and shall be delivered either personally, or by
\nregistered or certified mail (postage prepaid and return receipt requested) or
\nby express courier or delivery service, or by telegram, telefax, telex or
\nsimilar facsimile means, to the parties, at the addresses (or at such other
\naddresses as shall be specified by the parties by like notice) set forth below:<\/p>\n
(i) if to any of the Southern Company Parties:<\/p>\n
SEI Holdings, Inc.
\n 900 Ashwood Parkway
\n Suite 500
\n Atlanta, Georgia 30338-4780
\n Attn: Chief Financial Officer
\n Facsimile: 770-379-7001
\n Telephone: 770-379-7000<\/p>\n
with a copy to:<\/p>\n
Southern Energy, Inc.
\n 900 Ashwood Parkway
\n Suite 500
\n Atlanta, Georgia 30338-4780
\n Attn: Senior Vice President – North American Division
\n Facsimile: 770-379-7001
\n Telephone: 770-379-7000<\/p>\n
(ii) if to any of the Vastar Parties:<\/p>\n
Vastar Resources, Inc.
\n 15375 Memorial Drive
\n Houston, Texas 77079
\n Attn: Chief Financial Officer
\n Facsimile: 281-584-6519
\n Telephone: 281-584-6000<\/p>\n
Notices and other communications shall be deemed given or made (i) when
\nreceived, if sent by telegram, telefax, telex or similar facsimile means
\n(confirmation of such receipt by confirmed<\/p>\n
Formation Agreement
\nPage 67
\n 74
\nfacsimile transmission being deemed receipt of communications sent by telefax,
\ntelex or similar facsimile means) and (ii) when delivered and receipted for (or
\nupon the date of attempted delivery where delivery is refused), if hand-
\ndelivered, sent by registered or certified mail or sent by express courier or
\ndelivery service, except in the case of facsimile transmissions received after
\nthe normal close of business at the receiving location, which shall be deemed
\ngiven on the next Business Day.<\/p>\n
12.2 ENTIRE AGREEMENT. This Agreement and the documents referred
\nto herein, together with the Schedules and Exhibits hereto (where applicable,
\nas executed and delivered), constitute the entire agreement between the parties
\nhereto with respect to the subject matter hereof and supersede all prior
\nagreements and understandings, both written and oral, between the parties with
\nrespect to the subject matter hereof.<\/p>\n
12.3 BINDING EFFECT; ASSIGNMENT; NO THIRD PARTY BENEFIT. This
\nAgreement shall be binding upon and inure to the benefit of the parties hereto
\nand their respective successors and permitted assigns. Neither this Agreement
\nnor any of the rights, interests or obligations hereunder shall be assigned by
\nany party hereto without the prior written consent of the other parties, and
\nany purported assignment without such consent shall be void. Except as
\nprovided in Article XI, nothing in this Agreement, express or implied, is
\nintended to or shall confer upon any person other than the parties hereto and
\nthe Partnership, and their respective successors and permitted assigns, any
\nrights, benefits or remedies of any nature whatsoever under or by reason of
\nthis Agreement.<\/p>\n
12.4 SEVERABILITY. If any provision of this Agreement is held to
\nbe unenforceable, this Agreement shall be considered divisible and such
\nprovision shall be deemed inoperative to the extent it is deemed unenforceable,
\nand in all other respects this Agreement shall remain in full force and effect;
\nprovided, however, that if any such provision may be made enforceable by
\nlimitation thereof, then such provision shall be deemed to be so limited and
\nshall be enforceable to the maximum extent permitted by Applicable Law.<\/p>\n
12.5 GOVERNING LAW. This Agreement shall be governed by and
\nconstrued and enforced in accordance with the laws of the State of Delaware,
\nwithout regard to the principles of conflicts of laws of such state.<\/p>\n
12.6 FURTHER ASSURANCES. From time to time following the First
\nClosing, at the request of any party hereto and without further consideration,
\nthe other parties shall execute and deliver to such requesting party such
\ninstruments and documents and take such other action as such requesting party
\nmay reasonably request or as may be otherwise necessary to (i) more fully and
\neffectively transfer to, and vest in, the Partnership, and put the Partnership
\nin possession of, any part of the Vastar Business Assets and the SETM Business
\nAssets, (ii) enable the Partnership to assume and fully and timely perform in
\naccordance with their terms any or all of the Assumed Contracts and
\nLiabilities, (iii) enable the Partnership to continue the Vastar Marketing
\nBusiness and the SETM Business, and (iv) otherwise consummate more fully and
\neffectively the transactions contemplated by this Agreement and the Ancillary
\nAgreements.<\/p>\n
Formation Agreement
\nPage 68
\n 75
\n 12.7 DESCRIPTIVE HEADINGS. The descriptive headings herein are
\ninserted for convenience of reference only, do not constitute a part of this
\nAgreement and shall not affect in any manner the meaning or interpretation of
\nthis Agreement.<\/p>\n
12.8 COUNTERPARTS. This Agreement may be executed by the parties
\nhereto in any number of counterparts, each of which shall be deemed an
\noriginal, but all of which shall constitute one and the same agreement.<\/p>\n
12.9 DISPUTE RESOLUTION; ARBITRATION. The procedures for dispute
\nresolution under this Agreement (“Alternate Dispute Resolution”) shall be as
\nfollows:<\/p>\n
(a) Except as otherwise provided in Section 7.18, the parties
\nagree that any controversy or claim arising out of or relating to this
\nAgreement or the breach hereof that cannot be settled by agreement of the
\nparties within 30 days shall first be submitted to the Board of Governors of
\nthe General Partner for consideration. If the controversy or claim cannot be
\nsettled by unanimous vote of such Board of Governors (as defined in the Limited
\nLiability Company Agreement) within an additional 30 days, it shall be subject
\nto arbitration as described in Section 12.9(b) below (“Alternate Dispute
\nResolution”).<\/p>\n
(b) Except as provided above in Section 7.18 or Section 12.9(a),
\nany controversy or claim arising out of or relating to this Agreement, or the
\nbreach hereof, (or, except as otherwise provided therein, relating to any of
\nthe Partnership Agreement, the Limited Liability Company Agreement or any of
\nthe Ancillary Agreements, or the breach thereof) shall be settled by
\narbitration administered by the JAMS\/Endispute, Inc. (“JAMS”) under the
\nCommercial Arbitration Rules of the American Arbitration Association. The
\narbitration proceedings shall be conducted in Memphis, Tennessee. Any dispute
\nsubmitted for arbitration shall be referred to a panel of three arbitrators.
\nThe party or parties submitting the intention to arbitrate (the “Demand”) shall
\nnominate one arbitrator, who shall be independent of the party or parties
\nnominating him. The party or parties required to answer the Demand shall
\nnominate one arbitrator, who shall be independent of the party or parties
\nnominating him. If the arbitrator chosen by the party or parties submitting
\nthe Demand and the arbitrator chosen by the party or parties answering the
\nDemand can agree upon a neutral arbitrator within seven days of submission to
\nthe JAMS of the answer to the Demand, then such individual shall serve as the
\nthird arbitrator. If no such agreement is reached, the third arbitrator shall
\nbe appointed by the JAMS. The arbitration award shall be final and binding on
\nthe parties and shall be enforced in accordance with its terms. The
\narbitration award shall be enforceable by any court having jurisdiction over
\nthe party against which the award has been rendered.<\/p>\n
Formation Agreement
\nPage 69
\n 76<\/p>\n
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
\nbe duly executed as of the day and year first above written.<\/p>\n
VASTAR RESOURCES, INC. SEI HOLDINGS, INC.<\/p>\n
By: \/s\/ CHARLES D. DAVIDSON By: \/s\/ S. MARCE FULLER
\n ————————– —————————
\nName: Charles D. Davidson Name: S. Marce Fuller
\nTitle: President and Chief Title: Assistant Secretary
\n Executive Officer <\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[8237,9228],"corporate_contracts_industries":[9534,9409],"corporate_contracts_types":[9573,9577],"class_list":["post-41635","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-mirant-corp","corporate_contracts_companies-vastar-resources-inc","corporate_contracts_industries-utilities__electric","corporate_contracts_industries-energy__exploration","corporate_contracts_types-formation","corporate_contracts_types-formation__partner"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/41635","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=41635"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=41635"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=41635"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=41635"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}