-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TFfUH69wpNqPaeerIy9JZRc32epIB5FNNeEZO9VnVML5PsED5TEupjR1PwDOlRh5 sdZm2eP63eY/JbiJ/4Bvzg== 0000950124-07-001499.txt : 20070314 0000950124-07-001499.hdr.sgml : 20070314 20070314151935 ACCESSION NUMBER: 0000950124-07-001499 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20070313 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070314 DATE AS OF CHANGE: 20070314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CMS ENERGY CORP CENTRAL INDEX KEY: 0000811156 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 382726431 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09513 FILM NUMBER: 07693507 BUSINESS ADDRESS: STREET 1: ONE ENERGY PLAZA CITY: JACKSON STATE: MI ZIP: 49201 BUSINESS PHONE: 5177881031 MAIL ADDRESS: STREET 1: ONE ENERGY PLAZA CITY: JACKSON STATE: MI ZIP: 49201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSUMERS ENERGY CO CENTRAL INDEX KEY: 0000201533 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 380442310 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05611 FILM NUMBER: 07693508 BUSINESS ADDRESS: STREET 1: ONE ENERGY PLAZA CITY: JACKSON STATE: MI ZIP: 49201 BUSINESS PHONE: 5177881031 MAIL ADDRESS: STREET 1: ONE ENERGY PLAZA CITY: JACKSON STATE: MI ZIP: 49201 FORMER COMPANY: FORMER CONFORMED NAME: CONSUMERS POWER CO DATE OF NAME CHANGE: 19920703 8-K 1 k13277e8vk.txt CURRENT REPORT DATED MARCH 13, 2007 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MARCH 13, 2007
COMMISSION REGISTRANT; STATE OF INCORPORATION; IRS EMPLOYER FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO. - ----------- ----------------------------------- ------------------ 1-9513 CMS ENERGY CORPORATION 38-2726431 (A MICHIGAN CORPORATION) ONE ENERGY PLAZA JACKSON, MICHIGAN 49201 (517) 788-0550 1-5611 CONSUMERS ENERGY COMPANY 38-0442310 (A MICHIGAN CORPORATION) ONE ENERGY PLAZA JACKSON, MICHIGAN 49201 (517) 788-0550
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. The disclosures set forth under Item 2.01 hereof are hereby incorporated by reference in this Item 1.01. ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS. On March 13, 2007, CMS Enterprises Company ("Enterprises"), a wholly owned subsidiary of CMS Energy Corporation ("CMS Energy"), completed the previously announced sale of its ownership interest in substantially all of its Argentine assets and its northern Michigan non-utility gas gathering, processing and pipeline businesses (the "Assets") together with certain related rights and interests, for $130 million net to Lucid Energy LLC ("Lucid") whose financial partners include Sociedad Argentina de Energia S.A., an Argentine company. The $130 million of net proceeds were realized from a gross sale price of $156.9 million, netted against approximately $26.9 million in cash which was retained by one of the sold subsidiaries after receipt from Endesa, S.A. ("Endesa") in connection with Endesa's separate purchase of Enterprises' ownership interest in the El Chocon plant in Argentina pursuant to a partnership agreement right of first offer (as further described below). As a result of the exercise of the right of first offer, the El Chocon plant that was originally part of the Assets sold to Lucid was instead sold to Endesa. Immediately prior to completion of the sale of the Assets, Enterprises and Lucid entered into definitive purchase and sale agreements (the "Agreements") regarding the Assets. The Agreements contain indemnifications, guarantees, and representations and warranties that are typical for such sale transactions. The Agreements provide that Enterprises' liability for breaches of representation and warranties will be capped at the amount of $25 million for those relating to the Argentine assets and $5 million for those relating to the Michigan businesses. Copies of the Agreements are attached hereto as Exhibit 10.1, 10.2 and 10.3. A CMS Energy News Release announcing the completion of the sale is attached as Exhibit 99.1. On March 9, 2007, CMS Energy announced that it had sold its interest in El Chocon, an Argentine hydroelectric generating business to Endesa for $50 million. Of the $50 million, $23.1 million was paid to CMS Enterprises and the balance was paid to one of the subsidiaries sold to Lucid Energy. Enterprises' interest in El Chocon was originally part of the asset group that Lucid agreed to purchase pursuant to a binding letter of intent. The letter of intent was attached to CMS Energy's form 8-K filed on February 1, 2007 that is incorporated by reference herein. However, Endesa had a right of first offer on Enterprises' interest in El Chocon that it exercised. A CMS Energy News Release announcing Endesa's exercise of its right of first offer for El Chocon is attached as Exhibit 99.2 As a result of the sales to Endesa and Lucid, CMS Energy realized cash proceeds of $180 million, and will recognize an after-tax, non-cash loss of approximately $160 million in the first quarter of 2007. CMS Enterprises will maintain its interest in the TGN natural gas business in Argentina, which remains subject to a potential sale to the government of Argentina or other disposition. In recognition of Enterprises' commitment to sell its 23.5 percent interest in TGN, CMS Energy expects to record an after-tax impairment charge of approximately $140 million in the first quarter of 2007 to reflect the fair value of its TGN ownership interest. ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (B) PRO FORMA FINANCIAL INFORMATION The accompanying unaudited pro forma condensed consolidated financial statements reflect adjustments to the historical consolidated financial statements of CMS Energy to give effect to the sale of interests in 2 the Argentine and Michigan Businesses assuming the sale had been effective for the periods indicated. The sales will be accounted for as discontinued operations in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" and Emerging Issues Task Force 03-13, "Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations". Certain information and notes normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission governing pro forma information. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of CMS Energy, as contained in its 2006 Annual Report on Form 10-K. The Unaudited Pro Forma Condensed Consolidated Balance Sheet assumes the sale of interests in the Argentine and Michigan Businesses was consummated on December 31, 2006. Therefore, the loss on sale recognized at December 31, 2006 will ultimately differ from the actual loss that occurred at the March 13, 2007 date of sale. The Unaudited Pro Forma Condensed Consolidated Statements of Income (Loss) assume the disposition occurred on January 1, 2004. The unaudited pro forma condensed consolidated financial statements are presented for purposes of illustration only, in accordance with the adjustments set forth below, and are not necessarily indicative of the financial position or results of operations that would have occurred had the sale been consummated on the dates as of which, or at the beginning of the period which, the sale is being given effect, nor are they necessarily indicative of future operating results or financial position of CMS Energy. 3 CMS ENERGY CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2006 (In Millions)
HISTORICAL ADJUSTMENTS AND SALE PRO FORMA HISTORICAL TRANSACTION ADJUSTMENTS PRO FORMA CMS ENERGY (NOTES 1 AND 2) (NOTES 1 AND 2) CMS ENERGY ---------- --------------- --------------- ---------- ASSETS Plant and property (at cost) $12,642 $(250) $ -- $12,392 Less accumulated depreciation, depletion and amortization 5,317 (119) -- 5,198 ------- ----- ----- ------- 7,325 (131) 7,194 Construction work-in-progress 651 -- -- 651 ------- ----- ----- ------- Net plant and property 7,976 (131)(a) -- 7,845 Investments 598 (19)(a) -- 579 Cash and cash equivalents at cost, which approximates market 351 130 (a) (175)(b) 306 Accounts receivable, notes receivable, and accrued revenue, net 808 (25)(a) -- 783 Inventories at average cost 1,357 (6)(a) -- 1,351 Other current assets 627 (2)(a) -- 625 Non-current assets 3,654 (16)(a) -- 3,638 ------- ----- ----- ------- TOTAL ASSETS $15,371 $ (69) $(175) $15,127 ======= ===== ===== ======= STOCKHOLDERS' INVESTMENT AND LIABILITIES Common stockholders' equity $ 2 $ -- $ -- $ 2 Other paid-in capital 4,468 -- -- 4,468 Accumulated other comprehensive loss (318) 127 (c) -- (191) Retained deficit (1,918) (161)(d) -- (2,079) Preferred stock 305 -- -- 305 Long-term debt 6,202 -- (175)(b) 6,027 Long-term debt related parties 178 -- -- 178 Non-current portion of capital and finance lease obligations 42 -- -- 42 ------- ----- ----- ------- Total capitalization 8,961 (34) (175) 8,752 Minority interests 91 (3)(e) -- 88 Accounts payable 564 (21)(f) -- 543 Other current liabilities 1,592 (13)(f) -- 1,579 Non-current liabilities 4,163 2 (f) -- 4,165 ------- ----- ----- ------- TOTAL STOCKHOLDERS' INVESTMENT AND LIABILITIES $15,371 $ (69) $(175) $15,127 ======= ===== ===== =======
See notes to pro forma condensed consolidated financial statements. 4 CMS ENERGY CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) FOR THE YEAR ENDED DECEMBER 31, 2006 (In Millions, except per share amounts)
HISTORICAL PRO FORMA HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA CMS ENERGY (NOTES 1 AND 2) (NOTES 1 AND 2) CMS ENERGY ---------- --------------- --------------- ---------- OPERATING REVENUE $6,810 $(199)(g) $ -- $6,611 EARNINGS FROM EQUITY METHOD INVESTEES 89 (3)(h) -- 86 OPERATING EXPENSES -- Fuel for electric generation 984 (59)(i) -- 925 Fuel costs mark-to-market at the MCV Partnership 204 -- -- 204 Purchased and interchange power 829 (50)(i) -- 779 Cost of gas sold 2,131 -- -- 2,131 Other operating expense 1,225 (18)(i) -- 1,207 Maintenance 326 (15)(i) -- 311 Depreciation, depletion, and amortization 576 (13)(i) -- 563 General taxes 198 (1)(i) -- 197 Asset impairment charges 459 -- -- 459 ------ ----- ----- ------ 6,932 (156) -- 6,776 ------ ----- ----- ------ OPERATING INCOME (LOSS) (33) (46) -- (79) OTHER INCOME -- Gain on asset sales, net 79 -- -- 79 Interest and dividends 86 (5)(j) -- 81 Other income 36 -- -- 36 ------ ----- ----- ------ 201 (5) 196 FIXED CHARGES 511 (10)(k) (12)(l) 489 ------ ----- ----- ------ INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS (343) (41) 12 (372) MINORITY INTEREST (OBLIGATIONS), NET (100) (1)(m) -- (101) INCOME TAX EXPENSE (BENEFIT) (158) (19)(n) 4(o) (173) ------ ----- ----- ------ INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE PREFERRED DIVIDENDS (85) (21) 8 (98) PREFERRED DIVIDENDS 11 -- -- 11 ------ ----- ----- ------ INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER PREFERRED DIVIDENDS $ (96) $ (21) $ 8 $ (109) ====== ===== ===== ====== INCOME (LOSS) FROM CONTINUING OPERATIONS PER SHARE: Basic - Average Common Shares Outstanding 219.9 219.9 - Income (Loss) Per Average Common Share $(0.44) $(0.50) Diluted - Average Common Shares Outstanding 219.9 219.9 - Income (Loss) Per Average Common Share $(0.44) $(0.50)
See notes to pro forma condensed consolidated financial statements. 5 CMS ENERGY CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) FOR THE YEAR ENDED DECEMBER 31, 2005 (In Millions, except per share amounts)
HISTORICAL PRO FORMA HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA CMS ENERGY (NOTES 1) (NOTES 1 AND 2) CMS ENERGY ---------- ----------- --------------- ---------- OPERATING REVENUE $6,288 $(142) (g) $ -- $6,146 EARNINGS FROM EQUITY METHOD INVESTEES 125 (4) (h) -- 121 OPERATING EXPENSES -- Fuel for electric generation 720 (40) (i) -- 680 Fuel costs mark-to-market at the MCV Partnership (200) -- -- (200) Purchased and interchange power 546 (38) (i) -- 508 Cost of gas sold 2,297 -- -- 2,297 Other operating expense 1,105 (13) (i) -- 1,092 Maintenance 249 (10) (i) -- 239 Depreciation, depletion, and amortization 525 (11) (i) -- 514 General taxes 261 (1) (i) -- 260 Asset impairment charges 1,184 -- -- 1,184 ------ ----- ---- ------ 6,687 (113) -- 6,574 ------ ----- ---- ------ OPERATING INCOME (LOSS) (274) (33) -- (307) OTHER INCOME (DEDUCTIONS) Gain on asset sales, net 6 -- -- 6 Interest and dividends 66 (2) (j) -- 64 Other deductions (15) -- -- (15) ------ ----- ---- ------ 57 (2) 55 FIXED CHARGES 489 (8) (k) (12) (l) 469 ------ ----- ---- ------ INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS (706) (27) 12 (721) MINORITY INTEREST (OBLIGATIONS), NET (440) (1) (m) -- (441) INCOME TAX EXPENSE (BENEFIT) (168) (16) (n) 4 (o) (180) ------ ----- ---- ------ INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE PREFERRED DIVIDENDS (98) (10) 8 (100) PREFERRED DIVIDENDS 10 -- -- 10 ------ ----- ---- ------ INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER PREFERRED DIVIDENDS $ (108) $ (10) $ 8 $ (110) ====== ===== ==== ====== INCOME (LOSS) FROM CONTINUING OPERATIONS PER SHARE: Basic - Average Common Shares Outstanding 211.8 211.8 - Income (Loss) Per Average Common Share $(0.51) $(0.52) Diluted - Average Common Shares Outstanding 211.8 211.8 - Income (Loss) Per Average Common Share $(0.51) $(0.52)
See notes to pro forma condensed consolidated financial statements. 6 CMS ENERGY CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) FOR THE YEAR ENDED DECEMBER 31, 2004 (In Millions, except per share amounts)
HISTORICAL PRO FORMA HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA CMS ENERGY (NOTES 1) (NOTES 1 AND 2) CMS ENERGY ---------- ----------- --------------- ---------- OPERATING REVENUE $5,472 $(103) (g) $ -- $5,369 EARNINGS FROM EQUITY METHOD INVESTEES 115 (1) (h) -- 114 OPERATING EXPENSES -- Fuel for electric generation 774 (29) (i) -- 745 Fuel costs mark-to-market at the MCV Partnership 19 -- -- 19 Purchased and interchange power 344 (17) (i) -- 327 Cost of gas sold 1,786 -- -- 1,786 Other operating expense 954 (10) (i) -- 944 Maintenance 256 (10) (i) -- 246 Depreciation, depletion, and amortization 431 (12) (i) -- 419 General taxes 270 (1) (i) -- 269 Asset impairment charges 160 -- -- 160 ------ ----- ---- ------ 4,994 (79) -- 4,915 ------ ----- ---- ------ OPERATING INCOME (LOSS) 593 (25) -- 568 OTHER INCOME Gain on asset sales, net 52 -- -- 52 Interest and dividends 27 -- -- 27 Other income 99 (2) (j) -- 97 ------ ----- ---- ------ 178 (2) 176 FIXED CHARGES 634 (11) (k) (12) (l) 611 ------ ----- ---- ------ INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS 137 (16) 12 133 MINORITY INTEREST (OBLIGATIONS), NET 15 (1) (m) -- 14 INCOME TAX EXPENSE (BENEFIT) (5) (6) (n) 4 (o) (7) ------ ----- ---- ------ INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE PREFERRED DIVIDENDS 127 (9) 8 126 PREFERRED DIVIDENDS 11 -- -- 11 ------ ----- ---- ------ INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER PREFERRED DIVIDENDS $ 116 $ (9) $ 8 $ 115 ====== ===== ==== ====== INCOME (LOSS) FROM CONTINUING OPERATIONS PER SHARE: Basic - Average Common Shares Outstanding 168.6 168.6 - Income (Loss) Per Average Common Share $ 0.68 $ 0.68 Diluted - Average Common Shares Outstanding 172.1 172.1 - Income (Loss) Per Average Common Share $ 0.67 $ 0.67
See notes to pro forma condensed consolidated financial statements. 7 NOTE 1 - SALE OF INTERESTS IN THE ARGENTINE BUSINESSES AND THE MICHIGAN BUSINESSES As discussed in Item 2.01, CMS Energy has reflected, in the accompanying unaudited pro forma condensed consolidated financial statements, that the sale yielded CMS Energy total cash consideration of $180 million. The proceeds from the sale will be used to reduce debt. The sale resulted in an after-tax loss of $161 million calculated as of December 31, 2006 and reflected in retained deficit in the accompanying Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2006. The loss was calculated as follows:
In Millions ----------- Total cash consideration $ 180 Net book value of assets sold (202) Recognition of cumulative foreign currency translation adjustments (195) Fair value liability (a) (25) Selling expenses (5) ----- Loss on Sale Before Taxes (247) Tax benefit 86 ----- Net Loss on Sale $(161) =====
(a) Relates to the recognition of an estimated $25 million fair value of a liability related to claims on Gas Transmission and Generation assets in Argentina. The Unaudited Pro Forma Condensed Consolidated Statements of Income (Loss) for the years ended December 31, 2005 and December 31, 2004 present the elimination of historical values to be reclassified as discontinued operations that were not required to be reflected in discontinued operations as of December 31, 2006. The Unaudited Pro Forma Condensed Consolidated Statements of Income (Loss) include the elimination of allocated parent interest of $7 million in 2006, $6 million in 2005, and $9 million in 2004. The after-tax loss resulting from this transaction has not been reflected in the accompanying Unaudited Pro Forma Condensed Consolidated Statements of Income (Loss). NOTE 2 - PRO FORMA ADJUSTMENTS The following is a summary of the adjustments: Condensed Consolidated Balance Sheets: (a) To reflect the removal of the interests in the Argentine Businesses' and the Michigan Businesses' assets and the receipt of $180 million in cash consideration. (b) To reflect the use of the net cash proceeds of $175 million to retire long-term debt, excluding any premiums assessed to retire long-term debt. (c) To reflect the reversal of $127 million, net of taxes, of certain cumulative amounts of the Argentine Businesses related foreign currency translation adjustments from Accumulated other comprehensive loss into earnings. (d) To reflect the earnings impact, net of tax, of the loss on the sale of our interests in the Argentine Businesses and the Michigan Businesses and the reclassification of cumulative foreign currency translation adjustments. 8 (e) To reflect the removal of Minority interests. (f) To reflect the removal of the interests in the Argentine Businesses' and the Michigan Businesses' liabilities. Condensed Consolidated Statements of Income (Loss): (g) To reflect the elimination of historical Operating Revenue for the Argentine Businesses and the Michigan Businesses, assuming the disposition occurred as of January 1, 2004. (h) To reflect the elimination of historical Earnings from Equity Method Investees for the Argentine Businesses, assuming the disposition occurred as of January 1, 2004. (i) To reflect the elimination of historical Operating Expenses for the Argentine Businesses and the Michigan Businesses, assuming the disposition occurred as of January 1, 2004. (j) To reflect the elimination of historical Other Income (Loss) for the Argentine Businesses and the Michigan Businesses, assuming the disposition occurred as of January 1, 2004. (k) To reflect the elimination of historical Fixed Charges and allocated parent interest in the Argentine Businesses and the Michigan Businesses, assuming the disposition occurred as of January 1, 2004. (l) To reflect reduced interest expense at an average interest rate of 7.0 percent from the use of $175 million of net proceeds to reduce long-term debt outstanding assuming the disposition occurred as of January 1, 2004. (m) To reflect the elimination of Minority Interest (Obligations) in the Argentine Businesses. (n) To reflect the elimination of income tax expense applicable to CMS Enterprises' interest in the Argentine Businesses and the Michigan Businesses, assuming the disposition occurred as of January 1, 2004. (o) To reflect the income tax effects of the pro forma adjustments, assuming the disposition occurred as of January 1, 2004. 9 (D) EXHIBITS. 10.1 Common Agreement dated March 12, 2007 between CMS Enterprises Company and Lucid Energy, LLC. 10.2 Agreement of Purchase and Sale dated March 12, 2007 by and among CMS Enterprises Company, CMS Energy Investment, LLC, and Lucid Energy, LLC and Michigan Pipeline and Processing, LLC. 10.3 Agreement of Purchase and Sale dated March 12, 2007 by and among CMS Enterprises Company, CMS Generation Holdings Company, CMS International Ventures, LLC, and Lucid Energy, LLC and New Argentine Generation Company, LLC. 99.1 CMS Energy's News Release dated March 14, 2007. 99.2 CMS Energy's News Release dated March 9, 2007. This Form 8-K contains "forward-looking statements" as defined in Rule 3b-6 of the Securities Exchange Act of 1934, as amended, Rule 175 of the Securities Act of 1933, as amended, and relevant legal decisions. The forward-looking statements are subject to risks and uncertainties. They should be read in conjunction with "FORWARD-LOOKING STATEMENTS AND INFORMATION" and "RISK FACTORS" each found in the MANAGEMENT'S DISCUSSION AND ANALYSIS sections of CMS Energy's Form 10-K and Consumers' Form 10-K for the Year Ended December 31, 2006 (CMS Energy's and Consumers' "FORWARD-LOOKING STATEMENTS AND INFORMATION" and "RISK FACTORS" sections are incorporated herein by reference), that discuss important factors that could cause CMS Energy's and Consumers' results to differ materially from those anticipated in such statements. 10 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. CMS ENERGY CORPORATION Dated: March 14, 2007 By: /s/ Thomas J. Webb ------------------------------------ Thomas J. Webb Executive Vice President and Chief Financial Officer CONSUMERS ENERGY COMPANY Dated: March 14, 2007 By: /s/ Thomas J. Webb ------------------------------------ Thomas J. Webb Executive Vice President and Chief Financial Officer 11 EX-10.1 2 k13277exv10w1.txt COMMON AGREEMENT DATED MARCH 12, 2007 BETWEEN CMS ENTERPRISES COMPANY AND LUCID ENERGY, LLC EXHIBIT 10.1 COMMON AGREEMENT This COMMON AGREEMENT, dated as of March 12, 2007, is made and entered into by and between CMS Enterprises Company, a Michigan corporation ("CMS"), and Lucid Energy, LLC, a Michigan limited liability company ("Lucid"). WITNESSETH: WHEREAS, CMS, through certain of its subsidiaries, is engaged in Michigan-based natural gas transmission, gathering, storage and processing businesses (the "Michigan Businesses") as well as Argentina-based natural gas transmission and marketing and independent power production businesses (the "Argentine Businesses" and collectively with the Michigan Businesses, the "Businesses") and directly or indirectly holds related options and rights that CMS or its Affiliates intend to grant to Lucid in conjunction with the Businesses pursuant to separate agreements; WHEREAS, CMS and Lucid and their respective Affiliates contemporaneously herewith are entering into separate Agreements of Purchase and Sale in the forms of Annex A (the "Argentine Sale Agreement") and Annex B (the "Michigan Sale Agreement") relating to the sales of the Argentine Businesses and the Michigan Businesses, respectively. The Argentine Sale Agreement and the Michigan Sale Agreement collectively are referred to as the "Sale Agreements." When used in this Common Agreement in connection with either or both of the Sale Agreements, the terms "Seller" and "Buyer" shall mean the entities named as Seller and Buyer in Annex A and Annex B, as applicable. WHEREAS, it is the intention of CMS and Lucid that each of the transactions contemplated by this Common Agreement and by the Sale Agreements, as well as the grant of the related options and rights, will be consummated if and only if all such transactions are consummated concurrently; NOW, THEREFORE, in consideration of the Buyer and Seller entering into the Sale Agreements and CMS or its Affiliates granting Lucid or its Affiliates the options and rights, and other good and valuable consideration the adequacy and receipt of which are hereby acknowledged, the parties hereby agree as follows: 1. Contemporaneous Closing and Grant; Aggregate Consideration. (a) CMS and Lucid hereby agree that the consummation of the transactions contemplated by each of the Argentine Sale Agreement and the Michigan Sale Agreement, as well as the grant of the options and rights, will only occur if each such consummation occurs simultaneously under both of the Sale Agreements. Notwithstanding the foregoing, the obligations and rights under each of the Argentine Sale Agreement and the Michigan Sale Agreement accrue solely to the respective Buyer and Seller as defined therein in Annex A and Annex B. (b) At the contemporaneous consummation of the transactions contemplated under the Sale Agreements, Lucid hereby agrees to cause the aggregate purchase price under the Sale Agreements of One Hundred Eighty Million Dollars ($180,000,000), less the amount paid to CMS Generation Co. in connection with the Empresa Nacional de Electricidad S.A. exercise of its right of first offer for certain shares owned by CMS Generation Co., to be paid to CMS or its designated Seller entities in order to so consummate the transactions contemplated by of each of the Argentine Sale Agreement and the Michigan Sale Agreement according to their respective terms. (c) Notwithstanding that the consummation of the transactions contemplated by the Sale Agreements are contemporaneous and include the same parties, the transactions under the Sale Agreements are separate transactions and each of them shall stand alone. Neither party shall assert or set off any rights or claims or obligations that are involved, arise or are created under one Sale Agreement against any rights, claims or obligations owed or receivable under the other Sale Agreement. 2. Further Assurances. CMS and Lucid agree that each of them shall enter into such additional agreements and deliver such documents and instruments as either of them deems reasonably necessary or appropriate to effect the contemporaneous Closings under the Sale Agreements and the grant of the Options and Rights as well as such related actions and transactions as are necessary to effect the transactions contemplated by this Common Agreement or the Sale Agreements. 3. Miscellaneous. All of the provisions in Article VII of the Michigan Sale Agreement shall apply to this Common Agreement as if they were set forth herein. IN WITNESS WHEREOF, CMS and Lucid, by their duly authorized officers or managers, have executed this Agreement as of the date first written above. CMS Enterprises Company Lucid Energy, LLC By: /s/ Thomas W. Elward By: /s/ Rai Bhargava --------------------------------- ------------------------------------ Thomas W. Elward Name: Rai Bhargava Its: President and Chief Operating Its: Chairman & CEO Officer EX-10.2 3 k13277exv10w2.txt AGREEMENT OF PURCHASE AND SALE DATED MARCH 12, 2007 EXHIBIT 10.2 ================================================================================ AGREEMENT OF PURCHASE AND SALE BY AND BETWEEN CMS ENTERPRISES COMPANY AND CMS ENERGY INVESTMENT LLC, COLLECTIVELY AS SELLER, AND LUCID ENERGY, L.L.C. AND MICHIGAN PIPELINE AND PROCESSING, LLC, COLLECTIVELY AS BUYER, DATED AS OF MARCH 12, 2007 ================================================================================ TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS.................................................... 1 Section 1.1 Specific Definitions..................................... 1 ARTICLE II SALE AND PURCHASE............................................. 8 Section 2.1 Agreement to Sell and Purchase........................... 8 Section 2.2 Time and Place of Closing................................ 8 Section 2.3 Effective Date........................................... 9 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..................... 10 Section 3.1 Corporate Organization; Qualification.................... 10 Section 3.2 Authority Relative to this Agreement..................... 10 Section 3.3 Equity Interests......................................... 11 Section 3.4 Consents and Approvals................................... 12 Section 3.5 No Conflict or Violation................................. 12 Section 3.6 Financial Information.................................... 12 Section 3.7 Contracts................................................ 13 Section 3.8 Compliance with Law...................................... 13 Section 3.9 Permits.................................................. 13 Section 3.10 Litigation............................................... 14 Section 3.11 Employee Matters......................................... 14 Section 3.12 Labor Relations.......................................... 15 Section 3.13 Intellectual Property.................................... 15 Section 3.14 Representations with Respect to Environmental Matters.... 16 Section 3.15 Tax Matters.............................................. 16 Section 3.16 Insurance................................................ 17 Section 3.17 Absence of Certain Changes or Events..................... 17 Section 3.18 Absence of Undisclosed Liabilities....................... 18 Section 3.19 Property................................................. 19 Section 3.20 Brokerage and Finders' Fees.............................. 19 Section 3.21 Corporate and Accounting Records......................... 19 Section 3.22 Affiliated Transactions.................................. 19 Section 3.23 No Other Representations or Warranties................... 19
-i- TABLE OF CONTENTS (CONTINUED)
PAGE ---- ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER................... 20 Section 4.1 Corporate Organization; Qualification.................... 20 Section 4.2 Authority Relative to this Agreement..................... 20 Section 4.3 Consents and Approvals................................... 21 Section 4.4 No Conflict or Violation................................. 21 Section 4.5 Litigation............................................... 21 Section 4.6 Brokerage and Finders' Fees.............................. 22 Section 4.7 Investment Representations............................... 22 Section 4.8 No Other Representations or Warranties................... 22 ARTICLE V COVENANTS OF THE PARTIES....................................... 22 Section 5.1 Consents and Approvals................................... 22 Section 5.2 Further Assurances....................................... 24 Section 5.3 Employee Matters......................................... 24 Section 5.4 Tax Covenants............................................ 25 Section 5.5 Maintenance of Insurance Policies........................ 30 Section 5.6 Transfers of Title and Possession of Assets of Entities................................................. 31 Section 5.7 Preservation of Records.................................. 31 Section 5.8 Public Statements........................................ 32 Section 5.9 Use of Corporate Name; Transitional Use of Seller's Name..................................................... 32 Section 5.10 Release of Guarantees.................................... 32 Section 5.11 Confidentiality.......................................... 33 ARTICLE VI SURVIVAL; INDEMNIFICATION..................................... 33 Section 6.1 Survival................................................. 33 Section 6.2 Indemnification.......................................... 34 Section 6.3 Calculation of Damages................................... 36 Section 6.4 Procedures for Third-Party Claims........................ 36 Section 6.5 Procedures for Inter-Party Claims........................ 37 Section 6.6 Special Indemnification Provision Relating to Environmental Matters.................................... 38
-ii- TABLE OF CONTENTS (CONTINUED)
PAGE ---- ARTICLE VII MISCELLANEOUS PROVISIONS..................................... 39 Section 7.1 Interpretation........................................... 39 Section 7.2 Disclosure Letters....................................... 40 Section 7.3 Payments................................................. 40 Section 7.4 Expenses................................................. 40 Section 7.5 Choice of Law............................................ 40 Section 7.6 Assignment............................................... 40 Section 7.7 Notices.................................................. 40 Section 7.8 Resolution of Disputes................................... 42 Section 7.9 No Right of Setoff....................................... 43 Section 7.10 Time is of the Essence................................... 43 Section 7.11 Specific Performance..................................... 43 Section 7.12 Entire Agreement......................................... 43 Section 7.13 Binding Nature; Third Party Beneficiaries................ 43 Section 7.14 Counterparts............................................. 44 Section 7.15 Severability............................................. 44 Section 7.16 Headings................................................. 44 Section 7.17 Waiver................................................... 44 Section 7.18 Amendment................................................ 44
EXHIBITS A TRANSITION SERVICES AGREEMENT -iii- TABLE OF CONTENTS (CONTINUED)
PAGE ---- INDEX OF DEFINED TERMS Action.................................................................. 1 Affected Employees...................................................... 2 Affiliate............................................................... 2 Agreement............................................................... 2 Applicable Law.......................................................... 2 Argentine Businesses.................................................... 1 Business Day............................................................ 2 Buyer................................................................... 1 Buyer Disclosure Letter................................................. 2 Buyer Indemnified Parties............................................... 33 Buyer Plans............................................................. 24 Cap Amount.............................................................. 34 Casualty Insurance Claims............................................... 29 Claims.................................................................. 2 Code.................................................................... 2 Common Agreement........................................................ 1 Confidentiality Agreement............................................... 2 Consolidated Income Tax Return.......................................... 27 Cut-off Date............................................................ 29 Damages................................................................. 2 Dispute................................................................. 41 Distribution............................................................ 3 Entities................................................................ 1 Environmental Laws...................................................... 3 Environmental Permit.................................................... 3 Equity Interests........................................................ 1 ERISA................................................................... 3 Exchange Act............................................................ 3 Financial Statements.................................................... 12 GAAP.................................................................... 3 Governmental Authority.................................................. 3 Guarantees.............................................................. 32 Hazardous Substances.................................................... 3 Indebtedness............................................................ 4 Indemnified Party....................................................... 34 Indemnifying Party...................................................... 34 Indemnity Period........................................................ 33 Insurance Policies...................................................... 30 Intellectual Property................................................... 4 Knowledge of Seller..................................................... 4 Knowledge of such Person................................................ 4 Liabilities............................................................. 4
-iv- TABLE OF CONTENTS (CONTINUED)
PAGE ---- Liens................................................................... 4 Lucid................................................................... 1 Material Adverse Effect................................................. 5 Material Contract....................................................... 13 Michigan Businesses..................................................... 1 Michigan Courts......................................................... 42 Minimum Claim Amount.................................................... 34 PBOPs................................................................... 24 Pension Plans........................................................... 6 Permits................................................................. 13 Permitted Liens......................................................... 6 Person.................................................................. 6 Plans................................................................... 14 Policies................................................................ 16 Post-Cut-off Taxes...................................................... 26 Pre-Cut-off Taxes....................................................... 26 Released Parties........................................................ 32 Representatives......................................................... 6 Rules................................................................... 42 Seller.................................................................. 1 Seller Disclosure Letter................................................ 7 Seller Indemnified Parties.............................................. 34 Seller Plans............................................................ 24 Seller Returns.......................................................... 25 Straddle Period......................................................... 25 Straddle Period Returns................................................. 25 Straddle Statement...................................................... 25 Subsidiary.............................................................. 7 Tax Claim............................................................... 28 Tax Indemnified Party................................................... 28 Tax Indemnifying Party.................................................. 28 Tax Return.............................................................. 7 Taxes................................................................... 7 Third-Party Claim....................................................... 36 Threshold Amount........................................................ 34 Transfer Taxes.......................................................... 29 Transition Services Agreement........................................... 7 Treasury Regulation..................................................... 7
-v- AGREEMENT OF PURCHASE AND SALE This AGREEMENT OF PURCHASE AND SALE, dated as of March 12, 2007, is made and entered into by and between CMS Enterprises Company, a Michigan corporation, and CMS Energy Investment LLC, a Delaware limited liability company (collectively the "Seller"), and Lucid Energy, L.L.C., a Michigan limited liability company ("Lucid"), and Michigan Pipeline and Processing, LLC, a Michigan limited liability company (collectively the "Buyer"). WITNESSETH: WHEREAS, Seller and Lucid have entered into that certain Common Agreement dated as of the date hereof (the "Common Agreement"), pursuant to which Seller, directly or through Affiliates of Seller, agreed to sell, and Lucid, directly or through Affiliates of Lucid, agreed to acquire, upon the terms and conditions set forth in this Agreement, certain Michigan-based natural gas transmission, gathering and processing businesses (the "Michigan Businesses"), and upon the terms and conditions entered into contemporaneously herewith, Argentina-based natural gas transmission and marketing and independent power production businesses (the "Argentine Businesses"); WHEREAS, Seller and Buyer intend that the transactions contemplated by this Agreement relating to the sale of the Michigan Businesses will be consummated if and only if the sale of the Argentine Businesses is consummated; WHEREAS, the Michigan Businesses are conducted through various domestic legal entities (the "Entities" as described on Annex I), the equity participations in which are owned, directly or indirectly and in relevant amounts, by Seller ("Equity Interests" as described on Annex I); WHEREAS, Buyer desires to purchase, and Seller desires to sell to Buyer, the Equity Interests, upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the foregoing, the representations, warranties, covenants and agreements set forth in this Agreement, and other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the parties hereby agree as follows: ARTICLE I DEFINITIONS Section 1.1 Specific Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below: "Action" shall mean any administrative, regulatory, judicial or other formal proceeding, action, Claim, suit, investigation or inquiry
by or before any Governmental Authority, arbitrator or mediator, at law or at equity. "Affected Employees" shall mean the Employees listed on Section 1.1(a) of the Seller Disclosure Letter. "Affiliate" shall have the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. "Agreement" shall mean this Agreement of Purchase and Sale, together with the Seller Disclosure Letter, Buyer Disclosure Letter, Annex I and Exhibits hereto, as the same may be amended or supplemented from time to time in accordance with the provisions hereof. "Applicable Law" shall mean any statute, treaty, code, law, ordinance, executive order, rule or regulation (including a regulation that has been formally promulgated in a rule-making proceeding but, pending final adoption, is in proposed or temporary form having the force of law); guideline or notice having the force of law; or approval, permit, license, franchise, judgment, order, decree, injunction or writ of any Governmental Authority applicable to a specified Person or specified property, as in effect from time to time. "Business Day" shall mean any day that is not a Saturday, Sunday or other day on which banks are required or authorized by law to be closed in the City of New York. "Buyer Disclosure Letter" shall mean the Buyer Disclosure Letter delivered to Seller concurrently with this Agreement, which is an integral part of this Agreement. "Claims" shall mean any and all claims, lawsuits, demands, causes of action, investigations and other proceedings (whether or not before a Governmental Authority). "Code" shall mean the Internal Revenue Code of 1986, as amended. "Confidentiality Agreement" shall mean the confidentiality agreement entered into by and between the EE Group (an Affiliate of Buyer) and CMS Enterprises Company dated October 23, 2006. "Damages" shall mean judgments, settlements, fines, penalties, damages, Liabilities, losses or deficiencies, costs and expenses, including reasonable attorney's fees, court costs, expenses of arbitration or mediation, and other out-of-pocket expenses
2 incurred in investigating or preparing the foregoing; provided, however, that "Damages" shall not include incidental, indirect or consequential damages, damages for lost profits or other special, punitive or exemplary damages. "Distribution" shall mean: (i) any dividend, distribution, repayment or repurchase of share capital, capital contribution or other return of capital to such Person's shareholders or equivalent holders of its ownership interests; (ii) any repayment of any loan owed to an Affiliate of such Person; (iii) any loan made to an Affiliate of such Person, in each case, other than to any of the Entities. "Environmental Laws" shall mean all foreign, federal, state and local laws, regulations, rules and ordinances in effect and existence as of the closing Date where the Michigan Businesses currently operate relating to pollution or protection of human health or the environment, natural resources or safety and health, including laws relating to releases or threatened releases of Hazardous Substances into the environment (including ambient air, surface water, groundwater, land, surface and subsurface strata). "Environmental Permit" shall mean any Permit, formal exemption, identification number or other authorization issued by a Governmental Authority pursuant to an applicable Environmental Law. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "GAAP" shall mean United States generally accepted accounting principles as in effect from time to time "Governmental Authority" shall mean any executive, legislative, judicial, tribal, regulatory, taxing or administrative agency, body, commission, department, board, court, tribunal, arbitrating body or authority of the United States or any foreign country, or any state, local or other governmental subdivision thereof. "Hazardous Substances" shall mean any chemicals, materials or substances defined as
3 or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "hazardous constituents", "restricted hazardous materials", "extremely hazardous substances", "toxic substances", "contaminants", "pollutants", "toxic pollutants", or words of similar meaning and regulatory effect under any applicable Environmental Law. "Indebtedness" of any Person shall mean (i) all liabilities and obligations of such Person for borrowed money or evidenced by notes, bonds or similar instruments, (ii) obligations in respect of the deferred purchase price of property or services (other than any amount that would constitute current assets) to the extent that such amount would be accrued as a liability on a balance sheet prepared in accordance with GAAP, (iii) obligations in respect of capitalized leases, (iv) obligations in respect of letters of credit, acceptances or similar obligations, (v) obligations under interest rate cap agreements, interest rate swap agreements, foreign currency exchange contracts or other hedging contracts, and (vi) any guarantee of the obligations of another Person with respect to any of the foregoing. "Intellectual Property" shall mean all U.S. and foreign (a) patents and patent applications, (b) trademarks, service marks, logos, slogans, and trade dress, (c) copyrights, (d) software (excluding commercial off-the-shelf software), and (e) all confidential and proprietary information and know-how. "Knowledge of Seller" shall mean the knowledge, after due inquiry, of those Persons set forth in Section 1.1(b) of the Seller Disclosure Letter. "Knowledge of such Person" shall mean, and with respect to Lucid, the knowledge, after due inquiry, of those Persons set forth in Section 1.1(b) of the Buyer Disclosure Letter, and with respect to Michigan Pipeline and Processing, LLC, the knowledge, after due inquiry, of those Persons set forth in Section 1.1(c) of the Buyer Disclosure Letter. "Liabilities" shall mean any and all debts, liabilities, commitments and obligations, whether or not fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whether or not required by GAAP to be reflected in financial statements or disclosed in the notes thereto. "Liens" shall mean any mortgage, pledge, lien (statutory or otherwise
4 and including, without limitation, environmental, ERISA and tax liens), security interest, easement, right of way, limitation, encroachment, covenant, claim, restriction, right, option, conditional sale or other title retention agreement, charge or encumbrance of any kind or nature (except for any restrictions arising under any applicable securities laws). "Material Adverse Effect" shall mean actions, circumstances or omissions that have an effect, individually or in the aggregate, that is materially adverse to (a) the business, operations, financial condition or assets of the Entities, taken as a whole, or (b) the ability of Seller to consummate the transactions contemplated hereby, in each case, other than any effect resulting from, relating to or arising out of: (i) the negotiation, execution, announcement of this Agreement and the transactions contemplated hereby, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors, partners, joint owners or venturers and employees, (ii) any action taken by Seller, the Entities, Buyer or any of their respective Representatives or Affiliates required or permitted to be taken by the terms of this Agreement or necessary to consummate the transactions contemplated by this Agreement, (iii) the general state of the industries in which the Entities operate (including (A) pricing levels, (B) changes in national, regional or local wholesale or retail markets for natural gas or electricity, (C) changes in the national, regional or local interstate natural gas pipeline systems, (D) rules, regulations or decisions of Governmental Authorities or the courts affecting the gas transmission, gathering or processing industries as a whole, or rate orders, motions, complaints or other actions affecting the Entities and (E) any condition described in the Seller Disclosure Letter), (iv) general legal, regulatory, political, business, economic, capital market and financial market conditions (including prevailing interest rate levels), or conditions otherwise generally affecting the industries in which the Entities operate, (v) any change in law, rule or regulation or GAAP or interpretations thereof applicable to the Entities, Seller or Buyer, (vi) acts of God, national or international political or social conditions or (vii) general economic conditions in Michigan; provided, that, for purposes of determining a "Material Adverse Effect", any effect on the business, financial conditions or assets of the business of any Person shall include only the portion of such effect attributable to the ownership interest of the Entities and their Affiliates and shall exclude any portion of such effect attributable to the ownership interest of any third party in such Person.
5 "Pension Plans" shall mean all Plans providing pensions, superannuation benefits or retirement savings, including pension plans, top up pensions or supplemental pensions. "Permitted Liens" shall mean (a) zoning, planning and building codes and other applicable laws regulating the use, development and occupancy of real property and permits, consents and rules under such laws; (b) encumbrances, easements, rights-of-way, covenants, conditions, restrictions and other matters affecting title to real property which do not materially detract from the value of such real property or materially restrict the use of such real property; (c) leases and subleases of real property; (d) all easements, encumbrances or other matters which are necessary for utilities and other similar services on real property; (e) Liens to secure indebtedness reflected on the Financial Statements or indebtedness incurred in the ordinary course of business, consistent with past practice, after the date thereof, (f) Liens for Taxes and other governmental levies not yet due and payable or, if due, (i) not delinquent or (ii) being contested in good faith by appropriate proceedings during which collection or enforcement against the property is stayed and with respect to which adequate reserves have been established and are being maintained to the extent required by GAAP, (g) mechanics', workmen's, repairmen's, materialmen's, warehousemen's, carriers' or other Liens, including all statutory Liens, arising or incurred in the ordinary course of business, (h) original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business, (i) Liens that do not materially interfere with or materially affect the value or use of the respective underlying asset to which such Liens relate, (j) Liens which are capable of being cured through condemnation procedures under the Natural Gas Act, and (k) Liens which are reflected in any Material Contract. "Person" shall mean any natural person, corporation, company, general partnership, limited partnership, limited liability partnership, joint venture, proprietorship, limited liability company, or other entity or business organization or vehicle, trust, unincorporated organization or Governmental Authority or any department or agency thereof. "Representatives" Shall mean accountants, counsel or representatives.
6 "Seller Disclosure Letter" shall mean the Seller Disclosure Letter delivered to Buyer concurrently with this Agreement, which is an integral part of this Agreement. "Subsidiary" of any Entity means, at any date, any Person (a) the accounts of which would be consolidated with and into those of the applicable Person in such Person's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date or (b) of which securities or other ownership interests representing more than fifty percent (50%) of the equity or more than fifty percent (50%) of the ordinary voting power or, in the case of a partnership, more than fifty percent (50%) of the general partnership interests or more than fifty percent (50%) of the profits or losses of which are, as of such date, owned, controlled or held by the applicable Person or one or more subsidiaries of such Person. "Tax Return" shall mean any report, return, declaration, or other information required to be supplied to a Governmental Authority in connection with Taxes including any claim for refund or amended return. "Taxes" shall mean all taxes, levies or other like assessments, including income, gross receipts, excise, value added, real or personal property, withholding, asset, sales, use, license, payroll, transaction, capital, business, corporation, employment, net worth and franchise taxes, or other governmental taxes imposed by or payable to any foreign, Federal, state or local taxing authority, whether computed on a separate, consolidated, unitary, combined or any other basis; and in each instance such term shall include any interest, penalties or additions to tax attributable to any such Tax. "Transition Services shall mean the transition services agreement to Agreement" be entered into on the date hereof between Seller and Buyer, substantially in the form of the agreement attached hereto as Exhibit A. "Treasury Regulation" shall mean the income Tax regulations, including temporary and proposed regulations, promulgated under the Code, as amended.
7 ARTICLE II SALE AND PURCHASE Section 2.1 Agreement to Sell and Purchase. (a) Simultaneously with the payment of the Purchase Price in accordance with Section 2.1(b) of this Agreement, Buyer shall purchase, acquire and accept from Seller, and Seller shall sell, convey, assign, transfer and deliver to Buyer, all of Seller's interests in the Equity Interests, free and clear of all Liens, as well as certain rights and interests in related tangible and intangible property being granted in support of the consummation of the transactions contemplated hereby. (b) As of the date hereof, Buyer shall pay to Seller, in consideration for the purchase of the Equity Interests and such related rights and interests pursuant to Section 2.1(a), an amount in cash equal to $55,000,000 (the "Purchase Price") by wire transfer of same day funds to an account or accounts and in such amounts as designated by Seller. Section 2.2 Time and Place of Closing. (a) Upon payment of the Purchase Price, Seller shall deliver or cause to be delivered, in form and substance satisfactory to Buyer (unless previously delivered), the following items: (i) a certificate or certificates representing the Equity Interests (or other appropriate instruments evidencing transfer of ownership), accompanied by stock or similar powers duly endorsed in blank by Seller or accompanied by instruments of transfer duly executed by Seller; (ii) a certificate of incumbency and authority of Seller dated the date hereof; (iii) a duly executed counterpart of the Transition Services Agreement; (iv) written resignations, effective as of the date hereof, from each of the officers and directors of the Entities; (v) title to all assets attributed to the Entities and their businesses that are not in their possession or titled in their name and would not otherwise be transferred by transfer of the certificates representing the Equity Interests; (vi) an estimated payment of $2,200,000, which payment shall be made by wire transfer of same day funds to an account or accounts and in such amounts as designated by Buyer in writing. The estimated payment will be reconciled in accordance with the provisions of Section 2.3.; and 8 (vii) evidence of termination of the Intercompany Cash Pooling Arrangement between CMS Energy Investment LLC and/or CMS Capital LLC and the Entities (other than Jackson Pipeline Company LLC, which is not a party to such arrangement). (b) As of the date hereof, Buyer shall deliver or cause to be delivered to Seller (unless previously delivered), the following items: (i) the Purchase Price by wire transfer of same day funds to an account or accounts and in such amounts as designated by Seller in writing; (ii) a certificate of incumbency and authority of Buyer dated the date hereof; and (iii) a duly executed counterpart of the Transition Services Agreement. Section 2.3 Effective Date. The Effective Date of the transaction for financial purposes shall be December 31, 2006, so that Buyer will receive the assets and liabilities shown on the December 31, 2006 Financial Statements plus all of the results of operations (including net cash flow) in the ordinary course of business consistent with past practices of each of the Entities after December 31, 2006. To avoid confusion, Buyer and Seller agree that: (a) Buyer shall receive the assets and liabilities shown on the December 31, 2006 Financial Statements, less the following Intercompany Notes receivables: (i) $2,494,058 loan from CMS Antrim Gas LLC to CMS Energy Investment LLC (ii) $855,989 loan from CMS Litchfield LLC to CMS Energy Investment LLC (iii) $716,663 loan from CMS Grands Lacs LLC to CMS Energy Investment LLC (iv) $950,341 loan from CMS Bay Area Pipeline, LLC to CMS Energy Investment LLC (v) $566,887 loan from CMS Jackson LLC to CMS Energy Investment LLC. (b) Buyer shall also receive all the results of operations (including net cash flow) from January 1, 2007 through the date hereof. Buyer and Seller shall work in good faith to reconcile and settle all accounts as of the date hereof, 9 consistent with the intent described above, within thirty (30) days after the date hereof. If it is determined that Seller owes money to Buyer, it shall pay Buyer within five (5) days of such determination. If it is determined that Buyer owes money to Seller, it shall pay Seller within five (5) days of such determination. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Buyer as follows: Section 3.1 Corporate Organization; Qualification. Each Seller is duly organized and validly existing and in good standing under the Laws of its governing jurisdiction. Each of the Entities is duly organized and validly existing and in good standing under the Laws of its governing jurisdiction and each (a) has the requisite power to carry on its businesses as currently conducted and (b) is duly qualified to do business in each of the jurisdictions in which the ownership, operation or leasing of its properties or assets or the conduct of its business requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect. Section 3.2 Authority Relative to this Agreement. Each Seller has full corporate power and authority to execute and deliver this Agreement, the Transition Services Agreement (as applicable) and the other agreements, documents and instruments to be executed and delivered by it in connection with this Agreement or the Transition Services Agreement, and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement, the Transition Services Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement or the Transition Services Agreement and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all the necessary action on the part of each Seller (as applicable) and no other corporate or other proceedings on the part of Seller are necessary to authorize this Agreement, the Transition Services Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement or the Transition Services Agreement or to consummate the transactions contemplated hereby and thereby. This Agreement, the Transition Services Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement or the Transition Services Agreement have been, duly and validly executed and delivered by Seller and assuming that this Agreement, the Transition Services Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement or the Transition Services Agreement constitute legal, valid and binding agreements of the Buyer, are enforceable against Seller in accordance with their respective terms, except that such enforceability may be limited by applicable 10 bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. Section 3.3 Equity Interests. (a) The Equity Interests are duly authorized, validly issued and fully paid and were not issued in violation of any preemptive rights. Except as set forth in Section 3.3(a) of the Seller Disclosure Letter, (i) there are no equity interests of the Entities authorized, issued or outstanding or reserved for any purpose and (ii) there are no (A) existing options, warrants, calls, preemptive rights, subscriptions or other rights, agreements, arrangements or commitments of any character, relating to the Entities, obligating Seller or any of its Affiliates to issue, transfer or sell, or cause to be issued, transferred or sold, any additional equity interest in the Entities, (B) outstanding securities of Seller or its Affiliates that are convertible into or exchangeable or exercisable for any equity interest in the Entities, (C) options, warrants or other rights to purchase from Seller or its Affiliates any such convertible or exchangeable securities or (D) other than this Agreement, contracts, agreements or arrangements of any kind relating to the issuance of any equity interest in the Entities, or any such options, warrants or rights, pursuant to which, in any of the foregoing cases, Seller or its Affiliates are subject or bound. (b) Except as set forth in Section 3.3(b) of the Seller Disclosure Letter, Seller owns all of the issued and outstanding Equity Interests and has good, valid and marketable title to the Equity Interests, free and clear of all Liens or other defects in title, and the Equity Interests have not been pledged or assigned to any Person. The Equity Interests owned by Seller are not subject to any restrictions on transferability other than those imposed by this Agreement and by applicable securities laws. Following the transfer of the Equity Interests to Buyer, Buyer will own all of the issued and outstanding Equity Interests owned by Seller and will have good and valid title to the Equity Interests, free and clear of all Liens. (c) Section 3.3(c) of the Seller Disclosure Letter sets forth, as of the date hereof, a list of each of the Entities, including its name, its jurisdiction of organization, its authorized and outstanding capital stock (or equivalent equity interest) and the percentage of its outstanding capital stock owned by the Seller and/or the Entities, as applicable. (d) Except as set forth in Section 3.3(d) of the Seller Disclosure Letter, there are no Persons (other than any of the Entities) in which any of the Entities owns any equity or other similar interest. Section 3.4 Consents and Approvals. Except as set forth in Section 3.4 of the Seller Disclosure Letter, Seller requires no consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority, or any other Person as a condition to the execution and delivery of this Agreement or the performance of the obligations hereunder, except where the 11 failure to obtain such consent, approval or authorization of, or filing of, registration or qualification with, any Governmental Authority, or any other Person would not have a Material Adverse Effect. Section 3.5 No Conflict or Violation. Except as set forth in Section 3.5 of the Seller Disclosure Letter, the execution, delivery and performance by the Seller of this Agreement does not: (a) violate or conflict with any provision of the organizational documents or bylaws of Seller or any of the Entities; (b) violate any applicable provision of a law, statute, judgment, order, writ, injunction, decree, award, rule or regulation of any Governmental Authority, except where such violation would not have a Material Adverse Effect; (c) violate, result in a breach of, constitute (with due notice or lapse of time or both) a default, or cause any material obligation, penalty or premium to arise or accrue including without limitation the acceleration of maturity of any indebtedness or other obligation or imposition of any lien, charge or encumbrance on any assets of any of the Entities, under any Material Contract, lease, loan, mortgage, security agreement, trust indenture or other material agreement or instrument to which any of the Entities is a party or by which any of them is bound or to which any of their respective properties or assets is subject, except for violations, breaches or defaults that would not have a Material Adverse Effect; (d) result in the imposition or creation of any material Lien upon or with respect to any of the properties or assets owned or used by the Entities; or; (e) result in the cancellation, modification, revocation or suspension of any material Permits or in the failure to renew any material Permit. Section 3.6 Financial Information. (a) Prior to the date hereof, Seller has made available to Buyer or its Representatives certain unaudited financial information relating to each of the Entities as of December 31, 2004, 2005 and 2006 detailing assets, liabilities, income and cash flows (collectively, the "Financial Statements"). A copy of the unaudited financial statements as of December 31, 2006 of the Entities is disclosed in Section 3.6(a) of the Seller Disclosure Letter. (b) The Financial Statements were prepared in accordance with GAAP, consistently applied throughout the periods indicated and fairly present, in all material respects, the combined financial position, results of operations and cash flows of each of the Entities, as of the dates thereof and for the periods covered thereby, in each case, except as disclosed in Section 3.6(b) of the Seller Disclosure Letter. 12 Section 3.7 Contracts. (a) Section 3.7(a) of the Seller Disclosure Letter sets forth a list, as of the date hereof, of each material contract, lease or similar agreement or instrument to which any of the Entities is a party, other than (i) any purchase or sale orders arising in the ordinary course of business, (ii) any contract involving the payment or receipt of less than $100,000 in any one year, (iii) any contract terminable within 30 days or less by its terms, and (iv) any contract listed in any other Section of the Seller Disclosure Letter (each contract set forth in Section 3.7(a) of the Seller Disclosure Letter being referred to herein as a "Material Contract"). (b) Section 3.7(b) of the Seller Disclosure Letter sets forth a list, as of the date hereof, of each Material Contract that any of the Entities has with Seller or with any Affiliate of Seller that is not one of the Entities. (c) Except as set forth in Section 3.7(c) of the Seller Disclosure Letter, each Material Contract is a valid and binding agreement of the Entities party thereto and, to the Knowledge of Seller, is in full force and effect. (d) Except as set forth in Section 3.7(d) of the Seller Disclosure Letter, there is no default by Seller or any of the Entities under any Material Contract to which it is a party, and Seller has no Knowledge of any default by any counterparties under any Material Contract, in each case other than defaults which have been cured or waived and which would not have a Material Adverse Effect. Section 3.8 Compliance with Law. Except for Environmental Laws and Tax laws, which are the subject of Section 3.14 and Section 3.15, respectively, and except as set forth in Section 3.8 of the Seller Disclosure Letter, the Entities are in compliance with all federal, state, local or foreign laws, statutes, ordinances, rules, regulations, judgments, orders, writs, injunctions or decrees of any Governmental Authority applicable to their respective properties, assets and businesses except where such noncompliance would, individually or in the aggregate, not have a Material Adverse Effect. Section 3.9 Permits. (a) Except as set forth in Section 3.9(a) of the Seller Disclosure Letter, Seller, and the Entities have all permits, licenses, certificates of authority, orders and approvals of, and have made all filings applications and registrations with Governmental Authorities necessary for the conduct of their respective business operations as presently conducted (collectively, the "Permits"), except for those Permits the absence of which would not have a Material Adverse Effect. (b) Except as set forth in Section 3.9(b) of the Seller Disclosure, all Permits are issued to, and in the name of, the Entities which require such Permit. 13 (c) Except as set forth in Section 3.9(c) of the Seller Disclosure Letter, the Permits are in full force and effect, no violations thereof have been recorded and no proceedings are pending or, to the Knowledge of Seller, threatened for the revocation or partial revocation thereof, in each case other than such failures, violations or proceedings that have been cured or waived and those which would not have a Material Adverse Effect. Seller and Buyer shall use their reasonable best efforts to cooperate with respect to the use and transfer of any Permits and licenses that cannot be readily transferred. Section 3.10 Litigation. Except as identified in Section 3.10 of the Seller Disclosure Letter, there are no Actions before any Governmental Authority or arbitration panel or tribunal pending or in progress or, to the Knowledge of Seller, threatened, against Seller, the Entities, or any of their respective Affiliates or any executive officer or director thereof relating to the Equity Interests or the respective assets or businesses of the Entities, except as would not, individually or in the aggregate, have a Material Adverse Effect. None of Seller, the Entities, or any of their respective Affiliates are subject to any outstanding judgment, order, writ, injunction, decree or award entered in an Action to which such Person was a named party relating to the Equity Interests or the respective assets or businesses of such Persons, except as would not, individually or in the aggregate, have a Material Adverse Effect. Section 3.11 Employee Matters. (a) All material benefit and compensation plans and contracts, including, but not limited to, "employee benefit plans" within the meaning of Section 3(3) of ERISA, and deferred compensation, stock option, stock purchase, stock appreciation rights, stock-based incentive bonus, severance, employment, change in control, vacation or fringe benefit programs, policies, agreements, arrangements or plans maintained by the Entities or by the Seller or their Affiliates for the benefit of any of their current employees of the Entities (collectively, the "Plans") have been or are being terminated and, if applicable, vested as of the date hereof, in each case as determined by Seller and its Affiliates in its sole discretion and subject to the provisions of such Plans and applicable Law. (b) All Affected Employees are subject to "at will" employment arrangements under applicable policies of Seller and the Entities as of the date hereof. Section 3.12 Labor Relations. Except as set forth in Section 3.12 of the Seller Disclosure Letter, (i) none of the Entities is a party to any labor or collective bargaining agreements, and there are no labor or collective bargaining agreements which pertain to any employees of the Entities, (ii) within the preceding eighteen (18) months, there have been no representation or certification proceedings, or petitions seeking a representation proceeding, pending or, to 14 the Knowledge of Seller, threatened in writing to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority with respect to the Entities, (iii) within the preceding twelve (12) months, to the Knowledge of Seller, there have been no organizing activities involving the Entities with respect to any group of their respective employees, (iv) there are no pending or, to the Knowledge of Seller, threatened strikes, work stoppages, slowdowns or lockouts against the Entities, or their respective Employees or involving any of the Entities' facilities; and (v) there are no pending unfair employment practice charges, grievances or complaints filed or, to the Knowledge of Seller, threatened to be filed with any Governmental Authority based on the employment or termination of employment by the Entities of any employee Section 3.13 Intellectual Property. (a) Section 3.13(a) of the Seller Disclosure Letter sets forth a list of all material U.S. and foreign: (i) patents and patent applications; (ii) trademark registrations and applications; and (iii) copyright registrations and applications, owned by the Entities. The foregoing schedules set forth at Section 3.13(a) of the Seller Disclosure Letter are complete and accurate in all material respects. To the Knowledge of Seller, the foregoing registrations are in effect and subsisting. Except as set forth in Section 3.13(a) of the Seller Disclosure Letter, the Entities have all licenses necessary to use the equipment and processes as currently being used by them in the ordinary conduct of their respective businesses and operations and, to the Knowledge of Seller, no further licenses are required to so conduct their businesses and operations. (b) Except as would not, individually or in the aggregate, have a Material Adverse Effect, or as set forth in Section 3.13(b) of the Seller Disclosure Letter, (i) to the Knowledge of Seller, the conduct of the respective businesses of the Entities does not infringe or otherwise violate any Person's Intellectual Property, and there is no such claim pending or to the Seller's Knowledge threatened against the Entities, and (ii) to the Knowledge of Seller, no Person is infringing or otherwise violating any Intellectual Property owned by the Entities, and no such claims are pending or threatened against any Person by the Entities. (c) Except as set forth in Section 3.13(c) of the Seller Disclosure, all owned or licensed Intellectual Property is owned by or licensed to the Entities which utilize such Intellectual Property. Section 3.14 Representations with Respect to Environmental Matters. To the Knowledge of Seller, and except as set forth in Section 3.14 of the Seller Disclosure Letter or as would not, individually or in the aggregate, have Material Adverse Effect: (a) The Entities are in compliance with all applicable Environmental Laws; 15 (b) The Entities have all of the Environmental Permits required in order to conduct their operations or, where such Environmental Permits have expired, have applied for a renewal of such Environmental Permits in a timely fashion; (c) There is no pending or threatened written Claim, lawsuit, or administrative proceeding against the Entities under or pursuant to any Environmental Law; (d) None of the Entities is a party or subject to any administrative or judicial order, decree or other agreement with a Governmental Authority under or pursuant to any applicable Environmental Law; (e) None of the Entities has received written notice from any third party, including any Governmental Authority, alleging that any of the Entities has been or is in violation or potentially in violation of any applicable Environmental Law or otherwise may be liable under any applicable Environmental Law; and (f) With respect to the real property that is currently owned, leased or under easement or right of way by the Entities, there have been no spills or discharges of Hazardous Substances on or underneath any such real property. The representations and warranties set forth in this Section 3.14 are Seller's sole and exclusive representations and warranties related to environmental matters. Section 3.15 Tax Matters. Except as would not have a Material Adverse Effect: (a) All federal, state, and local Tax Returns required to be filed by or on behalf of the Entities, and each consolidated, combined, unitary, affiliated or aggregate group of which any of the Entities are a member has been timely filed (taking into account applicable extensions) and in each case are correct and complete in so far as the Entities are concerned, and all Taxes shown as due on such Tax Returns have been paid, or adequate reserves therefor have been established. (b) There is no deficiency, proposed adjustment, or matter in controversy that has been asserted or assessed in writing with respect to any Taxes due and owing by the Entities that has not been paid or settled in full. (c) Each of the Entities is treated as a disregarded entity for federal tax purposes. Section 3.16 Insurance. (a) Section 3.16(a) of the Seller Disclosure Letter sets forth a true and complete list of all current policies of all material property and casualty insurance, insuring the properties, assets, employees and/or operations of the Entities (collectively, the "Policies"). To the Knowledge of Seller, all premiums payable under 16 such Policies have been paid in a timely manner and the Entities, as applicable, have complied in all material respects with the terms and conditions of all such Policies. (b) As of the date hereof, Seller has not received any written notification of the failure of any of the Policies to be in full force and effect. To the Knowledge of Seller, none of the Entities is in default under any provision of the Policies, and except as set forth in Section 3.16(b) of the Seller Disclosure Letter, there is no claim by the Entities or any other Person pending under any of the Policies as to which coverage has been denied or disputed by the underwriters or issuers thereof. Section 3.17 Absence of Certain Changes or Events. (a) Except as set forth in Section 3.17(a) of the Seller Disclosure Letter, each of the Entities conducts its respective businesses in the ordinary course of business, consistent with past practice in all material respects, since December 31, 2006. (b) Except as set forth in Section 3.17(b) of the Seller Disclosure Letter, or in the Financial Statements, and the notes thereto, there has not been with respect to each of the Entities any event or development or change which has resulted or would reasonably be likely to result in a Material Adverse Effect. (c) Section 3.17(c) of the Seller Disclosure Letter sets forth a true and complete list of the Distributions made by each of the Entities since December 31, 2006. (d) Except as set forth in Section 3.17(d) of the Seller Disclosure Letter, since December 31, 2006, each of the Entities has not: (i) granted any severance or termination pay to, or entered into, extended or amended any employment, consulting, severance or other compensation agreement with, or otherwise increased the compensation or benefits provided to any of its officers or other employees whose annual salary base is in excess of $100,000; (ii) sold, leased, licensed, mortgaged or otherwise disposed of any properties or assets material to its business having a fair market value in excess of $100,000 individually or $400,000 in the aggregate, other than (A) sales made in the ordinary course of business, consistent with past practice; or (B) sales of obsolete or other assets not presently utilized in its business; (iii) made any capital expenditure in excess of 10% of the annual budgeted capital expenditures; (iv) paid, repurchased, discharged or satisfied any of its material Claims, Liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than in the ordinary course of business, consistent with past practice; 17 (v) (A) incurred or assumed or guaranteed any long-term debt, or except in the ordinary course of business or consistent with past practice, incurred or assumed or guaranteed short-term Indebtedness (other than intercompany Indebtedness) exceeding $100,000 in the aggregate; (B) modified the terms of any Indebtedness or other liability, other than modifications of short-term debt in the ordinary course of business, consistent with past practice; or (C) assumed, guaranteed, endorsed or otherwise became liable or responsible (whether directly, contingently or otherwise) for the material obligations of any other Person; or (vi) authorized any of, or committed or agreed to take any of, the actions referred to in the paragraphs (i) through (v) above. (e) Except as set forth in Section 3.17(e) of the Seller Disclosure Letter, since December 31, 2006, each of the Entities has not recognized any material Tax liability outside the ordinary course of business, made or changed any election for Tax purposes, changed any annual accounting period for Taxes, filed any material Tax Return or amended Tax Return, entered into any closing agreement for Tax purposes, settled any Tax claim or assessment relating to any of the Entities, surrendered any right to claim a refund of Taxes, consented to any extension or waiver of the limitation period applicable to any Tax claim or assessment relating to any of the Entities, or taken any other action relating to the filing of any Tax Return or the payment of any Tax, if such election, adoption, change, amendment, agreement, settlement, surrender, consent or other action would have the effect of increasing the Tax liability of any of the Entities for any period ending after December 31, 2006 or decreasing any Tax attribute of any of the Entities existing on that date. Section 3.18 Absence of Undisclosed Liabilities. None of the Entities has any Liabilities (whether absolute, accrued, contingent or otherwise) except those Liabilities (a) disclosed and reserved against in the Financial Statements (or notes thereto) as required by GAAP, (b) set forth in Section 3.18 of the Seller Disclosure Letter, (c) incurred in the ordinary course of business since December 31, 2006 for each of the Entities as described in Section 3.6 or (d) which would not result in a Material Adverse Effect. Section 3.19 Property. Except as set forth in Section 3.19 of the Seller Disclosure Letter, each of the Entities has valid title to, leases, or holds valid rights of way, easements or similar real property rights relating to, all assets used or held for use by each of the Entities, in each case free and clear of any Liens (other than Permitted Liens) except for such failures of which to so own, lease or hold would not, individually or in the aggregate, have a Material Adverse Effect. Section 3.20 Brokerage and Finders' Fees. None of Seller, the Entities, or any of their Affiliates or their respective stockholders, partners, directors, officers or employees, has incurred, or will incur any 18 brokerage, finders' or similar fee in connection with the transactions contemplated by this Agreement or the Transition Services Agreement. Section 3.21 Corporate and Accounting Records. The minute books of the Entities (excluding Jackson Pipeline Company) contain true, complete and accurate records of all meetings and accurately reflect all other corporate action of their respective members (including committees thereof). Each of the Entities (except Jackson Pipeline Company) maintains adequate records which accurately and validly reflect transactions conducted by each of the Entities in reasonable detail, and maintains accounting controls, policies and procedures sufficient to ensure that such transactions are (a) executed in accordance with its management's general or specific authorization and (b) recorded in a manner which permits the preparation of financial statements in accordance with Applicable Law and applicable regulatory accounting requirements. Section 3.22 Affiliated Transactions. Except as described in Section 3.22 of the Seller Disclosure Letter, and except for trade payables and receivables arising in the ordinary course of business consistent with past practices for purchases and sales of goods or services consistent with past practice, none of the Entities have been a party over the past twelve (12) months to any material transaction or agreement with Seller or any Affiliate of Seller (other than the Entities) and no director or officer of Seller or its Affiliates (other than the Entities), has, directly or indirectly, any material interest in any of the assets or properties of the Entities. Section 3.23 No Other Representations or Warranties. Except for the representations and warranties contained in this Article III, none of Seller, the Entities, or any other Person makes any other express or implied representation or warranty on behalf of Seller. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER Each Buyer hereby represents and warrants to Seller as follows: Section 4.1 Corporate Organization; Qualification. Such Person (a) is a limited liability company duly organized and validly existing under the Laws of its jurisdiction of formation, (b) has the requisite power to carry on its businesses as currently conducted and (c) is duly qualified to do business in each of the jurisdictions in which the ownership, operation or leasing of its properties or assets or the conduct of its business requires it to be so qualified, except where the failure to be so qualified would not materially and adversely affect the ability of, or timing for, Buyer to consummate the transactions contemplated by this Agreement or the Transition Services Agreement. 19 Section 4.2 Authority Relative to this Agreement. Such Person has full corporate or similar power and authority to execute and deliver this Agreement, the Transition Services Agreement and the other agreements, documents and instruments to be executed and delivered by it in connection with this Agreement or the Transition Services Agreement, and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement, the Transition Services Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement or the Transition Services Agreement and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all the necessary action on the part of such Person and no other organization or similar proceedings on the part of such Person are necessary to authorize this Agreement, the Transition Services Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement or the Transition Services Agreement or to consummate the transactions contemplated hereby and thereby. This Agreement, the Transition Services Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement or the Transition Services Agreement has been duly and validly executed and delivered by such Person and assuming that this Agreement, the Transition Services Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement or the Transition Services Agreement constitute legal, valid and binding agreements of the Seller are enforceable against such Person in accordance with their respective terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. Section 4.3 Consents and Approvals. Except as set forth in Section 4.3 of the Buyer Disclosure Letter, such Person requires no consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority, or any other Person as a condition to the execution and delivery of this Agreement or the performance of the obligations hereunder, except where the failure to obtain such consent, approval or authorization of, or filing of, registration or qualification with, any Governmental Authority, or any other Person would not materially and adversely affect the ability of, or timing for, Seller to consummate the transactions contemplated by this Agreement or the Transition Services Agreement. Section 4.4 No Conflict or Violation. Except as set forth in Section 4.4 of the Buyer Disclosure Letter, the execution, delivery and performance by such Person of this Agreement does not: (a) violate or conflict with any provision of the organizational documents of such Person; 20 (b) violate any applicable provision of a law, statute, judgment, order, writ, injunction, decree, award, rule or regulation of any Governmental Authority, except where such violation would not materially and adversely affect the ability of, or timing for, Seller to consummate the transactions contemplated by this Agreement or the Transition Services Agreement; or (c) violate, result in a breach of, constitute (with due notice or lapse of time or both) a default or cause any material obligation, penalty or premium to arise or accrue under any material contract, lease, loan, agreement, mortgage, security agreement, trust indenture or other material agreement or instrument to which such Person is a party or by which it is bound or to which any of its properties or assets is subject, except as would not materially and adversely affect the ability of, or timing for, Seller to consummate the transactions contemplated by this Agreement or the Transition Services Agreement. Section 4.5 Litigation. Except as identified in Section 4.5 of the Buyer Disclosure Letter, there are no Actions before any Governmental Authority or arbitration panel or tribunal pending or in progress or, to Knowledge of such Person, threatened, against such Person, or any of their respective Affiliates or any executive officer or director thereof, except as would not materially and adversely affect the ability of, or timing for, such Person to consummate the transactions contemplated by this Agreement or the Transition Services Agreement. Neither such Person nor any of its Affiliates are subject to any outstanding judgment, order, writ, injunction, decree or award entered in an Action to which such Person was a named party, except as would not materially and adversely affect the ability of, or timing for, such Person to consummate the transactions contemplated by this Agreement or the Transition Services Agreement. Section 4.6 Brokerage and Finders' Fees. Neither such Person nor any of its Affiliates, or their respective members, stockholders, partners, directors, officers or employees, has incurred, or will incur any brokerage, finders' or similar fee in connection with the transactions contemplated by this Agreement or the Transition Services Agreement. Section 4.7 Investment Representations. (a) Such Person is acquiring the Equity Interests to be acquired by it hereunder for its own account, solely for the purpose of investment and not with a view to, or for sale in connection with, any distribution thereof in violation of the federal securities laws or any applicable foreign or state securities law. (b) Such Person understands that the acquisition of the Equity Interests to be acquired by it pursuant to the terms of this Agreement involves substantial risk. Such Person and its officers have experience as an investor in securities and equity interests of companies such as the ones being transferred pursuant to this Agreement and acknowledges that it can bear the economic risk of its investment and has such 21 knowledge and experience in financial or business matters that such Person is capable of evaluating the merits and risks of its investment in the Equity Interests to be acquired by it pursuant to the transactions contemplated hereby. (c) Such Person understands that the Equity Interests to be acquired by it hereunder have not been registered under the Securities Act on the basis that the sale provided for in this Agreement is exempt from the registration provisions thereof. Such Person acknowledges that such securities may not be transferred or sold except pursuant to the registration and other provisions of applicable securities laws or pursuant to an applicable exemption therefrom. (d) Such Person acknowledges that the offer and sale of the Equity Interests to be acquired by it in the transactions contemplated hereby has not been accomplished by the publication of any advertisement. Section 4.8 No Other Representations or Warranties. Except for the representations and warranties contained in this Article IV, neither such Person nor any other Person makes any other express or implied representation or warranty on behalf of such Person. ARTICLE V COVENANTS OF THE PARTIES Section 5.1 Consents and Approvals. (a) Upon the terms and subject to the conditions of this Agreement, each of the parties hereto agrees to use, and will cause its Affiliates to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary or advisable under Applicable Law to consummate and make effective the transactions contemplated by this Agreement as promptly as practicable including the preparation and filing of all forms, registrations and notices required to be filed by such party in order to consummate the transactions contemplated by this Agreement and the taking of such actions as are necessary to obtain any approvals, consents, orders, exemptions or waivers of Governmental Authorities required to be obtained by such party in order to consummate the transactions contemplated by this Agreement. Each party shall promptly consult with the other with respect to, provide any necessary information with respect to, and provide copies of all filings made by such party with any Governmental Entity or any other information supplied by such party to a Governmental Entity in connection with this Agreement and the Transition Services Agreement and the transactions contemplated hereby and thereby. (b) If any objections are asserted with respect to the transactions contemplated by this Agreement or the Transition Services Agreement under any anti-competition Law or if any suit or proceeding is instituted or threatened by any Governmental Entity or any private party challenging any of the transactions contemplated by this Agreement or the Transition Services Agreement as violative of any 22 anti-competition Law, each of Seller and Buyer shall use its reasonable best efforts to promptly resolve such objections. Notwithstanding anything to the contrary in this Agreement, none of Seller or any of its Affiliates shall have any obligation to hold separate or divest any property or assets of Seller or any of its Affiliates in connection with any such claim under anti-competition law. In furtherance of the foregoing, Buyer shall, and shall cause its Affiliates to, take all action, including agreeing to hold separate or to divest any of the businesses or properties or assets of Buyer or any of its Affiliates (including the Equity Interests) and to terminate any existing relationships and contractual rights and obligations, as may be required (i) by the applicable Governmental Entity in order to resolve such objections as such Governmental Entity may have to such transactions under any anti-competition Law or (ii) by any domestic or foreign court or other tribunal, in any action or proceeding brought by a private party or Governmental Entity challenging such transactions as violative of any anti-competition Law, in order to avoid the entry of, or to effect the dissolution, vacating, lifting, altering or reversal of, any order that has the effect of restricting, preventing or prohibiting the consummation of the transactions contemplated by this Agreement or the Transition Services Agreement. In addition, Buyer shall, and shall cause its Affiliates to, vigorously defend any action or proceeding brought by a private party or Governmental Entity challenging the transactions contemplated hereby or by the Transition Services Agreement as violative of any anti-competition Law, in order to avoid the entry of, or to effect the dissolution, vacating, lifting, altering or reversal of, any order that has the effect of restricting, preventing or prohibiting the consummation of the transactions contemplated by this Agreement or the Transition Services Agreement (including by pursuing any available appeal process). Section 5.2 Further Assurances. On and after the date hereof, Seller and Buyer shall cooperate and use their respective reasonable best efforts to take or cause to be taken all appropriate actions and do, or cause to be done, all things necessary or appropriate to consummate and make effective the transactions contemplated hereby, including the execution of any additional assignment or similar documents or instruments of transfer of any kind, the obtaining of consents which may be reasonably necessary or appropriate to carry out any of the provisions hereof and the taking of all such other actions as such party may reasonably be requested to take by the other party hereto from time to time, consistent with the terms of this Agreement and the Transition Services Agreement, in order to effectuate the provisions and purposes of this Agreement and the Transition Services Agreement and the transactions contemplated hereby and thereby. Included without limitation within the foregoing assurances is Seller's agreement to take such further actions to evidence delivery to Buyer of title to the pipeline owned by the Jackson Pipeline Company in form and scope that is customary for properties of this type including obtaining at Seller's cost an opinion of outside counsel confirming the reasonable nature of such title if such an opinion is deemed necessary in the joint opinion of Buyer and Seller. As further detailed in the Transition Services Agreement, Seller shall continue to receive, record and deposit receivables of the Entities and irrevocably instruct the Entities' bank(s) to transfer all receipts to such bank and accounts as designated by Buyer in writing and to forward to Buyer all correspondence and invoices received by Seller that are directed to any of the Entities. Section 5.3 Employee Matters. (a) Subject to Section 5.3(b) and Section 5.3(c) below, on the date hereof (unless previously done), Seller shall give notice to all Affected Employees 23 that the active participation of the Affected Employees in the Seller's and Entities' employee benefit plans, programs and arrangements (such plans, programs and arrangements, the "Seller Plans") shall terminate on the date hereof, and the Entities shall terminate participation of Affected Employees in the Seller Plans as of the date hereof. In addition, Seller shall retain all Liabilities and assets that arise with respect to current and former employees of the Entities by virtue of their employment with the Sellers or their Affiliates prior to the date hereof, including without limitation under the Pension Plan for Employees of Consumers Energy and Other CMS Energy Companies. (b) As of the date hereof, Buyer shall cause the Entities to continue to employ all of the Affected Employees for a period of at least six (6) months from and after the date hereof. (c) With respect to those employee benefit plans of Buyer or its Affiliates ("Buyer Plans") in which Affected Employees may participate on or after the date hereof, Buyer shall, and shall cause the Entities to, credit prior service of the Affected Employees with the Entities or other Affiliates of Seller for purposes of eligibility and vesting under Buyer Plans and for all purposes with respect to vacation, sick days and severance under such Buyer Plans. Affected Employees shall also be given pro rata credit for any deductible or co-insurance payment amounts payable in respect of the Buyer Plan year in which the date hereof occurs, to the extent that, following the date hereof, they participate in any Buyer Plan during such plan year for which deductibles or co-payments are required. (d) Buyer and the Entities shall be responsible for all Liabilities and obligations under the Worker Adjustment and Retraining Notification Act and similar foreign, state and local rules, statutes and ordinances resulting from the actions of Buyer and the Entities after the date hereof (e) CMS Energy Corporation or its Affiliates shall retain all assets that are accumulated as of date hereof under Financial Accounting Standards Board Statement 106 (and deposited in various VEBA accounts and 401(h) accounts of Seller or its Affiliates). Further, Seller or its Affiliates shall retain the liability for post-employment benefits other than pensions ("PBOPs") for the benefit of former employees of the Entities who are retirees of the Entities as of the date hereof, and Affected Employees who are eligible to retire and qualified for benefits under PBOPs as of the date hereof, and Seller or its Affiliates shall retain the responsibility for providing post-retirement benefits to such employees pursuant to the eligibility requirements of the Seller Plans. It is the intent of the parties that Buyer shall have no obligation whatsoever with respect to pension or any other post-employment benefits that any employee of the Entities, whether current or retired, is entitled to as a result of employment with the Entities or its Affiliates prior to the date hereof. Section 5.4 Tax Covenants. (a) Tax Return Filings, Refunds, and Credits. 24 (i) Seller shall timely prepare and file (or cause such preparation and filing) with the appropriate Tax authorities all Tax Returns (including any Consolidated Income Tax Returns) with respect to the Entities for Tax periods that end on or before the Cut-off Date (the "Seller Returns"), and will pay (or cause to be paid) all Taxes due with respect to the Seller Returns. The taxes shown on the Tax Returns shall be correct and complete insofar as the Entities are concerned. (ii) Buyer shall timely prepare and file (or cause such preparation and filing) with the appropriate Tax authorities all Tax Returns (the "Straddle Period Returns") with respect to the Entities for all Tax periods ending after the Cut-off Date that include the Cut-off Date (the "Straddle Period"). All Straddle Period Returns shall be prepared in accordance with past practice. Buyer shall provide Seller with copies of any Straddle Period Returns at least forty-five (45) days prior to the due date thereof (giving effect to any extensions thereto), accompanied by a statement (the "Straddle Statement") setting forth and calculating in reasonable detail the Pre-Cut-off Taxes as defined below. If Seller agrees with the Straddle Period Return and Straddle Statement, Seller shall pay to Buyer (or Buyer shall pay to Seller, if appropriate) an amount equal to the Pre-Cut-off Taxes as shown on the Straddle Statement not later than two (2) Business Days before the due date (including any extensions thereof) for payment of Taxes with respect to such Straddle Period Return. If, within fifteen (15) days of the receipt of the Straddle Period Return and Straddle Statement, Seller notifies Buyer that it disputes the manner of preparation of the Straddle Period Return or the amount calculated in the Straddle Statement, then Buyer and Seller shall attempt to resolve their disagreement within the five (5) days following Seller's notification or Buyer of such disagreement. If Buyer and Seller are unable to resolve their disagreement, the dispute shall be submitted to a mutually agreed upon nationally recognized independent accounting firm, whose expense shall be borne equally by Buyer and Seller, for resolution, if possible, within twenty (20) days of such submission. If the parties have not agreed on an independent accounting firm within fifteen days following Seller's notification of Buyer of such disagreement, on the request of any party such independent accounting firm shall be appointed by the ICC Centre. Any independent accounting firm appointed by the ICC Centre shall be an impartial and disinterested senior partner in an internationally recognized accounting firm. The decision of such accounting firm with respect to such dispute shall be binding upon Buyer and Seller, and Seller shall pay to Buyer (or Buyer shall pay to Seller, if appropriate) an amount equal to the Pre-Cut-off Taxes as decided by such accounting firm not later than two (2) Business Days before the due date (including any extensions thereof) for payment of Taxes with respect to such Straddle Period Return. (iii) From and after the Cut-off Date, Buyer and its Affiliates (including the Entities) will not file any amended Tax Return, carryback claim, or other adjustment request with respect to the Entities for any Tax period that includes or ends on or before the Cut-off Date unless Seller consents in writing; provided, however, that with respect to any Straddle Period Return, such 25 consent shall not be unreasonably withheld, provided Buyer has made arrangements to the reasonable satisfaction of Seller to make Seller whole for any detriment or cost incurred (or to be incurred) by Seller as a result of such amended Tax Return, carryback claim or other adjustment request. (iv) For purposes of this Agreement, in the case of any Taxes of the Entities that are payable with respect to any Straddle Period, the portion of any such Taxes that constitutes "Pre-Cut-off Taxes" shall be the excess of (A) (i) in the case of Taxes that are either (x) based upon or related to income or receipts or (y) imposed in connection with any sale, transfer or assignment or any deemed sale, transfer or assignment of property (real or personal, tangible or intangible) be deemed equal to the amount that would be payable if the Tax period ended on the Cut-off Date and (ii) in the case of Taxes (other than those described in clause (i)) imposed on a periodic basis with respect to the business or assets of the Entities, be deemed to be the amount of such Taxes for the entire Straddle Period (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding Tax period) multiplied by a fraction the numerator of which is the number of calendar days in the portion of the Straddle Period ending on the Cut-off Date and the denominator of which is the number of calendar days in the entire Straddle Period over (B) any prepayment or advances of Taxes or any payments of estimated Taxes with respect to the Straddle Period. For purposes of clause (i) of the preceding sentence, any exemption, deduction, credit or other item that is calculated on an annual basis shall be allocated to the portion of the Straddle Period ending on the Cut-off Date on a pro rata basis determined by multiplying the total amount of such item allocated to the Straddle Period by a fraction, the numerator of which is the number of calendar days in the portion of the Straddle Period ending on the Cut-off Date and the denominator of which is the number of calendar days in the entire Straddle Period. Pre-Cut-off Taxes include any Taxes attributable to a Person that is treated as a partnership for federal income tax purposes as if such Person allocated Tax items to its partners in a manner consistent with this Section 5.4(b)(iv). In the case of any Tax based upon or measured by capital (including net worth or long-term debt) or intangibles, any amount thereof required to be allocated under this Section 5.6(b)(iv) shall be computed by reference to the level of such items on the Cut-off Date. The parties hereto will, to the extent permitted by Applicable Law, elect with the relevant Tax authority to treat a portion of any Straddle Period as a short taxable period ending as of the close of business on the Cut-off Date. For purposes of this Agreement, "Post-Cut-off Taxes" shall include any Taxes of the Entities that are payable with respect to a Straddle Period, except for the portion of any such Taxes that constitutes Pre-Cut-off Taxes. For avoidance of doubt, Michigan property taxes shall be prorated using the "statutory" method. (v) Seller and Buyer shall reasonably cooperate in preparing and filing all Tax Returns with respect to the Entities, including maintaining and making available to each other all records reasonably necessary 26 in connection with Taxes of the Entities and in resolving all disputes and audits with respect to all Tax periods relating to Taxes of the Entities. (vi) For a period of seven (7) years after the Cut-off Date, the Seller and its Representatives shall have reasonable access to the books and records (including the right to make extracts thereof) of the Entities to the extent that such books and records relate to Taxes and to the extent that such access may reasonably be required by Seller in connection with matters relating to or affected by the operation of the Entities prior to the Cut-off Date. Such access shall be afforded by Buyer upon receipt of reasonable advance notice and during normal business hours. If Buyer shall desire to dispose of any of such books and records prior to the expiration of such seven-year period, Buyer shall, prior to such disposition, give Seller a reasonable opportunity, at Seller's expense, to segregate and remove such books and records as Seller may select. (vii) If an Indemnified Party actually receives a refund or credit or other reimbursement with respect to Taxes for which it would be indemnified under this Agreement, the Indemnified Party shall pay over such refund or credit or other reimbursement to the Indemnifying Party. (viii) Buyer shall not, and shall cause the Entities to not, make, amend or revoke any Tax election if such action would reasonably be expected to adversely affect any of Seller or its Affiliates with respect to any Tax period ending on or before the Cut-off Date or for the Pre-Cut-off portion of any Straddle Period or any Tax refund or credit with respect thereto. (ix) For purposes of this Agreement a "Consolidated Income Tax Return" is any income Tax Return filed with respect to any consolidated, combined, affiliated or unified group provided for under Section 1501 of the Code and the Treasury Regulations under Section 1502 of the Code, or any comparable provisions of Applicable Law, other than any income Tax Return that includes only any one of the Entities. (b) Indemnity for Taxes. (i) Seller hereby agrees to indemnify the Buyer and its Affiliates against and hold them harmless from all liability for (i) all Taxes imposed on the Entities with respect to Tax periods ending on or before the Cut-off Date, (ii) Pre-Cut-off Taxes with respect to any Straddle Period, and (iii) all Taxes that are attributable to Seller or any member (other than the Entities) of an affiliated, consolidated, combined or unitary Tax group of which at least one of the Entities was a member prior to the Cut-off Date that is imposed under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Tax law) by reason of the Entities being included in any such Tax group. (ii) Buyer hereby agrees to indemnify Seller and its Affiliates against and hold them harmless from all liability for (A) all Taxes of the 27 Entities with respect to all Tax periods beginning after the Cut-off Date, (B) Post-Cut-off Taxes with respect to any Straddle Period, and (C) Transfer Taxes. (iii) The obligation of Seller to indemnify and hold harmless Buyer, on the one hand, and the obligations of Buyer to indemnify and hold harmless Seller, on the other hand, pursuant to this Section 5.4, shall terminate upon the expiration of the applicable statutes of limitations with respect to the Tax Liabilities in question (giving effect to any waiver, mitigation or extension thereof). (iv) Any indemnification obligation under this Section 5.4(b) which relates to one of the Entities that is not wholly owned by Seller shall be reduced pro rata to reflect the elimination of the amount of Tax liability equivalent to the third-party's ownership percentage in such Entity. (c) Certain Payments. Buyer and Seller agree to treat (and cause their Affiliates to treat) any payment under this Section 5.4 as an adjustment to the Purchase Price for all Tax purposes. (d) Contests. (i) After the Cut-off Date, Seller and Buyer each shall notify the other party in writing within ten (10) days of the commencement of any Tax audit or administrative or judicial proceeding affecting the Taxes of any of the Entities that, if determined adversely to the taxpayer (the "Tax Indemnified Party") or after the lapse of time would be grounds for indemnification under this Section 5.4 by the other party (the "Tax Indemnifying Party" and a "Tax Claim"). Such notice shall contain factual information describing any asserted Tax liability in reasonable detail and shall include copies of any notice or other document received from any Tax authority in respect of any such asserted Tax liability. Failure to give such notification shall not affect the indemnification provided in this Section 5.4 except to the extent the Tax Indemnifying Party shall have been prejudiced as a result of such failure (except that the Tax Indemnifying Party shall not be liable for any expenses incurred during the period in which the Tax Indemnified Party failed to give such notice). Thereafter, the Tax Indemnified Party shall deliver to the Tax Indemnifying Party, as promptly as possible but in no event later than ten (10) days after the Tax Indemnified Party's receipt thereof, copies of all relevant notices and documents (including court papers) received by the Tax Indemnified Party. (ii) In the case of an audit or administrative or judicial proceeding involving any asserted liability for Taxes relating to any Taxable years or periods ending on or before the Cut-off Date or any Straddle Period, Seller shall have the right, at its expense, to control the conduct of such audit or proceeding; provided, however, that (A) with respect to Straddle Periods, Seller shall keep Buyer reasonably informed with respect to the status of such audit or proceeding and provide Buyer with copies of all written correspondence with 28 respect to such audit or proceeding in a timely manner and (B) if such audit or proceeding would be reasonably expected to result in a material increase in Tax liability of the Entities for which Buyer would be liable under this Section 5.6, Buyer may participate in the conduct of such audit or proceeding at its own expense. (iii) In the case of an audit or administrative or judicial proceeding involving any asserted liability for Taxes relating to any Taxable years or periods beginning after the Cut-off Date, Buyer shall have the right, at its expense, to control the conduct of such audit or proceeding. (iv) Buyer and Seller shall reasonably cooperate in connection with any Tax Claim, and such cooperation shall include the provision to the Tax Indemnifying Party of records and information which are reasonably relevant to such Tax Claim and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. (e) Transfer and Similar Taxes. Notwithstanding any other provisions of this Agreement to the contrary, all sales, use, transfer, gains, stamp, duties, recording and similar Taxes (collectively, "Transfer Taxes") incurred in connection with the transactions contemplated by this Agreement shall be borne by Buyer, and Buyer shall accurately file all necessary Tax Returns and other documentation with respect to Transfer Taxes and timely pay all such Transfer Taxes. If required by Applicable Law, Seller will join in the execution of any such Return. Buyer shall provide copies of any Tax Returns with respect to Transfer Taxes to Seller no later than fifteen (15) days after the due dates of such Tax Returns. (f) Termination of Tax Sharing Agreements. On or prior to the Cut-off Date, Seller shall cause all Tax sharing agreements between the Seller or any of its Affiliates (as determined immediately after the Cut-off Date) on the one hand, and the Entities on the other hand, to be terminated, and all obligations thereunder shall be settled, and no additional payments shall be made under any provisions thereof after the Cut-off Date. (g) Special Rule. For purposes of applying this Section 5.4, when applying the definitions "Pre-Cut-off Taxes," "Post-Cut-off Taxes," and "Straddle Period," the term "Cut-off Date" as used in such definitions shall mean December 31, 2006. Section 5.5 Maintenance of Insurance Policies. (a) Seller and Buyer agree that Casualty Insurance Claims relating to the businesses of the Entities (including reported claims and including incurred but not reported claims) will remain with the Entities immediately following the consummation of the transaction contemplated in this Agreement. For purposes hereof, "Casualty Insurance Claims" shall mean workers' compensation, auto liability, general 29 liability and products liability claims and claims for damages caused to the facilities of the Entities generally insured under all risk, real property, boiler and mechanical breakdown insurance coverage which are disclosed on Section 5.6(a) of the Seller Disclosure Letter. The Casualty Insurance Claims are subject to the provisions of policies of insurance with insurance carriers and contractual arrangements with insurance adjusters maintained by Seller or its Affiliates prior to the date hereof (collectively, the "Insurance Policies"). With respect to the Casualty Insurance Claims, the following procedures shall apply: (i) Seller or its Affiliates shall continue to administer, adjust, settle and pay, on behalf of the Entities, all Casualty Insurance Claims with dates of occurrence prior to the date of hereof and (ii) Seller shall invoice Buyer at the end of each month for Casualty Insurance Claims paid on behalf of the Entities by Seller. In the event that Buyer does not pay, or cause to be paid, to Seller such amount due within fifteen (15) days of such invoice, interest at the rate of ten percent (10%) per annum shall accrue on the amount of such invoice. Casualty Insurance Claims to be paid by Seller hereunder shall include all costs necessary to settle claims including compensatory, medical, legal and other allocated expenses. In the event that any Casualty Insurance Claims exceeds a deductible or self-insured retention under the Insurance Policies, Seller shall be entitled to the benefit of any insurance proceeds that may be available to discharge any portion of such Casualty Insurance Claim. (b) Seller makes no representation or warranty with respect to the applicability, validity or adequacy of any Insurance Policies, and Seller shall not be responsible to Buyer or any of its Affiliates for the failure of any insurer to pay under any such Insurance Policy. (c) Nothing in this Agreement is intended to provide or shall be construed as providing a benefit or release to any insurer or claims service organization of any obligation under any Insurance Policies. Seller and Buyer confirm that the sole intention of this Section 5.6 is to divide and allocate the benefits and obligations under the Insurance Policies between them as of the date hereof and not to effect, enhance or diminish the rights and obligations of any insurer or claims service organization thereunder. Nothing herein shall be construed as creating or permitting any insurer or claims service organization the right of subrogation against Seller or Buyer or any of their Affiliates in respect of payments made by one to the other under any Insurance Policy. (d) If Buyer requests a copy of an Insurance Policy relating to a pending or threatened Casualty Insurance Claim, Seller shall provide a copy of all relevant insurance policies which insure such Casualty Insurance Claims within five (5) Business Days, provided, that if Seller cannot provide such policy within five (5) days after exercising reasonable best efforts to locate such policy, Seller shall continue to exercise its reasonable best efforts to provide such policy to Buyer as soon as possible thereafter. 30 Section 5.6 Transfers of Title and Possession of Assets of Entities. In those cases where a Material Contract, deed, easement, Permit, right of way or other asset was entered into or acquired for the benefit of one of the Entities or its business by any person other than one of the Entities, including an Affiliate of one of the Entities, and the rights and obligations of such Material Contract, deed, easement, Permit or other asset have not been assigned to one of the Entities as of the date hereof, Seller will use its reasonable best efforts at its reasonable expense to ensure that such assignments are made as soon as reasonably practicable. Section 5.7 Preservation of Records. (a) Buyer agrees that it shall, at its own expense, preserve and keep the records held by it relating to the respective businesses of the Entities that could reasonably be required after the consummation of the transaction contemplated in this Agreement by Seller for the time periods required pursuant to the applicable document retention program in effect on the date hereof (a copy of which has been provided to Buyer); provided, however, that upon expiration of such period, as applicable, Buyer shall give written notice to Seller if it or the custodian of such books and records proposes to destroy or dispose of the same. Seller shall have the opportunity for a period of thirty (30) days after receiving such notice to elect to have some or all of such books and records delivered, at Seller's expense and risk, to a location chosen by Seller. In addition, Buyer shall make such records available to Seller as may reasonably be required by Seller in connection with, among other things, any insurance claim, legal proceeding or governmental investigation relating to the respective businesses of Seller and its Affiliates, including the Entities. Seller agrees to maintain the confidentiality of all information provided by Buyer or the Entities hereunder during the time periods provided for in this Section. (b) Seller agrees that it shall, at its own expense, preserve and keep the records held by it relating to the respective business of the Entities which are contained in the records of Seller or its Affiliates that could reasonably be required after the consummation of the transaction contemplated by this Agreement by Seller for the time periods required pursuant to the applicable document retention program in effect on the date hereof. In addition, Seller shall make such records available to Buyer as may reasonably be required by Buyer in connection with, among other things, any insurance claim, legal proceeding or governmental investigation relating to the Entities. Section 5.8 Public Statements. No public or private release, announcement or regulatory filing concerning the transactions contemplated hereby shall be issued by any of the parties without the prior consent of the other parties (which consent shall not unreasonably withheld), except for such press release, announcement or regulatory filing as is required by law, court process or stock exchange rule to be made by the party proposing to issue the same, in which case such party shall use its reasonable best efforts to consult in good faith with the other party prior to the issuance of any such press release, announcement or filing. 31 Section 5.9 Use of Corporate Name; Transitional Use of Seller's Name. Promptly after the consummation of the transaction contemplated hereby, Buyer shall cause each of the Entities to make any necessary legal filings with the appropriate Governmental Authorities to register the change in their corporate names to names that do not include "CMS". Buyer and its Affiliates shall hold harmless and indemnify Seller and any of its Affiliates against all Damages resulting from or arising in connection with the use by Buyer or any of its Affiliates of the "CMS" name as provided in this Section 5.11. Section 5.10 Release of Guarantees. Unless previously done, Buyer shall, as soon as reasonably practicable, either (a) arrange for substitute letters of credit, guarantees and other obligations on commercially reasonable terms to replace in all respects the indemnities, performance bonds, performance guarantees, other guaranty obligations, letters of credit and other similar arrangements of Seller or its Affiliates (collectively, the "Released Parties") in favor of any of the Entities (collectively, "Guarantees" as further disclosed in Section 5.10 of the Seller Disclosure Letter) or (b) assume all obligations under each such Guarantee, obtaining from the creditor or other counter-party a full release of the Released Parties. As soon as reasonably practicable, Buyer shall terminate, or cause Buyer or one of its Affiliates to be substituted in all respects for the Released Parties in respect of, all obligations of the Released Parties under any such Guarantee. Buyer shall, to the extent the beneficiary or counter-party under any Guarantee refuses to accept such a substitute letter of credit, (i) obtain a letter of credit on behalf of Buyer and (ii) indemnify and hold harmless the Released Parties for any Losses arising from payments under such Guarantees that relate to events or circumstances arising after the date hereof. To the extent that any Released Party has performance obligations under any such Guarantee, Buyer shall (i) perform such obligations on behalf of such Released Party or (ii) otherwise take such action as reasonably requested by Seller so as to put such Released Party in the same position as if Buyer, and not such Released Party, had performed or was performing such obligations. Section 5.11 Confidentiality. Each of Buyer and Seller will hold, and will cause its Representatives to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of Law, all confidential documents and information concerning the Entities furnished to Buyer in connection with the transactions contemplated by this Agreement, except to the extent that such information can be shown to have been (i) previously known on a non-confidential basis by Buyer or Seller, (ii) in the public domain through no fault of Buyer or Seller or (iii) later lawfully acquired by Buyer or Seller from sources other than the the other party; provided that Buyer may disclose such information to its Representatives in connection with the transactions contemplated by this Agreement so long as such Persons are informed by Buyer of the confidential nature of such information and are directed by Buyer to treat such information confidentially. The obligation of each of Buyer and Seller to hold any such information in confidence shall 32 be satisfied if it exercises the same care with respect to such information as it would take to preserve the confidentiality of their own similar information. ARTICLE VI SURVIVAL; INDEMNIFICATION Section 6.1 Survival. (a) All representations and warranties contained herein shall survive for a period of twelve (12) months following the date hereof except for the representations and warranties of Seller set forth in Sections 3.1, 3.2, and 3.3, and of Buyer in Sections 4.1 and 4.2, which shall survive indefinitely and those in Section 3.15 which shall survive for the applicable statutes of limitation periods referred to therein (such periods set forth above are referred to herein as the relevant "Indemnity Period"). The parties intend to shorten the statute of limitations and agree that no claims or causes of action may be brought against Seller, Buyer or any of their respective directors, officers, employees, Affiliates, controlling persons, agents or Representatives based upon, directly or indirectly, any of the representations and warranties contained in this Agreement after the Indemnity Period; provided that if a written notice of claim for indemnification is made during the applicable Indemnity Period in accordance with this Article VIII, such claim shall survive until its resolution. (b) All covenants and agreements contained herein that by their terms are to be performed in whole or in part, or which prohibit actions, subsequent to the date hereof, shall survive the consummation of the transaction contemplated hereby in accordance with their terms. (c) Seller hereby covenants that CMS Enterprises Company shall maintain a consolidated net worth of at least $10,000,000 for a period of twelve (12) months following the date hereof. Section 6.2 Indemnification. (a) Subject to the limitations set forth in this Article VI, subsequent to the consummation of the transaction contemplated hereby, Seller shall indemnify, defend, save and hold harmless Buyer and its Affiliates, their respective successors and permitted assigns, and their officers and directors (collectively, the "Buyer Indemnified Parties"), from and against any and all Damages incurred by a Buyer Indemnified Party arising out of, resulting from or incurred in connection with: (i) any breach or inaccuracy of any representation or warranty of Seller contained in this Agreement, in each case, when made or deemed made; and (ii) any breach in any material respect by Seller of any covenant or agreement contained in this Agreement. 33 (b) Subject to the limitations set forth in this Article VI, subsequent to the consummation of the transaction contemplated by this Agreement, Buyer shall indemnify, defend, save and hold harmless Seller and its Affiliates, their respective successors and permitted assigns, and their officers and directors (collectively, the "Seller Indemnified Parties") from and against any and all Damages to the extent incurred by the Seller Indemnified Party arising out of, resulting from or incurred in connection with: (i) any breach or inaccuracy of any representation or warranty of such Buyer contained in this Agreement, in each case, when made or deemed made. For the avoidance of doubt, it is expressly understood that each of Lucid and Michigan Pipeline and Processing, LLC shall be severally, and not jointly, liable for Damages incurred by a Seller Indemnified Party as a result of a breach or inaccuracy of any representation or warranty made by such Person or for the breach of confidentiality obligations governed by Section 5.15 and, as a result, a Seller Indemnified Party shall not be entitled to make a Claim, seek contribution, assert joint and several liability or otherwise seek indemnification against the other Buyer based on such breach or inaccuracy or breach of confidentiality obligations; and (ii) any breach in any material respect by Buyer of any covenant or agreement contained in this Agreement. (c) Any Person providing indemnification pursuant to the provisions of this Section 6.2 is referred to herein as an "Indemnifying Party," and any Person entitled to be indemnified pursuant to the provisions of this Section 6.2 is referred to herein as an "Indemnified Party." (d) Seller's indemnification obligations contained in Section 6.2(a)(i) shall not apply to any Claim for Damages unless and until the aggregate of all such Damages exceeds $300,000 (the "Threshold Amount"), in which event Seller's indemnity obligation contained in Section 6.2(a)(i) shall apply to all Claims for Damages in excess of the Threshold Amount, subject to a maximum liability to Seller, in the aggregate, of $5,000,000 (the "Cap Amount"); provided, however, that any Claims for Damages for breach of the representations and warranties set forth in Section 3.1, Section 3.2 and Section 3.3, shall not be subject to the Threshold Amount, Cap Amount or Minimum Claim Amount (as defined below). Damages relating to any single breach or series of related breaches of Seller's representations and warranties shall not constitute Damages, and therefore shall not be applied towards the Threshold Amount or be indemnifiable hereunder, unless such Damages relating to any single breach or series of related breaches exceed $25,000 (the "Minimum Claim Amount"). (e) Buyer's indemnification obligations contained in Section 6.2(b)(i) shall not apply to any Claim for Damages unless and until the aggregate of all such Damages equals the Threshold Amount, in which event Buyer's indemnification obligation contained in Section 862(b)(i) shall apply to all Claims for Damages in excess of the Threshold Amount, subject to a maximum liability to the 34 Buyer, in the aggregate, of the Cap Amount. Damages relating to any single breach or series of related breaches of Buyer's representations and warranties shall not constitute Damages, and therefore shall not be applied towards the Threshold Amount or be indemnifiable hereunder, unless such Damages relating to any single breach or series of related breaches exceed the Minimum Claim Amount. (f) The indemnification obligations of each party hereto under this Section 6.2 shall inure to the benefit of the Buyer Indemnified Parties and Seller Indemnified Parties, and such Buyer Indemnified Parties and Seller Indemnified Parties shall be obligated to keep and perform the obligations imposed on an Indemnified Party by this Section 6.2, on the same terms as are applicable to such other party. (g) In all cases in which a Person is entitled to be indemnified in accordance with this Agreement, such Indemnified Party shall be under a duty to take all commercially reasonable measures to mitigate all losses. (h) Notwithstanding any other provision of this Agreement, claims for indemnification with respect to Tax matters shall be governed by the provisions of Section 5.4 and claims for Environmental matters shall be governed by Section 6.6 of this Agreement, but in each such case the indemnification obligations for each party hereto shall remain subject to the remaining provisions of Section 6.2 including without limitation the application of the Cap Amount, Threshold Amount and Minimum Claim Amount. (i) Notwithstanding any other provision of this Agreement, in no event shall any Indemnified Party be entitled to indemnification pursuant to this Article VI to the extent any Damages were attributable to such Indemnified Party's own gross negligence or willful misconduct. (j) The remedies provided in this Article VI shall be deemed the sole and exclusive remedies of the parties, from and after the date hereof, with respect to this Agreement and the transactions contemplated hereby. Section 6.3 Calculation of Damages. (a) The amount of any Damages suffered by any party hereto shall be reduced by (i) any amount that is reserved for sums held in reserve in respect of the indemnifiable event on the balance sheet of the Entities, as applicable, as of December 31, 2006 to the extent such Damages are suffered by a Buyer Indemnified Party, or (ii) any amount that an Indemnified Party is entitled to receive with respect thereto under any third party insurance coverage or from any other party alleged to be responsible therefor. (b) If an Indemnified Party makes a claim for indemnification under this Article VI, the Indemnified Party shall use its reasonable best efforts to collect any amounts available under such insurance coverage and from such other party alleged to have responsibility. If an Indemnified Party receives an amount under insurance coverage or from such other party with respect to Damages at any time subsequent to any 35 indemnification provided by Seller or Buyer, as the case may be, pursuant to this Article VI, then such Indemnified Party shall promptly reimburse the Indemnifying Party for any payment made or expense incurred by the Indemnifying Party in connection with providing such indemnification up to such amount received by the Indemnified Party, but net of any expenses incurred by the Indemnified Party in collecting such amount. To the extent the Indemnifying Party makes any indemnification payment pursuant to this Article VII in respect of Damages for which an Indemnified Party has a right to recover against a third party (including an insurance company), the Indemnifying Party shall be subrogated to the right of the Indemnified Party to seek and obtain recovery from such third party; provided, however, that if the Indemnifying Party shall be prohibited from such subrogation, the Indemnified Party shall seek recovery from such third party on the Indemnifying Party's behalf and pay any such recovery to the Indemnifying Party net of expenses. Section 6.4 Procedures for Third-Party Claims. The obligations of any Indemnifying Party to indemnify any Indemnified Party under this Article VI with respect to Claim for Damages by third parties (including Governmental Entities) (a "Third-Party Claim"), shall be subject to the following terms and conditions: (a) The Indemnified Party shall give the Indemnifying Party written notice of any such Third-Party Claim reasonably promptly after learning of such Third-Party Claim, and the Indemnifying Party may, at its option, undertake the defense thereof by Representatives of its own choosing and reasonably acceptable to the Indemnified Party, and shall provide written notice of any such undertaking to the Indemnified Party. Failure to give prompt written notice of a Third-Party Claim hereunder shall not affect the Indemnifying Party's obligations under this Article VI, except to the extent that the Indemnifying Party is actually prejudiced by such failure to give prompt written notice. The Indemnified Party shall, and shall cause its employees and Representatives to, cooperate reasonably with the Indemnifying Party in connection with the settlement or defense of such Third-Party Claim and shall provide the Indemnifying Party with all available information and documents concerning such Third-Party Claim. The Indemnifying Party shall provide the Indemnified Party with copies of all non-privileged communications and other information in respect of the Third-Party Claim. If the Indemnifying Party, within thirty (30) days after written notice of any such Third-Party Claim, fails to assume the defense of such Third-Party Claim, or, after assuming defense, negligently fails to defend and fails to call after reasonable written notice of the same, the Indemnified Party against whom such Third-Party Claim has been made shall (upon further written notice to the Indemnifying Party) have the right to undertake the defense, compromise or settlement of such Third-Party Claim on behalf of and for the account and risk, and at the expense, of the Indemnifying Party, subject to the right of the Indemnifying Party to assume the defense of such Third-Party Claim at any time prior to settlement, compromise or final determination thereof upon written notice to the Indemnified Party. 36 (b) Anything in this Section 6.4 to the contrary notwithstanding, (i) the Indemnified Party shall not settle a Third-Party Claim for which it is indemnified without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed and (ii) the Indemnifying Party shall not enter into any settlement or compromise of any action, suit or proceeding, or consent to the entry of any judgment for relief other than monetary damages to be borne by the Indemnifying Party, without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld, conditioned or delayed. Section 6.5 Procedures for Inter-Party Claims. In the event that an Indemnified Party determines that it has a Claim for Damages against an Indemnifying Party hereunder (other than as a result of a Third-Party Claim), the Indemnified Party shall give reasonably prompt written notice thereof to the Indemnifying Party, specifying the amount of such Claim and any relevant facts and circumstances relating thereto, and such notice shall be promptly given even if the nature or extent of the Damages is not then known. The notification shall be subsequently supplemented within a reasonable time as additional information regarding the Claim or the nature or extent of Damages resulting therefrom becomes available to the Indemnified Party. Any failure to give such reasonably prompt notice or supplement thereto or to provide any such facts and circumstances will not waive any rights of the Indemnified Party, except to the extent that the rights of the Indemnifying Party are actually materially prejudiced thereby. The Indemnified Party and the Indemnifying Party shall attempt to negotiate in good faith for a thirty-day (30-day) period regarding the resolution of any disputed Claims for Damages. If for any reason, such dispute cannot be resolved by negotiation, on the request of any party it shall be resolved by arbitration in accordance with Section 9.8 herein. Promptly following the final determination of the amount of any Damages claimed by the Indemnified Party, the Indemnifying Party, subject to the limitations of the Minimum Claim Amount, Threshold Amount and the Cap Amount, shall pay such Damages to the Indemnified Party by wire transfer of immediately available funds. Section 6.6 Special Indemnification Provision Relating to Environmental Matters. (a) Buyer shall indemnify and hold the Seller harmless from all Damages arising in any way from the matters disclosed in Section 6.6(a) of the Seller Disclosure Letter. This includes, without limitation, all Damages arising from non-compliance with, or remediation under, any Environmental Law that arise out of actions or omissions that occurred before the date hereof and that have been disclosed to Buyer in Section 6.6(a) of the Seller Disclosure Letter. It is further agreed that nothing herein shall be deemed to require Seller to pursue any insurance or other third party claims, or, if received, to pay over any insurance or other third party proceeds to Buyer, in connection with the foregoing matters. 37 (b) Buyer shall indemnify and hold the Seller harmless from all Damages resulting from non-compliance with, or remediation under, any Environmental Law that arise out of actions or omissions that occur after the date hereof. (c) Seller shall indemnify and hold Buyer harmless from all Damages under any Environmental Law that arise out of actions or omissions that occurred before the date hereof but were not disclosed in the Seller Disclosure Letter, if they relate to matters as to which written notification is given by Buyer to Seller during a period ending one year after the date hereof. To the extent, if any, that Seller may have responsibility for responding to any non-compliance or requirement for remediation under any Environmental Law with respect to a period for which it has indemnification obligations hereunder, Buyer shall reasonably cooperate with environmental response activities of Seller on the property of the Entities being transferred pursuant to this Agreement. Buyer shall ensure that Seller has reasonable access at all such times to investigate, monitor, and remediate said property, and to install, operate, and maintain facilities for the containment or treatment of the soil and groundwater, and to perform other environmental remediation and response activities, which shall not unreasonably interfere with the business of the Buyer or the Entities. In the event of an environmental remediation with respect to a period for which Seller may have indemnification obligations hereunder, Seller may elect to perform a cleanup in accordance with applicable industrial cleanup standards or (if applicable at the time of cleanup) commercial III or IV cleanup standards under the Michigan Natural Resources and Environmental Protection Act, Part 201 (Part 201), or similar standards which may be allowed under Michigan law in the future. In connection with such a cleanup, Buyer agrees to impose restrictions upon future use of the property, if required, including the restrictions required under Mich. Comp. Laws Section 324.20120a(1)(b) or (d). These may be included in a declaration of restrictive covenants, in the form approved by the Michigan Department of Environmental Quality, and which must be signed by Buyer and filed with the Register of Deeds. By way of example and not of limitation, these may include restrictions on site uses to commercial or industrial uses consistent with the cleanup standards, restrictions on groundwater use, and provisions for appropriate management of soils in accordance with the requirements of Part 201, provided, however, (i) Seller shall conduct any and all such investigation, monitoring, and remediation in compliance with applicable Environmental Laws; (ii) cleanup standards or cleanup criteria applicable to any remedial action by Seller at the property shall not be in any way inconsistent with current use of the subject property or expansion of uses of a similar nature at the property; (iii) no restrictions, declarations or covenants to be imposed on the subject property or recorded in the public registry shall be in any way inconsistent with current use of the subject property or expansion of uses of a similar nature at the property; and (iv) reasonable efforts shall be made to minimize the applicable area for any restrictions, declarations or covenants to be imposed on the subject property or recorded in the public registry by limiting them to portions of the property that are subject to such remedial actions. 38 In regard to the matters covered by this Section 6.6, each party shall at all times act reasonably so as to avoid unnecessarily exposing the other party to liability under this Section 6.6 or to otherwise unnecessarily cause the other party to incur costs or expenses. ARTICLE VII MISCELLANEOUS PROVISIONS Section 7.1 Interpretation. (a) Unless the context of this Agreement otherwise requires, (a) words of any gender include the other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire Agreement; (d) the terms "Article," "Section" and "Exhibit" refer to the specified Article, Section and Exhibit of this Agreement, respectively; and (e) "including," shall mean "including, but not limited to"; and (v) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties (whether real or personal). Unless otherwise expressly provided, any agreement, instrument, law or regulation defined or referred to herein means such agreement, instrument, law or regulation as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of a law or regulation) by succession of comparable successor law and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein. (b) For purposes of Article III and all covenants and obligations of Seller hereunder including indemnification obligations of Article VI, all representations, warranties, covenants and obligations made by Seller shall be deemed to be jointly and severally made by each Seller entity. (c) For purposes of Article V, in the event that Seller shall be obligated to cause, or use its reasonable best efforts to cause, an Affiliate over which it does not have voting control to act or not act, directly or indirectly through the exercise of equity voting rights or contractual and other rights, it shall be obligated to exercise all of its contractual and other rights to cause such action or inaction by such Affiliate. Section 7.2 Disclosure Letters. The Seller Disclosure Letter and the Buyer Disclosure Letter are incorporated into this Agreement by reference and made a part hereof. Section 7.3 Payments. All payments set forth in this Agreement and the Transition Services Agreement are in United States Dollars. Such payments shall be made by wire transfer of immediately available funds or by such other means as the parties to such payment shall designate. 39 Section 7.4 Expenses. Except as expressly set forth herein, or as agreed upon in writing by the parties, each party shall bear its own costs, fees and expenses, including the expenses of its representatives, incurred by such party in connection with this Agreement and the Transition Services Agreement and the transaction contemplated hereby and thereby. Section 7.5 Choice of Law. THIS AGREEMENT, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR CHOICE OF LAWS OR ANY OTHER LAW THAT WOULD MAKE THE LAWS OF ANY OTHER JURISDICTION OTHER THAN THE STATE OF MICHIGAN APPLICABLE HERETO. Section 7.6 Assignment. This Agreement may not be assigned by either party without the prior written consent of the other party; provided, however, that without the prior written consent of the other party, each party shall have the right to assign its rights and obligations under this Agreement to any third party successor and/or its Affiliates to all or substantially all of its entire business. Section 7.7 Notices. All demands, notices, consents, approvals, reports, requests and other communications hereunder must be in writing, will be deemed to have been duly given only if delivered personally or by facsimile transmission (with confirmation of receipt) or by an internationally-recognized express courier service or by mail (first class, postage prepaid) to the parties at the following addresses or telephone or facsimile numbers and will be deemed effective upon delivery; provided, however, that any communication by facsimile shall be confirmed by an internationally-recognized express courier service or regular mail. 40 (i) If to the Seller: CMS Enterprises Company One Energy Plaza Jackson, Michigan 49201 Attention: General Counsel Telephone: (517)788-0550 Facsimile: (517)788-1671 With a required copy to: Miller, Canfield, Paddock and Stone, PLC 101 North Main Street, 7th Floor Ann Arbor, Michigan 48104 Attention: Michael D. VanHemert Telephone: (734)668-7117 Facsimile: (734)747-7147 (ii) If to Buyer: Lucid Energy, L.L.C. 30078 Schoenherr, Suite 150 Warren, Michigan Attention: Rai Bhargava/Manouch Daneshvar Telephone: (586)445-2300 Facsimile: (586)445-1782 With a required copy to: Ufer & Spaniola, P.C. 5440 Corporate Drive, Suite 250 Troy, Michigan 48098-2648 Attention: Gerald Van Wyke, Esquire Telephone: (248)641-7000 Facsimile: (248)641-5120 or to such other address as the addressee shall have last furnished in writing in accord with this provision to the addressor. Section 7.8 Resolution of Disputes. Except for the resolution of disputes that shall be resolved in accordance with the procedures set forth in sections 5.5 and 6.5 herein, all disputes arising out of or relating to this Agreement or any Transition Services Agreement or the breach, termination or validity thereof or the parties' performance hereunder or thereunder ("Dispute") shall be resolved as provided by this Section 7.8. 41 (a) If the Dispute has not been resolved by executive officer negotiation within thirty (30) days of the disputing party's notice requesting negotiation, or if the parties fail to meet within twenty (20) days from delivery of said notice, such Dispute shall be submitted to and finally settled by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce in Detroit, Michigan ("ICC") then in effect (the "Rules"), except as modified herein. (b) The arbitration shall be held, and the award shall be rendered, in the English language. There shall be three arbitrators, one of whom shall be nominated by each of Buyer and Seller in accordance with the Rules. The two party appointed arbitrators shall have thirty (30) days from the confirmation of the nomination of the second arbitrator to agree on the nomination of a third arbitrator who shall serve as chair of the arbitral tribunal. On the request of any party, any arbitrator not timely appointed in accordance with this Agreement or the Rules shall be appointed by the ICC. (c) The award shall be final and binding upon the parties as from the date rendered, and shall be the sole and exclusive remedy between the parties regarding any claims, counterclaims, issues, or accounting presented to the arbitral tribunal. Judgment upon any award may be entered and enforced in any court having jurisdiction over a party or any of its assets. For the purpose of the enforcement of an award, the parties irrevocably and unconditionally submit to the jurisdiction of a competent court in any jurisdiction in which a party may have assets and waive any defenses to such enforcement based on lack of personal jurisdiction or inconvenient forum. This Agreement and the rights and obligations of the parties shall remain in full force and effect pending the award in any arbitration proceeding hereunder. (d) The Parties agree that any court action or proceeding to compel or in support of arbitration or for provisional remedies in aid of arbitration, including but not limited to any action to enforce the provisions of this Section 7.8, for temporary injunctive relief maintain the status quo or prevent irreparable harm prior to the appointment of the arbitral tribunal, shall be brought exclusively in the federal or state courts located in Jackson, Michigan (the "Michigan Courts"). The Parties hereby unconditionally and irrevocably submit to the exclusive jurisdiction of the Michigan Courts for such purpose, and to the non-exclusive jurisdiction of the Michigan Courts in any action to enforce any arbitration award rendered hereunder, and waive any right to stay or dismiss any such actions or proceedings brought before the Michigan Courts on the basis of forum non conveniens or improper venue. Without prejudice to such provisional remedies as may be available under the jurisdiction of a national court, the arbitral tribunal shall have full authority to grant provisional remedies and to direct the parties to request that any court modify or vacate any temporary or preliminary relief issued by such court, and to award damages for the failure of any party to respect the arbitral tribunal's orders to that effect. Section 7.9 No Right of Setoff. Neither party hereto nor any Affiliate thereof may deduct from, set off, holdback or otherwise reduce in any manner whatsoever any amount owed to it hereunder or 42 pursuant to the Transition Services Agreement or any agreement related to the sale of the Argentine Businesses (the "Argentine Transaction Documents") against any amounts owed hereunder or pursuant to the Transition Services Agreement or the Argentine Transaction Documents by such Persons to the other party hereto or any of such other party's Affiliates. Section 7.10 Time is of the Essence. Time is of the essence in the performance of the provisions of this Agreement. Section 7.11 Specific Performance. Each party acknowledges and agrees that any breach of any provision of this Agreement would cause irreparable harm to the other party. Each party, without prejudice to any rights to judicial relief it may otherwise have, shall be entitled to equitable relief, including injunction and specific performance. Each party agrees that it will not oppose the granting of such relief on the basis that the other party has not suffered irreparable harm or that the other party has an adequate remedy at law. Each party agrees that it will not seek and agrees to waive any requirement for the securing or posting of a bond in connection with the other party's seeking or obtaining such relief. Section 7.12 Entire Agreement. This Agreement, together with the Seller Disclosure Letter, Buyer Disclosure Letter, Annex I, the Exhibits hereto, the Transition Services Agreement and the Confidentiality Agreement constitute the entire agreement between the parties hereto with respect to the subject matter herein and supersede all previous agreements, whether written or oral, relating to the subject matter of this Agreement and all prior drafts of this Agreement, all of which are merged into this Agreement. No prior drafts of this Agreement and no words or phrases from any such prior drafts shall be admissible into evidence in any action or suit involving this Agreement. In the case of any material conflict between any provision of this Agreement and any other agreement including the Transition Services Agreement, this Agreement shall take precedence. Section 7.13 Binding Nature; Third Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their respective successors (whether by operation of law or otherwise) and permitted assigns. Except as expressly provided herein, none of the provisions of this Agreement shall be for the benefit of or enforceable by any third party, including any creditor of either party or any of their Affiliates. Except as expressly provided herein, no such third party shall obtain any right under any provision of this Agreement or shall by reasons of any such provision make any Claim in respect of any Liability (or otherwise) against either party hereto. 43 Section 7.14 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which, when executed, shall be deemed to be an original and both of which together shall constitute one and the same document. Any counterpart or other signature to this Agreement that is delivered by facsimile or electronic mail shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Agreement. Section 7.15 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any applicable present or future law, and if the rights or obligations of either party under this Agreement will not be materially and adversely affected thereby, (i) such provision shall be fully severable, (ii) this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (iii) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement, a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible. Section 7.16 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. Section 7.17 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 or parties 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. Section 7.18 Amendment. This Agreement may be altered, amended or changed only by a writing making specific reference to this Agreement and signed by duly authorized representatives of each party. 44 IN WITNESS WHEREOF, Seller and Buyer, by their duly authorized officers, have executed this Agreement as of the date first written above. CMS ENTERPRISES COMPANY By: /s/ Thomas W. Elward ------------------------------------ Thomas W. Elward Title: President and Chief Operating Officer CMS ENERGY INVESTMENT LLC By: /s/ Thomas W. Elward ------------------------------------ Thomas W. Elward Title: President and Chief Executive Officer (Collectively, the Seller) LUCID ENERGY, L.L.C. By: /s/ Rai Bhargava ------------------------------------ Name: Rai Bhargava Title: Chairman & CEO MICHIGAN PIPELINE AND PROCESSING, LLC By: /s/ Rai Bhargava ------------------------------------ Name: :Rai Bhargava Title: Chairman & CEO (Collectively, the Buyer) 45 ANNEX I ENTITIES AND EQUITY INTERESTS
ENTITY NAME % OWNERSHIP INTEREST - ----------- --------------------------------------- CMS Antrim Gas LLC 100% owned by CMS Energy Investment LLC CMS Bay Area Pipeline, LLC 100% owned by CMS Energy Investment LLC CMS Grands Lacs LLC 100% owned by CMS Energy Investment LLC CMS Jackson LLC 100% owned by CMS Energy Investment LLC CMS Litchfield LLC 100% owned by CMS Energy Investment LLC Jackson Pipeline Company*
* CMS Jackson LLC's 75% ownership interest in the Jackson Pipeline Company general partnership will be transferred by virtue of the sale of the ownership of CMS Jackson LLC. 46 EX-10.3 4 k13277exv10w3.txt AGREEMENT OF PURCHASE AND SALE DATED MARCH 12, 2007 EXHIBIT 10.3 EXECUTION COPY ================================================================================ AGREEMENT OF PURCHASE AND SALE BY AND BETWEEN CMS ENTERPRISES COMPANY, CMS GENERATION HOLDINGS COMPANY and CMS INTERNATIONAL VENTURES, LLC, COLLECTIVELY AS SELLER, AND LUCID ENERGY, L.L.C. and NEW ARGENTINE GENERATION COMPANY, LLC COLLECTIVELY AS BUYER, DATED AS OF MARCH 12, 2007 ================================================================================ TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS.................................................... 2 Section 1.1 Specific Definitions................................... 2 ARTICLE II SALE AND PURCHASE............................................. 9 Section 2.1 Agreement to Sell and Purchase......................... 9 Section 2.2 Deliveries by the Parties.............................. 10 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..................... 12 Section 3.1 Corporate Organization; Qualification.................. 12 Section 3.2 Authority Relative to this Agreement................... 13 Section 3.3 Equity Interests; Assumed Indebtedness................. 13 Section 3.4 Consents and Approvals................................. 15 Section 3.5 No Conflict or Violation............................... 15 Section 3.6 Financial Information.................................. 15 Section 3.7 Contracts.............................................. 16 Section 3.8 Compliance with Law.................................... 16 Section 3.9 Permits................................................ 17 Section 3.10 Litigation............................................. 17 Section 3.11 Employee Matters....................................... 17 Section 3.12 Labor Relations........................................ 18 Section 3.13 Intellectual Property.................................. 18 Section 3.14 Representations with Respect to Environmental Matters................................................ 19 Section 3.15 Tax Matters............................................ 20 Section 3.16 Insurance.............................................. 22 Section 3.17 Regulatory Matters..................................... 22 Section 3.18 Absence of Certain Changes or Events................... 22 Section 3.19 Absence of Undisclosed Liabilities..................... 24 Section 3.20 Property............................................... 24 Section 3.21 Brokerage and Finders' Fees............................ 24 Section 3.22 Corporate and Accounting Records....................... 24 Section 3.23 Affiliated Transactions................................ 25
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PAGE ---- Section 3.24 Certain Practices...................................... 25 Section 3.25 No Other Representations or Warranties................. 26 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER................... 26 Section 4.1 Corporate Organization; Qualification.................. 26 Section 4.2 Authority Relative to this Agreement................... 26 Section 4.3 Consents and Approvals................................. 27 Section 4.4 No Conflict or Violation............................... 27 Section 4.5 Litigation............................................. 28 Section 4.6 Brokerage and Finders' Fees............................ 28 Section 4.7 Investment Representations............................. 28 Section 4.8 Regulation Matters..................................... 28 Section 4.9 No Other Representations or Warranties................. 29 ARTICLE V COVENANTS OF THE PARTIES....................................... 29 Section 5.1 Notification to the CNDC; Negative Antitrust Decision; Transfer of Equity Interests to a Third Purchaser...... 29 Section 5.2 Further Assurances..................................... 32 Section 5.3 Employee Matters....................................... 32 Section 5.4 Tax Covenants.......................................... 34 Section 5.5 Intercompany Accounts.................................. 38 Section 5.6 Surrender of Intellectual Property..................... 38 Section 5.7 Maintenance of Insurance Policies...................... 39 Section 5.8 Preservation of Records................................ 40 Section 5.9 Public Statements...................................... 40 Section 5.10 Certain Transactions................................... 40 Section 5.11 Use of Corporate Name; Transitional Use of Seller's Name................................................... 41 Section 5.12 Use of Information Technology.......................... 41 Section 5.13 Confidentiality........................................ 41 Section 5.14 Actions Relating to Entities........................... 42
-ii- TABLE OF CONTENTS (CONTINUED)
PAGE ---- ARTICLE VI SURVIVAL; INDEMNIFICATION..................................... 42 Section 6.1 Survival............................................... 42 Section 6.2 Indemnification........................................ 43 Section 6.3 Calculation of Damages................................. 45 Section 6.4 Procedures for Third-Party Claims...................... 45 Section 6.5 Procedures for Inter-Party Claims...................... 46 ARTICLE VII MISCELLANEOUS PROVISIONS..................................... 47 Section 7.1 Interpretation......................................... 47 Section 7.2 Disclosure Letters..................................... 48 Section 7.3 Payments............................................... 48 Section 7.4 Expenses............................................... 48 Section 7.5 Choice of Law.......................................... 48 Section 7.6 Assignment............................................. 48 Section 7.7 Notices................................................ 48 Section 7.8 Resolution of Disputes................................. 50 Section 7.9 Language............................................... 52 Section 7.10 No Right of Setoff..................................... 52 Section 7.11 Time is of the Essence................................. 52 Section 7.12 Specific Performance................................... 52 Section 7.13 Currency Matters....................................... 52 Section 7.14 Entire Agreement....................................... 52 Section 7.15 Binding Nature; Third Party Beneficiaries.............. 53 Section 7.16 Counterparts........................................... 53 Section 7.17 Severability........................................... 53 Section 7.18 Headings............................................... 53 Section 7.19 Waiver................................................. 53 Section 7.20 Amendment.............................................. 54
-iii- TABLE OF CONTENTS (CONTINUED)
PAGE ---- EXHIBITS A ASSIGNMENT OF QUOTAS AGREEMENT
-iv- TABLE OF CONTENTS (CONTINUED)
PAGE ---- INDEX OF DEFINED TERMS Action................................................................... 2 Affected Employees....................................................... 2 Affiliate................................................................ 2 Agreement................................................................ 2 Antitrust Approval....................................................... 2 Antitrust Law............................................................ 2 Applicable Law........................................................... 2 AR$...................................................................... 2 Business Day............................................................. 3 Buyer Disclosure Letter.................................................. 3 Claims................................................................... 3 CNDC..................................................................... 3 Code..................................................................... 3 Confidentiality Agreement................................................ 3 CTM...................................................................... 3 Cut-off.................................................................. 3 Damages.................................................................. 3 Direct Equity Interests.................................................. 3 Distribution............................................................. 3 Dollars or $............................................................. 3 Employees................................................................ 4 Entities................................................................. 4 Environmental Laws....................................................... 4 Environmental Permit..................................................... 4 EWG...................................................................... 4 Exchange Act............................................................. 4 FERC..................................................................... 4 FPA...................................................................... 4 FUCO..................................................................... 4 GAAP..................................................................... 5 Generation............................................................... 5 Governmental Authority................................................... 5 Hazardous Substances..................................................... 5 Hidroinvest SPA.......................................................... 5 Indebtedness............................................................. 5 Indirect Equity Interests................................................ 5 Intellectual Property.................................................... 5 Knowledge of Buyer....................................................... 6
-v- TABLE OF CONTENTS (CONTINUED)
PAGE ---- Knowledge of Seller...................................................... 6 Liabilities.............................................................. 6 Liens.................................................................... 6 Material Adverse Effect.................................................. 6 Negative Antitrust Decision.............................................. 7 Operating................................................................ 7 Ownership Percentage..................................................... 7 Pension Plans............................................................ 7 PermittedLiens........................................................... 7 Person................................................................... 8 Representatives.......................................................... 8 Seller Disclosure Letter................................................. 8 Subsidiary............................................................... 8 Tax Return............................................................... 9 Taxes.................................................................... 9 TGM...................................................................... 9 USFCPA................................................................... 9
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PAGE ---- ANNEXES I EQUITY INTERESTS II ASSUMED INDEBTEDNESS III COPY OF THE HIDROINVEST SPA
-vii- AGREEMENT OF PURCHASE AND SALE This AGREEMENT OF PURCHASE AND SALE, dated as of March 12, 2007, is made and entered into by and between CMS Enterprises Company and CMS Generation Holdings Company, each a Michigan corporation, and CMS International Ventures, L.L.C., a Michigan limited liability company (collectively, the "Seller"), and Lucid Energy, LLC ("Lucid") and New Argentine Generation Company, LLC, a Delaware limited liability company ("Newco" and collectively with Lucid, the "Buyer"). WITNESSETH: WHEREAS, Seller and Lucid have entered into that certain Common Agreement dated as of the date hereof (the "Common Agreement"), pursuant to which Seller, directly or through Affiliates of Seller, agreed to sell, and Lucid, directly or through Affiliates of Lucid, agreed to acquire, upon the terms and conditions set forth in this Agreement certain Argentina-based natural gas transmission and marketing and independent power production businesses (the "Argentine Businesses"), and upon the terms and conditions entered into contemporaneously herewith, Michigan-based natural gas transmission, gathering, storage and processing businesses (the "Michigan Businesses"); WHEREAS, Seller and Buyer intend that the transactions contemplated by the agreements relating to the sale of the Michigan Business will be consummated if and only if the sale of the Argentine Businesses is consummated; WHEREAS, the Argentine Businesses are conducted through various Argentine legal entities, the equity participations in which are owned, directly or indirectly and in relevant amounts, by Seller ("Equity Interests" as described on Annex I); WHEREAS, Buyer desires to purchase, and Seller desires to sell to Buyer, the Equity Interests, and Seller desires to assign, and Buyer desires to assume, certain intercompany Indebtedness as described in Annex II (the "Assumed Indebtedness"), in each case upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the foregoing, the representations, warranties, covenants and agreements set forth in this Agreement, and other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the parties hereby agree as follows: ARTICLE I DEFINITIONS Section 1.1 Specific Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below: "Action" shall mean any administrative, regulatory, judicial or other formal proceeding, action, Claim, suit, investigation or inquiry by or before any Governmental Authority, arbitrator or mediator, at law or at equity. "Affected Employees" shall mean the Employees on the date hereof. "Affiliate" shall have the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. "Agreement" shall mean this Agreement of Purchase and Sale, together with the Seller Disclosure Letter, Buyer Disclosure Letter, Annexes I, II and III and Exhibits hereto, as the same may be amended or supplemented from time to time in accordance with the provisions hereof. "Antitrust Approval" is the approval of the Acquisition without undertakings by the Republic of Argentina Secretariat of Internal Trade, or any agency or tribunal that may replace it in the future or that may be declared by a res judicata judgment to be empowered to issue a final decision on the Acquisition, approving the same under the Antitrust Law. "Antitrust Law" as regards the Republic of Argentina means Law No. 25,156 (as amended), Decree No. 89/2001, Resolution No. 40/2001 of the former Secretariat of Competition and Consumer Defense, Resolution No. 164/2001 of the former Secretariat of Competition, Deregulation and Consumer Defense, Resolution No. 26/2006 of the former Secretariat of Technical Coordination and any other law or regulation, administrative resolution and judicial decision addressing competition issues, including but not limited to the competition clearance of mergers, acquisitions or other business combinations. "Applicable Law" shall mean any statute, treaty, code, law, ordinance, executive order, rule or regulation (including a regulation that has been formally promulgated in a rule-making proceeding but, pending final adoption, is in proposed or temporary form having the force of law); guideline or notice having the force of law; or approval, permit, license, franchise, judgment, order, decree, injunction or writ of any Governmental Authority applicable to a specified Person or specified property, as in effect from time to time. "AR$" shall mean Argentine Pesos.
2 "Business Day" shall mean any day that is not a Saturday, Sunday or other day on which banks are required or authorized by law to be closed in the City of New York. "Buyer Disclosure Letter" shall mean the Buyer Disclosure Letter delivered to Seller concurrently with this Agreement, which is an integral part of this Agreement. "Claims" shall mean any and all claims, lawsuits, demands, causes of action, investigations and other proceedings (whether or not before a Governmental Authority). CNDC" shall mean Comision Nacional de Defensa de la Competencia. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Confidentiality shall mean the confidentiality agreement entered Agreement" into by and between the EE Group and CMS Enterprises Company dated October 23, 2006. "CTM" shall mean Centrales Termicas Mendoza S.A. "Cut-off" shall mean December 31, 2006. "Damages" shall mean judgments, settlements, fines, penalties, damages, Liabilities, losses or deficiencies, costs and expenses, including reasonable attorney's fees, court costs, expenses of arbitration or mediation, and other out-of-pocket expenses incurred in investigating or preparing the foregoing; provided, however, that "Damages" shall not include incidental, indirect or consequential damages, damages for lost profits or other special, punitive or exemplary damages unless such Damages are deemed to be direct damages of an Indemnified Party in connection with a Third-Party Claim. "Direct Equity Interests" shall mean the equity interests held directly by the Seller as described in Annex I. "Distribution" shall mean: (a) any dividend, distribution, repayment or repurchase of share capital, capital contribution or other return of capital to such Person's shareholders or equivalent holders of its ownership interests; (b) any repayment of any loan owed to an Affiliate of such Person; and (c) any loan made to an Affiliate of such Person, in each case, other than to any of the Entities. "Dollars or $" shall mean dollars of the United States of America.
3 "Employees" shall mean all employees employed by the Argentine Businesses, including employees on short-term disability, military leave, maternity leave or paternity leave and other approved leaves of absence from active employment as set forth in Section 1.1(a) of the Seller Disclosure Schedule. "Entities" shall mean each of the following Argentine sociedades anonimas and sociedades de responsabilidad limitada, as the case may be: CMS Operating S.R.L., CMS Centrales Termicas S.A., CMS Generation S.R.L., CMS Comercializadora de Energia S.A., Cuyana S.A. de Inversiones, Central Termicas Mendoza S.A., CMS Ensenada S.A. and Transportadora de Gas del Mercosur S.A. "Environmental Laws" shall mean all foreign, federal, state and local laws, regulations, rules and ordinances in effect and existence as of the closing Date where the Argentine Businesses currently operate relating to pollution or protection of human health or the environment, natural resources or safety and health, including laws relating to releases or threatened releases of Hazardous Substances into the environment (including ambient air, surface water, groundwater, land, surface and subsurface strata). "Environmental Permit" shall mean any Permit, formal exemption, identification number or other authorization issued by a Governmental Authority pursuant to an applicable Environmental Law. "EWG" shall have the meaning set forth for the term "exempt wholesale generator" at Section 366.1 of FERC's regulations (18 C.F.R. 366.1). "Exchange Act" shall mean the United States Securities Exchange Act of 1934, as amended. "FERC" shall mean the United States Federal Energy Regulation Commission. "FPA" shall mean the United States Federal Power Act, as amended. "FUCO" shall have the meaning set forth for the term "foreign utility company" at Section 366.1 of FERC's regulations (18 C.F.R. 366.1). "GAAP" shall mean Argentine generally accepted accounting principles
4 as in effect from time to time, applied on a consistent basis. "Generation" shall mean CMS Generation S.R.L. "Governmental Authority" shall mean any executive, legislative, judicial, tribal, regulatory, taxing or administrative agency, body, commission, department, board, court, tribunal, arbitrating body or authority of the United States or any foreign country, or any state, local or other governmental subdivision thereof. "Hazardous Substances" shall mean any chemicals, materials or substances defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials", "hazardous constituents", "restricted hazardous materials", "extremely hazardous substances", "toxic substances", "contaminants", "pollutants", "toxic pollutants", or words of similar meaning and regulatory effect under any applicable Environmental Law. "Hidroinvest SPA" shall mean that certain Stock Purchase Agreement between CMS Generation Co. and Generation, as sellers, and Empresa Nacional de Electricidad S.A. - ENDESA CHILE, as buyer, dated March 8, 2007, the copy of which is attached as Annex III to this Agreement. "Indebtedness" of any Person shall mean (a) all liabilities and obligations of such Person for borrowed money or evidenced by notes, bonds or similar instruments, (b) obligations in respect of the deferred purchase price of property or services (other than any amount that would constitute current assets) to the extent that such amount would be accrued as a liability on a balance sheet prepared in accordance with GAAP, (c) obligations in respect of capitalized leases, (d) obligations in respect of letters of credit, acceptances or similar obligations, (e) obligations under interest rate cap agreements, interest rate swap agreements, foreign currency exchange contracts or other hedging contracts, (f) any accrued or unpaid interest or breakage fees related to any of the foregoing and (g) any guarantee of the obligations of another Person with respect to any of the foregoing. "Indirect Equity shall mean the equity interests held indirectly by Interests" the Seller as described in Annex I. "Intellectual Property" shall mean all Argentine and foreign (a) patents and patent applications, (b) trademarks, service marks, logos, slogans, and
5 trade dress, (c) copyrights, (d) software (excluding commercial off-the-shelf software), and (e) all confidential and proprietary information and know-how. "Knowledge of Buyer" shall mean, with respect to Lucid, the knowledge, after due inquiry, of those Persons set forth in Section 1.1(b) of the Buyer Disclosure Letter, and with respect to Newco, the knowledge, after due inquiry, of those Persons set forth in Section 1.1(c) of the Buyer Disclosure Letter. "Knowledge of Seller" shall mean the knowledge, after due inquiry, of those Persons set forth in Section 1.1(b) of the Seller Disclosure Letter. "Liabilities" shall mean any and all debts, liabilities, commitments and obligations, whether or not fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whether or not required by GAAP to be reflected in financial statements or disclosed in the notes thereto. "Liens" shall mean any mortgage, pledge, lien (statutory or otherwise and including, without limitation, environmental, ERISA and tax liens), security interest, easement, right of way, limitation, encroachment, covenant, claim, restriction, right, option, conditional sale or other title retention agreement, charge or encumbrance of any kind or nature (except for any restrictions arising under any applicable securities laws). "Material Adverse Effect" shall mean actions, circumstances or omissions that have an effect, individually or in the aggregate, that is materially adverse to (a) the business, operations, financial condition or assets of the Entities, taken as a whole or (b) the ability of Seller to consummate the transactions contemplated hereby, in each case, other than any effect resulting from, relating to or arising out of: (i) the negotiation, execution, announcement of this Agreement and the transactions contemplated hereby, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors, partners, joint owners or venturers and employees, (ii) any action taken by Seller, the Entities, Buyer or any of their respective representatives or Affiliates required or permitted to be taken by the terms of this Agreement or necessary to consummate the transactions contemplated by this Agreement, (iii) the general state of the industries in Argentina in which the Entities operate (including (A) pricing levels, (B) changes in the national, regional or local wholesale or retail markets for
6 natural gas or electricity in Argentina, (C) changes in the national, regional or local natural gas pipeline systems in Argentina, (D) changes in the Argentine national, regional or local markets for the distribution of electricity, (E) rules, regulations or decisions of Governmental Authorities or the courts affecting the natural gas transmission or independent power production industries in Argentina as a whole and (F) any condition described in the Seller Disclosure Letter, (iv) general legal, regulatory, political, business, economic, capital market and financial market conditions (including prevailing interest rate levels), or conditions otherwise generally affecting the industries in which the Entities operate, (v) any change in law, rule or regulation or GAAP or interpretations thereof applicable to the Entities, Seller or Buyer, (vi) acts of God, national or international political or social conditions or (vii) general economic conditions in Argentina; provided, that, for purposes of determining a "Material Adverse Effect", any effect on the business, financial conditions or assets of the business of any Person shall include only the portion of such effect attributable to the ownership interests of the Entities and their Affiliates and shall exclude any portion of such effect attributable to the ownership interest of any third party in such Person. "Negative Antitrust shall mean a resolution by the Republic of Argentina Decision" Secretariat of Internal Trade, or any agency or tribunal that may replace it in the future or that may be declared by a res judicata judgment to be empowered to issue a final decision on the Acquisition, either prohibiting the Acquisition or conditioning it to the fulfilment of any unduly burdensome undertakings, in each case, exclusively based on the Antitrust Law. "Operating" shall mean CMS Operating S.R.L. "Ownership Percentage" shall mean, with respect to any Subsidiary, the percentage of the equity represented by securities or ownership interests, or, in the case of a partnership, the percentage of the profits and losses of such partnership, owned directly or indirectly by Seller as of the date hereof. "Pension Plans" shall mean all Plans providing pensions, superannuation benefits or retirement savings, including pension plans, top up pensions or supplemental pensions. "Permitted Liens" shall mean (a) zoning, planning and building codes and other
7 applicable laws regulating the use, development and occupancy of real property and permits, consents and rules under such laws; (b) encumbrances, easements, rights-of-way, covenants, conditions, restrictions and other matters affecting title to real property which do not materially detract from the value of such real property or materially restrict the use of such real property; (c) leases and subleases of real property; (d) all easements, encumbrances or other matters which are necessary for utilities and other similar services on real property; (e) Liens to secure Indebtedness reflected on the Financial Statements or Indebtedness incurred in the ordinary course of business, consistent with past practice, after the date thereof, (f) Liens for Taxes and other governmental levies not yet due and payable or, if due, (i) not delinquent or (ii) being contested in good faith by appropriate proceedings during which collection or enforcement against the property is stayed and with respect to which adequate reserves have been established and are being maintained to the extent required by GAAP, (g) mechanics', workmen's, repairmen's, materialmen's, warehousemen's, carriers' or other Liens, including all statutory Liens, arising or incurred in the ordinary course of business, (h) original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business, (i) Liens that do not materially interfere with or materially affect the value or use of the respective underlying asset to which such Liens relate, and (j) Liens which are reflected in any Material Contract. "Person" shall mean any natural person, corporation, company, general partnership, limited partnership, limited liability partnership, joint venture, proprietorship, limited liability company, or other entity or business organization or vehicle, trust, unincorporated organization or Governmental Authority or any department or agency thereof. "Representatives" shall mean accountants, counsel or representatives. "Seller Disclosure shall mean the Seller Disclosure Letter delivered to Letter" Buyer concurrently with this Agreement, which is an integral part of this Agreement. "Subsidiary" of any entity means, at any date, any Person (a) the accounts of which would be consolidated with and into those of the applicable Person in such Person's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date or (b) of which
8 securities or other ownership interests representing more than fifty percent (50%) of the equity or more than fifty percent (50%) of the ordinary voting power or, in the case of a partnership, more than fifty percent (50%) of the general partnership interests or more than fifty percent (50%) of the profits or losses of which are, as of such date, owned, controlled or held, directly or indirectly by the applicable Person or one or more subsidiaries of such Person. "Tax Return" shall mean any report, return, declaration, or other information required to be supplied to a Governmental Authority in connection with Taxes including any claim for refund or amended return. "Taxes" shall mean all taxes, levies or other like assessments, including income, gross receipts, excise, value added, real or personal property, withholding, asset, sales, use, license, payroll, social security (including payments and contributions to pension funds) transaction, capital, business, corporation, employment, net worth and franchise taxes, or other governmental taxes of any kind whatsoever imposed by or payable to any U.S. or foreign, federal, state, provincial or local taxing authority, whether computed on a separate, consolidated, unitary, combined or any other basis; and whether imposed as transferee, successor, by contract or otherwise; in each instance such term shall include any interest, penalties or additions to tax attributable to any such Tax. "TGM" shall mean Transportadora de Gas del Mercosur S.A. "US FCPA" shall mean the United States Foreign Corrupt Practices Act of 1977, as amended.
ARTICLE II SALE AND PURCHASE Section 2.1 Agreement to Sell and Purchase. (a) In accordance with the terms of this Agreement and simultaneously with the payment of the Purchase Price in accordance with Section 2.1(b) of this Agreement, (i) Buyer shall purchase, acquire and accept from Seller, and Seller shall sell, convey, assign, transfer and deliver to Buyer, the Equity Interests, free and clear of all Liens, and (ii) Buyer shall purchase and assume from Seller, and Seller shall sell and assign to Buyer, the Assumed Indebtedness, free and clear of all Liens (the "Acquisition"). 9 (b) As of the date hereof, Buyer shall pay to Seller, in consideration for (i) the purchase of the Equity Interests pursuant to Section 2.1(a)(i) and (ii) the assignment and assumption of the Assumed Indebtedness pursuant to section 2.1(a)(ii), an amount in cash equal to $125,000,000 less the amount paid to CMS Generation Co. under the Hidroinvest SPA (the "Purchase Price"), by wire transfer of same day funds to an account or accounts and in such amounts as designated by Seller. Section 2.2 Deliveries by the Parties. (a) Simultaneously with the confirmation of receipt of the Purchase Price by Seller's bank, Seller shall deliver or cause to be delivered, in form and substance satisfactory to Buyer (unless previously delivered), the following items: (i) the appropriate notices of transfer of the Direct Equity Interests signed by the holders of record and addressed to each of the relevant Entities whose Equity Interests are being transferred; (ii) certified copies of all resolutions of the boards of directors of Seller approving the entering into and completion of the transactions contemplated by this Agreement; (iii) certified copies of the registration of Seller at the Superintendency of Corporations (Inspeccion General de Justicia), in accordance with Section 123 of Argentine Corporate Act No 19.550; (iv) except for TGM, (x) all organizational documents (estatutos); (y) all books of minutes of meeting and resolutions of shareholders, quotaholders, directors and managers (and any committees); and (z) the share certificate books (libro de registro de accionistas), if applicable; (v) except for the resignations of those officers listed in Section 2.2(a)(v) of the Seller Disclosure Letter, written resignations, effective as of the date hereof, from each of the regular and alternate directors, and of the regular and alternate managers, as the case may be, and, when applicable, and statutory supervisors (sindicos) of any of the Entities appointed by Seller; (vi) written evidence of the signing by the directors and statutory auditors (sindicos) appointed by Seller of the minutes which are pending in the shareholders' and board of directors' minutes books of the Entities; (vii) official reports stating that CMS International Ventures LLC and CMS Generation Holdings Company are not subject to any restriction to sell and transfer their interests in Operating and Generation, in compliance with Section 127 of General Resolution 7/2005 passed by the Superintendency of Corporations (Inspeccion General de Justicia). The above-mentioned reports shall be granted by the competent authority with jurisdiction in the City of Buenos Aires and should be dated up to ten (10) days prior to the date hereof; 10 (viii) officer's certificates of CMS International Ventures, LLC and CMS Generation Holdings Company stating that, according to the laws of the State of Michigan, United States of America, it is not possible to comply with Section 127, 4th paragraph of General Resolution 7/2005 passed by the Superintendency of Corporations (Inspeccion General de Justicia) based on the fact that there is no governmental authority that can issue such certificate; (ix) duly executed instruments of transfer, assignment and assumption of the Assumed Indebtedness, and all underlying documentation evidencing the rights and obligations of the creditors and obligors thereunder (the "Assumed Indebtedness Documents"), in form and substance acceptable to Buyer; and (x) a certificate of incumbency and authority of Seller dated the date hereof. (b) Simultaneously with the confirmation of receipt of the Purchase Price by Seller's bank, Seller and Buyer shall enter into the relevant Assignment of Quotas Agreements substantially in the form of the Agreement attached hereto as Exhibit B to perfect the transfer of Seller's quotas in Operating and in Generation to Buyer. (c) As of the date hereof, Buyer shall deliver or cause to be delivered to Seller (unless previously delivered), the following items: (i) the Purchase Price by wire transfer of same day funds to an account or accounts and in such amounts as designated by Seller in writing; and (ii) a certificate of incumbency and authority of Buyer dated the date hereof. (d) As of the date hereof, Seller shall cause the board of directors or managers of the Entities, as the case may be, to call shareholders' or quotaholders' meetings (as applicable) of the Entities wholly owned, directly or indirectly, by Seller to be held on the date hereof and shall cause such shareholders or quotaholders meetings to (i) accept the resignation of the regular and alternate directors and of the regular and alternate managers, as the case may be, and, when applicable, statutory supervisors (sindicos) originally nominated by Seller or its Affiliates and, if applicable, replace the officers appointed by Seller who have not resigned to their offices as of the date hereof; (ii) approve the performance of the resigning directors and managers, as the case may be, and statutory supervisors (sindicos); (iii) appoint regular and alternate directors and regular and alternate managers, as the case may be, and, when applicable, statutory supervisors (sindicos) designated by Buyer; (iv) change, pursuant to Buyer's instructions, the Entities' legal address (sede social) and corporate name (denominacion social) in order to eliminate references to "CMS"; (v) amend the requisite organizational documents to authorize each of the Entities to guarantee the debt (actual or contingent) of any Person (including any Person directly or indirectly 11 controlling, controlled by, under common control with or otherwise affiliated to, such Entities) and to pledge, mortgage or otherwise encumber (including, without limitation, by way of trust assignment or security assignment) any of its present or future assets of any kind as security for the debt (actual or contingent) of any Person (including any person directly or indirectly controlling, controlled by, under common control with or otherwise affiliated to, such Entities); and (vi) amend the by-laws of each of Operating and Generation in order to eliminate the reference to the identity of each quotaholders from the articles of the by-laws. (e) Simultaneously with the confirmation of receipt of the Purchase Price by Seller's bank, Seller shall cause the board of directors of CTM to convey (i) a special class "A" shareholders' meeting to be held on the date hereof to (A) accept the resignation of the regular and alternate directors and statutory supervisors (sindicos) nominated by class "A" shareholders; and (B) appoint regular and alternate directors and statutory supervisors (sindicos) designated by class "A" shareholders; (ii) a special class "B" shareholders' meeting to be promptly held after the date hereof to (A) accept the resignation of the regular and alternate directors and statutory supervisors (sindicos) nominated by class "B" shareholders and (B) appoint regular and alternate directors and statutory supervisors (sindicos) designated by class "B" shareholders; and (iii) an ordinary shareholders meeting to be promptly held after the date hereof in order to consider and approve the performance of the resigning officers. Buyer undertakes to approve the performance of the regular and alternate directors and statutory supervisors (sindicos) appointed by class "A" and class "B" shareholders in the relevant general shareholders' meeting of CTM. (f) Simultaneously with the confirmation of receipt of the Purchase Price by Seller's bank, Seller shall cause the members of the board of directors of TGM appointed by Class "C" shareholders to request a calling of a board of directors' meeting in order to convey (i) a special Class "C" shareholders' meeting to be promptly held after the date hereof to (A) accept the resignation of the regular and alternate directors nominated by Class "C" shareholders and (B) appoint regular and alternate directors designated by Class "C" shareholders; and (ii) an ordinary shareholders' meeting to be promptly held after the date hereof in order to consider and approve the performance of the resigning officers. Buyer undertakes to approve the performance of the regular and alternate directors appointed by Seller in the relevant general shareholders' meeting of TGM. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby represents and warrants to Buyer as follows: Section 3.1 Corporate Organization; Qualification. Each Seller is duly organized and validly existing and in good standing under the Laws of its governing jurisdiction. Each of the Entities is duly organized and validly existing and in good standing under the Laws of its governing jurisdiction and each (a) has the requisite power 12 to carry on its businesses as currently conducted and (b) is duly qualified to do business in each of the jurisdictions in which the ownership, operation or leasing of its properties or assets or the conduct of its business requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect. Section 3.2 Authority Relative to this Agreement. Each Seller has full corporate power and authority to execute and deliver this Agreement and the other agreements, documents and instruments to be executed and delivered by it in connection with this Agreement and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all the necessary action on the part of each Seller (as applicable), and no other corporate or other proceedings on the part of Seller are necessary to authorize this Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement or to consummate the transactions contemplated hereby and thereby. This Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement have been duly and validly executed and delivered by Seller and assuming that this Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement constitute legal, valid and binding agreements of the Buyer are enforceable against Seller in accordance with their respective terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. Section 3.3 Equity Interests; Assumed Indebtedness. (a) Except as set forth in Section 3.3(a) of the Seller Disclosure Letter, the Equity Interests are duly authorized, validly issued and fully paid and were not issued in violation of any preemptive rights. Except as set forth in Section 3.3(a) of the Seller Disclosure Letter, (i) there are no equity interests of the Entities authorized, issued or outstanding or reserved for any purpose and (ii) there are no (A) existing options, warrants, calls, preemptive rights, subscriptions or other rights, agreements, arrangements or commitments of any character, relating to the Entities, obligating Seller or any of its Affiliates to issue, transfer or sell, or cause to be issued, transferred or sold, any additional equity interest in the Entities, (B) outstanding securities of Seller or its Affiliates that are convertible into or exchangeable or exercisable for any equity interest in the Entities, (C) options, warrants or other rights to purchase from Seller or its Affiliates any such convertible or exchangeable securities or (D) outstanding Liabilities to pay any additional amounts on the equity interests or in respect of the capital of the Entities, including any Liabilities in respect of obligations to make capital contributions to any of the Entities, or (E) other than this Agreement, contracts, agreements or arrangements of any kind relating to the issuance of any equity 13 interest in the Entities, or any such options, warrants or rights, pursuant to which, in any of the foregoing cases, Seller or its Affiliates are subject or bound. (b) Except as set forth in Section 3.3(b) of the Seller Disclosure Letter, Seller owns all of the issued and outstanding Equity Interests and has good, valid and marketable title to the Equity Interests, free and clear of all Liens or other defects in title, and the Equity Interests have not been pledged or assigned to any Person. The Equity Interests owned by Seller are not subject to any restrictions on transferability other than those imposed by this Agreement and by applicable securities laws. Following the transfer of the Equity Interests to Buyer, Buyer will own all of the issued and outstanding Equity Interests and will have good and valid title to the Equity Interests, free and clear of all Liens. (c) Section 3.3(c) of the Seller Disclosure Letter sets forth, as of the date hereof, a list of each of the Entities, including its name, its jurisdiction of organization, its authorized and outstanding capital stock (or equivalent equity interest) and the percentage of its outstanding capital stock (or quota) owned by the Seller and/or the Entities, as applicable. Except as set forth in Section 3.3(c) of the Seller Disclosure Letter, the shares of outstanding capital stock or other equity interests or quotas, as the case may be, of the Entities are duly authorized, validly issued, fully paid and nonassessable, and are held of record by Seller and the Entities as set forth in Section 3.3(c) of the Seller Disclosure Letter, free and clear of Liens. Except as set forth in Section 3.3(c) of the Seller Disclosure Letter, there are no (i) existing options, warrants, calls, preemptive rights, subscriptions or other rights, agreements, arrangements or commitments of any character, relating to the capital stock or partnership interest of the Entities, obligating Seller, the Entities, or any of their Affiliates to issue, transfer or sell, or cause to be issued, transferred or sold, any equity interest in any of the Entities, (ii) outstanding securities of Seller, the Entities, or their Affiliates that are convertible into or exchangeable or exercisable for any of capital stock or partnership interest of any of the Entities, (iii) options, warrants or other rights to purchase from Seller, the Entities, or their Affiliates any such convertible or exchangeable securities or (iv) other than this Agreement, contracts, agreements or arrangements of any kind relating to the issuance of any equity interest of any of the Entities, or any such options, warrants or rights, pursuant to which, in any of the foregoing cases, Seller, any of the Entities or its Affiliates are subject or bound. (d) Except as set forth in Section 3.3(d) of the Seller Disclosure Letter, there are no Persons (other than an Entity) in which any of the Entities owns any equity or other similar interest. (e) Seller represents and warrants that it is the legal and beneficial owners of the Assumed Indebtedness, free and clear of any Lien. Seller has delivered to Buyer true and complete copies of all Assumed Indebtedness Documents. Seller further represents and warrants that any and all representations and warranties given by Seller or any of its Affiliates in the Assumed Indebtedness Documents are true and correct in all material respects. 14 Section 3.4 Consents and Approvals. Except as otherwise provided in Section 5.1(a) of this Agreement or as set forth in Section 3.4 of the Seller Disclosure Letter, Seller requires no consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority, or any other Person as a condition to the execution and delivery of this Agreement or the performance of the obligations hereunder, except where the failure to obtain such consent, approval or authorization of, or filing of, registration or qualification with, any Governmental Authority, or any other Person would not have a Material Adverse Effect. Section 3.5 No Conflict or Violation. Except as set forth in Section 3.5 of the Seller Disclosure Letter, the execution, delivery and performance by the Seller of this Agreement does not: (a) violate or conflict with any provision of the organizational documents or bylaws of Seller or any of the Entities; (b) violate any applicable provision of a law, statute, judgment, order, writ, injunction, decree, award, rule or regulation of any Governmental Authority, except where such violation would not have a Material Adverse Effect; or (c) violate, result in a breach of, constitute (with due notice or lapse of time or both) a default or cause any obligation, penalty or premium to arise or accrue under any Material Contract, lease, loan, mortgage, security agreement, trust indenture or other material agreement or instrument to which Seller or any of the Entities is a party or by which any of them is bound or to which any of their respective properties or assets is subject, except for violations, breaches or defaults that would not have a Material Adverse Effect. (d) result in the imposition or creation of any material Lien upon or with respect to any of the properties or assets owned or used by the Entities; or (e) result in the cancellation, modification, revocation or suspension of any material Permits or in the failure to renew any material Permit. Section 3.6 Financial Information. (a) Prior to the date hereof, Seller has made available to Buyer or its representatives the audited combined balance sheet of each of the Entities as of December 31, 2005, and the audited combined statements of income and cash flows of each of the Entities for each of the two years ended December 31, 2004 and 2005, together with the related notes thereto, accompanied by the reports thereon of Seller's accountants, as well as such audited combined balance sheet and statements of income and cash flows of each of the Entities (except Generation and TGM) as of and for the two years ended December 31, 2005 and 2006, (collectively, the "Financial Statements"). 15 (b) The Financial Statements were prepared in accordance with GAAP, consistently applied throughout the periods indicated and fairly present, in all material respects, the combined financial position, results of operations and cash flows of each of the Entities, as of the dates thereof and for the periods covered thereby, in each case, except as disclosed in the Financial Statements (or the notes thereto) or in Section 3.6(b) of the Seller Disclosure Letter. (c) As reflected in the Financial Statements as of December 31, 2006, there was approximately $50,000,000 of unencumbered cash and cash equivalents held by the Entities (excluding TGM and Generation). (d) As the date hereof, $26,900,000 collected by Generation under the Hidroinvest SPA as purchase price of the Hidroinvest S.A. shares sold by Generation thereunder are held in the an account of Operating for the benefit of Generation. Section 3.7 Contracts. (a) Section 3.7(a) of the Seller Disclosure Letter sets forth a list of each material contract, lease or similar agreement or instrument to which any of the Entities (except for TGM) is a party, other than (i) any purchase or sale orders arising in the ordinary course of business, and (ii) any contract involving the payment or receipt of less than $350,000 in any one year (each contract set forth in Section 3.7(a) of the Seller Disclosure Letter being referred to herein as a "Material Contract"). (b) Section 3.7(b) of the Seller Disclosure Letter sets forth a list of each contract that any of the Entities has with Seller or with any Affiliate of Seller that is not one of the Entities. (c) Except as set forth in Section 3.7(c) of the Seller Disclosure Letter, each Material Contract is a valid and binding agreement of the Entities party thereto and, to the Knowledge of Seller, is in full force and effect. (d) Except as set forth in Section 3.7(d) of the Seller Disclosure Letter, there is no default by Seller or any Entity under any Material Contract to which it is a party, and Seller has no Knowledge of any default by any counterparties under any Material Contract, other than defaults which have been cured or waived and which would not have a Material Adverse Effect. Section 3.8 Compliance with Law. Except for Environmental Laws and Tax laws, which are the subject of Section 3.14 and Section 3.15, respectively, and except as set forth in Section 3.8 of the Seller Disclosure Letter, the Entities are in compliance with all federal, state, local or foreign laws, statutes, ordinances, rules, regulations, judgments, orders, writs, injunctions or decrees of any Governmental Authority applicable to their respective properties, assets and businesses except where such noncompliance would not have a Material Adverse Effect. 16 Section 3.9 Permits. Except as set forth in Section 3.9 of the Seller Disclosure Letter, Seller and the Entities have all permits, licenses, certificates of authority, orders and approvals of, and have made all filings applications and registrations with Governmental Authorities necessary for the conduct of their respective business operations as presently conducted (collectively, the "Permits"), except for those Permits the absence of which would not, individually or in the aggregate, have a Material Adverse Effect. Section 3.10 Litigation. Except as identified in Section 3.10 of the Seller Disclosure Letter, there are no Actions before any Governmental Authority or arbitration panel or tribunal pending or in progress or, to the Knowledge of Seller, threatened, against Seller, the Entities, or any of their respective Affiliates or any executive officer or director thereof relating to the Equity Interests or Assumed Indebtedness or the respective assets or businesses of the Entities, except as would not, individually or in the aggregate, have a Material Adverse Effect. None of Seller, the Entities, or any of their respective Affiliates are subject to any outstanding judgment, order, writ, injunction, decree or award entered in an Action to which such Person was a named party relating to the Equity Interests or Assumed Indebtedness or the respective assets or businesses of such Persons, except as would not, individually or in the aggregate, have a Material Adverse Effect. Section 3.11 Employee Matters. (a) Section 3.11(a) of the Seller Disclosure Letter lists all material employee benefit and compensation plans and contracts and deferred compensation, stock option, stock purchase, stock appreciation rights, stock-based incentive bonus, severance, employment, change in control, vacation or fringe benefit programs, policies, agreements, arrangements or plans maintained by the Entities for the benefit of any of their current or former Employees (collectively, the "Plans"). True and complete copies of all material Plans, and all amendments thereto have been provided or made available to Buyer or its representatives. (b) To the Knowledge of Seller: (i) each Plan is registered, funded, administered and invested, as applicable, in substantial compliance with the current terms of such Plan, and in accordance with Applicable Laws; (ii) for any Plan where contributions are required to be made in accordance with an actuarial valuation report, all minimum contributions required to be made to such Plan have been made or will be timely made in accordance with the actuarial report most recently filed with the applicable Governmental Entity; (iii) for any Plan where contributions are not required to be made in accordance with an actuarial valuation report, all contributions required to be made to such Plan have been made; 17 (iv) no event has occurred respecting any qualified Plan that would result in the revocation of the registration of such Plan or could otherwise reasonably be expected to adversely affect the tax status of any such Plan; and (v) each of the Entities have made all contributions to the Pension Plans to which the Entities are required to make contributions. (c) With respect to each Plan, (i) no material Action is pending or, to the Knowledge of Seller, threatened and (ii) to the Knowledge of Seller no facts or circumstances exist that would give rise to any material Actions. (d) Except as set forth in Section 3.11(d) of the Seller Disclosure Letter, in the three (3) years prior to the date hereof there have been no partial or full wind-ups declared in respect of any Pension Plan. (e) Except as set forth in Section 3.11(e) of the Seller Disclosure Letter, none of Seller or the Entities has made any written promise to create any Plan or to improve or change the benefits provided under any Plan. (f) Except as set forth in Section 3.11(f) of the Seller Disclosure Letter, the consummation of the transactions contemplated hereby will not (i) cause any of the Entities to be obliged to pay to any current or former employee or officer of any of the Entities any termination pay, severance pay, unemployment compensation or any other payment; or (ii) accelerate the time of payment or vesting, or increase the amount of compensation due to any such employee or officer. Section 3.12 Labor Relations. Except as set forth in Section 3.12 of the Seller Disclosure Letter, (i) none of the Entities is a party to any labor or collective bargaining agreements, and there are no labor or collective bargaining agreements which pertain to any employees of the Entities, (ii) within the preceding eighteen (18) months, there have been no representation or certification proceedings, or petitions seeking a representation proceeding, pending or, to the Knowledge of Seller, threatened in writing to be brought or filed with any other labor relations tribunal or authority with respect to the Entities and (iii) within the preceding twelve (12) months, to the Knowledge of Seller, there have been no organizing activities involving the Entities with respect to any group of their respective employees; (iv) there are no pending or, to the Knowledge of Seller, threatened strikes, work stoppages, slowdowns or lockouts against the Entities, or their respective Employees or involving any of the Entities' facilities; and (v) there are no pending unfair employment practice charges, grievances or complaints filed or, to the Knowledge of Seller, threatened to be filed with any Governmental Authority based on the employment or termination of employment by the Entities of any employee. Section 3.13 Intellectual Property. (a) Subject to the provisions of Section 5.6 of this Agreement, Section 3.13(a) of the Seller Disclosure Letter sets forth a list of all material Argentine 18 and foreign: (i) patents and patent applications; (ii) trademark registrations and applications; and (iii) copyright registrations and applications, owned by the Entities. The foregoing schedules set forth at Section 3.13(a) of the Seller Disclosure Letter are complete and accurate in all material respects. To the Knowledge of Seller, the Entities have taken all steps necessary to maintain these rights and have not taken any action that would constitute abandonment thereof, including, but not limited to, making any and all necessary filings with any governmental authority, administrative office, or other entity, and paying any and all necessary fees. (b) Except as set forth on Section 3.13(b) of the Seller Disclosure Letter or as would not have a Material Adverse Effect: (i) the foregoing registrations are in effect and subsisting; (ii) each of the Entities owns all of the rights and interests in and has title to, or has validly licensed to it all of the Intellectual Property used by such Person; (iii) the Entities are the owners or authorized users of all the Intellectual Property required to operate their respective businesses as currently operated, free and clear of all Liens; (iv) no Intellectual Property owned or used by the Entities is subject to any outstanding judgment, injunction, order, decree or agreement restricting the use, licensing or sublicensing thereof by any of such Persons. There are no claims or actions pending or, to the Knowledge of Seller, threatened against any of the Entities by any Person arising out of or relating to any Intellectual Property owned or used by such Persons; (v) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not breach, violate or conflict with any instrument or agreement governing any Intellectual Property owned or used by the Entities, and will not cause the forfeiture or termination or give rise to a right of forfeiture or termination of any Intellectual Property owned or used by such Entities, except for the forfeiture or termination of such Intellectual Property as would not materially and adversely affect business, operations, financial condition or assets of the Entities, taken as a whole; and (vi) To the Knowledge of Seller, no third party is infringing upon, misappropriating, or otherwise violating rights to the Intellectual Property owned by the Entities. Section 3.14 Representations with Respect to Environmental Matters. To the Knowledge of Seller, and except as set forth in Section 3.14 of the Seller Disclosure Letter or as would not, individually or in the aggregate, have a Material Adverse Effect: 19 (a) The Entities are in compliance with all applicable Environmental Laws; (b) The Entities have all of the Environmental Permits required in order to conduct their operations in accordance with applicable laws or, where such Environmental Permits have expired, have applied for a renewal of such Environmental Permits in a timely fashion; (c) The Entities are in compliance with the Environmental Permits issued to them; (d) There is no pending or threatened written Claim, lawsuit, or administrative proceeding against the Entities under or pursuant to any Environmental Law; (e) None of the Entities is a party or subject to any administrative or judicial order, decree or other agreement with a Governmental Authority under or pursuant to any applicable Environmental Law; (f) None of the Entities has received written notice from any third party, including any Governmental Authority, alleging that any of the Entities has been or is in violation or potentially in violation of any applicable Environmental Law or otherwise may be liable under any applicable Environmental Law; and (g) With respect to the real property that is currently owned or leased by the Entities, there have been no spills or discharges of Hazardous Substances on or underneath any such real property. The representations and warranties set forth in this Section 3.14 are Seller's sole and exclusive representations and warranties related to environmental matters. Section 3.15 Tax Matters. Except for matters set forth on Section 3.15 of the Seller Disclosure Letter, and limited to the Knowledge of Seller with respect to TGM: (a) Each of the Entities and each consolidated, combined, unitary, affiliated or aggregate group of which any of the Entities is or was a member has timely filed all Tax Returns that it was required to file. All such returns are correct and complete in all material respects. All Taxes owed by any of the Entities have been paid, whether or not shown as due on any such filed Tax Returns. None of the Entities currently is the beneficiary of any extension of time within which to file any Tax Return. No claim or assertion has ever been made by a taxing authority in a jurisdiction where any of the Entities does not file Tax Returns that such Entity is or may be subject to taxation by that jurisdiction. There are no Tax liens on the assets of any of the Entities, other than Permitted Liens. 20 (b) The charges, accruals and reserves for Taxes reflected on the December 31, 2006 Financial Statements are adequate to cover all liabilities for Taxes of the Entities (except TGM), through the date of such Financial Statements. The charges, accruals and reserves for Taxes for TGM reflected on the December 31, 2005 Financial Statements are adequate to cover all liabilities for Taxes of TGM through the date of such Financial Statements. Since December 31, 2006, the Entities have not incurred any liability for Taxes relating to transactions outside the ordinary course of business or otherwise inconsistent with past custom and practice. (c) Each of the Entities has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, former employee, independent contractor, creditor, stockholder, affiliate, customer, supplier or other third party. (d) There is no dispute or claim concerning any Tax liability of an Entity either claimed or raised by any taxing authority in writing. Section 3.15(d) of the Seller Disclosure Letter lists all United States federal, state, local and non-United States Tax Returns with respect to Taxes determined by reference to net income filed with respect to each Entity for any taxable period ended on or after January 1, 2002, indicates those Tax Returns that have been audited and indicates those Tax Returns that currently are the subject of audit. No other Tax audits or other administrative or judicial Tax proceedings with respect to Taxes of the Entities are pending or are being conducted. No Entity has waived any statute of limitations in respect of Taxes or agreed to any extension thereof that is currently in effect. (e) Section 3.15 of the Seller Disclosure Letter sets out the classification for United States federal income tax purposes of each of the Entities. (f) Each of the Entities that is subject to VAT (or sales Tax) is registered for VAT, is a taxable person and has complied in all material respects with the requirements of the Laws relating to VAT. All VAT returns and payments due in respect of the VAT group of which the Entities are members have been made. (g) To the Knowledge of Seller, all stamp, transfer and registration Taxes have been paid in respect of documents in the enforcement of which each of the Entities is interested. (h) None of the Entities has any liability for the Taxes of any person other than itself under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise. No Entity has extended or waived the application of any statute of limitations of any jurisdiction regarding the assessment or collection of any Tax. None of the Entities is a party to any Tax sharing or Tax indemnity agreements or similar arrangements pursuant to which Buyer or its Affiliates would have any obligation to make payments after the date hereof or surrender or share any Tax attributes or benefits. 21 (i) None of the Entities has made an election under Section 897(i) of the code to be treated as a United States corporation for purposes of Section 897, 1445 and 6039C of the Code. (j) None of the Entities (i) has an investment in U.S. property within the meaning of Section 956 of the Code, (ii) is engaged in a United States trade or business for U.S. federal income Tax purposes, or (iii) is a passive foreign investment company within the meaning of the Code; and (k) None of the Entities is a "surrogate foreign corporation" within the meaning of Section 7874(a)(2)(B) of the Code or is treated as a U.S. corporation under Section 7874(b) of the Code. Section 3.16 Insurance. (a) Section 3.16(a) of the Seller Disclosure Letter sets forth a true and complete list of all current policies of all material property and casualty insurance, insuring the properties, assets, employees and/or operations of the Entities (collectively, the "Policies"). To the Knowledge of Seller, all premiums payable under such Policies have been paid in a timely manner and the Entities, as applicable, have complied in all material respects with the terms and conditions of all such Policies. (b) As of the date hereof, Seller has not received any written notification of the failure of any of the Policies to be in full force and effect. To the Knowledge of Seller, none of the Entities is in default under any provision of the Policies, and except as set forth in Section 3.16(b) of the Seller Disclosure Letter, there is no claim by the Entities or any other Person pending under any of the Policies as to which coverage has been denied or disputed by the underwriters or issuers thereof. Section 3.17 Regulatory Matters. Seller is not a "public utility" as such term is defined in the FPA, as amended, or the regulations of the FERC promulgated thereunder. No Entity is a "public utility" as such term is defined in the FPA or the regulations of the FERC promulgated thereunder. Each Entity that directly owns or operates facilities used for the generation, transmission, or distribution of electric energy for sale or the distribution at retail of natural or manufactured gas for heat, light, or power is a FUCO, or, to the extent that an Entity's activities are limited to the business of owning or operating electric generating facilities and selling electricity at wholesale such Entity is either an EWG or FUCO. Section 3.18 Absence of Certain Changes or Events. (a) Except as set forth in Section 3.18(a) of the Seller Disclosure Letter, each Entity has conducted its respective businesses in the ordinary course of business, consistent with past practice in all material respects, since the date of the latest Financial Statements for such Entity as described in Section 3.6. 22 (b) Except as set forth in Section 3.18(b) of the Seller Disclosure Letter, or in the Financial Statements, and the notes thereto, there has not been with respect to each of the Entities any event or development or change which has resulted or would reasonably be likely to result in a Material Adverse Effect. (c) Section 3.18(c) of the Seller Disclosure Letter sets forth a true and complete list of the Distributions made by each Entity since the date of the latest Financial Statements for such Entity as described in Section 3.6. (d) Except as set forth in Section 3.18(d) of the Seller Disclosure Letter, since the date of the latest Financial Statements for each Entity, such Entity has not: (i) granted any severance or termination pay to, or entered into, extended or amended any employment, consulting, severance or other compensation agreement with, or otherwise increased the compensation or benefits provided to any of its officers or other employees whose annual salary base is in excess of $100,000; (ii) sold, leased, licensed, mortgaged or otherwise disposed of any properties or assets material to its business having a fair market value in excess of $100,000 individually or $400,000 in the aggregate, other than (A) sales made in the ordinary course of business, consistent with past practice; or (B) sales of obsolete or other assets not presently utilized in its business; (iii) made any capital expenditure in excess of 10% of the annual budgeted capital expenditures; (iv) paid, repurchased, discharged or satisfied any of its material Claims, Liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than in the ordinary course of business, consistent with past practice; (v) (A) incurred or assumed or guaranteed any long-term debt, or except in the ordinary course of business consistent with past practice, incurred or assumed or guaranteed short-term Indebtedness (other than intercompany Indebtedness) exceeding $100,000 in the aggregate; (B) modified the terms of any Indebtedness or other liability, other than modifications of short-term debt in the ordinary course of business, consistent with past practice; or (C) assumed, guaranteed, endorsed or otherwise became liable or responsible (whether directly, contingently or otherwise) for the material obligations of any other Person; or (vi) authorized any of, or committed or agreed to take any of, the actions referred to in the paragraphs (i) through (v) above. (e) Except as set forth in Section 3.18(e) of the Seller Disclosure Letter, since the date of the latest Financial Statements for each Entity, such Entity has not incurred any material Tax liability outside the ordinary course of 23 business, made or changed any election for Tax purposes, changed any annual accounting period for Taxes, filed any amended Tax Return, entered into any closing agreement for Tax purposes, settled any Tax claim or assessment relating to any Entity, surrendered any right to claim a refund of Taxes, consented to any extension or waiver of the limitation period applicable to any Tax claim or assessment relating to any Entity, or taken any other action relating to the filing of any Tax Return or the payment of any Tax, if such election, adoption, change, amendment, agreement, settlement, surrender, consent or other action would have the effect of increasing the Tax liability of any Entity for any period ending after the Cut-off or decreasing any Tax attribute of any Entity existing on the Cut-off. Section 3.19 Absence of Undisclosed Liabilities. None of the Entities has any Liabilities (whether absolute, accrued, contingent or otherwise) except those Liabilities (a) disclosed and reserved against in the Financial Statements (or notes thereto) as required by GAAP, (b) set forth in Section 3.19 of the Seller Disclosure Letter, (c) incurred in the ordinary course of business since the date of the latest Financial Statements for such Entity as described in Section 3.6 or (d) which would not result in a Material Adverse Effect. Section 3.20 Property. Except as set forth in Section 3.20 of the Seller Disclosure Letter, each of the Entities has valid title to or leases, free and clear of any Liens (other than Permitted Liens), all assets used or held for use by each of the Entities, except for such assets the failure of which to so own or lease would not, individually or in the aggregate, have a Material Adverse Effect. Section 3.21 Brokerage and Finders' Fees. None of Seller, the Entities, or any of their Affiliates or their respective stockholders, partners, directors, officers or employees, has incurred, or will incur any brokerage, finders' or similar fee in connection with the transactions contemplated by this Agreement. Section 3.22 Corporate and Accounting Records. The minute books of the Entities previously made available to Buyer contain true, complete and accurate records of all meetings and accurately reflect all other corporate action of their respective stockholders and board of directors (including committees thereof). Each of the Entities maintains adequate records which accurately and validly reflect transactions conducted by such Entity in reasonable detail, and maintains accounting controls, policies and procedures sufficient to ensure that such transactions are (a) executed in accordance with its management's general or specific authorization and (b) recorded in a manner which permits the preparation of financial statements in accordance with Applicable Law and applicable regulatory accounting requirements, 24 Section 3.23 Affiliated Transactions. Except as described in Section 3.23 of the Seller Disclosure Letter, and except for trade payables and receivables arising in the ordinary course of business consistent with past practices for purchases and sales of goods or services consistent with past practice, none of the Entities have been a party over the past twelve (12) months to any material transaction or agreement with Seller or any Affiliate of Seller (other than the Entities) and no director or officer of Seller or its Affiliates (other than the Entities), has, directly or indirectly, any material interest in any of the assets or properties of the Entities. Section 3.24 Certain Practices. None of the Entities or any of their respective Representatives has corruptly (within the meaning of the US FCPA or any other similar Applicable Law) or otherwise illegally offered or given, and, to the Knowledge of Seller, no Person has corruptly (within the meaning of the US FCPA or any other similar applicable Law) or otherwise illegally offered or given on behalf of the Entities, anything of value to: (i) any official of a Governmental Authority, any political party or official thereof, or any candidate for political office; or (ii) any other Person, in any such case while knowing, or having reason to know, that all or a portion of such money or thing of value may be offered, given or promised, directly or indirectly, to any official or employee of a Governmental Authority, any political party or official thereof, or candidate for political office for the purpose of the following: (x) influencing any action or decision of such Person, in his or her official capacity, including a decision to fail to perform his or her official function; (y) inducing such Person to use his or her influence with any Governmental Authority to affect or influence any act or decision of such Governmental Authority to assist any of the Entities in obtaining or retaining business for, or with, any Governmental Authority or to secure an improper advantage; or (z) where such payment would constitute a bribe, kickback or illegal or improper payment to assist any of the Entities in obtaining or retaining business for, or with, or directing business to, any Person or in securing any improper advantage. There have been no false or fictitious entries made in the books or records of any of the Entities relating to any illegal payment or secret or unrecorded fund and none of the Entities has established or maintained a secret or unrecorded fund. Each Entity keeps books, records and accounts which in reasonable detail which accurately and fairly reflect the transactions and dispositions of its assets. Each of the Entities has devised and maintained a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary (x) to permit preparation of financial statements in conformity with GAAP or any other criteria applicable to such statements; and (y) to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences 25 Section 3.25 No Other Representations or Warranties. Except for the representations and warranties contained in this Article III, none of Seller, the Entities, or any other Person makes any other express or implied representation or warranty on behalf of Seller. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER Each Buyer hereby represents and warrants to Seller as follows: Section 4.1 Corporate Organization; Qualification. Such Person (a) is a limited liability company duly organized and validly existing under the Laws of its jurisdiction of formation, (b) has the requisite power to carry on its businesses as currently conducted and (c) is duly qualified to do business in each of the jurisdictions in which the ownership, operation or leasing of its properties or assets or the conduct of its business requires it to be so qualified, except where the failure to be so qualified would not materially and adversely affect the ability of, or timing for, Buyer to consummate the transactions contemplated by this Agreement. Section 4.2 Authority Relative to this Agreement. Such Person has full corporate or similar power and authority to execute and deliver this Agreement and the other agreements, documents and instruments to be executed and delivered by it in connection with this Agreement and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all the necessary action on the part of such Person and no other organization or similar proceedings on the part of such Person are necessary to authorize this Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement or to consummate the transactions contemplated hereby and thereby. This Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement have been duly and validly executed and delivered by such Person and assuming that this Agreement and the other agreements, documents and instruments to be executed and delivered in connection with this Agreement constitute legal, valid and binding agreements of the Seller are enforceable against such Person in accordance with their respective terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 26 Section 4.3 Consents and Approvals. Except as otherwise provided in Section 5.1(a) of this Agreement or as set forth in Section 4.3 of the Buyer Disclosure Letter, such Person requires no consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority, or any other Person as a condition to the execution and delivery of this Agreement or the performance of the obligations hereunder, except where the failure to obtain such consent, approval or authorization of, or filing of, registration or qualification with, any Governmental Authority, or any other Person would not materially and adversely affect the ability of, or timing for, such Person to consummate the transactions contemplated by this Agreement. Section 4.4 No Conflict or Violation. Except as set forth in Section 4.4 of the Buyer Disclosure Letter, the execution, delivery and performance by such Person of this Agreement does not: (a) violate or conflict with any provision of the organizational documents of such Person; (b) violate any applicable provision of a law, statute, judgment, order, writ, injunction, decree, award, rule or regulation of any Governmental Authority, except where such violation would not materially and adversely affect the ability of, or timing for, such Person to consummate the transactions contemplated by this Agreement; or (c) violate, result in a breach of, constitute (with due notice or lapse of time or both) a default or cause any material obligation, penalty or premium to arise or accrue under any material contract, lease, loan, agreement, mortgage, security agreement, trust indenture or other material agreement or instrument to which such Person is a party or by which it is bound or to which any of its properties or assets is subject, except as would not materially and adversely affect the ability of, or timing for, such Person to consummate the transactions contemplated by this Agreement. 27 Section 4.5 Litigation. Except as identified in Section 4.5 of the Buyer Disclosure Letter, there are no Actions before any Governmental Authority or arbitration panel or tribunal pending or in progress or, to Knowledge of such Person, threatened, against such Person, or any of their respective Affiliates or any executive officer or director thereof, except as would not materially and adversely affect the ability of, or timing for, such Person to consummate the transactions contemplated by this Agreement. Neither such Person nor any of its Affiliates is subject to any outstanding judgment, order, writ, injunction, decree or award entered in an Action to which such Person was a named party, except as would not materially and adversely affect the ability of, or timing for, such Person to consummate the transactions contemplated by this Agreement. Section 4.6 Brokerage and Finders' Fees. Neither such Person nor any of its Affiliates, or their respective members, stockholders, partners, directors, officers or employees, has incurred, or will incur any brokerage, finders' or similar fee in connection with the transactions contemplated by this Agreement. Section 4.7 Investment Representations. (a) Such Person is acquiring the Equity Interests to be acquired by it hereunder for its own account, solely for the purpose of investment and not with a view to, or for sale in connection with, any distribution thereof in violation of the federal securities laws or any applicable foreign or state securities law. (b) Such Person understands that the acquisition of the Equity Interests to be acquired by it pursuant to the terms of this Agreement involves substantial risk. Such Person and its officers have experience as an investor in securities and equity interests of companies such as the ones being transferred pursuant to this Agreement and acknowledges that it can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that such Person is capable of evaluating the merits and risks of its investment in the Equity Interests to be acquired by it pursuant to the transactions contemplated hereby. (c) Such Person understands that the Equity Interests to be acquired by it hereunder have not been registered under the Securities Act on the basis that the sale provided for in this Agreement is exempt from the registration provisions thereof. Such Person acknowledges that such securities may not be transferred or sold except pursuant to the registration and other provisions of applicable securities laws or pursuant to an applicable exemption therefrom. (d) Such Person acknowledges that the offer and sale of the Equity Interests to be acquired by it in the transactions contemplated hereby has not been accomplished by the publication of any advertisement. Section 4.8 Regulation Matters. 28 Such Person is not (a) "public utility," or a "holding company in a holding company system that includes a transmitting utility or an electric utility", as such terms are defined in the FPA or the regulations of the FERC promulgated thereunder. Section 4.9 No Other Representations or Warranties. Except for the representations and warranties contained in this Article IV, neither such Person nor any other Person makes any other express or implied representation or warranty on behalf of such Person. ARTICLE V COVENANTS OF THE PARTIES. Section 5.1 Notification to the CNDC; Negative Antitrust Decision; Transfer of Equity Interests to a Third Purchaser. (a) Notification of the Acquisition to the CNDC. Within seven (7) days from the date hereof, and at any subsequent date that may be required by instruction of the CNDC, Seller and Buyer shall cooperate with one another and file all notifications, applications, registrations, filings, declarations and reports required under the Antitrust Law relating to the Acquisition, and use their reasonable efforts to take, or cause to be taken all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable to obtain the Antitrust Approval. (b) Negative Antitrust Decision. (i) Buyer hereby expressly acknowledges and undertakes that the entire risk as to a Negative Antitrust Decision and/or the issuance of any resolution, decree, judgment, injunction or other order, whether temporary, preliminary or permanent, oral or in writing, in each case pursuant to Antitrust Law, that may prohibit, prevent or restrict the consummation of the Acquisition rests exclusively with Buyer. (ii) Buyer shall be the sole responsible party to perform any and all actions required by the Negative Antitrust Decision including, but not limited to, (i) a divesture of Buyer's or the Entities' businesses, product lines or assets in favor of a third party, at its own risk, cost and expense; and (ii) appointment of the management of the Entities following directives by the CNDC or other antitrust authority. Notwithstanding anything contained herein to the contrary, none of Seller or its Affiliates shall be required to (i) divest any of its respective businesses, product lines or assets that are not transferred to Buyer or (ii) take or agree to take any other action or agree to any limitation that could reasonable be expected to (a) result in a adverse effect on its business, assets, condition (financial or otherwise) or (b) deprive any Seller of any benefit of the Acquisition. (iii) Each party shall promptly give to the other party notice of all information in its possession regarding the Negative Antitrust Decision or its 29 consequences and promptly transmit to the other party a copy of all documents received or sent in that respect. Each party shall also promptly respond to any reasonable request for information from the other party on the Negative Antitrust Decision or its consequences. (c) Transfer of Equity Interests to a Third Purchaser. (i) Notwithstanding Section 5.1(f), upon issuance of a Negative Antitrust Decision prohibiting the transfer of the Equity Interests to Buyer, Buyer shall negotiate the sale and transfer of the Equity Interests to a third party regarding whom the Antitrust Approval may be obtained (the "Third Purchaser"). (ii) If legally required and for the exclusive purpose of transferring the Equity Interests to the Third Purchaser, each Seller hereby grants special irrevocable powers of attorney to Buyer and/or the Persons whom Buyer may appoint to (i) take all reasonable actions to obtain the relevant Antitrust Approval; (ii) notify the transfer of the Equity Interests to the Ente Nacional Regulador de la Electricidad and to the Republic of Argentina Secretariat of Energy; (iii) subscribe the relevant documentation and make the relevant filings to record the transfer of the Equity Interests on their respective official ownership records; and (iv) collect from the Third Purchaser the purchase price of the Shares (it being understood that if such purchase price were to exceed the Purchase Price, then the excess shall be exclusively for Buyer's benefit). It is hereby expressly agreed that the irrevocable powers of attorney provided for in this Section 5.1(c) are granted for a period beginning on the date of issuance of the Negative Antitrust Decision preventing the Acquisition and ending on the date which is ten (10) years from the date hereof; it being understood that the irrevocability of the special power of attorney granted herein is based on both parties' interests. (iii) Notwithstanding anything contained herein to the contrary, from the transfer of the Equity Interests to Buyer pursuant to this Agreement until the transfer of the Equity Interests to a Third Purchaser, as the case may be, Buyer will have, to the fullest extent permitted by law, complete control of the assets and businesses of the Entities. In furtherance of the foregoing, Seller shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions, as Buyer may reasonably deem necessary to permit Buyer to have complete control of the Entities as from the date hereof. (d) Waiver by Buyer. Seller will not be held liable for any loss or damage arising out of any of the events provided for in Section 5.1(b) hereof and/or the transfer of the Equity Interests to the Third Purchaser, including, but not limited to, any difference between the Purchase Price and the purchase price of the Equity Interests ultimately collected by Buyer from the Third Purchaser. Buyer hereby irrevocably and unconditionally waives to file any legal action and/or claim, judicial, non-judicial or of any other nature, against any Seller or any other third party directly or indirectly based on the fact that the Equity Interests were sold at a price lower than the Purchase Price. 30 (e) Waiver by Seller. Each Seller hereby irrevocably and unconditionally waives any right it may have against Buyer based on the fact that the Shares were sold to the Third Purchaser at a price higher than the Purchase Price. (f) Indemnification. (i) Subject only to the terms and limitations set forth in this Section 5.1 and not those set forth in Article VI, Buyer shall jointly and severally indemnify, defend and hold harmless Seller Indemnified Parties (whether or not also indemnified by any other Person under any other document) from and against any penalties, fines, administrative sanctions, costs and expenses (including reasonable attorneys' fees as provided in (ii) below) which directly relate to, or arise out of, any of the events provided for in Section 5.1(b), including fines, penalties and/or administrative sanctions imposed, or handed down, by the CNDC, the Secretariat of Internal Trade and/or any other agency, tribunal or court because the Acquisition is ultimately deemed to breach the Antitrust Law (an "Antitrust Claim"). (ii) Within five (5) days following the receipt by Seller of an Antitrust Claim, Seller shall promptly give notice to each Buyer in writing. Buyer shall assume and control the defense of an Antitrust Claim with counsel of their own choice it being understood, however, that each Seller may retain, at its own cost, separate co-counsel and participate fully in the defense of the Antitrust Claim with full access to all relevant information. (iii) If an Antitrust Claim implies a fine, penalty and/or an administrative sanction to any Seller, then at Seller's option Buyer shall be jointly and severally liable to (i) pay the amount of the relevant fine, penalty and/or an administrative sanction; or (ii) deposit in escrow at Seller's satisfaction the amount of the relevant fine, penalty and/or an administrative sanction. If Buyer fails to timely pay or deposit the relevant amount of the fine, penalty and/or an administrative sanction, the outstanding amount thereof shall bear default interest at a rate equal to LIBOR plus two per cent (2%) per annum. (iv) Notwithstanding Section 5.1(f)(iii), any and all expenses and/or costs incurred by any Seller pursuant to Section 5.1(b), Section 5.1(c) and Section 5.1(f) (including, but not limited to, fines, penalties and/or an administrative sanctions) shall be reimbursed by Buyer upon request by Seller within five (5) Business Days from the date of the request. If Buyer fails to timely reimburse the expenses and/or costs incurred by any Seller, the outstanding amount thereof shall bear default interest at a rate equal to LIBOR plus two per cent (2%) per annum. (v) If Seller and Buyer are found jointly liable of any Antitrust Claim, Buyer shall be the sole responsible for the settlement of said Antitrust Claim and Buyer hereby waives any recoverability right it may have against any Seller. (vi) This Section 5.1 shall exclusively govern all Antitrust Claims. For the avoidance of doubt, indemnity limitations contemplated in 31 Section 6.2 hereof shall not apply to the indemnity undertakings assumed by Buyer in this Section 5.1 regarding Antitrust Claims. (g) Fees, Costs and Expenses. Except for Buyer's obligation to pay all fees, costs and expenses (including, without limitation, reasonable legal fees) incurred by the parties in connection with any Antitrust Claim, each of the parties shall pay all fees, costs and expenses (including, without limitation, reasonable legal fees) incurred by it in connection with the filings made with the CNDC in order to obtain the Antitrust Approval. Section 5.2 Further Assurances. On and after the date hereof, Seller and Buyer shall cooperate and use their respective reasonable best efforts to take or cause to be taken all appropriate actions and do, or cause to be done, all things necessary or appropriate to consummate and make effective the transactions contemplated hereby, including the execution of any additional documents or instruments of any kind, the obtaining of consents which may be reasonably necessary or appropriate to carry out any of the provisions hereof and the taking of all such other actions as such party may reasonably be requested to take by the other party hereto from time to time, consistent with the terms of this Agreement, in order to effectuate the provisions and purposes of this Agreement and the transactions contemplated hereby and thereby. Section 5.3 Employee Matters. (a) Subject to the following provisions, Buyer shall maintain the employment of all Affected Employees following the date hereof for at least a period of twelve (12) months as from the date hereof and subject to the existence of proper grounds for Buyer for termination or restructuring thereof. (b) Subject to Section 5.3(c) and Section 5.3(d) below, on the date hereof (unless previously done), Seller shall give notice to all Affected Employees that the active participation of the Affected Employees in those employee benefit plans, programs and arrangements that are not sponsored by the Entities or that are not listed in Section 3.11(a) of the Seller Disclosure Letter (such plans, programs and arrangements, the "Seller Plans") shall terminate on the date hereof, and the Entities shall terminate participation of Affected Employees in the Seller Plans as of the date hereof. Each of the Entities shall be solely responsible for all obligations and Liabilities under each employee benefit plan listed in Section 3.11(a) of the Seller Disclosure Letter in existence as of the date hereof, or that they establish, maintain or contribute to, on or after the date hereof, and no such obligations or Liabilities shall be assumed or retained by Seller or its Affiliates. In addition, Seller shall retain all Liabilities and assets with respect to current and former employees of the Entities under the Pension Plan for Employees of Consumers Energy and Other CMS Energy Companies. Notwithstanding the foregoing, any Affected Employee who is unable to report to work with Buyer as of the date hereof due to disability (each, a "Disabled Employee"), shall continue to be eligible for any applicable long-term disability and life insurance coverage pursuant to 32 Seller's plans until such Disabled Employee returns to active employment with Buyer or any of the Entities; provided, however, that in order to be eligible for such benefits, each such Disabled Employee, pending approval for long-term disability benefits or return to active employment, must continue to pay all applicable long-term disability and life insurance premiums due following the date hereof for such coverage pursuant to Seller's long-term disability plan and life insurance plans. Buyer shall, or shall cause the Entities to, (A) pay Disabled Employees who are on short-term disability as of the date hereof the short-term disability benefits, if any, that apply under the Buyer's plans, provided, however, that such benefits need not be provided to the extent that they would duplicate benefits paid under the Seller Plans, and (B) honor any continuing pay or salary obligations and return to work obligations that apply to any such Disabled Employees. (c) Buyer and the Entities shall be responsible for all Liabilities and obligations under the Worker Adjustment and Retraining Notification Act and similar foreign, state and local rules, statutes and ordinances resulting from the actions of Buyer and the Entities after the date hereof. Buyer agrees to hold Seller harmless for any breach of such responsibility and Buyer's indemnification of Seller in this regard specifically includes any Claim by the Affected Employees for back pay, front pay, benefits or compensatory or punitive damages, any Claim by any Governmental Authority for penalties regarding any issue of prior notification (or lack thereof) of any plant closing or mass layoff occurring after the date hereof and Seller's costs, including reasonable attorney's fees, in defending any such Claims. (d) CMS Energy Corporation or its Affiliates shall retain all assets that are accumulated through the date hereof under Financial Accounting Standards Board Statement 106 (and deposited in various VEBA accounts and 401(h) accounts of Seller or its Affiliates). Further, Seller or its Affiliates shall retain the liability for PBOP for the benefit of former employees of the Entities who are retirees of the Entities as of the date hereof, and Affected Employees who are eligible to retire and qualified for benefits under PBOP as of the date hereof, and Seller or its Affiliates shall retain the responsibility for providing post-retirement benefits (other than pension) to such employees pursuant to the eligibility requirements of the Seller Plans. (e) Nothing in this Section 5.3 shall (i) create any third party beneficiary right in any current or former Employees, any beneficiary or dependent thereof, or any collective bargaining or other labor representation thereof, or (ii) constitute an amendment to any Plan. 33 Section 5.4 Tax Covenants. (a) Section 338(g) Elections. Except with the express written consent of Seller, which can be withheld in Seller's sole and absolute discretion, Buyer shall not make any election under Section 338(g) of the Code (or any analogous provision of state, local, or foreign income tax law) with respect to the deemed purchase of the assets of any of the Entities. (b) Tax Return Filings, Refunds, and Credits. (i) Seller shall timely prepare and file (or cause such preparation and filing) with the appropriate Tax authorities all Tax Returns with respect to the Entities which are Subsidiaries of the Seller for Tax periods that end on or before the Cut-off or that otherwise are required to be filed (taking into account any extensions) on or before the date hereof (the "Seller Returns"), and will pay (or caused to be paid) by such Entities all Taxes due with respect to the Seller Returns. The Seller Returns shall be prepared in accordance with past practice, except as required by applicable law. Seller shall make such income Tax Return sufficiently in advance of the due date for filing any such income Tax Returns to provide Buyer with a meaningful opportunity to review and comment on such income Tax Returns before filing. (ii) Buyer shall timely prepare and file (or cause such preparation and filing) with the appropriate Tax authorities all Tax Returns (the "Straddle Period Returns") with respect to the Entities which are Subsidiaries of the Seller for all Tax periods ending after the Cut-off that include the Cut-off (the "Straddle Period") except for Tax Returns required to be filed (taking into account any extension) on or before the date hereof. Except as otherwise required by applicable law, all Straddle Period Returns shall be prepared in accordance with past practice. Buyer shall provide Seller with copies of any Straddle Period Returns at least forty-five (45) days prior to the due date thereof (giving effect to any extensions thereto), accompanied by a statement (the "Straddle Statement") setting forth and calculating in reasonable detail the Pre- Cutoff Taxes as defined below. If Seller agrees with the Straddle Period Return and Straddle Statement, Seller shall pay to Buyer (or Buyer shall pay to Seller, if appropriate) an amount equal to the Ownership Percentage of Pre- Cut-off Taxes as shown on the Straddle Statement not later than two (2) Business Days before the due date (including any extensions thereof) for payment of Taxes with respect to such Straddle Period Return. If, within fifteen (15) days of the receipt of the Straddle Period Return and Straddle Statement, Seller notifies Buyer that it disputes the manner of preparation of the Straddle Period Return or the amount calculated in the Straddle Statement, then Buyer and Seller shall attempt to resolve their disagreement within the five (5) days following Seller's notification or Buyer of such disagreement. If Buyer and Seller are unable to resolve their disagreement, the dispute shall be submitted to a mutually agreed upon nationally recognized independent accounting firm, whose expense shall be borne equally by Buyer and Seller, for resolution, if possible, within twenty (20) days of such submission. If the parties have not agreed on an independent accounting firm within fifteen days following Seller's notification of Buyer of such disagreement, on the request of any party such independent accounting firm shall be appointed by the ICC Centre. 34 Any independent accounting firm appointed by the ICC Centre shall be an impartial and disinterested senior partner in an internationally recognized accounting firm. The decision of such accounting firm with respect to such dispute shall be binding upon Buyer and Seller, and Seller shall pay to Buyer (or Buyer shall pay to Seller, if appropriate) an amount equal to the Pre- Cut-off Taxes as decided by such accounting firm not later than two (2) Business Days before the due date (including any extensions thereof) for payment of Taxes with respect to such Straddle Period Return. (iii) From and after the date hereof, Buyer and its Affiliates (including the Entities) will not file any amended Tax Return, carryback claim, or other adjustment request with respect to the Entities for any Tax period that includes or ends on or before the Cut-off unless Seller consents in writing; provided, however, that (i) such prohibition shall not apply (A) to any amended Tax Return filed to address any Tax matter excepted out of the Seller's tax representations and warranties in Section 3.15, or (B) to address any Tax matter for which, at the time of filing such amended Tax Return, Seller's indemnification obligations under Section 6.2 hereof shall have expired, except, with respect to the foregoing subparagraph (B) only, as would have, in Seller's reasonable opinion, an adverse effect with regard to any Tax Returns filed by Seller and/or Seller's Affiliates (not including the Entities) and (ii) with respect to any Straddle Period Return, such consent shall not be unreasonably withheld, or conditioned, provided Buyer has made arrangements to the reasonable satisfaction of Seller to make Seller whole for any detriment or cost incurred (or to be incurred) by Seller as a result of such amended Straddle Period Return. (iv) For purposes of this Agreement, in the case of any Taxes of the Entities that are payable with respect to any Straddle Period, the portion of any such Taxes that constitutes "Pre- Cut-off Taxes" shall be the excess of (A) (i) in the case of Taxes that are either (x) based upon or related to income or receipts or (y) imposed in connection with any sale, transfer or assignment or any deemed sale, transfer or assignment of property (real or personal, tangible or intangible) be deemed equal to the amount that would be payable if the Tax period ended on the Cut-off and (ii) in the case of Taxes (other than those described in clause (i)) imposed on a periodic basis with respect to the business, property, shares, quota holdings or assets of the Entities, be deemed to be the amount of such Taxes for the entire Straddle Period (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding Tax period) multiplied by a fraction the numerator of which is the number of calendar days in the portion of the Straddle Period ending on the Cut-off and the denominator of which is the number of calendar days in the entire Straddle Period over (B) any prepayment or advances of Taxes or any payments of estimated Taxes with respect to the Straddle Period. For purposes of clause (i) of the preceding sentence, any exemption, deduction, credit or other item that is calculated on an annual basis shall be allocated to the portion of the Straddle Period ending on the Cut-off on a pro rata basis determined by multiplying the total amount of such item allocated to the Straddle Period by a fraction, the numerator of which is the number of calendar days in the portion of the Straddle Period ending on the Cut-off and the denominator of which is the number of calendar days in the entire Straddle Period. Pre-Cut-off Taxes include any Taxes attributable to a Person that is treated as a partnership for federal income tax purposes as 35 if such Person allocated Tax items to its partners in a manner consistent with this Section 5.4(b)(iv). In the case of any Tax based upon or measured by capital (including net worth or long-term debt) or intangibles, any amount thereof required to be allocated under this Section 5.4(b)(iv) shall be computed by reference to the level of such items on the Cutoff. The parties hereto will, to the extent permitted by Applicable Law, elect with the relevant Tax authority to treat a portion of any Straddle Period as a short taxable period ending as of the close of business on (i) the Cut-off date or (ii) the date hereof, as applicable. For purposes of this Agreement, "Post- Cut-off Taxes" shall include any Taxes of the Entities that are payable with respect to a Straddle Period, except for the portion of any such Taxes that constitutes Pre-Cut-off Taxes. (v) Seller and Buyer shall reasonably cooperate in preparing and filing all Tax Returns with respect to the Entities, including maintaining and making available to each other all records reasonably necessary in connection with Taxes of the Entities and in resolving all disputes and audits with respect to all Tax periods relating to Taxes of the Entities. (vi) For a period of seven (7) years after the date hereof, the Seller and its representatives shall have reasonable access to the books and records (including the right to make extracts thereof) of the Entities to the extent that such books and records relate to Taxes and to the extent that such access (i) is in the power of Buyer using reasonable best efforts and (ii) may reasonably be required by Seller in connection with matters relating to or affected by the operation of the Entities prior to the Cut-off. Such access shall be afforded by Buyer upon receipt of reasonable advance notice and during normal business hours. If Buyer shall desire to dispose of any of such books and records prior to the expiration of such seven-year period, Buyer shall, prior to such disposition, give Seller a reasonable opportunity, at Seller's expense, to segregate and remove such books and records as Seller may select. (vii) For a period of seven (7) years after the date hereof, Buyer and its representatives shall have reasonable access to the books and records (including the right to make extracts thereof) of Seller to the extent that such books and records relate to Taxes of an Entity or Taxes of Seller and its Affiliates attributable to such Persons' investment in an Entity that are reasonably necessary for Buyer and its members to compute their Taxes (including, for the avoidance of doubt, such Person's share of each Entity's previously taxed income, earnings and profits, and any deemed dividend from such Person's sale of any Entity under Section 1248 of the Code, and any information necessary to comply with Proposed Regulations Section 1.959-1(d) and Proposed Regulations Section 1.959-3 or any successor regulation and to the extent that such access (i) is within the power of Seller using reasonable best efforts and (ii) may reasonably be required by Buyer in connection with matters relating to or affected by the operation of any Entity after the Cut-off. Such access shall be afforded by Seller upon receipt of reasonable advance notice and during normal business hours. If Seller shall desire to dispose of any such books and records prior to the expiration of such seven year period, Seller shall, prior to such disposition, give Buyer reasonable opportunity, at Buyer's expense, to segregate and remove such books and records as Buyer may select. 36 (viii) If an Indemnified Party actually receives a refund or credit or other reimbursement with respect to Taxes for which it would be indemnified under this Agreement, the Tax Indemnified Party shall pay over such refund or credit or other reimbursement to the Tax Indemnifying Party. (ix) Buyer shall not, and to the extent within the power of Buyer using reasonable best efforts, cause any Entity to not, make, amend or revoke any Tax election if such action would reasonably be expected to adversely affect any of Seller or its Affiliates with respect to any Tax period ending on or before the date hereof or for the portion of any Straddle Period prior to the Cut-off or any Tax refund or credit with respect thereto, except (A) to the extent such amendment or revocation relates to any Tax matter excepted out of the Seller's tax representations and warranties in Section 3.15 or as relates to (B) any Tax matter which, at the time such election is made or revoked, Seller's indemnification obligations under Section 6.2 hereof shall have expired, except, with respect to the foregoing subparagraph (B) only, as would have, in Seller's reasonable opinion, an adverse effect with regard to any tax returns filed by Seller and/or Seller's Affiliate (not including the Entities). Seller shall not, and shall cause any Entity to not, make, amend or revoke any Tax election if such action would reasonably be expected to adversely affect any of Buyer or its Affiliates with respect to any Tax period beginning after the date hereof or for the portion of any Straddle Period after the Cut-off or any Tax refund or credit with respect thereto. (c) Certain Payments. Buyer and Seller agree to treat (and cause their Affiliates to treat) any payment under this Section 5.4 as an adjustment to the Purchase Price for all Tax purposes. (d) Transfer and Similar Taxes. Notwithstanding any other provisions of this Agreement to the contrary, all transfer, stamp, registration and similar Taxes (collectively, "Transfer Taxes") incurred in connection with the transactions contemplated by this Agreement shall be borne 50% by Buyer and 50% by Seller and Buyer shall accurately file all necessary Tax Returns and other documentation with respect to Transfer Taxes and timely pay all such Transfer Taxes. If required by Applicable Law, Seller will join in the execution of any such Return. Buyer shall provide copies of any Tax Returns with respect to Transfer Taxes to Seller no later than ten (10) days after the due dates of such Tax Returns. Seller shall pay its portion of the Transfer Taxes to Buyer prior to the due date of such Transfer Taxes. (e) Termination of Tax Sharing Agreements. On the date hereof, Seller shall cause all Tax sharing agreements between Seller or any of its Affiliates (that is not one of the Entities) on the one hand, and any of the Entities on the other hand, to be terminated, and all obligations thereunder shall be settled, and no additional payments shall be made under any provisions thereof after the date hereof. (f) Actions Affecting Seller's Liability for Taxes. Except as otherwise set forth in Section 5.4(f) of the Seller Disclosure Letter, on or before December 31, 2007, Buyer (i) shall not sell, liquidate, merge or otherwise dispose of any Entity, and (ii) shall cause each Entity which is a Subsidiary of Buyer not to sell, 37 liquidate, merge or otherwise dispose of any other Entity or to dispose of a significant portion of its assets outside of the ordinary course of business, in each case, in a manner which by virtue of such transaction being a taxable transaction of such Entity for U.S. tax purposes would increase the U.S. Subpart F income of Seller or its Affiliates or the deemed dividend recognized by Seller or its Affiliates under Section 1248 of the Code (such Subpart F income or deemed dividend hereinafter referred to as the "Seller Tax Amount"), when netted or combined with any other transaction involving an Entity which affects the Seller Tax Amount. For the avoidance of doubt, this Section 5.4(f) shall not limit Buyer's rights under Section 5.4(b) to address any Tax matter excepted out of the Seller's Tax representations and warranties under Section 3.15. Section 5.5 Intercompany Accounts. Except with respect to the Assumed Indebtedness, all of which is detailed in Section 5.5 of the Seller Disclosure Letter that will remain outstanding as of the date hereof or be assumed by Buyer at the date hereof, (i) Seller shall, and shall cause its Affiliates (other than the Entities) to, pay in full all intercompany accounts payable to the Entities; and (ii) Seller shall cause the Entities to pay in full all intercompanies accounts payable to the Seller and its Affiliates (other than the Entities), in each case before the date hereof, and in each case in a manner that does not increase any Tax Liability or decrease any Tax assets of any Entity. Section 5.6 Surrender of Intellectual Property. On the date hereof Seller shall cause each of Operating and CMS Ensenada S.A., as the case may be, to surrender its right, title, and interest in and to all trademarks, trademarks applications, domain names, renewal applications, and Intellectual Property listed in Section 5.6 of the Seller Disclosure Letter, as well its commercial name, trade name, reputation and all its good will associated with its name, its trademarks and its Intellectual Property. As from the date hereof, Buyer shall cause each of Operating and CMS Ensenada S.A. to do their best efforts to obtain the final surrender of such Intellectual Property. Section 5.7 Maintenance of Insurance Policies. (a) Seller and Buyer agree that Casualty Insurance Claims relating to the businesses of the Entities (including reported claims and including incurred but not reported claims) will remain with the Entities immediately following the date hereof. For purposes hereof, "Casualty Insurance Claims" shall mean workers' compensation, auto liability, general liability and products liability claims and claims for damages caused to the facilities of the Entities generally insured under all risk, real property, boiler and mechanical breakdown insurance coverage. The Casualty Insurance Claims are subject to the provisions of policies of insurance with insurance carriers and contractual arrangements with insurance adjusters maintained by Seller or its Affiliates prior to the date hereof (collectively, the "Insurance Policies"). 38 (b) With respect to the Casualty Insurance Claims, the following procedures shall apply: (i) Seller shall use reasonable best efforts to make recovery under the relevant Insurance Policy and ensure that each of its Affiliates shall take such steps as Buyer reasonably requires to make and/or pursue any such claim (including giving notice of the claim to the insurer at the request of Buyer) and to assist Buyer and the Entities in making the claim; (ii) to the extent that recovery is made, Seller shall ensure that any proceeds actually received by Seller or its Affiliates that are not Entities are promptly paid to the applicable Entity which suffered the insured event giving rise to the Casualty Insurance Claim (or to Buyer on behalf of such Entity) and in any case within fifteen (15) Business Days of the receipt of such proceeds; and (iii) Seller or its Affiliates shall continue to administer, adjust, settle and pay, on behalf of the Entities, all Casualty Insurance Claims with dates of occurrence prior to the date hereof. Casualty Insurance Claims to be paid by Seller hereunder shall include all costs necessary to settle claims including compensatory, medical, legal and other allocated expenses. (c) The parties acknowledge that the Insurance Policies may provide coverage for workers' compensation, auto liability, general liability and products liability claims and claims for damages not related to the Entities ("Non-Entity Casualty Insurance Claims"). Seller agrees that, when administering, settling and paying Casualty Insurance Claims, it shall endeavor to provide that the economic benefits of the Insurance Policies are shared equitably among the Casualty Insurance Claims and the Non-Entity Casualty Insurance Claims (including, without limitation, by ensuring that coverage limits are equitably allocated or reserved among such claims or potential claims). (d) Seller makes no representation or warranty with respect to the applicability, validity or adequacy of any Insurance Policies, and Seller shall not be responsible to Buyer or any of its Affiliates for the failure of any insurer to pay under any such Insurance Policy. (e) Nothing in this Agreement is intended to provide or shall be construed as providing a benefit or release to any insurer or claims service organization of any obligation under any Insurance Policies. Seller and Buyer confirm that the sole intention of this Section 5.7 is to divide and allocate the benefits and obligations under the Insurance Policies between them as of the date hereof and not to effect, enhance or diminish the rights and obligations of any insurer or claims service organization thereunder. Nothing herein shall be construed as creating or permitting any insurer or claims service organization the right of subrogation against Seller or Buyer or any of their Affiliates in respect of payments made by one to the other under any Insurance Policy. (f) If Buyer requests a copy of an Insurance Policy relating to a pending or threatened Casualty Insurance Claim, Seller shall provide a copy of all relevant insurance policies which insure such Casualty Insurance Claims within five (5) Business Days, provided, that if Seller cannot provide such policy within five (5) days after exercising reasonable best efforts to locate such policy, Seller shall continue to 39 exercise its reasonable best efforts to provide such policy to Buyer as soon as possible thereafter. Section 5.8 Preservation of Records. Buyer acknowledges and agrees that Seller may, from time to time, in the normal course of investigating, prosecuting and/or defending various ongoing matters which may relate to the Entities or the businesses thereof, including its obligations pursuant to Section 6.2 of the Agreement, have, and will continue to have, a need (i) to refer to, and to use as evidence, certain books, records and other data, including electronic data maintained in computer files, relating to the Entities and /or their businesses and (ii) for the support and cooperation of present or former employees of the Entities in the event that such Persons' assistance or participation is needed to aid in the defense or settlement of the such matters. Buyer agrees that it shall, at its own expense, preserve and keep the records held by it relating to the respective businesses of the Entities that could reasonably be required after the consummation of the transaction contemplated in this Agreement by Seller for a period of five (5) years; provided, however, that upon expiration of such period, as applicable, Buyer shall give written notice to Seller if it or the custodian of such books and records proposes to destroy or dispose of the same. Seller shall have the opportunity for a period of thirty (30) days after receiving such notice to elect to have some or all of such books and records delivered, at Seller's expense and risk, to a location chosen by Seller. In addition, Buyer shall make such records available to Seller as may reasonably be required by Seller in connection with, among other things, any insurance claim, legal proceeding or governmental investigation relating to the respective businesses of Seller and its Affiliates, including the Entities. Seller agrees to maintain the confidentiality of all information provided by Buyer or the Entities hereunder. Section 5.9 Public Statements. No public or private release, announcement or regulatory filing concerning the transaction contemplated hereby shall be issued by any of the parties without the prior consent of the other parties (which consent shall not unreasonably withheld), except for such press release, announcement, or regulatory filing as is required by law, court process or stock exchange rule to be made by the party proposing to issue the same, in which case such party shall use its reasonable best efforts to consult in good faith with the other party prior to the issuance of any such press release, announcement or filing. Section 5.10 Certain Transactions. Buyer shall not, and shall not permit any of its Subsidiaries to, acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of or equity in, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets if the entering into of a definitive agreement relating to, or the consummation of such acquisition, merger or consolidation would reasonably be expected to (a) impose any material delay in the obtaining of, or significantly increase the risk of not obtaining, any authorizations, consents, orders, declarations or approvals of any Governmental Authority (other than any authority competent under the Antitrust Law) necessary to consummate the transactions contemplated by this Agreement or the expiration or termination of any applicable waiting period, (b) significantly increase the risk of any Governmental 40 Authority (other than any authority competent under the Antitrust Law) entering an order prohibiting the consummation of the transactions contemplated by this Agreement, (c) significantly increase the risk of not being able to remove any such order on appeal or otherwise or (d) materially delay or prevent the consummation of the transactions contemplated by this Agreement. Section 5.11 Use of Corporate Name; Transitional Use of Seller's Name. As soon as reasonably practicable following the date hereof, but in no event later than sixty (60) days following the date hereof, Buyer shall cause each of the Entities to make any necessary legal filings with the appropriate Governmental Authorities to register the change in their corporate names. Buyer and its Affiliates shall hold harmless and indemnify Seller and any of its Affiliates against all Damages resulting from or arising in connection with the use by Buyer or any of its Affiliates of the "CMS" name as provided in this Section 5.12. Section 5.12 Use of Information Technology. Seller will ensure the e-mail forwarding service from the Argentine Employees inboxes to the new inboxes placed at the Buyer's servers for a period of three (3) months from the date hereof. The following services will remain running for at least one (1) month: (a) Internet access; (b) VPN access; (c) incoming and outgoing e-mails to / from the Seller's current e-mail accounts; and (d) blackberry access. Seller will also provide the users id's and passwords for all the installed communication equipments, and upgrade the administration levels of the Argentine servers to the maximum privileges. Should Buyer request an extension for any time period provided herein, such services shall be provided solely at Seller's discretion and at a reasonable cost to be agreed upon by Buyer and Seller. Section 5.13 Confidentiality. Buyer will hold, and will cause its Representatives to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of Law, all confidential documents and information concerning the Seller furnished to Buyer in connection with the transactions contemplated by this Agreement, except to the extent that such information can be shown to have been (i) previously known on a non-confidential basis by Buyer, (ii) in the public domain through no fault of Buyer or (iii) later lawfully acquired by Buyer from sources other than the Seller; provided that Buyer may disclose such information to its Representatives in connection with the transactions contemplated by this Agreement so long as such Persons are informed by Buyer of the confidential nature of such information and are directed by Buyer to treat such information confidentially. The obligation of Buyer to hold any such information in confidence shall be satisfied if it exercises the same care with respect to such information as it would take to preserve the confidentiality of their own similar information. Section 5.14 Actions Relating to Entities. Seller shall use its reasonable best efforts to cooperate with Buyer after the date hereof, to: 41 (a) comply with all Argentine foreign holding company regulations in respect of Seller's holdings in each of the Entities (including, without limitation, Art. 220 of Resolution 7/05 of the IGJ) and related laws and regulations and provide evidence reasonably satisfactory of such compliance; (b) register all past capital increases and decreases of each the Entities with the IGJ, to the extent such capital increases and decreases have not been duly registered; (c) fund all necessary reserve amounts (including reserve amounts legally required to be funded) which have not been duly funded in connection with dividends declared by each of the Entities; (d) register with the Banco Central de la Republica Argentina, and otherwise comply with all applicable Argentine foreign exchange regulations (including, without limitation, Communication A3602, as amended, of the Argentine Central Bank and Decree 616/05 and its implementing regulations) relating to, the United States Dollars-denominated indebtedness of each of the Entities set forth in Section 3.7(b) of the Seller Disclosure Letter; and (e) deliver to Buyer all the original counterparts of the United States Dollars-denominated indebtedness of each of the Entities set forth in Section 3.7(b) of the Seller Disclosure Letter. ARTICLE VI SURVIVAL; INDEMNIFICATION Section 6.1 Survival. (a) All representations and warranties contained herein shall survive for a period of twelve (12) months following the date hereof except for the representations and warranties of Seller set forth in Sections 3.1, 3.2 and 3.3, and of Buyer in Sections 4.1 and 4.2, which shall survive indefinitely (such time periods set forth above are referred to herein as the relevant "Indemnity Period"). The parties intend to shorten the statute of limitations and agree that no claims or causes of action may be brought against Seller, Buyer or any of their respective directors, officers, employees, Affiliates, controlling persons, agents or representatives based upon, directly or indirectly, any of the representations and warranties contained in this Agreement after the Indemnity Period; provided that if a written notice of claim for indemnification is made during the applicable Indemnity Period in accordance with this Article VI, such claim shall survive until its resolution. (b) All covenants and agreements contained herein that by their terms are to be performed in whole or in part, or which prohibit actions, 42 subsequent to the date hereof, shall survive the consummation of the transaction contemplated hereby in accordance with their terms. Section 6.2 Indemnification. (a) Subject to the limitations set forth in this Article VI, subsequent to the date hereof, Seller shall indemnify, defend, save and hold harmless Buyer and its Affiliates, their respective successors and permitted assigns, and their officers and directors (collectively, the "Buyer Indemnified Parties"), from and against any and all Damages incurred by a Buyer Indemnified Party arising out of, resulting from or incurred in connection with: (i) any breach or inaccuracy of any representation or warranty of Seller contained in this Agreement, in each case, when made or deemed made; (ii) any breach in any material respect by Seller of any covenant or agreement contained in this Agreement; and (iii) the matters set forth on Section 6.2(a)(iii) of the Seller Disclosure Letter. (b) Subject to the limitations set forth in this Article VI, subsequent to the date hereof, each Buyer shall indemnify, defend, save and hold harmless Seller and its Affiliates, their respective successors and permitted assigns, and their officers and directors (collectively, the "Seller Indemnified Parties") from and against any and all Damages to the extent incurred by the Seller Indemnified Party arising out of, resulting from or incurred in connection with: (i) any breach or inaccuracy of any representation or warranty of such Buyer contained in this Agreement, in each case, when made or deemed made. For the avoidance of doubt, it is expressly understood that each of Lucid and Newco shall be severally, and not jointly, liable for Damages incurred by a Seller Indemnified Party as a result of a breach or inaccuracy of any representation or warranty made by such Person or for the breach of confidentiality obligations governed by Section 5.13 and, as a result, a Seller Indemnified Party shall not be entitled to make a Claim, seek contribution, assert joint and several liability or otherwise seek indemnification against the other Buyer based on such breach or inaccuracy or breach of confidentiality obligations; and (ii) any breach in any material respect by Buyer of any covenant or agreement contained in this Agreement. (c) Any Person providing indemnification pursuant to the provisions of this Section 6.2 is referred to herein as an "Indemnifying Party," and any Person entitled to be indemnified pursuant to the provisions of this Section 6.2 is referred to herein as an "Indemnified Party." 43 (d) Seller's indemnification obligations shall not apply to any Claim for Damages unless and until the aggregate of all such Damages exceeds one percent (1%) of the Purchase Price (the "Threshold Amount"), in which event Seller's indemnity obligations shall apply to all Claims for Damages in excess of the Threshold Amount, subject to a maximum liability to Seller, in the aggregate, of $25,000,000 (the "Cap Amount"); provided, however, that (i) any Claims for Damages for breach of the representations and warranties set forth in Section 3.1, Section 3.2, and Section 3.3, shall not be subject to the Threshold Amount, Cap Amount, or Minimum Claim Amount (as defined below); and (ii) Seller's indemnification obligations contained in Section 6.2(a)(iii) shall not be subject to the Threshold Amount and the Minimum Claim Amount. Damages relating to any single breach or series of related breaches of Seller's representations and warranties shall not constitute Damages, and therefore shall not be applied towards the Threshold Amount or be indemnifiable hereunder, unless such Damages relating to any single breach or series of related breaches exceed $100,000 (the "Minimum Claim Amount"). (e) Buyer's indemnification obligations contained in Section 6.2(b)(i) shall not apply to any Claim for Damages unless and until the aggregate of all such Damages equals the Threshold Amount, in which event Buyer's indemnification obligation contained in Section 6.2(b)(i) shall apply to all Claims for Damages in excess of the Threshold Amount, subject to a maximum liability to the Buyer, in the aggregate, of the Cap Amount. Damages relating to any single breach or series of related breaches of Buyer's representations and warranties shall not constitute Damages, and therefore shall not be applied towards the Threshold Amount or be indemnifiable hereunder, unless such Damages relating to any single breach or series of related breaches exceed the Minimum Claim Amount. (f) The indemnification obligations of each party hereto under this Section 6.2 shall inure to the benefit of the Buyer Indemnified Parties and Seller Indemnified Parties, and such Buyer Indemnified Parties and Seller Indemnified Parties shall be obligated to keep and perform the obligations imposed on an Indemnified Party by this Section 6.2, on the same terms as are applicable to such other party. (g) In all cases in which a Person is entitled to be indemnified in accordance with this Agreement, such Indemnified Party shall be under a duty to take all commercially reasonable measures to mitigate all losses. (h) All amounts paid by Seller or Buyer, as the case may be, under this Article VI shall be treated as adjustments to the Purchase Price for all Tax purposes. (i) Notwithstanding any other provision of this Agreement, in no event shall any Indemnified Party be entitled to indemnification pursuant to this Article VI to the extent any Damages were attributable to such Indemnified Party's own gross negligence or willful misconduct. 44 (j) The remedies provided in this Article VI shall be deemed the sole and exclusive remedies of the parties, from and after the date hereof, with respect to this Agreement and the transactions contemplated hereby. Section 6.3 Calculation of Damages. (a) The amount of any Damages suffered by any party hereto shall be reduced by (i) any amount that is reserved for sums held in reserve in respect of the indemnifiable event on the balance sheet of the Entities, as applicable, as of December 31, 2006, to the extent such Damages are suffered by a Buyer Indemnified Party, (ii) any amount that an Indemnified Party is entitled to receive with respect thereto under any third party insurance coverage or from any other party alleged to be responsible therefore or (iii) any Tax Benefit realized by an Indemnified Party or its Affiliates. For purposes of this Agreement, "Tax Benefit" shall mean the Tax savings attributable to any deduction, expense, loss, credit or refund to the indemnified party or its Affiliates, when incurred or received; provided, however, that if such benefit is reasonably expected to arise or be utilized after the year in which indemnification occurs pursuant to this Agreement, then it means the present value of such Tax savings (calculated using the one Prime Rate (as published in The Wall Street Journal on the first Business Day of the taxable year in which the indemnification occurs) and a Tax rate equal to the sum of the highest marginal Argentine corporate income Tax rate or rates applicable to ordinary income or capital gain, as the case may be, in effect for the taxable period in issue). (b) If an Indemnified Party makes a claim for indemnification under this Article VI, the Indemnified Party shall use its reasonable best efforts to collect any amounts available under such insurance coverage and from such other party alleged to have responsibility. If an Indemnified Party receives an amount under insurance coverage or from such other party with respect to Damages at any time subsequent to any indemnification provided by Seller or Buyer, as the case may be, pursuant to this Article VI, then such Indemnified Party shall promptly reimburse the Indemnifying Party for any payment made or expense incurred by the Indemnifying Party in connection with providing such indemnification up to such amount received by the Indemnified Party, but net of any expenses incurred by the Indemnified Party in collecting such amount. To the extent the Indemnifying Party makes any indemnification payment pursuant to this Article VI in respect of Damages for which an Indemnified Party has a right to recover against a third party (including an insurance company), the Indemnifying Party shall be subrogated to the right of the Indemnified Party to seek and obtain recovery from such third party; provided, however, that if the Indemnifying Party shall be prohibited from such subrogation, the Indemnified Party shall seek recovery from such third party on the Indemnifying Party's behalf and pay any such recovery to the Indemnifying Party net of expenses. Section 6.4 Procedures for Third-Party Claims. The obligations of any Indemnifying Party to indemnify any Indemnified Party under this Article VI with respect to Claim for Damages by third parties (including Governmental Entities) (a "Third-Party Claim"), shall be subject to the following terms and conditions: 45 (a) The Indemnified Party shall give the Indemnifying Party written notice of any such Third-Party Claim reasonably promptly after learning of such Third-Party Claim, and the Indemnifying Party may, at its option, undertake the defense thereof by representatives of its own choosing and reasonably acceptable to the Indemnified Party, and shall provide written notice of any such undertaking to the Indemnified Party. Failure to give prompt written notice of a Third-Party Claim hereunder shall not affect the Indemnifying Party's obligations under this Article VI, except to the extent that the Indemnifying Party is actually prejudiced by such failure to give prompt written notice. The Indemnified Party shall, and shall cause its employees and representatives to, cooperate reasonably with the Indemnifying Party in connection with the settlement or defense of such Third-Party Claim and shall provide the Indemnifying Party with all available information and documents concerning such Third-Party Claim. The Indemnifying Party shall provide the Indemnified Party with copies of all non-privileged communications and other information in respect of the Third-Party Claim and, with respect to any Third-Party Claim for Taxes, shall allow Buyer to participate at its own expense in defense of the claim under the reasonable control of the Indemnifying Party. If the Indemnifying Party, within thirty (30) days after written notice of any such Third-Party Claim, fails to assume the defense of such Third-Party Claim, or, after assuming defense, negligently fails to defend and fails to call after reasonable written notice of the same, the Indemnified Party against whom such Third-Party Claim has been made shall (upon further written notice to the Indemnifying Party) have the right to undertake the defense, compromise or settlement of such Third-Party Claim on behalf of and for the account and risk, and at the expense, of the Indemnifying Party, subject to the right of the Indemnifying Party to assume the defense of such Third-Party Claim at any time prior to settlement, compromise or final determination thereof upon written notice to the Indemnified Party. (b) Anything in this Section 6.4 to the contrary notwithstanding, (i) the Indemnified Party shall not settle a Third-Party Claim for which it is indemnified without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed and (ii) the Indemnifying Party shall not enter into any settlement or compromise of any action, suit or proceeding, or consent to the entry of any judgment for relief other than monetary damages to be borne by the Indemnifying Party, without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld, conditioned or delayed. Section 6.5 Procedures for Inter-Party Claims. In the event that an Indemnified Party determines that it has a Claim for Damages against an Indemnifying Party hereunder (other than as a result of a Third-Party Claim), the Indemnified Party shall give reasonably prompt written notice thereof to the Indemnifying Party, specifying the amount of such Claim and any relevant facts and circumstances relating thereto, and such notice shall be promptly given even if the nature or extent of the Damages is not then known. The notification shall be subsequently supplemented within a reasonable time as additional information regarding the Claim or the nature or extent of Damages resulting therefrom becomes available to the Indemnified 46 Party. Any failure to give such reasonably prompt notice or supplement thereto or to provide any such facts and circumstances will not waive any rights of the Indemnified Party, except to the extent that the rights of the Indemnifying Party are actually materially prejudiced thereby. The Indemnified Party and the Indemnifying Party shall attempt to negotiate in good faith for a thirty-day (30-day) period regarding the resolution of any disputed Claims for Damages. If for any reason, such dispute cannot be resolved by negotiation, on the request of any party it shall be resolved by arbitration in accordance with Section 7.8 herein. Promptly following the final determination of the amount of any Damages claimed by the Indemnified Party, the Indemnifying Party, subject to the limitations of the Minimum Claim Amount, Threshold Amount and the Cap Amount, shall pay such Damages to the Indemnified Party by wire transfer of immediately available funds. ARTICLE VII MISCELLANEOUS PROVISIONS Section 7.1 Interpretation. (a) Unless the context of this Agreement otherwise requires, (a) words of any gender include the other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms "hereof," "herein," "hereby" and derivative or similar words refer to this entire Agreement; (d) the terms "Article," "Section" and "Exhibit" refer to the specified Article, Section and Exhibit of this Agreement, respectively; and (e) "including," shall mean "including, but not limited to"; and (v) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties (whether real or personal). Unless otherwise expressly provided, any agreement, instrument, law or regulation defined or referred to herein means such agreement, instrument, law or regulation as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of a law or regulation) by succession of comparable successor law and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein. (b) For purposes of Article III and all covenants and obligations of Seller hereunder including indemnification obligations of Article VI, all representations, warranties, covenants and obligations made by Seller shall be deemed to be jointly and severally made by each Seller entity. (c) For purposes of Article V, in the event that Seller shall be obligated to cause, or use its reasonable best efforts to cause, an Affiliate over which it does not have voting control to act or not act, directly or indirectly through the exercise of equity voting rights or contractual and other rights, it shall be obligated to exercise all of its contractual and other rights to cause such action or inaction by such Affiliate. 47 Section 7.2 Disclosure Letters. The Seller Disclosure Letter and the Buyer Disclosure Letter are incorporated into this Agreement by reference and made a part hereof. Section 7.3 Payments. All payments set forth in this Agreement are in United States Dollars. Such payments shall be made by wire transfer of immediately available funds or by such other means as the parties to such payment shall designate. Section 7.4 Expenses. Except as expressly set forth herein, or as agreed upon in writing by the parties, each party shall bear its own costs, fees and expenses, including the expenses of its representatives, incurred by such party in connection with this Agreement and the transaction contemplated hereby and thereby. Section 7.5 Choice of Law. THIS AGREEMENT, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR CHOICE OF LAWS OR ANY OTHER LAW THAT WOULD MAKE THE LAWS OF ANY OTHER JURISDICTION OTHER THAN THE STATE OF NEW YORK APPLICABLE HERETO. Section 7.6 Assignment. This Agreement may not be assigned by either party without the prior written consent of the other party; provided, however, that without the prior written consent of the other party, each party shall have the right to assign its rights and obligations under this Agreement to any third party successor to all or substantially all of its entire business. Section 7.7 Notices. All demands, notices, consents, approvals, reports, requests and other communications hereunder must be in writing, will be deemed to have been duly given only if delivered personally or by facsimile transmission (with confirmation of receipt) or by an internationally-recognized express courier service to the parties at the following addresses or telephone or facsimile numbers and will be deemed effective upon delivery; provided, however, that any communication by facsimile shall be confirmed by an internationally-recognized express courier service. 48 (i) If to the Seller: CMS Enterprises Company One Energy Plaza Jackson, Michigan 49201 Attention: General Counsel Telephone: (517) 788-0550 Facsimile: (517) 788-1671 With a required copy to: Miller, Canfield, Paddock and Stone, PLC 101 North Main Street, 7th Floor Ann Arbor, Michigan 48104 Attention: Michael D. VanHemert Telephone: (734) 668-7117 Facsimile: (734) 747-7147 (ii) If to Buyer: (a) Lucid Energy, LLC 30078 Schoenherr, Suite 150 Warren, Michigan Attention: Rai Bhargava/Manouch Daneshvar Telephone: (586) 445-2300 Facsimile: (586) 445-1782 With a required copy to: Ufer & Spaniola, P.C. 5440 Corporate Drive, Suite 250 Troy, Michigan 48098-2648 Attention: Gerald Van Wyke, Esquire Telephone: (248) 641-7000 Facsimile: (248) 641-5120) (b) New Argentine Generation Company, L.L.C. 410 Park Avenue, Suite 510, New York, NY 10022 Attention: Authorized Person Telephone: (212) 751-9233 Facsimile: (212) 355-3594 49 With a required copy to: Garrigues 410 Park Avenue, Suite 510, New York, NY 10022 Attention: Xavier Ruiz Telephone: (212) 751-9233 Facsimile: (212) 355-3594 Citigroup Financial Products Inc. 390 Greenwich Street 7th Floor NY, NY 10013 Attention: Al Valma Telephone: 212-657-8195 Facsimile: 212-657-9042 Attention: Michael Triolo Telephone: 212-723-1305 Facsimile: 212-723-8036 or to such other address as the addressee shall have last furnished in writing in accord with this provision to the addressor. Section 7.8 Resolution of Disputes. Except for the resolution of disputes that shall be resolved in accordance with the procedures set forth in Sections 5.1 and 6.5 herein, all disputes arising out of or relating to this Agreement or any Related Agreement or the breach, termination or validity thereof or the parties' performance hereunder or thereunder ("Dispute") shall be resolved as provided by this Section 7.8. (a) If the Dispute has not been resolved by executive officer negotiation within thirty (30) days of the disputing party's notice requesting negotiation, or if the parties fail to meet within twenty (20) days from delivery of said notice, such Dispute shall be submitted to and finally settled by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce in New York ("ICC") then in effect (the "Rules"), except as modified herein. (b) The arbitration shall be held, and the award shall be rendered, in the English language. There shall be three arbitrators, one of whom shall be nominated by each of Buyer and Seller in accordance with the Rules. The two party appointed arbitrators shall have thirty (30) days from the confirmation of the nomination 50 of the second arbitrator to agree on the nomination of a third arbitrator who shall serve as chair of the arbitral tribunal. On the request of any party, any arbitrator not timely appointed in accordance with this Agreement or the Rules shall be appointed by the ICC. (c) The award shall be final and binding upon the parties as from the date rendered, and shall be the sole and exclusive remedy between the parties regarding any claims, counterclaims, issues, or accounting presented to the arbitral tribunal. Judgment upon any award may be entered and enforced in any court having jurisdiction over a party or any of its assets. For the purpose of the enforcement of an award, the parties irrevocably and unconditionally submit to the jurisdiction of a competent court in any jurisdiction in which a party may have assets and waive any defenses to such enforcement based on lack of personal jurisdiction or inconvenient forum. This Agreement and the rights and obligations of the parties shall remain in full force and effect pending the award in any arbitration proceeding hereunder. (d) The Parties agree that any court action or proceeding to compel or in support of arbitration or for provisional remedies in aid of arbitration, including but not limited to any action to enforce the provisions of this Section 7.8, for temporary injunctive relief to maintain the status quo or prevent irreparable harm prior to the appointment of the arbitral tribunal, shall be brought exclusively in the federal or state courts located in New York, New York (the "New York Courts"). The Parties hereby unconditionally and irrevocably submit to the exclusive jurisdiction of the New York Courts for such purpose, and to the non-exclusive jurisdiction of the New York Courts in any action to enforce any arbitration award rendered hereunder, and waive any right to stay or dismiss any such actions or proceedings brought before the New York Courts on the basis of forum non conveniens or improper venue. Without prejudice to such provisional remedies as may be available under the jurisdiction of a national court, the arbitral tribunal shall have full authority to grant provisional remedies and to direct the parties to request that any court modify or vacate any temporary or preliminary relief issued by such court, and to award damages for the failure of any party to respect the arbitral tribunal's orders to that effect. Section 7.9 Language. The parties confirm that it is their wish that this Agreement and any other documents related hereto or thereto, including notices, schedules and authorizations, have been and shall be drawn up in the English language only. Section 7.10 No Right of Setoff. Neither party hereto nor any Affiliate thereof may deduct from, set off, holdback or otherwise reduce in any manner whatsoever any amount owed to it hereunder or pursuant to any Related Agreement against any amounts owed hereunder of pursuant to any Related Agreement by such Persons to the other party hereto or any of such other party's Affiliates. 51 Section 7.11 Time is of the Essence. Time is of the essence in the performance of the provisions of this Agreement. Section 7.12 Specific Performance. Each party acknowledges and agrees that any breach of any provision of this Agreement would cause irreparable harm to the other party. Each party, without prejudice to any rights to judicial relief it may otherwise have, shall be entitled to equitable relief, including injunction and specific performance. Each party agrees that it will not oppose the granting of such relief on the basis that the other party has not suffered irreparable harm or that the other party has an adequate remedy at Law. Each party agrees that it will not seek and agrees to waive any requirement for the securing or posting of a bond in connection with the other party's seeking or obtaining such relief. Section 7.13 Currency Matters. (a) Each Party's obligations hereunder to make payments in Dollars shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than Dollars. (b) The obligation of any Party to pay in Dollars those amounts specified to be due in Dollars under this Agreement shall not be deemed to have been novated, discharged or satisfied by any tender of (or recovery under judgment expressed in) any currency other than Dollars. Additionally, all amounts due under this Agreement shall be payable and paid in the United States. Section 7.14 Entire Agreement. This Agreement, together with the Seller Disclosure Letter, Buyer Disclosure Letter, Annexes I, II and III, Exhibits hereto, the Confidentiality Agreement, and the closing letter between Seller and Buyer dated the date hereof constitute the entire agreement between the parties hereto with respect to the subject matter herein and supersede all previous agreements, whether written or oral, relating to the subject matter of this Agreement and all prior drafts of this Agreement, all of which are merged into this Agreement. No prior drafts of this Agreement and no words or phrases from any such prior drafts shall be admissible into evidence in any action or suit involving this Agreement. In the case of any material conflict between any provision of this Agreement and any other Related Agreement, this Agreement shall take precedence. Section 7.15 Binding Nature; Third Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their respective successors (whether by operation of law or otherwise) and permitted assigns. Except as expressly provided herein, none of the provisions of this Agreement shall be for the benefit of or enforceable by any third party, including any creditor of either party or any of their Affiliates. Except as expressly provided herein, no such third party shall obtain any right under any provision of this Agreement or shall by 52 reasons of any such provision make any Claim in respect of any Liability (or otherwise) against either party hereto. Section 7.16 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which, when executed, shall be deemed to be an original and both of which together shall constitute one and the same document. Any counterpart or other signature to this Agreement that is delivered by facsimile or electronic mail shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Agreement. Section 7.17 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any applicable present or future law, and if the rights or obligations of either party under this Agreement will not be materially and adversely affected thereby, (i) such provision shall be fully severable, (ii) this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (iii) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement, a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible. Section 7.18 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. Section 7.19 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 or parties 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. Section 7.20 Amendment. This Agreement may be altered, amended or changed only by a writing making specific reference to this Agreement and signed by duly authorized representatives of each party. 53 IN WITNESS WHEREOF, Seller and Buyer, by their duly authorized officers, have executed this Agreement as of the date first written above. CMS ENTERPRISES COMPANY By: /s/ Thomas W. Elward ------------------------------------ Name: Thomas W. Elward Title: President and Chief Operating Officer CMS GENERATION HOLDINGS COMPANY By: /s/ Thomas W. Elward ------------------------------------ Name: Thomas W. Elward Title: President and Chief Executive Officer CMS INTERNATIONAL VENTURES, L.L.C. By: /s/ Thomas W. Elward ------------------------------------ Name: Thomas W. Elward Title: President (Collectively, the Seller) LUCID ENERGY, LLC By: /s/ Manouch Daneshvar ------------------------------------ Name: Manouch Daneshvar Title: President, COO and Secretary NEW ARGENTINE GENERATION COMPANY, LLC By: /s/ Rai Bhargava ------------------------------------ Name: Rai Bhargava Title: Chairman and Chief Executive Officer NEW ARGENTINE GENERATION COMPANY, LLC By: /s/ Manouch Daneshvar ------------------------------------ Name: Manouch Daneshvar Title: President, Chief Operating Officer and Secretary (Collectively, the Buyer) 54 ANNEX I EQUITY INTEREST DIRECT EQUITY INTEREST (i) 312,234,100 quotas of CMS Operating S.R.L. owned by CMS International Ventures, L.L.C. (ii) 43,176,438 quotas of CMS Operating S.R.L. owned by CMS Generation Holding Company (12,1483% of the capital) (iii) 62,055,630 quotas of CMS Generation S.R.L. owned by CMS International Ventures, L.L.C. (iv) 6,895,070 quotas of CMS Generation S.R.L. owned by CMS Generation Holdings Company (v) 121,999 shares of CMS Comercializadora de Energia S.A. owned by CMS Enterprises Company (vi) 1 share of CMS Comercializadora de Energia S.A. owned by CMS Generation Holdings Company (vii) 22,500 shares of CMS Centrales Termicas S.A. owned by CMS Enterprises Company (viii) 2,500 shares of CMS Centrales Termicas S.A. owned by CMS Generation Holdings Company (ix) 80,060 shares of CMS Ensenada S.A. owned by CMS Generation Holdings Company INDIRECT EQUITY INTEREST (i) 37,931,940 shares of CMS Ensenada S.A. owned by CMS Operating S.R.L. (ii) 272,890,208 shares of Cuyana S.A. de Inversiones owned by CMS Operating S.R.L. (iii) 8,440,145 shares of Cuyana S.A. de Inversiones owned by CMS Centrales Termicas S.A. (iv) 141,946,679 class A shares and 115,772,224 class B shares of Centrales 55 Termicas Mendoza S.A. owned by Cuyana S.A. de Inversiones. (v) 8,702,400 class C shares of Transportadora de Gas del Mercosur S.A. owned by CMS Operating S.R.L. 56 ANNEX II ASSUMED INDEBTEDNESS (i) Promissory Notes from CMS Ensenada S.A. to CMS Enterprises Company dated (a) January 15, 2004; (b) July 15, 2004; and (c) July 7, 2005 in the amounts of US$825,421, US$2,003,898, and US$577,042, respectively plus accrued interests. (ii) Promissory Note from Transportadora de Gas del Mercosur S.A. to CMS international Ventures L.L.C. - current balance is US$ 7,807,814.45 as of January 31, 2007. (iii) Promissory Note from Transportadora de Gas del Mercosur S.A. to CMS Operating SRL - current balance is US$ 277,011.51 as of January 31, 2007. (iv) Promissory Note from CMS Generation Investment Company VI to Cuyana S.A. de Inversiones dated December 21, 2005 - current balance is US$12,484,339 plus accrued interests. (v) Intercompany Account Payable to CMS International Ventures, L.L.C. from CMS Operating S.R.L. in the amount of US$ 4,543,034 as of February 28, 2007. 57 ANNEX III COPY OF THE HIDROINVEST SPA 58 EX-99.1 5 k13277exv99w1.txt CMS ENERGY'S NEWS RELEASE DATED MARCH 14, 2007 EXHIBIT 99.1 [CMS ENERGY LOGO] NEWS RELEASE - -------------------------------------------------------------------------------- CMS ENTERPRISES ANNOUNCES CLOSE OF SALE OF PORTFOLIO OF ARGENTINA BUSINESSES AND NON-UTILITY NATURAL GAS ASSETS IN MICHIGAN JACKSON, Mich., March 14, 2007 -- CMS Enterprises announced today that it has completed the sale of a portfolio of its businesses in Argentina and its northern Michigan non-utility natural gas assets for about $130 million. CMS Enterprises, a principal subsidiary of CMS Energy, sold its interests in those businesses to Lucid Energy. The Argentina businesses sold by CMS Enterprises were the CT Mendoza and Ensenada generating plants and the TGM natural gas pipeline business. The sale of Argentine businesses to Lucid Energy originally was to include the CMS Enterprises interest in Hidroelectrica El Chocon, S.A. However, the CMS Enterprises 17.2 percent interest in El Chocon was sold last week to Endesa under a separate arrangement after Endesa exercised a right of first offer for $50 million. The total proceeds from the two transactions -- the sale to Lucid Energy announced today and the sale of the El Chocon interest announced Friday -- are $180 million. Proceeds from both sales will be used to reduce debt and invest in CMS Energy's Michigan utility, Consumers Energy. In Michigan, the sale to Lucid Energy includes CMS Enterprises' natural gas pipelines and processing assets: the Antrim natural gas processing plant, 155 miles of associated gathering lines, and interests in three special purpose gas transmission pipelines that total 110 miles. As a result of the sales to Endesa and Lucid Energy, CMS Energy expects to recognize an after-tax, non-cash loss of approximately $160 million in the first quarter of 2007. CMS Enterprises will maintain its interest in the TGN natural gas business in Argentina, which remains subject to a potential sale to the government of Argentina or some other disposition. In recognition of CMS Enterprises commitment to sell its 23.5 percent interest in TGN, CMS Energy expects to record an after-tax impairment charge of approximately $140 million in the first quarter of 2007 to reflect the fair value of its TGN ownership interest. CMS Energy (NYSE: CMS) is a Michigan-based company that has as its primary business operations an electric and natural gas utility, natural gas pipeline systems, and independent power generation. # # # For more information on CMS Energy, please visit our web site at: www.cmsenergy.com Media Contacts: Jeff Holyfield, 517/788-2394 or Dan Bishop, 517/788-2395 Investment Analyst Contact: CMS Energy Investor Relations, 517/788-2590 EX-99.2 6 k13277exv99w2.txt CMS ENERGY'S NEWS RELEASE DATED MARCH 9, 2007 EXHIBIT 99.2 (CMS ENERGY LOGO) NEWS RELEASE CMS ENTERPRISES ANNOUNCES SALE OF HIDROELECTRICA EL CHOCON BUSINESS INTEREST TO ENDESA JACKSON, Mich., March 9, 2007 - CMS Enterprises announced today that it has sold its interest in an Argentina hydroelectric generating business to Endesa for $50 million. CMS Enterprises, a principal subsidiary of CMS Energy, held a 17.2 percent interest in Hidroelectrica El Chocon, S.A., which owns the 1,200 megawatt El Chocon hydroelectric facility and the 120 megawatt Arroyito hydroelectric facility. The company previously announced that it expected to sell its El Chocon interest as part of the sale of a portfolio of its Argentina businesses and its northern Michigan non-utility natural gas assets to Lucid Energy. Following that sale announcement, Endesa decided to exercise its right of first offer to buy the CMS Enterprises interest in El Chocon for $50 million. Proceeds from the sale will be used to reduce parent debt and invest in CMS Energy's Michigan utility, Consumers Energy. The El Chocon sale announced today will result in a $50 million reduction in the proceeds that CMS Enterprises expects to receive from Lucid Energy for the remaining businesses involved in that sale. CMS Enterprises now expects the proceeds of that sale to be about $130 million. CMS Energy (NYSE: CMS) is a Michigan-based company that has as its primary business operations an electric and natural gas utility, natural gas pipeline systems, and independent power generation. # # # For more information on CMS Energy, please visit our web site at: www.cmsenergy.com Media Contacts: Jeff Holyfield, 517/788-2394 or Dan Bishop, 517/788-2395 Investment Analyst Contact: CMS Energy Investor Relations, 517/788-2590 -----END PRIVACY-ENHANCED MESSAGE-----