UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2015
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
001-33024
EV Energy Partners, L.P.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization) |
20–4745690
(I.R.S. Employer Identification No.) |
|
1001 Fannin, Suite 800, Houston, Texas
(Address of principal executive offices) |
77002
(Zip Code) |
Registrant’s telephone number, including area code: (713) 651-1144
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES þ NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES þ NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b–2 of the Exchange Act. Check one:
Large accelerated filer þ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Exchange Act).
YES ¨ NO þ
As of July 31, 2015, the registrant had 48,871,399 common units outstanding.
Table of Contents
PART I. FINANCIAL INFORMATION | 2 | |
Item 1. | Condensed Consolidated Financial Statements (Unaudited) | 2 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 24 |
Item 4. | Controls and Procedures | 25 |
PART II. OTHER INFORMATION | 25 | |
Item 1. | Legal Proceedings | 25 |
Item 1A. | Risk Factors | 25 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 25 |
Item 3. | Defaults Upon Senior Securities | 25 |
Item 4. | Mine Safety Disclosures | 25 |
Item 5. | Other Information | 25 |
Item 6. | Exhibits | 25 |
Signatures | 27 |
1 |
EV Energy Partners, L.P.
Condensed Consolidated Balance Sheets
(In thousands, except number of units)
(Unaudited)
June 30, | December 31, | |||||||
2015 | 2014 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 58,813 | $ | 8,255 | ||||
Accounts receivable: | ||||||||
Oil, natural gas and natural gas liquids revenues | 28,425 | 32,758 | ||||||
Related party | - | 1,043 | ||||||
Other | 3,596 | 4,570 | ||||||
Derivative asset | 72,683 | 113,044 | ||||||
Other current assets | 1,549 | 2,000 | ||||||
Assets held for sale | - | 315,173 | ||||||
Total current assets | 165,066 | 476,843 | ||||||
Oil and natural gas properties, net of accumulated
depreciation, depletion and amortization;
June 30, 2015, $888,073; December 31, 2014, $778,679 |
1,589,324 | 1,710,925 | ||||||
Other property, net of accumulated depreciation and amortization; June 30, 2015, $917; December 31, 2014, $898 | 1,104 | 1,141 | ||||||
Restricted cash | - | 33,768 | ||||||
Long–term derivative asset | 12,895 | 20,647 | ||||||
Other assets | 7,161 | 5,879 | ||||||
Total assets | $ | 1,775,550 | $ | 2,249,203 | ||||
LIABILITIES AND OWNERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities: | ||||||||
Third party | $ | 37,190 | $ | 47,878 | ||||
Related party | 7,344 | - | ||||||
Total current liabilities | 44,534 | 47,878 | ||||||
Asset retirement obligations | 105,657 | 103,832 | ||||||
Long–term debt | 499,444 | 1,030,391 | ||||||
Other long–term liabilities | 477 | 989 | ||||||
Commitments and contingencies | ||||||||
Owners’ equity: | ||||||||
Common unitholders – 48,871,399 units and 48,572,019 units issued and outstanding as of June 30, 2015 and December 31, 2014, respectively | 1,135,862 | 1,077,826 | ||||||
General partner interest | (10,424 | ) | (11,713 | ) | ||||
Total owners’ equity | 1,125,438 | 1,066,113 | ||||||
Total liabilities and owners’ equity | $ | 1,775,550 | $ | 2,249,203 |
See accompanying notes to unaudited condensed consolidated financial statements.
2 |
EV Energy Partners, L.P.
Condensed Consolidated Statements of Operations
(In thousands, except per unit data)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenues: | ||||||||||||||||
Oil, natural gas and natural gas liquids revenues | $ | 43,722 | $ | 88,125 | $ | 90,147 | $ | 182,199 | ||||||||
Transportation and marketing–related revenues | 734 | 1,235 | 1,551 | 2,500 | ||||||||||||
Total revenues | 44,456 | 89,360 | 91,698 | 184,699 | ||||||||||||
Operating costs and expenses: | ||||||||||||||||
Lease operating expenses | 23,800 | 26,028 | 47,324 | 51,423 | ||||||||||||
Cost of purchased natural gas | 504 | 942 | 1,078 | 1,912 | ||||||||||||
Dry hole and exploration costs | 272 | 1,653 | 686 | 1,971 | ||||||||||||
Production taxes | 1,603 | 2,957 | 3,351 | 6,480 | ||||||||||||
Asset retirement obligations accretion expense | 1,213 | 1,203 | 2,414 | 2,390 | ||||||||||||
Depreciation, depletion and amortization | 25,337 | 25,026 | 51,233 | 51,238 | ||||||||||||
General and administrative expenses | 7,944 | 12,749 | 20,359 | 25,047 | ||||||||||||
Impairment of oil and natural gas properties | 48,284 | 1,069 | 106,457 | 1,321 | ||||||||||||
Loss (gain) on sales of oil and natural gas properties | 6 | - | (531 | ) | (1,484 | ) | ||||||||||
Total operating costs and expenses | 108,963 | 71,627 | 232,371 | 140,298 | ||||||||||||
Operating (loss) income | (64,507 | ) | 17,733 | (140,673 | ) | 44,401 | ||||||||||
Other (expense) income, net: | ||||||||||||||||
(Loss) gain on derivatives, net | (9,246 | ) | (17,817 | ) | 14,364 | (40,812 | ) | |||||||||
Interest expense | (13,101 | ) | (12,445 | ) | (27,236 | ) | (24,517 | ) | ||||||||
Other income (expense), net | 41 | 206 | (155 | ) | 380 | |||||||||||
Total other expense, net | (22,306 | ) | (30,056 | ) | (13,027 | ) | (64,949 | ) | ||||||||
Loss from continuing operations before income taxes | (86,813 | ) | (12,323 | ) | (153,700 | ) | (20,548 | ) | ||||||||
Income taxes | 473 | 78 | 623 | 333 | ||||||||||||
Loss from continuing operations | (86,340 | ) | (12,245 | ) | (153,077 | ) | (20,215 | ) | ||||||||
Income from discontinued operations | 250,442 | 3,222 | 255,512 | 4,939 | ||||||||||||
Net income (loss) | $ | 164,102 | $ | (9,023 | ) | $ | 102,435 | $ | (15,276 | ) | ||||||
Basic and diluted earnings per limited partner unit: | ||||||||||||||||
Loss from continuing operations | $ | (1.74 | ) | $ | (0.26 | ) | $ | (3.08 | ) | $ | (0.43 | ) | ||||
Income from discontinued operations | 4.99 | 0.07 | 5.11 | 0.10 | ||||||||||||
Net income (loss) | $ | 3.25 | $ | (0.19 | ) | $ | 2.03 | $ | (0.33 | ) | ||||||
Weighted average limited partner units outstanding (basic and diluted) | 48,871 | 48,572 | 48,833 | 48,555 | ||||||||||||
Distributions declared per unit | $ | 0.50 | $ | 0.769 | $ | 1.00 | $ | 1.537 |
See accompanying notes to unaudited condensed consolidated financial statements.
3 |
EV Energy Partners, L.P.
Condensed Consolidated Statements of Changes in Owners’ Equity
(In thousands)
(Unaudited)
Common
Unitholders |
General Partner
Interest |
Total Owners'
Equity |
||||||||||
Balance, December 31, 2014 | $ | 1,077,826 | $ | (11,713 | ) | $ | 1,066,113 | |||||
Contributions from general partner | - | 91 | 91 | |||||||||
Distributions | (49,498 | ) | (997 | ) | (50,495 | ) | ||||||
Equity–based compensation | 7,148 | 146 | 7,294 | |||||||||
Net income | 100,386 | 2,049 | 102,435 | |||||||||
Balance, June 30, 2015 | $ | 1,135,862 | $ | (10,424 | ) | $ | 1,125,438 |
Common
Unitholders |
General Partner
Interest |
Total Owners'
Equity |
||||||||||
Balance, December 31, 2013 | $ | 1,083,718 | $ | (11,785 | ) | $ | 1,071,933 | |||||
Contribution from general partner | - | 154 | 154 | |||||||||
Distributions | (75,883 | ) | (1,529 | ) | (77,412 | ) | ||||||
Other | (5 | ) | – | (5 | ) | |||||||
Equity–based compensation | 10,837 | 221 | 11,058 | |||||||||
Net loss | (14,971 | ) | (305 | ) | (15,276 | ) | ||||||
Balance, June 30, 2014 | $ | 1,003,696 | $ | (13,244 | ) | $ | 990,452 |
See accompanying notes to unaudited condensed consolidated financial statements.
4 |
EV Energy Partners, L.P.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended | ||||||||
June 30, | ||||||||
2015 | 2014 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 102,435 | $ | (15,276 | ) | |||
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities: | ||||||||
Income from discontinued operations | (255,512 | ) | (4,939 | ) | ||||
Asset retirement obligations accretion expense | 2,414 | 2,390 | ||||||
Depreciation, depletion and amortization | 51,233 | 51,238 | ||||||
Equity–based compensation cost | 7,294 | 11,058 | ||||||
Impairment of oil and natural gas properties | 106,457 | 1,321 | ||||||
Gain on sales of oil and natural gas properties | (531 | ) | (1,484 | ) | ||||
(Gain) loss on derivatives, net | (14,364 | ) | 40,812 | |||||
Cash settlements of matured derivative contracts | 62,477 | (11,555 | ) | |||||
Other | 890 | 1,271 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 6,350 | (12,978 | ) | |||||
Other current assets | 457 | (813 | ) | |||||
Accounts payable and accrued liabilities | 4,714 | 2,478 | ||||||
Other, net | (583 | ) | (243 | ) | ||||
Net cash flows provided by operating activities from continuing operations | 73,731 | 63,280 | ||||||
Net cash flows used in operating activities from discontinued operations | (372 | ) | - | |||||
Net cash flows provided by operating activities | 73,359 | 63,280 | ||||||
Cash flows from investing activities: | ||||||||
Additions to oil and natural gas properties | (44,854 | ) | (44,865 | ) | ||||
Prepaid drilling costs | - | (2,346 | ) | |||||
Proceeds from sale of oil and natural gas properties | 774 | 7,315 | ||||||
Restricted cash | 33,768 | - | ||||||
Other | 32 | 34 | ||||||
Net cash flows used in investing activities from continuing operations | (10,280 | ) | (39,862 | ) | ||||
Net cash flows provided by (used in) investing activities from discontinued operations | 572,160 | (83,188 | ) | |||||
Net cash flows provided by (used in) investing activities | 561,880 | (123,050 | ) | |||||
Cash flows from financing activities: | ||||||||
Repayment of long-term debt borrowings | (561,000 | ) | - | |||||
Long–term debt borrowings | 30,000 | 144,000 | ||||||
Loan costs incurred | (3,277 | ) | - | |||||
Contributions from general partner | 91 | 154 | ||||||
Distributions paid | (50,495 | ) | (77,412 | ) | ||||
Other | - | (5 | ) | |||||
Net cash flows (used in) provided by financing activities | (584,681 | ) | 66,737 | |||||
Increase in cash and cash equivalents | 50,558 | 6,967 | ||||||
Cash and cash equivalents – beginning of year | 8,255 | 11,698 | ||||||
Cash and cash equivalents – end of period | $ | 58,813 | $ | 18,665 |
See accompanying notes to unaudited condensed consolidated financial statements.
5 |
EV Energy Partners, L.P.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1. ORGANIZATION AND NATURE OF BUSINESS
Nature of Operations
EV Energy Partners, L.P. together with its indirect wholly owned subsidiaries (“we,” “our” or “us”) is a publicly held limited partnership. Our general partner is EV Energy GP, L.P. (“EV Energy GP”), a Delaware limited partnership, and the general partner of our general partner is EV Management, LLC (“EV Management”), a Delaware limited liability company. EV Management is an indirect wholly owned subsidiary of EnerVest, Ltd. (“EnerVest”), a Texas limited partnership. EnerVest and its affiliates also have a significant interest in us through their 71.25% ownership of EV Energy GP which, in turn, owns a 2% general partner interest in us and all of our incentive distribution rights.
With the sale of our interest in Cardinal Gas Services, LLC (“Cardinal”) in October 2014 and the sale of our interest in Utica East Ohio Midstream LLC (“UEO”) in June 2015, we no longer operate in the midstream segment, and we have reclassified our condensed consolidated financial statements for all periods presented to reflect the operations of our midstream segment as discontinued operations (see Note 9). We now operate in one reportable segment engaged in the acquisition, development and production of oil and natural gas properties and all of our operations are located in the United States.
Basis of Presentation
Our unaudited condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. We believe that the presentations and disclosures herein are adequate to make the information not misleading. The unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the interim periods. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These interim financial statements should be read in conjunction with our Annual Report on Form 10–K for the year ended December 31, 2014.
All intercompany accounts and transactions have been eliminated in consolidation. In the Notes to Unaudited Condensed Consolidated Financial Statements, all dollar and unit amounts in tabulations are in thousands of dollars and units, respectively, unless otherwise indicated.
NOTE 2. EQUITY–BASED COMPENSATION
We grant various forms of equity–based awards to employees, consultants and directors of EV Management and its affiliates who perform services for us. These equity–based awards consist primarily of phantom units and performance units.
We estimated the fair value of the phantom units using the Black–Scholes option pricing model. Compensation cost is recognized for these phantom units on a straight–line basis over the service period and is net of estimated forfeitures. These phantom units are subject to graded vesting over a four year period. We recognized compensation cost related to these phantom units of $2.3 million and $5.0 million in the three months ended June 30, 2015 and 2014, respectively, and $7.1 million and $8.1 million in the six months ended June 30, 2015 and 2014, respectively. These costs are included in “General and administrative expenses” in our unaudited condensed consolidated statements of operations.
As of June 30, 2015, there was $17.0 million of total unrecognized compensation cost related to unvested phantom units which is expected to be recognized over a weighted average period of 2.5 years.
In September 2011, we issued 0.3 million performance units to certain employees and executive officers of EV Management and its affiliates. These performance units were fully vested as of January 2015. We recognized compensation cost related to these performance units of $0.2 million in the six months ended June 30, 2015 and $1.6 million and $2.9 million in the three months and six months ended June 30, 2014, respectively. These costs are included in “General and administrative expenses” in our unaudited condensed consolidated statements of operations.
6 |
EV Energy Partners, L.P.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
NOTE 3. RISK MANAGEMENT
Our business activities expose us to risks associated with changes in the market price of oil, natural gas and natural gas liquids. In addition, our floating rate credit facility exposes us to risks associated with changes in interest rates. As such, future earnings are subject to fluctuation due to changes in the market prices of oil, natural gas and natural gas liquids and interest rates. We use derivatives to reduce our risk of volatility in the prices of oil, natural gas and natural gas liquids and interest rates. Our policies do not permit the use of derivatives for speculative purposes.
We have elected not to designate any of our derivatives as hedging instruments . Accordingly, changes in the fair value of our derivatives are recorded immediately to operations as “(Loss) gain on derivatives, net” in our unaudited condensed consolidated statements of operations.
As of June 30, 2015, we had entered into commodity contracts with the following terms:
Period Covered | Hedged Volume |
Weighted Average
Fixed Price |
||||||
Oil (MBbls): | ||||||||
Swaps – July 2015 to December 2015 | 644.0 | $ | 90.28 | |||||
Swaps – 2016 | 366.0 | 90.14 | ||||||
Natural Gas (MmmBtus): | ||||||||
Swaps – July 2015 to December 2015 | 19,964.0 | 4.86 | ||||||
Swaps – 2016 | 18,300.0 | 4.07 | ||||||
Natural Gas Liquids (MBbls): | ||||||||
Swaps – July 2015 to December 2015 | 239.2 | 24.98 |
7 |
EV Energy Partners, L.P.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The following table sets forth the fair values and classification of our outstanding derivatives:
Net Amounts | ||||||||||||
Gross Amounts | of Assets | |||||||||||
Offset in the | Presented in the | |||||||||||
Gross | Unaudited | Unaudited | ||||||||||
Amounts of | Condensed | Condensed | ||||||||||
Recognized | Consolidated | Consolidated | ||||||||||
Assets | Balance Sheet | Balance Sheet | ||||||||||
Derivatives: | ||||||||||||
As of June 30, 2015: | ||||||||||||
Derivative asset | $ | 72,683 | $ | - | $ | 72,683 | ||||||
Long–term derivative asset | 12,895 | - | 12,895 | |||||||||
Total | $ | 85,578 | $ | - | $ | 85,578 | ||||||
As of December 31, 2014: | ||||||||||||
Derivative asset | $ | 114,754 | $ | (1,710 | ) | $ | 113,044 | |||||
Long–term derivative asset | 20,647 | - | 20,647 | |||||||||
Total | $ | 135,401 | $ | (1,710 | ) | $ | 133,691 |
Net Amounts | ||||||||||||
Gross Amounts | of Liabilities | |||||||||||
Offset in the | Presented in the | |||||||||||
Gross | Unaudited | Unaudited | ||||||||||
Amounts of | Condensed | Condensed | ||||||||||
Recognized | Consolidated | Consolidated | ||||||||||
Liabilities | Balance Sheet | Balance Sheet | ||||||||||
Derivatives: | ||||||||||||
As of December 31, 2014: | ||||||||||||
Derivative liability | $ | 1,710 | $ | (1,710 | ) | $ | - | |||||
Long–term derivative liability | - | - | - | |||||||||
Total | $ | 1,710 | $ | (1,710 | ) | $ | - |
We have entered into master netting arrangements with our counterparties. The amounts above are presented on a net basis in our unaudited condensed consolidated balance sheets when such amounts are with the same counterparty. In addition, we have recorded accounts payable and receivable balances related to our settled derivatives that are subject to our master netting agreements. These amounts are not included in the above table; however, under our master netting agreements, we have the right to offset these positions against our forward exposure related to outstanding derivatives.
Should our credit facility become due and payable because of an event of default, our derivatives that are in a net liability position could also become due and payable. We could also be required to post cash collateral related to these derivatives under certain circumstances. As of June 30, 2015 and December 31, 2014, we were not required to post any collateral nor did we hold any collateral associated with our derivatives.
NOTE 4. IMPAIRMENT OF OIL AND NATURAL GAS PROPERTIES
We evaluate our proved oil and natural gas properties and related equipment and facilities for impairment whenever events or changes in circumstances indicate that the carrying amounts of such properties may not be recoverable. The determination of recoverability is made based upon estimated undiscounted future net cash flows. The amount of impairment loss, if any, is determined by comparing the fair value, as determined by a discounted cash flow analysis, with the carrying value of the related asset. We recorded impairment charges of $58.2 million in the six months ended June 30, 2015 related to proved oil and natural gas properties (see Note 5).
8 |
EV Energy Partners, L.P.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Unproved oil and natural gas properties are assessed periodically on a property–by–property basis, and any impairment in value is recognized. We recorded impairment charges of $48.3 million in the three months and six months ended June 30, 2015 related to unproved oil and natural gas properties, of which $47.9 million related to a change in our development plans for acreage in the Utica Shale.
NOTE 5. FAIR VALUE MEASUREMENTS
Recurring Basis
The following table presents the fair value hierarchy for our assets and liabilities that are required to be measured at fair value on a recurring basis:
Fair Value Measurements
at the End of the Reporting
Period |
||||||||||||||||
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | ||||||||||||||||
Markets | Significant | |||||||||||||||
for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
As of June 30, 2015: | ||||||||||||||||
Assets - Oil, natural gas and natural gas liquids derivatives | $ | 85,578 | $ | - | $ | 85,578 | $ | - | ||||||||
As of December 31, 2014: | ||||||||||||||||
Assets - Oil and natural gas derivatives | $ | 135,401 | $ | - | $ | 135,401 | $ | - | ||||||||
Liabilities - Interest rate swaps | $ | 1,710 | $ | - | $ | 1,710 | $ | - |
Our derivatives consist of over–the–counter contracts which are not traded on a public exchange. As the fair value of these derivatives is based on inputs using market prices obtained from independent brokers or determined using quantitative models that use as their basis readily observable market parameters that are actively quoted and can be validated through external sources, including third party pricing services, brokers and market transactions, we have categorized these derivatives as Level 2. We value these derivatives using the income approach with inputs such as the forward curve for commodity prices based on quoted market prices and prospective volatility factors related to changes in the forward curves and yield curves based on money market rates and interest rate swap data, such as forward LIBOR curves. Our estimates of fair value have been determined at discrete points in time based on relevant market data. There were no changes in valuation techniques or related inputs in the six months ended June 30, 2015.
Nonrecurring Basis
In the six months ended June 30, 2015, as a result of a reduction in estimated future net cash flows primarily caused by lower oil, natural gas and natural gas liquids prices, we recognized a $58.2 million impairment charge to write down oil and natural gas properties to their fair value of $31.4 million.
The fair values were determined using the income approach and were based on the expected present value of the future net cash flows from proved reserves. Significant Level 3 assumptions associated with the calculation of discounted cash flows used in the impairment analysis included estimates of future prices, production costs, development expenditures, anticipated production of proved reserves, appropriate risk–adjusted discount rates and other relevant data.
9 |
EV Energy Partners, L.P.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Financial Instruments
The estimated fair values of our financial instruments have been determined at discrete points in time based on relevant market information. Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, derivatives and long–term debt. The carrying amounts of our financial instruments other than derivatives and long–term debt approximate fair value because of the short–term nature of the items. Derivatives are recorded at fair value (see above).
The carrying value of debt outstanding under our credit facility approximates fair value because the credit facility’s variable interest rate resets frequently and approximates current market rates available to us. The estimated fair value of our senior notes due 2019 was $465.0 million and $427.5 million at June 30, 2015 and December 31, 2014, respectively, which differs from the carrying value of $499.4 million at both June 30, 2015 and December 31, 2014. The fair value of the senior notes due 2019 was determined using Level 2 inputs.
NOTE 6. ASSET RETIREMENT OBLIGATIONS
We record an asset retirement obligation (“ARO”) and capitalize the asset retirement cost in oil and natural gas properties in the period in which the retirement obligation is incurred based upon the fair value of an obligation to perform site reclamation, dismantle facilities or plug and abandon wells. After recording these amounts, the ARO is accreted to its future estimated value using an assumed cost of funds and the additional capitalized costs are depreciated on a unit–of–production basis. The changes in the aggregate ARO are as follows:
2015 | 2014 | |||||||
Balance as of January 1 | $ | 105,773 | $ | 103,173 | ||||
Liabilities incurred | 367 | 393 | ||||||
Revisions | (1 | ) | - | |||||
Accretion expense | 2,414 | 2,390 | ||||||
Settlements and divestitures | (955 | ) | (2,034 | ) | ||||
Balance as of June 30 | $ | 107,598 | $ | 103,922 |
As of both June 30, 2015 and December 31, 2014, $1.9 million of our ARO is classified as current and is included in “Accounts payable and accrued liabilities” in our unaudited condensed consolidated balance sheets.
NOTE 7. LONG–TERM DEBT
Credit Facility
As of June 30, 2015, we have a $1.0 billion credit facility that expires in February 2020. Borrowings under the facility are secured by a first priority lien on substantially all of our oil and natural gas properties. We may use borrowings under the facility for acquiring and developing oil and natural gas properties, for working capital purposes, for general corporate purposes and for funding distributions to partners. We also may use up to $100.0 million of available borrowing capacity for letters of credit. The facility requires the maintenance of a current ratio (as defined in the facility) of greater than 1.0 and a ratio of senior secured debt to earnings plus interest expense, taxes, depreciation, depletion and amortization expense and exploration expense of no greater than 3.5 to 1.0. As of June 30, 2015, we were in compliance with these financial covenants.
The facility does not require any repayments of amounts outstanding until it expires in February 2020. Borrowings under the facility bear interest at a floating rate based on, at our election, a base rate or the London Inter–Bank Offered Rate plus applicable premiums based on the percent of the borrowing base that we have outstanding (weighted average effective interest rate of 3.50% and 2.99% at June 30, 2015 and 2014, respectively).
Borrowings under the facility may not exceed a “borrowing base” determined by the lenders under the facility based on our oil and natural gas reserves. Upon the sale of our interest in UEO, the borrowing base under our facility was reduced by $150.0 million and, as of June 30, 2015, the borrowing base under the facility was $500.0 million. The borrowing base is subject to scheduled redeterminations as of April 1 and October 1 of each year with an additional redetermination once per calendar year at our request or at the request of the lenders and with one calculation that may be made at our request during each calendar year in connection with material acquisitions or divestitures of properties.
10 |
EV Energy Partners, L.P.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
As of June 30, 2015, we had no amounts outstanding under the facility. As of December 31, 2014, we had $531.0 million outstanding under the facility.
8.0% Senior Notes due 2019
Our senior notes due 2019 are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by all of our existing subsidiaries other than EV Energy Finance Corp. (“Finance”), which is a co–issuer of the Notes. Neither EV Energy Partners, L.P. nor Finance have independent assets or operations apart from the assets and operations of our subsidiaries.
The aggregate carrying amount of our senior notes due 2019 was $499.4 million at both June 30, 2015 and December 31, 2014, respectively.
NOTE 8. COMMITMENTS AND CONTINGENCIES
We are involved in disputes or legal actions arising in the ordinary course of business. We do not believe the outcome of such disputes or legal actions will have a material effect on our unaudited condensed consolidated financial statements, and no amounts have been accrued at June 30, 2015 or December 31, 2014.
NOTE 9. OWNERS’ EQUITY
Units Outstanding
At June 30, 2015, owners’ equity consists of 48,871,399 common units, representing a 98% limited partnership interest in us, and a 2% general partnership interest.
Issuance of Units
In the six months ended June 30, 2015, we issued 0.3 million common units related to the vesting of equity–based awards. In conjunction with the vesting of these units, we received a contribution of $0.1 million by our general partner to maintain its 2% interest in us.
Cash Distributions
The following sets forth the distributions we paid during the six months ended June 30, 2014:
Date Paid | Period Covered | Distribution per Unit | Total Distribution | |||||||
February 13, 2015 | October 1, 2014 – December 31, 2014 | $ | 0.50 | $ | 25,274 | |||||
May 15, 2015 | January 1, 2015 – March 31, 2015 | 0.50 | 25,221 | |||||||
$ | 50,495 |
On July 30, 2015, the board of directors of EV Management declared a $0.50 per unit distribution for the second quarter of 2015 on all common units. The distribution of $25.2 million is to be paid on August 14, 2015 to unitholders of record at the close of business on August 10, 2015.
NOTE 10. DISCONTINUED OPERATIONS
Our midstream segment, which consisted of our investments in UEO and Cardinal, was engaged in the construction and operation of natural gas processing, natural gas liquids fractionation, connecting pipeline infrastructure and gathering systems to serve production in the Utica Shale area in Ohio. In October 2014, we sold our interest in Cardinal. In June 2015, we sold our interest in UEO and received net proceeds of $572.2 million and recognized a gain of $246.7 million. This gain is included in “Income from discontinued operations” for the three months and six months ended June 30, 2015.
11 |
EV Energy Partners, L.P.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
As a result of the reduction in the borrowing base under our facility upon the sale of our interest in UEO, we were required to repay $25.0 million of outstanding borrowings. Accordingly, $1.5 million of interest related to this $25.0 million and the write off of deferred financing costs related to the reduction in the borrowing base have been allocated to “Income from discontinued operations.”
We have reclassified our unaudited condensed consolidated financial statements for all periods presented to reflect the operations of our midstream segment as discontinued operations. Accordingly, in our unaudited condensed consolidated balance sheets, amounts previously included in “Investments in unconsolidated affiliates” have been reclassified to ”Assets held for sale” and, in our unaudited condensed consolidated statement of operations, amounts previously included in “Equity in income of unconsolidated affiliates” have been reclassified to “Income from discontinued operations.”
Summarized financial information for our midstream segment is as follows:
December
31,
2014 (1) |
||||
Current assets | $ | 98,061 | ||
Noncurrent assets | 1,381,773 | |||
Total assets | $ | 1,479,834 | ||
Current liabilities | $ | 37,967 | ||
Owner’s equity | 1,441,867 | |||
Total liabilities and owner’s equity | $ | 1,479,834 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2015 (1) | 2014 (2) | 2015 (1) | 2014 (2) | |||||||||||||
Revenues | $ | 45,183 | $ | 59,606 | $ | 93,726 | $ | 101,795 | ||||||||
Operating income | 24,697 | 23,504 | 49,171 | 37,401 | ||||||||||||
Net income | 24,781 | 23,537 | 49,525 | 37,468 |
(1) | Information is for UEO on a stand–alone basis through the date of divestiture. |
(2) | Information is for UEO and Cardinal on a combined basis. |
12 |
EV Energy Partners, L.P.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
NOTE 11. NET INCOME (LOSS) PER LIMITED PARTNER UNIT
The following sets forth the calculation of net income (loss) per limited partner unit:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Loss from continuing operations | $ | (86,340 | ) | $ | (12,245 | ) | $ | (153,077 | ) | $ | (20,215 | ) | ||||
General partner’s 2% interest in loss from continuing operations | 1,727 | 244 | 3,061 | 404 | ||||||||||||
Loss from continuing operations attributable to unvested phantom units | (315 | ) | (454 | ) | (657 | ) | (937 | ) | ||||||||
Limited partners’ interest in loss from continuing operations | $ | (84,928 | ) | $ | (12,455 | ) | $ | (150,673 | ) | $ | (20,748 | ) | ||||
Earnings per limited partner unit (basic and diluted) | $ | (1.74 | ) | $ | (0.26 | ) | $ | (3.08 | ) | $ | (0.43 | ) | ||||
Income from discontinued operations | $ | 250,442 | $ | 3,222 | $ | 255,512 | $ | 4,939 | ||||||||
General partner’s 2% interest in income from discontinued operations | (5,009 | ) | (64 | ) | (5,110 | ) | (99 | ) | ||||||||
Income from discontinued operations attributable to unvested phantom units | (1,732 | ) | - | (675 | ) | - | ||||||||||
Limited partners’ interest in income from discontinued operations | $ | 243,701 | $ | 3,158 | $ | 249,727 | $ | 4,840 | ||||||||
Earnings per limited partner unit (basic and diluted) | $ | 4.99 | $ | 0.07 | $ | 5.11 | $ | 0.10 | ||||||||
Net income (loss) | $ | 164,102 | $ | (9,023 | ) | $ | 102,435 | $ | (15,276 | ) | ||||||
General partner’s 2% interest in net income (loss) | (3,282 | ) | 180 | (2,049 | ) | 305 | ||||||||||
Net income (loss) attributable to unvested phantom units | (2,047 | ) | (454 | ) | (1,332 | ) | (937 | ) | ||||||||
Limited partners’ interest in net income (loss) | $ | 158,773 | $ | (9,297 | ) | $ | 99,054 | $ | (15,908 | ) | ||||||
Earnings per limited partner unit (basic and diluted) | $ | 3.25 | $ | (0.19 | ) | $ | 2.03 | $ | (0.33 | ) | ||||||
Weighted average limited partner units outstanding (basic and diluted) | 48,871 | 48,572 | 48,833 | 48,555 |
As of June 30, 2015, there are no unearned performance units outstanding. Unearned performance units totaling 0.2 million units were not included in the computation of diluted net income (loss) per limited partner unit for the three months and six months ended June 30, 2014 because the effect would have been anti–dilutive.
NOTE 12. RELATED PARTY TRANSACTIONS
Pursuant to an omnibus agreement, we paid EnerVest $3.3 million and $3.0 million in the three months ended June 30, 2015 and 2014, respectively, and $6.6 million and $6.0 million in the six months ended June 30, 2015 and 2014, respectively, in monthly administrative fees for providing us general and administrative services. These fees are based on an allocation of charges between EnerVest and us based on the estimated use of such services by each party, and we believe that the allocation method employed by EnerVest is reasonable and reflective of the estimated level of costs we would have incurred on a standalone basis. These fees are included in general and administrative expenses in our unaudited condensed consolidated statements of operations.
13 |
EV Energy Partners, L.P.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
We have entered into operating agreements with EnerVest whereby a subsidiary of EnerVest acts as contract operator of the oil and natural gas wells and related gathering systems and production facilities in which we own an interest. We reimbursed EnerVest approximately $3.7 million and $3.8 million in the three months ended June 30, 2015 and 2014, respectively, and $7.8 million and $8.3 million in the six months ended June 30, 2015 and 2014, respectively, for direct expenses incurred in the operation of our wells and related gathering systems and production facilities and for the allocable share of the costs of EnerVest employees who performed services on our properties. As the vast majority of such expenses are charged to us on an actual basis (i.e., no mark–up or subsidy is charged or received by EnerVest), we believe that the aforementioned services were provided to us at fair and reasonable rates relative to the prevailing market and are representative of the costs that would have been incurred on a standalone basis. These costs are included in lease operating expenses in our unaudited condensed consolidated statements of operations. Additionally, in its role as contract operator, this EnerVest subsidiary also collects proceeds from oil and natural gas sales and distributes them to us and other working interest owners.
NOTE 13. OTHER SUPPLEMENTAL INFORMATION
Supplemental cash flows and noncash transactions were as follows:
Six Months Ended | ||||||||
June 30, | ||||||||
2015 | 2014 | |||||||
Supplemental cash flows information - cash paid for interest, net of capitalized interest of $4,322 at June 30, 2014 | $ | 26,460 | $ | 22,781 | ||||
Cash (refunded) paid for income taxes | $ | (155 | ) | $ | 155 |
As of June 30, | ||||||||
2015 | 2014 | |||||||
Noncash transaction - costs for additions to oil and natural gas properties in accounts payable and accrued liabilities | $ | 9,970 | $ | 17,700 |
Accounts payable and accrued liabilities consisted of the following:
June 30, | December 31, | |||||||
2015 | 2014 | |||||||
Costs for additions to oil and natural gas properties | $ | 9,970 | $ | 18,028 | ||||
Lease operating expenses | 8,759 | 9,701 | ||||||
Interest | 8,333 | 8,649 | ||||||
Production and ad valorem taxes | 4,334 | 5,683 | ||||||
General and administrative expenses | 1,883 | 2,317 | ||||||
Current portion of ARO | 1,940 | 1,941 | ||||||
Derivative settlements | 268 | 280 | ||||||
Other | 1,703 | 1,279 | ||||||
Total | $ | 37,190 | $ | 47,878 |
NOTE 14. NEW ACCOUNTING STANDARDS
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015–03, Interest – Imputation of Interest . This ASU changes the presentation of debt issuance costs in financial statements. Under ASU 2015–03, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. The provisions of ASU 2015–03 are applicable to annual reporting periods beginning after December 15, 2015 and interim periods within those annual periods. Early adoption is permitted for financial statements that have not yet been previously issued. We do not expect that adopting this ASU will have a material impact on our unaudited condensed consolidated financial statements.
14 |
EV Energy Partners, L.P.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
In April 2015, the FASB issued ASU No. 2015–06, Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions . ASU 2015–06 specifies that for purposes of calculating historical earnings per unit under the two class method, the earnings (losses) of a transferred business before the date of a dropdown transaction should be allocated entirely to the general partner. In addition, qualitative disclosures about how the rights to the earnings (losses) differ before and after the dropdown transaction occurs for purposes of computing earnings per unit under the two class method are also required. The provisions of ASU 2015–06 are applicable to annual reporting periods beginning after December 15, 2015 and interim periods within those annual periods. We will adopt this ASU should we enter into a dropdown transaction.
No other new accounting pronouncements issued or effective during the six months ended June 30, 2015 have had or are expected to have a material impact on our unaudited condensed consolidated financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto, as well as our Annual Report on Form 10–K for the year ended December 31, 2014.
OVERVIEW
We are a Delaware limited partnership formed in April 2006 by EnerVest to acquire, produce and develop oil and natural gas properties. Our general partner is EV Energy GP, a Delaware limited partnership, and the general partner of our general partner is EV Management, a Delaware limited liability company.
With the sale of our interest in Cardinal in October 2014 and the sale of our interest in UEO in June 2015, we no longer operate in the midstream segment. We now operate in one reportable segment engaged in the acquisition, development and production of oil and natural gas properties and all of our operations are located in the United States.
As of December 31, 2014, our oil and natural gas properties were located in the Barnett Shale, the Appalachian Basin (which includes the Utica Shale), the Mid-Continent area in Oklahoma, Texas, Arkansas, Kansas and Louisiana, the Monroe Field in Northern Louisiana, the San Juan Basin, Michigan, Central Texas (which includes the Austin Chalk area), and the Permian Basin. As of December 31, 2014, we had estimated net proved reserves of 11.9 MMBbls of oil, 712.2 Bcf of natural gas and 36.1 MMBbls of natural gas liquids, or 1,000.5 Bcfe, and a standardized measure of $1,093.3 million.
CURRENT DEVELOPMENTS
In the six months ended June 30, 2015, prices for oil, natural gas and natural gas liquids have declined, and they continue to remain low by historical standards. These low prices have affected our business in numerous ways, including:
· | a material reduction in our revenues and cash flows; |
· | a decrease in proved reserves and possible additional impairments of our oil and natural gas properties as a result of reduced capital spending and the possibility that some of our developed wells and undeveloped wells may become uneconomic; |
· | an increase in our cost of capital and difficulty in accessing capital, including a decrease in the borrowing base under our credit facility; and |
· | an increase in the possibility that some of the purchasers of our oil and natural gas production, or some of the companies that provide us with services, may experience financial difficulties. |
In response to continued lower prices, we have taken a number of actions to preserve our liquidity and financial flexibility, including:
· | amending our credit facility in February 2015 to include, among other things, an extension of the facility to February 2020, as well as an extension of our senior secured debt to EBITDAX covenant to March 31, 2016; |
· | divesting our 21% interest in UEO in June 2015 for net proceeds of $572.2 million and using these net proceeds to repay amounts outstanding under our credit facility and to fund future activities, including acquisitions of oil and natural gas properties; |
· | using the $33.8 million of proceeds from the sale of certain oil and natural gas properties that we deposited with a qualified intermediary to facilitate like–kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code that were returned to us in April 2015 to repay amounts outstanding under our credit facility; |
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· | reducing the amount of capital spending we expect to dedicate to the development of our proved undeveloped reserves by approximately 40% in 2015; and |
· | actively seeking alternative sources of capital to develop our proved undeveloped and probable reserves, including farmouts, production payments and joint ventures. |
BUSINESS ENVIRONMENT
Our primary business objective is to provide stability and growth in cash distributions per unit over time. The amount of cash we can distribute on our units principally depends upon the amount of cash generated from our operations, which will fluctuate from quarter to quarter based on, among other things:
· | the prices at which we will sell our oil, natural gas liquids and natural gas production; |
· | our ability to hedge commodity prices; |
· | the amount of oil, natural gas liquids and natural gas we produce; and |
· | the level of our operating and administrative costs. |
Oil, natural gas and natural gas liquids prices are determined by many factors that are outside of our control. Historically, these prices have been volatile, and we expect them to remain volatile. In late 2014, prices for oil, natural gas and natural gas liquids declined precipitously, and prices have continued to remain low through June 2015; prices for oil have remained at or below $62 per Bbl and natural gas prices have remained below $3.25 per MmBtu.
Factors contributing to lower oil prices include real or perceived geopolitical risks in oil producing regions of the world, particularly the Middle East; lower forecasted levels of global economic growth combined with excess global supply; actions taken by the Organization of Petroleum Exporting Countries; and the strength of the U.S. dollar in international currency markets. Factors contributing to lower natural gas prices include increased supplies of natural gas due to greater exploration and development activities; higher levels of natural gas in storage; and competition from other energy sources. Prices for natural gas liquids generally correlate to the price of oil and, accordingly, prices have fallen in recent months and are likely to continue to directionally follow the market for oil. Further, excess supply with higher volumes in storage has resulted in a further drop in pricing for natural gas liquids in recent months.
In order to mitigate the impact of these lower prices on our cash flows, we are a party to derivatives, and we intend to enter into derivatives in the future to reduce the impact of price volatility on our cash flows. Although we have entered into derivative contracts covering a portion of our future production through December 2017, a sustained lower price environment would result in lower prices for unprotected volumes and reduce the prices that we can enter into derivative contracts for additional volumes in the future. We have mitigated, but not eliminated, the potential effects of changing prices on our cash flows from operations for those periods. If commodity prices are depressed for an extended period of time, it could alter our acquisition and development plans, and adversely affect our growth strategy and ability to access additional capital in the capital markets.
The primary factors affecting our production levels are capital availability, our ability to make accretive acquisitions, the success of our drilling program and our inventory of drilling prospects. In addition, as initial reservoir pressures are depleted, production from our wells decreases. We attempt to overcome this natural decline through a combination of drilling and acquisitions. Our future growth will depend on our ability to continue to add reserves through drilling and acquisitions in excess of production. We will maintain our focus on the costs to add reserves through drilling and acquisitions as well as the costs necessary to produce such reserves. Our ability to add reserves through drilling is dependent on our capital resources and can be limited by many factors, including our ability to timely obtain drilling permits and regulatory approvals. Any delays in drilling, completion or connection to gathering lines of our new wells will negatively impact our production, which may have an adverse effect on our revenues and, as a result, cash available for distribution.
We focus our efforts on increasing our reserves and production while controlling costs at a level that is appropriate for long–term operations. Our future cash flows from operations are dependent upon our ability to manage our overall cost structure.
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Utica Shale
We hold approximately 173,000 net working interest acres in Pennsylvania and Ohio and an approximate 2% average ORRI in 880,000 gross acres in Ohio which we believe may be prospective for the Utica Shale. In addition, partnerships managed by EnerVest own acreage which may be prospective for the Utica Shale. Exploration and development activities targeting the Utica Shale are progressing, and it is possible that our estimates of the acreage in Ohio that we believe is prospective for the Utica Shale may change, perhaps materially, as additional exploration and development activities are conducted in the area. In June 2015, we recognized a $47.9 million impairment charge related to a change in our development plans for acreage in the Utica Shale.
In mid–2012, we initiated the process for the monetization of a majority of our working interest acres related to the Utica Shale, and in 2013, we, along with certain institutional partnerships managed by EnerVest, signed agreements to divest a portion of our Utica Shale acreage. Through June 2015, we have closed on sales with proceeds of $45.6 million for these acres. We continue to pursue additional forms of monetizations, and we cannot at this time predict the type of transactions we may enter into or the type or amount of consideration we may receive. We may not be successful in our additional efforts to monetize the Utica Shale properties, it may take longer to complete the divestiture process than we expect, or we may decide to delay the monetization of all or a portion of the Utica Shale properties.
RESULTS OF OPERATIONS
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Production data: | ||||||||||||||||
Oil (MBbls) | 237 | 255 | 478 | 520 | ||||||||||||
Natural gas liquids (MBbls) | 563 | 571 | 1,145 | 1,121 | ||||||||||||
Natural gas (MMcf) | 10,018 | 10,962 | 20,606 | 21,798 | ||||||||||||
Net production (MMcfe) | 14,818 | 15,920 | 30,344 | 31,645 | ||||||||||||
Average sales price per unit: | ||||||||||||||||
Oil (Bbl) | $ | 52.84 | $ | 98.84 | $ | 48.39 | $ | 96.48 | ||||||||
Natural gas liquids (Bbl) | 15.09 | 30.36 | 15.10 | 31.89 | ||||||||||||
Natural gas (Mcf) | 2.27 | 4.16 | 2.41 | 4.42 | ||||||||||||
Mcfe | 2.95 | 5.54 | 2.97 | 5.76 | ||||||||||||
Average unit cost per Mcfe: | ||||||||||||||||
Production costs: | ||||||||||||||||
Lease operating expenses | $ | 1.61 | $ | 1.64 | $ | 1.56 | $ | 1.63 | ||||||||
Production taxes | 0.11 | 0.19 | 0.11 | 0.20 | ||||||||||||
Total | 1.72 | 1.83 | 1.67 | 1.83 | ||||||||||||
Depreciation, depletion and amortization | 1.71 | 1.57 | 1.69 | 1.62 | ||||||||||||
General and administrative expenses | 0.54 | 0.80 | 0.68 | 0.79 |
Three Months Ended June 30, 2015 Compared with the Three Months Ended June 30, 2014
Net income (loss) for the three months ended June 30, 2015 was $164.1 million compared with $(9.0) million for the three months ended June 30, 2014. The significant factors in this change were (i) a $247.2 million increase in income from discontinued operations; (ii) an $8.6 million favorable change in (loss) gain on derivatives, net; (iii) a $4.8 million decrease in general and administrative expenses; offset by (iv) a $47.2 million increase in impairment of oil and natural gas properties and (v) a $44.4 million decrease in oil, natural gas and natural gas liquids revenues.
Oil, natural gas and natural gas liquids revenues for the three months ended June 30, 2015 totaled $43.7 million, a decrease of $44.4 million compared with the three months ended June 30, 2014. This was the result of decreases of $41.2 million related to lower prices for oil, natural gas and natural gas liquids and $3.2 million related to decreased oil, natural gas and natural gas liquids production.
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Lease operating expenses for the three months ended June 30, 2015 decreased $2.2 million compared with the three months ended June 30, 2014 as the result of $1.8 million from a lower unit cost per Mcfe and $0.4 million related to our decreased production. The lower unit cost per Mcfe reflects the downward trend in operating costs throughout the oil and natural gas industry. Lease operating expenses per Mcfe were $1.61 in the three months ended June 30, 2015 compared with $1.64 in the three months ended June 30, 2014.
Production taxes, which are generally based on a percentage of our oil, natural gas and natural gas liquids revenues, for the three months ended June 30, 2015 decreased $1.4 million compared with the three months ended June 30, 2014 due to decreased oil, natural gas and natural gas liquids revenues. Production taxes for the three months ended June 30, 2015 were $0.11 per Mcfe compared with $0.19 per Mcfe for the three months ended June 30, 2014.
Depreciation, depletion and amortization (“DD&A”) for the three months ended June 30, 2015 increased $0.3 million compared with the three months ended June 30, 2014 due to an increase of $2.2 million from a higher DD&A rate offset by $1.9 million from lower production. The higher average DD&A rate per Mcfe reflects the change that prices had on our reserves estimates. DD&A for the three months ended June 30, 2015 was $1.71 per Mcfe compared with $1.57 per Mcfe for the three months ended June 30, 2014.
General and administrative expenses for the three months ended June 30, 2015 totaled $7.9 million, a decrease of $4.8 million compared with the three months ended June 30, 2014. This decrease is the result of $3.2 million of costs incurred in the three months ended June 30, 2014 related to the departure of a former officer and $1.7 million of lower equity compensation costs offset by $0.3 million of higher fees paid to EnerVest under the omnibus agreement. General and administrative expenses were $0.54 per Mcfe in the three months ended June 30, 2015 compared with $0.80 per Mcfe in the three months ended June 30, 2014.
In the three months ended June 30, 2015, we incurred leasehold impairment charges of $48.3 million, of which $47.9 million related to a change in our development plans for acreage in the Utica Shale. In the three months ended June 30, 2014, we incurred leasehold impairment charges of $1.1 million.
(Loss) gain on derivatives, net was $(9.2) million for the three months ended June 30, 2015 compared with $(17.8) million for the three months ended June 30, 2014. This change was attributable to changes in future oil and natural gas prices. The 12 month forward price at June 30, 2015 for oil averaged $61.99 per Bbl compared with $53.30 at March 31, 2015, and the 12 month forward prices at June 30, 2015 for natural gas averaged $3.13 per MmBtu compared with $2.91 at March 31, 2015. The 12 month forward price at June 30, 2014 for oil averaged $97.49 per Bbl compared with $97.33 per Bbl at March 31, 2014, and the 12 month forward price at June 30, 2014 for natural gas averaged $4.07 per MmBtu compared with $4.50 at March 31, 2014.
Interest expense for the three months ended June 30, 2015 increased $0.7 million compared with the three months ended June 30, 2014 due to $1.1 million from a higher weighted effective average interest rate and $2.4 million from a decrease in capitalized interest offset by $2.8 million from a lower weighted average long–term debt balance.
Income from discontinued operations for the three months ended June 30, 2015 increased $247.2 million compared with the three months ended June 30, 2014. The significant factor in the increase was the $246.7 million gain recognized on the sale of our interest in UEO.
Six Months Ended June 30, 2015 Compared with the Six Months Ended June 30, 2014
Net income (loss) for the six months ended June 30, 2015 was $102.4 million compared with $(15.3) million for the six months ended June 30, 2014. The significant factors in this change were (i) a $250.6 million increase in income from discontinued operations and (ii) a $55.2 million favorable change in (loss) gain on derivatives, net; offset by (iii) a $105.1 million increase in impairment of oil and natural gas properties and (iv) a $92.1 million decrease in oil, natural gas and natural gas liquids revenues.
Oil, natural gas and natural gas liquids revenues for the six months ended June 30, 2015 totaled $90.1 million, a decrease of $92.1 million compared with the six months ended June 30, 2014. This was the result of decreases of $87.5 million related to lower prices for oil, natural gas and natural gas liquids and $4.9 million related to decreased oil and natural gas production offset by an increase $0.3 million from higher natural gas liquids production.
Lease operating expenses for the six months ended June 30, 2015 decreased $4.1 million compared with the six months ended June 30, 2014 as the result of $2.0 million from a lower unit cost per Mcfe and $2.1 million related to our decreased production. The lower unit cost per Mcfe reflects the downward trend in operating costs throughout the oil and natural gas industry. Lease operating expenses per Mcfe were $1.56 in the six months ended June 30, 2015 compared with $1.63 in the six months ended June 30, 2014.
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Production taxes for the six months ended June 30, 2015 decreased $3.1 million compared with the six months ended June 30, 2014 due to lower oil, natural gas and natural gas liquids revenues. Production taxes for the six months ended June 30, 2015 were $0.11 per Mcfe compared with $0.20 per Mcfe for the six months ended June 30, 2014.
DD&A for the six months ended June 30, 2015 was flat compared with the six months ended June 30, 2014 due to $2.2 million from lower production offset by $2.2 million from a higher average DD&A rate per Mcfe. The higher average DD&A rate per Mcfe reflects the change that prices had on our reserves estimates. DD&A for the six months ended June 30, 2015 was $1.69 per Mcfe compared with $1.62 per Mcfe for the six months ended June 30, 2014.
General and administrative expenses for the six months ended June 30, 2015 totaled $20.4 million, a decrease of $4.7 million compared with the six months ended June 30, 2014. This decrease is primarily the result of (i) $3.6 million of lower equity compensation costs; (ii) $0.9 million of decreased compensation costs related to the vesting of our phantom units issued under our equity based compensation plan; and (iii) $0.7 million of costs incurred in the six months ended June 30, 2014 related to the departure of a former officer; offset by $0.5 million of higher fees paid to EnerVest under the omnibus agreement. General and administrative expenses were $0.68 per Mcfe in the six months ended June 30, 2015 compared with $0.79 per Mcfe in the six months ended June 30, 2014.
In the six months ended June 30, 2015, we incurred impairment charges of $106.5 million. Of this amount, $58.2 million related to oil and natural gas properties that were written down to their fair value as determined based on the expected present value of the future net cash flows. Significant assumptions associated with the calculation of discounted cash flows used in the impairment analysis included estimates of future prices, production costs, development expenditures, anticipated production of our estimated reserves, appropriate risk – adjusted discount rates and other relevant data. The remainder of the impairment charges consisted of $48.3 million of leasehold impairments, of which $47.9 million related to a change in our development plans for acreage in the Utica Shale. In the six months ended June 30, 2014, we incurred impairment charges of $1.3 million, of which $0.2 million related to a charge to write down assets held for sale to their fair value and $1.1 million related to leasehold impairment charges.
(Loss) gain on derivatives, net was $14.4 million for the six months ended June 30, 2015 compared with $(40.8) million for the six months ended June 30, 2014. This change was attributable to changes in future oil and natural gas prices. The 12 month forward price at June 30, 2015 for oil averaged $61.99 per Bbl compared with $56.46 at December 31, 2014, and the 12 month forward prices at June 30, 2015 for natural gas averaged $3.13 per MmBtu compared with $3.03 at December 31, 2014. The 12 month forward price at June 30, 2014 for oil averaged $97.49 per Bbl compared with $95.66 per Bbl at December 31, 2013, and the 12 month forward price at June 30, 2014 for natural gas averaged $4.07 per MmBtu compared with $4.19 at December 31, 2013.
Interest expense for the six months ended June 30, 2015 increased $2.7 million compared with the six months ended June 30, 2014 due to $0.9 million from a higher weighted effective average interest rate and $4.3 million from a decrease in capitalized interest offset by $2.5 million from a lower weighted average long–term debt balance.
Income from discontinued operations for the six months ended June 30, 2015 increased $252.0 million compared with the six months ended June 30, 2014. The significant factor in the increase was the $246.7 million gain recognized on the sale of our interest in UEO.
LIQUIDITY AND CAPITAL RESOURCES
Historically, our primary sources of liquidity and capital have been issuances of equity and debt securities, borrowings under our credit facility and cash flows from operations. Our primary uses of cash have been acquisitions of oil and natural gas properties and related assets, development of our oil and natural gas properties, contributions to our midstream investments, distributions to our unitholders and general partner and working capital needs. For 2015, we believe that cash on hand, proceeds from sales of assets, net cash flows generated from operations and borrowings under our credit facility will be adequate to fund our capital budget, pay distributions to our unitholders and general partner and satisfy our short–term liquidity needs. We may also utilize borrowings under our credit facility and various financing sources available to us, including the issuance of equity or debt securities through public offerings or private placements, to fund our acquisitions and long–term liquidity needs. Our ability to complete future offerings of equity or debt securities and the timing of these offerings will depend upon various factors including prevailing market conditions and our financial condition.
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In the six months ended June 30, 2015, prices for oil, natural gas and natural gas liquids have declined, and they continue to remain low by historical standards. In response to these continued lower prices, we have taken a number of actions to preserve our liquidity and financial flexibility, including:
· | amending our credit facility in February 2015 to include, among other things, an extension of the facility to February 2020, as well as an extension of our senior secured debt to EBITDAX covenant to March 31, 2016; |
· | divesting our 21% interest in UEO for $572.2 million in June 2015 and using the net proceeds to repay all amounts outstanding under our credit facility and to fund future activities, including acquisitions of oil and natural gas properties; |
· | using the $33.8 million of proceeds from the sale of certain oil and natural gas properties that we deposited with a qualified intermediary to facilitate like–kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code that were returned to us in April 2015 to repay amounts outstanding under our credit facility; |
· | reducing the amount of capital spending we expect to dedicate to the development of our proved undeveloped reserves by approximately 40% in 2015; and |
· | actively seeking alternative sources of capital to develop our proved undeveloped and probable reserves, including farmouts, production payments and joint ventures. |
We repaid amounts outstanding under our credit facility with proceeds from the sale of our interest in UEO and the $33.8 million in proceeds from the sale of certain oil and natural gas properties that were deposited with a qualified intermediary. Upon the sale of our interest in UEO, the borrowing base under our credit facility was reduced by $150.0 million to $500.0 million. We plan to invest the remainder of the proceeds from the sale of our interest in UEO in future acquisitions of long–life, producing oil and natural gas properties, which we believe will increase our borrowing base.
Long–term Debt
As of June 30, 2015, we have a $1.0 billion credit facility that expires in February 2020. Borrowings under the facility may not exceed a “borrowing base” determined by the lenders based on our oil and natural gas reserves. As of June 30, 2015, the borrowing base was $500.0 million, and we had no amounts outstanding.
As of June 30, 2015, we have $500.0 million in aggregate principal amount outstanding of 8.0% senior notes due 2019. As of June 30, 2015, the aggregate carrying amount of the senior notes due 2019 was $499.4 million.
For additional information about our long–term debt, such as interest rates and covenants, please see “Item 1. Condensed Consolidated Financial Statements (unaudited)” contained herein.
Cash and Short–term Investments
At June 30, 2015, we had $58.8 million of cash and short–term investments, which included $57.6 million of short–term investments. With regard to our short–term investments, we invest in money market accounts with a major financial institution.
Counterparty Exposure
All of our derivative contracts are with major financial institutions who are also lenders under our credit facility. Should one of these financial counterparties not perform, we may not realize the benefit of some of our derivative contracts and we could incur a loss. As of June 30, 2015, all of our counterparties have performed pursuant to their derivative contracts.
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Cash Flows
Cash flows provided by (used in) type of activity were as follows:
Six Months Ended | ||||||||
June 30, | ||||||||
2015 | 2014 | |||||||
Operating activities | $ | 73,359 | $ | 63,280 | ||||
Investing activities | 561,880 | (123,050 | ) | |||||
Financing activities | (584,681 | ) | 66,737 |
Operating Activities
Cash flows from operating activities provided $73.4 million and $63.3 million in the six months ended June 30, 2015 and 2014, respectively. The significant factors in the change were a $92.1 million decrease in our oil, natural gas and natural gas liquids revenues and a decrease in working capital, primarily related to lower accounts receivable as a result of lower oil, natural gas and natural gas liquids prices at June 30, 2015 compared with June 30, 2014, offset by $74.0 million of increased cash settlements from our matured derivative contracts. The increased cash settlements are due to the impact of derivative contracts with less favorable terms that expired as of December 31, 2014.
Investing Activities
During the six months ended June 30, 2015, cash flows used in investing activities from continuing operations totaled $(10.3) million. This consisted of $44.9 million for additions to our oil and natural gas properties offset by $33.8 million from the release of cash deposited with a qualified intermediary to facilitate like–kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code and $0.8 million in proceeds from the sales of oil and natural gas properties. Net cash flows provided by investing activities from discontinued operations of $572.2 million consisted of the proceeds from the sale of our interest in UEO.
During the six months ended June 30, 2014, cash flows used in investing activities from continuing operations totaled $(39.9) million. This consisted of $44.9 million for additions to our oil and natural gas properties offset by $7.3 million in proceeds from the sales of oil and natural gas properties. Net cash flows used in investing activities from discontinued operations of $83.2 million consisted of increases to our investment in unconsolidated affiliates.
Financing Activities
During the six months ended June 30, 2015, we repaid $561.0 million of borrowings under our credit facility with proceeds from the sale of our investment in UEO and the release of our restricted cash. We also received $30.0 million from borrowings under our credit facility, incurred loan costs of $3.3 million related to the amendment of our credit facility and paid distributions of $50.5 million to holders of our common units, phantom units and our general partner. During the six months ended June 30, 2014, we received $144.0 million from borrowings under our credit facility and paid distributions of $77.4 million to holders of our common units, phantom units and our general partner.
FORWARD–LOOKING STATEMENTS
This Form 10–Q contains forward–looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act (each a “forward–looking statement”). These forward–looking statements relate to, among other things, the following:
· | our future financial and operating performance and results, and our ability to pay distributions; |
· | our business strategy and plans, and future capital expenditures, including plans for the sale of additional acreage in the Utica Shale and the Eagle Ford formation; |
· | our estimated net proved reserves, PV–10 value and standardized measure; |
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· | market prices; |
· | our future derivative activities; and |
· | our plans and forecasts. |
We have based these forward–looking statements on our current assumptions, expectations and projections about future events.
The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “estimate,” “project,” “forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” “should,” “would,” “may,” “likely” and similar expressions, and the negative thereof, are intended to identify forward–looking statements. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other “forward–looking” information. We do not undertake any obligation to update or revise publicly any forward–looking statements, except as required by law. These statements also involve risks and uncertainties that could cause our actual results or financial condition to materially differ from our expectations in this Form 10–Q including, but not limited to:
· | fluctuations in prices of oil, natural gas and natural gas liquids and the length of time commodity prices remain depressed; |
· | significant disruptions in the financial markets; |
· | future capital requirements and availability of financing; |
· | uncertainty inherent in estimating our reserves; |
· | risks associated with drilling and operating wells; |
· | discovery, acquisition, development and replacement of reserves; |
· | cash flows and liquidity; |
· | timing and amount of future production of oil, natural gas and natural gas liquids; |
· | availability of drilling and production equipment; |
· | marketing of oil, natural gas and natural gas liquids; |
· | developments in oil and natural gas producing countries; |
· | competition; |
· | general economic conditions; |
· | governmental regulations; |
· | activities taken or non–performance by third parties, including suppliers, contractors, operators, transporters and purchasers of our production and counterparties to our derivative financial instruments; |
· | hedging decisions, including whether or not to enter into derivative financial instruments; |
· | actions of third party co–owners of interest in properties in which we also own an interest; |
· | fluctuations in interest rates and the value of the U.S. dollar in international currency markets; and |
· | our ability to effectively integrate companies and properties that we acquire. |
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All of our forward–looking information is subject to risks and uncertainties that could cause actual results to differ materially from the results expected. Although it is not possible to identify all factors, these risks and uncertainties include the risk factors and the timing of any of those risk factors identified in the “Risk Factors” section included in Item 1A of our Annual Report on Form 10–K for the year ended December 31, 2014.
Our revenues, operating results, financial condition and ability to borrow funds or obtain additional capital depend substantially on prevailing prices for oil, natural gas and natural gas liquids. Declines in prices may materially adversely affect our financial condition, liquidity, ability to obtain financing and operating results. Lower prices also may reduce the amount of oil, natural gas or natural gas liquids that we can produce economically. A decline in prices could have a material adverse effect on the estimated value and estimated quantities of our reserves, our ability to fund our operations and our financial condition, cash flows, results of operations and access to capital. Historically, prices and markets have been volatile, with prices fluctuating widely, and they are likely to continue to be volatile.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks that are inherent in our financial statements that arise in the normal course of business. We may enter into derivative instruments to manage or reduce market risk, but do not enter into derivative agreements for speculative purposes.
We do not designate these or plan to designate future derivative instruments as hedges for accounting purposes. Accordingly, the changes in the fair value of these instruments are recognized currently in earnings.
Commodity Price Risk
Our major market risk exposure is to prices for oil, natural gas and natural gas liquids. These prices have historically been volatile. As such, future earnings are subject to change due to changes in these prices. Realized prices are primarily driven by the prevailing worldwide price for oil and regional spot prices for natural gas production. We have used, and expect to continue to use, commodity contracts to reduce our risk of changes in the prices of oil, natural gas and natural gas liquids. Pursuant to our risk management policy, we engage in these activities as a hedging mechanism against price volatility associated with pre–existing or anticipated sales of oil, natural gas and natural gas liquids.
We have entered into commodity contracts
to hedge a portion of our anticipated oil and natural gas production through December 2016. As of June 30, 2015, we have commodity
contracts covering approximately 58% of our production attributable to our estimated net proved reserves from July 2015 through
December 2016, as estimated in our reserve report prepared by third party engineers using prices, costs and other assumptions
required by SEC rules. Subsequent to June 30, 2015, we entered into additional commodity contracts and now have commodity contracts
covering approximately 59% of our production from July 2015 through December 2017. Our actual production will vary from the amounts
estimated in our reserve reports, perhaps materially.
The fair value of our commodity contracts at June 30, 2015 was a net asset of $85.6 million. A 10% change in oil and natural gas prices with all other factors held constant would result in a change in the fair value (generally correlated to our estimated future net cash flows from such instruments) of our oil and natural gas commodity contracts of approximately $18.2 million. Please see “Item 1. Condensed Consolidated Financial Statements (unaudited)” contained herein for additional information.
Interest Rate Risk
Our floating rate credit facility also exposes us to risks associated with changes in interest rates and as such, future earnings are subject to change due to changes in interest rates. If interest rates on our facility increased by 1%, interest expense for the six months ended June 30, 2015 would have increased by approximately $2.4 million. Please see “Item 1. Condensed Consolidated Financial Statements (unaudited)” contained herein for additional information.
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
In accordance with Exchange Act Rule 13a–15 and 15d–15, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2015 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Change in Internal Controls Over Financial Reporting
There have not been any changes in our internal controls over financial reporting that occurred during the quarterly period ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
We are involved in disputes or legal actions arising in the ordinary course of business. We do not believe the outcome of such disputes or legal actions will have a material adverse effect on our unaudited condensed consolidated financial statements.
There have been no material changes with respect to the risk factors disclosed in our Annual Report on Form 10–K for the year ended December 31, 2014.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
None.
The exhibits listed below are filed or furnished as part of this report:
3.1 | First Amended and Restated Partnership Agreement EV Energy Partners, L.P. (incorporated by reference from Exhibit 3.1 to EV Energy Partners, L.P.’s current report on Form 8–K filed with the SEC on October 5, 2006). |
3.2 | First Amended and Restated Partnership Agreement of EV Energy GP, L.P. (incorporated by reference from Exhibit 3.2 to EV Energy Partners, L.P.’s current report on Form 8–K filed with the SEC on October 5, 2006). |
3.3 | Amended and Restated Limited Liability Company Agreement of EV Management, LLC. (incorporated by reference from Exhibit 3.3 to EV Energy Partners, L.P.’s current report on Form 8–K filed with the SEC on October 5, 2006). |
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3.4 | First Amendment dated April 15, 2008 to First Amended and Restated Partnership Agreement of EV Energy Partners, L.P., effective as of January 1, 2007 (incorporated by reference from Exhibit 3.1 to EV Energy Partners, L.P.’s current report on Form 8–K filed with the SEC on April 18, 2008). |
4.1 | Indenture, dated as of March 22, 2011, by and among EV Energy Partners, L.P., EV Energy Finance Corp., the Guarantors named therein and U.S. National Bank Association, as trustee (incorporated by reference from Exhibit 4.1 to EV Energy Partners, L.P.’s current report on Form 8–K filed with the SEC on March 22, 2011). |
+10.1 | Guarantee, dated as of April 2, 2015, by and among Williams Partners L.P. and CGAS Properties, L.P. |
+10.2 | Guarantee, dated as of April 2, 2015, by and among CGAS Properties, L.P. and Utica Gas Services, L.L.C. |
+10.3 | Membership Interest Purchase Agreement, dated as of April 2, 2015, between CGAS Properties, L.P. and Utica Gas Services, L.L.C. |
+10.4 | Amendment No.1 to Membership Interest Purchase Agreement, dated as of May 26, 2015 |
+10.5 | Membership Interest Purchase Agreement, dated as of May 26, 2015, between CGAS Properties, L.P. and M3 Ohio Gathering LLC |
+31.1 | Rule 13a-14(a)/15d–14(a) Certification of Chief Executive Officer. |
+31.2 | Rule 13a-14(a)/15d–14(a) Certification of Chief Financial Officer. |
+32.1 | Section 1350 Certification of Chief Executive Officer. |
+32.2 | Section 1350 Certification of Chief Financial Officer. |
+101 | Interactive Data Files. |
+ | Filed herewith |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
EV Energy Partners, L.P. | ||
(Registrant) | ||
Date: August 7, 2015 | By: | /s/ NICHOLAS BOBROWSKI |
Nicholas Bobrowski | ||
Vice President and Chief Financial Officer |
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EXHIBIT INDEX
3.1 | First Amended and Restated Partnership Agreement EV Energy Partners, L.P. (incorporated by reference from Exhibit 3.1 to EV Energy Partners, L.P.’s current report on Form 8–K filed with the SEC on October 5, 2006). |
3.2 | First Amended and Restated Partnership Agreement of EV Energy GP, L.P. (incorporated by reference from Exhibit 3.2 to EV Energy Partners, L.P.’s current report on Form 8–K filed with the SEC on October 5, 2006). |
3.3 | Amended and Restated Limited Liability Company Agreement of EV Management, LLC. (incorporated by reference from Exhibit 3.3 to EV Energy Partners, L.P.’s current report on Form 8–K filed with the SEC on October 5, 2006). |
3.4 | First Amendment dated April 15, 2008 to First Amended and Restated Partnership Agreement of EV Energy Partners, L.P., effective as of January 1, 2007 (incorporated by reference from Exhibit 3.1 to EV Energy Partners, L.P.’s current report on Form 8–K filed with the SEC on April 18, 2008). |
4.1 | Indenture, dated as of March 22, 2011, by and among EV Energy Partners, L.P., EV Energy Finance Corp., the Guarantors named therein and U.S. National Bank Association, as trustee (incorporated by reference from Exhibit 4.1 to EV Energy Partners, L.P.’s current report on Form 8–K filed with the SEC on March 22, 2011). |
+10.1 | Guarantee, dated as of April 2, 2015, by and among Williams Partners, L.P. and CGAS Properties, L.P. |
+10.2 | Guarantee, dated as of April 2, 2015, by and among CGAS Properties, L.P. and Utica Gas Services, L.L.C. |
+10.3 | Membership Interest Purchase Agreement, dated as of April 2, 2015, between CGAS Properties, L.P. and Utica Gas Services, L.L.C. |
+10.4 | Amendment No.1 to Membership Interest Purchase Agreement, dated as of May 26, 2015 |
+10.5 | Membership Interest Purchase Agreement, dated as of May 26, 2015, between CGAS Properties, L.P. and M3 Ohio Gathering LLC |
+31.1 | Rule 13a-14(a)/15d–14(a) Certification of Chief Executive Officer. |
+31.2 | Rule 13a-14(a)/15d–14(a) Certification of Chief Financial Officer. |
+32.1 | Section 1350 Certification of Chief Executive Officer. |
+32.2 | Section 1350 Certification of Chief Financial Officer. |
+101 | Interactive Data Files. |
+ | Filed herewith |
Exhibit 10.1
GUARANTEE
WHEREAS , CGAS Properties, L.P., a Delaware limited partnership (“ Seller ”) and Utica Gas Services, L.L.C., an Oklahoma limited liability company (“ Purchaser ”) are parties to the Membership Interest Purchase Agreement, dated as of April 2, 2015 (the “ Purchase Agreement ”);
WHEREAS, pursuant to the terms of the Purchase Agreement, it is a closing condition of Seller, that Purchaser deliver, or cause to be delivered, to Seller the guaranty of Williams Partners L.P. (“ Guarantor ”) substantially in the form hereof.
NOW, THEREFORE , in satisfaction of the foregoing condition and to induce Seller to consummate the transactions contemplated by the Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby agrees in favor of Seller as follows:
1. Guarantee . For the value received Guarantor unconditionally and irrevocably guarantees to Seller, its successors, endorsees and assigns, the prompt payment and performance when due of all present and future obligations of all kinds of Purchaser to Seller, whether due or to become due, secured or unsecured, absolute or contingent, joint or several, pursuant to the Purchase Agreement (the “ Obligations ”). For greater certainty, Obligations shall not include consequential, exemplary, punitive or other tort damages or losses, including lost profits, unless such damages or losses, are recoverable by Seller under the terms of the Purchase Agreement. Notwithstanding anything to the contrary herein (i) the liability of Guarantor under this Guarantee and Seller’s right of recovery hereunder is limited to (A) a total aggregate amount of the “Adjusted Purchase Price” as defined in the Purchase Agreement during the period beginning on the date hereof and ending April 2, 2017 and (B) $50,000,000 during the period beginning on April 3, 2017 and ending April 2, 2018 (the “ Guarantee Cap ”) and (ii) this Guarantee shall expire on April 2, 2018, except to the extent of any claims made in writing to Purchaser by Seller under Purchase Agreement prior to such date. Notwithstanding anything contained herein to the contrary, this Guarantee shall terminate and be of no further force and effect in the event the Purchase Agreement is terminated pursuant to Section 8.1 of the Purchase Agreement.
2. Nature of Guarantee . Guarantor reserves the right to assert defenses which Purchaser may have to payment of any Obligation other than defenses arising from the bankruptcy or insolvency of Purchaser and other defenses expressly waived hereby.
3. Consents, Waivers and Renewals . Guarantor agrees that Seller and Purchaser may, with the prior written consent of Guarantor, which shall not be unreasonably delayed, mutually agree to modify the Obligations or any agreement between Seller and Purchaser, without in any way impairing or affecting this Guarantee. Guarantor agrees that Seller may resort to Guarantor for payment of any of the Obligations, whether or not Seller shall have resorted to any collateral security or shall have proceeded against any other obligor principally or secondarily obligated with respect to any of the Obligations. Guarantor hereby waives notice of acceptance of this Guarantee, and presentment, protest and notice of protest or dishonor of any of the obligations hereby guaranteed.
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4. Subrogation . Upon the earlier of payment of all the Obligations owing to Seller or the Guarantee Cap, Guarantor shall be subrogated to the rights of Seller against Purchaser, and Seller agrees to take, at Guarantor’s expense, such steps as Guarantor may reasonably request to implement such subrogation.
5. Representations and Warranties . As of the date of this Guarantee, except as would not have a material adverse effect on Guarantor’s ability to perform under this Guarantee, Guarantor hereby represents and warrants to Purchaser as follows:
a. | Guarantor is an entity duly formed, validly existing and in good standing under the laws of the state of its formation; |
b. | The execution, delivery and performance by Guarantor of this Guarantee are within Guarantor’s partnership powers, have been duly authorized by all necessary partnership action and do not contravene Guarantor’s Certificate of Formation or Amended and Restated Agreement of Limited Partnership or any applicable law or material contract binding on guarantor in a manner that would impact Guarantor’s obligations hereunder or Seller’s enforcement hereof; and |
c. | This Guarantee is the legal, valid and binding obligation of Guarantor enforceable against Guarantor in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws or equitable principles relating to or limiting creditor’s rights generally; and |
d. | This Guarantee may be reasonably expected to benefit, directly or indirectly, Guarantor. |
6. Notices . Any notice or other communication given hereunder by either Guarantor or Seller to the other shall be in writing and delivered personally or mailed by registered or certified mail, postage prepaid and return receipt requested, or by facsimile, or by scanned document transmitted by email (with written confirmation of delivery), as follows:
a. | if to Guarantor: |
Williams Partners L.P.
One Williams Center, MD 50-4
Tulsa, OK 74172
Attention: Credit Manager
Facsimile: 918-732-0235
b. | if to Seller: |
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CGAS Properties, L.P.
c/o EV Energy Partners, L.P.
1001 Fannin, Suite 800
Houston, Texas 77002
Attn: Michael E. Mercer, President and Chief Executive Officer
Email: mmercer@EVEnergyPartners.com
7. Assignment and Transfer . This Guarantee shall be binding upon Guarantor and Guarantor’s legal representatives, successors and assigns and shall inure to the benefit of and be enforceable by Seller, its successors and the permitted assigns of Seller’s rights (in whole or in part) under the Purchase Agreement.
8. Termination, Governing Law . This Guarantee, which is binding on Guarantor’s successors and assigns, is a guarantee of payment and not of collection. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS BETWEEN RESIDENTS OF DELAWARE THAT ARE TO BE WHOLLY PERFORMED WITHIN SUCH STATE. SELLER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS OF THE STATE OF DELAWARE IN THE COUNTY OF NEW CASTLE FOR THE PURPOSES OF RESOLVING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED IN ANY WAY TO THIS GUARANTEE AND IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO THE JURISDICTION OF ANY SUCH COURTS AND HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR PROCEEDING IN ANY SUCH COURTS, ANY OBJECTION TO VENUE WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF THE PLACE OF RESIDENCE OR DOMICILE OF ANY PARTY THERETO. SELLER AND GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE THE RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY CLAIM ARISING OUT OF OR RELATED TO THIS GUARANTEE.
9. Entire Agreement . This Guarantee constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes and replaces all prior agreements and/or understandings (whether written or oral), including, without limitation, all prior guarantee agreements given by Guarantor to Seller.
[Signatures on Next Page]
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GUARANTOR | ||
Williams Partners L.P . | ||
By: WPZ GP LLC, its general partner | ||
By: | /s/ Alan S. Armstrong | |
Name: Alan S. Armstrong | ||
Title: Chief Executive Officer |
ACKNOWLEDGED AND AGREED: | ||
CGAS PROPERTIES, L.P. | ||
By: EVCG GP, LLC, its general partner | ||
By: | /s/ Michael E. Mercer | |
Name: Michael E. Mercer | ||
Title: President and Chief Executive Officer |
[Signature Page to WPZ Guarantee]
Exhibit 10.2
GUARANTEE
WHEREAS , CGAS Properties, L.P., a Delaware limited partnership (“ Seller ”) and Utica Gas Services, L.L.C., an Oklahoma limited liability company (“ Purchaser ”) are parties to the Membership Interest Purchase Agreement, dated as of April 2, 2015 (the “ Purchase Agreement ”);
WHEREAS, pursuant to the terms of the Purchase Agreement, it is a closing condition of Purchaser, that Seller deliver, or cause to be delivered, to Purchaser the guaranty of EV Energy Partners, L.P. (“ Guarantor ”), substantially in the form hereof.
NOW, THEREFORE , in satisfaction of the foregoing condition and to induce Purchaser to consummate the transactions contemplated by the Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby agrees in favor of Purchaser as follows:
1. Guarantee . For the value received Guarantor unconditionally and irrevocably guarantees to Purchaser, its successors, endorsees and assigns, the prompt payment and performance when due of all present and future obligations of all kinds of Seller to Purchaser, whether due or to become due, secured or unsecured, absolute or contingent, joint or several, pursuant to the Purchase Agreement (the “ Obligations ”). For greater certainty, Obligations shall not include consequential, exemplary, punitive or other tort damages or losses, including lost profits, unless such damages or losses, are recoverable by Purchaser under the terms of the Purchase Agreement. Notwithstanding anything to the contrary herein (i) the liability of Guarantor under this Guarantee and Purchaser’s right of recovery hereunder is limited to (A) a total aggregate amount of the “Adjusted Purchase Price” as defined in the Purchase Agreement during the period beginning on the date hereof and ending April 2, 2017 and (B) $50,000,000 during the period beginning on April 3, 2017 and ending April 2, 2018 (the “ Guarantee Cap ”) and (ii) this Guarantee shall expire on April 2, 2018, except to the extent of any claims made in writing to Seller by Purchaser under Purchase Agreement prior to such date. Notwithstanding anything contained herein to the contrary, this Guarantee shall terminate and be of no further force and effect in the event the Purchase Agreement is terminated pursuant to Section 8.1 of the Purchase Agreement.
2. Nature of Guarantee . Guarantor reserves the right to assert defenses which Seller may have to payment of any Obligation other than defenses arising from the bankruptcy or insolvency of Seller and other defenses expressly waived hereby.
3. Consents, Waivers and Renewals . Guarantor agrees that Purchaser and Seller may, with the prior written consent of Guarantor, which shall not be unreasonably delayed, mutually agree to modify the Obligations or any agreement between Purchaser and Seller, without in any way impairing or affecting this Guarantee. Guarantor agrees that Purchaser may resort to Guarantor for payment of any of the Obligations, whether or not Purchaser shall have resorted to any collateral security or shall have proceeded against any other obligor principally or secondarily obligated with respect to any of the Obligations. Guarantor hereby waives notice of acceptance of this Guarantee, and presentment, protest and notice of protest or dishonor of any of the obligations hereby guaranteed.
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4. Subrogation . Upon the earlier of payment of all the Obligations owing to Purchaser or the Guarantee Cap, Guarantor shall be subrogated to the rights of Purchaser against Seller, and Purchaser agrees to take, at Guarantor’s expense, such steps as Guarantor may reasonably request to implement such subrogation.
5. Representations and Warranties . As of the date of this Guarantee, except as would not have a material adverse effect on Guarantor’s ability to perform under this Guarantee, Guarantor hereby represents and warrants to Purchaser as follows:
a. | Guarantor is an entity duly formed, validly existing and in good standing under the laws of the state of its formation; |
b. | The execution, delivery and performance by Guarantor of this Guarantee are within Guarantor’s partnership powers, have been duly authorized by all necessary partnership action and do not contravene Guarantor’s Certificate of Formation or Amended and Restated Agreement of Limited Partnership or any applicable law or material contract binding on guarantor in a manner that would impact Guarantor’s obligations hereunder or Purchaser’s enforcement hereof; and |
c. | This Guarantee is the legal, valid and binding obligation of Guarantor enforceable against Guarantor in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws or equitable principles relating to or limiting creditor’s rights generally; and |
d. | This Guarantee may be reasonably expected to benefit, directly or indirectly, Guarantor. |
6. Notices . Any notice or other communication given hereunder by either Guarantor or Purchaser to the other shall be in writing and delivered personally or mailed by registered or certified mail, postage prepaid and return receipt requested, or by facsimile, or by scanned document transmitted by email (with written confirmation of delivery), as follows:
a. | if to Guarantor: |
EV Energy Partners, L.P.
1001 Fannin, Suite 800
Houston, Texas 77002
Attn: Michael E. Mercer, President and Chief Executive Officer
Email: mmercer@EVEnergyPartners.com
b. | if to Purchaser: |
Utica Gas Services, L.L.C.
c/o Williams Partners L.P.
One Williams Center, MD 50-4
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Tulsa, OK 74172
Attention: Credit Manager
Facsimile: 918-732-0235
7. Assignment and Transfer . This Guarantee shall be binding upon Guarantor and Guarantor’s legal representatives, successors and assigns and shall inure to the benefit of and be enforceable by Purchaser, its successors and the permitted assigns of Purchaser’s rights (in whole or in part) under the Purchase Agreement.
8. Termination, Governing Law . This Guarantee, which is binding on Guarantor’s successors and assigns, is a guarantee of payment and not of collection. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS BETWEEN RESIDENTS OF DELAWARE THAT ARE TO BE WHOLLY PERFORMED WITHIN SUCH STATE. PURCHASER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS OF THE STATE OF DELAWARE IN THE COUNTY OF NEW CASTLE FOR THE PURPOSES OF RESOLVING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED IN ANY WAY TO THIS GUARANTEE AND IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO THE JURISDICTION OF ANY SUCH COURTS AND HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR PROCEEDING IN ANY SUCH COURTS, ANY OBJECTION TO VENUE WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING AND ANY RIGHT OF JURISDICTION ON ACCOUNT OF THE PLACE OF RESIDENCE OR DOMICILE OF ANY PARTY THERETO. PURCHASER AND GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE THE RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY CLAIM ARISING OUT OF OR RELATED TO THIS GUARANTEE.
9. Entire Agreement . This Guarantee constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes and replaces all prior agreements and/or understandings (whether written or oral), including, without limitation, all prior guarantee agreements given by Guarantor to Purchaser.
[Signatures on Next Page]
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GUARANTOR | ||
EV Energy Partners, L.P. | ||
By: EV Energy GP, L.P., its general partner | ||
By: EV Management LLC, its general partner | ||
By: | /s/ Michael E. Mercer | |
Name: Michael E. Mercer | ||
Title: President and Chief Executive Officer |
ACKNOWLEDGED AND AGREED: | ||
Utica Gas Services, L.L.C. | ||
By: | /s/ Alan S. Armstrong | |
Name: Alan S. Armstrong | ||
Title: Chief Executive Officer |
[Signature Page to EVEP Guarantee]
Exhibit 10.3
MEMBERSHIP
INTEREST PURCHASE AGREEMENT
BETWEEN
CGAS Properties, L.P.
AS SELLER
AND
UTICA GAS SERVICES, L.L.C.
AS PURCHASER
Executed on April 2, 2015
TABLE OF CONTENTS
Page | ||
ARTICLE 1 DEFINITIONS | 1 | |
ARTICLE 2 PURCHASE AND SALE | 2 | |
2.1 | Purchase and Sale | 2 |
2.2 | Purchase Price | 2 |
2.3 | Reduction in Subject Interest and Purchase Price | 2 |
2.4 | Adjustments to Purchase Price | 2 |
2.5 | Agreement Regarding LLC Agreement | 3 |
ARTICLE 3 CLOSING | 3 | |
3.1 | Time and Place of Closing | 3 |
3.2 | Obligations of Seller at Closing | 3 |
3.3 | Obligations of Purchaser at Closing | 4 |
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER | 5 | |
4.1 | Existence | 5 |
4.2 | Power | 5 |
4.3 | Authorization and Enforceability | 5 |
4.4 | No Conflicts | 5 |
4.5 | LLC Agreement | 6 |
4.6 | Ownership | 6 |
4.7 | Liability for Brokers’ Fees | 6 |
4.8 | Litigation | 6 |
4.9 | Taxes. | 6 |
4.10 | Environmental Laws | 7 |
4.11 | Compliance with Laws | 7 |
4.12 | Midstream Assets | 7 |
4.13 | Contracts | 7 |
4.14 | Tag-Along Rights, Consents and Preferential Rights | 7 |
4.15 | Employee Matters | 8 |
4.16 | Intellectual Property | 8 |
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4.17 | Anti-Corruption Matters | 8 |
4.18 | OFAC | 8 |
4.19 | Solvency | 9 |
4.20 | Certain Disclaimers. | 9 |
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER | 10 | |
5.1 | Existence and Qualification | 10 |
5.2 | Power | 10 |
5.3 | Authorization and Enforceability | 10 |
5.4 | No Conflicts | 10 |
5.5 | Liability for Brokers’ Fees | 10 |
5.6 | Litigation | 11 |
5.7 | Financing | 11 |
5.8 | Investment Intent | 11 |
5.9 | Independent Investigation | 11 |
5.10 | Other Consents | 11 |
ARTICLE 6 COVENANTS OF THE PARTIES | 11 | |
6.1 | Exclusivity | 12 |
6.2 | Government Authorizations; Cooperation. | 12 |
6.3 | Public Announcement | 13 |
6.4 | Assumption of Obligations | 13 |
6.5 | Casualty and Condemnation | 14 |
6.6 | Further Assurances | 14 |
6.7 | Cooperation on Taxes | 14 |
6.8 | Schedule Update | 14 |
6.9 | Other Agreement | 15 |
6.10 | Conduct Pending Closing | 15 |
6.11 | Encumbrances on the Subject Interest | 16 |
6.12 | Confidentiality | 16 |
6.13 | Non-Solicitation | 16 |
ARTICLE 7 CONDITIONS TO CLOSING | 17 | |
7.1 | Conditions of Seller to Closing | 17 |
7.2 | Conditions of Purchaser to Closing | 17 |
ii |
ARTICLE 8 TERMINATION | 18 | |
8.1 | Termination | 18 |
8.2 | Effect of Termination | 19 |
ARTICLE 9 INDEMNIFICATION; LIMITATIONS | 19 | |
9.1 | Indemnification | 19 |
9.2 | Indemnification Actions | 22 |
9.3 | Limitation on Actions | 24 |
ARTICLE 10 MISCELLANEOUS | 25 | |
10.1 | Counterparts | 25 |
10.2 | Notice | 25 |
10.3 | Expenses | 26 |
10.4 | Transfer Taxes | 26 |
10.5 | Governing Law | 27 |
10.6 | Jurisdiction; Waiver of Jury Trial | 27 |
10.7 | Captions | 27 |
10.8 | Waivers | 27 |
10.9 | Assignment | 28 |
10.10 | Entire Agreement | 28 |
10.11 | Amendment | 28 |
10.12 | References | 28 |
10.13 | Construction | 28 |
10.14 | Limitation on Damages | 29 |
10.15 | Specific Performance | 29 |
10.16 | Right to Rely | 29 |
Exhibits
Exhibit A | – | Definitions |
Exhibit B | – | Form of Assignment Agreement |
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Schedules | ||
Schedule 1.1(b) | – | Knowledge Personnel - Seller |
Schedule 1.1(c) | – | Knowledge Personnel - Purchaser |
Schedule 4.6 | – | Encumbrances |
Schedule 4.8 | – | Litigation |
Schedule 4.9(a) | – | Taxes |
Schedule 4.9(c) | – | Certain Tax Matters |
Schedule 4.10 | – | Environmental |
Schedule 4.11 | – | Compliance with Laws |
Schedule 4.14 | – | Certain Consents |
Schedule 5.10 | – | Other Purchaser Consents |
Schedule 6.2 | – | Government Authorizations |
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
This Membership Interest Purchase Agreement (this “ Agreement ”) is dated April 2, 2015 (the “ Execution Date ”), and is by and between CGAS Properties, L.P., a Delaware limited partnership (“ Seller ”), Utica Gas Services, L.L.C., an Oklahoma limited liability company (“ Purchaser ”). Seller and Purchaser are sometimes referred to individually as a “ Party ” and collectively as the “ Parties .”
RECITALS
WHEREAS, Seller owns a 21% Membership Interest (the “ Entire Interest ”) in Utica East Ohio Midstream LLC, a Delaware limited liability company (the “ Company ”);
WHEREAS, Purchaser owns a 49% Membership Interest in the Company;
WHEREAS, M3 Ohio Gathering LLC, a Delaware limited liability company (the “ Other Member ”), owns the remaining 30% Membership Interest in the Company;
WHEREAS, Seller desires to sell the Entire Interest and, in accordance with Section 8.6 of the LLC Agreement (as hereinafter defined), has delivered to Purchaser and the Other Member a Proposed Transfer Notice and Offer Terms, dated April 2, 2015 (“ Transfer Notice ”);
WHEREAS, Purchaser desires to accept the offer set forth in the Transfer Notice and to purchase the Entire Interest for the consideration, and as set forth in this Agreement, subject to the right of the Other Member to acquire its pro rata share of the Entire Interest as set forth in the LLC Agreement; and
WHEREAS, the Parent and EVEP have executed guarantees (each, a “ Guaranty ”) of the obligations of their subsidiaries in connection with the execution of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual promises, representations, warranties, covenants, conditions and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound by the terms hereof, agree as follows:
ARTICLE
1
DEFINITIONS
In addition to the terms defined in the introductory paragraph and the recitals of this Agreement, for purposes hereof, the capitalized terms used herein and not otherwise defined shall have the meanings set forth in Exhibit A .
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ARTICLE
2
PURCHASE AND SALE
2.1 Purchase and Sale . At the Closing, and upon the terms and subject to the conditions of this Agreement, Seller shall sell and convey to Purchaser, and Purchaser shall purchase, accept and pay for, all of Seller’s right, title and interest in and to the Subject Interest, free and clear of all Encumbrances, other than any restrictions under federal and state securities Laws and the terms and conditions of the LLC Agreement, for the consideration in Section 2.2 .
2.2 Purchase Price . The purchase price for the Subject Interest (the “ Purchase Price ”) shall be Five Hundred and Seventy Five Million Dollars ($575,000,000). The Purchase Price shall be subject to adjustment as provided in Sections 2.3 and 2.4 .
2.3 Reduction in Subject Interest and Purchase Price . The Subject Interest shall initially be a 21% Membership Interest in the Company. If or simultaneously with the Closing, the Other Member acquires a 30/79 x 21% (approximately 7.975%) Membership Interest in the Company from the Seller pursuant to Other Member’s rights as set forth in Section 8.6 of the LLC Agreement, the Subject Interest shall be reduced correspondingly to a 49/79 x 21% (approximately 13.025%) Membership Interest and the Purchase Price shall be reduced to Three Hundred and Fifty Six Million, Six Hundred and Forty Five Thousand and Five Hundred and Seventy Dollars ($356,645,570) and further adjusted as in accordance with Section 2.4 . For the avoidance of doubt, the Subject Interest and Purchase Price will be reduced as provided in this Section only if the Other Member closes on the acquisition of, including payment for, its share of the Entire Interest pursuant to Section 8.6 of the LLC Agreement.
2.4 Adjustments to Purchase Price . The Purchase Price for the Subject Interest shall be adjusted as follows:
(a) Capital Contributions . The Purchase Price shall be increased by an amount equal to the sum of all Capital Contributions (as defined in the LLC Agreement) made by Seller to the Company with respect to the Subject Interest after the Effective Time and prior to Closing.
(b) Distributions . The Purchase Price shall be decreased by an amount equal to the sum of all Distributions (as defined in the LLC Agreement) received by Seller from the Company with respect to the Subject Interest after the Effective Time and prior to Closing.
(c) Casualty . The Purchase Price shall be decreased by any casualty or condemnation adjustments under Section 6.5 .
(d) Adjusted Purchase Price . The Purchase Price, adjusted as set forth in Section 2.3, this Section 2.4 and Section 6.5 shall be the “Adjusted Purchase Price.”
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2.5 Agreement Regarding LLC Agreement . Seller and Purchaser agree and acknowledge that (a) this Agreement and the Transfer Notice constitute the “Proposed Transfer Notice,” “Offer Terms” and “Purchase Notice” as such terms are used in the LLC Agreement, (b) this Agreement and the Transfer Notice satisfy in all respects the requirements of Section 8.6 of the LLC Agreement imposed on Seller and Purchaser and (c) none of the covenants, agreements, representations and warranties set forth in this Agreement shall be deemed breached or violated by Seller or Purchaser because of any alleged or actual failure of the Transfer Notice or this Agreement to comply with Section 8.6 of the LLC Agreement. Seller and Purchaser further agree and acknowledge that (i) its execution and delivery of this Agreement is consistent with the requirements of Section 8.6 the LLC Agreement, (ii) that neither Purchaser nor Seller shall allege or bring any claim of any kind, whether at law or equity or sounding in contract (express or implied) or tort, against the other concerning, relating to or arising under Sections 8.6(a) and (b) of the LLC Agreement in connection with the Transfer Notice and this Agreement constitutes a bar to any such claim and (iii) Purchaser and Seller shall diligently defend any claim or allegation that the Transfer Notice and this Agreement do not satisfy the requirements of the LLC Agreement.
ARTICLE
3
CLOSING
3.1 Time and Place of Closing . Consummation of the purchase and sale of the Subject Interest as contemplated by this Agreement (the “ Closing ”) shall, unless otherwise agreed to in writing by Purchaser and Seller, take place at the offices of Haynes and Boone, LLP in Houston, Texas, at 10:00 a.m., local time, on the Closing Date. From and after the Closing, the Closing shall be deemed to have been effective as of 12:01 a.m., local time, on the Closing Date.
3.2 Obligations of Seller at Closing . At the Closing, upon the terms and subject to the conditions of this Agreement, and subject to the simultaneous performance by Purchaser of its obligations pursuant to Section 3.3 , Seller shall deliver or cause to be delivered to Purchaser, the following:
(a) four (4) duly executed counterparts of an assignment of the Subject Interest (the “ Assignment Agreement ”) in substantially the form attached hereto as Exhibit B ;
(b) four (4) originals of a certificate duly executed by an Authorized Officer of Seller, dated as of the Closing Date, certifying on behalf of Seller that the conditions set forth in Sections 7.2(a) and 7.2(b) have been fulfilled;
(c) four (4) originals of a certificate duly executed by the secretary or any assistant secretary of the general partner of Seller, dated as of the Closing, (i) attaching and certifying on behalf of Seller complete and correct copies of (A) the certificate of formation and agreement of limited partnership of Seller, as in effect as of the Closing, (B) the resolutions of the board of directors of the general partner of Seller authorizing the execution, delivery, and performance by Seller of this Agreement and the transactions contemplated hereby, and (C) any required approval by the partners of Seller of this Agreement and the transactions contemplated hereby and (ii) certifying on behalf of Seller the incumbency of each officer of the general partner of Seller executing this Agreement or any document delivered in connection with the Closing;
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(d) four (4) originals of an executed certificate described in Treasury Regulation Section 1.1445-2(b)(2) certifying that Seller is not a foreign person within the meaning of the Code;
(e) documents in form and substance reasonably satisfactory to Purchaser evidencing the release of the Encumbrance listed on Schedule 4.6 ;
(f) an executed letter of resignation of the Manager (as defined in the LLC Agreement) appointed to the board of Managers by Seller, in form and substance reasonably acceptable to Purchaser; and
(g) any other agreements, instruments or documents that are required by the terms of this Agreement under Article 7 to be delivered by Seller to Purchaser or as otherwise reasonably requested by Purchaser to consummate the transactions contemplated hereby.
3.3 Obligations of Purchaser at Closing . At the Closing, upon the terms and subject to the conditions of this Agreement, and subject to the simultaneous performance by Seller of its obligations pursuant to Section 3.2 , Purchaser shall deliver or cause to be delivered to Seller, the following:
(a) a wire transfer of the Adjusted Purchase Price, in same-day funds to an account of Seller designated in writing by Seller to Purchaser no later than two days prior to the Closing Date;
(b) four (4) duly executed counterparts of the Assignment Agreement;
(c) four (4) originals of a certificate by an Authorized Officer of Purchaser, dated as of the Closing Date, certifying on behalf of Purchaser that the conditions set forth in Sections 7.1(a) and 7.1(b) have been fulfilled;
(d) four (4) originals of a certificate duly executed by the secretary or any assistant secretary of Purchaser, dated as of the Closing Date, (i) attaching, and certifying on behalf of Purchaser as complete and correct, copies of (A) the certificate of formation and limited liability company agreement of Purchaser, each as in effect as of the Closing, (B) the resolutions of the managers of Purchaser authorizing the execution, delivery and performance by Purchaser of this Agreement and the transactions contemplated hereby and (C) any required approval by the members of Purchaser of this Agreement and the transactions contemplated hereby and (ii) certifying on behalf of Purchaser the incumbency of each officer of Purchaser executing this Agreement or any document delivered in connection with the Closing; and
(e) any other agreements, instruments, or documents that are required by the terms of this Agreement under Article 7 to be delivered by Purchaser to Seller or as otherwise reasonably requested by Seller to consummate the transactions contemplated hereby.
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ARTICLE
4
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Schedules to this Agreement, and subject to Section 4.20 , Seller represents and warrants as of the date hereof and as of the Closing Date to Purchaser that:
4.1 Existence . Seller is a limited partnership duly formed, validly existing and in good standing under the Laws of the State of Delaware.
4.2 Power . Seller has the requisite partnership power and authority to execute and deliver this Agreement (and all documents to be executed and delivered by Seller pursuant to this Agreement), to perform its obligations hereunder (and thereunder), and to consummate the transactions contemplated hereby (and thereby).
4.3 Authorization and Enforceability . The execution, delivery and performance by Seller of this Agreement (and all documents required to be executed and delivered by Seller pursuant to this Agreement), and the consummation by Seller of the transactions contemplated hereby (and thereby), have been duly and validly authorized by all necessary partnership action on the part of Seller or, in the case of documents to be executed and delivered pursuant to this Agreement, will have been duly and validly authorized by all necessary corporate action on the part of Seller. This Agreement has been duly executed and delivered by Seller (and all documents required hereunder to be executed and delivered by Seller pursuant to this Agreement will be duly executed and delivered by Seller) and, assuming due authorization, execution and delivery by Purchaser, this Agreement constitutes (and such other documents will constitute) the valid and binding obligations of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar Laws affecting the rights and remedies of creditors generally as well as by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) (the “ Enforceability Exceptions ”).
4.4 No Conflicts . The execution, delivery and performance of this Agreement by Seller (and all documents to be executed and delivered by Seller pursuant to this Agreement), and the consummation of the transactions contemplated by this Agreement (and by such documents), do not and will not (a) violate any provision of the certificate of formation, limited partnership agreement or other organizational documents of Seller, (b) result in a material default (with due notice or lapse of time or both) or the creation of any Encumbrance, or give rise to any right of termination, cancellation or acceleration under any note, bond, mortgage, indenture, or other financing instrument to which Seller or, to the Knowledge of Seller, the Company is a party or by which their respective assets are bound, (c) result in a material violation or breach of any judgment, order, ruling, or decree applicable to Seller or, to the Knowledge of Seller, the Company, as a party in interest, (d) result in a material violation or breach of any Laws applicable to Seller or, to the Knowledge of Seller, the Company or (e) except for the Government Authorizations listed in Schedule 6.2 , require notice to, filing with, or the obtaining of approval from, any Governmental Body by or with respect to Seller or, to the Knowledge of the Seller, the Company.
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4.5 LLC Agreement . Seller has performed all of its material obligations under the LLC Agreement and is not in material default under any provision of the LLC Agreement.
4.6 Ownership . Except as set forth on Schedule 4.6 , as of the Execution Date, Seller has good and valid title to the Subject Interest, free and clear of any Encumbrances, other than any restrictions under federal and state securities Laws and the terms and condition of the LLC Agreement. As of the Closing, Seller will have good and valid title to the Subject Interest, in each case, free and clear of any Encumbrances, other than any restrictions under federal and state securities Laws and the terms and condition of the LLC Agreement.
4.7 Liability for Brokers’ Fees . Purchaser will not directly or indirectly have any responsibility, liability or expense, as a result of undertakings or agreements of Seller or any Affiliate of Seller, for brokerage fees, finder’s fees, agent’s commissions or other similar forms of compensation in connection with this Agreement or any agreement or transaction contemplated hereby.
4.8 Litigation . Except as set forth on Schedule 4.8 , to the Knowledge of Seller, there are no actions, suits or proceedings pending, or threatened, before any Governmental Body or arbitrator against the Company. There are no actions, suits or proceedings pending, or, to the Knowledge of Seller, threatened, before any Governmental Body or arbitrator against Seller, which are reasonably likely to materially delay or materially impair Seller’s ability to perform its obligations under this Agreement.
4.9 Taxes .
(a) Seller has made available to Purchaser true and complete copies of any written notices or other written information Seller has received from the Company’s “tax matters partner” with respect to any material Tax matters related to the Company.
(b) There are no Encumbrances for Taxes upon the Subject Interest.
(c) Except as set forth on Schedule 4.9 , to the Knowledge of Seller:
(i) the Company has timely filed all material Tax Returns required to have been filed by or with respect to the Company and its operations, and such Tax Returns are complete and correct in all material respects and all material Taxes owed by the Company have been timely paid;
(ii) the Company has always been and will be through the Closing Date validly classified, for United States federal income tax purposes, as either a “disregarded entity” as defined in Treasury Regulation Section 301.7701-3 or as a “partnership” as defined in Section 761(a) of the Code;
(iii) there is no material claim, audit, action, suit or proceeding pending or threatened in writing against or with respect to the Company in respect of any Tax or Tax Return, and there are no Encumbrances for Taxes (other than Encumbrances for Taxes not yet due and payable) upon the assets of the Company;
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(iv) the Company is not obligated to pay the Taxes of another person under applicable Law, by Contract, as a transferee, as a successor or otherwise; and
(v) the transactions contemplated by this Agreement would not, if consummated, result in a Tax Termination Event of the Company as described in Section 8.2(a) of the LLC Agreement.
4.10 Environmental Laws . Except as set forth in Schedule 4.10 , to the Knowledge of Seller: (a) the Company is in compliance in all material respects with all applicable Environmental Laws; (b) there are no actions pending or threatened in writing against the Company, or any real property owned, operated or leased by it, alleging violation of or liability under any Environmental Law; (c) the Company has not entered into any order, settlement, judgment, injunction or decree involving uncompleted, outstanding or unresolved obligations, liabilities or requirements relating to or arising under Environmental Law; (d) the Company holds and is in compliance in all material respects with all material Permits required under Environmental Law for it to conduct its business; and (e) the Company has not Released any Hazardous Substance in or on the Company’s assets in quantities or concentrations requiring material remedial action by the Company under Environmental Laws. Notwithstanding anything to the contrary contained in this Agreement, the representations and warranties contained in this Section 4.10 are Seller’s sole representations and warranties with respect to environmental matters and Environmental Laws.
4.11 Compliance with Laws . Except as set forth in Schedule 4.11 , to the Knowledge of Seller: (a) the Company is conducting its business in compliance in all material respects with all applicable Laws, including any Laws relating to bribery, improper payments to a Governmental Body or governmental officer or employee, candidate for political office, political party or official thereof, or public international organization, and money laundering; (b) the Company holds all material Permits necessary for the lawful conduct of its business as presently conducted; and (c) the Company is in compliance in all material respects with the terms of all such material Permits, and no written notices have been received relating to the termination, cancellation or withdrawal thereof. This Section 4.11 does not address environmental matters and Environmental Laws, which are exclusively governed by Section 4.10 .
4.12 Midstream Assets . To the Knowledge of Seller, the Company has not disposed of any of its Midstream Assets that are material to its operations and there are no claims pending or threatened against the Company disputing the Company’s title to its Midstream Assets.
4.13 Contracts . Except for the Existing Agreements, the Company is not a party to any Contract with Seller or an Affiliate of Seller which will be binding on the Company after Closing.
4.14 Tag-Along Rights, Consents and Preferential Rights . Except as set forth on Schedule 4.14 and as set forth in the LLC Agreement: (a) Seller’s execution, delivery and performance of this Agreement (and any document required to be executed and delivered by Seller at Closing) is not and will not be subject to any option by any Person to participate as a seller in the sale to Purchaser contemplated by this Agreement; (b) Seller’s execution, delivery and performance of this Agreement (and any document required to be executed and delivered by Seller pursuant to this Agreement) is not and will not be subject to any required consent of, or notice to, any third Person (other than a Governmental Body); and (c) there are no preferential rights to purchase, rights of first opportunity or similar rights created by Seller or its Affiliates applicable to a sale of the Subject Interest.
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4.15 Employee Matters . To the Knowledge of Seller, the Company does not have any employees and does not maintain, sponsor, contribute to, and is not required or obligated to contribute to, and is not a party to any, Employee Benefit Plan. To the Knowledge of Seller, there is no pending or threatened strike, slowdown, work stoppage, lockout or other labor dispute relating to any Person providing services for or on behalf of the Company.
4.16 Intellectual Property . To the Knowledge of Seller: (a) the Company owns or has a license or other right to use all material Intellectual Property used in the conduct of the Company’s business; (b) neither the Company’s use of Intellectual Property nor the Company’s conduct of its business as currently conducted infringes, violates or misappropriates in any material respect the Intellectual Property of any Person; and (c) there are no actions, suits or proceedings pending or threatened in writing against the Company alleging any such infringement, violation or misappropriation.
4.17 Anti-Corruption Matters . To the Knowledge of Seller, the Company has not, directly or indirectly, taken any action which would cause the Company to (a) be in violation of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any similar anti-bribery law or regulation applicable to the Company or (b) violate or operate in noncompliance with any export restrictions, anti-boycott regulations, or embargo regulations.
4.18 OFAC . To the Knowledge of Seller, (a) neither the Company nor any of its officers or managers is currently the subject or target of any sanctions administered or enforced by the U.S. Government (including the Office of Foreign Assets Control of the United States Department of the Treasury and the U.S. Department of State and including the designation as a “specially designated national” or “blocked person”), the United Nations Security Council, the European Union, or Her Majesty’s Treasury, (collectively “ Sanctions ”), (b) nor does the Company have its principal place of business or the majority of its business operations (measured by revenues) located in a country that is the subject or target of Sanctions, including Cuba, Burma (Myanmar), Iran, North Korea, Sudan, and Syria. To the Knowledge of Seller, neither the Company nor any of its officers or directors has in the last five (5) years knowingly engaged in, or is now knowingly engaged in, any dealings or transactions relating to or with any Person, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.
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4.19 Solvency . Seller is not now insolvent and will not be rendered insolvent by any of the transactions contemplated hereby. As used in this Section 4.19 , “insolvent” means that the sum of the debts and other probable Liabilities of Seller exceeds the present fair saleable value of Seller’s assets. Immediately after giving effect to the consummation of the transactions contemplated hereunder: (i) Seller will be able to pay its obligations and liabilities as they become due in the usual course of its business; (ii) Seller will have adequate capital with which to conduct its business; and (iii) Seller will have assets (calculated at fair market value) that exceed its obligations and liabilities, including a reasonable estimate of the amount of all contingent liabilities of Seller.
4.20 Certain Disclaimers.
(a) The representations and warranties set forth in this Article 4 and in the agreements and certificates to be delivered by Seller at Closing pursuant to Section 3.2 are the only representations and warranties made by Seller. Except as specifically set forth in this Article 4 , or in the agreements and certificates to be delivered by Seller at Closing pursuant to Section 3.2 , Seller makes no, and disclaims any, warranty, express or implied, as to any matter whatsoever relating to Seller, the Company, their respective businesses, assets, liabilities or any other matter relating to the transactions contemplated by this Agreement.
(b) WITHOUT LIMITING THE GENERALITY OF SECTION 4.20(a) , EXCEPT AS MAY BE SPECIFICALLY SET FORTH IN THIS ARTICLE 4 OR IN THE AGREEMENTS OR CERTIFICATES TO BE DELIVERED BY SELLER AT CLOSING PURSUANT TO SECTION 3.2 , SELLER FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, REGARDING (I) TITLE TO ANY OF THE COMPANY’S ASSETS, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY CONSULTANT, RELATING TO THE COMPANY’S ASSETS, (III) ANY ESTIMATES OF THE VALUE OF THE SUBJECT INTEREST THE COMPANY’S ASSETS OR FUTURE REVENUES GENERATED BY ANY OF THE PRECEDING, OR (IV) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE COMPANY’S ASSETS, AND FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OR OTHER PERSONAL PROPERTY, OR REGARDING INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS IN CONNECTION WITH THE OPERATION OF THE COMPANY AND ITS ASSETS, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT PURCHASER SHALL BE DEEMED TO BE OBTAINING THE SUBJECT INTEREST SUBJECT TO ALL OF THE COMPANY’S RESPECTIVE DIRECT AND INDIRECT RIGHTS AND ASSETS BEING IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS, AND THAT PURCHASER SHALL CAUSE TO BE MADE SUCH INSPECTIONS AS PURCHASER DEEMS APPROPRIATE. The Parties agree that the disclaimers in this Section are “conspicuous” disclaimers for the purpose of any applicable Law.
(c) Inclusion of information in the Schedules to this Agreement shall not be construed as an admission that such information is material to the business, assets, liabilities, financial condition or results of operations of Seller, or the Company, or otherwise material, or that such information is required to be included in the Schedules to this Agreement, and inclusion of a matter on a Schedule addressing matters reasonably expected to have a Material Adverse Effect shall not necessarily be deemed an indication that such matter does, or may, have a Material Adverse Effect. Matters may be disclosed on a Schedule for purposes of information only, and inclusion of any such matter does not mean that all such matters are included. A matter disclosed on a Schedule to this Agreement shall be deemed to be an exception to all representations, and any indemnifications under Section 9.1 , to which it is relevant, but only if it is reasonably apparent that such matter also applies to such other representations.
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ARTICLE
5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as of the date hereof and as of the Closing:
5.1 Existence and Qualification . Purchaser is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Oklahoma.
5.2 Power . Purchaser has the requisite corporate power and authority to execute and deliver this Agreement (and all documents to be executed and delivered by Purchaser pursuant to this Agreement), to perform its obligations hereunder (and thereunder), and to consummate the transactions contemplated hereby (and thereby).
5.3 Authorization and Enforceability . The execution, delivery and performance by Purchaser of this Agreement (and all documents required to be executed and delivered by Purchaser pursuant to this Agreement), and the consummation by Purchaser of the transactions contemplated hereby (and thereby), have been duly and validly authorized by all necessary company action on the part of Purchaser, or in the case of documents to be executed and delivered pursuant to this Agreement, will have been duly and validly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser (and all documents required hereunder to be executed and delivered by Purchaser pursuant to this Agreement will be duly executed and delivered by Purchaser), and, assuming due authorization, execution and delivery by Seller, this Agreement constitutes (and at the Closing such documents will constitute) the valid and binding obligation of Purchaser, enforceable in accordance with its terms, subject to the Enforceability Exceptions.
5.4 No Conflicts . The execution, delivery and performance of this Agreement (and all documents to be executed and delivered by Purchaser pursuant to this Agreement) by Purchaser, and the transactions contemplated by this Agreement (and by such documents), do not and will not (a) violate any provision of the certificate of formation and limited liability company agreement or other organizational documents of Purchaser, (b) result in a material default (with due notice or lapse of time or both) or the creation of any Encumbrance, or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, mortgage, indenture or other financing instrument to which Purchaser is a party or by which any of its assets are bound, (c) result in a material violation or breach of any judgment, order, ruling, or regulation applicable to Purchaser as a party in interest, or (d) result in a material violation or breach of any Laws applicable to Purchaser.
5.5 Liability for Brokers’ Fees . Seller will not directly or indirectly have any responsibility, liability or expense, as a result of undertakings or agreements of Purchaser or any Affiliate of Purchaser, for brokerage fees, finder’s fees, agent’s commissions or other similar forms of compensation in connection with this Agreement or any agreement or transaction contemplated hereby.
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5.6 Litigation . There are no actions, suits or proceedings pending, or, to the Knowledge of Purchaser, threatened in writing, before any Governmental Body or arbitrator against Purchaser which are reasonably likely to materially delay or materially impair Purchaser’s ability to perform its obligations under this Agreement.
5.7 Financing . At the date scheduled for the Closing, Purchaser will have sufficient cash, available lines of credit or other sources of immediately available funds (in US dollars) to enable it to pay all amounts required to be paid hereunder, including the payment required to be paid to Seller at the Closing.
5.8 Investment Intent . Purchaser is acquiring the Subject Interest for its own account and not with a present intent to transfer or otherwise distribute the Subject Interest to any other Person in violation of applicable securities Laws.
5.9 Independent Investigation . Purchaser recognizes that investment in the Subject Interest involves substantial risks. Purchaser is (or its advisors are) experienced and knowledgeable in the oil and gas business and aware of the risks of that business. Purchaser acknowledges and affirms that, as of the Execution Date, it has made all such independent investigation, verification, analysis and evaluation of the Company and its assets, liabilities, businesses and prospects as Purchaser deems necessary or appropriate to enter into this Agreement. Except for the representations and warranties expressly made by Seller in Article 4 of this Agreement, or in the certificate to be delivered to Purchaser pursuant to Section 3.2(b) of this Agreement, Purchaser acknowledges that there are no representations or warranties, express or implied, as to the Company or its assets, liabilities, businesses and prospects and that in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Purchaser has relied solely upon its own independent investigation, verification, analysis and evaluation.
5.10 Other Consents . Purchaser’s execution, delivery and performance of this Agreement (and any document required to be executed and delivered by Purchaser pursuant to this Agreement) is not and will not be subject to any consent, approval, or waiver from any Governmental Body or other third Person, except for the Government Authorizations listed in Schedule 6.2 and as set forth on Schedule 5.10 .
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ARTICLE
6
COVENANTS OF THE PARTIES
6.1 Exclusivity . In consideration of the resources, time and expense Purchaser has and will incur in connection with transactions contemplated in this Agreement, without the prior written consent of Purchaser, (i) during the period from the Execution Date until the earlier of the Closing Date or the termination of this Agreement, Seller shall not sell, transfer, or place an Encumbrance (other than any restrictions under federal and state securities Laws and the terms and condition of the LLC Agreement), upon the Subject Interest or any portion thereof, and (ii) during the period from the Execution Date until June 1, 2015, Seller shall not (a) directly or indirectly solicit, facilitate or knowingly encourage any other proposal relating to a Competing Transaction (defined below), (b) negotiate or enter into a letter of intent, agreement in principle, arrangement, understanding or Contract, regarding a Competing Transaction, or (c) otherwise cooperate in any way, including through the provision of confidential information, with any person in connection with a Competing Transaction; provided that if the condition to Closing set forth in Section 7.2(d) has been satisfied on or prior to June 1, 2015, Seller shall not take any of the foregoing actions until the termination of this Agreement. As used in this Agreement, “ Competing Transaction ” means the direct or indirect sale, lease, license, exchange, mortgage, transfer or other disposition, or financing, in a single transaction or series of related transactions, of all or any portion of the Subject Interest. In addition, without limiting the foregoing, if Seller provides confidential information to a Person in connection with a Competing Transaction after June 1, 2015: (a) prior to disclosing any such confidential information to such prospective purchaser, Seller shall receive an executed customary confidentiality agreement from such prospective purchaser containing language that makes the Company a third party beneficiary under such confidentiality agreement and within two Business Days provides an unredacted copy of such executed confidentiality agreement to the Purchaser; and (b) Seller promptly provides to the Purchaser a copy of any confidential information disclosed to such prospective purchaser.
6.2 Government Authorizations; Cooperation .
(a) Seller and Purchaser shall, each in a timely manner, (i) make all required filings, provide all required notices, prepare all required applications and conduct negotiations with each Governmental Body as to which such filings, notices, applications or negotiations are necessary or appropriate in the consummation of the transactions contemplated hereby, including the filings, notices and applications listed on Schedule 6.2 (the “ Government Authorizations ”), provided that Purchaser agrees to make any required filings under the HSR Act within ten (10) Business Days following the date of this Agreement and (ii) provide such information as the other may reasonably request to make or obtain the Government Authorizations. Each Party shall reasonably cooperate with and use commercially reasonable efforts to assist the other with respect to the Government Authorizations. Each Party shall promptly supply any additional information and documentary material that may reasonably be requested by any Governmental Body in connection with the filings, notices and applications for the Government Authorizations. Each Party shall bear its own costs of all filing or application fees payable to any Governmental Body with respect to the transactions contemplated by this Agreement, provided that the costs of filing fees under the HSR Act, will be paid equally by Purchaser and Seller.
(b) If any objections are asserted with respect to the transactions contemplated hereby under any antitrust or competition Law or if any suit or proceeding is instituted or threatened by any Governmental Body or any private party challenging any of the transactions contemplated hereby as violating any antitrust or competition Law, each of Purchaser and Seller shall use its commercially reasonable efforts to promptly resolve such objections in order to enable the transactions contemplated by this Agreement to be consummated as promptly as practicable, provided, however, that notwithstanding the foregoing, that Purchaser and Seller shall have the right, but not the obligation, to defend any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated by this Agreement under any antitrust or competition Law, including but not limited to seeking to have any stay, injunction, or temporary restraining order entered by any court or other Governmental Body vacated or reversed. Each Party shall give notice to the other Party with respect to any meeting, discussion, appearance or contact with any governmental authority or the staff or regulators of any governmental authority, with such notice being sufficient to provide the other Party with the opportunity to attend and participate in such meeting, discussion, appearance or contact. Notwithstanding anything to the contrary in this Agreement, neither Purchaser nor Seller shall be required to take or agree to take any action, including entering into any consent decree, hold separate order or other arrangement, that would (i) require or result in the sale, divestiture or other direct or indirect disposition of any assets or rights of Purchaser or any of its Affiliates or any portion of the Seller or any of its Affiliates, or (ii) limit Purchaser’s or its Affiliates’ freedom of action with respect to, or its or their ability to retain, conduct, consolidate or otherwise control, any of Purchaser’s or its Affiliates’ assets or businesses.
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6.3 Public Announcement . Except as expressly provided in this Section 6.3 , until the Closing, no Party, or any Affiliate of a Party, shall make any press release or other public announcement regarding the existence of this Agreement, the contents hereof or the transactions contemplated hereby without the prior written consent of the other Party. Each Party acknowledges that the other Party (or its Affiliates) intends to issue a press release concerning this Agreement shortly after the execution of this Agreement in substantially the form previously provided to and approved by the other Party. The foregoing shall not restrict disclosures by Purchaser or Seller or any of their respective Affiliates (a) that are required by applicable securities or other Laws or regulations or the applicable rules of any stock exchange having jurisdiction over the disclosing Party or its Affiliates or, (b) to Governmental Bodies and third Persons holding rights of consent or rights to receive notice that may be applicable to the transactions contemplated by this Agreement, as reasonably necessary to obtain waivers of such rights or such consents or to provide such notice, provided that, in each case to which such an exception applies, the releasing Party shall, to the extent legally permissible, provide the other Party not less than twenty-four (24) hours to comment on a draft of such disclosure, and such releasing Party shall consider in good faith all comments provided by such other Party. Seller and Purchaser shall each be liable for compliance by its respective Affiliates with the terms of this Section.
6.4 Assumption of Obligations . By the consummation of the transactions contemplated by this Agreement at the Closing, and without limiting the indemnification obligations of Seller under Article 9 (including those relating to the representations and warranties contained herein), Purchaser assumes and agrees to pay, perform and discharge all obligations with respect to the Subject Interest, whether arising under the LLC Agreement, applicable Law or otherwise, and whether attributable to the period before or after the Effective Time, but excluding, for the avoidance of doubt, (a) any obligations of Seller or any of its Affiliates under this Agreement or as a counterparty to the Company (or any now or hereafter existing Affiliate of the Company) under the Existing Agreements or any other contract entered into by Seller or any of its Affiliates and the Company or any Affiliate of the Company, (b) any obligations to the extent caused by the gross negligence, willful misconduct or criminal activity of Seller or any of its Affiliates, (c) any obligations of Seller or its Affiliates arising under U.S. federal, state or local income, franchise or similar Tax Laws for periods prior to the Closing, and (d) any obligation arising out of the material breach by Seller of the LLC Agreement.
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6.5 Casualty and Condemnation .
(a) If after the Execution Date but prior to Closing, any of the Midstream Assets are actually damaged or destroyed by any casualty or are taken in condemnation or under right of eminent domain, then the Purchase Price shall be reduced (without duplication) by the Proportionate Share of the amount of the actual out-of-pocket losses caused to the Company by any such casualty or taking (after giving effect to any insurance proceeds received by the Company); provided that if the Proportionate Share of the aggregate actual out-of-pocket losses caused to the Company by such casualties and takings (i) is less than $1.0 million (after giving effect to any insurance proceeds received by the Company), there shall be no adjustment to the Purchase Price, but the Proportionate Share of any such actual out-of-pocket losses shall be credited against the Deductible as if such losses are Damages for which Purchaser is entitled to indemnification pursuant to Article 9 or (ii) exceeds in value ten percent (10%) of the Purchase Price (without giving effect to any insurance proceeds available to the Company), either Party may, by notice to the other Party at least one (1) Business Day prior to Closing, elect to terminate this Agreement under Section 8.1 . Except as provided in the immediately preceding sentence, Purchaser shall be required to close as provided for in this Agreement notwithstanding any such casualties or takings.
(b) Seller and Purchaser shall reasonably cooperate with each other in determining the Proportionate Share of the amount of any losses caused to the Company by any casualty or taking described in Section 6.5(a) , including as promptly as reasonably possible requesting information on the amount of the losses from the Company and providing each other with copies of any estimates of losses provided by the Company.
6.6 Further Assurances . At and after the Closing, Seller and Purchaser agree to take such further actions and to execute, acknowledge and deliver all such further documents as are reasonably requested by the other Party for carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.
6.7 Cooperation on Taxes . Each Party shall promptly furnish to the other such information pertaining to the Company or the transactions contemplated by this Agreement, as may reasonably be requested by the other Party with respect to Tax matters of such other Party or Affiliate of such other Party, including by providing access to relevant books and records and making employees available to provide additional information and explanation of any materials provided hereunder, but in each case only to the extent that such Party may do so without violating applicable Laws or any obligations to any third Person and to the extent that such Party has access to such information and has authority to furnish such information under any restrictions binding on such Party. The Parties shall further reasonably cooperate, and cause their Affiliates to reasonably cooperate, with each other in connection with the preparation of any Tax Returns.
6.8 Schedule Update . From time to time prior to the Closing, for purposes of its certificate to be delivered at Closing pursuant to Section 3.2(b) and for purposes of determining whether the Seller’s representations and warranties are true and correct as of the Closing Date as though made on and as of the Closing Date, to the extent and in the manner provided under Section 7.2(a), Seller may at its option supplement or amend and deliver updates to the Schedules to Article 4 to include reference to any matter relating to Seller, the Company or its assets which first arises or occurs after the Execution Date and does not represent a breach of Seller’s covenants in this Agreement; provided, however, notwithstanding the foregoing, (a) no such supplement or amendment shall in any way affect Purchaser’s ability to terminate this Agreement based upon the condition to closing set forth in Section 7.2(f) not being satisfied and (b) Purchaser shall have the right to terminate this Agreement in the event Seller supplements or amends any Schedule relating to the Fundamental Reps.
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6.9 Other Agreement . Purchaser and Seller acknowledge that the Other Member has the right, as provided in the LLC Agreement, to deliver a Purchase Notice agreeing to acquire the Entire Interest. If the Other Member exercises this right, Seller will promptly notify Purchaser and provide Purchaser with a copy of the notice of such exercise. If the Other Member closes the acquisition, the Other Member will acquire the Remaining Interest and the Subject Interest to be purchased by the Purchaser will be reduced in accordance with Section 2.3 . In connection with the exercise of the Other Member’s right to agree to purchase the Entire Interest, Seller may enter into an agreement (“ Other Agreement ”) with the Other Member to facilitate the Transfer (as defined in the LLC Agreement). Seller shall provide Purchaser a copy of the Other Agreement in the form executed by the parties thereto, promptly following its execution. Purchaser acknowledges that Seller may provide a copy of this Agreement to the Other Member. In any negotiations or discussions with the Other Member to acquire the Membership Interest of the Other Member, Purchaser will use commercially reasonable efforts to cause the Other Member to waive its rights under Section 8.6 of the LLC Agreement to acquire the Entire Interest as proposed in the Transfer Notice, or if the Other Member has accepted the offer in the Transfer Notice to acquire its Proportionate Share of the Entire Interest, to withdraw such acceptance (to which Seller shall consent) in each case with the intent of causing the Closing to occur at the earliest possible date on or after May 1, 2015. If prior to the acceptance by the Other Member of the offer set forth in the Transfer Notice, Purchaser agrees to acquire the Membership Interest of the Other Member, Purchaser will cause the Other Member to waive its rights under Section 8.6 of the LLC Agreement to acquire the Entire Interest as offered in the Transfer Notice and Purchaser will provide Seller a copy of such waiver. If the Other Member and Seller execute the Other Agreement, each Party shall reasonably cooperate with and use commercially reasonable efforts to facilitate the simultaneous closings of this Agreement and the Other Agreement.
6.10 Conduct Pending Closing . Except as otherwise expressly contemplated by this Agreement or with the prior written consent of the Purchaser, from the date hereof until the Closing or termination of this Agreement as provided in Article 8 , Seller shall not:
(a) vote any of the Subject Interests in favor of: (i) any amendment to the LLC Agreement or the Transaction Documents (as such terms are defined in the LLC Agreement); (ii) to take any of the actions contemplated under Section 7.4(b) of the LLC Agreement); (iii) any election to dissolve the Company; or (iv) issuing any equity interests, options, warrants, convertible securities or other rights of any kind to acquire any equity or ownership interest of the Company;
(b) amend or otherwise change the certificate of formation, limited partnership agreement or other organizational documents of Seller in any manner that would adversely affect or impede the ability of Seller to consummate the transactions contemplated by this Agreement; or
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(c) vote or consent to or permit its Managers (as defined in the LLC Agreement) to vote or consent to (i) sell, assign, transfer, lease, license or otherwise dispose of any assets owned by the Company; (ii) have the Company make or commit to make any capital expenditure not approved under the existing Capital Expenditure Budget (as defined in the LLC Agreement); or (iii) create, incur, assume, guarantee, endorse or otherwise become liable or responsible with respect to (whether directly, contingently or otherwise) any indebtedness of the Company or otherwise amend, modify, alter, waive or otherwise change any rights or obligations with respect thereto, including any claims thereunder; or
(d) agree to take any action prohibited by this Section 6.10 .
6.11 Encumbrances on the Subject Interest . Prior to Closing, Seller shall take such commercially reasonable actions as are necessary to cause release of the Encumbrance listed on Schedule 4.6 .
6.12 Confidentiality . Upon Closing and for a period of one (1) year thereafter, Seller agrees to keep confidential, and not to make use of (other than for purposes of filing its tax returns or for other routine matters required by law) or, without the prior written consent of the Company, disclose to any Person, any information or matter relating to the Company and its affairs or any of the terms and conditions of the LLC Agreement (other than disclosure as required by any applicable law, including the rules and regulations of the United States Securities and Exchange Commission, and the New York Stock Exchange, NASDAQ, or any other applicable national securities exchange), provided, however, in the event that Seller receives a request to disclose any such information under the terms of a subpoena or order issued by a court of competent jurisdiction or by any applicable law, Seller will, to the extent permitted by law: (a) immediately notify each of the Company of the existence, terms, and circumstances surrounding such request; (b) consult with the Company as to the advisability of taking steps legally available to resist or narrow the scope of the disclosure required by such subpoena, order, or law; and (c) exercise its commercially reasonable efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to any information so disclosed by Seller, with the Company being liable to reimburse Seller for any actions taken at the request of the Company that are described in clause (b) of this Section 6.12 .
6.13 Non-Solicitation . For a period of two (2) years commencing on the Closing Date, Seller will not, and will cause EVEP not to, directly or indirectly, solicit, canvass, approach, entice or induce any employee of Purchaser or its Affiliates who have responsibilities related to the Company during such time period to alter, lessen or terminate his, her or its employment, engagement or relationship with Purchaser; provided, however, that the foregoing restriction on solicitation shall not prohibit the Purchaser or EVEP from hiring any such employee of Purchaser pursuant to a general solicitation (such as an advertisement) not specifically directed to employees of Purchaser.
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ARTICLE
7
CONDITIONS TO CLOSING
7.1 Conditions of Seller to Closing . The obligations of Seller to consummate the transactions contemplated by this Agreement are subject, at the option of Seller, to the satisfaction on or prior to Closing of each of the following conditions:
(a) Representations . The representations and warranties of Purchaser set forth in Article 5 shall be true and correct in all material respects (except to the extent that such representations and warranties are qualified by the term “material,” “in all material respects,” “Material Adverse Effect” or similar words in which case such representations and warranties shall be true and correct in all respects at and as of the Closing Date), in each case as of the Execution Date and as of the Closing Date as though made on and as of the Closing Date.
(b) Performance . Purchaser shall have performed and observed all covenants and agreements to be performed or observed by it under this Agreement prior to or on the Closing Date.
(c) Pending Litigation . On the Closing Date, no injunction, order or award restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement, or granting material damages in connection therewith, shall have been issued and remain in force, and no suit, action or other proceeding (excluding any such matter initiated by Seller or its Affiliates) seeking to restrain, enjoin or otherwise prohibit the consummation of the transactions contemplated by this Agreement, or seeking substantial damages in connection therewith, shall be pending before any Governmental Body or arbitrator.
(d) Deliveries to Seller . Purchaser shall have delivered to Seller the documents and certificates to be delivered by Purchaser under Section 3.3 .
(e) Government Authorizations . The Government Authorizations set forth on Schedule 6.2 shall have been duly obtained, made or given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental Body shall have occurred; provided, however, that the absence of any appeals and the expiration of any appeal period with respect to any of the foregoing shall not constitute a condition to Closing hereunder.
(f) Payment . Purchaser shall have paid to Seller the Adjusted Purchase Price.
7.2 Conditions of Purchaser to Closing . The obligations of Purchaser to consummate the transactions contemplated by this Agreement are subject, at the option of Purchaser, to the satisfaction on or prior to Closing of each of the following conditions:
(a) Representations . The representations and warranties of Seller set forth in Article 4 shall be true and correct in all material respects (except to the extent that such representations and warranties are qualified by the term “material,” “in all material respects,” “Material Adverse Effect” or similar words in which case such representations and warranties shall be true and correct in all respects at and as of the Closing Date), as of the Execution Date and as of the Closing Date as though made on and as of the Closing Date (other than representations and warranties that refer to a specified date which need only be true and correct in all material respects, on and as of such specified date).
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(b) Performance . Seller shall have performed and observed all covenants and agreements to be performed or observed by it under this Agreement prior to or on the Closing Date.
(c) Pending Litigation . On the Closing Date, no injunction, order or award restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement, or granting material damages in connection therewith, shall have been issued and remain in force, and no suit, action or other proceeding (excluding any such matter initiated by Purchaser or its Affiliates) seeking to restrain, enjoin or otherwise prohibit the consummation of the transactions contemplated by this Agreement, or seeking substantial damages in connection therewith, shall be pending before any Governmental Body or arbitrator.
(d) Government Authorizations . The Government Authorizations set forth on Schedule 6.2 shall have been duly obtained, made or given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental Body shall have occurred; provided, however, that the absence of any appeals and the expiration of any appeal period with respect to any of the foregoing shall not constitute a condition to Closing hereunder.
(e) Deliveries . Seller shall have delivered to Purchaser duly executed counterparts of the documents and certificates to be delivered by Seller under Section 3.2 .
(f) Material Adverse Effect . From the Execution Date, no Material Adverse Effect shall have occurred.
ARTICLE
8
TERMINATION
8.1 Termination .
(a) This Agreement may be terminated at any time prior to Closing:
(i) by the mutual prior written consent of Seller and Purchaser;
(ii) by Purchaser, if Purchaser is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Seller pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Section 7.2 and such breach, inaccuracy or failure has not been cured by Seller within ten days of Seller’s receipt of written notice of such breach from Purchaser;
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(iii) by Seller, if Seller is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Purchaser pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Section 7.1 and such breach, inaccuracy or failure has not been cured by Purchaser within ten days of Purchaser’s receipt of written notice of such breach from Seller;
(iv) by either Seller or Purchaser, if Closing has not occurred on or before the Termination Date, provided , however , that no Party shall be entitled to terminate this Agreement under this Section 8.1(a)(iv) (x) if the Closing has failed to occur because such Party failed to perform or observe in any material respect its covenants and agreements hereunder or (y) if the other Party has filed (and is then pursuing) an action seeking specific performance as permitted by Section 10.15 ;
(v) by either Seller or Purchaser in accordance with Section 6.5 , provided , however , that no Party shall be entitled to terminate this Agreement under this Section 8.1(a)(v) if the other Party has filed (and is then pursuing) an action seeking specific performance as permitted by Section 10.15 ; or
(vi) by Purchaser pursuant to Section 6.8 .
(b) The Party desiring to terminate this Agreement pursuant to Section 8.1(a) shall give written notice of such termination to the other Party hereto specifying the provision hereof pursuant to which such termination is made.
8.2 Effect of Termination . If this Agreement is terminated pursuant to Section 8.1 , this Agreement shall become void and of no further force or effect (except for the provisions of Sections 4.7, 5.5, 6.3 , this Section 8.2 and Article 10 , which shall continue in full force and effect). Notwithstanding anything to the contrary contained in this Agreement, the termination of this Agreement shall not relieve any Party from liability for any breach or breaches of its agreements or covenants which occurred on or prior to the date of such termination, which breach or breaches resulted in the conditions set forth in Section 7.1(b) or Section 7.2(b) , as applicable, not being satisfied, in which case the other Party shall be entitled to all remedies available at law or in equity and shall be entitled to recover court costs and attorneys’ fees in addition to any other relief to which such Party may be entitled.
ARTICLE
9
INDEMNIFICATION; LIMITATIONS
9.1 Indemnification .
(a) From and after the Closing, Purchaser shall indemnify, defend and hold harmless Seller from and against all Damages incurred or suffered by Seller:
(i) to the extent constituting obligations assumed by Purchaser pursuant to Section 6.4 ; provided, however, that Purchaser shall have no liability to Seller for any Damages for which (A) Purchaser is entitled to be indemnified pursuant to this Agreement or (B) the event or circumstance giving rise to such Damages also constitutes a breach of any of Seller’s representations or warranties set forth in this Agreement or arises as a result of Seller’s breach of any of its covenants or agreements under this Agreement or the LLC Agreement (whether or not Purchaser would then be entitled to be indemnified therefor under this Agreement or otherwise). For the avoidance of doubt, the foregoing indemnity shall not be applicable with respect to any obligations of Seller to make payments under Section 9.1(b) .
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(ii) caused by or arising out of or resulting from Purchaser’s breach of any of Purchaser’s covenants or agreements contained in this Agreement, or
(iii) caused by or arising out of or resulting from any breach of any representation or warranty made by Purchaser contained in Article 5 of this Agreement or in the certificate delivered by Purchaser at Closing pursuant to Section 3.3(c) ; provided, however, that if a representation or warranty is qualified by “in all material respects,” “in any material respect,” or “material default,” then for purposes of this clause (a)(iii), such qualifier will in all respects be ignored, even if such Damages are caused in whole or in part by the negligence (whether sole, joint or concurrent), strict liability or other legal fault of any Indemnified Person , but excepting in each case Damages to the extent caused by the willful misconduct of any Indemnified Person.
(b) From and after the Closing, Seller shall indemnify, defend and hold harmless Purchaser against and from all Damages incurred or suffered by Purchaser:
(i) caused by or arising out of or resulting from Seller’s breach of any of Seller’s covenants or agreements contained in this Agreement,
(ii) caused by or arising out of or resulting from any breach of any representation or warranty made by Seller contained in Article 4 of this Agreement, or in the certificate delivered by Seller at Closing pursuant to Section 3.2(b) ; provided, however, that if a representation or warranty is qualified by Material Adverse Effect, “in all material respects,” “in any material respect,” or “material default,” then for purposes of this clause (b)(ii), such qualifier will in all respects be ignored, even if such Damages are caused in whole or in part by the negligence (whether sole, joint or concurrent), strict liability or other legal fault of any Indemnified Person , but excepting in each case Damages to the extent caused by the willful misconduct of any Indemnified Person, or
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(iii) caused by or arising out of (x) the Subject Interest or (y) the Company or its assets, liabilities, operations or other activities, whether arising under contracts, applicable Law or otherwise, in the case of each of (x) and (y) attributable to the period before the Effective Time (A) resulting from the gross negligence, willful misconduct or criminal activity of Seller or any of its Affiliates; (B) in connection with any obligations of Seller or any of its Affiliates as a counterparty to the Company (or any now or hereafter existing Affiliate of the Company) under the Existing Agreements or any other contract or other arrangement entered into by the Seller or its Affiliates and the Company or any Affiliate of the Company; or (C) with respect to any obligations of Seller or its Affiliates arising under U.S. federal, state, or local income, franchise or similar Tax Laws for periods prior to the Closing.
(c) Notwithstanding anything to the contrary contained in this Agreement, except as provided in Section 10.15 and except for causes of action based upon intentional fraud or intentional misrepresentation, this Section 9.1 contains the Parties’ sole and exclusive remedies against each other with respect to any and all claims for any breaches of the representations, warranties, covenants and agreements herein or otherwise relating to the subject matter of this Agreement (subject to the stated exclusions, the “ Exclusive Representations and Covenants ”). Except for the remedies contained in this Section 9.1 , the remedies provided for in Section 10.15 and causes of action based on intentional fraud or intentional misrepresentation, other than the Exclusive Representations and Covenants, Seller and Purchaser each release, remise and forever discharge the other and its or their Affiliates and all such Parties’ officers, directors, employees, agents, advisors and representatives from any and all suits, legal or administrative proceedings, claims, demands, damages, losses, costs, liabilities, interest, or causes of action whatsoever, in law or in equity, known or unknown, which such Parties might now or subsequently may have, based on, relating to or arising out of this Agreement, the Subject Interest, the activities, operations, assets or liabilities of the Company, whether before or after the Effective Time, or the use, condition, quality, status or nature of the assets of the Company, including, without limitation, rights to contribution under any Law, breaches of statutory or implied warranties, nuisance or other tort actions, rights to punitive damages and rights of contribution, rights under agreements between the Company and Seller or any of its Affiliates, and rights under insurance maintained by Seller or any Affiliate of Seller, even if caused in whole or in part by the negligence (whether sole, joint or concurrent), strict liability or other legal fault of any released Person, but, for the avoidance of doubt, without prejudice to either Party’s rights under Section 10.15 or Purchaser’s right to cause the Company to enforce any obligations of Seller as a counterparty pursuant to the Existing Agreements.
(d) “ Damages ,” for purposes of this Article 9 , shall mean the amount of any actual liability, loss, cost, expense, claim, award or judgment incurred or suffered by any Indemnified Person arising out of or resulting from the indemnified matter, whether attributable to personal injury or death, property damage, contract claims (including contractual indemnity claims), torts, or otherwise, including the costs of enforcement of the indemnity and shall include (i) reasonable fees and expenses of attorneys, consultants, accountants or other agents and experts reasonably incident to matters indemnified against, and (ii) the costs of investigation and/or monitoring of such matters. No Indemnified Person shall be entitled to indemnification under this Section 9.1 for, and “ Damages ” shall not include, (A) any punitive damages (other than punitive damages suffered by Persons other than Indemnified Persons for which an Indemnified Person has been held liable), (B) any Taxes that may be assessed on payments made under this Article 9 or the loss, reduction or limitation of any Tax benefits to which the Indemnified Person may be entitled (nor shall any offset be made for Tax benefits to which the Indemnified Person becomes entitled as a consequence of the liability, loss, cost, expense, claim, award or judgment), and (C) any liability, loss, cost, expense, claim, award or judgment to the extent resulting from or to the extent increased by the actions or omissions of any Indemnified Person after the Closing Date.
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(e) The indemnity in favor of each Party provided in this Section 9.1 shall be for the benefit of and extend to such Party’s present and former Affiliates and its and their directors, officers, employees, and agents. Any claim for indemnity under this Section 9.1 by any such Affiliate, director, officer, employee, or agent must be brought and administered by a Party to this Agreement. No Indemnified Person other than Seller and Purchaser shall have any rights against either Seller or Purchaser under the terms of this Section 9.1 except as may be exercised on its behalf by Purchaser or Seller, as applicable, pursuant to this Section 9.1(e) . Seller and Purchaser may each elect to exercise or not exercise indemnification rights under this Section on behalf of the other Indemnified Person affiliated with it in its sole discretion and shall have no liability to any such other Indemnified Person for any action or inaction under this Section.
(f) To the extent permitted by applicable Laws, the Parties shall treat, for Tax purposes, any amounts paid under this Article 9 as an adjustment to the Purchase Price.
9.2 Indemnification Actions . All claims for indemnification under Section 9.1 shall be asserted and resolved as follows:
(a) For purposes of this Article 9 , the term “ Indemnifying Person ” when used in connection with particular Damages shall mean the Person or Persons having an obligation to indemnify another Person or Persons with respect to such Damages pursuant to this Article 9 , and the term “ Indemnified Person ” when used in connection with particular Damages shall mean the Person or Persons having the right to be indemnified with respect to such Damages by another Person or Persons pursuant to this Article 9 .
(b) To make a claim for indemnification under Section 9.1 , an Indemnified Person shall notify the Indemnifying Person of its claim under this Section 9.2 in writing, including the specific details of and specific basis under this Agreement for its claim (the “ Claim Notice ”). In the event that the claim for indemnification is based upon a claim by a third Person against the Indemnified Person (a “ Third Party Claim ”), the Indemnified Person shall provide its Claim Notice promptly after the Indemnified Person has actual knowledge of the Third Party Claim and shall enclose a copy of all papers (if any) served with respect to the Third Party Claim. The failure of any Indemnified Person to give notice of a claim as provided in this Section 9.2 shall not relieve the Indemnifying Person of its obligations under Section 9.1 except to the extent such failure materially prejudices the Indemnifying Person’s ability to defend against the claim. In the event that the claim for indemnification is based upon an inaccuracy or breach of a representation, warranty, covenant or agreement, the Claim Notice shall specify the representation, warranty, covenant or agreement which was inaccurate or breached.
(c) In the case of a claim for indemnification based upon a Third Party Claim, the Indemnifying Person shall have thirty (30) days from its receipt of the Claim Notice to notify the Indemnified Person whether it admits or denies its obligation to defend the Indemnified Person against such Third Party Claim under this Article 9 . If the Indemnifying Person does not notify the Indemnified Person within such thirty (30) day period whether the Indemnifying Person admits or denies its obligation to defend the Indemnified Person, it shall be conclusively deemed obligated to provide such indemnification hereunder. The Indemnified Person is authorized, prior to and during such thirty (30) day period, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the Indemnifying Person and that is not prejudicial to the Indemnifying Person (it being understood that if the Indemnified Person is ultimately entitled to be indemnified with respect to such Third Party Claim, the cost of filing such motion, answer or other pleading shall be reimbursed by the Indemnifying Person).
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(d) If the Indemnifying Person admits its obligation, it shall have the right and obligation to diligently defend, at its sole cost and expense, the Third Party Claim, and shall have full control of such defense and proceedings, including any compromise or settlement thereof, provided that if the Third Party Claim consists of a criminal proceeding or regulatory proceeding with potential criminal sanctions by any Governmental Body against the Indemnified Person or seeks permanent injunctive relief, or primarily seeks other permanent equitable relief, with respect to the Indemnified Person, the Indemnified Person shall have the option, by notice to the Indemnifying Person within the thirty (30) day period set forth in Section 9.2(c) , to control such defense and proceedings (at the cost and expense of the Indemnifying Person, if the Indemnified Person is entitled to indemnification hereunder). If requested by the Indemnifying Person, the Indemnified Person agrees to cooperate in contesting any Third Party Claim which the Indemnifying Person elects to contest (provided, however, that the Indemnified Person shall not be required to bring any counterclaim or cross-complaint against any Person). The Indemnified Person may at its own expense participate in, but not control, any defense or settlement of any Third Party Claim controlled by the Indemnifying Person pursuant to this Section 9.2(d) . An Indemnifying Person shall not, without the written consent of the Indemnified Person, settle any Third Party Claim or consent to the entry of any judgment with respect thereto which (i) does not result in a final resolution of the Indemnified Person’s liability with respect to the Third Party Claim (including, in the case of a settlement, an unconditional written release of the Indemnified Person from all further liability with respect to the Third Party Claim) or (ii) may materially and adversely affect the Indemnified Person (other than as a result of money damages covered by the indemnity).
(e) If the Indemnifying Person does not admit its obligation or admits its obligation but fails to diligently defend or settle the Third Party Claim, then the Indemnified Person shall have the right to defend against the Third Party Claim (at the sole cost and expense of the Indemnifying Person, if the Indemnified Person is entitled to indemnification hereunder), with counsel of the Indemnified Person’s choosing, subject to the right of the Indemnifying Person to admit its obligation and assume the defense of the Third Party Claim at any time prior to settlement or final determination thereof. If the Indemnifying Person has not yet admitted its obligation to provide indemnification with respect to a Third Party Claim, the Indemnified Person shall send written notice to the Indemnifying Person of any proposed settlement and the Indemnifying Person shall have the option for ten (10) days following receipt of such notice to (i) admit in writing its obligation to provide indemnification with respect to the Third Party Claim and (ii) if its obligation is so admitted, assume the defense of the Third Party Claim and reject the proposed settlement. If the Indemnified Person settles any Third Party Claim, other than a Third Party Claim consisting of a criminal proceeding or regulatory proceeding with potential criminal sanctions by any Governmental Body against the Indemnified Person or seeking permanent injunctive relief, or primarily seeking other permanent equitable relief, over the objection of the Indemnifying Person after the Indemnifying Person has timely admitted its obligation in writing and assumed the defense of a Third Party Claim, the Indemnified Person shall be deemed to have waived any right to indemnity therefor.
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(f) In the case of a claim for indemnification not based upon a Third Party Claim, the Indemnifying Person shall have thirty (30) days from its receipt of the Claim Notice to (i) cure the Damages complained of, (ii) admit its obligation to provide indemnification with respect to such Damages or (iii) dispute the claim for such Damages. If the Indemnifying Person does not notify the Indemnified Person within such thirty (30) day period that it has cured the Damages or that it disputes the claim for such Damages, the Indemnifying Person shall be conclusively deemed obligated to provide such indemnification hereunder.
9.3 Limitation on Actions .
(a) The Sections 4.1, 4.2, 4.3, 4.6, 4.7, 4.9(b) and 4.14 , (the “ Fundamental Reps ”) and the representations and warranties of Purchaser in Sections 5.1 , 5.2 and 5.3 and the corresponding representations and warranties given in the certificates delivered at the Closing pursuant to Sections 3.2(b) and 3.3(c) , as applicable, shall survive the Closing indefinitely; the representations and warranties of Seller in Section 4.9 shall survive until six months after the expiration of the applicable statute of limitations (taking into account any extension thereof); and all other representations and warranties of the Parties in Article 4 and Article 5 and the corresponding representations and warranties given in the certificates delivered at the Closing pursuant to Sections 3.2(b) and 3.3(c) , as applicable, shall survive the Closing for a period of fifteen (15) months (unless a shorter period is expressly provided within the applicable section). Representations, warranties, covenants and agreements shall be of no further force and effect after the date of their expiration, provided that there shall be no termination of any bona fide claim asserted pursuant to this Agreement with respect to such a representation, warranty, covenant or agreement prior to its expiration date.
(b) The indemnity in Section 9.1(a)(i) and 9.1(b)(iii) shall continue without time limit. The indemnities in Sections 9.1(a)(ii) , 9.1(a)(iii) , 9.1(b)(i) and 9.1(b)(ii) shall terminate as of the termination date of each respective representation, warranty, covenant or agreement that is subject to indemnification thereunder, except in each case as to matters for which a specific written claim for indemnity has been delivered to the Indemnifying Person on or before such termination date.
(c) Subject to Section 9.3(e) , neither Seller nor Purchaser shall have any liability for any indemnification under Section 9.1(a)(iii) or Section 9.1(b)(ii) for any Damages with respect to any claim (or a series of related claims arising from the same facts or circumstances) that do not exceed $100,000 (the “ Individual Claim Threshold ”), provided, however, to the extent all claims (or a series of related claims arising from the same facts or circumstances) for indemnification by Seller result in aggregate Damages exceeding the Deductible (including those claims (or a series of related claims arising from the same facts or circumstances) under the Individual Claim Threshold), then Purchaser shall be entitled to be indemnified for such Damages under this Article 9 without regard to the Individual Claim Threshold.
(d) Subject to Section 9.3(c) and Section 9.3(e) , (A) Seller shall not have any liability for any indemnification under Section 9.1(b)(ii) unless and until the aggregate Damages for which Claim Notices for claims (or a series of related claims arising from the same facts or circumstances) meeting the Individual Claim Threshold are delivered by Purchaser with respect to such matters exceed one percent (1%) of the Purchase Price (the “ Deductible ”), and then only to the extent such Damages exceed the Deductible and (B) Seller shall not be required to indemnify Purchaser under the indemnity in Section 9.1(b)(ii) for aggregate Damages in excess of fifteen percent (15%) of the Purchase Price (the “ Cap ”).
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(e) The Deductible and the Cap shall not apply to any indemnification obligations of Seller under Section 9.1(b)(ii) for Damages caused by or arising out of or resulting from Seller’s breach of any Fundamental Reps; provided that Seller shall not be required to indemnify Purchaser under this Article 9 for breaches of such Fundamental Reps for aggregate Damages in excess of the Purchase Price.
(f) The amount of any Damages for which an Indemnified Person is entitled to indemnity under this Article 9 shall be reduced by the amount of insurance proceeds realized by the Indemnified Person or its Affiliates with respect to such Damages (net of any collection costs, and excluding the proceeds of any insurance policy issued or underwritten by the Indemnified Person or its Affiliates).
(g) Any Indemnified Person that becomes aware of a loss for which it seeks indemnification shall be required to use commercially reasonable efforts to mitigate the loss, including taking any actions reasonably requested by the Indemnifying Party, and an Indemnifying Party shall not be liable for any loss to the extent that it is attributable to the Indemnified Party’s failure to use commercially reasonable efforts to mitigate.
(h) In no event shall any Indemnified Person be entitled to duplicate compensation with respect to the same Damage, liability, loss, cost, expense, claim, award or judgment under more than one provision of this Agreement and the various documents delivered in connection with the Closing.
ARTICLE
10
MISCELLANEOUS
10.1 Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original instrument, but all such counterparts together shall constitute but one agreement. Any signature of this Agreement delivered by a Party by facsimile or scanned document transmitted by email shall be deemed to be an original signature for all purposes.
10.2 Notice . All notices which are required or may be given pursuant to this Agreement must be given in writing and delivered personally, by courier, or by scanned document transmitted by email (with written confirmation of delivery) or by registered or certified mail, postage prepaid, as follows:
If to Seller:
CGAS Properties, L.P.
c/o EV Energy Partners, L.P.
1001 Fannin, Suite 800
Houston, Texas 77002
Attn: Michael E. Mercer, President and Chief Executive Officer
Email: mmercer@EVEnergyPartners.com
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With a copy to:
EnerVest, Ltd.
1001 Fannin, Suite 800
Houston, Texas 77002
Attn: Fabene Welch, Senior Vice President and General Counsel
Email: Fwelch@EnerVest.net
With a copy to:
Haynes and Boone, LLP
1221 McKinney Street, Suite 2100
Houston, Texas 77010
Attn: Guy Young
Email: guy.young@haynesboone.com
If to Purchaser:
Utica Gas Services, L.L.C.
One Williams Center
Tulsa, Oklahoma 74172-0172
Attention: General Counsel
Facsimile No.: (918) 573-3101
With a copy to:
Conner & Winters, LLP
4000 One Williams Center
Tulsa, OK 74172-0148
Attention: J. Ryan Sacra
Email: rsacra@cwlaw.com
Either Party may change its address for notices by giving notice to the other Party in the manner set forth above. All notices shall be deemed to have been duly given at the time of receipt by the Party to which such notice is addressed.
10.3 Expenses . Except as provided in Sections 6.2 and 10.4 , all expenses incurred by Seller in connection with or related to the authorization, preparation or execution of this Agreement, the conveyances delivered hereunder and the Exhibits and Schedules hereto and thereto, and all other matters related to the Closing, including, without limitation, all fees and expenses of counsel, accountants and financial advisers employed by Seller, shall be borne solely and entirely by Seller, and all such expenses incurred by Purchaser shall be borne solely and entirely by Purchaser.
10.4 Transfer Taxes . All Transfer Taxes associated with the purchase and sale of the Subject Interest contemplated by this Agreement shall be paid by Purchaser.
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10.5 Governing Law . This Agreement and any documents delivered pursuant hereto, and the legal relations between the Parties hereunder and thereunder, shall be governed by and construed in accordance with the Laws of the State of Delaware, excluding any conflict of laws rules that would refer the matter to the Laws of another jurisdiction.
10.6 Jurisdiction; Waiver of Jury Trial .
(a) Any legal suit, action or proceeding arising out of or based upon this Agreement, or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of Delaware in the County of New Castle, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.6(b) .
10.7 Captions . The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.
10.8 Waivers . Any failure by any Party or Parties to comply with any of its or their obligations, agreements or conditions herein contained may be waived by the Party or Parties to whom such compliance is owed by an instrument signed by such Party or Parties and expressly identified as a waiver, but not in any other manner. No waiver of, or consent to a change in, any of the provisions of this Agreement shall be deemed or shall constitute a waiver of, or consent to a change in, other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.
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10.9 Assignment . No Party shall assign all or any part of this Agreement, nor shall any Party assign or delegate any of its rights or duties hereunder, without the prior written consent of the other Party; provided, however, that the Purchaser may assign its rights under this Agreement (but not its obligations) to any Affiliate of Purchaser without the prior consent of Seller but such assignment shall not release Parent from its obligations under the Guaranty. Subject to the preceding sentences, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns. Any purported assignment not permitted under this Section 10.9 shall be null and void.
10.10 Entire Agreement . This Agreement and the documents to be executed hereunder (and the Exhibits, Attachments and Schedules attached hereto) constitute the entire agreement between the Parties pertaining to the subject matter hereof, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties pertaining to the subject matter hereof.
10.11 Amendment . This Agreement may be amended or modified only by an agreement in writing executed by all Parties and expressly identified as an amendment or modification.
10.12 References . In this Agreement:
(a) References to any gender includes a reference to all other genders;
(b) References to the singular includes the plural, and vice versa;
(c) Reference to any Article or Section means an Article or Section of this Agreement;
(d) Reference to any Exhibit or Schedule means an Exhibit, Attachment or Schedule to this Agreement, all of which are incorporated into and made a part of this Agreement;
(e) Unless expressly provided to the contrary, “hereunder,” “hereof,” “herein” and words of similar import are references to this Agreement as a whole and not to any particular Section or other provision of this Agreement; and
(f) “Include” and “including” shall mean include or including without limiting the generality of the description preceding such term.
10.13 Construction . Purchaser is a party capable of making such investigation, inspection, review and evaluation of the Company and the Subject Interest as a prudent purchaser would deem appropriate under the circumstances including with respect to all matters relating to the value, operation and suitability of the assets of the Company. Seller and Purchaser have had the opportunity to exercise business discretion in relation to the negotiation of the details of the transaction contemplated hereby. This Agreement is the result of arm’s-length negotiations from equal bargaining positions. Based on the foregoing, any rule of construction that a contract be construed against the drafter shall not apply to the interpretation or construction of this Agreement.
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10.14 Limitation on Damages . Notwithstanding anything to the contrary contained in this Agreement, except in connection with (i) any Party’s failure to consummate the transactions contemplated by this Agreement as required by the terms hereof (subject to Section 8.2 ) and (ii) any such damages claimed by Persons other than the Parties or their Affiliates for which indemnification is available under the terms of this Agreement, none of Purchaser, Seller or any of their respective Affiliates shall be entitled to punitive or exemplary damages in connection with this Agreement and the transactions contemplated hereby and, except as otherwise provided in this sentence, Purchaser and Seller, for themselves and on behalf of their Affiliates, hereby expressly waive any right to punitive or exemplary damages in connection with this Agreement and the transactions contemplated hereby.
10.15 Specific Performance . The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed or were threatened to be not performed in accordance with their specific terms or were otherwise breached, and that money damages or legal remedies would not be an adequate remedy for any such damages. The Parties accordingly agree that, in addition to any other remedy that may be available to it, including monetary damages, each party shall be entitled to enforce specifically the terms and provisions of this Agreement, or to enforce compliance with, the covenants and obligations of any other party and appropriate injunctive relief shall be granted in connection therewith and all such rights and remedies at law or in equity shall be cumulative, except as may be limited by Section 9.1(c) . Any party seeking an injunction, a decree or order of specific performance shall not be required to provide any bond or other security in connection therewith and any such remedy shall be in addition and not in substitution for any other remedy to which such party is entitled at law or in equity.
10.16 Right to Rely . Notwithstanding any other provision of this Agreement, if the transactions contemplated hereby are consummated, Purchaser expressly reserves the right to seek indemnity or other remedy for any Damages arising out of or relating to any breach of any representation, warranty or covenant contained herein, notwithstanding any investigation by, disclosure to, knowledge or imputed knowledge of Purchaser or any of its Affiliates and its and their managers, directors, officers, employees and agents in respect of any fact or circumstances that reveals the occurrence of any such breach, whether before or after the execution and delivery hereof. In furtherance of the foregoing, Seller agrees that as knowledge or lack of reliance shall not be a defense in law or equity to any claim of breach of representation, warranty or covenant by Seller herein, Seller shall not in any action, suit or proceeding concerning a breach or alleged breach of any representation, warranty or covenant herein, or any indemnity thereof, seek information concerning knowledge or reliance of Purchaser or any of its Affiliates and its and their managers, directors, officers, employees and agents, through deposition, discovery or otherwise or seek to introduce evidence or argument in any action, suit or proceeding regarding the knowledge or lack of reliance of Purchaser or any of its Affiliates and its and their managers, directors, officers, employees and agents prior to the Closing on or with respect to any such representations, warranties or covenants.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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The Parties are signing this Agreement as of the Execution Date.
SELLER: | ||
CGAS PROPERTIES, L.P. | ||
EVCG GP, LLC, its general partner | ||
By: | /s/ Michael E. Mercer | |
Michael E. Mercer, President and | ||
Chief Executive Officer | ||
PURCHASER: | ||
UTICA GAS SERVICES, L.L.C. | ||
By: | /s/ Alan S. Armstrong | |
Alan S. Armstrong, Chief Executive Officer |
Signature Page to
Membership Interest Purchase Agreement between CGAS Properties, L.P. and Utica Gas Services, L.L.C.
Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and Utica Gas Services, L.L.C.
Exhibit A
Definitions
“ Adjusted Purchase Price ” has the meaning set forth in Section 2.4(d) .
“ Affiliate ” with respect to any Person, means any other Person that directly or indirectly controls, is controlled by or is under common control with such Person, with control in such context meaning the ability to direct the management and policies of a Person through ownership of voting shares or other equity rights, pursuant to a written agreement, or otherwise.
“ Agreement ” has the meaning set forth in the Preamble.
“ Assignment Agreement ” has the meaning set forth in Section 3.2(a) .
“ Authorized Officer ” means, with respect to any act to be performed or duty to be discharged by any Person which is not an individual, any officer or other representative thereof then authorized to perform such act or discharge such duty.
“ Business Day ” means each calendar day except Saturday, Sunday, and any other day on which banks are generally closed for business in Houston, Texas.
“ Cap ” has the meaning set forth in Section 9.3(d) .
“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and the rules and regulations promulgated thereunder.
“ Claim Notice ” has the meaning set forth in Section 9.2(b) .
“ Closing ” has the meaning set forth in Section 3.1 .
“ Closing Date ” means July 16, 2015; provided that , (i) if the right in Section 8.6 of the LLC Agreement of the Other Member to acquire the Entire Interest is waived or rescinded; or if Purchaser has closed a transaction with the Other Member pursuant to which Purchaser acquires the Other Member’s Membership Interest, the Closing Date shall mean the fifth full Business Day following the satisfaction or waiver of all conditions in Article 7 of this Agreement, but in no event prior to May 1, 2015; (ii) if the Other Member does not exercise its right to agree to acquire the Entire Interest as provided in and subject to Section 8.6 of the LLC Agreement, on or before June 1, 2015, the Closing Date shall mean the fifth full Business Day following the satisfaction or waiver of all conditions in Article 7 of this Agreement; (iii) if the condition set forth in Section 7.2(d) is not satisfied as of July 16, 2015, the Closing Date shall mean the fifth full Business Day following the satisfaction or waiver of all conditions in Article 7 of this Agreement.
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Company ” has the meaning set forth in the Recitals.
Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and Utica Gas Services L.L.C.
“ Competing Transaction ” has the meaning set forth in Section 6.1 .
“ Contract ” means any legally binding contract, lease, license, evidence of indebtedness, mortgage indenture, purchase order, binding bid, letter of credit, security agreement or other written or oral and legally binding arrangement.
“ Damages ” has the meaning set forth in Section 9.1(d) .
“ Deductible ” has the meaning set forth in Section 9.3(c) .
“ Dispute ” means any dispute, controversy or claim and other matter in question arising out of or relating to this Agreement, including any dispute as to the interpretation, construction, validity, enforceability, breach, or termination hereof.
“ Effective Time ” means 12:01 a.m., United States of America central time, on May 1, 2015.
“ Employee Benefit Plan ” means any employment, consulting, services, stock option, equity or equity based, change-in-control, retention, incentive, severance, termination, deferred compensation, profit sharing, retirement, supplemental income, fringe benefit, collective bargaining, employee loan or extension of credit, vacation, sick leave, workmen’s compensation or other insurance, disability, death benefit, group insurance, health, life, welfare, accident or other plan, program, understanding, agreement, practice, policy or arrangement of any kind, whether written or oral, including, without limitation, each “employee benefit plan” within the meaning of Section 3(3) of ERISA and each “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA, whether or not subject to ERISA.
“ Encumbrance ” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, option, preemptive right, right of first refusal or first offer, proxy, levy, voting trust or agreement, encumbrance, or other adverse claim or restriction on title or transfer of any nature whatsoever.
“ Enforceability Exceptions ” has the meaning set forth in Section 4.3 .
“ Entire Interest ” has the meaning set forth in the Recitals.
“ Environmental Laws ” means all Laws of any Governmental Body having jurisdiction over the Company or its property in question addressing pollution or protection of the environment.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.
“ Exclusive Representations and Covenants ” has the meaning set forth in Section 9.1(c) .
“ Execution Date ” has the meaning set forth in the Preamble.
“ Existing Agreements ” means the agreements listed on Schedule 4.13 .
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Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and Utica Gas Services L.L.C.
“ EVEP ” means EV Energy Partners, L.P., a Delaware limited partnership and indirect owner of all of the partnership interests in the Seller.
“ Fundamental Reps ” has the meaning set forth in Section 9.3(a) .
“ GAAP ” means US generally accepted accounting principles, consistently applied.
“ Government Authorizations ” has the meaning set forth in Section 6.2 .
“ Governmental Body ” means any domestic or foreign national, state, local, municipal, or other government, and any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; and any court or governmental tribunal.
“ Guaranty ” has the meaning in the Recitals.
“ Hazardous Substance ” means (i) any petroleum or petroleum products, flammable explosives, radioactive materials, medical waste, radon, asbestos or asbestos-containing products or materials, chlorofluorocarbon, hydrofluorocarbon, urea formaldehyde foam insulation, polychlorinated biphenyls (PCBs) or lead-containing paint or plumbing; and (ii) any element, compound, substance, waste or other material that is defined as, or included in the definition of, or deemed by or pursuant to any Environmental Law or by any Governmental Body to be “hazardous,” “toxic,” a “contaminant,” “waste,” a “pollutant,” “hazardous substance,” “hazardous waste,” “restricted hazardous waste,” “hazardous material,” “extremely hazardous waste,” a “toxic substance,” a “toxic pollutant” or words with similar meaning.
“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and the accompanying rules and regulations.
“ Hydrocarbons ” means oil and gas and other hydrocarbons produced or processed in association therewith (whether or not any such item is in liquid or gaseous form), or any combination thereof, and any minerals produced in association therewith.
“ Indemnified Person ” has the meaning set forth in Section 9.2(a) .
“ Indemnifying Person ” has the meaning set forth in Section 9.2(a) .
“ Individual Claim Threshold ” has the meaning set forth in Section 9.3(c) .
“ Intellectual Property ” means any trademarks, service marks, copyrights, trade secrets, patents, patent applications and other intellectual property rights.
“ Knowledge ” means (a) with respect to Seller, the actual knowledge, without investigation, of those individuals identified on Schedule 1.1(b) and (b) with respect to Purchaser, the actual knowledge, without investigation, of those individuals identified on Schedule 1.1(c) .
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Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and Utica Gas Services L.L.C.
“ Laws ” means all laws, statutes, rules, regulations, ordinances, orders, restrictions, decrees, common law, directives, judgments, injunctions, writs, awards, codes and other legal requirements of, or issued by, any Governmental Body.
“ LLC Agreement ” means the Limited Liability Company Agreement of the Company dated as of March 9, 2012, as amended from time to time.
“ Material Adverse Effect ” means any event, occurrence, fact, condition or change that is or could be reasonably expected to become, individually or in the aggregate, with all other such events, occurrences, facts, conditions or changes, materially adverse to the ownership, operation, business, assets, liabilities, results of operations, financial condition or value of the Company, as currently operated, taken as a whole (it being understood and agreed that, if the aggregate amount of Damages resulting therefrom is ten percent (10%) or more of the Purchase Price, such event, occurrence, fact, condition or change shall be deemed to constitute a Material Adverse Effect), or prevents or materially delays the ability of Seller to consummate the transactions contemplated by this Agreement; provided, however, in no event shall any of the following be deemed to constitute, nor shall any of the following be taken into account in determining whether there has been or will be, a Material Adverse Effect:
(A) changes in Hydrocarbon prices;
(B) any change affecting the oil and gas industry generally in the region in which the Company operates;
(C) any change in the economy or the financial, capital or energy markets generally in the region in which the Company operates, in the United States or elsewhere in the world, including changes generally in supply, demand, price levels or interest or exchange rates;
(D) any change in Law or in GAAP or interpretations thereof or accounting standards, governmental policy or political conditions;
(E) any labor strike, request for representation, organizing campaign, work stoppage, slowdown, lockout or other labor disputes;
(F) any change in general regulatory or political conditions, including acts of war, sabotage, armed hostilities or terrorism, embargo, sanctions or interruption of trade, or any escalation or worsening of any acts of war, sabotage, armed hostilities or terrorism, embargo, sanctions or interruption of trade;
(G) any change in the financial condition or results of operation of Purchaser or its Affiliates;
(H) any failure of any assumptions, estimates or projections relating to the Company to be accurate (provided that the underlying causes of such failures (subject to the other provisions of this definition) shall not be excluded);
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Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and Utica Gas Services L.L.C.
(I) the announcement of the execution, or the pendency, of this Agreement or the performance of obligations under this Agreement;
(J) any casualty loss or condemnation, which shall be subject to the provisions of Section 6.5 ;
(K) any natural disasters or acts of God; or
(L) any actions or inactions of Seller or the Company consented to by Purchaser;
provided further, however, that any event, occurrence, fact, condition or change referred to in the immediately preceding clauses (A), (B), (C), (D), (E), (F), or (K) shall be taken into account for purposes of determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur only to the extent such event, occurrence, fact, condition or change adversely affects the Company in a disproportionate manner relative to other companies operating in the industries in which the Company operates (provided for the avoidance of doubt, to the extent any such disproportionate impact is the physical damage or destruction to the assets of the Company constituting a casualty loss, such impact shall not be considered and the provisions of Section 6.5 shall apply).
“ Member ” has the meaning set forth in the LLC Agreement.
“ Membership Interest ” has the meaning given to it in the LLC Agreement.
“ Midstream Assets ” means collectively, the Plant Facilities and the Gas Pipeline Facilities as defined in the LLC Agreement.
“ Other Agreement ” has the meaning set forth in Section 6.9 .
“ Other Member ” has the meaning set forth in the Recitals.
“ Parent ” means Williams Partners L. P.
“ Party ” and “ Parties ” have the meanings set forth in the Preamble.
“ Permit ” means all permits, licenses, registrations, certifications, authorizations, approvals, consents, exemptions, waivers, variances, privileges and other authorizations of or by any Governmental Body.
“ Person ” means any individual, firm, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, or Governmental Body or any other entity.
“ Proportionate Share ” means 21%; provided that if the Other Member purchases its share of the Entire Interest as provided in Section 8.6 of the LLC Agreement, the Proportionate Share shall be decreased to 49/79 x 21% (approximately 13.025%).
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Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and Utica Gas Services L.L.C.
“ Purchase Price ” has the meaning set forth in Section 2.2 , subject to adjustment as provided in Sections 2.3 and 2.4 .
“ Purchaser ” has the meaning set forth in the Preamble.
“ Release ” means any releasing, spilling, leaking, discharging, disposing of, pumping, pouring, emitting, emptying, injecting, leaching, dumping or allowing to escape and includes “release” as defined in CERCLA or any other Environmental Law.
“ Remaining Interest ” means a Membership Interest equal to the Entire Interest minus the Subject Interest.
“ Sanctions ” has the meaning set forth in Section 4.18 .
“ Seller ” has the meaning set forth in the Preamble.
“ Subject Interest ” means a 21% Membership Interest; provided that if the Other Member purchases its share of the Entire Interest as provided in Section 8.6 of the LLC Agreement, the Subject Interest shall be decreased as provided in Section 2.3 .
“ Tax ” and “ Taxes ” mean all federal, state, local, and foreign income, profits, franchise, sales, use, ad valorem, property, severance, production, excise, stamp, documentary, real property transfer or gain, gross receipts, goods and services, registration, capital, transfer, value-added or withholding taxes or other assessments, duties, fees or charges imposed by any Governmental Body, including any interest, penalties or additional amounts which may be imposed with respect thereto except insofar as such interest, penalties or additional amounts are attributable to the delay or default of a Person seeking indemnification therefor.
“ Tax Return ” means any return, report or other information required to be supplied to a Governmental Body in connection with Taxes, or amendment thereto.
“ Termination Date ” means September 1, 2015.
“ Third Party Claim ” has the meaning set forth in Section 9.2(b) .
“ Transfer Notice ” has the meaning set forth in the Recitals.
“ Transfer Taxes ” means all sales, use, VAT, business transfer, real property transfer, recording, documentary, stamp, registration, stock transfer, or similar taxes and fees.
“ Treasury Regulations ” means the regulations promulgated under the Code by the United States Department of the Treasury, as such regulations may be amended from time to time.
“ $ ” means United States dollars.
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Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and Utica Gas Services, L.L.C.
EXHIBIT B
FORM OF ASSIGNMENT AGREEMENT
ASSIGNMENT
This Assignment (this “ Assignment ”) is dated [ ● ], 2015 (the “ Execution Date ”), and is between CGAS Properties, L.P., a Delaware limited partnership (“ Assignor ”), and Utica Gas Service, L.L.C., an Oklahoma limited liability company (“ Assignee ”). Assignor and Assignee are sometimes referred to individually as a “ Party ” and collectively as the “ Parties ”.
RECITALS
WHEREAS , Assignor owns twenty-one percent (21%) of the membership interests of Utica East Ohio Midstream, LLC, a Delaware limited liability company (the “ Company ”);
WHEREAS , the Parties have entered into that certain Membership Interest Purchase Agreement dated April 2, 2015 (the “ MIPA ”), whereby Assignor agreed to sell to Assignee, and Assignee agreed to purchase from Assignor, a [ ]% membership interest (“ Subject Interest ”); and
WHEREAS , the Parties are executing this Assignment to effect the assignment and transfer from Assignor to Assignee of the Subject Interest, subject to the terms and conditions herein.
NOW, THEREFORE , in consideration of the premises and of the mutual promises, representations, warranties, covenants, conditions and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound by the terms hereof, agree as follows:
1. Definitions . Capitalized terms used but not otherwise defined herein shall have the meanings given such terms in the MIPA.
2. Conveyance of the Subject Interest . On and with effect from the date of this Assignment, Assignor hereby sells, assigns, and transfers to Assignee, and Assignee hereby acquires, accepts, and assumes from Assignor, all of Assignor’s right, title and interest in and to the Subject Units, free and clear of all Encumbrances other than restrictions that may be imposed by applicable Laws and restrictions under the LLC Agreement.
3. Disclaimer of Representations and Warranties . Other than the representations and warranties of Assignor specifically set forth in the MIPA and without prejudice to the rights of Assignee under the MIPA, the assignment of the Subject Interest pursuant to this Assignment is made without representation or warranty, express or implied, and Assignor hereby disclaims and negates any such representation or warranty.
4. Severability . If any provision or provisions of this Assignment is or at any time becomes illegal, invalid or unenforceable in any respect, the legality, validity and enforceability of the remaining provisions of this Assignment shall not in any way be affected or impaired thereby.
Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and Utica Gas Services L.L.C.
5. Entire Agreement; Amendment . This Assignment and the MIPA and the other documents to be executed thereunder and the Exhibits, Attachments and Schedules attached thereto constitute the entire agreement between the Parties pertaining to the subject matter thereof and hereof, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties pertaining to the subject matter thereof and hereof. This Assignment may be amended or modified only by an agreement in writing executed by all Parties and expressly identified as an amendment or modification.
6. Counterparts . This Assignment may be executed in counterparts, each of which shall be deemed an original instrument, but all such counterparts together shall constitute but one agreement.
7. Governing Law; Disputes . This Assignment and the legal relations between the Parties shall be governed by and construed in accordance with the laws of the State of Texas, excluding any conflict of laws rules that would refer the matter to the Laws of another jurisdiction. Any Dispute between the Parties with respect to this Assignment shall be resolved in accordance with the terms of Section 10.6 of the MIPA, which is incorporated into this Assignment by reference.
8. MIPA; Conflict . This Assignment is made subject to the terms and conditions of the MIPA. In the event of any conflict between this Assignment and the MIPA, the provisions of the MIPA shall prevail.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and Utica Gas Services L.L.C.
The Parties are signing this Assignment as of the Execution Date.
ASSIGNOR: | ||
CGAS PROPERTIES, L.P. | ||
By: | EVCG GP, LLC , its general partner | |
By:/ | s/Michael E. Mercer | |
Name: | Michael E. Mercer | |
Title: | President and Chief Executive Officer | |
ASSIGNEE: | ||
UTICA GAS SERVICES, L.L.C. | ||
By:/ | s/Alan S. Armstrong | |
Name: | Alan S. Armstrong | |
Title: | Chief Executive Officer |
3 |
Exhibit 10.4
AMENDMENT NO. 1 TO MEMBERSHIP INTEREST PURCHASE AGREEMENT
This Amendment No. 1 to Membership Interest Purchase Agreement (this “Amendment”) dated as of May 26, 2015 amends the Membership Interest Purchase Agreement (the “ MIPA ”) dated as of April 2, 2015 by and between CGAS Properties, L.P., a Delaware limited partnership (“ Seller ”), and Utica Gas Services, L.L.C., an Oklahoma limited liability company (“ Purchaser ”). All capitalized terms not otherwise defined in this Amendment shall have the meaning set forth in the MIPA.
RECITALS
WHEREAS , the Other Member has agreed to acquire its pro rata share of the Entire Interest and the parties to the MIPA agreed to cooperate to facilitate simultaneous closings of the MIPA and the Other Agreement;
WHEREAS , the parties therefore desire to amend the MIPA to reflect a revision to the definition of the Closing Date and to clarify certain understandings with respect to the Closing.
NOW, THEREFORE , in consideration of the foregoing and the mutual covenants and agreements set forth herein, the Parties to this Amendment do hereby agree as follows, intending to be legally bound:
Article I.
Amendments
1. | The definition of “Closing Date” in Exhibit A of the MIPA shall be amended and restated as follows: |
“ Closing Date ” means June 10, 2015, on which date Purchaser shall acquire its Proportionate Share; provided, if the Other Member does not close on the purchase of its pro rata share of the Entire Interest on June 10, 2015, the Closing Date shall be such date as selected by Purchaser, not later than June 24, 2015 on which date Purchaser shall acquire the Entire Interest.
2. | If Purchaser does not close the purchase of its Proportionate Share or the Entire Interest, as applicable on the Closing Date, Purchaser shall have no further right, claim or interest in or to all or part of the Entire Interest so long as the Other Member consummates the sale of the Entire Interest as contemplated by the Other Agreement on or before July 31, 2015. Purchaser further acknowledges and agrees that Seller is entitled to consummate the sale of the Entire Interest to the Other Member as contemplated by the Other Agreement by July 31, 2015. |
Article II
Miscellaneous
1. | Interpretation . This Amendment has been negotiated at arm’s length and between Persons sophisticated and knowledgeable in the matters dealt with in this Amendment. Each party has been represented by experienced and knowledgeable legal counsel. Accordingly, any rule of law or legal decision that would require interpretation of any ambiguities in this Amendment against the party that has drafted it is not applicable and is waived. The provisions in this Amendment shall be interpreted in a reasonable manner to effect the purposes of the parties, this Amendment and the MIPA. |
2. | Counterparts . This Amendment may be executed simultaneously in multiple counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same instrument. Execution and delivery of this Amendment by exchange of facsimile copies bearing a facsimile signature of a party hereto shall constitute a valid and binding execution and delivery of this Amendment by such party. Such facsimile copies shall constitute enforceable original documents. |
3. | Governing Law . The internal laws of the State of Delaware (irrespective of its choice of law principles) will govern the validity of this Amendment, the construction of its terms, and the interpretation and enforcement of the rights and duties of the parties hereto. |
4. | Severability . If any provision of this Amendment, or the application thereof, shall for any reason or to any extent be invalid or unenforceable, the remainder of this Amendment and application of such provision to other persons or circumstances shall continue in full force and effect and in no way be affected, impaired or invalidated. |
5. | No Other Amendments or Modification . Except as expressly modified and amended by this Amendment, the MIPA shall remain in full force and effect. |
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have duly executed this Amendment as of the date first written above.
SELLER: | ||
CGAS PROPERTIES, L.P. | ||
EVCG GP, LLC, its general partner | ||
By: | /s/Michael E. Mercer | |
Michael E. Mercer, President and | ||
Chief Executive Officer |
IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have duly executed this Amendment as of the date first written above.
PURCHASER: | ||
UTICA GAS SERVICES, L.L.C. | ||
By: | Frank E. Billings | |
Frank E. Billings, Senior Vice President, Corporate Strategic Development |
Exhibit 10.5
MEMBERSHIP INTEREST PURCHASE AGREEMENT
BETWEEN
CGAS Properties, L.P.
AS SELLER
AND
M3 Ohio Gathering LLC
AS PURCHASER
Executed on MAY 26, 2015
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TABLE OF CONTENTS
Page | ||
Article 1 DEFINITIONS | 1 | |
Article 2 PURCHASE AND SALE | 2 | |
2.1 | Purchase and Sale | 2 |
2.2 | Purchase Price | 2 |
2.3 | Increase in Subject Interest and Purchase Price; Extension of Closing Date | 2 |
2.4 | Adjustments to Purchase Price | 2 |
2.5 | Agreement Regarding LLC Agreement | 3 |
Article 3 CLOSING | 3 | |
3.1 | Time and Place of Closing | 3 |
3.2 | Obligations of Seller at Closing | 3 |
3.3 | Obligations of Purchaser at Closing | 4 |
Article 4 REPRESENTATIONS AND WARRANTIES OF SELLER | 5 | |
4.1 | Existence | 5 |
4.2 | Power | 5 |
4.3 | Authorization and Enforceability | 5 |
4.4 | No Conflicts | 5 |
4.5 | LLC Agreement | 6 |
4.6 | Ownership | 6 |
4.7 | Liability for Brokers’ Fees | 6 |
4.8 | Litigation | 6 |
4.9 | Taxes | 6 |
4.10 | Environmental Laws | 7 |
4.11 | Compliance with Laws | 7 |
4.12 | Midstream Assets.. | 7 |
4.13 | Contracts | 7 |
4.14 | Tag-Along Rights, Consents and Preferential Rights | 7 |
4.15 | Employee Matters | 8 |
4.16 | Intellectual Property | 8 |
4.17 | Anti-Corruption Matters | 8 |
i
4.18 | OFAC | 8 |
4.19 | Solvency. | 8 |
4.20 | Certain Disclaimers | 9 |
Article 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER | 10 | |
5.1 | Existence and Qualification | 10 |
5.2 | Power | 10 |
5.3 | Authorization and Enforceability | 10 |
5.4 | No Conflicts | 10 |
5.5 | Liability for Brokers’ Fees | 10 |
5.6 | Litigation | 11 |
5.7 | Investment Intent | 11 |
5.8 | Independent Investigation | 11 |
5.9 | Other Consents | 11 |
5.10 | Financing. | 11 |
Article 6 COVENANTS OF THE PARTIES | 11 | |
6.1 | Exclusivity | 12 |
6.2 | Government Authorizations; Cooperation | 12 |
6.3 | Public Announcement | 13 |
6.4 | Assumption of Obligations | 13 |
6.5 | Casualty and Condemnation | 14 |
6.6 | Further Assurances | 14 |
6.7 | Cooperation on Taxes | 14 |
6.8 | Schedule Update | 14 |
6.9 | Other Agreement | 15 |
6.10 | Encumbrances on the Subject Interest | 15 |
6.11 | Confidentiality | 15 |
6.12 | Non-Solicitation | 15 |
6.13 | Closing | 16 |
6.14 | Conduct Pending Closing. | 16 |
Article 7 CONDITIONS TO CLOSING | 16 | |
7.1 | Conditions of Seller to Closing | 16 |
7.2 | Conditions of Purchaser to Closing | 17 |
ii
Article 8 TERMINATION | 18 | |
8.1 | Termination | 18 |
8.2 | Effect of Termination | 19 |
Article 9 INDEMNIFICATION; LIMITATIONS | 19 | |
9.1 | Indemnification | 19 |
9.2 | Indemnification Actions | 22 |
9.3 | Limitation on Actions | 24 |
Article 10 MISCELLANEOUS | 25 | |
10.1 | Counterparts | 25 |
10.2 | Notice | 26 |
10.3 | Expenses | 27 |
10.4 | Transfer Taxes | 27 |
10.5 | Governing Law | 27 |
10.6 | Jurisdiction; Waiver of Jury Trial | 27 |
10.7 | Captions | 28 |
10.8 | Waivers | 28 |
10.9 | Assignment | 28 |
10.10 | Entire Agreement | 28 |
10.11 | Amendment | 28 |
10.12 | References | 29 |
10.13 | Construction | 29 |
10.14 | Limitation on Damages | 29 |
10.15 | Specific Performance | 30 |
iii
Exhibits
Exhibit A | – | Definitions |
Exhibit B | – | Form of Assignment Agreement |
Schedules | ||
Schedule 1.1(b) | – | Knowledge Personnel - Seller |
Schedule 1.1(c) | – | Knowledge Personnel - Purchaser |
Schedule 4.6 | – | Encumbrances |
Schedule 4.8 | – | Litigation |
Schedule 4.9 | – | Taxes |
Schedule 4.10 | – | Environmental |
Schedule 4.11 | – | Compliance with Laws |
Schedule 4.13 | – | Existing Agreements |
Schedule 4.14 | – | Certain Consents |
Schedule 5.9 | – | Other Purchaser Consents |
Schedule 6.2 | – | Government Authorizations |
iv
MEMBERSHIP INTEREST PURCHASE AGREEMENT
This Membership Interest Purchase Agreement (this “ Agreement ”) is dated May 26, 2015 (the “ Execution Date ”), and is by and between CGAS Properties, L.P., a Delaware limited partnership (“ Seller ”) and M3 Ohio Gathering LLC, a Delaware limited liability company (“ Purchaser ”). Seller and Purchaser are sometimes referred to individually as a “ Party ” and collectively as the “ Parties .”
RECITALS
WHEREAS, Seller owns a 21% Membership Interest (the “ Entire Interest ”) in Utica East Ohio Midstream LLC, a Delaware limited liability company (the “ Company ”);
WHEREAS, Purchaser owns a 30% Membership Interest in the Company;
WHEREAS, Utica Gas Services, L.L.C., an Oklahoma limited liability company (the “ Other Member ”) owns the remaining 49% Membership Interest in the Company;
WHEREAS, Seller desires to sell the Entire Interest and, in accordance with Section 8.6 of the LLC Agreement (as hereinafter defined), has delivered to Purchaser and the Other Member a Proposed Transfer Notice and Offer Terms, dated April 2, 2015 (“ Transfer Notice ”);
WHEREAS, Seller and the Other Member have entered into a Membership Interest Purchase Agreement (the “ Other Agreement ”), wherein the Seller has agreed to sell to the Other Member, and the Other Member has agreed to purchase from the Seller, the Entire Interest, subject to the right of the Purchaser to purchase its pro rata share of the Entire Interest as provided in Section 8.6 of the LLC Agreement; and
WHEREAS, Purchaser desires to accept the offer set forth in the Transfer Notice and to exercise its rights as provided in Section 8.6 of the LLC Agreement to purchase the Subject Interest for the consideration, and subject to the terms and conditions, set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual promises, representations, warranties, covenants, conditions and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound by the terms hereof, agree as follows:
Article 1
DEFINITIONS
In addition to the terms defined in the introductory paragraph and the recitals of this Agreement, for purposes hereof, the capitalized terms used herein and not otherwise defined shall have the meanings set forth in Exhibit A .
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Article 2
PURCHASE AND SALE
2.1 Purchase and Sale . At the Closing, and upon the terms and subject to the conditions of this Agreement, Seller shall sell and convey to Purchaser, and Purchaser shall purchase, accept and pay for, all of Seller’s right, title and interest in and to the Subject Interest, free and clear of all Encumbrances other than any restrictions under federal and state securities Laws and the terms and conditions of the LLC Agreement, for the consideration in Section 2.2 .
2.2 Purchase Price . The purchase price for the Subject Interest (the “ Purchase Price ”) shall be Two Hundred and Eighteen Million, Three Hundred and Fifty Four Thousand Four Hundred and Thirty Dollars ($218,354,430). The Purchase Price shall be subject to adjustment as provided in Section 2.3 and 2.4 .
2.3 Increase in Subject Interest and Purchase Price; Extension of Closing Date . The Subject Interest shall initially be a 30/79 x 21% (approximately 7.975%) Membership Interest in the Company. If the Other Member does not close on the purchase of the Remaining Interest on June 10, 2015, or, if applicable, on the purchase of the Entire Interest on or before June 24, 2015, and this Agreement has not been terminated, as permitted under Section 8.1 then (a) the Closing Date shall be extended to July 31, 2015 or such earlier date as agreed to by the Parties, (b) the Subject Interest shall be increased to 21% and (c) the Purchase Price shall be increased to Five Hundred and Seventy Five Million Dollars ($575,000,000).
2.4 Adjustments to Purchase Price . The Purchase Price for the Subject Interest shall be adjusted as follows:
(a) Capital Contributions . The Purchase Price shall be increased by an amount equal to the sum of all Capital Contributions (as defined in the LLC Agreement) made by Seller to the Company with respect to the Subject Interest after the Effective Time and prior to Closing.
(b) Distributions . The Purchase Price shall be decreased by an amount equal to the sum of all Distributions (as defined in the LLC Agreement) received by Seller from the Company with respect to the Subject Interest after the Effective Time and prior to Closing.
(c) Casualty . The Purchase Price shall be decreased by any casualty or condemnation adjustments under Section 6.5 .
(d) Adjusted Purchase Price . The Purchase Price, adjusted as set forth in Section 2.3 , this Section 2.4 and Section 6.5 , shall be the “ Adjusted Purchase Price .”
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2.5 Agreement Regarding LLC Agreement . Seller and Purchaser agree and acknowledge that (a) this Agreement and the Transfer Notice constitute the “Proposed Transfer Notice,” “Offer Terms” and “Purchase Notice” as such terms are used in the LLC Agreement, (b) this Agreement and the Transfer Notice satisfy in all respects the requirements of Section 8.6 of the LLC Agreement imposed on Seller and Purchaser and (c) none of the covenants, agreements, representations and warranties set forth in this Agreement shall be deemed breached or violated by Seller or Purchaser because of any alleged or actual failure of the Transfer Notice or this Agreement to comply with Section 8.6 of the LLC Agreement. Seller and Purchaser further agree and acknowledge that (i) its execution and delivery of this Agreement is consistent with the requirements of Section 8.6 the LLC Agreement, (ii) that neither Purchaser nor Seller shall allege or bring any claim of any kind, whether at law or equity or sounding in contract (express or implied) or tort, against the other concerning, relating to or arising under Sections 8.6(a) and (b) of the LLC Agreement in connection with the Transfer Notice and this Agreement constitutes a bar to any such claim and (iii) Purchaser and Seller shall diligently defend any claim or allegation that the Transfer Notice and this Agreement do not satisfy the requirements of the LLC Agreement.
Article 3
CLOSING
3.1 Time and Place of Closing . Consummation of the purchase and sale of the Subject Interest as contemplated by this Agreement (the “ Closing ”) shall, unless otherwise agreed to in writing by Purchaser and Seller, take place at the offices of Haynes and Boone, LLP in Houston, Texas, at 10:00 a.m., local time, on the Closing Date. From and after the Closing, the Closing shall be deemed to have been effective as of 12:01 a.m., local time, on the Closing Date.
3.2 Obligations of Seller at Closing . At the Closing, upon the terms and subject to the conditions of this Agreement, and subject to the simultaneous performance by Purchaser of its obligations pursuant to Section 3.3 , Seller shall deliver or cause to be delivered to Purchaser the following:
(a) four (4) duly executed counterparts of an assignment of the Subject Interest (the “ Assignment Agreement ”) in substantially the form attached hereto as Exhibit B ;
(b) four (4) originals of a certificate duly executed by an Authorized Officer of Seller, dated as of the Closing Date, certifying on behalf of Seller that the conditions set forth in Sections 7.2(a) and 7.2(b) have been fulfilled;
(c) four (4) originals of a certificate duly executed by the secretary or any assistant secretary of the general partner of Seller, dated as of the Closing Date, (i) attaching and certifying on behalf of Seller complete and correct copies of (A) the certificate of formation and agreement of limited partnership of Seller, as in effect as of the Closing, (B) the resolutions of the board of directors of the general partner of Seller authorizing the execution, delivery, and performance by Seller of this Agreement and the transactions contemplated hereby, and (C) any required approval by the partners of Seller of this Agreement and the transactions contemplated hereby and (ii) certifying on behalf of Seller the incumbency of each officer of the general partner of Seller executing this Agreement or any document delivered in connection with the Closing;
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(d) four (4) originals of an executed certificate described in Treasury Regulation Section 1.1445-2(b)(2) certifying that Seller is not a foreign person within the meaning of the Code;
(e) documents in form and substance reasonably satisfactory to Purchaser evidencing the release of the Encumbrance listed on Schedule 4.6 ;
(f) an executed letter of resignation of the Manager (as defined in the LLC Agreement) appointed to the board of Managers by Seller, in form and substance reasonably acceptable to Purchaser; and
(g) any other agreements, instruments or documents that are required by the terms of this Agreement under Article 7 to be delivered by Seller to Purchaser or as otherwise reasonably requested by Purchaser to consummate the transactions contemplated hereby.
3.3 Obligations of Purchaser at Closing . At the Closing, upon the terms and subject to the conditions of this Agreement, and subject to the simultaneous performance by Seller of its obligations pursuant to Section 3.2 , Purchaser shall deliver or cause to be delivered to Seller the following:
(a) a wire transfer of the Adjusted Purchase Price, in same-day funds to an account of Seller designated in writing by Seller to Purchaser no later than two days prior to the Closing Date;
(b) four (4) duly executed counterparts of the Assignment Agreement;
(c) four (4) originals of a certificate by an Authorized Officer of Purchaser, dated as of the Closing Date, certifying on behalf of Purchaser that the conditions set forth in Sections 7.1(a) and 7.1(b) have been fulfilled;
(d) four (4) originals of a certificate duly executed by the secretary or any assistant secretary of Purchaser, dated as of the Closing Date, (i) attaching, and certifying on behalf of Purchaser as complete and correct, copies of (A) the certificate of formation and limited liability company agreement of Purchaser, each as in effect as of the Closing, (B) the resolutions of the managers of Purchaser authorizing the execution, delivery and performance by Purchaser of this Agreement and the transactions contemplated hereby and (C) any required approval by the members of Purchaser of this Agreement and the transactions contemplated hereby and (ii) certifying on behalf of Purchaser the incumbency of each officer of Purchaser executing this Agreement or any document delivered in connection with the Closing; and
(e) any other agreements, instruments, or documents that are required by the terms of this Agreement under Article 7 to be delivered by Purchaser to Seller or as otherwise reasonably requested by Seller to consummate the transactions contemplated hereby.
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Article 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Schedules to this Agreement, and subject to Section 4.20 , Seller represents and warrants as of the date hereof and as of the Closing Date to Purchaser that:
4.1 Existence . Seller is a limited partnership duly formed, validly existing and in good standing under the Laws of the State of Delaware.
4.2 Power . Seller has the requisite partnership power and authority to execute and deliver this Agreement (and all documents to be executed and delivered by Seller pursuant to this Agreement), to perform its obligations hereunder (and thereunder), and to consummate the transactions contemplated hereby (and thereby).
4.3 Authorization and Enforceability . The execution, delivery and performance by Seller of this Agreement (and all documents required to be executed and delivered by Seller pursuant to this Agreement), and the consummation by Seller of the transactions contemplated hereby (and thereby), have been duly and validly authorized by all necessary partnership action on the part of Seller or, in the case of documents to be executed and delivered pursuant to this Agreement, will have been duly and validly authorized by all necessary corporate action on the part of Seller. This Agreement has been duly executed and delivered by Seller (and all documents required hereunder to be executed and delivered by Seller pursuant to this Agreement will be duly executed and delivered by Seller) and, assuming due authorization, execution and delivery by Purchaser, this Agreement constitutes (and such other documents will constitute) the valid and binding obligations of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar Laws affecting the rights and remedies of creditors generally as well as by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) (the “ Enforceability Exceptions ”).
4.4 No Conflicts . The execution, delivery and performance of this Agreement by Seller (and all documents to be executed and delivered by Seller pursuant to this Agreement), and the consummation of the transactions contemplated by this Agreement (and by such documents), do not and will not (a) violate any provision of the certificate of formation, limited partnership agreement or other organizational documents of Seller, (b) result in a material default (with due notice or lapse of time or both) or the creation of any Encumbrance, or give rise to any right of termination, cancellation or acceleration under any note, bond, mortgage, indenture, or other financing instrument to which Seller or, to the Knowledge of Seller, the Company is a party or by which their respective assets are bound, (c) result in a material violation or breach of any judgment, order, ruling, or decree applicable to Seller or, to the Knowledge of Seller, the Company, as a party in interest, (d) result in a material violation or breach of any Laws applicable to Seller or, to the Knowledge of Seller, the Company or (e) except for the Government Authorizations listed in Schedule 6.2 , require notice to, filing with, or the obtaining of approval from, any Governmental Body by or with respect to Seller or, to the Knowledge of the Seller, the Company.
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4.5 LLC Agreement . Seller has performed all of its material obligations under the LLC Agreement and is not in material default under any provision of the LLC Agreement.
4.6 Ownership . Except as set forth on Schedule 4.6 , as of the Execution Date, Seller has good and valid title to the Subject Interest, free and clear of any Encumbrances, other than any restrictions under federal and state securities Laws and the terms and condition of the LLC Agreement. As of the Closing, Seller will have good and valid title to the Subject Interest, in each case, free and clear of any Encumbrances, other than any restrictions under federal and state securities Laws and the terms and condition of the LLC Agreement.
4.7 Liability for Brokers’ Fees . Purchaser will not directly or indirectly have any responsibility, liability or expense, as a result of undertakings or agreements of Seller or any Affiliate of Seller, for brokerage fees, finder’s fees, agent’s commissions or other similar forms of compensation in connection with this Agreement or any agreement or transaction contemplated hereby.
4.8 Litigation . Except as set forth on Schedule 4.8 , to the Knowledge of Seller, there are no actions, suits or proceedings pending, or threatened, before any Governmental Body or arbitrator against the Company. There are no actions, suits or proceedings pending, or, to the Knowledge of Seller, threatened, before any Governmental Body or arbitrator against Seller, which are reasonably likely to materially delay or materially impair Seller’s ability to perform its obligations under this Agreement.
4.9 Taxes .
(a) There are no Encumbrances for Taxes upon the Subject Interest.
(b) Except as set forth on Schedule 4.9 , to the Knowledge of Seller:
(i) the Company has timely filed all material Tax Returns required to have been filed by or with respect to the Company and its operations, and such Tax Returns are complete and correct in all material respects and all material Taxes owed by the Company have been timely paid;
(ii) the Company has always been and will be through the Closing Date validly classified, for United States federal income tax purposes, as either a “disregarded entity” as defined in Treasury Regulation Section 301.7701-3 or as a “partnership” as defined in Section 761(a) of the Code;
(iii) there is no material claim, audit, action, suit or proceeding pending or threatened in writing against or with respect to the Company in respect of any Tax or Tax Return, and there are no Encumbrances for Taxes (other than Encumbrances for Taxes not yet due and payable) upon the assets of the Company;
(iv) the Company is not obligated to pay the Taxes of another person under applicable Law, by Contract, as a transferee, as a successor or otherwise; and
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(v) the transactions contemplated by this Agreement would not, if consummated, result in a Tax Termination Event of the Company as described in Section 8.2(a) of the LLC Agreement.
4.10 Environmental Laws . Except as set forth in Schedule 4.10 , to the Knowledge of Seller: (a) the Company is in compliance in all material respects with all applicable Environmental Laws; (b) there are no actions pending or threatened in writing against the Company, or any real property owned, operated or leased by it, alleging violation of or liability under any Environmental Law; (c) the Company has not entered into any order, settlement, judgment, injunction or decree involving uncompleted, outstanding or unresolved obligations, liabilities or requirements relating to or arising under Environmental Law; (d) the Company holds and is in compliance in all material respects with all material Permits required under Environmental Law for it to conduct its business; and (e) the Company has not Released any Hazardous Substance in or on the Company’s assets in quantities or concentrations requiring material remedial action by the Company under Environmental Laws. Notwithstanding anything to the contrary contained in this Agreement, the representations and warranties contained in this Section 4.10 are Seller’s sole representations and warranties with respect to environmental matters and Environmental Laws.
4.11 Compliance with Laws . Except as set forth in Schedule 4.11 , to the Knowledge of Seller: (a) the Company is conducting its business in compliance in all material respects with all applicable Laws, including any Laws relating to bribery, improper payments to a Governmental Body or governmental officer or employee, candidate for political office, political party or official thereof, or public international organization, and money laundering; (b) the Company holds all material Permits necessary for the lawful conduct of its business as presently conducted; and (c) the Company is in compliance in all material respects with the terms of all such material Permits, and no written notices have been received relating to the termination, cancellation or withdrawal thereof. This Section 4.11 does not address environmental matters and Environmental Laws, which are exclusively governed by Section 4.10 .
4.12 Midstream Assets . To the Knowledge of Seller, the Company has not disposed of any of its Midstream Assets that are material to its operations and there are no claims pending or threatened against the Company disputing the Company’s title to its Midstream Assets.
4.13 Contracts . Except for the Existing Agreements, the Company is not a party to any Contract with Seller or an Affiliate of Seller which will be binding on the Company after Closing.
4.14 Tag-Along Rights, Consents and Preferential Rights . Except as set forth on Schedule 4.14 and as set forth in the LLC Agreement: (a) Seller’s execution, delivery and performance of this Agreement (and any document required to be executed and delivered by Seller at Closing) is not and will not be subject to any option by any Person to participate as a seller in the sale to Purchaser contemplated by this Agreement; (b) Seller’s execution, delivery and performance of this Agreement (and any document required to be executed and delivered by Seller pursuant to this Agreement) is not and will not be subject to any required consent of, or notice to, any third Person (other than a Governmental Body); and (c) there are no preferential rights to purchase, rights of first opportunity or similar rights created by Seller or its Affiliates applicable to a sale of the Subject Interest.
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4.15 Employee Matters . To the Knowledge of Seller, the Company does not have any employees and does not maintain, sponsor, contribute to, and is not required or obligated to contribute to, and is not a party to any, Employee Benefit Plan. To the Knowledge of Seller, there is no pending or threatened strike, slowdown, work stoppage, lockout or other labor dispute relating to any Person providing services for or on behalf of the Company.
4.16 Intellectual Property . To the Knowledge of Seller: (a) the Company owns or has a license or other right to use all material Intellectual Property used in the conduct of the Company’s business; (b) neither the Company’s use of Intellectual Property nor the Company’s conduct of its business as currently conducted infringes, violates or misappropriates in any material respect the Intellectual Property of any Person; and (c) there are no actions, suits or proceedings pending or threatened in writing against the Company alleging any such infringement, violation or misappropriation.
4.17 Anti-Corruption Matters . To the Knowledge of Seller, the Company has not, directly or indirectly, taken any action which would cause the Company to (a) be in violation of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any similar anti-bribery law or regulation applicable to the Company or (b) violate or operate in noncompliance with any export restrictions, anti-boycott regulations, or embargo regulations.
4.18 OFAC . To the Knowledge of Seller, (a) neither the Company nor any of its officers or managers is currently the subject or target of any sanctions administered or enforced by the U.S. Government (including the Office of Foreign Assets Control of the United States Department of the Treasury and the U.S. Department of State and including the designation as a “specially designated national” or “blocked person”), the United Nations Security Council, the European Union, or Her Majesty’s Treasury, (collectively “ Sanctions ”), (b) nor does the Company have its principal place of business or the majority of its business operations (measured by revenues) located in a country that is the subject or target of Sanctions, including Cuba, Burma (Myanmar), Iran, North Korea, Sudan, and Syria. To the Knowledge of Seller, neither the Company nor any of its officers or directors has in the last five (5) years knowingly engaged in, or is now knowingly engaged in, any dealings or transactions relating to or with any Person, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.
4.19 Solvency . Seller is not now insolvent and will not be rendered insolvent by any of the transactions contemplated hereby. As used in this Section 4.19 , “insolvent” means that the sum of the debts and other probable Liabilities of Seller exceeds the present fair saleable value of Seller's assets. Immediately after giving effect to the consummation of the transactions contemplated hereunder: (i) Seller will be able to pay its obligations and liabilities as they become due in the usual course of its business; (ii) Seller will have adequate capital with which to conduct its business; and (iii) Seller will have assets (calculated at fair market value) that exceed its obligations and liabilities, including a reasonable estimate of the amount of all contingent liabilities of Seller.
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4.20 Certain Disclaimers .
(a) The representations and warranties set forth in this Article 4 and in the agreements and certificates to be delivered by Seller at Closing pursuant to Section 3.2 are the only representations and warranties made by Seller. Except as specifically set forth in this Article 4 , or in the agreements and certificates to be delivered by Seller at Closing pursuant to Section 3.2 , Seller makes no, and disclaims any, warranty, express or implied, as to any matter whatsoever relating to Seller, the Company, their respective businesses, assets, liabilities or any other matter relating to the transactions contemplated by this Agreement.
(b) WITHOUT LIMITING THE GENERALITY OF SECTION 4.20(a) , EXCEPT AS MAY BE SPECIFICALLY SET FORTH IN THIS ARTICLE 4 OR IN THE AGREEMENTS OR CERTIFICATES TO BE DELIVERED BY SELLER AT CLOSING PURSUANT TO SECTION 3.2 , SELLER FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, REGARDING (I) TITLE TO ANY OF THE COMPANY’S ASSETS, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY CONSULTANT, RELATING TO THE COMPANY’S ASSETS, (III) ANY ESTIMATES OF THE VALUE OF THE SUBJECT INTEREST, THE COMPANY’S ASSETS OR FUTURE REVENUES GENERATED BY ANY OF THE PRECEDING, OR (IV) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE COMPANY’S ASSETS, AND FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OR OTHER PERSONAL PROPERTY, OR REGARDING INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS IN CONNECTION WITH THE OPERATION OF THE COMPANY AND ITS ASSETS, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT PURCHASER SHALL BE DEEMED TO BE OBTAINING THE SUBJECT INTEREST SUBJECT TO ALL OF THE COMPANY’S RESPECTIVE DIRECT AND INDIRECT RIGHTS AND ASSETS BEING IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS, AND THAT PURCHASER SHALL CAUSE TO BE MADE SUCH INSPECTIONS AS PURCHASER DEEMS APPROPRIATE. The Parties agree that the disclaimers in this Section are “conspicuous” disclaimers for the purpose of any applicable Law.
(c) Inclusion of information in the Schedules to this Agreement shall not be construed as an admission that such information is material to the business, assets, liabilities, financial condition or results of operations of Seller, or the Company, or otherwise material, or that such information is required to be included in the Schedules to this Agreement, and inclusion of a matter on a Schedule addressing matters reasonably expected to have a Material Adverse Effect shall not necessarily be deemed an indication that such matter does, or may, have a Material Adverse Effect. Matters may be disclosed on a Schedule for purposes of information only, and inclusion of any such matter does not mean that all such matters are included. A matter disclosed on a Schedule to this Agreement shall be deemed to be an exception to all representations, and any indemnifications under Section 9.1 , to which it is relevant, but only if it is reasonably apparent that such matter also applies to such other representations.
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Article 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as of the date hereof and as of the Closing:
5.1 Existence and Qualification . Purchaser is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware.
5.2 Power . Purchaser has the requisite corporate power and authority to execute and deliver this Agreement (and all documents to be executed and delivered by Purchaser pursuant to this Agreement), to perform its obligations hereunder (and thereunder), and to consummate the transactions contemplated hereby (and thereby).
5.3 Authorization and Enforceability . The execution, delivery and performance by Purchaser of this Agreement (and all documents required to be executed and delivered by Purchaser pursuant to this Agreement), and the consummation by Purchaser of the transactions contemplated hereby (and thereby), have been duly and validly authorized by all necessary company action on the part of Purchaser, or in the case of documents to be executed and delivered pursuant to this Agreement, will have been duly and validly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser (and all documents required hereunder to be executed and delivered by Purchaser pursuant to this Agreement will be duly executed and delivered by Purchaser), and, assuming due authorization, execution and delivery by Seller, this Agreement constitutes (and at the Closing such documents will constitute) the valid and binding obligation of Purchaser, enforceable in accordance with its terms, subject to the Enforceability Exceptions.
5.4 No Conflicts . The execution, delivery and performance of this Agreement (and all documents to be executed and delivered by Purchaser pursuant to this Agreement) by Purchaser, and the transactions contemplated by this Agreement (and by such documents), do not and will not (a) violate any provision of the certificate of formation and limited liability company agreement or other organizational documents of Purchaser, (b) result in a material default (with due notice or lapse of time or both) or the creation of any Encumbrance, or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, mortgage, indenture or other financing instrument to which Purchaser is a party or by which any of its assets are bound, (c) result in a material violation or breach of any judgment, order, ruling, or regulation applicable to Purchaser as a party in interest, or (d) result in a material violation or breach of any Laws applicable to Purchaser.
5.5 Liability for Brokers’ Fees . Seller will not directly or indirectly have any responsibility, liability or expense, as a result of undertakings or agreements of Purchaser or any Affiliate of Purchaser, for brokerage fees, finder’s fees, agent’s commissions or other similar forms of compensation in connection with this Agreement or any agreement or transaction contemplated hereby.
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5.6 Litigation . There are no actions, suits or proceedings pending, or, to the Knowledge of Purchaser, threatened in writing, before any Governmental Body or arbitrator against Purchaser which are reasonably likely to materially delay or materially impair Purchaser’s ability to perform its obligations under this Agreement.
5.7 Investment Intent . Purchaser is acquiring the Subject Interest for its own account and not with a present intent to transfer or otherwise distribute the Subject Interest to any other Person in violation of applicable securities Laws.
5.8 Independent Investigation . Purchaser recognizes that investment in the Subject Interest involves substantial risks. Purchaser is (or its advisors are) experienced and knowledgeable in the oil and gas business and aware of the risks of that business. Purchaser acknowledges and affirms that, as of the Execution Date, it has made all such independent investigation, verification, analysis and evaluation of the Company and its assets, liabilities, businesses and prospects as Purchaser deems necessary or appropriate to enter into this Agreement. Except for the representations and warranties expressly made by Seller in Article 4 of this Agreement, or in the certificate to be delivered to Purchaser pursuant to Section 3.2(b) of this Agreement, Purchaser acknowledges that there are no representations or warranties, express or implied, as to the Company or its assets, liabilities, businesses and prospects and that in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Purchaser has relied solely upon its own independent investigation, verification, analysis and evaluation.
5.9 Other Consents . Purchaser’s execution, delivery and performance of this Agreement (and any document required to be executed and delivered by Purchaser pursuant to this Agreement) is not and will not be subject to any consent, approval, or waiver from any Governmental Body or other third Person, except for the Government Authorizations listed in Schedule 6.2 and as set forth on Schedule 5.9 .
5.10 Financing . At the Closing Date, Purchaser will have sufficient cash, available lines of credit or other sources of immediately available funds (in U.S. dollars) to enable it to pay all amounts required to be paid hereunder, including the payment required to be paid to Seller at the Closing.
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Article 6
COVENANTS OF THE PARTIES
6.1 Exclusivity . In consideration of the resources, time and expense Purchaser has and will incur in connection with transactions contemplated in this Agreement, without the prior written consent of Purchaser, (i) during the period from the Execution Date until the earlier of the Closing Date or the termination of this Agreement, Seller shall not sell, transfer, or place an Encumbrance (other than any Encumbrances that may be imposed by applicable securities Laws or Encumbrances under the LLC Agreement), upon the Subject Interest or any portion thereof, and (ii) during the period from the Execution Date until June 1, 2015, Seller shall not (a) directly or indirectly solicit, facilitate or knowingly encourage any other proposal relating to a Competing Transaction (defined below), (b) negotiate or enter into a letter of intent, agreement in principle, arrangement, understanding or Contract, regarding a Competing Transaction, or (c) otherwise cooperate in any way, including through the provision of confidential information, with any person in connection with a Competing Transaction; provided that if the condition to Closing set forth in Section 7.2(d) has been satisfied on or prior to June 1, 2015, Seller shall not take any of the foregoing actions until the termination of this Agreement. As used in this Agreement, “Competing Transaction” means the direct or indirect sale, lease, license, exchange, mortgage, transfer or other disposition, or financing, in a single transaction or series of related transactions, of all or any portion of the Subject Interest. In addition, without limiting the foregoing, if Seller provides confidential information to a Person in connection with a Competing Transaction after June 1, 2015: (a) prior to disclosing any such confidential information to such prospective purchaser, Seller shall receive an executed customary confidentiality agreement from such prospective purchaser containing language that makes the Company a third party beneficiary under such confidentiality agreement and within two Business Days provides an unredacted copy of such executed confidentiality agreement to the Purchaser; and (b) Seller promptly provides to the Purchaser a copy of any confidential information disclosed to such prospective purchaser..
6.2 Government Authorizations; Cooperation .
(a) Seller and Purchaser shall, each in a timely manner, (i) make all required filings, provide all required notices, prepare all required applications and conduct negotiations with each Governmental Body as to which such filings, notices, applications or negotiations are necessary or appropriate in the consummation of the transactions contemplated hereby, including the filings, notices and applications listed on Schedule 6.2 (the “ Government Authorizations ”), provided that Purchaser agrees to (and shall only be required to) make any required filings under the HSR Act within three (3) Business Days after June 10, 2015 if the Closing does not occur on such date, and (ii) provide such information as the other may reasonably request to make or obtain the Government Authorizations. Each Party shall reasonably cooperate with and use commercially reasonable efforts to assist the other with respect to the Government Authorizations. Each Party shall promptly supply any additional information and documentary material that may reasonably be requested by any Governmental Body in connection with the filings, notices and applications for the Government Authorizations. Each Party shall bear its own costs of all filing or application fees payable to any Governmental Body with respect to the transactions contemplated by this Agreement, provided that if an HSR filing is required as provided herein, the costs of filing fees under the HSR Act will be paid equally by Purchaser and Seller.
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(b) If any objections are asserted with respect to the transactions contemplated hereby under any antitrust or competition Law or if any suit or proceeding is instituted or threatened by any Governmental Body or any private party challenging any of the transactions contemplated hereby as violating any antitrust or competition Law, each of Purchaser and Seller shall use its commercially reasonable efforts to promptly resolve such objections in order to enable the transactions contemplated by this Agreement to be consummated as promptly as practicable, provided, however, that notwithstanding the foregoing, that Purchaser and Seller shall have the right, but not the obligation, to defend any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated by this Agreement under any antitrust or competition Law, including but not limited to seeking to have any stay, injunction, or temporary restraining order entered by any court or other Governmental Body vacated or reversed. Each Party shall give notice to the other Party with respect to any meeting, discussion, appearance or contact with any governmental authority or the staff or regulators of any governmental authority, with such notice being sufficient to provide the other Party with the opportunity to attend and participate in such meeting, discussion, appearance or contact. Notwithstanding anything to the contrary in this Agreement, neither Purchaser nor Seller shall be required to take or agree to take any action, including entering into any consent decree, hold separate order or other arrangement, that would (i) require or result in the sale, divestiture or other direct or indirect disposition of any assets or rights of Purchaser or any of its Affiliates or any portion of the Seller or any of its Affiliates, or (ii) limit Purchaser’s or its Affiliates’ freedom of action with respect to, or its or their ability to retain, conduct, consolidate or otherwise control, any of Purchaser’s or its Affiliates’ assets or businesses.
6.3 Public Announcement . Except as expressly provided in this Section 6.3, until the Closing, no Party, or any Affiliate of a Party, shall make any press release or other public announcement regarding the existence of this Agreement, the contents hereof or the transactions contemplated hereby without the prior written consent of the other Party. Each Party acknowledges that the other Party (or its Affiliates) intends to issue a press release concerning this Agreement shortly after the execution of this Agreement in substantially the form previously provided to and approved by the other Party. The foregoing shall not restrict disclosures by Purchaser or Seller or any of their respective Affiliates (a) that are required by applicable securities or other Laws or regulations or the applicable rules of any stock exchange having jurisdiction over the disclosing Party or its Affiliates or, (b) to Governmental Bodies and third Persons holding rights of consent or rights to receive notice that may be applicable to the transactions contemplated by this Agreement, as reasonably necessary to obtain waivers of such rights or such consents or to provide such notice, provided that, in each case to which such an exception applies, the releasing Party shall, to the extent legally permissible, provide the other Party not less than twenty-four (24) hours to comment on a draft of such disclosure, and such releasing Party shall consider in good faith all comments provided by such other Party. Seller and Purchaser shall each be liable for compliance by its respective Affiliates with the terms of this Section.
6.4 Assumption of Obligations . By the consummation of the transactions contemplated by this Agreement at the Closing, and without limiting the indemnification obligations of Seller under Article 9 (including those relating to the representations and warranties contained herein), Purchaser assumes and agrees to pay, perform and discharge all obligations with respect to the Subject Interest, whether arising under the LLC Agreement, applicable Law or otherwise, and whether attributable to the period before or after the Effective Time, but excluding, for the avoidance of doubt, (a) any obligations of Seller or any of its Affiliates under this Agreement or as a counterparty to the Company (or any now or hereafter existing Affiliate of the Company) under the Existing Agreements or any other contract entered into by Seller or any of its Affiliates and the Company or any Affiliate of the Company, (b) any obligations to the extent caused by the gross negligence, willful misconduct or criminal activity of Seller or any of its Affiliates, (c) any obligations of Seller or its Affiliates arising under U.S. federal, state or local income, franchise or similar Tax Laws for periods prior to the Closing and (d) any obligation arising out of the material breach by Seller of the LLC Agreement.
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6.5 Casualty and Condemnation .
(a) If after the Execution Date but prior to Closing, any of the Midstream Assets are actually damaged or destroyed by any casualty or are taken in condemnation or under right of eminent domain, then the Purchase Price shall be reduced (without duplication) by the Proportionate Share of the amount of the actual out-of-pocket losses caused to the Company by any such casualty or taking (after giving effect to any insurance proceeds received by the Company); provided that if the Proportionate Share of the aggregate actual out-of-pocket losses caused to the Company by such casualties and takings (i) is less than $600,000 (after giving effect to any insurance proceeds received by the Company), there shall be no adjustment to the Purchase Price, but the Proportionate Share of any such actual out-of-pocket losses shall be credited against the Deductible as if such losses are Damages for which Purchaser is entitled to indemnification pursuant to Article 9 or (ii) exceeds in value ten percent (10%) of the Purchase Price (without giving effect to any insurance proceeds available to the Company), either Party may, by notice to the other Party at least one (1) Business Day prior to Closing, elect to terminate this Agreement under Section 8.1 . Except as provided in the immediately preceding sentence, Purchaser shall be required to close as provided for in this Agreement notwithstanding any such casualties or takings.
(b) Seller and Purchaser shall reasonably cooperate with each other in determining the Proportionate Share of the amount of any losses caused to the Company by any casualty or taking described in Section 6.5(a) , including as promptly as reasonably possible requesting information on the amount of the losses from the Company and providing each other with copies of any estimates of losses provided by the Company.
6.6 Further Assurances . At and after the Closing, Seller and Purchaser agree to take such further actions and to execute, acknowledge and deliver all such further documents as are reasonably requested by the other Party for carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.
6.7 Cooperation on Taxes . Each Party shall promptly furnish to the other such information pertaining to the Company or the transactions contemplated by this Agreement, as may reasonably be requested by the other Party with respect to Tax matters of such other Party or Affiliate of such other Party, including by providing access to relevant books and records and making employees available to provide additional information and explanation of any materials provided hereunder, but in each case only to the extent that such Party may do so without violating applicable Laws or any obligations to any third Person and to the extent that such Party has access to such information and has authority to furnish such information under any restrictions binding on such Party. The Parties shall further reasonably cooperate, and cause their Affiliates to reasonably cooperate, with each other in connection with the preparation of any Tax Returns.
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6.8 Schedule Update . From time to time prior to the Closing, for purposes of its certificate to be delivered at Closing pursuant to Section 3.2(b) and for purposes of determining whether the Seller’s representations and warranties are true and correct as of the Closing Date as though made on and as of the Closing Date, to the extent and in the manner provided under Section 7.2(a) , Seller may at its option supplement or amend and deliver updates to the Schedules to Article 4 to include reference to any matter relating to Seller, the Company or its assets which first arises or occurs after the Execution Date and does not represent a breach of Seller’s covenants in this Agreement; provided, however, notwithstanding the foregoing, (a) no such supplement or amendment shall in any way affect Purchaser’s ability to terminate this Agreement based upon the condition to closing set forth in Section 7.2(f) not being satisfied and (b) Purchaser shall have the right to terminate this Agreement in the event Seller supplements or amends any Schedule relating to the Fundamental Reps.
6.9 Other Agreement . Seller has provided Purchaser a copy of the Other Agreement in the form executed by the parties thereto, and shall provide Purchaser with copies of any amendments to the Other Agreement within one (1) Business Day of the execution thereof. Purchaser acknowledges that Seller is required to provide a copy of this Agreement to the Other Member. Each Party shall reasonably cooperate with and use commercially reasonable efforts to facilitate the simultaneous closings of this Agreement and the Other Agreement.
6.10 Encumbrances on the Subject Interest . Prior to Closing, Seller shall take such commercially reasonable actions as are necessary to cause release of the Encumbrance listed on Schedule 4.6 .
6.11 Confidentiality . Upon Closing and for a period of one (1) year thereafter, Seller agrees to keep confidential, and not to make use of (other than for purposes of filing its tax returns or for other routine matters required by law) or, without the prior written consent of the Company, disclose to any Person, any information or matter relating to the Company and its affairs or any of the terms and conditions of the LLC Agreement (other than disclosure as required by any applicable law, including the rules and regulations of the United States Securities and Exchange Commission, and the New York Stock Exchange, NASDAQ, or any other applicable national securities exchange), provided, however, in the event that Seller receives a request to disclose any such information under the terms of a subpoena or order issued by a court of competent jurisdiction or by any applicable law, Seller will, to the extent permitted by law: (a) immediately notify each of the Company of the existence, terms, and circumstances surrounding such request; (b) consult with the Company as to the advisability of taking steps legally available to resist or narrow the scope of the disclosure required by such subpoena, order, or law; and (c) exercise its commercially reasonable efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to any information so disclosed by Seller, with the Company being liable to reimburse Seller for any actions taken at the request of the Company that are described in clause (b) of this Section 6.11 .
6.12 Non-Solicitation . For a period of two (2) years commencing on the Closing Date, Seller will not, and will cause EVEP not to, directly or indirectly, solicit, canvass, approach, entice or induce any employee of Purchaser or its Affiliates who have responsibilities related to the Company during such time period to alter, lessen or terminate his, her or its employment, engagement or relationship with Purchaser; provided, however, that the foregoing restriction on solicitation shall not prohibit the Purchaser or EVEP from hiring any such employee of Purchaser pursuant to a general solicitation (such as an advertisement) not specifically directed to employees of Purchaser.
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6.13 Closing . If on June 10, 2015 (a) the conditions to the closing of the Other Agreement are satisfied and the Other Member is prepared to close on the purchase of the Remaining Interest as evidenced by delivery of the closing certificates and documents required thereby; (b) the conditions to Closing set forth in Section 7.2 (other than (d)) are satisfied as evidenced by delivery of the closing certificates and documents required thereby; and (c) Purchaser does not close the purchase of the Subject Interest, then Seller shall have the right to terminate this Agreement pursuant to Section 8.1(a)(vii) , and Seller may consummate the sale of the Entire Interest to the Other Member as contemplated by the Other Agreement by June 24, 2015 and so long as the Other Member consummates the sale of the Entire Interest as contemplated by the Other Agreement on or before June 24, 2015, Purchaser shall have no further right, claim or interest in or to all or part of the Entire Interest.
6.14 Conduct Pending Closing . Except as otherwise expressly contemplated by this Agreement or with the prior written consent of the Purchaser, from the date hereof until the Closing or termination of this Agreement as provided in Article 8 , Seller shall not:
(a) vote any of the Subject Interests in favor of: (i) any amendment to the LLC Agreement or the Transaction Documents (as such terms are defined in the LLC Agreement); (ii) to take any of the actions contemplated under Section 7.4(b) of the LLC Agreement; (iii) any election to dissolve the Company; or (iv) issuing any equity interests, options, warrants, convertible securities or other rights of any kind to acquire any equity or ownership interest of the Company;
(b) amend or otherwise change the certificate of formation, limited partnership agreement or other organizational documents of Seller in any manner that would adversely affect or impede the ability of Seller to consummate the transactions contemplated by this Agreement;
(c) vote or consent to or permit its Managers (as defined in the LLC Agreement) to vote or consent to (i) sell, assign, transfer, lease, license or otherwise dispose of any assets owned by the Company; (ii) have the Company make or commit to make any capital expenditure not approved under the existing Capital Expenditure Budget (as defined in the LLC Agreement); or (iii) create, incur, assume, guarantee, endorse or otherwise become liable or responsible with respect to (whether directly, contingently or otherwise) any indebtedness of the Company or otherwise amend, modify, alter, waive or otherwise change any rights or obligations with respect thereto, including any claims thereunder; or
(d) agree to take any action prohibited by this Section 6.14 .
Article 7
CONDITIONS TO CLOSING
7.1 Conditions of Seller to Closing . The obligations of Seller to consummate the transactions contemplated by this Agreement are subject, at the option of Seller, to the satisfaction on or prior to Closing of each of the following conditions:
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(a) Representations . The representations and warranties of Purchaser set forth in Article 5 shall be true and correct in all material respects (except to the extent that such representations and warranties are qualified by the term “material,” “in all material respects,” “Material Adverse Effect” or similar words in which case such representations and warranties shall be true and correct in all respects at and as of the Closing Date), in each case as of the Execution Date and as of the Closing Date as though made on and as of the Closing Date.
(b) Performance . Purchaser shall have performed and observed all covenants and agreements to be performed or observed by it under this Agreement prior to or on the Closing Date.
(c) Pending Litigation . On the Closing Date, no injunction, order or award restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement, or granting material damages in connection therewith, shall have been issued and remain in force, and no suit, action or other proceeding (excluding any such matter initiated by Seller or its Affiliates) seeking to restrain, enjoin or otherwise prohibit the consummation of the transactions contemplated by this Agreement, or seeking substantial damages in connection therewith, shall be pending before any Governmental Body or arbitrator.
(d) Deliveries to Seller . Purchaser shall have delivered to Seller the documents and certificates to be delivered by Purchaser under Section 3.3 .
(e) Government Authorizations . The Government Authorizations set forth on Schedule 6.2 shall have been duly obtained, made or given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental Body shall have occurred; provided, however, that the absence of any appeals and the expiration of any appeal period with respect to any of the foregoing shall not constitute a condition to Closing hereunder.
(f) Payment . Purchaser shall have paid to Seller the Adjusted Purchase Price.
7.2 Conditions of Purchaser to Closing . The obligations of Purchaser to consummate the transactions contemplated by this Agreement are subject, at the option of Purchaser, to the satisfaction on or prior to Closing of each of the following conditions:
(a) Representations . The representations and warranties of Seller set forth in Article 4 shall be true and correct in all material respects (except to the extent that such representations and warranties are qualified by the term “material,” “in all material respects,” “Material Adverse Effect” or similar words in which case such representations and warranties shall be true and correct in all respects at and as of the Closing Date), as of the Execution Date and as of the Closing Date as though made on and as of the Closing Date (other than representations and warranties that refer to a specified date which need only be true and correct in all material respects, on and as of such specified date).
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(b) Performance . Seller shall have performed and observed all covenants and agreements to be performed or observed by it under this Agreement prior to or on the Closing Date.
(c) Pending Litigation . On the Closing Date, no injunction, order or award restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement, or granting material damages in connection therewith, shall have been issued and remain in force, and no suit, action or other proceeding (excluding any such matter initiated by Purchaser or its Affiliates) seeking to restrain, enjoin or otherwise prohibit the consummation of the transactions contemplated by this Agreement, or seeking substantial damages in connection therewith, shall be pending before any Governmental Body or arbitrator.
(d) Government Authorizations . The Government Authorizations set forth on Schedule 6.2 shall have been duly obtained, made or given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental Body shall have occurred; provided, however, that the absence of any appeals and the expiration of any appeal period with respect to any of the foregoing shall not constitute a condition to Closing hereunder.
(e) Deliveries . Seller shall have delivered to Purchaser duly executed counterparts of the documents and certificates to be delivered by Seller under Section 3.2 .
(f) Material Adverse Effect . From the Execution Date, no Material Adverse Effect shall have occurred.
Article 8
TERMINATION
8.1 Termination .
(a) This Agreement may be terminated at any time prior to Closing:
(i) by the mutual prior written consent of Seller and Purchaser;
(ii) by Purchaser, if Purchaser is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Seller pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Section 7.2 and such breach, inaccuracy or failure has not been cured by Seller within ten days of Seller’s receipt of written notice of such breach from Purchaser;
(iii) by Seller, if Seller is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Purchaser pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Section 7.1 and such breach, inaccuracy or failure has not been cured by Purchaser within ten days of Purchaser’s receipt of written notice of such breach from Seller;
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(iv) by either Seller or Purchaser, if Closing has not occurred on or before the Termination Date, provided , however , that no Party shall be entitled to terminate this Agreement under this Section 8.1(a)(iv) (x) if the Closing has failed to occur because such Party failed to perform or observe in any material respect its covenants and agreements hereunder or (y) if the other Party has filed (and is then pursuing) an action seeking specific performance as permitted by Section 10.15 ;
(v) by either Seller or Purchaser in accordance with Section 6.5 provided , however that no Party shall be entitled to terminate this Agreement under this Section 8.1 (a)(v) if the other Party has filed (and is then pursuing) an action seeking specific performance as permitted by Section 10.15 ;
(vi) by Purchaser pursuant to Section 6.8 ; or
(vii) by Seller pursuant to Section 6.13(b) .
(b) The Party desiring to terminate this Agreement pursuant to Section 8.1(a) shall give written notice of such termination to the other Party hereto specifying the provision hereof pursuant to which such termination is made.
8.2 Effect of Termination . If this Agreement is terminated pursuant to Section 8.1 , this Agreement shall become void and of no further force or effect (except for the provisions of Sections 4.7, 5.5, 6.3 , this Section 8.2 and Article 10 , which shall continue in full force and effect). Notwithstanding anything to the contrary contained in this Agreement, the termination of this Agreement shall not relieve any Party from liability for any breach or breaches of its agreements or covenants which occurred on or prior to the date of such termination, which breach or breaches resulted in the conditions set forth in Section 7.1(b) , Section 7.1(d) , Section 7.2(b) , or Section 7.2(e) , as applicable, not being satisfied, in which case the other Party shall be entitled to all remedies available at law or in equity and shall be entitled to recover court costs and attorneys’ fees in addition to any other relief to which such Party may be entitled.
Article 9
INDEMNIFICATION; LIMITATIONS
9.1 Indemnification .
(a) From and after the Closing, Purchaser shall indemnify, defend and hold harmless Seller from and against all Damages incurred or suffered by Seller:
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(i) to the extent constituting obligations assumed by Purchaser pursuant to Section 6.4 ; provided, however, that Purchaser shall have no liability to Seller for any Damages for which (A) Purchaser is entitled to be indemnified pursuant to this Agreement or (B) the event or circumstance giving rise to such Damages also constitutes a breach of any of Seller’s representations or warranties set forth in this Agreement or arises as a result of Seller’s breach of any of its covenants or agreements under this Agreement or the LLC Agreement (whether or not Purchaser would then be entitled to be indemnified therefor under this Agreement or otherwise). For the avoidance of doubt, the foregoing indemnity shall not be applicable with respect to any obligations of Seller to make payments under Section 9.1(b) .
(ii) caused by or arising out of or resulting from Purchaser’s breach of any of Purchaser’s covenants or agreements contained in this Agreement, or
(iii) caused by or arising out of or resulting from any breach of any representation or warranty made by Purchaser contained in Article 5 of this Agreement or in the certificate delivered by Purchaser at Closing pursuant to Section 3.3(c) ; provided, however, that if a representation or warranty is qualified by “in all material respects,” “in any material respect,” or “material default,” then for purposes of this clause (a)(iii), such qualifier will in all respects be ignored, even if such Damages are caused in whole or in part by the negligence (whether sole, joint or concurrent), strict liability or other legal fault of any Indemnified Person , but excepting in each case Damages to the extent caused by the willful misconduct of any Indemnified Person.
(b) From and after the Closing, Seller shall indemnify, defend and hold harmless Purchaser against and from all Damages incurred or suffered by Purchaser:
(i) caused by or arising out of or resulting from Seller’s breach of any of Seller’s covenants or agreements contained in this Agreement,
(ii) caused by or arising out of or resulting from any breach of any representation or warranty made by Seller contained in Article 4 of this Agreement, or in the certificate delivered by Seller at Closing pursuant to Section 3.2(b) ; provided, however, that if a representation or warranty is qualified by Material Adverse Effect, “in all material respects,” “in any material respect,” or “material default,” then for purposes of this clause (b)(ii), such qualifier will in all respects be ignored, even if such Damages are caused in whole or in part by the negligence (whether sole, joint or concurrent), strict liability or other legal fault of any Indemnified Person , but excepting in each case Damages to the extent caused by the willful misconduct of any Indemnified Person, or
(iii) caused by or arising out of (x) the Subject Interest or (y) the Company or its assets, liabilities, operations or other activities, whether arising under contracts, applicable Law or otherwise, in the case of each of (x) and (y) attributable to the period before the Effective Time (A) resulting from the gross negligence, willful misconduct or criminal activity of Seller or any of its Affiliates; (B) in connection with any obligations of Seller or any of its Affiliates as a counterparty to the Company (or any now or hereafter existing Affiliate of the Company) under the Existing Agreements or any other contract or other arrangement entered into by the Seller or its Affiliates and the Company or any Affiliate of the Company; or (C) with respect to any obligations of Seller or its Affiliates arising under U.S. federal, state, or local income, franchise or similar Tax Laws for periods prior to the Closing.
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(c) Notwithstanding anything to the contrary contained in this Agreement, except (i) as provided in Section 8.2 and Section 10.15 , (ii) the right of a Party to exercise all remedies available at law or equity in connection with the other Party’s failure to consummate the transactions contemplated by this Agreement as required by the terms hereof, and (iii) for causes of action based upon intentional fraud or intentional misrepresentation, this Section 9.1 contains the Parties’ sole and exclusive remedies against each other with respect to any and all claims for any breaches of the representations, warranties, covenants and agreements herein or otherwise relating to the subject matter of this Agreement (subject to the stated exclusions, the “ Exclusive Representations and Covenants ”). Except for the remedies contained in this Section 9.1 , the remedies provided for in Section 8.2 and Section 10.15 , the right of a Party to exercise all remedies available at law or in equity in connection with the other Party’s failure to consummate the transactions contemplated by this Agreement as required by the terms hereof, and causes of action based on intentional fraud or intentional misrepresentation, other than the Exclusive Representations and Covenants, Seller and Purchaser each release, remise and forever discharge the other and its or their Affiliates and all such Parties’ officers, directors, employees, agents, advisors and representatives from any and all suits, legal or administrative proceedings, claims, demands, damages, losses, costs, liabilities, interest, or causes of action whatsoever, in law or in equity, known or unknown, which such Parties might now or subsequently may have, based on, relating to or arising out of this Agreement, the Subject Interest, the activities, operations, assets or liabilities of the Company, whether before or after the Effective Time, or the use, condition, quality, status or nature of the assets of the Company, including rights to contribution under any Law, breaches of statutory or implied warranties, nuisance or other tort actions, rights to punitive damages and rights of contribution, rights under agreements between the Company and Seller or any of its Affiliates, and rights under insurance maintained by Seller or any Affiliate of Seller, even if caused in whole or in part by the negligence (whether sole, joint or concurrent), strict liability or other legal fault of any released Person, but, for the avoidance of doubt, without prejudice to either Party’s rights under Section 8.2 and Section 10.15 , the right of a Party to exercise all remedies available at law or in equity in connection with the other Party’s failure to consummate the transactions contemplated by this Agreement as required by the terms hereof, or Purchaser’s right to cause the Company to enforce any obligations of Seller as a counterparty pursuant to the Existing Agreements.
(d) “ Damages ,” for purposes of this Article 9 , shall mean the amount of any actual liability, loss, cost, expense, claim, award or judgment incurred or suffered by any Indemnified Person arising out of or resulting from the indemnified matter, whether attributable to personal injury or death, property damage, contract claims (including contractual indemnity claims), torts, or otherwise, including the costs of enforcement of the indemnity and shall include (i) reasonable fees and expenses of attorneys, consultants, accountants or other agents and experts reasonably incident to matters indemnified against, and (ii) the costs of investigation and/or monitoring of such matters. No Indemnified Person shall be entitled to indemnification under this Section 9.1 for, and “ Damages ” shall not include, (A) any punitive damages (other than punitive damages suffered by Persons other than Indemnified Persons for which an Indemnified Person has been held liable), (B) any Taxes that may be assessed on payments made under this Article 9 or the loss, reduction or limitation of any Tax benefits to which the Indemnified Person may be entitled (nor shall any offset be made for Tax benefits to which the Indemnified Person becomes entitled as a consequence of the liability, loss, cost, expense, claim, award or judgment), and (C) any liability, loss, cost, expense, claim, award or judgment to the extent resulting from or to the extent increased by the actions or omissions of any Indemnified Person after the Closing Date.
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(e) The indemnity in favor of each Party provided in this Section 9.1 shall be for the benefit of and extend to such Party’s present and former Affiliates and its and their directors, officers, employees, and agents. Any claim for indemnity under this Section 9.1 by any such Affiliate, director, officer, employee, or agent must be brought and administered by a Party to this Agreement. No Indemnified Person other than Seller and Purchaser shall have any rights against either Seller or Purchaser under the terms of this Section 9.1 except as may be exercised on its behalf by Purchaser or Seller, as applicable, pursuant to this Section 9.1(e) . Seller and Purchaser may each elect to exercise or not exercise indemnification rights under this Section on behalf of the other Indemnified Person affiliated with it in its sole discretion and shall have no liability to any such other Indemnified Person for any action or inaction under this Section.
(f) To the extent permitted by applicable Laws, the Parties shall treat, for Tax purposes, any amounts paid under this Article 9 as an adjustment to the Purchase Price.
9.2 Indemnification Actions . All claims for indemnification under Section 9.1 shall be asserted and resolved as follows:
(a) For purposes of this Article 9 , the term “ Indemnifying Person ” when used in connection with particular Damages shall mean the Person or Persons having an obligation to indemnify another Person or Persons with respect to such Damages pursuant to this Article 9 , and the term “ Indemnified Person ” when used in connection with particular Damages shall mean the Person or Persons having the right to be indemnified with respect to such Damages by another Person or Persons pursuant to this Article 9 .
(b) To make a claim for indemnification under Section 9.1 , an Indemnified Person shall notify the Indemnifying Person of its claim under this Section 9.2 in writing, including the specific details of and specific basis under this Agreement for its claim (the “ Claim Notice ”). In the event that the claim for indemnification is based upon a claim by a third Person against the Indemnified Person (a “ Third Party Claim ”), the Indemnified Person shall provide its Claim Notice promptly after the Indemnified Person has actual knowledge of the Third Party Claim and shall enclose a copy of all papers (if any) served with respect to the Third Party Claim. The failure of any Indemnified Person to give notice of a claim as provided in this Section 9.2 shall not relieve the Indemnifying Person of its obligations under Section 9.1 except to the extent such failure materially prejudices the Indemnifying Person’s ability to defend against the claim. In the event that the claim for indemnification is based upon an inaccuracy or breach of a representation, warranty, covenant or agreement, the Claim Notice shall specify the representation, warranty, covenant or agreement which was inaccurate or breached.
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(c) In the case of a claim for indemnification based upon a Third Party Claim, the Indemnifying Person shall have thirty (30) days from its receipt of the Claim Notice to notify the Indemnified Person whether it admits or denies its obligation to defend the Indemnified Person against such Third Party Claim under this Article 9 . If the Indemnifying Person does not notify the Indemnified Person within such thirty (30) day period whether the Indemnifying Person admits or denies its obligation to defend the Indemnified Person, it shall be conclusively deemed obligated to provide such indemnification hereunder. The Indemnified Person is authorized, prior to and during such thirty (30) day period, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the Indemnifying Person and that is not prejudicial to the Indemnifying Person (it being understood that if the Indemnified Person is ultimately entitled to be indemnified with respect to such Third Party Claim, the cost of filing such motion, answer or other pleading shall be reimbursed by the Indemnifying Person).
(d) If the Indemnifying Person admits its obligation, it shall have the right and obligation to diligently defend, at its sole cost and expense, the Third Party Claim, and shall have full control of such defense and proceedings, including any compromise or settlement thereof, provided that if the Third Party Claim consists of a criminal proceeding or regulatory proceeding with potential criminal sanctions by any Governmental Body against the Indemnified Person or seeks permanent injunctive relief, or primarily seeks other permanent equitable relief, with respect to the Indemnified Person, the Indemnified Person shall have the option, by notice to the Indemnifying Person within the thirty (30) day period set forth in Section 9.2(c) , to control such defense and proceedings (at the cost and expense of the Indemnifying Person, if the Indemnified Person is entitled to indemnification hereunder). If requested by the Indemnifying Person, the Indemnified Person agrees to cooperate in contesting any Third Party Claim which the Indemnifying Person elects to contest (provided, however, that the Indemnified Person shall not be required to bring any counterclaim or cross-complaint against any Person). The Indemnified Person may at its own expense participate in, but not control, any defense or settlement of any Third Party Claim controlled by the Indemnifying Person pursuant to this Section 9.2(d) . An Indemnifying Person shall not, without the written consent of the Indemnified Person, settle any Third Party Claim or consent to the entry of any judgment with respect thereto which (i) does not result in a final resolution of the Indemnified Person’s liability with respect to the Third Party Claim (including, in the case of a settlement, an unconditional written release of the Indemnified Person from all further liability with respect to the Third Party Claim) or (ii) may materially and adversely affect the Indemnified Person (other than as a result of money damages covered by the indemnity).
(e) If the Indemnifying Person does not admit its obligation or admits its obligation but fails to diligently defend or settle the Third Party Claim, then the Indemnified Person shall have the right to defend against the Third Party Claim (at the sole cost and expense of the Indemnifying Person, if the Indemnified Person is entitled to indemnification hereunder), with counsel of the Indemnified Person’s choosing, subject to the right of the Indemnifying Person to admit its obligation and assume the defense of the Third Party Claim at any time prior to settlement or final determination thereof. If the Indemnifying Person has not yet admitted its obligation to provide indemnification with respect to a Third Party Claim, the Indemnified Person shall send written notice to the Indemnifying Person of any proposed settlement and the Indemnifying Person shall have the option for ten (10) days following receipt of such notice to (i) admit in writing its obligation to provide indemnification with respect to the Third Party Claim and (ii) if its obligation is so admitted, assume the defense of the Third Party Claim and reject the proposed settlement. If the Indemnified Person settles any Third Party Claim, other than a Third Party Claim consisting of a criminal proceeding or regulatory proceeding with potential criminal sanctions by any Governmental Body against the Indemnified Person or seeking permanent injunctive relief, or primarily seeking other permanent equitable relief, over the objection of the Indemnifying Person after the Indemnifying Person has timely admitted its obligation in writing and assumed the defense of a Third Party Claim, the Indemnified Person shall be deemed to have waived any right to indemnity therefor.
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(f) In the case of a claim for indemnification not based upon a Third Party Claim, the Indemnifying Person shall have thirty (30) days from its receipt of the Claim Notice to (i) cure the Damages complained of, (ii) admit its obligation to provide indemnification with respect to such Damages or (iii) dispute the claim for such Damages. If the Indemnifying Person does not notify the Indemnified Person within such thirty (30) day period that it has cured the Damages or that it disputes the claim for such Damages, the Indemnifying Person shall be conclusively deemed obligated to provide such indemnification hereunder.
9.3 Limitation on Actions .
(a) The Sections 4.1, 4.2, 4.3, 4.6, 4.7, 4.9(a) and 4.14 (the “ Fundamental Reps ”) and the representations and warranties of Purchaser in Sections 5.1 , 5.2 and 5.3 and the corresponding representations and warranties given in the certificates delivered at the Closing pursuant to Sections 3.2(b) and 3.3(c) , as applicable, shall survive the Closing indefinitely; the representations and warranties of Seller in Section 4.9 shall survive until six months after the expiration of the applicable statute of limitations (taking into account any extension thereof); and all other representations and warranties of the Parties in Article 4 and Article 5 and the corresponding representations and warranties given in the certificates delivered at the Closing pursuant to Sections 3.2(b) and 3.3(c) , as applicable, shall survive the Closing for a period of fifteen (15) months (unless a shorter period is expressly provided within the applicable section). Representations, warranties, covenants and agreements shall be of no further force and effect after the date of their expiration, provided that there shall be no termination of any bona fide claim asserted pursuant to this Agreement with respect to such a representation, warranty, covenant or agreement prior to its expiration date.
(b) The indemnity in Section 9.1(a)(i) and 9.1(b)(iii) shall continue without time limit. The indemnities in Sections 9.1(a)(ii) , 9.1(a)(iii) , 9.1(b)(i) and 9.1(b)(ii) shall terminate as of the termination date of each respective representation, warranty, covenant or agreement that is subject to indemnification thereunder, except in each case as to matters for which a specific written claim for indemnity has been delivered to the Indemnifying Person on or before such termination date.
(c) Subject to Section 9.3(e) , neither Seller nor Purchaser shall have any liability for any indemnification under Section 9.1(a)(iii) or Section 9.1(b)(ii) for any Damages with respect to any claim (or a series of related claims arising from the same facts or circumstances) that do not exceed $60,000 (the “ Individual Claim Threshold ”), provided, however, to the extent all claims (or a series of related claims arising from the same facts or circumstances) for indemnification by Seller result in aggregate Damages exceeding the Deductible (including those claims (or a series of related claims arising from the same facts or circumstances) under the Individual Claim Threshold), then Purchaser shall be entitled to be indemnified for such Damages under this Article 9 without regard to the Individual Claim Threshold.
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(d) Subject to Section 9.3(c) and Section 9.3(e) , (A) Seller shall not have any liability for any indemnification under Section 9.1(b)(ii) unless and until the aggregate Damages for which Claim Notices for claims (or a series of related claims arising from the same facts or circumstances) meeting the Individual Claim Threshold are delivered by Purchaser with respect to such matters exceed one percent (1%) of the Purchase Price (the “ Deductible ”), and then only to the extent such Damages exceed the Deductible and (B) Seller shall not be required to indemnify Purchaser under the indemnity in Section 9.1(b)(ii) for aggregate Damages in excess of fifteen percent (15%) of the Purchase Price (the “ Cap ”).
(e) The Deductible and the Cap shall not apply to any indemnification obligations of Seller under Section 9.1(b)(ii) for Damages caused by or arising out of or resulting from Seller’s breach of any Fundamental Reps; provided that Seller shall not be required to indemnify Purchaser under this Article 9 for breaches of such Fundamental Reps for aggregate Damages in excess of the Purchase Price.
(f) The amount of any Damages for which an Indemnified Person is entitled to indemnity under this Article 9 shall be reduced by the amount of insurance proceeds realized by the Indemnified Person or its Affiliates with respect to such Damages (net of any collection costs, and excluding the proceeds of any insurance policy issued or underwritten by the Indemnified Person or its Affiliates).
(g) Any Indemnified Person that becomes aware of a loss for which it seeks indemnification shall be required to use commercially reasonable efforts to mitigate the loss, including taking any actions reasonably requested by the Indemnifying Party, and an Indemnifying Party shall not be liable for any loss to the extent that it is attributable to the Indemnified Party’s failure to use commercially reasonable efforts to mitigate.
(h) In no event shall any Indemnified Person be entitled to duplicate compensation with respect to the same Damage, liability, loss, cost, expense, claim, award or judgment under more than one provision of this Agreement and the various documents delivered in connection with the Closing.
Article 10
MISCELLANEOUS
10.1 Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original instrument, but all such counterparts together shall constitute but one agreement. Any signature of this Agreement delivered by a Party by facsimile or scanned document transmitted by email shall be deemed to be an original signature for all purposes.
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10.2 Notice . All notices which are required or may be given pursuant to this Agreement must be given in writing and delivered personally, by courier, or by scanned document transmitted by email (with written confirmation of delivery) or by registered or certified mail, postage prepaid, as follows:
If to Seller:
CGAS Properties, L.P.
c/o EV Energy Partners, L.P.
1001 Fannin, Suite 800
Houston, Texas 77002
Attn: Michael E. Mercer, President and Chief Executive Officer
Email: mmercer@EVEnergyPartners.com
With a copy to:
EnerVest, Ltd.
1001 Fannin, Suite 800
Houston, Texas 77002
Attn: Fabene Welch, Senior Vice President and General Counsel
Email: Fwelch@EnerVest.net
With a copy to:
Haynes and Boone, LLP
1221 McKinney Street, Suite 2100
Houston, Texas 77010
Attn: Debra Gatison Hatter
Email: debra.hatter@haynesboone.com
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If to Purchaser:
M3 Ohio Gathering LLC
600 Travis, Suite 4910
Houston, Texas 77002
Attn: Laranne Breagy, Senior VP & General Counsel
Email: l.breagy@m3midstream.com
With a copy to:
Vinson & Elkins LLP
1001 Fannin Street, Suite 2500
Houston, Texas 77002
Attn: Doug Bland
Email: dbland@velaw.com
Either Party may change its address for notices by giving notice to the other Party in the manner set forth above. All notices shall be deemed to have been duly given at the time of receipt by the Party to which such notice is addressed.
10.3 Expenses . Except as provided in Sections 6.2 and 10.4 , all expenses incurred by Seller in connection with or related to the authorization, preparation or execution of this Agreement, the conveyances delivered hereunder and the Exhibits and Schedules hereto and thereto, and all other matters related to the Closing, including, without limitation, all fees and expenses of counsel, accountants and financial advisers employed by Seller, shall be borne solely and entirely by Seller, and all such expenses incurred by Purchaser shall be borne solely and entirely by Purchaser.
10.4 Transfer Taxes . All Transfer Taxes associated with the purchase and sale of the Subject Interest contemplated by this Agreement shall be paid by Purchaser.
10.5 Governing Law . This Agreement and any documents delivered pursuant hereto, and the legal relations between the Parties hereunder and thereunder, shall be governed by and construed in accordance with the Laws of the State of Delaware, excluding any conflict of laws rules that would refer the matter to the Laws of another jurisdiction.
10.6 Jurisdiction; Waiver of Jury Trial .
(a) Any legal suit, action or proceeding arising out of or based upon this Agreement, or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of Delaware in each case located in the County of New Castle, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by mail to such party's address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
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(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.6(b) .
10.7 Captions . The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.
10.8 Waivers . Any failure by any Party or Parties to comply with any of its or their obligations, agreements or conditions herein contained may be waived by the Party or Parties to whom such compliance is owed by an instrument signed by such Party or Parties and expressly identified as a waiver, but not in any other manner. No waiver of, or consent to a change in, any of the provisions of this Agreement shall be deemed or shall constitute a waiver of, or consent to a change in, other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.
10.9 Assignment . No Party shall assign all or any part of this Agreement, nor shall any Party assign or delegate any of its rights or duties hereunder, without the prior written consent of the other Party. Subject to the preceding sentences, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns. Any purported assignment not permitted under this Section 10.9 shall be null and void.
10.10 Entire Agreement . This Agreement and the documents to be executed hereunder (and the Exhibits, Attachments and Schedules attached hereto) constitutes the entire agreement between the Parties pertaining to the subject matter hereof, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties pertaining to the subject matter hereof.
10.11 Amendment . This Agreement may be amended or modified only by an agreement in writing executed by all Parties and expressly identified as an amendment or modification.
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10.12 References . In this Agreement:
(a) References to any gender includes a reference to all other genders;
(b) References to the singular includes the plural, and vice versa;
(c) Reference to any Article or Section means an Article or Section of this Agreement;
(d) Reference to any Exhibit or Schedule means an Exhibit, Attachment or Schedule to this Agreement, all of which are incorporated into and made a part of this Agreement;
(e) Unless expressly provided to the contrary, “hereunder,” “hereof,” “herein” and words of similar import are references to this Agreement as a whole and not to any particular Section or other provision of this Agreement; and
(f) “Include” and “including” shall mean include or including without limiting the generality of the description preceding such term.
10.13 Construction . Purchaser is a party capable of making such investigation, inspection, review and evaluation of the Company and the Subject Interest as a prudent purchaser would deem appropriate under the circumstances including with respect to all matters relating to the value, operation and suitability of the assets of the Company. Seller and Purchaser have had the opportunity to exercise business discretion in relation to the negotiation of the details of the transaction contemplated hereby. This Agreement is the result of arm’s-length negotiations from equal bargaining positions. Based on the foregoing, any rule of construction that a contract be construed against the drafter shall not apply to the interpretation or construction of this Agreement.
10.14 Limitation on Damages . Notwithstanding anything to the contrary contained in this Agreement, except in connection with (i) any Party’s failure to consummate the transactions contemplated by this Agreement as required by the terms hereof, in which case a Party has all remedies and damages available to it at law or in equity, as well as pursuant to Section 8.2 and Section 10.15 , and (ii) any such damages claimed by Persons other than the Parties or their Affiliates for which indemnification is available under the terms of this Agreement, none of Purchaser, Seller or any of their respective Affiliates shall be entitled to punitive or exemplary damages in connection with this Agreement and the transactions contemplated hereby and, except as otherwise provided in this sentence, Purchaser and Seller, for themselves and on behalf of their Affiliates, hereby expressly waive any right to punitive or exemplary damages in connection with this Agreement and the transactions contemplated hereby.
10.15 Specific Performance . The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed or were threatened to be not performed in accordance with their specific terms or were otherwise breached, and that money damages or legal remedies would not be an adequate remedy for any such damages. The Parties accordingly agree that, in addition to any other remedy that may be available to it, including monetary damages, each party shall be entitled to enforce specifically the terms and provisions of this Agreement, or to enforce compliance with, the covenants and obligations of any other party and appropriate injunctive relief shall be granted in connection therewith and all such rights and remedies at law or in equity shall be cumulative, except as may be limited by Section 9.1(c) . Any party seeking an injunction, a decree or order of specific performance shall not be required to provide any bond or other security in connection therewith and any such remedy shall be in addition and not in substitution for any other remedy to which such party is entitled at law or in equity.
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10.16 Right to Rely . Notwithstanding any other provision of this Agreement, if the transactions contemplated hereby are consummated, Purchaser expressly reserves the right to seek indemnity or other remedy for any Damages arising out of or relating to any breach of any representation, warranty or covenant contained herein, notwithstanding any investigation by, disclosure to, knowledge or imputed knowledge of Purchaser or any of its Affiliates and its and their managers, directors, officers, employees and agents in respect of any fact or circumstances that reveals the occurrence of any such breach, whether before or after the execution and delivery hereof. In furtherance of the foregoing, Seller agrees that as knowledge or lack of reliance shall not be a defense in law or equity to any claim of breach of representation, warranty or covenant by Seller herein, Seller shall not in any action, suit or proceeding concerning a breach or alleged breach of any representation, warranty or covenant herein, or any indemnity thereof, seek information concerning knowledge or reliance of Purchaser or any of its Affiliates and its and their managers, directors, officers, employees and agents, through deposition, discovery or otherwise or seek to introduce evidence or argument in any action, suit or proceeding regarding the knowledge or lack of reliance of Purchaser or any of its Affiliates and its and their managers, directors, officers, employees and agents prior to the Closing on or with respect to any such representations, warranties or covenants.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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The Parties are signing this Agreement as of the Execution Date.
SELLER: | ||
CGAS PROPERTIES, L.P. | ||
EVCG GP, LLC, its general partner | ||
By: | /s/Michael E. Mercer | |
Name: | Michael E. Mercer | |
Title: | President and Chief Executive Officer | |
PURCHASER: | ||
M3 Ohio Gathering LLC | ||
By: | /s/Frank D. Tsuru | |
Name: | Frank D. Tsuru | |
Title: | Manager |
Signature Page to Membership Interest Purchase Agreement
Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and M3 Ohio Gathering LLC
Exhibit A
Definitions
“ Adjusted Purchase Price ” has the meaning set forth in Section 2.4(d) .
“ Affiliate ” with respect to any Person, means any other Person that directly or indirectly controls, is controlled by or is under common control with such Person, with control in such context meaning the ability to direct the management and policies of a Person through ownership of voting shares or other equity rights, pursuant to a written agreement, or otherwise.
“ Agreement ” has the meaning set forth in the Preamble.
“ Assignment Agreement ” has the meaning set forth in Section 3.2(a) .
“ Authorized Officer ” means, with respect to any act to be performed or duty to be discharged by any Person which is not an individual, any officer or other representative thereof then authorized to perform such act or discharge such duty.
“ Business Day ” means each calendar day except Saturday, Sunday, and any other day on which banks are generally closed for business in Houston, Texas.
“ Cap ” has the meaning set forth in Section 9.3(d) .
“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and the rules and regulations promulgated thereunder.
“ Claim Notice ” has the meaning set forth in Section 9.2(b) .
“ Closing ” has the meaning set forth in Section 3.1 .
“ Closing Date ” means June 10, 2015, or July 31, 2015 (if extended to such date pursuant to Section 2.3 ) or such earlier date as agreed to by the Parties.
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Company ” has the meaning set forth in the Recitals.
“ Competing Transaction ” has the meaning set forth in Section 6.1 .
“ Contract ” means any legally binding contract, lease, license, evidence of indebtedness, mortgage indenture, purchase order, binding bid, letter of credit, security agreement or other written or oral and legally binding arrangement.
“ Damages ” has the meaning set forth in Section 9.1(d) .
“ Deductible ” has the meaning set forth in Section 9.3(d)
A- 1 |
Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and M3 Ohio Gathering LLC
“ Dispute ” means any dispute, controversy or claim and other matter in question arising out of or relating to this Agreement, including any dispute as to the interpretation, construction, validity, enforceability, breach, or termination hereof.
“ Effective Time ” means 12:01 a.m., United States of America central time, on May 1, 2015.
“ Employee Benefit Plan ” means any employment, consulting, services, stock option, equity or equity based, change-in-control, retention, incentive, severance, termination, deferred compensation, profit sharing, retirement, supplemental income, fringe benefit, collective bargaining, employee loan or extension of credit, vacation, sick leave, workmen’s compensation or other insurance, disability, death benefit, group insurance, health, life, welfare, accident or other plan, program, understanding, agreement, practice, policy or arrangement of any kind, whether written or oral, including, without limitation, each “employee benefit plan” within the meaning of Section 3(3) of ERISA and each “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA, whether or not subject to ERISA.
“ Encumbrance ” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, option, preemptive right, right of first refusal or first offer, proxy, levy, voting trust or agreement, encumbrance, or other adverse claim or restriction on title or transfer of any nature whatsoever.
“ Enforceability Exceptions ” has the meaning set forth in Section 4.3 .
“ Entire Interest ” has the meaning set forth in the Recitals.
“ Environmental Laws ” means all Laws of any Governmental Body having jurisdiction over the Company or its property in question addressing pollution or protection of the environment.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.
“ Exclusive Representations and Covenants ” has the meaning set forth in Section 9.1(c) .
“ Execution Date ” has the meaning set forth in the Preamble.
“ Existing Agreements ” means the agreements listed on Schedule 4.13 .
“ EVEP ” means EV Energy Partners, L.P., a Delaware limited partnership and indirect owner of all of the partnership interests in the Seller.
“ Fundamental Reps ” has the meaning set forth in Section 9.3(a) .
“ GAAP ” means US generally accepted accounting principles, consistently applied.
“ Government Authorizations ” has the meaning set forth in Section 6.2(a) .
A- 2 |
Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and M3 Ohio Gathering LLC
“ Governmental Body ” means any domestic or foreign national, state, local, municipal, or other government, and any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; and any court or governmental tribunal.
“ Hazardous Substance ” means (i) any petroleum or petroleum products, flammable explosives, radioactive materials, medical waste, radon, asbestos or asbestos-containing products or materials, chlorofluorocarbon, hydrofluorocarbon, urea formaldehyde foam insulation, polychlorinated biphenyls (PCBs) or lead-containing paint or plumbing; and (ii) any element, compound, substance, waste or other material that is defined as, or included in the definition of, or deemed by or pursuant to any Environmental Law or by any Governmental Body to be “hazardous,” “toxic,” a “contaminant,” “waste,” a “pollutant,” “hazardous substance,” “hazardous waste,” “restricted hazardous waste,” “hazardous material,” “extremely hazardous waste,” a “toxic substance,” a “toxic pollutant” or words with similar meaning.
“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and the accompanying rules and regulations.
“ Hydrocarbons ” means oil and gas and other hydrocarbons produced or processed in association therewith (whether or not any such item is in liquid or gaseous form), or any combination thereof, and any minerals produced in association therewith.
“ Indemnified Person ” has the meaning set forth in Section 9.2(a) .
“ Indemnifying Person ” has the meaning set forth in Section 9.2(a) .
“ Individual Claim Threshold ” has the meaning set forth in Section 9.3(c) .
“ Intellectual Property ” means any trademarks, service marks, copyrights, trade secrets, patents, patent applications and other intellectual property rights.
“ Knowledge ” means (a) with respect to Seller, the actual knowledge, without investigation, of those individuals identified on Schedule 1.1(b) , and (b) with respect to Purchaser, the actual knowledge, without investigation, of those individuals identified on Schedule 1.1(c) .
“ Laws ” means all laws, statutes, rules, regulations, ordinances, orders, restrictions, decrees, common law, directives, judgments, injunctions, writs, awards, codes and other legal requirements of, or issued by, any Governmental Body.
“ LLC Agreement ” means the Limited Liability Company Agreement of the Company dated as of March 9, 2012, as amended from time to time.
A- 3 |
Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and M3 Ohio Gathering LLC
“ Material Adverse Effect ” means any event, occurrence, fact, condition or change that is or could be reasonably expected to become, individually or in the aggregate, with all other such events, occurrences, facts, conditions or changes, materially adverse to the ownership, operation, business, assets, liabilities, results of operations, financial condition or value of the Company, as currently operated, taken as a whole (it being understood and agreed that, if the aggregate amount of Damages resulting therefrom is ten percent (10%) or more of the Purchase Price, such event, occurrence, fact, condition or change shall be deemed to constitute a Material Adverse Effect), or prevents or materially delays the ability of Seller to consummate the transactions contemplated by this Agreement; provided, however, in no event shall any of the following be deemed to constitute, nor shall any of the following be taken into account in determining whether there has been or will be, a Material Adverse Effect:
(A) changes in Hydrocarbon prices;
(B) any change affecting the oil and gas industry generally in the region in which the Company operates;
(C) any change in the economy or the financial, capital or energy markets generally in the region in which the Company operates, in the United States or elsewhere in the world, including changes generally in supply, demand, price levels or interest or exchange rates;
(D) any change in Law or in GAAP or interpretations thereof or accounting standards, governmental policy or political conditions;
(E) any labor strike, request for representation, organizing campaign, work stoppage, slowdown, lockout or other labor disputes;
(F) any change in general regulatory or political conditions, including acts of war, sabotage, armed hostilities or terrorism, embargo, sanctions or interruption of trade, or any escalation or worsening of any acts of war, sabotage, armed hostilities or terrorism, embargo, sanctions or interruption of trade;
(G) any change in the financial condition or results of operation of Purchaser or its Affiliates;
(H) any failure of any assumptions, estimates or projections relating to the Company to be accurate (provided that the underlying causes of such failures (subject to the other provisions of this definition) shall not be excluded);
(I) the announcement of the execution, or the pendency, of this Agreement or the performance of obligations under this Agreement;
(J) any casualty loss or condemnation, which shall be subject to the provisions of Section 6.5 ;
(K) any natural disasters or acts of God; or
(L) any actions or inactions of Seller or the Company consented to by Purchaser;
A- 4 |
Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and M3 Ohio Gathering LLC
provided further, however, that any event, occurrence, fact, condition or change referred to in the immediately preceding clauses (A), (B), (C), (D), (E), (F), or (K) shall be taken into account for purposes of determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur only to the extent such event, occurrence, fact, condition or change adversely affects the Company in a disproportionate manner relative to other companies operating in the industries in which the Company operates (provided for the avoidance of doubt, to the extent any such disproportionate impact is the physical damage or destruction to the assets of the Company constituting a casualty loss, such impact shall not be considered and the provisions of Section 6.5 shall apply).
“ Member ” has the meaning set forth in the LLC Agreement.
“ Membership Interest ” has the meaning given to it in the LLC Agreement.
“ Midstream Assets ” means collectively, the Plant Facilities and the Gas Pipeline Facilities as defined in the LLC Agreement.
“ Other Agreement ” has the meaning set forth in the Recitals.
“ Other Member ” has the meaning set forth in the Recitals.
“ Party ” and “ Parties ” have the meanings set forth in the Preamble.
“ Permit ” means all permits, licenses, registrations, certifications, authorizations, approvals, consents, exemptions, waivers, variances, privileges and other authorizations of or by any Governmental Body.
“ Person ” means any individual, firm, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, or Governmental Body or any other entity.
“ Proportionate Share ” means 30/79 x 21% (approximately 7.975%), unless the Subject Interest is increased to 21% pursuant to Section 2.3 , in which case “Proportionate Share” means 21%.
“ Purchase Price ” has the meaning set forth in Section 2.2 , subject to adjustment as provided in Sections 2.3 and 2.4 .
“ Purchaser ” has the meaning set forth in the Preamble.
“ Release ” means any releasing, spilling, leaking, discharging, disposing of, pumping, pouring, emitting, emptying, injecting, leaching, dumping or allowing to escape and includes “release” as defined in CERCLA or any other Environmental Law.
“ Remaining Interest ” means a Membership Interest equal to the Entire Interest minus the Subject Interest.
“ Sanctions ” has the meaning set forth in Section 4.18 .
A- 5 |
Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and M3 Ohio Gathering LLC
“ Seller ” has the meaning set forth in the Preamble.
“ Subject Interest ” means a 30/79 x 21% (approximately 7.975%) Membership Interest in the Company or a 21% Membership Interest in the Company (if increased to such percentage pursuant to Section 2.3 ).
“ Tax ” and “ Taxes ” mean all federal, state, local, and foreign income, profits, franchise, sales, use, ad valorem, property, severance, production, excise, stamp, documentary, real property transfer or gain, gross receipts, goods and services, registration, capital, transfer, value-added or withholding taxes or other assessments, duties, fees or charges imposed by any Governmental Body, including any interest, penalties or additional amounts which may be imposed with respect thereto except insofar as such interest, penalties or additional amounts are attributable to the delay or default of a Person seeking indemnification therefor.
“ Tax Return ” means any return, report or other information required to be supplied to a Governmental Body in connection with Taxes, or amendment thereto.
“ Termination Date ” means September 1, 2015.
“ Third Party Claim ” has the meaning set forth in Section 9.2(b) .
“ Transfer Notice ” has the meaning set forth in the Recitals.
“ Transfer Taxes ” means all sales, use, VAT, business transfer, real property transfer, recording, documentary, stamp, registration, stock transfer, or similar taxes and fees.
“ Treasury Regulations ” means the regulations promulgated under the Code by the United States Department of the Treasury, as such regulations may be amended from time to time.
“ $ ” means United States dollars.
A- 6 |
Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and M3 Ohio Gathering LLC
Exhibit B
Form of Assignment Agreement
ASSIGNMENT
This Assignment (this “ Assignment ”) is dated [ ● ], 2015 (the “ Execution Date ”), and is between CGAS Properties, L.P., a Delaware limited partnership (“ Assignor ”), and M3 Ohio Gathering LLC, a Delaware limited liability company (“ Assignee ”). Assignor and Assignee are sometimes referred to individually as a “ Party ” and collectively as the “ Parties ”.
RECITALS
WHEREAS , Assignor owns twenty-one percent (21%) of the membership interests of Utica East Ohio Midstream, LLC, a Delaware limited liability company (the “ Company ”);
WHEREAS , the Parties have entered into that certain Membership Interest Purchase Agreement dated May 26, 2015 (the “ MIPA ”), whereby Assignor agreed to sell to Assignee, and Assignee agreed to purchase from Assignor, a [__] membership interest (“ Subject Interest ”); and
WHEREAS , the Parties are executing this Assignment to effect the assignment and transfer from Assignor to Assignee of the Subject Interest, subject to the terms and conditions herein.
NOW, THEREFORE , in consideration of the premises and of the mutual promises, representations, warranties, covenants, conditions and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound by the terms hereof, agree as follows:
1. Definitions . Capitalized terms used but not otherwise defined herein shall have the meanings given such terms in the MIPA.
2. Conveyance of the Subject Interest . On and with effect from the date of this Assignment, Assignor hereby sells, assigns, and transfers to Assignee, and Assignee hereby acquires, accepts, and assumes from Assignor, all of Assignor’s right, title and interest in and to the Subject Units, free and clear of all Encumbrances other than restrictions that may be imposed by applicable Laws and restrictions under the LLC Agreement.
3. Disclaimer of Representations and Warranties . Other than the representations and warranties of Assignor specifically set forth in the MIPA and without prejudice to the rights of Assignee under the MIPA, the assignment of the Subject Interest pursuant to this Assignment is made without representation or warranty, express or implied, and Assignor hereby disclaims and negates any such representation or warranty.
B- 1 |
Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and M3 Ohio Gathering LLC
4. Severability . If any provision or provisions of this Assignment is or at any time becomes illegal, invalid or unenforceable in any respect, the legality, validity and enforceability of the remaining provisions of this Assignment shall not in any way be affected or impaired thereby.
5. Entire Agreement; Amendment . This Assignment and the MIPA and the other documents to be executed thereunder and the Exhibits, Attachments and Schedules attached thereto constitute the entire agreement between the Parties pertaining to the subject matter thereof and hereof, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties pertaining to the subject matter thereof and hereof. This Assignment may be amended or modified only by an agreement in writing executed by all Parties and expressly identified as an amendment or modification.
6. Counterparts . This Assignment may be executed in counterparts, each of which shall be deemed an original instrument, but all such counterparts together shall constitute but one agreement.
7. Governing Law; Disputes . This Assignment and the legal relations between the Parties shall be governed by and construed in accordance with the laws of the State of Texas, excluding any conflict of laws rules that would refer the matter to the Laws of another jurisdiction. Any Dispute between the Parties with respect to this Assignment shall be resolved in accordance with the terms of Section 10.6 of the MIPA, which is incorporated into this Assignment by reference.
8. MIPA; Conflict . This Assignment is made subject to the terms and conditions of the MIPA. In the event of any conflict between this Assignment and the MIPA, the provisions of the MIPA shall prevail.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
B- 2 |
Attached to and made part of that certain Membership Interest Purchase Agreement between CGAS Properties, L.P. and M3 Ohio Gathering LLC
The Parties are signing this Assignment as of the Execution Date.
ASSIGNOR: | ||
CGAS PROPERTIES, L.P. | ||
By: EVCG GP, LLC, its general partner | ||
By: | /s/Michael E. Mercer | |
Name: | Michael E. Mercer | |
Title: | President and Chief Executive Officer | |
ASSIGNEE: | ||
M3 Ohio Gathering LLC | ||
By: | /s/Frank D. Tsuru | |
Name: | Frank D. Tsuru | |
Title: | Manager |
B- 3 |
Exhibit 31.1
CERTIFICATIONS
I, Michael E. Mercer, certify that:
1. | I have reviewed this quarterly report on Form 10–Q of EV Energy Partners, L.P.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 7, 2015 | /s/ MICHAEL E. MERCER |
Michael E. Mercer | |
Chief Executive Officer of EV Management LLC, | |
general partner of EV Energy GP, L.P., | |
general partner of EV Energy Partners, L.P. |
Exhibit 31.2
CERTIFICATIONS
I, Nicholas Bobrowski, certify that:
1. | I have reviewed this quarterly report on Form 10–Q of EV Energy Partners, L.P.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 7, 2015 | /s/NICHOLAS BOBROWSKI |
Nicholas Bobrowski | |
Chief Financial Officer of EV Management LLC, | |
general partner of EV Energy GP, L.P., | |
general partner of EV Energy Partners, L.P. |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying report on Form 10–Q for the period ended June 30, 2015 of EV Energy Partners, L.P. (the “Partnership”) and filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael E. Mercer, Chief Executive Officer of EV Management, LLC, the general partner of EV Energy GP, L.P., the general partner of the Partnership, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002, that:
• | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. |
Date: August 7, 2015 | /s/ MICHAEL E. MERCER |
Michael E. Mercer | |
Chief Executive Officer of EV Management LLC, | |
general partner of EV Energy GP, L.P., | |
general partner of EV Energy Partners, L.P. |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying report on Form 10–Q for the period ended June 30, 2015 of EV Energy Partners, L.P. (the “Partnership”) and filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nicholas Bobrowski, Chief Financial Officer of EV Management, LLC, the general partner of EV Energy GP, L.P., the general partner of the Partnership, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002, that:
• | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. |
Date: August 7, 2015 | /s/NICHOLAS BOBROWSKI |
Nicholas Bobrowski | |
Chief Financial Officer of EV Management LLC, | |
general partner of EV Energy GP, L.P., | |
general partner of EV Energy Partners, L.P. |