SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
MAY 16, 2003
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Date of Report (Date of earliest event reported)
AMERICAN REAL ESTATE PARTNERS, L.P.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-9516 13-3398766
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(State of Organization) (Commission File Number) (IRS Employer
Identification Number)
100 SOUTH BEDFORD ROAD
MT. KISCO, NY 10549
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(Address of Registrant's Principal Executive Office (Zip Code)
(914) 242-7700
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(Registrant's telephone number, including area code)
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On May 16, 2003 (i) the Company issued a press release, a copy of which is
filed as Exhibit 99.1, and (ii) a subsidiary of the Company has entered into
Stock, Debt and LLC Interest Purchase Agreement, copy of which is filed as
Exhibit 99.2.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
EXHIBIT NO. DESCRIPTION
99.1 Joint Press Release of American Real Estate Partners, L.P., dated as
of May 16, 2003.
99.2 Stock, Debt and LLC Interest Purchase Agreement, dated as of May 16,
2003
SIGNATURES
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 hereunto duly authorized.
AMERICAN REAL ESTATE PARTNERS, L.P.
(Registrant)
By: American Property Investors, Inc.
General Partner
By: /s/ John P. Saldarell
John P. Saldarelli
Chief Financial Officer,
Secretary and Treasurer
Dated: May 16, 2002
Exhibit 99.1
[Letterhead of American Real Estate Partners, L.P.]
Contact: John P. Saldarelli
Secretary and Treasurer
(914) 242-7700
FOR IMMEDIATE RELEASE
AMERICAN REAL ESTATE PARTNERS, L.P. AGREES TO
ACQUIRE CERTAIN SECURITIES OF NATIONAL ENERGY GROUP, INC.
Mount Kisco, New York, May 16, 2003 - American Real Estate Partners, L.P.,
(NYSE: ACP) ("AREP") announced today that American Real Estate Holdings Limited
Partnership, a subsidiary of AREP, has agreed to acquire certain debt and equity
securities of National Energy Group, Inc. and the 100% interest in an entity
owning such debt and equity securities, from the entities affiliated with and
indirectly wholly-owned by Carl C. Icahn for the aggregate consideration of
$148,084,689.50, subject to certain adjustments at closing, by entering into a
definitive Stock, Debt and LLC Interest Purchase Agreement dated as of today.
Following the closing of this transaction, AREP will beneficially own in excess
of 50% of the issued and outstanding Common Stock of National Energy Group, Inc.
and the 100% of the outstanding 10 3/4 % Senior Notes due 2006 of National
Energy Group, Inc. in the aggregate principal amount of $148,637,000. The
closing of the transactions contemplated by the agreement is subject to certain
conditions, including, among other things, the approval of the shareholders of
National Energy Group, Inc. of certain amendments to the certificate of
incorporation of National Energy Group, Inc. and subsequent action of the board
of directors of National Energy Group, Inc. pursuant to such amendment.
National Energy Group, Inc. owns an interest in entities primarily involved
in owning and operating of oil and gas properties and manages the oil and gas
operations of such entities.
American Real Estate Partners, L.P. is a master limited partnership
primarily engaged in acquiring and managing real estate investments with a
primary focus on office, retail, industrial, hotel, gaming and residential
properties.
This release contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995.
Exhibit 99.2
STOCK, DEBT AND LLC INTEREST PURCHASE AGREEMENT
dated as of May 16, 2003
by and between
American Real Estate Holdings, L.P.,
as Purchaser,
and
Arnos Corp.,
High River Limited Partnership
and
High Coast Limited Partnership,
as Sellers
Table of Contents
Page
Article I
SALE OF SHARES, DEBT AND LLC INTEREST AND CLOSING
1.1 Purchase and Sale.....................................................................................1
1.2 Purchase Price........................................................................................1
1.3 Closing...............................................................................................2
Article II
REPRESENTATIONS AND WARRANTIES OF SELLERS REGARDING SHARES, DEBT AND COMPANY
2.1 Organization of the Sellers...........................................................................2
2.2 Authority.............................................................................................2
2.3 Title.................................................................................................2
2.4 No Conflicts..........................................................................................2
2.5 Due Incorporation of Company and Subsidiaries.........................................................3
2.6 Consents and Approvals; Authority Relative to this Agreement..........................................3
2.7 Capitalization........................................................................................3
2.8 Capitalization at Closing.............................................................................4
2.9 SEC Filings; Financial Statements.....................................................................5
2.10 No Adverse Effects or Changes.........................................................................5
2.11 Title to Properties...................................................................................6
2.12 Litigation............................................................................................6
2.13 Claims Against Officers and Directors.................................................................6
2.14 Insurance.............................................................................................6
2.15 Compliance with Law...................................................................................6
2.16 Taxes.................................................................................................6
2.17 Undisclosed Liabilities...............................................................................7
2.18 Related Parties.......................................................................................7
2.19 Intellectual Property.................................................................................7
2.20 Environmental Matters.................................................................................7
2.21 Oil and Gas Operations................................................................................8
2.22 Proven Reserves.......................................................................................9
2.23 Derivatives and Hedging Contracts.....................................................................9
2.24 Employees, Labor Matters, etc.........................................................................9
2.25 Employee Benefit Plans...............................................................................10
2.26 Brokers..............................................................................................10
2.27 Accuracy of Statements...............................................................................10
Article III
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF ARNOS AND HIGH RIVER REGARDING HOLDING LLC
3.1 Due Organization of Company..........................................................................11
3.2 Authority............................................................................................11
3.3 Title to Properties..................................................................................11
3.4 Litigation...........................................................................................11
3.5 Claims Against Members and Manager...................................................................11
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3.6 No Other Business....................................................................................11
Article IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.1 Organization of Purchaser............................................................................11
4.2 Authority............................................................................................12
4.3 No Conflicts.........................................................................................12
Article V
ASSIGNMENT AND ASSUMPTION OF OPERATING AGREEMENT
5.1 Assignment and Assumption............................................................................12
Article VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
6.1 Warranties True as of Both Present Date and Closing Date.............................................12
6.2 Compliance with Agreements and Covenants.............................................................13
6.3 Consents and Approvals...............................................................................13
6.4 No Material Adverse Change...........................................................................13
6.5 Actions or Proceedings...............................................................................13
6.6 Purchase of Additional Shares........................................................................13
Article VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH SELLER
7.1 Warranties True as of Both Present Date and Closing Date.............................................13
7.2 Compliance with Agreements and Covenants.............................................................13
7.3 Consents and Approvals...............................................................................14
7.4 Actions or Proceedings...............................................................................14
Article VIII
TERMINATION
8.1 Termination..........................................................................................14
8.2 Effect of Termination................................................................................14
Article IX
INDEMNIFICATION
9.1 Indemnification by Sellers...........................................................................14
9.2 Claims...............................................................................................15
9.3 Notice of Third-Party Claims; Assumption of Defense..................................................15
9.4 Settlement or Compromise.............................................................................16
9.5 Failure of Indemnifying Person to Act................................................................16
9.6 Tax Character........................................................................................16
Article X
DEFINITIONS
10.1 Definitions..........................................................................................16
Article XI
MISCELLANEOUS
11.1 Investigation........................................................................................22
11.2 Entire Agreement.....................................................................................22
11.3 Waiver...............................................................................................22
11.4 Amendment............................................................................................22
11.5 No Third Party Beneficiary...........................................................................22
11.6 Assignment; Binding Effect...........................................................................22
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11.7 Headings.............................................................................................22
11.8 Invalid Provisions...................................................................................22
11.9 Expenses.............................................................................................22
11.10 Further Action....................................................................................24
11.11 Governing Law.....................................................................................24
11.12 Counterparts......................................................................................24
11.13 Independent Obligations...........................................................................24
11.14 Exclusive Remedy..................................................................................24
11.15 Acknowledgement...................................................................................24
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This STOCK, DEBT AND LLC INTEREST PURCHASE AGREEMENT (this "Agreement")
dated as of May 16, 2003 is made and entered into by and among Arnos Corp., a
Nevada corporation ("Arnos"), High River Limited Partnership, a Delaware limited
partnership ("High River"), High Coast Limited Partnership, a Delaware limited
partnership ("High Coast"), (each a "Seller" and collectively, the "Sellers"),
and American Real Estate Holdings, L.P., a Delaware limited partnership
("Purchaser"). Capitalized terms not otherwise defined herein have the meanings
set forth in ARTICLE X.
WHEREAS, Purchaser desires to purchase (i) 4,044,595 shares (such number of
shares, the "Shares") of Common Stock, par value $.01 per share, of National
Energy Group, Inc. (the "Company"), from Arnos at a price of $0.50 per Share,
(ii) $54,909,000 in principal amount of 10 3/4 % Senior Notes due 2006 of the
Company (such notes in such principal amount of $54,909,000, the "Debt"), from
High Coast at a price equal to 97.75% (the "Discount Rate") of the sum of the
principal amount of the Debt plus 100% of any interest unpaid but accrued on the
Debt through and inclusive of the Closing Date (as defined below), and (iii)
100% of the limited liability company interest (the "LLC Interest") of
Greenville Holding LLC, a Delaware limited liability company (the "Holding
LLC"), from the Holding LLC's members High River and Arnos, at a price equal to
$92,388,844.50 (plus 100% of any interest unpaid but accrued on the Holding Debt
(as defined below) through and inclusive of the Closing Date), which price is
calculated by applying the same price per Share to the Holding Shares and
Discount Rate to the Holding Debt as were applied to the Shares and the Debt,
respectively; in each case on the terms and subject to the conditions set forth
in this Agreement; and
WHEREAS, Holding LLC holds (i) 1,539,449 shares of Common Stock, par value
$.01 per share, of the Company (the "Holding Shares") and (ii) $93,728,000 in
principal amount of 10 3/4 % Senior Notes due 2006 of the Company (the "Holding
Debt").
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Article I
SALE OF SHARES, DEBT AND LLC INTEREST AND CLOSING
1.1 Purchase and Sale. The Sellers agree to sell to Purchaser, and
Purchaser agrees to purchase from the Sellers, the Shares, the Debt (together
with any unpaid but accrued interest thereon through and including the Closing
Date) and the LLC Interest at the Closing on the terms and subject to the
conditions set forth in this Agreement.
1.2 Purchase Price. The aggregate purchase price for the Shares, the Debt
and the LLC Interest is $148,084,689.50 (plus 100% of any interest unpaid but
accrued on the Debt and the Holding Debt through and inclusive of the Closing
Date, the "Purchase Price"), payable in immediately available United States
funds at the Closing in the manner provided in Section 1.3. The allocation of
the Purchase Price (other than for any unpaid but accrued interest on the Debt
and, with respect to the price for the LLC Interest, the Holding Debt, the
amount of which will be calculated on the Closing Date) with respect to each
Seller and between the Shares, the Debt and the LLC Interest is as set forth on
Schedule A hereto. The parties to this Agreement agree
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not to take any position with any Governmental or Regulatory Authority
inconsistent with this purchase price allocation.
1.3 Closing. The Closing will take place at the offices of Icahn Associates
Corp., 767 Fifth Avenue, 47th Floor, New York, New York 10153, or such other
location as may be agreed to by the parties, on the second business day after
the satisfaction or waiver of conditions set forth in Articles VI and VII (the
"Closing Date"). At the Closing: (i) Purchaser will pay the Purchase Price by
electronic transfer of immediately available funds to such respective accounts
of each Seller as such Seller has directed, and (ii) the Sellers will sell to
Purchaser the Shares, the Debt and the LLC Interest by (A) delivering to
Purchaser the Shares and the Debt against such payment via a DTC-book entry
transfer from the accounts of the Sellers to the account of Purchaser, through
Icahn &Co., Inc., and (B) effectuating the sale of the LLC Interest and the
assignment of the Operating Agreement contemplated in Article V hereof to
Purchaser.
Article II
REPRESENTATIONS AND WARRANTIES OF SELLERS REGARDING SHARES, DEBT AND COMPANY
Each Seller hereby jointly and severally represents and warrants (except
with respect to representations and warranties set forth in Sections 2.1, 2.2,
2.3, 2.4, 2.6, 2.7(c), 2.26 and 2.27 which are being made severally and not
jointly by each such Seller solely with respect to itself and not any other
Seller) to Purchaser as follows:
2.1 Organization of the Sellers. Each Seller is a duly organized
corporation or limited partnership, as the case may be, validly existing and in
good standing under the Laws of the State of Delaware. Each Seller has full
corporate or organizational, as the case may be, power and authority to execute
and deliver this Agreement and to perform such Seller's obligations hereunder
and to consummate the transactions contemplated hereby, including without
limitation to sell and transfer (pursuant to this Agreement) its respective
portions of the Shares, the Debt and the LLC Interest.
2.2 Authority. The execution and delivery by each Seller of this Agreement,
and the performance by such party of its obligations hereunder, have been duly
and validly authorized by the managing member/manager of Seller or its board of
directors, as the case may be, no other organizational or corporate action on
the part of any Seller or its members/managers or the board of directors, as the
case may be, being necessary. This Agreement has been duly and validly executed
and delivered by each Seller and constitutes a legal, valid and binding
obligation of each Seller enforceable against such Seller in accordance with its
terms;
2.3 Title. The delivery of its respective portions of the Shares, the Debt
and the LLC Interest by the respective Sellers to Purchaser in the manner
provided in Section 1.3 will transfer to Purchaser good and valid title to the
Shares, the Debt and the LLC Interest, free and clear of all Liens other than
Liens created by Purchaser.
2.4 No Conflicts. The execution and delivery by each Seller of this
Agreement do not, and the performance by each Seller of its obligations under
this Agreement and the consummation of the transactions contemplated hereby will
not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the organizational documents (other than the Section
6 of the
2
Company's certificate of incorporation) of any of the Sellers, the Company
or any of the Company's Subsidiaries;
(b) conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to any Seller, the Company or any of
the Company's Subsidiaries or any of their respective Assets and Properties
(other than such conflicts, violations or breaches which will not in the
aggregate adversely affect the validity or enforceability of this Agreement or
have a material adverse effect on the Business or Condition of such Seller, the
Company or any of the Company's Subsidiaries); or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require any Seller, the Company or any of the Company's Subsidiaries to
obtain, other than the Section 6 Approval and the Section 6 Waiver, any consent,
approval or action of, make any filing with or give any notice to any Person as
a result or under the terms of, (iv) result in or give to any Person any right
of termination, cancellation, acceleration or modification in or with respect
to, or (v) result in the creation or imposition of any Lien upon any Seller, the
Company or any of the Company's Subsidiaries or any of their respective Assets
and Properties under, any Contract or License to which any Seller, the Company
or any of the Company's Subsidiaries is a party or by which any of their
respective Assets and Properties are bound.
2.5 Due Incorporation of Company and Subsidiaries. The Company and each of
its Subsidiaries is duly organized and validly existing under the laws of the
state in which it is incorporated or organized, as the case may be, with all
requisite power and authority to own, lease and operate its properties and to
carry on its business as they are now being owned, leased, operated and
conducted. The Company and each of its Subsidiaries is licensed or qualified to
do business and is in good standing (where the concept of "good standing" is
applicable) as a foreign corporation in each jurisdiction where the nature of
the properties owned, leased or operated by it and the business transacted by it
require such licensing or qualification (except with respect to the Company's
Subsidiaries, where the failure to be so licensed or qualified or be in good
standing will not in the aggregate adversely affect the validity or
enforceability of this Agreement or have a material adverse effect on the
Business or Condition of any of the Company's Subsidiaries). The ownership of
the Company's Subsidiaries is as set forth in the Company SEC Documents filed
prior to the date hereof, to the extent such ownership is required to be
disclosed therein under any Law applicable to the Company.
2.6 Consents and Approvals; Authority Relative to this Agreement. Other
than the Section 6 Approval and the Section 6 Waiver, no consent, authorization
or approval of, filing or registration with, or cooperation from, any
Governmental Authority or any other Person not a party to this Agreement is
necessary in connection with the execution, delivery and performance by each
Seller of its respective obligations under this Agreement or the consummation by
each Seller of its respective transactions contemplated hereby.
2.7 Capitalization. (a) The authorized capital stock of the Company
consists of 15,000,000 shares of common stock (the "Common Stock"), $.01 par
value per share, 11,190,650 of which are currently issued and outstanding. All
of such shares (i) are validly issued, fully paid and nonassessable and (ii)
are, and when issued were, free of preemptive rights. Except as set forth in the
Company SEC Documents filed prior to the date hereof, there
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are no shares of capital stock of the Company held in the treasury of the
Company and no shares of capital stock of the Company are currently reserved for
issuance for any purpose or upon the occurrence of any event or condition.
(b) Except as set forth in the Company SEC Documents filed prior to
the date hereof, there are no shares of capital stock or other securities
(whether or not such securities have voting rights) of the Company or any of its
Subsidiaries issued or outstanding or any subscriptions, options, warrants,
calls, rights, convertible securities or other agreements or commitments of any
character obligating any Seller, the Company or any of the Company's
Subsidiaries, or obligating any Seller or any of their Affiliates to cause the
Company or any of the Company's Subsidiaries, to issue, transfer or sell, or
cause the issuance, transfer or sale of, any shares of capital stock or other
securities (whether or not such securities have voting rights) of the Company or
any of its Subsidiaries as applicable. Except as set forth in the Company SEC
Documents filed prior to the date hereof, there are no outstanding contractual
obligations of any Seller, the Company or any of the Company's Subsidiaries
which relate to the purchase, sale, issuance, repurchase, redemption,
acquisition, transfer, disposition, holding or voting of any shares of capital
stock or other securities of the Company or any of the Company Subsidiaries or
the management or operation of the Company or its Subsidiaries. Except for any
Seller's rights as a holder of Shares and except for Plans or except as set
forth in the Company SEC Documents filed prior to the date hereof, no Person has
any right to participate in, or receive any payment based on any amount relating
to, the revenue, income, value or net worth of the Company or any component or
portion thereof, or any increase or decrease in any of the foregoing.
(c) The assignments, endorsements, stock powers and other instruments of
transfer delivered by each applicable Seller to Purchaser at the Closing will be
sufficient to transfer such Seller's entire interest, legal and beneficial, in
the Shares and the Debt. Each such Seller has, and on the Closing Date will
have, full power and authority to convey good and marketable title to all of the
Shares and the Debt it holds, and upon the DTC transfer to Purchaser of such
Shares and Debt, Purchaser will receive good and marketable title to such Shares
and Debt, free and clear of all Liens.
(d) The aggregate principal amount of issued and outstanding 10 3/4% Senior
Notes due 2006 as of the date hereof is $148,637,000. Except (i) as set forth in
the Company SEC Documents filed prior to the date hereof or (ii) as otherwise
incurred in the ordinary course of business, consistent with past practice, and
in amounts which individually or in the aggregate are not material, neither the
Company nor any of its Subsidiaries has any indebtedness for borrowed money.
2.8 Capitalization at Closing. (a) Except for shares of capital stock
issued in respect of subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments set forth in the
Company SEC Documents filed prior to the date hereof, the authorized and issued
and outstanding capital stock of the Company will be the same at the Closing as
set forth in the Company SEC Documents filed prior to the date hereof; and
(b) The aggregate principal amount of issued and outstanding 10 3/4% Senior
Notes Due 2006 will be the same at the Closing as the aggregate principal amount
of issued and outstanding 10 3/4% Senior Notes Due 2006 set forth in Section
2.7(d) above.
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2.9 SEC Filings; Financial Statements. (a) Since August 4, 2000, the
Company has timely filed all required reports, schedules, forms, statements and
other documents (including exhibits and all other information incorporated
therein) with the SEC ("Company SEC Documents"). As of their respective dates
(and without giving effect to any amendments or modifications filed after the
date of this Agreement), each of the Company SEC Documents, including the
financial statements, exhibits and schedules thereto, filed and publicly
available with the SEC prior to the date hereof complied (and each of the
Company SEC Documents filed after the date of this Agreement, will comply) as to
form with applicable Securities Laws and did not (or in the case of statements,
circulars or reports filed after the date of this Agreement, will not) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
(b) Each of the Company's consolidated statements of financial condition or
balance sheets included in or incorporated by reference into the Company SEC
Documents, including the related notes and schedules, fairly presented in all
material respects (or, in the case of Company SEC Documents filed after the date
of this Agreement, will fairly present in all material respects) the financial
position of the Company as of the date of such balance sheet and each of the
Company's statements of income, cash flows and changes in stockholders' equity
included in or incorporated by reference into the Company SEC Documents,
including any related notes and schedules (collectively, the foregoing financial
statements and related notes and schedules are referred to as the "Company
Financial Statements"), fairly presented in all material respects (or, in the
case of Company SEC Documents filed after the date of this Agreement, will
fairly present in all material respects) the results of operations, cash flows
and changes in stockholders' equity of the Company for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments not material in amount), in each case in accordance with GAAP
consistently applied during the periods involved (except as may be noted therein
and except, in the case of unaudited statements, for the absence of notes). Each
of the Company Financial Statements complied (or, in the case of Company
Financial Statements included or incorporated by reference in Company SEC
Documents filed after the date of this Agreement, will, as of the Closing Date,
comply) as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto.
2.10 No Adverse Effects or Changes. Since the date of the Company Recent
Balance Sheet, (i) neither the Company nor any of its Subsidiaries has suffered
any Company Material Adverse Effect; (ii) there has been no change, event,
development, damage or circumstance affecting the Company or its Subsidiaries
that, individually or in the aggregate could reasonably be expected to have a
Company Material Adverse Effect; (iii) there has not been any material change by
the Company in its accounting methods, principles or practices, any revaluation
by the Company of any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business consistent with past practice; and (iv) the Company has
conducted its business only in the ordinary course of business consistent with
past practice.
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2.11 Title to Properties. Each of the Company and its Subsidiaries has, and
on the Closing Date will have, good and marketable title to, and is, and on the
Closing Date will be, the lawful owner of, all of the tangible and intangible
assets, properties and rights used in connection with its respective businesses
and all of the tangible and intangible assets, properties and rights reflected
in the Company Financial Statements (other than assets leased under the leases
listed on Schedule 2.11 and assets disposed of in the ordinary course of
business since the date of such Company Financial Statements).
2.12 Litigation. (a) Except as disclosed in the Company SEC Documents filed
prior to the date hereof, there are no material actions, suits, arbitrations,
regulatory proceedings or other litigation, proceedings or governmental
investigations pending or threatened against or affecting the Company, its
Subsidiaries or any of their respective officers, directors, employees or agents
in their capacity as such, or any of the Company's Assets and Properties or
businesses of the Company or any of its Subsidiaries, and Seller is not aware of
any facts or circumstances which may give rise to any of the foregoing. Except
as disclosed in the Company SEC Documents filed prior to the date hereof,
neither the Company nor any of its Subsidiaries is subject to any material
order, judgment, decree, injunction, stipulation or consent order of or with any
court or other Governmental Authority.
(b) There are no claims, actions, suits, proceedings or investigations
pending or threatened by or against the Company or any of its Subsidiaries or
Sellers with respect to this Agreement, or in connection with the transactions
contemplated hereby, and no Seller has any reason to believe there is a valid
basis for any such claim, action, suit, proceeding, or investigation.
2.13 Claims Against Officers and Directors. There are no pending or
threatened claims against any director, officer, employee or agent of the
Company, its Subsidiaries or any other Person, which could give rise to any
claim for indemnification against the Company or its Subsidiaries or cause the
Company or its Subsidiaries to incur any material liability or otherwise suffer
or incur any material Loss.
2.14 Insurance. The Company and its Subsidiaries maintain insurance
policies that provide adequate and suitable insurance coverage for the business
of the Company and its Subsidiaries and are on such terms, cover such risks and
are in such amounts as the insurance customarily carried by comparable companies
of established reputation similarly situated and carrying on the same or similar
business.
2.15 Compliance with Law. Except as set forth in the Company SEC Documents
filed prior to the date hereof, the Company and its Subsidiaries are in
compliance and, at all times, have been in compliance in all material respects
with all applicable Laws relating to the Company or its Subsidiaries or their
respective Assets and Properties or businesses. Except as disclosed in the
Company SEC Documents filed prior to the date hereof, no investigation or review
by any governmental authority or self-regulatory authority is pending or, to the
knowledge of the Sellers, threatened, nor has any such authority indicated in
writing to the Company or any of its Subsidiaries an intention to conduct the
same.
2.16 Taxes. The Company and its Subsidiaries have duly filed all material
Tax Returns required to have been filed by them. Neither the Company nor any of
its Subsidiaries has any material liability for any Taxes in excess of the
amounts paid (or reserved, in accordance
6
with GAAP, as reflected in the Company SEC Documents filed prior to the
date hereof), and neither the Company nor any of its Subsidiaries is delinquent
in the payment of any material Tax. The consummation of the transactions
contemplated by Article I hereof will not cause an "ownership change" within the
meaning of Section 382 of the Internal Revenue Code of 1986, as amended.
2.17 Undisclosed Liabilities. Except (i) as and to the extent disclosed or
reserved against the Company Recent Balance Sheet, or (ii) as incurred since the
date of the Company Recent Balance Sheet in the ordinary course of business
consistent with past practice, the Company does not have any material
liabilities or obligations of any nature, whether known or unknown, absolute,
accrued, contingent or otherwise and whether due or to become due.
2.18 Related Parties. Except as set forth in the Company SEC Documents
filed prior to the date hereof, and except for transactions between the Company
and its Subsidiaries or between the Company's Subsidiaries, (i) no Affiliate of
the Company is a party to any material agreement with the Company or any of its
Subsidiaries; (ii) no Affiliate of the Company owes any material amount of money
to, nor is such Affiliate owed any material amount of money by, the Company or
any of its Subsidiaries, other than pursuant to the Plans or in respect of
earned but unpaid salary or wages and other than reimbursement for or
advancement of routine expenses in the ordinary course of business; (iii)
neither the Company nor any of its Subsidiaries has, directly or indirectly,
guaranteed or assumed any material indebtedness for borrowed money or otherwise
for the benefit of an Affiliate of the Company; and (iv) since August 4, 2000,
neither the Company nor any of its Subsidiaries has made any material payment
to, or engaged in any material transaction with, an Affiliate of the Company,
other than pursuant to the Company's Plans and salary or wage plans and other
than reimbursement for or advancement of routine expenses in the ordinary course
of business.
2.19 Intellectual Property. (a) The Company and its Subsidiaries own, or
possess adequate rights to use, all material patents, trade names, trademarks,
copyrights, inventions, processes, designs, formulae, trade secrets, know-how
and other intellectual property rights necessary for the conduct of their
business. All material intellectual property has been duly registered with,
filed in or issued by the relevant filing offices, domestic or foreign, to the
extent necessary or desirable to ensure full protection under any applicable
Law, and such registrations, filings or issuances remain in full force and
effect.
(b) The conduct of the business of the Company and its Subsidiaries does
not infringe or otherwise materially conflict with any rights of any Person in
respect of intellectual property rights. None of the intellectual property
rights owned by the Company or its Subsidiaries is being infringed or otherwise,
in any material way, used or available for use by any Person without a license
or permission from the Company and its Subsidiaries and neither the Company nor
any of its Subsidiaries has taken or omitted to take any action which would have
the effect of waiving any of its rights thereunder.
2.20 Environmental Matters. Except as set forth in the Company SEC
Documents filed prior to the date hereof:
(a) The Company and each of its Subsidiaries have obtained all material
Environmental Permits that are required with respect to their respective Assets
and Properties and businesses, either owned or leased;
7
(b) The Company, each of its Subsidiaries, and their respective Assets and
Properties and businesses, are in compliance in all material respects with all
terms and conditions of all applicable Environmental Laws and Environmental
Permits;
(c) There are no Environmental Claims pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries has received any notice from any
Governmental or Regulatory Authority of any unresolved violation or liability
arising under any Environmental Law or Environmental Permit in connection with
its Assets and Properties, businesses or operations;
(d) Neither the Company nor its Subsidiaries owns, leases or operates or
has owned, leased or operated, any property listed on the National Priorities
List pursuant to CERCLA or on the CERCLIS or on any other federal or state list
as sites requiring investigation or cleanup;
(e) Neither the Company nor any of its Subsidiaries is directly
transporting, has directly transported, or is directly arranging for the
transportation of, any Hazardous Material to any location which is listed on the
National Priorities List pursuant to CERCLA, on the CERCLIS, or on any similar
federal or state list or which is the subject of federal, state or local
enforcement actions or other investigations that may lead to material claims
against the Company or its Subsidiaries for remedial work, damage to natural
resources or personal injury including claims under CERCLA;
(f) There are no sites, locations or operations at which the Company is
currently undertaking, or has completed, any remedial or response action
relating to any such disposal or release, as required by Environmental Laws;
(g) All underground storage tanks and solid waste disposal facilities owned
or operated by the Company or its Subsidiaries are used and operated in material
compliance with Environmental Laws; and
(h) There are no physical or environmental conditions existing on any
property owned or leased by the Company or its Subsidiaries resulting from their
respective operations or activities, past or present, at any location, that
would give rise to any material on-site or off-site remedial obligations under
any applicable Environmental Laws, other than normal and ordinary remedial work
associated with plugging and abandoning of oil and gas facilities.
2.21 Oil and Gas Operations. Except as set forth in the Company SEC
Documents filed prior to the date hereof, all wells included in the Oil and Gas
Interests of the Company and its Subsidiaries have been drilled and (if
completed) completed, operated and produced in accordance with generally
accepted oil and gas field practices and in compliance in all material respects
with applicable oil and gas leases, pooling and unit agreements, and applicable
Laws. Except as set forth in the Company SEC Documents filed prior to the date
hereof:
(a) With respect to the oil, gas and other mineral leases, unit agreements,
pooling agreements, communitization agreements and other documents creating
interests comprising the Oil and Gas Interests: (i) the Company and its
Subsidiaries have fulfilled all requirements in all material respects for
filings, certificates, disclosures of parties in interest, and
8
other similar matters contained in such leases or other documents (or
otherwise applicable thereto by Law) and is fully qualified to own and hold all
such leases or other interests, and (ii) upon the establishment and maintenance
of production in commercial quantities, the leases and other interests are to be
in full force and effect over the economic life of the property involved and do
not have terms fixed by a certain number of years;
(b) Proceeds from the sale of crude oil, natural gas and other minerals
produced from the Oil and Gas Interests are being received by the Company and
its Subsidiaries in a timely manner and are not being held in suspense for any
reason (except for amounts, which are not materially significant, either
individually or in the aggregate, and which are held in suspense in the ordinary
course of business); and
(c) No person has any call upon, option to purchase, preferential right to
purchase or similar rights with respect to any material Oil and Gas Interests or
to the production therefrom. Neither the Company nor its Subsidiaries has any
obligation to provide a fixed and determinable quantity of natural gas or crude
oil in the future under existing contracts or agreements.
2.22 Proven Reserves. (a) The estimates of proven reserves attributable to
the Oil and Gas Interests of the Company and its Subsidiaries which are set
forth in the Company SEC Documents filed prior to the date of this Agreement
have been (or, in the case of Company SEC Documents filed after the date of this
Agreement, will be, as of the Closing Date) prepared in accordance with (i) the
published guidelines of the Securities and Exchange Commission, and (ii)
generally accepted petroleum engineering and evaluation principles as set forth
in the Standards Pertaining to the Estimating and Auditing of Oil and Gas
Reserve Information promulgated by the Society of Petroleum Engineers; and
(b)......The factual information underlying the estimates of reserves set
forth in the Company SEC Documents filed prior to the date of this Agreement
(including, without limitation, production, volumes, sales prices for
production, contractual pricing provisions under oil or gas sales or marketing
contracts, costs of operations and development, and working interest and net
revenue information relating to the Company's and its Subsidiaries' ownership
interests in oil and gas properties) is, or in the case of Company SEC Documents
filed after the date of this Agreement, will be, as of the Closing Date, true
and correct in all material respects as of the date such estimates were
prepared.
2.23 Derivatives and Hedging Contracts. Except as set forth in the Company
SEC Documents filed prior to the date hereof, neither the Company nor any of its
Subsidiaries is a party to (i) any agreement pursuant to which the Company or
its Subsidiaries has hedged its exposure to price fluctuations in the natural
gas or crude oil, spot or futures markets, including but not limited to,
options, swaps, floors, collars, forward sales or forward purchases involving
commodities or commodities prices, or indexes based on any of the foregoing, and
(ii) any derivative or similar financial instrument (whether used for
speculative activities in any currency, commodities or financial market, or to
hedge against any financial risk).
2.24 Employees, Labor Matters, etc. Except as set forth in the Company SEC
Documents filed prior to the date hereof, neither the Company nor any of its
Subsidiaries is a party to or bound by any collective bargaining agreement, and
there are no labor unions or other
9
organizations representing, purporting to represent or attempting to
represent any employees employed by the Company or any of its Subsidiaries.
Since August 4, 2000, there has not occurred or been threatened any material
strike or other similar labor activity with respect to any employees of the
Company or any of its Subsidiaries. There are no labor disputes currently
subject to any grievance procedure, arbitration or litigation and there is no
representation petition pending or threatened with respect to any employee of
the Company or any of its Subsidiaries. The Company and its Subsidiaries have
complied with all applicable Laws pertaining to the employment or termination of
employment of their respective employees, including, without limitation, all
such Laws relating to labor relations, equal employment opportunities, fair
employment practices, prohibited discrimination or distinction and other similar
employment activities, except for any failure so to comply that, individually
and in the aggregate, could not result in any Company Material Adverse Effect.
2.25 Employee Benefit Plans. Except as set forth in the Company SEC
Documents filed prior to the date hereof, neither the Company nor any of its
Subsidiaries has incurred any liability, and no event, transaction or condition
has occurred or exists that could result in any liability, on account of any
Plans, including but not limited to liability for (i) additional contributions
required to be made to any Plans with respect to periods ending on or prior to
the date hereof which are not reflected, reserved against or accrued in the
Company Recent Balance Sheet or accrued thereafter in accordance with the terms
of the Plans; (ii) breaches by the Company or any of its Subsidiaries, or any of
their employees, officers, directors, stockholders, or, to the knowledge of
Seller, the trustees under the trusts created under the Plans, or any other
Persons under ERISA or any other applicable Law; or (iii) income taxes by reason
of non-qualification of the Plans. Each of the Plans has been operated and
administered in all respects in compliance with its terms, all applicable Laws
and all applicable collective bargaining agreements.
2.26 Brokers. Neither any of the Sellers nor the Company has used any
broker or finder in connection with the transactions contemplated hereby, and
neither Purchaser nor any Affiliate of Purchaser has or shall have any liability
or otherwise suffer or incur any Loss as a result of or in connection with any
brokerage or finder's fee or other commission of any Person retained (or
purporting to be retained) by any of the Sellers or by the Company in connection
with any of the transactions contemplated by this Agreement.
2.27 Accuracy of Statements. Neither this Agreement nor any schedule,
exhibit, statement, list, document, certificate or other information furnished
or to be furnished by or on behalf of the Company or any of the Sellers to
Purchaser or any representative or Affiliate of Purchaser in connection with
this Agreement or any of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
Article III
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF ARNOS
ND HIGH RIVER REGARDING HOLDING LLC
Each of Arnos and High River (each a "Member" and collectively, the
"Members"), jointly and severally, hereby represents and warrants to Purchaser
as follows:
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3.1 Due Organization of Company. The Holding LLC is duly organized, validly
existing and in good standing under the laws of the State of Delaware, with all
requisite power and authority to own, lease and operate its properties and to
carry on its business as they are now being owned, leased, operated and
conducted. The Holding LLC is licensed or qualified to do business and is in
good standing (where the concept of "good standing" is applicable) as a foreign
corporation in each jurisdiction where the nature of the properties owned,
leased or operated by it and the business transacted by it require such
licensing or qualification.
3.2 Authority. The sale, transfer and assignment by the Members to
Purchaser of the LLC Interest has been duly and validly authorized by all
necessary limited liability company action. Any instrument or instruments of
transfer used to effect such sale, transfer or assignment will be, as of the
Closing Date sufficient to transfer Members' entire interest, legal and
beneficial, in the LLC Interest.
3.3 Title to Properties. The Holding LLC has, and on the Closing Date will
have, good and marketable title to, and is, and on the Closing Date will be, the
lawful owner of, the Holding Shares, the Holding Debt and all of the tangible
and intangible assets, properties and rights used in connection with its
business.
3.4 Litigation. There are no actions, suits, arbitrations, regulatory
proceedings or other litigation, proceedings or governmental investigations
pending or threatened against or affecting the Holding LLC or any of its
officers, employees, agents, members or managers in their capacity as such, or
any of the Holding LLC's properties or businesses, and Seller is not aware of
any facts or circumstances which may give rise to any of the foregoing. The
Holding LLC is not subject to any order, judgment, decree, injunction,
stipulation or consent order of or with any court or other Governmental
Authority. There are no claims, actions, suits, proceedings or investigations
pending or threatened by or against the Holding LLC or Seller with respect to
this Agreement, or in connection with the transactions contemplated hereby, and
neither Member has reason to believe there is a valid basis for any such claim,
action, suit, proceeding, or investigation.
3.5 Claims Against Members and Manager. There are no pending or threatened
claims against any manager, member, officer, employee or agent of the Holding
LLC or any other Person, which could give rise to any claim for indemnification
against the Holding LLC.
3.6 No Other Business. Since its formation, the Holding LLC has not engaged
in any business or transaction with any Person or owned or otherwise held any
properties or assets, other than holding the Holding Shares and the Holding Debt
which were contributed to the Holding LLC by Arnos and High River, the only
Members of the Holding LLC.
Article IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
4.1 Organization of Purchaser. Purchaser is a limited partnership duly
organized, validly existing and in good standing under the Laws of the State of
Delaware. Purchaser has full organizational power and authority to execute and
deliver this Agreement and to perform Purchaser's obligations hereunder and to
consummate the transactions contemplated hereby,
11
including without limitation to buy (pursuant to this Agreement) the
Shares, the Debt and the LLC Interest.
4.2 Authority. The execution and delivery by Purchaser of this Agreement,
and the performance by Purchaser of its obligations hereunder, have been duly
and validly authorized, no other action on the part of Purchaser being
necessary. This Agreement has been duly and validly executed and delivered by
Purchaser and constitutes a legal, valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms.
4.3 No Conflicts. The execution and delivery by Purchaser of this Agreement
do not, the performance by Purchaser of its obligations under this Agreement and
the consummation of the transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the organizational documents of Purchaser;
(b) conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to Purchaser or any of its Assets and
Properties (other than such conflicts, violations or breaches (i) which will not
in the aggregate adversely affect the validity or enforceability of this
Agreement or have a material adverse effect on the Business or Condition of
Purchaser or (ii) as would occur solely as a result of the identity or the legal
or regulatory status of Seller or any of its Affiliates); or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under,
(iii) require Purchaser to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of,
(iv) result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, or (v) result in the
creation or imposition of any Lien upon Purchaser or any of its Assets and
Properties under, any Contract or License to which Purchaser is a party or by
which any of its Assets and Properties are bound.
Article V
ASSIGNMENT AND ASSUMPTION OF OPERATING AGREEMENT
5.1 Assignment and Assumption. Effective at the Closing, (i) each of the
Members transfers, assigns, conveys, grants and sets over to Purchaser, its
successors and assigns forever, rights, title and interest as of such date in,
to the Operating Agreement, and (ii) Purchaser agrees to be bound by all of the
provisions of such agreement.
Article VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under Article I of this Agreement are subject
to the satisfaction or waiver by Purchaser of the following conditions precedent
on or before the Closing Date:
6.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of each Seller contained herein shall have been
accurate, true and correct in all
12
material respects on and as of the date of this Agreement, and shall also
be accurate, true and correct in all material respects on and as of the Closing
Date with the same force and effect as though made by such Seller on and as of
the Closing Date.
6.2 Compliance with Agreements and Covenants. Each Seller shall have
performed and complied with all of its respective covenants, obligations and
agreements contained in this Agreement to be performed and complied with by it
on or prior to the Closing Date.
6.3 Consents and Approvals. Each of the Sellers and Purchaser shall have
received all consents and approvals (including, without limitation, the Section
6 Approval and the Section 6 Waiver) required for the consummation of the
transactions contemplated hereby, and all required filings, if any, shall have
been made.
6.4 No Material Adverse Change. No Company Material Adverse Change shall
have occurred and no event shall have occurred which, in the reasonable judgment
of Purchaser, is reasonably likely to have a Company Material Adverse Effect.
6.5 Actions or Proceedings. No action or proceeding by any Governmental or
Regulatory Authority or other Person shall have been instituted or threatened
which (a) might have a Company Material Adverse Effect, or (b) could enjoin,
restrain or prohibit, or could result in substantial damages in respect of, any
provision of this Agreement or the consummation of the transactions contemplated
hereby.
6.6 Purchase of Additional Shares. Purchaser shall have acquired a number
of shares of the Common Stock of National Energy Group, Inc., which together
with the shares of the Common Stock of National Energy Group, Inc. to be
acquired by Purchaser directly or indirectly pursuant to this Agreement, will
result in Purchaser beneficially owning in the aggregate shares of the Common
Stock of National Energy Group, Inc. in excess of 50% of the issued and
outstanding shares of the Common Stock of National Energy Group, Inc.
Article VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH SELLER
The obligations of each Seller under Article I of this Agreement are
subject to the satisfaction or waiver by such Seller of the following conditions
precedent on or before the Closing Date:
7.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of Purchaser contained herein shall have been
accurate, true and correct in all material respects on and as of the date of
this Agreement, and shall also be accurate, true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made by Purchaser on and as of the Closing Date.
7.2 Compliance with Agreements and Covenants. Purchaser shall have
performed and complied with all of its respective covenants, obligations and
agreements contained in this Agreement to be performed and complied with by it
on or prior to the Closing Date.
13
7.3 Consents and Approvals. Each of the Sellers and Purchaser shall have
received all consents and approvals (including, without limitation, the Section
6 Approval and the Section 6 Waiver) required for the consummation of the
transactions contemplated hereby, and all required filings, if any, shall have
been made.
7.4 Actions or Proceedings. No action or proceeding by any Governmental or
Regulatory Authority or other Person shall have been instituted or threatened
which (a) might have a Company Material Adverse Effect, or (b) could enjoin,
restrain or prohibit, or could result in substantial damages in respect of, any
provision of this Agreement or the consummation of the transactions contemplated
hereby.
Article VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time on or prior
to the Closing Date:
(a) With the mutual written consent of all of the Sellers and Purchaser;
(b) By any of the Sellers or Purchaser, if the Closing shall not have taken
place on or before December 31, 2003; provided, however, that the right to
terminate this Agreement under this Section 8.1(b) shall not be available to any
party whose willful failure to fulfill any obligation under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or
before such date;
(c) By Purchaser, if there shall have been a breach of any covenant or
other agreement or any material breach of any representation or warranty of any
Seller hereunder, and such breach shall not have been remedied within ten
Business Days after receipt by such Seller of a notice in writing from Purchaser
specifying the breach and requesting such be remedied; or
(d) By any Seller, if there shall have been a breach of any covenant or
other agreement or any material breach of any representation or warranty of
Purchaser hereunder, and such breach shall not have been remedied within ten
Business Days after receipt by Purchaser of notice in writing from such Seller
specifying the breach and requesting such be remedied.
8.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all obligations of the parties hereunder shall terminate, except
for the obligations set forth in Article XI hereof, which shall survive the
termination of this Agreement, and except that no such termination shall relieve
any party from liability for any prior willful breach of this Agreement.
Article IX
INDEMNIFICATION
9.1 Indemnification by Sellers. Each Seller agrees to indemnify Purchaser
against, and agrees to hold it harmless from, any and all Losses incurred or
suffered by it relating to or arising out of or in connection with (a) any
breach of or any inaccuracy in any representation or
14
warranty made by such Seller in this Agreement, (b) any breach of or
failure by such Seller to perform any of its covenants or obligations set out or
contemplated in this Agreement, or (c) the formation or operation of, or any
other activities relating to, the Holding LLC. The representations and
warranties contained in this Agreement shall survive the consummation of the
transactions contemplated hereby.
9.2 Claims. As soon as is reasonably practicable after becoming aware of a
claim for indemnification under this Agreement, the indemnified person
("Indemnified Person") shall promptly give notice to the indemnifying person
("Indemnifying Person") of such claim and the amount the Indemnified Person will
be entitled to receive hereunder from the Indemnifying Person; provided that the
failure of the Indemnified Person to promptly give notice shall not relieve the
Indemnifying Person of its obligations except to the extent (if any) that the
Indemnifying Person shall have been prejudiced thereby. If the Indemnifying
Person does not object in writing to such indemnification claim within 30 days
of receiving notice thereof, the Indemnified Person shall be entitled to
recover, on the thirty-fifth day after such notice was given, from the
Indemnifying Person the amount of such claim, and no later objection by the
Indemnifying Person shall be permitted; if the Indemnifying Person agrees that
it has an indemnification obligation but objects that it is obligated to pay
only a lesser amount, the Indemnified Person shall nevertheless be entitled to
recover, on the thirty-fifth day after such notice was given, from the
Indemnifying Person the lesser amount, without prejudice to the Indemnified
Person's claim for the difference. In addition to the amounts recoverable by the
Indemnified Person from the Indemnifying Person pursuant to the foregoing
provisions, the Indemnified Person shall also be entitled to recover from the
Indemnifying Person interest on such amounts at the rate of 7% per annum
compounded quarterly from, and including, the thirty-fifth day after such notice
of an indemnification claim is given to, but not including, the date such
recovery is actually made by the Indemnified Person.
9.3 Notice of Third-Party Claims; Assumption of Defense. The Indemnified
Person shall give notice as promptly as is reasonably practicable to the
Indemnifying Person of the assertion of any claim, or the commencement of any
suit, action or proceeding, by any Person not a party hereto in respect of which
indemnity may be sought under this Agreement; provided that the failure of the
Indemnified Person to promptly give notice shall not relieve the Indemnifying
Person of its obligations except to the extent (if any) that the Indemnifying
Person shall have been prejudiced thereby. The Indemnifying Person may, at its
own expense, (a) participate in the defense of any claim, suit, action or
proceeding and (b) upon notice to the Indemnified Person and the Indemnifying
Person's delivering to the Indemnified Person a written agreement that the
Indemnified Person is entitled to indemnification for all Losses arising out of
such claim, suit, action or proceeding and that the Indemnifying Person shall be
liable for the entire amount of any Loss, at any time during the course of any
such claim, suit, action or proceeding, assume the defense thereof; provided,
however, that (i) the Indemnifying Person's counsel is reasonably satisfactory
to the Indemnified Person, and (ii) the Indemnifying Person shall thereafter
consult with the Indemnified Person upon the Indemnified Person's reasonable
request for such consultation from time to time with respect to such claim,
suit, action or proceeding. If the Indemnifying Person assumes such defense, the
Indemnified Person shall have the right (but not the duty) to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Person. If, however, the Indemnified Person
reasonably determines in its judgment that representation by the Indemnifying
Person's counsel of both the Indemnifying Person and the Indemnified Person
15
would present such counsel with a conflict of interest, or that the
Indemnified Person and the Indemnifying Person have differing interests, then
such Indemnified Person may employ separate counsel to represent or defend it in
any such claim, action, suit or proceeding and the Indemnifying Person shall pay
the fees and disbursements of such separate counsel. Whether or not the
Indemnifying Person chooses to defend or prosecute any such claim, suit, action
or proceeding, all of the parties hereto shall cooperate in the defense or
prosecution thereof.
9.4 Settlement or Compromise. Any settlement or compromise made or caused
to be made by the Indemnified Person or the Indemnifying Person, as the case may
be, of any claim, suit, action or proceeding shall also be binding upon the
Indemnifying Person or the Indemnified Person, as the case may be, in the same
manner as if a final judgment or decree had been entered by a court of competent
jurisdiction in the amount of such settlement or compromise; provided, however,
that no obligation, restriction or Loss shall be imposed on the Indemnified
Person as a result of such settlement without its prior written consent. The
Indemnified Person will give the Indemnifying Person at least 30 days' notice of
any proposed settlement or compromise of any claim, suit, action or proceeding
it is defending, during which time the Indemnifying Person may reject such
proposed settlement or compromise; provided, however, that from and after such
rejection, the Indemnifying Person shall be obligated to assume the defense of
and full and complete liability and responsibility for such claim, suit, action
or proceeding and any and all Losses in connection therewith in excess of the
amount of unindemnifiable Losses which the Indemnified Person would have been
obligated to pay under the proposed settlement or compromise.
9.5 Failure of Indemnifying Person to Act. In the event that the
Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
9.6 Tax Character. The Sellers and Purchaser agree that any payments
pursuant to this Article IX will be treated for federal and state income tax
purposes as adjustments to the purchase price of the Shares, the Debt and the
LLC Interest, and that they will report such payments on all Tax Returns
consistently with such characterization.
Article X
DEFINITIONS
10.1 Definitions.
(a) Defined Terms. As used in this Agreement, the following defined terms
have the meanings indicated below:
"Affiliate" means, with respect to any specified Person, (1) any other
Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person,
(2) any other Person which is a director, officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities of the specified Person or a Person described in clause (1) of this
paragraph, (3) another Person of which the specified Person is a director,
officer or partner or is, directly or
16
indirectly, the beneficial owner of 10 percent or more of any class of
equity securities, or (4) any relative or spouse of the specified Person or any
of the foregoing Persons.
"Agreement" means this Stock, Debt and LLC Interest Purchase Agreement, as
the same shall be amended from time to time.
"Assets and Properties" of any Person means all assets and properties of
every kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible, and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person.
"Business Day" means any day of the year other than (i) any Saturday or
Sunday or (ii) any other day on which commercial banks located in New York City
are generally closed for business.
"Business or Condition of a Person" means the business, financial condition
or results of operations of such
Person and its Subsidiaries taken as a whole.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or any successor statutes and any regulations
promulgated thereunder.
"CERCLIS" means the Comprehensive Environmental Response, Compensation and
Liability Information System List.
"Closing" means the closing of the transactions contemplated by Section
1.3.
"Closing Date" means the closing date of the transactions contemplated by
Section 1.3.
"Common Stock" has the meaning ascribed to it in Section 2.7(a).
"Company Financial Statements" has the meaning ascribed to it in Section
2.8(b) of this Agreement.
"Company Material Adverse Change" means a change (or circumstance involving
a prospective change) in the business, operations, assets, liabilities, results
of operations, cash flows, condition (financial or otherwise) or prospects of
the Company which is materially adverse.
"Company Material Adverse Effect" means an effect (or circumstance
involving a prospective effect) on the business, operations, assets,
liabilities, results of operations, cash flows, condition (financial or
otherwise) or prospects of the Company which is materially adverse.
"Company Recent Balance Sheet" means the balance sheet of the Company at
March 31, 2003 included in the Company's Quarterly Report on Form 10-Q for the
three-month period then ended.
"Company SEC Documents" has the meaning ascribed to it in Section 2.8(a) of
this Agreement.
"Contract" means any contract, lease, commitment, understanding, sales
order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit or license, whether written or oral,
which is intended or purports to be binding and enforceable.
"Debt" has the meaning ascribed to it in the forepart of this Agreement.
"Discount Rate" has the meaning ascribed to it in the forepart of this
Agreement.
"Dollars" or numbers preceded by the symbol "$" means amounts in United
States Dollars.
17
"Environmental Claim" means any third party (including governmental
agencies and employees) action, lawsuit, claim or proceeding (including claims
or proceedings under OSHA or similar laws relating to safety of employees) that
seeks to impose material liability for (a) pollution or contamination of the
ambient air, surface water, ground water or land; (b) solid, gaseous or liquid
waste generation, handling, treatment, storage, disposal or transportation; (c)
exposure to hazardous or toxic substances; (d) the safety or health of
employees; or (e) the transportation, processing, distribution in commerce, use
or storage of hydrocarbons or chemical substances. An Environmental Claim
includes, but is not limited to, a common law action, as well as a proceeding to
issue, modify or terminate an Environmental Permit.
"Environmental Law" means any applicable material law, rule, regulation or
order of any federal, foreign, state or local executive, legislative, judicial,
regulatory or administrative agency, board or authority with jurisdiction over
the Company or any of its Subsidiaries or any of their respective properties or
assets that relate to (a) pollution or protection of the ambient air, surface
water, ground water or land; (b) solid, gaseous or liquid waste generation,
treatment, storage, disposal or transportation; (c) exposure to hazardous or
toxic substances; (d) the safety or health of employees; or (e) regulation of
the manufacture, processing, distribution in commerce, use or storage of
hydrocarbons or chemical substances. Environmental Laws include but are not
limited to OSHA, CERCLA, the Clean Air Act, as amended, the Federal Water
Pollution Control Act, as amended, the Rivers and Harbors Act of 1899, as
amended, the Safe Drinking Water Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), as amended, the Resource Conservation and
Recovery Act of 1976 ("RCRA"), as amended, the Hazardous and Solid Waste
Amendments Act of 1984, as amended, the Toxic Substances Control Act, as
amended, the Oil Pollution Act of 1990 ("OPA"), as amended, the Hazardous
Materials Transportation Act, as amended, and any other federal, foreign, state
and local law whose purpose is to conserve or protect human health, the
environment, wildlife or natural resources.
"Environmental Permit" means any material permit, license, approval or
other authorization under any Environmental Law applicable law, regulation and
other requirement of the United States or any foreign country or of any state,
municipality or other subdivision thereof relating to pollution or protection of
health or the environment, including laws, regulations or other requirements
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants or hazardous substances or toxic materials or wastes
into ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of hydrocarbons or chemical substances, pollutants
contaminants or hazardous or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means U.S. generally accepted accounting principles at the time in
effect.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or any state, county, city or other political subdivision.
"Hazardous Material" means (a) any "hazardous substance," as defined by
CERCLA; (b) any "hazardous waste" or "solid waste," in either case as defined by
the Resource Conservation and Recovery Act, as amended; (c) any solid hazardous,
dangerous or toxic chemical, material, waste or substance, within the meaning of
and regulated by any Environmental Law; (d) any
18
radioactive material, including any naturally occurring radioactive
material, and any source, special or byproduct material as defined in 42 U.S.C.
2011 et seq. and any amendments or authorizations thereof; (e) any
asbestos-containing materials in any form or condition; (f) any polychlorinated
biphenyls in any form or condition; (g) petroleum, petroleum hydrocarbons, or
any fraction or byproducts thereof; or (h) any air pollutant which is so
designated by the U.S. Environmental Protection Agency as authorized by the
Clean Air Act.
"Holding Debt" has the meaning ascribed to it in the forepart of this
Agreement.
"Holding Shares" has the meaning ascribed to it in the forepart of this
Agreement.
"Indemnified Person" has the meaning ascribed to it in Section 9.2 of the
Agreement.
"Indemnifying Person" has the meaning ascribed to it in Section 9.2 of the
Agreement.
"Laws" means all laws, statutes, rules, regulations, ordinances and other
pronouncements having the effect of law of the United States or any state,
county, city or other political subdivision or of any Governmental or Regulatory
Authority.
"License" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Lien" means any mortgage, lien (except for any lien for Taxes not yet due
and payable), charge, restriction, pledge, security interest, option, lease or
sublease, claim, right of any third party, easement, encroachment or
encumbrance.
"LLC Interest" has the meaning ascribed to it in the forepart of this
Agreement.
"Loss" or "Losses" means any and all liabilities, losses, costs, claims,
damages (including consequential damages), penalties and expenses (including
attorneys' fees and expenses and costs of investigation and litigation).
"Member" means either Arnos or High River.
"Oil and Gas Interests" mean (a) direct and indirect interests in and
rights with respect to oil, gas, mineral and related properties and assets of
any kind and nature, direct or indirect, including working, royalty and
overriding royalty interests, production payments, operating rights, net profits
interests, other non-working interests and non-operating interests; (b)
interests in and rights with respect to crude oil, natural gas and other
minerals or revenues therefrom and contracts in connection therewith and claims
and rights thereto (including oil and gas leases, operating agreements,
unitization and pooling agreements and orders, division orders, transfer orders,
mineral deeds, royalty deeds, oil and gas sales, exchange and processing
contracts and agreements and, in each case, interests thereunder), surface
interests, fee interests, reversionary interests, reservations and concessions;
(c) easements, rights of way, licenses, permits, leases, and other interests
associated with, appurtenant to, or necessary for the operation of any of the
foregoing; and (d) interests in equipment and machinery (including well
equipment and machinery) oil and gas production, gathering, transmission,
compression, treating, processing and storage facilities (including tanks, tank
batteries, pipelines and gathering systems), pumps, water plants, electric
plants, gasoline and gas processing plants, refineries and other tangible
personal property and fixtures associated with, appurtenant to, or necessary for
the operation of any of the foregoing.
19
"Operating Agreement" means that certain Operating Agreement of Greenville
Holding LLC dated as of April 14, 2003, by and between the Members, attached
hereto as Exhibit A.
"Order" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
"OSHA" means the Occupational Safety and Health Act, as amended, or any
successor statute and any regulations promulgated thereunder.
"Person" means any natural person, corporation, limited liability company,
general partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority.
"Plans" means employee benefit plans as such term is defined in section
3(3) of ERISA.
"Purchase Price" has the meaning ascribed to it in Section 1.2.
"Purchaser" has the meaning ascribed to it in the forepart of this
Agreement.
"Section 6 Approval" means the approval of the stockholders of the Company
of an amendment of Section 6 of the Company's certificate of incorporation so as
to enable the directors of the Company to waive the applicability of Section 6
of the Company's certificate of incorporation to (A) the transactions
contemplated under this Agreement and (B) the transaction or a series of
transactions involving Purchaser acquiring, purchasing or otherwise becoming a
beneficial owner of (in a privately negotiated transaction, open market purchase
or otherwise) more than 50% of the then issued and outstanding Common Stock.
"Section 6 Waiver" means the waiver by the Board of Directors of the
Company of the applicability of Section 6 of the Company's certificate of
incorporation (as amended pursuant to the Section 6 Approval) to (A) the
transactions contemplated under this Agreement and (B) the transaction or a
series of transactions involving Purchaser acquiring, purchasing or otherwise
becoming a beneficial owner of (in privately negotiated transaction, open market
purchases or otherwise) more than 50% of the then issued and outstanding Common
Stock.
"Securities Laws" mean (i) the Securities Act of 1933, as amended, and the
rules and regulations promulgated under it, (ii) the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated under it, and (iii)
any applicable foreign, federal or state securities laws.
"Seller" has the meaning ascribed to it in the forepart of this Agreement.
"Shares" has the meaning ascribed to it in the forepart of this Agreement.
"Subsidiary" means, with respect to a specified Person, any other Person of
which at least 50% of the outstanding shares, limited liability company
interests or other equity interests having ordinary voting power for the
election of directors or comparable managers of such Person are owned, directly
or indirectly, by such specified Person.
"Taxes" means all taxes, charges, fees, duties, levies or other
assessments, including income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational, interest equalization, windfall profits,
severance, employee's income withholding, other withholding, unemployment and
Social Security taxes, which are imposed by any Governmental Authority, and such
term shall include any interest, penalties or additions to tax attributable
thereto. The term "Tax" shall have a correlative meaning.
20
"Tax Return" means any return, report, declaration, form, claim for refund
or information return or statement relating to Taxes, including any schedule or
attachment to it, and including any amendment to it.
Article XI
MISCELLANEOUS
11.1 Investigation. It shall be no defense to an action for breach of this
Agreement that Purchaser or its agents have (or have not) made investigations
into the affairs of the Company or that the Company or any of the Sellers could
not have known of the misrepresentation or breach of warranty.
11.2 Entire Agreement. This Agreement supersedes all prior discussions and
agreements between the parties with respect to the subject matter hereof and
contains the sole and entire agreement between the parties hereto with respect
to the subject matter hereof.
11.3 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
11.4 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party hereto.
11.5 No Third Party Beneficiary. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights upon any other Person.
11.6 Assignment; Binding Effect. This Agreement and any right, interest or
obligation hereunder may not be assigned by either Purchaser or any Seller
without the prior written consent of all of the parties hereto, and any such
assignment without obtaining such consent shall be no force or effect. This
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and permitted assigns.
11.7 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
11.8 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, and (c)
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance here from.
11.9 Expenses. The Sellers, on the one hand, and the Purchaser, on the
other hand, shall bear their respective expenses, costs and fees (including
attorneys', auditors' and financing
21
commitment fees) in connection with the transactions contemplated hereby,
including the preparation, execution and delivery of this Agreement and
compliance herewith, whether or not the transactions contemplated hereby shall
be consummated.
11.10 Further Action. Sellers and Purchaser agree to use all reasonable
efforts to take or cause to be taken all actions, and do or cause to be done all
other things, necessary, proper or advisable in order to give full effect to
this Agreement.
11.11 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of New York applicable to a Contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof.
11.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
11.13 Independent Obligations. Other than with respect to the
representations and warranties set forth in (i) Sections 2.5, 2.7(a), 2.7(b),
2.7(d), 2.7(e) and 2.8 through 2.25 hereof, which were made jointly and
severally by all of the Sellers or (ii) Article III hereof, which were made
jointly and severally by Arnos and High River, notwithstanding anything in this
Agreement to the contrary or any reference to "Sellers" in this Agreement or any
other language that might otherwise imply that any duty obligation, liability,
right, agreement, covenant, representation or warranty set forth herein (each an
"Obligation" and collectively, the "Obligations") is a collective Obligation of
Arnos, High River and High Coast, it is the intention of the parties hereto that
each Seller hereunder be deemed to have made or undertaken any Obligation only
with respect to itself, individually, severally, separately, independently and
not jointly and no Seller shall be liable or otherwise responsible for any
breach, performance or payment (including, without limitation, any indemnity
payment or the payment of the Purchase Price) of any Obligation attributable to
another Seller or its Assets and Properties.
11.14 Exclusive Remedy. The sole and exclusive remedy of any party hereto
for any breach of any representation or warranty hereunder by any other party
hereto shall be (i) prior to the Closing, the termination of this Agreement
pursuant to Section 8.1 hereof, or (ii) after the Closing, the indemnification
available pursuant to Article IX hereof. The sole and exclusive remedy of any
party hereto for any breach of any covenant or other agreement hereunder shall
be, after the Closing, the indemnification available pursuant to Article IX
hereof.
11.15 Acknowledgement. Parties hereto acknowledge that the representations
and warranties made by the Sellers with respect to the Company and its
Subsidiaries constitute the allocation to the Sellers of the economic risk of
the statements contained therein not being true and correct, and that such
statements are not made to affirm or promise a particular state of affairs with
respect to the Company or its Subsidiaries, which state of affairs could be
beyond the knowledge of the Sellers. However, notwithstanding the foregoing
acknowledgement, after the Closing, the Sellers shall be responsible to
Purchaser pursuant to Article IX hereof for any failure of any such
representation or warranty to be true and correct.
[Signature Page Follows]
22
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officer of each party hereto as of the date first above
written.
Arnos Corp.
By: /s/ Edward E. Mattner
Name: Edward E. Mattner
Title: Vice President
High Coast Limited Partnership
By: Beckton Corp., its General Partner
By: /s/ Edward E. Mattner
Name: Edward E. Mattner
Title: Authorized Signatory
High River Limited Partnership
By: Barberry Corp., its General Partner
By: /s/ Edward E. Mattner
Name: Edward E. Mattner
Title: Authorized Signatory
American Real Estate Holdings, L.P.
By: American Property Investors, Inc.,
its General Partner
By: /s/ Martin Hirsch
Name: Martin Hirsch
Title: Executive Vice President
[Signature Page to the Stock, Debt and LLC Interest Purchase Agreement]
23
Schedule A
Allocation of Purchase Price
Price for Shares Price for Debt Price for LLC Interest Total Price per Seller
Seller ($) ($) ($) ($)
High River N/A N/A $ 55,642,475.00 $ 55,642,475.00
Arnos $ 2,022,297.50 N/A $ 36,746,369.50 $ 38,768,667.00
High Coast N/A $ 53,673,547.50 N/A $ 53,673,547.50
Total Price $ 2,022,297.50 $ 53,673,547.50 $ 92,388,844.50 $148,084,689.50
Exhibit A
Operating Agreement of Greenville Holding LLC dated as of April 14, 2003
OPERATING AGREEMENT
OF
GREENVILLE HOLDING LLC
Dated as of April 14, 2003
OPERATING AGREEMENT
OF
GREENVILLE HOLDING LLC
OPERATING AGREEMENT of GREENVILLE HOLDING LLC dated as of April 14, 2003,
between Arnos Corp., a Nevada corporation ("Arnos") and High River Limited
Partnership, a Delaware limited partnership ("High River " and, collectively
with Arnos, the "Members"). W I T N E S E T H:
WHEREAS, the Members desire to form a limited liability company pursuant to
the Delaware Limited Liability Company Act (the "Act"); and
WHEREAS, the Members wish to state the terms and conditions that shall
govern the operation (the "Operating Agreement") of the limited liability
company;
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained, the Members hereby state:
I. FORMATION
1.1 Formation; Name. The Members hereby form a Delaware limited liability
company (the "Company") under the Act, to be conducted under the name
"GREENVILLE HOLDING LLC."
1.2 Purposes. The purpose for which the Company has been formed is to
engage in any lawful act or activity permitted under the Act which the Members
may from time to time determine.
1.3 Term. The term of the Company has begun on April 9, 2003 with the
filing of the certificate of formation with the Office of the Secretary of State
of the State of Delaware and shall end on April 9, 2030.
II. CAPITAL CONTRIBUTIONS AND LIABILITY
2.1 Member Capital Contribution. Each of Arnos and High River has
contributed (i) the 612,294 and 927,155 shares of Common Stock, par value $.01
per share, of National Energy Group, Inc. (the "Company"), respectively, (ii)
$37,279,000 and $56,449,000 in principal amount of the 10 3/4 % Senior Notes due
2006 of the Company, respectively, in exchange for their respective interests in
the Company. The Members shall not be required to make any additional capital
contributions to the Company but may make same from time to time.
2.2 Member's Liability. The liability of the Members as such, shall be
limited to the amount of the fair market value as of the contribution date of
the initial capital contributions set forth in Section 2.1 above. The Members
shall not be personally liable for any obligation of the Company. The provisions
of this Operating Agreement are not intended to be for the benefit of any
creditor or other person to whom any debts, liabilities, or obligations are owed
by (or who otherwise has any claim against) the Company or the Members; and no
such creditor or other person shall obtain any benefit from such provisions or
shall, by reason of any such foregoing provision, make any claim in respect of
any debt, liability, or obligation against the Company or the Members.
III. TITLE TO PROPERTY
Title to any property real or personal, owned by or leased to the Company
shall be held in the name of the Company, or in the name of any nominee the
Members may in its discretion designate.
IV. MANAGEMENT OF COMPANY
The business and affairs of the Company shall be conducted and managed by a
manager or managers (the "Manager") who shall be Edward E. Mattner, with the
title of President, who shall serve at the pleasure of the Members. The Members
may at any time appoint one or more additional Managers and may dismiss a
Manager or Managers at any time. In addition, any Manager may resign at any time
for any reason.
V. PROFITS AND LOSSES
All profits and losses of the Company shall be allocated and distributions,
if any, shall be made to the Members in proportion to their respective capital
contributions. Section 704(c) of the Internal Revenue Code of 1986, as amended,
shall apply so as to take into account any variation between the basis of
property contributed to the Company and its fair market value at the time of
contribution. [Signature Page Follows]
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
Arnos Corp.,
By: /s/ Edward E. Mattner
Name: Edward E. Mattner
Title: Vice President
High River Limited Partnership
By: Barberry Corp., its General Partner
By: /s/ Edward E. Mattner
Name: Edward E. Mattner
Title: Authorized Signatory
[Signature page to of GREENVILLE HOLDING LLC dated as of April 14, 2003]